Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 24, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | TYL | |
Entity Registrant Name | TYLER TECHNOLOGIES INC | |
Entity Central Index Key | 860,731 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 37,568,139 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||||
Software licenses and royalties | $ 19,842 | $ 19,930 | $ 55,172 | $ 54,331 |
Subscriptions | 44,840 | 36,869 | 125,889 | 104,926 |
Software services | 47,479 | 44,738 | 139,869 | 133,208 |
Maintenance | 92,285 | 83,000 | 268,556 | 237,775 |
Appraisal services | 6,290 | 6,541 | 19,268 | 20,083 |
Hardware and other | 3,410 | 3,419 | 14,057 | 12,439 |
Total revenues | 214,146 | 194,497 | 622,811 | 562,762 |
Cost of revenues: | ||||
Software licenses and royalties | 826 | 623 | 2,204 | 1,927 |
Acquired software | 5,473 | 5,598 | 16,243 | 16,737 |
Software services, maintenance and subscriptions | 98,036 | 88,623 | 287,748 | 260,610 |
Appraisal services | 4,089 | 4,053 | 12,568 | 12,473 |
Hardware and other | 2,293 | 2,120 | 10,408 | 8,481 |
Total cost of revenues | 110,717 | 101,017 | 329,171 | 300,228 |
Gross profit | 103,429 | 93,480 | 293,640 | 262,534 |
Selling, general and administrative expenses | 44,656 | 42,007 | 131,249 | 124,998 |
Research and development expense | 11,834 | 11,070 | 35,307 | 31,362 |
Amortization of customer and trade name intangibles | 3,492 | 3,458 | 10,413 | 10,273 |
Operating income | 43,447 | 36,945 | 116,671 | 95,901 |
Other income (expense), net | 75 | (526) | (216) | (1,713) |
Income before income taxes | 43,522 | 36,419 | 116,455 | 94,188 |
Income tax provision | 5,259 | 989 | 14,308 | 15,527 |
Net income | $ 38,263 | $ 35,430 | $ 102,147 | $ 78,661 |
Earnings per common share: | ||||
Basic (USD per share) | $ 1.02 | $ 0.97 | $ 2.74 | $ 2.16 |
Diluted (USD per share) | $ 0.97 | $ 0.91 | $ 2.60 | $ 2.02 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 124,603 | $ 36,151 |
Accounts receivable (less allowance for losses of $4,491 in 2017 and $3,396 in 2016) | 206,444 | 200,334 |
Short-term investments | 39,911 | 20,273 |
Prepaid expenses | 23,219 | 21,039 |
Income tax receivable | 3,362 | 2,895 |
Other current assets | 2,182 | 2,268 |
Total current assets | 399,721 | 282,960 |
Accounts receivable, long-term | 3,867 | 2,480 |
Property and equipment, net | 149,142 | 124,268 |
Other assets: | ||
Goodwill | 655,068 | 650,237 |
Other intangibles, net | 245,520 | 267,259 |
Non-current investments and other assets | 39,800 | 30,741 |
Total assets | 1,493,118 | 1,357,945 |
Current liabilities: | ||
Accounts payable | 4,563 | 7,295 |
Accrued liabilities | 57,583 | 55,989 |
Deferred revenue | 297,163 | 298,217 |
Total current liabilities | 359,309 | 361,501 |
Revolving line of credit | 0 | 10,000 |
Deferred revenue, long-term | 1,468 | 2,140 |
Deferred income taxes | 54,563 | 68,779 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Preferred stock, $10.00 par value; 1,000,000 shares authorized; none issued | 0 | 0 |
Common stock, $0.01 par value; 100,000,000 shares authorized; 48,147,969 shares issued and outstanding as of September 30, 2017 and December 31, 2016 | 481 | 481 |
Additional paid-in capital | 604,324 | 556,663 |
Accumulated other comprehensive loss, net of tax | (46) | (46) |
Retained earnings | 538,023 | 435,876 |
Treasury stock, at cost; 10,596,386 and 11,381,733 shares in 2017 and 2016, respectively | (65,004) | (77,449) |
Total shareholders' equity | 1,077,778 | 915,525 |
Total liabilities and shareholders' equity | $ 1,493,118 | $ 1,357,945 |
CONDENSED CONSOLIDATED BALANCE4
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for losses | $ 4,491 | $ 3,396 |
Preferred stock, par value (in USD per share) | $ 10 | $ 10 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 48,147,969 | 48,147,969 |
Common stock, shares outstanding | 48,147,969 | 48,147,969 |
Treasury stock, shares | 10,596,386 | 11,381,733 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 102,147 | $ 78,661 |
Adjustments to reconcile net income to cash provided by operations: | ||
Depreciation and amortization | 40,096 | 37,521 |
Share-based compensation expense | 27,368 | 21,348 |
Deferred income tax benefit | (14,216) | (11,289) |
Changes in operating assets and liabilities, exclusive of effects of acquired companies: | ||
Accounts receivable | (7,097) | (14,641) |
Income taxes | (467) | 1,769 |
Prepaid expenses and other current assets | (2,706) | 1,169 |
Accounts payable | (2,733) | (917) |
Accrued liabilities | 1,318 | 8,515 |
Deferred revenue | (1,329) | 17,918 |
Net cash provided by operating activities | 142,381 | 140,054 |
Cash flows from investing activities: | ||
Additions to property and equipment | (37,734) | (29,529) |
Purchase of marketable security investments | (49,905) | (13,127) |
Proceeds from marketable security investments | 21,175 | 9,256 |
Cost of acquisitions, net of cash acquired | (9,761) | (9,394) |
Decrease (increase) in other | 418 | (52) |
Net cash used by investing activities | (75,807) | (42,846) |
Cash flows from financing activities: | ||
Decrease in net borrowings on revolving line of credit | (10,000) | (32,000) |
Purchase of treasury shares | (7,032) | (94,499) |
Proceeds from exercise of stock options | 33,568 | 15,089 |
