Tyler (TYL) 26 Apr 232023 Q1 Earnings call transcript

Company Profile

Participants

Hala Elsherbini	Senior Director of IR
Lynn Moore	President & CEO
Brian Miller	CFO
Sami Badri	Credit Suisse
Kirk Materne	Evercore ISI
Matthew VanVliet	BTIG
Joshua Reilly	Needham & Company
Terry Tillman	Truist Securities
Saket Kalia	Barclays
Pete Heckmann	D.A. Davidson
Charles Strauzer	CJS Securities, Inc.
Michael Turrin	Wells Fargo Securities
Jonathan Ho	William Blair
Rob Oliver	Baird
Gabriela Borges	Goldman Sachs
Keith Housum	Northcoast Research
Clarke Jeffries	Piper Sandler
Joe Goodwin	JMP

Call transcript

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Operator

Hello, and welcome to today’s Tyler Technologies First Quarter 2023 Conference Call.

Your host for today’s call is Lynn Moore, President and CEO of Tyler Technologies. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions]. this being reminder, XX, today, a XXXX. as conference recorded is April And

to over ahead. the Tyler would turn I like call of Relations. Senior Investor to Please go Director Elsherbini, Hala

Hala Elsherbini

call. Thank and Moore, President our Chief you, and Miller, today Officer Brian Financial welcome our our and Davin, Executive Chief is With to Lynn me Officer.

annual give initial review quarter, our our Brian will Lynn comments the and the of guidance. and then Harbor results your questions. Lynn statement. with comments, Safe I end on After will some our details some have will and take then provide additional we’ll

During information make statements and conference expenses, company’s that historical projections the include revenues, than the concerning other this management may future call, provide profits. may prospects, information and

forward-looking the you would under provision to actual risks. of those other SEC considered Harbor differ risks filings to Act Reform cause from statements Private We Form Litigation and uncertainties, these Safe of more refer are on XXXX subject information results to for and materially and our certain the Such XX-K statements could Securities which are projections.

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

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

otherwise. relate that corresponding supplement on growth tab, of make Presentations to prepared comparisons and Events an will note we year summary unless period call deck the posted all today the the specify last our On earnings slide remarks. Please we to we

Lynn?

Lynn Moore

exceeded that for delivering quarter results our key XXXX strong Thanks, metrics. Hala. met began by expectations We most first or

client’s proposal demo space. the continue sector activity sector our and to activity request support for software seeing business level market unique public the in solutions, strong across strength and with our see ability public ERP modernization a product high digital needs. of particularly to We our our reflecting We're demand broad-based across in

software solid embrace revenues the move demonstrates XX% SaaS new revenues the of even deals recurring our with our mix pleased with revenue as grew contract to our shift software organic revenues COVID-related our was last XX.X%. and growth quarterly importantly, and of Most nearly mix Total QX XX% of accelerate, also year. to excludes X.X% SaaS market compared XX% new X.X% how also SaaS Our organically comprised new to business growth, with comprising to cloud. growth value our which revenues. revenue the We're continues to continued software at

this upsells and sales relationships solutions. driven cross-selling quarter Our with Solutions state at opportunities leveraging Digital success and division, activity our our by including formerly data strong reflected insight NIC,

cross-sell pipeline wins, to In of opportunities grow. current our addition our quarter to continues

our to continue around strategy payments growth also business. We our execute

During XXX we robust Solutions deals, with payment the gaining pleased with are acquisition Financial quarter, first we the payment and new and traction capabilities. are signed we early more Rapid issuing their our that of than especially

program The affordability sending to childcare. illustrate the these Tyler's that In and with the Disbursement Solutions like and its a care family fund between I'd purpose relationship successes. and division payment is a providers. Indiana's of Digital Service process for increase administration deals disbursement improve as of services quality platform first development the availability, payments we couple highlight Indiana, to of a our quarter for the contract to expanded to and existing federal child social CCDS

information of users portal collecting setup, the including and and our reconciliation the from Leveraging payments combination process banking Rapid's acquisition, from contract, payment platform, enterprise also state in complete oversight the robust the Through payment the provide existing channels. entire to providers disbursement solution across capabilities Rapid will we all to program. streamline registering and reporting with virtual support account will types from features

for disbursement and including addition, deal Shelby solution. Fort quarter's courts a assessment to current The rapid County, contracts the at Tennessee, current Bend was valued court solution in New enterprise funds, provide County, Tyler's payments $XX.X Tyler Brunswick signed we Canada user two of Enterprise management million with In our largest jury province client. of solution Texas, SaaS approximately a for

the property flagship implement fourth New our Brunswick becomes solution. Canadian to tax province

