Company Reports

We are raising our fair value estimate to $500 per share from $485 for wide-moat Tyler after the firm reported solid first-quarter results and took the unusual step of modestly raising its full-year outlook on both the top and bottom lines. Compared with our expectations, both revenue and non-GAAP operating profit were slightly ahead. We continue to see shares as attractive and are encouraged by management’s assertion that cross-selling and upselling motions are gaining momentum and its bullish assessment of the demand environment. We continue to see federal stimulus funds as supporting the healthy environment and see consistent growth and margin expansion over time driven by the maturation of the cloud transition and think that as the leader in local government software Tyler should benefit.

We view Tyler Technologies as the clear leader in a sleepy and underserved public service software niche market. We believe there is a decadelong runway for normalized top-line growth near 10% at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

We view Tyler Technologies as the clear leader in a sleepy and underserved public service software niche market. We believe there is a decadelong runway for normalized top-line growth near 10% at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

We view Tyler Technologies as the clear leader in a sleepy and underserved public service software niche market. We believe there is a decadelong runway for normalized top-line growth near 10% at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

We are raising our fair value estimate to $485 per share from $475 for wide-moat Tyler after the company reported solid fourth-quarter results, and we adjusted our model for the time value of money. We still believe shares are attractive. Compared with our expectations, both revenue and non-GAAP operating profit were slightly light, while new 2024 guidance was in line on both the top and bottom lines. Management continues to guide to 20% compounded growth for SaaS through 2025. We continue to see federal stimulus funds as supporting the healthy environment and see consistent growth and margin expansion over time driven by the maturation of the cloud transition. We believe Tyler is the clear leader for municipal software needs and continue to view shares as attractive.

We are maintaining our fair value estimate of $475 per share for wide-moat Tyler after the company reported solid third-quarter results that included revenue that was in line with our expectations and better-than-anticipated profitability. We view shares as attractive despite a post-earnings pop. SaaS growth ticked up, which is positive but something that we do not view as a durable trend. Management continues to guide to 20% compounded growth for SaaS through 2025. Margins were similarly strong, but we are not convinced that we need to make material changes to our model. Implied fourth-quarter growth was generally in line with our thinking. We continue to see federal stimulus funds as supporting the healthy environment and see consistent growth and margin expansion over time. We believe Tyler is the clear leader for municipal software needs and therefore continue to view shares as attractive.

Wide-moat Tyler reported second-quarter results that were ahead of our estimates for both revenue and profitability despite the accelerating software as a service transition, which tends to mute both measures. Management believes the demand environment remains at healthy levels at or above prepandemic levels, and we concur. Additionally, the firm tweaked 2023 guidance, with the revenue range narrowed around the same midpoint, while non-GAAP EPS was moved $0.10 higher at the midpoint. Changes, therefore, were modest within our model, which in turn holds our fair value estimate stable at $475 per share. We continue to see federal stimulus funds as supporting the healthy environment and see consistent growth and margin expansion over time. We believe Tyler is the clear leader for municipal software needs and therefore continue to view shares as attractive.

On June 15, Tyler Technologies hosted its first analyst day in more than four years, where it emphasized its long-standing and deep relationships with government, its path to being cloud-first, and payments as a growth driver. Importantly, management provided both midterm and long-term financial targets in its Vision 2030 strategy that are slightly better than our estimates and include revenue growing 10% to 12% annually through 2030 along with $1 billion in free cash flow. We see the investor day as reinforcing our thesis that Tyler maintains the largest portfolio of government-related software solutions, is a clear leader in the space, and offers investors a long-term opportunity for steady revenue growth coupled with substantial expansion in free cash flow margins. Our fair value estimate of $475 per share is unchanged, and we continue to view shares of wide-moat Tyler as attractive.

Wide-moat Tyler reported first-quarter results that fell short of our estimates for both revenue and profitability. SaaS deals continue to come in faster than expectations, which has a muting effect on revenue and margins, and the firm does not provide quarterly guidance, so we do not view the shortfall as meaningful. We consider Tyler’s demand environment to be healthy with normal patterns of bookings, subscriptions, and transactional revenue. Additionally, the firm reiterated 2023 guidance, so we kept our model largely unchanged, which in turn holds our fair value estimate stable at $475 per share. We continue to see federal stimulus funds as supporting the market and see consistent growth and margin expansion over time. We believe Tyler is the clear leader for municipal software needs and therefore view shares as attractive.

Wide-moat Tyler Technologies reported fourth-quarter results that fell short of our estimates for both revenue and non-GAAP operating margin. We consider Tyler’s demand environment to be healthy with normal patterns of bookings, software subscriptions, and transactional revenue. However, guidance for 2023 was shy of our estimates, as Tyler expects faster software as a service (SaaS) growth but license revenue contraction. This mix shift should pressure both revenue and margins. In turn, we are lowering our fair value estimate to $475 per share, from $500 previously. We continue to see federal stimulus funds as supporting the market and see consistent growth and margin expansion over time, and we believe Tyler is the clear leader for municipal software needs, and therefore view shares as attractive.

