Q1 2020 Earnings Call

Thank you Brent.

And Welcome to our first quarter 2020 earnings call with me on the call today are Lynn War our president and chief executive officer and Brian Miller our Chief Financial Officer. Like for Brian to give the Safe Harbor statement next when we'll have some preliminary comments and Brian will review the details of our first quarter results. This will be followed by a discussion of the impact in our response in a related to the covid-19 pandemic and I'll have some final comments and we'll take your questions.

Thanks, John during the course of this conference call management may make statements that provide information other than historical information and may include projections concerning the company's future prospects revenues expenses and profits such statements are considered forward-looking statements under the Safe Harbor provision of the private Securities litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from these projections. We would refer you to our form 10-K and other SEC filings for more information on those risks, please note that all grown comparisons we make on the call today will relate to the corresponding period of last year unless we specify otherwise then

Thanks Brian. We had a very solid first-quarter with a great deal of momentum going into the second half of March when we began to see the effects of the covid-19 pandemic the market was active and we bought it at a high level. This was our 34th consecutive quarter of double-digit Revenue growth has Gap revenues grew 11.9% and non-gaap revenues grew 11.3% off organic Revenue growth was 6.4% for Gap revenues and 5.7% for non-gaap revenues. Our core software revenues from licenses and subscriptions grew 12.1% of a non-gaap basis with 8.3% Organic growth.

We continue to experience an increasing preference among clients for a cloud offerings subscription Arrangements represented 73% of new contract value signed this quarter. Of course this wage pressure on short-term Revenue growth, but generates higher revenues and margins over the long term.

Gap subscription revenues grew twenty one and half percent and non-gaap subscription revenues grew 25% subscription Revenue growth has now exceeded 20% for eleven consecutive quarters and fifty two of the last fifty Seven quarters.

Total recurring revenues from maintenance and subscriptions grew 17.1% on a gaap basis and comprised approximately 71% of total revenues.

He was another extremely strong quarter for bookings which were up 39.8% our second consecutive quarter of greater than 30% bookings growth our two largest size deals with a quarter led the way down both were following contracts with the state of North Carolina Administrative Office of the courts. The first was for our new Odyssey warrant solution and was valued at approximately 24 million dollars on a second contract which we noted on. Our last earnings call was for our Brazeau see citation solution valued at approximately 14 and 1/2 million.

both of these ten years

Has agreements expand on the relationship with North Carolina that started with our largest SAS agreement ever an 85 million dollar contract signed last June for Odyssey case management and e-filing Solutions month and they demonstrate our ability to grow our client relationships across our broad portfolio of Integrated Solutions.

We signed to other SAS deals in the quarter that each had a contract value of greater than six million dollars one with DuPage County, Illinois for our is World appraisal solution and one with the City of Richardson Texas where a multi sweet arrangement for our immune CRP execu time time and attendance and enter gov Civic services in code courts, and so crowded and insights Solutions takes full advantage of our connected communities vision.

We also signed five new SAS arrangements with contract values greater than three million dollars four of those deals were for our immunity RP solution with the cities of Merced Napa Palm Springs all in California as well as Napa County, California, V was with the South Carolina Department of Education for the first Statewide implementation of a guy in school transportation solution.

Our largest on premises licence till the quarter was a six point three million dollar contract with Beaver County Pennsylvania for our is World appraisal solution, which also included Appraisal Services.

We continue to widen our market share lead in the California court case management Market with a 4.4 Million Dollar on premises licence contract with Contra Costa County for Odyssey solution month. We also signed a 2.7 million dollar license arrangement with LA county for enter gov Civic Services solution.

I'd like for Brian to provide more detail in the results for the quarter and then we'll move to a discussion of covid-19.

Thankful in yesterday Tyler Technologies reported its results for the first quarter ended March 31st, 2020 in our earnings release. We have included non-gaap measures that we believe facilitate understanding of our results and comparisons with peers in the software industry a Reconciliation of gaap to non-gaap measures is provided in our earnings release. We've also posted on the investor relations section of our website under the financial reports tab schedules with supplemental information provided on this call including information about quarterly bookings backlog and recurring revenues Gap revenues for the first quarter were two hundred seventy six point five million dollars up 11.9% on a non-gaap basis revenues were 276.8 million dollars up 11.3% Organic Revenue growth was 6.5% on a gaap basis and 5.7% on a non-gaap basis.

Our core software license and subscription revenues combined grew organically 8.3% on a non-gaap basis.

Subscription revenues for the quarter increased twenty one and half percent. We edit 131 new subscription-based arrangements and converted nineteen existing on premises clients represent life, ultimately 101 million dollars in total contract value in q1 of last year. We added a hundred and twenty-eight new subscription-based arrangements and had 13 on premises conversions representing approximately $49 in total contract value subscription contract value comprised approximately seventy 3% of new Total new software contract value signed this month compared to 54% in q1 last year the value weighted average term of new sales contracts. This quarter was 5.9 years compared to 4.1 years in June last year with the increase caused by the two large ten-year contracts with the state of North Carolina mentioned earlier.

revenues from e-filing

Online payments which are included in subscriptions increased 14.7% to $22 that amount includes e-filing revenue of 14.9 dollars up 1.7% over last year and he payments revenue of 7.1 million dollars up to 56.7%

For the first quarter our annualized non-gaap total recurring revenue or ARR was 785 million dollars up. 16.2% Non-gaap. Non-gaap are are for SAS arrangements for q1 was approximately $239 up 22.8% transaction-based ARR was approximately $88 off 14.7% and non-gaap maintenance was approximately $458 million dollars up 13.3%

Our backlog at the end of the quarter reached a new high of one point five billion dollars up 19.2% backlog included $369 of Maintenance compared to three hundred fifty-three million a year ago subscription backlog was $668 compared to $489 last year and includes approximately $128 relating to six feet be finding contracts including re-filing contract with the state of Texas, which was extended for one year through August of 2022 during the quarter.