Contributions from employee stock purchase plan | 5,342 | 4,429 |
Net cash provided (used) by financing activities | 21,878 | (106,981) |
Net increase (decrease) in cash and cash equivalents | 88,452 | (9,773) |
Cash and cash equivalents at beginning of period | 36,151 | 33,087 |
Cash and cash equivalents at end of period | $ 124,603 | $ 23,314 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation We prepared the accompanying condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States, or GAAP, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted for interim periods. Balance sheet amounts are as of September 30, 2017 , and December 31, 2016 , and operating result amounts are for the three and nine months ended September 30, 2017 , and 2016 , respectively, and include all normal and recurring adjustments that we considered necessary for the fair summarized presentation of our financial position and operating results. As these are condensed financial statements, one should also read the financial statements and notes included in our latest Form 10-K for the year ended December 31, 2016 . Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from non-owner sources and includes all components of net income (loss) and other comprehensive income (loss). We had no items of other comprehensive income (loss) for the three and nine months ended September 30, 2017 and 2016 . Certain amounts for the previous year have been reclassified to conform to the current year presentation. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisitions On August 2, 2017 , we acquired all of the capital stock of Digital Health Department, Inc. ("DHD"), a company that provides environmental health software, offering a software-as-a-service (SaaS) solution for public health compliance and inspections processes. The total purchase price, net of debt assumed, was $3.9 million , of which $3.7 million was paid in cash and $0.2 million was accrued as of September 30, 2017 . On May 30, 2017 , we acquired all of the capital stock of Modria.com, Inc. , a company that specializes in online dispute resolution for government and commercial entities. The total purchase price, net of debt assumed, was $7.0 million , of which $6.1 million was paid in cash and $0.9 million was accrued as of September 30, 2017 . As of September 30, 2017 , the purchase price allocations for DHD and Modria.com are not yet complete. The preliminary estimates of fair value assumed at each acquisition date for intangibles, liabilities, deferred revenue, and related deferred taxes are subject to change as valuations are finalized. The impact of both acquisitions on our operating results is not material. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ Equity The following table details activity in our common stock: Nine months ended September 30, 2017 2016 Shares Amount Shares Amount Purchases of treasury shares (42 ) $ (6,171 ) (758 ) $ (94,499 ) Stock option exercises 787 33,568 564 15,089 Employee stock plan purchases 40 5,342 34 4,429 As of September 30, 2017 , we had authorization from our board of directors to repurchase up to 2.0 million additional shares of Tyler common stock. |
Other Assets
Other Assets | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | Other Assets As of September 30, 2017 , we have $61.7 million in investment grade corporate and municipal bonds and asset backed securities with maturity dates ranging from 2017 through 2021 . We intend to hold these securities to maturity and have classified them as such. We believe cost approximates fair value because of the relatively short duration of these investments. The fair values of these securities are considered Level II as they are based on inputs from quoted prices in markets that are not active or other observable market data. These investments are included in short-term investments and non-current investments and other assets. We have a $15.0 million investment in convertible preferred stock representing a 20% interest in Record Holdings Pty Limited, a privately held Australian company specializing in digitizing the spoken word in court and legal proceedings. The investment in convertible preferred stock is accounted under the cost method because the Company does not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values. Our investment is carried at cost less any impairment write-downs. Annually, the Company’s cost method investments are assessed for impairment. The Company does not reassess the fair value of cost method investments if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investments. This investment is included in non-current investments and other assets. |
Revolving Line of Credit
