Subscription revenue grew 21 percent
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the second quarter ended June 30, 2017.
Second Quarter 2017 Financial Highlights:
- Total revenues were $209.1 million, up
10.7 percent from $189.0 million for the second quarter of
2016.
- Recurring revenue from maintenance and
subscriptions was $130.4 million, an increase of 15.7 percent
compared to the second quarter of 2016, and comprised 62.3 percent
of second quarter 2017 revenue.
- Operating income was $37.1 million, an
increase of 19.9 percent from $30.9 million for the second quarter
of 2016.
- Net income was $31.6 million, or $0.81
per diluted share, up 26.3 percent compared to $25.0 million, or
$0.65 per diluted share, for the second quarter of 2016.
- Cash flows from operations were $1.4
million, down 92.8 percent compared to $19.5 million for the second
quarter of 2016, primarily because of the timing of payroll and
income tax payments.
- Non-GAAP total revenues were $209.4
million, up 8.1 percent from $193.7 million for the second quarter
of 2016.
- Non-GAAP operating income was $55.2
million, up 5.8 percent from $52.2 million for the second quarter
of 2016.
- Non-GAAP net income was $35.6 million,
or $0.91 per diluted share, up 7.0 percent compared to $33.2
million, or $0.86 per diluted share, for the second quarter of
2016.
- Adjusted EBITDA was $59.5 million, up
7.4 percent compared to $55.4 million for the second quarter of
2016.
- Total backlog was $1.0 billion, up 17.3
percent from $867.6 million at June 30, 2016. Software-related
backlog (excluding appraisal services) was $988.7 million, up 19.6
percent from $826.9 million at June 30, 2016.
“Tyler performed at a high level on many fronts in the second
quarter, and our outlook for the full year is unchanged from our
guidance issued after the first quarter,” said John S. Marr Jr.,
Tyler’s chairman and chief executive officer. “Our bookings were
once again very strong, growing 14 percent over last year, and for
the first time our quarter-end backlog surpassed $1 billion. For
the first half of 2017, bookings were up nearly 18 percent.
“Subscription arrangements made up more than half of our new
software contracts in the quarter. While subscription revenues
increased more than 20 percent, the mix of new contracts certainly
impacted our overall revenue and earnings growth in the
quarter.
“As expected, our non-GAAP gross margin and non-GAAP operating
margin declined slightly as we continue to invest at a high level
in product development initiatives. We're very pleased with our
progress on those projects, including major initiatives related to
our public safety products that we believe are starting to
positively impact buying decisions in the market,” said Marr.
Guidance for 2017
As of July 26, 2017, Tyler Technologies is providing the
following guidance for the full year 2017:
- GAAP total revenues are expected to be
in the range of $844 million to $854 million.
- Non-GAAP total revenues are expected to
be in the range of $845 million to $855 million.
- GAAP diluted earnings per share are
expected to be approximately $3.26 to $3.34 and may vary
significantly due to the impact of stock option exercises on the
GAAP effective tax rate under ASU 2016-09.
- Non-GAAP diluted earnings per share are
expected to be approximately $3.83 to $3.91.
- Pretax non-cash, share-based
compensation expense is expected to be approximately $37
million.
- Fully diluted shares for the year are
expected to be between 39 million and 40 million shares.
- GAAP earnings per share assumes an
estimated effective tax rate of approximately 20 percent after
discrete tax items, and includes approximately $29 million of
discrete tax benefits related to share-based compensation.
- The non-GAAP effective tax rate is
expected to be 35.5 percent.
- Capital expenditures are expected to be
between $53 million and $55 million, including approximately $24
million related to real estate. Total depreciation and amortization
expense is expected to be approximately $50 million, including
approximately $35 million of amortization of acquisition
intangibles.
GAAP to non-GAAP guidance
reconciliation
Non-GAAP total revenues is derived from adding back the
estimated full year impact of write-downs of acquisition-related
deferred revenue and amortization of acquired leases of
approximately $1 million. Non-GAAP diluted earnings per share is
derived by adding back the estimated full year impact of non-cash
share-based compensation expense and employer portion of payroll
tax related to employee stock transactions of approximately $38
million, and amortization of acquired software and intangible
assets of approximately $35 million. Additionally, the non-GAAP tax
rate of 35.5 percent is estimated annually as described below under
"Non-GAAP Financial Measures" and excludes approximately $29
million of discrete tax benefits related to share-based
compensation that are included in the GAAP estimated annual
effective tax rate.
