Exhibit 99.1
Tyler Technologies Reports 17
Percent Increase in Earnings for Third Quarter 2007
Operating Income Reaches Record High on 10 Percent Revenue Growth
DALLAS--(BUSINESS WIRE)--Oct. 24, 2007--Tyler Technologies, Inc.
(NYSE:TYL) today reported the following financial results for the
quarter ended September 30, 2007:
-- Total revenues were $54.9 million, up 9.6 percent compared to
$50.1 million in the same period last year. Software-related
revenues (software licenses, software services and
maintenance) grew in the aggregate 11.1 percent for the
quarter.
-- Operating income was $7.9 million, a 19.6 percent increase
compared with operating income of $6.6 million in the same
quarter of 2006.
-- Net income was $5.2 million, or $0.12 per diluted share, an
increase of 16.9 percent, compared to net income for the three
months ended September 30, 2006 of $4.4 million, or $0.11 per
diluted share.
-- Free cash flow increased 33.9 percent to $14.7 million (cash
provided by operating activities of $15.7 million minus
capital expenditures of $1.0 million). For the third quarter
of 2006, free cash flow was $11.0 million (cash provided by
operating activities of $12.1 million minus capital
expenditures of $1.1 million). For the nine months ended
September 30, 2007, free cash flow rose 13.6 percent to $21.8
million (cash provided by operating activities of $24.5
million minus capital expenditures of $2.7 million). For the
nine months ended September 30, 2006, free cash flow was $19.2
million (cash provided by operating activities of $22.7
million minus capital expenditures of $3.5 million).
-- EBITDA, or earnings before interest, income taxes,
depreciation and amortization, totaled $10.6 million. EBITDA
for the third quarter of 2006 totaled $9.1 million.
-- Gross margin was 39.4 percent, compared to 40.2 percent in the
quarter ended September 30, 2006. Sequentially, gross margin
for the third quarter improved from 37.6 percent in the second
quarter of 2007.
-- Selling, general and administrative expenses were $12.7
million (23.1 percent of revenues), compared to $12.4 million
(24.8 percent of revenues) in the same quarter last year.
-- Share-based compensation expense for the third quarter under
SFAS No. 123R totaled $632,000, of which $59,000 was included
in cost of revenues and $573,000 was included in selling,
general and administrative expenses. For the third quarter of
2006, share-based compensation expense was $554,000, of which
$37,000 was included in cost of revenues and $517,000 was
included in selling, general and administrative expenses.
-- Total backlog was $225.8 million at September 30, 2007,
including $198.2 million of software-related backlog and $27.6
million of appraisal services backlog.
-- Tyler is debt-free and ended the third quarter of 2007 with
$48.7 million in cash and short-term investments. For the nine
months ended September 30, 2007, the Company repurchased
889,120 shares of its common stock at a cost of $11.1 million.
Revenues for the nine months ended September 30, 2007 increased
10.6 percent to $159.4 million from $144.1 million in 2006. Operating
income for the first nine months of 2007 was $17.2 million, compared
to $15.5 million in the first nine months of 2006. Net income for the
nine months ended September 30, 2007 was $11.3 million, or $0.27 per
diluted share, compared to net income of $10.2 million, or $0.24 per
diluted share, for the comparable period of 2006.
"Tyler continued to execute our business plan well and achieved
results for the third quarter that showed improvement in line with our
expectations," commented John S. Marr, Jr., Tyler's president and
chief executive officer. "We reached new quarterly highs in several
key measures, including total revenues, operating income, free cash
flow and backlog.
"We are pleased that total revenues increased by nearly ten
percent to $55 million, even as we added to the base of recurring
revenues from customers who have selected our subscription-based
options, rather than purchasing the software under a traditional
perpetual license arrangement. These 'software as a service'
arrangements result in lower license revenues in the initial year as
compared to traditional perpetual license sales, but generate higher
overall revenues over the term of the contract. Although the number of
clients choosing our subscription-based options in the third quarter
represents a relatively small percentage of our new customers, the
average size of those contracts was larger than in prior quarters. In
fact, our two largest financial management system deals of the quarter
were application service provider contracts with the Fort Worth
Independent School District and the City of Richmond, California.
"While this does not represent a fundamental change in our
business model, we provide our solutions to clients under a variety of
innovative options that address their specific needs. Government is
relatively deliberate in its pace of change, but over time, we expect
to generate significant subscription-based revenue. Our annualized
revenue run rate in the third quarter for these subscription services
is approximately $8.5 million, which is included in software services
revenue on our income statements, and we expect the new subscription
contracts signed in the third quarter will increase the annualized run
rate in future quarters to more than $10.8 million," continued Mr.
Marr.
