Why Tyler Technologies Stock Got Thrashed on Thursday
Key Points
It missed on revenue, although not dramatically.
It also announced a new, $1.5 billion share repurchase program.
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A decent-if-not-great earnings report pushed Tyler Technologies (NYSE: TYL) stock into the red on the second-to-last trading day of the week. The public sector-focused enterprise software company saw its share price sag by more than 3% on Thursday.
A mixed second quarter
Tyler uploaded its second-quarter results just after market close on Wednesday. These showed that revenue for the specialty tech company grew by 8% year over year to $645 million. Of this, recurring revenue rose at a similar rate to just under $560 million.
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The growth dynamic was weaker with net income not under generally accepted accounting principles (non-GAAP, i.e., adjusted). This inched up less than 1% to $129 million, or $3.08 per share.
With those numbers, Tyler missed the average analyst consensus estimate of almost $648 million and narrowly beat the $3.07-per-share projection for adjusted net profit.
The company also said that it approved a share buyback plan last week. Its board of directors has authorized $1.5 billion for the repurchase of Tyler Class A common stock. It said the new program supersedes any previous ones, although the company could opt to make buys from older initiatives.
That leaves the door open for continued purchases under the latest program, which, as of July 29, had almost $1.75 billion left under authorization.
Softness in software
Tyler also proffered guidance for the full year 2026. It's forecasting revenue of almost $2.54 to under $2.58 billion for the year, and adjusted earnings per share (EPS) of $12.95 to $13.20. The consensus analyst estimates for the two metrics are nearly $2.56 billion and $12.89, respectively.
Software stocks have taken quite a beating over the past few months, lately on concerns that spending on artificial intelligence (AI) would cannibalize enterprise budget money devoted to software.
Tyler, then, probably needed a blowout quarter to bring the bulls back into its pen. To me, the company is more insulated than most as a go-to for the public sector, so investors should consider loading up on it when its price is relatively low.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tyler Technologies. The Motley Fool has a disclosure policy.
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