Q4 2021 Tyler Technologies Inc Earnings Call

Speaker 1: Hello and welcome to today's Tyler Technologies fourth quarter 2021 conference call. Your host for today's call is Lynn Moore, president and CEO of Tyler Technologies. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. And as a reminder, this conference is being recorded today, February 17th, 2022. I would now like to turn the call over to Mr. Moore.

Hello, and welcome to today's Tyler Technologies fourth quarter 2021 Conference call. Your hosts for today's call is Lynn Moore, President and CEO of Tyler technologies.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

And as a reminder, this conference is being recorded today February 17 2022.

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

Thank you Gary and welcome to our call.

Speaker 2: Thank you, Gary, and welcome to our call. With me today is Brian Miller, our Chief Executive Officer of the United States Department of

With me today is Brian Miller, our Chief Financial Officer.

Speaker 2: First, I'd like for Brian to give a safe harbor statement. Next, I'll have some comments on our quarter, and then Brian will review the details of our results. I'll end with some additional comments on 2021 and our longer-term outlook, and then we'll take questions. Brian ? Thanks, Lynn. 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.

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

Next I'll have some comments on our quarter and then Brian will review the details of our results I'll end with some additional comments on 2021 and our longer term outlook and then we'll take questions right.

Thanks Lynn during the course of this conference call management May make statements that provide information other than historical information and may include projections concerning the companys 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 1095.

Speaker 3: 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.

Speaker 3: and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections.

Speaker 3: We would refer you to our Form 10-K and other SEC filings for more information on those risks.

Speaker 3: Please note that all growth comparisons we make on the call today will relate to the corresponding period of last year unless we specify otherwise.

Please note that all growth comparisons we make on the call today will relate to the corresponding period of last year, unless we specify otherwise.

Speaker 3: Also, we are officially launching next week our new brand architecture, a broad company initiative that better organizes and names Tyler's products and solutions to represent the verticals and markets we serve. The new brand architecture uses functional descriptive product names and has eliminated all individual product logos.

Also we are officially launching next week, our new brand architecture abroad company initiatives that better organizes and named Tyler's products and solutions to represent the verticals and markets. We serve the new brand architecture used dysfunctional descriptive product names and has eliminated all individual product logos Tyler.

Tyler solutions have been organized under five solution portfolios public administration health and human services courts, and public safety schools in transformative technology throughout the call today, we will refer to product and solution named using the new architecture.

Speaker 3: Tyler's solutions have been organized under five solution portfolios. Public administration, health and human services, courts and public safety, schools and transformative technology.

Speaker 3: Throughout the call today, we will refer to product and solution names using the new architecture. Lynn?

Lynn.

Thanks, Brian .

Speaker 2: Thanks, Brian . Our four-quarter results were in line with our expectations and continued to the positive momentum from the first three-quarters to provide a strong finish to 2021.

First quarter results were in line with our expectations and continue the positive momentum from the first three quarters to provide a strong finish to 2021.

Speaker 2: We're pleased that revenue growth continue to rebound, even as we experienced revenue headwinds from the accelerating shift of new business to our SaaS model.

We're pleased that revenue growth continued to rebound even as we experience revenue headwinds from the accelerating shift of new business to our SaaS model.

Total revenues grew 53% with solid organic growth increasing to nine 2%.

Speaker 2: Total revenues grew 53% with solid organic growth increasing to 9.2%.

And I see continued its strong performance in the fourth quarter as well with core revenue growth of seven 5%, excluding COVID-19 related revenues as.

Speaker 2: NIC continued its strong performance in the fourth quarter as well, with core revenue growth of 7.5%, excluding COVID-related revenues.

As expected Covid related revenues declined sequentially from the third quarter of 2021, and we're slightly above our plan at $16 6 million and the omicron very increased demand for testing in December and revenues from our new initiatives supporting relief programs in Virginia came online.

Speaker 2: As expected, COVID-related revenues declined sequentially from the third quarter of 2021, and were slightly above our plan at $16.6 million as the Omicron variant increased demand for testing in December and revenues from our new initiatives supporting rent relief programs in Virginia came online.

Recurring revenues comprised over 80% of our quarterly revenues for the second consecutive quarter and were led by 144% growth in subscription revenues.

Speaker 2: Recurring revenues comprised over 80% of our quarterly revenues for the second consecutive quarter and were led by 144% growth in subscription revenues.

Excluding an IC revenues subscription revenue growth was robust at 28, 1% again, reflecting our accelerating shift to the cloud.

Speaker 2: Excluding NIC revenues, subscription revenue growth was robust at 28.1%. Again, reflecting our accelerating shift to the cloud.

We've now achieved greater than 20% subscription revenue growth in 56 of the last 64 quarters.

Speaker 2: We have now achieved greater than 20% subscription revenue growth in 56 of the last 64 quarters.

We continue to experience pressure on margins in Q4, as we have throughout the year as a result of several factors.

Speaker 2: We continue to experience pressure on margins in Q4 as we have throughout the year as result of several factors.

Speaker 2: Some low margin revenues, such as billboard travel, that the clients of Stanchley in 2020 due to the pandemic, began to return in 2021.

Some low margin revenues such as billable travel the declined substantially in 2020 due to the pandemic began to return in 2021 in.

In addition, some expenses that also declined in 2020 have also started to return including business travel trade shows and employee health costs.

Speaker 2: In addition, some expenses that also declined in 2020 have also started to return, including business travel, trade shows, and employee health costs.

Margins have also been impacted by the inclusion of nic's, including their lower margin gross payments contracts in Covid initiative revenues.

Speaker 2: Margins have also been impacted by the inclusion of NIC, including their lower margin gross payments contracts and COVID initiative revenues.

As a result, our non-GAAP operating margin declined 330 basis points to 23, 6%.

Speaker 2: As a result, our non-gap operating margin declined 330 basis points to 23.6%.

And while our accelerating move to the cloud continues to build long term value the increase in the SaaS mix of new business also weighed on our fourth quarter margins SaaS accounted for 77% of our new contract volume in the quarter versus 73% last year.

Speaker 2: And while our accelerating move to the cloud continues to build long-term value, the increase in the SaaS mix in new business also weighed on our fourth quarter margins, a SaaS accounted for 77% of our new contract volume in the quarter versus 73% last year.

We continue to be very pleased with Nic's performance in the market and with a growing pipeline of joint opportunities for Tyler and I see.

Speaker 2: We continue to be very pleased with NIC's performance in the market and with the growing pipeline of joint opportunities for Tyler and NIC.

During the fourth quarter NFC was successful and competitive Rebids for enterprise contracts in South Carolina, and Indiana payments.

Speaker 2: During the fourth quarter, NIC was successful in competitive rebids for enterprise contracts in South Carolina and Indiana payments, and with renewals or extensions of enterprise agreements in Mississippi, Arkansas, Colorado, Hawaii, and Texas payments.

And with renewals or extensions of enterprise agreements in Mississippi, Arkansas, Colorado, Hawaii, and Texas payments.

We believe that Tyler's acquisition of NFC was a positive factor in the extension of these client relationships in.

Speaker 2: We believe that Tyler's acquisition of NIC was a positive factor in the extension of these client relationships.

In particular, the inclusion of our enterprise data platform powered by <unk> was a material differentiator and the successful competitive rebid for South Carolina.

Speaker 2: In particular, the inclusion of our enterprise data platform, powered by Secrata, was a material differentiator in the successful competitive rebid for South Carolina.

We had nine combined sell through wins in the quarter were Tyler products were sold through Nic's state enterprise contracts or whats influence from Nic's state teams.

Speaker 2: We had nine combined cell through wins in the quarter, where Tyler products were sold through NIC state enterprise contracts, or with influence from NIC state teams.

Speaker 2: These winds contain a number of Tyler products and services, including our enterprise data platform, powered by Sacrata, case management development platform, PowerPy and TeleTrack, Vend engine and NIC payments, and generated over $1 million in new ARR for Tyler.

These wins contain a number of Tyler products and services, including our enterprise data platform powered by <unk> <unk>.

This management development platform powered by Intel a track than the engine and then I see payments and generated over $1 million in new <unk> for Tyler.

We also continue to experience increased cross selling opportunities across tyler's product suites, especially for our enterprise data platform and our two largest new SaaS deals in the fourth quarter were examples.

Speaker 2: We also continue to experience increased cross-selling opportunities across Tyler's products week.

Speaker 2: especially for our enterprise data platform. And our two largest new SAS deals in the fourth quarter were exemplarly, the gaysWe are among the most impressionable

Speaker 2: The first deal was with the City of Lawrence, Kansas, valued at approximately 4.3 million. And the second was with the City of Hammond, Indiana, valued at approximately 3.8 million.

The first deal was with the city of Lawrence, Kansas valued at approximately $4 3 million in the second was what the city of Hammond, Indiana data at approximately $3 8 million.

Both new contracts included our enterprise ERP powered by munis enterprise permitting and licensing powered by <unk>, an enterprise data platform.

Speaker 2: Both new contracts included our Enterprise ERP, powered by Munis, Enterprise Permitting and Licensing, powered by InterGov, and Enterprise Data Platform, powered by Socrata Solutions, among others.

<unk> solutions among others.

In addition, we signed a new combination license and SaaS deal with the Colorado Division of real estate valued at nearly $1 million for our case management and development platform and enterprise data platform solutions as well as Nic's electronic payment solution.

Speaker 2: In addition, we signed a new combination license and SAS deal with the Colorado Division of Real Estate valued at nearly $1 million dollars for our case management and development platform and enterprise data platform solutions as well as NIC's electronic payment solution.

This is also a great example of not only our ability to add value by offering multiple Tyler solutions in a single deal, but also the ability to win follow on deals with various agencies.

Speaker 2: This is also a great example of not only our ability to add value by offering multiple Tyler solutions in a single deal, but also the ability to win follow-on deals with various agents.

As you recall in Q2 of 2021, we signed a $9 $3 million contract with the Colorado Department of regulatory agencies division of professions and occupations for similar products, which paved the way for this deal with the division of real estate.

Speaker 2: As you recall, in Q2 of 2021, we signed a $9.3 million contract with the Colorado Department of Regulatory Agents.

Speaker 2: division of professions and occupations for similar products, which paved the way for this deal with the division of real estate.

Other significant new SaaS arrangement signed this quarter each with a total contract value of greater than $2 million included the city of Kamus, Washington for enterprise, ERP and enterprise permitting and licensing solutions Baton.

Speaker 2: Other significant new SAS arrangements signed this quarter, each with a total contract value of greater than $2 million included, the City of Kamis, Washington, for Enterprise ERP and Enterprise Permanent in Licensing Solutions.

Baton Rouge, Louisiana for Enterprise Justice and supervision solutions powered by Odyssey.

Speaker 2: Baton Rouge, Louisiana for Enterprise Justice and Supervision Solutions, powered by Odyssey.

City of Taunton, Massachusetts for Enterprise ERP solution.

Speaker 2: The City of Taunt and Massachusetts for our Enterprise ERP solution.

