TYLER TECHNOLOGIES INC — Call Transcript 2025

Ladies and gentlemen, hello and welcome to today's Tyler Technologies Second Quarter 2025 Conference Call. Your host for today's call is Lynn Moore, President and CEO of Tyler Technologies. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. 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. As a reminder, this conference is being recorded today, July 31, 2025. I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. Please go ahead. Thank you, Abby, 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 updates on our annual guidance for 2025. Lynn will end with some additional comments, and then we'll take your questions. During this call, management may make statements that provide information other than historical information and may include projections concerning the company's future prospects, revenues, expenses, and profits. Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections. We would refer you to our Form 10-K and other SEC filings for more information on those risks. 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, a schedule with supplemental information, including information about our quarterly recurring revenues and bookings. On the Events and Presentations tab, we posted an earnings summary with 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? Thanks, Hala. Our second quarter results again exceeded expectations and reflect continued momentum with double-digit total revenue growth, strong profitability, and exceptional free cash flow. Our performance continues to be supported by stable market demand and strong execution as we advance our cloud-first strategy. SaaS revenues grew 21.5%, marking our 18th consecutive quarter of SaaS growth of 20% or more. Transaction-based revenue growth was especially robust and ahead of plan at 21.3%, as quarterly transaction revenue surpassed $200 million for the first time. Our non-GAAP operating margin expanded 200 basis points to 26.5%. In addition, free cash flow grew 80.9% to $88 million, significantly exceeding expectations. As we've discussed on prior calls, we operate in a market defined by inherently long sales cycles, particularly for larger deals, which can create quarterly variability but ultimately support long-term growth. While we still are seeing some scattered delays or cancellations of procurement processes related to the macro environment and noise around federal funding, they are not material. Many of the sales processes that were delayed in Q1 were signed in Q2, and we saw solid sequential improvement in SaaS bookings in Q2. We're seeing no fundamental change in public sector demand or purchasing behavior, and our sales pipeline remains strong, supported by generally stable and healthy budgets, with funding priorities increasingly aligned to technology investments that drive long-term efficiencies through digital modernization. In addition, client conversations at our recent Connect Conference reinforced that the vast majority of Tyler clients do not expect federal funding, DOGE, or other macro factors to impact their spend with Tyler. Our cloud-first strategy is the foundation of our success and is anchored by unifying principles that drive toward a single release stream to better scale, innovate, and deliver improved time-to-value for our clients. By closely aligning our cloud strategy and client success efforts with our deliberate AI approach, we're unlocking the full potential of the cloud while creating deeper client connections through a unified experience that we believe will enhance cross-sell and up-sell opportunities. Our team continues to execute at a high level against our strategic roadmap, reinforcing our leadership position in the public sector and advancing our four key growth pillars: completing our cloud transition, leveraging our large client base, growing our payments business, and expanding into new markets. I'd like to highlight a few second quarter wins that illustrate progress against our growth objectives, with a broader list of key deals included in our quarterly earnings deck. Our largest SaaS deal of the quarter was an $11 million contract that expands our relationship with the Arizona Supreme Court for our Enterprise Supervision Solution. We signed a contract for full enterprise justice on-premises to cloud migration with the Santa Clara County Superior Court in California, the sixth most populous county in the state. This is our first California court flip and represents more than $1 million in SaaS ARR. It was another strong sales quarter in public safety, including a multi-jurisdictional, multi-product, competitive SaaS win with the West Suburban Consolidated Dispatch in the Chicago area, and a full public safety suite SaaS win in Anoka County, Minnesota, worth more than $1 million in ARR. The City of Dallas, Texas, expanded its contract for our Priority-Based Budgeting Solution. The City desired an accelerated deployment to leverage our AI-powered application to identify and prioritize the highest-value budget initiatives for the City and