Subscription revenues grow 32 percent
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the third quarter ended September 30, 2018.
Third Quarter 2018 Financial Highlights:
- Total revenues were $236.1 million, up
9.9 percent from $214.7 million for the third quarter of 2017.
Organic revenue growth was 6.6 percent.
- Recurring revenues from maintenance and
subscriptions were $154.9 million, an increase of 13.7 percent
compared to the third quarter of 2017, and comprised 65.6 percent
of third quarter 2018 revenue.
- Operating income was $37.6 million,
down 15.1 percent from $44.3 million for the third quarter of
2017.
- Net income was $38.9 million, or $0.96
per diluted share, up 0.2 percent compared to $38.8 million, or
$0.99 per diluted share, for the third quarter of 2017.
- Cash flows from operations were $112.1
million, up 20.8 percent compared to $92.8 million for the third
quarter of 2017.
- Non-GAAP total revenues were $237.6
million, up 10.5 percent from $215.0 million for the third quarter
of 2017. Non-GAAP organic revenue growth was 6.5 percent.
- Non-GAAP operating income was $64.3
million, up 1.6 percent from $63.3 million for the third quarter of
2017.
- Non-GAAP net income was $49.7 million,
or $1.23 per diluted share, up 18.9 percent compared to $41.8
million, or $1.06 per diluted share, for the third quarter of
2017.
- Adjusted EBITDA was $70.5 million, up
3.6 percent compared to $68.1 million for the third quarter of
2017.
- Total backlog was $1.24 billion, up 7.3
percent from $1.16 billion at September 30, 2017.
- Software license arrangements comprised
approximately 63 percent and subscription arrangements comprised
approximately 37 percent of the total contract value for new
software contracts in the third quarter.
- Software subscription bookings in the
third quarter added $5.6 million in annual recurring revenue from
new clients.
- On August 31, 2018, Tyler acquired
CaseloadPRO, L.P., and its results are included in Tyler's
consolidated results from the date of acquisition. After the end of
the third quarter, on October 1, 2018, Tyler acquired TradeMaster,
Inc., dba MobileEyes.
- Effective January 1, 2018, Tyler
adopted the requirements of ASU No. 2014-09, Revenue from Contracts
with Customers (Topic 606), utilizing the full retrospective method
of transition. Prior year amounts have been restated from
previously reported amounts to reflect the impact of the full
retrospective adoption of Topic 606.
"Earnings for the third quarter were in line with our
expectations, and cash flow exceeded our expectations," said Lynn
Moore Jr., Tyler’s president and chief executive officer. "Total
non-GAAP revenues grew 10.5 percent, led by exceptional growth in
subscription revenues, which increased by more than 30 percent,
including the addition of Socrata in the second quarter. From a
product perspective, growth for our enterprise solutions, which
include ERP, appraisal and tax, and civic services, exceeded
expectations. Growth for our justice products, which include courts
and public safety, lagged expectations, as revenues from new
initiatives, including re:Search, Modria, and redaction, have been
less predictable and have come online slower than planned. However,
we are confident these initiatives provide meaningful long-term
growth opportunities.
"Operationally, we performed at a high level during the quarter,
with several key go-lives across our product suites. We continue to
execute well on our product development initiatives, and our 44
percent increase in research and development expense reflects the
depth of the investments we're making to help drive future growth.
Our new business pipeline is strong, and our sales execution is
good, although the timing of some deals taking place in the second
half of the year has been difficult to forecast. Bookings for the
quarter declined 5 percent and were affected by an intentional
reduction in average contract terms for new software subscription
contracts to 3.6 years, compared to 5.4 years in the third quarter
of 2017. For the trailing twelve months, bookings grew almost 18
percent and our quarter-end backlog of $1.2 billion was up more
than 7 percent from last year.
"We are particularly pleased with our cash generation in what is
historically our strongest quarter for cash flow. Cash flows from
operations in the third quarter grew 21 percent and exceeded $100
million for the first time, and free cash flow grew by nearly 22
percent. We ended the quarter with $315 million in cash and
investments.
