Total revenues grow nearly 13 percent;
subscription revenues rise 26 percent
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the fourth quarter and year ended December 31,
2017.
Fourth Quarter 2017 Financial Highlights:
- Total revenues were $217.9 million, up
12.7 percent from $193.3 million for the fourth quarter of
2016.
- Recurring revenue from maintenance and
subscriptions was $140.6 million, up 14.4 percent compared to the
fourth quarter of 2016, and comprised 64.6 percent of fourth
quarter 2017 revenue.
- Operating income was $44.3 million, up
25.0 percent from $35.4 million for the fourth quarter of
2016.
- Net income was $61.8 million, or $1.56
per diluted share, up 98.1 percent compared to $31.2 million, or
$0.80 per diluted share, for the fourth quarter of 2016.
- Cash flows from operations were $53.4
million, up 3.0 percent compared to $51.8 million for the fourth
quarter of 2016.
- Non-GAAP total revenues were $218.1
million, up 11.8 percent from $195.1 million for the fourth quarter
of 2016.
- Non-GAAP operating income was $63.8
million, up 16.4 percent from $54.8 million for the fourth quarter
of 2016.
- Non-GAAP net income was $42.1 million,
or $1.07 per diluted share, up 19.5 percent compared to $35.2
million, or $0.90 per diluted share, for the fourth quarter of
2016.
- Adjusted EBITDA was $69.3 million, up
19.0 percent compared to $58.2 million for the fourth quarter of
2016.
- The company repurchased 2,600 shares of
its common stock during the quarter at an average price of
$169.93.
Full Year 2017 Financial Highlights:
- Total revenues were $840.7 million, up
11.2 percent from $756.0 million in 2016.
- Recurring revenue from maintenance and
subscriptions was $535.1 million, up 14.9 percent compared to 2016,
and comprised 63.6 percent of 2017 revenue.
- Operating income was $160.9 million, up
22.6 percent from $131.3 million in 2016.
- Net income was $163.9 million, or $4.18
per diluted share, up 49.2 percent compared to $109.9 million, or
$2.82 per diluted share, in 2016.
- Cash flows from operations were $195.8
million, up 2.0 percent compared to $191.9 million in 2016.
- Non-GAAP total revenues were $841.8
million, up 9.1 percent from $771.6 million in 2016.
- Non-GAAP operating income was $236.1
million, up 10.6 percent from $213.5 million in 2016.
- Non-GAAP net income was $153.9 million,
or $3.92 per diluted share, up 13.3 percent compared to $135.8
million, or $3.49 per diluted share, in 2016.
- Adjusted EBITDA was $254.3 million, up
12.3 percent compared to $226.4 million in 2016.
- Total backlog was $1.1 billion, up 17.6
percent from $953.3 million at December 31, 2016.
Software-related backlog (excluding appraisal services) was $1.1
billion, an increase of 18.4 percent compared to $914.6 million at
December 31, 2016.
- The company repurchased 44,496 shares
of its common stock during the year at an average price of
$148.62.
“We are pleased with Tyler's very strong finish to 2017,” said
John S. Marr Jr., Tyler’s chairman and chief executive officer. “We
achieved double-digit total revenue growth in the fourth quarter,
with subscription revenue growth of 26 percent. In addition,
license and royalties revenue reached a new quarterly high,
surpassing $20 million for the first time. We also achieved an
increase in our non-GAAP operating margin of 120 basis points.
"Our GAAP effective tax rate was favorably impacted in the
fourth quarter by the enactment of the Tax Cuts and Jobs Act (the
"Tax Act") primarily due to the remeasurement of deferred tax
assets and liabilities. Going forward, we expect that our effective
tax rate will benefit significantly from the reduction in corporate
tax rates as a result of the Tax Act.
“Market activity and our competitive position in the local
government software market remain strong and our total bookings for
the quarter rose 37 percent. Bookings under both our license and
subscription models were robust, and subscription arrangements
comprised approximately 33 percent of the total dollar volume of
new software contracts. We added approximately $7 million in annual
recurring revenues from software subscriptions in the fourth
quarter, an increase of 156 percent over last year. Annual bookings
for 2017 exceeded $1 billion for the first time, and year-end
backlog was $1.1 billion, up 18 percent over last year.
