Tyler Technologies, Inc. (NYSE: TYL) stock lost over 4.4% on 2nd May, 2019 (Source: Google finance) after the company posted mixed results for the first quarter of FY 19. Subscription agreements made up the majority of the new software contracts in the quarter, and the four largest software contracts signed in the quarter were all subscription arrangements, which put pressure on short-term top-line growth but is a long-term positive trend for Tyler. The non-GAAP gross margin rose 130 basis points while the non-GAAP operating margin fell 120 basis points. Research and development expense rose 45%, due to a continued high level of investment in products across the company, including heightened investments in recent acquisitions.
Moreover, bookings had increased 17% over the first quarter of 2018, and contributed to the backlog growth of 5%. Contract signings were particularly strong for the public safety, ERP, and appraisal and tax products, and the new business pipeline remains active.
TYL in the first quarter of FY 19 has reported the adjusted earnings per share of $1.22, which is in line with the analysts’ estimates for the adjusted earnings per share of $1.22. The company had reported the adjusted revenue growth of 11.7 percent to $248.8 million in the first quarter of FY 19, missing the analysts’ estimates for revenue of $253.6 million. Organic revenue growth was 5.5%. Non-GAAP total revenues were $248.8 million, up 12.4% from $221.4 million for the first quarter of 2018. Recurring revenues from maintenance and subscriptions were $167.4 million, which is an increase of 17.1% compared to the first quarter of 2018, and comprised 67.8% of first quarter 2019 revenue.
For FY 19, TYL expects Non-GAAP total revenues to be in the range of $1.09 billion to $1.11 billion. Non-GAAP diluted earnings per share are expected to be in the range of $5.20 to $5.35. Pretax non-cash, share-based compensation expense is expected to be approximately $62 million. Research and development expense is expected to be in the range of $82 million to $84 million. The non-GAAP annual effective tax rate is expected to be 24%. Capital expenditures are expected to be in the range of $48 million to $50 million, including approximately $22 million related to real estate and approximately $6 million of capitalized software development. Total depreciation and amortization expense is expected to be approximately $77 million, including approximately $51 million from amortization of acquisition intangibles.