GTY Technology (GTYH) Misses Q1 EPS by 23c, Revenues Miss; Withdraws FY20 Guidance

GTY Technology (NASDAQ: GTYH) reported Q1 EPS of ($0.30), $0.23 worse than the analyst estimate of ($0.07). Revenue for the quarter came in at $11.28 million versus the consensus estimate of $12.93 million.

• First quarter GAAP revenues up 42% year-over-year to $11.3 million
• First quarter non-GAAP revenues up 31% year-over-year to $11.6 million
• More than 300 State and Local Governments seek GTY emergency Covid-19 Care Program; Grants Management, Procurement and Budgeting software in demand
• Company withdraws previously issued guidance for the full year 2020 due to uncertainties with respect to COVID-19-related disruption duration
• Company shares operating assumptions pointing to a base line of over 20% revenue growth for GTY in Fiscal 2020 and being cash flow positive in the second half of 2020 excluding the impact of severance payments

COVID-19 Related Stakeholder Actions

“Our primary concern has been the safety and wellbeing of our people,” said TJ Parass, GTY CEO. “We quickly moved to 100% business remote operations. As state-wide pandemic-related lockdowns rolled out, many local public government organizations and offices experienced an inability to conduct normal business given the predominance of on-premise IT operations. I’m incredibly proud of how our team immediately put into motion our GTY COVID Emergency Care Program to help public sector organizations such as health services, K-12 schools, Higher Education, and State/Local government entities to easily obtain, implement and become operational with critical applications. As examples, these organizations have immediate needs to track, secure and distribute COVID stimulus grants, to create new budget scenarios, and to ensure mission-critical procurements and payments. Without Cloud-based applications they were hamstrung.”

“With the current low government adoption of Cloud technologies, this crisis highlights that the digital transformation of government needs to be done sooner rather than later,” continued Parass. “We anticipate an acceleration of Government digital transformation as a result of this pandemic.” More than 300 organizations are now onboarding to GTY’s COVID Emergency Care Program, which is available free of charge for a period of months, depending on the software application in use.

Q1 Business Developments and Financial Results

“The top line was strong this quarter at more than 30% growth on a non-GAAP basis and more than 40% growth on a GAAP basis,” said Parass. “We experienced double-digit revenue growth across all six business units. However, we did see some Q1 opportunities push out of the quarter and we expect many of these will close in Q2. Our team moved quickly at the start of the pandemic to ensure that all of our products could be sold, operated and implemented remotely. We believe government offices will now have a greater appreciation for the value of cloud-based solutions and will move up the timeframe for their digital transformations as a result of the current crisis.”

John Curran, GTY CFO, said, “As we experienced a business slowdown late in March, we swiftly took action to reduce costs while preserving as many jobs as possible. Our results reflect a $3.5 million restructuring charge related to costs associated with a 10% reduction in our workforce. In addition, we reduced our discretionary spending and implemented cost savings initiatives.”

First quarter 2020 operating loss was $16.5 million compared with $42.6 million in Q4 2019. First quarter non-GAAP operating loss was $5.7 million compared with $5.4 million in Q4 2019.

Business Outlook

“Since the start of the pandemic, we have increased our financial flexibility, reduced fixed and variable expenses, and worked to ensure that we would have sufficient liquidity to bring us through the remainder of the year,” continued Curran. “We believe we are on solid footing for the year and we continue to expect year-over-year revenue growth for GTY. While the impact of COVID-19 on our Q1 results was relatively small, we have experienced longer sales cycles and collection cycles since the start of Q2. Due to the heightened uncertainty related to the pandemic and its impact on the operating and economic environment we are withdrawing the previously issued full-year non-GAAP revenue guidance that we provided in early March.”

For earnings history and earnings-related data on GTY Technology (GTYH) click here.

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