March 12, 2020
(Austin, Texas, March 12, 2020) – GTY Technology Holdings Inc. (Nasdaq: GTYH) (“GTY”), a leading vertical SaaS/Cloud solution for the public sector, announced strong financial results for the quarter and year ended December 31, 2019 and reaffirmed guidance for the full year 2020.
• Fourth quarter GAAP revenues up 31% year-over-year to $11.5 million
• Fourth quarter non-GAAP revenues up 37% year-over-year to $12.0 million
• Full year 2019 GAAP revenues up 22% year-over-year to $36.4 million
• Full year 2019 non-GAAP revenues up 36% year-over-year to $40.5 million
“2019 proved to be a strong growth year for GTY,” said Stephen Rohleder, Chairman and CEO. “We closed on six acquisitions in February of 2019 to form our Company, brought together an essential lineup of offerings to digitize the public sector and experienced great momentum in the back half of the year. The year was marked by significant wins in the marketplace, expansion of our partner ecosystem, the delivery of new product innovations and market recognition for the value our solutions bring. Today, more than 1,500 organizations are GTY customers and we expect to accelerate topline growth this year.
“GTY aims to be the pre-eminent native SaaS/Cloud software company serving the public sector. Our mission is to help our customers improve citizen engagement while reducing cost and enhancing efficiency,” continued Rohleder. “We uniquely bring a portfolio of solutions that solve key customer pain points in the areas of budgeting, procurement, grants management, payments and permitting.”
“We’re executing on our strategic plan,” stated Rohleder. “The four drivers to our plan are customer success, Go-to-Market excellence, continuous innovation and enhanced operational efficiency.”
Customer Success: Added 62 new customers in the fourth quarter with larger average deal sizes compared with prior quarters, reflective of our focus to expand our enterprise activity across our business units.
• New customers in the quarter include the City of San Jose for our digital payments platform by CityBase; Osage Nation, US Virgin Islands and California Housing and Community Development for our grants management platform by eCivis.
Go-to-Market Excellence: We go-to-market through a direct sales force and an ecosystem of partners. Our accomplishments during the quarter include:
• Entering into a new relationship with Carahsoft, a trusted government IT solutions provider, which will help GTY to expand its market reach.
• Increasing sales and marketing headcount by 22, giving us the sales capacity we believe is necessary to achieve our 2020 objectives.
• Entering into a new marketing agreement with Grant Thornton, giving us incremental delivery and go-to-market capacity in our grants management and budgeting businesses.
• Gaining five new customers as a result of the cooperative agreement we entered into with the Texas Department of Information Resources in Q2.
Continuous Innovation: Introduced a number of new offerings in the quarter, including:
• Multi-step approvals and versioning for OpenCounter,
• FundMax from eCivis, and
• CityBase’s new user profile functionality.
• We also have our first joint offering between CityBase and OpenCounter, whereby we are using CityBase’s payment functionality along with Open Counter’s permitting and licensing solution.
Enhanced Operational Efficiency: Implemented NetSuite ERP across all business units. We are in the process of rolling out Concur for managing our Travel and Entertainment spend and we expect to have Salesforce.com fully operational by the end of Q1.
Investments to fuel the company to higher levels of revenue, including sales and marketing headcount and enterprise software expenses, contributed to an operating loss in the fourth quarter and full year 2019. Sales and marketing expenses, including incremental resources, comprised roughly half of our operating expense increase for the quarter. Fourth quarter 2019 operating loss was $42.6 million compared with $5.5 million in Q4 2018. Our operating loss for the quarter includes a goodwill impairment charge of $32.2 million. Fourth quarter non-GAAP operating loss was $5.4 million compared with $4.8 million in Q4 2018. Full year operating loss was $105.5 million for the year ended December 31, 2019 compared with $15.6 million for full-year 2018. Full-year 2019 non-GAAP operating loss was $19.8 million for the year ended December 31, 2019 compared with $12.3 million in full-year 2018.
“Looking at the year 2020, we expect non-GAAP revenue in the range of $57 to $63 million. We also expect increased operating leverage as we scale, leading to improvements in EBITDA and Free Cash Flow as we move through the year,” stated John Curran, GTY CFO.
“2020 outlook does not take into account any potential impact from the coronavirus. While we have no revenue from countries outside of North America, our selling model partly depends on event-based marketing and travel to client meetings. At this time, we are unable to quantify the effect of continued trends with travel and meeting cancellations due to the virus. While our SaaS products generally allow for work from home usage so that physical closure of offices due to coronavirus should not materially affect us, we are unable to determine if outbreaks of coronavirus could affect budget sizes or budgeting priorities of our government clients going forward,” concluded Curran.
GTY will hold its quarterly earnings call on March 12, 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 part of our website.
Conference ID: 4883125
Participant Toll Free Dial-In Number: (866) 211-4173
Participant International Dial-In Number: (647) 689-6719
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 the previously announced review of strategic alternatives; (2) the lack of actionable alternatives being 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; and (9) other risks and uncertainties included in the company’s registration statement on Form S-1 (File No. 333-229926), including those under “Risk Factors” therein, and in the company’s other filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2019. 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.
As a result of the business combination, GTY is the acquirer for accounting purposes and Bonfire, CityBase, eCivis, Open Counter, 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 closing date (labeled “Predecessor”) and the period including and after that date (labeled “Successor”). The merger 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.
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 twelve months ended December 31, 2019 to 2018, 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 December 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. 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, goodwill impairment expense 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.
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; Open Counter 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; Sherpa provides public-sector budgeting software and consulting services.