Hello, welcome to today's Tyler Technologies conference call. Your host for today's call is John Marr, President and CEO of Tyler Technologies. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, instructions follow at that time. As a reminder, this conference is being recorded today, October 1, 2015. If you require operator assistance, please press star then zero. I would now like to turn the conference over to Brian Miller, Executive Vice President and CFO. Please go ahead.
Thank you, Andrew, welcome to our call to discuss our announcements this morning. I'm going to give the safe harbor statement, turn the call over to John Marr, our President and CEO, for his comments on the acquisition. Following that, we'll take your questions. I'd like to point out that as a supplement to the information contained in the press release, there's an investor deck with additional information on New World Systems and the proposed acquisition posted on the investor relations section of our website at www.tylertech.com. During the course of this conference call, management may make statements that provide information other than historical information and may include projections concerning the company's future prospects, revenues, expenses, and profits.
Such statements relate to a variety of matters, including the operations of the businesses of Tyler and New World Systems, separately and as a combined entity, the timing and confirmation of the proposed transaction, the expected benefits of the integration of the two companies, the companies' combined plans, objectives, expectations, and intentions, and other statements that are not historical in nature, such as future revenues, costs and expenses, operating income, earnings per share, margins, cash flows, and capital expenditures. These statements are made on the basis of the current beliefs, expectations, and assumptions of the management of Tyler and New World Systems regarding future events and are subject to certain risks and uncertainties. Investors are cautioned not to place reliance on any such forward-looking statements, which speak only as of the date they are made.
Neither Tyler nor New World Systems undertakes any obligation to update or revise these statements, whether as a result of new information, future events, or otherwise. Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections. We'd refer you to our press release issued today and our Form 10-K and other SEC filings for more information on those risks. With that, I'd like to turn the call over to John for his remarks.
Okay. Thank you, Brian, and good morning. We're extremely excited about the announcement today that Tyler has signed a definitive agreement to acquire New World Systems. The transaction is subject to regulatory approval and is expected to close in the fourth quarter. We have known and respected New World, its founder and CEO, Larry Leinweber, and their team for many years, both as a solid competitor in our ERP business and as a leader in the public safety space, where we have not historically had a significant presence. Larry will be joining the Tyler board following the closing of the transaction. This is a complementary and extremely comfortable acquisition for Tyler. New World, like Tyler, is focused exclusively on the public sector.
What they have achieved over more than 30 years in this space is remarkable and a testament to the skill and hard work of their leadership and the entire team of professionals. Tyler and New World share comparable values and strengths. We see many similarities in the way both companies have entrepreneurial foundations, high client retention rates, strong financial results, long track records of successful execution of implementations, and consistently competitive products. While this will be by far the largest acquisition in Tyler's history, it's very consistent with the strategy of our past acquisition, it supports our long-term strategy of being an industry leader in all major enterprise applications essential to local government. We have a long and successful record of creating value through successful acquisitions, and we look forward to building on that record with the addition of New World.
New World's success is due in large part to their team, which, like Tyler's, has deep domain expertise, we have no plans to materially impact the New World workforce or their operations at their headquarters in Troy. In fact, we expect that New World's growth will accelerate as part of Tyler and that the combined companies will provide enhanced opportunities for all employees to advance their careers. We believe the strategic rationale behind the transaction is compelling. From a product standpoint, we have for some time talked about our desire to expand our presence in the public safety space to complement our leadership position in courts and justice software. The public safety market, which is estimated to be at $2.1 billion annually, is highly fragmented.
The market has attractive characteristics, including a growing demand for new technology to support initiatives like NextGen 911, which allows digital information such as voice, photos, videos, and text messages to flow seamlessly from the public through the 911 network and on to the emergency responders. FirstNet, a nationwide wireless broadband network dedicated to public safety. New World is a leader in public safety software, which represents approximately two-thirds of their revenues. New World has a robust suite of public safety applications, which are used by dispatchers, law enforcement officers, firefighters, EMS, and correction officers. Applications include 911 and computer-aided dispatch, mobile messaging, field reporting, records and management, corrections management, and analytics.
