It has been about a month since the last earnings report for Tyler Technologies (
TYL Quick Quote TYL - Free Report) . Shares have lost about 2.2% in that time frame, outperforming 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 Q2 Earnings and Revenues Beat Expectations
Tyler Technologies reported second-quarter 2023 non-GAAP earnings of $2.01 per share, which beat the Zacks Consensus Estimate of $1.86 and increased 6.9% from the year-ago quarter’s $1.88 per share.
Non-GAAP revenues increased 7.6% year over year to $504.3 million. The top line surpassed the Zacks Consensus Estimate of $490.7 million.
The robust year-over-year top-line growth was primarily driven by rise in subscription revenues. During the second quarter, software subscription arrangements comprised approximately 82% 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 10.4%.
Tyler’s recurring revenues from maintenance and subscriptions increased 11.2% year over year to $414.3 million and accounted for 82.2% of the total quarterly revenues.
TYL reported annualized recurring revenues on a non-GAAP basis of $1.66 billion, up 11.2% year over year.
Segment-wise, Maintenance revenues (accounting for 23.1% of total revenues) were $116.5 million, slightly down from $116.8 million in the year-ago quarter. Our model estimates for Maintenance revenues were pegged at $113.7 million.
Subscription revenues (59.1% of total revenues) grew 16.4% year over year to $297.8 million while our model estimate for the same was $289.6 million.
Software licenses and royalties (1.9% of total revenues) of $9.8 million decreased 34.7% on a year-over-year basis. Our model predicted Software licenses and royalties sales to decline 37.1% to $9.4 million.
Professional Services revenues (13.2% of total revenues) amounted to $66.4 million, down 7.6% from the year-ago quarter. Our model estimate for the same was pegged at $66.1 million.
Hardware and other revenues (2.7% of total revenues) climbed 51.6% from the year-ago quarter to $13.8 million. Our model estimate for Hardware and other revenues was pegged at $10.9 million.
The backlog at the quarter-end was $1.90 billion, up 2.8% year over year.
Bookings decreased 0.5% year over year at $559 million. Moreover, in the trailing 12 months, bookings fell 4.5% year over year to $1.95 billion.
Tyler’s non-GAAP gross profit increased 11.2% year over year to $238.5 million. Non-GAAP gross margin expanded 160 basis points (bps) to 47.3%.
Adjusted EBITDA increased 5.4% year over year to $125.5 million.
Non-GAAP operating income for the quarter totaled $115.9 million and went up 4.8% year over year. However, the non-GAAP operating margin contracted 60 bps to 23%.
Balance Sheet & Other Details
As of Jun 30, 2023, Tyler’s cash and cash equivalents were $118.8 million compared with $130.8 million as of Mar 31, 2023.
The company used $19.2 million in cash from operational activities. Free cash flow was negative $33.2 million. 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 $1.940-$1.965 billion.
TYL estimates adjusted earnings guidance in the $7.60-$7.75 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.
Currently, Tyler Technologies has a subpar Growth Score of D, however its Momentum Score is doing a bit better 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 F. 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.