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Tyler Technologies Reports Earnings For Fourth Quarter And Fiscal 2012

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 further developed or 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) economic, political and market conditions, including the recent global economic and financial crisis, and the general tightening of access to debt or equity capital; (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 successfully complete acquisitions and 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 data)
(Unaudited)
       
 
 
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Revenues:
Software licenses $ 8,732 $ 9,833 $ 33,172 $ 32,594
Subscriptions 12,762 8,930 44,618 31,160
Software services 21,042 17,217 83,408 69,617
Maintenance 45,489 38,919 171,851 146,498
Appraisal services 5,496 5,283 22,543 23,228
Hardware and other   1,847   1,897   7,712   6,294
Total revenues 95,368 82,079 363,304 309,391
 
Cost of revenues:
Software licenses 475 714 1,983 3,034
Acquired software 518 343 1,888 1,125
Software services, maintenance and subscriptions 45,168 37,405 171,584 143,776
Appraisal services 3,619 3,248 14,889 14,550
Hardware and other   948   1,349   5,258   4,994
Total cost of revenues 50,728 43,059 195,602 167,479
 
Gross profit 44,640 39,020 167,702 141,912
 
Selling, general and administrative expenses 22,763 21,141 86,706 75,650
Research and development expense 5,365 2,634 20,140 16,414
Amortization of customer and trade name intangibles   1,093   923   4,279   3,331
Operating income 15,419 14,322 56,577 46,517
Other expense, net   384   818   2,709   2,404
Income before income taxes 15,035 13,504 53,868 44,113
Income tax provision   5,659   4,805   20,874   16,556
Net income $ 9,376 $ 8,699 $ 32,994 $ 27,557
 
 
 
Earnings per common share:
Basic $ 0.30 $ 0.29 $ 1.09 $ 0.88
Diluted $ 0.28 $ 0.27 $ 1.00 $ 0.83
 
 
Weighted average common shares outstanding:
Basic 30,779 29,823 30,327 31,267
Diluted 33,421 32,031 32,916 33,154
       
 
 
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
 
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
Reconciliation of non-GAAP gross profit and margin
GAAP gross profit $ 44,640 $ 39,020 $ 167,702 $ 141,912
Non-GAAP adjustments:
Add: Share-based compensation expense included in cost of revenues 293 222 1,084 871
Add: Amortization of acquired software   518     343     1,888     1,125  
Non-GAAP gross profit $ 45,451   $ 39,585   $ 170,674   $ 143,908  
 
Non-GAAP gross margin   47.7 %   48.2 %   47.0 %   46.5 %
 
 
Reconciliation of non-GAAP operating income and margin
GAAP operating income $ 15,419 $ 14,322 $ 56,577 $ 46,517
Non-GAAP adjustments:
Add: Share-based compensation expense 1,905 1,668 7,411 6,253
Add: Amortization of acquired software 518 343 1,888 1,125
Add: Amortization of customer and trade name intangibles   1,093     923     4,279     3,331  
Non-GAAP adjustments subtotal $ 3,516   $ 2,934   $ 13,578   $ 10,709  
Non-GAAP operating income $ 18,935   $ 17,256   $ 70,155   $ 57,226  
 
Non-GAAP operating margin   19.9 %   21.0 %   19.3 %   18.5 %
 
 
Reconciliation of non-GAAP net income and earnings per share
GAAP net income $ 9,376 $ 8,699 $ 32,994 $ 27,557
Non-GAAP adjustments:
Add: Total non-GAAP adjustments affecting operating income 3,516 2,934 13,578 10,709
Less: Tax impact related to non-GAAP adjustments   (1,101 )   (882 )   (4,198 )   (3,087 )
Non-GAAP net income $ 11,791   $ 10,751   $ 42,374   $ 35,179  
 
Non-GAAP earnings per diluted share $ 0.35   $ 0.34   $ 1.29   $ 1.06  
 
 
Detail of share-based compensation expense
Cost of software services, maintenance and subscriptions $ 293 $ 222 $ 1,084 $ 871
Selling, general and administrative expenses   1,612     1,446     6,327     5,382  
Total share-based compensation expense $ 1,905   $ 1,668   $ 7,411   $ 6,253  
 