Caldwell County, Texas for Enterprise Justice, and Jerry solutions, and the city of Snoqualmie, Washington for Enterprise ERP solution.

Speaker 2: Caldwell County, Texas for Enterprise Justice and Jury Solutions and the City of Snoop Wal-Me, Washington for Enterprise ERP Solutions.

For on premise license contracts notables new signings included the Lee County clerk of the courts, and Comptroller and Florida valued at approximately $2 9 million and the city of woodland, California valued at approximately $1 $4 million for our enterprise ERP solution.

Speaker 2: For on premise license contracts, Notables News Stinges included the Lee County Clerk of the Courts and Comptroller in Florida valued at approximately 2.9 million and the City of Woodland, California valued at approximately 1.4 million dollars for our enterprise ERP solution.

Speaker 2: and the cities of Colorado Springs, Colorado, and Salem, Oregon, for our enterprise public safety solutions, valued at approximately 2.4 million and 1.4 million, respectively.

And the city of Colorado Springs, Colorado, and Salem, Oregon for our enterprise public safety solutions valued at approximately $2 4 million and $1 4 million respectively.

Now I'd like for Brian to provide more detail on the results for the quarter and our guidance on 'twenty for 2022.

Speaker 2: Now I'd like to provide more detail in the results for the quarter in our guidance on 2020-22.

Thanks, Lynn yesterday, Tyler technologies reported its results for the fourth quarter ended December 31, 2021 in our earnings release. We've 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.

Speaker 3: Thanks, Lynn. Yesterday, Tyler Technology reported its results for the fourth quarter and the December 31, 2021. 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 GAP to non- GAAP measures is provided in our earnings release.

Speaker 3: We've also posted on the Investor Relations section of our website under the Financial Reports cap. Schedules with supplemental information provided on this call, including information about quarterly bookings, backlog, and recurring revenues.

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.

GAAP revenues for the quarter were $433 5 million up 53% with the inclusion of nic's or other acquisitions or not.

Speaker 3: Gap revenues for the quarter were $433.5 million, up 53% with the inclusion of NIC and our other acquisition.

Speaker 3: non-gap revenues were 434.2 million up 53.2%

non-GAAP revenues were $434 2 million up 53, 2%.

On an organic basis, GAAP and non-GAAP revenues, both grew nine 2%.

Speaker 3: On an organic basis, Gap and non-Gap revenues both grew 9.2%.

Software licenses and services grew 21, 1% or four 6% excluding nics checks.

Speaker 3: Software licenses and services grew 21.1% or 4.6% excluding NIC.

Subscription revenues Rose 144, 1%.

Speaker 3: The description revenues rose 144.1%.

Excluding the contribution from Nic's subscription revenues were still very strong growing 28, 1%.

Speaker 3: Excluding the contribution from NIC, subscription revenues were still very strong, growing 28.1%.

Speaker 3: We added 135 new subscription-based arrangements and converted 71 existing on-premises clients, representing approximately $74 million in total contract value.

We added 135, new subscription based arrangements and converted 71 existing on premises clients, representing approximately $74 million in total contract value.

In Q4 of last year, we added 118, new subscription based arrangements and 50 on premises conversions, representing approximately $73 million in total contract value.

Speaker 3: In Q4 of last year, we added 118 new subscription based arrangements and 50 on premises conversions, representing approximately $73 million in total contract value.

Speaker 3: Our software subscription bookings in the fourth quarter added $14.8 million in new annual recurring revenue.

Our software subscription bookings in the fourth quarter added $14 $8 million in new annual recurring revenue.

Subscription contract value comprised approximately 77% of the total new software contract value signed this quarter.

Speaker 3: Subscription contract value comprised approximately 77% of the total new software contract value signed this quarter Compared to 73% in Q4 last year

Compared to 73% in Q4 of last year.

Collecting in our ongoing shift to a cloud first approach to sales and increasing client preferences for cloud based solutions.

Speaker 3: reflecting an R ongoing shift to a cloud first approach to sales and increasing client preferences for cloud-based solutions.

The value weighted average term of new SaaS contracts. This quarter was three nine years compared to $3 five last year.

Speaker 3: The evaluated average term of new theft contracts this quarter was 3.9 years compared to 3.5 last year. Transaction-based revenues, which include NIC portal, payment processing, and E filing revenues, and are included in subscriptions, were $137.1 million, up almost fivefold from last year.

Transaction based revenues, which include Nic's portal payment processing and E filing revenues and are included in subscriptions were $137 $1 million up almost five fold from last year.

E filing revenues reached a new high of $17 6 million up 13, 4%.

Speaker 3: E-filing revenues reached a new high of $17.6 million, up 13.4%.

Excluding nic's Tyler's transaction based revenues grew 14%.

Speaker 3: excluding NIC Tyler's transaction-based revenues grew 14%.

For the fourth quarter, our annualized non-GAAP total recurring revenue or <unk>.

Speaker 3: For the fourth quarter, our annualized non-gap total recurring revenue, or ARR, was approximately $1.4 billion, up 63.7%.

<unk> was approximately $1 4 billion up 63, 7%.

non-GAAP <unk> for SaaS software arrangements for Q4 was approximately $372 million up 34%.

Speaker 3: Non-GAP ARR for SAS software arrangements for Q4 was approximately 372 million, up 34%.

Speaker 3: Transaction-based ARR was approximately 548 million, up to 458%. And non-gap maintenance ARR was down slightly at approximately 471 million, due to the continued migration of on-premises clients to the cloud.

Transaction based <unk> was approximately $548 million up 458% and non-GAAP maintenance <unk> was down slightly at approximately $471 million due to the continued migration of on premises clients to the cloud.

Our backlog at the end of the quarter was $1 8 billion up 12, 6%.

Speaker 3: Our backlog at the end of the quarter was $1.8 billion, up 12.6%.

Speaker 3: Because the vast majority of NIC's revenues are transaction-based, their backlog at quarter-end was only $24 million.

Because the vast majority of Nic's revenues, our transaction base their backlog at quarter end was only $24 million.

Speaker 3: Excluding the addition of NIC, Tyler's Backlog grew 11.1%.

Excluding the addition of Nic's Tyler's backlog grew 11, 1%.

Our bookings in the quarter were robust at $464 million up 39, 3%, including the transaction based revenues of NFC.

Speaker 3: Our bookings in the quarter were robust at $464 million, up 39.3%. Including the transaction-based revenues of NIC.

Speaker 3: On an organic basis, bookings were approximately 347 million up 4.2%.

On an organic basis bookings were approximately $347 million up four 2%.

As a reminder, bookings in the fourth quarter of 2020 included a large contract for tax software and appraisal services valued at approximately $18 million, making for a tough bookings comparison.

Speaker 3: As a reminder, bookings in the fourth quarter of 2020 included a large contract for tax software and appraisal services valued at approximately $18 million, making for a tough bookings comparison.

For the year bookings were approximately $1 8 billion up 41, 6%.

Speaker 3: For the year bookings were approximately $1.8 billion up 41.6%. And on an organic basis, we're approximately 1.4 billion up 11.7%.

And on an organic basis were approximately $1 4 billion up 11, 7%.

Our business continues to generate cash at a high level and for the fourth quarter cash from operations grew almost 30% and free cash flow grew 13, 7% to $95 $1 million.

Speaker 3: Our business continues to generate cash at a high level, and for the fourth quarter cash from operations grew almost 30 percent. And free cash flow grew 13.7 percent to 95.1 million dollars.

Our balance sheet also remains very strong.

Speaker 3: Our balance sheet also remains very strong. During the quarter, we repaid $87.5 million of our term debt, and since the NIC acquisition, we have repaid $395 million of debt.

During the quarter, we repaid 87 $5 million of our term debt and since the <unk> acquisition, we have repaid $395 million of debt.

We ended the quarter with total outstanding debt of 134 billion in cash and investments of $407 8 million.

Speaker 3: We ended the quarter with total outstanding debt of $1.34 billion and cash and investments of $407.8 million. And that lever...

And net leverage of approximately two.

Speaker 3: 2.0-tut 7 times trailing 12-month pro forma eva da

2.07 times trailing 12 months pro forma EBITDA.

Turning to 2022, our focus continues to be on our strategic activities around our cloud transition on several fronts.

Speaker 3: Turning to 2022, our focus continues to be on our strategic activities around our cloud transition on several fronts.

Although this creates some short term pressure on revenue growth and margins that Lynne will discuss in more detail.

Speaker 3: Although this creates some short-term pressure on revenue growth in margins, the LIM will discuss in more detail. We believe the acceleration of this strategy is creating significant long-term value for shareholders and clients.

We believe the acceleration of this strategy is creating significant long term value for shareholders and clients.

Our 2020 to annual guidance reflects the impact of these strategic activities and is as follows we.

Speaker 3: Our 2022 annual guidance reflects the impact of these strategic activities and is as follows.

Speaker 3: We expect both Gap and non-Gap total revenues will be between $1.83 billion and $1.87 billion.

We expect both GAAP and non-GAAP total revenues will be between $1 83 billion and $1 87 billion.

The midpoint of our guidance implies organic growth of approximately 95%.

Speaker 3: The midpoint of our guidance implies organic growth of approximately 9.5%.

We expect total revenues will include approximately $36 million of Covid related revenues from Nic's toward health and pandemic rent relief services.

Speaker 3: We expect total revenues will include approximately $36 million of COVID-related revenues from NIC's tour health and pandemic rent relief service.

Speaker 3: The tour health revenues are expected to continue through the first half of 2022, while revenues from the rent relief program are expected to continue throughout the year.

Tour Health revenues are expected to continue through the first half of 2022, while revenues from the rent relief program are expected to continue throughout the year.

Speaker 3: We expect GAPI diluted EPS will be between $4.9 and $4.26, and may very significantly due to the impact of stock incentive awards on the GAP effective tax rate.

We expect GAAP diluted EPS will be between $4 90, and $4 26.

And may vary significantly due to the impact of stock incentive awards on the GAAP effective tax rate.

We expect non-GAAP diluted EPS will be between $7 41 seven.

Speaker 3: We expect non-gap to lose EPS will be between $7.41 and $7.58.

$7 58.

To provide a little more color on our revenue guidance, we expect that our license revenues will decline in the mid single digits in 2022, while subscription.

Speaker 3: We provide a little more color on our revenue guidance. We expect that our license revenues will decline in the mid-single digits in 2022. While subscription revenues will grow 25 to 30%.

<unk> revenues will grow 25% to 30%.

Excluding COVID-19 related revenues subscriptions are expected to grow in the mid to high Thirty's.

Speaker 3: Excluding COVID-related revenues, subscriptions are expected to grow in the mid to high 30s.

Speaker 3: Maintenance will be flat to down low single digits. Thought for services, appraisal services, and hardware and other revenues are each expected to grow in the low to mid-team.

Maintenance will be flat to down low single digits software services appraisal services and hardware and other revenues are each expected to grow in the low to mid teens.

Other details of our guidance are included in our earnings release.

