Tyler Technologies (TYL) 10-K risk factor changes: FY2018 vs FY2017
The 2018-12-31 10-K against the 2017-12-31 one, compared heading by heading and sentence by sentence. One of these filings carries no fiscal year tag, so its year is the calendar year of the period end.
Item 1A5 rewritten1 added11 removed251 unchanged
All filing items536 rewritten758 added373 removed1,664 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 758 added, 373 removed, 536 rewritten and 1,664 unchanged across 11 items that differ.
Sentences by item
16 items, with every count and a link to each item that changed
| Item | Added | Removed | Rewritten | Unchanged |
|---|---|---|---|---|
| Item 1A. RISK FACTORS. | 1 | 11 | 5 | 251 |
| Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 215 | 150 | 140 | 380 |
| Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 0 | 0 | 3 | 5 |
| Item 1. BUSINESS. | 8 | 11 | 25 | 277 |
| Item 3. LEGAL PROCEEDINGS. | 0 | 0 | 0 | 3 |
| Cover and table of contents | 5 | 5 | 25 | 96 |
| Item 1B. UNRESOLVED STAFF COMMENTS. | 0 | 0 | 0 | 3 |
| Item 2. PROPERTIES. | 0 | 0 | 1 | 3 |
| Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. | 0 | 0 | 0 | 4 |
| Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. | 21 | 24 | 17 | 16 |
| Item 6. SELECTED FINANCIAL DATA. | 9 | 7 | 17 | 17 |
| Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. | 0 | 0 | 0 | 3 |
| Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. | 0 | 0 | 0 | 3 |
| Item 9A. CONTROLS AND PROCEDURES. | 0 | 0 | 6 | 10 |
| Item 9B. OTHER INFORMATION. | 0 | 1 | 1 | 28 |
| Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. | 499 | 164 | 296 | 565 |
Underlined words on a shaded ground are new in FY2018; struck-through words were in FY2017. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. RISK FACTORS.
5 rewritten, 1 added, 11 removed, 251 unchanged
[removed: Local and state governments] [added: Governments] may face financial pressures that could in turn affect our growth rate and profitability in the future.
There is no assurance that [removed: local and state] [added: government] spending levels will be unaffected by declining or stagnant general economic conditions, and if budget shortfalls occur, they may negatively impact [removed: local and state] [added: government] IT spending and could adversely affect our business.
We believe [removed: the] [added: our] market is highly fragmented with a large number of competitors that vary in size, product platform, and product scope.
| • | We may have to defer revenues under our revenue recognition policies [added: and GAAP] |
Examples of factors that may significantly impact our stock price [removed: include][added: include:]
There has also recently been an apparent evolution in the legal standards and regulations courts and the U.S. patent office may apply in favorably evaluating software patent rights.
There has also been significant litigation recently involving intellectual property rights.
| | |
| --- | --- |
Software revenue recognition rules may require us to delay revenue recognition into future periods.
We have in the past had to, and may in the future be required to, defer revenue recognition for software license fees due to several factors, including
| • | License agreements include applications that are under development or other undelivered elements |
| • | Client contracts require the delivery of services considered essential to the functionality of the software, including significant modifications, customization, or complex interfaces, that could delay product delivery or acceptance |
| • | The transaction involves customer acceptance criteria with a right to refund |
Because of these factors and other specific requirements for software revenue recognition under generally accepted accounting principles in the United States, we must have very precise terms in our contracts to recognize revenue upon the delivery and installation of our software or performance of services.
Negotiation of mutually acceptable terms and conditions may extend the sales cycle.
We are not always able to negotiate terms and conditions that permit revenue recognition at the time of delivery or even upon project completion.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
140 rewritten, 215 added, 150 removed, 380 unchanged
We also provide subscription-based services such as software as a service (“SaaS”), which [removed: utilizes] [added: primarily utilize] the Tyler private cloud, and electronic document filing solutions (“e-filing”), which simplify the filing and management of court related documents.
Our products generally automate [removed: six] [added: seven] major functional areas: (1) financial management and education, (2) courts and justice, (3) public safety (4) property appraisal and tax, (5) planning, regulatory and [removed: maintenance, and] [added: maintenance] (6) land and vital records [removed: management.][added: management and (7) data and insights.]
The Enterprise Software (“ES”) segment provides municipal and county governments and schools with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as: financial management; courts and justice processes; public safety; planning, regulatory and maintenance; [removed: and] land and vital records [removed: management.][added: management; and data analytics.]
The total purchase price was [removed: $1.4 million.][added: approximately $5.3 million in cash.]
The [removed: operating] results of these acquisitions are included [removed: in our] [added: with the operating] results of [removed: operations of] the [removed: Enterprise Software] [added: ES] segment from [removed: the date] [added: their dates] of [removed: the] acquisition.
The impact of these [removed: acquisitions,] [added: acquisitions on our operating results is not considered material,] individually and in the aggregate, [removed: on our operating results] [added: and] is not [removed: material.][added: included in the table above.]
The impact of the rate reduction on our 2017 income tax provision is a [removed: $21.6] [added: $26.0] million [added: (as adjusted)] tax benefit due to the remeasurement of deferred tax assets and liabilities.
Subscriptions and maintenance are considered recurring revenue sources and comprised approximately [removed: 64%] [added: 65%] of our revenue in [removed: 2017.][added: 2018.]
During [removed: 2017,] [added: 2018,] based on our number of customers, turnover was approximately 2%.
[removed: As of December 31, 2017, our] [added: Our] total employee count increased to [removed: 4,069] [added: 4,525 at December 31, 2018,] from [removed: 3,831] [added: 4,069] at December 31, [removed: 2016.][added: 2017.]
[removed: On February 25, 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, “Leases (Topic 842).”] Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
[removed: The ASU] [added: Topic 842] is effective for fiscal years beginning after December 15, 2018, including interim periods therein.
The local government software market continues to be active, and our backlog at December 31, [removed: 2017] [added: 2018] reached [removed: $1.1] [added: $1.25] billion, a [removed: 18%] [added: 2%] increase from last year.
Significant items subject to such estimates and assumptions include the application of the [removed: percentage-of-completion and proportional performance] [added: progress toward completion] methods of revenue recognition, [added: estimated standalone selling price ("SSP") for distinct performance obligations,] the carrying amount and estimated useful lives of intangible assets, determination of share-based compensation expense and valuation allowance for receivables.
[removed: Our revenues are derived from sales] [added: Most] of [added: our] software [removed: licenses and royalties, subscription-based services, appraisal services, maintenance and support, and services] [added: arrangements with customers contain multiple performance obligations] that [removed: typically] range from [added: software licenses,] installation, [removed: training] [added: training,] and [removed: basic] consulting to software modification and customization to meet specific customer [removed: needs.][added: needs (services), hosting, and PCS.]
We maintain allowances for doubtful [removed: accounts and sales adjustments,] [added: accounts,] which are provided at the time the revenue is recognized.
[removed: Because] [added: Since] most of our customers are [added: domestic] governmental entities, we rarely incur a loss resulting from the inability of a customer to make required payments.
Events or changes in circumstances that indicate that the carrying amount for the allowances for doubtful accounts [removed: and sales adjustments] may require [removed: revision,] [added: revision] include, but are not limited to, deterioration of a customer’s financial condition, failure to manage our customer’s expectations regarding the scope of the services to be delivered, and defects or errors in new versions or enhancements of our software products.
We allocate [removed: the] contract value to each [removed: element] [added: performance obligation] of the arrangement that qualifies for treatment as a [removed: separate] [added: distinct] element based on [removed: vendor-specific objective evidence of fair value (“VSOE”), and if VSOE is not available, third-party evidence, and if third-party evidence is unavailable,] estimated [removed: selling price.][added: SSP.]
For [removed: professional] [added: software] services associated with [added: certain] SaaS [removed: arrangements that] [added: arrangements,] we [removed: determine do not] have [removed: stand-alone value to] [added: concluded that] the [removed: customer or] [added: services] are [removed: contingent on delivery of other elements,] [added: not distinct, and] we recognize the [removed: services] revenue ratably over the remaining contractual period once [removed: hosting has gone live and] we [removed: may begin billing for] [added: have provided] the [removed: hosting services.][added: customer access to the software.]
Our annual goodwill impairment analysis, which we performed quantitatively during the second quarter of [removed: 2017,] [added: 2018,] did not result in an impairment charge.
During [removed: 2017,] [added: 2018,] we did not identify any triggering events that would require an update to our annual impairment review.