its constituents. The State of Alabama Department of Revenue selected our AI-driven resident assistance solution. This win builds on our resident assistant projects currently in deployment in four other states, including Hawaii, Indiana, Mississippi, and South Carolina. We see a strong pipeline behind these wins as we build upon these successes. We were recently recognized as a leader and visionary in the first-ever Gartner Magic Quadrant for Cloud-based ERP for U.S. local government. We believe this represents a clear testament to the strength of our competitive position, innovation, and the differentiated value of our uniquely integrated suite of public sector solutions. Before I turn the call over to Brian, I'd like to highlight the acquisition of Emergency Networking earlier this week. Emergency Networking, a Tyler partner since 2023, is a leading provider of Cloud-native software for fire departments and emergency medical services agencies, including fire records management and Patient Care Reporting with advanced analytics. The addition of Emergency Networking solutions expands our TAM and adds an important piece to Tyler's public safety portfolio, solidifying our position as a market leader in compliant fire and EMS records management, including the National Emergency Response Information System, or NERIS. We believe Tyler now has the most comprehensive suite of solutions for public safety agencies, from law enforcement to first responders to EMS agencies. Now I'd like for Brian to provide more detail on results for the quarter and our updated annual guidance for 2025. Thanks, Lynn. Total revenues for the quarter were $596.1 million, up 10.2%. Subscriptions revenue increased 21.4%. Within subscriptions, SaaS revenues grew 21.5% to $189.6 million. As we've discussed previously, there's often a lag from the signing of a 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 and SaaS bookings, both year-over-year and sequentially, may fluctuate from quarter to quarter. Transaction revenues grew 21.3% to $215.5 million, driven by higher transaction volumes from both new and existing clients, increased adoption and deployment of new transaction-based services, and higher revenues from third-party payment processing partners. As a reminder, Q2 is typically our highest-volume quarter for transaction revenues, encompassing peak outdoor seasons along with tax filing deadlines. Professional services revenues declined 18.5% to $58.6 million due to both an intentional focus on de-emphasizing low-margin services, as well as the impact of reserves related to projects that were in the implementation phase with agencies in two states. Total bookings for Q2 were 28.8%, up sequentially from Q1, and up 5.1% year-over-year as some delayed Q1 decisions signed during Q2. SaaS bookings in total for Q2, including new SaaS deals, expansions, renewals, and flips, were solid, up 47.7% sequentially from Q1 and up 8.2% year-over-year. During the quarter, we added 172 new SaaS arrangements and signed 118 SaaS flips of existing on-premises clients, with a total contract value of approximately $91 million. Up 35.2% sequentially from Q1, but down 28.4% year-over-year against a difficult comparison, reflecting the lumpiness of large deals. Total ARR from new SaaS deals was approximately $15 million, which more than doubled sequentially from Q1, but was down 7% year-over-year. The average ARR from new SaaS contracts was approximately $87,000, up 65.1% sequentially from Q1 and up 9.8% over last year. The number of SaaS flips grew modestly over last year to 118. Total ARR from SaaS flips was approximately $13.3 million, up 10.9% sequentially from Q1, but down 9.2% year-over-year. Our total annualized recurring revenue was approximately $2.07 billion, up 15.2%. Our non-GAAP operating margin expanded to 26.5%, up 200 basis points from last year. The margin expansion reflects a positive shift in revenue mix towards higher-margin SaaS and transaction revenues, efficiency gains across our cloud operations, and favorable operating expense trends, including leverage in sales and marketing and G&A expenses. 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 included in both revenues and cost of revenues. We incurred merchant fees of approximately $53 million in Q2 compared to $45 million last year. Cash flows from operations and free cash flow were robust at $98.3 million and $88 million, respectively, driven by higher margins and working capital improvements. The recent passage of the One Big Beautiful Bill Act provided a permanent repeal of Section 174, which required capitalization of R&D expenditures for tax purposes, along with favorable changes in the treatment of tax bonus depreciation. As a result, we currently expect that our cash tax payments in the second half of 2025 will be approximately $55 million lower than previously expected, adding approximately 200 basis points to our free cash flow margin for the year. Similarly, we expect that our cash tax payments in 2026 will be minimal. We ended the quarter with $600 million of convertible