"With our positive outlook for 2018 and our strong financial
position and cash flow, supplemented by the benefit of lower tax
rates, we plan to make incremental research and development
investments to continue to expand our market-leading position in
public sector software and drive future growth. We expect to
increase our R&D spend by more than 20 percent in 2018, while
continuing to pursue strategic acquisitions at reasonable
valuations,” said Marr.
Guidance for 2018
As of February 21, 2018, Tyler Technologies is providing
the guidance below for the full year 2018. This guidance reflects
the preliminary estimated impact of ASC 606, which Tyler expects to
adopt using the full retrospective method effective January 1,
2018.
- GAAP total revenues are expected to be
in the range of $912 million to $928 million.
- Non-GAAP total revenues are expected to
be in the range of $913 million to $929 million.
- GAAP diluted earnings per share are
expected to be approximately between $3.65 and $3.75 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 approximately between $4.73 and $4.83.
- Pretax non-cash, share-based
compensation expense is expected to be approximately $49
million.
- Research and development expense is
expected to be between $58 million and $60 million.
- Fully diluted shares for the year are
expected to be between 40.0 million and 40.5 million shares.
- GAAP earnings per share assumes an
estimated effective tax rate of approximately 11 percent after
discrete tax items and includes approximately $26 million of
discrete tax benefits related to share-based compensation.
- The non-GAAP effective tax rate is
expected to be 24 percent. This was adjusted from 35 percent in
2017 primarily because of the impact of the Tax Cuts and Jobs
Act.
- Capital expenditures are expected to be
between $22 million and $25 million, including approximately $1
million related to real estate. Total depreciation and amortization
expense is expected to be approximately $59 million, including
approximately $35 million of amortization of acquisition
intangibles.
The actual impact of ASC 606 is subject to a number of variables
and uncertainties, including the mix and timing of new contracts
and specific terms contained in individual contracts. For
comparison purposes, Tyler's guidance for 2018 under the prior ASC
605 basis would be as follows:
- GAAP total revenues would be expected
to be in the range of $918 million to $934 million.
- Non-GAAP total revenues would be
expected to be in the range of $919 million to $935 million.
- GAAP diluted earnings per share would
be expected to be approximately between $3.75 and $3.85.
- Non-GAAP diluted earnings per share
would be expected to be approximately between $4.81 and $4.91.
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 $49
million, and amortization of acquired software and intangible
assets of approximately $35 million. Additionally, the non-GAAP tax
rate of 24 percent is estimated periodically as described below
under "Non-GAAP Financial Measures" and excludes approximately $26
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,
February 22, at 10:00 a.m. EST 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/10115773. 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
22.
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 February 28, 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 10115773.
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, 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 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, and expenses associated with amortization of intangibles
arising from business combinations.