We believe that the addition of these applications integrated with our courts and justice solution will enable Tyler to provide an end-to-end solution spanning from a 911 call through probation that does not exist in the marketplace today. New World's public safety revenues have grown in the low double digits since 2012. In public administration and ERP space, which represents the other third of New World's business, they have a very competitive application for financial management, payroll and human resources, community development, utilities, analytics, and web-based self-service. Many of these products overlap with other Tyler products, but we plan to continue to invest in and support the New World products and their extensive client base.
We believe that with New World, we will have a strong cross-selling opportunity with their existing and new clients for complementary Tyler products and services, including software-as-a-service, cloud-based solutions, disaster recovery services, and our Intergov solution. From a financial standpoint, we believe the valuation on the acquisition is very fair and represents an attractive multiple in comparison to similar deals. The transaction will be immediately accretive to Tyler's margins, cash flow, and non-GAAP earnings. We expect for the year 2016, the impact of the transaction will be to add approximately $134 million to our annual non-GAAP revenues, approximately $49 million to our adjusted EBITDA, and approximately $0.56 to our non-GAAP earnings per diluted share. Tyler plans to continue to invest in and grow New World's products and to integrate them with Tyler products, and these estimates include incremental spend on product development over New World's current level.
Now, Andrew, we'd like to take questions.
We will now begin the question-and-answer session. To enter a question into the question queue, please press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset and then press the star key and the number one. To withdraw your request, press the star key then the number two. Please limit your question to one and one follow-up, and then place yourself back into the queue for additional questions. We will pause momentarily to assemble our roster. Your first question comes from Brian Kinstler of Maxim Group. Please go ahead.
Hi, good morning.
Morning.
The first question I had, I'm curious, in their public safety business, what's the client overlap? Essentially, what's your upsell opportunity in your installed base for Odyssey?
We don't really know, Brian, exactly at this point in time. I haven't had the opportunity to completely compare those customer lists. Generally, Odyssey plays at a little higher level in terms of the size of the client. As you know, Odyssey has many statewide deployments, top 20 county types of deployments. Probably plays at a little higher level and does reach down into mid-size counties and as well, where New World would have a stronger presence. New World would be a very strong player on the public safety side in the tier 2 to tier 3 space. I think it's fair to say they have a pretty strong leadership position in that space.
There's some overlap, but there's also a great opportunity to take our courts and justice system downstream a little bit, as well as I think with our brand, the strength of our company, and our presence in larger courts to move New World's public safety solution up into the tier 1 space as well.
Great. On the other side of their business, I think it's Logos, is that right? I'm curious, is that more of a competitor to Munis or Incode? Do you see them often when going after new deals? Is it more a function of geography? Just a sense of how you competed with them.
Yeah, I'd say it's 80/20 competitive with Munis over Encode. Again, strong tier 2, maybe 2 and a half, maybe the lower end of 2-tier presence, very strong tier 3 presence. National in terms of footprint, but certainly very focused and very successful in certain states over others. Probably not as mature a national presence as Munis has. You would want to look at it as very similar to the addressable market that Munis has, but again, probably not as far along in terms of a national rollout.
Great. Thank you.
The next question comes from Jonathan Ho of William Blair. Please go ahead.
Good morning, and congrats on the acquisition. Just wanted to understand, Chris, in terms of your thinking around acquired deferred revenue, and also maybe if you can just walk through similarities or differences in terms of how the company structures contracts and the type of selling models.
The acquired deferred revenue, we're still quantifying that. We don't know exactly what the close date will be, so we don't know exactly what that is. In the impact for next year that we presented in the press release, that is exclusive of the non-GAAP or the write-down for GAAP of deferred revenue, that would be their normalized number.
Got it. Just in terms of average deal length and the types of contracts that the company is using for selling, it doesn't sound like there's a SaaS product here. I just want to get a sense of maybe the similarities or differences there across both the public safety side and the corporate side.
Yeah. Our understanding is that the public safety side, they actually do about the same number of deals on Logos and Aegis Finance and Public Safety, and have about the same number of existing clients, yet the public safety side is about twice as big. Obviously that suggests, our understanding is that those deals are larger. One of the things they do well in public safety is there is a movement toward combining agencies into central 911 dispatch centers, where a county might run a dispatch center for seven or eight small towns. There's a lot of consolidation around that. That's something that they have the ability to do. They have multi-agency, multi-jurisdiction functionality, it's driving some bigger deals. Their average sales price and average customer arrangement, maintenance arrangement, in general, is about twice as big on the public safety side.
