TYL - Earnings call transcript Q3 2019 | Tyler Technologies, Inc.

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Operator

Hello and welcome to today's Tyler Technologies third quarter 2019 conference call.

Your host for today's call is John Marr, Chairman of Tyler Technologies. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference is being recorded today, October 31, 2019.

turn over to Mr. like would the to call I Marr. Please go ahead.

John Marr

Moore, and Nick the third Lynn Financial Chief Officer. welcome our quarter Brian you Officer call President and Executive XXXX are on our Chief me to Thank Miller, and With earnings today our call.

Harbor First, like Safe to give Brian would I the for statement.

comments Next, the our third final our and update we details XXXX have have Then and quarter preliminary will Then comments. your some will take of Lynn Brian review I guidance. questions. will will results some

Brian?

Brian Miller

Thanks John.

materially the During subject may future the Private the may information to historical call, forward-looking and are course Reform Safe refer include make Litigation and the we of XXXX and this Securities and to Please of results call uncertainties, projections. period differ those we on under all statements revenues, filings and Form prospects, certain make note will other relate of XX-K today Harbor unless these conference management the Such provision information corresponding could last our risks. that would company's provide specify growth statements considered profits. cause which other year more that information of the risks Act to comparisons from expenses on otherwise. projections We for SEC concerning are to actual you than statements

Lynn?

Lynn Moore

Thanks Brian.

quarter third to like would into highlight we I get week. results, made announcements we this the Before two

have that we Web Tuesday, on a we announced into Services. agreement strategic First, Amazon entered collaboration with

forward needs. public have cloud cloud the the allows clients. to to development, training of look public sector. It for order services offers cloud, working to our that bring to toward in we cloud-native the agreement and the clients future collaboration for and support services continue us increasing their evolve to AWS closely applications groundwork Tyler to the scalability, trend advanced most the and to resiliency security the As we applications to response AWS to together next-generation leverage lay framework sector continue that the in provides for This

have leading across Technologies, SaaS and Canada, Vancouver, a announced also and United courts of statewide states elevate including court all States British complement yesterday management of that we five based We and their addition jury solutions. acquired in of Columbia. the CHT's solution systems Courthouse existing serves provider our will suite agreements

to results. QX Now back turning

Our solid was quarter, the non-GAAP in highs execution the as cash of continue Xsecond quarterly EPS. digit did third a both as consecutive new in grew was quarter by and of non-GAAP build flow provided GAAP as growth strong third revenue first Cash revenues to This we reached upon operations free and half XX.X%. the year. double both quarter our

software-related the our revenue of quarter. revenue double and lines second accelerated digits organic grew All from growth by

a revenues and software core Our on XX% subscriptions basis from grew with growth. non-GAAP XX% organic licenses

Software license our second-highest the quarter XX.X%. and royalty revenues in were history, in the third increasing

as and contracts the expected, As the the third value. new total XX% shifted quarter, approximately new quarter up of of compared XX% to license second on-premises deals the number contract somewhat made mix

quarter, XXXX, the full the signed high. the months of in already nine a first we year contracts And software new XXXX. of deals in new total XXX the signed We new of surpassed quarterly number have through

Total of added XX.X% subscriptions non-GAAP and new GAAP revenue, and revenues maintenance grew XX.X% revenues subscription new XX% Our subscription comprised revenue. total of software deals million recurring subscription XX%. grew and $XX.X XX.X%. revenues annual up from recurring grew

quarter. deals channel. by timing delays through the its in federal quarter and were license the While but sales and good, of of also MicroPact quarter, partners revenue increasing signed an will $X.X were coming of were Vocational include These and execute million largest significant affected Several October for bookings MicroPact will the Administration MicroPact in Education the as contract contracts Veterans' the until Rehabilitation contracts fourth for with end by at not fee. a a partner deal, in third several amount related they at the the are be the recognized

largest-ever MicroPact in sales its October. a As month license result, achieved

for this court Odyssey case Our strong management our quarter sales well. as continued solution

Our largest the of total of Court deal e-filing SaaS District as Odyssey Columbia quarter of $X.X the a Superior with arrangement was million. a for as management case value with well approximately

Superior Shasta two added new e-filing with a arrangement license and in with Snohomish with new the clients also SaaS Washington. County, County with California, fixed-fee a contract Mendocino We Court, agreement a Odyssey along

new was New sales multi-suite contracts of Munis were some for a Munis be data and all-time solution, that Richland recently quarter Socrata deals number a solutions. data including Socrata Munis, of deals and for our ERP Significant MobileEyes our Texas Longview, solutions products, North the with the and insight with more our included those Among insights include and Hills, Texas contract high. solutions. of continue an robust number acquired for in our and to contracts EnerGov, for and