Aslynn doubted our bookings were very strong again this quarter at approximately 319 million dollars an increase of 39.8% from q1 of last year for the trailing-twelve-month bookings were approximately one point four billion dollars up 3.7 up 37%

our software subscription bookings in the quarter added twelve point six million dollars in new annual recurring Revenue up 10.7% over last year's 11.4 million for comparison to all of our new subscription contracts have been under license Arrangements. We estimated that they would have represented additional license revenue of approximately twenty million dollars.

As a reminder our bookings comparison in the second quarter will be a very tough one irrespective of the impact of covid-19 last year second quarter bookings were record 452 million dollars and insult our largest contract in history the 85 million dollar SAS contract for the North Carolina Courts as well as a 20 million dollar SAS contract with Bexar County, Texas Courts.

Cash flow from operations more than doubled to fifty six point seven million dollars and free cash flow quadrupled to $46 primarily due to strong collection of receivables during a quarter. We repurchased 58804 shares of our stock for a total of 15 and 1/2 million dollars or an average of approximately $263 per share. We ended the quarter with a $393 in cash and Investments and no outstanding debt now. I'd like to turn the call back over to Lynn for the discussion on the impact of and our responses to the covid-19 pandemic then thanks Brian.

in response to the

Calling covid-19 pandemic its effect on the economy. I want to share information on how Tyler Technologies approaching this Challenge and its impact on our business.

First our operational response Tyler's nearly 5,500 team members continue to provide a high standard of client service with minimal disruption.

Our primary focus has been on ensuring that our employees and their families are safe and healthy while supporting clients who provide essential services to the public.

Most of our offices already had many staff members who normal workdays involved remote work environments beginning in mid-march, we transition quickly to work from home for all of our staff equipping our employer to continue their work uninterrupted and also curtailed travel for our employees.

Our clients faced increasing disruption to their operations as they dealt with the effects of the pandemic on their communities and focused on providing vital services to their citizens in March. We begin with delays and some procurement processes and finalizing some existing contract Awards became logistically more difficult.

Some implementation appraisal service projects were also delayed as clients were grappling with balancing local shelter in place and social distancing quarters with conducting daily operations trade shows with large numbers of vendors in perspective clients Gather in person or scheduled or rescheduled or cancelled.

We are addressing the challenges imposed by the covid-19 pandemic by adapting the way we do business using web and video conversing extensively for collaboration conducting sales demos providing support and delivering Professional Services such as training remotely and even executing complex go lives virtually.

With the spread of covid-19 our clients need for digital connectedness both within their organization and directly with the public is rapidly shifting from a vision to an urgent requirement off.

In recent weeks we've seen many examples of our team members working with our clients to adapt to the current environment and truly inspiring ways. I'd like to highlight a few examples.

San Bernardino County California pulled off a completely virtual go live of our Odyssey court case management system by pivoting to our remote Command Center model the go-live would ordinarily have involved a number of other team members traveling to be on site.

In response to the covid-19 fan demek. We accelerate the launch of our new virtual Court solution and are offering it without charge for 90 days in order to help Court clients serve their constituents without an interruption since the official launch last month more than 60 courts have selected the solution to handle cases remotely removing the burden of having defendants physically appear in a courtroom will also brought access to justice justice for disadvantaged or displaced defendants.

New York state division of the Veterans Affairs deployed are until attract solution in under a week. So it's staff could continue to improve claims remotely ensuring that veterans in the state will continue to have access to Thursday. It's numerous law enforcement agencies optimize their new world computer aided dispatch tools to flag calls for service or someone might be a covid-19 carrier allowing officers to take necessary precautions school districts are using Tyler's diverse a ride 360 app temporarily offered free of charge to assist with parent Communications during the crisis and are using our school bus driver software the plan meal deliveries to families in need.

the Superior Court

San Luis Obispo California worked with Tyler teams over a single weekend to customize its Odyssey guide and file solution. So domestic violence violence complaints could be filed online shelter-in-place orders are in effect.

Numerous cities are using our my Civic app to provide up to the date covid-19 information to residents.

I couldn't be prouder of how are dedicated professionals have embraced The Challenge and are excelling at meeting the needs of our clients. I'm constantly constantly inspired by the spirit resilience and compassion shown by our team members.

With that backdrop. I'd like to make a few General comments about the financial impact of the pandemic on the quarter and the rest of 2020 as well as provide some thoughts on the long-term Outlook and Prospect of Tyler.

Well, not Material the pandemic and the response by clients and Prospects did affect first quarter results. As I mentioned previously a few sales pushed out of the first quarter and Professional Services revenues, including the little travel. We're also negatively impacted. We also canceled our annual user conference Tyler connect, which was scheduled to be held this week in Orlando wage costs associated with that cancellation. Approximately $727,000 are included in our first quarter results.

