SaaS revenues grew 24.4%
Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the first quarter ended March 31, 2023.
First Quarter 2023 Financial Highlights:
Revenues
Total revenues were $471.9 million, up 3.5% from the first
quarter of 2022. On an organic basis, which also excludes
COVID-related revenues, revenues grew 7.2%.
Recurring Revenues
Recurring revenues from maintenance and subscriptions were
$395.6 million, up 9.1% from the first quarter of 2022, and
comprised 83.8% of total revenues (compared to 79.5% for the first
quarter of 2022). On an organic basis, recurring revenues grew
10.4%.
- Subscription revenues were $280.5 million, up 14.3% from the
first quarter of 2022. On an organic basis, subscription revenues
grew 16.4%. Within subscriptions:
- SaaS revenues grew organically 24.4% to $126.6 million.
- Transaction-based revenues grew 7.1% to $153.9 million. On an
organic basis, transaction-based revenues grew 13.1%.
- SaaS arrangements comprised approximately 87% of the total new
software contract value, compared to approximately 80% for the
first quarter of 2022.
- Annualized recurring revenue (ARR) from subscriptions and
maintenance was $1.58 billion, up 9.1% from the first quarter of
2022. SaaS bookings and conversions in the quarter added $17.1
million in SaaS ARR.
Earnings/EBITDA
- GAAP operating income was $45.0 million, down 19.5% from the
first quarter of 2022. Non-GAAP operating income was $102.2
million, down 7.7% from the first quarter of 2022.
- GAAP net income was $30.9 million, or $0.73 per diluted share,
down 22.8% from the first quarter of 2022. Non-GAAP net income was
$74.7 million, or $1.76 per diluted share, down 7.6% from the first
quarter of 2022.
- Adjusted EBITDA was $112.5 million, down 5.6% from the first
quarter of 2022.
Cash Flow
Cash flows from operations were $74.7 million, up 39.5% from the
first quarter of 2022. Free cash flow was $63.6 million, up 55.1%
from the first quarter of 2022.
"We began 2023 by delivering strong first quarter results that
met or exceeded our expectations for most key metrics," said Lynn
Moore, Tyler's president and chief executive officer. "We achieved
organic revenue growth of 7.2% even with the impact of short-term
headwinds from our new business mix shift and the related decline
in software license revenues. Cloud adoption trended higher than
anticipated with SaaS comprising 87% of our new software contract
value, and free cash flow was robust. We continued to direct cash
flow to debt repayment as we reduced our term debt by $120 million
during the quarter, bringing our net leverage to 1.5 times proforma
EBITDA.
"We saw strong sales performance across our product portfolios
as momentum continues to build with cross-division sales synergies
and a growing pipeline of active opportunities. The public sector
market remains very active, and we are experiencing a robust demand
environment reflected in high volumes of request for proposal and
demo activity.
"Our cloud initiatives are on track in what we see as a pivotal
year in our cloud transition. Importantly, our unparalleled
competitive strengths, including the breadth of our products and
the depth of our client base, position us well to execute our
long-term strategic growth roadmap. We look forward to sharing more
details of our mid- to long-term strategy supporting our Tyler 2030
vision during our upcoming investor day on June 15, 2023,"
concluded Moore.
Guidance for 2023
As of April 26, 2023, Tyler Technologies is providing the
following guidance for the full year 2023:
- Total revenues are expected to be in the range of $1.935
billion to $1.970 billion.
- GAAP diluted earnings per share are expected to be in the range
of $3.65 to $3.80 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 $7.50 to $7.65.
- Interest expense is expected to be approximately $26 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 $109 million.
- Research and development expense is expected to be in the range
of $108 million to $110 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 18.5% after discrete tax items, including
approximately $7 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 $109 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 $7 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,
April 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 and
dial-in number and PIN that will allow them to listen to the call
live.
