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Tyler Technologies Reports Earnings For Third Quarter 2015

October 21, 2015 4:17 PM

Quarterly revenue, earnings and backlog reach record levels

PLANO, Texas--(BUSINESS WIRE)-- Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the third quarter ended September 30, 2015.

Third Quarter 2015 Financial Highlights:

“Tyler’s third quarter results once again exceeded our expectations, with double-digit growth across all revenue lines,” said John S. Marr Jr., Tyler’s president and chief executive officer. “Quarterly revenue surpassed $150 million for the first time, led by growth in subscription revenues of almost 28 percent. Despite some gross margin headwind from expenses associated with onboarding new professional services and development staff in recent quarters to support our growing backlog, we expanded our non-GAAP operating margin by 100 basis points to 26.1 percent.

“Bookings this quarter increased nearly 26 percent from third quarter of 2014, and bookings for new SaaS contracts were the highest in Tyler’s history. As a result, our backlog reached a new high of $758 million as of September 30.

“We enter the fourth quarter with a great deal of momentum and look forward to building on that with the acquisition of New World Systems. We believe that this acquisition will be beneficial to the clients, employees and shareholders of both companies. We are excited about this opportunity to continue to execute our strategy of being an industry leader in all major enterprise applications essential to local government.”

Guidance for 2015

As of October 21, 2015, Tyler Technologies is providing the following guidance for the full year 2015:

Note that our guidance does not include any impact from the proposed acquisition of New World Systems, as the completion and timing of the acquisition is subject to regulatory approval and other customary closing conditions.

Conference Call

Tyler Technologies will hold a conference call on Thursday, October 22, at 10:00 a.m. EDT 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/10072798. 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 October 22, 2015.

Participants who do not wish to pre-register for the call may dial in using 866-777-2509 (U.S. callers) or 412-317-5413 (international callers), and ask for the “Tyler Technologies” call. A replay will be available two hours after completion of the call through October 28, 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 10072798.

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

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 13,000 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 six 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, acquisition-related costs, 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 materially from our expectations and beliefs: (1) changes in the budgets or regulatory environments of our clients, 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 clients, 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, client 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.

