Tyler Earnings: Healthy Environment Drives a Strong Quarter All Around

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.