Tyler Technologies Reports Earnings for Fourth Quarter 2016

PLANO, Texas--(BUSINESS WIRE)--

Tyler Technologies, Inc. TYL today announced financial results for the fourth quarter and year ended December 31, 2016.

Fourth Quarter 2016 Financial Highlights:

• Total revenues were $193.3 million, up 21.6 percent from $158.9 million for the fourth quarter of 2015. Organic growth was 12.1 percent.
• Recurring revenue from maintenance and subscriptions was $123.0 million, an increase of 25.0 percent compared to the fourth quarter of 2015, and comprised 63.6 percent of fourth quarter 2016 revenue.
• Operating income was $35.4 million, an increase of 79.0 percent from $19.8 million for the fourth quarter of 2015.
• Net income was $31.2 million, or $0.80 per diluted share, up 262.0 percent compared to $8.6 million, or $0.23 per diluted share, for the fourth quarter of 2015.
• Cash flows from operations were $51.8 million compared to $53.6 million for the fourth quarter of 2015.
• Non-GAAP total revenues were $195.1 million, up 20.3 percent from $162.1 million for the fourth quarter of 2015.
• Non-GAAP operating income was $54.8 million, up 34.7 percent from $40.7 million for the fourth quarter of 2015.
• Non-GAAP net income was $35.2 million, or $0.90 per diluted share, up 57.3 percent compared to $22.4 million, or $0.59 per diluted share, for the fourth quarter of 2015.
• Adjusted EBITDA was $58.2 million, up 37.8 percent compared to $42.3 million for the fourth of 2015.
• The company repurchased approximately 125,000 shares of its common stock during the quarter at an average price of $146.02.

Full Year 2016 Financial Highlights:

• Total revenues were $756.0 million, up 27.9 percent from $591.0 million in 2015. Organic growth was 11.8 percent.
• Recurring revenue from maintenance and subscriptions was $465.7 million, an increase of 30.3 percent compared to 2015, and comprised 61.6 percent of 2016 revenue.
• Operating income was $131.3 million, an increase of 21.5 percent from $108.0 million in 2015.
• Net income was $109.9 million, or $2.82 per diluted share, up 69.4 percent compared to $64.9 million, or $1.77 per diluted share, in 2015.
• Cash flows from operations were $191.9 million compared to $134.3 million in 2015.
• Non-GAAP total revenues were $771.6 million, up 29.8 percent from $594.2 million in 2015.
• Non-GAAP operating income was $213.5 million, up 43.1 percent from $149.2 million in 2015.
• Non-GAAP net income was $135.8 million, or $3.49 per diluted share, up 46.6 percent compared to $92.7 million, or $2.54 per diluted share, in 2015.
• Adjusted EBITDA was $226.4 million, up 43.7 percent compared to $157.5 million in 2015.
• Total backlog was $953.3 million, up 12.9 percent from $844.5 million at December 31, 2015. Software-related backlog (excluding appraisal services) was $914.6 million, an increase of 14.8 percent compared to $797.0 million at December 31, 2015.
• The company repurchased approximately 882,000 shares of its common stock during the year at an average price of $127.75.

"Our fourth quarter performance provided a strong finish to another great year for Tyler," said John S. Marr Jr., Tyler's chairman and chief executive officer. "Software licenses and royalties revenue grew 38 percent, of which 20 percent was organic, and subscription revenue grew 23 percent, which was almost all organic. With the addition of New World's operations for a full year, we achieved exceptional margin expansion while investing in product development at a high level, as our non-GAAP gross and operating margins increased by 270 and 300 basis points, respectively. Without the increase in diluted shares resulting from the adoption of ASU 2016-09, our fourth quarter and full year non-GAAP diluted earnings per share would have been $0.91 and $3.53, respectively.