We have a stock [removed: option] [added: incentive] plan that provides for the grant of stock [removed: options] [added: options, restricted stock units and performance stock units] to key employees, directors and non-employee consultants.
We estimate the fair value of share-based awards on the date of [removed: grant using the Black-Scholes option valuation model.][added: grant.]
Share-based compensation expense includes the estimated effects of forfeitures, which will be adjusted over the requisite service period to the extent actual forfeitures [removed: differ,] [added: differ] or are expected to differ from such estimates.
The following discussion compares the historical results of operations on a basis consistent with GAAP for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015.][added: 2016.]
| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |
| Software licenses and royalties | [removed: 9.0] | [removed: % | | 9.8 | % |] [added: $] | [removed: 10.0] [added: —] | [removed: %] |
| Appraisal services | [removed: 3.0] [added: 2.3] | | | [removed: 3.5] [added: 3.0] | | | [removed: 4.2] [added: 3.5] | |
| Hardware and other | [removed: 2.1] [added: 2.5] | | | [removed: 2.0] [added: 2.1] | | | [removed: 1.6] [added: 1.9] | |
| Cost of software licenses, royalties and acquired software | [removed: 3.0] [added: 2.9] | | | [removed: 3.3] [added: 3.0] | | | [removed: 1.0] [added: 3.3] | |
| Cost of software services, maintenance and subscriptions | [removed: 46.1] [added: 46.9] | | | [removed: 46.2] [added: 46.1] | | | [removed: 48.2] [added: 45.8] | |
| Cost of appraisal services | [removed: 1.9] [added: 1.5] | | | [removed: 2.2] [added: 1.9] | | | [removed: 2.7] [added: 2.2] | |
| Cost of hardware and other | [removed: 1.5] [added: 1.7] | | | [removed: 1.3] [added: 1.5] | | | [removed: 1.1] [added: 1.3] | |
| Selling, general and administrative expenses | [removed: 21.1] [added: 22.2] | | | [removed: 22.1] [added: 20.9] | | | [removed: 22.6] [added: 21.7] | |
| Research and development expense | [removed: 5.6] [added: 6.8] | | | [removed: 5.7] [added: 5.6] | | | [removed: 5.1] [added: 5.7] | |
| Amortization of customer and trade name intangibles | 1.7 | | | [removed: 1.8] [added: 1.6] | | | [removed: 1.0] [added: 1.7] | |
| Operating income | [removed: 19.1] [added: 16.3] | | | [removed: 17.4] [added: 19.4] | | | 18.3 | |
| Other income (expense), net | [removed: 0.1] [added: 0.4] | | | [removed: (0.3] [added: 0.1] | [removed: )] | | [removed: 0.1] [added: (0.3] | [added: )] |
[removed: |] Income [removed: tax (benefit) provision | (0.3 | ) | | 2.6 | | | 7.4 | |][added: Tax Provision (Benefit)]
For the twelve months ended December 31, 2018, total revenues increased 11% compared to the prior year.
Organic revenue growth was 9% for the twelve months ended December 31, 2018, compared to the prior year period and revenues from acquisitions contributed 2% of growth for the twelve months ended December 31, 2018.
Subscriptions revenue grew 28% for the twelve months ended December 31, 2018, due to a gradual shift toward cloud-based, software as a service business, as well as continued strong growth in our e-filing revenues from courts and the addition of new subscription revenues from the acquisition of Socrata.
Organic subscriptions revenue increased 21% for the twelve months ended December 31, 2018.
Our backlog at December 31, 2018 was $1.25 billion, a 2% increase from last year.
On December 7, 2018, we acquired certain assets and intellectual property of SceneDoc, Inc. ("SceneDoc"), a company that provides mobile-first, software-as-a-service (SaaS) field reporting for law enforcement agencies.
The total purchase price was approximately $6.2 million, of which $5.4 million was paid in cash and approximately $759,000 accrued for a working capital holdback.
As of December 31, 2018, the purchase price allocation for SceneDoc is not yet complete.
The preliminary estimates of fair value assumed at the acquisition date for intangible assets, receivables and deferred revenue and related deferred taxes are subject to change as valuations are finalized.
On October 1, 2018, we acquired all of the equity interests of TradeMaster, Inc. dba MobileEyes ("MobileEyes"), a company that develops software to improve public safety by supporting fire prevention and suppression, emergency response, and structural safety.
On August 31, 2018, we acquired all of the assets of CaseloadPRO, L. P. ("CaseloadPro"), a company that provides a fully featured probation case management system.
The purchase price of $9.3 million was paid in cash.
On April 30, 2018, we acquired all of the capital stock of Socrata, Inc. ("Socrata"), a company that provides open data and data-as-a-service solutions including cloud-based data integration, visualization, analysis, and reporting solutions for federal, state and local government agencies.
The purchase price, net of cash acquired of $1.7 million, was $147.6 million in cash.
On April 30, 2018, we acquired all of the equity interests of Sage Data Security, LLC ("Sage"), a cybersecurity company offering a suite of services that supports an entire cybersecurity lifecycle, including program development, education and training, technical testing, advisory services, and digital forensics.
The total purchase price was $11.6 million paid in cash.
As of December 31, 2018, the purchase price allocations for Sage, Socrata, CaseloadPro, and MobileEyes are complete.
The operating results of all 2018 acquisitions are included with the operating results of the Enterprise Software segment since their date of acquisition.
Revenues from Socrata included in Tyler's results of operations totaled approximately $13.9 million and the net loss was $11.5 million for the twelve months ended December 31, 2018.
The impact of the Sage, CaseloadPRO, MobileEyes and SceneDoc acquisitions, individually and in the aggregate, on our operating results, assets and liabilities is not material.
Our balance sheet as of December 31, 2018, reflects the allocation of the purchase price to the assets acquired based on their fair value at the date of each acquisition.
The fair value of the assets and liabilities acquired are based on valuations using Level III, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As of December 31, 2018, our total employee count increased to 4,525 from 4,069 at December 31, 2017.
Adoption of New Revenue Accounting Standard
On January 1, 2018, we adopted ASU No. 2014-09, using the full retrospective method of transition, which requires that the new standard be applied to all periods presented.
The impacts of adoption are reflected in the financial information herein.
For additional details, see Note 1 - "Summary of Significant Accounting Policies" to our consolidated financial statements in this report.
On February 25, 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases ("Topic 842").
Upon adoption, entities will be required to use a modified retrospective approach with an option to use certain practical expedients.
We expect to adopt ASU 2016-02 when effective, using the transition method that allows us to initially apply the guidance at the adoption date of January 1, 2019, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
We expect to use the package of practical expedients that allows us to not reassess: (1) lease classification for any expired or existing leases and (2) initial direct costs for any expired or existing leases.
We expect ASU 2016-02 will impact our consolidated financial statements and related disclosures.
We are currently evaluating the extent of the impact and expect that most of our lease commitments will be subject to the updated guidance and recognized as lease liabilities and right-of-use assets on our consolidated balance sheets upon adoption.
Based on our current portfolio of leases, we estimate a range of $15.5 million to $17.8 million of lease assets and liabilities to be recognized on our balance sheet, primarily relating to office facilities.
We earn revenue from software licenses, royalties, subscription-based services, software services, post-contract customer support (“PCS” or “maintenance”), hardware, and appraisal services.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
We determine revenue recognition through the following steps:
| • | Identification of the contract, or contracts, with a customer |
| | |
| --- | --- |
Total revenues increased 11% in 2017 compared to 2016.
On November 29, 2017, we acquired audio and digital two-way radio communications technology and related assets from Radio 10-33, LLC an audio and digital two-way radio communications company.
On August 2, 2017, we acquired substantially all of the assets and assumed certain liabilities of Digital Health Department, Inc. ("DHD"), a company that provides environmental health software, offering a software-as-a-service (SaaS) solution for public health compliance and inspections processes.
The total purchase price, net of debt assumed, was $3.9 million.
On May 30, 2017, we acquired all of the capital stock of Modria.com, Inc., a company that specializes in online dispute resolution for government and commercial entities.
The total purchase price, net of debt assumed, was $7.0 million.
On December 22, 2017, the Tax Act was enacted.
The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits and deductions for individuals and businesses.
For businesses, the Tax Act reduces the U.S. corporate federal tax rate from 35% to 21% and transitions from a worldwide tax system to a territorial tax system.
Refer to Note 7 "Income Tax" for further discussion on the impact of the Tax Act.