In terms of cloud, the good news is they have some cloud clients. I think cloud is a more immediate opportunity on the Logos side. We know in Tyler's experience that the market is becoming more and more receptive to that, there's really not any resistance around it. The good news is, they do have a few clients, not hosted in their facilities, but hosted at colos. The proof of concept is largely proven up. We'll do some more work there, we will introduce what you know we do as flips at Munis and other divisions to offer clients who want to stay with the same application but do it on a hosted basis that. That'd be an opportunity to grow within the install base to some degree. Probably not as immediate an opportunity on the public safety side.
I think the nature of public safety is still that generally it's preferred to be a deployed solution.
Great. Just as a quick follow-up, can you talk a little bit about product integration? I think you said you were going to continue supporting Logos, just want to understand what your thoughts are in terms of overlapping product platforms, whether you would tend to merge those over time.
Yeah, we'll certainly continue to support it and invest in the product. We'll certainly do some analysis as to what markets. They have great success. They're a strong player in that space. It's not just one homogeneous market. Obviously, there's size and range of clients. There's geographies, there's state-specific applications. There's a range of different things that make the same product more or less successful in subsegments of the marketplace. We'll be doing that analysis, and we're certain that the Logos system plays very well in certain segments of the marketplace, and that's where we'll focus and invest further in those products. Our hope would be, obviously, that the combined market share that Logos and Munis and Encode share today is something we can continue and extend, which means that all of them need to be competitive in the marketplace.
It's pretty compelling, the market share that that combination will have.
Thank you.
The next question comes from Kirk Materne of Evercore ISI. Please go ahead.
Thanks very much, congratulations on the acquisition. John, I guess, can you talk just a little bit more about just sort of geographic overlap? I'd imagine one of the opportunities is obviously getting the New World sales force to be able to carry some of your products. Can you just talk about maybe where you see some areas of opportunity? You guys have obviously been really strong down some of the Sun Belt states, just any color on that would be helpful.
Yeah, sure. They're very strong here in the Midwest. They're pretty strong in California, in the Southeast to some degree. They really do have kind of a 2-tier market geographically, about 20 states would be characterized as franchise states, is what they call them, where they have a very strong focus and a strong presence and good win rates. That's where we'll obviously focus to continue to support a leadership position. Other Tyler products and services, as you ask, is an opportunity for both the installed base as well as the new business market. We've been where they are, which is that their core financial system, their core payroll HR system, very strong. There are all these other applications that enter into a decision process. When that's just another application in a large suite, they can't all be industry-leading.
If they get to something like the Intergov side of the business, instead of that being two hours in the demo that you hope to get through, all of a sudden, you're kind of a rock star in that particular segment. Instead of getting through it elevates you to the next level in the decision process. Not only does it leverage another Tyler product, as we've seen with Munis working with Intergov, it actually improves their chances of winning that particular name considerably. Going into their install base. They've got about 800 customer support agreements across a couple thousand agencies. Obviously, a lot of those clients could use those same products.
As we mentioned in the opening remarks, to market services like disaster recovery, SaaS flips, Intergov solutions, Tyler Content Manager, a lot of these solutions we have that are industry-leading that maybe are just part of their suite, is a great opportunity to sell into the base and create an even stickier relationship.
Just, Brian, I was wondering if you could give us a little bit of an idea of, at least you guys give some revenue guidance for next year. What should we be thinking in terms of maybe software versus services split? Maybe just a rough estimate of where their gross margins were trending. You would seem to be, they might be a little bit higher than where yours are, but I was just kind of curious if you could give us some idea on those two elements.
Sure. Their mix is not too dissimilar from ours. I think for this year, they'll be around 20% licenses, just a little north of 20% in services. It's low 20s services. They're about 54%-55% maintenance and 4% or so hardware and other. Their gross margins, obviously not a public company, their gross margins are slightly higher than ours. This will be accretive to margins. We will be making some additional investments, particularly in product development. The guidance we've given doesn't really reflect more additional costs than cost synergies. We do expect it to be somewhat accretive to our margins.
