Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the quarter ended September 30, 2012. Total revenue
grew 21.6 percent to $93.8 million and net income was $10.8
million, or $0.33 per diluted share. In the same quarter last year,
the Company had revenue of $77.2 million and net income of $7.5
million, or $0.23 per diluted share. Gross margin increased 110
basis points to 47.9 percent compared to 46.8 percent in the
year-ago quarter.
Recurring software revenue from maintenance and subscriptions
was $55.8 million in the third quarter of 2012, an increase of 24.0
percent compared to the third quarter of 2011, and comprised 59.4
percent of the quarter’s total revenue.
Excluding capital expenditures associated with real estate, free
cash flow for the third quarter of 2012 was $32.9 million compared
to $24.3 million in the third quarter of last year. Including real
estate capital expenditures, free cash flow for the current quarter
was $31.8 million compared to $24.3 million for the same period in
2011.
EBITDA, or earnings before interest, income taxes, depreciation
and amortization, increased 45.9 percent to $21.6 million in the
third quarter of 2012, compared to $14.8 million in the prior-year
quarter.
Total backlog was $357.9 million at September 30, 2012, up 19.8
percent from $298.7 million at September 30, 2011. Software-related
backlog (excluding appraisal services) reached a new high of $328.2
million, an increase of 18.3 percent compared to $277.5 million at
September 30, 2011.
“Tyler achieved exceptional results for the quarter, returning
organic revenue growth of over 13 percent and together with
revenues from our recent acquisitions, total growth of over 21
percent from the same period last year. We are encouraged that all
of our software-related revenue lines, and particularly our
recurring revenues, experienced strong double-digit growth,” said
John S. Marr Jr., Tyler’s president and chief executive officer.
“Tyler’s gross margin of 47.9 percent and operating profit margin
of almost 20 percent were both new quarterly highs.
“Bookings in the third quarter increased 15 percent over last
year, continuing a trend of improvement that reflects both improved
market conditions and our strong competitive position. In addition,
our new business pipeline remains very active, with volume near
historically high levels,” said Mr. Marr. “Our revenue and earnings
guidance is consistent with that issued earlier in the year, with
the ranges narrowed slightly to reflect our current expectations
for the mix of new business between SaaS and deployed license
contracts.”
Annual Guidance for 2012
Total revenues for 2012 are currently expected to be in the
range of $360 million to $363 million. Tyler expects that diluted
earnings per share will be approximately $0.96 to $1.01. These
estimates include assumed pretax non-cash, stock-based compensation
expense of approximately $7.5 million, or $0.17 per share after
taxes. The Company currently estimates that its effective tax rate
for 2012 will be approximately 39.2 percent. Tyler expects that
capital expenditures for the year will be between $12.5 million and
$13.5 million, including approximately $6.5 million related to real
estate, and that depreciation and amortization expense will be
between $13.2 million and $13.7 million.
Tyler Technologies will hold a conference call on Thursday,
October 25, 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 10019175 when prompted. A replay will be
available two hours after the completion of the call through
November 2, 2012. To access the replay, please dial 877-344-7529
(U.S. callers) and 412-317-0088 (international callers) and
reference passcode 10019175. The live webcast and archived replay
can also be accessed at www.tylertech.com.
About Tyler Technologies,
Inc.