debt outstanding and cash and investments of approximately $895 million, and net leverage of zero. In light of our strong second quarter results and our positive outlook for the balance of the year, we have revised our annual guidance for 2025 as follows. We expect total revenues will be between $2.33 billion and $2.36 billion. The midpoint of our guidance implies growth of approximately 10%. We expect GAAP diluted EPS will be between $7.40 and $7.70 and may vary significantly due to the impact of discrete tax items on the GAAP effective tax rate. We expect non-GAAP diluted EPS will be between $11.20 and $11.50. Our estimated non-GAAP tax rate for 2025 is expected to be 22.5%. We're currently evaluating potential impacts of the new tax bill on our tax rate going forward. We expect our free cash flow margin will be between 25% and 27%. We expect research and development expense will be in the range of $202 million to $205 million. Other details of our guidance are included in our earnings release and in the Q2 earnings deck posted on our website. I'd also like to add some additional color around our revenue guidance. Subscription revenues in total are expected to grow between 17% and 19%. Within subscriptions, SaaS revenue is expected to grow between 21% and 23%. Transaction revenues are expected to grow between 14% and 16%, with merchant fees up 7% to 9%. We now expect the majority of payment services under the Texas contract to continue through the end of 2025 or early 2026, with full-year revenues of approximately $41 million. Maintenance revenue is expected to decline 4% to 6%. Professional services revenue is expected to decline 3% to 6%. License revenues are expected to decline 16% to 18%. Hardware and other revenue is expected to grow between 3% and 5%. Now I'd like to turn the call back over to Lynn. Thanks, Brian. We closed the second quarter with strong performance and solid execution, positioning us well for the second half of the year. Our results reflect the competitive strength of our diversified business, delivering the broadest, most integrated portfolio of public sector solutions to lead our clients' digitally empowered future. In May, nearly 7,000 clients, sponsors, and team members came together at Tyler Connect 2025 in San Antonio. At the conference, we previewed our AI strategic roadmap with resounding client interest and indications of elevated adoption readiness. Our AI strategy, rooted in three core pillars: productivity, decision-making, and service delivery, will include the introduction of new AI features for multiple products by year-end. We've also worked to standardize our monetization strategy, focusing on a value-based SaaS model that provides the predictability that our clients need. We also highlighted our increased focus on and investments in improving the client experience, including presentations by our new Chief Client Officer, Andrew Coll. You may have seen our Form 8-K filed last week announcing John Marr's intention to end his service on Tyler's board of directors, effective after the company's annual meeting of shareholders in May of 2026. John joined Tyler through the acquisition of Munis, ultimately rising to President and CEO of Tyler. He joined the board of directors in 2002 and has chaired the board since 2017. John's impact on the company is immeasurable, and we look forward to celebrating him and his leadership next year. In the meantime, we extend both our profound thanks and our sincere congratulations to him. We're also grateful that he made this decision months before his actual board service ends so that we have time to execute a thoughtful and responsible board transition. To that end, the independent directors of the board discussed and unanimously agreed that their current intention is to nominate me as the company's next board chair. The independent directors also unanimously agreed that they would continue to appoint a lead independent director for so long as the board chair is not independent. On a personal level, I want to thank John for the remarkable ride we've had together since 1999. I'm deeply grateful for his leadership of the company and the board, but also in my own career at Tyler. I remain fully committed to executing our mission, building momentum on the initiatives we have launched, and delivering value to our shareholders, clients, and Tyler team members. It's been a privilege to do that with John, and I'm as inspired as ever to continue writing more chapters in the incredible story that John helped write. Additionally, I'm pleased to announce the recent appointment of Ryan O’Connor as our Senior Vice President of Payment Strategy and Operations, a newly created executive role to support strategic objectives and further expand our payments market opportunities. Ryan brings more than 30 years of experience in the payments industry and a proven track record of driving innovation and operational excellence. He'll be responsible for Tyler's overall payments strategy, technology, third-party payments partnerships, and day-to-day payments