Q1 2024 Tyler Technologies Inc Earnings Call
Operator: Hello, and welcome to today's Tyler Technologies first quarter 2024 conference call. Your host for today's call is Lynn Moore, President and Chief Executive Officer 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. In order to address your questions and stay within the allotted time, please limit your questions to one per person.
Hello, and welcome to today's Tyler technologies first quarter 'twenty 'twenty four conference call. Your hosts for today's call is Lynn Moore, President and Chief Executive Officer of Tyler technologies.
Operator: 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 in order to address your questions and stay within the allotted time. Please limit. Your question to one question per person you may get back into the queue for a follow up.
Operator: You may get back into the queue for a follow-up. And as a reminder, this conference is being recorded today, April 25, 2024. I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. Please go ahead.
Hala Elsherbini: And as a reminder, this conference is being recorded today April 25th 'twenty 'twenty four.
Hala Elsherbini: I would like to turn the call over to Holla Al Sherbini Tyler's senior director of Investor Relations. Please go ahead.
Hala Elsherbini: Thank you, Krista, and welcome to our call. With me today is Lynn Moore, our President and Chief Executive Officer, and Brian Miller, our Chief Financial Officer. After I give the safe harbor statement, Lynn will have some initial comments on our quarter, and then Brian will review the details of our results and update our annual guidance for 2024. Lynn will end with some additional comments, and then we'll take your questions.
Hala Elsherbini: Thank you Christa and welcome to our call with me today is Lynn Moore, our President and Chief Executive Officer, and Brian Miller, Our Chief Financial Officer. After I give the safe Harbor statement Lynn will have some initial comments on our quarter and then Brian will review the details of our results and update our annual guidance for 2024.
Hala Elsherbini: Lynn will end with some additional comments and then we'll take your questions.
Hala Elsherbini: During this conference call, management may make statements that provide information other than historical information and may include projections concerning the company's future prospects, revenues, expenses, and profits. Such statements are considered forward-looking statements under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from those projections. We would refer you to our Form 10-K and other SEC filings for more information on these risks.
Hala Elsherbini: During 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.
Hala Elsherbini: 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 those projections. We would refer you to our Form 10-K, and other SEC filings for more information.
Hala Elsherbini: Nation on those risks also 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.
Hala Elsherbini: Also, in our earnings release, we have included non-GAAP measures that we believe facilitate understanding of our results and comparisons with peers in the software industry. A reconciliation of GAAP to non-GAAP measures is provided in our earnings release. We have also posted on the Investor Relations section of our website, under the Financials tab, schedules with supplemental information, including information about our quarterly recurring revenues and bookings. On the Events and Presentations tab, we posted an Earnings Summary slide deck to supplement our prepared remarks. 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. Lynn?
Hala Elsherbini: A reconciliation of GAAP to non-GAAP measures is provided in our earnings release, we have also posted on the Investor Relations section of our website under the financials tab schedules with supplemental information, including information about our quarterly recurring revenues and bookings.
Hala Elsherbini: On the events and presentations tab, we've posted an earnings summary, slide deck to supplement our prepared remarks. Please.
Hala Elsherbini: 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 Lynn.
Unknown Attendee: Our first quarter results provided an exceptional start to the year, exceeding our expectations across key metrics, including revenues, earnings, operating margin, and cash flow. Recurring revenues grew almost 9% and comprised 84% of our total revenues.
Lynn: Thanks Ali.
Lynn: Our first quarter results provide an exceptional start to the year exceeding our expectations across key metrics, including revenues earnings operating margin and cash flow.
Unknown Attendee: Recurring revenues grew almost 9%.
Unknown Attendee: 84% of our total revenues.
Unknown Attendee: SAS revenues grew 22%, our 13th consecutive quarter of SAS revenue growth of 20% or more. Exceeding Expectations of a 20% CAGR and SAS revenues through 2025. In addition, transaction revenue surpassed our plan, with higher volumes and positive pricing trends. Our performance demonstrates the power of our business model against the backdrop of robust public sector demand, supported by a generally healthy budget. Our leading sales activity indicators remain elevated, and our pipeline reflects growing sales synergies as we execute our integrated go-to-market strategy.
Unknown Attendee: SaaS revenues grew 22% or.
Unknown Attendee: Our 13th consecutive quarter of SaaS revenue growth of 20% or more.
Unknown Attendee: Exceeding expectations of a 20% CAGR in SaaS revenues through 2025.
Unknown Attendee: In addition transaction revenue surpassed our plan with higher volumes and positive pricing trends.
Unknown Attendee: Our performance demonstrates the power of our business model against the backdrop of robust public sector demand supported by generally healthy budgets are.
Unknown Attendee: Our leading sales activity indicators remain elevated and our pipeline reflects growing sales synergies as we execute our integrated go to market strategy.
Unknown Attendee: During our Investor Day last year, we announced our Tyler 2030 vision, which aligns our strategic focus on four key growth drivers: leveraging our installed base, expanding into new markets, completing our cloud transition, and growing our payments business. Leveraging our unmatched installed base has been a cornerstone of our growth strategy, and we're pleased with the outstanding execution by our sales organization, driving impactful cross-sell and up-sell activity that further deepens existing client relationships and expands our market reach with new client engagement.
Unknown Attendee: During our Investor day last year, we announced our Tyler 2030 vision, which aligns our strategic focus on four key growth drivers leveraging our installed base expanding into new markets, completing our cloud transition and growing our payments business.
Unknown Attendee: Leveraging our unmatched installed base has been a cornerstone of our growth strategy and we're pleased with the outstanding execution by our sales organization driving impactful cross sell and up sell activity that further deepens existing client relationships and expands our market reach with new client engagements.
Unknown Attendee: Notable cross-sell and up-sell wins during the quarter included a records management and ERP pro contract, including payments, with Ada County, Idaho, leveraging our state enterprise relationship. An on-premises contract for our full enterprise public safety suite with the City of Columbus, Georgia, adding to its existing Tyler Courts, Corrections, ERP, tax, and permitting solutions. An Enterprise ERP win with the Texas Legislative Council, facilitated by our existing Digital Solutions Division relationship in Texas, which avoided an RFP process to secure a new Enterprise ERP client in a non-traditional market.
Unknown Attendee: Notable cross sell and upsell wins during the quarter included.
Unknown Attendee: A records management and ERP pro contract, including payments with Ada County, Idaho, leveraging our state enterprise relationship.
Unknown Attendee: And on premises contract for a full enterprise public safety suite with the city of Columbus, Georgia.
Unknown Attendee: Adding to its existing Tyler courts, corrections ERP tax and permitting solutions.
Unknown Attendee: And enterprise ERP win with the Texas Legislative Council facilitated by our existing digital solutions Division relationship in Texas.
Unknown Attendee: Avoided an RFP process to secure a new enterprise ERP client and a non traditional market.
Unknown Attendee: A combined SAS contract with the City of Juneau, Alaska, for enterprise assessment and tax and enterprise permitting and licensing solutions. By prioritizing the cloud as one of our key growth drivers, we are unlocking new levels of innovation and responsiveness in making the cloud accessible for our clients while providing enhanced security. Our new software SaaS mix continues to expand and comprise 93% of Q1 new software contract value. We're particularly encouraged to see a growing preference for cloud technology in the state and federal market with our application platform and an accelerated shift in public safety cloud demand with multiple client-driven SaaS selection.
Unknown Attendee: Our combined SaaS contract with the city of Juneau, Alaska for Enterprise assessment attacks and enterprise permitting and licensing solutions.
Unknown Attendee: By prioritizing the cloud is one of our key growth drivers, we are unlocking new levels of innovation and responsiveness and making the cloud accessible for our clients, while providing enhanced security.
Unknown Attendee: Our new software SaaS mix continue to expand and comprised 93% of Q1, new software contract value.
Unknown Attendee: We're particularly encouraged to see a growing preference for cloud technology in the state and federal market with our application platform and an accelerated shift in public safety cloud demand with multiple client driven SaaS selections.
Unknown Attendee: In fact, 75% of our first quarter enterprise public safety deals were for SaaS. Because the pace of the shift to SaaS in these markets this year is faster than we previously anticipated, we have lowered our expectations for license revenues for the year.
Unknown Attendee: In fact, 75% of our first quarter enterprise public safety deals were SaaS.
Unknown Attendee: Because the pace of the shift to SaaS in these markets. This year is faster than we previously anticipated we have lowered our expectations for license revenues for the year.
Unknown Attendee: And across Tyler, the volume of flips signed in the first quarter was in line with our expectations, with a 21.5% increase in average ARR. Key first quarter new SaaS deals and flips included Multi-Year SAS Arrangements with the Hawaii Department of Natural Resources and Land Between the Lakes National Recreation Area that build on our momentum in the outdoor recreation space. Competitive SAS wins for public safety included a full enterprise public safety suite contract with Palm Beach, Florida, which was focused on a cloud-only strategy.
Unknown Attendee: And across Tyler the volume of flip side in the first quarter was in line with our expectations with a 21, 5% increase in average IRR.
Unknown Attendee: Key first quarter, new SaaS deals and flips, including <unk>.
Unknown Attendee: A multi year SaaS arrangements with the Hawaii Department of natural resources and land between the lakes National Recreation area that build on our momentum in the outdoor recreation space.
Unknown Attendee: Competitive SaaS wins for public safety included a full enterprise public safety suite contract with Palm Beach, Florida, which was focused on a cloud only strategy.
Unknown Attendee: We also won a sole source enterprise public safety contract with the City of Evanston, Illinois, which expands our growing footprint in the Chicagoland area, and Enterprise Appraisal and Tax SAS Flip with Fulton County, Georgia, which includes Atlanta. The contract with ARR for more than $1 million was executed on an accelerated timeline with a go-live completed within one month. Two public safety SAS flips with Birmingham, Alabama, and Germantown, Tennessee, both of which were client-driven SAS selections and accelerated go lives. The Kansas Judicial Branch signed an Enterprise Justice Appellate Court SAS Flip as we continue to see a growing interest in moving to the cloud from our on-premises courts clients.
Unknown Attendee: We also want to sole source enterprise public safety contract with the city of Evanston, Illinois, which expands our growing footprint in the Chicago land area.
Unknown Attendee: And enterprise appraisal and tax S flip with Fulton County, Georgia, which includes Atlanta the.
Unknown Attendee: The contracts with more than $1 million was executed on accelerated timeline with a go live completed within one month.
Unknown Attendee: Two public safety SaaS flips with Birmingham, Alabama in Germantown, Tennessee, both of which were client driven SaaS selections and accelerated go lives.
Unknown Attendee: The Kansas Judicial branch sign an enterprise Justice appellate court SaaS flip as we continue to see a growing interest in moving to the cloud from our on premises Core's clients.
