TYL - Earnings call transcript Q2 2022 | Tyler Technologies, Inc.

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Operator

Hello, and welcome to today's Tyler Technologies Second Quarter 2022 Conference Call.

Your host for today's call is Lynn Moore, President and CEO 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. And as a reminder, this conference is being recorded today, July 28, 2022. turn over to Mr. like now the to call I'd Moore. Sir, ahead. please go

Lynn Moore

our and Chief me Chris, you, call. Financial welcome our Thank Miller, to With Brian today Officer. is

give I'd safe First, Brian to for harbor like statement. the

review comments, comments some I'll quarter, Brian our have I'll we'll the some take on of additional Next, details with then and our then will and end Brian? results. questions.

Brian Miller

Lynn. Thanks,

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

Lynn Moore

implementation by systems leveraged advanced quarter, a our opportunity to bookings. multi-suite position, environment Brian. an broader we our and challenging sector deliver market We environment services drove clients see macro to competitive wins as RFP market, a XX% strong affecting organic with continue resources. grew due of to challenges second Overall, revenues remains digital organic and labor to replacing our serve our basis, comprised efforts increase flat and in an coupled of solid public an market and to pleased of quarterly Recurring mission-critical and Thanks, transaction-based on led revenues successful revenues. We're revenues in our XX% active the as grew Total with with adding by an public in efficiently. the positively. were aging COVID-related organic more trend support our strong XX% exhibiting results the growth subscription excluding basis, some cross-selling quarter both public and X.X%. sector and revenues demo growth activities On to shift Services approximately hiring growth reflecting were XX.X% revenues, the accelerating revenues cloud subscription revenues. XX%, softness

We revenue achieved to licenses. contract software achieved mix the as XX% new our We was In from greater XX% to new have in XX% now quarters. shift revenue last of SaaS compared in accelerates than growth SaaS growth year. QX, solid contract XX subscription XX in QX even last the value software of

about increase our costs as license expected, Along of to cloud SaaS as in and compressed, transition. decline a point As the the margins XX well for growth joint their reflecting free the cash of and pipeline second anniversary highs excited to new acquisition, organic NIC. was marked core both X%. our and April the continue both mix high associated as revenues cash performance for of quarter. flows operations new flow achieved in from a revenue bookings NIC the with cash Tyler NIC's opportunities be performance, quarter we and first and the was growing business related flow

which titling contract new a NIC per in second our motor ARR Kansas West for quarter, quarter, the New vehicle million of generate transaction-based four-year will Virginia, state contracts enterprise estimate digital $X Kentucky. successfully solution, largest also signed revenues Jersey extended for with the arrangement our of we the During Vermont, we year. approximately and

of Alabama which enterprise solution the agreement clients. states for SaaS are both cannabis with new a signed NIC addition, Illinois, state and In our

joint build opportunities with We momentum and cross-sell NIC. with to our continue

than NIC assessment total and well state a Resident solution. Those Resources million. clients, QX, Maricopa from Entellitrak VendEngine of solution; suites applications; enterprise for value in our and of for contract our Lancaster, for Florida licensing Arizona, doubled Veterans for Tyler public product our four Benefit Solution. deals Utah pipeline each full other $X.X deals, and and for notable with state each solution; County, and value and our suite supervision with justice enterprise cross-sell our different including Orange for Kentucky System closed safety greater for and include the our solutions tax County, ERP Ohio the new Lima, In active of Our divisions, enterprise California SaaS permitting we as additional enterprise as our signed three we

contract values we the deals SaaS million addition, $X $X million with and million XX and deals SaaS each values signed each. between in between In contract six quarter million $X $X and with

the contract. amended fee fixed During Washington our e-filing with million. of nine state volume deal also agreement The arrangement we the second transaction-based $XX a years for from approximately to a quarter, spans

the of ARR the bookings was contract not adds or in expanding majority included quarter. in deal terms, backlog in However, in The $X.X approximately half agreement. of million the over this due contract million $X this to latter ARR, certain to

Our was largest approximately a enterprise million. valued Quebec new our solution software and assessment contract with $XX Montreal, for at license in deal tax the quarter

million. the $X also worth territory in the solution We approximately second with same a for signed deal Canada Yukon

for County, largest largest case with valued include In million. ninth Owasso, Oklahoma safety, enforcement enterprise approximately than Dallas Charlotte solution; signed making our mobile correction in and enterprise U.S., County, a the our Florida Fort in ERP signed it arrangements uses public Worth, solution, currently data at value client. and significant and insight solution; significant Other jail management Park, solution deal our with our for system a and Huntington Texas $X for our the of has addition, Texas we which jail Dallas $X.X enforcement California license each license enterprise the quarter, for mobile solutions. County, enterprise greater total million contract

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

Brian Miller

peers the program revenues in ended TourHealth excluding Technologies earnings for our measures our revenues in comparisons GAAP XXXX. completed provided a the In release. million. website and X.X% the COVID-related expected provided initiatives A for second the second have quarter in NIC's Thanks, schedules and our release, Revenues on software third for revenue our industry. from our with basis. was our in of reported rent relief the XX, information included of this revenues. of non-GAAP expectations June million, quarter non-GAAP Yesterday, believe the $XXX.X also including Investor information growth, recurring facilitate the $XX.X in revenues we including Reports the exceeded with to NIC we measures months. Tyler that under basis quarter GAAP up Lynn. and section revenues acquisitions be results were supplemental and COVID-related Organic GAAP last its non-GAAP quarter a X.X% call, Relations XX other about to XX%, the earnings quarter. results reconciliation and and quarterly the the Virginia is at Both with backlog on tab, anticipated on $X is Financial from We've posted of understanding quarter the million concluded bookings, about non-GAAP on

continued mix license expected, software revenues XX.X% shift contract declined As SaaS. to to new our as

by XX.X% flat in an were the services Software basis delays service hiring but labor rose revenues market. organic revenues staff year. professional essentially last rose in XX.X% current with were Services on -- new impacted revenues

