EX-99.1 2 a991earningsrelease-3312022.htm EX-99.1 Document

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Tyler Technologies Reports Earnings for First Quarter 2022
Total revenues grew 54.7% with organic revenue growth of 12.8%
PLANO, Texas – April 27, 2022 – Tyler Technologies, Inc. (NYSE: TYL) today announced financial results for the first quarter ended March 31, 2022.
First Quarter 2022 Financial Highlights:
•Both GAAP and non-GAAP total revenues were $456.1 million, up 54.7% from $294.8 million for the first quarter of 2021. On an organic basis, both GAAP and non-GAAP revenues grew 12.8%.
•Recurring revenues from maintenance and subscriptions were $362.5 million, up 63.6% from $221.6 million for the first quarter of 2021, and comprised 79.5% of first quarter 2022 revenue, up from 75.2% for the first quarter of 2021. On an organic basis, recurring revenues were $254.1 million, up 14.7%.
•Subscription revenue and software services revenue included a total of $20.6 million from NIC's TourHealth and COVID-related initiatives, the majority of which are currently expected to wind down by the third quarter of 2022.
•Operating income was $55.9 million, up 46.2% from $38.2 million for the first quarter of 2021. Non-GAAP operating income was $110.8 million, up 40.5% from $78.9 million for the first quarter of 2021.
•Net income was $40.0 million, or $0.94 per diluted share, up 8.1% from $37.0 million, or $0.88 per diluted share, for the first quarter of 2021. Non-GAAP net income was $80.9 million, or $1.90 per diluted share, up 34.7% from $60.0 million, or $1.43 per diluted share, for the first quarter of 2021.
•Cash flows from operations were $53.5 million, down 25.3% from $71.7 million for the first quarter of 2021. Free cash flow was $41.0 million, down 33.5% from $61.7 million for the first quarter of 2021.
•Adjusted EBITDA was $119.2 million, up 39.2% from $85.7 million for the first quarter of 2021.
•Software subscription arrangements comprised approximately 80% of the total new software contract value for the first quarter, compared to approximately 66% for the first quarter of 2021.
•Software subscription bookings for the first quarter added $16.2 million in annual recurring revenue.
•Annualized non-GAAP recurring revenues were $1.45 billion, up 63.6% from $886.4 million for the first quarter of 2021.
•Total backlog was $1.76 billion, up 13.8% from $1.55 billion at March 31, 2021.
•During the first quarter, Tyler completed the acquisition of US eDirect for a cash purchase price of approximately $117 million, net of cash acquired.
“Our first quarter results provided a very strong start to 2022,” said Lynn Moore, Tyler’s president and chief executive officer. Total revenues grew approximately 55% with the inclusion of NIC and other acquisitions, and organic revenue growth of nearly 13% was the highest in 20 quarters. Recurring revenues comprised


Tyler Technologies Reports Earnings
For First Quarter 2022
April 27, 2022
Page 2
79.5% of total revenues, as subscription revenues grew 139.5% in total and 33.8% organically. This marked our 65th consecutive quarter of double-digit subscription revenue growth.
"Our NIC division continued to perform well in the first quarter, with core revenue growth of 13%, excluding COVID-related revenues, which were in line with expectations. NIC's growth was boosted by revenues from our new statewide payments contract in Florida, and in particular by revenues associated with corporate filings with the Department of State that are concentrated in the first quarter.
"We're pleased to see an acceleration in the shift of our new software contract mix from licenses to SaaS, as subscription agreements comprised 80% of our new software contract value. As expected, margins compressed compared to the first quarter of 2021, reflecting the inclusion of NIC's revenues, as well as expenses related to our transition to the cloud.
"Activity in the public sector market continues to be robust, and our bookings are indicative of both the positive market conditions and our strong competitive position. Bookings in the first quarter were approximately $419 million, up 70.1% over the first quarter of 2021. Excluding NIC, bookings grew 14.7%. For the trailing twelve months, bookings were approximately $1.9 billion, up 65%, and excluding NIC, were approximately $1.4 billion, growing 21.7%.
"We achieved very solid growth in the first quarter, even as we continue to accelerate our transition to the cloud. Our revised guidance for the year reflects our strong first quarter results and our current positive outlook for the remainder of 2022," concluded Moore.
Guidance for 2022
As of April 27, 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 $1.835 billion to $1.870 billion.
•Total revenues are expected to include approximately $40 million of COVID-related revenues from NIC's TourHealth and rent relief services. Revenues from TourHealth are currently expected to continue through the second quarter of 2022, while revenues from the rent relief program are expected to continue through the third quarter.
•GAAP diluted earnings per share are expected to be in the range of $3.92 to $4.08 and may vary significantly due to the impact of stock incentive awards on the GAAP effective tax rate.
•Non-GAAP diluted earnings per share are expected to be in the range of $7.48 to $7.64.
•Interest expense is expected to be approximately $23 million, including approximately $5 million of amortization of debt discounts and issuance costs. This represents an increase of approximately $3.4 million compared to our initial guidance, with an impact on non-GAAP diluted earnings per share of approximately $0.06 per share, based on current expectations for further rate hikes this year.
•Pretax non-cash, share-based compensation expense is expected to be approximately $108 million.
•Research and development expense is expected to be in the range of $98 million to $101 million.
•Fully diluted shares for the year are expected to be in the range of 42.5 million to 43.0 million shares.


