May 8, 2020
(Boston, MA, May 8, 2020) – GTY Technology Holdings Inc. (Nasdaq: GTYH) (“GTY”), a leading vertical SaaS/Cloud solution for the public sector, today announced financial results for the quarter ended March 31, 2020.
• First quarter GAAP revenues up 42% year-over-year to $11.3 million
• First quarter non-GAAP revenues up 31% year-over-year to $11.6 million
• More than 300 State and Local Governments seek GTY emergency Covid-19 Care Program; Grants Management, Procurement and Budgeting software in demand
• Company withdraws previously issued guidance for the full year 2020 due to uncertainties with respect to COVID-19-related disruption duration
• Company shares operating assumptions pointing to a base line of over 20% revenue growth for GTY in Fiscal 2020 and being cash flow positive in the second half of 2020 excluding the impact of severance payments
“Our primary concern has been the safety and wellbeing of our people,” said TJ Parass, GTY CEO. “We quickly moved to 100% business remote operations. As state-wide pandemic-related lockdowns rolled out, many local public government organizations and offices experienced an inability to conduct normal business given the predominance of on-premise IT operations. I’m incredibly proud of how our team immediately put into motion our GTY COVID Emergency Care Program to help public sector organizations such as health services, K-12 schools, Higher Education, and State/Local government entities to easily obtain, implement and become operational with critical applications. As examples, these organizations have immediate needs to track, secure and distribute COVID stimulus grants, to create new budget scenarios, and to ensure mission-critical procurements and payments. Without Cloud-based applications they were hamstrung.”
“With the current low government adoption of Cloud technologies, this crisis highlights that the digital transformation of government needs to be done sooner rather than later,” continued Parass. “We anticipate an acceleration of Government digital transformation as a result of this pandemic.” More than 300 organizations are now onboarding to GTY’s COVID Emergency Care Program, which is available free of charge for a period of months, depending on the software application in use.
“The top line was strong this quarter at more than 30% growth on a non-GAAP basis and more than 40% growth on a GAAP basis,” said Parass. “We experienced double-digit revenue growth across all six business units. However, we did see some Q1 opportunities push out of the quarter and we expect many of these will close in Q2. Our team moved quickly at the start of the pandemic to ensure that all of our products could be sold, operated and implemented remotely. We believe government offices will now have a greater appreciation for the value of cloud-based solutions and will move up the timeframe for their digital transformations as a result of the current crisis.”
John Curran, GTY CFO, said, “As we experienced a business slowdown late in March, we swiftly took action to reduce costs while preserving as many jobs as possible. Our results reflect a $3.5 million restructuring charge related to costs associated with a 10% reduction in our workforce. In addition, we reduced our discretionary spending and implemented cost savings initiatives.”
First quarter 2020 operating loss was $16.5 million compared with $42.6 million in Q4 2019. First quarter non-GAAP operating loss was $5.7 million compared with $5.4 million in Q4 2019.
“Since the start of the pandemic, we have increased our financial flexibility, reduced fixed and variable expenses, and worked to ensure that we would have sufficient liquidity to bring us through the remainder of the year,” continued Curran. “We believe we are on solid footing for the year and we continue to expect year-over-year revenue growth for GTY. While the impact of COVID-19 on our Q1 results was relatively small, we have experienced longer sales cycles and collection cycles since the start of Q2. Due to the heightened uncertainty related to the pandemic and its impact on the operating and economic environment we are withdrawing the previously issued full-year non-GAAP revenue guidance that we provided in early March.”
Conference Call and Webcast
GTY will hold its quarterly earnings call on May 8, 2020 at 8:30 a.m. ET. Conference call details for participation on the call are listed below. A transcript will also be posted to the Investor Relations section of the company’s website at www.gtytechnology.com.
