Tyler Technologies, Inc. (NYSE: TYL) today reported the
following financial results for the quarter ended June 30,
2010:
- Total revenues were $72.6
million compared to $72.2 million in the same period last year.
Software-related revenues (software licenses, subscriptions,
software services, and maintenance) were $66.3 million versus $65.6
for the second quarter of 2009.
- Operating income was $10.5
million compared with operating income of $11.4 million in the same
quarter of 2009.
- The effective income tax rate
was 39.8 percent compared to 39.4 percent in the second quarter of
2009.
- Net income was $6.2 million, or
$0.17 per diluted share, compared to the prior year’s second
quarter of $6.9 million, or $0.19 per diluted share.
- Free cash flow was negative $8.6
million (cash used by operating activities of $7.3 million minus
capital expenditures of $1.3 million). For the second quarter of
2009, free cash flow was negative $6.1 million (cash used by
operating activities of $3.9 million minus capital expenditures of
$2.2 million). For the six months ended June 30, 2010, free cash
flow was negative $3.9 million (cash used by operating activities
of $374,000 minus capital expenditures of $3.5 million). For the
six months ended June 30, 2009, free cash flow was $3.8 million
(cash provided by operating activities of $8.3 million minus
capital expenditures of $4.5 million). Capital expenditures for the
six-month periods ending June 30, 2010 and 2009 included $1.6
million and $3.3 million, respectively, related to acquisitions of
real estate for the company’s current and future office
requirements. Excluding the real estate acquisitions, free cash
flow for the six months ended June 30, 2010 was negative $2.2
million compared to $7.1 million for the same period in 2009.
- EBITDA, or earnings before
interest, income taxes, depreciation and amortization, totaled
$13.1 million compared to $13.8 million for the second quarter of
2009.
- Gross margin increased 40 basis
points to 44.7 percent, compared to 44.3 percent in the quarter
ended June 30, 2009. Sequentially, gross margin for the second
quarter improved from 43.0 percent, or 170 basis points, in the
first quarter of 2010.
- Selling, general and
administrative expenses were $17.4 million (24.0 percent of
revenues), compared to $17.1 million (23.7 percent of revenues) in
the same quarter last year. Sequentially, SG&A expenses as a
percentage of revenue decreased 110 basis points from 25.1 percent
for the first quarter of 2010.
- Share-based compensation expense
for the second quarter totaled $1.6 million, of which $180,000 was
included in cost of revenues and $1.4 million was included in
selling, general and administrative expenses. For the second
quarter of 2009, share-based compensation expense was $1.2 million,
of which $134,000 was included in cost of revenues and $1.1 million
was included in selling, general and administrative expenses.
- Total backlog was $258.0 million
at June 30, 2010, compared to $218.8 million at March 31, 2010 and
$235.3 million at June 30, 2009. Software-related backlog
(excluding appraisal services) was $223.9 million compared to
$209.4 million at June 30, 2009.
- Tyler ended the second quarter
of 2010 with $8.3 million in cash and investments and $7.1 million
of availability under its $25.0 million revolving line of credit.
The Company is currently engaged in discussions with banks
regarding an expanded long-term revolving credit facility to
provide additional flexibility for working capital, potential
acquisitions and/or share repurchases. However, there can be no
assurances that such discussions will be successful.
- During the quarter, the Company
repurchased 739,856 shares of its common stock for $12.5 million at
an average price of $16.85 per share. For the first six months of
2010, Tyler repurchased 868,489 shares at an average price of
$17.13 per share. On July 27, 2010 Tyler’s board of directors
authorized the repurchase of up to an additional two million shares
of the Company’s common stock and together with previous
authorizations, Tyler may repurchase up to 3.4 million shares.
Revenues for the six months ended June 30, 2010 were $142.4
million compared to $141.7 million for the same period in 2009.
Operating income for the first half of 2010 was $18.6 million
versus operating income of $21.4 for the first half of 2009. Net
income for the six months ended June 30, 2010 was $11.1 million, or
$0.31 per diluted share compared to net income of $12.9 million, or
$0.35 per share for the comparable period of 2009.
