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Operator
Hello, everyone, and welcome to today's Tyler Technologies first-quarter fiscal 2007 earnings conference call. Today's call is being recorded. Your host for today's call is Mr. John Marr, President and CEO of Tyler Technologies. Mr. Marr, you may begin.
John Marr - President & CEO
Thank you, Darryl. And welcome to our first-quarter 2007 earnings call. Joining me from our management team is Brian Miller, our Chief Financial Officer. First, I would like for Brian to give the Safe Harbor statement, then I will have some preliminary comments and Brian will review the details of our operating results. Then I will have some final comments and we will take questions. Brian.
Brian Miller - CFO
Thanks, John. 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 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 refer to you our form 10-K and other SEC filings for more information on those risks. John?
John Marr - President & CEO
The first quarter of 2006 represents Tyler's 24th consecutively profitable quarter and our results are reasonably consistent with our long-term objectives, with 12% growth in revenue, 19% growth in earnings, and a 130 basis-point expansion in our gross margins. We were also productive on the investment side of our business, executing two acquisitions for a total of $5 million, as well as repurchasing $4 million of our stock. After making these investments, Tyler finished the quarter with a little more than $40 million in cash and short-term investments.
We also made good progress assembling a new team to execute our part of the development related to our previously announced relationship with Microsoft. However, while there is no single item that has changed significantly since we built our 2007 plan, there are a number of issues that have changed enough that, collectively, they create some exposure to our original outlook for the year.
These items include a jump in our healthcare costs during the first quarter well above our historical experience, an increase in our investment and R&D, specifically a more expensive ramp-up in the Microsoft project. To date this project has been entirely expensed and we now believe that virtually all of our investment in this project for the year will be expensed. Higher-than-usual adoption rate of software as a service during the first quarter, as well as anticipated to continue for the balance of the year. Effectively lowering our license revenue for 2007, but adding to our recurring revenue base going forward. And last, a modest softening in some of our markets and our performance in those markets slightly lowers our license expectation for the year.
I don't want to minimize any downward adjustment in our outlook and can assure you that we will be diligent to contain and minimize the effect of these issues on our results. However, I would like to reinforce that this adjustment is relatively modest and there is no individual issue that suggests any material change in our business or its expected long-term performance. Now I will ask Brian to review the numbers.
Brian Miller - CFO
Thank you, John. Yesterday, Tyler Technologies reported its results for the quarter ended March 31, 2007. For the first quarter of 2007, Tyler had revenues of $50.3 million, up 12.2% from the first quarter of 2006. Operating income was $3.5 million versus $3.3 million for the first quarter of last year. Net income for the quarter increased 19.3% to $2.4 million or $0.06 per diluted share, compared to net income of $2 million or $0.05 per diluted share in the first quarter of 2006.
We continued our trend of very strong cash flow performance in the first quarter. Cash flow from operations was $6.9 million for the first quarter compared to $10 million a year ago. Free cash flow was $6.1 million compared to $9 million for first quarter of last year. A decrease in free cash flow from the prior year is primarily due to the timing of working capital changes, including larger reductions in accounts payable and accrued liabilities in the first quarter of this year compared to last year.
EBITDA for the first quarter of 2007 was $6.1 million compared to EBITDA of $5.7 million in the first quarter of 2006. A reconciliation of GAAP income to EBITDA is included in our earnings release. Our software-related revenues which include Software Licenses, Software Services and Maintenance, increased in aggregate 12.1% over of the first quarter of 2006. Software license revenues increased 5% over last year's first quarter. Software license revenue related to our financial products, which comprise over 65% of our software license revenues, declined moderately primarily to a product mix that required less third-party software than in the prior year period.
Software services were up 14.8% from last year's first quarter and maintenance revenues grew 12.9%. Appraisal services revenues for the first quarter increased 18.7% from the first quarter of '06, primarily because of high activity in connection with Ohio reevaluation project, which will be winding down this year as that cycle concludes.