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

Brian Miller

also Digital reported was included Thanks, Solutions which its COVID-related initiatives, first for XX, Total Lynn. NIC, in year's our Organic of division, $XXX.X million XXXX. COVID-related at revenue $XX.X up results all quarter X.X%. of which for Technologies quarter Last revenues revenues X.X%. formerly ended million, the Yesterday, the quarter revenues excludes XXXX. Tyler growth, March were first ended from

rose which declined Professional accelerated pace. Within COVID XX% subscriptions, SaaS grew revenue contract X.X% to X.X% revenue $XXX.X revenues revenues, revenue Subscriptions and software On new basis, to XX.X%. million. rose organically our our COVID-related excludes an an revenues and License services Transaction to XX.X% XX% continued revenues shift also but SaaS XX.X%. as $XXX.X mix due organic increased to organically. million of at grew transaction XX.X% completion initiatives, to declined grew

value value on-premises added contract SaaS year, new QX contract In We total clients approximately XXX $XX arrangements new arrangements software software XX we total conversions, million. and million. of converted added SaaS with SaaS approximately to new and of new with $XX the had last on-premises existing XXX of XX a

million bookings Our quarter $XX.X in new ARR. first new SaaS added the in

of SaaS Our was approximately organically revenues. exceed now Since year, $X.XX -- maintenance our and X.X% I'm total ARR billion, sorry, revenues QX XX.X%. up grew last

the quarter to revenues. the the license decline once business shift by cloud were in new in of again the and pressured related acceleration the the in margins Operating

of trough As we've we expansion previously stated, to in margin XXXX. return and to margin operating expect trajectory in to a XXXX

In our we discussed last interchange under impact revenues those merchant margins. consolidated our of revenues, of margin If QX, points non-GAAP netted million. cost for basis and model As $XX been merchant approximately from meaningful operating fees payments have quarter approximately would of overall higher. business fees revenue the fees also the and a both our we quarter, gross paid have on out were XXX

Cash quarter this from of flow cash with million cash of XX.X% XX.X%. up flow $XX.X free and flow million, was up operations $XX.X robust

As which to and a estimated impacted taxes the year an will estimated Section for of cash million balance XXX flow taxes. the $XXX be cash reminder, to resulting is of of related by the from payments is tax related tax XXXX changes, XXXX $XX $XX million million

sheet million cash approximately and with $XXX.X outstanding million. ended of We of million total continue strengthen our We during first of $XXX we investments and to the $XXX as quarter. QX balance debt repaid term rate floating debt

end at times Our quarter X.XX pro net XX-month leverage approximately trailing was forma EBITDA.

non-GAAP are the guidance and earnings revenue year Our for unchanged.

will be $X.XXX Our follows: of XXXX billion. billion our expect total we is X%. The $X.XXX guidance implies organic guidance approximately between midpoint revenues and growth as of

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

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

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

Lynn Moore

Brian. Thanks,

quarter results across first our momentum are business. demonstrate Our we the building strong

margin data cloud initiatives this the track managed as with of transition centers bubble through year AWS expected resulting cloud progress well are accelerated we headwinds and as in from pivotal to our pace as costs. make on from cloud Tyler's adoption Our move

long-term on Our unparalleled us our reflect highly strength, well successes cross-sell map. our and execute position synergistic marketplace upsell and in to desirable road the strategic solutions competitive momentum and cloud growth

We report. efforts. and In made corporate the you'll time learn days, some review we'll our ESG the next release few responsibility to fourth about progress hope we've our take more annual it with

excited clients and in connect Connect, place May some ever, are person all-time conference, To close, San which this public will Registrations our attending. annual our take from in at user May be an sector we're with XX. high, X will host X,XXX extremely Antonio clients largest through to

to on highlighting along forward value to in you'll we growth our long-term supporting and vision. held financial in will will webcast. us Frisco, More We XX Tyler details in Day differentiated live drivers We person a mid- able that or look online. proposition our hope in be targets look also be upcoming our XXXX June to and forward to person soon, strategic Investor with be join Texas, plan, our communicated

With that, we'd the like for line Q&A. to open

Operator

question your from line And [indiscernible] Suisse Instructions] Securities comes first Ryan Credit the [Operator from of USA.

