TYL Tyler Technologies Corp

Tyler Technologies, Inc. (NYSE: TYL) today reported the following financial results for the quarter ended March 31, 2008: Total revenues were $59.4 million, up 17.9 percent compared to $50.3 million in the same period last year. Software-related revenues (software licenses, subscriptions, software services and maintenance) grew in the aggregate 23.1 percent for the quarter. Operating income was $4.7 million, up 34.3 percent, compared with operating income of $3.5 million in the same quarter of 2007. Net income was $3.1 million, or $0.08 per diluted share, an increase of 30.2 percent over the prior year�s first quarter. Net income for the three months ended March 31, 2007 amounted to $2.4 million, or $0.06 per diluted share. Free cash flow was $16.9 million (cash provided by operating activities of $17.8 million minus capital expenditures of $891,000), a 176 percent increase from the prior period�s free cash flow of $6.1 million (cash provided by operating activities of $6.9 million minus capital expenditures of $766,000). EBITDA, or earnings before interest, income taxes, depreciation and amortization, totaled $7.6 million. EBITDA for the first quarter of 2007 totaled $6.1 million. Gross margin was 36.7 percent, compared to 35.8 percent in the quarter ended March 31, 2007. Selling, general and administrative expenses were $14.8 million (24.9 percent of revenues) compared to $13.0 million (25.8 percent of revenues) in the same quarter last year. Share-based compensation expense for the first quarter under FAS 123R totaled $716,000, of which $69,000 was included in cost of revenues and $647,000 was included in selling, general and administrative expenses. For the first quarter of 2007, share-based compensation expense was $498,000, of which $43,000 was included in cost of revenues and $455,000 was included in selling, general and administrative expenses. Total backlog was $239.0 million at March 31, 2008, compared to $197.8 million at March 31, 2007. Software-related backlog (excluding appraisal services) grew year-over-year by $39.1 million, or 22.3 percent, to $214.5 million at March 31, 2008. Tyler is debt free and ended the first quarter of 2008 with $46.1 million in cash and investments. The Company used $13.9 million in cash for two acquisitions during the quarter and repurchased 814,000 shares of its common stock at an aggregate purchase price of $10.5 million. �We are pleased to report solid results for the first quarter of 2008 which were in line with our expectations and marked Tyler�s 28th consecutive profitable quarter,� commented John S. Marr, Jr., Tyler�s President and Chief Executive Officer. �Our revenue growth of approximately 18 percent reflects a stable market and the continued strength of our competitive position. Acquisitions completed since March 31, 2007, accounted for approximately one-third of our revenue growth, while organic growth was approximately 12.3 percent, despite the anticipated decline in appraisal services revenues. Tyler�s revenue growth, combined with a 90 basis point increase in our overall gross margin and improvement in SG&A expenses as a percentage of revenue, resulted in net income growth of more than 30 percent from the same period last year. �Tyler�s free cash flow of approximately $17.0 million was exceptionally strong in the first quarter, driven by favorable billing terms on certain large contracts,� noted Mr. Marr. �For the trailing twelve months ended March 31, 2008, our free cash flow exceeded $41 million. And, although we used nearly $14 million in cash for acquisitions and repurchased 814,000 shares of our common stock in the first quarter, we finished the quarter with more than $46 million in cash and investments on a balance sheet that provides us the ability to maintain significant product development expenditures as well as the flexibility to make strategic investments for future growth. �Although there are obviously broad concerns about the U.S. economy and real estate values, activity in the markets in which we compete continues to be essentially normal. We have not seen fundamental changes in our sales pipeline, including leading indicators such as requests for proposals and demonstration activity,� Mr. Marr continued. �In addition, our backlog remains healthy and grew year-over-year at a faster rate than revenues. While our current outlook for the full year 2008 is basically unchanged from the guidance we provided earlier this year, we will continue to vigilantly monitor market conditions as we go forward.