8-K
TYLER TECHNOLOGIES INC (TYL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 8-K
_____________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 26, 2022 (October 26, 2022)
Date of Report (Date of earliest event reported)
_____________________________________________
TYLER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________
| Delaware | 1-10485 | 75-2303920 | |||||
|---|---|---|---|---|---|---|---|
| (State or other jurisdiction of incorporation organization) | (Commission <br>File Number) | (I.R.S. Employer Identification No.) | 5101 TENNYSON PARKWAY | PLANO | Texas | 75024 | |
| --- | --- | --- | --- | ||||
| (Address of principal executive offices) | (City) | (State) | (Zip code) |
(972) 713-3700
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)
| Title of each class | Trading symbol | Name of each exchange<br><br>on which registered |
|---|---|---|
| COMMON STOCK, $0.01 PAR VALUE | TYL | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On October 26, 2022, Tyler Technologies, Inc. issued the earnings news release announcing results from operations and financial condition as of September 30, 2022, attached hereto as Exhibit 99.1, which news release is incorporated by reference herein.
| Exhibit number | Exhibit description |
|---|---|
| 99.1 | News Release issued by Tyler Technologies, Inc. dated October 26, 2022 |
| 104 | Cover Page Interactive Data File (embedded in the Inline XBRL document) |
| SIGNATURES | |
| --- |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TYLER TECHNOLOGIES, INC. | ||
|---|---|---|
| /s/ Brian K. Miller | ||
| October 26, 2022 | By: | Brian K. Miller<br>Executive Vice President and Chief Financial<br>Officer (principal financial officer) |
Document
Tyler Technologies Reports Earnings for Third Quarter 2022
Revenues grew approximately 9% organically, excluding COVID-related revenues
PLANO, Texas – October 26, 2022 – Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the third quarter ended September 30, 2022.
Third Quarter 2022 Financial Highlights:
•Both GAAP and non-GAAP total revenues were $473.2 million, up 2.9% from $459.9 million and 2.7% from $460.6 million, respectively, for the third quarter of 2021. On an organic basis (excluding COVID-related revenues), GAAP revenues grew 9.0% and non-GAAP revenues grew 8.8%.
•Recurring revenues from maintenance and subscriptions were $371.7 million, up 0.2% from $370.8 million for the third quarter of 2021, and comprised 78.5% of third quarter 2022 revenues, compared to 80.6% for the third quarter of 2021. On an organic basis (excluding COVID-related revenues), recurring revenues were $364.5 million, up 9.3%.
•Revenues included a total of $11.7 million from NIC's COVID-related initiatives, which are expected to end in the fourth quarter. Revenues from COVID-related initiatives totaled $43.3 million in the third quarter of 2021.
•Operating income was $60.9 million, up 8.4% from $56.2 million for the third quarter of 2021. Non-GAAP operating income was $117.8 million, up 0.9% from $116.8 million for the third quarter of 2021.
•Net income was $53.2 million, or $1.26 per diluted share, up 20.5% from $44.2 million, or $1.04 per diluted share, for the third quarter of 2021. Non-GAAP net income was $87.4 million, or $2.06 per diluted share, up 2.8% from $85.0 million, or $2.01 per diluted share, for the third quarter of 2021.
•The annual non-GAAP effective tax rate is 22.5%, down from 24.0% in 2021, as the result of an increase in the estimated research tax credit. For the third quarter, the non-GAAP effective tax rate was 19.6% to reflect the change in tax rate for the first nine months of the year.
•Cash flows from operations were $129.4 million compared to $205.4 million for the third quarter of 2021. Free cash flow was $115.6 million compared to $192.8 million for the third quarter of 2021.
•Adjusted EBITDA was $126.9 million, up 1.5% from $125.0 million for the third quarter of 2021.
•Software subscription arrangements comprised approximately 91% of the total new software contract value for the third quarter, compared to approximately 74% for the third quarter of 2021.
