Tyler Technologies Reports Earnings For Third Quarter 2012

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 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; (3) economic, political and market conditions, including the recent global economic and financial crisis, and the general tightening of access to debt or equity capital; (4) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (5) our ability to successfully complete acquisitions and achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (6) 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; (7) 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 (8) 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 COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
(Unaudited)
				Three Months Ended September 30,								Nine Months Ended September 30,
				2012				2011				2012				2011
Revenues:
Software licenses				$	8,704			$	7,631			$	24,440			$	22,761
Subscriptions					11,335				7,989				31,856				22,230
Software services					22,099				17,644				62,366				52,400
Maintenance					44,452				37,011				126,362				107,579
Appraisal services					5,594				5,761				17,047				17,945
Hardware and other					1,661				1,148				5,865				4,397
Total revenues					93,845				77,184				267,936				227,312
Cost of revenues:
Software licenses					458				536				1,508				2,320
Acquired software					478				243				1,370				782
Software services, maintenance and subscriptions					43,485				35,689				126,416				106,371
Appraisal services					3,598				3,776				11,270				11,302
Hardware and other					882				808				4,310				3,645
Total cost of revenues					48,901				41,052				144,874				124,420
Gross profit					44,944				36,132				123,062				102,892
Selling, general and administrative expenses					20,909				18,755				63,943				54,509
Research and development expense					4,273				4,196				14,775				13,780
Amortization of customer and trade name intangibles					1,103				801				3,186				2,408
Operating income					18,659				12,380				41,158				32,195
Other expense, net					849				562				2,325				1,586
Income before income taxes					17,810				11,818				38,833				30,609
Income tax provision					6,978				4,312				15,215				11,751
Net income				$	10,832			$	7,506			$	23,618			$	18,858
Earnings per common share:
Basic				$	0.36			$	0.24			$	0.78			$	0.60
Diluted				$	0.33			$	0.23			$	0.72			$	0.57
Comprehensive income				$	10,914			$	7,506			$	23,700			$	18,858
EBITDA (1)				$	21,625			$	14,823			$	50,203			$	39,572
Weighted average common shares outstanding:
Basic					30,387				31,097				30,267				31,247
Diluted					32,986				32,960				32,838				33,027
(1) Reconciliation of EBITDA				Three Months Ended September 30,								Nine Months Ended September 30,
				2012				2011				2012				2011
Net income				$	10,832			$	7,506			$	23,618			$	18,858
Amortization of customer and trade name intangibles					1,103				801				3,186				2,408
Depreciation and other amortization included in cost of revenues, SG&A and other expenses					2,177				1,758				6,430				5,370
Interest expense included in other expense, net					535				446				1,754				1,185
Income tax provision					6,978				4,312				15,215				11,751
EBITDA				$	21,625			$	14,823			$	50,203			$	39,572

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
				September 30
				2012				December 31,
				(Unaudited)				2011
ASSETS
Current assets:
Cash and cash equivalents				$	103			$	1,326
Short-term investments available-for-sale					-				25
Accounts receivable, net					78,218				90,012
Other current assets					10,692				10,634
Deferred income taxes					5,051				5,095
Total current assets					94,064				107,092
Accounts receivable, long-term portion					681				2,095
Property and equipment, net					43,017				40,915
Non-current investments available-for-sale					2,029				1,953
Other assets:
Goodwill and other intangibles, net					155,069				141,722
Other					1,234				1,614
Total assets				$	296,094			$	295,391
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities				$	24,527			$	27,962
Deferred revenue					120,127				123,678
Total current liabilities					144,654				151,640
Revolving line of credit					28,000				60,700
Deferred income taxes					5,431				4,941
Shareholders' equity					118,009				78,110
Total liabilities and shareholders' equity				$	296,094			$	295,391

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Nine months ended September 30,
				2012					2011
Cash flows from operating activities:
Net income				$	23,618				$	18,858
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization					9,616					7,778
Share-based compensation expense					5,506					4,585
Excess tax benefit from exercise of share-based arrangements					(3,283	)				(1,721	)
Changes in operating assets and liabilities, exclusive of
effects of acquired companies					6,797					15,605
Net cash provided by operating activities					42,254					45,105
Cash flows from investing activities:
Proceeds from sales of investments					75					50
Cost of acquisitions, net of cash acquired					(15,229	)				-
Additions to property and equipment					(6,351	)				(9,926	)
Decrease in other					41					199
Net cash used by investing activities					(21,464	)				(9,677	)
Cash flows from financing activities:
(Decrease) increase in net borrowings on revolving line of credit					(32,700	)				31,500
Purchase of treasury shares					-					(68,525	)
Contributions from employee stock purchase plan					1,832					1,472
Proceeds from exercise of stock options					5,572					1,570
Excess tax benefit from exercise of share-based arrangements					3,283					1,721
Net cash used by financing activities					(22,013	)				(32,262	)
Net (decrease) increase in cash and cash equivalents					(1,223	)				3,166
Cash and cash equivalents at beginning of period					1,326					2,114
Cash and cash equivalents at end of period				$	103				$	5,280
Reconciliation of free cash flow:				Nine months ended September 30,
				2012					2011
Cash provided by operating activities				$	42,254				$	45,105
Capital expenditures					(6,351	)				(9,926	)
Free cash flow					35,903					35,179
Capital expenditures for real estate					3,078					6,657
Free cash flow, excluding real estate				$	38,981				$	41,836

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