The revenue mix for the first quarter of 2007 was as follows: Software licenses, 16%; Software Services, 30%; Maintenance, 40%; Appraisal Services, 11%; and Hardware and Other, 3%. The mix for the first quarter of '06 was as follows: Software licenses, 17%; Software Services, 29%; Maintenance, 39%; Appraisal Services, 11%; and Hardware and Other, 4%. Overall, 85% of our revenue mix was from software-related revenues in the first quarter of both 2007 and 2006.
For the first quarter of 2007, our overall gross margin improved 130 basis points to 35.8%, compared to 34.5% in last year's first quarter. Sequentially, gross margins decreased from 39.6% in the fourth quarter of 2006. The increase in blended gross margin from last year's first quarter was the result of improvement in margins for each of Software Licenses, Software Services and Maintenance, and Appraisal Services, with the greatest margin increase in Software License revenues. The sequential decrease in the blended gross margin from the fourth quarter of '06 is due to lower software license revenues in the revenue mix in the first quarter of '07 which is a typical seasonal trend.
Software License margins for the quarter were up significantly from last year at 70.5% versus 60.7% last year. The increase is due to a license product mix this year that includes less third-party software, which has lower margins than our proprietary software, combined with lower software amortization expenses. Certain products became fully amortized. The blended margin for Software Services and Maintenance increased to 29.8% from 29.3% for the same quarter of last year, and decreased sequentially from 32.6% in the fourth quarter of last year. The gross margin for Appraisal Services improved to 28.4% in the first quarter from 27.5% in last year's first quarter, as fixed costs were leveraged against higher revenues.
SG&A expenses were $13 million for the first quarter of '07, compared to $11 million for the same period in '06. First-quarter 2007 SG&A expenses were 25.8% of revenues, compared to 24.5% in the same quarter last year. For the three months ended March 31, 2007, health claims in our self-insured employee health plan were approximately $1 million higher than in last year's first quarter. Without the higher health cost component of SG&A, SG&A as a percentage of revenues for the three months ended March 31, 2007 would have been consistent with the prior year period. Research and development expense increased 36% to $1.2 million in the first quarter, reflecting the start of development efforts under our new alliance with Microsoft, as well other new product development projects. We expect to ramp up this year's spending on the Microsoft project more rapidly than we previously planned, and currently estimate that virtually all of our new product development expense in 2007 will be expensed rather than capitalized.
Our backlog at March 31, 2007 was $196.8 million compared to $186.8 million at March 31, 2006, and $205.9 million at December 31, 2006. Backlog related to our software business, which excludes backlog from Appraisal Services contracts, was $174.3 million at March 31st, a decrease of $8.9 million, or 4.9%, from the fourth quarter of last year, and an increase of $17.9 million, or 11.4%, from March 31st of last year. Appraisal Services backlog was 22.4 million at March 31 of 2007, compared to 22.6 million at December 31 of 2006.
During the first quarter, we repurchased approximately 290,000 shares of our common stock on the open market at an average cost of approximately $13.62 per share. For the year 2006, we repurchased a total of 1 million shares of our stock at an average of $10.19 per share. Our remaining authorization of shares that may be purchased total 741,000 shares. Our capital expenditures during the first quarter were $766,000, which includes $25,000 of capitalized software development. CapEx for the first quarter of last year was $1 million, and included $73,000 of capitalized software development cost. Although we continue to spend significant amounts on product development, we currently expect that capitalized software development will remain at very low levels for the foreseeable future and virtually all of our development costs in 2007 will be expensed.
Amortization of post acquisition software development cost was $1.2 million in the first quarter, down from $1.5 million in last year's first quarter. Days sales outstanding in accounts receivable at March 31, 2007 were 84 days, compared to 102 days at December 31, 2006 and 77 days at December 30 -- at March 31, 2006. December is one of the peaks of our annual maintenance billing cycle. And a large amount of the related cash payment are received in the first quarter of the year. Our stockholder's equity at March 31, 2007 was $126.3 million. We have no debt outstanding and ended the first quarter with $40.3 million in cash, cash equivalents and short-term investments.