operations. Ryan's strategic counsel will be key in this next phase of our growth as we realize the full potential of Tyler's payments business. Now we'd like to open the line for Q&A. Thank you. We'll now begin the question-and-answer session. To ask a question, please press Star 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset and then press Star 1. If you would like to withdraw your request, press Star 1 a second time. As a reminder, please limit your question to one question so that we may stay within the allotted time. We'll pause just momentarily to assemble our roster. Our first question comes from the line of Terry Tillman with Truist Securities. Your line is open. Yeah, thanks. Good morning. First, I want to say congrats to John and all the best going forward. Hey, Lynn, Brian, and Hala. My one question, I'm going to focus on bookings, the SaaS bookings. I think there was some commentary in the prepared remarks about maybe some benefit from stuff from 1Q to 2Q actually materializing. If I just look at the SaaS bookings, the $148 million to $218 million, that is a substantial uplift sequentially and is higher than any bookings last year, including some quarters where there were some big deals. Just anything you can share more on that bookings because I know part of the definition of the SaaS bookings is not just new deals, but also extensions and renewals. Maybe unpack a little bit more around that SaaS bookings. Thank you. Yeah, Terry. The real strength in the SaaS bookings this quarter, although the new deals, the new logo, new name deals, did improve pretty significantly from Q1 sequentially. That did include the impact of some of the deals that we talked about in Q1 that were delayed. The strength there was around inside sales, which would be expansions, additional sales to existing customers, and renewals. It was a very strong renewal period. Some of that is just timing of when some of the SaaS deals, especially multi-year deals, deals that we signed last year in a very strong bookings year, have renewed. That's really what drove most of that strength. There's really four components there, as you mentioned: new names, additional sales to existing customers, renewals, and flips. The latter three were all pretty strong this quarter. Thank you. Our next question comes from the line of Alexei Gogolev with J.P. Morgan. Your line is open. Hello, everyone. Lynn, yesterday we've heard the Tenable call out improving federal spending environment. How have Tyler's sales cycle evolved since Q1, and what specific improvements are you observing in the pipeline as macro begins to improve? Yeah, Alexi, that's a good question. You're right. I think if you step back and look at the broader economy, you go back just three months ago, there was kind of a lot of noise going on on a lot of things, whether it was Doge or it was Terrace. Things seem to be stabilizing on a more broader level, I think. Reports recently, inflation's down. GDP, I think, was around 3% this past quarter, reflecting, I think, both a change in import-exports. I think there for Q1, there was a lot of pre-term imports coming in. Wages are up. There's an expectation of rate cuts coming. I think some of that market uncertainty is starting to loosen on a broader environment. What we're seeing is there was a little bit of uncertainty, I think, coming out of Q4, really into Q1 around that broader environment. In our business, those deals don't go away. When we talk about our pipeline remains strong, it does remain strong. Even when there's been a little bit of a delay in some decisions, we're still delivering mission-critical systems to our clients. They have to have them. That demand doesn't go away. I think you're starting to see that, and we're seeing that in market activity. An anecdote, for example, in our ERP space, RFPs are up, I think, 25% since Q1. As I said, the demand doesn't go away. The pipeline is still there and robust, and we are starting to see decisions. I think as we continue throughout the year sequentially, we'll be seeing those increase in those decisions more back to what we were accustomed to the last several years. Thank you, Lynn. Our next question comes from the line of Ken Wong with Oppenheimer. Your line is open. Great. Thank you for taking my question. I realize that everyone's still digesting all the potential OVBA impacts. Any thoughts on as more responsibility is pushed down to states, specifically around things like Medicaid, and they're already stretched thin? Any concerns this could potentially influence buying behavior in the near term? Yeah, Ken, that's not something that we're hearing, particularly when you talk about things being pushed down to the states. I mean, what we see is pretty normal budgets. I think NASBO recently came out with a report that state budgets are relatively flat over the past couple of years, and those budgets the last few years have been elevated. Just as a reminder, even in our state business, our DSD business, I think less than 15% of our deals are actually coming from state-funded