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8-K - FORM 8-K - TYLER TECHNOLOGIES INCd868155d8k.htm

Exhibit 99.1

 

LOGO

Tyler Technologies Reports Earnings

For Fourth Quarter and Fiscal 2014

Quarterly net income grows 46 percent on 15 percent revenue increase

PLANO, Texas – Feb. 4, 2015 – Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the fourth quarter and year ended December 31, 2014.

Fourth Quarter 2014 Financial Highlights:

 

    Total revenue was $127.4 million, up 15.1 percent from $110.7 million for the fourth quarter of 2013. Organic growth was 14.5 percent.

 

    Recurring software revenue from maintenance and subscriptions was $79.5 million, an increase of 15.1 percent compared to the fourth quarter of 2013, and comprised 62.4 percent of fourth quarter 2014 revenue.

 

    Royalty revenue from Microsoft Dynamics® AX, which is included in software licenses and royalties, was $881,000 compared to $473,000 for the fourth quarter of 2013.

 

    Operating income was $24.6 million, an increase of 26.4 percent from $19.5 million for the fourth quarter of 2013.

 

    Net income was $15.3 million, or $0.43 per diluted share, up 45.7 percent compared to $10.5 million, or $0.30 per diluted share, for the fourth quarter of 2013.

 

    Cash flow from operations was $28.3 million, compared to $7.4 million for the fourth quarter of 2013.

 

    Non-GAAP operating income was $30.5 million, up 23.7 percent from $24.7 million for the fourth quarter of 2013.

 

    Adjusted EBITDA was $32.4 million, up 24.4 percent compared to $26.0 million for the fourth quarter of 2013.

 

    Non-GAAP net income was $19.3 million, or $0.54 per diluted share, up 38.1 percent compared to $14.0 million, or $0.39 per diluted share, for the fourth quarter of 2013.

 

    Total backlog reached a new high of $702.0 million at December 31, 2014, up 27.2 percent from $551.7 million at December 31, 2013. Software-related backlog (excluding appraisal services) was $657.3 million, an increase of 23.6 percent compared to $531.8 million at December 31, 2013.

Full Year 2014 Financial Highlights:

 

    Total revenue was $493.1 million, up 18.4 percent from $416.6 million in 2013.

 

    Recurring software revenue from maintenance and subscriptions was $300.5 million, an increase of 18.5 percent compared to 2013, and comprised 60.9 percent of 2014 revenue.

 

    Royalty revenue from Microsoft Dynamics AX was $3.0 million compared to $3.1 million in 2013.

 

    Operating income was $94.8 million, an increase of 41.3 percent from $67.1 million in 2013.


Tyler Technologies Reports Earnings

For Fourth Quarter and Fiscal 2014

Feb. 4, 2015

Page 2

 

    Net income was $58.9 million, or $1.66 per diluted share, up 50.7 percent compared to $39.1 million, or $1.13 per diluted share, in 2013.

 

    Cash flow from operations was $123.4 million, compared to $66.1 million in 2013.

 

    Non-GAAP operating income was $116.6 million, up 35.0 percent from $86.4 million in 2013.

 

    Adjusted EBITDA was $124.3 million, up 35.2 percent compared to $91.9 million in 2013.

 

    Non-GAAP net income was $74.0 million, or $2.09 per diluted share, up 41.5 percent compared to $52.3 million, or $1.51 per diluted share, in 2013.

Tyler also announced that its contractual research and development (R&D) commitment to develop public sector functionality for Microsoft Dynamics AX expires with the release of Dynamics AX 7. Tyler does not anticipate continuing its R&D commitment, although it will continue to provide sustained engineering and technical support for the public sector functionality within Dynamics AX. Tyler further expects that license and maintenance royalties for all applicable domestic and international sales of Dynamics AX to public sector entities will continue under the terms of the contract.

“Our fourth-quarter results provided a strong finish to a year of exceptional performance for Tyler,” said John S. Marr Jr., Tyler’s president and chief executive officer. “Revenues for the quarter grew by more than 15 percent, and despite onboarding expenses associated with significant additions to our headcount during the year, we still expanded our non-GAAP operating margin by 160 basis points for the fourth quarter, and almost 300 basis points for the full year.

“Our team of professionals continues to execute at a high level and our competitive position and win rates remain very strong. This was reflected in our fourth-quarter bookings and backlog, which each grew more than 27 percent year-over-year. SaaS bookings were robust in the fourth quarter, as total new SaaS contract values achieved a new quarterly high of $31.0 million, including our largest single SaaS contract to date. For the full year, SaaS bookings rose 37 percent to $72.7 million.

