Summary
Tyler Technologies posted first quarter fiscal 2021 total revenues of $294.8 million, up 6.6% from the prior-year quarter. Gross profit was $144.21 million, up 11.7%, and gross margin was 48.9%, up 2.2 percentage points. Operating income was $38.21 million, up 12.7%, and operating margin was 13.0%, up 0.7 percentage points. Net income was $36.98 million, down 22.2%, and diluted EPS was $0.88, down 24.1%. The profit decline came despite higher revenue and operating income, because the prior-year quarter carried a large income tax benefit.
The shift toward cloud delivered the growth. Subscriptions revenue grew 25.4%. Recurring revenues from maintenance and subscriptions were $221.6 million, up 13.0%, and comprised 75.2% of first quarter revenue. Annualized non-GAAP recurring revenues were $886.4 million, up 12.9%. Software subscription arrangements were approximately 66% of total new software contract value, compared to approximately 73% in the first quarter of 2020. Subscription bookings added $10.2 million in annual recurring revenue. Tyler added 84 new SaaS clients in the quarter, and 39 existing on-premises clients converted to its SaaS model. Since March 31, 2020, it added 441 new SaaS clients while 177 existing on-premises clients converted. Transaction-based fees contributed $4.9 million to the subscriptions revenue increase, driven by online payment volumes from utility billings.
Margins and cash generation improved. Non-GAAP total revenues were $294.8 million, up 6.5%. Non-GAAP gross margin was 53.3%, up 210 basis points, and non-GAAP operating margin was 26.8%, up 270 basis points. Non-GAAP operating income was $78.9 million, up 18.1%. Non-GAAP net income was $60.0 million, or $1.43 per diluted share, up 16.5%. Adjusted EBITDA was $85.7 million, up 17.1%. Operating cash flow was $71.70 million, up 26.4%, and free cash flow was $61.7 million, up 33.9%. Capital expenditures were $6.56 million, down 29.8%. Deferred revenue was $420.62 million, up 14.9%, and remaining performance obligations were $1.55 billion, up 3.3%.
Backlog and bookings told a mixed story. Total backlog was $1.55 billion, up 3.0% from $1.50 billion at March 31, 2020, and software-related backlog was $1.50 billion, up 2.9% from $1.46 billion. First quarter bookings were approximately $247 million, down 22.8% against a challenging comparison with the first quarter of 2020. That prior-year period included several large contracts, among them two SaaS contracts with the North Carolina Administrative Office of the Courts totaling approximately $38 million.
The company closed a transformational deal after quarter end. On April 21, 2021, Tyler completed the acquisition of NIC Inc. for approximately $2.3 billion in cash. NIC serves more than 7,100 federal, state, and local government agencies. NIC's first quarter core revenues, excluding the TourHealth and COVID initiatives expected to wind down after the second quarter, grew more than 10% over the prior year, and its operating income excluding those initiatives and acquisition costs rose more than 20%. Tyler said it remains on track to achieve its full-year 2021 revenue and EPS guidance communicated in February for Tyler, excluding the NIC acquisition, and expects to issue 2021 guidance for the combined company during the second quarter. Earlier, on March 31, 2021, it acquired DataSpec and ReadySub, deals it said will not have a material impact on its consolidated financial statements. Financing for NIC included $600 million of 0.25% convertible senior notes due 2026 issued on March 9, 2021, and a new $1.4 billion senior unsecured credit facility entered in April that includes $900 million of three and five-year term notes and a new $500 million five-year revolving credit agreement.
Risks remain tied to the pandemic and to integration. COVID-19 continues to delay some government procurement processes and is expected to affect implementations, which weighs on revenue. Other named risks include changes in client budgets or regulatory environments, cyber-attacks and security vulnerabilities, data center interruptions, integration of acquired businesses, reliance on internet infrastructure, project delays, competition, and the ability to attract and retain key personnel. Management pointed to the $350 billion of direct federal fiscal relief for state and local governments under the American Rescue Plan Act as a positive for government technology spending.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $294.8M | $283.3M | +4.1% | $276.5M | +6.6% |
| Gross profit | $144.2M | $138.7M | +4.0% | $129.1M | +11.7% |
| Gross margin | 48.9% | 49.0% | -0.0 pp | 46.7% | +2.2 pp |
| Sales & marketing | $78.8M | $62.7M | +25.6% | $67.5M | +16.7% |
| Operating income (loss) | $38.2M | $48.0M | -20.5% | $33.9M | +12.7% |
| Operating margin | 13.0% | 17.0% | -4.0 pp | 12.3% | +0.7 pp |
| Net income (loss) | $37.0M | $54.1M | -31.6% | $47.5M | -22.2% |
| Net margin | 12.5% | 19.1% | -6.6 pp | 17.2% | -4.7 pp |
| Diluted EPS | $0.88 | $1.30 | -$0.42 | $1.16 | -$0.28 |
Risks
Tyler issued $600 million aggregate principal amount of 0.25% Convertible Senior Notes due 2026 on March 9, 2021 and entered a New Credit Agreement with up to $1.4 billion borrowing capacity, borrowing $1.15 billion initially on April 21, 2021 to fund the NIC acquisition. Servicing this debt requires significant cash and may strain liquidity if operating cash flow is insufficient.
Borrowings under the New Credit Agreement are at variable rates; based on $1.15 billion initial borrowings, each quarter point change in interest rates would result in a $2.9 million change in annual interest expense.
The conditional conversion feature of the Convertible Senior Notes may require cash settlement if holders convert, and even without conversion accounting rules could reclassify principal as a current liability, materially reducing net working capital and potentially diluting shareholders.
The Indenture and New Credit Agreement contain covenants limiting additional indebtedness, liens, investments, acquisitions, dispositions, and restricted payments and require total leverage and interest coverage ratios. A breach could result in defaults and acceleration of amounts due.
The pandemic continues to delay government procurement processes and implementations, contributing to a 20% decrease in software licenses and royalties revenue and a 9% decrease in software services revenue for the three months ended March 31, 2021 versus the prior year period, and may further impact revenue and the timing of client payments.
Tyler completed the NIC acquisition on April 21, 2021 for approximately $2.3 billion in cash, and the filing cites risk that integration may fail to achieve growth or operational synergies while causing unanticipated costs and disruptions.
A material portion of Tyler's business depends on local and state government clients, and changes in their budgets or regulatory environments could negatively impact information technology spending.
Software licenses and royalties revenue decreased 20% for the three months ended March 31, 2021 as new clients shifted toward subscription arrangements. Subscriptions revenue grew 25%, but subscription-based arrangements generally do not result in license revenue in the initial year and may slow longer-term software license growth.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Adjusted EBITDA
New SaaS Clients Added
Recurring Revenues
Non-GAAP Gross Margin
Existing On-Premises Clients Converted to SaaS
Subscription Revenue
Total backlog
Bookings
Annualized non-GAAP recurring revenues
Subscription bookings added ARR
Recurring Revenues as % of Total Revenue
Software subscription arrangements % of total new software contract value
Summary, forecast, risks and KPIs are extracted from TYLER TECHNOLOGIES INC's SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.