We estimate that the total revenue impact of covid-19. And the first quarter was approximately six million dollars.

As we look out over the rest of twenty-twenty. We anticipate a greater impact from covid-19 in the second and third quarters while we have not seen meaningful cancellations. We continue to see delays and procurement office and lengthening sales Cycles as public sector entities focus on issues related to pandemic

Although the cares act provided approximately $424 billion in economic aid to State and local governments and additional stimulus packages are expected to provide more assistance many of our clients will face near-term judging others. We can deliver their majority of our Professional Services remotely, but we expect to see lower Services revenues as some projects are delayed by client availability in addition a number of Courts have limited operations during the pandemic which will impact transaction-based e-filing revenues during this period

In addition to these core revenues approximately six million dollars of revenues classified as hardware and other revenues will be eliminated in the second quarter as a result of the cancellation of our connect conference.

Global Travel will also be impacted significantly in the second quarter, but should return as states begin to Transit transition back from shelter-in-place to more normal operations.

Well, some of these variable revenue streams will continue to be impacted by the current environment. We anticipate that recurring revenues which comprise approximately 70% of our total revenues will not be significantly affected.

We expect to continue to invest in product development and accelerating our move to the cloud at levels consistent with our initial plans for the year.

We

Value the experience and expertise of our employees and do not expect to eliminate any positions but anticipate that incremental hiring will be reduced somewhat from original plans.

We also expect to see reductions in some expenses including travel and entertainment trade shows and health claims.

As we remain confident in our long-term Outlook, there are significant short-term uncertainties around the continuously evolving covid-19 pandemic and its impact on our operations. And those of our clients wage for example government response to the pandemic will continue to vary significantly from state to state and even from jurisdiction to jurisdiction within a state there by making the duration and scope of business restrictions within the public sector difficult to predict.

As a result, we are suspending our guidance until such time as we have more clarity around the ultimate severity duration and impact of the pandemic. I expect to have more clarity on the impact of covid-19 off to our 2020 financial performance during our second quarter earnings call.

Well, our near-term Outlook remains clouded by some uncertainty given are high percentage of recurring revenues. It's my current expectation that Tyler revenues will still grow in the mid single-digits during 2012-13 with relatively flat operating margins compared to last year.

As I look out beyond the uncertainties created by the pandemic. I am as confident as ever in Tyler's long-term Outlook and Prospects Tyler's fundamentals. I never been stronger. Tyler has endured trying times in the past including Y2K and the.com bust nine eleven and the Great Recession.

Each time we emerge as a stronger company with an improved competitive position.

Unlike certain industries. The pandemic has not changed the underlying fundamentals and long-term demand for our software and services.

Tyler exclusively serves the public sector including local state and federal government. Our clients will not go out of business and the solutions we provide our essential whether managing Revenue that communities operating ensuring Public Safety to help the most vulnerable or providing transparency and access to government for the residents of the jurisdictions they serve

Our software manages Mission critical functions such as nine-one-one dispatch courts property taxes utilities and payroll.

Often our clients are acquiring solutions to replace aging systems that are end of life and maybe unreliable or unsupported replacing those essential Services is generally a high-priority issue regardless of the economic environment.

If anything the current crisis is already highlighting the Reliance on outdated technology by large segments of the public sector you likely have seen recent news around issues related some of these decades-old couple BAE Systems.

long

Opportunities will emerge from this crisis as both Tyler and our clients re-examine historical business practices, for example work from home postures further highlight the need and benefit of connectivity and cloud services something we have been actively investing in and are continuing with our strategic collaboration with AWS.

Clients will continue to appreciate the value of data and being connected with others with other departments and jurisdictions as well as its citizens. This is are connected communities Vision a vision that only Tyler can execute

Clients may become more willing to accept remote delivery of services something they've been more reluctant to do in the past doing so makes our employees even more productive and efficient and off our ability to deliver uninterrupted high-quality support during these uncertain times only further strengthens our bonds with clients and reinforces. Tyler Tyler's messages of both agility and stability.

As I mentioned earlier Tyler has endured challenging times in the past and emerged stronger than before today. We believe we are even better positioned to whether or not kanamit slowdown occurring revenues comprise approximately 70% of our total including including newer transaction-based revenue streams, like e-filing and online payments.

Our competitive position and win rates are stronger than ever and we have significantly expanded our total addressable Market through investments in a combination of m&a and research and development and technology is increasingly critical factor in helping government function effectively, especially in difficult times.

Our financial position is also the strongest it's ever been with zero debt nearly four hundred million in cash and Investments and substantial additional liquidity available through our $400 undrawn credit facility, which can be further expanded through an accordion feature.

As a result we're able to continue to invest at a high level in all of our long-term strategic initiatives something that companies with highly leveraged balance sheets or start-up slacking disability highly recurring Revenue base may not be able to do.

Our ability to actively invest during the Great Recession was one of the key differentiators that strengthen our overall Market position would demand inevitably returned. We will continue to do the same during this crisis.

We recognize this is this is an evolving situation. Tyler is fortunate to have a deep and broad base of knowledge and domain expertise across our employee Group, which is approaching the situation with compassion and good humor.

I am confident. We will see our way through these unusual circumstances with the spirit of cooperation integrity and service that has been the Hallmark of our company from beginning.

I can't be more proud and excited to be part of Tyler than I am now.

