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GTY Technology Holdings Announces Second Quarter 2020 Results

35% Revenue Growth, Strong Bookings Growth and On Path to Cash-Flow Positive

BOSTON--(BUSINESS WIRE)--#GTYtechnology--GTY Technology Holdings Inc. (Nasdaq: GTYH) (“GTY”), a leading vertical SaaS/Cloud solution provider for the public sector, today announced financial results for the second quarter and six months ended June 30, 2020.


  • New leadership team delivers on topline growth, cost management, customer satisfaction and cultural adaptation to healthy and engaged remote work.
  • First half GAAP revenues up 38% year-over-year to $22.4 million; second quarter GAAP revenues up 35% to $11.2 million.
  • First half non-GAAP revenues up 22% year-over-year to $22.9 million; second quarter non-GAAP revenues up 14% to $11.3 million.
  • Focus on efficiency including cost management and consolidation in the back-office functions delivers $3 million in quarterly savings.
  • High demand for Budgeting, Procurement and Grants Management Solutions.
  • More than 375 Public Sector organizations have deployed GTY’s free Emergency COVID-19 Care Program.
  • Customer retention at an all-time high.
  • Employees fully adapted to working from home; leadership fostering engagement and ensuring wellness support.

“We delivered significant revenue growth this quarter while getting leaner and remaining focused on growth, cost reductions and customer satisfaction. We’ve also deployed centralized processes and discipline to be more predictable in our execution and results,” said TJ Parass, CEO of GTY. “Customer retention and loyalty are at an all-time high. The COVID-19 pandemic is driving organizations in the public sector to continually iterate their budgets, rapidly seek and manage grants, and modernize other government functions, such as serving citizens remotely. We believe GTY is well-positioned to help these organizations address these time sensitive, evolving demands.

"GTY's mission is to help digitize the public sector so that government can work like most other private organizations in modern life -- quickly and online,” said Parass. “With GTY, government customers are able to digitally transform critical applications in days or weeks so that they can be effective working remotely in this dynamic environment while better serving their customers. Our free COVID-19 Care program is now introducing hundreds of new prospects to our offerings while helping entities such as nonprofits when they need it the most.

“In the mid-market in particular, government offices are favoring GTY for the value of our solutions and the speed of deployment. Our customers can now apply for grants, manage and track grant deployments, conduct the necessary budget iterations, procure goods and services and deploy touch-less cash payments so that no government employee has to feel unsafe handling cash. All while being remote. Governments using our technology solutions are serving citizens and themselves better and faster,” said Parass.

Financial Discussion and Outlook

According to John Curran, CFO of GTY, “Our cost reduction initiatives are working as expected. We experienced a savings of more than $3 million in our quarterly operating expenses. We are planning for our operating expenses to remain at this level each quarter for the balance of the year. On the revenue side, recurring revenues were up 7% compared with Q1 2020 and up 23% compared with Q2 2019. We are on track with our revenue growth expectation from Q1 2020 of more than 20% for the full year 2020.”

Second quarter 2020 operating loss narrowed to $7.8 million compared with $16.5 million in Q1 2020. Second quarter non-GAAP operating loss narrowed to $2.8 million compared with $5.7 million in Q1 2020.

Conference Call and Webcast

GTY will hold its quarterly earnings call on August 7, 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 our website at www.gtytechnology.com.

Investors and participants can register for the call in advance by visiting http://www.directeventreg.com/registration/event/3259166. The call will also be available via live webcast at https://event.on24.com/wcc/r/2395129/E72C6C8650BB4E79B747EAA45211315F. The archived webcast will be available shortly after the call on the Company website, www.gtytechnology.com.

Forward-Looking Statements

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) the impact of the coronavirus outbreak (“COVID-19), or similar global health concerns, on our operations and customer base; (2) our ability to consummate any proposed transaction with respect to the previously announced review of strategic alternatives; (3) the lack of actionable alternatives being identified in connection with 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) other risks and uncertainties included in our Annual Report on Form 10-K for the year ended December 31, 2019 and our subsequent filings with the Securities and Exchange Commission. 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 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.

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 six months ended June 30, 2020 to the six months ended June 30, 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 June 30, 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.

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; 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.