The live audio webcast and archived replay can also be accessed
at
http://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 more than 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) the effects of
the COVID-19 pandemic, including its potential effects on the
economic environment, our customers and our operations, as well as
any changes to federal, state or local government laws, regulations
or orders in connection with the pandemic; (2) changes in the
budgets or regulatory environments of our clients, primarily local
and state governments, that could negatively impact information
technology spending; (3) disruption to our business and harm to our
competitive position resulting from cyber-attacks and security
vulnerabilities; (4) our ability to protect client information from
security breaches and provide uninterrupted operations of data
centers; (5) our ability to achieve growth or operational synergies
through the integration of acquired businesses, while avoiding
unanticipated costs and disruptions to existing operations; (6)
material portions of our business require the Internet
infrastructure to be adequately maintained; (7) 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; (8)
general economic, political and market conditions, including
inflation and increases in interest rates; (9) technological and
market risks associated with the development of new products or
services or of new versions of existing or acquired products or
services; (10) 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; (11) 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
(12) 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)
#TYL_Financial
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended March 31,
2023
2022
Revenues:
Subscriptions
$
280,465
$
245,443
Maintenance
115,130
117,029
Professional services
60,929
70,015
Software licenses and royalties
10,130
16,506
Hardware and other
5,199
7,115
Total revenues
471,853
456,108
Cost of revenues:
Subscriptions, maintenance, and
professional services
252,415
242,832
Software licenses and royalties
2,313
1,445
Amortization of software development
2,588
1,164
Amortization of acquired software
8,920
13,221
Hardware and other
5,780
5,028
Total cost of revenues
272,016
263,690
Gross profit
199,837
192,418
Sales and marketing expense
37,103
35,206
General and administrative expense
72,360
62,689
Research and development expense
26,987
23,941
Amortization of other intangibles
18,407
14,714
Operating income
44,980
55,868
Interest expense
(7,684
)
(4,804
)
Other income, net
1,246
364
Income before income taxes
38,542
51,428
Income tax provision
7,667
11,444
Net income
$
30,875
$
39,984
Earnings per common share:
Basic
$
0.74
$
0.97
Diluted
$
0.73
$
0.94
Weighted average common shares
outstanding:
Basic
41,832
41,364
Diluted
42,506
42,443
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended March 31,
Reconciliation of non-GAAP gross profit
and margin
2023
2022
GAAP gross profit
$
199,837
$
192,418
Non-GAAP adjustments:
Add: Share-based compensation expense
included in cost of revenues
6,342
6,772
Add: Amortization of acquired software
8,920
13,221
Non-GAAP gross profit
$
215,099
$
212,411
GAAP gross margin
42.4
%
42.2
%
Non-GAAP gross margin
45.6
%
46.6
%
Three months ended March 31,
Reconciliation of non-GAAP operating
income and margin
2023
2022
GAAP operating income
$
44,980
$
55,868
Non-GAAP adjustments:
Add: Share-based compensation expense
27,896
25,279
Add: Employer portion of payroll tax
related to employee stock transactions
479
712
Add: Acquisition-related costs
22
1,031
Add: Lease restructuring costs and other
asset write-offs
1,545
—
Add: Amortization of acquired software
8,920
13,221
Add: Amortization of customer and trade
name intangibles
18,407
14,714
Non-GAAP adjustments subtotal
57,269
54,957
Non-GAAP operating income
$
102,249
$
110,825
GAAP operating margin
9.5
%
12.2
%
Non-GAAP operating margin
21.7
%
24.3
%
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended March 31,
Reconciliation of non-GAAP net income and
earnings per share
2023
2022
GAAP net income
$
30,875
$
39,984
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to
operating income
57,269
54,957
Less: Tax impact related to non-GAAP
adjustments
(13,411
)
(14,088
)
Non-GAAP net income
$
74,733
$
80,853
GAAP earnings per diluted share
$
0.73
$
0.94
Non-GAAP earnings per diluted share
$
1.76
$
1.90
Three months ended March 31,