Revenue from Contracts with Customers.
On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This ASU is the result of a convergence project between the FASB and the International Accounting Standards Board.
The core principle behind ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering those goods and services.
This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations.
The ASU allows two methods of adoption: a full retrospective approach where three years of financial information are presented in accordance with the new standard, and a modified retrospective approach where the ASU is applied to the most current period presented in the financial statements.
We have adopted the new standard effective January 1, 2018 using the full retrospective method which will require each prior reporting period presented to be recast in future issuance of our financial statements.
In preparation for adoption of the standard, we have implemented internal controls and key system functionality to enable the preparation of financial information and have reached conclusions on key accounting assessments related to the standard.
During the fourth quarter of fiscal 2017, we have substantially completed data conversion activities required to recast our prior period results.
We continue to perform an in-depth review of our preliminary results; therefore, we are in the process of completing our analysis necessary to recast prior period results.
We do not believe there are any remaining significant implementation topics associated with the adoption of this ASU that have not yet been addressed.
This standard will have a material impact on our consolidated balance sheets and statement of shareholders’ equity.
The impact of the standard on consolidated revenue and costs of revenue will be dependent upon the mix of revenue streams due to our accounting for software license fees, allocation of discounts across all performance obligations and to the incremental costs of obtaining a contract.
Specifically, under the new standard software license fees under perpetual agreements will no longer be subject to 100% discount allocations from other elements in the contract.
Discounts in arrangements will be allocated across all deliverables increasing license revenues and decreasing revenues allocated to other performance obligations.
In addition, in most cases, net license fees (total license fees less any allocated discounts) will be recognized at the point in time that control of the software license transfers to the customer versus our current policy of recognizing revenue only to the extent billable per the contractual terms.
Time-based license fees currently recognized over the license term will no longer be recognized over the period of the license and will instead be recognized at the point in time that control of the software license transfers to the customer.
Revenue related to our software as a service (“SaaS”) offerings, post-contract customer support ("PCS") renewals and professional services remain substantially unchanged.
Due to the complexity of certain contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms and may vary in some instances from recognition at the time of billing.
Application of the new standard requires that incremental costs directly related to obtaining a contract (typically sales commissions plus any associated fringe benefits) must be recognized as an asset and expensed on a systematic basis that is consistent with the transfer to the customer of the goods and services to which the asset relates, unless that life is less than one year.
Currently, we defer sales commissions and recognize expense over the relevant initial contractual term.
With the adoption of the new standard, amortization periods will extend past the initial term.
Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.
The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented.
Lessees and lessors may not apply a full retrospective transition approach.
We are assessing the financial impact of adopting the new standard; however, we are currently unable to provide a reasonable estimate regarding the financial impact.
We will adopt the new standard in fiscal year 2019.
We recognize revenues in accordance with the provisions of Accounting Standards Codification (“ASC”) 605, Revenue Recognition and ASC 985-605, Software Revenue Recognition.
For multiple element software arrangements, which do not entail the performance of services that are considered essential to the functionality of the software, we generally record revenue when the delivered products or performed services result in a legally enforceable and non-refundable claim.
In a limited number of cases, we encounter a customer who is dissatisfied with some aspect of the software product or our service, and we may offer a “concession” to such customer.
In those limited situations where we grant a concession, we rarely reduce the contract arrangement fee, but alternatively may perform additional services, such as additional training or creating additional custom reports.
An excerpt. Shown here: 40 of 140 rewritten, 40 of 215 added and 40 of 150 removed. The counts are complete. For every sentence, read Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. in the FY2018 filing and the FY2017 filing.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
3 rewritten, 0 added, 0 removed, 5 unchanged
In [removed: 2017,] [added: 2018,] our effective average interest rate for borrowings was [removed: 2.20%.][added: 5.22%.]
As of December 31, [removed: 2017,] [added: 2018,] our interest rate was [removed: 4.75%] [added: 5.75%] under the prime rate option or approximately [removed: 2.78%] [added: 3.77%] under the 30-day LIBOR option.
As of December 31, [removed: 2017,] [added: 2018,] we had no outstanding borrowings under the Credit Facility and therefore are not subject to any interest risk.
Item 1. BUSINESS.
25 rewritten, 8 added, 11 removed, 277 unchanged
We partner with clients to make [removed: local] government more accessible to the public, more responsive to the needs of citizens and more efficient in its operations.
We have a broad line of software solutions and services to address the information technology (“IT”) needs of major areas of operations for cities, counties, schools and other [removed: local] government entities.
For clients who prefer not to physically acquire the software and hardware, most of our software applications can be delivered as software as a service (“SaaS”), which [added: primarily] utilize the Tyler private cloud.
Although local governments [removed: generally] [added: often] face budgetary constraints in their operations, their primary revenue sources are usually property taxes, and to a lesser extent, utility billings and other fees, which historically tend to be relatively stable.
Gartner, Inc., a leading information technology research and advisory company, estimates that state and local government application and vertical specific software spending will grow from [removed: $14.7] [added: $16.1] billion in [removed: 2018] [added: 2019] to [removed: $18.3] [added: $19.6] billion in [removed: 2021.][added: 2022.]
The professional services and support segments of the market are expected to expand from [removed: $30.7] [added: $31.6] billion in [removed: 2018] [added: 2019] to [removed: $34.4] [added: $35.2] billion in [removed: 2021.][added: 2022.]
Application and vertical specific software sales in the primary and secondary education segments of the market is expected to expand from [removed: $2.6] [added: $2.8] billion in [removed: 2018] [added: 2019] to [removed: $3.3] [added: $3.6] billion in [removed: 2021] [added: 2022] while professional services and support are expected to grow from [removed: $2.3] [added: $1.9] billion in [removed: 2018] [added: 2019] to [removed: $2.5] [added: $2.2] billion in [removed: 2021.][added: 2022.]
Our software solutions and services are generally grouped in [removed: six] [added: seven] major areas:
For clients who acquire software for use [removed: in-house,] [added: on premises,] we generally license our systems under standard perpetual license agreements that provide the client with a fully paid, nonexclusive, nontransferable right to use the software.
We also offer SaaS arrangements, which [added: generally] utilize the Tyler private cloud, for clients who do not wish to maintain, update and operate these systems or to make up-front capital expenditures to implement these advanced technologies.
We also offer specialized products that automate numerous city [added: and county] functions, including municipal courts, parking tickets, equipment and project costing, animal licenses, business licenses, permits and inspections, code enforcement, citizen complaint tracking, ambulance billing, fleet maintenance, and cemetery records management.
Subscription-based revenue is primarily derived from our SaaS arrangements, which [added: generally] utilize the Tyler private cloud, as well as our [removed: transaction based] [added: transaction-based] offerings such as e-filing solutions.
The contract terms for these arrangements range from one to 10 [removed: years,] [added: years] but are typically contracted for initial periods of three to [removed: seven] [added: five] years.
The key components of our business strategy are [removed: to][added: to:]
We have a large recurring revenue base from maintenance and support and subscription-based services, which generated revenues of [removed: $535.1] [added: $605.1] million, or [removed: 64%] [added: 65%] of total revenues, in [removed: 2017.][added: 2018.]
Subscription-based revenues have been our fastest growing revenue category over the past five years, increasing from [removed: $61.9] [added: $87.8] million in [removed: 2013] [added: 2014] to [removed: $173.5] [added: $220.5] million in [removed: 2017.][added: 2018.]
While we expect to primarily grow internally, from time to time we selectively pursue strategic acquisitions that provide us with one or more of the [removed: following][added: following:]
| • | Entry into new markets related to [removed: local governments] [added: the public sector] |
Clients consist primarily of [added: federal,] county and municipal agencies, school districts and other [removed: local] government offices.
During [removed: 2017,] [added: 2018,] approximately [removed: 43%] [added: 41%] of our revenue was attributable to ongoing support and maintenance agreements.
We also compete with national firms, some of which have greater financial and technical resources than we do, including Oracle Corporation, Infor, SAP AG, Workday, Inc., [removed: Superion,] [added: CentralSquare Technologies,] Thomson Reuters Corporation, and Constellation Software, Inc. In addition, we sometimes compete with consulting and systems integration firms, which develop custom systems, primarily for larger governments.
At December 31, [removed: 2017,] [added: 2018,] our [removed: estimated] revenue backlog was approximately [removed: $1.1] [added: $1.25] billion, compared to [removed: $953.3 million] [added: $1.23 billion (as adjusted)] at December 31, [removed: 2016.][added: 2017.]
