Tyler Technologies: Impressive 2030 Vision for 10% Top-Line Growth and Substantial Margin Expansion

On June 15, Tyler Technologies TYL 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.

Tyler highlighted its large and expanding portfolio that includes key solutions in public administration, courts and public safety, heath and human services, and K-12 education, along with the Socrata data platform that cuts across solutions. We believe this is the largest portfolio focused exclusively on governmental solutions. The firm has more than 13,000 clients, many of whom have been a Tyler client for decades, with more than 40,000 software installations. We believe this installed base is a strategic asset, as this represents the easiest path to growth. Along those lines, management noted that multi-solution sales have grown by about 15% annually since 2020 and that Tyler could expand its revenue base by a factor of 10 simply by expanding relationships with existing customers.