Tyler Earnings: Full Steam Ahead on Cloud Uplift and Cross-Selling

We are raising our fair value estimate to $600 per share from $500 for wide-moat Tyler, after the firm reported good first-quarter results and again raised its full-year outlook. The company continues to hit milestones, such as closing the first of its two proprietary data centers in the quarter, and delivering on its cloud evolution, where positive trends, such as public safety moving to the cloud and conversions of on-premises customers to the cloud, are accelerating. We continue to see federal stimulus funds as supporting the healthy 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. We see shares as modestly undervalued.