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 its non-GAAP
pretax 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
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 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 EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016
2017 2016 Revenues: Software
licenses and royalties
$ 20,522 $ 19,975
$
75,694 $ 74,306 Subscriptions
47,621 37,778
173,510 142,704 Software services
47,280 41,595
187,149 174,804 Maintenance
93,013 85,194
361,569 322,969 Appraisal services
5,755 6,204
25,023 26,287 Hardware and other
3,660
2,535
17,717 14,973
Total revenues
217,851 193,281
840,662 756,043
Cost of revenues: Software licenses and royalties
1,117 1,037
3,321 2,964 Acquired software
5,443 5,498
21,686 22,235 Software services,
maintenance and subscriptions
99,886 88,329
387,634
348,939 Appraisal services
3,718 3,938
16,286 16,411
Hardware and other
2,187 1,662
12,595 10,143 Total cost of
revenues
112,351 100,464
441,522 400,692 Gross
profit
105,500 92,817
399,140 355,351 Selling,
general and administrative expenses
45,725 42,162
176,974 167,161 Research and development expense
12,017 11,793
47,324 43,154 Amortization of customer
and trade name intangibles
3,499 3,458
13,912 13,731 Operating
income
44,259 35,404
160,930 131,305 Other income
(expense), net
914 (285 )
698 (1,998 ) Income before income taxes
45,173 35,119
161,628 129,307 Income tax (benefit)
provision
(16,625 ) 3,923
(2,317 ) 19,450 Net income
$
61,798 $ 31,196
$ 163,945
$ 109,857 Earnings per common share: Basic
$ 1.64 $ 0.85
$ 4.40
$ 3.01 Diluted
$ 1.56 $ 0.80
$ 4.18 $ 2.82 Weighted
average common shares outstanding: Basic
37,694 36,653
37,273 36,448 Diluted
39,499 38,975
39,246
38,961
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016
2017 2016
Reconciliation of
non-GAAP total revenues
GAAP total revenues
$ 217,851 $ 193,281
$
840,662 $ 756,043 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
124 1,664
663
15,063 Add: Amortization of acquired leases
111
111
444 444
Non-GAAP total revenues
$ 218,086 $ 195,056
$ 841,769 $ 771,550
Reconciliation of
non-GAAP gross profit and margin
GAAP gross profit
$ 105,500 $ 92,817
$
399,140 $ 355,351 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
124 1,664
663
15,063 Add: Amortization of acquired leases
111 111
444 444 Add: Share-based compensation expense included in
cost of revenues
2,541 1,881
9,415 6,548 Add:
Amortization of acquired software
5,443
5,498
21,686 22,235
Non-GAAP gross profit
$ 113,719 $ 101,971
$ 431,348 $ 399,641 GAAP gross
margin
48.4 % 48.0 %
47.5
% 47.0 % Non-GAAP gross margin
52.1
% 52.3 %
51.2 % 51.8 %
Reconciliation of
non-GAAP operating income and margin
GAAP operating income
$ 44,259 $ 35,404
$
160,930 $ 131,305 Non-GAAP adjustments: Add: Write-downs of
acquisition-related deferred revenue
124 1,664
663
15,063 Add: Amortization of acquired leases
111 111
444 444 Add: Share-based compensation expense
9,980
8,399
37,348 29,747 Add: Employer portion of payroll tax
related to employee stock transactions
418 311
1,102
1,001 Add: Amortization of acquired software
5,443 5,498
21,686 22,235 Add: Amortization of customer and trade name
intangibles
3,499 3,458
13,912 13,731 Non-GAAP adjustments
subtotal
$ 19,575 $ 19,441
$
75,155 $ 82,221 Non-GAAP operating income
$ 63,834 $ 54,845
$
236,085 $ 213,526 GAAP operating margin
20.3 % 18.3 %
19.1 %
17.4 % Non-GAAP operating margin
29.3 %
28.1 %
28.0 % 27.7 %
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016
2017 2016
Reconciliation of
non-GAAP net income and earnings per share
GAAP net income
$61,798 $31,196
$163,945 $ 109,857
Non-GAAP adjustments: Add: Total non-GAAP adjustments to operating
income
19,575 19,441
75,155 82,221 Less: Tax impact
related to non-GAAP adjustments
(39,287 ) (15,408 )
(85,192 ) (56,230 ) Non-GAAP net income
$42,086 $35,229
$153,908 $
135,848 GAAP earnings per diluted share
$1.56
$0.80
$4.18 $ 2.82 Non-GAAP earnings
per diluted share
$1.07 $0.90
$3.92
$ 3.49
Detail of
