Tyler Technologies Reports Earnings For Fourth Quarter and Fiscal 2013

  Tyler Technologies Reports Earnings For Fourth Quarter and Fiscal 2013

               Year-end backlog up 45 percent compared to 2012

Business Wire

PLANO, Texas -- February 5, 2014

Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the
fourth quarter and year ended December 31, 2013.

Tyler's President and CEO John S. Marr Jr. (Photo: Business Wire)

Tyler's President and CEO John S. Marr Jr. (Photo: Business Wire)

Fourth Quarter Financial Highlights:

  *Total revenue was $110.7 million in the fourth quarter of 2013, up 16.1
    percent, of which 14.0 percent was organic and 2.1 percent was acquisition
    related, from $95.4 million in the fourth quarter of 2012.
  *Recurring software revenue from maintenance and subscriptions was $69.1
    million for the quarter, an increase of 18.5 percent compared to the
    fourth quarter of 2012, and comprised 62.4 percent of fourth quarter 2013
    revenue.
  *Royalty revenue from Microsoft Dynamics^® AX, which is included in
    software licenses and royalties, was $473,000 compared to $238,000 for the
    fourth quarter of 2012.
  *Operating income for the quarter was $19.5 million, an increase of 26.2
    percent from the fourth quarter of 2012.
  *Net income for the quarter was $10.5 million, or $0.30 per diluted share,
    compared to $9.4 million, or $0.28 per diluted share, for the fourth
    quarter of 2012.
  *Cash flow from operations for the quarter was $7.4 million, compared to
    $16.4 million for the fourth quarter of 2012.
  *Non-GAAP operating income for the quarter was $24.7 million, up 28.9
    percent from $19.1 million for the fourth quarter of 2012.
  *Adjusted EBITDA for the quarter was $26.0 million, up 27.9 percent
    compared to $20.3 million for the fourth quarter of 2012.
  *Non-GAAP net income for the quarter was $14.0 million, or $0.39 per
    diluted share, compared to $11.9 million, or $0.36 per diluted share, for
    the fourth quarter of 2012.

Full Year Financial Highlights:

  *Total revenue for 2013 was $416.6 million, up 14.7 percent, of which 11.6
    percent was organic and 3.1 percent was acquisition related, from $363.3
    million in 2012.
  *Recurring software revenue from maintenance and subscriptions was $253.6
    million for the year, an increase of 17.1 percent compared to 2012, and
    comprised 60.9 percent of 2013 revenue.
  *Royalty revenue from Microsoft Dynamics AX was $3.1 million compared to
    $756,000 in 2012.
  *Operating income for the year was $67.1 million, an increase of 18.6
    percent from 2012.
  *Net income for the year was $39.1 million, or $1.13 per diluted share,
    compared to $33.0 million, or $1.00 per diluted share, in 2012.
  *Cash flow from operations for the year was $66.1 million, compared to
    $58.7 million in 2012.
  *Non-GAAP operating income for the year was $86.4 million, up 22.6 percent
    from $70.5 million in 2012.
  *Adjusted EBITDA for the year was $91.9 million, up 20.9 percent compared
    to $76.1 million in 2012.
  *Non-GAAP net income for the year was $52.3 million, or $1.51 per diluted
    share, compared to $42.6 million, or $1.29 per diluted share, in 2012.
  *Total backlog reached a new high of $551.7 million at December 31, 2013,
    up 45.0 percent from $380.6 million at December 31, 2012. Software-related
    backlog (excluding appraisal services) was $531.8 million, an increase of
    51.7 percent compared to $350.6 million at December 31, 2012.

“The fourth quarter represented a strong finish to our best year ever by
virtually every measure, including revenues, earnings and bookings,” said John
S. Marr Jr., Tyler’s president and chief executive officer. “Subscription
revenues paced our growth with a 51 percent increase over last year,
reflecting increased adoption of our SaaS model as well as a significant
increase in revenues from our electronic filing solution for courts. In
addition, software license revenues in the fourth quarter were the highest
since the fourth quarter of 2009. Our ability to achieve solid growth in
licenses and improve margins while continuing to expand a high-growth cloud
business is indicative of Tyler’s strong competitive position and a testament
to the consistent high level of execution by more than 2,500 Tyler
professionals.

“We enter 2014 with a historically high backlog level and a very active
new-business environment. We remain enthusiastic about the long-term market
opportunities in front of us, and we look forward to continuing to build on
Tyler’s leadership position in the public sector market in the coming year,”
continued Mr. Marr.

Guidance for 2014

As of February 5, 2014, Tyler Technologies is providing the following guidance
for the full year 2014:

  *Total revenues are expected to be in the range of $467 million to $475
    million.
  *Diluted earnings per share are expected to be approximately $1.31 to
    $1.37.
  *Non-GAAP diluted earnings per share are expected to be approximately $1.76
    to $1.85.
  *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 39.0
    percent and 41.0 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 $15.0 million and $15.5 million, including approximately $6.5
    million of amortization of acquisition intangibles.