Approximately [removed: $578.2] [added: $625.6] million, or [removed: 52%,] [added: 50%,] of the backlog is expected to be recognized during [removed: 2018.][added: 2019.]
At December 31, [removed: 2017,] [added: 2018,] we had [removed: 4,069] [added: 4,525] employees.
In addition, copies of our annual report will be made available, free of [removed: charge] [added: charge,] upon written request.
| • | Data and Insights |
Data and Insights
Our data and insights solutions make existing government data discoverable, usable, and actionable for government workers and the people they serve.
The data and insights solution includes a data-as-a-service platform and cloud applications for open data and citizen engagement, exclusively for city, county, state, and federal government organizations.
Our data and insights solutions allow government to analyze, visualize, and securely share data across multiple departments and programs.
These solutions deliver data-driven innovation and cost-savings by bringing together disparate systems and leveraging the cloud to dramatically enhance the effectiveness of government programs, to improve quality of life for residents, to positively impact local economies, and to achieve excellence in government operations.
| | |
| --- | --- |
We significantly expanded our presence in the public safety market with our acquisition of New World Systems Corporation in November 2015.
- Establish strategic alliances.
In January 2007, we announced a strategic alliance with Microsoft Corporation to jointly develop core public sector functionality for Microsoft Dynamics AX to address the unique accounting needs of public sector organizations worldwide.
As part of this alliance, we are enhancing Microsoft Dynamics AX with public sector-specific functionality.
The arrangement has broadened the functionality of Microsoft Dynamics AX, providing both Tyler and Microsoft with a public sector accounting platform to support their existing and prospective clients well into the future.
Microsoft Dynamics AX with public sector functionality was released to the market in August 2011 and is being sold in the United States and internationally through Microsoft’s distribution channels.
Tyler is also an authorized Microsoft reseller for the Microsoft Dynamics solutions developed under this arrangement.
Tyler receives license and maintenance royalties on direct and indirect public-sector sales worldwide.
Our contractual research and development commitment to develop public sector functionality for Microsoft Dynamics AX was amended in March 2016 and significantly reduced our development commitment through March 2018.
However, we will continue to provide sustained engineering and technical support for the public sector functionality within Dynamics AX.
Contracts for appraisal outsourcing services are generally one to three years in duration.
Cover and table of contents
25 rewritten, 5 added, 5 removed, 96 unchanged
For the Fiscal Year Ended December 31, [removed: 2017][added: 2018]
The aggregate market value of the voting stock held by non-affiliates of the registrant was [removed: $6,107,280,000] [added: $8,417,174,000] based on the reported last sale price of common stock on June 30, [removed: 2017,] [added: 2018,] which is the last business day of the registrant’s most recently completed second fiscal quarter.
The number of shares of common stock of the registrant outstanding on February [removed: 20, 2018] [added: 19, 2019] was [removed: 37,901,000][added: 38,293,000.]
Certain information required by Part III of this annual report is incorporated by reference from the registrant’s definitive proxy statement for its annual meeting of stockholders to be held on May [removed: 9, 2018.][added: 7, 2019.]
| Item 1. | [removed: [Business](#s5A4DC258B6FF5B3DBCCA83AB0F9CD2B9)] [added: [Business](#sD523CD7F8A0C50B78C919DD9648F35E2)] | [removed: [3](#s5A4DC258B6FF5B3DBCCA83AB0F9CD2B9)] [added: [3](#sD523CD7F8A0C50B78C919DD9648F35E2)] |
| Item 1A. | [Risk [removed: Factors](#sA220516537A85A4EB45E28DD60086C19)] [added: Factors](#s8A76800B0FBB509FBCEF1862F8AEEE7A)] | [removed: [11](#sA220516537A85A4EB45E28DD60086C19)] [added: [11](#s8A76800B0FBB509FBCEF1862F8AEEE7A)] |
| Item 1B. | [Unresolved Staff [removed: Comments](#sA8E47FA816765875B22CA63D27348EBB)] [added: Comments](#sA31BFF28EAB2526A92AC1C6A455015E9)] | [removed: [17](#sA8E47FA816765875B22CA63D27348EBB)] [added: [17](#sA31BFF28EAB2526A92AC1C6A455015E9)] |
| Item 2. | [removed: [Properties](#s28983F9E6E525DDFBBBB10499B9D82AF)] [added: [Properties](#sF1ECA3361569547198B0AA2BAE5A6ABF)] | [removed: [17](#s28983F9E6E525DDFBBBB10499B9D82AF)] [added: [17](#sF1ECA3361569547198B0AA2BAE5A6ABF)] |
| Item 3. | [Legal [removed: Proceedings](#s9BCBDDDEE9E450E1970F6D1F9F4A6297)] [added: Proceedings](#s07B07B8712D0593D8432C0A78B1DD5D5)] | [removed: [17](#s9BCBDDDEE9E450E1970F6D1F9F4A6297)] [added: [17](#s07B07B8712D0593D8432C0A78B1DD5D5)] |
| Item 4. | [Submission of Matters to a Vote of Security [removed: Holders](#s4BE5FAF16C465086AADE5E2066168B06)] [added: Holders](#s86D067EF63AD5614A99FEA6C2F56836B)] | [removed: [17](#s4BE5FAF16C465086AADE5E2066168B06)] [added: [17](#s86D067EF63AD5614A99FEA6C2F56836B)] |
| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sCD74C544776656B0A1893F8162BE3DAB)] [added: Securities](#sA2A70B8A6CED57E2AAEE06AE6BF23F34)] | [removed: [18](#sCD74C544776656B0A1893F8162BE3DAB)] [added: [18](#sA2A70B8A6CED57E2AAEE06AE6BF23F34)] |
| Item 6. | [Selected Financial [removed: Data](#s9ECD5098ABA15225918BE57CF6FCA610)] [added: Data](#s9B4E8391207E59758DD643EE3EF7F095)] | [removed: [21](#s9ECD5098ABA15225918BE57CF6FCA610)] [added: [20](#s9B4E8391207E59758DD643EE3EF7F095)] |
| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s6A3CDEA704A65CFB807DE7E8853C3A77)] [added: Operations](#s505F71055DA45A4B89BD7025EED7808D)] | [removed: [22](#s6A3CDEA704A65CFB807DE7E8853C3A77)] [added: [21](#s505F71055DA45A4B89BD7025EED7808D)] |
| Item 7A. | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#s8E74CCF2DDAA559188CA15FE865A59FD)] [added: Risk](#sCD39A02A47A259C99679469A24FACEB0)] | [removed: [40](#s8E74CCF2DDAA559188CA15FE865A59FD)] [added: [41](#sCD39A02A47A259C99679469A24FACEB0)] |
| Item 8. | [Financial Statements and Supplementary [removed: Data](#sB33235B2645F55F4BD2E8D30833A6A55)] [added: Data](#s5085BE0471755104ADA7A496A1913DB8)] | [removed: [40](#sB33235B2645F55F4BD2E8D30833A6A55)] [added: [41](#s5085BE0471755104ADA7A496A1913DB8)] |
| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sC239C2CF3A3D501C9D59F5E48098A6C9)] [added: Disclosure](#s8619CAFA87CB52048773F18FE748972A)] | [removed: [40](#sC239C2CF3A3D501C9D59F5E48098A6C9)] [added: [41](#s8619CAFA87CB52048773F18FE748972A)] |
| Item 9A. | [Controls and [removed: Procedures](#sDB6E543A9BFC5FA9938A0B1860B59A4D)] [added: Procedures](#sE27187159E9253C0A4C3BC2020E3A784)] | [removed: [40](#sDB6E543A9BFC5FA9938A0B1860B59A4D)] [added: [41](#sE27187159E9253C0A4C3BC2020E3A784)] |
| Item 9B. | [Other [removed: Information](#s5626F72410C059B7A1DDAB83B2D78137)] [added: Information](#s9CABCE8D791D5707B70FE762806E7639)] | [removed: [41](#s5626F72410C059B7A1DDAB83B2D78137)] [added: [42](#s9CABCE8D791D5707B70FE762806E7639)] |