Exhibit 1
GTY Technology Holdings Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
Successor Predecessor
Three Months
Ended
Three Months
Ended
Six Months
Ended
February 19, 2019
through
January 1, 2019
through
June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 February 18, 2019
Revenues

$

11,164

 

$

8,246

 

$

22,440

 

$

11,280

 

$

4,928

 

Cost of revenues

 

4,394

 

 

2,931

 

 

8,921

 

 

4,507

 

 

1,614

 

Gross Profit

 

6,770

 

 

5,315

 

 

13,519

 

 

6,773

 

 

3,314

 

 
Operating expenses
Sales and marketing (1)

 

3,667

 

 

4,159

 

 

8,521

 

 

5,537

 

 

1,394

 

General and administrative (1)

 

4,491

 

 

7,676

 

 

11,940

 

 

10,030

 

 

1,749

 

Research and development (1)

 

2,573

 

 

3,135

 

 

6,371

 

 

4,607

 

 

1,580

 

Amortization of intangible assets

 

3,642

 

 

3,872

 

 

7,315

 

 

5,565

 

 

32

 

Acquisition costs

 

-

 

 

(2,280

)

 

-

 

 

32,749

 

 

151

 

Restructuring charges

 

198

 

 

-

 

 

3,664

 

 

-

 

 

-

 

Change in fair value of contingent consideration

 

-

 

 

-

 

 

29

 

 

-

 

 

(37

)

Total operating expenses

 

14,571

 

 

16,562

 

 

37,840

 

 

58,488

 

 

4,869

 

Loss from operations

 

(7,801

)

 

(11,247

)

 

(24,321

)

 

(51,715

)

 

(1,555

)

 
Other income (expense)
Interest income (expense), net

 

(436

)

 

(108

)

 

(672

)

 

313

 

 

(170

)

Loss from issuance of shares

 

666

 

 

(904

)

 

(1,390

)

 

(904

)

 

-

 

Other income (loss), net

 

634

 

 

187

 

 

1,133

 

 

182

 

 

12

 

Total other income (expense), net

 

864

 

 

(825

)

 

(929

)

 

(409

)

 

(158

)

 
Loss before income taxes

 

(6,937

)

 

(12,072

)

 

(25,250

)

 

(52,124

)

 

(1,713

)

Benefit from income taxes

 

(837

)

 

1,670

 

 

1,684

 

 

1,670

 

 

-

 

Net loss

 

(7,774

)

 

(10,402

)

 

(23,566

)

 

(50,454

)

 

(1,713

)

 
Deemed dividend for Exchangeable Shares - Series C

 

-

 

 

(183

)

 

-

 

 

(183

)

 

-

 

Net loss applicable to common shareholders

$

(7,774

)

$

(10,585

)

$

(23,566

)

$

(50,637

)

$

(1,713

)

 
 
Net loss per share, basic and diluted

$

(0.15

)

$

(0.22

)

$

(0.44

)

$

(1.03

)

Weighted average common shares outstanding, basic and diluted

 

53,481

 

 

49,159

 

 

53,028

 

 

48,943

 

 
Net loss

$

(7,774

)

$

(10,402

)

$

(23,566

)

$

(50,454

)

$

(1,713

)

Other comprehensive loss:
Foreign currency translation gain (loss)

 

(953

)

 

186

 

 

1,096

 

 

186

 

 

-

 

Total other comprehensive income (loss)

 

(953

)

 

186

 

 

1,096

 

 

186

 

 

-

 

Comprehensive loss

$

(8,727

)

$

(10,216

)

$

(22,470

)

$

(50,268

)

$

(1,713

)

 
(1) Amounts include share-based compensation expense as follows:
Cost of revenues

$

132

 

$

-

 

$

350

 

$

-

 

$

-

 

Sales and Marketing

 

362

 

 

1,262

 

 

1,133

 

 

1,721

 

 

61

 

General and administrative

 

395

 

 

427

 

 

2,446

 

 

452

 

 

-

 

Research and development

 

130

 

 

71

 

 

385

 

 

138

 

 

-

 

Total share-based compensation expense

$

1,019

 

$

1,760

 

$

4,314

 

$

2,311

 

$

61

 

 
Exhibit 2
Reconciliations of non-GAAP Financial Measures
(in thousands)
(unaudited)
 
 
Non-GAAP Reconciliation Three Months Ended
June 30, 2020 March 31, 2020 June 30, 2019
Revenues

$

11,164

 

$

11,276

 

$

8,246

 

Purchase accounting adjustment to revenue

 

146

 

 

315

 

 

1,699

 

Non-GAAP Revenues

$

11,310

 

$

11,591

 

$

9,945

 

 
 
Gross Profit

$

6,770

 

$

6,749

 

$

5,315

 

Purchase accounting adjustment to revenue

 

146

 

 

315

 

 

1,699

 

Share-based compensation

$

132

 

$

218

 

 

-

 

Non-GAAP Gross Profit

$

7,048

 

$

7,282

 

$

7,014

 

 
Gross Margin

 

61

%

 

60

%

 

64

%

Non-GAAP Gross Margin

 

62

%

 

63

%

 

71

%

 
Loss from operations

$

(7,801

)

$

(16,520

)

$

(11,247

)

