Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the second quarter ended June 30, 2013.
Second Quarter Financial Highlights:
- Total revenue was $103.1 million in the
second quarter of 2013, up 12.8 percent from $91.4 million in the
second quarter of 2012. Organic revenue growth was 9.5 percent and
acquisitions accounted for 3.3 percent growth.
- Recurring software revenue from
maintenance and subscriptions was $60.5 million for the quarter, an
increase of 15.0 percent compared to the second quarter of 2012,
and comprised 58.7 percent of second quarter 2013 revenue.
- Operating income for the quarter was
$15.3 million, an increase of 23.2 percent from the second quarter
of 2012.
- Net income for the quarter was $9.0
million, or $0.26 per diluted share, compared to $7.1 million, or
$0.22 per diluted share, for the second quarter of 2012.
- Cash flow from operations for the
quarter was negative $498,000, compared to negative $9.7 million
for the second quarter of 2012.
- Non-GAAP operating income for the
quarter was $19.9 million, up 25.6 percent from $15.8 million for
the second quarter of 2012.
- Adjusted EBITDA for the quarter was
$21.5 million, an increase of 23.4 percent, compared to $17.4
million for the second quarter of 2012.
- Non-GAAP net income for the quarter was
$12.2 million, or $0.36 per diluted share, compared to $9.5
million, or $0.29 per diluted share, for the second quarter of
2012.
- Total backlog was a record $430.9
million at June 30, 2013, up 19.7 percent from $360.0 million at
June 30, 2012. Software-related backlog (excluding appraisal
services) was $411.1 million, an increase of 25.3 percent compared
to $328.0 million at June 30, 2012.
“We are pleased with the results Tyler Technologies achieved in
the second quarter, with quarterly revenues surpassing $100 million
for the first time,” said John S. Marr Jr., Tyler’s president and
chief executive officer. “Software licenses and royalties revenue
increased almost 20 percent, while our subscription revenues grew
more than 31 percent, as adoption of our SaaS model and e-filing
offerings continues to expand. Our non-GAAP operating margin
improved 200 basis points to 19.3 percent and non-GAAP net income
rose 29 percent.
“Our bookings increased 24 percent over the second quarter of
2012, as we signed several significant contracts, including an $18
million contract with New York City for our iasWorld® property tax
solution and an agreement with the city of Columbus, Ohio, valued
at more than $5 million for the Microsoft Dynamics® AX ERP
solution. We ended the second quarter with a record backlog of $431
million. We continue to be encouraged by improving market
conditions as well as our competitive strengths, and we look
forward to building on our success in the second half of the year
while investing in growth initiatives like our e-filing solution
for Texas courts and expanding our subscription revenues,” said Mr.
Marr.
Guidance for 2013
As of July 24, 2013, Tyler Technologies is providing the
following guidance for the full year 2013:
- Tyler expects total revenues for 2013
to be in the range of $411 million to $416 million.
- Tyler expects 2013 diluted earnings per
share to be approximately $1.08 to $1.14.
- Tyler expects 2013 non-GAAP diluted
earnings per share to be approximately $1.44 to $1.50.
- Tyler expects pretax non-cash,
share-based compensation expense to be approximately $11.5
million.
- Tyler expects that its effective tax
rate for 2013 will be approximately 40 percent.
- Tyler expects that capital expenditures
for the year will be between $25.5 million and $26.5 million,
including approximately $17.8 million related to real estate, and
that total depreciation and amortization expense is expected to be
between $14.0 million and $14.5 million, including approximately
$6.5 million of amortization of acquisition intangibles.
Conference Call
Tyler Technologies will hold a conference call on Thursday, July
25, at 10:00 a.m. Eastern Daylight 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 10030606 when prompted. A replay will be
available two hours after the completion of the call through July
31, 2013. To access the replay, please dial 877-344-7529 (U.S.
callers) and 412-317-0088 (international callers) and reference
passcode 10030606. The live webcast and archived replay can also be
accessed in the Investor section of Tyler’s website 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
11,000 local government offices in all 50 states, Canada, the
Caribbean, the United Kingdom and other international locations.