"This contract mix, coupled with contract terms on some existing
projects that dictate deferral of license revenue recognition until
certain milestones are achieved, contributed to a 21 percent decline
in license revenues from last year's third quarter. However, software
services revenues increased 26 percent, primarily driven by staffing
increases that enabled us to deliver more services associated with
implementations of our Odyssey courts and justice products, as well as
a higher level of subscription-based services revenues. In addition,
maintenance revenues increased 17 percent, reflecting our continued
growth in our customer base from new sales, coupled with extremely
high customer retention. Annual recurring revenues, including
subscription-based services as well as maintenance and support,
comprised approximately 45% of our total revenues in the third quarter
of 2007.
"Free cash flow for the third quarter grew 34 percent over the
same period last year and for the first nine months of the year is
nearly double GAAP net income," added Mr. Marr. "For the trailing
twelve months ended September 30, 2007, Tyler posted $15.5 million in
earnings, or $0.37 per diluted share, on revenues of $210.5 million,
while generating $25.1 million of free cash flow (cash provided by
operating activities of $28.7 million minus capital expenditures of
$3.6 million). With total cash and investments of $48.7 million as of
September 30, we have the resources to invest in growing our business.
"We continue to spend aggressively on product development, with
more than 420 developers working to maintain our competitive edge
through improving existing products and building new products. We have
also invested $9.0 million in cash in 'tuck-in' acquisitions this
year, including the purchase of EDP Enterprises, Inc. in September,
which significantly increased our presence in the public schools
market in Texas.
"Our guidance for the full year 2007 remains generally consistent
with our communications last quarter. The markets we compete in
continue to be active, and in some cases robust. We believe the
Company is well-positioned to continue to execute our business model,
with attractive long-term revenue growth and margin expansion
opportunities," Mr. Marr concluded.
Annual Guidance for 2007
Total revenues for 2007 are currently expected to be in the range
of $217 million to $220 million. Tyler expects to have diluted
earnings per share of approximately $0.38 to $0.41 for the full year
2007. These estimates include assumed pretax expense for the year of
approximately $2.3 million, or $0.04 per share after taxes, related to
stock options and the Company's stock purchase plan. The Company
currently estimates that its effective income tax rate for 2007 will
be approximately 39 percent.
Tyler expects that free cash flow for the year 2007 will be
between $25 million and $28 million (cash provided by operations of
$29 million to $31 million minus capital expenditures of between $3.5
million and $4.0 million).
Tyler Technologies will hold a conference call on Thursday,
October 25 at 12:00 p.m. Eastern Time to discuss the Company's
results. To participate in the teleconference, please dial into the
call a few minutes before the start time: (800) 817-8869 for U.S.
dialers and (913) 312-0941 for international dialers. Please refer to
confirmation code 4866768. A replay of the call will be available two
hours after the completion of the call through October 31, 2007. To
access the replay, please dial (888) 203-1112 for U.S. dialers and
(719) 457-0820 for international dialers. A live Webcast of the call
can be accessed on the Company's Web site at www.tylertech.com. A
replay will also be available on Tyler's Web site following the
conference call.
Based in Dallas, Tyler Technologies is a leading provider of
end-to-end information management solutions and services for local
governments. Tyler partners with clients to make local government more
accessible to the public, more responsive to needs of citizens, and
more efficient. Tyler's client base includes more than 6,000 local
government offices throughout all 50 states, Canada, Puerto Rico and
the United Kingdom. Tyler has been named one of "America's 200 Best
Small Companies" by Forbes Magazine and one of "America's 100 Most
Trustworthy Companies" by Audit Integrity, an independent research
firm. More information about Tyler Technologies can be found at
www.tylertech.com.
Non-GAAP Measures:
This press release discloses the financial measures of EBITDA and
free cash flow. These financial measures are not prepared in
accordance with generally accepted accounting principles (GAAP) and
are therefore considered non-GAAP financial measures. The non-GAAP
measures should be considered in addition to, and not as a substitute
for, or superior to, operating income, cash flows, or other measures
of financial performance prepared in accordance with GAAP. The
non-GAAP measures used by Tyler Technologies may be different from
non-GAAP measures used by other companies. We believe the presentation
of these non-GAAP financial measures provides useful information to
users of our financial statements and is helpful to fully understand
our past financial performance and prospects for the future. We
believe these measures are widely used by investors, analysts, and
other users of our financial statements to analyze operating
performance and to compare our results to those of other companies,
and they provide a more complete understanding of our underlying
operational results and trends, as well as our marketplace performance
and our ability to generate cash. In addition, we internally monitor
and review these non-GAAP financial measures on a consolidated basis
as some of the primary indicators management uses to evaluate Company
performance and for planning and forecasting future periods.