Speaker 3: Other details of our guidance are included in our earnings release. Now I'd like to turn...

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

Thanks, Brian .

Speaker 2: Thanks, Brian . I'm very pleased with our fourth quarter results, especially with regard to our sales and revenue performance. Activity in the public sector market continues to trend positively with indicators such as RFP and demo activity generally at or above.

I'm very pleased with our fourth quarter results, especially with regard to our sales and revenue performance active.

Activity in the public sector market continues to trend positively with indicators, such as RFP and demo actively gen.

Generally at or above pre COVID-19 levels.

It's also gratifying that our nics operations are executing at a high level and that we're seeing early successes in achieving the go to market objectives, we envision around the acquisition.

Speaker 2: It's also gratifying that our NIC operations are executing at a high level and that we're seeing early successes in achieving the go-to-market objective we envisioned around the acquisition.

For example, <unk> was recently awarded an early three year extension to its Texas payments contract at existing rates.

Speaker 2: For example, NIC was recently awarded an early three-year extension to its Texas payments contract at existing rates.

Speaker 2: Similar to the South Carolina ReBid, the inclusion of Tyler's enterprise data platform, and in particular payment insights with fraud detection and prevention, proved to be a major factor in obtaining this early extension.

Similar to the South Carolina rebid, the inclusion of Tyler's enterprise data platform and in particular payment insights with fraud detection and prevention proved to be a major factor in obtaining this early extension.

We're very excited to expand Nic's portfolio of software solutions with the acquisition of USC direct which we completed last week.

Speaker 2: We're very excited to expand NIC's portfolio software solutions with the acquisition of USC Direct, which we completed last week.

USC direct has a market leading AWS cloud hosted outdoor reservation platform for the fast growing campground, and outdoor recreation management market, which complements our existing strength in the hunting and fishing license market.

Speaker 2: USC Direct has a market leading AWS Cloud hosted outdoor reservation platform for the fast growing campground and outdoor recreation management market, which complements our existing strength in the hunting and fishing license mark.

Speaker 2: This combination will house to create a very competitive, all-in-one outdoor solution, addressing an estimated $2 billion market, while also expanding our payments opportunity.

This combination will allow us to create a very competitive all in one outdoor solution addressing an estimated $2 billion market, while also expanding our payments opportunity.

USC direct is now a part of our NSE Division and we welcome their 60 team members to Tyler.

Speaker 2: USC Direct is now part of our NIC division and we welcome their 60 team members to Tyler.

Now I'd like to take a few minutes to discuss our accelerated move to the cloud, including the expected impact on our results in both the near term and the long term.

Speaker 2: Now, I'd like to take a few minutes to discuss our accelerate and move to the cloud, including the expected impact on our results in both the near term and the long term.

As most of you know we operate in a hybrid model for many years offering our core products in either an on premises model with an upfront license and annual maintenance or SaaS model with a software generally hosted in a Tyler datacenter and a multiyear subscription revenue stream.

Speaker 2: As most of you know, we have operated a hybrid model for many years, offering our core products in either an on-premises model with an upfront license and annual maintenance, or a SaaS model with a software generally hosted in a Tyler Data Center and a multi-year subscription revenue stream.

Since our first Ias client Auclair, Wisconsin chose Tyler in 2000, and the mix of clients choosing our SaaS model grew slowly but steadily as we pursued a cloud agnostic approach to sales and let the market decide the pace at which you would move to the cloud.

Speaker 2: Since our first SAS client, O'Clair Wisconsin, chose Tyler in 2000, the mix of clients using our SAS model grew slowly but steadily, as we pursued a cloud-agnostic approach to sales and let the market decide the pace at which it would move to the cloud.

And as with many things in the public sector or market has moved to the cloud more slowly than the private sector.

Speaker 2: And as with many things in the public sector, our market has moved to the cloud more slowly than the private sector.

In fact, it took until 2019 for the majority of our new business to come to us in the cloud.

Speaker 2: In fact, it took until 2019 for the majority of our new business to come to us in the cloud.

Speaker 2: a year in which we also recognize an all-time high 100.2 million in licensed revenue.

Year in which we also recognized an all time high $100 2 million in license revenues.

2019 was also the year in which we made the strategic decision to shift our future model from a cloud agnostic approach to a cloud first approach and.

Speaker 2: 2019 was also the year in which we made the strategic decision to shift our future model from a clouding diagnostic approach to a cloud first approach.

Speaker 2: In conjunction with that shift, we entered into a strategic collaboration agreement with Amazon Web Services and embarked on significant development efforts to optimize our key products to be efficiently deployed in the cloud through AWS.

In conjunction with that shift we entered into a strategic collaboration agreement with Amazon Web services and embarked on significant development efforts to optimize our key products to be efficiently deployed in the cloud through AWS with.

With an ultimate goal of exiting our two proprietary data centers and eventually deploying all of our SaaS clients in the public cloud.

Speaker 2: with an ultimate goal of exiting our two proprietary data centers and eventually deploying all of our SAS clients in the public cloud.

Over the past two years, we've made substantial progress under a cloud first approach.

Speaker 2: Over the past two years, we've made substantial progress under our cloud first approach.

I am pleased to report that we remain on target with our product development initiatives with an expectation that all of our major products will be cloud efficient where cloud optimized by the end of 2023 or early 2024.

Speaker 2: I'm pleased to report that we remain on target with our product development initiatives. With an expectation that all of our major products will be cloud-efficient or cloud-optimized by the end of 2023 or early 2024.

In addition, almost every product we've added through acquisition in the last several years has been cloud native.

Speaker 2: In addition, almost every product we've added through acquisition in the last several years has been cloud native.

Speaker 2: We've begun deploying some new SAS clients in AWS, as well as lifting and shifting a limited number of existing SAS clients out of our data centers and into AWS.

We've been we've begun deploying some new SaaS clients in AWS as well as lifting and shifting a limited number of existing SaaS clients out of our data centers and into AWS.

Speaker 2: We've made changes to sales compensation to encourage cloud sales over license.

We've made changes to sales compensation to encourage cloud sales over licenses.

Speaker 2: In early 2021, we also created a new cloud strategy in operations.

In early 2021, we also created a new cloud strategy and operations team, which has responsibility for our overall cloud transformation strategy and operations, including things like defining best practices for cloud development operations and deployment to achieve the full value of our cloud initiative.

Speaker 2: which has responsibility for our overall cloud transformation, strategy and operation.

Speaker 2: including things like defining best practices for cloud development, operations, and deployment to achieve the full value of our cloud initiatives.

And as we've as we've embraced the cloud first approach. Our market has also continued to embrace the cloud at an increasing rate.

Speaker 2: And as we've embraced the cloud first approach, our market has also continued to embrace the cloud at an increasing rate.

2021, 71% of our new software contract value came to us in the cloud.

Speaker 2: 2021, 71% of our new soft contract value came to us in the cloud.

With that percentage, reaching 77% in the fourth quarter.

Speaker 2: With that percentage reaching 77% in the fourth quarter.

And conversions of existing on premises clients to the cloud have also reached new highs in each of the last three quarters.

Speaker 2: and conversions of existing on-premises clients of the cloud have also reached new highs in each of the last three quarters.

So clearly our shift to the cloud is in sync with the market as clients recognize the many benefits of cloud based solutions.

Speaker 2: So clearly, our shift to the cloud is in sync with the market, as clients recognize the many benefits of cloud-based solutions.

This acceleration of our cloud transition is continuing as we move into 2022.

Speaker 2: This acceleration of our cloud transition is continuing as we move into 2022.

Speaker 2: In the effective January 1, 2022, some of our major products, including enterprise ERP powered by Munis, and enterprise permitting and licensing powered by Intergov, will almost exclusively be offered to new clients as cloud solutions. Other apps...

Effective January one 2022, some of our major products, including enterprise ERP powered by munis and enterprise permitting and licensing powered by <unk> will almost exclusively be offered to new clients as cloud solutions.

Other applications will follow.

Speaker 2: We expect that the percentage of new clients choosing the cloud model will continue to grow significantly in 2022. With the exception of public safety, or today there has been more market reluctance to move systems to the cloud.

We expect that the percentage of new clients choosing the cloud model will continue to grow significantly in 2022 with the exception of public safety to date, there has been more market reluctance to move systems to the cloud.

The general impacts of a SaaS transition on a software company financial model are generally understood.

Speaker 2: The general impacts of a SaaS transition on a software company financial model are generally understood.

From a revenue perspective, there is an initial headwind as license revenue that is generally recognized upfront is replaced by a recurring subscription revenue stream.

Speaker 2: From a revenue perspective, there is initial headwind. As licensed revenue that is generally recognized up front is replaced by a recurring subscription revenue stream.

Speaker 2: And unlike licenses, that recurring revenue stream is not recognized in full immediately.

And unlike licenses that recurring revenues revenue stream is not recognized in full immediately ran.

Speaker 2: Rather, revenue recognition typically begins when customers go live with particular models, which can take several quarters.

Other revenue recognition typically begins when customers go live with particular models, which can take several quarters.

However, because the annual recurring revenues from a subscription client are approximately one eight to two times the annual maintenance the same client would generate in a license deal the SaaS revenue stream significantly higher over the life of the client.

Speaker 2: However, because the annual recurring revenues from a subscription client are approximately 1.8 to 2 times the annual maintenance, the same flight would generate an analysis.

Speaker 2: The SAS revenue stream is significantly higher over the life of the client. To some extent, we have experienced this headwind for several years. But

To some extent we've experienced this headwind for several years, but.

But the impact is increasing as the shift accelerates.

Over the next several years as Brian mentioned license and maintenance revenue will continue to decline while subscriptions will accelerate.

Speaker 2: Over the next several years, as Brian mentioned, license and maintenance revenue will continue to decline, while subscriptions will accelerate.

For example, in 2019 maintenance revenues were 45% higher than subscriptions in 2022 subscriptions will surpass maintenance revenues.

Speaker 2: For example, in 2019, maintenance revenues were 45% higher than subscriptions. In 2022, subscriptions will surpass maintenance revenues.

From a margin perspective, there are multiple short term headwinds as well.

Speaker 2: From a margin perspective, there are multiple short-term headwinds as well. License revenues have very high margins with immediate impact. And as they decline, margins are negatively impacted until the subscription revenue stream reaches the point where it offsets those lost license.

License revenues have very high margins with immediate impact and as they decline margins are negatively impacted until the subscription revenue stream reaches the point, where it offsets those lost licenses.

In addition, we will experience some margin headwinds from bubble costs around the transition from our internal data centers to the AWS hosting environment.

Speaker 2: In addition, we will experience some margin headwood from bubble costs around the transition from our internal data centers to the AWS hosting environment.

Speaker 2: We currently host almost all of our more than 4,500 SAS clients in one of two main proprietary data centers.

We currently host almost all of our more than 40 5400 SaaS clients in one of two main proprietary data centers we.

Speaker 2: We have certain fixed costs associated with running those data centers, even as we transition the hosting of new and existing clients to AWS.