The first-quarter results include the results of our two acquisitions from their first -- from their respective acquisition dates during the quarter. In February, we completed the acquisition of all the capital stock of Advanced Data Systems, Inc., which develops and sells fund accounting solutions primarily for schools in New England. The total purchase price, including transaction costs, along with an office building used in its business, was approximately $4.2 million. In January, we purchased certain software assets of Chandler Information Systems for approximately $756,000 to enhance our courts and justice product line. We've accounted for these acquisitions in the first quarter, based on a preliminary allocation of the purchase prices, which is subject to revision as the allocation is finalized. Now, I'd like to turn the call back over to John for some additional comments.
John Marr - President & CEO
Thank you, Brian. As you can see, we've experienced healthy improvement in operating results from the first quarter of last year. With double-digit revenue and net income growth and 130 basis point expansion in gross margin. Cap Ex remains low, although we continue to devote the same level of development resources to product enhancements and development for our existing products and have increased our planned commitment to R&D for the remainder of 2007. Virtually all of these costs that are now being expensed are included in our operating expense structure.
We signed a number of significant contracts in the quarter, including financial sales with Salem-Keizer public schools for a contract value of $1.4 million. This marks our first entrance into the Oregon school market. In Texas, we signed contracts with McKinney and the Ysleta school districts and the city of South Lake. These three contracts total $3.3 million. We signed an ASP Arrangement with the village of Schaumburg, Illinois for $2.2 million. And in Florida, we signed contracts with Palm Beach and the city of North Lauderdale, with contract values of $1.35 million. Overall, in our financial divisions, we signed 32 new customer contracts in 15 different states, clearly extending our leadership position in this space.
However, even with these numbers, we believe this is a market that may offer marginally less opportunity for us throughout the year. In our courts and justice division, we added Grayson and Guadalupe counties as members of the CUC contract, for a total of $2.6 million. Demand for our Odyssey products remains very strong. We are executing well on the contracts in place and continue to aggressively build out our delivery channel. Our appraisal division signed a contract with Cobb County, Georgia for data verification services for $3.6 million. Overall in the quarter, License Revenue's growth was 5%, certainly below our expectations. And for the year, we would expect license growth above this level but probably below the overall company's growth rate.
Our guidance for 2007 is as follows. Our revenue outlook remains essentially unchanged from the guidance provided earlier this year. We continue to expect revenues of $218 million to $222 million, and while we have not changed our revenue guidance, we now expect a modest change in our revenue mix, with slightly lower license revenue fees. We now expect our revenues for the year to be slightly impacted by an increase in the number of recurring revenue arrangements. These types of arrangements generally result in license fees being recognized over a longer period of time. However, these arrangements are beneficial because they generally generate higher overall revenues versus one-time license sales and they create predictable recurring revenue streams.
We revised our earnings and cash flow guidance to reflect the following. An increase in our commitment to investment in R&D and new product development, including our recently announced Microsoft partnership, as well as our products which are under development. A refinement in our estimate of the amount of development costs that would be expensed, you may recall that when we issued our guidance in January, we indicated that our initial estimates of these amounts to be capitalized in expense would vary. And finally, a revision in our estimate on health care costs. This remains a large and somewhat volatile cost for us.
We currently expect diluted earnings per share to be in the range of $0.37 to $0.42 with fully diluted shares of approximately $42 million. For the year, estimated pre-tax expense related to stock options in the employee stock purchase plan is expected to be $2.5 million or approximately $0.05 per share after taxes. We also estimate an effective tax rate of approximately 39% for 2007. Free cash flow is now expected to be between $24 million and $28 million, with total Cap Ex of approximately $3.5 million to $4 million for the year. Now Darren, we will take questions.
Operator
Thank you. We will now begin the Question and Answer session. (OPERATOR INSTRUCTIONS) We will pause momentarily just to assemble our roster. And we will take our first question from Brian Kinstlinger from Sidoti & Company. Please go ahead.
Brian Kinstlinger - Analyst
Good morning, guys.
John Marr - President & CEO
Good morning, Brian.
Brian Kinstlinger - Analyst
I guess I'm interested, first about the seasonality. I've asked you a couple of times. It appears that the seasonality might go away. Do you think part of the first quarter's earnings has somewhat to do with maybe there's still a little bit more seasonality than you guys may have thought in the quarters past in your business? Or do you think that it was just maybe some of the extra costs that caused earnings as well to come down. And I am looking more at the software license piece of the business.
