Revenues grow double-digits as bookings rise
40%
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the first quarter ended March 31, 2020.
First Quarter 2020 Financial Highlights:
- Total revenues were $276.5 million, up 11.9% from $247.1
million for the first quarter of 2019. Organic revenue growth was
6.4%. Non-GAAP total revenues were $276.8 million, up 11.3% from
$248.8 million for the first quarter of 2019. Non-GAAP organic
revenue growth was 5.7%.
- Recurring revenues from maintenance and subscriptions were
$196.1 million, an increase of 17.1% compared to the first quarter
of 2019, and comprised 70.9% of first quarter 2020 revenue.
- Operating income was $33.9 million, down 1.7% from $34.5
million for the first quarter of 2019. Non-GAAP operating income
was $66.8 million, up 6.1% from $63.0 million for the first quarter
of 2019.
- Net income was $47.6 million, or $1.16 per diluted share, up
73.9% compared to $27.3 million, or $0.69 per diluted share, for
the first quarter of 2019. Non-GAAP net income was $51.5 million,
or $1.25 per diluted share, up 6.7% compared to $48.3 million, or
$1.22 per diluted share, for the first quarter of 2019.
- Cash flows from operations were $56.7 million, up 136.7%
compared to $24.0 million for the first quarter of 2019.
- Adjusted EBITDA was $73.2 million, up 5.2% compared to $69.5
million for the first quarter of 2019.
- Software subscription arrangements comprised approximately 73%
of the total new software contract value in the first quarter,
compared to approximately 54% in the first quarter of 2019.
- Total bookings were $319 million, up 39.8% compared to the
first quarter of 2019. Subscription bookings in the first quarter
added $12.6 million in annual recurring revenue.
- Total backlog was $1.50 billion, up 19.2% from $1.26 billion at
March 31, 2019. Software-related backlog (excluding appraisal
services) was $1.46 billion, up 20.1% from $1.22 billion at March
31, 2019.
- Tyler repurchased 58,804 shares of its common stock during the
quarter at an average price of $263.28.
“We had a solid first quarter with a great deal of momentum
going into the second half of March, when we began to see the
effects of the COVID-19 pandemic,” said Lynn Moore, Tyler’s
president and chief executive officer. “The market was active, and
we executed at a high level. Our bookings for the quarter were
extremely strong, as they rose almost 40%. Non-GAAP revenues grew
11.3%, our 34th consecutive quarter of double-digit growth.
Subscription revenue grew 21.5%, and recurring revenues made up
nearly 71% of total revenues. Cash flow for the quarter was robust,
as cash from operations more than doubled and free cash flow
quadrupled last year's first quarter, and we ended the quarter with
$393 million in cash and investments."
Impact of COVID-19
Our primary focus has been on ensuring that our employees and
their families are safe and healthy, while supporting our clients
who provide essential services to the public. In mid-March, we
implemented work from home and curtailed travel for our employees.
Our clients faced increasing disruption to their operations as they
dealt with the effects of the pandemic on their communities and
focused on providing vital services to their citizens. As a result,
we began to see delays in some procurement processes and
implementation projects. A few sales pushed out of the first
quarter, and professional services revenues were also negatively
impacted. We estimate that first quarter revenues were reduced by
approximately $6 million as a result of COVID-19.
"We rapidly mobilized our employees to begin working from home
and, as a result, our operations continued without interruption,"
said Moore. "In addition to continuing to provide ongoing support
to our clients, we began online sales demos, delivering
implementation services remotely and executing complex go-lives
virtually. I couldn't be prouder of how our dedicated professionals
have embraced the challenge and are excelling at meeting the needs
of our clients during these turbulent times. I'm inspired each day
by the spirit, resilience and compassion shown by our team
members.
"Our annual Tyler Connect user conference, which was scheduled
to occur this week in Orlando, was canceled, and the associated
costs are included in our first quarter results. However, we are
pleased that we will be able to provide a significant amount of
valuable content to our clients by offering portions of Connect
virtually, and we look forward to gathering with our clients in
person in San Antonio, Texas, in April 2021," added Moore.