We have certain fixed costs associated with running those data centers, even as we transition the hosting of new and existing clients to AWS.

Speaker 2: until we completely exit one and ultimately both of our data centers, we will incur some duplicative costs that put pressure on margin.

Until we completely exit one and ultimately both of our data centers, we will incur some duplicative costs that put pressure on margins.

Speaker 2: Once we are in AWS with products that are architected to operate more efficiently in the public cloud, we will see an uplift in margin.

Once we are in AWS with products that are architected operate more efficiently in the public cloud, we will see an uplift in margins.

With that backdrop I'd like to turn to a closer look at our outlook for 2022 and beyond.

Speaker 2: With that backdrop, I'd like to turn to a closer look at our outlook for 2022 and beyond.

Our revenue growth outlook is solid representing the continuing return to and growth over pre pandemic levels and our increasing competitive position.

Speaker 2: A revenue growth outlook is solid, representing the continuing return to and growth over pre-pandemic levels and our increasing competitive position.

The midpoint of our guidance would represent approximately 16% total growth and nine 5% organic growth even in light of the continued accelerated shift of new business to SaaS.

Speaker 2: The midpoint of our guidance would represent approximately 16% total growth and 9.5% organic growth, even in light of the continued accelerated shift of new business to SAS.

We expect that approximately 80% of our new software contract mix in 2022 will be SaaS.

Speaker 2: We expect that approximately 80% of our new software contract mix in 2022 will be sass.

From a margin perspective, the midpoint of our 2022 guidance implies non-GAAP operating margin contraction of approximately 160 basis points.

Speaker 2: From a margin perspective, the midpoint of our 2022 guidance implies non-GAAP operating margin contraction of approximately 160 basis points.

That said.

Speaker 2: Our implied 2022 non-gap operating margin is consistent with or even slightly higher than our 2021 Q4 operating margin as the major factors impacting margins began before this year. I'd like to break-

Our implied 2022, non-GAAP operating margin is consistent with or even slightly higher than our 2021 Q4 operating margin as the major factors impacting margins began before this year.

Like to break down a few of those factors.

The first material category margin pressures, we considered to be part of our long term strategy of becoming a cloud first company.

Speaker 2: The first material category of margin pressures we consider to be part of our long-term strategy of becoming a cloud-first company.

The impact of the year over year increase in our SaaS business mix.

Speaker 2: impact of the year over here increase in our SaaS business mix.

Net of on premises conversions, along with increasing bubble costs in 2022 will negatively impact operating profit by approximately $28 million to $30 million.

Speaker 2: Net of on-premises conversions, along with increasing bubble costs in 2022, will negatively impact operating profit by approximately $28 to $30 million.

The second significant category of factors, causing margin pressure is made up of costs and low margin revenues that experienced reductions during the pandemic, but had been slowly returning to at the end of last year and which we've discussed on prior calls. These include Tradeshows sales related travel costs and some billable travel.

Speaker 2: The second significant category of factors causing margin pressure is made up of costs and low margin revenues that experience reductions during the pandemic. But it has been slowly returning since the end of last year and which we have discussed on prior calls. These include trade shows, sales related travel costs and some billable travel.

Importantly, some costs have not and will not return to pre COVID-19 levels.

Speaker 2: importantly, some costs have not and will not return to pre-COVID level.

The third category of factors include some one time or non discretionary costs.

Speaker 2: The third category of factors includes some one time or non-discretionary costs.

Speaker 2: We, like virtually every company, are experiencing the effects of labor market disruptions and increased wage pressure.

We like virtually every company are experiencing the effects of labor market disruptions and increased wage pressure and.

Speaker 2: and health care costs also continue to rise as a result of health care inflation combined with the catch-up of the expenses from health care that were deferred during the pandemic.

In health care costs also continue to rise as a result of health care inflation combined with the catch up is the expenses from health care that were deferred during the pandemic.

We've posted on our website with the supplemental quarterly data a summary of these margin challenges.

Speaker 2: We've posted on our website with the supplemental quarterly data summary of these margin challenges.

The estimated total impact of all of these items accounted for approximately 290 basis points of operating margin impact in our 2022 outlook.

Speaker 2: The estimated total impact of all these items accounts for approximately 290 basis points of operating margin impact in our 2022 outlook.

Looking beyond 2022, we expect that our margins will continue to be impacted by some of these factors, particularly declining license revenues and cloud transition bubble costs.

Speaker 2: Looking beyond 2022, we expect that our margins will continue to be impacted by some of these factors, particularly declining license revenues and cloud transition bubble costs.

We believe that operating margin pressures from the cloud transition will bottom out in 2023 and that beginning in 2024, we will start to see accelerating revenue growth and returned to margin expansion.

Speaker 2: We believe that operating margin pressures from the cloud transition will bottom out in 2023 and that beginning in 2024 we will start to see accelerating revenue growth and return to margin expansion.

The timing of the cloud transition varies by products. Some products are further along creating something of an ebb and flow in the short term headwinds and long term tailwind.

Speaker 2: The timing of the cloud transition varies by products, as some products are further along, creating something of an ebb and flow in the short term headwinds and long term tailwinds.

For example for enterprise ERP, our largest and most profitable product.

Speaker 2: For example, for enterprise ERP, our largest and most profitable product, revenue growth slowed to approximately 8.5% in 2021, and is expected to grow approximately 8% in 2022, as the mix of new business significantly shifted to SaaS. For example, in 2019, the new business mix was 50%. Fourth quarter last year, it was...

Revenue growth slowed to approximately eight 5% in 2021 and is expected to grow approximately 8% in 2022 as.

As the mix of new business significantly shifted to SaaS for example in 2019, the new business mix was 50%.

Fourth quarter last year it was over 90%.

However, the early expectations are for that products growth to accelerate to around 11% in 2023 as it begins to reach the other side of this transition and experience the SaaS uplift.

Speaker 2: However, the early expectations are for that product's growth to accelerate to around 11% in 2023, as it begins to reach the other side of this transition and experience the SaaS uplifting.

As we head into 2022, I am more excited than ever about Tyler's future.

Speaker 2: As we head into 2022, I am more excited than ever about Tyler's future. It's amazing to think that it took 19 years from the time we entered the government technology market in 1998 to surpass 800 million in revenues in 2017.

It's amazing to think that it took 19 years from the time, we entered the government technology market in 1998, two surpassed $800 million in revenues in 2017 and.

And in 2022, we will have added the next $1 billion of revenues in just five years.

Speaker 2: And in 2022, we will have added the next billion dollars of revenues in just five years.

In 2017 recurring revenues accounted for 63% of total revenues in 2022, they will exceed 80% and approach $1 5 billion, creating.

Speaker 2: In 2017, recurring revenues accounted for 63% of total revenues. In 2022, they will exceed 80% and approach $1.5 billion creating long-term value.

Creating long term value.

We're executing on our strategic long term cloud transition and we have an incredible platform as the clear leader in the massive public sector market.

Speaker 2: We're executing on our strategic long-term cloud transition and we have an incredible platform as the clear leader in the massive public sector market.

We have reorganized and aligned our Tyler payments team with Nic's payment team to further capitalize on this opportunity.

Speaker 2: We have reorganized and aligned our Tyler Payments team with NIC's Payment team to further capitalize on this opportunity.

Our elevated prepay endemic investments are paying off as our market environment is strong and our competitive position and win rates across our core applications remain extremely high.

Speaker 2: Our elevated pre-pandemic investments are paying off as our market environment is strong and our competitive position and wind rates across our coral applications remain extremely high.

One of our biggest assets is our existing client base with over 37000 installations across more than 12000 locations something that takes decades to establish and we are poised to take advantage of cross selling and payment opportunities to accelerate growth and expand margins as we complete our transition to the cloud.

Speaker 2: One of our biggest assets is our existing client base with over 37,000 installations across more than 12,000 locations.

Speaker 2: something that takes decades to establish. And we are poised to take advantage of cross-selling and payment opportunities to accelerate growth and expand margins as we complete our transition to the cloud. With that, we'd like to open a lot of blind for Q&A.

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

We will now begin the question and answer session.

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Please limit your questions to one and one follow up and then place yourself back in the queue for additional questions.

Speaker 1: Please live at your question to one and one follow-up and then place yourself back in the queue for additional questions. We will pause momentarily.

We'll pause momentarily to assemble our roster.

Yeah.

Yes.

Speaker 1: Our first question comes from Matt Van Vleut with BTIG. Please go ahead.

Our first question comes from Matt Vanvliet with BTG. Please go ahead.

Speaker 4: Yeah, thanks for taking the question guys. Appreciate it. I guess as you look at the commentary around the additional sales activity in RFPs, do you have a sense for how much the average budget is growing for the next 12 months?

Yes, thanks for taking the question guys.

I appreciate it I guess as you look at.

The commentary around the additional sales activity in Rfps do you have a sense for how much.

The average budget is growing.

The next 12 months.

Speaker 4: We're kind of going to go forward basis. And how much of that can you attribute to the federal stimulus money finally sort of making its way into these budgets and people ready to allocate and spend those dollars?

Kind of on a go forward basis, and how much of that can you attribute to the federal stimulus money, you finally sort of making its way into these budgets and people ready to allocate and spend those dollars.

Yes, I don't have the.

Speaker 3: yeah i don't have the at the percentage growth in in the government budget said in my finger tips but that's been back drop is strong

The percentage growth in government budgets at my fingertips, but the backdrop is strong.

I would say that.

Speaker 3: i would say that one of the you know that the public local government one of the biggest revenue streams as property taxes often that accounts for more than half of their budget and generally property values remain strong real estate markets are strong says not a lot of pressure there uh... so the overall environmental environment backdrop is strong uh... and i would say that doesn't really include a lot of uh... uplift from federal stimulus yet expert

One obviously in public in the local government one of the biggest revenue streams is property taxes, often that accounts for more than half of their budget.

And generally property values remained strong real estate markets are strong so there's a lot of pressure there.

So the overall environment the environment backdrop is strong.

And I would say that doesn't really include a lot of uplift from federal stimulus yet we've seen.

Oh.

Speaker 3: Oh, a handful of deals this last quarter, they were specifically identified as coming from, or being funded with stimulus money. There's certainly some indirect funding that may not be used directly for a Tyler purchase that relieves pressures elsewhere in the budget.

A handful of deals this last quarter that we are specifically identified as coming from they're being funded with stimulus money.

There is certainly some indirect funding that may not be used directly for a tyler purchased that relieves pressures elsewhere in the budget and frees up funds for money they'd like to spend with Tyler, but in our view the vast majority of the stimulus money has not yet been spent or even committed yet.

Speaker 3: freez up funds for money they'd like to spend with Tyler but in our view the vast majority of the stimulus money has not yet been spent or even committed yet. With the CARES Act money they have until the end.

With the cares act money they have until.

American rescue plan money, they've got until the end of 2024 to spend that and I think many governments are still in the very early stages of figuring out where they're going to spend that.