Unknown Attendee: Another key driver of our long-term growth is our transactions and payments business. And, as I mentioned earlier, better-than-expected transaction volumes contributed to first-quarter revenues that exceeded our expectations. In the first quarter, we signed 288 new payments deals across Tyler, representing approximately $9 million in projected ARR. In our State Enterprise Portal business, we signed a new three-year enterprise contract with the state of Mississippi, extending our existing 14-year relationship. Our enterprise agreement with the state of Idaho was also renewed for two years through a rebid through the NASPO Citizen Engagement Agreement.
Unknown Attendee: Another key driver of our long term growth as our transactions and payments business and as I mentioned earlier better than expected transaction volumes contributed to first quarter revenues that exceeded our expectations in.
Unknown Attendee: In the first quarter, we signed 288, new payments deals across Tyler representing approximately $9 million in projected IRR.
Unknown Attendee: And our state enterprise portal business, we signed a new three year enterprise contract with the state of Mississippi, extending our existing 2014 year relationship.
Unknown Attendee: Our enterprise agreement with the state of Idaho was also renewed for two years in a rebid through the Nast both citizen engagement agreement.
Unknown Attendee: We're also very pleased to see early traction and growing demand for the solutions we added to our portfolio through our 2023 acquisitions of CSI, AR Inspect, and Resource X, each of which brought us expanded AI capabilities. For CSI, we signed a contract with our existing Quartz client in Dallas County, Texas, adding approximately $900,000 of ARR. We've seen demo activity double over pre-acquisition levels for our augmented field operation solution, formerly AR-Inspect. The first quarter wins included the City of Newark manhole inspections and an expansion contract with the New Jersey Department of Environmental Protection.
Unknown Attendee: We're also very please see early traction and growing demand for the solutions, we added to our portfolio through our 2023 acquisitions of CSI, AAR inspect and resource X each of which brought us expanded AI capabilities.
Unknown Attendee: With CSI, we signed a contract with our existing <unk> client Dallas County, Texas, adding approximately $900000 of IRR.
Unknown Attendee: We've seen demo activity double over pre acquisition levels for augmented field operation solution, formerly inspect with first quarter wins that included the city of Newark, Manhole inspections, and an expansion contract with the New Jersey Department of Environmental protection.
Unknown Attendee: For our priority-based budgeting solution, powered by ResourceX, we signed contracts with Collier County, Florida, and Fort Worth, Texas, that added almost $600,000 of ARR. Now, I'd like Brian to provide more detail on the results for the quarter and our updated annual guidance for 2024.
Unknown Attendee: Through our priority based budgeting solution powered by resource X, we signed contracts with Collier County, Florida, and Fort worth, Texas that added almost $600000 of a R. R.
Unknown Attendee: Now I'd like Brian to provide more detail on the results for the quarter and our updated annual guidance for 2024.
Unknown Attendee: Glenn total.
Brian: Total revenues for the quarter were $512 4 million up eight 6% Inorganically grew seven 8%.
Brian Miller: Total revenues for the quarter were $512.4 million, up 8.6%, and organically grew 7.8%. Subscription revenue increased 11.7%, and organically grew 11.4%.
Unknown Attendee: Subscriptions revenue increased 11, 7% and organically rose 11, 4%.
Brian Miller: Within subscriptions, our SaaS revenues grew 22% to $148 8 million and grew organically 21, 3%.
Brian Miller: Keep in mind that there is often a lag from the signing of the new SaaS deal or a flip to the start of revenue recognition that can vary from one to several quarters because of this as well as the timing of SaaS renewals and related price increases SaaS revenue growth both year over year and sequentially may fluctuate from quarter to quarter.
Brian Miller: Within subscriptions, our SAS revenues grew 22% to $148.8 million and grew organically by 21.3%. Keep in mind that there is often a lag from the signing of a new SAS deal or a flip to the start of revenue recognition that can vary from one to several quarters. Because of this, as well as the timing of SAS renewals and related price increases, SAS revenue growth, both year-over-year and sequentially, may fluctuate from quarter-to-quarter.
Brian Miller: Transaction revenues grew three 7% to $164 5 million.
Brian Miller: While transaction revenues exceeded our plan, primarily due to higher transaction volumes from new and existing clients, including driver history Records.
Brian Miller: Year over year comparison continues to be impacted by the change last year from the growth model to the net model for payments under one of our state Enterprise agreement.
Brian Miller: Transaction revenues grew 3.7% to $164.5 million. While transaction revenues exceeded our plan primarily due to higher transaction volumes from new and existing clients, including driver history records, the year-over-year comparison continues to be impacted by the change last year from the gross model to the net model for payments under one of our state enterprise agreements. SAS deals comprised approximately 93% of our Q1 new software contract value, compared to 87% last year. During the quarter, we added 200 new SaaS arrangements and converted 90 existing on-premises clients to SaaS, with a total contract value of approximately $86 million.
Brian Miller: SaaS deals comprised approximately 93% of our Q1, new software contract value compared to 87% last year.
Brian Miller: During the quarter, we added 200, new SaaS arrangements and converted 90 existing on premises SaaS clients on premises clients to SaaS.
Brian Miller: The total contract value of approximately $86 million.
Brian Miller: In Q1 of last year, we added 145, new SaaS arrangements and had 73 on premises conversions with a total contract value of approximately $86 million.
Brian Miller: More importantly, the average <unk> associated with our Q1 flips increased 21, 5% over last year.
Brian Miller: Including transaction revenues expansions with existing clients and professional services total bookings increased 15, 7% on an organic basis.
Brian Miller: In Q1 of last year, we added 145 new SaaS arrangements and had 73 on-premises conversions, with a total contract value of approximately $86 million. More importantly, the average ARR associated with our Q1 flips increased 21.5% over last year. Including transaction revenues, expansions with existing clients, and professional services, total bookings increased 15.7% on an organic basis.
Brian Miller: Our total annualized recurring revenue was approximately $1 72 billion.
Brian Miller: Up eight 8% and organically grew eight 2%.
Brian Miller: In previous quarters, we discussed our expectation that 2023 would be the operating margin trough from our cloud transition and that 2024 with market returned to operating margin expansion.
Brian Miller: Our non-GAAP operating margin in the first quarter was 23, 8% up 210 basis points from last year.
Brian Miller: Margin expansion reflects improved margins from for our cloud operations, along with effective operating expense management.
Brian Miller: As we discussed on previous calls merchant and interchange fees from our payments business under the gross revenue model have a meaningful impact on our overall margins as they are pass through to clients and are included in both revenues and cost of revenues.
Brian Miller: Our total annualized recurring revenue was approximately $1.72 billion, up 8.8%, and organically grew 8.2%. In previous quarters, we discussed our expectation that 2023 would be the operating margin trough from our cloud transition, and that 2024 would mark a return to operating margin expansion. Our non-GAAP operating margin in the first quarter was 23.8%, up 210 basis points from last year. The margin expansion reflects improved margins for our cloud operations, along with effective operating expense management.
Brian Miller: We paid merchant fees of approximately $42 million in Q1.
Brian Miller: Both cash flows from operations and free cash flow were above expectations for the quarter at 71, 8 million and $57 $2 million, respectively, which allowed us to repay the remaining $50 million of term debt outstanding from Eni's acquisition earlier in the year than planned.
Brian Miller: We ended the quarter with $600 million of convertible debt outstanding and cash and investments of approximately $202 million. Our net leverage at quarter end was approximately 709 times trailing 12 month pro forma EBITDA with our only remaining debt to $600 million convertible due in 2020.
Brian Miller: As we discussed on previous calls, merchant and interchange fees from our payments business under the gross revenue model have a meaningful impact on our overall margins as they are passed through to clients and are included in both revenues and cost of revenues. We paid merchant fees of approximately $42 million in Q1. Both cash flows from operations and free cash flow were above expectations for the quarter, at $71.8 million and $57.2 million, respectively, which allowed us to repay the remaining $50 million of term debt outstanding from the NIC acquisition earlier in the year than planned. We ended the quarter with $600 million of convertible debt outstanding and cash in investments of approximately $202 million.
Brian Miller: Our updated 2024 annual guidance is as follows we expect total revenues will be between $2 110 billion to 140 $1 billion.
Brian Miller: The midpoint of our guidance implies organic growth of approximately eight 5%.
Brian Miller: We now expect that merchant fees will be up slightly over last year and that implied organic growth excluding merchant fees would be approximately 50 basis points higher.
Brian Miller: We expect GAAP diluted EPS will be between $5 27, and $5 47.
Brian Miller: And may vary significantly due to the due to the impact of discrete tax items on the GAAP effective tax rate.
Brian Miller: We expect non-GAAP diluted EPS will be between $9 10, and $9 30.
Brian Miller: We expect to see sequential growth in earnings throughout the year with both revenues and EPS slightly weighted towards the second half.
Brian Miller: We expect our free cash flow margin will be between 17% and 19%, including the estimated impact of approximately $58 million of incremental cash taxes related to section 174.
Unknown Attendee: Our net leverage at quarter end was approximately 0.79 times trailing 12-month pro forma EBITDA, with our only remaining debt, the $600 million convertible due in 2026. Our updated 2024 annual guidance is as follows. We expect total revenues to be between $2.110 billion and $2.140 billion. The midpoint of our guidance implies organic growth of approximately 8.5%. We now expect that merchant fees will be up slightly over last year and that implied organic growth excluding merchant fees would be approximately 50 basis points higher.
Unknown Attendee: Other details of our guidance are included in our earnings release and in the Q1 earnings deck posted on our website.
Unknown Attendee: Now I'd like to turn the call back over to Lynn.
Speaker Change: Thanks, Brian.
Unknown Attendee: Our performance in the quarter demonstrates strong execution by team members across Tyler in key strategic areas anchored to our Tyler 2030 vision we.
Unknown Attendee: We are starting to see the expected benefits of our cloud transition through progress with version consolidation cloud optimization of products cost efficiencies and improve agility as we empower our clients who serve the public through Tyler's next generation cloud applications.
Unknown Attendee: Our strong first quarter results and positive outlook for the remainder of the year are reflected in our revised annual guidance.
Unknown Attendee: Even with lower expectations for license revenues because of the accelerated shift to SaaS with our public safety and application platform solutions. We've raised our revenue guidance, while also increasing our earnings outlook.
Unknown Attendee: We expect GAAP diluted EPS to be between $5.27 and $5.47 and may vary significantly due to the impact of discrete tax items on the GAAP effective tax rate. We expect non-GAAP diluted EPS to be between $9.10 and $9.30. We expect sequential growth in earnings throughout the year, with both revenues and EPS slightly weighted towards the second half. We expect our free cash flow margin will be between 17 and 19%.