Looking forward
We anticipate a greater impact from COVID-19 in the second and
third quarters. We have not seen meaningful cancellations, but
continue to see delays in procurement processes and lengthening
sales cycles, as public sector entities focus on issues related to
the pandemic. Although the CARES Act provides approximately $424
billion in economic aid to state and local governments and
additional stimulus packages are expected to provide more
assistance, many of our clients will face near-term budget
pressures. We can deliver the majority of our professional services
remotely, but expect to continue to see lower services revenues as
some projects are delayed by client availability and billable
travel is reduced. Approximately $6 million of revenues classified
as "hardware and other revenues" will be also eliminated in the
second quarter as a result of the cancellation of our Connect
conference. We anticipate that recurring revenues, which comprise
approximately 70% of our total revenues, will not be significantly
affected. We expect to continue to invest in product development
and accelerating our move to the cloud at levels consistent with
our initial plans for the year. We value the experience and
expertise of our employees and do not expect to eliminate any
positions, but anticipate that incremental hiring will be reduced
somewhat from our original plans.
While we are confident in our long-term outlook, there are
significant uncertainties around the continuously evolving COVID-19
pandemic and its impact on our operations and those of our clients.
As a result, we are suspending guidance until we have more clarity
around the ultimate severity, duration and impact of the pandemic.
We currently expect to have greater clarity by the time we report
our second quarter results.
"Tyler has significant strengths that position us to continue to
perform well, invest at a high level and strengthen our competitive
position during difficult economic conditions," added Moore. "More
than two-thirds of our revenues are recurring, with extremely low
attrition. Our financial position has never been stronger, with
significant cash and no debt on our balance sheet, strong cash flow
and additional available liquidity from our $400 million undrawn
credit facility. We have a market leading competitive position,
strong win rates, and an addressable market that has expanded
significantly through investments in a combination of M&A and
research and development.
"Although we are not immune to the effects of COVID-19 and the
slowdown in the economy, Tyler's mission-critical software and
services power essential functions of government, and the
fundamental demand for our products will remain strong in the long
term. This crisis is already highlighting the reliance on outdated
technology by large segments of the public sector, and the need for
and the benefits of connectivity and cloud services, which are
priorities for Tyler. Technology is an increasingly critical factor
in helping government function effectively, especially during this
time. As a company and as a management team, we have faced
difficult times in the past, including the Great Recession, and
emerged as a stronger company. We expect to do the same in this
crisis, emerging with new, innovative ways of doing business for a
client base that is confident in our commitment to them," concluded
Moore.
Conference Call
Tyler Technologies will hold a conference call on Thursday,
April 30, at 10:00 a.m. Eastern Time 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/10140947. Registered participants will
receive an email with a calendar reminder and a dial-in number and
PIN that will allow them to listen to the call live.
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 May 7, 2020. 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 10140947.
The live webcast and archived replay can also be accessed at
https://tylertech.irpass.com/Presentations.
About Tyler Technologies, Inc.
Tyler Technologies (NYSE: TYL) provides integrated software and
technology services to the public sector. Tyler's end-to-end
solutions empower local, state, and federal government entities to
operate more efficiently and connect more transparently with their
constituents and with each other. By connecting data and processes
across disparate systems, Tyler's solutions are transforming how
clients gain actionable insights that solve problems in their
communities. Tyler has more than 26,000 successful installations
across more than 10,000 sites, with clients in all 50 states,
Canada, the Caribbean, Australia, and other international
locations. A financially strong company, Tyler has achieved
double-digit revenue growth every quarter since 2012. It was also
named to Forbes' "Best Midsize Employers" list in 2019 and
recognized twice on its "Most Innovative Growth Companies" list.
More information about Tyler Technologies, headquartered in Plano,
Texas, can be found at 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
subleases, share-based compensation expense, employer portion of
payroll taxes on employee stock transactions, expenses associated
with amortization of intangibles arising from business
combinations, acquisition-related expenses, and incremental costs
associated with COVID-19.
