Subscription revenue grew 18 percent
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the first quarter ended March 31, 2017.
First Quarter 2017 Financial Highlights:
- Total revenues were $199.5 million, up
11.3 percent from $179.3 million for the first quarter of
2016.
- Recurring revenue from maintenance and
subscriptions was $127.0 million, an increase of 15.3 percent
compared to the first quarter of 2016, and comprised 63.6 percent
of first quarter 2017 revenue.
- Operating income was $36.1 million, an
increase of 28.9 percent from $28.0 million for the first quarter
of 2016.
- Net income was $32.3 million, or $0.83
per diluted share, up 77.3 percent compared to $18.2 million, or
$0.47 per diluted share, for the first quarter of 2016.
- Cash flows from operations were $48.2
million, up 16.6 percent compared to $41.3 million for the first
quarter of 2016.
- Non-GAAP total revenues were $199.9
million, up 8.0 percent from $185.0 million for the first quarter
of 2016.
- Non-GAAP operating income was $54.4
million, up 10.9 percent from $49.1 million for the first quarter
of 2016.
- Non-GAAP net income was $35.0 million,
or $0.90 per diluted share, up 11.8 percent compared to $31.3
million, or $0.80 per diluted share, for the first quarter of
2016.
- Adjusted EBITDA was $58.1 million, up
11.1 percent compared to $52.3 million for the first quarter of
2016.
- Total backlog was $939.2 million, up
16.1 percent from $808.7 million at March 31, 2016.
Software-related backlog (excluding appraisal services) was $904.6
million, up 18.5 percent from $763.3 million at March 31,
2016.
- The company repurchased approximately
42,000 shares of its common stock during the quarter at an average
price of $147.30.
“We are pleased with our first quarter results, which provided a
solid start to 2017,” said John S. Marr Jr., Tyler’s chairman and
chief executive officer. “Recurring revenue from maintenance and
subscriptions continued to exhibit strength with mid-teens growth.
Our non-GAAP operating margin expanded by 70 basis points even as
we are investing at a high level in product development.
“Cash generation was very strong, as cash from operations
increased almost 17 percent from last year's first quarter. We're
especially encouraged by our robust bookings for the quarter, which
grew 25 percent,” said Marr.
Guidance for 2017
As of April 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,
April 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/10104419. 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 April
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 May 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 10104419.
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
2016, Forbes ranked Tyler on its "Most Innovative Growth Companies"
list, and it has also 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
EndedMarch 31,
2017 2016 Revenues: Software
licenses and royalties
$ 18,223 $ 16,850
Subscriptions
40,102 34,089 Software services
45,018
42,430 Maintenance
86,859 76,032 Appraisal services
6,612 6,558 Hardware and other
2,728
3,334 Total revenues
199,542 179,293
Cost of revenues: Software licenses and royalties
731 638
Acquired software
5,410 5,459 Software services, maintenance
and subscriptions
93,540 85,270 Appraisal services
4,197 3,962 Hardware and other
1,316
1,846 Total cost of revenues
105,194 97,175
Gross profit
94,348 82,118 Selling, general
and administrative expenses
43,142 40,759 Research and
development expense
11,599 9,956 Amortization of customer
and trade name intangibles
3,458 3,362
Operating income
36,149 28,041 Other expense, net
(190 ) (467 ) Income before income
taxes
35,959 27,574 Income tax provision
3,653
9,350 Net income
$ 32,306
$ 18,224 Earnings per common share: Basic
$ 0.88 $ 0.50 Diluted
$
0.83 $ 0.47 Weighted average common
shares outstanding: Basic
36,845 36,550 Diluted
38,932 39,071
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(Amounts in thousands, except per share
data)
(Unaudited)
Three Months EndedMarch 31,
2017 2016
Reconciliation of
non-GAAP total revenues
GAAP total revenues
$ 199,542 $ 179,293 Non-GAAP
adjustments: Add: Write-downs of acquisition-related deferred
revenue
204 5,584 Add: Amortization of acquired leases
111 111 Non-GAAP total revenues
$ 199,857 $ 184,988
Reconciliation of
non-GAAP gross profit and margin
GAAP gross profit
$ 94,348 $ 82,118 Non-GAAP
adjustments: Add: Write-downs of acquisition-related deferred
revenue
204 5,584 Add: Amortization of acquired leases
111 111 Add: Share-based compensation expense included in
cost of revenues
2,097 1,317 Add: Amortization of acquired
software
5,410 5,459 Non-GAAP
gross profit