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Revenues:
Software licenses and royalties $ 15,690 $ 13,226 $ 44,576 $ 36,541
Subscriptions 29,036 22,694 81,273 64,135
Software services 36,398 31,159 101,765 85,594
Maintenance 61,018 54,713 177,829 156,904
Appraisal services 6,557 5,802 19,337 16,097
Hardware and other 2,146 1,070 7,326 6,390
Total revenues 150,845 128,664 432,106 365,661
Cost of revenues:
Software licenses and royalties 147 565 1,183 1,439
Acquired software 552 448 1,464 1,373
Software services, maintenance and subscriptions 72,764 61,428 207,819 174,701
Appraisal services 3,984 3,764 12,397 10,740
Hardware and other 1,565 667 5,278 4,528
Total cost of revenues 79,012 66,872 228,141 192,781
Gross profit 71,833 61,792 203,965 172,880
Selling, general and administrative expenses 31,869 27,344 90,810 80,130
Research and development expense 7,193 6,567 21,307 19,128
Amortization of customer and trade name intangibles 1,282 1,136 3,585 3,393
Operating income 31,489 26,745 88,263 70,229
Other income (expense), net 255 (47 ) 621 (522 )
Income before income taxes 31,744 26,698 88,884 69,707
Income tax provision 11,602 9,698 32,633 26,084
Net income $ 20,142 $ 17,000 $ 56,251 $ 43,623
Earnings per common share:
Basic $ 0.59 $ 0.52 $ 1.66 $ 1.32
Diluted $ 0.55 $ 0.48 $ 1.56 $ 1.23
Weighted average common shares outstanding:
Basic 33,900 32,935 33,787 32,947
Diluted 36,349 35,284 36,163 35,339
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Reconciliation of non-GAAP gross profit and margin
GAAP gross profit $ 71,833 $ 61,792 $ 203,965 $ 172,880
Non-GAAP adjustments:
Add: Share-based compensation expense included in cost of revenues 902 569 2,349 1,595
Add: Amortization of acquired software 552 448 1,464 1,373
Non-GAAP gross profit $ 73,287 $ 62,809 $ 207,778 $ 175,848
Non-GAAP gross margin 48.6 % 48.8 % 48.1 % 48.1 %
Reconciliation of non-GAAP operating income and margin
GAAP operating income $ 31,489 $ 26,745 $ 88,263 $ 70,229
Non-GAAP adjustments:
Add: Share-based compensation expense 5,598 3,885 14,459 10,887
Add: Employer portion of payroll tax related to employee stock transactions 60 144 333 168
Add: Acquisition-related costs 342 - 342 -
Add: Amortization of acquired software 552 448 1,464 1,373
Add: Amortization of customer and trade name intangibles 1,282 1,136 3,585 3,393
Non-GAAP adjustments subtotal $ 7,834 $ 5,613 $ 20,183 $ 15,821
Non-GAAP operating income $ 39,323 $ 32,358 $ 108,446 $ 86,050
Non-GAAP operating margin 26.1 % 25.1 % 25.1 % 23.5 %
Reconciliation of non-GAAP net income and earnings per share
GAAP net income $ 20,142 $ 17,000 $ 56,251 $ 43,623
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to operating income 7,834 5,613 20,183 15,821
Less: Tax impact related to non-GAAP adjustments (2,334 ) (1,661 ) (6,147 ) (4,686 )
Non-GAAP net income $ 25,642 $ 20,952 $ 70,287 $ 54,758
Non-GAAP earnings per diluted share $ 0.71 $ 0.59 $ 1.94 $ 1.55
Detail of share-based compensation expense
Cost of software services, maintenance and subscriptions $ 902 $ 569 $ 2,349 $ 1,595
Selling, general and administrative expenses 4,696 3,316 12,110 9,292
Total share-based compensation expense $ 5,598 $ 3,885 $ 14,459 $ 10,887
Reconciliation of adjusted EBITDA
GAAP net income $ 20,142 $ 17,000 $ 56,251 $ 43,623
Amortization of customer and trade name intangibles 1,282 1,136 3,585 3,393
Depreciation and other amortization included in
cost of revenues, SG&A and other expenses 2,820 2,519 8,001 7,543
Interest expense included in other expense, net - 75 - 362
Income tax provision 11,602 9,698 32,633 26,084
EBITDA $ 35,846 $ 30,428 $ 100,470 $ 81,005
Share-based compensation expense 5,598 3,885 14,459 10,887
Acquisition-related costs 342 - 342 -
Adjusted EBITDA $ 41,786 $ 34,313 $ 115,271 $ 91,892
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
September 30, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 238,614 $ 206,167
Accounts receivable, net 129,228 112,660
Current investments and other current assets 33,989 18,209
Deferred income taxes 9,674 9,674
Total current assets 411,505 346,710
Accounts receivable, long-term portion 1,072 1,761
Property and equipment, net 68,092 65,910
Other assets:
Goodwill and other intangibles, net 161,633 158,864
Cost method investment 15,000 -
Non-current investments and other assets 21,080 737
Total assets $ 678,382 $ 573,982
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 41,584 $ 43,627
Deferred revenue 200,890 189,212
Total current liabilities 242,474 232,839
Deferred income taxes 4,813 4,170
Shareholders' equity 431,095 336,973
Total liabilities and shareholders' equity $ 678,382 $ 573,982
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Cash flows from operating activities:
Net income $ 20,142 $ 17,000 $ 56,251 $ 43,623
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization 4,102 3,655 11,586 10,936
Share-based compensation expense 5,598 3,885 14,459 10,887
Excess tax benefit from exercise of share-based arrangements (1,974 ) (3,511 ) (10,801 ) (6,717 )
Changes in operating assets and liabilities,
exclusive of effects of acquired companies 27,232 45,274 (1,582 ) 36,402
Net cash provided by operating activities 55,100 66,303 69,913 95,131
Cash flows from investing activities:
Purchase of cost method investment - - (15,000 ) -
Purchase of held-to-maturity securities (22,942 ) - (29,391 ) -
Proceeds from sale of investments - 800 - 808
Cost of acquisitions, net of cash acquired - (3,242 ) (6,447 ) (3,242 )
Additions to property and equipment (2,399 ) (1,560 ) (8,525 ) (8,037 )
Decrease (increase) in other 14 (116 ) 5 219
Net cash used by investing activities (25,327 ) (4,118 ) (59,358 ) (10,252 )
Cash flows from financing activities:
Purchase of treasury shares - (2 ) (645 ) (22,817 )
Proceeds from exercise of stock options 1,640 2,622 8,369 6,739
Contributions from employee stock purchase plan 1,124 1,023 3,367 3,037
Excess tax benefit from exercise of share-based arrangements 1,974 3,511 10,801 6,717
Net cash provided (used) by financing activities 4,738 7,154 21,892 (6,324 )
Net increase in cash and cash equivalents 34,511 69,339 32,447 78,555
Cash and cash equivalents at beginning of period 204,103 88,092 206,167 78,876
Cash and cash equivalents at end of period $ 238,614 $ 157,431 $ 238,614 $ 157,431

Tyler Technologies, Inc.

Brian K. Miller, 972-713-3720

Executive Vice President - CFO

[email protected]

Source: Tyler Technologies, Inc.

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