Tyler Technologies Reports Earnings
For First Quarter 2022
April 27, 2022
Page 3
•GAAP earnings per share assumes an estimated annual effective tax rate of approximately 18.0% after discrete tax items, including approximately $19 million of discrete tax benefits related to share-based compensation.
•The non-GAAP annual effective tax rate is expected to be 24%.
•Capital expenditures are expected to be in the range of $62 million to $67 million, including approximately $36 million of capitalized software development costs. Total depreciation and amortization expense is expected to be approximately $145 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 $108 million, amortization of acquired software and intangible assets of approximately $109 million, and acquisition-related costs of approximately $1 million. Additionally, the non-GAAP tax rate of 24% is estimated periodically as described below under "Non-GAAP Financial Measures" and excludes approximately $19 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 28, 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: http://dpregister.com/sreg/10165058/f21927a028. 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 844-861-5506 (U.S. callers) or 412-317-6587 (international callers) or 866-450-4696 (Canada callers) and ask for the “Tyler Technologies” call. A replay will be available two hours after completion of the call through May 5, 2022. To access the replay, please dial 877-344-7529 (U.S. callers), 412-317-0088 (international callers) and 855-669-9658 (Canada callers) and reference passcode 9235226.
The live webcast and archived replay can also be accessed at https://tylertech.irpass.com/Presentations.
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 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.


Tyler Technologies Reports Earnings
For First Quarter 2022
April 27, 2022
Page 4
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 and acquired subleases, 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 incremental costs associated with COVID-19.
Tyler currently uses a non-GAAP tax rate of 24%. 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


Tyler Technologies Reports Earnings
For First Quarter 2022
April 27, 2022
Page 5
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; (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
22-23


TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)


Three Months Ended March 31,
20222021
Software licenses and royalties$16,506 $14,933 
Subscriptions245,443 102,479 
Software services61,497 47,640 
Maintenance117,029 119,112 
Appraisal services8,518 6,465 
Hardware and other7,115 4,173 
Total revenues456,108 294,802 
Software licenses and royalties2,609 1,236 
Amortization of acquired software13,221 7,964 
Subscriptions, software services and maintenance236,896 134,320 
Appraisal services5,936 4,617 
Hardware and other5,028 2,458 
Total cost of revenues263,690 150,595 
  Gross profit192,418 144,207 
Selling, general and administrative expenses97,895 78,774 
Research and development expense23,941 21,813 
Amortization of customer and trade name intangibles14,714 5,412 
  Operating income55,868 38,208 
Interest expense(4,804)(478)
Other income, net364 566 
Income before income taxes51,428 38,296 
Income tax provision11,444 1,320 
Net income$39,984 $36,976 
Earnings per common share:
   Basic$0.97 $0.91 
   Diluted$0.94 $0.88 
Weighted average common shares outstanding:
   Basic41,364 40,611 
   Diluted42,443 42,056 



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 margin20222021
GAAP gross profit$192,418$144,207
Non-GAAP adjustments:
  Add: Share-based compensation expense included in cost of
           revenues		6,7725,000
  Add: Amortization of acquired software13,2217,964
Non-GAAP gross profit$212,411$157,171
GAAP gross margin42.2 %48.9 %
Non-GAAP gross margin46.6 %53.3 %

Three Months Ended March 31,
Reconciliation of non-GAAP operating income and margin20222021
GAAP operating income$55,868$38,208
Non-GAAP adjustments:
  Add: Share-based compensation expense25,27925,724
  Add: Employer portion of payroll tax related to employee stock
           transactions		712767
  Add: Acquisition related costs1,031813
  Add: Amortization of acquired software13,2217,964
  Add: Amortization of customer and trade name intangibles14,7145,412
Non-GAAP adjustments subtotal54,95740,680
Non-GAAP operating income$110,825$78,888
GAAP operating margin12.2 %13.0 %
Non-GAAP operating margin24.3 %26.8 %