Purchase accounting adjustment to revenue

 

146

 

 

315

 

 

1,699

 

Amortization of intangibles

 

3,642

 

 

3,673

 

 

3,872

 

Share-based compensation

 

1,019

 

 

3,295

 

 

1,760

 

Acquisition costs

 

-

 

 

-

 

 

(2,280

)

Restructuring charges

 

198

 

 

3,466

 

 

-

 

Change in fair value of contingent consideration

 

-

 

 

29

 

 

-

 

Non-GAAP Loss from operations

$

(2,796

)

$

(5,742

)

$

(6,196

)

 
 
Six Months Ended June 30,

 

2020

 

 

2019

 

Revenues - Successor Period

$

22,440

 

$

11,280

 

Revenues - Predecessor Period

 

-

 

 

4,928

 

Pro forma as Adjusted Revenues

 

22,440

 

 

16,208

 

Purchase accounting adjustment to revenue

 

461

 

 

2,571

 

Non-GAAP Pro forma as Adjusted Revenues

$

22,901

 

$

18,779

 

 
 
Gross Profit - Successor Period

$

13,519

 

$

6,773

 

Gross Profit - Predecessor Period

 

-

 

 

3,314

 

Pro forma as Adjusted Gross Profit

 

13,519

 

 

10,087

 

Purchase accounting adjustment to revenue

 

461

 

 

2,571

 

Share-based compensation

 

350

 

 

-

 

Non-GAAP Pro forma as Adjusted Gross Profit

$

14,330

 

$

12,658

 

 
Gross Margin - Successor Period

 

60

%

 

60

%

Gross Margin - Predecessor Period

 

N/A

 

 

67

%

Pro forma as Adjusted Gross Margin

 

60

%

 

62

%

Non-GAAP Pro forma as Adjusted Gross Margin

 

63

%

 

67

%

 
Loss from operations - Successor Period

$

(24,321

)

$

(51,715

)

Loss from operations - Predecessor Period

 

-

 

 

(1,555

)

Pro forma as Adjusted Loss from operations

 

(24,321

)

 

(53,270

)

Purchase accounting adjustment to revenue

 

461

 

 

2,571

 

Amortization of intangibles

 

7,315

 

 

5,597

 

Share-based compensation

 

4,314

 

 

2,372

 

Acquisition costs

 

-

 

 

32,900

 

Restructuring charges

 

3,664

 

 

-

 

Change in fair value of contingent consideration

 

29

 

 

(37

)

Non-GAAP Pro forma as Adjusted Loss from operations

$

(8,538

)

$

(9,867

)

 
Exhibit 3
GTY Technology Holdings Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
June 30, December 31,

 

2020

 

 

2019

 

Assets
Current assets:
Cash and cash equivalents

$

5,990

 

$

8,374

 

Accounts receivable, net

 

10,919

 

 

9,184

 

Prepaid expenses and other current assets

 

3,803

 

 

3,047

 

Total current assets

 

20,712

 

 

20,605

 

 
Property and equipment, net

 

5,195

 

 

3,185

 

Intangible assets, net

 

108,473

 

 

115,788

 

Goodwill

 

286,635

 

 

286,635

 

Other assets

 

7,670

 

 

8,180

 

Total assets

$

428,685

 

$

434,393

 

 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued expenses

$

6,979

 

$

8,443

 

Contract liabilities - current portion

 

17,982

 

 

17,346

 

Contingent consideration - current portion

 

10,685

 

 

12,680

 

Term loan, net - current portion

 

11,545

 

 

-

 

Other current liabilities

 

2,440

 

 

2,406

 

Total current liabilities

 

49,631

 

 

40,875

 

 
Contract and other long-term liabilities

 

2,237

 

 

1,264

 

Deferred tax liability

 

17,657

 

 

20,276

 

Contingent consideration - less current portion

 

41,230

 

 

41,233

 

Term loan, net

 

3,210

 

Other long-term liabilities

 

3,854

 

 

5,122

 

Total liabilities

 

117,819

 

 

108,770

 

 
Commitments and contingencies
 
Shareholders’ equity:
Common stock

 

5

 

 

5

 

Exchangeable shares

 

40,918

 

 

45,681

 

Additional paid in capital

 

382,232

 

 

369,756

 

Accumulated other comprehensive loss

 

1,466

 

 

370

 

Treasury stock

 

(5,174

)

 

(5,174

)

Accumulated deficit

 

(108,581

)

 

(85,015

)

Total shareholders' equity

 

310,866

 

 

325,623

 

Total liabilities and shareholders’ equity

$

428,685

 

$

434,393

 

 

 


Contacts

Company Contacts:
Investor Relations
John Curran
ir@gtytechnology.com
(702) 945-2898