Okay. Are you assuming much in terms of sales synergies in the first year? I'm guessing not, but I just want to double-check.
No. There will be some cost synergies, obviously, but we would say that there will be a net increase in spend. Over time, there'll be some shifts in heads, but again, this is a net investment. We'll accelerate some of the dev projects that we think could be impactful. We'll accelerate some of the go-to-market and sales channel work. Obviously, there'll be some areas that go in the other direction, but it will be a net increase in investment.
Okay, great. Thanks, guys.
The next question comes from Scott Berg of Needham & Company. Please go ahead.
Hey, John and Brian, congrats on the transaction. I guess one quick one for me would be on the size of the ERP space, at least with you and New World together, you create a pretty large kind of dominant market share there is. Would there be any antitrust kind of concerns or issues, given your size in that end market?
We don't think so. We've been advised that it probably doesn't come near the threshold that would make it that issue. This is a multi-billion dollar market, there may be small segments where obviously we have a concentration, but it's a very big market, I think the way you look at it from a macro standpoint, we're still a small part of it.
Okay. My follow-up on that, John, would be around the competitive dynamic within public safety. New World, my understanding, is one of the larger competitors there, but how would you compare their competitive positioning and their win rates historically in that market relative to yours that have been obviously really high recently?
They just have a much bigger presence, address, significantly larger part of the marketplace. It's just at a whole different level than what Tyler Public Safety's been at. We certainly will take care of those clients and continue the initiatives we have around it. This is a much, much bigger presence in that space. As I said earlier, I think everybody, their competitors, the market, everybody would characterize them as either a leader or the leader in the tier 2, tier 3 space. They do very well in that space. It's a very mature product, very deep functionality, high quality, going to run. They install and execute on time, manage scope, a lot of the things that Tyler does well. Obviously, risk-averse clients looking for proven solutions, they're the place to go.
The opportunity will be, I think, with Tyler's brand and the strength of the company to broaden that in terms of the size and range of these clients up into the larger tiers. I think that opportunity's there. Again, to accelerate some of the investment in newer technology and some of those things we mentioned along with NextGen 911 and dispatch and some of these areas in order to really have best of all the different worlds rather than just win on a few of the decision points that they happen to be strong at right now.
Great. Congrats again. Thanks for taking my questions.
Thank you.
The next question comes from Alex Zukin of Stephens. Please go ahead.
Hey, guys. Thanks for the time. Congratulations on the acquisition. I wanted to ask about the maintenance model that they had. Was it similar to the evergreen maintenance model you guys have? Is there a thought about transitioning those relationships to your type of evergreen model?
Close. I think they were later. I think we probably drove or dragged some other competitors, like New World, to that. I think they hung on to licensed upgrades longer than we did, and they may have some still. They still have several dozen AS400 type clients that will go through a migration to their Microsoft stack products. There may be some relicensing still going on, but it's limited. I think they've largely moved to more of an evergreen approach, and that would be our direction to Tylerize that and move them completely in that direction.
Got it. Then, apologize if you mentioned this on the call, but the total growth rate for the whole business, not just the public safety business, did you guys mention that?
No, the combined business has been in the high single digits in recent years, with obviously stronger growth on the public safety side.
You guys mentioned a confidence that you can accelerate that growth rate. What's the underlying confidence there?
Well, we think that we can accelerate both sides of the business. I think, on the Logos side, again, selling Tyler products and services into their base, adding Tyler products and services to strengthen their competitive position in the new business market. I think that that company can grow at a higher level than what it has been in the most recent years, but not tremendously high. It will grow below Tyler's, say, blended overall growth rate. The public safety side, we believe, maybe not immediately, obviously, you need to make these investments to impact the competitiveness, but we believe that we can accelerate that growth and grow that side of the business at a level above Tyler's overall growth rate. Strategically, that's the whole objective here.
