Lawrence Hamtil

Tyler Technologies ($TYL) - great pitch in the latest Value Investor Insight (from Pat Dorsey) $TYL is the dominant software provider for state & local govt, running payroll, property tax collection, court administration & school district finance. • Compounder: Top line grows 10-12% a yr, op margins in the low to mid teens, retention in the high 90s, & the stock historically priced for 40-50x earnings for it. • Derating: Two fears broke that, AI disruption & a SaaS transition that started later than the rest of software & muddies y/y comps. • SaaS transition: ~50% of the base is on SaaS today, target 85% in 4-5 years, which lifts gross margin & cash conversion & cuts legacy support cost. • Moat = inertia: Municipal buyers are a decade behind on tech & allergic to change, which slows the migration but makes an AI vendor with no references a non-starter in procurement. • Runway: ~50% of the state & local market still runs on decades-old architecture, ransomware is forcing upgrades, & $TYL is the default when the decision finally gets made. • Earnings power: 10-12% growth plus margin uplift as SaaS mixes up = ~20% EPS CAGR over 5 years, fading to low teens after. • Valuation: 5% forward FCF yield at $394 embeds little of that, a rare case of the stock getting cheaper while the business gets better.