Tyler Technologies Inc. ( TYL Quick Quote TYL - Free Report) recently announced the acquisition of DataSpec, a veterans’ claim management software firm, for an undisclosed amount.
DataSpec’s web-based veterans’ claims management system — VetraSpec — is a software-as-a-service (SaaS). Apart from providing scheduling, calendaring, and payment options, VetraSpec offers secure electronic claims submission to the federal Department of Veterans Affairs (VA) and reporting capabilities.
The acquisition will help Tyler enhance its capabilities and strengthen the firm’s position in the veterans’ benefits management solutions market. Notably, Tyler has a similar veterans’ benefit solution based on its Entellitrak platform. The company said that it will provide VetraSpec’s clients to migrate to the Tyler’s Veterans Benefits Solutions whenever they are ready. Till then, it will continue supporting them on the VetraSpec platform.
Tyler also intends to expand its veteran-focused software offerings to VA departments in additional states. Currently, more than 5,000 customers across 32 state departments of VA, VA attorneys, as well as hundreds of counties and municipalities are using DataSpec’s VetraSpec platform.
Tyler Rides on Acquisitions
Tyler Technologies has been pursuing strategic acquisitions in order to expand its products and services, enter new markets related to local governments, attract clients and expand geographically.
The company has derived a significant portion of its historical growth from acquisitions. Though the company is focusing on internal growth, it continues to identify and pursue buyouts.
Most recently in February, Tyler announced its plan to acquire payments company, NIC Inc. for a total consideration of $2.3 billion to bank on the pandemic-induced shift to online services and electronic payments by governments.
Tyler has a solid balance sheet with ample liquidity position and lesser debt obligations that provide it flexibility to pursue growth initiatives, including acquisitions. As of Dec 31, 2020, cash and cash equivalents were $603.7 million compared with $519 million as of Sep 30, 2020. Further, cash flow from operations was $88.8 million. Markedly, the company has been able to regularly increase its cash flow from operations in the last five years.
Tyler’s growth trajectory in recent years has been driven by acquisitions. In 2019, it acquired certain assets of Courthouse Technologies, MicroPact and Civic. The buyouts expanded the company’s footprint into SaaS-based jury-management system, case management and business-process management. MicroPact contributed $63 million to revenues in 2019.
The company is likely to pursue more acquisitions that will be strategically fit to its current offerings. Along with investments on research & development, acquisitions are likely to strengthen its product offerings and clientele over the long run.
Zacks Rank & Key Picks
Tyler currently carries a Zacks Rank #5 (Strong Sell).
A few better-ranked stocks in the broader technology sector include
Dropbox ( DBX Quick Quote DBX - Free Report) , Facebook ( FB Quick Quote FB - Free Report) and NVIDIA ( NVDA Quick Quote NVDA - Free Report) , all carrying a Zacks Rank #2 (Buy) at present. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
The long-term earnings growth rate for Dropbox, Facebook and NVIDIA is currently pegged at 40.9%, 19.2%, and 12.6%, respectively.
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