SaaS valued for Instruction a Munis with ERP school at signed also state new agreement earlier districts the we under one with North Schools $X.X agreement Service is eight County of contracts Carolina the this Carolina. North SaaS Agreement solution Union Master the with Department of quarter This We signed Public year. million in our Public this

the with Fulton City, Metropolitan Ohio. Grove County, New significant solutions, safety County, contracts Dispatch County, New Illinois, we Computer-Aided and York in Champaign public our York, For Nassau signed

a Minnesota For County, County, Macomb SaaS our with tax agreement Clara and the deals appraisal solutions, Santa and and city license Michigan. California Minneapolis, with of we significant signed

the Administrative Rail data and Other we time Transportation Public new Odyssey Virginia had signings U.S. include Socrata long client. the of Cloud of Department Department of the Mexico insight solution, and a our Courts, and significant Affairs. win Socrata the the key a Office for with Government Veterans For Connected New

Utah the of MicroPact Office notable for with the Department acquired Management recently our the the of For General's of solution, Department signed Health, Agriculture. arrangements Office Illinois entellitrak Personnel Inspector with and we

the annual results the for and detail like update our more on Now for I for provide would XXXX. Brian quarter to guidance

Brian Miller

annual third then, reported I the XXXX. some XXXX. for update performance guidance for Technologies will additional Lynn. additional quarter have results John data Thanks quarter's XX, September the going ended And Tyler our on am comments. provide some to and Yesterday, its

In have reconciliation measures and GAAP our of release, we the A provided non-GAAP in facilitate believe software understanding included industry. earnings with results non-GAAP measures comparisons our release. that to earnings of our we peers in is

under on also backlog quarterly on section recurring supplemental provided about the posted call, have and We with information Investor website, of our bookings, Relations revenues. tab, information Financial including schedules Reports this the

to million, GAAP on basis the rose of for a basis. On XX.X%. XX.X%. on and Organic revenues a were basis, up were from X.X% growth non-GAAP quarter a GAAP X.X% revenues million, second quarter $XXX.X XXXX up revenue $XXX.X non-GAAP the

software XXX revenues of core grew converted organically license approximately subscription-based increased approximately in we quarter year, In We on-premises contract subscription-based Our conversions, contract added added XX%. and and million existing XX total value. arrangements Subscription had clients, the and total approximately value. QX arrangements $XX XX XX.X%. new new representing $XX representing last subscription in combined revenues on-premises million for XX

term comprised years SaaS was last this value-weighted year. contract XX% Subscription year. XX% X.X total the this new in software of of signed value to years, average quarter The new contract QX X.X to quarter, compared of of in compared QX contracts last value

last e-filing in are amount up increased online revenue and XX.X% XX% $XX.X over million payments, $XX.X year. million, million. $XX.X to subscriptions, of from included which e-filing from includes Revenues That

GAAP million, approximately XX.X% non-GAAP up basis on revenues $XXX QX also approximately Annualized up $XXX million, were and XX.X%. recurring a for were

last the points operating from but from R&D are third last significant integrated the as margins margin declined sequentially acquisitions receiving The near points decline into second non-GAAP basis in quarter two which the increased investment basis to XXX Our in completed factors, XXX year-over-year reflects term quarter. our investments year's from major quarter lower in XX.X% Tyler. XX.X% two also they increased and in their operating affect years, are profitability that third the

almost up R&D were would basis, our points margin Our points. XX% third XX results flat last been year of excluded, basis with and and in were XXXX up from on R&D XX.X%, the non-GAAP XXXX If year. expense acquisitions basis have the year-to-date XXX QX a our expense operating increased XX%, and last our quarter

Our backlog million, year quarter million includes and maintenance, million billion, million backlog $XXX to of $XXX end $XXX million $XXX of compared at the to year $XXX Subscription a approximately to $X.XX fixed-fee e-filing Backlog was included related last up ago. was XX.X%. the compared contracts.

increase Our an bookings the million, of QX for from of approximately last year. X.X% $XXX were quarter

average trailing term in bookings bookings contracts of the same For billion, the X.X%. bookings reduction XX.X%. bookings new as of approximately been The intentional XX-months, were year, up term subscription approximately been in would Had last growth. growth have also the quarter the impacted $X.X subscription the