"We had another solid quarter for bookings, which rose more than 18 percent and drove backlog to a new high of $953 million, reflecting Tyler's very strong competitive position in the local government space. We're also pleased with our progress in 2016 on the integration of New World's products and operations. Our balance sheet continues to be extremely strong, and our cash flows from operations for the year rose 43 percent. As we evaluate opportunities for deploying capital, our plans for 2017 include significant product development investments aimed at further strengthening our leadership positions and driving new long-term growth opportunities," said Marr.

Adoption of New Share-Based Compensation Expense Accounting Standard

In the fourth quarter, Tyler Technologies adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which addresses, among other items, the accounting for income taxes and cash flow presentation of share-based compensation. Under ASU 2016-09, excess tax benefits and deficiencies generated upon the settlement or exercise of stock awards are no longer recognized as additional paid-in capital but are instead recognized as adjustments to income tax expense. The change in accounting for income taxes is effective on a prospective basis as of the beginning of the 2016 fiscal year. Also, cash flows related to excess tax benefits are required to be presented as an operating activity rather than a financing activity. The statements of cash flows for 2016 and 2015 reflect the cash flow classifications under the new ASU.

The early adoption of ASU 2016-09 increased GAAP net income and GAAP diluted earnings per share by $20.4 million and $0.50, respectively, for the nine months ended September 30, 2016, and increased net cash provided by operating activities by $18.8 million for the nine months ended September 30, 2016, with a corresponding $18.8 million increase in net cash used by financing activities. The early adoption of ASU 2016-09 decreased non-GAAP diluted earnings per share by $0.04 for the nine months ended September 30, 2016. In addition, retrospective application related to cash flow presentation increased net cash provided by operating activities by $29.6 million for the year ended December 31, 2016, with a corresponding $29.6 million increase in net cash used by financing activities. For the three months and year ended December 31, 2015, the retrospective application related to cash flow presentation increased net cash provided by operating activities by $34.5 million and $45.3 million, respectively, with a corresponding $34.5 million and $45.3 million decrease in net cash provided by financing activities, respectively. Recast amounts can be found in the supplemental financial information section of this release.

Guidance for 2017

As of February 8, 2017, Tyler Technologies is providing the following guidance for the full year 2017:

• GAAP total revenues are expected to be in the range of $844 million to $854 million.
• Non-GAAP total revenues are expected to be in the range of $845 million to $855 million.
• GAAP diluted earnings per share are expected to be approximately $3.26 to $3.34 and may vary significantly due to the impact of stock option exercises on the GAAP effective tax rate under ASU 2016-09.
• Non-GAAP diluted earnings per share are expected to be approximately $3.83 to $3.91.
• Pretax non-cash, share-based compensation expense is expected to be approximately $37 million.
• Fully diluted shares for the year are expected to be between 39 million and 40 million shares.
• GAAP earnings per share assumes an estimated effective tax rate of approximately 20 percent after discrete tax items, and includes approximately $29 million of discrete tax benefits related to share-based compensation.
• The non-GAAP effective tax rate is expected to be 35.5 percent.
• Capital expenditures are expected to be between $52 million and $54 million, including approximately $24 million related to real estate. Total depreciation and amortization expense is expected to be approximately $50 million, including approximately $35 million of amortization of acquisition intangibles.

GAAP to non-GAAP guidance reconciliation

Non-GAAP total revenues is derived from adding back the estimated full year impact of write-downs of acquisition-related deferred revenue and amortization of acquired leases of approximately $1 million. Non-GAAP diluted earnings per share is derived by adding back 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 $38 million, and amortization of acquired software and intangible assets of approximately $35 million. Additionally, the non-GAAP tax rate of 35.5 percent is estimated annually as described below under "Non-GAAP Financial Measures" and excludes approximately $29 million of discrete tax benefits related to share-based compensation that are included in the GAAP estimated annual effective tax rate.

Conference Call

Tyler Technologies will hold a conference call on Thursday, February 9, at 10:00 a.m. EST 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/10098120. Registered participants will receive an email with a calendar reminder and a dial-in number and PIN that will allow them immediate access to the call on February 9, 2017.

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 February 15, 2017. 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 10098120.