XX.X%. during revenues of backlog year, total our there approximately they QX the large value. organic added and to the added be a new see billable. XX and with period hired class XXX million to growing during of representing million contract term approximately converted we arrangements new and rose clients, total to pipeline, representing subscription-based new as XX We grow continue subscription-based of last is value. the existing of While conversions, those in up. several of support quarter, implementers $XX revenues will We months onboarding growth delivery in had year half fully teams the $XXX on ramp a second an likely Subscription services intend continue on-premises to our on-premises pressure high short XXX of team XX.X% but strong we In contract arrangements we'll in implementation some of before

million, contract in value contracts Subscription new this XX% X.X NIC second portal, quarter XX% this $XXX.X new contract signed to years up last in subscription $XX.X year. total Our software in approximately software ARR. of e-filing were XX.X%. QX was average bookings to included are the added SaaS compared million years of value which revenues, quarter term in compared quarter revenues and and X.X the payment weighted comprised subscriptions, value The of new include year. Transaction-based last processing

million, reached XX.X%. Excluding transaction-based new revenues NIC, XX%. revenues a grew up Tyler's high of $XX.X E-filing

software arrangements X.X% Transaction-based approximately million approximately approximately up non-GAAP the non-GAAP to migration billion, up our For of XX.X% up Non-GAAP cloud. $X.XX million, XX.X%. ARR ARR million, at SaaS was ARR to ARR the approximately clients for down continued due was the quarter, on-premises maintenance XX.X%. $XXX.X was $XXX.X and $XXX.X second was

the Bookings $XXX transaction-based quite organic quarter approximately $XXX XX.X%. including of strong million, were an up in at bookings the very basis, million, backlog quarter up robust at XX%, the end a Our billion, was approximately also new $X.XX of revenues. at high were XX.X%. up On

contracts for bookings bookings an contract the basis weighted If approximately on XX.X%. would growth have as billion For $X up year, approximately were organic been the billion, months, terms XX.X% trailing XX.X%. were XX our $X.X up organic average last same SaaS had been new

reached negative highs earlier, rose As a free million for million second both from Lynn quarter. cash were $XX.X and cash from last flows $XX.X Cash free operations and $XX year. cash million flow new mentioned to operations from flow flows

our We strengthen sheet. continue balance to already solid

million During NIC we have million debt. the paid term term we $XX of since $XXX debt. And down our the of quarter, acquisition, completing repaid

and pay $XXX the investments debt at down of of with month. end also ended $XXX quarter the in We and million $X.XXX will additional cash We term billion million. this total of an debt outstanding

debt rate is reminder, a the convertible is form of in XXXX XXXX. an and with in debt our in interest debt term of and of million remainder X.XX% prepayable the $XXX due As

have million undrawn $XXX an revolver. We also

beginning and than the pro the in should higher XX resulted hikes leverage the of year at interest of end at far of leverage year July. year thus Xx net have XX forma X.XXx expense significantly trailing anticipated Interest this the our projected the under Our the be at year. projected June remainder was we for rate for approximately months and EBITDA

to debt earnings term interest. year And assumptions those interest of In discounts in we our changes as have required term reflect guidance our we amortized around as adjusted addition, are full the have those prepay debt for debt, issuance costs amortization we related Accordingly, being and that are we to the noncash costs. accelerate expense. to

of of term to cash compared $X represents previous for share The revenue million EPS that our current expectations It's interest million operating and important changed, for amortization on for increase with of increase of million our outlook. consistent costs. our $X.XX Our about GAAP $X not generally guidance. debt approximately $X $XX an discounts about debt note margins previous per guidance interest includes has guidance million and issuance expense noncash $X and of the additional are million both full our year to and or non-GAAP

Our updated XXXX guidance is follows. as

We of and midpoint The between implies revenues non-GAAP be of billion. growth billion expect will total both $X.XXX X%. organic our GAAP guidance approximately and $X.XXX

quarter. We quarter, revenues third relief from are rent the wind the approximately revenues pandemic expected from second to include down in from NIC's TourHealth TourHealth of program Revenues concluded revenues $XX and services. expect million COVID-related relief total in will the while rent

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

diluted We details of debt earnings in of non-GAAP our approximately discounts EPS release. to million be expected million, guidance expect and included between noncash are expense costs. our and Interest issuance $X.XX $X.XX. Other $XX will including amortization be approximately $X.X is of

Now call to turn the over I'd back like Lynn. to

Lynn Moore

sector backdrop well of federal including particular, in public advantage months, the continued position, competitive supplemented are initiatives, In we're NIC, helping around opportunities budgets positioned market. and active deliver growing acquisitions sector our progress made pursue pipeline continues NIC strong public multiple execute by to and competitive combined of cross-sell with new performing together both cross-sell Thanks, strength forward we software begin quarters. and strategy We payment take domain US upsell opportunities our investments the ongoing position and with and base, eDirect, funds, We're to clients. very stimulus grow, Brian. qualified create expertise experiencing Tyler's contributing Against to to are progress the solutions, around and over our more client VendEngine The generally also XX enthusiasm our pleased with rapidly to we've products us NIC's to and tremendous our wins portfolio a leading and market. With business. the last strategic across well we TAM. strong government-focused in payments is reporting Tyler recent Tyler platform, payments analytics our of leveraging our payment opportunities. extensive as through a we broad believe uniquely in coming the deep strength and a our reporting with of and the go-to-market to look existing

results power segments mission-critical services many are business out our of end Tyler's face that revenues, interest to many compared essential environment highly that rates, of rising of or private public we sector economic resilient make to don't We reliable deal in that macro ability solutions flow. of and revenues our systems comprised The Recurring software relatively grow to go a approximately an uncertain as stable a of cash the are and generate Even we clients of market with than have provide peers. to cash life, XX% confidence replacing get defensive inflation total acquired. growing factors flow. solid government financial and sector. great and our often is There continue more business number and generating

In which public on is focused increasingly moving cloud, the sector model. support cloud-first addition, our with the into we

Tyler than confidence much Our stronger economic in is during experience decade to supports a and position more a our recession succeed downturn. during the ago an today clearly

if strategically competitors We may which also the growth to even constrained. reliable of advantage invest cash to and us balance strong a some in very be flow, continue have enables sheet

While are to convertible associated expect rates, been with impacted and we we by approximately acquisition have rising at term have debt NIC adjusted Xx leveraged and interest and the modestly we EBITDA, and near retaining delever. we value. debt flow prioritizing term, acquisitions flexibility Accordingly, long-term provide cash investments pursue while the strategic to the that continue using to to are in our reduce

efficient our the report line the migration to cloud, open driving remain cloud to our the to With products proprietary on optimizing that from to expansion. moving like happy track and Q&A. we deployment strategic that, to accelerating I'm we'd AWS, our including Finally, the for margin our related with initiatives, long-term ultimately major clients of projects centers and on-premise data for of

Operator

question is Suisse. [Operator Badri Sami Instructions] with first Our from Credit

Your line is open.