Your line is open.

Sami Badri

on line. is Sami Ryan's This Badri

better first Any bit seeing The was you just operating other to kind better. into margin kind of the I business, and beat? want better off it's our Street the better just cost of And pricing, understand with what going control? a margins. model question than looks I wanted the about models if forecasting. around It did allowing execute details or you were guys Are little the into of kind you guys to mechanism to like kick

give And then they you the have please? XXXX and it troughing be you point us seen already your I XQ operating expand margins, in building from Can on are But is, and before to in operating that know margins this guys have XXXX. possible and been just base? other color margins we messaging those going a trough understood question well that very is expanding forward you're from about maybe

Brian Miller

lower you'll margin I think full question, be improvement. the the we've full don't the that. implies Sure. point for I the part will QX do will and the -- margin the think it guidance be Around the where think year, last this think year for year-over-year was and than consolidated seen year I yet of second trough We see year. our don't

that margin by don't not think would hit point. the we I expect QX, think yet. at year-over-year be But trough -- that I we've we'd seeing improvement

we And terms give out guidance, there. have margin, the quarterly quarterly so we don't target then margin overall a of in didn't

Our the and where revenue is we guidance from started unchanged year. basically earnings

So point our consistent. expectations are at this generally

quarters. that can coming good from revenues which did performance, of we've signed first revenues And The somewhat. deals the around growth those some have hit prior are at pace as good those in online affect quarter revenues the subscription

our our a full probably hasn't changed. year But the bit -- above where margins I for subscription the were think was. revenues Street the generally, expectation

Lynn Moore

It's headwinds add a on sort a a Tyler. than bit too. this, the letting Sami, We've financial And lot couple on Tyler. little over sitting more at more going just of there's both Yes, of but analysis. going revenue run a now, of back years and through right about last transition talked margins, and the there's lot the cloud transition I'd and the impact say within the intentionality on I'd cloud lot

We initiatives on should we that lot parts be internal beyond transition, a lot going just of be doing. we at analysis, look and different look -- doing have of the things taking different a deep cloud business, of a have our can

work and the with on for commend our now. our for going sort of really of that's and really everybody I our staff sure. work of And say team that that our what at lot long-term could generally margin I goals aligned going a vision on executive and long-term is part around expansion. Tyler right entire is There's is But

are just smaller of a of lot of intentionality I things intentionality. going we're lot that just But there's a lot on, going doing. So a pieces. things bigger there's There's There think some on.

Operator

Kirk the from Next of question line from ISI. comes Evercore Materne

open. is line Your

Kirk Materne

signing from, talk Thanks clients of very if that? you say, week you're you've the was weeks, folks week to kind to And conference? I governments hoping connect next seen more Lynn, from much. the away take you're that at next about in state curious couple just or participate given going of or just up next can what

Lynn Moore

going that's introduced are some government lot clients, hosting a our question. them state and special our stakeholders going have We key events executive around government to Kirk, of to a state our have a We're of lot to Yes, actually there. good we're team.

be path the with sort larger part of as going well. be there'll side a them, also on forum So of

got help unique listen to us what training, offerings it's a a their that the It's We've hear chance a new many to with clients for our jobs so to and down things clients. better talk opportunity opportunity for is them needs, great have, is, but vision, about our interact. for chance sit more It's a just us vision Connect their can more and make to about for information, that talk us to them, and more talk to we efficient. their listen us. also

It takes of lot work. a big event. It's a

very go, it's -- Our job. does to I'd anybody that an in does If a a hasn't lot team it's just and not events it, inexpensive of goes an that's people done marketing work into manner. There's but something team been worthwhile. it. amazing event, recommend It's it's -- really first-class

get team lot I and Tyler out a not only of does executive think it.

I think a it. out lot of get our clients

Operator

from question next the of Your line VanVliet comes BTIG. Matthew from

is line open. Your

Matthew VanVliet

back could there, you're referenced actually you question. contracts. the a sort the of magnitude that for Good of much Lynn, potential I give number question Curious and us some where around like guess, near-term of deal of pipeline the is taking state-level last the of how some of morning. pipeline, on nature? terms opportunities of Thanks of things sort the in if you discussing sense feel the you specific

what just And down has come to those and maybe it contracts of in much closed what's since or do so realized you of percentage Thanks. opportunities what sort to sort more the potential term terms compared how inning far? near long the term and upsell you've cross-sell sort of guess through of on think mix? acquisition What's then maybe maybe of those boils I