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 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 that 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 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 customers, 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 further developed or
adequately maintained; (4) 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; (5) economic, political and
market conditions, including the recent global economic and
financial crisis, and the general tightening of access to debt or
equity capital; (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
successfully complete acquisitions and 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, customer
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 June
30, Six Months Ended June 30,
2013 2012
2013 2012
Revenues: Software licenses and royalties
$ 10,090 $
8,422
$ 18,920 $ 15,985 Subscriptions
13,863
10,553
27,336 20,521 Software services
24,085 21,737
44,546 40,267 Maintenance
46,639 42,060
92,689
81,910 Appraisal services
5,056 5,771
10,647 11,453
Hardware and other
3,355 2,825
4,749 3,955 Total revenues
103,088 91,368
198,887 174,091 Cost of revenues: Software licenses
and royalties
692 484
1,118 1,050 Acquired software
523 482
1,072 892 Software services, maintenance and
subscriptions
48,833 43,118
95,215 82,931 Appraisal
services
3,418 3,876
7,217 7,672 Hardware and other
2,580 2,709
3,378 3,428
Total cost of revenues
56,046 50,669
108,000 95,973
Gross profit
47,042 40,699
90,887 78,118
Selling, general and administrative expenses
24,971
21,699
47,617 43,034 Research and development expense
5,594 5,408
11,192 10,502 Amortization of customer
and trade name intangibles
1,128 1,137
2,259 2,083 Operating income
15,349 12,455
29,819 22,499 Other expense, net
296
773
634 1,476 Income before income taxes
15,053 11,682
29,185 21,023 Income tax provision
6,006 4,577
11,645 8,237
Net income
$ 9,047 $ 7,105
$ 17,540 $
12,786 Earnings per common share: Basic
$ 0.29 $ 0.24
$ 0.55 $ 0.42 Diluted
$ 0.26 $ 0.22
$ 0.51 $ 0.39
Weighted average common shares outstanding: Basic
31,617
30,171
31,670 30,175 Diluted
34,290 32,769
34,279 32,732 TYLER
TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES (Amounts in thousands, except per share data) (Unaudited)
Three Months EndedJune 30,
Six Months EndedJune 30,
2013 2012
2013
2012 Reconciliation of non-GAAP gross profit
and margin GAAP gross profit
$ 47,042 $ 40,699
$ 90,887 $ 78,118 Non-GAAP adjustments: Add:
Share-based compensation expense included in cost of revenues
343 257
679 505 Add: Amortization of acquired
software
523 482
1,072 892 Non-GAAP gross profit
$ 47,908 $ 41,438
$
92,638 $ 79,515 Non-GAAP gross margin
46.5 % 45.4 %
46.6
% 45.7 % Reconciliation of non-GAAP
operating income and margin GAAP operating income
$
15,349 $ 12,455
$ 29,819 $ 22,499 Non-GAAP
adjustments: Add: Share-based compensation expense
2,903
1,768
5,478 3,603 Add: Amortization of acquired software
523 482
1,072 892 Add: Amortization of customer and
trade name intangibles
1,128 1,137
2,259 2,083 Non-GAAP
adjustments subtotal
$ 4,554 $ 3,387
$ 8,809 $ 6,578 Non-GAAP operating
income
$ 19,903 $ 15,842
$
38,628 $ 29,077 Non-GAAP operating
margin
19.3 % 17.3 %
19.4
% 16.7 % Reconciliation of non-GAAP net
income and earnings per share GAAP net income
$ 9,047
$ 7,105
$ 17,540 $ 12,786 Non-GAAP adjustments: Add:
Total non-GAAP adjustments affecting operating income
4,554
3,387
8,809 6,578 Less: Tax impact related to non-GAAP
adjustments
(1,375 ) (1,015 )
(2,654 ) (1,947 ) Non-GAAP net income
$
12,226 $ 9,477
$ 23,695 $
17,417 Non-GAAP earnings per diluted share
$
0.36 $ 0.29
$ 0.69 $ 0.53
Detail of share-based compensation expense
Cost of software services, maintenance and subscriptions
$
343 $ 257
$ 679 $ 505 Selling, general and
administrative expenses
2,560 1,511
4,799 3,098 Total
share-based compensation expense
$ 2,903 $
1,768
$ 5,478 $ 3,603
Reconciliation of adjusted EBITDA GAAP net income
$
9,047 $ 7,105
$ 17,540 $ 12,786 Amortization
of customer and trade name intangibles
1,128 1,137
2,259 2,083 Depreciation and other amortization included in
cost of revenues, SG&A and other expenses
2,231 2,173
4,422 4,253 Interest expense included in other expense, net
164 641
374 1,219 Income tax provision
6,006 4,577
11,645
8,237 EBITDA
$ 18,576 $ 15,633
$ 36,240 $ 28,578 Share-based
compensation expense
2,903 1,768
5,478 3,603 Adjusted EBITDA
$ 21,479 $ 17,401
$
41,718 $ 32,181 TYLER TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
(Unaudited)
June 30, December
31,
2013 2012 ASSETS Current assets:
Cash and cash equivalents
$ 3,068 $ 6,406 Accounts
receivable, net
121,256 99,212 Other current assets
16,716 10,480 Deferred income taxes
5,512
5,544 Total current assets
146,552 121,642
Accounts receivable, long-term portion
800 1,187 Property
and equipment, net
55,378 45,381 Non-current investments
available-for-sale
2,103 2,037 Other assets: Goodwill
and other intangibles, net
163,300 166,811 Other
795 1,197 Total assets
$ 368,928
$ 338,255 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable and accrued liabilities
$ 27,359 $ 29,185 Deferred revenue
155,903 140,550 Total
current liabilities
183,262 169,735 Revolving line of
credit
- 18,000 Deferred income taxes
5,511 5,221
Shareholders' equity
180,155 145,299
Total liabilities and shareholders' equity
$ 368,928
$ 338,255 TYLER TECHNOLOGIES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six months ended June 30,
2013
2012 Cash flows from operating activities: Net income
$ 17,540 $ 12,786 Adjustments to reconcile net income
to net cash provided by operations: Depreciation and amortization
6,681 6,336 Share-based compensation expense
5,478
3,603 Excess tax benefit from exercise of share-based arrangements
(5,661 ) (1,581 ) Changes in operating assets and
liabilities, exclusive of effects of acquired companies
(7,452 ) (12,719 ) Net cash provided by
operating activities
16,586 8,425
Cash flows from investing activities: Proceeds from
sales of investments
25 25 Cost of acquisitions, net of cash
acquired
(181 ) (15,175 ) Additions to property and
equipment
(13,839 ) (4,334 ) Decrease (increase) in
other
295 (61 ) Net cash used by
investing activities
(13,700 ) (19,545
) Cash flows from financing activities: (Decrease) increase
in net borrowings on revolving line of credit
(18,000
) 5,000 Contributions from employee stock purchase plan
1,634 1,166 Proceeds from exercise of stock options
4,481 2,359 Excess tax benefit from exercise of share-based
arrangements
5,661 1,581 Net
cash (used) provided by financing activities
(6,224
) 10,106 Net decrease in cash and cash
equivalents
(3,338 ) (1,014 ) Cash and cash
equivalents at beginning of period
6,406
1,326 Cash and cash equivalents at end of
period
$ 3,068 $ 312
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