Sami Badri

Are right, you at tied in quarter. What then sales and Any wanted that I second sales First, environment. with up from cycle line length? back, about local they in I there of think how cycles companies, guys these? deals lot larger connect strengthening one question we into the into and on spend do a guys several Could announced color those that announced, side? to the revenues seeing or local elongating? like to date in yourselves? do for actually they're you just tightening, investors is field a going revisions to translated the the we that those you prior actual ask get that? were how sales idea you those state the what the budgets And budgets? your kind state budget on see question bookings from looking cycle date And their end are the you way kind do of from making And of is -- this that us an give guys sorry, Are was are

Lynn Moore

and sure, start in. jump I'll it's Brian I'll Yes, Sami, let Lynn.

sales are cycles our now, right think I pretty normal.

continually experienced But in of we've times 'XX, during you to go 'XX, saw little push and you do out and recession often that seeing things they're software we we that we We if and date replacing of that about a delayed. I back functionality provide is or think systems. needed where I what talk things think are the is that's get COVID. started key are the out provide the bit the that fact essential

our are now, a bit to And so different a across large cycles the looks even market right will normal little typical with Sales sales respect vary divisions. healthy good. The time, pretty deals. those for cycles

others. longer have than Some

little on And it's suites, cycles you talk When I state do track. across the pretty sales some of longer. and local quarter a government our But bit and I'd of ARPA. product sometimes numbers are leading and think spending government. the people a board, other Brian's across anticipated little say deals infusion are in much about our Also larger that environment, budgets with And some different I their got this really right think take right stimulus. that of around all were right state things thoughts COVID, the know made is of in what comments coming lot I But that, of I've nearly like as you're our seeing well before that the demos, I good out our I seeing healthy. it a bit shape. pretty not things reports some around and journal we've RFPs hard some hit we're now as what they and we're things in pipeline, now read. in agree think seeing are now, indicators is local bookings the

Brian Miller

when pretty Dallas Montreal deal actually with a long I'd unpredictable. someone somewhat things. had on signed and start the I'd we're the have persistent. a a larger about, these these very be contract in typically do add a a talked years show And large but to from pretty cycle just case can measured sometimes about those cycles, the of solution in can that we and sales talking be deals, some say longer And and up larger couple timing deal couple that's Clearly, of we sales time of of ones, the contracts, the the cycles both

vary also can the In into bookings, a how it something of timing quite of that the terms makes bit.

somewhat have that it's mission-critical a of solution start and will is the process before it jurisdictions knowing they replacing it solution a nondiscretionary. acquiring budgeted, Some

buying or start Others budget in process contract actually be really quickly. when advance well may then sales a forward the accelerate process a or and it's get showing process. process a they pretty the budget a and may to up and move in funded in of sign a that it then start prepared So

variety activity but new So it always up. -- sort ways, flood don't of rising fact new can a immediately of that in perfectly doesn't take in match pipeline place are of a result the budgets that so

Operator

VanVliet Next from with Matthew BTIG. is question

Your line is open.

Matthew VanVliet

and the You on overall services professional side implementation. mentioned

add hire to the You were headcount a a perspective bit limited to from little both that. ability headcount new and to

Just that's have what the those secondarily, changed through the through look deployments? of both more curious to how tackling progressing, terms of increased end of the in July to this implementations at then year? partners or some of appetite straightforward least the external with some and has blocking expectations, how to of the And more your components help

Lynn Moore

may And challenges would immune the Matthew. just out unique be our there, Thanks, in a lot little the Sure. not I about things are market guess macro where labor that But talk we in there. we're that we market, business challenges labor external say the of factors. a of I to some bit the

we've deliver large recruiting, hiring right some And The business carry things of we're year. this on experiencing both probably seeing It make some we're and and expect of has are revenues in got little a bit it sort and off now, want like We terms a our classes. through time. and been services it that. and that of challenge, do impact little higher throughout hiring the -- to lot And is on, to early so I'd bit. but we've of been retirements a a execute with for we also generally seeing

group. our large They February. in example, back for hired take, ERP enterprise a class You very

for the to become it another speed in fully hire get can get few weeks. we're they on time out point client looking hiring implementation. large to and next to I you even think them large But where takes a up class at those classes, go billable when very and

months. So five, it can six take four,

there's delay there. of So a little bit

bit our them to but on, that these happen for billable. margins we as a there's little bring time So people start as impact little will it a even takes becoming of

handing has our out advantage but to and The I to what point we us our ownership to our historically, it been our value lot a from handing it for in-house. the our think to team, always of has it It's have to wanted certainly services in-house, touch is of a to As off not the off the been keep experience partners, years. big initially really team, them think success relationship external always and competitive and support -- professional margin relates implementation really client of I XX in thought last played client having we've and think market. that advantage, from from it drives client part a sales,

least such to so the now, these looking we a right for And as of do things that. want business time I that to unique think not in-house, really It's we're just being. keep at

Matthew VanVliet

progressing as Very, up how level look the of getting the statewide in very sort agreements agreements. hunting your way you into, associated helpful. state I local customers, And NIC that terms demand making roll of that license do through then has place, in those you're those purchasing you any at with feel through guess,

a sort still that didn't you? to captured early fruit low-hanging that those just stages Or overall through. for of very we of the present the NIC the opportunity are of have You've sell product lot