Revolving Line of Credit | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Revolving Line of Credit | Revolving Line of Credit On November 16, 2015, we entered into a $300.0 million Credit Agreement with various lender parties and Wells Fargo Bank, National Association, as Administrative Agent (the “Credit Facility”). The Credit Facility provides for a revolving credit line up to $300.0 million , including a $10.0 million sublimit for letters of credit. The Credit Facility matures on November 16, 2020 . Borrowings under the Credit Facility may be used for general corporate purposes, including working capital requirements, acquisitions and share repurchases. Borrowings under the Credit Facility bear interest at a rate of either (1) Wells Fargo Bank’s prime rate (subject to certain higher rate determinations) plus a margin of 0.25% to 1.00% or (2) the 30, 60, 90 or 180 day LIBOR rate plus a margin of 1.25% to 2.00% . As of September 30, 2017 , the interest rates were 4.50% under the Wells Fargo Bank's prime rate and 2.49% under a 30-day LIBOR contract. The Credit Facility is secured by substantially all of our assets. The Credit Facility requires us to maintain certain financial ratios and other financial conditions and prohibits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens. As of September 30, 2017 , we were in compliance with those covenants. As of September 30, 2017 , we had no outstanding borrowings and two outstanding letters of credit totaling $2.2 million . Available borrowing capacity under the Credit Facility was $297.8 million . |
Income Tax Provision
Income Tax Provision | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Tax Provision | Income Tax Provision For the three and nine months ended September 30, 2017 , we had effective income tax rates of 12.1% and 12.3% , respectively, compared to 2.7% and 16.5% for the three and nine months ended September 30, 2016 , respectively. The effective income tax rates for the periods presented were different from the statutory United States federal income tax rate of 35% principally due to excess tax benefits related to stock option exercises. The excess tax benefits related to stock option exercises realized were $9.0 million and $27.6 million for the three and nine months ended September 30, 2017 , respectively, compared to $13.3 million and $20.8 million for the three and nine months ended September 30, 2016 , respectively. The change in the effective income tax rates for the three and nine months ended September 30, 2017 as compared to the prior year periods is mainly due to the change in excess tax benefits related to stock option exercises realized. Excluding the excess tax benefits, the effective rates were 32.8% and 36.0% for the three and nine months ended September 30, 2017 , respectively, compared to 39.3% and 38.5% for the three and nine months ended September 30, 2016 , respectively. Other differences from our federal statutory income tax rate included state income taxes, non-deductible business expenses, tax credits, and the tax benefit of the domestic production activities deduction. We made tax payments of $29.0 million and $25.0 million in the nine months ended September 30, 2017 , and September 30, 2016 , respectively. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The following table details the reconciliation of basic earnings per share to diluted earnings per share: Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Numerator for basic and diluted earnings per share: Net income $ 38,263 $ 35,430 $ 102,147 $ 78,661 Denominator: Weighted-average basic common shares outstanding 37,391 36,433 37,238 36,438 Assumed conversion of dilutive securities: Stock options 1,951 2,629 2,028 2,576 Denominator for diluted earnings per share - Adjusted weighted-average shares 39,342 39,062 39,266 39,014 Earnings per common share: Basic $ 1.02 $ 0.97 $ 2.74 $ 2.16 Diluted $ 0.97 $ 0.91 $ 2.60 $ 2.02 For the three and nine months ended September 30, 2017 , stock options representing the right to purchase common stock of approximately 1,499,000 shares and 1,303,000 shares, respectively, were not included in the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. For the three and nine months ended September 30, 2016 , stock options representing the right to purchase common stock of approximately 741,000 shares and 769,000 shares, respectively, were not included in the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. |
Share-Based Compensation
Share-Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation The following table summarizes share-based compensation expense related to share-based awards recorded in the statements of income, pursuant to Accounting Standards Codification (“ASC”) 718, Stock Compensation: Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Cost of software services, maintenance and subscriptions $ 2,524 $ 1,779 $ 6,874 $ 4,668 Selling, general and administrative expenses 7,267 5,877 20,494 16,680 Total share-based compensation expense $ 9,791 $ 7,656 $ 27,368 $ 21,348 |
Segment and Related Information
