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Exhibit 99.1

 

LOGO

Tyler Technologies Reports Earnings

for Third Quarter 2014

Quarterly earnings grow 54 percent on 20 percent revenue growth

PLANO, Texas – Oct. 22, 2014 – Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the third quarter ended September 30, 2014.

Third Quarter Financial Highlights:

 

    Total revenue was $128.7 million in the third quarter of 2014, up 20.2 percent from $107.0 million in the third quarter of 2013.

 

    Recurring software revenue from maintenance and subscriptions was $77.4 million for the quarter, an increase of 20.0 percent compared to the third quarter of 2013, and comprised 60.2 percent of third quarter 2014 revenue.

 

    Royalty revenue from Microsoft Dynamics® AX, which is included in software licenses and royalties, was $906,000 compared to $1.0 million for the third quarter of 2013.

 

    Operating income for the quarter was $26.7 million, an increase of 49.8 percent from the third quarter of 2013.

 

    Net income for the quarter was $17.0 million, or $0.48 per diluted share, up 53.9 percent compared to $11.0 million, or $0.32 per diluted share, for the third quarter of 2013.

 

    Cash flow from operations for the quarter was $66.3 million, a 57.4 percent increase compared to $42.1 million for the third quarter of 2013.

 

    Non-GAAP operating income for the quarter was $32.4 million, up 40.3 percent from $23.1 million for the third quarter of 2013.

 

    Adjusted EBITDA for the quarter was $34.3 million, up 41.7 percent compared to $24.2 million for the third quarter of 2013.

 

    Non-GAAP net income for the quarter was $21.0 million, or $0.59 per diluted share, up 42.8 percent compared to $14.7 million, or $0.42 per diluted share, for the third quarter of 2013.

 

    Total backlog was $674.0 million at September 30, 2014, up 24.6 percent from $541.0 million at September 30, 2013. Software-related backlog (excluding appraisal services) was $634.3 million, an increase of 22.6 percent compared to $517.6 million at September 30, 2013.

“Tyler achieved exceptional results for the third quarter, with our second consecutive quarter of revenue growth greater than 20 percent and non-GAAP net income growth greater than 40 percent,” said John S. Marr Jr., Tyler’s president and chief executive officer. “All of our software-related revenue lines delivered double-digit growth, including 26 percent growth in software license and royalty revenues and 49 percent growth in subscriptions. Our results for the quarter also reflect a high degree of operating leverage, as our non-GAAP gross margin expanded by 160 basis points and our non-GAAP operating margin grew 350 basis points to 25.1 percent.

 

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Tyler Technologies Reports Earnings

for Third Quarter 2014

Oct. 22, 2014

Page 2

 

“Our record earnings have also generated record cash flow thus far in 2014. For the third quarter, Tyler’s cash flow from operations of $66.3 million actually exceeded our full-year 2013 cash flow from operations. We ended the quarter with cash of more than $157 million, and the strength of our balance sheet positions us well to take advantage of future growth opportunities.

“Tyler followed our record bookings in the second quarter of this year with another very good quarter for new contract signings, which illustrates our strong competitive position and resulting high win rates. Excluding the eFileTexas contract signed in last year’s third quarter, our bookings rose nearly 5 percent for the quarter, and 22 percent for the trailing 12 months. New contract signings were solid across product lines and in both our on-premises and cloud-based offerings.

“We have a sharp focus on executing at a high level with respect to sales, implementations and client support to continue to build on our considerable strengths in the market. With the results achieved in the first three quarters of 2014, combined with our continued positive outlook for the fourth quarter, we have again revised upward our revenue and earnings guidance,” Mr. Marr concluded.

Guidance for 2014

As of October 22, 2014, Tyler Technologies is providing the following full-year 2014 guidance:

 

    Total revenues are expected to be in the range of $489 million to $494 million.

 

    Diluted earnings per share are expected to be approximately $1.63 to $1.69.