Lynn Moore

Matthew. Yes,

still XX deals the in top The what of NIC on -- learning the made we're we've the done, even and call We're think first probably they last each this the deals think wouldn't our about just I reality that already -- comment we really of some soon, I the local say done we've inning. maybe that do -- already. closed did the is relationships. that they we've of didn't fact that have I other. number first inning with of the I the can

around in with just won Our a pretty pretty of exciting such That's integrations million. of north normal we're contracts. still We've significant our short period deals, NIC. active $XX some doing while pipeline XXX is time

mentioned earlier, exciting contract I've That's Arkansas our the think, stuff, with in another I when particularly Benefits we Utah. I Entellitrak about last VendEngine Veterans quarter, with and Corrections, Kentucky, contract with pretty talked said Department between mentioned a these -- and comments is deep contract last of VendEngine NIC able something be we've state a my won internally deal with in leverage relationships NIC on to well as relationships contracts, the has coordination to and business pretty already see are the to that exciting those both and stuff. parts that different the as in those that enterprise year brought and it's of got acquisitions VendEngine

Brian Miller

And add platform, we're specifically But NIC with early and integrating that but down for and basis, outdoor looking of stages US combined increase more on I'd of within on we're just that local fishing, big of... to hunting things a lot strength still and significant the very really recreation I'd the there. eDirect areas broadly, being say is in drive able in our government state that the one both that a and a we've federal product in we're the out of But that at got levels. capabilities

Lynn Moore

I Matthew, understanding. those we asking state, if hunting, about you're call heard I apologize,

Matthew VanVliet

thanks about But talking those deals, extra color, Appreciated for agreements. the guys. the was I Brian. NIC No,

Operator

Kalia Barclays. Saket from is question next with The

Your open. line is

Saket Kalia

Great. base feel over moving maybe most the Where talk like -- that, SaaS in more last to last just this in maintenance year lot years? to of having SaaS? TCV you quarter -- success? Lynn, or related And converted this than what about a then do that were year. I you're areas there bit Can how coming know about the having that you you there -- success do QX think versus in converting a Okay. lot are was a product more little customers just to for you.

Lynn Moore

Saket. It's the Thanks good sure, question. Yes, question. a for

seeing right I suite think probably business. -- of in now, areas the of where flips the most our primary we're the ERP is the side

and ERP the Pro our we base. coincidentally, That's ERP enterprise customers. and We our largest most have areas where solutions. are actually the both had So those -- our customer

our the our about see for end down probably volume. plan I We're suite. through we already flips. our a to of move there, highest going well not our formerly think we businesses, increase as about ahead do is our continue in year we're only plan year the XXX solution, across at first half. ERP, We're it solution, in our lower XX% product to product Pro obviously our suites. that in but enterprise in ERP that's The to which you're top Incode end, seeing but other our forward, And all of ahead that

model part that around we call we're today a big I the over But year to per going we not As years, to do of to sort internal see world. what starting strategy look of area. and And very Tyler our converting a I'm on-prem base growth SaaS that's customer forward, some high over out XXXX. is and into prepared modeling from movement much you would in next to projection that of momentum going grow. how to and the continue to how expect give five many seven you're increased

Saket Kalia

revenue, related mentioned been commentary on for to folks services strong It's on maybe bookings it. follow-up. And on hiring that and little than the some done had you a can of frankly. software you But is just this services. strong bookings? bookings, of makes Brian, maybe about a bit a sense. That Got of as quarters couple talk you

can different strength? And conversion to So driving what's that just revenue here year versus this just talk years? prior maybe anything about the you about

Brian Miller

get Well, of I it think revenue and more a on SaaS the revenue necessarily is or that -- don't you of hit. part the the so second is question, to just conversion

start it's revenue you In we and stood revenues. typically recognize fact, their Often, a before signing don't after hit immediately. two up or get the environment to quarter a

course, customer, that And SaaS a lag. with stream recurring revenue of got the a you're then, even So there's grow. you've starting to

worth you so the you quarter the revenues, get it a quarter third get and the and month next worth So month's forth. of so start and may in a of quarter's

about pressure as bit that the mostly well. part are little in a typically change of been of licenses, upfront. which ongoing service We less And that talked has the with mix a so recognized

teams. sort that is once there, a up might we're fully as our So bit staffed signings ramping we're, also with little below new quickly not those our implementation of -- as think, we with billable plan headcount I

the thing. that's biggest think I So

generally, think I driving long quarter-to-quarter, that we've around the sort budget said bookings, a it's strong lumpy available in especially that's can got But sales higher those of economic stimulus of those deals. I'd we to couple have contract. bookings of be them. from to cycles out, pointed aided In did ARPA funds, somewhat in the governments. around certainly say this federal by big pretty deals terms those a situation combination backdrop quarter, just big always of It's factors

identifiable funds. on calls, As clearly that sometimes not it's talked with prior deal ARPA funded about we've a was

of are and by those helps sales perhaps add-on But additional something believe it an is funds are that's about some the been the study counties. some XXXX XX% it products And and but funds Brookings that in sales. a strength there incremental committed at Other of that and in times said saw frees selling by the seeing we've money of to got the in end to end we least commit the inside make an existing this our Sometimes ARPA is, customers, or for We're of we else, driven purchase up had federal by used as quarter. that real those. as really stimulus cities of spend funds a sort to of XXXX, indicated tailwind long-term of past, that yet until they've through those XXXX and only stimulus.

ongoing So an we tailwind think there's of sort there.

products mean, acquisitions We've to high a then that we strength the So added multiple at really our competitive got market and we've continue strong. builds. and invest is position in internal level. I through

safety solution that more sales would in been now often than new our of data a because bundled a past products in that's that sale, things our bigger and they public number the have that in make a are average that together, our like are are products often bundled we've sale bigger. new got often insight So

of a from that. number lag are there to yes, is So there factors growth. typically contributing revenue growth But a to bookings

Operator

next The from Fargo Securities. with question Michael is Wells Turrin

is line Your open.