John Marr - President & CEO
Yes, maybe. Certainly it is more consistent with the historical trend, and we have said in the past that over time, we expect that to moderate somewhat as we are in different geographies with different fiscal years and have a broader set of revenues. But certainly that didn't materialize in the first quarter.
Brian Kinstlinger - Analyst
I guess I am interested in the recurring deals versus the more software loaded up-front deals. Or -- is that something that you are pushing, your customers are pushing? And generally, what is driving that right now?
John Marr - President & CEO
Yes, not really. Since we introduced software as a service option for the marketplace and for our existing customers five-and-a-half years ago now, we've tried to do the pricing, compensation for sales reps, really everything on a relatively neutral basis and not try to drive that with any bias. And our objective has been to attract all the clients we can with reasonable pricing in margins under whatever method they want. As we have indicated over the last five years, the adoption of that has been relatively slow.
I think we do now have 75 ASP-type clients or recurring arrangements, which is certainly a significant number, but relative to our overall customer base or even new contracts over the last five years, not that big a number. And in the last -- probably little more than a quarter, probably the last four or five months, we have seen a little more interest in that. All of these things, as we've indicated, are pretty marginal by themselves so I wouldn't overstate it, but a little more interest than we have historically and looking at the forecast and talking to the people in the marketplace, we expect that to continue a little bit throughout the year. So we see a little higher adoption of the recurring model, but to answer your question, it is not really anything we are pushing.
We do have that model in some products we didn't have historically. So in recording, for example, we have that model established now and there has been some adoption on that side of our business, but I would not overreact to this. It could be a little bit, just lumpiness, but I think maybe it's just clicking up a little bit in terms of the adoption rate is going to shift a little bit of license revenue out of this year and, obviously, enhance the recurring revenues going forward, but not all that significantly.
Brian Kinstlinger - Analyst
And so -- just like, to understand properly, when your sales guy goes to a potential client, they have the option to price software as a service or do it in a traditional method of software license plus the maintenance and some services as well. They have, really -- (multiple speakers)
John Marr - President & CEO
That's right. You want to remember, that in a lot of these, we get an RFP that is specifically requesting purchasing the software and deploying it on their equipment, and et cetera, and you can see no interest in software as a service model. And in those cases, I am sure we mention it to them, that we have that available at some point in time, but the default proposal is the traditional historically deployed software. In cases where -- where they show, you know, an interest in evaluating the different options, we might actually give them two different proposals and say this what it would cost to buy the system and deploy it on your equipment and this is what it would cost if you would like us to host it and deploy it in a software as a service model.
So they do -- not all of our products, but, for a number of our products now, the reps have the option. And their job is -- again, they are incented pretty neutrally to go out and capture the business and we will take the business either way and we are seeing a little bit of an uptick in the newer model.
Brian Kinstlinger - Analyst
In the newer model, is there a software-license component at all or is that --?
John Marr - President & CEO
Sure. Yes. But it's really -- You might want to look at it as a, almost a rental license. They pay so much a year.
Brian Kinstlinger - Analyst
Got you.
John Marr - President & CEO
In license for that software and it could take, not to get into the whole pricing model, but it would take a number of years to pay a full initial license but, after that's occurred, you continue to generate those license fees and benefit it, which is certainly more revenue than what you get in a traditional support agreement. So obviously, it shifts some current year license revenue to the recurring revenue stream. It's a great model. We have a lot of interest in higher adoption. And if that were to happen, we would certainly explain it to you folks. We're not seeing anything at that level, any significant change in our business, but we are just acknowledging, along with a number of other things, we have seen some marginal, higher interest in that.
Brian Kinstlinger - Analyst
Okay. And Brian, could you give us a rough sense maybe of -- in your software backlog -- and just a rough number of, historically or now, what software license is as a percentage of the software backlog. And I don't need anything specific, the exact number, just a rough sense.
