GTY Technology Holdings Inc.
Q4 2020 Earnings Call Transcript

Published: 16 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the GTY Technology Q4 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, John Curran, CFO. Thank you. Please go ahead.

[John Curran:]

Thank you, and good morning, everyone. I'm John Curran, GTY's CFO, and I'd like to welcome you to our fourth quarter and full year 2020 earnings conference call. With me on today's call is TJ Parass, GTY's CEO. We will be presenting slides on today's call and encourage you to view the presentation found on our website at www.gtytechnology.com.

[TJ Parass:]

Thank you, John. Good afternoon and thank you all for joining us. We are pleased with our execution throughout the year and we ended 2020 on a high note with a solid quarter. Before, we dig into this quarter's results, I want to take a moment to remind everyone GTY's mission is a modernize governments and make them more efficient, best of breed cloud technologies. Pandemic has highlighted the needs for government to move on to more modern solutions. Our focus is twofold to improve and modernize the citizens' experience with government front offices of every level and to bring modeling solutions to government employees. So, they're able to achieve optimal efficiency. As John will discuss later in this call, our fourth quarter GAAP revenue grew 14% year-over-year, to $313.1 million, and grew 32% to $48.1 million for the full year. From a non-GAAP perspective, revenue increased 10%, to $13.2 million compared to Q4, 2019, and grew 20%, $48.8 million for the full year. Most importantly annual recurring revenue or ARR grew 25% year-over-year to $41.4 million. Finally, we had a very strong year in new customer additions, adding more than 100 new customers in the fourth quarter and over 350 new customers for the year. GTY provides our industry-leading cloud technologies through six brands that cover the front and back offices of state and local government organizations. Let's start with our two front-office solutions CityBase and Open Counter. Open Counter enables any ordinary citizen to decipher the guarantee made for permits needed for projects or improvement. And then process those permits online. These permits can be as simple as a tree removal permit to as complex as helping someone start a new business by walking them through the many permits that will be required. Open Counter's momentum demonstrated considerable strength all year and accelerated in Q4 with five new customer wins and 11 for all 2020, a 30% gain in new customers year-over-year.

[John Curran:]

Thanks, TJ. As TJ highlighted earlier, Q4 was a strong finish what was otherwise a challenging year. Our GAAP revenues were up 32% to 2020 and we remain cash flow positive for the second quarter in a row. We saw strong demand for all of our products in Q4, as evidenced by the number of new logos that TJ discussed earlier. I should also point out that our financial condition has improved significantly in the quarter as we raised over $18 million in new capital.

[TJ Parass:]

Thank you, John. As we look towards 2021, I wanted to take a moment to reflect on 2020 which was a very challenging year for our customers. As a pandemic took hold, many of our customers scrambled as employees transition to working from home. Our customer's revenues are supported by a variety of taxes, however which are very stable like property tax. But many others are variable and based on volumes of activity such as sales tax.

[Operator:]

Our first question comes from Scott Berg with Needham. Your line is open.

[Scott Berg:]

Hi, TJ, and John. Congrats on a good quarter and thanks for taking the questions. I have two, I guess, let's start off in the current environment. TJ you talked about now expecting much change here in the short-term versus maybe some more positive developments in the second half of the year. How much of that is customers just unwilling to spend because maybe their processes are maybe not there internal processes to signing new deal or moving along as they should versus maybe some of the budgetary concerns that I think we all hear about for state and local governments?

[TJ Parass:]

Thanks, Scott. So, couple of answers to that, if we were to rewind back to early 2020, I would say it was like lot to do is just getting by you're working from home so processes were broken and they were getting back that. Now were past that a lot of the eyes are on the budget and that work on both sides of the equation for us. If they are finding, they need to cut back on staffing or anticipating that they're looking for solutions to help improve their processes of fleet turning to automation and Cloud technology that goes. And then, the other thing that we're keeping an eye on is we're trying to get a bit of reporting back that some states have not seen the budget shortfalls that they were expecting, and we're starting to keep a close eye on that. So I think a sense of how much they withdraw back in anticipation revenues declining and what actually happened. So, as we start seeing the budgets being close up this year and we're watching those now and we've got a large budget business unit, they will see a lot of the budget information we're keeping a close eye on that.

[Scott Berg:]

Got it. Helpful. And then from a follow-up perspective, John you talk in the guidance 10% revenue growth in the first quarter. In press release you talk about $57 million to $60 million for the full year, which I believe is, we'll use round numbers 20 %to 25% growth rate, which does mirror your ARR growth in the fourth quarter of ‘20. But how should we think about kind of the shape and modeling the year and maybe your confidence that 10% growth rate is going to accelerate through part of the balance here in the year?