Conference Call

Tyler Technologies will hold a conference call on Thursday, February 6, at
10:00 a.m. EST to discuss the Company’s results. Due to historically high call
volume, the company is offering participants the opportunity to register in
advance for the conference through the following link:
http://dpregister.com/10039014. 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 February 6, 2014.

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 February 13, 2014. To access the replay, please
dial 877-344-7529 (U.S. callers) or 412-317-0088 (international callers) and
reference passcode 10039014.

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 has 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 that 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 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        Twelve Months Ended
                    31,                                December 31,
                    2013              2012             2013          2012
Revenues:
Software
licenses and        $  11,426         $  8,970         $ 40,841      $ 33,928
royalties
Subscriptions          19,314            12,762          61,864        44,618
Software               23,861            21,042          93,267        83,408
services
Maintenance            49,740            45,489          191,720       171,851
Appraisal              4,971             5,496           20,825        22,543
services
Hardware and          1,423            1,609          8,126        6,956
other
Total revenues         110,735           95,368          416,643       363,304
                                                                     
Cost of
revenues:
Software
licenses and           676               475             2,377         1,983
royalties
Acquired               493               518             2,078         1,888
software
Software
services,              52,616            45,168          199,617       171,584
maintenance and
subscriptions
Appraisal              3,232             3,619           13,809        14,889
services
Hardware and          951              948            5,559        5,258
other
Total cost of          57,968            50,728          223,440       195,602
revenues
                                                                     
Gross profit           52,767            44,640          193,203       167,702
                                                                     
Selling,
general and            26,091            22,763          98,289        86,706
administrative
expenses
Research and
development            6,095             5,365           23,269        20,140
expense
Amortization of
customer and          1,129            1,093          4,517        4,279
trade name
intangibles
Operating              19,452            15,419          67,128        56,577
income
Other expense,        390              384            1,309        2,709
net
Income before          19,062            15,035          65,819        53,868
income taxes
Income tax            8,550            5,659          26,718       20,874
provision
Net income          $  10,512         $  9,376         $ 39,101      $ 32,994
                                                                     
                                                                     
                                                                     
Earnings per
common share:
Basic               $  0.32           $  0.30          $ 1.23        $ 1.09
Diluted             $  0.30           $  0.28          $ 1.13        $ 1.00
                                                                     
Weighted
average common
shares
outstanding:
Basic                  32,498            30,779          31,891        30,327
Diluted                35,348            33,421          34,590        32,916
                                                                       


TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
                                                         
                   Three Months Ended              Twelve Months Ended
                   December 31,                    December 31,
                   2013           2012             2013            2012
Reconciliation
of non-GAAP
gross profit
and margin
GAAP gross         $ 52,767       $ 44,640         $ 193,203       $ 167,702
profit
Non-GAAP
adjustments:
Add:
Share-based
compensation
expense              422            293              1,509           1,084
included in
cost of
revenues
Add:
Amortization        493          518            2,078         1,888   
of acquired
software
Non-GAAP gross     $ 53,682      $ 45,451        $ 196,790      $ 170,674 
profit
                                                                   
Non-GAAP gross      48.5   %      47.7   %        47.2    %      47.0    %
margin
                                                                   
                                                                   
Reconciliation
of non-GAAP
operating
income and
margin
GAAP operating     $ 19,452       $ 15,419         $ 67,128        $ 56,577
income
Non-GAAP
adjustments:
Add:
Share-based          3,114          1,905            11,653          7,411
compensation
expense
Add: Employer
portion of
payroll tax          472            201              982             311
related to
employee stock
transactions
Add:
Amortization         493            518              2,078           1,888
of acquired
software
Add:
Amortization
of customer         1,129        1,093          4,517         4,279   
and trade name
intangibles
Non-GAAP
adjustments        $ 5,208       $ 3,717         $ 19,230       $ 13,889  
subtotal
Non-GAAP
operating          $ 24,660      $ 19,136        $ 86,358       $ 70,466  
income
                                                                   
Non-GAAP
operating           22.3   %      20.1   %        20.7    %      19.4    %
margin
                                                                   
                                                                   
Reconciliation
of non-GAAP
net income and
earnings per
share
GAAP net           $ 10,512       $ 9,376          $ 39,101        $ 32,994
income
Non-GAAP
adjustments:
Add: Total
non-GAAP
adjustments          5,208          3,717            19,230          13,889
affecting
operating
income
Less: Tax
impact related      (1,770 )      (1,172 )        (6,014  )      (4,307  )
to non-GAAP
adjustments
Non-GAAP net       $ 13,950      $ 11,921        $ 52,317       $ 42,576  
income
                                                                   