Now I'd like to turn the call back to John for his comments.

Thanks Lynn and Brian obviously a little different call than usual and a lot of information to digest before we take your questions. I'd like to reinforce a few of the highlights forgot to add my recognition and appreciation to the entire Tyler team as well to the strong leadership that Lynn in his executive team have provided we deliver and support a lot of great Technologies, but the true value of Tyler exist in our 5500 incredible employees. These professionals are with differentiate Tyler from all other players in this space Lynn and Brian provides a lot of data points in detail. I'll just add one of my own anecdotal observations nearly every day for the past month. I would drive through the parking lots of the two larger facilities here Thursday. We're normally there would be five or 600 cars.

I need to admit after seeing this company grow to this level over the past twenty years. It can be a little discouraging to see nearly complete completely empty parking lots. But then as I talked to a couple of team I'm told that the dev and R&D projects are on schedule customer support issues are being handled and closed with better than normal response times. You can go lies continue to move forward as one has been saying it's not only impressive it's inspiring from early in the morning until literally midnight or past their thousands of Tyler employees are tunneled into the network and cranking out the work. These people have lives children homeschooling spouses working some of them in the healthcare profession in their own commitments one interesting fact is that the highest network activity is late at night 8:10 to 12:00 literally hundreds. Sometimes thousands are online getting the work done.

After the other challenges of the day have been satisfied. It's incredible to witness. It's also gratifying to know that we have a business model a strategy and we're in a position where these jobs are secure in Tyler will only grow stronger.

Yes, we will be impacted in the short and likely medium-term as you've heard sales Cycles will lengthen our ability to travel to customer sites will have an impact and they will be some incremental pressure on government, but now it's at all levels but the fundamentals that we are built on aren't changing everything we do is centered around a central Enterprise applications. Our customers Will Survive, and we rely on G G even more to recover.

They're still going to run payrolls manage courts dispatch First Responders appraise properties and on and on.

For now, there is some uncertainty but I love will grow this year will be profitable will strengthen our already strong balance sheet and most importantly will execute on all the key strategic a competitive initiatives. There's some simply won't be true for most of our competitors smaller start-up types don't have the financial strength many of our competitors RPG own and saddled with significant damage limiting their investment flexibility for other horizontal players. This isn't their first or highest priority and they'll have to make difficult decisions. I'm not suggesting there will be other competitors on the other side of this thing there always will be but I'm certain that Tyler will be stronger on the other side.

Whatever negative impact may occur over the next.

Couple of quarters. It's just timing if a decision to replace a system is delayed. That's all it is delayed. We saw this in the Great Recession recession with a slow year year-and-a-half and then a very robust recovery. It's a Net Zero game. And when those deals come back online I'm confident I win rates will only be higher now Brandt will take questions.

We will now begin. Our question-and-answer session Center question is the question to you, please press * then 1 on your touchtone phone off. If you're using a speaker phone, please pick up your handset. And then press the star key and the number one to a draw your request, press the star key. Then the number to gain from it your question to one and one follow-up and then Place yourself back in the queue for additional questions. We will pause momentarily to assemble our roster.

Our first question will come from from the train with evercore, please go ahead.

Thanks very much. And thanks for all the information today and hope you all are well. I guess maybe for Lynyrd John & Johnnie's are referred to the Great Recession and I was kind of Curious George. Obviously, your customer base is fairly unique and and correct me if I'm wrong, but I think a lot of the budgeting process maybe happens over the course of the summer is new, you know, fiscal year budgets are set so I have a little bit more maybe inside as to you know, how project planning might get impacted by the uncertainty brought on by code is something you might have a little bit more visibility on you know, by the end of the summer as budgets are set or is this something that you know, it's frankly just a totally open-ended question mark at this point.

Yeah, it's hard to know, you know, some of the some of the budget years were actually different around the country. Some people go out do they due diligence go through a selection process and then go to finance committees for a funds others get the money appropriated and know they have it and and then execute the process so it'll be a little bit all over the place. You know, that's obviously why we suspend guidance as we've said the you know about 70% of our business is recurring we don't see it to be affected in any meaningful way in a lot of the other 30 comes out of backlog and it's pretty essential and has to occur. And so you end up with a small piece of our business. It's important to us, but it's a little less predictable at this point in time and we'll just kind of have to see how things unfold as I've said and and what we experience in the Great Recession was the name.

Feels that got pushed they all occurred.

Back, then we actually had a flat Revenue year, I think would negative a million dollars. The only time it's ever happened. And then we we had several very strong years following that so it's really just a shift in the timing if they need new systems. They simply need them and they will replace them. But I think the next few quarters will be hard to hard to see other than you know, the brackets in our case are on a small percentage of our business. That's at risk and the vast majority of it stays in place. Yeah, that'll make sense and maybe just in terms of relatives still early in the fluid, but just met with your conversations with customers right now in terms of maybe their propensity to think more about sort of subscription models in terms of maybe some of the you know, capex savings versus op-ex wage is the to the state local government sort of think in that same way that that a lot of the commercial companies do in terms of you know, capex savings versus the topic spend and and you know, does that wage?

