Double-digit organic growth driven by 20%
increase in SaaS revenues
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the second quarter ended June 30, 2023.
Second Quarter 2023 Financial Highlights:
Revenues
Total revenues were $504.3 million, up 7.6% from the second
quarter of 2022. On an organic basis, revenues grew 10.4%.
Recurring Revenues
Recurring revenues from maintenance and subscriptions were
$414.3 million, up 11.2% from the second quarter of 2022, and
comprised 82.2% of total revenues (compared to 79.5% for the second
quarter of 2022). On an organic basis, recurring revenues grew
10.8%.
- Subscription revenues were $297.8 million, up 16.4% from the
second quarter of 2022. On an organic basis, subscription revenues
grew 16.0%. Within subscriptions:
- SaaS revenues grew organically 20.0% to $131.5 million.
- Transaction-based revenues grew 13.7% to $166.3 million. On an
organic basis, transaction-based revenues grew 12.8%.
- SaaS arrangements comprised approximately 82% of the total new
software contract value, compared to approximately 74% for the
second quarter of 2022.
- Annualized recurring revenue (ARR) was $1.66 billion, up 11.2%
from the second quarter of 2022.
Earnings/EBITDA
- GAAP operating income was $61.9 million, up 9.0% from the
second quarter of 2022. Non-GAAP operating income was $115.9
million, up 4.8% from the second quarter of 2022.
- GAAP net income was $49.1 million, or $1.15 per diluted share,
up 23.0% from the second quarter of 2022. Non-GAAP net income was
$85.9 million, or $2.01 per diluted share, up 8.1% from the second
quarter of 2022.
- Adjusted EBITDA was $125.5 million, up 5.4% from the second
quarter of 2022.
Cash Flow
Cash flows from operations were negative $19.2 million, compared
to $76.7 million for the second quarter of 2022. Free cash flow was
negative $33.2 million, compared to $60.0 million for the second
quarter of 2022. Cash flows in the quarter were impacted by
incremental cash tax payments of $90 million related to the current
status of IRC Section 174 capitalization rules.
"Tyler delivered exceptionally strong second quarter results
that exceeded expectations across our key performance measures. We
reached a new milestone for total quarterly revenues, surpassing
the $500 million mark for the first time," said Lynn Moore, Tyler's
president and chief executive officer. "We achieved organic revenue
growth of 10.4% while our SaaS mix expanded to 82% of our new
software contract value. Most importantly, SaaS revenues grew 20%
organically, our 10th consecutive quarter of SaaS revenue growth of
20% or more. Additionally, while operating margins continue to be
pressured by our cloud transition, we remain on track to return to
operating margin expansion in 2024.
"The public sector market remains strong, with our key sales
activity indicators generally at or above pre-COVID highs. We're
pleased with our progress with strategic initiatives that leverage
our unmatched installed client base and broad product portfolio to
drive cloud migrations, cross-sell and upsell opportunities, and
payments expansion. Our year-to-date performance demonstrates solid
execution against our cloud-first strategy and the mid- to
long-term goals outlined during our recent Investor Day," concluded
Moore.
Guidance for 2023
As of July 26, 2023, Tyler Technologies is providing the
following guidance for the full year 2023:
- Total revenues are expected to be in the range of $1.940
billion to $1.965 billion.
- GAAP diluted earnings per share are expected to be in the range
of $3.87 to $4.02 and may vary significantly due to the impact of
stock option activity on the GAAP effective tax rate.
- Non-GAAP diluted earnings per share are expected to be in the
range of $7.60 to $7.75.
- Interest expense is expected to be approximately $25 million,
including approximately $5 million of non-cash amortization of debt
discounts and issuance costs.
- Pretax non-cash, share-based compensation expense is expected
to be approximately $110 million.
- Research and development expense is expected to be in the range
of $113 million to $114 million.
- Fully diluted shares for the year are expected to be in the
range of 42.5 million to 43.0 million shares.
- GAAP earnings per share assumes an estimated annual effective
tax rate of approximately 15.5% after discrete tax items, including
approximately $11 million of discrete tax benefits related to
share-based compensation.
- The non-GAAP annual effective tax rate is expected to be
22.0%.
- Capital expenditures are expected to be in the range of $63
million to $65 million, including approximately $37 million of
capitalized software development costs. Total depreciation and
amortization expense is expected to be approximately $149 million,
including approximately $109 million from amortization of
acquisition intangibles.