Unknown Attendee: We recently published our 2023 corporate responsibility report, our fifth annual sustainability disclosure, covering our environmental social and governance activities.
Unknown Attendee: Our sustainability initiatives in 2023 included investments in data management validation and processes to drive reporting efficiencies.
Unknown Attendee: We also undertook a double materiality assessment to understand key insights for multiple constituents on both financial materiality and impact materiality we.
Unknown Attendee: We hope you take the time to review our report which is available on our website.
Unknown Attendee: Finally, we're excited about Tyler connect 2024, which will take place may 19 to 22 in Indianapolis.
Unknown Attendee: Including the estimated impact of approximately $58 million of incremental cash taxes related to Section 174. Other details of our guidance are included in our earnings release and in the Q1 earnings deck posted on our website. Now, I'd like to turn the call back over to Len.
Len: Nearly 5000, Tyler clients and 900, Tyler team members will come together for training collaboration and networking and we're looking forward to inspiring our clients with the latest innovations from Tyler.
Len: Now we'd like to open the line for Q&A.
Len: Thank you we will now begin the question and answer session to enter a question answered. The question queue. Please press star one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset and then press Star and then the number one.
Unknown Attendee: Our performance in the quarter demonstrates strong execution by team members across Tyler and key strategic areas anchored to our Tyler 2030 vision. We are starting to see the expected benefits of our cloud transition through progress with version consolidation, cloud optimization of products, cost efficiencies, and improved agility as we empower our clients who serve the public through Tyler's next generation cloud application. Our strong first quarter results and positive outlook for the remainder of the year are reflected in our revised annual guidance.
Speaker Change: To withdraw your request Preston Starkey and as a reminder, please limit your question to one question. So we may stay within the allotted time, well pause momentarily to assemble our roster.
Unknown Attendee: And your first question comes from Rob Oliver from Baird. Please go ahead.
Speaker Change: Great. Thanks, very much for taking my question good morning.
Lynn: Lynn minus for you.
Unknown Attendee: Even with lower expectations for license revenues because of the accelerated shift to SAS with our public safety and application platform solutions, we've raised our revenue guidance while also increasing our earnings outlook. We recently published our 2023 Corporate Responsibility Report, our fifth annual sustainability disclosure covering our environmental, social, and governance activities. Our sustainability initiatives in 2023 included investments in data management, validation, and processes to drive reporting efficiency. We also undertook a double materiality assessment to understand key insights from multiple constituents on both financial materiality and impact materiality.
Unknown Attendee: You mentioned in the outset of your prepared remarks kind of your growth focus areas, but you talked about.
Unknown Attendee: Growing sales synergies and integrated go to market strategy that you guys.
Unknown Attendee: I'll lay out in more detail last year and I know this has been a big push of Euro since you assumed the CEO role can you give us a little bit of color on kind of what are some of those growing sales synergies are.
Unknown Attendee: Youre excited about the progress you've had so far.
Unknown Attendee: The levers you're pulling are and what are some areas you still need to improve on I appreciate it.
Speaker Change: Yeah sure Rob it's a good question.
Unknown Attendee: Last year, we elevated.
Unknown Attendee: Couple of people to oversee all of our public admin sales all of our justice sales, they're working more closely together than ever before.
Operator: We hope you take the time to review our report, which is available on our website. Finally, we're excited about Tyler Connect 2024, which will take place May 19 to 22, in Indianapolis. Nearly 5,000 Tyler clients and 900 Tyler team members will come together for training, collaboration, and networking, and we're looking forward to inspiring our clients with the latest innovations from Tyler. Now we'd like to open the line for Q&A.
Operator: Done things around aligning some incentive comp plans.
Operator: And changing the way people are comped.
Operator: To make sure that for example.
Operator: In the old days, its P&L as recognized by them and we wanted to break down some of those barriers so that.
Operator: Really it's all about Tyler when Tyler wins, everybody wins, and so we've been doing things like that we've done some things and we're still in the process of <unk> and <unk>.
Operator: Thank you. We will now begin the question and answer session. To enter a question into the question queue, please press star one on your touchtone phone. If you're using a speakerphone, please pick up your handset and then press Starkey, and then the number one. To withdraw your request, press the star key, and as a reminder, please limit your question to one question so we may stay within the allotted time. We'll pause momentarily to assemble our roster. And your first question comes from Rob Oliver from Baird. Please go ahead.
Operator: That's still work in progress I mean, when I say that we started these initiatives they're not by any means finished but these are things that are work in progress we're doing things around our PSD and DSD divisions, our application platform and formally and I see we see a lot of synergies. There. So we're doing things right now to start to bring some of those divisions closer together.
Robert Cooney Oliver: So that they can they can work more closely with sales and operating efficiencies. We believe the application platform is tailor made for state government and.
Robert Cooney Oliver: And so just a number of initiatives like that.
Robert Cooney Oliver: And Theres a lot going on.
Unknown Attendee: in the outset of your prepared remarks kind of your growth focus areas, but you talked about the kind of growing sales synergies and the integrated go-to-market strategy that you guys laid out in more detail last year. And I know this has been a big push of yours since you assumed the CEO role. Can you give us a little bit of color on kind of what some of those growing sales synergies are, where you're excited about the progress you've made so far, what some of the levers you're pulling are, and what are some areas you still need to improve on? I appreciate it.
Robert Cooney Oliver: And I think we're going to continue to see improvement as we look out forward.
Speaker Change: Great. Okay. Thanks for that I'll hop back in the queue and take the one I appreciate it.
Unknown Attendee: Your next question comes from the line of Scarfskin Telia from Barclays. Please go ahead.
Speaker Change: Okay, Great Hey, Brian Hey, Brian Thanks for taking my question here.
Unknown Attendee: Lynn.
Unknown Attendee: The numbers are pretty straightforward, so maybe I'll ask just a little bit of a higher level question.
Unknown Attendee: It sounds like just the spending backdrop in state and local governments continues to sound sounds healthy, but just to make sure. The question is asked can you talk about Lynn what you've seen historically from those customers in presidential election years, I mean, I imagine that those two things aren't terribly related but again just wanted to add.
Unknown Attendee: Yeah, sure, Rob. It's a good question. You know, last year, we put in place a couple of people to oversee all of our public administration sales, all of our justice sales. They're working more closely together than ever before. We've done things around aligning some incentive comp plans and changing the way people are comped to make sure that, for example, in the old days, it's, well, whose P&L is this recognized by? We see a lot of synergies there.
Unknown Attendee: We want to make sure that question is asked as we kind of get deeper into until election season.
Unknown Attendee: Yes.
Unknown Attendee: Don't know that historically, there has been much of a correlation between our sales and a presidential election year.
Unknown Attendee: So we're doing things right now to start to bring some of those divisions closer together so that they can work more closely with sales and operating efficiencies. We believe the application platform is tailor-made for state government. And so just a number of initiatives like that. There's a lot going on, and I think we're going to continue to see improvement as we look out forward.
Unknown Attendee: More so than what may be going on in the broader macroeconomic environment.
Unknown Attendee: As you note the budgets of our clients are healthy and strong are our sales outlook for the year, we have some pretty aggressive sales plans, but our sales outlook for the year.
Unknown Attendee: I was looking on plan and significant parts of our business actually maybe ahead of plan.
Unknown Attendee: Maybe a little bit in the federal space I don't know that Ive got enough experience, yet with our our federal space as to what impact that may have but it's normally more so around.
Unknown Attendee: Great. Okay, thanks for that. I'll hop back in the queue and stick to one. I appreciate it.
Unknown Attendee: What's going on with the federal funding and budgets, but I think generally in our you look at our traditional local and state space.
Operator: Your next question comes from the line of Saket Kalia from Barclays. Please go ahead.
Speaker Change: Haven't seen a lot of change in my 25 years.
Operator: Plus.
Saket Kalia: Very helpful. Thanks.
Operator: Your next question comes from the line of Matt Van Vliet from BPI. Please go ahead.
Unknown Attendee: Okay, great. Hey, Lynn. Hey, Brian.
Unknown Attendee: Thanks for taking my question here. Lynn, the numbers are pretty straightforward. So maybe I'll ask just a little bit of a higher level question. You know, it sounds like just the spending backdrop in state and local governments continues to sound healthy. But just to make sure the question is asked, can you talk about, Lynn, what you've seen historically from those customers in presidential election years? I mean, I imagine that those two things aren't terribly related. But again, just want to ask, want to make sure that question is asked as we kind of get deeper into the elections.
Speaker Change: Hey, good morning, Thanks for taking the question.
Unknown Attendee: Yeah.
Unknown Attendee: Higher and higher mix.
Unknown Attendee: <unk>.
Unknown Attendee: <unk> contract.
Unknown Attendee: Even steeper acceleration to a certain extent.
Unknown Attendee: Okay.
Unknown Attendee: Public safety or maybe holding you back.
Unknown Attendee: Okay.
Unknown Attendee: Great.
Unknown Attendee: Okay.
Unknown Attendee: Impetus to try to push forward on more flips maybe encouraged customers.
Unknown Attendee: At a little bit more of an accelerated pace to move over and and just try to get this done with a sort.
Unknown Attendee: Sort of as quickly as possible or any changing in your thinking there of the motivation of customers.
Unknown Attendee: Yeah, I don't, I don't know that historically there's been much of a correlation between our sales and a presidential election year, more so than what may be going on in the broader macroeconomic environment. As you know, the budgets for our clients are healthy and strong. Our, our sales outlook for the year, we have some pretty aggressive sales plans, but our sales outlook for the year is looking on plan, and in significant parts of our business, actually may be ahead of plan.
Speaker Change: Yeah, and you've kind of cut in and out I think I got most of your question, Matt I'll start Brian you can certainly jump in.
Unknown Attendee: At public safety.
Unknown Attendee: I think it's a couple of things I think.
Unknown Attendee: Actually as you step back and you go back to 2019, when we sort of announced that we were going to go cloud first from cloud agnostic. Some of the message was we were going to at least internally was we were going to take our leadership position and start leading the market to where we thought it was going to go when needed to go.
Unknown Attendee: In public safety as you know historically, it's been a little bit slower.
Unknown Attendee: You know, maybe a little bit in the federal space. I don't know that I've got enough experience yet with our federal space as to what impact that may have, but it's normally more so around, you know, what's going on with federal funding and budgets. But I think generally, when you look at our traditional local and state space, I haven't seen a lot of change in my 25 years plus.
Unknown Attendee: We've spent a couple of years, we've got some new leadership public safety or our position in public safety, we're very competitive it's a competitive space, but we're in a very competitive space and it place excuse me and really starting this year in <unk>.