Their margins and the quality of the revenues and the company are very good and certainly not dilutive to Tyler's position. If we can achieve those growth rates and their blended growth rate be at or above Tyler's overall, then obviously this becomes a very compelling deal for Tyler. On the public safety side, it's a very fragmented marketplace. There's been a lot of companies that have gone the PE route in recent years. Generally, PE-owned properties are properties we compete very well with. They generally don't make the investments that we're prepared to make in this company. The argument that a public safety and a courts and justice system integrated, nobody else can do that. There is no company that's a leader on either side of those that's a leader on the other side as well.
We'll be the only company that's a leader in courts and justice, as well as public safety. Tomorrow, those systems don't work any better together, but I think the credibility of Tyler and New World's history of execution should even immediately improve our competitiveness just on the fact that that's the direction we'll be taking our clients.
Got it. Then were you looking at other assets in the market as well? Then why now? Is there something that compelled you to that?
Well, sure. There've been, as I said, a number of assets shopped. There've been some more significant size assets shopped over the last year or two, and there's a couple names out there that we still might think we'd see in the marketplace. I can tell you, this was our number one choice for a significant application, has been for a lot of years. It just fits very well. Entrepreneurial, private company, the sense of urgency and execution that we still have at Tyler. What they bring in public safety is very significant for us. All of those things. They deliver financial results while they improve products and take care of customers and employees. It's just, I think the fit and the strategic value of New World as a significant acquisition was at an entirely different level than anything else we've seen.
Got it. Thank you, guys. Congratulations again.
Thanks.
The next question comes from Mark Schappel of Benchmark. Please go ahead.
Hi. Good morning. Thanks for taking my question. Most of my questions have been answered. Just one, though. John, it's my understanding that New World's products were Microsoft-based, principally. If that's the case, does this present a problem with your strategy or your relationship with Dynamics?
No. In fact, most of Tyler's products are Microsoft-based, so they use the Microsoft stack. We use their tools, we use their database and back end, as do an awful lot of products and applications out there in the marketplace. It's not a Microsoft application like Dynamics, but it really isn't any more competitive, and it really isn't much different than Munis' stack or our Odyssey stacks, all Microsoft. Really similar architectures.
Great. Thank you.
The next question comes from Timothy Klasell of Northland Securities. Please go ahead.
Yeah. Just wanted to talk about a little of the sales synergies. It seems like you're talking a lot about maybe bringing in some of the New World products up to the higher tiers, but is there opportunity to maybe sell some of your traditional products into the New World's install base? Thank you.
Oh, yeah. Definitely. Products and services. As I've said, like Intergov, Tyler Content Manager, Appraisal, there's a lot of applications we have that they may or may not have, but maybe they have in kind of just a lower application level, like, say, Munis did or Incode did. Over the years, as we've either invested in or acquired industry-leading applications in those kind of sub-niches, they've been adopted across Tyler's customer base, and we'd expect that to occur here. These other Tyler products will be immediately available and sold through their inside sales channel. Then services. We have a disaster recovery service, for an example, where as an increment to your maintenance agreement, we take your files and put them on servers and have them available. In the case of a disaster, we can run their solution.
We've done that for many of our clients. Weather like we're having now on the East Coast.
Excuse me, there has been an interruption in the call. Please be patient until the speaker location rejoins the call. The speakers have been reconnected. Please continue.
Sorry about that. I think we were talking about selling our products and services into their customer base. I'm not sure when we got cut off, but the answer was yes, we'll sell a number of the applications we have, such as Intergov, talent and content management, our mass appraisal products, a bunch of those products that we have that are industry leading that they either didn't have or were maybe just a smaller part of their suite. We'll also offer our disaster recovery services, hosted solutions, and those types of services into their customer base as well.
Okay, great. Thank you very much.
Sure.
The next question comes from Peter Lowry of JMP Securities. Please go ahead.
Great. Thanks. You guys had signaled that you might make a larger transformative acquisition and in particular in the public safety space, but can you maybe give us an update on your current acquisition stance, if it's changed as a result of this?
Yeah. It's nitpicky, but we're saying this is not transformative because I look at this as a big deal. It's impactful, but because it's exactly the same end market, it's culturally and organizationally very similar. We really look at this as not being as transformative as the types of acquisitions that people do that address entirely new markets or leave their domain expertise areas. We just would characterize it a little bit differently. As I said earlier, if we had a choice of the larger assets available, the deal that we could have been certain to make, this is the company we'd have, we'd want to work with. I don't think it takes away our ability to do another deal, if one presented itself. You might be a little more disciplined just having done a deal.