� Annual Guidance for 2008 Total revenues for 2008 are currently expected to be in the range of $259 million to $265 million. Tyler expects to have diluted earnings per share of approximately $0.49 to $0.53. These estimates include assumed pretax expense for the year of approximately $2.9 million, or $0.06 per share after taxes, related to stock options and the Company�s stock purchase plan. The Company currently estimates that its effective income tax rate for 2008 will be approximately 38.3 percent. Tyler expects that free cash flow for the year 2008 will be between $36.0 million and $42.0 million (cash provided by operations of $41.5 million to $46.5 million minus capital expenditures of between $4.5 million and $5.5 million). Tyler Technologies will hold a conference call on Thursday, April 24 at 12:00 p.m. Eastern Time to discuss the Company�s results. To participate in the teleconference, please dial into the call a few minutes before the start time: (888) 240-9284 (U.S. dialers) and (913) 312-0644 (international dialers). Please reference passcode 3147438. A replay of the call will be available two hours after the completion of the call through May 1, 2008. To access the replay, please dial (888) 203-1112 (U.S. dialers) and (719) 457-0820 (international dialers) and reference passcode 3147438. The live webcast and archived replay can also be accessed on the Company�s Web site at www.tylertech.com. Based in Dallas, Tyler Technologies is a leading provider of end-to-end information management solutions and services for local governments. Tyler partners with clients to make local government more accessible to the public, more responsive to needs of citizens, and more efficient. Tyler�s client base includes more than 7,000 local government offices throughout all 50 states, Canada, Puerto Rico and the United Kingdom. Tyler has been named one of �America�s 200 Best Small Companies� by Forbes Magazine and one of �America�s 100 Most Trustworthy Companies� by Audit Integrity, an independent research firm. More information about Tyler Technologies can be found at www.tylertech.com. Non-GAAP Measures: This press release discloses the financial measures of EBITDA and free cash flow. These financial measures are not prepared in accordance with generally accepted accounting principles (GAAP) and are therefore considered non-GAAP financial measures. The non-GAAP measures should be considered in addition to, and not as a substitute for, or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. The non-GAAP measures used by Tyler Technologies may be different from non-GAAP measures used by other companies. We believe the presentation of these non-GAAP financial measures provides useful information to users of our financial statements and is helpful to fully understand our past financial performance and prospects for the future. We believe these measures are widely used by investors, analysts, and other users of our financial statements to analyze operating performance and to compare our results to those of other companies, and they provide a more complete understanding of our underlying operational results and trends, as well as our marketplace performance and our ability to generate cash. In addition, we internally monitor and review these non-GAAP financial measures on a consolidated basis as some of the primary indicators management uses to evaluate Company performance and for planning and forecasting future periods. Management believes that EBITDA and free cash flow provide meaningful supplemental information to the investor to fully assess the financial performance, trends, and future prospects of Tyler�s core operations. Tyler Technologies, Inc. has included in this press release "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 concerning its business and operations. Tyler Technologies expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its expectations. These expectations and the related statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to, changes in competition, changes in general economic conditions, changes in the budgets and regulatory environments of the