Tyler Technologies Reports Earnings for Third Quarter 2010


Highest quarterly free cash flow in Tyler's history

DALLAS - October 27, 2010 - Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the quarter ended September 30, 2010. Tyler reported total revenue of $73.8 million and net income of $6.7 million, or $0.19 per diluted share. In the same quarter last year, the Company had revenue of $74.3 million and net income of $7.5 million, or $0.20 per diluted share. Gross margin increased 30 basis points to 45.0 percent compared to 44.7 percent in the year-ago quarter.

Recurring software revenues from maintenance and subscriptions was $40.7 million in the third quarter of 2010, an increase of 9.2 percent compared to the third quarter of 2009 and comprised 55.2 percent of the quarter's total revenue.

Free cash flow for the quarter was $26.9 million (cash provided by operating activities of $27.6 million minus capital expenditures of $704,000), compared to $18.8 million (cash provided by operating activities of $22.9 million minus capital expenditures of $4.1 million) in the third quarter of last year. EBITDA, or earnings before interest, income taxes, depreciation and amortization, totaled $14.3 million in the third quarter of 2010, compared to $14.8 million in the prior year quarter.

Total backlog was $253.8 million at September 30, 2010, compared to $258.0 million at June 30, 2010 and $231.5 million at September 30, 2009. Software-related backlog (excluding appraisal services) was $216.2 million compared to $209.2 million at September 30, 2009.

Tyler ended the third quarter of 2010 with $8.6 million in cash and investments and $125.2 million of availability under its $150.0 million revolving line of credit. During the third quarter, Tyler repurchased approximately 2.5 million shares of its common stock at an average price of $18.81 per share. For the nine-month period ending September 30, 2010, Tyler repurchased approximately 3.3 million shares of its common stock at an average price of $18.37 per share. Additionally, on October 26, 2010, Tyler's board of directors authorized the repurchase of up to an additional two million shares of the Company's common stock. Together with previous authorizations, Tyler may now repurchase up to 2.9 million additional shares.

"We continue to experience extended sales cycles with customer decision processes that, in many cases, are longer, more involved and less predictable than in a more normal economic environment," said John Marr Jr., Tyler's president and chief executive officer. "Because of this, software license and software services revenues have lagged 2009 levels throughout the year. However, strength in our recurring revenues from maintenance and subscriptions, as well as our appraisal services business, have largely offset those declines and we currently expect those trends to continue in the fourth quarter. We are also pleased to report improvement in our gross margin for the third quarter, as well as the highest quarterly free cash flow in the company's history."

"We have revised our financial guidance for the full year 2010 to reflect continuing delays in contract and implementation timelines, as well as our expectation that a higher proportion of our new software contracts in the fourth quarter will be under subscription-based hosted arrangements. In addition, we have made changes to the timing of deployment of resources on our co-development project with Microsoft that in turn will delay the recognition of approximately $1.2 million of research and development expense reimbursements that we previously expected to record in the fourth quarter," said Mr. Marr.

Annual Guidance Update for 2010
Total revenues for 2010 are currently expected to be in the range of $289 million to $292 million. Tyler expects that diluted earnings per share will be approximately $0.67 to $0.71. These estimates include assumed non-cash pretax expense for the year of approximately $6.1 million, or $0.14 per share after taxes, related to stock options and the Company's stock purchase plan. The Company currently estimates that its effective tax rate for 2010 will be approximately 40 percent. Tyler also expects that free cash flow for the year will be between $33 million and $39 million (cash provided by operations of $39.0 million to $44.5 million minus capital expenditures of between $5.5 million and $6.0 million). Excluding estimated real estate capital expenditures of approximately $1.5 million, free cash flow for 2010 is expected to be between $34.5 million and $40.5 million.

Tyler Technologies will hold a conference call on Thursday, October 28 at noon 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: (888) 337-8259 (U.S. dialers) and (719) 325-2320 (international dialers). Please refer to confirmation code 4006993. A replay of the call will be available two hours after the completion of the call through November 4, 2010. To access the replay, please dial (888) 203-1112 (U.S. dialers) and (719) 457-0820 (international dialers) and reference passcode 4006993. The live webcast and archived replay can also be accessed on the Company's website at www.tylertech.com.

About Tyler Technologies, Inc.

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 empower the public sector-cities, counties, schools and other government entities-to become more efficient, more accessible, and more responsive to the needs of citizens. Tyler's client base includes more than 9,000 local government offices throughout all 50 states, Canada, Puerto Rico and the United Kingdom. Forbes Magazine named Tyler as one of "America's 200 Best Small Companies" for three consecutive years. More information about Tyler Technologies can be found at www.tylertech.com.

Contact:
Brian K. Miller
Executive Vice President - CFO
Tyler Technologies, Inc.
(972) 713-3720
brian.miller@tylertech.com

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