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Tyler's (TYL) Q2 Earnings Beat, Revenues Miss Estimates

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Tyler Technologies (TYL - Free Report) reported second-quarter 2020 non-GAAP earnings of $1.38 per share, which surpassed the Zacks Consensus Estimate of $1.16. Moreover, the bottom line increased 6.2% from the year-ago quarter.

Revenues on a non-GAAP basis declined 2.4% year over year to $271.3 million, missing the consensus mark of $280.2 million. Tyler recorded a 1.9% year-over-year decline in organic revenues.

Recurring revenues increased 12.3% year over year to $202.4 million and accounted for 74.7% of total revenues.

Q2 Results in Detail

Segment wise, Maintenance revenues (43.1% of total revenues) were $116.8 million, up 9.4% year over year.

Subscription revenues (31.6% of total revenues) climbed 16.6% year over year to $85.6 million.

Tyler Technologies, Inc. Price, Consensus and EPS Surprise

Tyler Technologies, Inc. Price, Consensus and EPS Surprise

Tyler Technologies, Inc. price-consensus-eps-surprise-chart | Tyler Technologies, Inc. Quote

Software subscription arrangements comprised roughly 43% of the total new software contract value in the reported quarter compared with the year-ago quarter’s 80%.

Software licenses and royalties (6.3% of total revenues) of $17 million slid 17.7% on a year-over-year basis.

Software Services revenues (16.1% of total revenues) of $43.7 million dropped 23.9% from the year-ago quarter.

Appraisal services revenues (1.7% of total revenues) slipped 24.7% to $4.7 million.

Hardware and other revenues (1.2% of total revenues) plummeted 68.8% to $3.3 million.

Backlog at the end of the quarter was $1.54 billion, up 7.4% year over year. Of this, software-related backlog increased 8% to $1.51 billion.

Bookings plunged 31.6% year over year to $309 million. Subscription bookings added $9.2 million in annual recurring revenues.

Operating Details

Tyler’s non-GAAP gross profit increased to $143.8 million from the year-earlier quarter’s $142.5 million. Non-GAAP gross margin also expanded180 basis points (bps) to 53%.

Adjusted EBITDA was $80.7 million, up 8.2% year over year.

Selling, general and administrative (SG&A) expenses, as percentage of revenues, shrunk 80 bps year over year to 23.1%. However, research and development (R&D) expenses, as percentage of revenues, expanded 80 bps to 8.1%.

The company’s non-GAAP operating income increased 9.1% year over year to $74.6 million. Its operating margin expended 290 bps to 27.5%.

Balance Sheet and Cash Flow

As of Mar 31, 2020, cash and cash equivalents were $351.3 million compared with $302 million as of Mar 31, 2020.

Cash flow from operations was $39.8 million, up 62.5% year over year.

Guidance

Tyler expects the pandemic to adversely impact its business during second-half of 2020. The company continues to see delays in procurement processes and lengthening sales cycles, as public sector entities focus on issues related to the pandemic.

For 2020, the company projects revenues between $1.125 billion and $1.145 billion. The Zacks Consensus Estimate for full-year revenues is pegged at $1.15 billion. The company’s non-GAAP earnings guidance range $5.30-$5.50 per share is higher than the consensus mark of $5.19.

Zacks Rank and Key Picks

Currently, Tyler carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Dropbox (DBX - Free Report) , Zoom Video Communications (ZM - Free Report) and Shopify SHOP, each flaunting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Dropbox, Zoom and Shopify is currently pegged at 32.5%, 25%, and 34%, respectively.

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