Michael Turrin

There the prepared and the the were throughout around demand several environment. resilience comments of strength remarks

the what wondering used customers seeing around to Just you're generally you're how what can you're you compare to and any referencing seeing sector there's time this more RFP if volumes add currently public of year? the color from

Lynn Moore

years few we're a rocky board. little right across to else. COVID really last now mean return levels I Michael. pre-COVID bit a have the sure, the seeing with been Yes, and What generally it's everything is --

strong. Our some RFPs is the I'd of it's and even those up market pipeline are are beyond looks growing some parts back of In levels. returned business, sort to pretty of up, say sort our In the parts, levels. demos our pre-COVID

what is right budgets indicators are now, is So we're there. all leading out there healthy the strong the demand the market, and and seeing in

Michael Turrin

detail That's business. with of helpful. lot of around Brian, various a segmentation provided useful the us you splits and

be metrics you can of the True view North the terms or couple transition? to else, SaaS it would line and you're focus the a pieces as you top through hear level the you In the talk macro what for it as metric your we're set think where model metric help the of of something moving all backlog, here? lies, ARR useful just I or Is through working through given working

Brian Miller

of to license given a and addition what the payments transition their pretty We to sizable recognize the and is and transaction-based cloud grow business through a more NIC is NIC business already significantly. that Yes. our complicated to grow that plans streams from our bit little revenue maybe the

lot of many So now, the ARR start kind I'd a the and flat you're do flip recognize ARR. those you right is for but as our we cloud. expect and particularly breakdown around metrics. of we we if give those say, transaction model and will different North to would But particularly, components really those metrics more kind subscription it software customers and to that of will of of get too decline ARR And ARR, be maintenance Star what's evolves, the looking give probably important of we metrics

recurring things metric So would that important be probably transactions. most from subscriptions and ARs around those the really, the

Operator

is question Reilly from next The Joshua with Needham.

Your open. line is

Joshua Reilly

How we both should portal seasonality, around if think from revenues the and the including NIC, core Tyler the business NIC? about payments now, from any,

Brian Miller

associated the with Typically, payment transactions. portal terms activity less fourth of there, those quarter slightly less is the are maybe often lighter portals, Yes. volumes less through that in

lower the and little around the So the a year, of holidays to end activity people there's bit get just as there.

of revenues that of their licensing us quarter, is sort beginning corporate payments the with for new $X quarter that quarter primarily the But Department bit year. associated And last contract lags a activity, is little State first we fourth thing payments. which about talked it it's Florida almost the million in seasonally second towards a and other The other the around which revenues in they the is the of with of that's the that, all were of quarter. into I around the think the around than to slowdown

Joshua Reilly

That's helpful.

Lynn Moore

business as the Tyler was it grow outdoor and around just as were to as we're within it that -- know, some we and things already Josh, stuff. payments extend continue you too, you of growing we activities NIC think and beyond I

it's products out, years, base several constituents, out I larger you'll across and and some look and using we across will a time. you'll volume take think, over more but the that As more that, flatten think see I gets bigger as it's time, that see

Joshua Reilly

revenue have NIC just then terms business. Is rest positively are you potentially in revenue record the year? would that the follow-up of you that segment? And of history that as And on it. Got that the impact seeing could expected? other the hold one driver throughout recovering how What much was from

Lynn Moore

I a Yes, of back about for to It's I'm very that business I'd starting other sort that which it impact of businesses go flat business grow internal little talk essentially it's of that's areas is of these to And I on resistant. in recession growth. bit the used right with NIC years, our of as plan of seeing the area several of our we're say was expecting business. when substantial DHR the think same really the a year, time, piece the -- kind an business in very we're At one to think DHR and little within decrease we streams. the the now, percentage where unit. if the DHR be somewhat you big impact DHR being

total as some it's revenues, down of think towards maybe through services think the XX% in government and products XX% their that's some now, range COVID, outside revenues of I XX% more other right going revenues, I trending maybe and their about state grow interactive of systems. we're these payments starting to

Brian Miller

Yes.

about typically, this they down X%. So were quarter,

bit, softness to those one supply there. believe new but that's also we a are a and is indirectly there. There's And by economy. chain And still no affected out recovering cars vehicle tied they're some that's sales. broader So that of

Operator

is with The Kirk from next Evercore Materne question ISI.

Your line is open.

Kirk Materne

X, much Congrats about with they're today number ago? retention revenue all just bigger obviously meaning just expansive say, sort on to versus was upsell a is in really sort net conversation bit sort working sort terms in about much ago? story a of accelerating? a than I portfolio of of of basis, share XX as nice to I is curious and discussions the of just expand years of talk the years you of you more wondering ability what's of kind take have XX vendors net reliant product the was new, I'm again, you more that Lynn, your a thinking customers with. it today ago. part How bookings did that were Is could of the a was quarter. consolidating say, you little ability cross And like wallet on you than years wondering all be sort as about XX just accelerating? X,

Lynn Moore

question. Yes, Good sure, Kirk.

to always to And other of having because that our sometimes think be to a sure suite you're and vendors, the solutions. do vendor. I'm to point significant bunch a compete way. things me really some to to extra competitive of there headache single a a are and to of multiple get I that quite than have our seems why products and not integrations, out rather just going go sell more There suggesting that's way trying strategy has right. consultants as part still think comprehensive advantage. I suite been are a a single to as opposed

of one help develop. takes to decades think our I it

cross-selling And for to I the advantages upselling every base, back outdo inside to channels continue -- the so and that Every you're seeing were strategic driver a continuing do each at that's in when quarter, big forward. our competitive and quarter. broaden and see themselves do reports of also are as going our think our sales to you to into look tuck-in And us I market. that. one it's portfolio, acquisitions continue we going And think I'm

Kirk Materne

And bit you expecting sort on on ahead services billable just think or more that that are think bring of sort business and next about XX%. the Any in on we start as guys your more up How maybe should on heavier aware the Brian, of But ramped half a little back we next ramp picking anything out margins of, margins year realize the up the be that should of headcount to side. bit is versus there as I maybe little in year. a year impacting color not be 'XX, just helpful. weight again get we meaning would half? first people