•Software subscription bookings for the third quarter added $28.1 million in annual recurring revenue.
•Annualized non-GAAP recurring revenues (ARR) were $1.49 billion, unchanged from $1.49 billion for the third quarter of 2021 due to a reduction in COVID-related subscription revenue. On an organic basis, excluding COVID-related revenues, annualized non-GAAP ARR grew 11.2%.
Tyler Technologies Reports Earnings
For Third Quarter 2022
October 26, 2022
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•Total backlog was $1.88 billion, up 6.3% from $1.77 billion at September 30, 2021.
“Third quarter results were highlighted by strong execution and robust public sector market demand, supported by healthy budgets," said Lynn Moore, Tyler's president and chief executive officer. "We are carrying strong momentum across our divisions, and market activity continues to build and drive larger opportunities and multi-suite wins. Professional services revenue continues to be pressured as we onboard new implementation team members and build capacity to support our growing backlog.
"Overall, we reported solid top and bottom-line results while advancing our cloud-first strategy. Total contract value for new software subscription agreements reached a new high and comprised 91% of our new software contract value this quarter. Contract signings were highlighted by a five-year $54 million contract with the U.S. Department of State for our Case Management Development Platform. This represents the largest win in our Federal Division's history, although only approximately $8 million of the contract value was included in the third quarter bookings due to certain contract provisions.
"In light of the rising interest rate environment, we continue to prioritize the use of excess cash to aggressively reduce debt, while being opportunistic toward strategic acquisitions and investments that enhance our long-term growth strategy. During the quarter, we reduced term debt by $190 million and our net leverage is now under two times proforma EBITDA.
"Looking forward, we are encouraged by continued strength in the public sector markets as reflected in stable or increasing RFP and demo activity across our business units. We are also pleased that our software revenue mix continues to arc towards SaaS even more rapidly than previously expected, even though the increased mix of SaaS arrangements is putting pressure on near-term revenue growth, as license revenue will decline faster than planned this year and in 2023. We have reduced the upper end of our full year revenue guidance to reflect lower license revenue, as well as pressure on professional services revenue related to staffing. The midpoint of our annual non-GAAP EPS guidance, adjusted for the reduction in our effective tax rate, is unchanged," concluded Moore.
Guidance for 2022
As of October 26, 2022, Tyler Technologies is providing the following guidance for the full year 2022:
•GAAP and non-GAAP total revenues are both expected to be in the range of $1.837 billion to $1.857 billion.
•Total revenues are expected to include approximately $49 million of COVID-related revenues from NIC's TourHealth and rent relief services. Revenue from TourHealth concluded in the second quarter, while revenue from the rent relief program are expected to end in the fourth quarter.
•GAAP diluted earnings per share are expected to be in the range of $3.89 to $4.05 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 $7.51 to $7.65.
•Interest expense is expected to be approximately $28 million, including approximately $7 million of non-cash amortization of debt discounts and issuance costs.
•Pretax non-cash, share-based compensation expense is expected to be approximately $107 million.
Tyler Technologies Reports Earnings
For Third Quarter 2022
October 26, 2022
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•Research and development expense is expected to be in the range of $97 million to $100 million.
•Fully diluted shares for the year are expected to be in the range of 42.4 million to 42.8 million shares.
•GAAP earnings per share assumes an estimated annual effective tax rate of approximately 14.0% after discrete tax items, including approximately $8 million of discrete tax benefits related to share-based compensation.
•The non-GAAP annual effective tax rate is expected to be 22.5%, down from 24% based on a change in our estimated research tax credit and its effect on our annual effective GAAP tax rate.