Non-GAAP
earnings per       $ 0.39        $ 0.36          $ 1.51         $ 1.29    
diluted share
                                                                   
                                                                   
Detail of
share-based
compensation
expense
Cost of
software
services,          $ 422          $ 293            $ 1,509         $ 1,084
maintenance
and
subscriptions
Selling,
general and         2,692        1,612          10,144        6,327   
administrative
expenses
Total
share-based        $ 3,114       $ 1,905         $ 11,653       $ 7,411   
compensation
expense
                                                                   
                                                                   
Reconciliation
of adjusted
EBITDA
GAAP net           $ 10,512       $ 9,376          $ 39,101        $ 32,994
income
Amortization
of customer          1,129          1,093            4,517           4,279
and trade name
intangibles
Depreciation
and other
amortization
included in
cost of
revenues, SG&A       2,564          2,002            9,269           8,432
and other
expenses
Interest
expense
included in          149            310              685             2,064
other expense,
net
Income tax          8,550        5,659          26,718        20,874  
provision
EBITDA             $ 22,904      $ 18,440        $ 80,290       $ 68,643  
Share-based
compensation        3,114        1,905          11,653        7,411   
expense
Adjusted           $ 26,018      $ 20,345        $ 91,943       $ 76,054  
EBITDA
                                                                             


TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
                                                           
                                               December 31,     December 31,
                                               2013             2012
ASSETS
                                                                
Current assets:
Cash and cash equivalents                      $   78,876       $   6,406
Accounts receivable, net                           106,570          99,212
Income tax receivable                              9,721            406
Other current assets                               14,309           10,074
Deferred income taxes                             7,759           5,955
Total current assets                               217,235          122,053
                                                                
Accounts receivable, long-term portion             588              1,187
Property and equipment, net                        64,844           45,381
Non-current investments available-for-sale         1,288            2,037
                                                                
Other assets:
Goodwill and other intangibles, net                159,997          166,811
Other                                             536             1,197
                                                                
Total assets                                   $   444,488      $   338,666
                                                                
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                
Current liabilities:
Accounts payable and accrued liabilities       $   35,372       $   29,185
Deferred revenue                                  156,738         140,550
Total current liabilities                          192,110          169,735
                                                                
Revolving line of credit                           -                18,000
Deferred income taxes                              6,059            5,632
Shareholders' equity                              246,319         145,299
                                                                
Total liabilities and shareholders' equity     $   444,488      $   338,666
                                                                    


TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                            
                    Three months ended December       Twelve months ended
                    31,                               December 31,
                    2013            2012              2013            2012
Cash flows from
operating
activities:
Net income          $ 10,512        $ 9,376           $ 39,101        $ 32,994
Adjustments to
reconcile net
income to net
cash
provided by
operations:
Depreciation
and                   3,693           3,095             13,786          12,711
amortization
Share-based
compensation          3,114           1,905             11,653          7,411
expense
Provision for
losses-accounts       729             961               729             961
receivable
Excess tax
benefit from
exercise of           (15,007 )       (5,481  )         (28,207 )       (8,764  )
share-based
arrangements
Deferred income       (417    )       (215    )         (1,497  )       (215    )
taxes
Changes in
operating
assets and
liabilities,
exclusive of
effects of
acquired             4,765         6,773           30,525        13,570  
companies
Net cash
provided by          7,389         16,414          66,090        58,668  
operating
activities
                                                                      
Cash flows from
investing
activities:
Proceeds from
sales of              1,040           -                 1,090           75
investments
Cost of
acquisitions,         -               (10,451 )         (181    )       (25,680 )
net of cash
acquired
Additions to
property and          (6,596  )       (2,751  )         (26,858 )       (9,102  )
equipment
Decrease
(increase) in        20            (70     )        291           (29     )
other
Net cash used
by investing         (5,536  )      (13,272 )        (25,658 )      (34,736 )
activities
                                                                      
Cash flows from
financing
activities:
Decrease in net
borrowings on         -               (10,000 )         (18,000 )       (42,700 )
revolving line
of credit
Contributions
from employee         1,007           809               3,542           2,641
stock purchase
plan
Proceeds from
exercise of           8,888           6,871             18,289          12,443
stock options
Excess tax
benefit from
exercise of          15,007        5,481           28,207        8,764   
share-based
arrangements
Net cash
provided (used)      24,902        3,161           32,038        (18,852 )
by financing
activities
                                                                      
Net increase in
cash and cash         26,755          6,303             72,470          5,080
equivalents
Cash and cash
equivalents at       52,121        103             6,406         1,326   
beginning of
period
                                                                      
Cash and cash
equivalents at      $ 78,876       $ 6,406          $ 78,876       $ 6,406   
end of period

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Contact:

Tyler Technologies, Inc.
Brian K. Miller, 972-713-3720
Executive Vice President - CFO
brian.miller@tylertech.com
 
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