Tier Technologies, Inc. (TIER)
F3Q10 (Qtr End 06/30/10) Earnings Call Transcript
August 10, 2010 5:00 pm ET
Liz Bowman – Assistant Controller
Chuck Berger – Interim CEO
Ron Johnston – CFO
Brett Huff – Stephens
Gary Prestopino – Barrington Research
Brad Evans – Heartland
Beth Lilly – Gabelli
Good afternoon. I would like to welcome everyone to the Tier Technologies’ third quarter earnings conference call for fiscal year 2010.
Previous Statements by TIER
» Tier Technologies, Inc. F2Q10 (Qtr End 03/31/2010) Earnings Call Transcript
» Tier Technologies, Inc. F1Q10 (Qtr End 12/31/09) Earnings Call
» Tier Technologies, Inc. F4Q09 (Qtr End 09/30/09) Earnings Call Transcript
All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.
Ms. Bowman, you may begin your conference.
Good afternoon. My name is Liz Bowman, Assistant Controller for Tier Technologies. At this time, I would like to welcome everyone to the Tier Technologies’ earnings conference call for the quarter ended June 30, 2010. Today’s call is scheduled for one hour.
Yesterday, we issued a press release announcing Tier’s financial results for the third quarter ended June 30, 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 firstname.lastname@example.org.
A taped replay of this call will be available on the Company’s web site beginning Tuesday, August 10th at 8:30 PM, Eastern Time until Tuesday, August 24, 2010 at 11:59 PM Eastern Time. Alternatively, you can hear a replay by dialing 800-753-0360 and entering the conference ID number 3668013.
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”, particularly our federal, state and local income tax and property tax verticals; the timing and the cost of consolidating our payment processing platforms and migrating our customers on to a consolidated platform; failure to achieve anticipated gross margin levels due to unanticipated costs incurred in transaction-based projects; increasing competition; 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 third quarter” refer to quarter ended June 30, 2010.
On the call this afternoon, are Ron Johnston, Chief Financial Officer and Keith Kendrick, Senior Vice President of Strategic Marketing. Today’s call will begin with Chuck Berger, Tier’s interim Chief Executive Officer. Chuck.
Thank you, Liz and good afternoon. As you know, in late June our Board appointed me to the position of interim CEO. I have served on Tier’s Board for approximately eight years so I have been able to come up to speed relatively quickly in this role.
I will review the financial highlights from our third fiscal quarter, review the market opportunity we see for Tier and then update you on progress against our strategic plans and goals.
Revenues from continuing operations were $39.4 million compared with $44.2 million for the prior year’s third quarter representing a decline of $4.8 million, or 10.8%. The revenue reduction is primarily attributable to the extended economic downturn, which has impacted our revenues throughout our government tax verticals which include federal, state and local, and real property tax. Our federal vertical is composed primarily of two components: one, a partnership with an online tax filing service and two, our contract with the IRS, which we implement through our primary brand, Official Payments.
Both components faced new competitive pressures this tax season. Our partnership with the online tax filing service which had been exclusive to the Company is now shared with another payments services company. Our contract with the IRS also faced increased competition for the first time this tax season, the IRS awarded contracts to three providers of electronic payment services instead of just two. The IRS gives us information only on the transactions processed by these three providers pursuant to their contracts with the IRS. Based on this data, it appears that despite the increased competition with the third competitor, we only lost mid-single digit share in both transactions and dollars processed in this component of our federal vertical.
Our transactions processed through the IRS contract for this tax season which started January 1, 2010 increased 18% through the end of the quarter as compared with the same period in 2009. The 18% increase in transactions was offset by a decrease in average payment size, resulting in a small decline in payment volume processed.
On a GAAP basis, net income from continuing operations for the third quarter was a loss of $0.2 million or $0.01 per share. This compares to a positive $0.6 million or $0.03 per share in the prior year’s quarter.