“We move into 2015 with a very positive outlook, supported by the visibility provided by our recurring revenues, high backlog level and an active new business pipeline. We look forward to expanding our market-leading position and building on Tyler’s 2014 successes in the coming year,” continued Mr. Marr.

Guidance for 2015

As of February 4, 2015, Tyler Technologies is providing the following guidance for the full year 2015:

 

    Total revenues are expected to be in the range of $567 million to $575 million.

 

    Diluted earnings per share are expected to be approximately $1.91 to $1.99.

 

    Non-GAAP diluted earnings per share are expected to be approximately $2.44 to $2.52.

 

    Pretax non-cash, share-based compensation expense is expected to be approximately $19.5 million to $20.0 million.

 

    The effective tax rate is expected to be between approximately 37.5 percent and 38.5 percent.

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Tyler Technologies Reports Earnings

For Fourth Quarter and Fiscal 2014

Feb. 4, 2015

Page 3

 

    Capital expenditures are expected to be between $13.5 million and $14.5 million, and total depreciation and amortization expense is expected to be between $15.5 million and $16.5 million, including approximately $6.5 million of amortization of acquisition intangibles.

Conference Call

Tyler Technologies will hold a conference call on Thursday, February 5, at 10:00 a.m. EST 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/10058748. 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 on February 5, 2015.

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 February 12, 2015. To access the replay, please dial 877-344-7529 (U.S. callers), 412-317-0088 (international callers) and 855-669-9658 (Canada callers) and reference passcode 10058748.

The live webcast and archived replay can also be accessed at www.tylertech.com.

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.

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Tyler Technologies Reports Earnings

For Fourth Quarter and Fiscal 2014

Feb. 4, 2015

Page 4

 

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 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

15-09


TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended December 31,      Twelve Months Ended December 31,  
     2014     2013      2014      2013  

Revenues:

          

Software licenses and royalties

   $ 12,524      $ 11,426       $ 49,065       $ 40,841   

Subscriptions

     23,713        19,314         87,848         61,864   

Software services

     28,227        23,861         113,821         93,267   

Maintenance

     55,792        49,740         212,696         191,720   

Appraisal services

     5,705        4,971         21,802         20,825   

Hardware and other

     1,479        1,423         7,869         8,126   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total revenues

  127,440      110,735      493,101      416,643   

Cost of revenues:

Software licenses and royalties

  461      676      1,900      2,377   

Acquired software

  485      493      1,858      2,078   

Software services, maintenance and subscriptions

  61,662      52,616      236,363      199,617   

Appraisal services

  3,544      3,232      14,284      13,809   

Hardware and other

  797      951      5,325      5,559   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total cost of revenues

  66,949      57,968      259,730      223,440   

Gross profit

  60,491      52,767      233,371      193,203   

Selling, general and administrative expenses

  28,130      26,091      108,260      98,289   

Research and development expense

  6,615      6,095      25,743      23,269   

Amortization of customer and trade name intangibles

  1,153      1,129      4,546      4,517   
  

 

 

   

 

 

    

 

 

    

 

 

 

Operating income

  24,593      19,452      94,822      67,128   

Other (income) expense, net

  (167   390      355      1,309   
  

 

 

   

 

 

    

 

 

    

 

 

 

Income before income taxes

  24,760      19,062      94,467      65,819   

Income tax provision

  9,443      8,550      35,527      26,718   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income

$ 15,317    $ 10,512    $ 58,940    $ 39,101   
  

 

 

   

 

 

    

 

 

    

 

 

 

Earnings per common share:

Basic

$ 0.46    $ 0.32    $ 1.79    $ 1.23   
  

 

 

   

 

 

    

 

 

    

 

 

 

Diluted

$ 0.43    $ 0.30    $ 1.66    $ 1.13   
  

 

 

   

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding:

Basic

  33,275      32,498      33,011      31,891   

Diluted

  35,661      35,348      35,401      34,590   


TYLER TECHNOLOGIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Amounts in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended December 31,     Twelve Months Ended December 31,  
     2014     2013     2014     2013  

Reconciliation of non-GAAP gross profit and margin

        

GAAP gross profit

   $ 60,491      $ 52,767      $ 233,371      $ 193,203   

Non-GAAP adjustments:

        

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

     582        422        2,177        1,509   

Add: Amortization of acquired software

     485        493        1,858        2,078   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

$ 61,558    $ 53,682    $ 237,406    $ 196,790   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

  48.3   48.5   48.1   47.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of non-GAAP operating income and margin

GAAP operating income

$ 24,593    $ 19,452    $ 94,822    $ 67,128   

Non-GAAP adjustments:

