Tier Technologies, Inc. F2Q10 (Qtr End 03/31/2010) Earnings Call Transcript

Tier Technologies, Inc. F2Q10 (Qtr End 03/31/2010) Earnings Call Transcript
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Tier Technologies, Inc. (TIER)

F2Q10 Earnings Call

May 11, 2010 5:00 pm ET

Executives

Liz Bowman – Director SEC Reporting

Ronald L. Rossetti – Chairman and Chief Executive Officer

Nina K. Vellayan – Executive Vice President and Chief Operating Officer

Ronald W. Johnston – Chief Financial Officer

Keith S. Kendrick – Senior Vice President of Strategic Marketing

Analysts

Brett Huff - Stephens, Inc.

P

resentation

Operator

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Previous Statements by TIER
» Tier Technologies, Inc. F1Q10 (Qtr End 12/31/09) Earnings Call
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» Tier Technologies, Inc. F3Q09 (Qtr End 30/6/2009) Earnings Call Transcript

Welcome everyone to the Tier Technologies second quarter earnings conference call for fiscal year 2010. (Operator Instructions) Ms. Bowman, you may begin your conference.

Liz Bowman

Good afternoon. My name is Liz Bowman, Tier Technologies’ Director of SEC Reporting. At this time I would like to welcome everyone to the Tier Technologies’ earnings conference call for the quarter ended March 31, 2010. Today’s call is scheduled for one hour.

Yesterday we issued a press release announcing Tier's financial results for the second quarter ended March 31, 2010. This afternoon we issued a copy of the text of today’s call, not including the Q&A, and accompanying presentation which includes charts that will be referenced during this call. A copy of these materials can be found in the Investor Relations section of our web site, www.tier.com.

We invite shareholders and analysts who wish to speak to management about the company and its performance to schedule a meeting by contacting our CFO, Ron Johnston, at 571-382-1333 or rjohnston@tier.com. A taped replay of this call will be available on the company's web site beginning Tuesday, May 11, 2010 at 8:00 pm Eastern Time until 11:59 pm Eastern Time on May 25, 2010. Alternatively, you can hear a replay by dialing 866-455-0163.

I want to remind you that various remarks that we make about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. The forward-looking statements discussed on this call represent management's current expectations about the company's future financial performance based on the information available to us today.

This information may change and our actual results may differ materially from these forward-looking statements. We undertake no obligation to update any such forward-looking statements. There are numerous risks and uncertainties that affect our business and may affect these statements including but not limited to, general economic conditions, which affect our financial results in all our markets which we refer to as verticals including our property tax vertical; the timing and the cost of consolidating our payment processing platforms; failure to achieve anticipated gross margin levels due to unanticipated costs incurred in transaction based projects; increasing competition; timing; the company's ability to realize revenues from its business development opportunities; changes in laws and government regulatory compliance requirements; ability to attract and retain qualified personnel and other risk factors that are set forth in our SEC filings. In this call references to “the quarter” or “the second quarter” refer to quarter ended March 31, 2010.

On the call this afternoon will be Nina Vellayan, Executive Vice President and Chief Operating Officer; Ron Johnston, Chief Financial Officer; and Keith Kendrick, Senior Vice President of Strategic Marketing.

Today’s call will begin with Ron Rossetti, Chief Executive Officer. Ron?

Ronald Rossetti

Thank you, Liz, and good afternoon. Let me outline the agenda for this call. First, I will review our financial performance during the second quarter of fiscal year 2010 and then I will provide a strategic update on our progress in the biller direct market with our Electronic Payments Solutions or EPS business.

For an update on our progress against our goals I have asked Nina Vellayan, our EVP and COO, to provide details regarding our recent operating results and plans for the immediate future. Next, Ron Johnston will cover our financial results for the quarter. Following Ron’s remarks, I will open the call to your questions.

I am pleased to report that for the second quarter, Tier has reported positive adjusted EBITDA from continuing operations of $1.1 million as compared with a loss of $1.2 million in the prior-year quarter for an improvement of $2.3 million. Ron Johnston will provide additional information on our use of adjusted EBITDA from continuing operations and other non-GAAP financial measures later in the call. For your convenience a summary of non-GAAP definitions used throughout this call appears in Chart 21 of the accompanying chart deck.

We continued to make progress against our strategy to improve margins. During the quarter we increased gross EPS revenue by $2.7 million, or 10.0% over the prior-year quarter and we grew net EPS revenue at a faster rate, an increase of $1.2 million, or 14.9% over the prior-year quarter. Please refer to Chart 13.

This progress came during our historically lowest revenue quarter and during continued difficult economic conditions where over 60% of our net EPS revenue is directly tied to collecting a portion of the tax due and where we continue to experience revenue declines from prior periods. The continuing improvement in financial performance is the result of increasing our profitability per transaction and driving substantial growth in the number of transactions we process while reducing overhead and holding platform costs relatively flat, thereby creating margin expansion in both net EPS revenue and adjusted EBITDA from EPS operations.

For the quarter ended March 31, 2010 our EPS transactions grew by 34.4%. There are two points about our financial performance I would like to bring to your attention. First, the quality of our earnings is improving and secondly the leverage in our fixed-cost platform is now becoming evident in our financial results. Regarding the quality of earnings, a greater portion of our adjusted EBITDA from continuing operations is from our EPS business.

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