Tyler Earnings: Fundamentals Are Strong Across the Board

We raise our fair value estimate to $630 per share from $600 for wide-moat Tyler, after the firm posted a solid third quarter, while tightening its full-year revenue outlook around the midpoint and slightly raising its EPS guidance. Healthy trends persist, including larger deals, a shift to software as a service, or SaaS, strong conversions of on-premises customers to the cloud, more rapid margin benefit capture from the cloud transition, successful cross-selling, and a buoyant demand environment. We also see consistent growth and margin expansion over time driven by the maturation of the cloud transition, from which we think Tyler—as the leader in local government software—should benefit. We also see continued success in upselling and cross-selling between legacy Tyler and NIC as an avenue for upside in the coming quarters. Even after raising our fair value estimate, we see shares as fairly valued, based on strong recent share performance.