| | [PART [removed: III](#s57CB8B180A325959B2D9497A788E4AE4)] [added: III](#s40ADE6378911519CBB6E3639EC402AFF)] | |
| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s7908AF1809B35440846D8763D59BF28E)] [added: Governance](#s9C208C2AFD7F551DA5912AC7C9E5508B)] | [removed: [41](#s7908AF1809B35440846D8763D59BF28E)] [added: [42](#s9C208C2AFD7F551DA5912AC7C9E5508B)] |
| Item 11. | [Executive [removed: Compensation](#s5F33AA4D529153F8BEB99810C051F2F0)] [added: Compensation](#sA93D48DECF17523587900C38A8E1CF38)] | [removed: [41](#s5F33AA4D529153F8BEB99810C051F2F0)] [added: [42](#sA93D48DECF17523587900C38A8E1CF38)] |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sBBF9082A578654DAB48FF964A42BBB7E)] [added: Matters](#s66CB3555C67E5B59BC89D0A6EABC144D)] | [removed: [41](#sBBF9082A578654DAB48FF964A42BBB7E)] [added: [42](#s66CB3555C67E5B59BC89D0A6EABC144D)] |
| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s1341CB2B2D9052AEAF00BB78243B3D98)] [added: Independence](#sA6AA0EA03C2F5A81B8C7A2DD5F8EC5DA)] | [removed: [41](#s1341CB2B2D9052AEAF00BB78243B3D98)] [added: [42](#sA6AA0EA03C2F5A81B8C7A2DD5F8EC5DA)] |
| Item 14. | [Principal Accounting Fees and [removed: Services](#s608D94090BA8566C987CBA9C67A3692E)] [added: Services](#s41D6740745BF5F4C971E487F0F608F36)] | [removed: [41](#s608D94090BA8566C987CBA9C67A3692E)] [added: [42](#s41D6740745BF5F4C971E487F0F608F36)] |
| Item 15. | [Exhibits, Financial Statement [removed: Schedules](#s1EDA1FD4BBF254F5BC8599B3965F0B2D)] [added: Schedules](#s22333EEEE98753ECA81B6031A40BFAFA)] | [removed: [42](#s1EDA1FD4BBF254F5BC8599B3965F0B2D)] [added: [43](#s22333EEEE98753ECA81B6031A40BFAFA)] |
10-K 1 tyl12312018-10k.htm 10-K
| | [PART I](#s6CDF62B9FDF2575BA03476DC5626DA6D) | |
| | [PART II](#s69DABF256ED555F8B94B28E07862326A) | |
| | [PART IV](#s561E20FBD6D756BEA5806D44FE7259F5) | |
| [Signatures](#s73FAADBA42055F028383FA15E7522063) | | [45](#s73FAADBA42055F028383FA15E7522063) |
10-K 1 tyl12312017-10k.htm 10-K
| | [PART I](#s699FE6C867DA5F9A8DEF085436FC986C) | |
| | [PART II](#sCBC76C2562965D8BA08C1358E51AE188) | |
| | [PART IV](#sA5F2C01B53D059B5B1E134BA8ED4BA0E) | |
| [Signatures](#s06FA76E5176C5A8499EA098688EEACFB) | | [44](#s06FA76E5176C5A8499EA098688EEACFB) |
Item 2. PROPERTIES.
1 rewritten, 0 added, 0 removed, 3 unchanged
We occupy [added: a total of] approximately 1.0 million square feet of office space, of which approximately 746,000 square feet is in [added: various] office facilities we own.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
17 rewritten, 21 added, 24 removed, 16 unchanged
Our common stock is traded on the New York Stock Exchange under the symbol “TYL.” At December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: 1,367] [added: 1,262] stockholders of record.
Most of our stockholders hold their shares in street name; therefore, there are substantially more than [removed: 1,367] [added: 1,262] beneficial owners of our common stock.
We did not pay any cash dividends in [removed: 2017] [added: 2018] or [removed: 2016.][added: 2017.]
The following table summarizes certain information related to our stock [removed: option plan] [added: incentive plan, restricted stock units] and our employee stock purchase plan.
There are no warrants or rights related to our equity compensation plans as of December 31, [removed: 2017.][added: 2018.]
| | Number of securities to be issued upon exercise of outstanding options, [removed: warrants and] [added: warrants, purchase] rights [added: and vesting of restricted stock units] as of December 31, [removed: 2017] [added: 2018] | | | Weighted average exercise price of outstanding [removed: options, warrants] [added: options] and [removed: rights] [added: unvested restricted stock units] | | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in initial column as of December 31, [removed: 2017)] [added: 2018)] | |
As of December 31, [removed: 2017,] [added: 2018,] we had authorization to repurchase up to approximately [removed: 2.0] [added: 1.2] million additional shares of Tyler common stock.
During [removed: 2017,] [added: 2018,] we purchased approximately [removed: 44,000] [added: 781,000] shares of our common stock for an aggregate purchase price of [removed: $6.6] [added: $150.1] million.
A summary of the repurchase activity during [removed: 2017] [added: 2018] is as follows:
| Period | | Total number of shares repurchased | | | Additional number of shares authorized that may be repurchased | | | [added: |] Average price paid per share | | | | Maximum number of shares that may be repurchased under current authorization | |
| Three months ended March 31 | | [removed: 41,896] [added: —] | | | [added: $] | [added: —] | | [added: |] $ | [removed: 147.30] [added: —] | | | [removed: 1,976,160] [added: 1,973,560] | |
| Three months ended June 30 | | — | | | — | | | [added: |] — | | | | [removed: 1,976,160] [added: 1,973,560] | |
| Three months ended September 30 | | — | | | — | | | [added: |] — | | | | [removed: 1,976,160] [added: 1,973,560] | |
The repurchase program, which was approved by our board of directors, was announced in October 2002 and was amended at various times from 2003 through [removed: 2016.][added: 2019.]
The following table compares total shareholder returns for Tyler over the last five years to the Standard and Poor’s 500 Stock Index and the Standard and Poor’s 600 Information Technology Index assuming a $100 investment made on December 31, [removed: 2012.][added: 2013.]
[removed: ][added: ]
| Company / Index | [removed: 12/31/12 | | |] 12/31/13 | | | 12/31/14 | | | 12/31/15 | | | 12/31/16 | | | 12/31/17 | | [added: | 12/31/18 | |]
| 2018 Incentive Stock Plan (a) | 4,425,728 | | | $ | 136.43 | | | 3,835,338 | |
| Employee Stock Purchase Plan | 14,869 | | | 157.95 | | | | 749,410 | |
| | 4,440,597 | | | $ | 136.50 | | | 4,584,748 | |
(a) In May 2018, stockholders approved our 2018 Stock Incentive Plan ("the 2018 Plan") which amended and restated the existing Tyler Technologies, Inc. 2010 Stock Option Plan ("the 2010 Plan").
Upon stockholder approval of the 2018 Plan, the remaining shares available for grant under the 2010 Plan were added to the shares authorized for grant under the 2018 Plan.
Additionally, any awards previously granted under the 2010 Plan that expire unexercised or are forfeited are added to the shares authorized for grant under the 2018 Plan.
Under the 2018 Plan, each award granted, other than stock options, reduces the number of securities available for issuance under the 2018 Plan by 2.5 shares.
| | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | | | |
| October 1 through October 31 | | 154,739 | | | — | | | | 209.69 | | | | 1,818,821 | |
| November 1 through November 30 | | 457,503 | | | — | | | | 189.13 | | | | 1,361,318 | |
| December 1 through December 31 | | 168,600 | | | — | | | | 183.86 | | | | 1,192,718 | |
| | | 780,842 | | | — | | | | $ | 192.16 | | | | |
Subsequent to December 31, 2018, our board of directors authorized the repurchase of an additional 1.5 million shares of Tyler common stock.
