EX-99.1 2 d19490exv99w1.htm NEWS RELEASE exv99w1
 

Exhibit 99.1

(TYLER TECHNOLOGIES LOGO)

Contact: Brian K. Miller
Vice President — Finance
Tyler Technologies, Inc.
(972) 713-3720
bmiller@tylerworks.com

TYLER TECHNOLOGIES ANNOUNCES THIRD QUARTER 2004 EARNINGS

Board Increases Stock Repurchase Authorization by Two Million Shares

Dallas, October 27, 2004 — Tyler Technologies, Inc. (NYSE: TYL) today reported that total revenues for the quarter ended September 30, 2004 increased 10% to $41.8 million from $37.9 million in the same period last year. Software-related revenues (licenses, services and maintenance) grew in the aggregate 15% for the quarter, while appraisal services revenues declined 14%.

Tyler also announced that its Board of Directors has increased the Company’s common stock repurchase authorization by two million shares.

Operating income for the quarter ended September 30, 2004 declined 33% compared with the same quarter of 2003, primarily because of lower software license revenues, higher amortization expense and increased selling, general and administrative (SG&A) expenses associated with corporate governance regulations.

Tyler’s results include the operations of Eden Systems, Inc. since its acquisition by Tyler in December 2003. Pro forma revenues, as if the acquisition of Eden had occurred as of the beginning of 2003, increased 1% from $41.2 million in the three months ended September 30, 2003.

Operating income for the quarter ended September 30, 2004 was $3.4 million, compared with operating income of $5.1 million in the same quarter of 2003.

Net income for the three months ended September 30, 2004 was $2.0 million, or $0.05 per diluted share. Net income for the quarter ended September 30, 2003 was $3.2 million, or $0.07 per share.

Third quarter EBITDA, or earnings before interest, income taxes, depreciation and amortization, decreased 21% to $6.2 million from $7.9 million in the third quarter of 2003.

Revenues for the nine months ended September 30, 2004 increased 20.0% to $127.5 million from $106.3 million in 2003. Pro forma revenues for the first nine months of 2004 increased 11% from $115.4 million in the first nine months of 2003.

Operating income for the nine months ended September 30, 2004 was $11.8 million, an increase of 19% compared to $9.9 million in 2003.

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Tyler Technologies Announces Third Quarter 2004 Earnings
October 27, 2004
Page 2

Net income for the nine months ended September 30, 2004 was $7.1 million, or $0.16 per diluted share. Excluding an after-tax realized gain in connection with the cash sale of Tyler’s entire investment in H.T.E., Inc (HTE) in 2003, net income for the nine months ended September 30, 2004 would have increased 13% from $6.3 million, or $0.14 per share, in the first nine months of 2003. Including the after-tax realized gain of $16.2 million, or $0.36 per share, from the HTE investment, net income for the nine months ended September 30, 2003 totaled $22.5 million, or $0.50 per diluted share.

EBITDA for the nine months ended September 30, 2004 was $20.3 million. Excluding the realized gain on the HTE investment in 2003, EBITDA in the first nine months of 2004 would have increased 20% over EBITDA of $17.0 million in the first nine months of 2003. EBITDA for the first nine months of 2003, including the HTE gain of $23.2 million, totaled $40.2 million.

Free cash flow for the third quarter of 2004 was $4.2 million (cash provided by operating activities of $5.6 million minus capital expenditures of $1.4 million). For the first nine months of 2004, free cash flow was $13.5 million (cash provided by operating activities of $18.6 million minus capital expenditures of $5.1 million). Tyler has no debt and had $36.6 million in cash, short-term investments, and certificates of deposit at September 30, 2004.

“Our third quarter 2004 results did not meet our expectations, particularly with regard to software license revenues,” commented John S. Marr, Jr., Tyler’s President and Chief Executive Officer. “Although the comparison to last year’s third quarter is particularly difficult because of the $3.4 million of license fees recognized last year on two large Odyssey contracts, we were still below our target for the current quarter. While our financial software products have experienced strong results with more mature products and a broader geographic footprint, we are working to ramp up sales and penetrate new geographies for our newer products in both courts and justice and property tax and appraisal. In addition, we have signed a number of contracts this year that are being accounted for using the percentage of completion method of revenue recognition, which results in the license revenues being spread over the implementation period.