Brian Miller - CFO
Yes, we really don't break out between License and Services and Maintenance in that backlog. All we break out is the Appraisal. The Maintenance portion of the backlog does go down a little bit, $2 million to $3 million from December to -- to March. And we give the Appraisal part. So if you look at the -- the split in the overall backlog, it probably is relatively consistent between Licenses and Services with our -- our overall revenue mix.
Brian Kinstlinger - Analyst
Okay. And -- I'm sorry because I joined the call a few minutes late. And I joined exactly when -- Brian, you mentioned something about SG&A in this quarter. Was there something one time in there that you said was making a comparison not apples to apples? I didn't understand, because I caught it in the middle of the sentence.
Brian Miller - CFO
We didn't point to any one-time thing, but we did see a significant increase in our health claims experience this quarter. We had approximately a $1 million increase in health claims costs. And -- where we've typically had experience in our annual cost for employees and our self-insured plan has typically been at or below the national average, we saw a spike in claims in the first quarter that pushed it above the national average. So sort of an unusual situation for us, and we -- obviously we had additional expense, the majority of which fell into SG&A, although part of it fell into some of the cost of revenue lines, but roughly $1 million of additional expense in the first quarter relative to the first quarter of last year.
Brian Kinstlinger - Analyst
Okay.
Brian Miller - CFO
And we will -- and we've also taken that into account in our revised guidance for the year, but we'll continue to monitor that and see if that's an anomaly or some sort of a trend, although that was an increase well above what we are seeing in the overall health inflation.
Brian Kinstlinger - Analyst
Okay. And then did you guys mention -- and, again, I am not sure, I am sorry, what your plan is for R&D spending this year for Microsoft or overall with an updated number that you guys provided that you might expense over time?
John Marr - President & CEO
No, we haven't given a number on that. And, you know, we rarely are going to -- staff and grow that team appropriately to take advantage of the opportunity. So we don't know -- don't know that number for certain because we want to remain flexible on -- on how we execute that project. When we said that in January, and at this point, we are seeing an opportunity to gear that up more quickly and to be more responsive to the project and taking advantage of that and it is resulting in higher cost. And, again, just based on technical accounting issues, we now expect very little or virtually none of that to be capitalized this year.
I guess just to answer your question at all, to give you some idea, we are talking about dozens of developers. It is certainly not hundreds of developers, and it is not a couple of handfuls. But that project, over the next few months will grow to be, several dozen developers on that team. And then we'll probably go through the year in that range and then at the end of the year take a look at it from there.
Brian Kinstlinger - Analyst
How many do you have right now? Can you share that?
John Marr - President & CEO
Probably half of that right now.
Brian Kinstlinger - Analyst
Probably half. Okay. Last question I have -- and I don't have all the facts, so the question might be a little naive, but I think California has some pretty strong budgets, and I'm not sure quite on the criminal justice side or the financial software side, but are you seeing any more opportunity in that state, given the strength in spending they are expected to have this year and next year?
John Marr - President & CEO
California is pretty -- has a pretty good outlook for the financial systems, which is the most active product we have in that market right now. So interesting you make that observation, but I would say from what I am seeing and the folks I am talking to, that is a pretty good market for us right now.
Brian Kinstlinger - Analyst
Okay.
John Marr - President & CEO
And it's a relatively new market for those products, as you know, so we are happy about that from a competitive standpoint.
Brian Kinstlinger - Analyst
And is that selling more of the EDEN product? Because that was more of the west coast --
John Marr - President & CEO
Actually, it's evenly split between EDEN and MUNIS in California and, on the low end, we do some INCODE business as well. So, it's really across the financial product.
Brian Kinstlinger - Analyst
Thank you, guys.
Operator
Once again, (OPERATOR INSTRUCTIONS) As a reminder, limit yourself to one question and one follow-up. And we'll take our next question from Bill Warmington from (inaudible) Capital Management. Please go ahead.
Bill Warmington - Analyst
Yes. Quick question. Are you folks installing, like, Microsoft Dynamics as your earpiece here in products?
John Marr - President & CEO
You mean internally?
Bill Warmington - Analyst
Yes.
John Marr - President & CEO
No. No, we are not.