Conference Call
Tyler Technologies will hold a conference call on Thursday, July
27, at 10:00 a.m. EDT to discuss the company’s results. The company
is offering participants the opportunity to register in advance for
the conference through the following link:
http://dpregister.com/10109107. Registered participants will
receive an email with a calendar reminder and a dial-in number and
PIN that will allow them immediate access to the call on July
27.
Participants who do not wish to pre-register for the call may
dial in using 844-861-5506 (U.S. callers) or 412-317-6587
(international callers) or 866-450-4696 (Canada callers), and ask
for the “Tyler Technologies” call. A replay will be available two
hours after completion of the call through August 3, 2017. To
access the replay, please dial 877-344-7529 (U.S. callers),
412-317-0088 (international callers) and 855-669-9658 (Canada
callers) and reference passcode 10109107.
The live webcast and archived replay can also be accessed at
http://investors.tylertech.com/Presentations.
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 their constituents. Tyler's client base includes more
than 15,000 local government offices in all 50 states, Canada, the
Caribbean, the United Kingdom and other international locations. In
2017, Forbes ranked Tyler on its "Most Innovative Growth Companies"
list, and it has named Tyler one of "America's Best Small
Companies" eight times. The company has been included six times on
the Barron's 400 Index, a measure of the most promising companies
in America. More information about Tyler Technologies,
headquartered in Plano, Texas, 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
revenues, 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 because they provide additional insight in
comparing results from period to period. Tyler believes 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
write-downs of acquisition-related deferred revenue and acquired
leases, share-based compensation expense, employer portion of
payroll taxes on employee stock transactions, acquisition-related
costs, expenses associated with amortization of intangibles arising
from business combinations, and the impact from the adoption of ASU
2016-09, Improvements to Employee Share-Based Payment Accounting,
on our income tax provision.
Historically, for the purpose of determining non-GAAP net
income, Tyler has used a non-GAAP tax rate of 35 percent in its
calculation of the tax impact related to certain non-GAAP
adjustments. Beginning in 2017, Tyler is adjusting non-GAAP
financial income using a tax rate equal to Tyler's annual estimated
tax rate on non-GAAP income. This rate is based on Tyler's
estimated annual GAAP income tax rate forecast, adjusted to account
for items excluded from GAAP income in calculating Tyler's non-GAAP
income, as well as significant non-recurring tax adjustments. The
non-GAAP tax rate used in future periods will be reviewed annually
to determine whether it remains appropriate in consideration of
factors including Tyler's periodic effective tax rate calculated in
accordance with GAAP, changes resulting from tax legislation,
changes in the geographic mix of revenues and expenses, and other
factors deemed significant. Due to differences in tax treatment of
items excluded from non-GAAP earnings, as wells as the methodology
applied to Tyler's estimated annual tax rate as described above,
the estimated tax rate on non-GAAP income may differ from the GAAP
tax rate and from Tyler's actual tax liabilities.
