It has been about a month since the last earnings report for Tyler Technologies (TYL Quick QuoteTYL - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tyler Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Tyler’s Earnings and Revenues Beat Estimates in Q3

Tyler Technologies reported third-quarter 2022 non-GAAP earnings of $2.06 per share, which beat the Zacks Consensus Estimate of $1.86 per share and improved 2.8% from the year-ago quarter.

GAAP and non-GAAP revenues increased 2.9% year over year to $473.2 million. The top line outpaced the Zacks Consensus Estimate of $466.5 million.

The robust year-over-year top-line growth was primarily driven by growth in subscription revenues. During the third quarter, software subscription arrangements comprised approximately 91% of the total new software contract value as the company continued to transform into a software-as-a-service model from its on-premise license-based model. On an organic basis, non-GAAP revenues increased 8.8%.

Quarterly Details

Tyler’s recurring revenues from maintenance and subscriptions increased 0.2% year over year to $371.7 million and accounted for 78.5% of the total quarterly revenues.

TYL reported annualized recurring revenues on a non-GAAP basis of $1.49 billion, which remained flat year over year. Subscription bookings in the third quarter added $28.1 million to annual recurring revenues.

Segment-wise, Maintenance revenues (accounting for 24.8% of total revenues) were $117.3 million, down from $117.8 million in the year-ago quarter.

Subscription revenues (53.7% of total revenues) grew 0.6% year over year to $254.3 million.

Software licenses and royalties (4.3% of total revenues) of $20.3 million decreased 10.6% on a year-over-year basis.

Professional Services revenues (13.4% of total revenues) amounted to $63.2 million, up 15.8% from the year-ago quarter.

Appraisal services revenues (1.8% of total revenues) rose 21.1% from the prior-year quarter to $8.6 million.

Hardware and other revenues (2% of total revenues) jumped 102.4% from the year-ago quarter to $9.4 million.

The backlog at the quarter-end was $1.88 billion, up 6.3% year over year.

Bookings dropped 17% year over year to $499. However, in the trailing 12 months, bookings increased 18.8% year over year to $1.9 billion.

Operating Details

Tyler’s non-GAAP gross profit increased 4.3% year over year to $225.5 million. Non-GAAP gross margin expanded 70 basis points (bps) to 47.6%.

Adjusted EBITDA increased 1.5% year over year to $126.9 million.

Non-GAAP operating income for the quarter totaled $117.8 million, up 0.9% year over year. However, the non-GAAP operating margin contracted 40 bps to 24.9%.

Balance Sheet & Other Details

As of Sep 30, 2022, Tyler’s cash and cash equivalents were $185.9 million compared with $253.1 million as of Jun 30, 2022.

The company generated $129.4 million in cash from operational activities and $115.6 million of free cash flow. With the rising interest rates, Tyler is focusing on utilizing its excess cash for debt reduction.

During the first nine months of 2022, the company generated $259.6 million and $216.6 million in operating and free cash flow, respectively.

Guidance

For 2022, Tyler now expects GAAP and non-GAAP revenues in the range of $1.837-$1.857 billion compared with the previous estimate of $1.835-$1.870 billion.

Further, TYL raised its adjusted earnings guidance range from the previously projected $7.36-$7.52 per share to the $7.51-$7.65 per share range. The company anticipates interest rate hikes, accelerated non-cash amortization of debt discounts and issuance costs associated with debt repayments.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Tyler Technologies has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tyler Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Tyler Technologies is part of the Zacks Business - Software Services industry. Over the past month, MSCI (MSCI Quick QuoteMSCI - Free Report) , a stock from the same industry, has gained 11.8%. The company reported its results for the quarter ended September 2022 more than a month ago.

MSCI reported revenues of $560.64 million in the last reported quarter, representing a year-over-year change of +8.4%. EPS of $2.85 for the same period compares with $2.53 a year ago.

For the current quarter, MSCI is expected to post earnings of $2.68 per share, indicating a change of +6.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for MSCI. Also, the stock has a VGM Score of D.