Bill Warmington - Analyst
Okay. I thought -- I mean that was -- (inaudible) cost for Microsoft Dynamics, etc. You said your healthcare costs increased by 40%. What causes that and what was there that (inaudible) for the quarter?
Brian Miller - CFO
Well, our total health plan -- we are self-insured for our employee health costs with stop-loss insurance that kicks in on large claims. And our total cost for the claims paid in the first quarter of this year was a little over $3 million, and, for example, in the first quarter of last year, it was a little over $2 million, about $2.4 million. So, we saw a significant increase in the claims experience, most of it in larger claims. Some of it is timing with 1500 employees plus the dependants, it's a fairly large pool of people, and it is a somewhat volatile number, but it usually falls in a narrower range. So that's the amounts for that expense.
Brian Kinstlinger - Analyst
Thank you.
Operator
We will take our next question from Ruchir Lahoty from Thomas Weisel. Please go ahead.
Ruchir Lahoty - Analyst
Hi, guys. My question is, first question would be towards the headcount. Could you give us a split of the headcount across G&A, selling and marketing and R&D?
Brian Miller - CFO
Sure. Total headcount at the end of the quarter was about 1586 employees. In general, Development has around 450 employees. Support and Implementation, around 550. There are about 130 in Sales and Marketing. About 280 in Appraisal Services. And the balance in Finance and Administration.
Ruchir Lahoty - Analyst
Okay. Thanks for that. Next question is -- are we looking at acceleration in the -- when are -- when the product based on Microsoft Dynamics would get ready because of higher spending?
John Marr - President & CEO
Not necessarily. We -- we don't control the release dates. Remember, we're -- we're building the public sector extensions and doing a bit of repackaging to make this system more ready out of the box in the public sector, and there is an overall release schedule for that product. So there may be some of our development in an earlier release than the original release date. That's a possibility. But, again, we are now in a very large system, obviously, with a lot of moving parts at Microsoft and need to kind of conform to their release schedule. So I think we -- we may have -- we are really probably more talking about a more robust system, including more of the -- the gap that we have between the public sector and a commercial system in some of the initial releases of this product, but not necessarily a change in the release dates.
Ruchir Lahoty - Analyst
Okay. And what was the contribution -- revenue contribution by the acquisition of Advanced Data Systems to the quarter?
John Marr - President & CEO
We really had about five weeks of them, I think, in the quarter, so it was a pretty insignificant amount of revenue there. It only generated $2 million in revenue in the year, so you can kind of break that down. We will say that it, actually -- for as little revenue as it was, was -- was profitable at least before acquisition intangibles. And after having them in, in the company now for a couple of months, we do expect it to be profitable and, at least neutral in its first year with us. And that's actually a positive given the kind of unusual accounting that you get on an acquisition in the first year. So that is settling in pretty nicely.
Ruchir Lahoty - Analyst
Okay, thanks so much.
Brian Miller - CFO
The revenues were just a little over $300,000 in the quarter.
Ruchir Lahoty - Analyst
Okay. Thank you very much.
Operator
We will take our next question from David Yuschak from SMH Capital. Please go ahead.
David Yuschak - Analyst
Good morning, gentlemen. Just on -- a little more follow-up on the Microsoft arrangement. The amount that you were anticipating spending at the beginning of the year, has that pretty much been pretty constant, it was just a matter of how you would allocate that between capitalized versus expense?
John Marr - President & CEO
It's probably a little of both. A little more of probably being able to staff and grow that team more quickly than we had thought was practical. So that's really a good thing in terms of the project. We have been able to move people onto that project that are part of the Company that obviously get backfilled by new people, but have significant skills and experience, as well as add people from outside the Company. And that has gone well, so we expect to be ramped up a little quicker and spend more money or invest more money in the year. And then, combined with that, we did allocate a certain amount of the project that we thought would -- would be capitalized in the year, and it looks like that is unlikely to occur. But to break it down, it's probably 60%. The increase is probably 60% more expense or investment in the year, and 40% transitioning expenses we expected from capitalized to expense.