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 clients, 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) our ability to achieve growth or operational synergies
through the integration of acquired businesses, while avoiding
unanticipated costs and disruptions to existing operations; (4)
material portions of our business require the Internet
infrastructure to be adequately maintained; (5) our ability to
achieve our financial forecasts due to various factors, including
project delays by our clients, reductions in transaction size,
fewer transactions, delays in delivery of new products or releases
or a decline in our renewal rates for service agreements; (6)
general economic, political and market conditions; (7)
technological and market risks associated with the development of
new products or services or of new versions of existing or acquired
products or services; (8) competition in the industry in which we
conduct business and the impact of competition on pricing, client
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 endedJune 30,
Six months endedJune 30,
2017 2016
2017 2016
Revenues: Software licenses and royalties
$ 17,107 $
17,551
$ 35,330 $ 34,401 Subscriptions
40,947
33,968
81,049 68,057 Software services
47,372 46,040
92,390 88,470 Maintenance
89,412 78,743
176,271 154,775 Appraisal services
6,366 6,984
12,978 13,542 Hardware and other
7,919
5,686
10,647 9,020
Total revenues
209,123 188,972
408,665 368,265
Cost of revenues: Software licenses and royalties
647 666
1,378 1,304 Acquired software
5,360 5,680
10,770 11,139 Software services, maintenance and
subscriptions
96,172 86,717
189,712 171,987 Appraisal
services
4,282 4,458
8,479 8,420 Hardware and other
6,799 4,515
8,115
6,361 Total cost of revenues
113,260
102,036
218,454 199,211 Gross profit
95,863
86,936
190,211 169,054 Selling, general and
administrative expenses
43,451 42,232
86,593 82,991
Research and development expense
11,874 10,336
23,473
20,292 Amortization of customer and trade name intangibles
3,463 3,453
6,921
6,815 Operating income
37,075 30,915
73,224 58,956 Other expense, net
(101 )
(720 )
(291 ) (1,187 ) Income
before income taxes
36,974 30,195
72,933 57,769
Income tax provision
5,396 5,188
9,049 14,538 Net income
$
31,578 $ 25,007
$ 63,884
$ 43,231 Earnings per common share: Basic
$ 0.85 $ 0.69
$ 1.72
$ 1.19 Diluted
$ 0.81 $ 0.65
$ 1.63 $ 1.11 Weighted
average common shares outstanding: Basic
37,154 36,160
37,144 36,316 Diluted
39,201 38,739
39,211
38,866
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,
2017 2016
2017 2016
Reconciliation of
non-GAAP total revenues
GAAP total revenues
$ 209,123 $ 188,972
$
408,665 $ 368,265 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
184 4,666
388
10,250 Add: Amortization of acquired leases
111
111
222 222
Non-GAAP total revenues
$ 209,418 $
193,749
$ 409,275 $ 378,737
Reconciliation of
non-GAAP gross profit and margin
GAAP gross profit
$ 95,863 $ 86,936
$
190,211 $ 169,054 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
184 4,666
388
10,250 Add: Amortization of acquired leases
111 111
222 222 Add: Share-based compensation expense included in
cost of revenues
2,253 1,571
4,350 2,888 Add:
Amortization of acquired software
5,360
5,680
10,770 11,139
Non-GAAP gross profit
$ 103,771 $ 98,964
$ 205,941 $ 193,553 GAAP gross
margin
45.8 % 46.0 %
46.5
% 45.9 % Non-GAAP gross margin
49.6
% 51.1 %
50.3 % 51.1 %
Reconciliation of
non-GAAP operating income and margin
GAAP operating income
$ 37,075 $ 30,915
$
73,224 $ 58,956 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
184 4,666
388
10,250 Add: Amortization of acquired leases
111 111
222 222 Add: Share-based compensation expense
8,901
7,212
17,577 13,692 Add: Employer portion of payroll tax
related to employee stock transactions
128 174
511
192 Add: Amortization of acquired software
5,360 5,680
10,770 11,139 Add: Amortization of customer and trade name
intangibles
3,463 3,453
6,921 6,815 Non-GAAP adjustments
subtotal
$ 18,147 $ 21,296
$
36,389 $ 42,310 Non-GAAP operating income
$ 55,222 $ 52,211
$
109,613 $ 101,266 GAAP operating margin
17.7 % 16.4 %
17.9 %
16.0 % Non-GAAP operating margin
26.4 %
26.9 %
26.8 % 26.7 %
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,
2017 2016
2017 2016
Reconciliation of
non-GAAP net income and earnings per share
GAAP net income
