TYL Tyler Technologies Corp

Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the quarter ended December 31, 2011. Tyler reported total revenues grew 13.3 percent to $82.1 million, and net income was $8.7 million, or $0.27 per diluted share. In the same quarter last year, the Company had revenue of $72.4 million and net income of $7.2 million, or $0.21 per diluted share. Gross margin increased 250 basis points to 47.5 percent compared to 45.0 percent in the year-ago quarter.

Recurring software revenues from maintenance and subscriptions were $47.8 million in the fourth quarter of 2011, an increase of 18.1 percent compared to the fourth quarter of 2010, and comprised 58.3 percent of the quarter’s total revenue, compared to 55.9 percent for the same period in 2010.

Free cash flow increased 22.1 percent to $9.0 million compared to $7.4 million in the fourth quarter of 2010. For the year 2011, Tyler reported record free cash flow, excluding capital expenditures for real estate, of $50.8 million, an increase of 60.1 percent, compared to free cash flow, excluding capital expenditures for real estate, of $31.7 million for 2010. Including capital expenditures for real estate, 2011 free cash flow was $44.2 million compared to 2010 free cash flow of $30.4 million.

EBITDA, or earnings before interest, income taxes, depreciation and amortization, increased 28.6 percent to $17.1 million, compared to $13.3 million in the prior-year quarter.

Total backlog reached a new high of $339.8 million at December 31, 2011, an increase of 20.7 percent from $281.4 million at December 31, 2010 and increased sequentially by 13.8 percent from $298.7 million at September 30, 2011. Software-related backlog (excluding appraisal services) was $319.9 million, an increase of 28.9 percent compared to $248.2 million at December 31, 2010, and sequentially increased by 15.3 percent from $277.5 million at September 30, 2011.

Tyler ended the fourth quarter of 2011 with $3.3 million in cash and investments and $81.0 million of availability under its $150.0 million revolving line of credit. During the fourth quarter, Tyler repurchased approximately 53,000 shares of its common stock at an average price of $24.77 per share. For the year 2011, Tyler repurchased approximately 3.0 million shares at an average price of $23.90. As of December 31, 2011, the Company was authorized to repurchase up to 1.7 million additional shares.

“Tyler’s strong fourth-quarter financial performance builds upon a trend of improving results that began in the second quarter as the market started to show signs of modest improvement,” said John S. Marr Jr., Tyler’s president and chief executive officer. “By many measures, our fourth-quarter results are the best we’ve ever reported. We achieved double-digit revenue growth driven by continued solid growth in recurring revenues from subscriptions and maintenance. We’re also pleased that software license revenue grew year-over-year for the first time since the fourth quarter of 2009. In addition, our gross margin of 47.5 percent represents a new quarterly high.

“New contract signings in the fourth quarter, which included a contract with the state of Maryland valued at approximately $45 million for our Odyssey® court management system, were very good,” said Mr. Marr. “Tyler enters 2012 with a record backlog of signed contracts and a very active sales pipeline. We are cautiously optimistic that market conditions will continue to improve in 2012, and with Tyler’s strong competitive position our outlook for the coming year is positive.”

Annual Guidance for 2012

Total revenues for 2012 are currently expected to be in the range of $350 million to $356 million. Tyler expects that diluted earnings per share will be approximately $0.94 to $1.01 and approximately 60 percent of earnings will occur in the second half of the year. These estimates include assumed pretax non-cash stock-based compensation expense of approximately $7.4 million, or $0.18 per share after taxes. The Company currently estimates that its effective tax rate for 2012 will be approximately 38.5 percent. Tyler expects that capital expenditures for the year will be between $15 million and $16 million, including approximately $9 million related to real estate, and that depreciation and amortization expense will be between $11.2 million and $11.7 million.