"We have continued to strengthen our product offerings through
strategic acquisitions, acquiring CaseloadPRO in August and
MobileEyes in October. While the size of these acquisitions is
relatively modest, with a combined total purchase price of
approximately $14 million in cash, they add native cloud solutions
with important functionality. CaseloadPRO strengthens the probation
and supervision offerings in our justice suite, and MobileEyes adds
valuable solutions for fire protection and inspections. We continue
to seek strategic acquisition opportunities to broaden our
capabilities, expand our addressable markets and enhance
growth.
"While we did not repurchase any stock in the third quarter, we
have been active with our buyback since the end of the quarter. In
October, we have repurchased approximately 155,000 shares of our
common stock for an aggregate purchase price of approximately $32.3
million, and our current repurchase authorization includes
approximately 1.8 million shares.
"Our full year non-GAAP earnings guidance for 2018 is unchanged
from last quarter. While we expect that organic and total revenue
growth will accelerate in the fourth quarter, we have slightly
lowered the upper end of our revenue guidance to reflect the timing
of new business in the second half of the year and revenue
recognition under ASC 606," added Moore.
Guidance for 2018
As of October 31, 2018, Tyler Technologies is providing the
following guidance for the full year 2018:
- GAAP total revenues are expected to be
in the range of $934 million to $944 million.
- Non-GAAP total revenues are expected to
be in the range of $940 million to $950 million.
- GAAP diluted earnings per share are
expected to be in the range of $3.63 to $3.71 and may vary
significantly due to the impact of stock option exercises on the
GAAP effective tax rate.
- Non-GAAP diluted earnings per share are
expected to be in the range of $4.76 to $4.84.
- Pretax non-cash, share-based
compensation expense is expected to be approximately $55
million.
- Research and development expense is
expected to be in the range of $62 million to $64 million.
- Fully diluted shares for the year are
expected to be in the range of 40.2 million to 40.5 million
shares.
- GAAP earnings per share assumes an
estimated annual effective tax rate of approximately 4 percent
after discrete tax items and includes approximately $36 million of
discrete tax benefits primarily related to share-based
compensation.
- The non-GAAP annual effective tax rate
is expected to be 24 percent.
- Capital expenditures are expected to be
in the range of $23 million to $26 million, including approximately
$1 million related to real estate. Total depreciation and
amortization expense is expected to be approximately $62 million,
including approximately $40 million from 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 $4 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 $55
million, and amortization of acquired software and intangible
assets of approximately $40 million. Additionally, the non-GAAP tax
rate of 24 percent is estimated periodically as described below
under "Non-GAAP Financial Measures" and excludes approximately $36
million of estimated discrete tax benefits that are included in the
GAAP estimated annual effective tax rate.
Conference Call
Tyler Technologies will hold a conference call on Thursday,
November 1, 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/10124482. 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 November
1.
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 November 8, 2018. 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 10124482.
The live webcast and archived replay can also be accessed at
https://tylertech.irpass.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, Australia, and other international locations. In 2017,
Forbes ranked Tyler on its "Most Innovative Growth Companies" list,
and Fortune included Tyler on its "100 Fastest-Growing 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
leases, share-based compensation expense, employer portion of
payroll taxes on employee stock transactions, and expenses
associated with amortization of intangibles arising from business
combinations.
