Tyler Technologies (TYL – Free Report) shares have gained 46.9% in the year-to-date period, outperforming the Zacks Business – Software Services industry, Zacks Computer and Technology Sector and S&P 500 index’s return of 21.4%, 28.8% and 25.1%, respectively. TYL’s outperformance can be attributed to its steady flow of customer wins, strong partnerships and robust financials.
Tyler recently signed a multi-year partnership with CourtCall. Together, the two companies will enhance remote and hybrid court hearings by streamlining virtual court proceedings, offering services, such as secure video and audio collaboration, AI-driven transcription, e-signatures and fingerprint capture.
To achieve these goals, Tyler will integrate its court case management solutions, namely the Enterprise Justice and Municipal Justice with CourtCall’s Remote Collaboration Platform. This collaboration is expected to benefit courts by retaining workflows for a better experience, collaborating from anywhere and tracking metrics like attendance, hence helping them increase the number of hearings in a given time. Through these solutions, Tyler will be able to grow the number of clients in the legal market.
So far this year, TYL has gained numerous clients in the legal space. Its customers in the legal space include the Idaho Supreme Court, Phoenix Municipal Court, Kentucky Court of Justice, Arizona Supreme Court and Texas Office of Court Administration.
Tyler YTD Performance
Image Source: Zacks Investment Research
Tyler Gains From Expanding Client Base
So far this year, Tyler has gained numerous clients from the government, healthcare and education end markets. TYL enabled Lewis County with its Enterprise Assessment & Tax solution. The State of New Jersey extended its agreement with Tyler for its Digital Government solutions. Idaho Supreme Court transitioned to TYL’s Court Case Management Solution from on-premises to cloud deployment.
North Dakota Parks subscribed to Tyler’s cloud-based reservation software. The city of Philadelphia Sheriff’s office implemented Tyler’s Civil Process solution. Florida Department of Corrections adopted TYL’s payment and deposit solutions. Evanston Police Department in Illinois, Arizona Supreme Court and Guam Department of Corrections implemented and expanded the use of TYL’s enterprise supervision solution.
Jackson Public Schools implemented the Enterprise Resource Planning solution. Collier County, FL, went live with Budgeting Solution from Tyler. Rhode Island Department of Business Regulation implemented the State Regulatory Platform suite. The city of Edina implemented TYL’s permitting and inspection processes software. With all these major wins, Tyler is expanding its footprint in the federal and public service solutions space.
As Tyler bolsters its offerings with new partnerships, it gains the capability to expand more in the untapped market. The public sector market in which Tyler operates is one of the largest in the United States, spanning approximately 3,000 counties, various public departments across 36,000 towns and cities, and over a thousand dozen schools across the country. The public sector’s ongoing transition from on-premise and outdated systems to scalable cloud-based systems gives Tyler ample scope to expand its business.
Tyler has shown a remarkable financial performance over the past several quarters. In the last reported financial results for the third quarter of 2024, revenues increased 9.8% year over year to $543.3 million.
The Zacks Consensus Estimate for the 2024 revenues is pegged at $2.14 billion, suggesting a year-over-year increase of 9.4%. The Zacks Consensus Estimate for 2024 earnings is pegged at $9.47, indicating 21.5% of year-over-year growth.
Tyler Faces Economic and Competitive Headwinds
Although Tyler is gaining clients on the back of its robust product portfolio and innovations, it faces tough competition from companies like Oracle (ORCL – Free Report) , Workday (WDAY – Free Report) and SAP (SAP – Free Report) across various product segments. These larger companies have greater resources and marketing capability at their disposal that they can use to give strong competition against Tyler.
Oracle provides Public Sector Cloud, PeopleSoft ERP solution and JD Edwards. Workday’s Human Capital Management, Enterprise Accounting and Finance and Adaptive Planning solutions compete with Tyler’s solutions. SAP provides comparable products like S/4HANA, SuccessFactors, Ariba, Analytics Cloud and Integrated Business Planning.
Tyler’s near-term growth prospect is also likely to be negatively impacted by delays in procurement processes and lengthening sales cycles amid ongoing macroeconomic uncertainties. Additionally, many of its customers are expected to face budget pressures in the near term due to a probable slowdown concern.
What Should Investors Do?
Tyler’s financials are improving on the back of its partnerships and expanding client base. However, TYL faces challenges including rising competition and macroeconomic uncertainties. Which could hurt its near-term prospect.
Considering all these factors, we suggest investors to retain this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