Unknown Attendee: And more so third quarter fourth quarter last year, we've taken the approach that we are going to start leading SaaS with public safety.
Unknown Attendee: So.
Unknown Attendee: That's resonating we talked about the Palm Beach, Florida contract that was a deal where they were only looking for SaaS arrangement.
Unknown Attendee: Very helpful. Thanks.
Operator: Your next question comes from a line from Matt VanVliet from BTIG. Please go ahead.
Unknown Attendee: As we look out this year, we're going to continue to do the things to push things quicker to SaaS.
Unknown Attendee: Yeah, good morning. Thanks for taking the time to ask the question. I guess you do see a higher and higher mix of new business going to set a contract, and it really seems to be an acceleration to a certain extent on the flip side. You know, it seems like areas like public safety are maybe holding you back more, but that doesn't seem to be the case. But does it give you any more, you know, I guess impetus to try to push forward on more flips, maybe encourage customers at a little bit more of an accelerated pace to move over and, and just try to get this done as quickly as possible or any change in your thinking there about the motivation of customers?
Matthew David VanVliet: At the end of the day, it's still the customers choice and Theres a lot of selling things around that.
Speaker Change: You look at our public safety I think our plan for the year was what to do about 50% on Prem licenses give or take which was up significantly from last year and what we're seeing right now I think we reported 75% in.
Unknown Attendee: In Q1 as it relates to flips theres, a theres a lot of selling messages generally around flips and all our sales folks are armed with those.
Unknown Attendee: I think one thing that Youre also starting to see and we've talked about it before on earnings calls as the.
Unknown Attendee: The continued rise of cyber security and ransomware attacks are also.
Unknown Attendee: Triggering clients to want to push to SaaS faster and the more that they see that out in their community, which aren't always publicized I think thats also sort of starting to grease, the wheels, a little bit to make that decision to move to SaaS.
Unknown Attendee: Yeah, and you kind of cut in and out. I think I got most of your questions, Matt. I'll start, Brian, but you can certainly jump in. You know, with public safety, I think there are a couple things. I think... Actually, if you step back and you go back to 2019, when we sort of announced that we were going to go cloud first from cloud agnostic, some of the message was that we were going to, at least internally, take our leadership position and start leading the market to where we thought it was going to go and needed to go. And public safety, as you know, historically, it's been a little bit slower. We've spent a couple years, we've got some new leadership in public safety.
Unknown Attendee: I guess, the only thing I'd add to that is in terms of our ability to <unk>.
Unknown Attendee: Significantly increase the pace of slips.
Unknown Attendee: Beyond the sales efforts that Lynn Lynn talked about we have talked about in the past the need for clients, who arent on the current version of our.
Unknown Attendee: Products generally to upgrade to that version either before or when they flip to the cloud as we drive towards having one version of each product in the cloud.
Unknown Attendee: And we've made a lot of progress with version consolidation.
Unknown Attendee: And.
Unknown Attendee: Sunsetting old versions and moving clients, along but that continues to be a gating factor in the pace of flips and so as we continue to make progress with that it opens up.
Unknown Attendee: More opportunities from clients being in a position to flip.
Unknown Attendee: As we've talked about especially as we move into the larger fleets.
Unknown Attendee: Our position in public safety is that we're very competitive. It's a competitive space, but we're in a very competitive space and a place, excuse me, and really starting this year and started more so third quarter, fourth quarter last year, we've taken the approach that we are going to start leading with SAS in public safety. And so that's responding.
Unknown Attendee: They're they're complicated processes from a class a planning perspective.
Unknown Attendee: And so.
Unknown Attendee: The timing leading up to the flip from the time, we start engaging with clients, sometimes can be kind of lengthy so.
Unknown Attendee: We're certainly pushing it as fast as possible we've talked about our roadmap.
Unknown Attendee: We talked about the Palm Beach, Florida, contract. That was a deal where they were only looking for a SAS arrangement. As we look ahead this year, we're going to continue to do things to push things quicker to SAS. At the end of the day, it's still the customer's choice. There are a lot of selling things around that.
Unknown Attendee: That varies by product, but across all of our products converges on us being at.
Unknown Attendee: 885% of our on Prem customer base, having moved to the cloud by 2030 and.
Unknown Attendee: All of our business units.
Unknown Attendee: Have roadmaps that are aligned with that goal.
Unknown Attendee: When you look at our public safety, I think our plan for the year was to do about 50% on-prem licenses, give or take, which was up significantly from last year. And what we're seeing right now, I think we reported 75% in Q1. As relates to flips, there are a lot of selling messages generally around flips, and all our sales folks are armed with those. I think one thing that you're also starting to see, and we've talked about it before on earnings calls, is
Speaker Change: Great. Thank you.
Unknown Attendee: Your next question comes from the line of Ken Wong from Oppenheimer. Please go ahead.
Speaker Change: Okay, great. Thank you for taking my question.
Unknown Attendee: Yes. This one is for you Lynn when we look at the number of subscription contracts. It looks like it took a really big step up this quarter I think you touched on some of the highlights just wondering if that's more of a kind of a lumpy volatile seasonality type of a situation. We're seeing there from the jump up to 200 or do you think that that is.
Unknown Attendee: The continued rise of cyber security and ransomware attacks is also sort of triggering clients to want to push to SaaS faster. And the more that they see that out in their community, which isn't always publicized, I think that's also sort of starting to grease the wheels a little bit to make that decision to move to SaaS.
Unknown Attendee: <unk>.
Unknown Attendee: Closer reflection of the run rate, we can be we can expect going forward.
Unknown Attendee: It's probably a little bit of both.
Unknown Attendee: One obviously with 200, new deals are going to vary in size and scope.
Unknown Attendee: But if you step back generally when I when I think about 200, new contracts a year or quarter.
Brian Miller: I guess the only thing I'd add to that is in terms of our ability to significantly increase the pace of flips beyond the sales efforts that Lynn talked about. We have talked about in the past the need for clients who aren't on the current version of our products generally to upgrade to that version either before or when they switch to the cloud, as we drive towards having one version of each product in the cloud.
Brian Miller: That plays out over 800 a year.
Brian Miller: That's a lot of business, we're doing and that's a lot of business, we're executing on it.
Brian Miller: It's great work by our sales teams, it's great work by our pro serve teams to then turn that into into revenue.
Brian Miller: <unk>.
Brian Miller: But I think its I don't know that that is certainly higher than it was coming out of Q4 last year and most of last year I think last year, we did about.
Brian Miller: 750, new deals give or take for the year.
Brian Miller: We've made a lot of progress with version consolidation and sunsetting old versions and moving clients along, but that continues to be a gating factor in the pace of flips. As we continue to make progress with that, it opens up more opportunities for clients being in a position to flip. As we've talked about, especially as we move into the larger flips, they're complicated processes from a planning perspective. The timing leading up to the flip, from the time we start engaging with clients, can sometimes be kind of lengthy.
Brian Miller: So on pace, a little better, but as I said right now markets are healthy budget.
Brian Miller: Budgets are strong.
Brian Miller: Our sales outlook all the indicators are positive and our sales outlook looks good for the year.
Speaker Change: Got it fantastic. Thank you Ed.
Brian Miller: Your next question comes from the line of Alexi Gogo <unk> from Jpmorgan. Please go ahead.
Speaker Change: Hello, everyone.
Brian Miller: Considering the elevated level of demand that lend you just referred to.
Brian Miller: Our win rate remained relatively consistent at around 50% and if it has it feels like you should be taking more market share do you feel that you could show acceleration of organic revenue growth in the near term.
Brian Miller: So we're certainly pushing it as fast as possible. We've talked about a roadmap that varies by product, but across all of our products, it converges on us being at 80, 85% of our on-prem customer base having moved to the cloud by 2030. And all of our business units have roadmaps that are aligned with that goal.
Brian Miller: Yes.
Speaker Change: Yes, Thanks Alexei.
Brian Miller: I'd say generally our win rates across the board are consistent and when you say, 50%. That's how you got to look by each each sort of major products. So there is certainly some areas where our win rates are.
Brian Miller: 80%, 85%.
Brian Miller: That are more competitive spaces, we talk about public safety, we talk about.
Operator: Great, thank you. Your next question comes from the line of Ken Wong from Oppenheimer. Please go ahead. Okay, great. Thank you for taking my question. This one's for you.
Brian Miller: The mid to higher ERP space, where there's it's a lot more competitive market and they may sort of be around there.
Ken Wong: So those really haven't changed.
Ken Wong: There's still we still have some of the same lag factors that we talked about before.
Operator: Your next question comes from the line of Ken Wong from Oppenheimer. Please go ahead. Great, thank you for taking my question.
Ken Wong: Time of getting a deal to contract and getting them up and running.
Operator: But yes, I mean, we as we look out.
Operator: Our overall revenue growth.
Ken Wong: Sort of slowed over the last two years and I think we've said we expect that to.
Unknown Attendee: It's probably a little bit of both. I think one, you know, obviously, with 200 new deals, is going to vary in size and scope. But if you step back, generally, when I think about 200 new contracts a year or quarter, you know, that that plays out to over 800 a year. That's a lot of business we do. And that's a lot of business we're executing on. It's great work by our sales teams.
Speaker Change: Pick back up and we're starting to see some of that.
Speaker Change: Thank you Dan.
Unknown Attendee: Your next question comes from the line of Joshua Reilly from Needham <unk> Company. Please go ahead.
Speaker Change: Yes, thanks for taking my question.
Unknown Attendee: So we're hearing some of your venture backed startup competitors in public safety, specifically records management are having challenges getting customers live are you using this as an opportunity to go back to these customers and highlight the Tyler value proposition and then just more broadly how often and you've seen this across other product lines.
Unknown Attendee: It's great work by our professional services teams to then turn that into revenue. But I think it's, I don't know that that's the new normal, it's certainly higher than it was coming out of Q4 last year. And most of last year, I think last year, we did about 750 new deals, give or take.
Unknown Attendee: Some of the venture backed startups are making promises about getting customers live on timelines that they arent able to execute on thank you.
Speaker Change: Yes, Josh that's a good question and it's something we've seen I'd say really over the 25 plus years I've been at Tyler, There's always seems to be little periods, where someone comes up it makes a little split I actually have a little spotlight on them.
Unknown Attendee: So we're on pace a little better. But as I said, you know, right now, markets are healthy, and budgets are strong.
Unknown Attendee: Our sales outlook, our indicators are positive, and our sales outlook looks good for the year. Got it. Fantastic. Thank you. Your next question comes from the line of Alexei Gogolev from JP Morgan. Please go ahead. Hello, everyone.