Tyler currently uses a non-GAAP tax rate of 24%. 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 periodically 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 well 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) the effects of
the COVID-19 pandemic, including its potential effects on the
economic environment, our customers and our operations, as well as
any changes to federal, state or local government laws, regulations
or orders in connection with the pandemic; (2) changes in the
budgets or regulatory environments of our clients, primarily local
and state governments, that could negatively impact information
technology spending; (3) our ability to protect client information
from security breaches and provide uninterrupted operations of data
centers; (4) our ability to achieve growth or operational synergies
through the integration of acquired businesses, while avoiding
unanticipated costs and disruptions to existing operations; (5)
material portions of our business require the Internet
infrastructure to be adequately maintained; (6) 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; (7)
general economic, political and market conditions; (8)
technological and market risks associated with the development of
new products or services or of new versions of existing or acquired
products or services; (9) 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; (10) 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 (11) costs of compliance and any failure to comply
with government and stock exchange regulations. 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.
(Comparative results follow)
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Amounts in thousands, except
per share data)
(Unaudited)
Three Months Ended March 31,
2020
2019
Software licenses and royalties
$
18,737
$
21,793
Subscriptions
81,723
67,275
Software services
52,133
48,443
Maintenance
114,365
100,152
Appraisal services
5,763
5,214
Hardware and other
3,820
4,189
Total revenues
276,541
247,066
Software licenses and royalties
740
818
Acquired software
8,027
6,682
Software services, maintenance and
subscriptions
131,779
117,160
Appraisal services
4,385
3,452
Hardware and other
2,479
2,906
Total cost of revenues
147,410
131,018
Gross profit
129,131
116,048
Selling, general and administrative
expenses
67,485
57,766
Research and development expense
22,361
18,941
Amortization of customer and trade name
intangibles
5,392
4,850
Operating income
33,893
34,491
Other income, net
990
586
Income before income taxes
34,883
35,077
Income tax (benefit) provision
(12,667
)
7,729
Net income
$
47,550
$
27,348
Earnings per common share:
Basic
$
1.20
$
0.71
Diluted
$
1.16
$
0.69
Weighted average common shares
outstanding:
Basic
39,500
38,308
Diluted
41,144
39,585
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three Months Ended March 31,
2020
2019
Reconciliation of
non-GAAP total revenues
GAAP total revenues
$
276,541
$
247,066
Non-GAAP adjustments:
Add: Write-downs of acquisition-related
deferred revenue
160
1,597
Add: Amortization of acquired leases
79
100
Non-GAAP total revenues
$
276,780
$
248,763
Reconciliation of
non-GAAP gross profit and margin
GAAP gross profit
$
129,131
$
116,048
Non-GAAP adjustments:
Add: Write-downs of acquisition-related
deferred revenue
160
1,597
Add: Amortization of acquired leases
79
100
Add: Share-based compensation expense
included in cost of revenues
4,252
3,798
Add: Amortization of acquired software
8,027
6,682
Non-GAAP gross profit
$
141,649
$
128,225
GAAP gross margin
46.7
%
47.0
%
Non-GAAP gross margin
51.2
%
51.5
%
Reconciliation of
non-GAAP operating income and margin
GAAP operating income
$
33,893
$
34,491
Non-GAAP adjustments:
Add: Write-downs of acquisition-related
deferred revenue
160
1,597
Add: Amortization of acquired leases
79
100
Add: Share-based compensation expense
17,302
14,416
Add: Employer portion of payroll tax
related to employee stock transactions
1,198
123
Add: Acquisition related costs
—
695
Add: COVID-19 incremental costs
727
—
Add: Amortization of acquired software
8,027
6,682
Add: Amortization of customer and trade
name intangibles
5,392
4,850
Non-GAAP adjustments subtotal
32,885
28,463
Non-GAAP operating income
$
66,778
$
62,954
GAAP operating margin
12.3
%
14.0
%
Non-GAAP operating margin