Lynn Moore

Matthew. sure, Yes,

in instituted inning. your this take we're innings the year. the might We've we're deliberate we're around with a in being Probably be the -- innings. about I'd of NIC. we're very ago in been think grow. still I that. approach of early to doing early everything talked The first opportunities think a the still year top say We part continue We cross-sell the in second. I with question,

brings, meetings been our the state, we're we baseline dive doing a in We've account of where and product GMs get Tyler taking how where products Solutions vehicle, the a getting terms of what into of what doing what's call footprint, are look objectives state the what's clients' where state of what can with particular NIC, management division the deep strategic state Digital and sort contract the Tyler sort really those the salespeople of sort together the the we relationships that easily are hands. into we're

about We're longer somewhere something $XX up I have of not to plays pipe. in going around near-term has now. probably a talk to mean horizon more pipe are, term, XXX, around I is a qualified million more pretty we call that opportunities me month think sort the more that we're we in of or looking ARR is but what we do are right there, at got next something types close X, considered it's those qualify XXX range number we of leads. opportunities on that we've that's viable what Qualified but it. When what different think a the them. we All qualified

Operator

next from & line Your Company. Joshua the Needham of question Reilly of comes

Your open. line is

Joshua Reilly

Yes, my thanks for question. taking

to the You that pipeline strong have ERP year. of you. just mentioned the the the and ERP results visibility rest and speak deals XXXX? rest for in in quarter the Thank driving that pipeline for you the the what's Can of you

Lynn Moore

Yes.

we're number highs. of Josh, really terms I that what think that RFP there, was what demos of the would seeing indicators, sales I say in volume, the we're all-time almost doing the at is

on it's can't my very driving budgets than finger what's Now solid. clients' now that's the our -- remain and not fact put several business really see. I don't going I quarters, high to but right for remains demand other encouraging that really turn into to that

Operator

line of Truist question from the Tillman comes Securities. of Next Terry

Your open. line is

Terry Tillman

and Question morning, my and for evolved? good slight has strategic terms product Yes, the to curious, I'd much -- the I a anything Brian. multi-suite propensity that and/or thanks Lynn these or what do changed taking footprint then as evolved with guess broader or more just think Hala in flips And on be broader of follow-up. the maybe you're doing conversions, you've conversions, question. Lynn, with

now? sounds interesting of of then on kind X. Financial plus part this with that terms in like business second quantifying Anything Solutions. the Rapid really X the X just it's size the of It And is of

Lynn Moore

Sure.

use upsell. we opportunity strategic the as to think That part and at certainly We're direction. is flips still going conversions our pace. an a of healthy I pretty

next us I all we'll over pace think -- X, way Investor to X, the Tyler up our hear XXXX. to in probably guidance we we get a be on and Day give the think X, little when probably more we'll conversions of June, the where

help exactly opportunity other for But to. and flip upsell us incentivize reach then products once an again and around right. yes, you're to It's out

to have fact disbursements we not a of in is transaction in-house. we relates it about. didn't have a the pretty that this I As whole house, the in issuing that It's that that excited It's that didn't closed bringing and whole capability the we're Rapid, capability November. a at side of deal the end

we've the think for I in X acquisitions. a little owned time. and so formally already got something working services unusual a bit us that And takes normally now, these of signed, we've It company a NIC, just this months synergies about already for this not little quite team, with little digital X early over the with is deals months

of lot side disbursement the map looking road a There's payments. on out

they're to the across product you focused primarily now develop, again As lines. but know, there's we've take justice momentum exciting, applicability but of to early the space, all seen. in of That right our pretty it's sort going is years

Brian Miller

And in but we disclose million, million acquired of the revenues them, we range. when $XX they were Rapid kind revenue don't separately, for the $XX annual

Operator

question next Wolfe of from Research. comes [indiscernible] from the Your line

open Your line is

Unidentified Analyst

Guys, is Alex. this Hey,

So maybe It kind a but or anything the of Lynn, special a guess environment. -- local. state Is going question talk every better there and you're is than relative quick been on sectors, on seeing does I unique about demand just question quick budgets company of obviously, strength another the there the seem, that literally -- basis, have other on?

as you there. be? a -- bookings, to to all? going environment where thought as good than own at has to you color it that on look it I'd the pace it Like it get your And thought love better was SaaS changed basis new be? of is relative at was if of kind Is is you going

trends Is that can on basis, you're year. tax appreciate on the where as that I I Brian And anything $XXX those out? cash cash the then on looking free And margin around. just there annual with operating the payments specifically, an through one conversion falls how through think help us commentary the at for propagates cash million, you flow year.

