A month has gone by since the last earnings report for Tyler Technologies (
TYL Quick Quote TYL - Free Report) . Shares have added about 0.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Tyler Technologies due for a pullback? 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 Q1 Earnings Beat, Revenues Miss Estimates
Tyler Technologies reported first-quarter 2023 non-GAAP earnings of $1.76 per share, which beat the Zacks Consensus Estimate of $1.71 per share but declined 7.6% from the year-ago quarter’s $1.90 per share.
Non-GAAP revenues increased 3.5% year over year to $471.9 million. The top line missed the Zacks Consensus Estimate of $473.7 million.
The robust year-over-year top-line growth was primarily driven by rise in subscription revenues. During the first quarter, software subscription arrangements comprised approximately 87% 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 7.2%.
Tyler’s recurring revenues from maintenance and subscriptions increased 9.1% year over year to $395.6 million and accounted for 83.8% of the total quarterly revenues.
TYL reported annualized recurring revenues on a non-GAAP basis of $1.58 billion, up 9.1% year over year. Subscription bookings in the first quarter added $17.1 million to annual recurring revenues.
Segment-wise, Maintenance revenues (accounting for 24.4% of total revenues) were $115.1 million, down from $117 million in the year-ago quarter.
Subscription revenues (59.4% of total revenues) grew 14.3% year over year to $280.5 million.
Software licenses and royalties (2.1% of total revenues) of $10.1 million decreased 38.8% on a year-over-year basis.
Professional Services revenues (12.9% of total revenues) amounted to $60.9 million, down 13% from the year-ago quarter.
Hardware and other revenues (1.1% of total revenues) slumped 26.8% from the year-ago quarter to $5.2 million.
The backlog at the quarter-end was $1.85 billion, up 5.1% year over year.
Bookings increased 2.9% year over year at $431 million. Moreover, in the trailing 12 months, bookings increased 0.4% year over year to $1.96 billion.
Tyler’s non-GAAP gross profit increased 1.3% year over year to $215.1 million. Non-GAAP gross margin contracted 100 basis points (bps) to 45.6%.
Adjusted EBITDA decreased 5.6% year over year to $112.5 million.
Non-GAAP operating income for the quarter totaled $102.2 million, down 7.7% year over year. However, the non-GAAP operating margin contracted 260 bps to 21.7%.
Balance Sheet & Other Details
As of Mar 31, 2023, Tyler’s cash and cash equivalents were $130.8 million compared with $173.9 million as of Dec 31, 2022.
The company generated $74.7 million in cash from operational activities and $63.6 million of free cash flow. With the rising interest rates, Tyler is focusing on utilizing its excess cash for debt reduction.
For 2023, Tyler expects GAAP and non-GAAP revenues in the range of $1.935-$1.970 billion.
TYL estimates adjusted earnings guidance to be in the $7.50-$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?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.87% due to these changes.
Currently, Tyler Technologies has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
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 Quote MSCI - Free Report) , a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended March 2023 more than a month ago.
MSCI reported revenues of $592.22 million in the last reported quarter, representing a year-over-year change of +5.8%. EPS of $3.14 for the same period compares with $2.98 a year ago.
MSCI is expected to post earnings of $3.13 per share for the current quarter, representing a year-over-year change of +12.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -1%.
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 C.