24.1
%
25.3
%
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three Months Ended March 31,
2020
2019
Reconciliation of
non-GAAP net income and earnings per share
GAAP net income
$
47,550
$
27,348
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to
operating income
32,885
28,463
Less: Tax impact related to non-GAAP
adjustments
(28,932
)
(7,521
)
Non-GAAP net income
$
51,503
$
48,290
GAAP earnings per diluted share
$
1.16
$
0.69
Non-GAAP earnings per diluted share
$
1.25
$
1.22
Detail of share-based compensation
expense
Cost of software services, maintenance and
subscriptions
$
4,252
$
3,798
Selling, general and administrative
expenses
13,050
10,618
Total share-based compensation expense
$
17,302
$
14,416
Reconciliation of
EBITDA and adjusted EBITDA
GAAP net income
$
47,550
$
27,348
Amortization of customer and trade name
intangibles
5,392
4,850
Depreciation and amortization included
in
cost of revenues, SG&A and other
expenses
14,549
12,426
Interest expense included in other income,
net
152
464
Income tax provision
(12,667
)
7,729
EBITDA
$
54,976
$
52,817
Write-downs of acquisition-related
deferred revenue
160
1,597
Share-based compensation expense
17,302
14,416
Acquisition related costs
—
695
COVID-19 incremental costs
727
—
Adjusted EBITDA
$
73,165
$
69,525
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Amounts in thousands)
(Unaudited)
March 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
301,985
$
232,682
Accounts receivable, net
318,144
374,089
Current investments and other assets
75,434
66,444
Income tax receivable
16,657
6,482
Total current assets
712,220
679,697
Accounts receivable, long-term portion
21,394
22,432
Operating lease right-of-use assets
17,992
18,992
Property and equipment, net
175,460
171,861
Other assets:
Goodwill
840,028
840,117
Other intangibles, net
366,506
378,914
Non-current investments and other
assets
85,776
79,601
Total assets
$
2,219,376
$
2,191,614
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$
72,723
$
90,211
Operating lease liabilities
6,373
6,387
Deferred revenue
365,959
412,495
Total current liabilities
445,055
509,093
Revolving line of credit
—
—
Deferred revenue, long-term
167
199
Deferred income taxes
45,774
48,442
Operating lease liabilities, long-term
15,548
16,822
Shareholders' equity
1,712,832
1,617,058
Total liabilities and shareholders'
equity
$
2,219,376
$
2,191,614
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in
thousands) (Unaudited)
Three Months Ended March 31,
2020
2019
Cash flows from operating activities:
Net income
$
47,550
$
27,348
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization
19,985
17,308
Share-based compensation expense
17,302
14,416
Operating lease right-of-use assets
expense
1,457
1,165
Deferred income tax (benefit) expense
(2,668
)
(4,785
)
Changes in operating assets and
liabilities, exclusive of effects of acquired companies
(26,920
)
(31,495
)
Net cash provided by operating
activities
56,706
23,957
Cash flows from investing activities:
Additions to property and equipment
(9,349
)
(12,320
)
Purchase of marketable security
investments
(27,271
)
(3,590
)
Proceeds from marketable security
investments
18,237
20,276
Proceeds from the sale of investment of
preferred shares
15,000
—
Purchase of investment of common
shares
(10,000
)
—
Investment in software
(1,315
)
(690
)
Cost of acquisitions, net of cash
acquired
(261
)
(199,130
)
(Increase) decrease in other
(48
)
564
Net cash used by investing activities
(15,007
)
(194,890
)
Cash flows from financing activities:
Decrease in net borrowings on revolving
line of credit
—
85,000
Purchase of treasury shares
(15,482
)
(17,786
)
Proceeds from exercise of stock
options
46,236
6,528
Payment of contingent consideration
(5,619
)
—
Contributions from employee stock purchase
plan
2,469
2,349
Net cash provided by financing
activities
27,604
76,091
Net increase (decrease) in cash and cash
equivalents
69,303
(94,842
)
Cash and cash equivalents at beginning of
period
232,682
134,279
Cash and cash equivalents at end of
period
$
301,985
$
39,437
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200429005829/en/
Brian K. Miller Executive Vice President & CFO Tyler
Technologies, Inc. 972-713-3720 brian.miller@tylertech.com
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