Lynn Moore

Yes.

things about we that certainly what -- things, talk the providing we're it's are when of we're mean think I functionality. we're the in seeing it the probably. reinforces principle I market, a essential couple that

also out that demand reinforces and of there pent periods where think been we modernization local COVID I of the and of time went principle coming shift little continued through might government. have towards it digitization a some up the

see how creating companies, the about for talk clients, We where which gap. affecting use that clients. we really markets, help markets there's to different labor to labor affecting also they're with and also as point challenges for our example, having and our our it's clients, And is are the and bridge also turnovers technology shortages labor but them

know there's things of So I'd this how right I'm now. now. my good -- don't right I pretty happy with is on a And a characterize right lot going just market the now. where expectation, but to it's It's market

Brian Miller

I And overall organic our our growth little an almost on were the on bookings just bit an XX%, X%. to But bookings close think on same the very Lynn was around the cash growth revenue interesting It's bookings on number was. flow our that growth was a mentioning. subscription and free basis organic basis

bookings, is real the both the and SaaS transaction bookings. in the the So strength

the XXX higher call bit On as this talked we taxes year. calculations fourth million, cash is impact the about gotten we've more. quarter higher more $XXX a this million Section flow, estimated cash and to bit is the That got the information related than into free year incremental a little yes, in $XXX had

applies million the think $XX year's for of really $XX that I this last year. about to deposit taxes it's million

year, that impact this does but until sort that catch have it in neutral. five to should we up So after continue X-year or but impact years, a year-over-year year, each decline of impact decline

that We of in made -- the biggest piece mid-April.

margin, -- low I roughly is cash in free $XX was excluding the of think around a XXX in kind overall, the kind each Section flow of the it's quarters. sorry, the And it flow impact is, mid-teens cash $XX range the of in the impact I'd Section I margin. million. free think, to margin XX% equal basis, the I and including flow XXX think our million more And free On range. I last X the then think the range change, around, including say, impact of of the it's the flow XX% ranges double-digit free in high I'm single, in impact cash -- cash the

this the year. So meaningful pretty impact is

Operator

Your comes the next Kalia Barclays. from question from Saket of line

line Your open. is

Saket Kalia

for you. Good morning, Great. bookings for SaaS here. taking additional question on Okay. Lynn, Brian disclosure, ARR. thanks appreciate Brian, I good morning I think, maybe the my

about in supplement. us And I trending mid-single wondering sort a I just what you digits you think bit little a that talk just off metric introduce called was about maybe year? was just the compare. think how how of that could that grew if I tough this the little we very of trend of a that that And bit. to through -- sort think quarter

to relatedly, disclosure, here? the think just you then a used that changes before. just get some And talk we is other of on Like appraisal about metric can I

I gotten somewhere think else. consolidated that's

Just talk changes want us of the here terms of about focus little bit to and disclosure you on in new? the us what some a to

Brian Miller

smaller sell under have Services, a it's sold customers revenues. property of we Yes. that that also to X% we piece to. or well our much is certainly But Appraisal important of will provide now tax it's an our often business. a Appraisal system service

talked And digital again, so really the growth, breaking and we've And some into between revenues. that we've consolidated the our we've be payments, those like revenues portal, things. e-filing And which things services sorts the recurring would revenue detail is the some of revenues, transaction-based around SaaS the solutions about given that as out seen professional focus, things line. of subscriptions line from the you've

basically SaaS grew the it But referring deals. just logo mid-single correct, you're -- sort the detail, new digits. of really bookings SaaS In to that's

there's products upsells, of inside increases, SaaS additional additional in the sales bookings So to existing pricing customers.

that revenues, the is quarter. was transactions overall, bookings So growth the metric number SaaS really the and is XX.X% subscriptions we and which important are think this for

Operator

of question D.A. Davidson. from Heckmann the Pete of line next comes Your

is open. line Your

Peter Heckmann

you. morning. Good Thank

Just questions. of quick a couple

really there of mainly How what does thinking some for at I in well reducing of potential leverage plan. fabulous mean done You've And as you your job and net look the post the on terms then acquisition of deleveraging landscape of valuations? are about that a NIC. as on M&A? not level much the resuming leverage? are repurchase net share have focused so repurchase thoughts share How