Three Months Ended March 31,
Reconciliation of non-GAAP net income and earnings per share20222021
GAAP net income$39,984$36,976
Non-GAAP adjustments:
  Add: Total non-GAAP adjustments to operating income54,95740,680
  Less: Tax impact related to non-GAAP adjustments(14,088)(17,634)
Non-GAAP net income$80,853$60,022
GAAP earnings per diluted share$0.94$0.88
Non-GAAP earnings per diluted share$1.90$1.43



TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
 

Three Months Ended March 31,
Detail of share-based compensation expense20222021
Subscriptions, software services and maintenance$6,772$5,000
Selling, general and administrative expenses18,50720,724
Total share-based compensation expense$25,279$25,724

Three Months Ended March 31,
Reconciliation of EBITDA and adjusted EBITDA20222021
GAAP net income$39,984$36,976
Amortization of customer and trade name intangibles14,7145,412
Depreciation and amortization included in cost of revenues, SG&A and other expenses21,93515,029
Amortization of debt discounts and issuance costs included in interest expense1,132—
Interest expense3,681379
Income tax provision (benefit)11,4441,320
EBITDA$92,890$59,116
Share-based compensation expense25,27925,724
Acquisition related costs1,031813
Adjusted EBITDA$119,200$85,653

Three Months Ended March 31,
Reconciliation of free cash flow20222021
Net cash provided by operating activities$53,541 $71,703 
Less: additions to property and equipment(4,579)(6,564)
Less: capitalized software development costs(7,947)(3,476)
Free cash flow$41,015 $61,663 


TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 (Unaudited)

March 31, 2022December 31, 2021
ASSETS
Current assets:
     Cash and cash equivalents$243,262 $309,171 
     Accounts receivable, net501,200 521,059 
Short-term investments 44,973 52,300 
Prepaid expenses and other current assets70,464 63,664 
     Income tax receivable— 18,137 
           Total current assets859,899 964,331 
Accounts receivable, long-term portion14,742 13,937 
Operating lease right-of-use assets42,369 39,720 
Property and equipment, net177,508 181,193 
Other assets:
     Software development costs, net36,311 28,489 
     Goodwill2,440,843 2,359,674 
     Other intangibles, net1,072,479 1,052,493 
     Non-current investments34,342 46,353 
     Other non-current assets45,313 45,971 
Total assets$4,723,806 $4,732,161 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued liabilities$269,222 $278,412 
Operating lease liabilities11,186 10,560 
     Current income tax payable1,374 — 
     Deferred revenue454,678 510,529 
     Current portion of term loans30,000 30,000 
           Total current liabilities766,460 829,501 
Revolving line of credit— — 
Term loans698,988 718,511 
Convertible senior notes due 2026, net593,194 592,765 
Deferred revenue, long-term— 38 
Deferred income taxes230,292 228,085 
Operating lease liabilities, long-term38,403 36,336 
Other long-term liabilities8,735 2,893 
Total liabilities2,336,072 2,408,129 
Shareholders' equity$2,387,734 $2,324,032 
Total liabilities and shareholders' equity$4,723,806 $4,732,161 

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
    Net income$39,984 $36,976 
    Adjustments to reconcile net income to cash
    provided by operations:
      Depreciation and amortization38,149 21,100 
      Gains from sale of investments(55)— 
      Share-based compensation expense25,279 25,724 
      Operating lease right-of-use assets expense3,082 1,546 
      Deferred income tax benefit(9,438)(3,267)
      Changes in operating assets and liabilities,
      exclusive of effects of acquired companies		(43,460)(10,376)
Net cash provided by operating activities53,541 71,703 
Cash flows from investing activities:
Additions to property and equipment(4,579)(6,564)
Purchase of marketable security investments(4,592)(52,755)
Proceeds and maturities from marketable security investments22,672 35,031 
Investment in software(7,947)(3,476)
Cost of acquisitions, net of cash acquired(116,698)(12,049)
(Increase) decrease in other(29)119 
Net cash used by investing activities(111,173)(39,694)
Cash flows from financing activities:
Decrease in net borrowings on revolving line of credit— — 
Payment on term loans(20,000)— 
Proceeds from issuance of convertible senior notes— 600,000 
Payment of debt issuance costs— (6,020)
Proceeds from exercise of stock options8,045 18,102 
Contributions from employee stock purchase plan3,678 3,038 
Net cash (used) provided by financing activities(8,277)615,120 
Net (decrease) increase in cash and cash equivalents(65,909)647,129 
Cash and cash equivalents at beginning of period309,171 603,623 
Cash and cash equivalents at end of period$243,262 $1,250,752