Tyler Technologies, Inc. TYL reported fourth-quarter 2018 non-GAAP earnings of $1.26 per share, which beat the Zacks Consensus Estimate of 97 cents. Further, the figure increased 20% from the year-ago quarter.
Net sales increased 11.2% on a year-over-year basis to $243 million in the quarter. The figure, however, missed the consensus estimate of $247 million.
Strong subscription, software license and royalties revenues, and strong pipeline of new business drove the top line. However, decline in bookings was an overhang.
For the full year of 2018, the company generated revenues of $939.7 million, 11.6% higher than the prior year. Non-GAAP earnings per share were $4.8 up 24.6%.
Tyler recorded organic sales growth of 7.3% for the reported quarter and 8.9% for the full year.
Tyler Technologies, Inc. Price, Consensus and EPS Surprise
Tyler Technologies, Inc. Price, Consensus and EPS Surprise | Tyler Technologies, Inc. Quote
A Look at Q4 Results
Recurring revenues, which include software maintenance and subscription revenues, increased 13.1% year over year and comprised 65.4% of total revenues.
Tyler’s subscription revenues for the quarter increased 26.2% to $59.8 million.
Tyler’s Software Services revenues of $46.5 million registered 1% growth on a year-over-year basis. Maintenance revenues of $98.3 million increased 6.4%. Hardware and other revenues rose 67.6% to $6.2 million.
Appraisal services revenues fell 6.9% to $5.4 million. Software licenses and royalties of $25.8 million grew 15.2%.
Tyler acquired SceneDoc, Inc. in December last year. It also announced its impending agreement to acquire MicroPact, Inc., which is expected to close in the first quarter of 2019.
However, bookings declined 13% due to a difficult year-over-year comparison. This was due to the $21 million Odyssey courts software contract with the State of Kansas Judicial Branch, which was included in the prior-year quarter.
Moreover, the strategic reduction in standard initial term for new software subscription contracts continued to negatively impact bookings, bringing down the average new subscription contract term to 4.1 years in the quarter from 5.4 years a year ago.
Tyler’s non-GAAP gross profit increased 11.6% year over year to $126.8 million. Non-GAAP gross margin expanded 10 basis points (bps) to 52.2%.
The company’s non-GAAP operating income increased 2.2% year over year to $65.2 million while operating margin contracted 250 bps to 26.8%.
Balance Sheet and Cash Flow
Tyler exited the quarter with cash and cash equivalents of $134.3 million, down from $219.45 million at the end of the previous quarter.
The company generated $70.9 million of cash flow from operational activities compared with $112.1 million in the third quarter.
Total backlog at the end of the quarter was $1.25 billion, up 1.7% year over year on the back of strong new business pipeline.
Tyler repurchased 780,842 shares at an average price of $192.16. The company also increased stock repurchase authorization by 1.5 million shares.
Tyler provided outlook for 2019. Non-GAAP total revenues are expected to be in the range of $1.09-$1.11 billion.
For 2018, the company continues to expect non-GAAP earnings per share in the range of $5.20 to $5.35.
Zacks Rank and Stocks to Consider
Tyler currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader technology sector are eGain Corp. EGAN, MeetMe, Inc. MEET and Symantec Corp. SYMC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for eGain, MeetMe and Symantec is projected to be 30%, 20% and 7.9%, respectively.
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