Earnings rise 63 percent on 21 percent revenue
growth
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the second quarter ended June 30, 2014.
Second Quarter Financial Highlights:
- Total revenue was $124.4 million in the
second quarter of 2014, up 20.6 percent from $103.1 million in the
second quarter of 2013.
- Recurring software revenue from
maintenance and subscriptions was $72.9 million for the quarter, an
increase of 20.5 percent compared to the second quarter of 2013,
and comprised 58.6 percent of second quarter 2014 revenue.
- Royalty revenue from Microsoft
Dynamics® AX, which is included in software licenses and royalties,
was $576,000 compared to $687,000 for the second quarter of
2013.
- Operating income for the quarter was
$23.6 million, an increase of 53.9 percent from the second quarter
of 2013.
- Net income for the quarter was $14.7
million, or $0.42 per diluted share, up 62.9 percent compared to
$9.0 million, or $0.26 per diluted share, for the second quarter of
2013.
- Cash flow from operations for the
quarter was $12.3 million, compared to negative $498,000 for the
second quarter of 2013.
- Non-GAAP operating income for the
quarter was $28.7 million, up 44.4 percent from $19.9 million for
the second quarter of 2013.
- Adjusted EBITDA for the quarter was
$30.7 million, up 43.0 percent compared to $21.5 million for the
second quarter of 2013.
- Non-GAAP net income for the quarter was
$18.4 million, or $0.52 per diluted share, up 50.2 percent compared
to $12.2 million, or $0.36 per diluted share, for the second
quarter of 2013.
- Total backlog was $654.7 million at
June 30, 2014, up 51.9 percent from $430.9 million at June 30,
2013. Software-related backlog (excluding appraisal services) was
$619.1 million, an increase of 50.6 percent compared to $411.1
million at June 30, 2013.
- The company repurchased approximately
294,000 shares of its common stock during the quarter at an average
price of $77.57.
“This was the best quarterly performance in the company’s
history by virtually any measure,” said John S. Marr Jr., Tyler’s
president and chief executive officer. “License and royalty
revenues grew by nearly 20 percent, while subscription revenues
rose more than 50 percent for the second consecutive quarter. We
achieved gross margin expansion of 150 basis points and operating
margin expansion of 410 basis points, even as we continued to
invest in long-term growth opportunities such as e-filing for
courts.
“In addition to record revenues and earnings, our bookings and
backlog also reached new highs. Bookings for the quarter and the
trailing 12 months grew 62.6 percent and 47.8 percent,
respectively, and our backlog at June 30 rose 52 percent over last
year. The total value of SaaS client contracts signed during the
quarter was almost $18 million as we added 65 SaaS clients, a new
quarterly high.
“During the second quarter we signed contracts for our Odyssey®
case management solution with courts in 13 California counties,
including Los Angeles and San Diego, two of the nation’s five
largest counties. Bookings and win rates were very strong across
all of our major product suites, which is indicative of Tyler’s
market-leading competitive position in the local government space.
More important, beyond the initial contract values reflected in
current bookings, we expect these new contracts will generate
long-term recurring revenue streams from maintenance or
subscriptions, and in the case of most of the new courts contracts,
transaction-based e-filing,” continued Mr. Marr.
“Our results in the first half of 2014 significantly exceeded
our expectations, and because the outlook for the remainder of the
year is increasingly positive, we are revising upward our revenue
and earnings guidance to reflect that outlook,” Mr. Marr
concluded.
Guidance for 2014
As of July 23, 2014, Tyler Technologies is providing the
following full-year 2014 guidance:
- Total revenues are expected to be in
the range of $482 million to $489 million.
- Diluted earnings per share are expected
to be approximately $1.52 to $1.59.
- Non-GAAP diluted earnings per share are
expected to be approximately $1.95 to $2.02.
- Pretax non-cash, share-based
compensation expense is expected to be approximately $15.0
million.
- The effective tax rate is expected to
be between approximately 38.0 percent and 40.0 percent.
- Capital expenditures are expected to be
between $12.0 million and $13.0 million, and total depreciation and
amortization expense is expected to be between $14.5 million and
$15.0 million, including approximately $6.5 million of amortization
of acquisition intangibles.