Segment and Related Information | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment and Related Information | Segment and Related Information We provide integrated information management solutions and services for the public sector, with a focus on local governments. We provide our software systems and services and appraisal services through four business units, which focus on the following products: • financial management, education and planning, regulatory and maintenance software solutions; • financial management, municipal courts, planning, regulatory and maintenance, and land and vital records management software solutions; • courts and justice and public safety software solutions; and • appraisal and tax software solutions and property appraisal services. In accordance with ASC 280-10, Segment Reporting, the financial management, education and planning, regulatory and maintenance software solutions unit; financial management, municipal courts, planning, regulatory and maintenance, and land and vital records management software solutions unit; and the courts and justice and public safety software solutions unit meet the criteria for aggregation and are presented in one reportable segment, the Enterprise Software (“ES”) segment. The ES segment provides municipal and county governments and schools with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions. The Appraisal and Tax (“A&T”) segment provides systems and software that automate the appraisal and assessment of real and personal property as well as property appraisal outsourcing services for local governments and taxing authorities. Property appraisal outsourcing services include: the physical inspection of commercial and residential properties; data collection and processing; computer analysis for property valuation; preparation of tax rolls; community education; and arbitration between taxpayers and the assessing jurisdiction. We evaluate performance based on several factors, of which the primary financial measure is business segment operating income. We define segment operating income for our business units as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense and income taxes. Segment operating income includes intercompany transactions. The majority of intercompany transactions relate to contracts involving more than one unit and are valued based on the contractual arrangement. Segment operating income for corporate primarily consists of compensation costs for the executive management team and certain accounting and administrative staff and share-based compensation expense for the entire company. Corporate segment operating income also includes revenues and expenses related to a company-wide user conference. For the three months ended September 30, 2017 Enterprise Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 18,223 $ 1,619 $ — $ 19,842 Subscriptions 42,826 2,014 — 44,840 Software services 42,295 5,184 — 47,479 Maintenance 86,576 5,709 — 92,285 Appraisal services — 6,290 — 6,290 Hardware and other 3,412 — (2 ) 3,410 Intercompany 2,660 — (2,660 ) — Total revenues $ 195,992 $ 20,816 $ (2,662 ) $ 214,146 Segment operating income $ 60,511 $ 5,479 $ (13,578 ) $ 52,412 For the nine months ended September 30, 2017 Enterprise Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 50,151 $ 5,021 $ — $ 55,172 Subscriptions 120,191 5,698 — 125,889 Software services 125,658 14,211 — 139,869 Maintenance 253,048 15,508 — 268,556 Appraisal services — 19,268 — 19,268 Hardware and other 9,435 — 4,622 14,057 Intercompany 7,309 — (7,309 ) — Total revenues $ 565,792 $ 59,706 $ (2,687 ) $ 622,811 Segment operating income $ 166,692 $ 14,103 $ (37,468 ) $ 143,327 For the three months ended September 30, 2016 Enterprise Software Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 18,492 $ 1,438 $ — $ 19,930 Subscriptions 35,169 1,700 — 36,869 Software services 40,608 4,130 — 44,738 Maintenance 78,292 4,708 — 83,000 Appraisal services — 6,541 — 6,541 Hardware and other 3,428 — (9 ) 3,419 Intercompany 1,971 — (1,971 ) — Total revenues $ 177,960 $ 18,517 $ (1,980 ) $ 194,497 Segment operating income $ 52,372 $ 4,713 $ (11,084 ) $ 46,001 For the nine months ended September 30, 2016 Enterprise Software Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 50,585 $ 3,746 $ — $ 54,331 Subscriptions 99,470 5,456 — 104,926 Software services 121,372 11,836 — 133,208 Maintenance 223,802 13,973 — 237,775 Appraisal services — 20,083 — 20,083 Hardware and other 9,406 16 3,017 12,439 Intercompany 4,743 — (4,743 ) — Total revenues $ 509,378 $ 55,110 $ (1,726 ) $ 562,762 Segment operating income $ 139,151 $ 13,534 $ (29,774 ) $ 122,911 Three months ended September 30, Nine months ended September 30, Reconciliation of reportable segment operating income to the Company's consolidated totals: 2017 2016 2017 2016 Total segment operating income $ 52,412 $ 46,001 $ 143,327 $ 122,911 Amortization of acquired software (5,473 ) (5,598 ) (16,243 ) (16,737 ) Amortization of customer and trade name intangibles (3,492 ) (3,458 ) (10,413 ) (10,273 ) Other expense, net 75 (526 ) (216 ) (1,713 ) Income before income taxes $ 43,522 $ 36,419 $ 116,455 $ 94,188 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Other than routine litigation incidental to our business, there are no material legal proceedings pending to which we are party or to which any of our properties are subject. |
New Accounting Pronouncements
New Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements Revenue from Contracts with Customers . On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This ASU is the result of a convergence project between the FASB and the International Accounting Standards Board. The core principle behind ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering those goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. The ASU allows two methods of adoption: a full retrospective approach where three years of financial information are presented in accordance with the new standard, and a modified retrospective approach where the ASU is applied to the most current period presented in the financial statements. We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. Our ability to adopt using the full retrospective method is dependent on system readiness, including software procured from third-party providers, and the completion of our analysis of information necessary to restate prior period financial statements. The new standard requires application no later than annual reporting periods beginning after December 15, 2017, including interim reporting periods therein; however, public entities are permitted to elect to early adopt the new standard. We will adopt the new standard in fiscal year 2018. We anticipate this standard will have a material impact on our consolidated financial statements. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to our accounting for software license fees and incremental cost of obtaining a contract. Specifically, under the new standard we expect software license fees under perpetual agreements will no longer be subject to 100% discount allocations from other elements in the contract. Discounts in arrangements will be allocated across all deliverables increasing license revenues and decreasing revenues allocated to other performance obligations. In addition, in most cases, net license fees (total license fees less any allocated discounts) will be recognized at the point in time that control of the software license transfers to the customer versus our current policy of recognizing revenue only to the extent billable per the contractual terms. Time-based license fees currently recognized over the license term will no longer be recognized over the period of the license and will instead be recognized at the point in time that control of the software license transfers to the customer. We expect revenue related to our software as a service (“SaaS”) offerings, post-contract customer support ("PCS") renewals and professional services to remain substantially unchanged. Due to the complexity of certain contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms and may vary in some instances from recognition at the time of billing. Application of the new standard requires that incremental costs directly related to obtaining a contract (typically sales commissions plus any associated fringe benefits) must be recognized as an asset and expensed on a systematic basis that is consistent with the transfer to the customer of the goods and services to which the asset relates, unless that life is less than one year. Currently, we defer sales commissions and recognize expense over the relevant initial contractual term. With the adoption of the new standard, we expect amortization periods to extend past the initial term. Leases. On February 25, 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: • A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and • A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods therein. Early application is permitted for all business entities upon issuance. We are assessing the financial impact of adopting the new standard; however, we are currently unable to provide a reasonable estimate regarding the financial impact. We expect to adopt the new standard in fiscal year 2019. |
New Accounting Pronouncements (
New Accounting Pronouncements (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements Revenue from Contracts with Customers . On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This ASU is the result of a convergence project between the FASB and the International Accounting Standards Board. The core principle behind ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering those goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. The ASU allows two methods of adoption: a full retrospective approach where three years of financial information are presented in accordance with the new standard, and a modified retrospective approach where the ASU is applied to the most current period presented in the financial statements. We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. Our ability to adopt using the full retrospective method is dependent on system readiness, including software procured from third-party providers, and the completion of our analysis of information necessary to restate prior period financial statements. The new standard requires application no later than annual reporting periods beginning after December 15, 2017, including interim reporting periods therein; however, public entities are permitted to elect to early adopt the new standard. We will adopt the new standard in fiscal year 2018. We anticipate this standard will have a material impact on our consolidated financial statements. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to our accounting for software license fees and incremental cost of obtaining a contract. Specifically, under the new standard we expect software license fees under perpetual agreements will no longer be subject to 100% discount allocations from other elements in the contract. Discounts in arrangements will be allocated across all deliverables increasing license revenues and decreasing revenues allocated to other performance obligations. In addition, in most cases, net license fees (total license fees less any allocated discounts) will be recognized at the point in time that control of the software license transfers to the customer versus our current policy of recognizing revenue only to the extent billable per the contractual terms. Time-based license fees currently recognized over the license term will no longer be recognized over the period of the license and will instead be recognized at the point in time that control of the software license transfers to the customer. We expect revenue related to our software as a service (“SaaS”) offerings, post-contract customer support ("PCS") renewals and professional services to remain substantially unchanged. Due to the complexity of certain contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms and may vary in some instances from recognition at the time of billing. Application of the new standard requires that incremental costs directly related to obtaining a contract (typically sales commissions plus any associated fringe benefits) must be recognized as an asset and expensed on a systematic basis that is consistent with the transfer to the customer of the goods and services to which the asset relates, unless that life is less than one year. Currently, we defer sales commissions and recognize expense over the relevant initial contractual term. With the adoption of the new standard, we expect amortization periods to extend past the initial term. Leases. On February 25, 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: • A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and • A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods therein. Early application is permitted for all business entities upon issuance. We are assessing the financial impact of adopting the new standard; however, we are currently unable to provide a reasonable estimate regarding the financial impact. We expect to adopt the new standard in fiscal year 2019. |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Summary of Activities in Common Stock | The following table details activity in our common stock: Nine months ended September 30, 2017 2016 Shares Amount Shares Amount Purchases of treasury shares (42 ) $ (6,171 ) (758 ) $ (94,499 ) Stock option exercises 787 33,568 564 15,089 Employee stock plan purchases 40 5,342 34 4,429 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Computation of Basic Earnings and Diluted Earnings Per Share Data | The following table details the reconciliation of basic earnings per share to diluted earnings per share: Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Numerator for basic and diluted earnings per share: Net income $ 38,263 $ 35,430 $ 102,147 $ 78,661 Denominator: Weighted-average basic common shares outstanding 37,391 36,433 37,238 36,438 Assumed conversion of dilutive securities: Stock options 1,951 2,629 2,028 2,576 Denominator for diluted earnings per share - Adjusted weighted-average shares 39,342 39,062 39,266 39,014 Earnings per common share: Basic $ 1.02 $ 0.97 $ 2.74 $ 2.16 Diluted $ 0.97 $ 0.91 $ 2.60 $ 2.02 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Share-Based Compensation Expense Related to Share-Based Awards | The following table summarizes share-based compensation expense related to share-based awards recorded in the statements of income, pursuant to Accounting Standards Codification (“ASC”) 718, Stock Compensation: Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Cost of software services, maintenance and subscriptions $ 2,524 $ 1,779 $ 6,874 $ 4,668 Selling, general and administrative expenses 7,267 5,877 20,494 16,680 Total share-based compensation expense $ 9,791 $ 7,656 $ 27,368 $ 21,348 |
Segment and Related Informati21
Segment and Related Information (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Revenues and Operations | For the three months ended September 30, 2017 Enterprise Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 18,223 $ 1,619 $ — $ 19,842 Subscriptions 42,826 2,014 — 44,840 Software services 42,295 5,184 — 47,479 Maintenance 86,576 5,709 — 92,285 Appraisal services — 6,290 — 6,290 Hardware and other 3,412 — (2 ) 3,410 Intercompany 2,660 — (2,660 ) — Total revenues $ 195,992 $ 20,816 $ (2,662 ) $ 214,146 Segment operating income $ 60,511 $ 5,479 $ (13,578 ) $ 52,412 For the nine months ended September 30, 2017 Enterprise Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 50,151 $ 5,021 $ — $ 55,172 Subscriptions 120,191 5,698 — 125,889 Software services 125,658 14,211 — 139,869 Maintenance 253,048 15,508 — 268,556 Appraisal services — 19,268 — 19,268 Hardware and other 9,435 — 4,622 14,057 Intercompany 7,309 — (7,309 ) — Total revenues $ 565,792 $ 59,706 $ (2,687 ) $ 622,811 Segment operating income $ 166,692 $ 14,103 $ (37,468 ) $ 143,327 For the three months ended September 30, 2016 Enterprise Software Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 18,492 $ 1,438 $ — $ 19,930 Subscriptions 35,169 1,700 — 36,869 Software services 40,608 4,130 — 44,738 Maintenance 78,292 4,708 — 83,000 Appraisal services — 6,541 — 6,541 Hardware and other 3,428 — (9 ) 3,419 Intercompany 1,971 — (1,971 ) — Total revenues $ 177,960 $ 18,517 $ (1,980 ) $ 194,497 Segment operating income $ 52,372 $ 4,713 $ (11,084 ) $ 46,001 For the nine months ended September 30, 2016 Enterprise Software Appraisal and Tax Corporate Totals Revenues Software licenses and royalties $ 50,585 $ 3,746 $ — $ 54,331 Subscriptions 99,470 5,456 — 104,926 Software services 121,372 11,836 — 133,208 Maintenance 223,802 13,973 — 237,775 Appraisal services — 20,083 — 20,083 Hardware and other 9,406 16 3,017 12,439 Intercompany 4,743 — (4,743 ) — Total revenues $ 509,378 $ 55,110 $ (1,726 ) $ 562,762 Segment operating income $ 139,151 $ 13,534 $ (29,774 ) $ 122,911 |