“Tyler Technologies’ results for the second quarter of 2010 were
somewhat mixed,” said John S. Marr, Jr., Tyler’s President and
Chief Executive Officer. “As in the first quarter of this year, our
total revenues grew only slightly, and revenues from both software
licenses and software services were below last year’s levels.
However, recurring revenues showed solid growth, with maintenance
up 10 percent and subscriptions up 40 percent. Despite lower
software license revenues, our gross margin improved by 40 basis
points over last year’s second quarter to 44.7 percent.
“We continued to invest aggressively in product development, and
our research and development expenses rose 32 percent over last
year. We believe that the investments we are making today in both
new and existing products are important strategically and that they
will result in significant long-term competitive advantages for
Tyler.
“It is encouraging that new contract signings were very strong
in the most recent quarter, and we enter the second half of the
year with a record high backlog of signed contracts and new
business pipelines that are active. Nonetheless, we continue to
experience longer sales cycles, as well as extended implementation
timelines on signed business. As a result, the timing of both new
contract signings and revenue recognition after signing remains
unpredictable in the current environment,” said Mr. Marr.
Annual Guidance for
2010
Total revenues for 2010 are currently expected to be in the
range of $298 million to $302 million. Tyler expects to have
diluted earnings per share of approximately $0.72 to $0.77. These
estimates include assumed non-cash pretax expense for the year of
approximately $6.1 million, or $0.13 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 2010
will be approximately 39.8 percent.
Tyler expects that free cash flow for the year 2010 will be
between $34.0 million and $39.5 million (cash provided by
operations of $40.0 million to $45.0 million minus capital
expenditures of between $5.5 million and $6.0 million). Excluding
estimated real estate capital expenditures of approximately $2.0
million, free cash flow for 2010 is expected to be between $36.0
million and $41.5 million.
Tyler Technologies will hold a conference call on Thursday, July
29 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: (877) 397-0292 (U.S. dialers) and
(719) 325-4844 (international dialers). Please refer to
confirmation code 9044051. A replay of the call will be available
two hours after the completion of the call through August 5, 2010.
To access the replay, please dial (888) 203-1112 (U.S. dialers) and
(719) 457-0820 (international dialers) and reference passcode
9044051. 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 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 9,000
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” for three consecutive years by Forbes
Magazine. 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 EBITDA and free cash flow
are widely used by investors, analysts, and other users of our
financial statements to analyze operating performance, provide
meaningful comparisons to prior periods 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. Therefore, 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.
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) economic,
political and market conditions, including the recent global
economic and financial crisis, and the general tightening of access
to debt or equity capital; (2) 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; (3) changes in the budgets or
regulatory environments of our customers, primarily local and state
governments, that could negatively impact information technology
spending; (4) technological and market risks associated with the
development of new products or services or of new versions of
existing or acquired products or services; (5) our ability to
successfully complete acquisitions and achieve growth or
operational synergies through the integration of acquired
businesses, while avoiding unanticipated costs and disruptions to
existing operations; (6) 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; (7) 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 (8) 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 INCOME STATEMENTS
(Amounts in thousands, except per share data) (Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2010 2009