Conference Call
Tyler Technologies will hold a conference call on Thursday, July
24, at 10:00 a.m. ET 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/10048915. 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.
Participants who do not wish to pre-register for the call may
dial in using 877-270-2148 (U.S. callers) or 412-902-6510
(international callers), and ask for the “Tyler Technologies” call.
A replay will be available two hours after completion of the call
through July 31, 2014. To access the replay, please dial
877-344-7529 (U.S. callers) or 412-317-0088 (international callers)
and reference passcode 10048915.
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
11,000 local government offices in all 50 states, Canada, the
Caribbean, the United Kingdom and other international locations.
Forbes named Tyler one of “America’s Best Small Companies” seven
times and the company has been included four times on the Barron’s
400 Index, a measure of the most promising companies in America.
More information about Plano-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 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, employer portion of payroll taxes on employee stock
transactions, 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 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) general economic, political and market conditions;
(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 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 amounts)
(Unaudited)
Three Months Ended June 30, Six Months
Ended June 30,
2014 2013
2014 2013 Revenues: Software
licenses and royalties
$ 12,083 $ 10,090
$
23,315 $ 18,920 Subscriptions
20,934 13,863
41,441 27,336 Software services
30,128 24,085
54,435 44,546 Maintenance
51,951 46,639
102,191 92,689 Appraisal services
5,444 5,056
10,295 10,647 Hardware and other
3,831
3,355
5,320 4,749 Total revenues
124,371 103,088
236,997 198,887 Cost of
revenues: Software licenses and royalties
343 692
874
1,118 Acquired software
444 523
925 1,072 Software
services, maintenance and subscriptions
58,274 48,833
113,273 95,215 Appraisal services
3,665 3,418
6,976 7,217 Hardware and other
3,087
2,580
3,861 3,378 Total cost of revenues
65,813 56,046
125,909 108,000 Gross profit
58,558 47,042
111,088 90,887 Selling, general
and administrative expenses
27,419 24,971
52,786
47,617 Research and development expense
6,389 5,594
12,561 11,192 Amortization of customer and trade name
intangibles
1,128 1,128
2,257
2,259 Operating income
23,622 15,349
43,484
29,819 Other expense, net
216 296
475 634 Income before income taxes
23,406
15,053
43,009 29,185 Income tax provision
8,666 6,006
16,386 11,645 Net
income
$ 14,740 $ 9,047
$ 26,623 $
17,540 Earnings per common share: Basic
$ 0.45 $ 0.29
$ 0.81 $ 0.55 Diluted
$ 0.42 $ 0.26
$ 0.75 $ 0.51
Weighted average common shares outstanding: Basic
32,918
31,617
32,876 31,670 Diluted
35,161 34,290
35,289 34,279
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share
amounts)
(Unaudited) Three Months Ended June 30, Six Months Ended
June 30,
2014 2013
2014 2013 Reconciliation of
non-GAAP gross profit and margin GAAP gross profit
$
58,558 $ 47,042
$ 111,088 $ 90,887 Non-GAAP
adjustments: Add: Share-based compensation expense included in cost
of revenues
513 343
1,026 679 Add: Amortization of
acquired software
444 523
925 1,072 Non-GAAP gross profit
$ 59,515 $ 47,908
$
113,039 $ 92,638 Non-GAAP gross margin
47.9 % 46.5 %
47.7
% 46.6 % Reconciliation of non-GAAP
operating income and margin GAAP operating income
$
23,622 $ 15,349
$ 43,484 $ 29,819 Non-GAAP
adjustments: Add: Share-based compensation expense
3,539
2,903
7,002 5,478
Add: Employer portion of payroll tax
related to employee stock transactions
- -
24 - Add: Amortization of acquired software
444 523
925 1,072 Add: Amortization of customer and
trade name intangibles
1,128 1,128
2,257 2,259 Non-GAAP