Brian Miller

Yes.

paying there more billable. I but a bring expenses, seeing people kind we're of to think become you're it's impact the margin maybe because in you on, obviously, what ramp-up your six of fully is this months them year those

of for deliver margin then year. And business is. positive strong billable a And generate and in you then this a we negative And expect productive. high-margin revenues, it. to get then pretty across But impact see get aren't -- become I the So so the start see more Linda, would part pretty you plans hit early class that you as into that hiring through they next cumulatively will QX with the initially, having those us you from you'll associated employees next of positive from impact, the second cost from half impact. revenues as Services see the they're backlog, us pretty middle year without so hired, the as a a it classes starting large have that a and a help as year. to and or being big year, of

be seems So we'll to a in part first bit. assuming settling and on we down the can resources execute Then turnover billable year. next those of those have

Operator

from is CJS question next Charles with Securities. The Strauzer

line Your open. is

Charles Strauzer

the kind year-over-year a the on Was of main labor was that lower. Just a at last hiring percentage behind question that looking SG&A down picking gross driver was down in it basis about and touch margin while sequentially on pretty that? up QX, the significantly

Lynn Moore

Yes.

as of the, there's talked combination is guidance, cost services we savings. headed professional a think we say, just I'd the that, COVID as year about certainly with into of I as of I We're of margin, described. the seeing a some return our part

Some of those the are SG&A in lines.

sales, Some those billable cost travel. are particularly in of of

business. in currently as still we a and we there across amount expect while of of deliver services is travel some remotely the during our COVID, significant returning future billable segments So to did

of that's transition the from about to specifically an move having then with the AWS. centers And and cost, which transaction so proprietary And associated our cloud we margins, from some with talked the impact we've data expected. costs our bubble

are things a have expected. the than COVID-related those also what margin. have did stream Those margin revenues we Tyler's We bit generally higher revenue with from a NIC. so line overall in And bit lower typically at

third So the as impact. quarter. in at the the over-performance we sort margin And negative those had of -- those away expect last we've a the go revenues end to in to those said, of

be So will a a perspective. that positive from margin

Charles Strauzer

kind AWS behind thing. where ahead expectations of the are And you on you staying in terms for you just think are on schedule, do And the helpful. tracking transition? there, That's -- that your of transition that

Lynn Moore

Yes.

sort we're our of product for both investments, bubble internal plans, we where are side plans the when of track exit our getting I think, And with about other data what with costs. of outlined the to our talk on terms we've in Charlie, we centers.

internally, sitting. pleased with now, So I'm right we're where

Operator

Rob question is Oliver with Baird. Next from

is open. line Your

Rob Oliver

on a the lot commentary of hasn't on There safety call. public been

in So couple then public success your I was thought And core. I'd years, have safety guys some ask over a a nice about certainly into last cross-sell see the It begun focus to of of in that. Indianapolis. you bit of

of activity fare for year And and So just safety the that at public all-important the right and half components sets of when back in characterize it that curious RFP rates pipeline, then market you that in does QX? to up sort now? their how you look win how know for how

Lynn Moore

right Rob. back I market to I'd Yes, the normal. pretty moved say sure, public safety sort that appreciate much back to comment. now, of has

ability where contract are comments, significant there and safety mobility. with opening time story know lot of the like the are We've that our my some County, are Courts about some smaller really but I competitors couple Enterprise out we before. competitive And a that was also like We've the as probably with through Ohio, you done We've and client. going we've reports debt, lot in seen I things with Alliance landscape. be a with that competitive strong be into a we I of public sit. their and these the to side, continues some little them other in along a now, a also might years C&J a There's carrying resonated may on We some of -- acquisitions talked more Our be mentioned difficult principally Lima that sold that. that Alliance pretty leveraging & space ago position. layoffs rates the we're competitors. which story. there's in product for think made which some like side our on things who Tyler Justice big and things mentioned, investment edge with, us, change competitors to in right pleased bit But impacting seen execute. that our

year maybe at see early done. client the looking our there. think, later in some Cloud, resistant still, starting somewhat the I year. We're The we're starting things market good So to potentially get getting beta or SaaS to to we're deals next is but AWS cloud, this first

in So going that there's things on some exciting market.

Rob Oliver

Great.

quick missed then, just really you, good a for I apologize CapEx reduction, it. if That's color. the I just on and Brian, one And Okay.

just that. the bit components were talk about could a what of you If little

Brian Miller

Nothing some the City of for around of is the particularly things, -- of those facility of CapEx? of and some the bit. NIC, some the timing really shifted and just a a Kansas our On in timing facilities It's has into tweaking some things moving example, around the new significant. of just our area

cloud year. changes development our right being optimization of early little our that bit A of the So thought the associated what some there's think some I CapEx in of notable at our most the we now efforts, with too in of capitalization anything products. around our to beginning relative don't minor internal software of

of little a there's accounting up estimated in difference expense. rules we runs of capitalize a what what fall it how through end how sometimes ultimately will with So bit the originally we and

Operator

Zukin The Research. Alex next is from Wolfe question with

Your line is open.

Alex Zukin

it It me. even a of What like better. have been like for -- it I've hiring you that SaaS few what that a of particularly that a sounds possible headwind you but to revenues -- services think the would adjust this challenge what SaaS would sounds talked quarter. lot about from strong got the is be if for -- this challenge? And more. bookings contracts, about asked, maybe to then the it know the if has you And -- you duration Just it's where be that particularly, revenues, few didn't you're really seeing if would were

Brian Miller

not how we exactly I'm would sure translate Yes, that.

modest, but we double-digit of I think sort the pretty I I a start is it's that higher lag in don't would but think a bit the be seeing level, effect. know little

full it's like the have And year I of the we said, hiring for pretty modest I up strength. our now. to to pretty get think teams aggressive rest plans

certainly It a the but create a to point, a could We'll it's some But in how think impact. big think on is subscription see at year. I the side. this plays factor there. it's relatively the of that impediment so it out of balance And softness revenues, sort services through not growth some I short-term

Alex Zukin

around I have pricing or customers. Got are software inflation companies the that it. upticks model raising and maintenance other question in particularly, kind And with headlines part adjustments of I vectors your are then that. with us inflation know you remind that of mean, can all what the price, is, you the And annual

those So as SaaS the to -- you you sure see that converting economics capture the more how on contracts subscription continue to unit make customers on you do SaaS, contracts.

