A month has gone by since the last earnings report for Tyler Technologies (TYL Quick QuoteTYL - Free Report) . Shares have lost about 3.4% 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 drivers.

Tyler Technologies Q2 Earnings & Revenues Top Estimates

Tyler Technologies reported second-quarter 2021 non-GAAP earnings of $1.83 per share beating the Zacks Consensus Estimate of $1.65 per share. The bottom line improved 32.6% from $1.38 per share in the year-ago quarter.

Non-GAAP revenues of the software and technology services provider improved by 49.4% year over year to $405.4 million from $271.3 million reported a year ago. The top line surpassed Zacks Consensus Estimate of $370.9 million.

The robust year-over-year growth in top-line was primarily driven by post-acquisition contributions of NIC and constant rebound of market and sales activities at pre-COVID levels. On an organic basis, non-GAAP revenues increased 12.3%.

Recurring revenues from maintenance and subscriptions increased 57.7% year over year to $319.2 million and accounted for 79% of the total quarterly revenues.

Annualized recurring revenues on a non-GAAP basis were $1.28 billion, up 58.2% year over year. Subscription bookings during the second quarter added $15.0 million in annual recurring revenues.

Quarterly Details

Segment-wise, maintenance revenues (accounting for 29.6% of total revenues) were $119.6 million, up 2.4% year over year.

Subscription revenues (49.3% of total revenues) climbed 133% year over year to $199.6 million.

Software licenses and royalties (4.4% of total revenues) of $17.6 million increased 3.4% on a year-over-year basis.

Software Services revenues (13.2% of total revenues) amounted to $53.3 million, up 22.1% from the year-ago quarter.

Appraisal services revenues (1.6% of total revenues) rose 33.4% from the prior-year quarter to $6.3 million.

Hardware and other revenues (1.9% of total revenues) rose 131.8% from the year-ago quarter to $7.7 million.

Backlog at quarter-end was $1.63 billion, up 5.6% year over year.

Bookings surged 50.1% year on year to $464 million, courtesy of post-acquisition activities of NIC along with the continuous rebound of market trends to pre-pandemic levels. Excluding NIC’s contribution, bookings increased 17.5% year over year. COVID-related initiatives, as well as NIC’s TourHealth, added $15.3 million to subscriptions revenues and software services revenues as well.

Operating Details

Tyler Technologies’ non-GAAP gross profit increased 39.8% year over year to $201 million. However, non-GAAP gross margin contracted 340 basis points to 49.6%.

Adjusted EBITDA increased by 42.1% year over year to $114.7 million.

Non-GAAP operating income for the quarter totaled $107.4 million, up 43.9% year over year. However, non-GAAP operating margin contracted 100 basis points to 26.5%.

Tyler Technologies' president and chief executive officer, Lynn Moore stated that operating margin declined “as some costs and lower-margin revenues that declined in 2020 due to the COVID pandemic began to return, along with the impact of the continuation of NIC's lower-margin COVID-related revenues.”

Balance Sheet & Other Financial Details

As of Jun 30, 2021, Tyler Technologies’ cash and cash equivalents were $216.8 million compared with $1.25 billion on Mar 31, 2021.

The company used $20.3 million of cash for operational activities. Free cash flow was negative $33.5 million.

During the second quarter of 2021, both operated and free cash flow was negatively influenced by costs of acquisition, the timing of cash collections by NIC as well as remittances to agencies post-acquisition. In the second quarter of 2021, Tyler Technologies repurchased 32,600 shares of its common stock for approximately $13 million.

Guidance

Buoyed by better-than-expected second-quarter performance, Tyler Technologies raised revenue and earnings outlook for the full fiscal. The company now projects revenues between $1.532 billion and $1.557 billion in fiscal 2021, up from the earlier guidance range of $1.51-$1.54 billion.

It also raised non-GAAP earnings guidance range to $6.70-$6.80 per share from $6.65-$6.77 projected earlier.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Tyler Technologies has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Tyler Technologies has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.