XX.X% annual over in quarter added Our million the revenue, software $X.X bookings recurring year's million. up last in subscription new $XX.X

of been had would contracts comparison, represented that all $XX approximately have of arrangements, license additional subscription new our we For license revenue estimate they if million. under

greater software of those contracts in an XX new XXXX. new signed We licenses compared third with average average an than included in $XXX,XXX quarter quarter on-premises the of and XX license contracts $XXX,XXX of the to $XXX,XXX, license contracts had value that

$XXX investments cash operations quarter We million Cash and $XXX.X rose cash rose and from highs. million flow to with new million, in almost $XXX.X the XX% outstanding to ended flow debt. no free and XX% both quarterly

to which through credit entered revolving credit November facility. million previous During unsecured funding accordion uncommitted our also facility provides next facility five-year a replaces The new the million new in we into new facility, of million also minimum The additional quarter, $XXX an credit $XXX credit feature. secured $XXX year. of scheduled mature a was

to to the facility also compared pricing to expanding our In contains credit the improved previous facility. moving addition unsecured, size and

September DSOs XXX under percentage the unbilled at milestone in was $XX of XXX a million sales primarily XXXX. receivable completion year-over-year timing related in to days increase September XX, XX, outstanding receivables. at in to increase The accounts large Days several XXXX, of and billings compared resulting is contracts, days

at receivables, were September XX from Excluding last current days. unbilled DSOs unchanged

XXXX the follows. full for guidance Our year is of as

between $X.XXX XXXX expect and and $X.XXX will will revenues billion between be be non-GAAP billion and $X.XXX revenues billion. billion $X.XXX GAAP We

and the of to significantly well the $X.XX acquired as stock XXXX expect as GAAP may diluted intangibles. due GAAP tax effective on $X.XX incentive impact final be of We rate will vary between valuation the EPS and awards

expect and We diluted $X.XX. non-GAAP $X.XX be XXXX between will EPS

year, estimated pretax the is For million. expense approximately compensation $XX expected to non-cash, share-based be

rate exercises. XX% of and are will tax and diluted be million million $XX share-based based between to on earnings XX expense million. $XX effective benefits shares per items, volume includes between R&D stock estimated million We for may of the year significantly be vary tax XX.X which estimated share GAAP option year to $XX related compensation, and annual expect discrete after discrete approximately for million an timing assumes shares. tax the expected of Fully the

Our XXXX annual is estimated non-GAAP XX%. effective rate for tax

and estate million million will for capital $X related capitalized our of related million, real including expenditures MicroPact. costs total million approximately between million of year, million of acquired We including to depreciation be development be expect $XX the $XX expected amortization is approximately to intangibles. and $XX approximately software and approximately Total to $XX $XX amortization

Now the to I would like to call comments. John for over his turn back

John Marr

Thanks Brian.

half solid history. third are very as the achieving We continue the quarter. build revenue as and double We pleased cash on with quarterly our digit well EPS strong of growth to non-GAAP in the to achieved year highest free first flow again

Our a reflecting remains last record part increased our quarter. and signed number in we in the competitive new of over two years deals investment in R&D position high, the

XXXX continue the active progress. into Tyler we of our integration the in We and by acquisitions XXXX encouraged to are be and

acquired Tyler's in starting made to to benefits products. the integration including We investments see are products, have core from we

For example, wins branded included public with ERP we platform CaseloadPRO, deals Supervision. safety seven and Tyler XX had Data-as-a-Service now quarter Socrata's this new and

to to agreement As the nation's together our largest Lynn very are with exclusively about brings the strategic Amazon accelerate in on agreement innovation collaboration also public the and noted, Services. excited together Web deepest look sector platform. forward these We software initiatives. AWS, and Tyler, focused broadest of company multifaceted strategic cloud This development new we the working

strategic response for to asset we experiences in programs. to of citizens delivery governments evolve applications their further the collaboration as our clients data and design, deliver better will As management to and use in Tyler's public the this to a enable continue enable sector needs,

take will we questions. the Nick, Now,

Operator

[Operator Instructions].

First Kirk from ISI. Evercore question Go comes Materne, ahead.

Kirk Materne

are some to flexibility term How color as platform little talk hoping very Hi. of you bit the start, the move of do accomplish just term? what clients and in what asking just term about and I applications? near guess goals? the then AWS about the Maybe maybe in Lynn much. immediate you to that, Thanks you I your maybe it? near that to little for are can terms development having Are AWS John, to on with of a guess, just of over own more a that bit goals sort think kind longer a more or about deal, maybe

Lynn Moore

Sure, Yes. Kirk.