Lynn Moore

Yes, Alex. sure,

an -- contracts a adjust ability most those and agreements. most few of small of have do multiyear basis. are annual them percentage A annual generally, have We maintenance but our escalators, right, to of you're So have ones. pricing on the built-in

maintenance Still our this the probably and are the that's internally it's CPI, are of not took think April sort a on about that talked some XX, out. we back the in I But a something there is flexibility look at went we July contracts majority. of those spring. And that and March June but there. to of X tied we cycle, before Some majority

As initial lot after you increases. SaaS it these the through mean price engagement, contracts, A of get have similar to -- in are you -- putting relates to start are things. do we the SaaS initial multiyear I ability our terms. deals

worked Some the revenue rate. of of may on them is a escalators, more flat recognizing recognition has historically are actually way have built-in we they been them but the that be

So be at of built-in there little looking bit why terms shorten to those in. It's tried those really so but do reasons can initial of that a be them the length contracts, one margin. escalators. of get some with also declining the we're we've we doing a We price contract able things to hard will

two roll off then as into they can't And move was agreements. have a that at we'll out there change pricing those to that more. even point. built in we we're that ago cash existing are year there some are the this pricing had getting or their we're -- and renewals, So the that in adjust we But obviously that annual ability agreements

Brian Miller

we've inflation. in for our our sort look professional services at in some account we And also adjustments a taken products, maintenance to year. of this there of billing rates our and implement some And increases did above-normal cases,

Alex Zukin

look to topic if half total of cash model, of I in the goes free XX% in then of around. your the door, on And cash your year. guys' from the It first flow to seasonality the Perfect. at jumps total years, actually XX% year guess XX% XX% you to every like two the

help XX-plus want full understand the a from half, just we're just allocation. I all, as but tie And where free in us -- the look specifically the cash the year, flow year? one like the then at perspective could that So just be with of seasonality second capital and we first it to understand in looks years more those it of like percent

the of comment where down buyback. talked and around wanting expenses which about perfect given an given raising -- are the to the debt, also But makes rate environment. stock possibility interest given where maybe sense your pay You the the fundamentals increased is,

Brian Miller

of think I'll first and part that's is -- billings. flow strongest the quarter, of quarter, maintenance I does Yes, typically year take that. because every primarily cash the those the third the

in don't maintenance. to the is that biggest of year close age. it, They the quarter. $XXX third have million X. second of We a in typically typically collected July of late in build quarter as the but they Those and chunk Not all renewed are

paid those So relatively promptly. are

So third quarter that cash growth. drives flow that

the acquisition. fair a that then I of just NIC was part around passing think around only little paid of there balance remitted bit anomaly we some dynamics of I'd to I through because with acquired their their shortly on on quarter the of of out, was -- was them, year customer when in the that's unusual sheet revenue was they a in an they after second for happen guess, describe of, as last there sort that the cash transaction-based from to were what have streams sort that And customers amount some quarter. timing --

consistent of sort nature of their most cash an there. NIC's anomaly quarter is the So more year the flow revenues. sort it's of it created across and This the year, of transaction-based full given normal

But kind year. the than the for X/X year. yes, bit last see half still in flow there cash sort certainly of I think I little second even of unusual to more. that you'll think think, So in But that more and the I half of out was start you our situation the probably see year a more of

Lynn Moore

around the right. on use second question of And you're cash, Yes.

mean something answering debt calls. at in Obviously, USD still Our we've processes in for -- through a at front, we've reasonable I We've the the really months. recently, And private it's almost few some year. acquisition the higher something bit has little in me we're to deals bit changed. that's Tyler. of of where not not priority need pitch these seen the What people last has turbulence acquisitions. as looking I the We've pay It's little hard The a some cases, we need broader to understand. And me looking. if gone But even least expectations that's a bit a compelling tell that head be we Direct We're downs. scratcher. purchased a But participated valuations this even at in for fact, markets they been paying exceeded. have still actively companies not like door. of in actively year. and early not in closed than is a couple We're valuation. of

will really our Our After of rate right now payment make about month. the blended But function It we after is be debt a we've -- this we is paid about X%. more I was so that's debt, think out our XX%. took that fact of this first month. convertible about when It this XX% payment will much debt debt. just our our down. total be over this

the is interest continue over impacted we as to be we look term as which won't next rates as down, year, nice. we our by out So pay

I I years, a now, you look move, with as significant the from share to in rather now, pay near really years repurchases, out As the to look attractive. think do it relates agree unless wanting stock we're five pretty I I'd think the debt seven But I could term. down right just

Operator

with The next Securities. Tillman question Terry Truist is from

open. line is Your

Terry Tillman

In Brian, have you, myself help I feel an of we're hour, to should can't going I but since a XX ask questions. going past like couple I I because I'm follow the

and about Bongor first one to opportunities about had management plus fringe relates guess old replacement ERP right Montreal business, then kind a of case would -- I for system. you've talked high-end -- question other deal your now cloud to talked opportunities? know we How to a I Matt I use court quick. the some of want somebody then First, case They terms just these versus your is about system. management do of asked in of XX-year public ERP asked how because stack the safety. some that Pro business rank And

Brian Miller

is dominant our of most marketplace, market the shares. of say probably products one one I'd management. biggest our Case our Yes. Case in Management probably most

case the management formerly think is of north courts XX% Odyssey the that enterprise use our So I of U.S. in solution.