The urgency is probably lessened somewhat, but we feel we remain in a good position to continue to be opportunistic and if something presents itself, to act on it.
Okay, great. Thank you.
The next question comes from Charles Strauzer of CJS Securities. Please go ahead.
Hi, good morning. Can you talk a little bit more about the margins of the business that you're acquiring? They are healthier, it looks like you said, than the Tyler margins. Just what drives that? Also, who are some of the players on the public safety side that you would consider more in the tier 1 space that they would compete with?
Okay. Well, what's interesting in margins, Charlie, is their margins are nearly identical to the more mature parts of Tyler. Where we have product suites that have tens of millions of dollars of maintenance and have reached a certain level of scale and a certain level of maturity, their margins are very similar to ours. That's the potential, as we've always said, of the entire company. Tyler probably has pursued more things with the intention that those would be catalysts for growth further down the road and sustain higher growth levels, and we have higher growth levels.
We have products like Intergov that we're investing heavily in their sales channel, in their products, in their professional service side that have much lower margins, almost by design, because we believe that that will continue to drive higher growth rates and eventually, as it hits certain levels of scale, will produce those types of margins. Again, their margins are reasonable. Their ability to have high margins, service their clients, their employees well, and invest in products for the future, or those existing products for the future, is exactly what we're doing at Munis, at Infinite Visions, at more mature areas of the business. They don't have the dynamics, the Intergov, the school initiatives, a lot of the things that we have for maybe 30% of our revenues that have lower margins or no margins that bring our blended margin rates down.
That's a little bit of a look at the margin landscape. The tier 1 space, I guess Intergraph, Motorola, some TriTech, Northrop Grumman, some of those names would be the names you see in the tier 1 space as we move up into that.
Got it. Do you think you have the competitive positioning to move into that tier 1 space on the public safety side now?
Over time, that's a process, yes. I think our relationships on the courts and justice side, I think being able to talk about and eventually deliver added value by coordinating those two different suites that others can't do will add value. I think pure play software companies like Tyler and New World generally execute very well on projects, which generally outperform some of these larger companies that work primarily through integrators. I think we bring some advantages to that place. If you look on the financial side, you've seen Munis and some of our applications move into that space, and you've really seen less of the tier 1 players in that space, the Oracles, the SAPs, whoever you might want to name. We think, again, these are all long-term strategies, but we can see ourselves moving up into that space.
Great. Lastly, was this an auction process?
No. There was no formal process. I wouldn't call it an auction process. I would certainly say he's an informed seller, or the folks at New World, certainly very well-informed, understood the marketplace. I think we all believe that this was a fair valuation for both sides. Very well-informed, certainly well-networked, but not a process.
Great. Thank you very much.
Sure.
The next question comes from George Prince of RBC. Please go ahead.
Hey, congratulations, guys.
Thanks, George.
The more I look at this deal, the more I am incredibly impressed. Congratulations again. If you could you talk about the potential technology opportunities or synergies between the two companies, the hooking the two together between the police with the 911 and your courts and justice, the financials, whatever. Is there a lot of opportunity to create new products and technologies and efficiencies there?
I'd say it's the former. When you talked about integration, I think the initiatives I'd say there's two initiatives as we move in that direction. One is to accelerate their investment in certain areas. NextGen 911 and dispatch, HTML5 or ubiquitous mobile, however you want to look at that. That's an acceleration, and then secondly, what we generally do is we don't want to dictate to divisions exactly how they implement the technology stack. A dispatch system is going to be architected different than a case management system, or a payroll system. Some are online transaction processing systems. Some are more database document management systems. The implementation of the technology should be done in a fashion that's ideal for that type of application.
What we have created is kind of a Tyler technology team that creates standards, creates certain technology stacks, things like workflow and dashboards and user experiences that we encourage every division to use when they possibly can. That as we move forward over time, as we do a joint public safety financial proposal and bid, or a joint public safety and court proposal and bid, that those applications look as much alike and work as much alike as they possibly could, again, without encumbering the engineering under the covers, so to speak, that those developers have to decide for themselves.