share-based compensation expense
Cost of software services, maintenance and subscriptions
$2,541 $1,881
$9,415 $ 6,548 Selling, general and
administrative expenses
7,439 6,518
27,933 23,199 Total share-based
compensation expense
$9,980 $8,399
$37,348 $ 29,747
Reconciliation of
EBITDA and adjusted EBITDA
GAAP net income
$ 61,798 $ 31,196
$
163,945 $ 109,857 Amortization of customer and trade name
intangibles
3,499 3,458
13,912 13,731 Depreciation
and other amortization included in cost of revenues, SG&A and
other expenses
10,330 9,322
40,013 36,570 Interest
expense included in other expense, net
191 270
762
1,965 Income tax provision (benefit)
(16,625 )
3,923
(2,317 )
19,450 EBITDA
$ 59,193 $ 48,169
$ 216,315 $ 181,573 Write-downs of
acquisition-related deferred revenue
124 1,664
663
15,063 Share-based compensation expense
9,980
8,399
37,348 29,747
Adjusted EBITDA
$ 69,297 $ 58,232
$ 254,326 $ 226,383
TYLER TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (Amounts in thousands) (Unaudited)
December 31,2017
December 31,2016
ASSETS Current assets: Cash and cash equivalents
$
185,926 $ 36,151 Accounts receivable, net
227,127
200,334 Current investments and other assets
72,408 43,580
Income tax receivable
11,339 2,895 Total
current assets
496,800 282,960 Accounts receivable,
long-term portion
7,536 2,480 Property and equipment, net
152,315 124,268 Other assets: Goodwill
657,987
650,237 Other intangibles, net
236,444 267,259 Non-current
investments and other assets
38,510 30,741
Total assets
$ 1,589,592 $ 1,357,945
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued liabilities
$
72,849 $ 63,284 Deferred revenue
309,461
298,217 Total current liabilities
382,310 361,501
Revolving line of credit
— 10,000 Deferred revenue,
long-term
1,274 2,140 Deferred income taxes
38,914
68,779 Shareholders' equity
1,167,094 915,525
Total liabilities and shareholders' equity
$
1,589,592 $ 1,357,945
TYLER TECHNOLOGIES,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands) (Unaudited)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016
2017 2016 Cash flows from
operating activities: Net income
$ 61,798 $ 31,196
$ 163,945 $ 109,857 Adjustments to reconcile net
income to cash provided by operations: Depreciation and
amortization
13,829 12,780
53,925 50,301 Share-based
compensation expense
9,980 8,399
37,348 29,747
Provision for losses - accounts receivable
4,110 4,484
4,110 4,484 Deferred income tax benefit
(15,649
) (17,650 )
(29,865 ) (28,939 ) Changes in
operating assets and liabilities, exclusive of effects of acquired
companies
(20,694 ) 12,596
(33,708 ) 26,409 Net cash
provided by operating activities
53,374
51,805
195,755 191,859
Cash flows from investing activities: Cost of acquisitions,
net of cash acquired
(1,583 ) —
(11,344
) (9,394 ) Purchase of marketable security investments
(9,874 ) (7,189 )
(59,779 ) (20,316 )
Proceeds from marketable security investments
7,611 7,581
28,786 16,837 Additions to property and equipment
(5,323 ) (8,197 )
(43,057 ) (37,726 )
Increase in other
(419 ) (69 )
(1 ) (121 ) Net cash used by investing
activities
(9,588 ) (7,874 )
(85,395 ) (50,720 ) Cash flows from
financing activities: Decrease in net borrowings on revolving line
of credit
— (24,000 )
(10,000 ) (56,000 )
Purchase of treasury shares
(442 ) (17,339 )
(7,474 ) (111,838 ) Contributions from employee stock
purchase plan
1,702 1,807
7,044 6,236 Proceeds from
exercise of stock options
16,277 8,438
49,845 23,527 Net cash
provided (used) by financing activities
17,537
(31,094 )
39,415 (138,075 )
Increase in net cash and cash equivalents
61,323
12,837
149,775 3,064 Cash and cash equivalents at beginning
of period
124,603 23,314
36,151 33,087 Cash and cash
equivalents at end of period
$ 185,926 $
36,151
$ 185,926 $ 36,151
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180221006213/en/
Tyler Technologies, Inc.Brian K. Miller, 972-713-3720Executive
Vice President - CFObrian.miller@tylertech.com
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