I an quarters. about a of talking a Tyler, been comprehensive term kind think the have initiative been cloud with have this several companywide I really within really about something strategic initiative is for last I long coming talking about strategy. up

We a on things. figure efficient cloud opportunities involves our more cloud-optimized, have our looking of with path providers and involves lot become It and at cloud-agnostic, evaluating and talked the them It right at long the trying our evaluating products, to cloud potential get term to to approach public roadmaps, how of of on. looking the on historic hopefully about Tyler it. strategy cloud, different current out

puzzle overall past been really so, that a of is working It's have the for we that of this an extension year. And on that. piece

of away to with the AWS continue help It to our eventually that. helps get term cloud applications, helps our also skills with our the partnering next-gen building moving the Tyler solutions strategy, modernizing and It from more we our helps long more for these It to with delivering some cloud. some portfolio training in short term. As apps. of them with on staff next-gen helps build focus necessary

still of on in the continuation you overall But have a been just this that of working we a know we in that have been that that in a really about. it's to quarter don't can talking an quarter. that position it's So year. this for past stuff movement outline expect are of part and sort we I

going want the not. away We We in be couple recognize model what sure certainly of that in to it's on continue sector. increasing it's immediate want the make clear from an I careful a I that's shift radical not the future. to public about on-premise. market our believe things. It's business shift to in

are and and were the to we responsive to more even years rates that There's continue strategy evolving But ago still We the responsive. in are be the have where market versus going talked and in on-premise we future. moving the five they to we going we about be think as today for where be are will demand demand, to significant cloud. to

from away cloud. also It's Tyler existing not an move immediate our

We have customer got existing commitments.

easily We hopefully needed some become have a over into And some and commitments. of more public products I cloud in financial move again, little a cost-efficient our mentioned, more time as to got a today and manner cloud-optimized. some can more cloud-efficient work

an a to us near at focusing In on really we various that's where high So But solidify are level, is. on it relationship. to to continue the term, framework for we It's development, we going year. work going recognizing where our Tyler overarching sense. and of market on an really initiatives. are future customers again, inside But doing migrating it's been the work collaboration, on the makes it and have where past the extension training, for of

Kirk Materne

but how on XXXX? any the it fourth about Super. missed this, guidance? apologize one maybe I I helpful. to from Brian. That's fiscal for impact think Or and maybe quarter And Brian follow-up just if for Courthouse

Brian Miller

No. $X relatively less revenues. million deal, It's than a annual in small

So in the material impact be QX. won't

Kirk Materne

Super. you Okay. Thank all.

Operator

Co. from Needham Our Berg, next comes question ahead. Go Scott &

Scott Berg

business Hi questions. is how on safety we everyone. this event some your for start and with up-market. let's side and Thanks great guess, at had that the I public discussions business here were taking better when of earlier my the week IACP positioning

more would some overall those more So Tier type be could efforts and opportunities a doing I you an Historically, the it hasn't you into are maybe to talk update customers? X know successes there focus. great. about big company's recently. maybe move But on been there more

Lynn Moore

Yes. Sure, absolutely.

really over the last, it So we years. about a couple of little bit, talked Scott, last have

Part of are purpose Those made short-listing. responding been the it of more a in up-market. core lot investments have to those our position one, was to, also of but to We get RFPs we the of investments of investments. product off terms in paying competitive have market number upscale, move

are But our to is, this year-over-year. number And question on I are names we is getting your example new to larger also up year, think deals seen have starting the be direct the significantly horizon. of as you

We expect deals $X the as of the by to year. in approximately as the last year close that were many end range twice million-plus

a investments. good of So example it's those

One I key there public over jurisdiction CAD quarter, big a go-lives quarter, mean, at we the back, and first a really done in Tier by think really And has on look growth a which to work big but it, that that about Scott. the Orlando, for lot fueling calls operational I safety, and really stepping Florida talk up-market. one this year. it's two X I we had you that when are two were don't really milestones product go-live. that have was we mean, was million-plus the our

Burlington X So were it's New been CAD we successful They first Jersey, client go-live. have and another both do that. the able to time Tier records. County, a for

We again, and getting the of talk time, stuff this sauce is hard on This this But the Tyler. up about of running secret budget. on clients is stuff, occasionally. kind

it's As and going we is up play a move and Getting up-market them X you running and as sites to know, more these having Tier to happy opportunities, reference help referenceable. get more continue business. and

our got success the notes clients example, of all the In personal the just Orlando's implementation. case, multiple about from handwritten for team

But really quarter it that's and in for put point stuff. to to moving that. good get your good don't So safety do got to public out you a place We references upstream, those releases was it. about press about really have