$ 31,578 $ 25,007
$
63,884 $ 43,231 Non-GAAP adjustments: Add: Total non-GAAP
adjustments to operating income
18,147 21,296
36,389
42,310 Less: Tax impact related to non-GAAP adjustments
(14,172 ) (13,079 )
(29,761
) (21,043 ) Non-GAAP net income
$
35,553 $ 33,224
$ 70,512
$ 64,498 GAAP earnings per diluted share
$
0.81 $ 0.65
$ 1.63 $ 1.11
Non-GAAP earnings per diluted share
$ 0.91
$ 0.86
$ 1.80 $ 1.66
Detail of
share-based compensation expense
Cost of software services, maintenance and subscriptions
$
2,253 $ 1,571
$ 4,350 $ 2,888 Selling, general
and administrative expenses
6,648 5,641
13,227 10,804 Total
share-based compensation expense
$ 8,901 $
7,212
$ 17,577 $ 13,692
Reconciliation of
EBITDA and adjusted EBITDA
GAAP net income
$ 31,578 $ 25,007
$
63,884 $ 43,231 Amortization of customer and trade name
intangibles
3,463 3,453
6,921 6,815
Depreciation and other amortization
included in
cost of revenues, SG&A and other expenses
9,804 9,221
19,445 18,035 Interest expense included in other expense,
net
189 686
380 1,187 Income tax provision
5,396 5,188
9,049
14,538 EBITDA
$ 50,430 $ 43,555
$ 99,679 $ 83,806 Write-downs of acquisition-related
deferred revenue
184 4,666
388 10,250 Share-based
compensation expense
8,901 7,212
17,577 13,692 Adjusted EBITDA
$ 59,515 $ 55,433
$
117,644 $ 107,748
TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (Amounts in thousands) (Unaudited)
June 30, 2017 December 31, 2016 ASSETS Current
assets: Cash and cash equivalents
$ 55,072 $ 36,151
Accounts receivable, net
233,831 200,334 Current investments
and other assets
51,169 43,580 Income tax receivable
12,206 2,895 Total current assets
352,278
282,960 Accounts receivable, long-term portion
2,333
2,480 Property and equipment, net
147,956 124,268
Other assets: Goodwill
651,721 650,237 Other intangibles,
net
252,874 267,259 Non-current investments and other assets
31,347 30,741 Total assets
$
1,438,509 $ 1,357,945 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable
and accrued liabilities
$ 55,454 $ 63,284 Deferred
revenue
304,128 298,217 Total current
liabilities
359,582 361,501 Revolving line of credit
— 10,000 Deferred revenue, long-term
1,643 2,140
Deferred income taxes
59,682 68,779 Shareholders' equity
1,017,602 915,525 Total liabilities and
shareholders' equity
$ 1,438,509 $ 1,357,945
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts
in thousands) (Unaudited)
Three months endedJune 30,
Six months endedJune 30,
2017 2016
2017 2016 Cash
flows from operating activities: Net income
$ 31,578
$ 25,007
$ 63,884 $ 43,231 Adjustments to reconcile
net income to cash provided by operations: Depreciation and
amortization
13,267 12,674
26,366 24,850 Share-based
compensation expense
8,901 7,212
17,577 13,692
Deferred income tax (benefit) expense
(5,008 ) 335
(9,097 ) 427 Changes in operating assets and
liabilities, exclusive of effects of acquired companies
(47,342 ) (25,708 )
(49,155
) (21,359 ) Net cash provided by operating activities
1,396 19,520
49,575 60,841 Cash flows from
investing activities: Additions to property and equipment
(10,303 ) (5,237 )
(30,123 ) (21,959 )
Purchase of marketable security investments
(14,264 )
(4,197 )
(21,392 ) (10,607 ) Proceeds from marketable
security investments
10,133 3,501
17,029 6,526 Cost
of acquisitions, net of cash acquired
(5,855 ) (7,394
)
(5,855 ) (9,394 ) Increase in other
(52 ) (232 )
(68 )
(281 ) Net cash used by investing activities
(20,341
) (13,559 )
(40,409 )
(35,715 ) Cash flows from financing activities: (Decrease)
increase in net borrowings on revolving line of credit
—
(5,000 )
(10,000 ) 69,000 Purchase of treasury shares
— (567 )
(7,032 ) (94,497 ) Proceeds from
exercise of stock options
8,509 4,012
23,360 5,793
Contributions from employee stock purchase plan
1,777
1,580
3,427 2,818
Net cash provided (used) by financing activities
10,286 25
9,755
(16,886 ) Net (decrease) increase in cash and cash
equivalents
(8,659 ) 5,986
18,921 8,240 Cash
and cash equivalents at beginning of period
63,731
35,341
36,151
33,087 Cash and cash equivalents at end of period
$ 55,072 $ 41,327
$
55,072 $ 41,327
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170726005958/en/
Tyler Technologies, Inc.Brian K. Miller, 972-713-3720Executive
Vice President - CFObrian.miller@tylertech.com
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