Or bring about I guess maybe an even faster transition towards subscription. I realize these are all they just curious how you guys think that's going to make think the bigger the bigger driver from this incident wage is just the availability of technology. So with everybody working from home with Citizen and partner facing applications much of that is just much more reliable Cloud. So, you know some of these people on Legacy systems that are hosted in the city Hall's County offices courthouses. It's been much more difficult for them to provide that kind of access in a reliable fashion in partnering with somebody that runs a modern technology advanced cloud system off in far greater flexibility. So I think that will be the bigger driver to accelerate the move to the cloud.

Okay, great. I'll turn it over to others. Thanks for your time and stay safe.

Our next question will come from Scott Berg with Needham, please go ahead.

How you doing? John? Lennon brasington questions is talked about some girl with a 2008 John you just mentioned expectation that deals package saving related component. But what about today versus 2018 you the guy in in from the uncertainties, you know through the different commentary suggesting that maybe the visibility of the business is a little bit different than 2008 or 2009 is is I guess in that a the right. And B, is there any other differences that you would you know call out today?

yeah Scott you know I think obviously one of the the clearest examples of difference between 9 and today is is the speed and of the shutdown impact is John mentioned earlier back then after coming out of the Great Recession we had a year where we were essentially flat maybe even a little down in revenues but that wasn't until 2010 the the impact on the off the economy was a little bit slower here we obviously have a much more forced you know self-imposed closure so I think the the the compression of the effects maybe a little longer still still hard to know I do think you know as we said earlier our Q2 and Q3 we're going to learn a little bit we're going to learn a little bit more we're going to learn a bit more as we go into some more budget Cycles. But I would say the speed of the compression and and and Associated lag maybe a little shorter you know the other another difference for us for us personally in in one of the things that that makes money

You know even more.

Is it today is is the position that Tyler is in today versus when we were twelve years ago, you know, we talked about our balance sheet. We talked about our cash position. You know, you go back to 2008/2009 wage, you know, our balance sheet was a lot different story. We we probably had somewhere around only ten million in cash and probably in about an equal amount in debt. And you know today we're in a different position a recurring revenues as a as a model I think back then we're less than half of our overall revenues, you know today they're approaching, you know, seventy 71% You know, we're we've been investing back then one of our biggest initiatives was to invest money during that time, but we've been doing that leading up to that. So a lot of the Investments we've been making are primed to be coming online and and and poised to take really take, you know, a position of of where we are when we come out of this so going to high level that's that's what I'd say the difference there certainly are some similarities, but it's certainly not it's certainly not identical. It gives me a lot of you know gives birth

To comfort to know that this company has been through that, you know being able to talk with your obviously I was here part of this team, but we've got senior leaders up and down the management team who who are part of this company. Let it through them gives us confidence in in what we've done in the past and what we can do in the future and that's really something that's great to lean on it. It's good to be able to lean on each other and and know that that we're on the war on the right course.

Got it, quite helpful things of that win and then from a follow-up perspective both in the press release and on the call here, you all called out the wage Act of of some of the your ability to deliver a Professional Services. Some of its clearly can be moved remotely. But um, you've had a a decent amount that's been delivered on premise. You know, what the fax over the last multiple years is can you help quantify maybe what that impact looks like in the short-term, or is it still just too difficult to to be able to maybe ascertain in terms of Jetpack to them out in the quarter? Thank you.

I got this is Brian there a couple of pieces to 1 we're we're delivering the vast majority of our services remotely wage. And as we mentioned earlier we are seeing customers who typically just expected that those things would be on site. Even if we had the ability to do it remotely that are certainly now more flexible about it. I'd say we we're probably delivering somewhere around 85% of what we would have planned off and and there's there's also a little bit of short-term adjustment as as customers also aren't all in one place to be able to accept some of the truck services. So I think that will continue to to moderate as we go through this longer one of the other factors is that included in Services revenues a significant

travel

Something on the order of five million dollars a quarter of revenues that we recognize that are that are effectively little to no margin on those but certainly affect our revenues. So they're they're grossed up on our income statement and we've seen that go to just about zero and again, we don't know exactly how rapidly that travel will resume off. But but likely some services will permanently be delivered remotely and from an efficiency standpoint a a utilization of our staff standpoint. That's a positive but it will have an effect on negative effect on revenues positive effect on margins.

Great, helpful. Thanks again.

Our next question will come from Peter Hickman with d a Davidson. Hey, good morning. Thanks for all the information. Just we'll follow up on on the pulling guidance role in some of your commentary around maybe a more likely range for Revenue growth. Your prior guidance. Was calling for 11 to 13% growth. And and I if I heard you correctly like you said, maybe maybe get single-digit might be more likely when we think about that. I mean, is there a is there a reasonable chance that the non-recurring portion of Revenue could be down for the year versus prior expectations?

So yeah, so Peter, you know, as we said before there's a little bit of uncertainty right now. There are there are still deals going forward. You know, what we see is particularly deals that are in their life stages are going forward. We talked earlier Scott was asking about implementation Services same thing, you know, those that are more in the middle of the projects versus the beginning of the projects are continuing. You know, what we right now, you know that that sort of our best guess for the rest of the year, you know, we met with management last week as we do every quarter. We had them really give us, you know, their best guest on the on the impact of covid-19 in their particular business units and it varies a little bit from business unit to business unit, you know our business units recognize Revenue differently with some more POC base. I'm work out of backlog summer a little more dependent on quarterly license sales, but we we met with them, you know, we we talked with them. We we had them present what they considered sort of dead.

