Tyler Technologies Posts Good Quarter; Macro Pressures Have Little Impact; FVE Steady at $530

After strong results and modest adjustments to its full-year outlook, we maintain our $530 per share fair value estimate for wide-moat Tyler Technologies and continue to view shares as attractive. Business momentum continues with strong bookings, growth in software subscriptions and transactional revenue, and incremental signs of cross-selling success between NIC and legacy Tyler. Stimulus funds from the federal government seem to be having an incrementally positive impact on demand, which management characterized as healthy. We expect the firm's full embrace of the cloud will be a drag on profitability over the next several years, but we do not anticipate much of a longer-term impact from this move. We also see margins bottoming in 2023, with revenue growth not really impacted given that most new business already arrives via subscriptions.