Reconciliation of Operating Income from Segments to Consolidated | Three months ended September 30, Nine months ended September 30, Reconciliation of reportable segment operating income to the Company's consolidated totals: 2017 2016 2017 2016 Total segment operating income $ 52,412 $ 46,001 $ 143,327 $ 122,911 Amortization of acquired software (5,473 ) (5,598 ) (16,243 ) (16,737 ) Amortization of customer and trade name intangibles (3,492 ) (3,458 ) (10,413 ) (10,273 ) Other expense, net 75 (526 ) (216 ) (1,713 ) Income before income taxes $ 43,522 $ 36,419 $ 116,455 $ 94,188 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Millions | Aug. 02, 2017 | May 30, 2017 | Sep. 30, 2017 |
Digital Health Department Inc. | |||
Business Acquisition [Line Items] | |||
Consideration transferred | $ 3.9 | ||
Cash payments to acquire business | $ 3.7 | ||
Accrued amount of consideration transferred | $ 0.2 | ||
Modria.com | |||
Business Acquisition [Line Items] | |||
Consideration transferred | $ 7 | ||
Cash payments to acquire business | $ 6.1 | ||
Accrued amount of consideration transferred | $ 0.9 |
Shareholders' Equity - Summary
Shareholders' Equity - Summary of Activities in Common Stock (Detail) - USD ($) shares in Thousands, $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Equity [Abstract] | ||
Purchases of common stock, Shares | (42) | (758) |
Stock option exercises, Shares | 787 | 564 |
Employee stock plan purchases, Shares | 40 | 34 |
Purchases of common stock, Amount | $ (6,171) | $ (94,499) |
Stock option exercises, Amount | 33,568 | 15,089 |
Employee stock plan purchases, Amount | $ 5,342 | $ 4,429 |
Shareholders' Equity - Addition
Shareholders' Equity - Additional Information (Detail) | Sep. 30, 2017shares |
Equity [Abstract] | |
Number of shares authorized to be repurchased | 1,976,160 |
Other Assets - Additional Infor
Other Assets - Additional Information (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Schedule Of Other Assets [Line Items] | |
Purchase of held to maturity securities | $ 61.7 |
Grade corporate and municipal bonds, maturity date | 2017 through 2021 |
Convertible Preferred Stock | Record Holdings Pty Limited | |
Schedule Of Other Assets [Line Items] | |
Cost method investment | $ 15 |
Investment percentage | 20.00% |
Revolving Line of Credit - Addi
Revolving Line of Credit - Additional Information (Detail) | 9 Months Ended | ||
Sep. 30, 2017USD ($)letters_of_credit | Dec. 31, 2016USD ($) | Nov. 16, 2015USD ($) | |
Line Of Credit Facility [Line Items] | |||
Outstanding borrowings | $ 0 | $ 10,000,000 | |
Number of letters of credit | letters_of_credit | 2 | ||
Credit Agreement | Letter of Credit | |||
Line Of Credit Facility [Line Items] | |||
Letters of credit, outstanding | $ 2,200,000 | ||
Revolving Credit Facility | Credit Agreement | |||
Line Of Credit Facility [Line Items] | |||
Revolving credit facility, maximum borrowing capacity | $ 300,000,000 | ||
Revolving line of credit maturity date | Nov. 16, 2020 | ||
Debt instrument, description of variable rate basis | Borrowings under the Credit Facility bear interest at a rate of either (1) Wells Fargo Bank’s prime rate (subject to certain higher rate determinations) plus a margin of 0.25% to 1.00% or (2) the 30, 60, 90 or 180 day LIBOR rate plus a margin of 1.25% to 2.00%. | ||
Outstanding borrowings | $ 0 | ||
Line of credit facility, unused borrowing capacity | $ 297,800,000 | ||
Revolving Credit Facility | Credit Agreement | Prime Commercial Lending Rate | |||
Line Of Credit Facility [Line Items] | |||
Effective percentage interest rate | 4.50% | ||
Revolving Credit Facility | Credit Agreement | Libor Rate | |||
Line Of Credit Facility [Line Items] | |||
Effective percentage interest rate | 2.49% | ||
Revolving Credit Facility | Credit Agreement | Minimum | Prime Commercial Lending Rate | |||
Line Of Credit Facility [Line Items] | |||
Line of credit facility interest rate | 0.25% | ||
Revolving Credit Facility | Credit Agreement | Minimum | Libor Rate | |||
Line Of Credit Facility [Line Items] | |||
Line of credit facility interest rate | 1.25% | ||
Revolving Credit Facility | Credit Agreement | Maximum | Prime Commercial Lending Rate | |||
Line Of Credit Facility [Line Items] | |||
Line of credit facility interest rate | 1.00% | ||
Revolving Credit Facility | Credit Agreement | Maximum | Libor Rate | |||
Line Of Credit Facility [Line Items] | |||
Line of credit facility interest rate | 2.00% | ||
Revolving Credit Facility | Credit Agreement | Letter of Credit | |||
Line Of Credit Facility [Line Items] | |||
Revolving credit facility, maximum borrowing capacity | $ 10,000,000 |
Income Tax Provision - Addition
Income Tax Provision - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rates | 12.10% | 2.70% | 12.30% | 16.50% |
Federal income tax rate | 35.00% | 35.00% | 35.00% | 35.00% |