You know barricade bull case and and best case and and you know, we we as a management team got together and said, you know, this is sort of where we think we're going to land as we said in my earlier comments. I'd expect have a lot more clarity at our YouTube conference call and I'd probably like to reserve until then to to make much more detail on my okay. Okay, and then just a follow-up. I didn't hear you say if a guy Ryan looked like the average term on subscription deals was up a little over 50% Um, can you talk about your your growth of bookings on a constant term basis you have faith had been the same bookings growth for the quarter. We've been right at twenty 20% They were as I mentioned there were two large a 24 and a $14 off sale steals both with the state of North Carolina. They were ten year deals consistent with our tenure court case management deal there if you take in those two deals out wage.

um the average term

Would have been about four point three years on all the rest of the contracts. But yeah, it would have been right at 20% without if if the term had been the same as last year's q1 God, I appreciate the feedback. Thanks.

Our next question will come from that then do it with btig, please go ahead.

Yeah, good morning. Thank you for taking my question. I guess wanted to get a little bit on on some of the Dynamics of the bookings through the quarter through April and what the pipeline looking like and and sort of what the sales forecasts or maybe shaking out on on sort of 360 a month basis. But looking at what your sales teams are focused on is there is there's been a greater focus on contacting existing customers where you have the relationship and and getting more response rates and and sort of seeing what you can do from from sort of virtual and work from home type elements with those customers. Are you seeing you know traction on new customers just curious and what the focus has been there and then across the product platform, you know you narrow your focus for the next couple of months on specific areas that are allowing more e-filing allowing more remote contact or do you are you continuing to see?

Sort of a broad-based approach to the sales sales leadership.

Yeah. Thanks Matt. So I guess initially you talked about Pipeline and I just want to reiterate our comments that we made earlier, you know, there may be a slight demand in pause but there's there's no real fundamental change in our industry demand. And and right now we don't really see a change in our pipeline. Although we do we do recognize there will be delays. We really haven't seen any meaningful cancellations as long as it relates to sales. You know, it it varies a little bit as I said, you know some processes that were already well down the road those are continuing we are doing remote demos which a little more different. In fact, we thought we just finished one last week and and received an award after 13 hours of doing a virtual remote demos. So a little bit knew some of the things we talked about internally, you know, we talked about, you know, what are things mitigation things steps that we can make but also what types of opportunities are out there. One of the things I think Tyler's always been really good about is is well keeping their discipline authors.

Staying opportunistic and some of the things you're you're talking about are are some things we're we're talking about, you know, we do believe that this will help accelerate the move to the cloud. So you see our own sales people will start talking about that. They'll start promoting cloud and start promoting our flips. We we will put more emphasis on our Mobile Solutions, you know things like in our Public Safety Mobility, even our payments and may you know, might things like my Civic you talk about messaging. I think there was a question earlier. This is a really good opportunity to really sort of start haunting are messaging on Roi. I mean, it's something that that we know internally, but may not have always been a top priority for some of our customers. So I think some of those things were doing and and again, you know, the impact of sales is sort of you know, you talk about reaching out to clients seen sometimes, you know, as I mentioned in my earlier comments just there there are some logistical difficulties right now because you have work from home environments, but we've wage

About those messages and and make sure that we're we're going to be equipped for when when things return to normal.

Unlikely to have to remove any any positions but maybe hiring gets pulled back a little bit other specific areas where in the near-term you're focusing on reducing hiring versus previous plan, or is it just a general pause now to to reassess over the next weeks and months of where business is picking back up and more the focus is off from a hiring perspective.

Yeah, so I would say the message I've I've sort of give it to the team is is cautious optimism. We need to see how things play out, but we but that's not to forget the optimism part. We already had some significant hires this year as part of our plans as we've mentioned before we're going to continue to invest in our long-term strategic initiatives. And so all those deaf projects going to keep going and when you get back and you look at potential projects being delayed and things like that, you know, there may be some a slight pause in in in hiring some of those Services components, but overall, you know, we're committed to our Workforce committed to running a business in such a way that our current employees won't be impacted. We will continue to do some hiring and as as the year unfolds and you start seeing returns normal, you'll start seeing some of that hiring again and just to give you a little perspective our plans for the year going into the year where to add about 500 net new heads. So we have a a fair amount of phlegm.

Billy they're Believers to pull with respect to the timing and and the volume of theirs but it wouldn't said most likely on the Professional Services and implementation where we I think he had plans to hire a couple of hundred people in the year that the likely be adjustments to that hiring reflecting the the change in in more that being delivered remotely relate.

Great. Thanks for taking my questions. Hope everyone stays safe and help you.

Our next question will come from Keith Hudson with North Coast research, please go ahead get my guys. Just trying to reconcile the commentary in terms of a deal is being pushed off the ability to maintain the the operating margins is really a function of the fact that perhaps your high range is not going to be as great. I guess the concern here is that your revenues not going to grow as much as you'd anticipated.

I think the the biggest Factor there is yeah there they'll be less hiring and so it'll be your expenses there. There are some offsets to expenses particularly travel expense. We mentioned Health claims are down significantly and travel T&E I'd say the other big thing is that a lot of the revenues that are being reduced our our life lowest margin revenues. I mentioned billable travel which has almost no margin the Professional Services, as you know are often very low-margin revenues for us and even removing connect. We mentioned will take six million dollars of revenues out of Q2, but that had no margin associated with it off. So the higher-margin revenues that subscriptions some of the transaction based revenues. Those are our growing nicely. So yep.