Scott Berg

maybe trend, where as awarded But couple seems more had will there rationale QX will from MicroPact and but be of movements Got of the business the there. get you of some there. have of you versus movement historically new been of in little short state for not moved less to QX I the assets before. guide didn't to with quarters, last kind deals it. certainly right. new couple quarters some has you predictability the Helpful. as Socrata deals obviously this some I has How then small been business moved maybe the maybe like a kind easy your around deal that into out And predictability today have always All understand it brought there. had view But invoiced of is and get into kind that a opportunities you federal international is follow-up there's perspective, customers? a Is flow? first some MicroPact, know in segments, Or these the bit certain very term what's purview? a local of you the with do time

Lynn Moore

Yes. Scott, I it's think things. couple a of

I are right. you think

about And But We relates markets. the have some we they their to significant of it of are that learning is think last of internal you learning some a that, as partner the business business, are really miss are was has years. channels which and still these to starting business, about know, and they some this the a see And spent at fruition. that couple some comes part little learning it's is and then little the sort September over still time certainly deals, of federal XX. bit all a as MicroPact, still really an bit I year that of lot investments made of in really their just a not

around. were Well, turn the that didn't but getting business partners

that Well, business XX. midnight stroke on literally, of to us at time contract. that comes no September the sometimes get for there's And in,

performance too of a business you the deal growing you of some, is you you see our and the is flow don't it and have I think have in and have, a when as of little some this is part don't more lines couple say, larger to, that that a slip more have little as business, more and may our deals to impact bit constant bit side flow. a continuous the there's will ERP you deal where opposed deals, tend

of So deals slip kind talk we It's just out. deals about slip in, and the nature business of that's don't it. the

and there's at is the with business, business. this little told MicroPact, we where little for core bit of some year gets I But in deals, see bit news off our lines, the like a the a larger generally, you Odyssey, But predictabilities even good the guys internally. the won sometimes these

We when will take the get business it. we

reason. are trends know, As is good the part is the learning don't news of you still there. the But bit business quarterly space. right, we we you Perhaps put that are of this a the are But out all little guidance.

Scott Berg

Thanks the taking Great. for questions.

Operator

Housum, next go Please Keith Northcoast ahead. comes question from Research. Our

Keith Housum

Good morning guys.

of need or I terms a portfolio am integrating you guess, of trying this spend updating making with Do of, terms In pattern Courthouse some acquisition, to is typical just the significant of I yours? R&D understand, your in their of amount to acquisitions? common foresee

Lynn Moore

which I acquisitions, strategic say of more lot acquisitions. product Yes. would been it's in with Keith, have recent line and primarily a our

either the or think white looking that for in fits have Technology I We in bill. Courthouse offerings. of And our initiative talked past space that voids about current sort our that deficiencies and are things

jury and that as our management probably I would management a of say company a something our solution. Technologies leading process was it's had CaseloadPRO, of rationale not Courthouse existing certainly very Supervision, acquisition lot in a is own an thought see that a not It similar A. Tyler now year. had It's last a we solution. which It strength is jury deals. We ours. really was

well other customer some outstanding as of our deals We jury as about requesting requirements. had think products. Odyssey I half

So in able we to find to And product more put a with it has in. some been R&D on a our investment. yet, list company bring to list, solid were our

just you and put usually see Tyler-ized, sort make off. them And in getting to make them investments. of take and every history growth To them up as really track. we your spending run. We year you on generally them start our couple of some has getting out do, We question two been, look a that or investment years R&D, end don't we let about a We almost like some integrations.

lot But do So is there. product a pretty of in expect shape and that will integration-related. I the good investment some be

Keith Housum

XX% I expect over next up just, some more at year-over-year? point, even Brian, guys year growth down we know that But good that you then into should is Or the acceleration you up to of perhaps about appreciate year-over-year. growth, two, cadence customers? Great. sign e-filing the this a And as business. I going at it. pretty think are deeper or quarter-over-quarter and

Brian Miller

I think to think, probably is mid-teens about generally kind way the of it. right

sort the implementing e-filing place. that are and clients some case of go in that solutions have have e-filing commitments process We system's management that of then got some of we backlog live on once in from will

We have fully still are others that not mandatory.

come. as win So there's continue volumes we expect business additional to we then, new this And quarter. did to to

think I Snohomish County, Washington was a customer. new e-filing

generally, bit I think kind be solutions it especially I come that about systems if jurisdictions. So can or larger a to right or lumpy of the average larger on too, is as online growth. think way But think mid-teens

Keith Housum

you. Thank Great.

