Continuing with its strategy of growing through acquisitions, Tyler Technologies (NYSE:TYL) TYL last week announced entering into a definitive agreement to buy VendEngine for approximately $84 million in cash. The transaction is anticipated to complete during the third quarter of this calendar year.
Operating in more than 230 counties and 32 states, VendEngine is a privately-held company that focuses on providing cloud-based software to be used in correctional facilities. The company offers financial management applications and communication platforms that are used by inmates of jails and prisons.
Its services include a website, JailFunds.com, through which families of jail inmates deposit money to be spent on making phone calls and buying items from prison commissaries. It also provides video visitation, in-bound e-mails and texts, medical requests, access to education, certificates and legal research resources, services to the prisoners.
Therefore, the acquisition of VendEngine will further expand Tyler’s correctional facilities portfolio.
Acquisitions Fueling Growth
Tyler’s growth trajectory, in recent years, has been riding on acquisitions. This April, the company completed the proposed acquisition of NIC (NASDAQ:EGOV) Inc. to bank on the pandemic-induced shift to online services and electronic payments by governments. This buyout is anticipated to be accretive to Tyler’s non-GAAP earnings, EBITDA, recurring revenue mix and free cash flow per share in 2021.
In the same month, Tyler purchased cloud-based school scheduling platform, ReadySub, to expand and strengthen its school portfolio. The transaction will help the company bring in more comprehensive schooling solutions to its school district clients, by helping them implement all-in-one workflows.
In late March, the company announced the acquisition of DataSpec, a veterans’ claim management software firm, for an undisclosed amount. The acquisition will help Tyler enhance its capabilities and strengthen the firm’s position in the veterans’ benefits management solutions market.
Tyler has a solid balance sheet with ample liquidity position and fewer debt obligations that provide it the flexibility to pursue growth initiatives, including acquisitions. As of Mar 31, 2021, cash and cash equivalents were $1.25billion. Further, the company had generated free and operating cash flows of $61.7 million and $71.7 million, respectively. Markedly, the firm has been able to regularly increase its cash flow from operations in the last five years.
Tyler is likely to pursue more acquisitions that will strategically align with its current offerings. Along with investments in research & development (R&D), acquisitions are likely to strengthen the firm’s product offerings and clientele over the long run.
Zacks Rank & Stocks to Consider
Tyler currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the broader technology sector include Lam Research Corporation (NASDAQ:LRCX) LRCX, ASML Holding (NASDAQ:ASML) N.V. ASML and Facebook (NASDAQ:FB) FB, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Lam Research, ASML Holding, and Facebook is currently pegged at 32.8%, 29.8% and 20.1%, respectively.
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