expenditures as opposed to transaction-based funding. That's a small percent of our business. What I would say is we're not seeing any real change due to that, due to the One Big Beautiful Bill Act. Fantastic. Thanks for the color. Our next question comes from the line of Michael Turrin with Wells Fargo Securities. Your line is open. Hey, great. Thanks. Good morning. I appreciate you taking the question. Brian, I was hoping we could just go back to some of the free cash flow commentary and unpack it a bit more. I guess with Q2 specifically, I'm wondering if anything in terms of transactional performance at all impacts seasonality of free cash flow or anything we should be mindful of. The commentary on the bill impacts, was that 200 basis points for the full year? Just given the change in the second half assumptions, anything additional you can add just there in terms of seasonality as we're updating our forecast and just trying to get a bit more calibration around some of the changes there is helpful. Thank you. Yeah, the 200 basis points is the impact of that $55 million lower cash tax payments for the full year. That is the impact on the full year margin. In terms of seasonality, it wasn't really strong. Seasonally, the second quarter is the strongest quarter for transaction revenues. This quarter was especially strong and exceeded the expectations around the cash flow from those transaction revenues, with higher volumes and some of the newer contracts that we've signed in recent quarters coming online. The third quarter is still our biggest free cash flow quarter by a wide margin, and that continues to be the expectation, especially because we still have a lot of maintenance, the majority of which renews in the third quarter or that we collect the cash for in the third quarter. The really big change to the second half assumption is around the lower cash taxes.We really expect that we won't pay any meaningful federal cash taxes for the next year and a half almost. Thanks very much. Our next question comes from the line of Matt VanVliet with Cantor. Your line is open. Good morning. Thanks for taking the question. I guess when you look at the pipeline for cloud flips, curious on how that was trending into your Connect User Conference, how the conference helped support that. As you look towards the back half of the year, how should we think about the progress of cloud flips and the magnitude of the ARR flipped over? Yeah, Matt, I think I'll start. Brian, you might want to jump in with some specifics. I think generally speaking, as every quarter goes by and as more clients successfully flip to the cloud, it creates more momentum. I've got a phrase I use around Tyler, momentum creates momentum, and we're seeing that. I think the SaaS flip that we did in California is a good example. I can't remember exactly when it was, maybe a year and a half ago, two years ago when we did our first statewide court flip in Idaho, and we talked about how that reference would create more momentum. We're seeing that. I think the other thing is it's one of the things that I think also drives the elevated interest in AI is just some of the unique factors that are going on in the public sector, one being the changing workforce and really the reductions in workforce, which also is going to be driving as people retire, continue to retire, and they're having more difficulty hiring than, say, in the public sector. I think that's also going to continue to fuel momentum in our cloud flip business. With respect to the flips this year, it is a little bit more back-end weighted towards the second half of the year. I think our assumption around flips this year really hasn't changed from where we started out the year. We expect the number of flips to grow around 25% year over year. I would say that our client base, our on-prem client base, is still more heavily weighted towards large customers. As Lynn said, we've only flipped at this point one of our state courts customers. We have a big presence in California with counties that we just flipped the first county there. The timing of the bigger flips really impacts that ARR, and it can be somewhat unpredictable. We still see the sort of the peak of the flips, especially around the bigger customers, somewhere in that 2027, 2028 timeframe. We're working with customers all across our on-prem base to develop timelines for when they'll flip. I think with virtually every customer now, it's a matter of when and not whether they'll flip. We still see that peak a couple of years down the road. Great. Thank you. Our next question comes from the line of Saket Kalia with Barclays. Your line is open. Hey, great. Hey, guys. Thanks for taking my question here. Great to see some of the stabilization. Brian, maybe for you. It was really good to see the SaaS bookings this quarter and that sequential growth. I noticed that you narrowed the SaaS revenue growth for the year just a little bit. It's really not that material. I was just wondering if you could just talk us through what were some of the puts and takes that