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
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” five times in the last six 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 CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (Amounts in thousands, except per share
data) (Unaudited)
Three Months Ended September 30, Nine Months
Ended September 30,
2012 2011
2012 2011 Revenues:
Software licenses
$ 8,704 $ 7,631
$
24,440 $ 22,761 Subscriptions
11,335 7,989
31,856 22,230 Software services
22,099 17,644
62,366 52,400 Maintenance
44,452 37,011
126,362 107,579 Appraisal services
5,594 5,761
17,047 17,945 Hardware and other
1,661
1,148
5,865 4,397 Total revenues
93,845
77,184
267,936 227,312 Cost of revenues: Software
licenses
458 536
1,508 2,320 Acquired software
478 243
1,370 782 Software services, maintenance and
subscriptions
43,485 35,689
126,416 106,371 Appraisal
services
3,598 3,776
11,270 11,302 Hardware and other
882 808
4,310 3,645 Total
cost of revenues
48,901 41,052
144,874 124,420
Gross profit
44,944 36,132
123,062 102,892
Selling, general and administrative expenses
20,909 18,755
63,943 54,509 Research and development expense
4,273
4,196
14,775 13,780 Amortization of customer and trade name
intangibles
1,103 801
3,186
2,408 Operating income
18,659 12,380
41,158
32,195 Other expense, net
849 562
2,325 1,586 Income before income taxes
17,810
11,818
38,833 30,609 Income tax provision
6,978 4,312
15,215 11,751 Net
income
$ 10,832 $ 7,506
$ 23,618 $
18,858 Earnings per common share: Basic
$ 0.36
$ 0.24
$ 0.78 $ 0.60 Diluted
$ 0.33 $
0.23
$ 0.72 $ 0.57 Comprehensive income
$ 10,914 $ 7,506
$ 23,700 $ 18,858
EBITDA (1)
$ 21,625 $ 14,823
$
50,203 $ 39,572 Weighted average common shares
outstanding: Basic
30,387 31,097
30,267 31,247
Diluted
32,986 32,960
32,838 33,027 (1)
Reconciliation of EBITDA Three Months Ended September 30, Nine
Months Ended September 30,
2012 2011
2012 2011 Net
income
$ 10,832 $ 7,506
$ 23,618 $
18,858 Amortization of customer and trade name intangibles
1,103 801
3,186 2,408
Depreciation and other amortization
included in cost of revenues, SG&A and other expenses
2,177 1,758
6,430 5,370 Interest expense included in
other expense, net
535 446
1,754 1,185 Income tax
provision
6,978 4,312
15,215
11,751 EBITDA
$ 21,625 $ 14,823
$
50,203 $ 39,572 TYLER TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
September
30 2012 December 31,
(Unaudited) 2011 ASSETS
Current assets: Cash and cash equivalents
$
103 $ 1,326 Short-term investments available-for-sale
- 25 Accounts receivable, net
78,218 90,012 Other
current assets
10,692 10,634 Deferred income taxes
5,051 5,095 Total current assets
94,064
107,092 Accounts receivable, long-term portion
681
2,095 Property and equipment, net
43,017 40,915 Non-current
investments available-for-sale
2,029 1,953 Other
assets: Goodwill and other intangibles, net
155,069 141,722
Other
1,234 1,614 Total assets
$
296,094 $ 295,391 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable
and accrued liabilities
$ 24,527 $ 27,962 Deferred
revenue
120,127 123,678 Total
current liabilities
144,654 151,640 Revolving line of
credit
28,000 60,700 Deferred income taxes
5,431
4,941 Shareholders' equity
118,009 78,110
Total liabilities and shareholders' equity
$
296,094 $ 295,391 TYLER TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited) Nine months
ended September 30,
2012 2011 Cash flows from operating
activities: Net income
$ 23,618 $ 18,858 Adjustments
to reconcile net income to net cash provided by operations:
Depreciation and amortization
9,616 7,778 Share-based
compensation expense
5,506 4,585 Excess tax benefit from
exercise of share-based arrangements
(3,283 ) (1,721
) Changes in operating assets and liabilities, exclusive of effects
of acquired companies
6,797 15,605
Net cash provided by operating activities
42,254 45,105 Cash flows from
investing activities: Proceeds from sales of investments
75
50 Cost of acquisitions, net of cash acquired
(15,229
) - Additions to property and equipment
(6,351
) (9,926 ) Decrease in other
41
199 Net cash used by investing activities
(21,464 ) (9,677 ) Cash flows from
financing activities: (Decrease) increase in net borrowings on
revolving line of credit
(32,700 ) 31,500 Purchase of
treasury shares
- (68,525 ) Contributions from employee
stock purchase plan
1,832 1,472 Proceeds from exercise of
stock options
5,572 1,570 Excess tax benefit from exercise
of share-based arrangements
3,283 1,721
Net cash used by financing activities
(22,013
) (32,262 ) Net (decrease) increase in cash
and cash equivalents
(1,223 ) 3,166 Cash and cash
equivalents at beginning of period
1,326
2,114 Cash and cash equivalents at end of
period
$ 103 $ 5,280
Reconciliation of free cash flow: Nine months ended September 30,
2012 2011 Cash provided by operating activities
$
42,254 $ 45,105 Capital expenditures
(6,351
) (9,926 ) Free cash flow
35,903 35,179
Capital expenditures for real estate
3,078
6,657 Free cash flow, excluding real estate
$
38,981 $ 41,836
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