Company's customers, risks associated with the development of new products and the enhancement of existing products, the ability to attract and retain qualified personnel, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. TYLER TECHNOLOGIES, INC. CONDENSED INCOME STATEMENTS (Amounts in thousands, except per share data) (Unaudited) � � Three Months Ended March 31, 2008 2007 Revenues: Software licenses $ 8,369 $ 7,932 Subscriptions 3,265 2,245 Software services 16,525 12,949 Maintenance 24,849 19,939 Appraisal services 4,582 5,580 Hardware and other � 1,761 � � 1,687 � Total revenues 59,351 50,332 � Cost of revenues: Software licenses 2,203 1,958 Acquired software 436 394 Software services, maintenance and subscriptions 30,444 24,643 Appraisal services 3,167 3,996 Hardware and other � 1,298 � � 1,319 � Total cost of revenues 37,548 32,310 � Gross profit 21,803 18,022 � Selling, general and administrative expenses 14,752 12,976 Research and development expense 1,816 1,223 Amortization of customer and trade name intangibles � 567 � � 347 � Operating income 4,668 3,476 Other income, net � 402 � � 447 � Income before income taxes 5,070 3,923 Income tax provision � 1,944 � � 1,522 � Net income $ 3,126 � $ 2,401 � � Earnings per common share: Basic $ 0.08 � $ 0.06 � Diluted $ 0.08 � $ 0.06 � � EBITDA (1) $ 7,571 � $ 6,065 � � Weighted average common shares outstanding: Basic 38,020 38,813 Diluted 39,527 42,066 � (1) Reconciliation of EBITDA Three MonthsEnded March 31, � 2008 � � 2007 � Net income $ 3,126 $ 2,401 Amortization of customer and trade name intangibles 567 347 Depreciation and other amortization included in cost of revenues and selling, general and administrative expenses 2,369 2,202 Interest income included in other income, net (435 ) (407 ) Income tax provision � 1,944 � � 1,522 � EBITDA $ 7,571 � $ 6,065 � TYLER TECHNOLOGIES, INC. CONDENSED BALANCE SHEETS (Amounts in thousands) � � � � March 31, 2008 (unaudited) December 31, 2007 ASSETS � Current assets: Cash and cash equivalents $ 33,091 $ 9,642 Restricted cash equivalents 5,082 4,462 Short-term investments available-for-sale 2,125 41,590 Accounts receivable, net 59,271 63,965 Other current assets 10,167 9,050 Deferred income taxes � 1,922 � 2,355 Total current assets 111,658 131,064 � Accounts receivable, long-term portion 529 398 Property and equipment, net 10,030 9,826 Non-current investments available-for-sale 5,825 - � Other assets: Goodwill and other intangibles, net 118,806 100,045 Other � 600 � 175 � Total assets $ 247,448 $ 241,508 � � LIABILITIES AND SHAREHOLDERS' EQUITY � Current liabilities: Accounts payable and accrued liabilities $ 21,816 $ 22,860 Deferred revenue � 83,426 � 73,714 Total current liabilities 105,242 96,574 � Deferred income taxes 9,415 7,723 Shareholders' equity � 132,791 � 137,211 � Total liabilities and shareholders' equity $ 247,448 $ 241,508 TYLER TECHNOLOGIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) � � Three months ended March 31, 2008 2007 Cash flows from operating activities: Net income $ 3,126 $ 2,401 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 2,936 2,549 Share-based compensation expense 716 498 Changes in operating assets and liabilities, exclusive of effects of acquired companies � 10,990 � � 1,424 � Net cash provided by operating activities � 17,768 � � 6,872 � � Cash flows from investing activities: Proceeds from sales of short-term investments 42,265 2,610 Purchases of short-term investments (8,625 ) (3,850 ) Cost of acquisitions, net of cash acquired (13,864 ) (4,963 ) Investment in software development costs - (25 ) Additions to property and equipment (891 ) (741 ) (Increase) decrease in restricted investments (620 ) 500 (Increase) decrease in other � (400 ) � 38 � Net cash provided by (used by) investing activities � 17,865 � � (6,431 ) � Cash flows from financing activities: Purchase of treasury shares (12,646 ) (3,943 ) Contributions from employee stock purchase plan 256 268 Proceeds from exercise of stock options 164 936 Excess tax benefits from share-based compensation expense � 42 � � 197 � Net cash used by financing activities � (12,184 ) � (2,542 ) � Net increase (decrease) in cash and cash equivalents 23,449 (2,101 ) Cash and cash equivalents at beginning of period � 9,642 � � 17,212 � � Cash and cash equivalents at end of period $ 33,091 � $ 15,111 