Add: Share-based compensation expense

  3,932      3,114      14,819      11,653   

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

  346      472      514      982   

Add: Amortization of acquired software

  485      493      1,858      2,078   

Add: Amortization of customer and trade name intangibles

  1,153      1,129      4,546      4,517   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP adjustments subtotal

$ 5,916    $ 5,208    $ 21,737    $ 19,230   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

$ 30,509    $ 24,660    $ 116,559    $ 86,358   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating margin

  23.9   22.3   23.6   20.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of non-GAAP net income and earnings per share

GAAP net income

$ 15,317    $ 10,512    $ 58,940    $ 39,101   

Non-GAAP adjustments:

Add: Total non-GAAP adjustments to operating income

  5,916      5,208      21,737      19,230   

Less: Tax impact related to non-GAAP adjustments

  (1,972   (1,770   (6,658   (6,014
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

$ 19,261    $ 13,950    $ 74,019    $ 52,317   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per diluted share

$ 0.54    $ 0.39    $ 2.09    $ 1.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Detail of share-based compensation expense

Cost of software services, maintenance and subscriptions

$ 582    $ 422    $ 2,177    $ 1,509   

Selling, general and administrative expenses

  3,350      2,692      12,642      10,144   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation expense

$ 3,932    $ 3,114    $ 14,819    $ 11,653   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of adjusted EBITDA

GAAP net income

$ 15,317    $ 10,512    $ 58,940    $ 39,101   

Amortization of customer and trade name intangibles

  1,153      1,129      4,546      4,517   

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

  2,518      2,564      10,061      9,269   

Interest expense included in other expense, net

  12      149      374      685   

Income tax provision

  9,443      8,550      35,527      26,718   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

$ 28,443    $ 22,904    $ 109,448    $ 80,290   
  

 

 

   

 

 

   

 

 

   

 

 

 

Share-based compensation expense

  3,932      3,114      14,819      11,653   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ 32,375    $ 26,018    $ 124,267    $ 91,943   
  

 

 

   

 

 

   

 

 

   

 

 

 


TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

     December 31,      December 31,  
     2014      2013  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 206,167       $ 78,876   

Accounts receivable, net

     112,660         106,570   

Other current assets

     18,209         24,030   

Deferred income taxes

     9,674         7,759   
  

 

 

    

 

 

 

Total current assets

  346,710      217,235   

Accounts receivable, long-term portion

  1,761      588   

Property and equipment, net

  65,910      64,844   

Other assets:

Goodwill and other intangibles, net

  158,864      159,997   

Other

  737      1,824   
  

 

 

    

 

 

 

Total assets

$ 573,982    $ 444,488   
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$ 43,627    $ 35,372   

Deferred revenue

  189,212      156,738   
  

 

 

    

 

 

 

Total current liabilities

  232,839      192,110   

Deferred income taxes

  4,170      6,059   

Shareholders’ equity

  336,973      246,319   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

$ 573,982    $ 444,488   
  

 

 

    

 

 

 


TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three months ended December 31,     Twelve months ended December 31,  
     2014     2013     2014     2013  

Cash flows from operating activities:

        

Net income

   $ 15,317      $ 10,512      $ 58,940      $ 39,101   

Adjustments to reconcile net income to cash

provided by operations:

        

Depreciation and amortization

     3,669        3,693        14,605        13,786   

Share-based compensation expense

     3,932        3,114        14,819        11,653   

Provision for losses-accounts receivable

     1,897        729        1,897        729   

Excess tax benefit from exercise of share-based arrangements

     (12,685     (15,007     (19,402     (28,207

Deferred income taxes

     (3,804     (417     (3,804     (1,497

Changes in operating assets and liabilities, exclusive of

effects of acquired companies

     19,980        4,765        56,382        30,525   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

  28,306      7,389      123,437      66,090   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

Proceeds from sales of investments

  —        1,040      808      1,090   

Cost of acquisitions, net of cash acquired

  —        —        (3,242   (181

Additions to property and equipment

  (1,306   (6,596   (9,343   (26,858

Decrease in other

  3      20      222      291   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used by investing activities

  (1,303   (5,536   (11,555   (25,658
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

Purchase of treasury shares

  —        —        (22,817   —     

Contributions from employee stock purchase plan

  1,107      1,007      4,144      3,542   

Proceeds from exercise of stock options

  7,941      8,888      14,680      18,289   

Decrease in net borrowings on revolving line of credit

  —        —        —        (18,000

Excess tax benefit from exercises of share-based arrangements

  12,685      15,007      19,402      28,207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

  21,733      24,902      15,409      32,038   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

  48,736      26,755      127,291      72,470   

Cash and cash equivalents at beginning of period

  157,431      52,121      78,876      6,406   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 206,167    $ 78,876    $ 206,167    $ 78,876