[John Curran:]

Sure. Yes, good question, Scott. So, we have a little bit of a headwind coming out of Q4. So, we did actually see the CityBase payment volume tick up in the fourth quarter as we would normally see from a seasonality perspective and, it's going to decline from Q4 to Q1, again in their normal cadence. So we're anticipating for the year that their seasonal pattern is going to come back. So, they would normally see lower Q1, higher Q2, lower Q3 with the highest period being Q4. So, we are anticipating that pattern to re-emerge in 2021. So that explains why we've got a little bit of a headwind from Q4 to Q1 related to payment volumes dropping.

[Scott Berg:]

Great, helpful. Thank you.

[Operator:]

Our next question comes from Jeff Van Rhee with Craig-Hallum. Your line is open.

[Jeff Van Rhee:]

Great, thanks for taking my questions. I've got several. John as it relates to the revenue splits, I think you shared which is your Open counter I believe. Do you have the numbers for the other key products?

[John Curran:]

So budgeting combined 20%, eCivis just under 10%, CityBase 11%, and bonfire around 55%.

[Jeff Van Rhee:]

Okay, that's helpful. And then the Q1 guide what's implicit in there, you commented to the professional services being a lumpy what's implicit in terms of the Q1 expectation around services?

[John Curran:]

We're expecting it to be a little higher than Q4.

[Jeff Van Rhee:]

Okay. And then, I guess maybe TJ, as it relates to the bookings. Just curious, I mean obviously we don't get a full bookings number and you may have few illusions you added a lot of customers. So, seemingly very, very good customer capture, I'm curious about the booking's value signed in the quarter versus maybe your expectations coming out of the September quarter?

[TJ Parass:]

So on a relative center?

[Jeff Van Rhee:]

Yes, just some sense on how did you compare to your expectations coming into the quarter. I mean, was this sort of in line with what you thought you'd post. Did you see any variation as the quarter progressed?

[TJ Parass:]

Yes, good question. So, we were a little ahead of what we expected in Q4.

[Jeff Van Rhee:]

Okay. And then on the churn front; obviously as you said, it depends on what the end customers budget driver is right use tax versus property tax versus other and how stable there revenue flows are? What from a churn standpoint did you see any, start there within the products? Did you see any variation in churn amongst the products in the quarter that was notable?

[TJ Parass:]

Yes, I was just actually looking over the churn numbers in the session we typically published, but I was comparing them relative to 2019, to see what the COVID effects were. Churn stayed just about the same as 2019, a little bit higher as we saw a little bit more contraction then churn like net churn then we saw in 2019 but overall, quite happy at the numbers.

[Jeff Van Rhee:]

Fair enough. And then the again, kind of looking at it by-product when you looked at the bookings certainly look like a very strong at least customer capture number year-end there for the budgeting side. But maybe what was the standout, maybe it was budgeting in terms of bookings in the quarter and maybe what was the one that was most challenged and that might give us a glimpse into sort of the end customer, or you have the end customer drivers. So kind of just within the product stat, what did you see the most momentum and where do you see the most headwind in the quarter?

[TJ Parass:]

Well, in this quarter we saw, I mean you saw bonfire numbers are amazing this year. So, you've seen a consistent growth. Cost good numbers are posted well, what you're seeing there is some of their mid-market, movement is starting to pick up. Some CityBase had some great sales in the last quarter, a lot of that as we've described in the past require that we onboard them in revenue flows in later. So they've had a significant, so they kind of uptick in their sales. Our open counter had a good pick up this quarter. They're the ones that have been because of the pandemic, the area of permitting has been a little bit down this year. So they are doing pretty good with what the year has been like and are up from last year. So, I hope that gives you a little bit of an idea and certainly eCivis that grants is up this quarter also.

[Jeff Van Rhee:]

Yes. Okay, great. And then just last one, TJ, is you're focusing on sales. What's on your to-do list in terms of maturing the sales org in ‘21 structurally just kind of what move should we think about in terms of your goals for structural change in ‘21?

[TJ Parass:]

Great question. So we've been really focused in the last year, making sure that sales team that we hired in the last Q4 2019 matured, they are mature -- our team now through these bookings increases. Second thing is now to focus on what's so successful there and start to expand on that; so expansion in growth of teams. You know, a lot of what I would call are cross-pollination, we call them internally call sales, Ted talks about learning what works, what doesn't work and making sure we're sharing those experiences across the different business units. For 2021 we largely expect to keep the business units with their own sales teams, and it's a highly focus because we see so much greenfield organic growth in the teams that we want to make sure they stay focused on that.

[Jeff Van Rhee:]

Okay, great. Thanks for taking my questions. Appreciate it.

[Operator:]

There are no further questions at this time. I'll turn the call back over to the company for closing remarks.

[TJ Parass:]

I just want to say thank you everyone and look forward to talking next quarter.

[Operator:]

This concludes today's conference call. You may now disconnect.