Tyler Technologies Reports Fourth Quarter 2007 Earnings Increase 49 Percent
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Operating Income Reaches New High on 18 Percent Revenue Growth
Dallas, February 27, 2008 -- Tyler Technologies, Inc. (NYSE: TYL) today reported the following financial results for the quarter ended December 31, 2007:
o Total revenues for the quarter were $60.4 million, up 18.1 percent compared to $51.2 million in the same period last year. Software-related revenues (software licenses, software services, subscriptions and maintenance) grew in the aggregate 20.4 percent for the quarter.
o Operating income was $9.6 million, a 53.2 percent increase compared with operating income of $6.3 million in the same quarter of 2006.
o Net income increased 48.2 percent to $6.2 million, or $0.15 per diluted share, compared to net income for the three months ended December 31, 2006 of $4.2 million, or $0.10 per share.
o Free cash flow rose 158 percent to $8.5 million (cash provided by operating activities of $9.6 million minus capital expenditures of $1.1 million). For the fourth quarter of 2006, free cash flow was $3.3 million (cash provided by operating activities of $4.1 million minus capital expenditures of $833,000).
o EBITDA, or earnings before interest, income taxes, depreciation and amortization, totaled $13.0 million, a 47.2 percent increase over EBITDA of $8.8 million for the fourth quarter of 2006.
o Gross margin was 40.4 percent, compared to 39.6 percent in the quarter ended December 31, 2006.
o Selling, general and administrative expenses were $13.3 million (22.0 percent of revenues), compared to $12.8 million (25.0 percent of revenues) in the same quarter last year.
o Share-based compensation expense for the fourth quarter under FAS 123R totaled $660,000, of which $69,000 was included in cost of revenues and $591,000 was included in selling, general and administrative expenses. For the fourth quarter of 2006, share-based compensation expense was $431,000, of which $37,000 was included in cost of revenues and $394,000 was included in selling, general and administrative expenses.
o Total backlog was $250.1 million at December 31, 2007, compared to $205.9 million at December 31, 2006. Software-related backlog (excluding appraisal services) grew year-over-year by $39.3 million, or 21.4 percent, to $222.5 million at December 31, 2007.
o Tyler is debt free and ended the fourth quarter of 2007 with $55.7 million in cash, short-term investments and restricted investments. The Company repurchased 360,600 shares of its common stock during the quarter at an aggregate cost of $5.0 million. For the year ending December 31, 2007, the Company repurchased 1,249,720 shares of its common stock at an aggregate cost of $16.2 million.
Revenues for the year ended December 31, 2007 increased 12.5 percent to $219.8 million from $195.3 million in 2006. Operating income for the year 2007 increased 23.0 percent to $26.8 million, compared to $21.8 million in 2006. Net income for the year ended December 31, 2007 was $17.5 million, or $0.42 per diluted share, compared to net income of $14.4 million, or $0.34 per share, for the comparable period of 2006.
For the year ended December 31, 2007, free cash flow increased 34.6 percent to $30.3 million (cash provided by operating activities of $34.1 million minus capital expenditures of $3.8 million), compared to free cash flow of $22.5 million (cash provided by operating activities of $26.8 million minus capital expenditures of $4.3 million) for the same period of 2006.
"Tyler finished 2007 on positive note with very solid results for the fourth quarter and the full year," said John S. Marr, Jr., Tyler's President and Chief Executive Officer. "In fact, the fourth quarter of 2007 was the best quarter in the company's history by many measures. Total revenues for the quarter grew 18 percent from last year and achieved a new quarterly high, while quarterly software license revenues also were the highest in our history. We also experienced a 48 percent increase in our subscription-based revenues. Our revenue growth, combined with improved gross margins and leverage of SG&A costs, resulted in a 53 percent increase in fourth quarter operating income, and our earnings per share of $0.15 represents a 50 percent increase over 2006.
"For the full year 2007, our total revenue growth of 13 percent was in line with our expectations. Although software license revenues were off 5.9 percent from 2006, our subscription-based revenues increased 42.6 percent. These "software as a service" revenues, which include our hosted application service provider model, accounted for less than five percent of our 2007 revenues, but represented our fastest-growing revenue line. The revenue mix, together with significant additions to our development and implementation staff to deliver our growing backlog, put pressure on our gross margin, which was basically flat with 2006.
"Perhaps more importantly, Tyler's 2007 free cash flow of $30.3 million grew nearly 35 percent over last year and exceeded GAAP net income by more than 73 percent," Mr. Marr continued. "We ended the year with a very healthy balance of cash and investments of nearly $56 million, after investing more than $23 million of cash in acquisitions and company stock repurchases during 2007.
"We entered 2008 with a positive outlook and a great deal of enthusiasm. New business signings were very strong in the fourth quarter, and we began 2008 with a record high backlog of $250 million of signed contracts and a rapidly growing base of recurring revenues. We believe our competitive position is stronger than ever, and we are seeing a market environment that is generally positive. In addition, we have closed two acquisitions in early 2008, VersaTrans and Schoolmaster, which bolster our presence in the education market with new products and an expanded customer base.
"We continue to expect that Tyler will experience solid results during 2008 in line with our long-term growth objectives, and our current outlook remains consistent with the preliminary guidance we issued earlier this month," Mr. Marr noted. "We look forward to expanding revenue, gross margins, earnings and cash flow in 2008, while making substantial investments in both existing and new products, including our joint development partnership with Microsoft. Consistent with our historical trends, we expect that first quarter 2008 earnings will not reach the level achieved in the fourth quarter of 2007, and that more than 60 percent of our annual earnings will come in the second half of 2008."
Annual Guidance for 2008
Total revenues for 2008 are currently expected to be in the range of $259 million to $265 million. Tyler expects to have diluted earnings per share of approximately $0.49 to $0.53. These estimates include assumed pretax expense for the year of approximately $2.9 million, or $0.06 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 2008 will be approximately 38.1 percent.
Tyler expects that free cash flow for the year 2008 will be between $34.0 million and $41.0 million (cash provided by operations of $39.5 million to $45.5 million minus capital expenditures of between $4.5 million and $5.5 million).
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 8,000 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.