Tyler Technologies will hold a conference call on Thursday, February 23, at 10 a.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: 877-317-6789 (U.S. callers) and 412-317-6789 (international callers), and reference confirmation code 10009867 when prompted. A replay will be available two hours after the completion of the call through March 2, 2012. To access the replay, please dial 877-344-7529 (U.S. callers) and 412-317-0088 (international callers) and reference passcode 10009867. 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 10,000 local government offices in all 50 states, Canada, the Caribbean and the United Kingdom. Forbes has named Tyler one of “America’s Best Small Companies” four times in the last five years. More information about Dallas-based 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) 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 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) economic, political and market conditions, including the recent global economic and financial crisis, and the general tightening of access to debt or equity capital; (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)           Three Months Ended December 31, Twelve Months Ended December 31,   2011   2010   2011   2010 Revenues: Software licenses $ 9,833 $ 8,469 $ 32,594 $ 34,913 Subscriptions 8,930 6,218 31,160 23,298 Software services 17,217 16,060 69,617 68,340 Maintenance 38,919 34,298 146,498 135,655 Appraisal services 5,283 5,742 23,228 20,554 Hardware and other   1,897   1,652   6,294   5,868 Total revenues 82,079 72,439 309,391 288,628   Cost of revenues: Software licenses 714 985 3,034 3,456 Acquired software 343 398 1,125 1,592 Software services, maintenance and subscriptions 37,405 33,901 143,776 138,085 Appraisal services 3,248 3,468 14,550 12,910 Hardware and other   1,349   1,071   4,994   4,268 Total cost of revenues 43,059 39,823 167,479 160,311   Gross profit 39,020 32,616 141,912 128,317   Selling, general and administrative expenses 21,141 17,143 75,650 69,480 Research and development expense 2,634 3,478 16,414 13,971 Amortization of customer and trade name intangibles   923   806   3,331   3,225 Operating income 14,322 11,189 46,517 41,641 Other expense, net   818   1,030   2,404   1,742 Income before income taxes 13,504 10,159 44,113 39,899 Income tax provision   4,805   2,949   16,556   14,845 Net income $ 8,699 $ 7,210 $ 27,557 $ 25,054   Earnings per common share: Basic $ 0.29 $ 0.22 $ 0.88 $ 0.74 Diluted $ 0.27 $ 0.21 $ 0.83 $ 0.71   EBITDA (1) $ 17,109 $ 13,306 $ 56,681 $ 51,572   Weighted average common shares outstanding: Basic 29,823 32,285 31,267 34,075 Diluted 32,031 33,895 33,154 35,528     (1) Reconciliation of EBITDA Three Months Ended December 31, Twelve Months Ended December 31,   2011   2010   2011   2010 Net income $ 8,699 $ 7,210 $ 27,557 $ 25,054 Amortization of customer and trade name intangibles 923 806 3,331 3,225 Depreciation and other amortization included in cost of revenues, SG&A and other expenses 1,975 1,905 7,345 7,563 Interest expense included in other expense, net 707 436 1,892 885 Income tax provision   4,805   2,949   16,556   14,845 EBITDA $ 17,109 $ 13,306 $ 56,681 $ 51,572   TYLER TECHNOLOGIES, INC. CONDENSED BALANCE SHEETS (Amounts in thousands)         December 31, December 31,   2011   2010 ASSETS   Current assets: Cash and cash equivalents $ 1,326 $ 2,114 Short-term investments available-for-sale 25 25 Accounts receivable, net 90,012 81,860 Other current assets 10,634 11,344 Deferred income taxes   5,095   3,106 Total current assets 107,092 98,449   Accounts receivable, long-term portion 2,095 1,231 Property and equipment, net 40,915 34,851 Non-current investments available-for-sale 1,953 2,126   Other assets: Goodwill and other intangibles, net 141,722 125,138 Other   1,614   2,237   Total assets $ 295,391 $ 264,032     LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities: Accounts payable and accrued liabilities $ 27,962 $ 22,059 Deferred revenue   123,678   102,590 Total current liabilities 151,640 124,649   Revolving line of credit 60,700 26,500 Deferred income taxes 4,941 5,911 Shareholders' equity   78,110   106,972   Total liabilities and shareholders' equity $ 295,391 $ 264,032         TYLER TECHNOLOGIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (In thousands)       Three Months Ended December 31, Twelve months ended December 31,   2011     2010     2011     2010   Cash flows from operating activities: Net income $ 8,699 $ 7,210 $ 27,557 $ 25,054 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 2,898 2,711 10,676 10,788 Share-based compensation expense 1,668 1,515 6,253 6,132 Provision for losses-accounts receivable 805 1,161 805 1,161 Excess tax benefit from exercise of share-based arrangements (1,869 ) (791 ) (3,590 ) (2,000 ) Deferred income taxes (2,916 ) (959 ) (2,916 ) (959 ) Changes in operating assets and liabilities, exclusive of effects of acquired companies   2,045     (2,761 )   17,650     (4,826 ) Net cash provided by operating activities   11,330     8,086     56,435     35,350     Cash flows from investing activities: Proceeds from sales of investments - - 50 75 Cost of acquisitions, net of cash acquired (17,298 ) - (17,298 ) (9,661 ) Additions to property and equipment (2,352 ) (733 ) (12,278 ) (4,930 ) Decrease in restricted investments - - - 6,000 Decrease (increase) in other   518     (175 )   717     (178 ) Net cash used by investing activities   (19,132 )   (908 )   (28,809 )   (8,694 )   Cash flows from financing activities: Increase in net borrowings on revolving line of credit 2,700 10,000 34,200 26,500 Purchase of treasury shares (3,277 ) (24,119 ) (71,802 ) (65,793 ) Contributions from employee stock purchase plan 573 497 2,045 1,901 Proceeds from exercise of stock options 1,983 1,318 3,553 3,181 Debt issuance costs - - - (2,027 ) Excess tax benefit from exercise of share-based arrangements   1,869     791     3,590     2,000   Net cash provided (used) by financing activities   3,848     (11,513 )   (28,414 )   (34,238 )   Net decrease in cash and cash equivalents (3,954 ) (4,335 ) (788 ) (7,582 ) Cash and cash equivalents at beginning of period   5,280     6,449     2,114     9,696     Cash and cash equivalents at end of period $ 1,326   $ 2,114   $ 1,326   $ 2,114       Reconciliation of free cash flow: Three Months Ended December 31, Twelve months ended December 31,   2011     2010     2011     2010   Cash provided by operating activities $ 11,330 $ 8,086 $ 56,435 $ 35,350 Capital expenditures   (2,352 )   (733 )   (12,278 )   (4,930 ) Free cash flow 8,978 7,353 44,157 30,420 Capital expenditures for real estate   -     -     6,657     1,310   Free cash flow, excluding real estate $ 8,978   $ 7,353   $ 50,814   $ 31,730