“We have continued to successfully sign new software contracts and our total backlog stood at a new high of $149.4 million at September 30. Software-related backlog (excluding appraisal services) grew by $7.4 million during the third quarter. We are also pleased with the strength in our recurring revenues, as maintenance revenues for the quarter grew by nearly 25% compared to last year, of which 16% was organic growth.”

Mr. Marr added, “With lower software license revenues compared to last year and increased amortization expense related to our new products, Tyler’s overall gross margin for the third quarter declined to 36.6% from 40.8% in the same quarter last year.

“SG&A expenses increased to 27.1% of revenues in the current quarter from 25.6% in the same quarter last year. Expenses related to compliance with the requirements of the Sarbanes-Oxley Act have been very high and, as the scope and cost of those efforts have evolved throughout the year, have significantly exceeded our original estimates. While some of the expenses we are incurring this year may be considered ‘one-time’ costs, it is clear that the new regulatory environment places an expensive burden on companies like Tyler that will continue into the future.”

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Tyler Technologies Announces Third Quarter 2004 Earnings
October 27, 2004
Page 3

Mr. Marr continued, “As in the first half of the year, third quarter cash flow was strong. As planned, capital spending for software development declined from last year’s level, and in fact, our current software amortization expense exceeds our capitalization of development costs. We continued to repurchase our common stock on the open market during the third quarter, buying back approximately 333,000 shares of common stock at an average cost of $8.55 per share.”

With the two million-share increase approved by Tyler’s Board, the Company is currently authorized to repurchase up to an additional 3,129,000 shares of its common stock. The shares may be repurchased from time to time in the open market or through negotiated transactions. The amount and timing of purchases under the program will be subject to, among other things, the price and availability of the Company’s shares and general market conditions. The repurchased shares may be reserved for later reissue in connection with employee benefit plans and other general corporate purposes.

“We currently expect that our results for the full year 2004 will be at the low end of our original guidance,” added Mr. Marr. “Revenue growth for the year 2004 will likely be in the 20% range with approximately half of the growth coming from the acquisition of Eden Systems. Fully diluted earnings per share will most likely be at or slightly below $0.27. Tyler’s effective income tax rate for 2004 is expected to be approximately 41%. In addition, we expect that total capital expenditures for the year will be in the range of $6.5 million to $7.0 million.

“Clearly, the timing of revenue recognition and the challenges associated with building new markets and establishing new products can make our quarterly results fluctuate from time to time and make it more difficult to grow as consistently as we would like. However, Tyler remains intensely focused on improving its competitive position each and every quarter while executing a long-term growth strategy to build a solid position as the leading provider of software for the local government sector,” concluded Mr. Marr.

Tyler Technologies will hold a conference call on Thursday, October 28 at 12:00 p.m. Eastern Time to discuss the Company’s results. A live Webcast of the call can be accessed on the Company’s Web site at www.tylerworks.com. A replay will be available on Tyler’s Web site following the conference call.

Based in Dallas, Tyler Technologies is a leading provider of end-to-end information management solutions and services to 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 6,000 local government offices throughout all 50 states, Canada, Puerto Rico and the United Kingdom. Tyler was named one of the “200 Best Small Companies” in America in 2004 by Forbes Magazine. More information about Tyler Technologies can be found on the World Wide Web at www.tylerworks.com.

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Tyler Technologies Announces Third Quarter 2004 Earnings
October 27, 2004
Page 4

Tyler Technologies, Inc. has included in this press release “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 concerning its business and operations. Tyler Technologies expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its expectations. These expectations and the related statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to, changes in competition, changes in general economic conditions, changes in the budgets and regulatory environments of the Company’s customers, risks associated with the development of new products and the enhancement of existing products, the ability to attract and retain qualified personnel, and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

(Comparative results follow)

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

                                 
    Three Months Ended September 30,
  Nine Months Ended September 30,
    2004
  2003
  2004
  2003
Revenues:
                               
Software licenses
  $ 6,955     $ 8,400     $ 21,210     $ 20,017  
Software services
    12,256       9,191       37,132       26,438  
Maintenance
    14,589       11,704       42,827       34,337  
Appraisal services
    6,406       7,440       21,405       21,547  
Hardware and other
    1,605       1,139       4,962       3,995  
 