2010 2009 Revenues: Software licenses
$ 8,735 $ 9,912
$ 17,184 $ 20,668
Subscriptions
5,807 4,160
11,060 8,136 Software
services
18,506 21,330
35,562 40,562 Maintenance
33,212 30,224
66,628 59,362 Appraisal services
4,925 5,054
9,200 9,946 Hardware and other
1,415 1,492
2,786
3,063 Total revenues
72,600 72,172
142,420 141,737 Cost of revenues: Software licenses
852 1,433
1,559 2,709 Acquired software
398
358
796 673 Software services, maintenance and subscriptions
34,595 34,174
69,476 67,261 Appraisal services
3,131 2,997
6,008 6,360 Hardware and other
1,149 1,213
2,087
2,445 Total cost of revenues
40,125 40,175
79,926 79,448 Gross profit
32,475 31,997
62,494 62,289 Selling, general and administrative
expenses
17,439 17,084
35,000 34,494 Research and
development expense
3,744 2,839
7,260 5,074
Amortization of customer and trade name intangibles
807 677
1,613
1,349 Operating income
10,485 11,397
18,621 21,372 Other expense, net
(102 )
(63 )
(144 ) (77 ) Income before
income taxes
10,383 11,334
18,477 21,295 Income tax
provision
4,134 4,461
7,356 8,416 Net income
$
6,249 $ 6,873
$ 11,121 $
12,879 Earnings per common share: Basic
$
0.18 $ 0.19
$ 0.32 $ 0.36
Diluted
$ 0.17 $ 0.19
$
0.31 $ 0.35
EBITDA (1)
$ 13,141 $ 13,784
$
23,926 $ 26,091 Weighted average common
shares outstanding: Basic
34,862 35,343
34,815 35,393
Diluted
36,203 36,723
36,262 36,708 (1)
Reconciliation of EBITDA Three Months Ended June 30, Six Months
Ended June 30,
2010 2009
2010 2009 Net income
$ 6,249 $ 6,873
$ 11,121 $ 12,879
Amortization of customer and trade name intangibles
807 677
1,613 1,349 Depreciation and other amortization included in
cost of revenues and selling, general and administrative expenses
1,862 1,725
3,705 3,385 Interest expense included in
other expense, net
89 48
131 62 Income tax provision
4,134 4,461
7,356
8,416 EBITDA
$ 13,141 $
13,784
$ 23,926 $ 26,091
TYLER TECHNOLOGIES, INC. CONDENSED BALANCE SHEETS (Amounts in
thousands)
June 30, December 31,
2010 2009
(Unaudited) ASSETS Current
assets: Cash and cash equivalents
$ 1,192 $ 9,696
Restricted cash equivalents
5,000 6,000 Short-term
investments available-for-sale
25 50 Accounts receivable,
net
89,503 81,245 Other current assets
11,356 9,358
Deferred income taxes
3,288 3,338 Total
current assets
110,364 109,687 Accounts receivable,
long-term portion
774 1,018 Property and equipment, net
35,695 35,750 Non-current investments available-for-sale
2,094 1,976 Other assets: Goodwill and other
intangibles, net
127,863 122,029 Other
209
210 Total assets
$ 276,999 $ 270,670
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued liabilities
$
19,895 $ 30,137 Short-term revolving line of credit
14,650 - Deferred revenue
97,838 99,116
Total current liabilities
132,383 129,253 Deferred
income taxes
7,137 7,059 Shareholders' equity
137,479 134,358 Total liabilities and
shareholders' equity
$ 276,999 $ 270,670
TYLER TECHNOLOGIES, INC. CONDENSED STATEMENTS OF CASH FLOWS
(In thousands) (unaudited) Six months ended June 30,
2010 2009 Cash flows from operating activities: Net income
$ 11,121 $ 12,879 Adjustments to reconcile net income
to net cash (used) provided by operations: Depreciation and
amortization
5,318 4,734 Share-based compensation expense
3,073 2,365 Excess tax benefit from exercise of share-based
arrangements
(1,161 ) (357 ) Changes in operating
assets and liabilities, exclusive of effects of acquired companies
(18,725 ) (11,288 ) Net cash (used)
provided by operating activities
(374 )
8,333 Cash flows from investing activities: Proceeds
from sales of investments
50 1,675 Cost of acquisitions, net
of cash acquired
(9,661 ) (2,234 ) Additions to
property and equipment
(3,493 ) (4,538 ) Decrease
(increase) in restricted investments
1,000 (918 ) Decrease
in other
3 8 Net cash used by
investing activities
(12,101 ) (6,007 )
Cash flows from financing activities: Purchase of treasury
shares
(14,398 ) (10,210 ) Increase in net borrowings
on revolving line of credit
14,650 7,425 Contributions from
employee stock purchase plan
951 713 Proceeds from exercise
of stock options
1,607 1,051 Excess tax benefit from
exercise of share-based arrangements
1,161
357 Net cash provided (used) by financing activities
3,971 (664 ) Net (decrease)
increase in cash and cash equivalents
(8,504 ) 1,662
Cash and cash equivalents at beginning of period
9,696 1,762 Cash and cash
equivalents at end of period
$ 1,192 $ 3,424
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