The live webcast and archived replay can also be accessed at http://investors.tylertech.com/Presentations.

About Tyler Technologies, Inc.

Tyler Technologies TYL 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 their constituents. Tyler's client base includes more than 15,000 local government offices in all 50 states, Canada, the Caribbean, the United Kingdom and other international locations. In 2016, Forbes ranked Tyler on its "Most Innovative Growth Companies" list, and it has also named Tyler one of "America's Best Small Companies" eight times. The company has been included six times on the Barron's 400 Index, a measure of the most promising companies in America. More information about Tyler Technologies, headquartered in Plano, Texas, can be found at www.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, and adjusted EBITDA. 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 leases, share-based compensation expense, employer portion of payroll taxes on employee stock transactions, acquisition-related costs, expenses associated with amortization of intangibles arising from business combinations, and the impact from the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, on our income tax provision.

Historically, for the purpose of determining non-GAAP net income, Tyler has used a non-GAAP tax rate of 35 percent in its calculation of the tax impact related to certain non-GAAP adjustments. Beginning in 2017, Tyler intends to adjust non-GAAP financial income using a tax rate equal to Tyler's annual estimated tax rate on non-GAAP income. 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 annually to determine whether it remains appropriate in consideration of factors including Tyler's periodic 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 wells 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) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (2) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (3) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (4) material portions of our business require the Internet infrastructure to be adequately maintained; (5) 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; (6) general economic, political and market conditions; (7) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (8) 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; (9) 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 (10) costs of compliance and any failure to comply with government and stock exchange regulations. A detailed discussion of 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. We expressly disclaim any obligation to publicly update or revise our forward-looking statements.

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
			2016				2015				2016				2015
Revenues:
Software licenses and royalties		$	19,975			$	14,432			$	74,306			$	59,008
Subscriptions			37,778				30,660				142,704				111,933
Software services			41,595				38,087				174,804				139,852
Maintenance			85,194				67,708				322,969				245,537
Appraisal services			6,204				5,728				26,287				25,065
Hardware and other			2,535				2,301				14,973				9,627
Total revenues			193,281				158,916				756,043				591,022
Cost of revenues:
Software licenses and royalties			1,037				449				2,964				1,632
Acquired software			5,498				2,976				22,235				4,440
Software services, maintenance and subscriptions			88,329				77,521				348,939				285,340
Appraisal services			3,938				3,525				16,411				15,922
Hardware and other			1,662				1,223				10,143				6,501
Total cost of revenues			100,464				85,694				400,692				313,835
Gross profit			92,817				73,222				355,351				277,187
Selling, general and administrative expenses			42,162				42,507				167,161				133,317
Research and development expense			11,793				8,615				43,154				29,922
Amortization of customer and trade name intangibles			3,458				2,320				13,731				5,905
Operating income			35,404				19,780				131,305				108,043
Other (expense) income, net			(285	)			(240	)			(1,998	)			381
Income before income taxes			35,119				19,540				129,307				108,424
Income tax provision			3,923				10,922				19,450				43,555
Net income		$	31,196			$	8,618			$	109,857			$	64,869
Earnings per common share:
Basic		$	0.85			$	0.24			$	3.01			$	1.90
Diluted		$	0.80			$	0.23			$	2.82			$	1.77
Weighted average common shares outstanding:
Basic			36,653				35,334				36,448				34,137
Diluted			38,975				37,864				38,961				36,552

With the fourth quarter 2016 adoption of ASU 2016-09 related to stock compensation, we were required to apply the new standard as of the beginning of 2016. As a result, the sum of the previously reported quarters and the fourth quarter of 2016 does not equal to the full year 2016 amounts above. Recast amounts can be found in the supplemental financial information section of this release.

TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
			2016				2015				2016				2015
Reconciliation of non-GAAP total revenues
GAAP total revenues		$	193,281			$	158,916			$	756,043			$	591,022
Non-GAAP adjustments:
Add: Write-downs of acquisition-related deferred revenue			1,664				3,186				15,063				3,186
Add: Amortization of acquired leases			111				37				444				37
Non-GAAP total revenues		$	195,056			$	162,139			$	771,550			$	594,245
Reconciliation of non-GAAP gross profit and margin
GAAP gross profit		$	92,817			$	73,222			$	355,351			$	277,187
Non-GAAP adjustments:
Add: Write-downs of acquisition-related deferred revenue			1,664				3,186				15,063				3,186
Add: Amortization of acquired leases			111				37				444				37
Add: Share-based compensation expense included in cost of revenues			1,881				1,031				6,548				3,380
Add: Amortization of acquired software			5,498				2,976				22,235				4,440
Non-GAAP gross profit		$	101,971			$	80,452			$	399,641			$	288,230
GAAP gross margin			48.0	%			46.1	%			47.0	%			46.9	%
Non-GAAP gross margin			52.3	%			49.6	%			51.8	%			48.5	%
Reconciliation of non-GAAP operating income and margin
GAAP operating income		$	35,404			$	19,780			$	131,305			$	108,043
Non-GAAP adjustments:
Add: Write-downs of acquisition-related deferred revenue			1,664				3,186				15,063				3,186
Add: Amortization of acquired leases			111				37				444				37
Add: Share-based compensation expense			8,399				5,723				29,747				20,182
Add: Employer portion of payroll tax related to employee stock transactions			311				1,173				1,001				1,506
Add: Acquisition-related costs			—				5,533				—				5,875
Add: Amortization of acquired software			5,498				2,976				22,235				4,440
Add: Amortization of customer and trade name intangibles			3,458				2,320				13,731				5,905
Non-GAAP adjustments subtotal		$	19,441			$	20,948			$	82,221			$	41,131
Non-GAAP operating income		$	54,845			$	40,728			$	213,526			$	149,174
GAAP operating margin			18.3	%			12.4	%			17.4	%			18.3	%
Non-GAAP operating margin			28.1	%			25.1	%			27.7	%			25.1	%

TYLER TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Amounts in thousands, except per share data)
(Unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
			2016				2015				2016				2015
Reconciliation of non-GAAP net income and earnings per share
GAAP net income		$	31,196			$	8,618			$	109,857			$	64,869
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to operating income			19,441				20,948				82,221				41,131
Less: Tax impact related to non-GAAP adjustments			(15,408	)			(7,171	)			(56,230	)			(13,318	)
Non-GAAP net income		$	35,229			$	22,395			$	135,848			$	92,682
GAAP earnings per diluted share		$	0.80			$	0.23			$	2.82			$	1.77
Non-GAAP earnings per diluted share		$	0.90			$	0.59			$	3.49			$	2.54
Detail of share-based compensation expense
Cost of software services, maintenance and subscriptions		$	1,881			$	1,031			$	6,548			$	3,380
Selling, general and administrative expenses			6,518				4,692				23,199				16,802
Total share-based compensation expense		$	8,399			$	5,723			$	29,747			$	20,182
Reconciliation of EBITDA and adjusted EBITDA
GAAP net income		$	31,196			$	8,618			$	109,857			$	64,869
Amortization of customer and trade name intangibles			3,458				2,320				13,731				5,905
Depreciation and other amortization included in
cost of revenues, SG&A and other expenses			9,322				5,668				36,570				13,669
Interest expense included in other expense, net			270				292				1,965				292
Income tax provision			3,923				10,922				19,450				43,555
EBITDA		$	48,169			$	27,820			$	181,573			$	128,290
Write-downs of acquisition-related deferred revenue			1,664				3,186				15,063				3,186
Acquisition-related costs			—				5,533				—				5,875
Share-based compensation expense			8,399				5,723				29,747				20,182
Adjusted EBITDA		$	58,232			$	42,262			$	226,383			$	157,533

With the fourth quarter 2016 adoption of ASU 2016-09 related to stock compensation, we were required to apply the new standard as of the beginning of 2016. As a result, the sum of the previously reported quarters and the fourth quarter of 2016 for the reconciliation of non-GAAP net income and earnings per share does not equal to the full year 2016 amounts above. Recast amounts can be found in the supplemental financial information section of this release.