As of February 20, 2019, we had remaining authorization to repurchase up to 2.7 million additional shares of our common stock.
| Tyler Technologies, Inc. | 100 | | | 107.16 | | | 170.68 | | | 139.79 | | | 173.36 | | | 181.94 | |
| S&P 500 Stock Index | 100 | | | 113.69 | | | 115.26 | | | 129.05 | | | 157.22 | | | 150.33 | |
| S&P 600 Information Technology Index | 100 | | | 113.29 | | | 118.56 | | | 158.70 | | | 175.01 | | | 159.38 | |
| | |
| --- | --- |
The following table shows, for the calendar periods indicated, the high and low sales price per share of our common stock as reported on the New York Stock Exchange.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | High | | | | Low | | |
| 2016 | First Quarter | $ | 172.50 | | | $ | 118.16 | |
| | Second Quarter | 168.19 | | | | 126.70 | | |
| | Third Quarter | 175.77 | | | | 159.24 | | |
| | Fourth Quarter | 172.24 | | | | 139.61 | | |
| 2017 | First Quarter | $ | 166.86 | | | $ | 142.75 | |
| | Second Quarter | 178.09 | | | | 152.00 | | |
| | Third Quarter | 182.49 | | | | 165.14 | | |
| | Fourth Quarter | 188.22 | | | | 168.12 | | |
| Stock option plan | 4,817,241 | | | $ | 107.91 | | | 2,128,560 | |
| Employee stock purchase plan | 12,052 | | | 150.49 | | | | 796,834 | |
| | 4,829,293 | | | $ | 108.02 | | | 2,925,394 | |
| | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| October 1 through October 31 | | — | | | — | | | — | | | | 1,976,160 | |
| November 1 through November 30 | | 2,600 | | | — | | | 169.93 | | | | 1,973,560 | |
| December 1 through December 31 | | — | | | — | | | — | | | | 1,973,560 | |
| | | 44,496 | | | — | | | $ | 148.62 | | | | |
| Tyler Technologies, Inc. | 100 | | | 210.84 | | | 225.93 | | | 359.87 | | | 294.74 | | | 365.50 | |
| S&P 500 Stock Index | 100 | | | 132.39 | | | 150.51 | | | 152.59 | | | 170.84 | | | 208.14 | |
| S&P 600 Information Technology Index | 100 | | | 144.91 | | | 164.17 | | | 171.80 | | | 229.96 | | | 253.61 | |
Item 6. SELECTED FINANCIAL DATA.
17 rewritten, 9 added, 7 removed, 17 unchanged
| | [removed: 2017 (a)] [added: 2018] | | | | [removed: 2016 (b)] [added: 2017 (a),(b)] | | | | [removed: 2015 (c)] [added: 2016 (a),(c)] | | | | [removed: 2014] [added: 2015(d)] | | | | [removed: 2013] [added: 2014] | | |
| Cost of revenues | [removed: 441,522] [added: 495,704] | | | | [removed: 400,692] [added: 441,522] | | | | [removed: 313,835] [added: 400,692] | | | | [removed: 259,730] [added: 313,835] | | | | [removed: 223,440] [added: 259,730] | | |
| Selling, general and administrative expenses | [removed: 176,974] [added: 207,605] | | | | [removed: 167,161] [added: 175,914] | | | | [removed: 133,317] [added: 165,176] | | | | [removed: 108,260] [added: 133,317] | | | | [removed: 98,289] [added: 108,260] | | |
| Research and development expense | [removed: 47,324] [added: 63,264] | | | | [removed: 43,154] [added: 47,324] | | | | [removed: 29,922] [added: 43,154] | | | | [removed: 25,743] [added: 29,922] | | | | [removed: 23,269] [added: 25,743] | | |
| Amortization of customer and trade name intangibles | [removed: 13,912] [added: 16,217] | | | | [removed: 13,731] [added: 13,381] | | | | [removed: 5,905] [added: 13,202] | | | | [removed: 4,546] [added: 5,905] | | | | [removed: 4,517] [added: 4,546] | | |
| Other income (expense), net | [added: 3,378 | | | |] 698 | | | | (1,998 | | ) | | 381 | | | | (355 | | ) | [removed: | (1,309 | | ) |]
| Income tax (benefit) provision [removed: (a)] [added: (b)] | [removed: (2,317] [added: 8,408] | | [removed: )] | | [removed: 19,450] [added: (6,115] | | [added: )] | | [removed: 43,555] [added: 21,957] | | | | [removed: 35,527] [added: 43,555] | | | | [removed: 26,718] [added: 35,527] | | |
| Net earnings per diluted share | $ | [removed: 4.18] [added: 3.68] | | | $ | [removed: 2.82] [added: 4.32] | | | $ | [removed: 1.77] [added: 2.92] | | | $ | [removed: 1.66] [added: 1.77] | | | $ | [removed: 1.13] [added: 1.66] | |
| Weighted average diluted shares [removed: (b)] [added: (c)] | [removed: 39,246] [added: 40,123] | | | | [removed: 38,961] [added: 39,246] | | | | [removed: 36,552] [added: 38,961] | | | | [removed: 35,401] [added: 36,552] | | | | [removed: 34,590] [added: 35,401] | | |
| Cash flows provided by operating activities [removed: (b)] [added: (c)] | $ | [removed: 195,755] [added: 250,203] | | | $ | [removed: 191,859] [added: 195,755] | | | $ | [removed: 134,327] [added: 191,859] | | | $ | [removed: 142,839] [added: 134,327] | | | $ | [removed: 94,297] [added: 142,839] | |
| Cash flows used by investing activities | [removed: (85,395] [added: (238,255] | | ) | | [removed: (50,720] [added: (85,395] | | ) | | [removed: (398,459] [added: (50,720] | | ) | | [removed: (11,555] [added: (398,459] | | ) | | [removed: (25,658] [added: (11,555] | | ) |
| Cash flows [removed: provided] (used) [added: provided] by financing activities [removed: (b)] [added: (c)] | [removed: 39,415] [added: (63,595] | | [added: )] | | [removed: (138,075] [added: 39,415] | | [removed: )] | | [removed: 91,052] [added: 138,075] | | | | [removed: (3,993] [added: 91,052] | | [removed: )] | | [removed: 3,831] [added: (3,993] | | [added: )] |
| Revolving line of credit | — | | | | [removed: 10,000] [added: —] | | | | [removed: 66,000] [added: 10,000] | | | | [removed: —] [added: 66,000] | | | | — | | |
[removed: (a)] [added: (b)] 2017 includes the significant impact of the enactment of the Tax Cuts and Jobs Act ("Tax Act").
The impact of the rate reduction on our 2017 income tax provision is a [removed: $21.6] [added: $26.0] million [added: (as adjusted)] tax benefit due to the remeasurement of deferred tax assets and liabilities.
[removed: (b)] [added: (c)] During 2016, we early adopted [removed: Accounting Standards Update ("ASU")] [added: ASU] No. 2016-09 [removed: "Improvements] [added: Improvements] to Employee Share-Based Payment [removed: Accounting"] [added: Accounting] requiring the recognition of excess tax benefits or tax deficiencies as a component of income tax expense; these benefits or deficiencies were historically recognized in equity.
[removed: (c)] [added: (d)] On November 16, 2015, we completed the acquisition of New World Systems Corporation ("NWS").
| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | | | |
| Revenues | $ | 935,282 | | | $ | 840,899 | | | $ | 759,880 | | | $ | 591,022 | | | $ | 493,101 | |
| Operating income | 152,492 | | | | 162,758 | | | | 137,656 | | | | 108,043 | | | | 94,822 | | |
| Income before income taxes | 155,870 | | | | 163,456 | | | | 135,658 | | | | 108,424 | | | | 94,467 | | |
| Net income | 147,462 | | | | 169,571 | | | | 113,701 | | | | 64,869 | | | | 58,940 | | |
| Total assets | $ | 1,790,963 | | | $ | 1,611,351 | | | $ | 1,378,502 | | | $ | 1,356,570 | | | $ | 569,812 | |
| Shareholders' equity | 1,324,846 | | | | 1,191,736 | | | | 934,540 | | | | 858,857 | | | | 336,973 | | |
(a) Reflects the impact of the adoption of Accounting Standards Update ("ASU") ASU No. 2014-09, Revenue from Contracts with Customers in fiscal year 2018.
Refer to Note - 1 "Summary of Significant Accounting Policies" for further discussion.
(In thousands, except per share data)
| Revenues | $ | 840,662 | | | $ | 756,043 | | | $ | 591,022 | | | $ | 493,101 | | | $ | 416,643 | |
| Operating income | 160,930 | | | | 131,305 | | | | 108,043 | | | | 94,822 | | | | 67,128 | | |
| Income before income taxes | 161,628 | | | | 129,307 | | | | 108,424 | | | | 94,467 | | | | 65,819 | | |
| Net income | 163,945 | | | | 109,857 | | | | 64,869 | | | | 58,940 | | | | 39,101 | | |
| Total assets | $ | 1,589,592 | | | $ | 1,357,945 | | | $ | 1,356,570 | | | $ | 569,812 | | | $ | 444,488 | |
| Shareholders' equity | 1,167,094 | | | | 915,525 | | | | 858,857 | | | | 336,973 | | | | 246,319 | | |
Item 9A. CONTROLS AND PROCEDURES.