•Capital expenditures are expected to be in the range of $58 million to $62 million, including approximately $34 million of capitalized software development costs. Total depreciation and amortization expense is expected to be approximately $147 million, including approximately $112 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 $107 million, amortization of acquired software and intangible assets of approximately $112 million, acquisition-related costs of approximately $1 million, and lease restructuring costs of approximately $1 million. Additionally, the non-GAAP tax rate of 22.5% is estimated periodically as described below under "Non-GAAP Financial Measures" and excludes approximately $8 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, October 27, 2022 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.
Participants who do not wish to pre-register for the call may dial in using 888-330-2506 (U.S. and Canada callers) or 240-789-2712 (international callers) and ask for the “Tyler Technologies” call. 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 connect more transparently with their constituents and with each other. By connecting data and processes across disparate systems, Tyler's solutions are transforming how clients gain actionable insights that solve problems in their communities. Tyler has more than 37,000 successful installations across more than 12,000 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
Tyler Technologies Reports Earnings
For Third Quarter 2022
October 26, 2022
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GovTech 100 list and Forbes' "Most Innovative Growth Companies" 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 revenues, 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 write-downs of acquisition-related deferred revenue, 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. Annualized non-GAAP recurring revenues (ARR) is calculated by annualizing the current quarter's non-GAAP recurring revenues from maintenance and subscriptions.
Tyler currently uses a non-GAAP tax rate of 22.5%. 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
Tyler Technologies Reports Earnings
For Third Quarter 2022
October 26, 2022
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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)
Contact: Brian K. Miller
Executive Vice President & CFO
Tyler Technologies, Inc.
972-713-3720
brian.miller@tylertech.com
Source: Tyler Technologies
#TYL_Financial
22-52
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Software licenses and royalties | $ | 20,269 | $ | 22,673 | $ | 51,784 | $ | 55,210 |
| Subscriptions | 254,346 | 252,942 | 755,604 | 554,979 | ||||
| Professional services | 63,180 | 54,624 | 187,802 | 155,601 | ||||
| Maintenance | 117,338 | 117,833 | 351,182 | 356,566 | ||||
| Appraisal services | 8,638 | 7,146 | 25,968 | 19,876 | ||||
| Hardware and other | 9,420 | 4,655 | 25,643 | 16,518 | ||||
| Total revenues | 473,191 | 459,873 | 1,397,983 | 1,158,750 | ||||
| Software licenses and royalties | 3,162 | 1,547 | 8,640 | 4,151 | ||||
| Amortization of acquired software | 13,622 | 12,896 | 40,882 | 32,683 | ||||
| Subscriptions, professional services and maintenance | 239,928 | 241,944 | 721,017 | 576,035 | ||||
| Appraisal services | 5,783 | 4,506 | 17,695 | 13,552 | ||||
| Hardware and other | 6,033 | 2,764 | 19,219 | 9,845 | ||||
| Total cost of revenues | 268,528 | 263,657 | 807,453 | 636,266 | ||||
| Gross profit | 204,663 | 196,216 | 590,530 | 522,484 | ||||