$ 102,170 $ 94,589 GAAP
gross margin
47.3 % 45.8 % Non-GAAP
gross margin
51.1 % 51.1 %
Reconciliation of
non-GAAP operating income and margin
GAAP operating income
$ 36,149 $ 28,041 Non-GAAP
adjustments: Add: Write-downs of acquisition-related deferred
revenue
204 5,584 Add: Amortization of acquired leases
111 111 Add: Share-based compensation expense
8,676
6,480 Add: Employer portion of payroll tax related to employee
stock transactions
383 18 Add: Amortization of acquired
software
5,410 5,459 Add: Amortization of customer and trade
name intangibles
3,458 3,362
Non-GAAP adjustments subtotal
$ 18,242 $
21,014 Non-GAAP operating income
$ 54,391
$ 49,055 GAAP operating margin
18.1
% 15.6 % Non-GAAP operating margin
27.2
% 26.5 %
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(Amounts in thousands, except per share
data)
(Unaudited)
Three Months EndedMarch 31,
2017 2016
Reconciliation of
non-GAAP net income and earnings per share
GAAP net income
$ 32,306 $ 18,224 Non-GAAP
adjustments: Add: Total non-GAAP adjustments to operating income
18,242 21,014 Less: Tax impact related to non-GAAP
adjustments
(15,589 ) (7,964 ) Non-GAAP
net income
$ 34,959 $ 31,274 GAAP
earnings per diluted share
$ 0.83 $ 0.47
Non-GAAP earnings per diluted share
$ 0.90
$ 0.80
Detail of
share-based compensation expense
Cost of software services, maintenance and subscriptions
$
2,097 $ 1,317 Selling, general and administrative expenses
6,579 5,163 Total share-based
compensation expense
$ 8,676 $ 6,480
Reconciliation of
EBITDA and adjusted EBITDA
GAAP net income
$ 32,306 $ 18,224 Amortization of
customer and trade name intangibles
3,458 3,362 Depreciation
and other amortization included in cost of revenues, SG&A and
other expenses
9,641 8,814 Interest expense included in
other expense, net
191 501 Income tax provision
3,653 9,350 EBITDA
$
49,249 $ 40,251 Write-downs of acquisition-related deferred
revenue
204 5,584 Share-based compensation expense
8,676 6,480 Adjusted EBITDA
$
58,129 $ 52,315
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in
thousands) (Unaudited) March 31, 2017
December 31, 2016 ASSETS Current assets: Cash and cash
equivalents
$ 63,731 $ 36,151 Accounts receivable,
net
163,723 200,334 Current investments and other assets
44,121 43,580 Income tax receivable
—
2,895 Total current assets
271,575 282,960 Accounts
receivable, long-term portion
2,577 2,480 Property and
equipment, net
142,109 124,268 Other assets: Goodwill
650,237 650,237 Other intangibles, net
258,280
267,259 Non-current investments and other assets
30,903 30,741 Total assets
$
1,355,681 $ 1,357,945 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable
and accrued liabilities
$ 47,356 $ 63,284 Deferred
revenue
270,208 298,217 Current income tax payable
4,681 — Total current liabilities
322,245
361,501 Revolving line of credit
— 10,000 Deferred
revenue, long-term
1,908 2,140 Deferred income taxes
64,691 68,779 Shareholders' equity
966,837
915,525 Total liabilities and shareholders' equity
$ 1,355,681 $ 1,357,945
TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Amounts in thousands)
(Unaudited) Three Months EndedMarch 31,
2017
2016 Cash flows from operating activities: Net income
$ 32,306 $ 18,224 Adjustments to reconcile net income
to cash provided by operations: Depreciation and amortization
13,099 12,176 Share-based compensation expense
8,676
6,480 Deferred income tax (benefit) expense
(4,089 )
92 Changes in operating assets and liabilities, exclusive of
effects of acquired companies
(1,813 )
4,349 Net cash provided by operating activities
48,179 41,321 Cash flows from
investing activities: Additions to property and equipment
(19,820 ) (16,722 ) Purchase of marketable security
investments
(7,128 ) (6,410 ) Sale of marketable
security investments
6,896 3,025 Cost of acquisitions, net
of cash acquired
— (2,000 ) Increase in other
(16 ) (49 ) Net cash used by investing
activities
(20,068 ) (22,156 )
Cash flows from financing activities: (Decrease) increase in net
borrowings on revolving line of credit
(10,000 )
74,000 Purchase of treasury shares
(7,032 ) (93,930 )
Proceeds from exercise of stock options
14,851 1,781
Contributions from employee stock purchase plan
1,650
1,238 Net cash used by financing activities
(531 ) (16,911 ) Net increase in
cash and cash equivalents
27,580 2,254 Cash and cash
equivalents at beginning of period
36,151
33,087 Cash and cash equivalents at end of
period
$ 63,731 $ 35,341
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170426006428/en/
Tyler Technologies, Inc.Brian K. Miller, 972-713-3720Executive
Vice President - CFObrian.miller@tylertech.com
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