GAAP to non-GAAP guidance
reconciliation
Non-GAAP diluted earnings per share excludes 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 $110 million, amortization of
acquired software and intangible assets of approximately $109
million, and acquisition-related costs, lease restructuring and
other asset write-off costs of approximately $2 million.
Additionally, the non-GAAP tax rate of 22.0% is estimated
periodically as described below under "Non-GAAP Financial Measures"
and excludes approximately $11 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, July
27, 2023, at 10:00 a.m. ET to discuss the company’s results. The
company is offering participants the opportunity to register in
advance for the conference through the following link:
https://conferencingportals.com/event/dXimaDxA. Registered
participants will receive an email with a calendar reminder,
dial-in number, and conference ID that allows them immediate access
to the call.
The live audio webcast and archived replay can also be accessed
at
https://investors.tylertech.com/events-and-presentations/default.aspx.
About Tyler Technologies, Inc.
Tyler Technologies (NYSE: TYL) provides integrated software and
technology services to the public sector. Tyler's end-to-end
solutions empower local, state, and federal government entities to
operate more efficiently and transparently with residents and each
other. By connecting data and processes across disparate systems,
Tyler's solutions transform how clients turn actionable insights
into opportunities and solutions for their communities. Tyler has
more than 40,000 successful installations across nearly 13,000
locations, with clients in all 50 states, Canada, the Caribbean,
Australia, and other international locations. Tyler has been
recognized numerous times for growth and innovation, including
Government Technology's GovTech 100 list. More information about
Tyler Technologies, an S&P 500 company 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
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, adjusted EBITDA, and free cash flow. 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
share-based compensation expense, employer portion of payroll taxes
on employee stock transactions, expenses associated with
amortization of intangibles arising from business combinations,
acquisition-related expenses, and lease restructuring costs and
other asset write-offs. Annualized recurring revenues (ARR) is
calculated by annualizing the current quarter's recurring revenues
from maintenance and subscriptions.
Tyler currently uses a non-GAAP tax rate of 22.0%. 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 annual 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) disruption to our business and harm to our
competitive position resulting from cyber-attacks and security
vulnerabilities; (3) our ability to protect client information from
security breaches and provide uninterrupted operations of data
centers; (4) our ability to achieve growth or operational synergies
through the integration of acquired businesses, while avoiding
unanticipated costs and disruptions to existing operations; (5)
material portions of our business require the Internet
infrastructure to be adequately maintained; (6) 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; (7)
general economic, political and market conditions, including
continued inflation and rising interest rates; (8) technological
and market risks associated with the development of new products or
services or of new versions of existing or acquired products or
services; (9) 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; (10) 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
(11) costs of compliance and any failure to comply with government
and stock exchange regulations. 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
and quarterly report on Form 10-Q. We expressly disclaim any
obligation to publicly update or revise our forward-looking
statements.
(Comparative results follow)
Source: Tyler Technologies
#TYL_Financial
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended June 30,
Six months ended June 30,
2023
2022
2023
2022
Revenues:
Subscriptions
$
297,789
$
255,816
$
578,254
$
501,259
Maintenance
116,539
116,815
231,670
233,844
Professional services
66,420