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
		December 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents		$	36,151		$	33,087
Accounts receivable, net			200,334			176,360
Current investments and other assets			43,580			37,688
Income tax receivable			2,895			21,080
Total current assets			282,960			268,215
Accounts receivable, long-term portion			2,480			2,777
Property and equipment, net			124,268			101,112
Other assets:
Goodwill			650,237			653,666
Other intangibles, net			267,259			295,378
Non-current investments and other assets			30,741			35,422
Total assets		$	1,357,945		$	1,356,570
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	63,284		$	55,945
Deferred revenue			298,217			281,627
Total current liabilities			361,501			337,572
Revolving line of credit			10,000			66,000
Deferred revenue, long-term			2,140			3,115
Deferred income taxes			68,779			91,026
Shareholders' equity			915,525			858,857
Total liabilities and shareholders' equity		$	1,357,945		$	1,356,570

TYLER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
			2016				2015				2016				2015
Cash flows from operating activities:
Net income		$	31,196			$	8,618			$	109,857			$	64,869
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization			12,780				7,988				50,301				19,574
Share-based compensation expense			8,399				5,723				29,747				20,182
Provision for losses - accounts receivable			4,484				1,756				4,484				1,756
Deferred income tax benefit			(17,650	)			(8,599	)			(28,939	)			(7,956	)
Changes in operating assets and liabilities,
exclusive of effects of acquired companies			12,596				38,127				26,409				35,902
Net cash provided by operating activities			51,805				53,613				191,859				134,327
Cash flows from investing activities:
Cost of acquisitions, net of cash acquired			—				(333,514	)			(9,394	)			(339,961	)
Purchase of cost method investment			—				—				—				(15,000	)
Purchase of marketable security investments			(7,189	)			(2,516	)			(20,316	)			(31,907	)
Proceeds from marketable security investments			7,581				900				16,837				900
Additions to property and equipment			(8,197	)			(3,976	)			(37,726	)			(12,501	)
(Increase) decrease in other			(69	)			5				(121	)			10
Net cash used by investing activities			(7,874	)			(339,101	)			(50,720	)			(398,459	)
Cash flows from financing activities:
(Decrease) increase in net borrowings on revolving line of credit			(24,000	)			66,000				(56,000	)			66,000
Purchase of treasury shares			(17,339	)			—				(111,838	)			(645	)
Contributions from employee stock purchase plan			1,807				1,304				6,236				4,671
Proceeds from exercise of stock options			8,438				14,791				23,527				23,160
Debt issuance costs			—				(2,134	)			—				(2,134	)
Net cash (used) provided by financing activities			(31,094	)			79,961				(138,075	)			91,052
Increase (decrease) in net cash and cash equivalents			12,837				(205,527	)			3,064				(173,080	)
Cash and cash equivalents at beginning of period			23,314				238,614				33,087				206,167
Cash and cash equivalents at end of period		$	36,151			$	33,087			$	36,151			$	33,087

Certain amounts in the prior periods have been reclassified between operating activities and financing activities from the result of the adoption of ASU 2016-09. See supplemental financial information section of this release.

