Analyst Note| Dan Romanoff, CPA |
Wide-moat Tyler Technologies continues to show improving fundamentals, as its third quarter was ahead of our top- and bottom-line expectations. The company experienced a ransomware incident involving its internal systems that did not involve hosted or cloud software for clients. While the situation is being investigated and remediated, the firm notes the attack resulted in $1.5 million in lost revenue in its services segment. Full-year guidance was mixed, with slightly lower revenue and slightly higher EPS, which we do not see as problematic. The company continues to see some COVID-driven pressure. Much as it did coming out of the 2008 financial crisis, we expect Tyler will emerge in an even stronger position to capture market share, as its portfolio is broader and it is increasingly exposed to multiple solution sales. Recurring accounts for 70% of total revenue compared with about 50% in 2008, and the balance sheet is much stronger today than it was then. We are now assuming higher profitability in our forecast, which results in an increase in our fair value estimate to $340 per share from $322.