6 rewritten, 0 added, 0 removed, 10 unchanged
Management, with the participation of the chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, [removed: 2017.][added: 2018.]
Based on this evaluation, the chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of December 31, [removed: 2017.][added: 2018.]
Management assessed the effectiveness of Tyler’s internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]
Based on our assessment, we concluded that, as of December 31, [removed: 2017,] [added: 2018,] Tyler’s internal control over financial reporting was effective based on those criteria.
Tyler’s internal control over financial reporting as of December 31, [removed: 2017] [added: 2018] has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited Tyler’s financial statements.
Changes in Internal Control Over Financial Reporting — During the quarter ended December 31, [removed: 2017,] [added: 2018,] there were no changes in our internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f), that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION.
1 rewritten, 0 added, 1 removed, 28 unchanged
| The information required under this item may be found under the section captioned “Proposals For Consideration – Proposal Two – Ratification of Our Independent Auditors for Fiscal Year [removed: 2018”] [added: 2019”] in our Proxy [removed: Statement.] [added: Statement when filed.] | | |
| | | |
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
296 rewritten, 499 added, 164 removed, 565 unchanged
| | | | | | [Reports of Independent Registered Public Accounting [removed: Firm](#sA65310313579596E97545E36208FD34E)] [added: Firm](#s3EE0DB95DD5B51699EF2ECC0259B93BE)] | | [removed: [F-1](#sA65310313579596E97545E36208FD34E)] [added: [F-1](#s3EE0DB95DD5B51699EF2ECC0259B93BE)] |
| | | | | | [Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#s2758680B2A5056E484E4DC02DB1A3A25)] [added: 2016](#s2BFEBE77F21154088484B21E68F1C239)] | | [removed: [F-3](#s2758680B2A5056E484E4DC02DB1A3A25)] [added: [F-3](#s2BFEBE77F21154088484B21E68F1C239)] |
| | | | | | [Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016](#s0475FEEF28545F0E994B2981D2C28B97)] [added: 2017](#sBD33A5ACE9295538BD15F54FE2BB2882)] | | [removed: [F-4](#s0475FEEF28545F0E994B2981D2C28B97)] [added: [F-4](#sBD33A5ACE9295538BD15F54FE2BB2882)] |
| | | | | | [Consolidated Statements of Shareholders’ Equity for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#s4C47D472EC2D5DB0A14B6D153E532C49)] [added: 2016](#s7C7633F2EDBC5A889719ED90209FE114)] | | [removed: [F-5](#s4C47D472EC2D5DB0A14B6D153E532C49)] [added: [F-6](#s7C7633F2EDBC5A889719ED90209FE114)] |
| | | | | | [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#s23A8E3116EE15740A630618B23747901)] [added: 2016](#s2E1A134956005CD8AA6C8F2CE09A6A53)] | | [removed: [F-6](#s23A8E3116EE15740A630618B23747901)] [added: [F-5](#s2E1A134956005CD8AA6C8F2CE09A6A53)] |
| | | | | | [Notes to Consolidated Financial [removed: Statements](#sFB2AEF20742A5D33B4D294D37016F7DD)] [added: Statements](#sEDDC6305CEC85089A2A23174B294B7DF)] | | [removed: [F-7](#sFB2AEF20742A5D33B4D294D37016F7DD)] [added: [F-7](#sEDDC6305CEC85089A2A23174B294B7DF)] |
| [removed: [4.3](http://www.sec.gov/Archives/edgar/data/860731/000119312515334622/d68985dex21.htm)] [added: [10.5](#s0C727D4DADD55298929E6CC17430320E)] | | [Agreement and [removed: Plan of Merger, dated as] [added: plan] of [removed: September 30, 2015,] [added: merger] by and among Tyler Technologies, [removed: Inc., Brinston Acquisition, LLC, New World Systems Corporation, and Larry D. Leinweber, as the Principal Shareholder identified therein] [added: Inc.] and [removed: the Shareholders’ Representative identified therein.] [added: Dedomena Acquisition, Inc., Socrata, Inc] (filed as Exhibit [removed: 2.1] [added: 10.4] to our Form [removed: 8-K,] [added: 10-Q] dated [removed: October 1, 2015,] [added: May 10, 2018] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312515334622/d68985dex21.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000024/tyl3312018exhibit104.htm)] |
| [removed: [10.2](http://www.sec.gov/Archives/edgar/data/860731/000095012310071762/d74977exv4w1.htm)] [added: [10.6](http://www.sec.gov/Archives/edgar/data/860731/000086073118000016/tylproxy2018.htm#sb3775a337bee452f876ac4e4a6e1c03e)] | | [Tyler Technologies, Inc. [removed: 2010] [added: 2018] Stock Option Plan effective as of May [removed: 13, 2010] [added: 9, 2018] (filed as [removed: Exhibit 4.1] [added: Appendix A] to [removed: our registration statement no. 333-168499] [added: the registrant's Proxy Statement filed with the Commission on March 28, 2018] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000095012310071762/d74977exv4w1.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000016/tylproxy2018.htm#sb3775a337bee452f876ac4e4a6e1c03e)] |
| [removed: [10.3](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex103.htm)] [added: [10.2](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex103.htm)] | | [Employment and Non-Competition Agreement between Tyler Technologies, Inc. and John S. Marr Jr. [removed: dated] [added: effective] February [removed: 5, 2013] [added: 26, 2018] (filed as Exhibit [removed: 10.3] [added: 10.1] to our Form [removed: 10-K for the year ended December 31, 2012] [added: 8-K dated March 9, 2018] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex103.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000013/a101exhibit2018execemplagm.htm)] |
| [removed: [10.4](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex104.htm)] [added: [10.4](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex106.htm)] | | [Employment and Non-Competition Agreement between Tyler Technologies, Inc. and [removed: Dustin R. Womble dated] [added: H. Lynn Moore, Jr effective] February [removed: 5, 2013] [added: 26, 2018] (filed as Exhibit [removed: 10.4] [added: 10.2] to our Form [removed: 10-K for the year ended December 31, 2012] [added: 8-K dated March 9, 2018] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex104.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000013/a102exhibit2018execemplagm.htm)] |
| [removed: [10.5](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex105.htm)] [added: [10.3](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex105.htm)] | | [Employment and Non-Competition Agreement between Tyler Technologies, Inc. and Brian K. Miller [removed: dated] [added: effective] February [removed: 5, 2013] [added: 26, 2018] (filed as Exhibit [removed: 10.5] [added: 10.3] to our Form [removed: 10-K for the year ended December 31, 2012] [added: 8-K dated March 9, 2018] and incorporated by reference [removed: herein)](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex105.htm).] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000013/a103exhibit2018execemplagm.htm) .] |
| [removed: [10.7](http://www.sec.gov/Archives/edgar/data/860731/000119312512139867/d323191ddef14a.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/860731/000119312512282212/d371277ds8.htm)] | | [Employee Stock Purchase Plan (filed as Exhibit 10.1 to our registration statement 333-182318 dated June 25, 2012 and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312512139867/d323191ddef14a.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312512282212/d371277ds8.htm)] |
| [removed: [*23](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit-23.htm)] [added: [*23](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit-23.htm)] | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit-23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit-23.htm)] |
| [removed: [*31.1](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit311.htm)] [added: [*31.1](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit311.htm)] | | [Rule 13a-14(a) Certification by Principal Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit311.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit311.htm)] |
| [removed: [*31.2](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit312.htm)] [added: [*31.2](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit312.htm)] | | [Rule 13a-14(a) Certification by Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit312.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit312.htm)] |
| [removed: [*32](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit321.htm)] [added: [*32](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit321.htm)] | | [Section 1350 Certification of Principal Executive Officer and Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073118000011/tyl12312017exhibit321.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit321.htm)] |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ John S. Marr |
| | | | | [removed: Chief] Executive [removed: Officer and] Chairman of the Board |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ H. Lynn Moore |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ Brian K. Miller |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ W. Michael Smith |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ Donald R. Brattain |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ Glenn A. Carter |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ Brenda A. Cline |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ J. Luther King |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ Daniel M. Pope |
| Date: February [removed: 21, 2018] [added: 20, 2019] | | By: | | /s/ Dustin R.Womble |
We have audited the accompanying consolidated balance sheets of Tyler Technologies, Inc. (the Company) as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] and the related notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 21, 2018] [added: 20, 2019] expressed an unqualified opinion thereon.
