Tyler Technologies (TYL) Down 5.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Tyler Technologies (TYL). Shares have lost about 5.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Tyler Technologies Q4 Earnings Beat, Revenues Miss
Tyler Technologies reported fourth-quarter 2023 non-GAAP earnings of $1.89 per share, which beat the Zacks Consensus Estimate of $1.86. The bottom line was higher than the year-ago quarter’s earnings of $1.66 per share.
Non-GAAP revenues increased 6.3% year over year to $480.9 million. However, the top line missed the Zacks Consensus Estimate of $483.3 million.
The year-over-year top-line growth was primarily driven by a rise in subscription revenues. During the fourth quarter, software subscription arrangements comprised approximately 89% 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.
Quarterly Details
Tyler’s recurring revenues from maintenance and subscriptions increased 7.9% year over year to $403.6 million and accounted for 83.9% of the total quarterly revenues.
TYL reported annualized recurring revenues on a non-GAAP basis of $1.61 billion, up 7.9% year over year.
Segment-wise, Maintenance revenues (accounting for 24.4% of total revenues) were $117.5 million, slightly up from $117.3 million in the year-ago quarter. Our model estimates for Maintenance revenues were pegged at $114.8 million.
Subscription revenues (59.5% of total revenues) grew 11.4% year over year to $286.1 million, while our model estimates for the same were pegged at $281.9 million. On an organic basis, Subscription revenues soared 10.8% year over year.
Software licenses and royalties (1.6% of total revenues) of $7.6 million were flat on a year-over-year basis. Our model predicted Software licenses and royalties’ sales to increase 34.6% to $10.3 million.
Professional Services revenues (12.8% of total revenues) amounted to $61.5 million, down 3.7% from the year-ago quarter. Our model estimates for the same were pegged at $68.3 million.
Hardware and other revenues (1.7% of total revenues) climbed 21.5% from the year-ago quarter to $8.2 million. Our model estimates for Hardware and other revenues were pegged at $7.1 million.
The backlog at the quarter-end was $2.03 billion, up 7.6% year over year. Bookings increased 21.3% year over year at $563 million.
Operating Details
Tyler’s non-GAAP gross profit increased 8.4% year over year to $229.1 million. The non-GAAP gross margin expanded 90 basis points (bps) to 47.6%.
Adjusted EBITDA increased 7.4% year over year to $117.9 million.
Non-GAAP operating income for the quarter totaled $107.4 million and went up 9.7% year over year. However, the non-GAAP operating margin expanded 70 bps to 22.3%.
Balance Sheet & Other Details
As of Dec 31, 2023, Tyler’s cash and cash equivalents were $165.5 million compared with $131.4 million as of Sep 30, 2023.
The company generated operating cash flow of $147.4 million in the fourth quarter and $380.4 million in in the full year 2023. It generated free cash flow of $134.4 million in the fourth quarter and $327.4 million in the full year. With its robust free cash flow, TYL is focusing on reducing debt. In the fourth quarter of 2023, Tyler reduced its term debt by $90 million.
FY24 Guidance
Tyler initiated annual guidance for 2024. The company expects revenues in the range of $2.095-$2.135 billion. TYL forecasts adjusted earnings guidance in the range of $8.90-$9.10 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Tyler Technologies has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Tyler Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Tyler Technologies, Inc. (TYL) : Free Stock Analysis Report