adjustments subtotal
$ 5,111 $ 4,554
$ 10,208 $ 8,809 Non-GAAP operating
income
$ 28,733 $ 19,903
$
53,692 $ 38,628 Non-GAAP operating
margin
23.1 % 19.3 %
22.7
% 19.4 % Reconciliation of non-GAAP net
income and earnings per share GAAP net income
$
14,740 $ 9,047
$ 26,623 $ 17,540 Non-GAAP
adjustments: Add: Total non-GAAP adjustments to operating income
5,111 4,554
10,208 8,809 Less: Tax impact related to
non-GAAP adjustments
(1,485 ) (1,375 )
(3,025 ) (2,654 ) Non-GAAP net income
$ 18,366 $ 12,226
$
33,806 $ 23,695 Non-GAAP earnings per
diluted share
$ 0.52 $ 0.36
$
0.96 $ 0.69 Detail of
share-based compensation expense Cost of software services,
maintenance and subscriptions
$ 513 $ 343
$
1,026 $ 679 Selling, general and administrative expenses
3,026 2,560
5,976
4,799 Total share-based compensation expense
$ 3,539 $ 2,903
$ 7,002
$ 5,478 Reconciliation of adjusted
EBITDA GAAP net income
$ 14,740 $ 9,047
$
26,623 $ 17,540 Amortization of customer and trade name
intangibles
1,128 1,128
2,257 2,259 Depreciation and
other amortization included in cost of revenues, SG&A and other
expenses
2,497 2,231
5,024 4,422 Interest expense
included in other expense, net
144 164
287 374 Income
tax provision
8,666 6,006
16,386 11,645 EBITDA
$
27,175 $ 18,576
$ 50,577
$ 36,240 Share-based compensation expense
3,539 2,903
7,002
5,478 Adjusted EBITDA
$ 30,714 $
21,479
$ 57,579 $ 41,718
TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (Amounts in thousands) (Unaudited)
June 30, December 31,
2014 2013 ASSETS Current assets: Cash and cash
equivalents
$ 88,092 $ 78,876 Short-term investments
available-for-sale
800 - Accounts receivable, net
144,234 106,570 Other current assets
20,147 24,030
Deferred income taxes
7,759 7,759 Total
current assets
261,032 217,235 Accounts receivable,
long-term portion
1,127 588 Property and equipment, net
67,160 64,844 Non-current investments available-for-sale -
1,288 Other assets: Goodwill and other intangibles, net
156,815 159,997 Other
683 536
Total assets
$ 486,817 $ 444,488
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued liabilities
$ 31,186 $
35,372 Deferred revenue
184,578
156,738 Total current liabilities
215,764
192,110 Deferred income taxes
4,574 6,059
Shareholders' equity
266,479 246,319
Total liabilities and shareholders' equity
$ 486,817
$ 444,488 TYLER
TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited) Six months ended June 30,
2014 2013 Cash flows from operating activities: Net income
$ 26,623 $ 17,540 Adjustments to reconcile net income
to cash provided by operations: Depreciation and amortization
7,281 6,681 Share-based compensation expense
7,002
5,478 Excess tax benefit from exercise of share-based arrangements
(3,206 ) (5,661 ) Changes in operating assets and
liabilities, exclusive of effects of acquired companies
(8,872 ) (7,452 ) Net cash provided by
operating activities
28,828 16,586
Cash flows from investing activities: Proceeds from
sales of investments
8 25 Cost of acquisitions, net of cash
acquired
- (181 ) Additions to property and equipment
(6,477 ) (13,839 ) Decrease in other
335 295 Net cash used by investing
activities
(6,134 ) (13,700 )
Cash flows from financing activities: Purchase of treasury shares
(22,815 ) - Contributions from employee stock
purchase plan
2,014 1,634 Proceeds from exercise of stock
options
4,117 4,481 Decrease in net borrowings on revolving
line of credit
- (18,000 ) Excess tax benefit from exercises
of share-based arrangements
3,206 5,661
Net cash used by financing activities
(13,478
) (6,224 ) Net increase (decrease) in cash and
cash equivalents
9,216 (3,338 ) Cash and cash equivalents at
beginning of period
78,876 6,406
Cash and cash equivalents at end of period
$
88,092 $ 3,068
Tyler Technologies, Inc.Brian K. Miller, 972-713-3720Executive
Vice President - CFObrian.miller@tylertech.com
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