Unknown Attendee: They certainly have a demo that looks good they wouldn't have the depth of functionality and products that we've had.
Alexei Mihaylovich Gogolev: Because they haven't been in this space for as long as we have.
Alexei Mihaylovich Gogolev: But they win some business.
Alexei Mihaylovich Gogolev: That's the only that's only part of the battle.
Alexei Mihaylovich Gogolev: We've always said.
Operator: Your next question comes from the line of Alexei Gogolev from JP Morgan. Please go ahead.
Unknown Attendee: Tyler secrets exhaust sources, not just winning the business, but executing on the business and its hard stuff.
Unknown Attendee: Yeah, thanks, Alexei. I'd say, generally, our win rates across the board are consistent. And when you say 50%, that's, you got to look by each sort of major product. So there are certainly some areas where our win rates are, you know, 80%, 85%. Some that are more competitive spaces, you know, we talk about public safety; we talk about sort of the mid to higher ERP space, where there's a lot more competitive market, and they may sort of be around there.
Alexei Mihaylovich Gogolev: Take for example, our municipal and schools Division, which really sales more on the low end of ERP in and has some courts and things like that they did I think last year I mean last quarter. They did 207 go lives in one quarter now obviously thats.
Unknown Attendee: Those are small deals, but that's a lot of business.
Unknown Attendee: And that's.
Unknown Attendee: That's the hard part and and people I think from the outside generally sort of look at Tyler look at Tyler's results and say boy. This is a this is an easy business. This is this business something we got to we got to invest in and get into and what we found not just with venture back, but <unk> PE money that's come in.
Unknown Attendee: So those really haven't changed. You still have some of the same lag factors that we talked about before, between, you know, the time of getting a deal to contract to getting them up and running. But yeah, I mean, as we look out, we've, you know, our overall revenue growth has sort of slowed over the last two years. And I think we've said we expect that to pick back up, and we're starting to see some of that.
Unknown Attendee: As they they don't didn't really understand the market and it's a lot more difficult than it may look at times from the outside and it's a testament to.
Unknown Attendee: All of our hard working people at Tyler, It's Testament to our culture. It's Testament, how we how we view our relationships with our clients.
Operator: Your next question comes from the line of Joshua Reilly from Niedermann Company. Please go ahead.
Speaker Change: So I appreciate you, bringing that up because it's not something we spend a lot of time talking about but it's.
Unknown Attendee: Yeah, thanks for taking my question. So we're hearing some of your venture-backed startup competitors in public safety, specifically records management, are having challenges getting customers live. Are you using this as an opportunity to go back to these customers and highlight the Tyler value proposition? And then, just more broadly, how often are you seeing this across other product lines where some of the venture-backed startups are making promises about getting customers live on timelines that they aren't able to execute on? Thank you. Yeah, Joshua, that's a good question.
Joshua Christopher Reilly: You are only as successful as your last implementation in this business and all our clients talk.
Unknown Attendee: So when you fail everybody knows.
Speaker Change: Thank you.
Unknown Attendee: Your next question comes from Clark Jefferies from Piper Sandler. Please go ahead.
Speaker Change: Hello, Thank you for taking the question Brian.
Unknown Attendee: Brian very encouraging to see operating margins up substantially operating income dollars up 19% year over year, you talked about an improved cloud operations as the driver of that.
Unknown Attendee: Yeah, Joshua, it's a good question and it's something we've seen, I'd say, really over the 25 plus years I've been at Tyler, there always seems to be little periods where someone comes up, makes a little splash, they have a little spotlight on them, they certainly have a demo that looks good, they wouldn't have the depth of functionality and products that we have because they haven't been in the space We've always said part of Tyler's secret sauce is not just winning the business but executing on the business, and it's hard stuff.
Unknown Attendee: Does that mean that some of the capacity and the private cloud has already been reduced.
Speaker Change: You are taking up EPS today, but could you talk a little bit about your expectations for full year.
Unknown Attendee: Operating margins Pan out for the rest of the year. Thank you.
Unknown Attendee: Yes, it's not so much.
Unknown Attendee: Capacity.
Unknown Attendee: We do continue to move clients to AWS and we are on track with our our plans too.
Unknown Attendee: Evacuate our first data center midyear of this year.
Unknown Attendee: But really that.
Unknown Attendee: A lot of those costs don't go out until after that data center is closed so that's not really the biggest factor.
Unknown Attendee: Take, for example, our Municipal and Schools Division, which really sells more on the low end of ERP and has some courts and things like that. They did, I think, last quarter. They did 207 go-lives in one quarter.
Unknown Attendee: Some of the things driving those improved efficiencies are the releases we've had.
Unknown Attendee: Over recent quarters of.
Unknown Attendee: Now, obviously, those are small deals, but that's a lot of business. That's the hard part, and people, I think, from the outside generally sort of look at Tyler, look at Tyler's results, and say, boy, this is an easy business. This business is something we ought to invest in and get into, and what we found, not just with venture-backed but some PE money that's come in, is they didn't really understand the market, and it's a lot more difficult than it may look at times from the outside, and it's a testament to all our hard-working people at Tyler.
Unknown Attendee: The cloud optimized versions of our product, which improves efficiencies and lowers our hosting cost at AWS.
Unknown Attendee: The the.
Unknown Attendee: The progress we've made with version consolidation.
Unknown Attendee: Made significant progress.
Unknown Attendee: Last year and continue to have aggressive plans. This year about sunsetting older versions of products and getting the benefits from both.
Unknown Attendee: Support costs and development costs around.
Unknown Attendee: The expenses associated with supporting multiple versions of multiple products.
Unknown Attendee: It's a testament to our culture. It's a testament to how we view our relationships with our clients. I appreciate you bringing that up because it's not something we spend a lot of time talking about, but you're only as successful as your last implementation in this business, and all our clients talk. When you fail, everybody knows.
Unknown Attendee: And the new AWS agreement.
Unknown Attendee: We talked about last quarter.
Unknown Attendee: Has provided us with.
Unknown Attendee: Increased deficiencies or increased cost efficiencies around our our hosting costs.
Unknown Attendee: All of those are are continuing to play out.
Unknown Attendee: And then.
Unknown Attendee: On the revenue side.
Operator: Thank you. Your next question comes from Clarke Jeffries on behalf of Piper Sandler. Please go ahead. Hello, thank you for taking the question.
Unknown Attendee: The outperformance in terms of revenues, especially on the payment side, where.
Clarke Jeffries: We were able to.
Clarke Jeffries: Cover fixed cost in a better way with with incremental revenues from things like driver history Records above our plan.
Operator: Your next question comes from Clarke Jeffries on behalf of Piper Sandler. Please go ahead.
Operator: That.
Clarke Jeffries: They contributed there and then lastly.
Brian Miller: Yeah, it's not so much the capacity debt. We do continue to move clients to AWS, and we are on track with our plans to evacuate our first data center mid-year of this year. But really, a lot of those costs don't come out until after that data center is closed. So that's not really the biggest factor.
Brian Miller: We mentioned briefly but.
Brian Miller: Continue to have effective expense management of Opex or both.
Brian Miller: Sales and marketing and G&A costs.
Brian Miller: Growing at a slower rate than our.
Brian Miller: And our overall revenue so we're getting efficiencies there.
Speaker Change: <unk> factor into the rest of the year as well, Yeah Clarke I'd add.
Brian Miller: We are seeing efficiencies for the cloud, but they are still along there's still runway to go and the efficiencies that we're going to achieve.
Brian Miller: Some of the things driving those improved cloud efficiencies are the releases we've had in recent quarters of the cloud-optimized versions of our product, which improves the efficiencies and lowers our hosting costs at AWS. The progress we've made with version consolidation, and we made significant progress last year and continue to have aggressive plans this year about sunsetting older versions of products and getting the benefits from both support costs and development costs around the expenses associated with supporting multiple versions of multiple products.
Brian Miller: There are some other internal initiatives, we don't talk a lot about.
Brian Miller: Things like improving our gross margins on pro services, we've seen and we saw an uptick of that in Q1.
Brian Miller: It's really a function of a few different things.
Brian Miller: More of a it's a strategic focus that we started working on last year.
Brian Miller: But it's also a function of that we've had a more stable labor market. Our turnover has been much lower and sort of return back to pre COVID-19 levels and that really helps it helps drive billable utilization.
Brian Miller: Other internal initiatives around things like rationalization of some internal it costs and real estate cost things that we've been working on behind the scenes are all <unk>.
Brian Miller: And the new AWS agreement that we talked about last quarter has provided us with increased efficiencies or increased cost efficiencies around our hosting costs. So all of those are continuing to play out. And then on the revenue side, the outperformance in terms of revenues, especially on payment, we were able to cover fixed costs in a better way with incremental revenues from things like driver history records above our plan. And then lastly, we mentioned briefly, but continue to have effective expense management of OPEX. So both sales and marketing and G&A costs are growing at a slower rate than our competitors.
Brian Miller: Starting to show some results in addition to the cloud but.
Brian Miller: But I wanted to emphasize that the efficiencies that we're going to see from further version consolidation and optimization in all of the things that we're going to do for them in the cloud or are still out there for us to go capture.
Speaker Change: Perfect. Thank you for the color.
Brian Miller: Your next question comes from the line of Michael <unk> from Wells Fargo Securities. Please go ahead.
Speaker Change: Hey, Thanks very much appreciate you taking the question.
Brian Miller: Maybe on transaction revenue.
Brian Miller: The prepared materials mentioned the customer changed from gross to net.
Brian Miller: , Yeah, Clark, I'd add, we are seeing.
Speaker Change: Would be curious on the rationale there or whether that's something we could see other customers are locked for and Bryan maybe you can just walk through both the margin impacts for us to consider there as well as the increased growth guide fast start came up a couple of times on the call, but if theres any supporting commentary on what's driving that.
Unknown Attendee: Yeah, Clarke, I'd add, we are seeing efficiencies through the cloud, but there's still a runway to go in the efficiencies that we're going to achieve, and, you know, there's some other internal initiatives we don't talk a lot about, things like improving our gross margins on pro services. We saw an uptick in that in Q1. That's really a function of a few different things.
Unknown Attendee: It's more of a strategic focus that we started working on last year, but it's also a function of having a more stable labor market. You know, our turnover has been much lower and sort of returned to pre-COVID levels, and that really helps. It helps drive billable utilization. Other internal initiatives around things like, you know, rationalization of some internal IT costs and real estate costs, things that we've been working on behind the scenes are all starting to show some results in addition to the cloud, but I want to emphasize that, you know, the efficiencies that we're going to see from further version consolidation and optimization and all the things that we're going to do in the cloud are still out there for us to go capture.
Speaker Change: Also helpful. Thank you.