Tyler currently uses a non-GAAP tax rate of 24 percent. 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) 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 Ended Nine Months Ended
September 30, September 30,
2018 2017
2018 2017 As Adjusted As
Adjusted Revenues: Software licenses and royalties
$
22,444 $ 22,762
$ 67,620 $ 63,826
Subscriptions
58,699 44,352
160,736 124,731 Software
services
48,199 46,045
144,812 134,401 Maintenance
96,215 91,847
286,188 266,965 Appraisal services
5,544 6,290
16,470 19,268 Hardware and other
4,966 3,410
17,475
14,007 Total revenues
236,067 214,706
693,301
623,198 Cost of revenues: Software licenses and royalties
957 826
2,939 2,204 Acquired software
5,897
5,473
17,003 16,243 Software services, maintenance and
subscriptions
111,508 98,036
327,080 287,748
Appraisal services
3,505 4,089
10,854 12,568 Hardware
and other
2,574 2,293
11,718 10,408 Total cost of revenues
124,441 110,717
369,594 329,171 Gross profit
111,626 103,989
323,707 294,027 Selling,
general and administrative expenses
52,605 44,513
152,471 130,293 Research and development expense
17,050 11,834
45,929 35,307 Amortization of customer
and trade name intangibles
4,386 3,360
11,742 10,016 Operating income
37,585 44,282
113,565 118,411 Other income (expense),
net
1,041 75
2,198
(216 ) Income before income taxes
38,626 44,357
115,763 118,195 Income tax (benefit) provision
(298 ) 5,521
(147 )
14,820 Net income
$ 38,924 $
38,836
$ 115,910 $ 103,375
Earnings per common share: Basic
$ 1.00
$ 1.04
$ 3.01 $ 2.78 Diluted
$
0.96 $ 0.99
$ 2.87 $ 2.63
Weighted average common shares outstanding: Basic
38,761 37,391
38,533 37,238 Diluted
40,528
39,342
40,345 39,266
TYLER TECHNOLOGIES, INC. RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES (Amounts in thousands, except
per share data) (Unaudited) Three Months Ended
Nine Months Ended September 30, September 30,
2018
2017
2018 2017 As Adjusted
As Adjusted
Reconciliation of
non-GAAP total revenues
GAAP total revenues
$ 236,067 $ 214,706
$
693,301 $ 623,198 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
1,397 151
3,048
539 Add: Amortization of acquired leases
104
111
326 333
Non-GAAP total revenues
$ 237,568 $ 214,968
$ 696,675 $ 624,070
Reconciliation of
non-GAAP gross profit and margin
GAAP gross profit
$ 111,626 $ 103,989
$
323,707 $ 294,027 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
1,397 151
3,048
539 Add: Amortization of acquired leases
104 111
326
333 Add: Share-based compensation expense included in cost of
revenues
3,909 2,524
9,640 6,874 Add: Amortization of
acquired software
5,897 5,473
17,003 16,243 Non-GAAP gross
profit
$ 122,933 $ 112,248
$
353,724 $ 318,016 GAAP gross margin
47.3 % 48.4 %
46.7 %
47.2 % Non-GAAP gross margin
51.7 %
52.2 %
50.8 % 51.0 %
Reconciliation of
non-GAAP operating income and margin
GAAP operating income
$ 37,585 $ 44,282
$
113,565 $ 118,411 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
1,397 151
3,048
539 Add: Amortization of acquired leases
104 111
326
333 Add: Share-based compensation expense
14,476 9,791
37,966 27,368 Add: Employer portion of payroll tax related
to employee stock transactions
484 173
1,408 684 Add:
Amortization of acquired software
5,897 5,473
17,003
16,243 Add: Amortization of customer and trade name intangibles
4,386 3,360
11,742
10,016 Non-GAAP adjustments subtotal
$
26,744 $ 19,059
$ 71,493
$ 55,183 Non-GAAP operating income
$ 64,329
$ 63,341
$ 185,058 $ 173,594
GAAP operating margin
15.9 %
20.6 %
16.4 % 19.0 % Non-GAAP operating
margin
27.1 % 29.5 %
26.6
% 27.8 %
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017
2018 2017
As Adjusted As Adjusted
Reconciliation of
non-GAAP net income and earnings per share
GAAP net income
$ 38,924 $ 38,836
$
115,910 $ 103,375 Non-GAAP adjustments: Add: Total non-GAAP
adjustments to operating income
26,744 19,059
71,493
55,183 Less: Tax impact related to non-GAAP adjustments
(15,987 ) (16,122 )
(45,088
) (45,859 ) Non-GAAP net income
$
49,681 $ 41,773
$ 142,315
$ 112,699 GAAP earnings per diluted share
$
0.96 $ 0.99
$ 2.87 $ 2.63