We view Tyler Technologies as the clear leader in a slow-moving and underserved niche market of government operational software. We believe there is a decadelong runway for normalized top-line growth near 10% at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

We view Tyler Technologies as the clear leader in a slow-moving and underserved niche market of government operational software. We believe there is a decadelong runway for normalized top-line growth near 10% at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

Tyler reported solid third-quarter results, including upside to our model on revenue and non-GAAP operating margin. The demand environment remains healthy and momentum continues with solid normalized bookings, software subscriptions, and transactional revenue. We also see the acquisition of Rapid Financial as expanding the market opportunity for Tyler’s payments business. Based on more rapid software as a service, or SaaS, growth and a more rapid license contraction, which will pressure both growth and margins, we have fine-tuned our estimates for the next couple years and we are accordingly lowering our fair value estimate to $500 per share, from $530 previously. We continue to see federal stimulus funds as supporting the market and see consistent growth and margin expansion over time, and therefore view shares as attractive.

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.

After strong results and only 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 growth in software subscriptions and transactional revenue and incremental signs of cross-selling success between NIC and legacy Tyler. 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 expect margins to bottom in 2023, with revenue growth not really impacted given that most new business already arrives via subscriptions.

After a generally solid and in line quarter coupled with a formal pivot to the cloud, we are lowering our fair value estimate for wide-moat Tyler to $530 per share from $575 but continue to view shares as attractive. We expect the company's full embrace of the cloud will be a drag on profitability over the next several years, although we do not anticipate much of an impact from this move over the longer term. The company has been organically shifting to the cloud for two decades so at least investors will get to skip the most painful first couple of years in a model transition. Further, we expect margins to bottom in 2023, with revenue growth not really impacted given that most new business is coming in via subscriptions already. Finally, we note the cloud transition adds some uncertainty around results for the next several quarters until investors are more comfortable with progress, notably on optimizing solutions for the cloud and moving clients from Tyler's data centers to AWS.

We view Tyler Technologies as the clear leader in a slow-moving and underserved niche market of government operational software. We believe there is a decadelong runway for normalized top-line growth near 10% at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

We view Tyler Technologies as the clear leader in a slow-moving and underserved niche market of government operational software. We believe there is a decadelong runway for normalized 10% top-line growth at Tyler, especially as demand for SaaS accelerates and the need to modernize local governments’ legacy enterprise resource planning systems intensifies.

Based on refinements to our DCF model after a strong third quarter and continued signs of an end market rebound, we are raising our fair value estimate to $575 per share from $500 for wide-moat Tyler and see modest upside to shares from here. Tyler’s robust results came in well ahead of our revenue and non-GAAP EPS expectations and included several large deals and an extension of coronavirus-related revenue for NIC that were originally thought to be winding down by the fourth quarter. The $2.3 billion NIC acquisition distorts results, but we see underlying trends that continue to point to a recovery. In fact, management noted that some areas, such as Munis, have returned to pre-coronavirus levels, and there are already a couple dozen deals benefiting from massive government stimulus efforts to support state and local governments. Forward-looking metrics, like bookings, were strong. We think the ongoing recovery, integration, and cross-selling efforts for NIC, and local governments’ use of pending stimulus funds over the next couple of years can drive performance over the next couple of years even while debt levels are reduced. Much as it did coming out of the 2008 financial crisis, we expect Tyler, especially after the acquisition of NIC, to emerge in an even stronger position to capture market share, as its portfolio is broader and it is increasingly exposed to multiple solution sales.

Wide-moat Tyler Technologies reported solid second-quarter results, including upside to FactSet consensus estimates on both the top and bottom lines. The $2.3 billion NIC acquisition closed on April 21, distorting results and rendering comparisons to consensus somewhat less relevant. Recently issued guidance for the year was raised, but not by as much as upside in the quarter, which we view as prudent given an uneven recovery for Tyler’s customers. Management continues to see signs of a recovery, including parts of the business that have already returned to pre-COVID levels. We think the ongoing recovery, integration and cross-selling efforts for NIC, and local governments’ use of pending stimulus funds over the next couple of years can drive better results than we currently model. We expect the company to continue to focus on debt reduction over the next two years. Based on modest refinements to our model, we are raising our fair value estimate to $500 per share from $475 and view shares as fairly valued. Much as it did coming out of the 2008 financial crisis, we expect Tyler, especially after acquiring NIC, to emerge in an even stronger position to capture market share, as its portfolio is broader and it is increasingly exposed to multiple solution sales.