 

    Non-GAAP diluted earnings per share are expected to be approximately $2.06 to $2.12.

 

    Pretax non-cash, share-based compensation expense is expected to be approximately $15.0 million.

 

    The effective tax rate is expected to be between approximately 37.0 percent and 39.0 percent.

 

    Capital expenditures are expected to be between $10.5 million and $11.0 million, and total depreciation and amortization expense is expected to be between $14.5 million and $15.0 million, including approximately $6.5 million of amortization of acquisition intangibles.

Conference Call

Tyler Technologies will hold a conference call on Thursday, October 23, at 10:00 a.m. ET to discuss the company’s results. The company is offering participants the opportunity to register in advance for the conference through the following link: http://dpregister.com/10053644. Registered participants will receive an email with a calendar reminder and a dial-in number and PIN that will allow them immediate access to the call.

Participants who do not wish to pre-register for the call may dial in using 877-270-2148 (U.S. callers) or 412-902-6510 (international callers), and ask for the “Tyler Technologies” call. A replay will be available two hours after completion of the call through October 30, 2014. To access the replay, please dial 877-344-7529 (U.S. callers) or 412-317-0088 (international callers) and reference passcode 10053644. The live webcast and archived replay can also be accessed at www.tylertech.com.

 

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Tyler Technologies Reports Earnings

for Third Quarter 2014

Oct. 22, 2014

Page 3

 

About Tyler Technologies, Inc.

Tyler Technologies (NYSE: TYL) is a leading provider of end-to-end information management solutions and services for local governments. Tyler partners with clients to empower the public sector — cities, counties, schools and other government entities — to become more efficient, more accessible and more responsive to the needs of citizens. Tyler’s client base includes more than 11,000 local government offices in all 50 states, Canada, the Caribbean, the United Kingdom and other international locations. Forbes named Tyler one of “America’s Best Small Companies” eight times and the company has been included four times on the Barron’s 400 Index, a measure of the most promising companies in America. More information about Plano-based Tyler Technologies can be found at www.tylertech.com.

Non-GAAP Financial Measures

Tyler Technologies has provided in this press release financial measures that have not been prepared in accordance with generally accepted accounting principles (GAAP) and are therefore considered non-GAAP financial measures. This information includes non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share, EBITDA and adjusted EBITDA. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating Tyler’s ongoing operational performance. Tyler believes the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures. Non-GAAP financial measures discussed above exclude share-based compensation expense, employer portion of payroll taxes on employee stock transactions, and expenses associated with amortization of intangibles arising from business combinations. We use these measures and believe they are useful to investors because they provide additional insight in comparing results from period to period.

Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial information prepared in accordance with GAAP. The non-GAAP measures used by Tyler Technologies may be different from non-GAAP measures used by other companies. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which has been provided in the financial statement tables included below in this press release.

Forward-looking Statements

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends, expectations or beliefs with respect to our financial condition, results of operations or business. Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,” “plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risks and uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-looking statements. We presently consider the following to be among the important factors that could cause actual results to differ

 

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Tyler Technologies Reports Earnings

for Third Quarter 2014

Oct. 22, 2014

Page 4

 

materially from our expectations and beliefs: (1) changes in the budgets or regulatory environments of our customers, primarily local and state governments, that could negatively impact information technology spending; (2) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (3) material portions of our business require the Internet infrastructure to be adequately maintained; (4) our ability to achieve our financial forecasts due to various factors, including project delays by our customers, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (5) general economic, political and market conditions; (6) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (7) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (8) competition in the industry in which we conduct business and the impact of competition on pricing, customer retention and pressure for new products or services; (9) the ability to attract and retain qualified personnel and dealing with the loss or retirement of key members of management or other key personnel; and (10) costs of compliance and any failure to comply with government and stock exchange regulations. A detailed discussion of these factors and other risks that affect our business are described in our filings with the Securities and Exchange Commission, including the detailed “Risk Factors” contained in our most recent annual report on Form 10-K. We expressly disclaim any obligation to publicly update or revise our forward-looking statements.