Speaker 3: American Rescue Plan money they've got until the end of 2024 to spend it and I think Many governments are still in the very early stages of figuring out where they're going to spend that

Alright, and then Brian when we look at the guidance.

Speaker 4: right and then right when we look at the guidance uh... you know i guess how much impact to the top line uh... are you seeing in terms of headwinds from just the the elevated uh... sass mix coming through so if we were to assume sort of the same level of mix from twenty one into twenty two how much of a lift uh... would we see on

I guess, how much impact to the topline.

Are you seeing in terms of headwinds from just the elevated.

<unk> mix coming through so if we were to assume sort of the same level of mix from 'twenty one into 'twenty two how much of a lift.

Would we see on.

Speaker 4: on that revenue number and then kind of secondarily to that on the margin side. What is the underlying assumption for the core Tyler legacy business in terms of margin expansion excluding some of these transition costs?

On that revenue number and then kind.

Secondarily to that on the margin side, you know what what is the underlying assumption for the core title.

Tyler legacy business in terms of margin expansion, excluding some of these transition costs.

Yeah.

The combination of the <unk>.

Speaker 3: So the combination of the bubble costs, which are the incremental SaaS costs and the shift in the new VINX.

Bubble costs, which are the incremental SaaS cost and the shift in the mix.

Speaker 3: is a combination of about $28 to $30 million of impact.

A combination of about 28% to $30 million of impact.

Speaker 3: on the OP line. On the revenue line, an OP related to the mixed shift is probably in the low teens, in 12 to 15 million dollars, of revenue impact from the increasing shift towards more staff.

On the op line.

On the revenue line.

And <unk> related to the mix shift.

Probably in the low teens $12 million to $15 million.

Of.

Of revenue impact from the increasing shift towards more SaaS.

I'd say it's.

Speaker 2: Yeah, I'd say it's a, and that's, that's a combination of two numbers because you've got the

That's a combination of two numbers because you've got the.

Speaker 2: When you're just talking about new business activity, it's more in the $17, $18 million.

When you're just talking about new business activity.

It's more in the $17 million to $18 million.

Hit on.

Speaker 2: hit on the short term. At the same time, you know, we are doing flips.

The short term at the same time, we are we are doing flips.

Speaker 2: which gets some immediate impact offsetting some maintenance loss. But if you're talking about just a new business revenue growth, it's more than $17,18 million when you offset flips.

Get some immediate impact offsetting some maintenance loss, but if you're talking about just the new business revenue growth, it's more in the $17 million to $18 million when you offset flips.

Speaker 2: It comes down a little bit lower, but there's also a cost that's associated with flips. When we do a flip, we provide some services that we don't build, and that also creates some short term pressure on the margins that will not be there.

It comes down a little bit lower but there's also a cost associated with flips typically when we do a flip.

We provide some services that we don't bill.

And that also creates some short term pressure on the margins that will.

Not be there in the future so that impact of the.

Speaker 3: So that impact of the, the, the, uh, mixed shift is probably, um, about a half point of margin, um, for the year.

The mix shift is probably.

About a half point of margin.

For the year.

Okay very helpful. Thank you.

The next question is from Peter Heckmann with D. A Davidson. Please go ahead.

Speaker 1: The next question is from Peter Hackman with DA Davidson. Please go ahead.

Hey, good morning, Thanks for taking my question just a couple of things in the quarter.

Speaker 5: Hey, good morning. Thanks for taking my question. Just a couple of things in the quarter. Were there any, it didn't sound like it, but were there any deals above five million in total contract value? And then in terms of, it's really encouraging to hear the cross sales so far, especially into the EGov base.

Are there any it didn't sound like it but were there any deals above $5 million in total contract value.

And then in terms of its really encouraging to hear the cross sales, so far especially into the E Bay I think.

Speaker 5: I think you're done a little bit of quantification, nine deals.

Done a little bit of quantification 90 deals.

Speaker 5: in the quarter. But is there any way to think about quantifying the total value of bookings that Tyler may have added since the close of the ego of selling into current eGov customers?

In the quarter, but is there any way to think about quantifying that the total value of bookings.

That may have added since the <unk>.

Clothes and began selling into current customers.

I'll take the first part of that no. There were not any deals this quarter that had a total contract value of more than 5 million. Our largest one was a little under $4 5 million.

Speaker 3: I'll take the first part of that. No, there were not any deals this quarter that had a total contract value more than 5 million. Our largest one was a little under 4.5 million. We had a lot of deals in the 1 to 3 million dollar range, but no, none of those mega deals this quarter. And we did in the fourth quarter of last year as we pointed out.

We had a lot of deals in the $1 million to $3 million range, but no none of those mega deals this quarter than we did in the fourth quarter of last year as we pointed out.

And I think I'd add.

Speaker 2: Yeah, I think I'd add, you know, talking about the cross-selling.

Talking about the cross selling.

That's one of our largest opportunities in our.

Speaker 2: That's one of our largest opportunities in our core applications and every time we do acquisitions. It's real exciting to see the things that are going on within IC right now and our other divisions.

Core applications and every time, we do acquisitions.

Exciting to see the things that are going on within IC right now in our in our other divisions.

Speaker 2: You know, one of the things that we didn't point out in our prepared comments was a very specific deal of the nine that we talked about. And this was a deal that NIC helped using their state enterprise contract, state contacts with the state of Arkansas, where we got a Vend engine deal where Vend engine is gonna be handling all the online and phone bank deposits in the statewide corrections contract. That's about 800,000 in ARR. And, you know, what ça...

One of the things that we didn't point out in our prepared comments was a very specific deal of the nine that we talked about.

And this was a deal that.

He helped using their state enterprise contracts eight contracts with the state of Arkansas.

Well, we got a vent engine deal where <unk> engine is going to be handling all of the online and phone based deposits in the state wide corrections contract that's about 800000.

And whats I think what's particularly exciting for me is Nick.

Speaker 2: i think what's particularly exciting for me is you know and i see that is a company that we acquired in in April and then dengense cut as a company that we acquired in September

Is it a company that we acquired in April and then the engines.

That we acquired in September and in the first quarter. Those two teams got together as we've talked in the past about some of the efforts we're doing around sales and education, and we're able to already get a deal of this size.

Speaker 2: And in the first quarter, those two teams got together as part, you know, we've talked in the past about some of the efforts we were doing around sales and education and we're able to already get a deal of this size. I think it's an example of the tip of the iceberg of where we can go, not only with NIC, but you know all the other acquisitions that we do for strategic purposes. And it's, again, it's pretty exciting.

I think it's an example of the tip of the iceberg of where we can go.

Not only with NFC, but in all the other acquisitions that we do for strategic purposes.

Again, it's pretty exciting.

Yeah, Yeah, that's incredible.

Speaker 5: Yeah, that's incredible. It's a, and it's found that if the more near term opportunity is selling Tyler's solutions into ego-based, and that might be a little easier just based upon how their portal contracts are kind of like hunting licenses. But longer term, do you see some cross cells the other way, either payments or certain applications that NIC has developed that you might be able to sell in the municipality?

It sounds as if the.

The more near term opportunity is selling Tyler solutions into eager abate and that might be a little easier just based upon how their portal contracts are kind of like hunting licenses.

But.

Longer term do you see some cross sell of the other way either payments or certain applications.

He has developed.

That you might be able to sell an administered <unk>.

Speaker 6: Yeah, I think that's fair. I also, you know, going back to the NIC strategy.

Yes, I think I think that's fair I also going back to the Nics strategy I mean, I remember a year and a half ago. When I was talking with the business leaders about this deal I said.

Speaker 2: I remember a year and a half ago when I was talking with the business leaders about this deal. I said, you know, show me why this deal is good for Tyler, but also show me why Tyler is good for NIC.

Show Me why this deal is good for Tyler, but also show me why Tyler is good for Nick.

Speaker 2: and you know i just gave example of the the the vending in arcan saw deal but i also gave examples in my prepared remarks about how d and i really was a significant contributor in getting uh... south carolina very competitive rebate again to look against the way

And I just gave the example of the vintage in Arkansas deal, but I also gave examples in my prepared remarks about how DNI really was a significant contributor in getting South Carolina in a very competitive rebid again against Deloitte and also an early extension of its Texas payments contracts. So that's an example, where we provided value to nics.

Speaker 2: and also an early extension of his Texas payments contracts. So that's an example where we provided value to NIC really out of the gate.

<unk> really out of the gate.

Speaker 2: I do think as we continue to talk about payments, yes, like you look at the state of Florida, we're going to help expand that payments revenue by having that hunting license and going through our local contacts. We put our payments teams together and today I generally just consider it Tyler, you know, it's one payments organization. I don't really distinguish between and I see and Tyler anymore, but certainly they were much more mature. They were the payments leader and I think we're helping there as well.

I do think as we continue you talk about payments.

Yes, like you look at the state of Florida, we're going to help expand that payments revenue by having that hunting license and going through our local contacts.

Our payments teams together.

Today, I generally just consider it Tyler.

One payments organization I don't really distinguish between an IC and Tyler anymore, but certainly they were much more mature they were the payments leader and I think we're helping there as well and of the nine combined sell through deals. This quarter. One of them was a payments deal with nic's payments with a Tyler local government client in <unk>.

Speaker 3: and of the nine combined uh... self-reduced this quarter one of them was a payment deal with n.i.c. payments with a Tyler local government client in Louisiana

Xena.

Great I appreciate it.

The next question is from Terry Tillman with Truest. Please go ahead.

Speaker 1: The next question is from Terry Tillman with Truist. Please go ahead.

Sir Your line is open at Orion as it possibly muted on yours, Hi, guys. This is <unk>.

Speaker 1: Okay, your line is open on RRN. It's a pathfully muted on yours. Oh my God, this is...

Hi, guys. This is <unk>.

Thank you very much this is Joe meares on for Terry Thanks for taking the question.

Speaker 1: Thank you very much. This is Joe Mears on for Terry. Thanks for taking the question. Just acknowledging that bookings can be lumpy and Tronin 12 Month View helps move things out. But I'm just curious about the bookings in 4Q, how that played out versus your Rx.

I'm, just acknowledging that bookings can be lumpy and change last month view helps smooth things out, but I'm just curious about the bookings in <unk>, how that played out versus your expectations.

I'd say generally pretty much in line with our expectations.

Speaker 3: They generally pretty much align with our expectations. One of the things we've talked about the recovery.

One of the things we've talked about the recovery.

In the the market over the last year, we've consistently talked about activity sort of leading indicators of activity in the market.

Speaker 3: in the market that over the last year, we've consistently talked about activity, sort of leading indicators of activity in the market. The number of RFPs we're seeing, the number of sales demos we're doing, those things continuing to rebound and trend back towards, and in many cases above pre-COVID levels. But you have to keep in mind.

Number of Rfps, we're seeing the number of sales demos, we're doing those things continuing to to rebound and trend back towards and in many cases above pre COVID-19 levels.

But you have to keep in mind that our.