 
Reconciliation of adjusted EBITDA
GAAP net income $ 9,376 $ 8,699 $ 32,994 $ 27,557
Amortization of customer and trade name intangibles 1,093 923 4,279 3,331
Depreciation and other amortization included in
cost of revenues, SG&A and other expenses 2,002 1,975 8,432 7,345
Interest expense included in other expense, net 310 707 2,064 1,892
Income tax provision   5,659     4,805     20,874     16,556  
EBITDA $ 18,440   $ 17,109   $ 68,643   $ 56,681  
Share-based compensation expense   1,905     1,668     7,411     6,253  
Adjusted EBITDA $ 20,345   $ 18,777   $ 76,054   $ 62,934  
 
 
 
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
   
 
 
December 31, December 31,
2012 2011
ASSETS
 
Current assets:
Cash and cash equivalents $ 6,406 $ 1,326
Short-term investments available-for-sale - 25
Accounts receivable, net 100,327 90,012
Other current assets 10,480 10,634
Deferred income taxes   5,544   5,095
Total current assets 122,757 107,092
 
Accounts receivable, long-term portion 1,187 2,095
Property and equipment, net 45,381 40,915
Non-current investments available-for-sale 2,037 1,953
 
Other assets:
Goodwill and other intangibles, net 165,756 141,722
Other   1,197   1,614
 
Total assets $ 338,315 $ 295,391
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable and accrued liabilities $ 29,245 $ 27,962
Deferred revenue   140,550   123,678
Total current liabilities 169,795 151,640
 
Revolving line of credit 18,000 60,700
Deferred income taxes 5,221 4,941
Shareholders' equity   145,299   78,110
 
Total liabilities and shareholders' equity $ 338,315 $ 295,391
 
 
 
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
       
 
Three months ended December 31, Twelve months ended December 31,
2012 2011 2012 2011
Cash flows from operating activities:
Net income $ 9,376 $ 8,699 $ 32,994 $ 27,557
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 3,095 2,898 12,711 10,676
Share-based compensation expense 1,905 1,668 7,411 6,253
Provision for losses-accounts receivable 961 805 961 805
Excess tax benefit from exercise of share-based arrangements (5,481 ) (1,869 ) (8,764 ) (3,590 )
Deferred income taxes (215 ) (2,916 ) (215 ) (2,916 )
Changes in operating assets and liabilities, exclusive of
effects of acquired companies   6,773     2,045     13,570     17,650  
Net cash provided by operating activities   16,414     11,330     58,668     56,435  
 
Cash flows from investing activities:
Proceeds from sales of investments - - 75 50
Cost of acquisitions, net of cash acquired (10,451 ) (17,298 ) (25,680 ) (17,298 )
Additions to property and equipment (2,751 ) (2,352 ) (9,102 ) (12,278 )
(Increase) decrease in other   (70 )   518     (29 )   717  
Net cash used by investing activities   (13,272 )   (19,132 )   (34,736 )   (28,809 )
 
Cash flows from financing activities:
(Decrease) increase in net borrowings on revolving line of credit (10,000 ) 2,700 (42,700 ) 34,200
Purchase of treasury shares - (3,277 ) - (71,802 )
Contributions from employee stock purchase plan 809 573 2,641 2,045
Proceeds from exercise of stock options 6,871 1,983 12,443 3,553
Excess tax benefit from exercise of share-based arrangements   5,481     1,869     8,764     3,590  
Net cash provided (used) by financing activities   3,161     3,848     (18,852 )   (28,414 )
 
Net increase (decrease) in cash and cash equivalents 6,303 (3,954 ) 5,080 (788 )
Cash and cash equivalents at beginning of period   103     5,280     1,326     2,114  
 
Cash and cash equivalents at end of period $ 6,406   $ 1,326   $ 6,406   $ 1,326  




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