The largest provider of software to the US public sector, Tyler Technologies has entered into a definitive agreement to acquire digital government service provider, NIC Inc, the companies jointly announced today. Tyler’s shares plunged 0.7% in premarket trading Wednesday while NIC rocketed 15.5% closing to its 21-year high.
Under the transaction, Tyler will buy all outstanding shares of NIC in an all-cash transaction which values NIC at around $2.3 billion. NIC shareholders will receive $34 for each NIC share held, which represents around a 22% premium to NIC’s 30-day volume-weighted average price as of February 9, 2021, and a 14.1% premium to the closing price and 52-week closing high of $29.81 on Tuesday.
Tyler plans to fund the transaction using $700 million of cash on its balance sheet while raising the rest through new debt. Financial commitments for a bridge facility of $1.6 billion have been obtained with Goldman Sachs which is expected to be replaced with permanent financing before closing. For Tyler, the deal is expected to be accretive to its non-GAAP earnings, EBITDA, recurring revenue mix, and free cash flow per share, in 2021.
The deal has been unanimously approved by the board of directors of both companies. It is expected to close in the second quarter of 2021 subject to satisfaction of customary closing conditions.
NIC – Digital Solutions
The Olathe, Kansas-based NIC provides digital government solutions and payment services to over 7,100 federal, state, and local government agencies across the US. Founded in 1992, it serves as a connection between the government and citizens by providing user-friendly digital services. Through NIC, people can apply for unemployment insurance, submit business filings, renew licenses, access information, and make secure payments without visiting a government office.
Fourth Quarter Results
NIC posted fourth-quarter earnings results today. Following are the highlights for the quarter as compared to the same period last year:
- Revenue increased 62% to $141.2 million
- Operating income surged 104% to $23.9 million
- Net income jumped 79% to $17.8 million
- Diluted earnings per share soared 73% to 26 cents
- Adjusted EBITDA was up 77% to $29.8 million
Following are the highlights of NIC’s full-year performance:
- Revenue jumped 30% to $460.5 million
- Operating income increased 40% to $87.4 million
- Net income surged 36% to $68.6 million
- Diluted earnings per share soared 35% to $1.01
- Adjusted EBITDA increased 31% to $108.8 million
The company’s exceptional performance was driven by TourHealth, NIC’s covid-19 testing solution with Impact Health and NEXT Marketing, and pandemic unemployment services provided to the Commonwealth of Virginia.
Tyler Technologies – Software Provider
The Plano, Texas-based Tyler Technologies provides valuable insights to clients to solve problems in their communities by connecting data and processes across different systems. It has over 27,000 successful installations in over 11,000 sites with clients across all 50 states, Canada, the Caribbean, Australia, and other international sites.
Fourth Quarter Results
Tyler Technologies also posted fourth-quarter results today which missed Wall Street’s expectations. Following are the highlights of the quarter as compared to the same period a year ago:
- Total revenues slipped 1.9% to $283.3 million
- Operating income was up slightly by 6.4% to $49 million
- Net income surged 15.6% to $54.1 million or $1.29 per diluted share
- Cash flows from operations jumped 16.5% to $88.8 million.
- Free cash flow rose 25.8% to $83.7 million
- Adjusted EBIDTA increased 1.3% to $83.2 million
Following are the highlights for the full year:
- Total revenues were up 2.8% to $1.117 billion
- Operating income surged 10.6% to $172.9 million
- Net income rose 33% to $194.8 million or $4.69 per diluted share
- Cash flows from operations jumped 39.4% to $355.1 million
- Free cash flow increased 53.6% to $326.6 million
- Adjusted EBIDTA surged 7.5% to $326 million
Tyler provided guidance for the year 2021 expecting GAAP and non-GAAP total revenues to be between $1.190 billion and $1.220 billion while non-GAAP diluted earnings per share are estimated to be between $5.65 and $5.77, excluding the impact of any acquisitions which may be completed during the year.
NIC – Tyler Merger
Tyler has acquired companies previously and has a history of successfully growing the acquired firms. Through the merger of NIC and Tyler Technologies, the combined entity is expected to capitalize on Tyler’s sales channels and client base to improve NIC’s scale and grow its strategy of offering vertical applications to clients. In 2020, NIC has processed over $24 billion in payments on behalf of citizens and governments. Tyler’s strength in local government and NIC’s power in state government makes them a perfect strategic fit for each other.
Post the deal, Tyler expects NIC to resume operation from its home office in Olathe, Kansas while retaining its employees and leadership team.