Speaker 3: Cell cycles are long and you know it's not uncommon that a deal from the time that process really gets started to the time we sign a contract can be a year year and a half.

Sales cycles are long and it's not uncommon that a deal from the time that process really gets started to the time, we sign a contract can be a year year and a half or so.

There is a lag between a lot of the time that activity starts to ramp up in that time. It shows up in bookings. So generally we're pretty pleased there's always some deals that flight out of the quarter, but nothing really terribly unusual this quarter.

Speaker 3: There's a lag between a lot of the time that activity starts to ramp up and the time it shows up in bookings. So generally we're pretty pleased there's always...

Speaker 3: Some deals that fly out of the quarter, but nothing really terribly unusual this quarter. And...

The progress on the booking is as.

Speaker 3: The progress in the booking is, I think, in line with our expectations, given the activity we've seen over the last few quarters.

I think in line with our expectations.

Given the activity we've seen over the last few quarters.

Great. Thanks, and then if you could just comment on <unk>.

Speaker 1: Great, thanks. And then if you could just comment on ERP demand through 2022 and how that looks going into 23. Thanks so much.

ERP demand through 2022, and how that looks going into 'twenty three thanks, so much.

Yes, I think I.

Speaker 2: Yeah, I think the ERP demand is like everything else and across the company. I mean, I talked earlier about demos are at all time highs. RFPs are up. The number of deals that we're signing, particularly at our enterprise platform is...

I think the ERP demand is like everything else in across the company I mean I talked earlier about.

Demos are at all time highs rfps are up.

The number of deals that we're signing.

Particularly at our enterprise.

<unk> platform is.

Is approaching really pre pandemic levels.

Speaker 2: approaching really pre-pandemic levels uh... at the lower end of our at our e-r-p-pro uh... our win rates are at all time highs uh... the growth is really is really good it has been really for a been good for last several quarters and really last year and a half or two years uh... so i think that i'm and is still is still pretty robust out there

At the lower ended our at our ERP Pro.

Our win rates are at all time highs.

Growth is really really good it has been really been good for the last several quarters and really last year and a half or two years.

I think the demand is still is still pretty robust out there.

Yes.

Thanks again.

The next question is from Charlie Strausser of CJS Securities. Please go ahead.

Speaker 7: The next question is from Charlie Strouser with CJS Securities. Please go ahead.

Hi, good morning.

Speaker 8: Just two quick questions real quick on the AWS progress. Are you currently, when you sign up a new SaaS customer, are you currently putting them on AWS? Are you still putting them on legacy systems and then migrating?

Just two quick questions real quick on the AWS and.

Progress.

Currently.

When you sign up a new SaaS customer are you currently putting them on AWS or you're still putting them on legacy systems and then migrating.

Over.

Yes.

Speaker 2: Yeah, that's sort of still depends a little bit by product. So new customers in our ERP side, particularly in our Civic, in our Power by Mutus, those new customers are going to be going to AWS. But you have to remember, we're still in the process of getting all of our core applications into a cloud efficient state. So even the new customers that we sign that go in AWS, we're not going to be experiencing

That's sort of still depends a little bit by product so.

New customers in our ERP side, particularly in our in our civic and are powered by munis are those new customers are going to be going in AWS, but you have to remember we're still in the process of getting all of our core applications into a cloud efficient state. So.

Even the new customers that we sign that go into AWS, we're not going to be experiencing.

The higher a higher margin that we will be as soon as we get these products more and more efficient in the cloud.

Speaker 2: the higher margin that we will be as soon as we get these products more efficient in the cloud.

That makes sense.

Speaker 8: makes sense. And obviously we talked about the EOS.

Obviously, you talked about some.

Some of these expenses and migration lasting into next year.

Speaker 8: and lasting it to next year. You think that's kind of, you know, first half of next year, full year, you know, how should we think about the progression of that decline?

Do you think that's kind of.

First half of next year the full year.

Should we think about the progression of that.

That decline of away from the call.

Yes.

So I'd say that it's pretty consistent throughout the year.

Speaker 3: So I'd say that it's pretty consistent throughout the year.

Okay.

We would expect that impact to continue on through the year.

Got it and then just lastly by my apologize.

Speaker 8: Got it. And then just lastly, Brian Apollinger, if you get this out over here, put in the guidance to any guidance to cash flow.

That earlier, but in the guidance any kinds of cash flow.

Speaker 3: We do not guide the cash flow. We give a lot of the, in the press release, there's a lot of information around the depreciation amortization, capitalization. They can help you get to that number, but we don't specifically guide the cash flow.

We do not guide the cash flow, we gave a lot of.

In the press release, there's a lot of information around the depreciation and amortization capitalization.

Can can help you get to that number, but we don't specifically guide to cash flow.

Got it thank you very much.

The next question is from Scott Berg with Needham <unk> Company. Please go ahead.

Speaker 7: The next question is from Scott Berg with Needham & Company. Please go ahead.

Hi, everyone. Congrats on a good quarter and thanks for taking my questions.

Speaker 5: Hi everyone, congrats on the good quarter and thanks for taking my question. Lynn, just to start off with a statement, you sound like you could be a CFO in your next life. Nice job with all those numbers there.

Lynn just to start off with the statement you sound like you could be a CFO in your next slides nice job with all of those numbers there.

Yeah.

Yes, I guess I wanted to.

Speaker 6: Yeah I guess I want to do out knowing one I know my own spreadsheets Alex, you know it's also impressive because I think your background is as an attorney. I remember question to, So double wh me that think.

My own spreadsheets.

Uh huh.

It's also impressive because I think your background is as an attorney if I remember correctly.

Double whammy there that's fantastic.

I guess I wanted to start by tackling.

Speaker 5: I guess I want to start by tackling fiscal 22 margins from a slightly different angle. As we think about the fall off at NIC revenues this year, kind of a two-part question there is, one, how much are NIC revenues pressuring margins this year versus the core, kind of organic Tyler business, because you didn't lay that out in the slide necessarily on the website. And then secondly, as some of those COVID revenues fall off in the first half.

Tackling in fiscal 'twenty to margins from a slightly different angle as we think about the falloff in IC revenues. This year kind of a two part question. There is one how much our NAC revenues pressuring margins this year versus the core kind of organic tailored business because you didn't lay that out in the slide necessarily on the website and then secondly as.

Some of those Covid revenues fall off in the first half.

Speaker 5: Given what those margins look like, should we get maybe a little bit of upward opportunity in margins with the fall off of those reds?

Given what those margins look like should we get maybe a little bit of upward opportunity and margins.

The fall off of those revenues.

Yes, I'll start Scott.

Speaker 6: Yeah, I'll start Scott. You know, I think you'll see throughout the year our margin will increase some throughout the year. And as we are losing some of those COVID-19...

I think youll see.

Throughout the year, our margin will increase some throughout the year and as we are losing some of those COVID-19 revenues.

And some of the areas I believe it's in South Carolina and Nevada.

Speaker 6: In some of the areas, I believe it's in South Carolina and Nevada, our role in those COVID revenues has changed from a prime to a sub. So while those revenues drop off, the margins actually get a little bit better. And so I think really at a high level, and I see these contributions somewhat consistent with Tyler's overall margin for

Our role in those Covid revenues has changed from a.

From a prime to a sub so while those revenues drop off the margins actually get a little bit better and so I think really at.

At a high level Nic's contribution is somewhat consistent.

With Tyler's overall margin for next year.

Okay.

Got it helpful. And then from a sorry go ahead, Brian I was just going to say, yes, the second half margins.

Speaker 5: Got it helpful and then from a, sorry, go ahead Brian . I was just gonna say, yeah, the second half margins do step up from the first half as the NIC.

Do step up from the first half is.

Nics.

Covid revenues decline.

Decline, but.

Speaker 3: that in general, NIC's revenues are margins in 2022 are fairly closed in line with Tyler.

In general Nic's revenues or margins.

In 2022 are fairly close to in line with with Tyler's.

Okay.

Speaker 5: Got it helpful and then from a follow up question

Got it helpful and then for my follow up question.

Speaker 5: Around the fast transition, you all seem significantly more confident in your ability to sell that obviously today, given what your recent successes are.

Around the SaaS transition you all seem significantly more confidence in your ability to sell that obviously today given what your recent successes are but Brian I remember talking historically over the last couple of years as your largest customers.

Speaker 5: Brian , I remember talking, you know, historically over the last couple of years as your largest of customers still.

Speaker 5: You know, had some hesitancy to adopt a subscription model for a variety of different reasons. I think in the lens remarks, your expectations around units were for virtually all of those deals to go subscription this year. And of course, units is one of those products you've also had an opportunity or growing opportunity at market. Should we see those large units deals also go subscription this year? Is that something that might push into maybe 23 or 24?

<unk> had some hesitancy to adopt subscription model for a variety of different reasons I think in the lens remarks your expectations around the units were for virtually all of those deals to go subscription this year and of course in units is one of those products also had an opportunity a growing opportunity a market should we see those large munis deals also goes subscriptions.

Year or is that something that might.

You're pushing that maybe 'twenty three 'twenty four.

I think we're seeing it across all tiers of the market.

Speaker 3: I think we're seeing it across all tiers of the market and that includes in the ERP space. I think...

And that include.

In the ERP space.

I think.

Last quarter.

Speaker 3: last quarter, 90% of me and his deals were...

90% of meters is deals where we are.

SaaS deals so.

Speaker 3: that deals. So the upper end of the market is, I think, just as willing to go to SAS as the lower end, and maybe in some cases more so. And we certainly had.

The upper end of the market is I think just as willing to go SaaS is the lower end and maybe in some cases more so than we certainly had success across other project products. For example, North Carolina, a couple of years ago and the Odyssey side.

Speaker 3: Six sets across other projects, products, for example, in the North Carolina a couple years ago, in the Odyssey side on the courts was ours.

The courts was our.

Biggest ask contract to date and we've seen some large customers on the appraisal.

Speaker 3: They get fast contract today and we've seen some large customers on the

Speaker 3: praise on tax side, collecting fast. So I think it's across all tiers of the market. Yeah, I think Scott, I'd add that, you know, we've communicated to the the the the minus client base, you know, the direction. And, and you're going to see more around this in, I think in April , when we have our Tyler user conference connect, you're going to see a significant more focus on our shift to the cloud and the expectation really, and the messaging is really is that,

Appraisal and tax side.

<unk> SaaS so.

I think it's across all tiers of the market I think that Scott I'd add that we've.

We've communicated the munis client base, the direction and Youre going to see more around this.

I think in April when we have our.

Tyler user conference connect Youre going to see a significant more focus on our shift to the cloud and the expectation really in the messaging is really is that pretty.

Speaker 2: pretty much almost all new business at that end will be going into the cloud and as Brian mentioned it was already over 90% and 2% for last year which you know if you go back three years ago it just gotten to 50-50 so it's been moving in that direction for some time

Pretty much almost all new business up at that and we'll be going into the cloud and as Brian mentioned it was already over 90% in Q4 of last year, which if you go back three years ago. It had just gotten to 50 50, so it's been moving in that direction for some time.