David Yuschak - Analyst
Okay. And then -- as far as some milestones as to how you ramped it up further. What things should we be looking forward to hearing from you going down the road here, as to things that would encourage an investor that, if we are ramping up sooner, we can maybe expect to see some things sooner. And the kind of spending you need to support getting it done sooner, in addition to what you've already put in place.
John Marr - President & CEO
That kind of was asked earlier, David, and it is a good question. Again, this is -- this is not our own product, so we don't really change the release schedule. So it is a good question that I haven't thought of, but the point is -- I don't think we are going to have any impact on the release schedule at all. There are just too many variables going on there that -- that really have nothing to do with us. So I think we are looking at pretty much the same timeline that we discussed with you in January. But the more -- there's a broad gap between what our products have and what their products have and what we both believe ought to be in this product for the marketplace. And I think what we are looking at is addressing more of that gap in the early releases of this product rather than changes in those dates.
David Yuschak - Analyst
As far as -- but I was kind of looking at how much spending you might have to do. You know, you may not control the actual release date given the potential here. It's -- are there certain benchmarks you know you're going to have to contribute in way of spending and it's just a matter of how -- when that rolls out?
John Marr - President & CEO
Yes, I don't think the overall cost has changed dramatically.
David Yuschak - Analyst
Okay.
John Marr - President & CEO
Again, the overall changes in our plan for the year and breaking it down by these items, no one issue is more than $1 million or so. It is not -- it is not a real big difference.
David Yuschak - Analyst
Okay. And then just one other thing. On the -- software licensing. You mentioned about the -- the ASP type of potential may interfere a little bit with licensing. But is there any other competitive threats out there that, maybe where you are losing business for whatever reason, that software licensing may not be where you wanted it to be?
John Marr - President & CEO
Well, those, those positions competitively certainly change modestly from product to product all the time, and as we said, I don't see any fundamental or significant change. But if we were to go through them quickly, I think our -- our position in the courts and justice area has done nothing but strengthen. We've had a strong product, a product that demonstrates well for a while. But now we have a number of good, solid references and a strong service channel, et cetera. And I think you would say if anything that has been improving competitively. They are winning certainly nearly all the deals that they are in that we consider meaningful to us.
On the financial side, which is a big part of our business, that market might have softened a hair. It is not a significant change. And so the competitive situation intensifies a little, and we may have lost a couple of deals over the last few months that we would have liked to have won or ordinarily would have won, so that's why we are being realistic and have a slightly lower outlook for that. At the same time, as I indicated, we did 30 some odd deals in 15 states and clearly more deals than anybody else, but we may have lost a deal or two we would have liked to win or would have felt generally would be our business.
David Yuschak - Analyst
Okay, thanks.
John Marr - President & CEO
Sure.
Operator
We will take our next question from Charles Strauzer from CJS Securities. Please go ahead.
Charles Strauzer - Analyst
Good day, John and Brian, how are you?
Brian Miller - CFO
Good.
Charles Strauzer - Analyst
Just one quick question -- most of my questions have been answered. But taking up what David was talking about on the competitive front. Are you seeing any more -- from the regional players or is it more from, kind of, the larger players, have you seen any new entrances to the competitive landscape?
John Marr - President & CEO
Nothing new. I think generally, we continue to see the shift that has been in this business for some time, which would be that -- I don't see the competition getting stronger from the local and regional players. Obviously, they are the ones that bring a little pricing pressure from time to time and require someone to make a value choice on what we offer and what they offer. But, no, I don't see that strengthening. I think it's other national players that are making significant investments in their products and have -- we've always said -- we've always got some good competition out there and are winning some deals. So we would certainly recognize there's some valid competition out there and, at the same time, we are certainly winning more than our share of the business.
Charles Strauzer - Analyst
Got it. Earlier, Brian was touching upon California. You said that the financial software space was looking pretty healthy there. I remember a while back, when Odyssey was kind of first launching, there was a couple of counties that were considering upgrading their court systems; that kind of got shelved when you had a shift over in the political side there. Has that changed at all? Are you seeing any potential RFPs coming out in the court justice side in California?