Speaker Change: Sure Yes.
Unknown Attendee: Yes last year, and we talked about this.
Unknown Attendee: Last year.
Unknown Attendee: We exited two clients last year and state enterprise clients that it changes from.
Unknown Attendee: The gross to net model.
Unknown Attendee: And still the vast majority of our payments business is on the growth model and we expect that to continue to be the case.
Unknown Attendee: So we really don't see sort of large scale changes like that.
Unknown Attendee: It is a client decision most of our clients prefer that.
Unknown Attendee: The certainty and predictability they get from having a.
Unknown Attendee: Our gross arrangement with us where we're responsible for the merchant fees and interchange fees and bear the risk of the fluctuation of those.
Operator: Your next question comes from the line of Michael Turrin from Wells Fargo Securities. Please go ahead.
Unknown Attendee: And.
Michael James Turrin: So most of our clients prefer that these two clients one changed towards the beginning of the year and the one that's still impacting our comparisons changed mid year last year.
Unknown Attendee: Hey, thanks very much. I appreciate you taking the time to answer the question. Maybe on transaction revenue, the prepared materials mentioned a customer change from gross to net. I would be curious about the rationale there, whether that's something we could see other customers elect for. And, Brian, maybe you can just walk through both the margin impacts for us to consider there, as well as the increased growth guide. Fast start came up a couple of times on the call. But if there's any supporting commentary on what's driving that, it would be also helpful. Thank you.
Unknown Attendee: And they had.
Speaker Change: Roughly between $45 million a quarter of merchant fees associated with that account so.
Unknown Attendee: It will impact us in terms of our comparison.
Unknown Attendee: For the <unk>.
Unknown Attendee: First half of this year and then.
Unknown Attendee: It will lap itself and it won't be a factor so.
Unknown Attendee: As a result, our our growth in.
Brian Miller: Sure. Yeah, last year, and we talked about this some last year, we actually had two clients last year, state enterprise clients that changed from the gross to the net model. And still, the vast majority of our payments business is on the gross model, and we expect that to continue to be the case. So we really don't see sort of large-scale changes like that ahead.
Unknown Attendee: Transaction revenues and because of that impact and again, it's an impact on revenues.
Brian Miller: It actually improves margins by going to the growth model.
Brian Miller: But merchant fees for that.
Brian Miller: First half of the year.
Speaker Change: We'll just be up.
Brian Miller: Transaction fees for the first half of the year growing low single digits, but the second half of the year, we expect low to mid teens when that impacts is lapped.
Brian Miller: It is a client decision. Most of our clients prefer the certainty and predictability they get from having a gross arrangement with us where we're responsible for the merchant fees and interchange fees and bear the risk of the fluctuation of those. And so most of our clients prefer that, these two clients.
Brian Miller: But again don't see that as a real trend going forward, but it is a client decision on an individual basis and different.
Brian Miller: Clients have different approaches to the risk they are willing to take and whether they are willing to manage those.
Brian Miller: And payers merchant interchange fees directly themselves.
Speaker Change: Details helpful. Thanks, Brian.
Brian Miller: One changed towards the beginning of the year, and the one that's still impacting our comparisons changed mid-year last year. And they had – roughly, you know, between four and $5 million, a quarter of merchant fees associated with that account. So it'll impact us in terms of our comparison for the first half of this year, and then it'll lap itself, and it won't be a factor. So as a result, our growth in transaction revenues, because of that impact, and again it's an impact on revenues, it actually improves margins by going to the gross model, but merchant fees for the first half of the year will just be up, or transaction fees for the first half of the year will grow in the low single digits, but the second half of the year we expect them to be low to mid-teens when that impact has worn off.
Brian Miller: Your next question comes from the line of Jonathan Ho from William Blair. Please go ahead.
Brian Miller: Hi.
Speaker Change: Wanted to maybe understand a little bit better the progress that you're seeing I guess, adding more transaction based systems to your existing customers can you give us a sense of how penetrated you are in terms of those transaction systems and whether you're sort of.
Brian Miller: On plan are on track in terms of adding more and more content to these existing contracts. Thank you.
Speaker Change: Yes, that's a good question, Jonathan I don't have those numbers.
Brian Miller: Here off the top of my hand, we certainly can get back to you with those.
Brian Miller: I would I would say that generally speaking we got a long runway left we're still pretty early.
Brian Miller: In our transactions business, you can point to R.
Brian Miller: But again, I don't see that as a real trend going forward, but it is a client decision on an individual basis, and different clients have different approaches to the risk they're willing to take and whether they're willing to manage those risks and pay those merchant interchange fees directly themselves.
Brian Miller: Our presentation at Tyler 2034, how we saw transactions revenue to grow in the cash flow from that.
Brian Miller: Over the next five to six years.
Brian Miller: Yes, we're still in the very early stages has very early innings of driving that cross sell we've done a lot of work with.
Brian Miller: Integrating the payments platform into our our software products that.
Brian Miller: Details helpful. Thanks, Brian. Your next question comes from the line of Jonathan Ho from William Blair. Please go ahead. I just wanted to maybe understand a little bit better why
Jonathan Frank Ho: That have significant payments capabilities things like utility billing in traffic court in licensing and permitting.
Operator: Your next question comes from the line of Jonathan Ho from William Blair. Please go ahead.
Jonathan Frank Ho: And then when you talked about earlier.
Operator: The.
Jonathan Frank Ho: Initiatives, we've had to.
Unknown Attendee: Yeah, that's a good question, Jonathan. I don't have those numbers, just off the top of my hand. We can certainly get back to you with those. I would say that, generally speaking, we have a long runway left. We're still pretty early in our transactions business. You can look point to our presentation at Tyler 2030 for how we saw transactions revenue to grow and the cash flow from that over the next five to six years.
Jonathan Frank Ho: Set in place.
Jonathan Frank Ho: More effective cross selling.
Unknown Attendee: Sales motions.
Unknown Attendee: We're starting to see the impact of that was <unk> 288, new payments deals across tyler's customer base, but it's a very small fraction that we.
Unknown Attendee: Penetrated so far.
Unknown Attendee: Of our software customer base with our payments platform and that continues to.
Unknown Attendee: To build momentum and we're really pleased with I would say at.
Brian Miller: Yeah, we're still in the very early stages, very early innings of driving that process. We've done a lot of work with integrating the payments platform into our software products that have significant payments capabilities, things like utility billing and traffic court, and licensing and permitting. [inaudible] that in place, more effective cross selling. Sales Motions. And we're starting to see the impact of that with, I think, we have 288 new payments deals across Tyler's customer base. But it's a very small fraction that we've penetrated so far of our software customer base with our payments platform.
Unknown Attendee: At least on track with our plans for this year.
Brian Miller: But again in the very early innings of that yes, and I'd add to that Jonathan Lash.
Brian Miller: I guess now two years ago, we acquired rapid financial which has got us into the disbursements world.
Brian Miller: We are we've barely scratched the surface with that so.
Brian Miller: Still a lot to do on both sides I would say if you look again point you are our 2030 presentations I'd say.
Brian Miller: Kind of on track right now for that.
Brian Miller: Okay.
Speaker Change: Great. Thank you.
Brian Miller: Your next question comes from the line of Keith Wholesome from Northcoast Research. Please go ahead.
Brian Miller: Good morning.
Brian Miller: <unk> the comment you made earlier in terms of cyber security as a driver public agencies moving to the cloud are we seeing like we had concerns about ransomware cyber security is perhaps a.
Brian Miller: And that continues to build momentum. And we're really pleased with, I'd say we're at least on track with our plans for this year. But again, in the very early innings of that. Yeah. And I'd add to that, Jonathan. I mean, last...
Brian Miller: A tailwind that you guys are doing now is just for public safety, but across the board and are you seeing the lifecycle of the.
Brian Miller: Systems that you're replacing is that shrinking. So we're seeing an acceleration of the refresh cycle or be it might be small but are we seeing some level that you think.
Unknown Attendee: Yeah, and I'd add to that, Jonathan. I mean, last, I guess now two years ago, we acquired Rapid Financial, which has got us into the disbursements world. We have barely scratched the surface with that. So, you know, there is still a lot to do on both sides. I would say if you look, again, point you to our 2030 presentation, I'd say we're kind of on track right now for the Great, thank you. Your next question comes from the line of Keith Housum from North Coast Research. Please go ahead. Good morning. I want to unpack a box.
Keith Michael Housum: I don't know about that.
Keith Michael Housum: I guess I would just say that.
Keith Michael Housum: Semi commented before on cyber security as we all know what's out there.
Keith Michael Housum: It's a big event when it happens to a client.
Unknown Attendee: <unk>.
Keith Michael Housum: Generally they.
Keith Michael Housum: We said, we they view us and we view them as their as their trusted partner and we're usually there to help them.
Keith Michael Housum: And one of the things that they realized quickly is getting them into the cloud will make them much more secure.
Keith Michael Housum: It is.
Keith Michael Housum: To say that Thats driving flips it is.
Keith Michael Housum: It's not a huge tailwind, but it's out there and it's not necessarily something that we're hoping for.
Operator: Your next question comes from the line of Keith Housum from North Coast Research. Please go ahead. Good morning.
Operator: But.
Keith Michael Housum: It's just a fact of life, that's a fact of doing business in today's world.
Unknown Attendee: I don't know about that. I guess I would just say that, in relation to my comment earlier on cybersecurity, we all know what's out there. It's a big event when it happens to a client. Generally, as I said, they view us, and we view them as their trusted partner, and we're usually there to help them.
Keith Michael Housum: Great. Thank you.
Speaker Change: Your next.
Unknown Attendee: Question comes from the line of Kirk <unk> from Evercore ISI. Please go ahead.
Speaker Change: Yes, thanks very much for taking the question.
Unknown Attendee: Brian on the 21% growth.
Unknown Attendee: And the flip is that just largely pricing.
Unknown Attendee: One of the things that they realize quickly is that getting them into the cloud will make them much more secure. To say that there are driving flips, it is. It's not a huge tailwind, but it's out there. It's not necessarily something that we're hoping for, but it's just a fact of life. It's a fact of doing business in today's world.
Unknown Attendee: Does that include cross sell upsell I guess, what does that entail is that I'm, just trying to get a sense on if that sort of apples to apples or if youre seeing some of those sales synergies, yes, Lynn discussed earlier factoring into that growth as well. Thanks.
Unknown Attendee: Yes.
Unknown Attendee: I think the biggest factor is.
Unknown Attendee: Larger average deal size. So we are seeing at least in the mix this quarter and they won't necessarily be consistent every quarter because of that.
Operator: Great, thank you. Your next question comes from the line of Kirk Materne from Evercore ISI. Please go ahead. Yeah, thanks very much.