71,937
127,349
141,952
Software licenses and royalties
9,779
15,009
19,909
31,515
Hardware and other
13,752
9,108
18,951
16,222
Total revenues
504,279
468,685
976,133
924,792
Cost of revenues:
Subscriptions, maintenance, and
professional services
255,789
250,168
508,204
493,000
Software licenses and royalties
2,432
1,547
4,745
2,992
Amortization of software development
2,896
1,322
5,485
2,486
Amortization of acquired software
8,924
14,039
17,844
27,260
Hardware and other
11,061
8,161
16,841
13,188
Total cost of revenues
281,102
275,237
553,119
538,926
Gross profit
223,177
193,448
423,014
385,866
Sales and marketing expense
37,103
31,881
74,206
67,087
General and administrative expense
77,681
67,820
150,041
130,509
Research and development expense
28,153
23,386
55,139
47,327
Amortization of other intangibles
18,366
13,604
36,774
28,318
Operating income
61,874
56,757
106,854
112,625
Interest expense
(6,387
)
(6,214
)
(14,071
)
(11,018
)
Other income, net
643
216
1,889
581
Income before income taxes
56,130
50,759
94,672
102,188
Income tax provision
7,000
10,813
14,667
22,258
Net income
$
49,130
$
39,946
$
80,005
$
79,930
Earnings per common share:
Basic
$
1.17
$
0.96
$
1.91
$
1.93
Diluted
$
1.15
$
0.94
$
1.87
$
1.88
Weighted average common shares
outstanding:
Basic
41,980
41,500
41,987
41,499
Diluted
42,751
42,321
42,710
42,449
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended June 30,
Six months ended June 30,
Reconciliation of non-GAAP gross profit
and margin
2023
2022
2023
2022
GAAP gross profit
$ 223,177
$
193,448
$
423,014
$
385,866
Non-GAAP adjustments:
Add: Share-based compensation expense
included in cost of revenues
6,437
6,867
12,779
13,639
Add: Amortization of acquired software
8,924
14,039
17,844
27,260
Non-GAAP gross profit
$ 238,538
$
214,354
$
453,637
$
426,765
GAAP gross margin
44.3
%
41.3
%
43.3
%
41.7
%
Non-GAAP gross margin
47.3
%
45.7
%
46.5
%
46.1
%
Three months ended June 30,
Six months ended June 30,
Reconciliation of non-GAAP operating
income and margin
2023
2022
2023
2022
GAAP operating income
$
61,874
$
56,757
$
106,854
$
112,625
Non-GAAP adjustments:
Add: Share-based compensation expense
26,028
25,800
53,924
51,079
Add: Employer portion of payroll tax
related to employee stock transactions
669
398
1,148
1,110
Add: Acquisition-related costs
50
—
72
1,031
Add: Lease restructuring costs and other
asset write-offs
—
—
1,545
—
Add: Amortization of acquired software
8,924
14,039
17,844
27,260
Add: Amortization of customer and trade
name intangibles
18,366
13,604
36,774
28,318
Non-GAAP adjustments subtotal
54,037
53,841
111,307
108,798
Non-GAAP operating income
$
115,911
$
110,598
$
218,161
$
221,423
GAAP operating margin
12.3
%
12.1
%
10.9
%
12.2
%
Non-GAAP operating margin
23.0
%
23.6
%
22.3
%
23.9
%
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended June 30,
Six months ended June 30,
Reconciliation of non-GAAP net income and
earnings per share
2023
2022
2023
2022
GAAP net income
$
49,130
$
39,946
$
80,005
$
79,930
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to
operating income
54,037
53,841
111,307
108,798
Less: Tax impact related to non-GAAP
adjustments
(17,237
)
(14,290
)
(30,648
)
(28,378
)
Non-GAAP net income
$
85,930
$
79,497
$
160,664
$
160,350
GAAP earnings per diluted share
$
1.15
$
0.94
$
1.87
$
1.88
Non-GAAP earnings per diluted share
$
2.01
$
1.88
$
3.76
$
3.78
Three months ended June 30,
Six months ended June 30,
Detail of share-based compensation
expense
2023
2022
2023
2022
Subscriptions, maintenance, and
professional services
$
6,437
$
6,867
$
12,779
$
13,639
Sales and marketing expense
2,367
2,224
4,760
4,364
General and administrative expense
17,224
16,709
36,385
33,076
Total share-based compensation expense
$
26,028
$
25,800
$
53,924
$
51,079
Three months ended June 30,
Six months ended June 30,
Reconciliation of EBITDA and adjusted
EBITDA
2023
2022
2023
2022
GAAP net income
$
49,130
$
39,946
$
80,005
$
79,930
Amortization of customer and trade name
intangibles
18,366
13,604
36,774
28,318
Depreciation and amortization included in
cost of revenues, sales and marketing expense, general and
administrative expense, and research and development expense
19,359
23,820
39,124
46,887
Interest expense
5,566
5,066
11,894
8,747
Income tax provision
7,000
10,813
14,667
22,258
