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Tyler (TYL) expands partnership with Arizona Supreme Court

TylerTYL shares have risen 21.7% year to date while the Zacks Business – Software Services industry has fallen 0.6% over the same period, reflecting investor confidence in the company’s continued customer wins and strong financials.

Tyler and the Arizona Supreme Court recently signed an agreement to expand the use of TYL’s Enterprise Supervision solution for juvenile probation. This agreement builds on the previous collaboration in which these two entities are working to streamline adult probation. The new agreement will allow the Arizona Supreme Court to expand the use of this solution to all 15 counties.

Under this contract, the Arizona Supreme Court will replace its existing Case Management System (CMS) with Tyler’s commercial CMS, which uses the latest cloud technology from Amazon‘s AMZN Amazon Web Services (“AWS”).

The Enterprises Supervision solution is used to streamline the probation process by simplifying coordination, enabling better communication, and implementing follow-up. The solution tracks cases, monitors finances, automates client check-ins, and generates detailed reports.

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Positive industry trends

The public sector’s growing reliance on technology to improve efficiency and service delivery bodes well for Tyler. Agencies and government departments at all levels are investing in digital transformation initiatives that include improving cybersecurity, modernizing legacy systems and adopting cloud-based solutions. As a trusted partner to the public sector, Tyler is well positioned to capitalize on these industry trends.

TYL also leverages its partnership with Microsoft MSFT and Amazon’s AWS and implements their offerings to deliver its solutions.

TYL has been working with Microsoft to develop core public sector capabilities in MSFT’s Dynamics 365 for finance and operations. The company recently signed an expanded cooperation agreement with its long-term partner, Amazon’s AWS, to accelerate its customers’ migration from the on-premise to the cloud ecosystem.

A robust demand environment, along with continued focus on expanding market presence and enhancing partnerships, is driving Tyler’s financial performance. In the first quarter of 2024, revenue and non-GAAP earnings per share increased 8.6% and 25%, respectively, year over year.

The Zacks Consensus Estimate for TYL’s earnings in 2024 has been revised up 4 cents to $9.19 per share, representing year-over-year growth of 17.8%. The consensus mark for revenue is $2.12 billion, representing year-over-year growth of 8.8%.

The long-term expected earnings growth rate is 15%, well above the industry average of 10.2%. Tyler’s earnings have exceeded the Zacks Consensus Estimate in each of the last four quarters, with the average surprise rate being 6.7%.

Short-term headwinds

Tyler is facing short-term challenges, such as delayed procurement processes and longer sales cycles caused by ongoing macroeconomic uncertainty. Many of its clients are concerned about a likely economic downturn, which is reflected in their low budget allocation for digital transformation.

TYL faces strong competition from industry leaders such as oracle ORCL and SAP in various market areas. These include Public Sector Cloud, PeopleSoft ERP solution, JD Edwards from Oracle and S/4HANA, SuccessFactors, Ariba, Analytics Cloud and Integrated Business Planning from SAP.

Competition from Oracle and SAP forces TYL to continuously invest in research and development. In addition, increasing competition puts pressure on Tyler’s product price, which impacts gross margin.

Diploma

The new agreement with the Arizona Supreme Court adds to the continued inflow of this Zacks Rank #2 (Buy) company’s growing customer base and boosts its revenue. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Despite short-term macroeconomic headwinds and ongoing competitive pressures, Tyler continues to expand its market presence and introduce innovative solutions to grow its public sector customer base. In addition, partnering with major companies such as Microsoft and Amazon is an advantage that gives investors confidence in the company’s future.

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