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Bull of the Day: Tyler Technologies (TYL)

·5 min read

Tyler Technologies, Inc. (TYL) was a pandemic winner as public agencies pushed community business online. This Zacks Rank #1 (Strong Buy) just closed on its largest acquisition ever, which will push those earnings even higher in 2021.

Tyler Technologies provides integrated software and technology services to the public sector. It has more than 27,000 installations across more than 11,000 sties, with clients in all 50 states, Canada, the Caribbean, Australia and other international locations.

Tyler Updates 2021 Guidance

Tyler acquired NIC Inc. on Apr 21, 2021. On June 7, it updated its full year guidance, including the results of NIC from the date of the acquisition.

Revenue is now expected in the range of $1.51 billion to $1.54 billion.

That's a gain of 36.6% over last year where revenue came in at $1.12 billion.

Analysts are bullish on 2022 as well, with revenue expected to rise another 20.5% to $1.84 billion.

Earnings are expected to be in the range of $6.65 and $6.77.

"Our guidance reflects the strong year-to-date performance and improving market activity for Tyler, including NIC," said Lynn Moore, Tyler's president and chief executive officer.

"As we noted previously, the NIC acquisition is expected to be significantly accretive to non-GAAP earnings per share and EBITDA."

"As we continue to work together with the NIC leadership team to identify and prioritize opportunities, we are emboldened by the potential to accelerate long-term growth in both of our businesses and expand our platform for connected communities."

"With the addition of NIC's highly complementary, industry-leading digital government solutions and payment services to Tyler's broad portfolio of essential public sector software solutions and extensive client base, the combined company is well equipped to address the tremendous demand at the federal, state, and local levels for innovative platform solutions," Moore added.

Analysts Raise 2021 and 2022 Estimates

The guidance was above analyst consensus so the analysts have moved to raise their estimates.

2 estimates were revised in the last week, pushing the Zacks Consensus Estimate up to $6.69 from $5.71. That's earnings growth of 21.2% as the company made $5.52 last year.

This is within the company's guidance range of $6.65 to $6.77.

2 estimates were also revised higher for 2022 at the same time, pushing up 2022's Zacks Consensus Estimate to $7.82 from $6.27.

That's another 16.8% growth.

The Acquisitions Continue

On June 3, Tyler announced it was acquiring VendEngine, a privately-held cloud-based software provider focused on financial technology for the corrections market for $84 million in cash.

VendEngine operates in 230 counties in 32 states in the corrections market.

The company provides essential tools and services for incarcerated people and their families such as trust accounting and digital messaging services. Key services include free inbound emails and texts, onsite video visitation, medical requests, access to education, certificates and legal research resources as well as trust management and grievance management for incarcerated people.

The deal is expected to close in the third quarter.

VendEngine will remain headquartered in Nashville.

Record Revenue in the First Quarter

On Apr 28, Tyler Technologies reported its first quarter results and beat the Zacks Consensus by $0.12. Earnings were $1.43 versus the consensus of $1.31.

Revenue rose 6.6% to an all-time quarterly record of $294.8 million from $276.5 million a year ago. Subscription revenue jumped 25.4%.

"We're pleased to see signs of growing activity in our public sector markets, and expect that the $350 billion of direct federal fiscal relief for state and local government under the American Rescue Plan Act will have a positive impact on government technology spending," said Lynn Moore, Tyler's CEO.

"Bookings in the first quarter were solid at approximately $247 million, but were down 22.8% against a challenging comparison with the first quarter of 2020, which included several large contracts, including two SaaS contracts with the North Carolina Administrative Office of the Courts that totaled approximately $38 million," he said.

Shares Cool in 2021

Tyler Technologies shares have been on a tear the last 2 years, gaining 95.4% compared to the S&P 500 ETF (SPY) at just 52%.

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In 2021, shares have cooled, but are still up 18.1% year-to-date.

They're not cheap, with a forward P/E of 63.4 and a P/S ratio of 15.

But if you're interested in the investing opportunities as government and other public agencies go digital, Tyler is one to keep on your short list.

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