Operator

Oliver comes question Please ahead. Our Baird. next from go Rob from

Rob Oliver

Great. Thanks taking my guys. question, for

sense First sounds I to nice a near of land. And a traction for term, this to tactically, some guys wins with like question it of on wanted more QX for got ask, New get obviously, quarter. you, just loaded wanted is both Lynn. public back-end World and Lynn, just safety you it's some the side type

So how effect of install feel base of safety your terms headed then that And from public to Thanks. kind cross-pollinate wins? QX? some the side. you are And nature those to the of kind starting wins federation of on into of you Tyler starting see in if

Lynn Moore

Yes.

and names sort the are before the up our is bit, investments. of quarters question we my get where now we over we invested and momentum to think acquisitions a back from the I I XX% mentioned there. and we metrics new Like about of going up. talked am pleased XX% are years RFPs short-listed on size I sits some our, sometimes more today. it but where a longer going than public think lot have lot the momentum of safety even three is to of year, than that before, or through going last just the deals takes little a And of comments

all big lot QX a seasonal is operational setting have and in quarter. a of the tends get the for all pipeline. do. lot of bit trending the direction. trending level, big stepping right those direction. XX,XXX-foot to in they closed. are difficult a at that way to still back to the is execution a little it's I right of deals competitiveness It It's in up to sort try mean, metrics But a thing be the The

products are Our there.

getting key move up-market. mentioned are We and Orlando which to from as I Burlington, the references, are

place And in And getting years customer and a feel was sure different are overall, couple status clients are that. it you than that they ago. can't a value. happy such the is our just overlook like of Making

As you we public. the guys in it, is we do everything out as have before, talked know

everything. Our customers are not competitors. They share

your being existing doing such a just So business are successful with base part is they big a job. and the new of getting great

Brian Miller

public on other add would question how working just about is I And and cross-pollination your one safety thing with Tyler products.

year had in Texas much of certainly in Texas. We are had have they a success deals had seeing historically. last so, that And our or solution not the public safety in number

of jurisdictions on in product. safety all of remarks those deals think use include our that in were case earlier e-citation of management the Odyssey public the courtside. solution lot that a safety go Many public our of back to Socrata to deals I to and safety included our Brazos, clients. Mentioned lot a public data our is expect we base and being in add Socrata those insights and

So clearly, business. public impact Tyler on we safety the of are seeing

Rob Oliver

That's you. a I just quick have follow-up, got Brian, great. Thanks. And while then

license Thanks got subscriptions on you perpetual then it have are guys. perpetual quarter, mix to are going into skewing hit got of of public more where since kind mix safety How to that lot XX% a and going kind perpetual. should be you to of about deals be tends the this that have you assuming this them quarter, QX? we think some So, MicroPact

Brian Miller

have deals cases, still where either more go Public are in still heavily there's be there's tends in the in awarded on-premises. they uncertainty, deals still deals number to some to will deciding a MicroPact or, client of much lot is going the to license finalist the in cloud we I weighted today. two that that ERP there's are been pipeline, has safety particularly the of or whether think are be factors: But be but Well, side, a QX. license a towards generally,

And heavily ERP cloud. having toward to both bigger tend in so, a did in their But of seasonality in mix licenses the said in trend cloud. QX, see QX in those QX more and the the we that,

don't to are on we revenue have some out. be those is there think heavily fairly and still uncertain QX it's cloud fall how that but factor going a was, today of side range I deals the biggest like wide So the

Rob Oliver

Great. Thanks again guys.

Operator

go Our next question Please Walravens, Securities. JMP ahead. comes from Pat

Pat Walravens

you. Great. Thank

long five out sort in the version to but lot but sort be seven a S/XHANA they we So doing got public SAP's more years, of got they and bought assume to cloud NetSuite. cloud are and are Fusion right? Oracle's and time, going a Let's looking of

For plan? solution? going ERP, the of it what's rewrite to so have mean, I that SaaS are we you your sort a true core multi-tenant,

Lynn Moore

like our be the said to to we cloud-optimized. Pat, able more and I are products more then of in and be evaluating roadmap cloud-efficient in core currently be responsive to right and earlier, the of all the Well, process cloud them trying first on get

but business going of to next just Our I being a for we near term, you demand recognizing on-premises. significant looking as to couple cloud-agnostic years, our a evolve model model look are perhaps away still that from out as cloud-first historical business over approach be of the think there's to again,

right which and sure We continuous that. now, it not of a we part operationally market's stuff field versions intently. product going. I am that multi-tenancy but in out the it's we but to just your the where revenue on ready from mean roadmap It's are for as see We something know do the give you it like what a efficiencies not technical, cloud, working am delivery, the I that the question improvement can reduce of can in and standpoint, what is continuous and strategic customer

we the middle are So all that. in of

more or I rest But of the approach hear little a business. to disciplined us we to think have more going strategy little be our our are we each you as done, a will continue info quarter, the tackled unfolds. way give this take specific