Brian Miller - CFO
Not to my knowledge. I'd probably know, the kind of deals -- I remember the deals you are talking about. There aren't deals of that nature imminent in the marketplace right now in California.
Charles Strauzer - Analyst
Got it. Roughly, John, remind us again of your priorities right now for the cash you have on hand.
John Marr - President & CEO
Well, we continue to evaluate acquisition opportunities that come in front of us. We haven't seen the quality of opportunities there that we see at the values we believe are appropriate, so I think we've been not that active there. But there, there are always a few of those or a number of those that we are looking at. So they are out there. We certainly continue to execute on our repurchase program and we will do that. So -- and obviously we are investing as much as we think is practical in our own products and our future products.
Charles Strauzer - Analyst
Great, thank you very much, John.
Operator
We will take our next question from [Dayton Rodigurtz] from Thai Capital. Please go ahead.
Dayton Rodigurtz - Analyst
Yes. I was wondering on the recurring revenue versus kind of your previous way that contracted most of your revenue. Is there much of a difference in a cash flow impact?
John Marr - President & CEO
Yes. Yes. When they buy the product up front, they pay generally in that first year or so all of the license fee. And instead, they would be paying a quarter or a third or some portion of that license fee, as well as the deployment resources gets spread out over a number of years. So these deals can be made up a number of different ways, but, yes, I would say the cash in the first year of a deal on a software as a service contract versus a recurring model might be a third to -- to 50% lower. And then obviously significantly higher in the outyears.
Dayton Rodigurtz - Analyst
You would say over the life of the contract, they are relatively similar or is one lower or higher?
John Marr - President & CEO
It will be higher in the software. It depends on how long the contract is -- but let's say, over a reasonable period of time, four or five years, it's definitely going to generate more revenue in software and a service. That doesn't necessarily mean a customer had significantly higher expenses, because we are employing people and owning and operating infrastructure that they otherwise would have had to have on their expense side. But there is certainly more revenue to us. And their expenses may be somewhat neutral because they -- they would eliminate or not require certain job descriptions and certain capital investments.
Dayton Rodigurtz - Analyst
My second question was, your backlog was up nicely year-over-year but it was down sequentially. And it seems like your big, your large contracting activity in the March quarter was extremely strong. I was just wondering, is there any particular reason why the backlog was down with regards to just how you recognize something or how you put it into (multiple speakers)?
John Marr - President & CEO
We had good strong contracts across the board, but we didn't have any major contract, and as you know, we do occasionally win a $10 million, $15 million, or $20 million contract, which is where the spikes generally come from or a multiyear contract. So, we did have, I think, good signings and good experience across the board, but no real significant contract, and yet we are working off some of the revenues from some of the deals in the past. So, that tends to be a little bit lumpy, and I certainly think we will continue to grow over the long run. About a third of the decrease sequentially is simply just the timeliness or seasonality of the renewals in the maintenance contracts. So, the difference is a little overstated if you adjust it for that.
Dayton Rodigurtz - Analyst
Great, thank you very much.
Operator
(OPERATOR INSTRUCTIONS) And we will take our next question from Chris Pauli from the Crown Advisors. Please go ahead.
Chris Pauli - Analyst
Hi. Could you just recap again the -- the buyback for the quarter, how many shares and the average price? Also, if you intend to go to the Board for an increase in the authorization? And then finally, when you plan to file your Q.
Brian Miller - CFO
We will file our Q immediately after this call. The stock buyback -- we bought 290,000 shares at an average cost of $13.62 per share this quarter. We've got 741,000 shares left in our authorization, so as we -- we said we expect that repurchases to continue to be one of the uses of our cash flow, and so I would expect that, as we work off the current authorization, that we will likely go to the board to increase that authorization, but that will certainly be a board decision at that time. But we still have, as I mentioned 741,000 shares left.
Chris Pauli - Analyst
Thank you very much.
Operator
At this time, there appear to be no further questions. I would like to turn the conference over back to Mr. Marr for any additional or closing or remarks.
John Marr - President & CEO
Thank you, Darren. And thank you for joining us on the call today. If there are any further questions, please feel free to contact Brian or me. Appreciate it.
Operator
Once again, ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may now disconnect.