Summary
Tyler Technologies reported second quarter fiscal 2022 revenue of $468.7 million, up 16.0% from $404.1 million in the prior-year quarter. Growth came with an asterisk. Excluding acquisitions closed in 2021 and 2022, revenue rose 6.0%. Organic revenue, which also strips out COVID-related work, grew 6.2%. Subscription revenue grew 28.2% in total and 14.1% organically, extending a long streak of double-digit subscription growth. The NIC division, acquired in April 2021, supplied $139.4 million of total revenue for the quarter. Subscription and software services revenue included $15.2 million tied to NIC's COVID-related initiatives. TourHealth revenue ended in the second quarter, and the Virginia rent relief program is expected to wind down in the third quarter.
Profitability splits sharply between GAAP and adjusted results. Operating income rose 48.2% to $56.8 million. Gross profit was $193.4 million, up 6.3%, net income climbed 56.5% to $39.9 million, and diluted EPS reached $0.94, up from $0.61. Non-GAAP operating income of $110.6 million rose only 3.0%, and non-GAAP net income of $79.5 million, or $1.88 per diluted share, was up 2.9%. The adjustments are large. Share-based compensation expense totaled $25.8 million, amortization of acquired software was $14.0 million, and amortization of customer and trade name intangibles reached $13.6 million. Gross margin fell to 41.3% from 45.1%, a drop of 3.8 percentage points. Management tied the compression to NIC's lower-margin revenue mix, weaker license and maintenance revenue, higher personnel costs from inflation, and extra hosting costs from the move off proprietary data centers to Amazon Web Services. Operating margin still rose to 12.1% from 9.5%, helped by lower acquisition transaction expense.
Cash generation swung hard in the right direction. Operating cash flow was $76.7 million against negative $20.3 million in the prior-year quarter, and free cash flow was $60.0 million against negative $33.5 million. Capital expenditures came in at $8.2 million. Bookings of approximately $562 million grew 21%, and 16% excluding NIC. Trailing twelve month bookings were about $2.0 billion, up 53%, with the ex-NIC figure near $1.5 billion and growing 21%. Annualized non-GAAP recurring revenue was $1.49 billion, up 16.3%, and remaining performance obligations were $1.85 billion, up 13.5%. Deferred revenue was $528.6 million, up 9.1%. Tyler added 167 new SaaS clients in the quarter and 96 existing on-premises clients converted to SaaS. Days sales outstanding was 115 days, up from 108 days at December 31, 2021, and better than 131 days a year earlier.
Full year 2022 guidance keeps revenue and operating margin expectations where they were. Tyler expects GAAP and non-GAAP total revenues of $1.835 billion to $1.870 billion, including roughly $44 million of COVID-related revenue from NIC's TourHealth and rent relief services. GAAP diluted earnings per share is guided to $3.60 to $3.76, and non-GAAP diluted earnings per share to $7.36 to $7.52. The change is in earnings, not revenue. Interest expense is now expected to be approximately $30 million, including $7.5 million of non-cash amortization of debt discounts and issuance costs, about $7 million above previous guidance and worth roughly $0.12 per diluted share. Capital expenditures are planned at $58 million to $62 million, including approximately $34 million of capitalized software development.
Several risks frame the second half. Rising interest rates matter more now that Tyler carries $600 million of convertible senior notes due 2026 and $675 million of unsecured term loans, though it repaid $80 million of the term loans in the first six months and another $100 million in July 2022. Margins are the bigger question. The cloud transition, NIC's revenue mix and inflation in personnel costs all weigh on gross margin, and management said services revenue was flat on an organic basis as it builds implementation teams for the growing backlog. The company also flags cyber-attacks and security vulnerabilities, changes in the budgets of local and state government clients, competition on pricing and retention, and the ability to attract and retain qualified personnel as factors that could affect results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $468.7M | $456.1M | +2.8% | $404.1M | +16.0% |
| Gross profit | $193.4M | $192.4M | +0.5% | $182.1M | +6.3% |
| Gross margin | 41.3% | 42.2% | -0.9 pp | 45.1% | -3.8 pp |
| Sales & marketing | $99.7M | $97.9M | +1.8% | $108.9M | -8.5% |
| Operating income (loss) | $56.8M | $55.9M | +1.6% | $38.3M | +48.2% |
| Operating margin | 12.1% | 12.3% | -0.1 pp | 9.5% | +2.6 pp |
| Net income (loss) | $39.9M | $40.0M | -0.1% | $25.5M | +56.5% |
| Net margin | 8.5% | 8.8% | -0.3 pp | 6.3% | +2.2 pp |
| Diluted EPS | $0.94 | $0.94 | ±$0.00 | $0.61 | +$0.33 |
Risks
Overall gross margin decreased 3.8 percentage points and 5.0 percentage points for the three and six months ended June 30, 2022, respectively, driven by the inclusion of NIC's lower-margin revenues, lower software license and maintenance revenue, higher personnel costs related to inflation, and bubble costs from the transition to AWS. The subscriptions, software services and maintenance gross margin also fell 2.4 and 3.9 percentage points for the same periods, partly due to higher hosting costs and unbillable professional services employees added to support backlog growth.
Software licenses and royalties revenue decreased 15% and 3% for the three and six months ended June 30, 2022, respectively, as more clients choose SaaS offerings rather than traditional perpetual licenses. MD&A expects the software license growth rate to continue to decline as the Company transitions to cloud-based only offerings, which may pressure near-term revenue recognition despite higher lifetime contract value.
Acquisitions completed in 2021 and 2022 accounted for 10.0% and 25.8% of the revenue increase for the three and six months ended June 30, 2022, respectively, and the NIC acquisition primarily drove subscriptions revenue growth. The company faces risk in integrating acquired businesses, achieving expected operational synergies, and avoiding unanticipated costs or disruptions to existing operations.
MD&A cites higher personnel costs related to inflation, and forward-looking factors include general economic and market conditions such as inflation and changes in interest rates, as well as changes in client budgets or regulatory environments of local and state governments that could negatively impact IT spending.
The company's implementation and support staff has grown by 239 employees since June 30, 2021, excluding acquisition additions, and MD&A notes higher personnel costs related to inflation plus an increase in professional services employees not yet billable. Forward-looking factors include the ability to attract and retain qualified personnel and manage the loss or retirement of key management.
As of June 30, 2022, the company had $600 million in outstanding principal for Convertible Senior Notes due 2026 and $675 million in outstanding principal for unsecured term loans, with no borrowings under the revolving credit facility. Cash and cash equivalents decreased to $253.1 million at June 30, 2022, from $309.2 million at December 31, 2021, and MD&A notes that access to capital and credit markets may be limited by economic conditions or other factors.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Adjusted EBITDA
Recurring Revenues
Non-GAAP Gross Margin
Non-GAAP Operating Income
Existing On-Premises Clients Converted to SaaS
Total backlog
Bookings
Recurring Revenues as % of Total Revenue
Summary, forecast, risks and KPIs are extracted from TYLER TECHNOLOGIES INC's SEC filings for Q2 FY2022 (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.