John Marr

major cloud, the evolve no. rewriting is. continue direct all specific ways And think to native be They question to your whatever We won't architected apps. are multi-tenant I is in objective certainly, the or be can they to the of that answer any though

So it's priorities. really a matter of

we functional balance user-experience And sales look technical at evolving of more marketplace people and toward solution. and quality then make decisions. priorities priorities, the with the have work marketing and priorities, we those and and things priorities we our cloud-native We a those

I last towards and two, been or attention more swung year toward and as has saying, the attributing Lynn's a So, the solutions. little focus think more cloud-native has over more resources pendulum been there

evolve disruptive can the But they So without do are strategy. rewrite. our generally very are customer. to all we our disruptive to part entirely be are will of of not major the a applications cloud-native not Tyler Rewrites business, to that. They just

our take generally we blowing so non-disruptive this products clients customers the as of strategies. well out a as in the without where our And an both our water evolve approach continue delivering to we way and to business

Pat Walravens

Okay. Great. Thank you.

Operator

go ahead. Mark next from comes Schappel question Benchmark. Our Please from

Mark Schappel

got competitive have I front. taking for question a my question. for the you you on Thank Hi.

was have competitor that's You in seeing if out been their out competitively them private past I during given if there? you seeing more basically major larger relatively equity-backed are year impact together wondering, new any stitched RFPs, or size, so. the you that's are a there,

Lynn Moore

Hi Yes. Mark.

of got think a PE number I size. talking They I about. you have are significant of know and assets So have who two together acquired firms

those pretty with We familiar are all assets.

them with in markets for competing are years. We the

they them of I follow think if you you significant probably debt. have closely, a got amount know also

market. in see downgraded. them look term. know, I We playbook more generally, the think near don't at their little they is, debt's PE recently I a the been the

they that know terms lines, have of BizOps. consolidate consolidate business trying been to disruptive in the been market bit has in a product little doing We what

base. bit remained So other the disruptive guess, it does heard it's strong competitors. their little all bit I a customer and our employee on But been little I has them competitive with, position with a our anecdotally. that as

Our the win are across rates good board.

Mark Schappel

which next then, been brush Great. company's in question if of address term an And just margins. Brian, has strokes for Thank R&D from broad wondering kind could impacted view standpoint, investment you couple margin your over years. the you. the was operating of longer And the front an This a on I you. year has

Brian Miller

last new the of expect to sort R&D. broadly, into certainly couple be We this I growing Yes. investments years. say, elevated of over would have level had we of

years. starting of has I out think That in the level two bit. R&D XX% been is to last up than a more each

I acquired flat think QX. pretty was companies, R&D our year's total expense, excluding last with

on expect we else look start that above expense see growth headcount will that see seen if over with that, level in we being we I that's compelling large out next longer leveraging equal out consistent opportunities improvement R&D few be operating our having won't we to that all what more a will So in of and of other have terms of not growth. over we And back a revenue that with that's of period trajectory margin way invest history. along that to R&D you And sort internally, term line. of then Tyler's long see years, on the that in will

generally other well would out call believe do margin opportunity improvement in for in say, are falloff year. reason really is ahead the there's biggest which that businesses, we in significant operating factor the on of pointed last So the the as the the around I us. margin acquired we

Lynn making after are we in we generally, investments about, term short acquire someone. As the talked

that's product, ahead of expense. that's Some have and beefing opportunities of with in the around those to the R&D in of them. sometimes of integration are they products, operating But advantage take that Tyler sometimes investments organization their some the sometimes other up around

two the we about years, so done collectively, seven the are now. just right And those breakeven last in have with acquisitions businesses

and those as So see a But they profitability we initial bit are get through to today, on expect investments, we margin not. where improvement. margin that's to of drag contribution our again, a

couple our that be still look we improvement and big years, discipline out back expect would we and to if we and of focus over yes, the something that. So to story part margin next have getting a of is do on a

Mark Schappel

Thank you.