Lynn Moore

sure, Pete. Yes,

I right. think you're

focus be Our reduction of debt. our with -- our continues interesting. primary capital. to of We're It's still a use that's focus

is now at of getting debt overall term to XX%. our closer XX% Our debt. It more started off

we've we're about So that model. -- kind of flipped

We where still a long-term we We like at pursue that, in Rapid still evaluate we're to did we see going M&A. the fall. Solutions lot If really of this last value, it. strategic believe opportunities. an just opportunity Clearly, look M&A deal we

hands Rapid, even in And That take higher I we've horizon. space, being our like full a things. a lot lot Tyler, do a lot on I said, or of but when not new our continuing see of different of net more we that's been had that's could probably a us of into a whole with entering transformational and sort leverage a think terms we've of going to acquisitions profile. got the near-term got on lot really initiatives at larger

Operator

Question Inc. Strauzer of of CJS comes from Charles the line Securities,

line Your is open.

Charles Strauzer

that year essentially less QX expected? guidance assume QX call, in be the a Should talked EPS, in we being unchanged. in the Brian, on the given full will you about QX similar results the terms QX good QX of ramp last morning. big with were than better to that Hi, ramp

Brian Miller

be say range to although same -- less in may did QX think and QX Well, upper for mean end jump the range -- But that point, confident first we'd quarter, it's year. a I and the bit yes, little early I $X.XX. ramp still we're we QX up a year, I be the still that the would but I'd little pronounced, I pretty still did more be this think think ballpark. in trending in but I in increasingly the the year. much the and that again, Last the $X.XX in of we the the we were in into of maybe is we're range. maybe full We at same range, think

Operator

from Turrin Fargo Securities. Wells Michael

Your line is open.

Michael Turrin

morning. volume end remained the towards organic of growth commentary good but Thanks, upbeat. the environment, target moving lower around realize consistently pieces, The demand question. are has range. number some X% the you there Appreciate taking the RFP I the

help number you can not just pipeline reflecting What general bookings on growth can relative provide things? transition is Any you square number helpful. to whether backdrop, that around organic or just those and us So impacts? is just the view your entirely context demand it's the mix

Brian Miller

at stab a take I'll that.

I think is and most deal statement. it when we income new lag of to around the a the time sign between that start the revenues hit

where our client it lag, to able be perhaps be bookings SaaS recent payments, in example, when and get signed a a transaction-based software to might So the whether for longer very new might environment deal when of signed revenue really our the about a typically -- start so or those is quarter, lag talked contract maybe we're is little set from between lags recognized. of we the quarter a the for and deal we've quarters over this there new a up in many X being bit We the particular, there's quarters things to a it's start same to contracts. strong. time But the sort recognizing and quarter and revenues time revenues

contract have we that after all those because the the pretty license time, see or very that deals, the the At signed. of if is revenue same of would majority immediately soon lower licenses impact much were recognized revenue we upfront when

There's on-prem period would in the it the with that uplift flips don't place, factor thing there's there. from revenues that the but same immediately. we be biggest now, so So takes sign time of it's we get where the -- may And transition to cloud. the a

Operator

question & from comes Jonathan William Company. Blair line Your Ho from next of

Your line is open.

Jonathan Ho

that Hi, product seeing opportunities you what perhaps data of referenced grouping? And Can in opportunity good you. Thank the bit morning. about script? that talk you're around in kind the a upsell insights and you little

Lynn Moore

Yes, Jonathan.

It's -- I to agency single the think in sector, very a our insights offering our but I me surface solutions. needing. non-Tyler even out solutions, unique future many can is only given own to and that sector look that mean in ability different public -- so unique position that's We're something across offering. of not is a public see every our data an data our I when large I big footprint

it's it. to X, made I that look, starting And that now see investment ago. something years think we're I -- more demand think for more we X and

actually internally, seen sort of I our product is now we've more within Tyler, we've have a of with so is that D&I each of former it think individual with differentiator it's that divisions so for deconstructed something What division also us. aligning we the sort we're integrated and the demand,

always think so, NIC. differentiator We've a it's even it seen or been in for year differentiator for the last us. I been it's a

or about a our talk part early ago, we primarily major insights. talking Texas South the was a or year in we about renewal factor or done were were rebid When Carolina contract. the data Those the of payments

So leverage. something that we're it's to continue going to

it's public think position really something the in sector with that unique needs. a we're I it, and

Operator

Baird. the of from comes line next Rob Your Oliver question of

Your open. line is

Rob Oliver

what saw of quick quarter a like a And you're And I follow-up. then seemed it quarter and a big you. just just think, deal and if in sizing, more deal Great. you last Brian, of closed for that the one deals seeing some of sizing. curious those moderate. of deals slipped know out couple terms this the I quarter, bit

anything understand on all flow? that apologize cash that's Is Or I the cash free there of the the here. laryngitis just on tax that 'XX? just better. impact impacting So free is the to catch-up else there from flow, side is

Brian Miller

Yes.