TYLER TECHNOLOGIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
(Unaudited)
Supplemental financial information
With the fourth quarter adoption of ASU 2016-09 related to stock compensation, we were required to apply the new standard as of the beginning of 2016 for the Condensed Consolidated Statements of Income and on a full retrospective basis for all periods in the Condensed Consolidated Statements of Cash Flows. The recast amounts are shown in the charts below.
		Three Months Ended				Three Months Ended								Three Months Ended								Three Months Ended
		December 31, 2016 (a)				September 30, 2016								June 30, 2016								March 31, 2016
		Reported				Reported				Recast				Reported				Recast				Reported				Recast
Income statement data:
Income before income taxes		$	35,119			$	36,419			$	36,419			$	30,195			$	30,195			$	27,574			$	27,574
Income tax provision			3,923				14,155				989				11,323				5,188				10,495				9,350
Net income		$	31,196			$	22,264			$	35,430			$	18,872			$	25,007			$	17,079			$	18,224
Earnings per common share:
Basic		$	0.85			$	0.61			$	0.97			$	0.52			$	0.69			$	0.47			$	0.50
Diluted		$	0.80			$	0.58			$	0.91			$	0.49			$	0.65			$	0.44			$	0.47
Weighted average common shares outstanding
Basic			36,653				36,433				36,433				36,160				36,160				36,549				36,549
Diluted			38,975				38,506				39,062				38,196				38,738				38,557				39,071
Reconciliation of GAAP to Non-GAAP data:
GAAP net income		$	31,196			$	22,264			$	35,430			$	18,872			$	25,007			$	17,079			$	18,224
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to operating income			19,441				20,470				20,470				21,296				21,296				21,014				21,014
Less: Tax impact related to non-GAAP adjustments			(15,408	)			(6,613	)			(19,779	)			(6,944	)			(13,079	)			(6,819	)			(7,964	)
Non-GAAP net income		$	35,229			$	36,121			$	36,121			$	33,224			$	33,224			$	31,274			$	31,274
GAAP earnings per diluted share		$	0.80			$	0.58			$	0.91			$	0.49			$	0.65			$	0.44			$	0.47
Non-GAAP earnings per diluted share		$	0.90			$	0.94			$	0.92			$	0.87			$	0.86			$	0.81			$	0.80

TYLER TECHNOLOGIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
(Unaudited)
		Three Months Ended				Three Months Ended								Three Months Ended						Three Months Ended
		December 31, 2016 (a)				September 30, 2016								June 30, 2016						March 31, 2016
		Reported				Reported				Recast				Reported			Recast			Reported				Recast
Cash flow data:
Net cash provided by operating activities		$	51,805			$	67,091			$	79,213			$	13,877		$	19,520		$	40,270			$	41,321
Net cash (used) provided by financing activities		$	(31,094	)		$	(77,973	)		$	(90,095	)		$	5,668		$	25		$	(15,860	)		$	(16,911	)
		Twelve Months Ended				Twelve Months Ended
		December 31, 2016 (b)				December 31, 2015
		Reported				Reported				Recast
Income statement data:
Income before income taxes		$	129,307			$	108,424			*
Income tax provision			19,450				43,555			*
Net income		$	109,857			$	64,869			*
Earnings per common share:
Basic		$	3.01			$	1.90			*
Diluted		$	2.82			$	1.77			*
Weighted average common shares outstanding
Basic			36,448				34,137			*
Diluted			38,961				36,552			*
Reconciliation of GAAP to Non-GAAP data:
GAAP net income		$	109,857			$	64,869			*
Non-GAAP adjustments:
Add: Total non-GAAP adjustments to operating income			82,221				41,131			*
Less: Tax impact related to non-GAAP adjustments			(56,230	)			(13,318	)		*
Non-GAAP net income		$	135,848			$	92,682			*
GAAP earnings per diluted share		$	2.82			$	1.77			*
Non-GAAP earnings per diluted share		$	3.49			$	2.54			*

TYLER TECHNOLOGIES, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
(Unaudited)
		Twelve Months Ended				Twelve Months Ended
		December 31, 2016 (b)				December 31, 2015
		Reported				Reported			Recast
Cash flow data:
Net cash provided by operating activities		$	191,859			$	89,013		$	134,327
Net cash (used) provided by financing activities		$	(138,075	)		$	136,366		$	91,052

(a)		Three months ended December 31, 2016 amounts reflect adoption of ASU 2016-09.
(b)		Twelve months ended December 31, 2016 is the sum of recast three months ended March 31, June 30, and September 30, 2016, and reported three months ended December 31, 2016.
*		Accounting standard ASU 2016-09 allowed only prospective adoption for the income statement; therefore, the prior annual periods were not recast.

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