   
 
     
 
     
 
     
 
 
Total revenues
    41,811       37,874       127,536       106,334  
Cost of revenues:
                               
Software licenses
    2,318       2,041       6,564       5,104  
Software services and maintenance
    18,450       14,090       54,305       41,937  
Appraisal services
    4,432       5,422       15,659       15,309  
Hardware and other
    1,315       851       3,787       3,007  
 
   
 
     
 
     
 
     
 
 
Total cost of revenues
    26,515       22,404       80,315       65,357  
Gross profit
    15,296       15,470       47,221       40,977  
Selling, general and administrative expenses
    11,312       9,678       33,251       28,840  
Amortization of acquisition intangibles
    583       680       2,175       2,190  
 
   
 
     
 
     
 
     
 
 
Operating income
    3,401       5,112       11,795       9,947  
Realized gain on sale of investment in H.T.E., Inc.
                      23,233  
Other income, net
    138       141       281       287  
 
   
 
     
 
     
 
     
 
 
Income before income taxes
    3,539       5,253       12,076       33,467  
Income tax provision
    1,507       2,020       4,978       10,957  
 
   
 
     
 
     
 
     
 
 
Net income
  $ 2,032     $ 3,233     $ 7,098     $ 22,510  
 
   
 
     
 
     
 
     
 
 
Earnings per common share:
                               
Basic
  $ 0.05     $ 0.08     $ 0.17     $ 0.52  
 
   
 
     
 
     
 
     
 
 
Diluted
  $ 0.05     $ 0.07     $ 0.16     $ 0.50  
 
   
 
     
 
     
 
     
 
 
EBITDA (1)
  $ 6,220     $ 7,860     $ 20,348     $ 40,209  
 
   
 
     
 
     
 
     
 
 
Weighted average common shares outstanding:
                               
Basic
    41,307       40,464       41,397       43,078  
Diluted
    44,350       43,181       44,737       45,218  

(1)   EBITDA consists of net income before interest, income taxes, depreciation and amortization. Although EBITDA is not a calculation in accordance with accounting principles generally accepted in the United States (GAAP), we believe that EBITDA is widely used as a measure of operating performance. Nevertheless, the measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with GAAP. In addition, since all companies do not calculate EBITDA in the same manner, this measure may not be comparable to similarly titled measures reported by other companies. The following reconciles EBITDA to net income for the periods presented:

                                 
    Three Months Ended September 30,
  Nine Months Ended September 30,
    2004
  2003
  2004
  2003
Net income
  $ 2,032     $ 3,233     $ 7,098     $ 22,510  
Amortization of acquisition intangibles
    583       680       2,175       2,190  
Depreciation and other amortization included in cost of revenues and selling, general and administrative expenses
    2,236       2,068       6,412       4,839  
Interest income, net included in other income, net
    (138 )     (141 )     (315 )     (287 )
Income tax provision
    1,507       2,020       4,978       10,957  
 
   
 
     
 
     
 
     
 
 
EBITDA (2003 includes $23,233 gross realized gain on sale of investment in H.T.E., Inc.)
  $ 6,220     $ 7,860     $ 20,348     $ 40,209  
 
   
 
     
 
     
 
     
 
 

 


 

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

                 
    September, 30    
    2004   December 31,
    (unaudited)
  2003
ASSETS
               
               
Current assets:
               
Cash and cash equivalents
  $ 12,706     $ 10,268  
Short-term investments available-for-sale
    16,359       11,669  
Accounts receivable, net
    39,057       38,694  
Other current assets
    4,262       3,532  
Deferred income taxes
    1,536       1,536  
 
   
 
     
 
 
Total current assets
    73,920       65,699  
Property and equipment, net
    6,697       6,927  
Other assets:
               
Certificate of deposit
    7,500       7,500  
Goodwill and other intangibles, net
    98,331       101,812  
Other
    265       314  
 
   
 
     
 
 
Total assets
  $ 186,713     $ 182,252  
 
   
 
     
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
       
               
Current liabilities
  $ 53,851     $ 51,148  
Deferred income taxes
    13,182       13,182  
Minority interest
          15  
Shareholders’ equity
    119,680       117,907  
 
   
 
     
 
 
Total liabilities and shareholders’ equity
  $ 186,713     $ 182,252