EBITDA
$
99,421
$
93,249
$
182,464
$
186,139
Share-based compensation expense
26,028
25,800
53,924
51,079
Acquisition-related costs
50
—
72
1,031
Lease restructuring costs and other asset
write-offs
—
—
1,545
—
Adjusted EBITDA
$
125,499
$
119,049
$
238,005
$
238,249
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended June 30,
Six months ended June 30,
Reconciliation of free cash flow
2023
2022
2023
2022
Net cash provided by operating
activities
$
(19,184
)
$
76,679
$
55,525
$
130,220
Less: additions to property and
equipment
(4,350
)
(8,178
)
(6,370
)
(12,757
)
Less: capitalized software development
(9,674
)
(8,516
)
(18,753
)
(16,463
)
Free cash flow
$
(33,208
)
$
59,985
$
30,402
$
101,000
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Amounts in thousands)
(Unaudited)
June 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
118,764
$
173,857
Accounts receivable, net
638,726
577,257
Short-term investments
19,100
37,030
Prepaid expenses and other current
assets
80,290
59,098
Total current assets
856,880
847,242
Accounts receivable, long-term portion
8,310
8,271
Operating lease right-of-use assets
46,824
50,989
Property and equipment, net
165,721
172,786
Other assets:
Software development costs, net
61,228
48,189
Goodwill
2,489,084
2,489,308
Other intangibles, net
948,990
1,002,164
Non-current investments
10,116
18,508
Other non-current assets
48,396
49,960
Total assets
$
4,635,549
$
4,687,417
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$
245,091
$
236,754
Operating lease liabilities
11,381
10,736
Current income tax payable
1,905
43,667
Deferred revenue
565,840
568,538
Current portion of term loans
30,000
30,000
Total current liabilities
854,217
889,695
Term loans
243,729
362,905
Convertible senior notes due 2026, net
595,345
594,484
Deferred revenue, long-term
1,164
2,037
Deferred income taxes
109,247
148,891
Operating lease liabilities, long-term
44,483
48,049
Other long-term liabilities
19,113
16,967
Total liabilities
1,867,298
2,063,028
Shareholders' equity
$
2,768,251
$
2,624,389
Total liabilities and shareholders'
equity
$
4,635,549
$
4,687,417
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three months ended June 30,
Six months ended June 30,
2023
2022
2023
2022
Cash flows from operating activities:
Net income
$
49,130
$
39,946
$
80,005
$
79,930
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization
37,636
37,717
75,748
75,866
Gains from sale of investments
2
2
2
(53
)
Share-based compensation expense
26,028
25,800
53,924
51,079
Operating lease right-of-use assets
expense
2,765
2,022
6,569
5,104
Deferred income tax benefit
(21,109
)
(9,698
)
(39,665
)
(19,136
)
Other
(54
)
—
445
—
Changes in operating assets and
liabilities, exclusive of effects of acquired companies
(113,582
)
(19,110
)
(121,503
)
(62,570
)
Net cash (used) provided by operating
activities
(19,184
)
76,679
55,525
130,220
Cash flows from investing activities:
Additions to property and equipment
(4,350
)
(8,178
)
(6,370
)
(12,757
)
Purchase of marketable security
investments
—
—
(10,617
)
(4,592
)
Proceeds and maturities from marketable
security investments
14,132
17,923
37,107
40,595
Investment in software development
(9,674
)
(8,516
)
(18,753
)
(16,463
)
Cost of acquisitions, net of cash
acquired
—
(615
)
(1,875
)
(117,313
)
Other
—
181
16
152
Net cash provided (used) by investing
activities
108
795
(492
)
(110,378
)
Cash flows from financing activities:
Payment on term loans
—
(60,000
)
(120,000
)
(80,000
)
Proceeds from exercise of stock options,
net of withheld shares for taxes upon equity award settlement
2,281
(12,152
)
2,123
(4,107
)
Contributions from employee stock purchase
plan
4,714
4,478
7,751
8,156
Net cash provided (used) by financing
activities
6,995
(67,674
)
(110,126
)
(75,951
)
Net (decrease) increase in cash and cash
equivalents
(12,081
)
9,800
(55,093
)
(56,109
)
Cash and cash equivalents at beginning of
period
130,845
243,262
173,857
309,171
Cash and cash equivalents at end of
period
$
118,764
$
253,062
$
118,764
$
253,062
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726456998/en/
Hala Elsherbini Senior Director, Investor Relations Tyler
Technologies, Inc. 972-713-3770 ext. 1143
hala.elsherbini@tylertech.com
Tyler Technologies (NYSE:TYL)
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