Kirk Materne: And it can be kind of lumpy what that mix is but we saw more bigger customers move we highlighted one of them Fulton County, Georgia with their tax solution.
Operator: Your next question comes from the line of Kirk Materne from Evercore ISI. Please go ahead.
Kirk Materne: Something like $1 3 million, an IRR from that one so seeing generally more larger customers in the mix.
Brian Miller: I think the biggest factor is a larger average deal size, so we're seeing at least in the mix this quarter, and it won't necessarily be consistent every quarter because that (inaudible). But there also is upsell in those as well. So, I think the... The average we've talked about still tends to be about a 1.7 or 1.8 times uplift relative to the maintenance. But in some of these, especially some of the larger ones, we've seen a bigger uplift where we've added new services or additional products when they flip. So it is a combination of both of those things.
Kirk Materne: Last quarter, we had our first.
Brian Miller: State Court flip this quarter, we had the appellate court in Kansas flipping so.
Brian Miller: It's more around the average size of the clients, but also as upsell in those as well so.
Brian Miller: I think the.
Brian Miller: The average we've talked about still tends to be about a 1718 times uplift relative to the maintenance, but in some of these especially some of the larger ones we've seen.
Brian Miller: Bigger uplift, where we've added new services or.
Brian Miller: Additional products.
Brian Miller: Products.
Brian Miller: When they flip so combination of both of those things.
Unknown Attendee: Yeah, and Kirk, I think there's also been a few occasions where we may have won business a while ago, and to get that business, we had some contract concessions, maybe had some fixed prices for a period of time, and the SAS Flip is an opportunity to sort of revisit that.
Brian Miller: And Kirk I think there's also been a few occasions, where.
Unknown Attendee: We may have one business, a while ago and to get that business. We had had some contract concessions maybe had some fixed pricing for a period of time and in the SaaS flip is an opportunity to sort of revisit that.
Unknown Attendee: Your next question comes from the line of Gabriela Borges from Goldman Sachs. Please go ahead. Hi, good morning.
Unknown Attendee: Your next question comes from the line of Gabriela Borges from Goldman Sachs. Please go ahead.
Gabriela Borges: Hi, Good morning, Thank you Lynn and Brian I wanted to reconcile some of the commentary you're making on transaction.
Unknown Attendee: Hi, good morning. Thank you.
Unknown Attendee: Lynn and Brian, I wanted to reconcile some of the commentary you're making on transactions and the transaction business. You commented specifically on higher transaction volumes and better pricing. So maybe just help us understand, is the volume a function of the traction you're making on cross-sell and the runway that you talked about earlier? Or is there an underlying dynamic going on as well? And then, if you could touch on pricing as well, is there an additional dynamic around better pricing independent of some of the specific contracts you talked about changing from gross to net and vice versa? Thanks.
Unknown Attendee: Action business.
Unknown Attendee: You comment that specifically around higher transaction volumes.
Unknown Attendee: And our pricing.
Unknown Attendee: Just help us understand mcgloin with function of the traction you're making on cross sell and the runway that you talked about earlier or is there underlying dynamic going on as well and then if you could touch on the pricing as well as there are an additional.
Unknown Attendee: Dynamic around pricing independent of some of the specific contracts and you talked about changing from question that of Vice President.
Speaker Change: Yeah on the pricing side specifically.
Brian Miller: Yeah, on the pricing side, specifically, we've talked about how as we continue to drive more business into the Tyler software customer base, we're able to generally achieve premium pricing or better pricing than a sort of a commodities-type payment arrangement where we provide additional value from things like automated reconciliations. So having the software or the payment platform embedded with the software creates additional value for the customer and lets us get better pricing than some of the just payments only type contracts.
Unknown Attendee: We've talked about.
Brian Miller: We continue to drive.
Brian Miller: More business into the Tyler software customer base.
Brian Miller: We're able to generally achieve.
Brian Miller: The premium pricing or better pricing than sort of a commodities type.
Brian Miller: Payment arrangement, where we provide additional value.
Brian Miller: Things like automated reconciliations.
Brian Miller: So having the software or the payments platform embedded with the software creates additional value for the customer and lets us get better pricing than than some of the.
Brian Miller: Just payments all need type contracts, so as we continue to add those.
Brian Miller: So as we continue to add those, we're seeing improvements there. We've also seen some price increases in some of our revenue sharing arrangements with third-party payment processors that have also benefited us. And then we also saw, even though they're down year over year, we saw better than expected revenues from some of the other transaction volumes, like driver history records, which tend to be a higher-margin business as well. So, sort of a combination of things driving that price increase. Thank you for listening. Your next question comes from the line of Mark Chappell from Loop Capital Markets.
Brian Miller: We're seeing improvements there.
Mark William Schappel: We've seen.
Mark William Schappel: As well as some price increases in some of our.
Brian Miller: Revenue sharing arrangements with third party payment processors.
Mark William Schappel: They have also benefited us and then we also saw.
Mark William Schappel: Even though they are down year over year, we saw better than expected.
Mark William Schappel: Revenues from some of the other transaction volumes like.
Mark William Schappel: The driver history records, which tend to be.
Brian Miller: Our higher margin business as well so.
Brian Miller: Sort of a combination of things driving that pricing.
Mark William Schappel: Thank you for the detail.
Mark William Schappel: Your next question comes from the line of Mark Chaparral from loop capital markets. Please go ahead.
Operator: Your next question comes from the line of Mark Chappell from Loop Capital Markets. Please go ahead.
Mark William Schappel: Alright, Thank you for taking my question.
Mark William Schappel: I believe the remaining ARPA funds must be allocated by year end I was wondering if you could just comment on the impact ARPA funds are having on your business today and whether you anticipate any demand falling off next year as these funds come to an end.
Brian Miller: Yeah, the ARPA funds generally have to be committed by the end of 2024 and spent by the end of 2026. And so the commitments, I mean, largely, I think, at this point, across the universe of our customers and prospects, I think the majority of those have been committed, probably a strong majority, I think, you know, 80, 85%, maybe more than that. But commitment is sort of an internal commitment and doesn't necessarily mean that they've even started a buying process. So they may have committed funds for a new ERP system, but they haven't even issued the RFP yet.
Brian Miller: Yes, the ARPA funds generally have to be.
Brian Miller: Committed by the end of 2024 and spent by the end of 2026.
Brian Miller: And so the commitments I mean, largely I think at this point.
Brian Miller: Across the universe of our customers and prospects.
Brian Miller: I think the majority of those have been committed probably a strong majority of I think.
Brian Miller: 885%, maybe more than that.
Brian Miller: Committed as.
Brian Miller: It's sort of an internal commitment and doesn't necessarily mean that they've even started to buying process. So they may have committed funds for a.
Brian Miller: The new ERP system, but they haven't even issued the RFP yet.
Brian Miller: We've said that we believe it is a factor in the strong market conditions we've talked about, but not the biggest factor. And so we expect it to continue to be a tailwind of some sort through 2026, as those commitments turn into purchases and then turn into deliveries and revenue recognition for us. But we don't expect a big drop-off after that. We've seen some of them, some of the funds used for things like hardware purchases for our school transportation solution that are sort of one-time purchases.
Brian Miller: We've said that we believe it is a factor in the strong market conditions, we've talked about.
Brian Miller: But not the biggest factor.
Brian Miller: And so we expect it to continue to be a tailwind of some sort really through 2026 as those.
Brian Miller: Commitments turn into to purchases and then turned into.
Brian Miller: Deliveries and revenue recognition for us.
Brian Miller: But we don't expect a big drop off after that.
Brian Miller: We've seen some of them some of the funds used for things like <unk>.
Brian Miller: Hardware purchases around our school transportation.
Brian Miller: Solution.
Brian Miller: That are sort of one time purchases, but generally when they're buying something from us it it creates a recurring revenue stream.
Brian Miller: But generally, when they're buying something from us, it creates a recurring revenue stream that they may fund for the first two or three years out of ARPA funds, and then they have an ongoing expense with us for a subscription. So, you know, I think it's a tailwind, not the biggest factor in the market we're seeing, but one that will continue for a while.
Brian Miller: That.
Brian Miller: They may fund.
Brian Miller: The first two or three years out of ARPA funds and then they have an ongoing.
Brian Miller: Expense with us for a subscription so.
Brian Miller: I think it's a tailwind.
Brian Miller: Not the biggest factor in the market, we're seeing the one that will continue for a while.
Operator: Your next question comes from the line of Terry Tillman from Truist Securities. Please go ahead.
Speaker Change: Thank you.
Operator: Your next question comes from the line of Terry Tillman from <unk> Securities. Please go ahead.
Unknown Attendee: Good morning, Lynn, Brian, and Hala. Most of my questions have been answered. But one question I still had was, maybe we could talk about traction with AI-powered acquisitions. I think it was called out, and it's on your slide deck. Just kind of curious, I know these were probably small acquisitions, but I'm curious about the revenue size of these products and maybe the kind of stack rank in terms of being in your possession, you know, with your size and scale and go-to market, how would these opportunities stack up versus maybe what you did in the parks and recreation area or the Vind engine and stuff in jails in the recent past. Just trying to better understand how meaningful these could be. Thank
Terrell Frederick Tillman: Good morning, Lynn, Brian and Halle most of my questions have been asked.
Unknown Attendee: Answered.
Unknown Attendee: But one question I still had was maybe we could talk about traction with AI powered acquisitions I think it was called out and it's on your slide deck.
Unknown Attendee: Kind of curious I know these were probably small acquisitions, but I'm curious about the revenue size of these products and maybe kind of stack rank in terms of in your possession, you know and with your size and scale and go to market. How would these opportunities stack up versus maybe what you did in the parks and recreation area or the vendor engine and stuff in jails in the recent past.
Unknown Attendee: Just trying to better understand how meaningful this could be thank you.
Unknown Attendee: Yeah, thanks, Terry. So I guess first of all, like I said, we're early with these acquisitions. These acquisitions really fit the mold of acquisitions that we've done that have been very successful, which is a product differentiator that we can take into our installed base, where we've got a really commanding position to leverage. I think each one of these three has different growth trajectories, which is another one of our criteria: can this grow at a rate faster than Tyler's overall rate? And I think all three of these clearly tick that box.
Speaker Change: Yes, Thanks Terry.
Unknown Attendee: So I guess first of all like I said, we're early with these acquisitions.
Unknown Attendee: These acquisitions really.
Unknown Attendee: Fit the mould of acquisitions that we've done that are have been very successful which is.
Unknown Attendee: A product differentiator that we can take into our installed base.
Unknown Attendee: We've got a really commanding position to leverage.
Unknown Attendee: I think each one of these three or <unk>.