Operator

go Wood from Our comes Northland. Tyler Please next question ahead. from

Tyler Wood

Yes.

look AWS you the your on-prem migrate? ERP, lines, stay as the be you business for cloud-native longer the Going expect stuff, time? delivery the do more will to see what be and you a you cloud which for fit best to different gradual quickest back do think then, And to across when and and partnership the public you. Thank safety, courts, the

Lynn Moore

more state two think to you run Tyler has cloud of public that As in in current cloud? I question One know, Well, efficiently what's the parts. our all is, the products today. a run our products

is, even demand? move has Tyler the the whatever, it cloud, cloud the calling The the second market and increasing. for been thing where is It's shift interesting, and SaaS, or to what is the

have also on a are in it the it We side. seen ERP lot the But we seeing lines. other

seeing of the We board. across it are kind really

deal we If Carolina North will larger Carolina the you announced are courts look North deal, We All way. to earnings talked DC about, Bexar SaaS those the the all the be contract. call, bit we at deals, last, about schools on in deals large, recently talked implementations starting trend that County, court side, last statewide cloud. the a there's ERP large little

more seeing having was the user safety safety say, probably information that four, the the their In safety that buyer reluctant. public public years in area receptiveness would was from more an to public side, five cloud, I ago, more up the whereas you are and and

area don't just where I know trend the that's specific moving It's that a is market than there's trend overall other. hotter the the way. that So

Tyler Wood

me. Got for it. Thanks. That's all

Operator

from & [Operator go William comes Please The Company. ahead. Ho, question next Instructions]. Blair Jonathan

Jonathan Ho

forward-looking for I ARR sort what just duration sort maybe shift think given what the company? Hi. of should touch ARR a morning. relevant Good I about bookings, metric and understand guess, your is just metric more just, growing? in this the when the the on we wanted be of of better maybe performance broader to And expectations

Brian Miller

The through ARR lot Yes. more are more There coming important. ARR we becomes I we certainly business that quarter a software $XX.X of as would over our the million new the new to become the of metric Tyler. third say, XX% is Jonathan, nuances ARR new and bookings. new more about of quarter. cloud, was year's this around that That last talked up around it really

We certainly revenue, include things e-filing, recurring two-thirds are also not have, now like also included of is a we in big maintenance. revenue are That's doesn't ARR. that that recurring It streams. chunk which

cloud. deals So the from it's software really new just

it predict of piece to that it's hard So it's a growth. and

in continue. certainly But very, has over for the XX% we our XX% that several expect consistently cloud our the last business, years to and range been subscription business growing very to

I and our piece emphasis high-growth we that on to put refine of more it continue business. So metric but think will a definitely

Jonathan Ho

had in now or to initiative to been contracts? I guess, sales a into about order there you change this it. the pushback quarters force few then Has this can duration you get Got to, from are And clients talk you through? that bit little much the shorter I in guess, reaction have a pursue, incentives

Brian Miller

I pushbacks. been don't there's believe

to were, term years our the I than it's think and is There's attrition more in with this cloud to software more newer we were clients most to there in very sign it. We our on-prem. certainly our long agreements. needed no line customers think companies. business, early XX in days In and cloud our felt going like we of ago, business I we up is back

negligible somewhat have in on and sample pretty we a actually it's less, there's guess, although attrition I bigger general.

of vendors with that. it's three-year comfortable those consistent kinds generally pretty lead our think, are with what And provide. the we I So term I is, customers that other think with

So there just sales in haven't to, It's changes process. these evolution any been the really our are standard an now. terms

Jonathan Ho

you. Okay. Thank

John Marr

early bundled into our services the deployment strategy annual fee. often cloud the Look,

term to our clients and on So the agreements. as by us annual Over de a the the for for became fee, order was necessary reasonable. less keep annual these doing in extended matured relationship terms typically hosting that, it require side we fee the to went had costs facto the for time, sign and market and fee services longer generally the paid to subscription

the So an that really had. relationship was we in evolution

necessary. as wasn't side, paid services And for on item the it professional became line that a they

hurdle felt new the there So we there no out that market. reason have to in business was

the it's client. So, if the significant Obviously, reasonable flexibility the price gives that been us are been our market changes well-received and to some have the hurt enough flexibility anything to or But road. very those have is never increases reality clients. cost it some down changes by

Jonathan Ho

you. Thank

Operator

Mr. Marr, will the back closing questions. no for be more you I over time, appear to turn call to remarks. At this there

John Marr

our or again. day. Thanks call to a questions, further Okay. thank myself, for joining any Have feel you free reach Well, today. out you, thank Nick If great Brian Lynn. and there to all are on us

Tyler (TYL) 1 Nov 192019 Q3 Earnings call transcript