Great helpful. Congrats again.

The next question is from Alex Zukin with Wolfe Research. Please go ahead.

Speaker 7: The next question is from Alex Zuchen with Wolf Research. Please go ahead.

Hey, guys. So just a couple from me I guess.

Speaker 8: Hey guys, so just a couple for me, I guess, you know, help us understand because

Help us understand because it does feel like Youre at a high level you are guiding to organic revenue growth acceleration next year.

Speaker 8: It does feel like, again, at a high level, you're guiding to organic revenue growth acceleration next year. And you grew organic bookings 11.5% this year. Outside of the headwinds, obviously, from the cloud transition stuff, put that into context and just drive home, maybe, if you will, A, when was the last time you got into accelerating growth? And what are some of the sustainable trends that you're seeing in the business that give you

And you grew organic bookings 11, 5% this year outside of the headwinds obviously from the cloud transition stuff put that into context, and just drive home may be if you will a one was the last time, you guided to accelerating growth and what are some of the sustainable.

Trends that youre seeing in the business that gives you that confidence.

Okay.

Yes.

Speaker 6: Yeah, well, I think you're right. You know, it's...

I think youre right.

It's.

It's funny I was.

Speaker 6: I talk sometimes in my personal life about the last couple years in COVID and sometimes I sort of call them as quote the lost years and I try to, you know, I try to remember how things happened and I almost put everything in reference to those pre-COVID or post-COVID.

Talk sometimes.

Personal life about the last couple of years, and Covid and sometimes like sort of call them as close to last year's and I tried to I was trying to remember how things happen and I almost put everything in reference to what it was pre COVID-19 or post COVID-19 .

Speaker 2: But you know what? I was thinking about this the other day, but Tyler, these haven't been lost years. We've been working hard and we've been investing and we knew that this market was gonna be rebounding and we talked about it as COVID started about, we went back to the Great Recession and we had that great big boost out of coming out of the Great Recession.

But.

I was thinking about this the other day, but at Tyler. These haven't been last years, we've been working hard and we've been investing and we knew that this market was going to be rebounding and we talked about it as COVID-19 started about we went back to the great recession, and we had that great big boost out of coming out of the great recession, and we were anticipating this and we.

Speaker 2: and we were anticipating this and we plan for it. We invested it at the same time, made our investments into the cloud. And I think seeing the market return, yes, the stimulus money's out there. I think the local state and local government budgets are very robust.

Going forward, we invest at the same time made our investments into the cloud and I think seeing the market return, yes. The stimulus money is out there I think the local state and local government budgets are are very robust.

Speaker 2: I think we're in our competitive position across all our products as in all time high.

I think we are in our competitive position across all of our products is an all time high we are at the point now where I'm starting to see.

Speaker 2: We are at the point now where I'm starting to see the coming out of the other side of the SAS transition. It's not happening tomorrow. It's not happening in the next couple of quarters. But my reference to what's going on at, for example, up at Munis and we see the uplift that's coming.

The coming out of the other side of the SaaS transition, it's not happening tomorrow, it's not happening in the next couple of quarters.

My reference to whats going on at for example, up in units and we see the uplift that's coming from that and so that's the stuff that gives me confidence.

Speaker 2: from that and so that's the stuff that gives me confidence You know the acquisitions that we're doing the cross-selling that's going on the interactions that's going on with our teams You know one thing we've been focused on really a lot in last few years is an idea that I called one Tyler and and that's that You know it's it's not where our enterprise group and our gesture we're all together and we're all pushing in the same direction And there's opportunities that we need to start tapping of tapping into more and more and we're starting to see this

The acquisitions that we're doing that.

The cross selling that's going on the interactions thats going on with our teams. One thing we've been focused on really a lot in the last few years is an idea that I call, one Tyler and that's that.

Not where our enterprise group and our adjusted were altogether and we're all pushing in the same direction and there is opportunities that we need to start tapping of tapping into more and more and we're starting to see this in deals and we've done it very successfully for a long time, but as I say, our greatest assets our customer base.

Speaker 6: in deals and we've done it very successfully for a long time. But as I say, our greatest assets are cuts.

Speaker 6: You know, it doesn't take years to develop, it takes decades to develop. And the opportunities we have there with our new products, as we move this <expletive> , as we continue to acquisition things like Vendinj and USC Direct, there's just, there's so many opportunities out there, and I just like where we sit right now.

It doesn't take years to develop it takes decades to develop and and the opportunities we have there with our new products as we move to SaaS as we continue to do acquisitions things like vent engine USC direct there's just there's so many opportunities out there and I, just like where we sit right now and as you can tell I get a little excited I think a year ago.

Speaker 2: and as you can tell i get a little excited i think a year ago i i think i was talking about cautious optimism and i was talking about temperate excitement and i think right now i'm just i'm just flat out excited about the future

I was talking about cautious optimism and then I was talking about tempered excitement and I think right now I'm just I'm just flat out excited about the future.

Speaker 2: We're gonna see some ripples or our financials over the next.

We're going to have a.

We're going to see some ripples through our financials over the next two years as the SaaS transition goes on but we're making significant progress and we know what we're going to be on the other side.

Speaker 2: two years as the SASC transition goes on, but we're making significant progress and we know where we're going to be on the other side.

That's super helpful. I guess, let's talk about my next questions about those ripples and I apologize it will be a little bit of a multi part question, but I wont.

Speaker 8: super helpful i guess let's talk about my next questions about those ripples and apologize if you live a little bit of a multi-part question but i i want you know i when you talk about subscription revenues x the COVID-19 uh... points being over thirty percent i want to ask you if we think about this transstrass transition what's the durability of that thirty plus percent

You talked about subscription revenues ex the COVID-19 .

Point being over 30% I wanted to ask you. If we think about this transfer transition what's the durability of that 30 plus percent subscription revenue growth and then on the margin side. I think you guys did a wonderful job laying out the costs.

Speaker 8: And then on the margin side, I think you guys did a wonderful job laying out the cost.

The cost hit that you're taking this year and bridging the margins on a like for like basis without it is this the year that margins trough in the business and then next as you absorbed those bubble costs as you absorb that comeback COVID-19 costs and then in 'twenty. Three you start to go back to seeing margin leverage or is.

Speaker 8: the cost hit that you're taking this year and bridging the margins on a like for like basis without it. Is this the year that margins trough in the business and then next you know as you absorb those bubble costs as you absorb the comeback COVID costs and then in 23 you start to go back to seeing margin leverage or is this transition going to you know kind of peg margins at this level for

This transition going to kind of peg margins at this level for a few years.

I'll start and I'll, let Brian jump in I think I think margins will.

Speaker 6: i'll start a little brine jump in i think i think margins will uh...

Trough, maybe the right word or sort of balance out at this level through 2023, and I think youll start to see the uplift coming out of there on your question around subscriptions and the uplift of course embedded in our subscription line is also transaction based revenues.

Speaker 2: Troph may be the right word or sort of balance out at this level through 2023 and I think you'll start to see the uplift coming out of there on your question around subscriptions and the uplift. Of course, embedding our subscription line is also transaction based revenues. Those will grow not at the same rate as some of our subscriptions which is just coming in with our SaaS contract.

Those will grow not at the same rate as some of our subscriptions, which is just coming in with our SaaS contracts.

Speaker 2: You know, we talked about on the call, we've grown in double digits.

We talked about on the call we've grown in double digits.

Speaker 6: 56 out of 64 quarters. We've been consistently at 20% plus. And I think as we make the transition and start coming out on the other side, I think you'll start seeing that. We talked about a few milestones in my prepared comments. You know, one of the things that's, it's also exciting to me when I look at our mix of recurring revenue versus where it was five years ago and you talk about our growth, you know, it's...

<unk> 664 quarters, we've been consistently at 20% plus and I think as we make the transition and start coming out on the other side I think youll start seeing that.

We talked about a few milestones in my prepared comments one of the things Thats. Its also exciting to me when I when I look at our mix of recurring revenue versus where it was five years ago and you talk about our growth.

It took us.

Speaker 2: from 1998 to 2019 to get to a billion dollars in total revenues. And in 2022, I think we're going to do right out about a billion dollars in subscriptions alone. That's part of the excitement that I see. And I see that continuing to grow at a pretty healthy clip in the near future.

From 1998 to 2019 to get to $1 billion in total revenues and in 2022, I think we're going to do right at about $1 billion in subscriptions alone.

That's part of the excitement that I.

And I see that continuing to grow at a pretty healthy clip in the near future.

Speaker 3: And I would just point out that that mid to high 30 subscription growth, it excludes the COVID-related revenues, but it is not an organic number. So it also includes the full year of NIC. On an organic basis, it would be more around the mid 20, so 24, 25%, which is more consistent with, I think, what's sort of a sustainable in the near-to-mid term kind of growth in subscriptions. God, that's super helpful. Thank you.

And I would just point out that that mid to high 30 subscription growth. It excludes the COVID-19 related revenues, but it is not an organic number. So it also includes the full year of Nic's on organic basis, it would be more.

The mid twenties 24, 25%.

Which is more consistent with it I think what sort of sustainable in the near to midterm kind of growth in subscriptions.

Got it that's super helpful. Thank you guys and congrats.

Speaker 7: The next question is from Brent Braseland with Piper Sandler. Please go ahead.

The next question is from Brent <unk> with Piper Sandler. Please go ahead.

Good morning, and thank you for taking the questions here.

Speaker 9: Good morning and thank you for taking the questions here. Obviously, super encouraging to see government appetite to embrace cloud. I think the impact as you accelerate those transitions are very clear and well known and well understood. I wanted to double click into the cross-cell opportunity around payment.

Obviously, it's super encouraging to see government appetite to embrace cloud.

<unk> as you accelerate those transitions are very clear.

All known and well understood I wanted to double click into the cross sell opportunity around payments specifically.

Specifically around <unk>.

Speaker 9: specifically around going into the existing installed base of Tyler software customers that potentially are using a different payment source and really convincing that base of customer to add on payment.

Going into the existing installed base of tie their software customers.

Potentially or using a different payment source.

Convincing that base of customer to to add on payments.

Speaker 9: Is the insertion point primarily upon a renewal? Is there a shorter sales cycle potentially to add on payments?

He is the insertion point, primarily upon our renewal is there a shorter sales cycle potentially to add on payments.

Or and.

Speaker 9: And do you have a dedicated team now that is going in and trying to cross that up, sell existing Tyler's software payments? Little more color just around that opportunity. It seems like it's a very big opportunity encouraged by the nine deals. You talk about bundling. Those sound a little more like new deals.

Do you have a dedicated team now that is going in.

And trying to cross sell up sell existing Tyler software payments little more color just around that opportunity. It seems like it's a very big opportunity and encouraged by the nine deals you talk about bundling those sounded like more like new deals love to get some color around around being trying to your success up selling the <unk>.

Speaker 9: Love to get some color around being kind of your success upselling the install base. Thanks.

Stall base. Thanks.

No. That's a good question, Brian I think.