Unknown Attendee: Different.
Unknown Attendee: Growth trajectories, as which is another one of our criteria is can this grow at a rate faster than tyler's overall rate and I think all three of these clearly clearly tick that box.
Unknown Attendee: I think the acquisition of CSI probably has a little bit bigger near-term market opportunity. The Resource X will drive a lot of revenue in its own right, but it's also going to drive higher win rates for our ERP solutions, which is not necessarily as measurable. AR Inspect, our field operations new product, again, we talked about there being a lot of interest there, a lot of excitement, and I'd expect that really sort of all of them to outperform our expectations coming in, but based on the criteria that I sort of originally outlined.
Unknown Attendee: I think the acquisition of CSI.
Unknown Attendee: Probably has a little bit bigger.
Unknown Attendee: Near term market opportunity.
Unknown Attendee: The resource X will drive sufficient a lot of revenue in its own right, but it's also going to drive higher win rates for our ERP solutions.
Unknown Attendee: Which is not necessarily is measurable.
Unknown Attendee: Inspect our field operations new product.
Unknown Attendee: Again, we talked about there's a lot of interest there are a lot of excitement.
Unknown Attendee: And I would expect that to really sort of all of them to outperform.
Unknown Attendee: Our expectations coming in.
Unknown Attendee: But based on those.
Unknown Attendee: The criteria that I sort of originally outlined so we're excited about all three of these.
Unknown Attendee: So we're excited about all three of these. We're generally excited about every acquisition we do, but these are off and running and off to a good start, and we're already seeing movements in the market based on these three acquisitions, and that's what's really appealing to me, and collectively, the three.
Unknown Attendee: Generally excited about every acquisition we do.
Unknown Attendee: But these are often running and after a good start and we're already seeing.
Unknown Attendee: Seeing movements in the market based on these three acquisitions and Thats whats really appealing to me and collectively those three are around $4 million of revenues for the quarter.
Brian Miller: And collectively, those three are around $4 million in revenues for the quarter. So, yeah, small compared to Tyler's total.
Brian Miller: So.
Brian Miller: Small town appeared to Tyler's total but.
Brian Miller: But interestingly, you know, a couple of deals we called out were significantly sized deals with large customers. So the Dallas County CSI, for example, almost $1 million of ARR from the CSI product. So you can see how, you know, relative to a group that is collectively doing around $4 million a quarter in revenues, adding single contracts that add $1 million of ARR is often a nice start.
Brian Miller: But interesting a couple of those deals we called out were significantly sized deals with.
Brian Miller: With large customers, so the Dallas County, CSI, almost $1 million or they are from the CSI products. So you can see how that.
Brian Miller: Relative to businesses the group that are collectively doing around.
Brian Miller: $4 million a quarter in revenues, adding single contracts that add $1 million of a R.
Brian Miller: This is off to a nice start.
Speaker Change: Definitely thank you.
Operator: Your next question comes from the line of Aleks Zukin from Wolf Research. Please go ahead.
Brian Miller: Your next question comes from the line of Alex Zukin from Wolfe Research. Please go ahead.
Unknown Attendee: Yeah, hey guys, thanks for taking the question. So, correct me if I'm wrong, but this is, I think, the first time since almost like 2014 that you've actually raised the top-line guide for the full year after Q1, so maybe Lynn, just talk about and walk through what's giving you that confidence to do that. You guys don't usually do that.
Aleksandr J. Zukin: Yeah, Hey, guys. Thanks for taking the question so.
Unknown Attendee: Correct me, if I'm wrong, but this is I think the first time since almost like 2014 that you've actually raised the topline guide.
Lynn: For the full year after Q1, so maybe.
Lynn: Let me just talk about and walk through what's giving you that confidence to do that you guys don't usually do that is that improving demand from from new arrangements as it flips as a transaction revenue expectations it might be all of the above.
Unknown Attendee: Is it improving demand from new arrangements? Is it flips? Is it transaction revenue expectations? It might be all of the above. It might be M&A, but what is driving that incremental confidence and conviction to kind of do something you don't usually do?
Unknown Attendee: It might be the M&A, but like what is driving that that incremental confidence and conviction to kind of do something you don't usually do.
Unknown Attendee: Yeah, it's a good point, Alex. And I was, I was actually thinking to myself, when was the last time we'd ever done it? And I couldn't recall. And I did my homework, and it told me it was 10 years ago.
Lynn: Yes, it's a good point, Alex and I was I was actually thinking to myself when was the last time, we've ever done it because I couldnt recall.
Unknown Attendee: You did my homework in and told me it was 10 years ago.
Unknown Attendee: You know, we just came off our management quarterly meetings; we've got really good visibility on what we see out there, and I would say it's improved. I talked earlier about not just the demand in the market but what we're seeing for our sales outlook. We're just seeing a lot of things lining up in a way that gives us that confidence to do it. As you point out, I mean, it's not something we typically do. We were, I wouldn't say we're conservative, but we like to not get ahead of ourselves.
Unknown Attendee: We just come off our management quarterly meetings, we've got really good visibility on what we see out there.
Unknown Attendee: And I would say, it's improved I talked earlier about.
Unknown Attendee: Not just the demand in the market, but what we're seeing for our sales outlook.
Unknown Attendee: We're just seeing a lot of a lot of things lining up in a way that.
Unknown Attendee: It gives us that confidence to do it.
Unknown Attendee: As you pointed out I mean this is not something we typically do we are I wouldn't say, we're conservative, but we'd like to we'd like to not get out ahead of our skis.
Unknown Attendee: And we like to tell you what we're going to do, and then we go do it. And it's just, it's a combination of a lot of factors. I can tell you that for the last couple of years, one of the mantras I've been saying within Tyler to not just the management team but to all the employees, whether it's in a town hall or what is, you know, I've been saying these last couple of years, I've never been more excited about Tyler's future than I am today.
Unknown Attendee: And we'd like to tell you, what we're going to do and I'm going to go do it.
Unknown Attendee: And it's just it's a combination of a lot of factors I can tell you that.
Unknown Attendee: For the last couple of years, one of the mantras I've been saying within Tyler to that just the management team, but to all the employees, whether it's in a town hall or what is.
Unknown Attendee: I would say the last couple of years have never been more excited about <unk> future.
Unknown Attendee: And coming into this year, and really the last couple months, I've switched that a little bit to say I've never been more confident in Tyler's future than I am today. Again, it's just a lot of things going right. We're, we're, we're clicking on all cylinders right now, and we've got an aligned management team with a singular vision and singular focus. There are a lot of initiatives going on at Tyler. I mean, we're not just sitting back. There are a lot of things going on, but I just like where we sit right now.
Unknown Attendee: Than I am today in and coming into this year and really the last couple of months I've switched that a little bit to say I've never been more confident in tyler's future.
Unknown Attendee: Than I am today and.
Unknown Attendee: Again, it's just a lot of things going right.
Unknown Attendee: We're clicking on all cylinders right now and we've got an aligned management team with a with a singular vision singular focus there's a lot of initiatives going on at Tyler I mean, we're not just sitting back there's a lot of things going on.
Unknown Attendee: But I, just like where we sit right now.
Brian Miller: And just generally, the revenue outperformance in Q1, obviously, it was not, you know, sort of a pull forward or timing of things that we might have seen in the later quarters, especially around the transaction-based revenue. It truly was additive to what we expected for the rest of the year, and so that drove us to raise the outlook for the full year.
Unknown Attendee: And just generally the <unk>.
Brian Miller: Revenue outperformance in Q1, obviously, it was not sort of pull forward or timing of things that we.
Brian Miller: We might have seen in the later quarter, especially around the transaction based revenue.
Brian Miller: It was additive to what we.
Brian Miller: Expected for the rest of the year and so.
Brian Miller: That drove.
Brian Miller: Thus raising.
Brian Miller: The outlook for the full year.
Unknown Attendee: And I usually, I usually never ask this follow-up question, particularly because we love margins and we love, you know, we love efficiency, but I guess, given this call, it's once in a decade, an incrementally higher level of confidence and conviction this early in a year. Is there a world where you maybe push the throttle a little bit more on investments, both organic and inorganic, as it does seem like the market is coming to you at a faster pace?
Speaker Change: And I, usually I, usually never ask this follow up question, particularly because we love margins and we love.
Unknown Attendee: We love efficiency, but I guess given this call at once in a decade.
Unknown Attendee: Incrementally higher level of confidence and conviction. This early in a year is there a a world where you do maybe push the throttle a little bit more on investments both organic <unk> inorganic as it does seem like the market.
Unknown Attendee: It seems to be coming to you at a faster pace.
Unknown Attendee: It's a good question, Aleks. I mean, I don't know that we'll deviate from our historical practice of just taking a disciplined approach. We've got plans in place as it relates to margin and investment. I like our balance right now. I like our capital allocation where we sit right now. So I don't think you're going to hear us say, you know, this isn't 2017, or 2018, where we're going to say, hey, this is now the time for elevated investment.
Speaker Change: That's a good question Alex I think.
Unknown Attendee: No that will deviate from our historical practice of.
Unknown Attendee: Just taking a disciplined approach we've got plans in place.
Unknown Attendee: As it relates to margin and investment.
Unknown Attendee: I like I like our balance right now are like our capital allocation.
Unknown Attendee: We sit right now so I don't think youre going to hear US say this isn't 2017 2018, where we're going to say hey. This is now the time for elevated investment we've got plenty of investments going on and.
Unknown Attendee: We've got plenty of investments going on, and like I said, a lot of initiatives both around revenue growth and margin expansion. So I don't think you'll hear that out of us over the next several quarters.
Unknown Attendee: Like I said a lot of initiatives in both around revenue growth and margin expansion. So.
Unknown Attendee: I don't think Youll see youll hear that out of us over the next several quarters.
Unknown Attendee: Excellent, thank you guys, a great quarter.
Speaker Change: Excellent. Thank you guys great quarter.
Speaker Change: Thanks, Alex.
Unknown Attendee: This does conclude our question and answer session. I will now turn the call back over to Lynn Moore for her closing remarks.
Unknown Attendee: This does conclude our question and answer session I will now turn the call back over to Lynn Moore for closing remarks.
Unknown Attendee: Thanks Krista, and thanks everybody for joining us today. If you have any further questions, please feel free to contact Brian Miller or myself. Thanks again, and have a great day.
Unknown Attendee: Thanks, Krista and thanks, everybody for joining us today, if you have any further questions. Please feel free to contact Brian Miller or myself, thanks, again and have a great day.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Speaker Change: Concludes today's conference call.
Speaker Change: Thank you for your participation and you may now disconnect.
Operator: [music].
unknown: [inaudible]
unknown: Yeah.