Great, and then as you talk about, you know.

Change in the profile Nets out to something.

Maintain flattish margins with last year, which was the expectation as we came into the year. Gosh. That's helpful. I guess is it you're trying to think into like yz1. Is there a concern that the budgetary pressures are being felt now by the local agencies is that this could carry over into a multi-year I guess headland.

Well, I think that's you know, that's a possibility is you know, is is John alluded to earlier there's there's different ways that projects are funded there's different. There's different budget cycle. There are you know, significantly still a lot of funding resources one of the things that you know people tend to forget or or may not emphasizes that you know, they're of all the funding sources property taxes are still probably the major funding source for state and local government really for a local government, excuse me for counties and cities they comprise a number portion of revenues as opposed to say sales tax. If you look at sales tax revenues, which are generally considered to be down those comprise more to Brown 7% of of a budget for county or city. I also expect that there will be some more funding coming from the the federal government. I think you may have seen earlier this week that the FED announced that it was broadening the number of local gov.

I'm not from which it would allow them to bite that form on originally. They had talked about doing things for counties that were only two million and up and and that's been reduced to populations of five hundred thousand cities at 2:50. But but there will be some impact and and I think if you are experiencing the Great Recession was I mentioned earlier the impact was really felt a little bit later in my response to comments earlier. I think the thing about this is that there may be a little bit more compression in that impact. But again, I think we'll have a little bit more clarity as as we as we get through the year particularly as we as we get through to them see the impact see what's happening as as the states and local jurisdictions are returning to work and then we'll I think will be a lot better position to answer that question.

Great. Thank you.

Our next question will come from Jonathan the home with William Blair, please go ahead.

Hi, good morning. You know, I guess just going back to your comments around past crises and you know the opportunity to maybe invest you know, where do you see maybe the most opportunity to do so this time around?

Yeah, Jonathan, it's a it's a good point. You know, I think I think one thing I want to emphasize is something that we've talked about for the last couple of years, which we have been we have already been investing an elevated level. We've done that for a number of reasons as I mentioned earlier these projects to me. That's an opportunity that we have initiated those elevated Investments across the board, but I think you're going to continue to see us invest in our Cloud initiatives. Those are not going away. And if anything we we may try to accelerate some of those, you know, all the things that we've been talking about that our long-term strategic and Thursday. We're going to continue to keep doing and then we'll continue across across the broad base of our products. But again, you know, I anticipate that that this crisis will accelerate further accelerate both the receptiveness and and willingness as well as the move to the cloud and and I think we're going to continue to invest their heavily in the next next couple of years.

Got it, and then just as a quick follow-up, you know are there.

Show you any you know projects that maybe get pulled forward or you know emergency buying for you know, things like virtual courts or my Civic you just wanted to see if there's any any maybe new demand that could come out of this month unexpected. Yeah, you know, we have a number of we have a number of success stories out there that I would consider some quick responses from some of our divisions. We talked about virtual courts wage talked about what was going on in public safety and and I think you know we've seen some of that we have had a couple of deals where some local governments have tapped into emergency funding. I wouldn't say it's a significant number, but but we've seen a little bit of that.

Great. Thank you.

Our next question will come from Rob Oliver with bared please go ahead.

Great. Thank you guys very much for taking my question. Can't remember a one month time period in my career were local and Municipal software has been in the news as much as it has over the past month to six weeks. I wanted to just ask about the North Carolina deals. You guys have to be extremely pleased with the with the follow-on the size of will follow on wins at North Carolina. And I was just wondering if we could get a little bit more color on those and then obviously in the near-term, you know, they'll be some uncertainty but to the extent to which you guys are able to template your success in North Carolina and Port that to other states would love to hear more about one follow-up.

Yeah, thanks Rob. Yeah, North Carolina's has been a real success story for us and and you're right. We're very excited. We talked about it last summer when we announced the North Carolina, steal. One of the things we specifically talked about was some of the potential upside sell opportunities. We called out Brazos in particular. We spend a lot of time talking about the Brazos East citations deal for really great deal largest deal really in Brazos history running in AWS. It's it's a it's a great story shifting gears to something that that we haven't talked a lot of detail as much as that this Odyssey warrants again. This is a really great story. This is for a lot of reasons are Odyssey warrants is really all about it's it's it's the electronic Transmissions of Warrant applications between you know police officers in the field and a judge who may be sitting in courtroom, or maybe at home at night. These are things that are that are time-sensitive potential potentially wage.

Tonight evidentiary matters, you know, maybe drawing blood on someone at a DUI accident or doing something. That's really the time-sensitive nature. This was this was a a legacy product that would say North Carolina had they talked with us about it. And and we said, hey we can build that and and and they they trusted us they they they building on that relationship. It's a hundred percent cloud-based built-in AWS. It's going to be spun up very quickly targeted go live is actually next year. We expect to have about 49,000 users. It's it's just a great it's a great story and it it really further evidences are connected communities Vision as as we as realize that it's you're you're connecting the agencies or connecting the the police agencies with the courts long. Do you think it could be a differentiator not only on our court side but also on our Public Safety side, so it's a really good opportunity. It's something that I'm extremely excited about. Do you said it builds on that earlier earlier big wage?

contract with with the state of North Carolina to your question about being a little bit broader, you know, I think the ewarrants opportunity in North

Caroline it's it's a nice Statewide opportunity. I think as you look out, I don't know that it was you go to other jurisdictions. It will be it really be on a Statewide basis. I think you'll see a lot more deals more locally at the at the county level, you know, you'll see things that some of our large our larger clients. So nobody else has this out in the market. I think it's it's it's something that's exciting as we look forward and then maybe go back to the first question that correct return asked, you know, obviously your or your customers are showing a greater appetite for subscription. You guys have been kind of consistently beating the name and number and you know, I know as John said short and medium-term more likely to see, you know impact here from covid-19.