On initially much it's and from higher XXX, evolving impact impact is cash catch-up yes, the particularly those things. all it complicated the into But some the you amount. than that's the Section expected, flow, of still really overhead to to we XXXX that free related pretty and a add calculation the of is have

from a that name we And in deals slipped did model, year. that bit than referred last we quarter. Yes, subscription talked the deals the by size couple have couple size that of that deal of half average But the -- a always was less the did this quarter in to, first with deal deals of this referred those quarter impactful. A we QX we have we of close to. license about that those quarter-to-quarter not bigger average it's

as recording We And State is license X and with this -- nice nice public had Raleigh had or is Virginia and counties Charlotte. well. safety property X closed County deals with a our County, then which which we quarter deal large for the the really in North Wake that product Carolina, Police Mecklenburg with

those seen a that the seen We've we've generally, timing those come shifted So in. bit. deals

Operator

the from Gabriela comes of line Goldman question next Your Borges from Sachs.

line is Your open.

Gabriela Borges

on expansion. Good morning. to follow up margin wanted some I on commentary of the Thank you.

period do there's some think a Brian, I Lynn progression maybe about So margin as you as this us expectation longer-term little you've know an of year Is Or when structure and a for margins, of given that accelerated is after see to qualitative you color be for the quantitative your linear? time color margins? and trajectory bit likely well.

Lynn Moore

clients Gabriela, things the trajectory certainly, of to looking and -- how at curve accelerate don't and trajectory. move will are the be timing on-prem we'll expect margins think topics the Investor X a over rarely timing linear. that our an as broadly or how that years we the if Day, of margin of And view the linear. cloud, a Yes, the next around from J-curve it works or flips factor that be be address S I do of targets that's I will we the to the few of in our

we're timing and of and more end closing data those we've the about those towards in have of bubble the XXXX, talked impact certain so that of X and data an centers costs closing more our in around will centers years. and being that of reduce XXXX the those to think I able those

our expect can't something Investor outlook it it beyond talking to margins refine topic we'll and be certainly So is I Day. to right I be linear. that much really about color for will at don't significant a we'll be now, give continue but

Brian Miller

but course, growing business our effect. our negative XXXX and and same our our time, talk through flips actively out and payments growth our a as of business, grow we SaaS will of somewhat transaction And Yes. we're at Tyler in the which we have about

on between overall have depending rates two impact those on So the some growth margins? businesses will

Operator

Keith from line of the question Research. next comes Housum Northcoast of Your

Your line is open.

Keith Housum

able servicing up the Can And to I that people quarters you’re? if the about Brian, bottom the those staffing the have guys. morning, you line? Good unit. with now, talked staffing contribute you talk about know currently to pass, revenue they're and you perhaps at, actually really you're

Brian Miller

Yes.

employment new surprising, are is continued flow, attrition not shifts well broader we've think some as which in to I staff as seeing markets. of the the given hire

about on side billable. talked pro we've quarters, few added classes new the last people, we've and are new those as becoming people So over the services

of also of and or will you'll most faster revenue, revenues services in that, at bringing QX subscription you'll nice in will online see we think help beyond, so impact SaaS pace. I more importantly, revenues likely a see the growth which see lead

people impact you'll with fully plan So to pretty becoming of well I on our I efforts start that think QX. capacity think the want to And have. the see those in up we really to we're to step billable

Lynn Moore

in I And And is the margins. over more margins really to loss services. talked a We've be on forward. or years That's change talked of to not breakeven think we've it likely historically not and services maybe about past accretive historically Yes. our leader. clear, going about in services the to

the do other is doing can on of business, within I what services minimize I think about of we impact negative part earlier around talked that to around that we're things intentionality margins. overall things when the

Operator

Sandler. Your of next Jeffries question of from comes Piper Clarke the line

is open. line Your

Clarke Jeffries

like ask, million seems $XXX XXXX? SaaS in were quarter, $XXX the about supplementals. and million we I an to QX change it's any last just a Brian, to just As revenue restatement example, was wanted there in here? of now it look talking as there I Was