Exess tax benefit | $ 9 | $ 13.3 | $ 27.6 | $ 20.8 |
Effective income tax rate excluding excess tax benefit | 32.80% | 39.30% | 36.00% | 38.50% |
Income tax payments | $ 29 | $ 25 |
Earnings Per Share - Computatio
Earnings Per Share - Computation of Basic Earnings and Diluted Earnings Per Share Data (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Net income | $ 38,263 | $ 35,430 | $ 102,147 | $ 78,661 |
Weighted-average basic common shares outstanding (in shares) | 37,391 | 36,433 | 37,238 | 36,438 |
Stock options (in shares) | 1,951 | 2,629 | 2,028 | 2,576 |
Denominator for diluted earnings per share - Adjusted weighted-average shares (in shares) | 39,342 | 39,062 | 39,266 | 39,014 |
Basic (USD per share) | $ 1.02 | $ 0.97 | $ 2.74 | $ 2.16 |
Diluted (USD per share) | $ 0.97 | $ 0.91 | $ 2.60 | $ 2.02 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Antidilutive securities excluded from computation of earnings per shares (in shares) | 1,499 | 741 | 1,303 | 769 |
Share-Based Compensation - Summ
Share-Based Compensation - Summary of Share-Based Compensation Expense Related to Share-Based Awards (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | $ 9,791 | $ 7,656 | $ 27,368 | $ 21,348 |
Cost of software services, maintenance and subscriptions | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 2,524 | 1,779 | 6,874 | 4,668 |
Selling, general and administrative expenses | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | $ 7,267 | $ 5,877 | $ 20,494 | $ 16,680 |
Segment and Related Informati31
Segment and Related Information - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2017Business_UnitSegment | |
Segment Reporting Information [Line Items] | |
Number of business units | Business_Unit | 4 |
Enterprise Software | |
Segment Reporting Information [Line Items] | |
Number of reportable segment | Segment | 1 |
Segment and Related Informati32
Segment and Related Information - Schedule of Segment Revenues and Operations (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Software licenses and royalties | $ 19,842 | $ 19,930 | $ 55,172 | $ 54,331 |
Subscriptions | 44,840 | 36,869 | 125,889 | 104,926 |
Software services | 47,479 | 44,738 | 139,869 | 133,208 |
Maintenance | 92,285 | 83,000 | 268,556 | 237,775 |
Appraisal services | 6,290 | 6,541 | 19,268 | 20,083 |
Hardware and other | 3,410 | 3,419 | 14,057 | 12,439 |
Total revenues | 214,146 | 194,497 | 622,811 | 562,762 |
Segment operating income | 43,447 | 36,945 | 116,671 | 95,901 |
Operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Segment operating income | 52,412 | 46,001 | 143,327 | 122,911 |
Corporate | ||||
Segment Reporting Information [Line Items] | ||||
Hardware and other | (2) | (9) | 4,622 | 3,017 |
Total revenues | (2,662) | (1,980) | (2,687) | (1,726) |
Segment operating income | (13,578) | (11,084) | (37,468) | (29,774) |
Intercompany | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | (2,660) | (1,971) | (7,309) | (4,743) |
Enterprise Software | Operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Software licenses and royalties | 18,223 | 18,492 | 50,151 | 50,585 |
Subscriptions | 42,826 | 35,169 | 120,191 | 99,470 |
Software services | 42,295 | 40,608 | 125,658 | 121,372 |
Maintenance | 86,576 | 78,292 | 253,048 | 223,802 |
Hardware and other | 3,412 | 3,428 | 9,435 | 9,406 |
Total revenues | 195,992 | 177,960 | 565,792 | 509,378 |
Segment operating income | 60,511 | 52,372 | 166,692 | 139,151 |
Enterprise Software | Intercompany | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 2,660 | 1,971 | 7,309 | 4,743 |
Appraisal and Tax | Operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Software licenses and royalties | 1,619 | 1,438 | 5,021 | 3,746 |
Subscriptions | 2,014 | 1,700 | 5,698 | 5,456 |
Software services | 5,184 | 4,130 | 14,211 | 11,836 |
Maintenance | 5,709 | 4,708 | 15,508 | 13,973 |
Appraisal services | 6,290 | 6,541 | 19,268 | 20,083 |
Hardware and other | 0 | 0 | 0 | 16 |
Total revenues | 20,816 | 18,517 | 59,706 | 55,110 |
Segment operating income | $ 5,479 | $ 4,713 | $ 14,103 | $ 13,534 |
Segment and Related Informati33
Segment and Related Information - Reconciliation of Operating Income from Segments to Consolidated (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Segment operating income | $ 43,447 | $ 36,945 | $ 116,671 | $ 95,901 |
Amortization of acquired software | (5,473) | (5,598) | (16,243) | (16,737) |
Amortization of customer and trade name intangibles | (3,492) | (3,458) | (10,413) | (10,273) |
Other expense, net | 75 | (526) | (216) | (1,713) |
Income before income taxes | 43,522 | 36,419 | 116,455 | 94,188 |
Operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Segment operating income | 52,412 | 46,001 | 143,327 | 122,911 |
Segment reconciling items | ||||
Segment Reporting Information [Line Items] | ||||
Amortization of acquired software | (5,473) | (5,598) | (16,243) | (16,737) |
Amortization of customer and trade name intangibles | (3,492) | (3,458) | (10,413) | (10,273) |
Other expense, net | $ 75 | $ (526) | $ (216) | $ (1,713) |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) | Sep. 30, 2017LegalMatter |
Commitments and Contingencies Disclosure [Abstract] | |
Number of material legal proceedings pending | 0 |