Detail of share-based compensation
expense
2023
2022
Subscriptions, maintenance and
professional services
$
6,342
$
6,772
Sales and marketing expense
2,393
2,140
General and administrative expense
19,161
16,367
Total share-based compensation expense
$
27,896
$
25,279
Three months ended March 31,
Reconciliation of EBITDA and adjusted
EBITDA
2023
2022
GAAP net income
$
30,875
$
39,984
Amortization of customer and trade name
intangibles
18,407
14,714
Depreciation and amortization included in
cost of revenues, sales and marketing expense, general and
administrative expense, and research and development expense
18,420
21,935
Interest expense
7,673
4,813
Income tax provision
7,667
11,444
EBITDA
$
83,042
$
92,890
Share-based compensation expense
27,896
25,279
Acquisition-related costs
22
1,031
Lease restructuring costs and other asset
write-offs
1,545
—
Adjusted EBITDA
$
112,505
$
119,200
TYLER TECHNOLOGIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except
per share data)
(Unaudited)
Three months ended March 31,
Reconciliation of free cash flow
2023
2022
Net cash provided by operating
activities
$
74,709
$
53,541
Less: additions to property and
equipment
(2,020
)
(4,579
)
Less: capitalized software development
(9,079
)
(7,947
)
Free cash flow
$
63,610
$
41,015
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Amounts in thousands)
(Unaudited)
March 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
130,845
$
173,857
Accounts receivable, net
508,683
577,257
Short-term investments
28,810
37,030
Prepaid expenses and other current
assets
77,325
59,098
Total current assets
745,663
847,242
Accounts receivable, long-term portion
9,282
8,271
Operating lease right-of-use assets
48,627
50,989
Property and equipment, net
167,683
172,786
Other assets:
Software development costs, net
54,565
48,189
Goodwill
2,489,084
2,489,308
Other intangibles, net
976,359
1,002,164
Non-current investments
14,544
18,508
Other non-current assets
49,828
49,960
Total assets
$
4,555,635
$
4,687,417
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$
226,883
$
236,754
Operating lease liabilities
11,413
10,736
Current income tax payable
69,337
43,667
Deferred revenue
497,395
568,538
Current portion of term loans
30,000
30,000
Total current liabilities
835,028
889,695
Term loans
243,603
362,905
Convertible senior notes due 2026, net
594,914
594,484
Deferred revenue, long-term
1,600
2,037
Deferred income taxes
130,367
148,891
Operating lease liabilities, long-term
46,567
48,049
Other long-term liabilities
17,423
16,967
Total liabilities
1,869,502
2,063,028
Shareholders' equity
$
2,686,133
$
2,624,389
Total liabilities and shareholders'
equity
$
4,555,635
$
4,687,417
TYLER TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three months ended March 31,
2023
2022
Cash flows from operating activities:
Net income
$
30,875
$
39,984
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization
38,112
38,149
Gains from sale of investments
—
(55
)
Share-based compensation expense
27,896
25,279
Operating lease right-of-use assets
expense
3,804
3,082
Deferred income tax benefit
(18,556
)
(9,438
)
Other
499
—
Changes in operating assets and
liabilities, exclusive of effects of acquired companies
(7,921
)
(43,460
)
Net cash provided by operating
activities
74,709
53,541
Cash flows from investing activities:
Additions to property and equipment
(2,020
)
(4,579
)
Purchase of marketable security
investments
(10,617
)
(4,592
)
Proceeds and maturities from marketable
security investments
22,975
22,672
Investment in software development
(9,079
)
(7,947
)
Cost of acquisitions, net of cash
acquired
(1,875
)
(116,698
)
Other
16
(29
)
Net cash provided used by investing
activities
(600
)
(111,173
)
Cash flows from financing activities:
Payment on term loans
(120,000
)
(20,000
)
Proceeds from exercise of stock options,
net of withheld shares for taxes upon equity award
(158
)
8,045
Contributions from employee stock purchase
plan
3,037
3,678
Net cash used provided by financing
activities
(117,121
)
(8,277
)
Net decrease in cash and cash
equivalents
(43,012
)
(65,909
)
Cash and cash equivalents at beginning of
period
173,857
309,171
Cash and cash equivalents at end of
period
$
130,845
$
243,262
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230426005822/en/
Brian K. Miller Executive Vice President & CFO Tyler
Technologies, Inc. 972-713-3720 brian.miller@tylertech.com
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