you considered when doing that. Just broader, remind us what you said about the long-term model here with SaaS growth at Analyst Day. If I remember correctly, it was kind of a two-stage sort of model. Wanted to see if you could just remind us about what that two stages sort of said about SaaS growth. Thanks. Yeah, sure. As we look at the, just as we get further in the year now, halfway through the year, we just have more clarity and are able to narrow that range. I think the biggest variables around the SaaS growth in the current year is not as much the current year bookings. As you get into the second half of the year, they don't have much impact on the current year revenues. Really, fully understanding the timing around the start of revenues around those bookings in the first half of the year, more information around the timing of flips and when those revenue shifts from maintenance to SaaS will occur. Those are the biggest factors that enabled us to kind of narrow that range down a little bit. Really, no fundamental changes there. In terms of the investor day targets, we talked about long-term between the time of the investor day and 2030, recurring revenues in total growing 10% to 12% CAGR with SaaS in the high teens, kind of a 20% CAGR through 2025. As you've seen, we're ahead of pace on that. As we get through that peak of the flips, it starts to move more towards that high teens over that total period, kind of low 20s up through the peak of the flips and then slowing down as we get on the downside of the flip chart. Makes a ton of sense. Thank you. Our next question comes from the line of Joshua Reilly with Needham. Your line is open. Yeah, thanks for taking my question. As we enter the second half of the year here, how should we think about the pipeline for big deals? I know specifically there's two states with RFPs for statewide court management contracts. Any update on how these are progressing and just the overall pipeline for big deals? Thank you. I think, Josh. As we said, just generally, our pipeline is solid. I'm aware generally, I probably can assume which deals you're talking about. We always have a good pipeline in the court space. Those bigger deals in court tend to be lumpy. We expect some large RFPs to be coming out over the next several quarters. We expect to be extremely competitive in those deals. The timing of those is always a little bit uncertain. Even if RFPs were to be announced in the next quarter, say, it would take some time to get through the process and get those signed. I'd say at a high level, the mix of large deals in our pipeline is pretty consistent with what we've seen over a long period of time. As Lynn said, it's really hard to predict the timing until they actually get down to an award. Oftentimes, even when they have published timelines for procurements, they don't stick to them too religiously. I'd say that broadly, the mix of large deals in our pipeline is consistent with kind of our historical norms. Thank you. Our next question comes from the line of Rob Oliver with Baird. Your line is open. Great. Thank you. Good morning. My question is on cross-sell. Brian, I think you mentioned from the SaaS revenue in the quarter, there was a good contribution from inside sales and cross-sell. Lynn, my question for you is, and particularly coming out of Connect, you've done a lot to kind of change the culture internally at Tyler and to drive cross-sell. Two areas of focus. One, where are you seeing kind of the bulk of the cross-sell today, I guess within product sets? How are you seeing the evolution of kind of the One Tyler where you're creating a pipeline of ability to cross-sell, say, public safety into Munis and Odyssey into Munis and vice versa? Thanks very much. Yeah, sure. I think that last point is pretty important. The One Tyler initiative, which really encompasses a lot of things, will become foundational for future cross-sell and upsell. It's more than just things we're doing around our sales teams and how we're now quoting people. Even when we've talked recently about building out a state sales team, which is still in the early stages, it extends into things like how we're approaching the cloud, how we're approaching cloud living, how we're approaching client experience, trying to give all of our clients a single unified experience, both from sales to support to implementation. That's what's going to continue to drive more and more cross-sell and upsell. We're seeing those opportunities really, I'd say, just kind of consistently across the board. I'd say we're still early in the process of capitalizing on the cross-sell upsell opportunities as we continue to build out that sort of One Tyler foundation that, for lack of a better term, sort of helps grease the skids for those types of sales. I continue to see that as one of our long-term growth drivers as we can continue to get more and more of our Tyler products into each of the clients' hands. Great. Thank you. Our next question comes from the line of Jonathan Ho with William Blair. Your line is open. Hi, good