Okay. All right, well, congratulations again, and good luck.
All right. Thanks, George.
The next question comes from Robert Moses of RGM Capital. Please go ahead.
Morning, guys.
Morning, Rob.
Certainly a name I've heard you guys talk about for more than a decade, glad it could finally come to fruition. Congrats on that.
Thanks.
Just a question, I guess, Brian, on the financing itself. I think you ended June with north of $200 million in cash, and you typically generate cash in the third and fourth quarter. Assuming this closes in the fourth quarter, I've got the company somewhere around $100 million in net debt, I guess, backing out the cash. Could you just talk about the revolver and the terms and how quickly you think you can kind of de-lever, if that is a plan, or do you expect to keep permanent financing given rates?
No, the metrics you described there are right on. Today, we have about $265 million in cash. The borrowing under the revolver should be in the $100 million range, and from our cash flow, certainly will be enhanced with New World added to it, that that debt would not be outstanding for a long time, absent other acquisitions or buybacks, which have been other uses of our cash. No, we wouldn't expect to be leveraged very much or for very long from this transaction. The revolver, we're in the process of putting that in place. As you know, we had a revolver that we hadn't used in some time that matured a little over a year ago, that we let go, we're working right now to put that syndication together.
We expect to have that in place over the next couple of weeks. Expect a typical five-year term on the revolver, and relatively small borrowings.
Okay. I think maybe you alluded to this, John, in terms of win rates. Your competitive win rates have been obviously very strong, and part of that is just the investments that you did in the downturn. It's different competitive dynamics, I guess, on the public safety side. Is your sense that the win rates are close, if not as comparable to Tyler? Just a sense as to the win rates and the versus some of the names you had mentioned, like Motorola and Intergraph, et cetera.
Of course, ours vary from one area to the other. It's nearly 100% in courts and justice. It's probably in the 55% range in ERP. I would say that theirs are more in the third range. I think 75% of the time they make the finals and maybe around 50% of the finals they get into, which is very high competitive position. Obviously, you do the math on that, you end up in the 35%-37% range. That would be an idea of their market share.
Got it. Thank you very much.
Sure.
We have a follow-up from Brian Kinstler of Maxim Group. Please go ahead.
Yeah, great. I'm just curious on the $134 million of revenue expected in 2016 and the $49 million of EBITDA. I'm curious what that implies in terms of growth. Is there any seasonality we should think about for 2016?
The growth, I think that would imply 8%, something like that, right around there. Again, we have developing strategies to get that closer to Tyler's overall growth rate, and we think that's reasonable. They have some seasonality. Fourth quarter generally is their strongest quarter.
Great. Then the last question I had, I'm curious, Brian, is it too early to give us a sense what amortization will be in 2016 related to this deal?
It is a little bit early. As we get closer to closing, we'll have a little bit better information on that. We have to engage an outside valuation expert to help us figure out what buckets those intangibles go in and what that amortization will be.
Great. Thank you.
Once again, if you have a question, you may press star then one on a touch-tone phone. The next question is a follow-up from Mark Schappel from Benchmark. Please go ahead.
Hi. Thanks again. Brian, just one question. How much cash does New World currently have, and how much are they bringing over?
They currently have in the $50 million-$60 million range. The agreement anticipates a neutral balance sheet. We're not sure exactly what it'll have at the closing, depending on what that date is. We don't know exactly what that number will be.
It's probably fair to assume, though, that number's probably not going down based on their operating margins.
Well, not on the margins, but it depends on how they manage their working capital.
Yeah. If their liabilities are less than that, then they could do a distribution. There'll be a working capital adjustment. I think the cash may be marginally below that when all is done.
Thank you.
I don't know. If you plugged in $40 million, you'd probably be safe, something like that. We just don't know until we do the working capital adjustments.
At this time, there appear to be no more questions. Mr. Marr, I'll turn the call back over to you for closing remarks.
Great. Well, thank you, and I appreciate everybody joining us on the call today. As we said in our remarks, we're very excited about this opportunity and look forward to executing on it. If anybody has any further questions, feel free to reach out to us. Have a great day.
The conference has ended. You may now disconnect your line. Thank you.