ParticipantToll Free Dial-In Number: (833) 502-0488
ParticipantToll Dial-In Number: (778) 560- 2559
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The company’s actual results may differ from its expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the company’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside of the company’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) our ability to consummate any proposed transaction with respect to our previously announced review of strategic alternatives; (2) the lack of actionable alternatives that have been identified in connection with the strategic alternative review; (3) risks relating to the substantial costs and diversion of personnel’s attention and resources due to the strategic alternative review; (4) our failure to generate sufficient cash flow from our business to make payments on our debt; (5) our ability to raise or borrow funds on acceptable terms; (6) changes in applicable laws or regulations; (7) the possibility that the company may be adversely affected by other economic, business, and/or competitive factors; (8) the impact of the coronavirus outbreak, or similar global health concerns, on our operations and customer base, particular budgetary constraints on our municipal customers due to substantial emergency expenses; and (9) other risks and uncertainties included in the company’s Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent filings made with the SEC. We caution you that the foregoing list of factors is not exclusive and readers should not place undue reliance upon any forward-looking statements, which speak only as of the date made. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.
Presentation of Predecessor and Successor Financial Results
As a result of its business combination in February 2019, GTY is the acquirer for accounting purposes and Bonfire, CityBase, eCivis, OpenCounter, Questica, and Sherpa are the acquirees and accounting predecessor. The company’s financial statement presentation distinguishes the company’s presentations into two distinct periods, the period up to the business combination closing date (labeled “Predecessor”) and the period including and after that date (labeled “Successor”). The transaction was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired.
Use of Non-GAAP Financial Measures
To supplement its condensed consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, GTY has provided in this release certain financial measures that have not been prepared in accordance with GAAP defined as “non-GAAP financial measures,” which include (i) non-GAAP revenues, (ii) non-GAAP gross profit and non-GAAP gross margin (iii) and non-GAAP loss from operations.
GTY’s management uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating GTY’s ongoing operational performance and trends. However, it is important to note that particular items GTY excludes from, or includes in, its non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP financial measures has been provided in the tables included as part of this press release. In addition, as the business combination occurred on February 19, 2019, GTY believes reviewing the operating results on a pro forma basis is more useful in discussing the overall operating performance when compared to the same period in the prior year. Therefore, to compare the three months ended March 31, 2020 to March 31, 2019, the company combined the GAAP and non-GAAP financial measures of the Predecessor period from January 1, 2019 through February 18, 2019 and the Successor period from February 19, 2019 through March 31, 2019 (“S/P Combined 2019”).
Non-GAAP Revenues. Non-GAAP revenues are defined as GAAP revenues adjusted for the impact of purchase accounting resulting from its business combination which reduced its acquired contract liabilities to fair value. The company believes that presenting non-GAAP revenues is useful to investors as it eliminates the impact of the purchase accounting adjustments to revenues to allow for a direct comparison between current and future periods.
Non-GAAP Gross profit and Non-GAAP Gross margin. Non-GAAP gross profit is defined as GAAP gross profit adjusted for the impact of purchase accounting resulting its business combination and share-based compensation included in cost of revenues. Non-GAAP gross margin is defined as non-GAAP gross profit divided by non-GAAP revenues. The Company believes that presenting non-GAAP gross profit and margin is useful to investors as it eliminates the impact of the purchase accounting adjustments to allow for a direct comparison between periods.
Non-GAAP Loss from operations. Non-GAAP loss from operations is defined as GAAP loss from operations adjusted for the impact of purchase accounting to revenues resulting from its business combination, the amortization of acquired intangible assets, share-based compensation, acquisition related costs, restructuring expenses and the change in fair value of contingent consideration. The company believes that presenting non-GAAP loss from operations is useful to investors as it eliminates the impact of certain non-cash and acquisition related expenses to allow a direct comparison of loss from operations between all periods presented.
About GTY Technology Holdings Inc.
GTY Technology Holdings Inc. (NASDAQ: GTYH) (“GTY”) brings leading public sector technology companies together to achieve a new standard in stakeholder engagement and resource management. Through its six business units, GTY offers an intuitive cloud-based suite of solutions for state and local governments, education institutions and healthcare organizations spanning functions in procurement, payments, grant management, budgeting, and permitting: Bonfire provides strategic sourcing and procurement software to enable confident and compliant spending decisions; CityBase provides government payment solutions to connect constituents with utilities and government agencies; eCivis offers a grant management system to maximize grant revenues and track performance; OpenCounter provides government payment software to guide applicants through complex permitting and licensing procedures; Questica offers budget preparation and management software to deliver on financial and non-financial strategic objectives and Sherpa provides public-sector budgeting software and consulting services.