It has been about a month since the last earnings report for Tyler Technologies (TYL). Shares have lost about 2.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Tyler Technologies Q3 Earnings Beat, Revenues Miss

Tyler Technologies, Inc. reported third-quarter 2024 non-GAAP earnings of $2.52 per share, which beat the Zacks Consensus Estimate of $2.44. The bottom line was higher than the year-ago quarter’s earnings of $2.14.

Non-GAAP revenues increased 9.8% year over year to $543.3 million. However, the top line missed the Zacks Consensus Estimate of $546.4 million.

The year-over-year improvement in the top line was primarily due to a rise in subscription revenues. During the second quarter, software subscription arrangements comprised approximately 97% 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 12.1% year over year to $462.8 million and accounted for 83.4% of the total quarterly revenues.

TYL reported annualized recurring revenues on a non-GAAP basis of $1.85 billion, up 12.1% year over year.

Segment-wise, Maintenance revenues (accounting for 21.3% of total revenues) were $115.6 million, down from $117.5 million reported in the year-ago quarter. Our model estimate for Maintenance revenues was pegged at $109 million.

Subscription revenues (63.9% of total revenues) grew 17.6% year over year to $347.2 million, while our model estimate for the same was pinned at $349.7 million. On an organic basis, Subscription revenues soared 17.3% year over year.

Software licenses and royalties (1.1% of total revenues) of $6.2 million fell year over year by 41.4%. Our model predicted Software licenses and royalties’ sales to decrease 4.8% to $10.1 million.

Professional Services revenues (11.9% of total revenues) amounted to $64.5 million, up 5.5% from the year-ago quarter. Our model estimate for the same was pegged at $65.7 million.

Hardware and other revenues (1.8% of total revenues) were down 3.9% from the year-ago quarter to $10.3 million. Our model estimate for Hardware and other revenues was pegged at $10 million.

Operating Details

Tyler Technologies’ non-GAAP gross profit increased 5.7% year over year to $254.7 million. The non-GAAP gross margin declined 180 basis points (bps) to 46.9%.

Adjusted EBITDA increased 15% year over year to $152.4 million.

Non-GAAP operating income for the quarter totaled $137.8 million and jumped 12.4% year over year. The non-GAAP operating margin expanded 60 bps to 25.4%.

Balance Sheet & Other Details

As of Sept. 30, 2024, TYL’s cash and cash equivalents were $538.3 million compared with $250.7 million as of June 30, 2024.

The company generated an operating cash flow of $263.7 million and a free cash flow of $252.9 million in the third quarter of 2024.

Revised FY24 Guidance

Tyler Technologies revised its guidance for 2024. The company now expects revenues in the range of $2.125-$2.145 billion compared with the previous guidance of $2.12-$2.15 billion. TYL projects its adjusted earnings per share in the range of $9.47-$9.62 compared with the previous guidance of $9.25-$9.45.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Tyler Technologies has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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 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.

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