XX state-wide implementation. I XX like counties the think country something of the largest it's in X

a the to big product counties. think XX, us. a strong because contracts really particularly couple case us of it's But that a written So is it lumpy very business, in old for not those be XXs somewhat systems were of it large XX-plus in also management respect of custom for see with unusual can to we've these replaced year some

pipeline, more activity is the rate are able of success come currently around those in we in it. And actively any been deals that more build growth the but so courts of We in as products position from have very think the of But are there And long-term a our of currently is management do we along. I the from the are market. there's we've mid-range coming some deals statewide now that high sort that sort suite on most have that in very active to see kind in that have don't we of as backdrop. then in case strong really those where space, big

our of longtime that Dallas been we has they our now a solution customer were a one case add county mentioned able to the products time. long XX -- deals, use. on Dallas management County. been It's bigger to top jail call County but a we the So today,

it's competitive right positioned. along, business, it very as us we've certainly a space, in we done process still that and strong But that probation, service say on a a prosecutor, now, jury, that grow broaden and acquisitions of building there But comes we're relationship, there. well solutions So have and new as I'd But enable to number solid activity. much not offerings our position.

Lynn Moore

acquisition we an largest that. company It's four leveraging in the even L.A. like this these even ago, to And add point other worth supervision, to pre County, around supervision, to few think about the United that whether the deal, and it's Jonathan, corrections some called Using take adding talked That's said, about to we're different anchor. I just that you is things Jail And of and -- Dallas signed investments QX, but coronal justice an still remember We in was emphasizing. supervision, won like the to County, And it's it of last trial. that, and years done, Yes. County CaseloadPRO. whether States. is years our L.A. we've ability did Brian solutions additional those a we think the for we in I a -- if areas -- supervision. still and which this strong going be position ago, the counties in it's juvenile adult departments we think gateway enterprise

So.

Terry Tillman

Congrats great. on That's the quarter.

Operator

with is question William Ho next Blair. The from Jonathan

Your line is open.

Jonathan Ho

to I'll it keep one question.

quarter, remind whether of some there deals are tougher bookings With of the you any terms in comparisons? upcoming us can SPX. maybe large

Brian Miller

year, Yes. A in really deals. second. QX, we any Last have mega didn't

deal than license $X million less which biggest was the a of with Our contract about and was a handful Kansas, million. of had $X SaaS value deals, Lawrence, biggest we

So comp I a it's up. coming think pretty normal

Operator

is question Research. from next Keith The Housum with Northcoast

line open. Your is

Keith Housum

know to Brian, affects one you while employees question late on going that retain to mine maybe ability I'll and past touch forward. the the business just over NIC keep here. I how year running we're the your acquisition,

Brian Miller

solid, for I and And acquisition NIC the sense Tyler. well all very really ton growth the at both great level think had the created their think, made management I recognized been the teams it's Yes, think solid as reasons at retention, opportunities that staff for we've of level as senior that. have a I

got think new, look people a smooth they've year, working the size, done and still Thomas, all leadership Lizabeth remote COVID. in for with President while there, the we during a it's new COO roles we team one senior the completed some particularly deal integration and to but a back I last of NIC, not managing integration. -- new and were that of was job particularly great as We've over that almost been the that

the opportunities there. team, and taken and example, team payments joined leadership Tyler. with team, very Payments NIC I that they've created it's for Their we're the happy with has retention think our NIC Tyler Payments the across the So and

So retention really with we're there. pleased the yes,

Lynn Moore

Yes.

the naturally think can we that in up retention. excitement together, that do think and things flows and with I the the just opportunities cross I helps that we down organization, see the that and

Operator

question final Sandler. Piper Clarke with Our from is Jeffries

is line open. Your

Clarke Jeffries

sense I range being impacting in are today considerations and just are it growth keep for how that. NIC, macro the terms driven brief. the I'll organic a is how or wanted get expectations revenues to core of of of rough what of sort the your

today, the So range from general what's you the going expect forward? X%

Brian Miller

average, mean grower I an X% around was Yes. several they back growth. what about pre-covid looking on over state NIC years, historically, of sort the, call,

organic a sort So growth. proxy for of

is pretty higher shift over sort the towards government and baseline. all last with transaction strong We've and digitally our think, And of business couple seen more years so so with that, doing volumes. growth businesses the of I citizens

it's they're of that the we the the of the is as combination more And So a kind and particularly cross-selling and But base couple to kind right an really growth, we of I'd opportunity X% think payment with But certainly the off there's strong X% drive move now, off into low acquisition, like is that's of good that established into higher? to years. baseline say in is that pretty double-digit should growing part given through think, which I of Tyler around NIC, quarter, last space. this ultimately a more for even of a the so up all really baseline of this drive continue Direct the was range. now initiatives impressive that this over that our very USC things and opportunities

Lynn Moore

Yes.

of Tyler. big you've near-term But acquisitions. as I a division go that of division those assume of within your a part opportunities they're that lot I headwind or obviously, we that, Brian's the NIC's cross-sell a But P&L out. mean -- forward, on P&L. to think, of whether internally, Clarke, not taking recognize like a stand-alone point, was it's out lot growth versus COVID, taken I different we the which

happen really vend it's in yet NIC hand because sitting deal the to over there. but some Justice payments specific growth just And like without see of Courts time, I to we I some a & think And client grows, as go our on of Arkansas, our books as you'll business going don't you significant revenue their ERP are business doesn't it's in report our on base, played engine really the see that units. go that just payments the over Kentucky, that organic opportunities within may division.

become on through first so, as so you'll but So I be divisions thought we appropriate, just the integrated was our We've other. less more other the leverage much are really like think probably year cross-sells NIC. as us as our or opportunities we go it revenues and comment of lot talked how will it a we each and growth forward, because see specific about, for rest with of they their there's kind of

us, becomes Tyler. to at it so And all just one point,

Operator

closing back you this At there more to turn Mr. I'll proves call time, remarks. questions. no for Moore, be the over to

Lynn Moore

Okay. Thanks, Great. everybody, today. joining Chris, and thanks, us for

more feel great Brian you everybody. a myself. Have day. Thanks, Miller please any have If free to questions, or contact

Operator

for this call. gentlemen, participating. today's Thank concludes and Ladies you conference

disconnect. now You may

Tyler (TYL) 28 Jul 222022 Q2 Earnings call transcript