Management believes that EBITDA and free cash flow provide meaningful
supplemental information to the investor to fully assess the financial
performance, trends and future prospects of Tyler's core operations.
Tyler Technologies, Inc. has included in this press release
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 concerning its business and
operations. Tyler Technologies expressly disclaims any obligation to
release publicly any updates or revisions to these forward-looking
statements to reflect any change in its expectations. These
expectations and the related statements are inherently subject to
risks and uncertainties that could cause actual results to differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements. The risks and uncertainties which
forward-looking statements are subject to include, but are not limited
to, changes in competition, changes in general economic conditions,
changes in the budgets and regulatory environments of the Company's
customers, risks associated with the development of new products and
the enhancement of existing products, the ability to attract and
retain qualified personnel, and other risks detailed from time to time
in the Company's filings with the Securities and Exchange Commission.
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Nine Months Ended
Ended September 30,
September 30,
--------------- -----------------
2007 2006 2007 2006
------- ------- -------- --------
Revenues:
Software licenses $ 8,196 $10,422 $ 24,560 $ 27,817
Software services 18,276 14,497 51,068 42,678
Maintenance 22,132 18,847 62,526 54,220
Appraisal services 4,927 4,920 16,514 14,727
Hardware and other 1,401 1,453 4,708 4,706
------- ------- -------- --------
Total revenues 54,932 50,139 159,376 144,148
Cost of revenues:
Software licenses 1,888 2,500 5,823 7,592
Acquired software 427 353 1,248 1,007
Software services and maintenance 26,737 22,647 77,505 67,341
Appraisal services 3,248 3,386 11,340 10,246
Hardware and other 1,002 1,096 3,471 3,397
------- ------- -------- --------
Total cost of revenues 33,302 29,982 99,387 89,583
Gross profit 21,630 20,157 59,989 54,565
Selling, general and administrative
expenses 12,691 12,421 38,448 35,578
Research and development expense 639 780 3,266 2,494
Amortization of customer and trade
name intangibles 372 326 1,075 973
------- ------- -------- --------
Operating income 7,928 6,630 17,200 15,520
Other income, net 441 306 1,252 603
------- ------- -------- --------
Income before income taxes 8,369 6,936 18,452 16,123
Income tax provision 3,209 2,523 7,141 5,938
------- ------- -------- --------
Net income $ 5,160 $ 4,413 $ 11,311 $ 10,185
======= ======= ======== ========
Earnings per common share:
Basic $ 0.13 $ 0.11 $ 0.29 $ 0.26
======= ======= ======== ========
Diluted $ 0.12 $ 0.11 $ 0.27 $ 0.24
======= ======= ======== ========
EBITDA (1) $10,553 $ 9,102 $ 25,008 $ 22,848
======= ======= ======== ========
Weighted average common shares
outstanding:
Basic 38,688 38,705 38,717 38,947
Diluted 41,395 41,898 41,673 41,911
(1) Reconciliation of EBITDA Three Months Nine Months Ended
Ended September September 30,
30,
---------------- -----------------
2007 2006 2007 2006
-------- ------- -------- --------
Net income $ 5,160 $4,413 $11,311 $10,185
Amortization of customer and
trade name intangibles 372 326 1,075 973
Depreciation and other
amortization included in cost of
revenues and selling, general
and administrative expenses 2,269 2,145 6,720 6,619
Interest income included in other
income, net (457) (305) (1,239) (867)
Income tax provision 3,209 2,523 7,141 5,938
-------- ------- -------- --------
EBITDA $10,553 $9,102 $25,008 $22,848
======== ======= ======== ========
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
September 30
2007 December 31,
(unaudited) 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 15,823 $ 17,212
Restricted cash equivalents 4,462 4,962
Short-term investments available-for-
sale 28,390 19,543
Accounts receivable, net 56,919 58,188
Other current assets 8,888 9,190
Deferred income taxes 2,579 2,579
------------ ------------
Total current assets 117,061 111,674
Accounts receivable, long-term portion 62 1,675
Property and equipment, net 9,556 7,390
Other assets:
Goodwill and other intangibles, net 102,363 99,371
Other 188 166
------------ ------------
Total assets $ 229,230 $ 220,276
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 20,868 $ 22,798
Deferred revenue 66,655 62,387
------------ ------------
Total current liabilities 87,523 85,185
Deferred income taxes 8,130 9,216
Shareholders' equity 133,577 125,875
------------ ------------
Total liabilities and shareholders' equity $ 229,230 $ 220,276
============ ============
CONTACT: Tyler Technologies, Inc.
Brian K. Miller, 972-713-3720
Senior Vice President - CFO
brian.miller@tylertech.com