Brian Miller

very a think, was some transaction revenues reclass, to not of SaaS There's from revenues. small I -- revenues there a

current that's one, supplemental the a but in reflected So and our line significant getting not in those of data. kind reporting, with -- but

Operator

JMP. question comes Your next from of the line of Joe Goodwin

open. Your is line

Joe Goodwin

your is I technology that space? different as differentiate guess, the and have for players product other would say payment or differentiation market now beyond would some current well? how the level the existing level in at there relationships built everything And is presence? NIC, Lynn and portfolio Rapid, Or you Brian, the there governments you so say you technology you is versus on

Brian Miller

Yes. We believe the technology is meaningfully differentiated from providers. the more horizontal payment

of systems and So types to the reporting, really job it's makes we for makes around Tyler's the -- side differentiator really us. robust acquiring different and the easier, now integration offer whether easier the that payment payment capabilities reconciliations adding the it's disbursement that meaningful back-end then to the channels can client's a

solid around we -- to in many And have fact, value provide pricing in to in it really some pricing because cases, premium be that. enables and us, instances, additional

competitive nice because invest integration. was to payments very, of robust and back-end addition Rapid very And already payment in create that to a a edge a have capabilities we platform of more NIC into capabilities, So had continues the but those that integrate underway that further today, and enhance to processes more and of lot to systems those. Tyler platform

Lynn Moore

topics, a detail in and the you opportunities what color, some think can we're us. of to more I we topic Joe, different the in differentiation Investor for And Yes. have around -- little more front of June, we us and little around market in in provide the the a these specifically maybe Day that at expect why

Operator

Evercore of Your of next question Materne ISI. Kirk comes from the line

Your is open. line

Kirk Materne

I'll of Lynn, this payments and follow-up, drag comment Just Brian as your well. sort I a on into maybe, guess,

shift no I Just have probably grosses to there rules. A, this I you you pick a ability quarter. go assume to calling meaning appreciate the a that bps gross out on easier, scale the certain to would from the which accounting mix required meaning perspective were are recognition, is you be I assume X all gets by assume drag payments with, And want XXX that real I but that revenue becomes less,

Should part bigger? to was just we sort if then business expect as flexibility kind I just of it in the should think get grows that Thanks. that how to we of sort there's drag get incrementally about maybe about any of to as that and the So of better scale? gets curious

Brian Miller

And a for. credit risk card choose can really for a it's is or the and really lot accounted merchant not or the how depending card, vary which of Visa, fees, interchange and it's whether There's ability difference paying it's personal on we type a assume to the of Amex card. fees whether and responsibility the whether pick those business

they so And for their that what our so in fee handle cases, that know most prefer clients us to is.

interchange charge, but per a as generally, it, we those we fees, X.XX% also have And call say, get can transaction the the they we might and well. merchant we pay around and that So fees vary charge out let's transaction and percentage number. of X%, a be, that

fee slim And margin and so a we on a do the generally. fees, then also we get merchant pretty it's but transaction get margin a

client getting then -- accounting. the gross In for cases, prefers to interchange to directly. chosen have transaction But are that fees, net per customer just we risk. that we a And would a take if model, the fees paying we we most services in generally the And merchant we're has those provide. -- a charge pay for do those fees to us

is those impact basis. back though think sort on that there we you it's of on put give to So is we even net important, that it some what margin a

if and out, a point of about, those it operating -- what you you as basis if whole. we out as sort XXX fees and we take it's expenses of margin revenues leave impact just those So Tyler would on talked overall take a both keep,

to the of why we that So to to how And those numbers could depending and or Tyler, you fast time. so how that give can over smaller. those trending of be that you the impact of one that's rest bigger reasons might expect on the be impact sort continue grow see would be relative of could

Lynn Moore

gross it lower the be clear, is actually flow. -- free while said, customer produces margin as Brian in And just model, the cash Kirk, to Yes. driven, higher

free to flow. So our benefit a it's cash

Operator

have And the for today. we that last was

So, I’d for hand closing Moore, to to Lynn back like comments.

Lynn Moore

us joining for everybody today. thanks and Kevin, Thanks

If further Brian any you day. free myself. have please Miller, Have great or contract questions a feel

Operator

for That does today. conclude our conference participating. you Thank

You disconnect. may now

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