| Selling, general and administrative expenses | 103,619 | 101,847 | 301,216 | 289,543 | ||||
| Research and development expense | 25,190 | 24,002 | 72,517 | 69,243 | ||||
| Amortization of customer and trade name intangibles | 14,941 | 14,183 | 43,259 | 31,015 | ||||
| Operating income | 60,913 | 56,184 | 173,538 | 132,683 | ||||
| Interest expense | (9,258) | (5,396) | (20,276) | (18,311) | ||||
| Other income, net | 131 | 445 | 712 | 1,249 | ||||
| Income before income taxes | 51,786 | 51,233 | 153,974 | 115,621 | ||||
| Income tax (benefit) provision | (1,447) | 7,063 | 20,811 | 8,945 | ||||
| Net income | $ | 53,233 | $ | 44,170 | $ | 133,163 | $ | 106,676 |
| Earnings per common share: | ||||||||
| Basic | $ | 1.28 | $ | 1.08 | $ | 3.21 | $ | 2.61 |
| Diluted | $ | 1.26 | $ | 1.04 | $ | 3.14 | $ | 2.53 |
| Weighted average common shares outstanding: | ||||||||
| Basic | 41,600 | 40,888 | 41,523 | 40,805 | ||||
| Diluted | 42,407 | 42,286 | 42,425 | 42,196 |
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reconciliation of non-GAAP total revenues | 2022 | 2021 | 2022 | 2021 | ||||||||
| GAAP total revenues | $ | 473,191 | $ | 459,873 | $ | 1,397,983 | $ | 1,158,750 | ||||
| Non-GAAP adjustments: | ||||||||||||
| Add: Write-downs of acquisition-related deferred revenue | — | 751 | — | 2,039 | ||||||||
| Non-GAAP total revenues | $ | 473,191 | $ | 460,624 | $ | 1,397,983 | $ | 1,160,789 | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of non-GAAP gross profit and margin | 2022 | 2021 | 2022 | 2021 | ||||||||
| GAAP gross profit | $ | 204,663 | $ | 196,216 | $ | 590,530 | $ | 522,484 | ||||
| Non-GAAP adjustments: | ||||||||||||
| Add: Write-downs of acquisition-related deferred revenue | — | 751 | — | 2,039 | ||||||||
| Add: Share-based compensation expense included in cost of <br> revenues | 7,181 | 6,303 | 20,820 | 17,212 | ||||||||
| Add: Amortization of acquired software | 13,622 | 12,896 | 40,882 | 32,683 | ||||||||
| Non-GAAP gross profit | $ | 225,466 | $ | 216,166 | $ | 652,232 | $ | 574,418 | ||||
| GAAP gross margin | 43.3 | % | 42.7 | % | 42.2 | % | 45.1 | % | ||||
| Non-GAAP gross margin | 47.6 | % | 46.9 | % | 46.7 | % | 49.5 | % | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of non-GAAP operating income and margin | 2022 | 2021 | 2022 | 2021 | ||||||||
| GAAP operating income | $ | 60,913 | $ | 56,184 | $ | 173,538 | $ | 132,683 | ||||
| Non-GAAP adjustments: | ||||||||||||
| Add: Write-downs of acquisition-related deferred revenue | — | 751 | — | 2,039 | ||||||||
| Add: Share-based compensation expense | 26,912 | 29,461 | 77,991 | 80,360 | ||||||||
| Add: Employer portion of payroll tax related to employee stock <br> transactions | 86 | 401 | 1,196 | 1,561 | ||||||||
| Add: Acquisition related costs | 183 | 2,888 | 1,214 | 22,718 | ||||||||
| Add: Lease restructuring costs | 1,159 | — | 1,159 | — | ||||||||
| Add: Amortization of acquired software | 13,622 | 12,896 | 40,882 | 32,683 | ||||||||
| Add: Amortization of customer and trade name intangibles | 14,941 | 14,183 | 43,259 | 31,015 | ||||||||
| Non-GAAP adjustments subtotal | 56,903 | 60,580 | 165,701 | 170,376 | ||||||||
| Non-GAAP operating income | $ | 117,816 | $ | 116,764 | $ | 339,239 | $ | 303,059 | ||||
| GAAP operating margin | 12.9 | % | 12.2 | % | 12.4 | % | 11.5 | % | ||||
| Non-GAAP operating margin | 24.9 | % | 25.3 | % | 24.3 | % | 26.1 | % |
TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| Reconciliation of non-GAAP net income and earnings per share | 2022 | 2021 | 2022 | 2021 | ||||
| GAAP net income | $ | 53,233 | $ | 44,170 | $ | 133,163 | $ | 106,676 |
| Non-GAAP adjustments: | ||||||||
| Add: Total non-GAAP adjustments to operating income | 56,903 | 60,580 | 165,701 | 170,376 | ||||
| Add: Acquisition related costs in interest expense | — | — | 6,407 | |||||
| Less: Tax impact related to non-GAAP adjustments | (22,737) | (19,772) | (51,115) | (61,232) | ||||
| Non-GAAP net income | $ | 87,399 | $ | 84,978 | $ | 247,749 | $ | 222,227 |
| GAAP earnings per diluted share | $ | 1.26 | $ | 1.04 | $ | 3.14 | $ | 2.53 |
| Non-GAAP earnings per diluted share | $ | 2.06 | $ | 2.01 | $ | 5.84 | $ | 5.27 |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Detail of share-based compensation expense | 2022 | 2021 | 2022 | 2021 | ||||
| Subscriptions, professional services and maintenance | $ | 7,181 | $ | 6,303 | $ | 20,820 | $ | 17,212 |
| Selling, general and administrative expenses | 19,731 | 23,158 | 57,171 | 63,148 | ||||
| Total share-based compensation expense | $ | 26,912 | $ | 29,461 | $ | 77,991 | $ | 80,360 |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of EBITDA and adjusted EBITDA | 2022 | 2021 | 2022 | 2021 | ||||
| GAAP net income | $ | 53,233 | $ | 44,170 | $ | 133,163 | $ | 106,676 |
| Amortization of customer and trade name intangibles | 14,941 | 14,183 | 43,259 | 31,015 | ||||
| Depreciation and amortization included in cost of revenues, SG&A and other expenses | 22,646 | 21,112 | 67,262 | 55,290 | ||||
| Amortization of debt discounts and issuance costs included in interest expense | 3,329 | 1,133 | 5,600 | 10,083 | ||||
| Interest expense | 5,928 | 4,262 | 14,676 | 8,228 | ||||
| Income tax (benefit) provision | (1,447) | 7,063 | 20,811 | 8,945 | ||||
| EBITDA | $ | 98,630 | $ | 91,923 | $ | 284,771 | $ | 220,237 |
| Write-downs of acquisition-related deferred revenue | — | 751 | — | 2,039 | ||||
| Share-based compensation expense | 26,912 | 29,461 | 77,991 | 80,360 | ||||
| Acquisition related costs | 183 | 2,888 | 1,214 | 22,718 | ||||
| Lease restructuring costs | 1,159 | — | 1,159 | — | ||||
| Adjusted EBITDA | $ | 126,884 | $ | 125,023 | $ | 365,135 | $ | 325,354 |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of free cash flow | 2022 | 2021 | 2022 | 2021 | ||||
| Net cash provided by operating activities | $ | 129,378 | $ | 205,387 | $ | 259,598 | $ | 256,743 |
| Less: additions to property and equipment | (4,684) | (6,547) | (17,441) | (20,770) | ||||
| Less: capitalized software development costs | (9,094) | (6,019) | (25,557) | (14,966) | ||||
| Free cash flow | $ | 115,600 | $ | 192,821 | $ | 216,600 | $ | 221,007 |
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
| September 30, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 185,927 | $ | 309,171 |
| Accounts receivable, net | 561,780 | 521,059 | ||
| Short-term investments | 39,360 | 52,300 | ||
| Prepaid expenses and other current assets | 65,704 | 63,664 | ||
| Income tax receivable | 7,379 | 18,137 | ||
| Total current assets | 860,150 | 964,331 | ||
| Accounts receivable, long-term portion | 9,213 | 13,937 | ||
| Operating lease right-of-use assets | 53,202 | 39,720 | ||
| Property and equipment, net | 175,196 | 181,193 | ||
| Other assets: | ||||
| Software development costs, net | 51,092 | 28,489 | ||
| Goodwill | 2,449,405 | 2,359,674 | ||
| Other intangibles, net | 1,004,045 | 1,052,493 | ||
| Non-current investments | 22,627 | 46,353 | ||