###

(Comparative results follow)

Contact: Brian K. Miller

Executive Vice President—CFO

Tyler Technologies, Inc.

972-713-3720

brian.miller@tylertech.com

14-78

 


TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014      2013      2014      2013  

Revenues:

           

Software licenses and royalties

   $ 13,226       $ 10,495       $ 36,541       $ 29,415   

Subscriptions

     22,694         15,214         64,135         42,550   

Software services

     31,159         24,860         85,594         69,406   

Maintenance

     54,713         49,291         156,904         141,980   

Appraisal services

     5,802         5,207         16,097         15,854   

Hardware and other

     1,070         1,954         6,390         6,703   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     128,664         107,021         365,661         305,908   

Cost of revenues:

           

Software licenses and royalties

     565         583         1,439         1,701   

Acquired software

     448         513         1,373         1,585   

Software services, maintenance and subscriptions

     61,428         51,786         174,701         147,001   

Appraisal services

     3,764         3,360         10,740         10,577   

Hardware and other

     667         1,230         4,528         4,608   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenues

     66,872         57,472         192,781         165,472   

Gross profit

     61,792         49,549         172,880         140,436   

Selling, general and administrative expenses

     27,344         24,581         80,130         72,198   

Research and development expense

     6,567         5,982         19,128         17,174   

Amortization of customer and trade name intangibles

     1,136         1,129         3,393         3,388   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     26,745         17,857         70,229         47,676   

Other expense, net

     47         285         522         919   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     26,698         17,572         69,707         46,757   

Income tax provision

     9,698         6,523         26,084         18,168   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 17,000       $ 11,049       $ 43,623       $ 28,589   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share:

           

Basic

   $ 0.52       $ 0.34       $ 1.32       $ 0.90   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.48       $ 0.32       $ 1.23       $ 0.83   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding:

           

Basic

     32,935         32,037         32,947         31,825   

Diluted

     35,284         34,764         35,339         34,474   


TYLER TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Amounts in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2014     2013     2014     2013  

Reconciliation of non-GAAP gross profit and margin

        

GAAP gross profit

   $ 61,792      $ 49,549      $ 172,880      $ 140,436   

Non-GAAP adjustments:

        

Add: Share-based compensation expense included in cost of revenues

     569        408        1,595        1,087   

Add: Amortization of acquired software

     448        513        1,373        1,585   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 62,809      $ 50,470      $ 175,848      $ 143,108   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

     48.8     47.2     48.1     46.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of non-GAAP operating income and margin

        

GAAP operating income

   $ 26,745      $ 17,857      $ 70,229      $ 47,676   

Non-GAAP adjustments:

        

Add: Share-based compensation expense

     3,885        3,061        10,887        8,539   

Add: Employer portion of payroll tax related to employee stock transactions

     144        510        168        510   

Add: Amortization of acquired software

     448        513        1,373        1,585   

Add: Amortization of customer and trade name intangibles

     1,136        1,129        3,393        3,388   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjustments subtotal

   $ 5,613      $ 5,213      $ 15,821      $ 14,022   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

   $ 32,358      $ 23,070      $ 86,050      $ 61,698   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating margin

     25.1     21.6     23.5     20.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of non-GAAP net income and earnings per share

        

GAAP net income

   $ 17,000      $ 11,049      $ 43,623      $ 28,589   

Non-GAAP adjustments:

        

Add: Total non-GAAP adjustments to operating income

     5,613        5,213        15,821        14,022   

Less: Tax impact related to non-GAAP adjustments

     (1,661     (1,590     (4,686     (4,244
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 20,952      $ 14,672      $ 54,758      $ 38,367   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per diluted share

   $ 0.59      $ 0.42      $ 1.55      $ 1.11   
  

 

