Exhibit 99.4
Use of Non-GAAP Financial Measures
The Company has provided in this Current Report on Form 8-K/A financial information that has not been prepared in accordance with generally accepted accounting principles (“GAAP”). This information includes non-GAAP net income and non-GAAP earnings per diluted share. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP measures are provided to enhance investors’ overall understanding of the acquisition and its impact on the Company’s financial performance. The Company believes that the non-GAAP financial measures presented herein are useful because they will allow for meaningful comparison of Tyler’s pro forma combined results in the periods presented with such results in future periods. The usefulness of the non-GAAP financial measures presented herein is limited by the fact that the adjustments are merely estimates of what the performance would have been with the adjustments discussed herein.
Non-GAAP financial measures discussed below add back write-downs of acquisition-related deferred revenue, write-downs of acquisition-related real estate income, share-based compensation expense, the employer portion of payroll tax related to employee stock transactions, acquisition-related costs, and amortization of intangibles arising from business combinations. These non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies.
The reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures is shown below.
TYLER TECHNOLOGIES, INC. | |
PRO FORMA RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |
(Amounts in thousands, except per share amounts) | |
(Unaudited) | |
| | Nine Months | | | Twelve Months | |
| | Ended | | | Ended | |
Reconciliation of non-GAAP net income and earnings per share | | September 30, 2015 | | | December 31, 2014 | |
Pro forma GAAP net income | | $ | 52,569 | | | $ | 44,436 | |
Pro forma non-GAAP adjustments included in total revenues: | | | | | | | | |
Add: Acquisition-related deferred revenue write-down | | | 579 | | | | 19,411 | |
Add: Acquisition-related real estate write-down | | | 125 | | | | 165 | |
Pro forma non-GAAP adjustments included in cost of revenues: | | | | | | | | |
Add: Share-based compensation expense | | | 2,349 | | | | 2,177 | |
Pro forma non-GAAP adjustments included in selling, general and administrative expenses: | | | | | | | | |
Add: Share-based compensation expense | | | 12,110 | | | | 12,642 | |
Add: Employer portion of payroll tax related to employee stock transactions | | | 333 | | | | 514 | |
Add: Non-recurring compensation related to acquisitions | | | 13,007 | | | | 15,870 | |
Add: Acquisition-related costs | | | 379 | | | | — | |
Add: Amortization of acquired software | | | 16,221 | | | | 21,534 | |
Add: Amortization of customer and trade name intangibles | | | 9,901 | | | | 12,967 | |
Pro forma non-GAAP adjustments subtotal | | | 55,004 | | | | 85,280 | |
Less: Tax impact related to non-GAAP adjustments | | | (18,334 | ) | | | (28,899 | ) |
Pro forma non-GAAP net income | | $ | 89,239 | | | $ | 100,817 | |
| | | | | | | | |
Shares used in computing Pro forma non-GAAP diluted earnings per share | | | 38,299 | | | | 37,537 | |
Pro forma non-GAAP earnings per diluted share | | $ | 2.33 | | | $ | 2.69 | |