Yeah.

Speaker 6: Actually, yes, a number of questions in there. I'll try to get the ones I recall if I miss one just come back to me

You've actually asked a number of questions in there I'll try to get to the ones I recall, if I Miss one just come back at me.

The sales cycle will vary a little bit with payments and some of that will be dependent upon the customer.

Speaker 6: The sail cycle will vary a little bit with payments and some of that will be dependent upon the customer.

Speaker 6: And payments, there's a number of things that can impact that. The current providers that the our clients might be using.

And payments.

A number of things that can impact that the current providers that our clients might be using.

Speaker 6: is one, but you're right. It is one of our larger opportunities and payments. While we've got some great new ground with NIC and for example, the Florida contract and going locally, it's one of the focuses and emphasis, for example, we talk, you know, there's been a lot of questions about what's going on with Munis on this call. It's considered to be one of their primary key growth drivers in the next few years is payment.

As one but you are right. It is one of our larger opportunities and payments, while we've got some great new ground with NFC and for example, the Florida contract and going locally. It's one of the focus is an emphasis for example, we talked there's been a lot of questions about what's going on with munis on this call.

It's considered to be one of their primary key growth drivers in the next few years is payments and there is a significant amount of dedicated resources that are focused on that and going back into that installed channel.

Speaker 6: and there's a significant amount of dedicated resources that are focused on that and going back into that installed channel. So you're exactly right there.

So youre exactly right there.

What we bring with <unk> in terms of payments and are now more complete solution.

Speaker 6: what we bring with NIC in terms of payments in our now more complete solution. I think it's something that's pretty important. One thing that we had really built out was electronic bill, presentment and payment.

I think it's something that's pretty important one thing that we had.

Really built out.

Electronic Bill Presentment and payment and that's a very big differentiator in the market and it's something that nic's.

Speaker 6: And that's a very big differentiator in the market. And it's something that NIC was not as strong at. And obviously they were very strong with their payment engine and gateway stuff, things that we needed to build. I think we've talked before where we both brought strengths here. We've got the ability through our connections with our proprietary products, either UB and tax collections, and we've got those relationships.

Not as strong at and obviously they were very strong with their payment engine and gateway stuff things that we needed to build I think we've talked before where we both brought strengths here.

We've got the ability through our in our connections with our proprietary products, either <unk> and tax collections and we've got those relationships.

Speaker 6: and we can start going to drive those sales. And so you're right, it's one of our larger strategic initiatives. It's getting a lot of attention and focus. I mentioned how we just recently reorganized internally the payments organization, bringing 45 payment resources within Tyler and getting them aligned with.

And we can start going to drive those sales.

And so you're right. It's one of our larger strategic initiatives. It is getting a lot of attention and focus I mentioned, how we just recently reorganized internally the payments organization, bringing.

<unk> 45 payment resources within Tyler and getting them aligned with.

With Eni's resources working on go to market strategies.

Speaker 6: with the NIC resources working on go-to-market strategies, looking at the size of the market. And so it's something that we are, I can assure you, we're actively pursuing.

Looking at the size of the market and so it's something that we are I can assure you we're actively pursuing.

Great Super helpful color, there and just one follow up on on the go to market for payments is the intent that each major it sounds like he's now five solution categories would have their own dedicated payments team or do you actually have a an overlay peanuts.

Speaker 9: Great, super helpful color there. And just one follow up on the go-to market for payments is the intent that each major, that sounds like these now five solution categories would have their own dedicated payments team or do you actually have an overlay payments sales team to go in and try to upsell cross-sell.

<unk> team to go in and try to upsell cross sell.

I think it's the latter right now.

Speaker 2: I think it's a ladder right now. And there are certain parts of our business where payments are a bigger focus. It obviously trickles through a lot of our different core applications. We'll be focusing on certain ones more out of the gate. And as we continue to capitalize on that opportunity, we'll continue to expand.

There are certain parts of our business, where where payments are we.

A bigger focus it obviously.

Trickles through a lot of our different core applications, we will be focusing on on certain ones more out of the gate.

We continue to capitalize on that opportunity will continue to expand.

Very clear thank you.

Yes.

Speaker 7: The next question is from Oddweight I hear with Evercore. Please go ahead.

The next question is from odd weighed out here with Evercore. Please go ahead.

Hey, Harry.

Speaker 10: Hey, this is Edward Aheri. I think a question on behalf of Kirk. Just two questions. First, I know it's been a really big year from an RNA perspective, but how are you thinking about the pace of RNA going forward? And then I know you talked a little bit about the transition to AWS, but could you touch a little bit about the incremental cost associated with the transition?

I'm asking question on behalf of Kirk.

Just two questions.

First I know, it's been a really big year from an M&A perspective, but how are you thinking about.

The pace of M&A going forward and then I know you guys talked a little bit about the transition to AWS, but.

Could you touch a little bit about on the.

Just the incremental cost associated with the transition.

Sure I'll start.

M&A is part of our history, it's something we've done since 1998, I think I think we've done 60 acquisitions over the 23 plus years I've been here.

Speaker 2: You know, M&A is part of our history. It's something we've done since 1998. I think we've done 50 acquisitions over the 20th to 3-plus years I've been here. And it's something that we continually look at. We have done a fair number. We did five last year. We just closed another one. Excuse me, those take significant amount of internal resources.

And it's something that we continually look at we have done a fair number we did five last year, we just closed another one.

Excuse me.

A significant amount of internal resources.

But I think as we look forward.

Speaker 6: We're going to continue to look at opportunities and when we find something compelling and strategic, we're going to execute on it. I mentioned last year, obviously the NIC deal, and I've made my comments where there were some other deals in the pipeline. USC Direct's a good example. This was something that was not in the pipeline last year. We talked about a little bit higher bar. I think we probably have a little bit higher bar right now.

We're going to continue to look at opportunities and when we find something compelling in its strategic we're going to we're going to execute on it.

I mentioned last year, obviously, the NRC deal and I've made my comments were there were some other deals in the pipeline USC directly a good example of this was something that was not in the pipeline last year, we talked about a little bit higher bar I think we'd probably have a little bit higher bar right now but.

Speaker 2: But I'm also comfortable with where we sit with our balance sheet and our debt. We paid down $395 million last year. Our net leverage is right around two. Give her take a little bit. So in my view, we're in a position to execute on any strategic initiative. And if it's a compelling M&A opportunity, we're going to do it.

But I'm also comfortable with where we sit with our balance sheet and our debt, we paid down $395 million last year, our net leverages right around 2% give or take a little bit.

In my view, where we are in a position to execute on any strategic initiative and it's a compelling M&A opportunity, we're going to we're going to do it.

And your question about the AWS transition costs I guess the.

Speaker 3: And your question about the AWS transition cost, I guess the, what we refer to as the bubble cost or the incremental SaaS transition cost in 2022 will be in the $16 to $18 million range. So somewhere around 90 basis points of operating margin impact.

What we refer to as the bubble costs are those incremental SaaS transition costs and.

In 2022 will be in the $16 million to $18 million range. So.

Somewhere around 90 basis points of operating margin impact.

Thank you guys.

The next question is from Keith <unk> with Northcoast Research. Please go ahead.

Speaker 7: The next question is from Keith Howesom with North Coast Research. Please go ahead.

Speaker 11: Hi, this is Trevor, filling in for Keith. I had a quick question about NIC. So the core revenue growth for the quarter was a little bit less than we expected. It's driver history records being impacted by the flowdown in Newcastle.

Hi, this is filling in for Keith I had a quick question about NAC. So the core revenue growth for the quarter was a little bit less than we expected is driver history records being impacted by the.

Slowdown in new car sales.

Yes, they are.

Speaker 3: Yes, they are. That is one of the bigger drivers of those revenue streams, which are a significant part of NXE's transaction revenues in many states. And...

That is the.

One of the bigger drivers of those.

Those revenue streams, which are a significant part of Nic's transaction revenues.

In many states and.

One of the drivers of that as new car sales are.

Speaker 3: one of the drivers of that is New Car Sales or

Which trigger a.

Speaker 3: trigger a insurance event. And so those have been affected in recent quarters by the this flowness in new car sales as a result of a flight chain issue.

Insurance event and so.

Those have been affected in <unk>.

Recent quarters by the slowness in new car sales as a result of supply chain issues.

Okay, and then a quick follow up sticking with NFC.

Speaker 11: Okay, and then a quick follow up, I'm sticking with NIC. You kind of touched on this a little bit earlier, but could you share the biggest success story so far in the acquisition and maybe any revenue synergies that you've achieved?

On this little bit earlier, but could you say are the biggest success story so far.

Acquisition, and maybe any revenue synergies that you've achieved.

Well I think the biggest success story.

Speaker 2: Well, I think the biggest success story, I could probably talk for another hour. I think the biggest success story has been bringing in their team and seeing how their team aligns with our team and seeing our teams work together.

I could probably I could probably talk for another hour I think the biggest success story has been.

Bringing in their team.

And seeing how their team aligns with our team and seeing our teams worked together.

Speaker 6: you know executing on our out of the gate strategy in 2021 you know them continuing them to deliver on their business while we also said and outlined a number of strategic initiatives uh... which are pretty wide and diverse across

Executing on our out of the gate strategy in 2021 them continuing to to deliver.

Deliver on their business, while we also sat and outlined a number of strategic initiatives.

Which are pretty wide and diverse across Tyler.

Speaker 2: You know, we talked about it on this call, a couple of deals that were really joint deals that may not have happened, or certainly the timing of it may not have happened, had we not been together.

We talked about on this call a couple of deals that were really joint deals that were that were that may not have happened or certainly the timing of them may not have happened had we not been together.

Speaker 2: The Vendention Deal, great example. The extension of Texas payments by three years because of DNI, huge success story. Beating in a very, very competitive rebid in South Carolina, which is a 10 million ARR.

The Vend engine deal Great example.

Extension of Tyler, Texas payments by three years because of DNI huge success story.

Beating meeting or in a very very competitive rebid in South Carolina, which is a $10 million.

Client.

Speaker 2: client and beating out them and using Tyler and the story of Tyler and D&I involved in that. Those are all success stories and I almost get to the point. You're almost asking me who's my favorite kid. There's a lot of them out there.

And beating out them and using Tyler in the story of Tyler and DNI involved in that.

Those are all success stories and I almost get to the point. It's you almost asked me who is my favorite Kid Theres a lot of them out there.

Okay, great. Thanks, a lot and congrats on the quarter.

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

Speaker 7: At this time, there appear to be no more questions. Mr. Moore, I'll turn the call back over to you for closing remarks.

Thanks, Gary and thanks, everybody for joining US today, we hope you stay safe and healthy and if you have any further questions. Please feel free to contact Brian Miller or myself. Thanks, everybody.

Speaker 2: Thanks, Garrett. And thanks, everybody, for joining us today. We hope you stay safe and healthy. And if you have any further questions, please feel free to contact Brian Miller or myself. Thanks, everybody.

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

Speaker 7: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Okay.

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