| Other non-current assets | 50,443 | 45,971 | ||
| Total assets | $ | 4,675,373 | $ | 4,732,161 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable and accrued liabilities | $ | 242,434 | $ | 278,412 |
| Operating lease liabilities | 10,581 | 10,560 | ||
| Deferred revenue | 529,233 | 510,529 | ||
| Current portion of term loans | 30,000 | 30,000 | ||
| Total current liabilities | 812,248 | 829,501 | ||
| Revolving line of credit | — | — | ||
| Term loans | 452,138 | 718,511 | ||
| Convertible senior notes due 2026, net | 594,054 | 592,765 | ||
| Deferred revenue, long-term | 2,473 | 38 | ||
| Deferred income taxes | 203,204 | 228,085 | ||
| Operating lease liabilities, long-term | 49,759 | 36,336 | ||
| Other long-term liabilities | 14,199 | 2,893 | ||
| Total liabilities | 2,128,075 | 2,408,129 | ||
| Shareholders' equity | $ | 2,547,298 | $ | 2,324,032 |
| Total liabilities and shareholders' equity | $ | 4,675,373 | $ | 4,732,161 |
TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 53,233 | $ | 44,170 | $ | 133,163 | $ | 106,676 |
| Adjustments to reconcile net income to cash<br> provided by operations: | ||||||||
| Depreciation and amortization | 41,084 | 36,888 | 116,950 | 97,864 | ||||
| Losses (gains) from sale of investments | 97 | — | 44 | — | ||||
| Share-based compensation expense | 26,912 | 29,461 | 77,991 | 80,360 | ||||
| Operating lease right-of-use assets expense | 4,136 | 2,982 | 9,240 | 7,016 | ||||
| Deferred income tax benefit | (13,709) | (9,251) | (32,845) | (15,681) | ||||
| Changes in operating assets and liabilities,<br> exclusive of effects of acquired companies | 17,625 | 101,137 | (44,945) | (19,492) | ||||
| Net cash provided by operating activities | 129,378 | 205,387 | 259,598 | 256,743 | ||||
| Cash flows from investing activities: | ||||||||
| Additions to property and equipment | (4,684) | (6,547) | (17,441) | (20,770) | ||||
| Purchase of marketable security investments | (15,836) | (7,630) | (20,428) | (75,684) | ||||
| Proceeds and maturities from marketable security investments | 14,457 | 23,168 | 55,052 | 114,563 | ||||
| Investment in software | (9,094) | (6,019) | (25,557) | (14,966) | ||||
| Cost of acquisitions, net of cash acquired | (393) | (89,492) | (117,706) | (2,088,394) | ||||
| Other | 174 | 424 | 326 | 463 | ||||
| Net cash provided (used) by investing activities | (15,376) | (86,096) | (125,754) | (2,084,788) | ||||
| Cash flows from financing activities: | ||||||||
| Decrease in net borrowings on revolving line of credit | — | (65,000) | — | — | ||||
| Payment on term loans | (190,000) | (57,500) | (270,000) | (57,500) | ||||
| Proceeds from term loans | — | — | — | 900,000 | ||||
| Proceeds from issuance of convertible senior notes | — | — | — | 600,000 | ||||
| Payment of debt issuance costs | — | (38) | — | (27,165) | ||||
| Purchase of treasury shares | — | — | — | (12,975) | ||||
| Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award | 4,405 | 17,045 | 298 | 46,433 | ||||
| Contributions from employee stock purchase plan | 4,458 | 3,557 | 12,614 | 9,757 | ||||
| Net cash (used) provided by financing activities | (181,137) | (101,936) | (257,088) | 1,458,550 | ||||
| Net (decrease) increase in cash and cash equivalents | (67,135) | 17,355 | (123,244) | (369,495) | ||||
| Cash and cash equivalents at beginning of period | 253,062 | 216,773 | 309,171 | 603,623 | ||||
| Cash and cash equivalents at end of period | $ | 185,927 | $ | 234,128 | $ | 185,927 | $ | 234,128 |