Just wondering if you could perhaps speculate on you know, how the trajectory might be different and if there's any early signs that you know, that subscription buying could could help change the trajectory out of out of this downturn this time appreciated guys. Thank you very much.

Well, you raised a good point, you know, we weren't a lot different model back then in 2008/2009 and certainly as we go back to even say the nine-eleven or Y2K. I think I think coming around 2009. I think Tyler's subscription revenues were only about seventy million a year today. We're north of three hundred million which which is obviously a different situation, you know, the trajectory as we talked about was a little bit delayed there. The impact was a little bit longer lasting but as you looked at a couple of years I think past as as past the recovery, I think Tyler's Revenue growth was more in the 18% range the question, you know, so the question is how quick does that come, you know, as we talked a lot of times as we move as we continue to move more to a subscription model. It's obviously a lot better long-term. It won't have the necessarily the same pop in the short term, but it's Jon's comments mentioned earlier, you know, we feel really confident about our ability to be positioned to get an overwhelming.

Piece of our share of the business is this pent-up demand and and hopefully we'll return as we get on the other side of this.

Our next question will come from Tyler wood with Northland Securities, please go ahead.

And thanks for taking our question just one from me. Do you do you mentioned last quarter of Public Safety win with Orlando and kind of your optimism there with large cities. Could you give us a sneak it on that? You know, maybe how the pipeline looked at that high end of the market in q1, you know before things ground to a halt and then just more generally, you know a little bit of color on what you're thinking around, you know, the covid-19 packed and how it will vary between the larger tier one tier two cities versus, you know, a smaller local cities. Thank you.

Yeah, sure Tyler, you know it's it's interesting. I talked to earlier about different business units. We've talked about that sometimes in the past as as to how long you know how their customer base maybe may or may not be more or less receptive to to certain things. I would say in q1 of all of our business segments a public safety probably was impacted a little more than are others and primarily because you know, the the market they serve is, you know First Responders and they were extremely focused on really more pressing local needs. We did spend a lot of time last call talking about the momentum in the market that momentum's there. It's real. There are a number of large opportunities. I can say that a couple of them have been pushed but as you as you look and we track what we what we track over the last several years is is we track our ability to move upmarket larger deals larger license deals, you know deals in excess of 1 million approaching two million, but also the size of the month

Size of the customer in terms of calls for service as you as you approach, you know, go over 500,000 to approaching a million and those those opportunities are continuing to be there. We did have see some delays them. I think we also saw in the public safety safety areas that that customer base was probably a little bit more reluctant in the first quarter and since to to accept remote delivery of services, but in terms of overall demand and our ability to fill that demand, whereas confidence we were last quarter the Investments we've made are paying off we're continuing to invest in those projects continue to do things that we've talked about like Mobility that are going to only make our products even that much more available or more desirable.

Thanks. That's all for me.

Again, if you'd like to ask a question, it is star than one.

Stars and one to ask a question.

Our next question will come from Joe Goodwin with JMP Securities, please go ahead.

Good morning. Thank you so much for taking my question. I just had a question around how are you guys thinking about em day in this environment and maybe if you could provide some color around the m&a pipeline what that's looking like and, what's happening there.

Yeah, sure Joe. I think generally I'd probably just want to step back and and just sort of you know, look at what we've done historically and sort of our our approach, you know, our approach has always been a very opportunistic. We've obviously done a lot of Acquisitions. I think we talked last year we had done about 8 since 2018 and and last year we sort of taken the approach of a little bit of it pause. I would say as we as we need to really integrate those Acquisitions and and make some Investments and refined some product strategies. I think coming out at last coming out towards the end of last year's. Our our approach was would have returned what I consider a more normal approach which is you know, something that we we continually look at continue to look for opportunities, you know in recent years we've talked about the fact that it's been tough to do Acquisitions, which is one of the reasons why we've done increased our R&D spend that's been for a number of reasons. There's been some wage

for inflated valuations by selling

A lot of bidding by pe firms as I look out forward. I think we're going to continue to be opportunistic. I do think there's going to be an opportunity out there. I think the current environment May create some additional opportunities. We may see opportunities where we may have a few more motivated sellers some of their valuations may become more in line with what we think are reasonable some of the competition for some of these deals wage which in the last several years have been PE firms. We've talked about the leverage that they've got on their on their balance sheets and and the issues that they this pandemic make make cause for them so we may be able to compete a little bit better off on our terms as we have in the past. It's been part of our history. We're going to continue to be opportunistic and I'd expect that to continue as we go forward.

Thank you.

This appears to be no more questions just to call back over to you for closing remarks, right? Thanks Brian. Thanks for joining us on the call today. We appreciate your interest, but obviously an interesting time and we appreciate all the questions. If you have any further questions, feel free to reach out to Brian Leonard myself. Thank you very much. Stay safe. Have a good day.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.