 

   

 

 

   

 

 

   

 

 

 

Detail of share-based compensation expense

        

Cost of software services, maintenance and subscriptions

   $ 569      $ 408      $ 1,595      $ 1,087   

Selling, general and administrative expenses

     3,316        2,653        9,292        7,452   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation expense

   $ 3,885      $ 3,061      $ 10,887      $ 8,539   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of adjusted EBITDA

        

GAAP net income

   $ 17,000      $ 11,049      $ 43,623      $ 28,589   

Amortization of customer and trade name intangibles

     1,136        1,129        3,393        3,388   

Depreciation and other amortization included in cost of revenues, SG&A and other expenses

     2,519        2,283        7,543        6,705   

Interest expense included in other expense, net

     75        162        362        536   

Income tax provision

     9,698        6,523        26,084        18,168   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 30,428      $ 21,146      $ 81,005      $ 57,386   
  

 

 

   

 

 

   

 

 

   

 

 

 

Share-based compensation expense

     3,885        3,061        10,887        8,539   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 34,313      $ 24,207      $ 91,892      $ 65,925   
  

 

 

   

 

 

   

 

 

   

 

 

 


TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

     September 30,      December 31,  
     2014      2013  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 157,431       $ 78,876   

Accounts receivable, net

     111,803         106,570   

Other current assets

     16,007         24,030   

Deferred income taxes

     7,759         7,759   
  

 

 

    

 

 

 

Total current assets

     293,000         217,235   

Accounts receivable, long-term portion

     1,454         588   

Property and equipment, net

     66,694         64,844   

Non-current investments available-for-sale

     —           1,288   

Other assets:

     

Goodwill and other intangibles, net

     160,376         159,997   

Other

     739         536   
  

 

 

    

 

 

 

Total assets

   $ 522,263       $ 444,488   
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable and accrued liabilities

   $ 35,517       $ 35,372   

Deferred revenue

     185,844         156,738   
  

 

 

    

 

 

 

Total current liabilities

     221,361         192,110   

Deferred income taxes

     4,911         6,059   

Shareholders’ equity

     295,991         246,319   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 522,263       $ 444,488   
  

 

 

    

 

 

 


TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three months ended September 30,     Nine months ended September 30,  
     2014     2013     2014     2013  

Cash flows from operating activities:

        

Net income

   $ 17,000      $ 11,049      $ 43,623      $ 28,589   

Adjustments to reconcile net income to cash provided by operations:

        

Depreciation and amortization

     3,655        3,412        10,936        10,093   

Share-based compensation expense

     3,885        3,061        10,887        8,539   

Excess tax benefit from exercise of share-based arrangements

     (3,511     (7,539     (6,717     (13,200

Changes in operating assets and liabilities, exclusive of effects of acquired companies

     45,274        32,132        36,402        24,680   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     66,303        42,115        95,131        58,701   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Proceeds from sales of investments

     800        25        808        50   

Cost of acquisitions, net of cash acquired

     (3,242     —          (3,242     (181

Additions to property and equipment

     (1,560     (6,423     (8,037     (20,262

(Increase) decrease in other

     (116     (24     219        271   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used by investing activities

     (4,118     (6,422     (10,252     (20,122
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Purchase of treasury shares

     (2     —          (22,817     —     

Contributions from employee stock purchase plan

     1,023        901        3,037        2,535   

Proceeds from exercise of stock options

     2,622        4,920        6,739        9,401   

Decrease in net borrowings on revolving line of credit

     —          —          —          (18,000

Excess tax benefit from exercises of share-based arrangements

     3,511        7,539        6,717        13,200   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided (used) by financing activities

     7,154        13,360        (6,324     7,136   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     69,339        49,053        78,555        45,715   

Cash and cash equivalents at beginning of period

     88,092        3,068        78,876        6,406   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 157,431      $ 52,121      $ 157,431      $ 52,121