[removed: February 21,] 2018
We have audited Tyler Technologies, Inc.’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
In our opinion, Tyler Technologies, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), consolidated balance sheets of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of [added: comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and our report dated February 20, 2019 expressed an unqualified opinion thereon.]
| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |
| Software licenses and royalties | [added: |] $ | 75,694 | | | $ | [added: 10,548 | | | $ | 86,242 | | | $ |] 74,306 | | | $ | [removed: 59,008] [added: 9,427] | | [added: | $ | 83,733 | |]
| Subscriptions | [added: |] 173,510 | | | | [added: (1,334 | | ) | | 172,176 | | | |] 142,704 | | | | [removed: 111,933] [added: (47] | | [added: )] | [added: | 142,657 | | |]
| Software services | [added: |] 187,149 | | | | [added: (6,689 | | ) | | 180,460 | | | |] 174,804 | | | | [removed: 139,852] [added: (3,156] | | [added: )] | [added: | 171,648 | | |]
| Appraisal services | [added: |] 25,023 | | | | [added: — | | | | 25,023 | | | |] 26,287 | | | | [removed: 25,065] [added: —] | | | [added: | 26,287 | | |]
| Hardware and other | [added: |] 17,717 | | | | [added: (38 | | ) | | 17,679 | | | |] 14,973 | | | | [removed: 9,627] [added: (416] | | [added: )] | [added: | 14,557 | | |]
| [10.7](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/plan_ofxmergermicropactexh.htm) | | [Agreement and Plan of Merger by and among Tyler Technologies, Inc, TMP, Subsidiary, Inc, MP Holding Parent, Inc.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/plan_ofxmergermicropactexh.htm) |
| | | | | President and Chief Executive Officer |
| Date: February 20, 2019 | | By: | | /s/ H. Lynn Moore |
| | | | | H. Lynn Moore |
| | | | | President and Chief Executive Officer |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.
February 20, 2019
February 20, 2019
| | | | | | As Adjusted | | | | As Adjusted | | |
| Subscriptions | 220,547 | | | | 172,176 | | | | 142,657 | | |
| Software services | 191,269 | | | | 180,460 | | | | 171,648 | | |
| Maintenance | 384,521 | | | | 359,319 | | | | 320,998 | | |
| Appraisal services | 21,846 | | | | 25,023 | | | | 26,287 | | |
| Hardware and other | 23,658 | | | | 17,679 | | | | 14,557 | | |
| Total revenues | 935,282 | | | | 840,899 | | | | 759,880 | | |
| Gross profit | 439,578 | | | | 399,377 | | | | 359,188 | | |
| Selling, general and administrative expenses | 207,605 | | | | 175,914 | | | | 165,176 | | |
| Operating income | 152,492 | | | | 162,758 | | | | 137,656 | | |
| Income before income taxes | 155,870 | | | | 163,456 | | | | 135,658 | | |
| Income tax provision (benefit) | 8,408 | | | | (6,115 | | ) | | 21,957 | | |
| Net income | $ | 147,462 | | | $ | 169,571 | | | $ | 113,701 | |
| Basic | $ | 3.84 | | | $ | 4.55 | | | $ | 3.12 | |
| Diluted | $ | 3.68 | | | $ | 4.32 | | | $ | 2.92 | |
| | December 31, 2018 | | | | December 31, 2017 | | |
| | | | | | As Adjusted | | |
| Cash and cash equivalents | $ | 134,279 | | | $ | 185,926 | |
| Prepaid expenses | 33,258 | | | | 32,206 | | |
| Total current assets | 518,858 | | | | 520,815 | | |
| Accounts receivable, long-term | 16,020 | | | | 12,107 | | |
| Other intangibles, net | 276,852 | | | | 229,617 | | |
| | $ | 1,790,963 | | | $ | 1,611,351 | |
| Deferred revenue | 350,512 | | | | 298,613 | | |
| [10.6](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex106.htm) | | [Employment and Non-Competition Agreement between Tyler Technologies, Inc. and H. Lynn Moore dated February 5, 2013 (filed as Exhibit 10.6 to our Form 10-K for the year ended December 31, 2012 and incorporated by reference herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex106.htm) |
| | | | | John S. Marr |
| | | | | President and Director |
comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated February 21, 2018 expressed an unqualified opinion thereon.
| Maintenance | 361,569 | | | | 322,969 | | | | 245,537 | | |
| Gross profit | 399,140 | | | | 355,351 | | | | 277,187 | | |
| Income before income taxes | 161,628 | | | | 129,307 | | | | 108,424 | | |
| Diluted | $ | 4.18 | | | $ | 2.82 | | | $ | 1.77 | |
| Total current assets | 496,800 | | | | 282,960 | | |
| | $ | 1,589,592 | | | $ | 1,357,945 | |
| Total current liabilities | 382,310 | | | | 361,501 | | |
| Total shareholders' equity | 1,167,094 | | | | 915,525 | | |
| Balance at December 31, 2014 | 48,148 | | | $ | 481 | | | $ | 201,389 | | | $ | (46 | ) | | $ | 261,150 | | | (14,679 | ) | | $ | (126,001 | ) | | $ | 336,973 | |
| Federal income tax benefit related to exercise of stock options | — | | | — | | | | 45,314 | | | | — | | | | — | | | | — | | | — | | | | 45,314 | | |
| Issuance of shares for acquisition | — | | | — | | | | 332,659 | | | | — | | | | — | | | | 2,149 | | | 31,674 | | | | 364,333 | | |
| Net income | — | | | — | | | | — | | | | — | | | | 109,857 | | | | — | | | — | | | | 109,857 | | |
| Net income | — | | | — | | | | — | | | | — | | | | 163,945 | | | | — | | | — | | | | 163,945 | | |
| Depreciation and amortization | 53,925 | | | | 50,301 | | | | 19,574 | | |
| Accounts receivable | (35,558 | | ) | | (30,227 | | ) | | (28,172 | | ) |
| Purchase of cost method investment | — | | | | — | | | | (15,000 | | ) |
| Debt issuance costs | — | | | | — | | | | (2,134 | | ) |
| Cash and cash equivalents at beginning of period | 36,151 | | | | 33,087 | | | | 206,167 | | |
If the arrangement does not require significant production, modification or customization or where the software services are not considered essential to the functionality of the software, revenue is recognized when all of the following conditions are met
| • | persuasive evidence of an arrangement exists |
| • | delivery has occurred |
| • | our fee is fixed or determinable |
| • | collectability is probable |
For multiple element arrangements, each element of the arrangement is analyzed and we allocate a portion of the total arrangement fee to the elements based on the relative fair value of the element using vendor-specific objective evidence of fair value (“VSOE”), regardless of any separate prices stated within the contract for each element.
Fair value is considered the price a customer would be required to pay if the element was sold separately based on our historical experience of stand-alone sales of these elements to third-parties.
For PCS, we use renewal rates for continued support arrangements to determine fair value.
For software services, we use the fair value we charge our customers when those services are sold separately.
We monitor our transactions to determine that we maintain and periodically revise VSOE to reflect fair value.
In software arrangements in which we have the fair value of all undelivered elements but not of a delivered element, we apply the “residual method,” in compliance with Accounting Standards Codification (“ASC”) 985-605, Software Revenue Recognition.
Under the residual method, if the fair value of all undelivered elements is determinable, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to the delivered element(s) and is recognized as revenue assuming the other revenue recognition criteria are met.
In software arrangements in which we do not have VSOE for all undelivered elements, revenue is deferred until fair value is determined or all elements for which we do not have VSOE have been delivered.
Alternatively, if sufficient VSOE does not exist and the only undelivered element is services that do not involve significant modification or customization of the software, the entire fee is recognized over the period during which the services are expected to be performed.
We recognize the revenue allocable to software licenses and specified upgrades upon delivery of the software product or upgrade to the customer, unless the fee is not fixed or determinable or collectability is not probable.
If the fee is not fixed or determinable, software license revenue is generally recognized as payments become due from the customer.
If collectability is not considered probable, revenue is recognized when the fee is collected.
For off-the-shelf software arrangements, we recognize the software license fee as revenue after delivery has occurred, customer acceptance is reasonably assured, that portion of the fee represents a non-refundable enforceable claim and is probable of collection, and the remaining services such as training are not considered essential to the product’s functionality.
An excerpt. Shown here: 40 of 296 rewritten, 40 of 499 added and 40 of 164 removed. The counts are complete. For every sentence, read Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. in the FY2018 filing and the FY2017 filing.