Non-GAAP earnings per diluted share
$ 1.23
$ 1.06
$ 3.53 $ 2.87
Detail of
share-based compensation expense
Cost of software services, maintenance and subscriptions
$
3,909 $ 2,524
$ 9,640 $ 6,874 Selling, general
and administrative expenses
10,567
7,267
28,326 20,494 Total
share-based compensation expense
$ 14,476 $
9,791
$ 37,966 $ 27,368
Reconciliation of
EBITDA and adjusted EBITDA
GAAP net income
$ 38,924 $ 38,836
$
115,910 $ 103,375 Amortization of customer and trade name
intangibles
4,386 3,360
11,742 10,016
Depreciation and other amortization
included in cost of revenues, SG&A and other expenses
11,466 10,238
33,472 29,684 Interest expense included
in other expense, net
192 191
570 571 Income tax
(benefit) provision
(298 ) 5,521
(147 ) 14,820 EBITDA
$
54,670 $ 58,146
$ 161,547 $ 158,466
Write-downs of acquisition-related deferred revenue
1,397
151
3,048 539 Share-based compensation expense
14,476 9,791
37,966
27,368 Adjusted EBITDA
$ 70,543
$ 68,088
$ 202,561 $ 186,373
TYLER TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts
in thousands) (Unaudited) September 30, 2018
December 31, 2017 As Adjusted ASSETS Current assets:
Cash and cash equivalents
$ 219,452 $ 185,926
Accounts receivable, net
281,523 246,188 Current investments
and other assets
87,438 77,362 Income tax receivable
13,281 11,339 Total current assets
601,694
520,815 Accounts receivable, long-term portion
12,966
12,107 Property and equipment, net
156,498 152,315
Other assets: Goodwill
749,502 657,987 Other intangibles,
net
282,806 229,617 Non-current investments and other assets
61,156 38,510 Total assets
$
1,864,622 $ 1,611,351 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable
and accrued liabilities
$ 70,617 $ 72,849 Deferred
revenue
326,421 298,613 Total current
liabilities
397,038 371,462 Deferred revenue,
long-term
493 1,274 Deferred income taxes
44,965
46,879 Shareholders' equity
1,422,126
1,191,736 Total liabilities and shareholders' equity
$ 1,864,622 $ 1,611,351
TYLER TECHNOLOGIES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in
thousands) (Unaudited) Three Months Ended Nine
Months Ended September 30, September 30,
2018
2017
2018 2017 As Adjusted As
Adjusted Cash flows from operating activities: Net income
$
38,924 $ 38,836
$ 115,910 $ 103,375
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization
15,978 13,598
45,627
39,700
Share-based compensation expense
14,476 9,791
37,966 27,368
Deferred income tax expense (benefit)
162 (4,858 )
(5,034 ) (13,705 )
Changes in operating assets and
liabilities, exclusive of effects of acquired companies
42,583 35,439
(15,116 ) (14,357 ) Net cash provided by
operating activities
112,123 92,806
179,353 142,381
Cash flows from investing activities: Additions to property and
equipment
(8,508 ) (7,611 )
(23,460 )
(37,734 ) Purchase of marketable security investments
(17,788 ) (28,513 )
(92,638 ) (49,905 )
Proceeds from marketable security investments
21,054 4,146
60,208 21,175 Cost of acquisitions, net of cash acquired
(10,156 ) (3,906 )
(167,308 ) (9,761 )
Decrease in other
1,043 486
857 418 Net cash used by
investing activities
(14,355 ) (35,398
)
(222,341 ) (75,807 ) Cash
flows from financing activities: Decrease in net borrowings on
revolving line of credit
— —
— (10,000 ) Purchase of
treasury shares
— —
— (7,032 ) Proceeds from exercise
of stock options
26,219 10,208
70,536 33,568
Contributions from employee stock purchase plan
2,218
1,915
5,978 5,342
Net cash provided by financing activities
28,437 12,123
76,514
21,878 Net increase in cash and cash
equivalents
126,205 69,531
33,526 88,452 Cash and
cash equivalents at beginning of period
93,247
55,072
185,926 36,151
Cash and cash equivalents at end of period
$
219,452 $ 124,603
$ 219,452
$ 124,603
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181031005798/en/
Tyler Technologies, Inc.Brian K. Miller, 972-713-3720Executive
Vice President & CFObrian.miller@tylertech.com
Tyler Technologies (NYSE:TYL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Tyler Technologies (NYSE:TYL)
Historical Stock Chart
From Jul 2023 to Jul 2024