morning. Let me echo my congratulations as well. In terms of the transaction-based revenue, what maybe drove the strong performance this quarter? Can you just unpack that for us a little bit more? What maybe causes us to drop back down to more normalized levels over the balance of the year? Thank you. There are a couple of things. Our Tyler payments revenues, as we've talked about, have a focus on a cross-sell focus really into bundling payments in an integrated manner with new Tyler software sales as well as back into our installed base. We've had a lot of success with that really over the last year and continue to work with existing customers to add payments to their software solutions. We've seen good growth in that. We've also seen growth in the revenues that we get from third-party payment relationships with some of our customers, and we've seen nice growth there. In new payment relationships, some of which are really what I kind of like to refer to as SaaS as a transaction, we're providing software but getting paid for it with transaction revenue. For example, the California Parks contract that we talked about last year went live last August, so that's still providing growth for us that wasn't in there last year. Some of our Digital Titling Solutions that are paid for with transaction revenues went live, for example, in the state of New Jersey with that. The Florida payments contract continues to grow as we went live actually last July with SunPass, the toll roads in Florida, so that's new revenue on a year-over-year basis. Texas, which is going away at some point, continues to have higher volumes as well. We saw some increase there. It's really volumes, new customers, and some of those new customers being cross-sells. I guess the things that would—some of the volumes can be seasonal somewhat. Over time, I think as we continue to mine the existing customer base, at some point, we'll sort of reach a peak there and have fewer opportunities or have worked through most of those opportunities. I think we're still some time away from having fully penetrated our customer base, but eventually we'll get there. I think to add to that, Jonathan, just two things. I think you may have covered it, Brian, but we're getting better at accelerating onboarding of our payment streams. We also have some initiatives around trying to help increase adoption within our client base. All the things that Brian mentioned plus those two factors as well. Thank you. Our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open. Hey, guys. Thanks for taking the question. Echo the congrats. I guess maybe just two quick ones for me. First, around the kind of macro timing impacts, is there kind of maybe gauge the level of conservatism still embedded in the outlook for those events just given the kind of maybe lower macro impacts that we've seen thus far? That's just the first one. I have a quick follow-up. Yeah. I mean, as I mentioned earlier, I think there has been a little bit of a macro cloud, maybe the wrong word, but hanging around. What's going on in the general economy, I think, should free up some of that maybe uncertainty we experienced earlier. It's short-lived. I mean, as I said earlier, the demand hadn't gone away. The pipeline hasn't gone away. In terms of conservatism and the remaining outlook for the year, given the timing of even if we start seeing more deals and the timing of them getting online, I wouldn't think that there's really any conservatism right now in our approach for the rest of 2025. Got it. Brian, maybe just on the free cash flow raise, I guess. You have 200 basis points add from the bill. You increased it by 100. Maybe what's that delta tied to? Given that's a half-year number, should we kind of, I know we're not guiding to it yet, but as we kind of tune our models for next year, should we assume kind of a 4 to 500 basis point impact from that for next year on top of what we may have been modeling previously? Yeah. No, I wouldn't do that. I think that would probably be overly aggressive. I think the difference is really around just the impact of higher margins and higher earnings. That's flowing through into cash, especially on the transaction side because the cash flow characteristics of the transaction revenues are really strong. We get the cash when the transaction takes place. Those are the biggest factors: the tax change and just the higher earnings and particularly transaction revenues. I think your starting point is going to be probably somewhere around where we are this year. The impact of basically no federal cash taxes next year, which would have been probably in the $100 million range, but that impact on next year. Got it. Thank you, guys. Our next question comes from the line of Charlie Strauzer with CJS Securities. Your line is open. Hi. Good morning. Just a personal thanks to John for the 23-plus years we've known each other. Thanks to him and you, Brian, especially for introducing us to the Tyler story at the very early days. Really, that's all I had for you guys. Just thank you. Thank you, Charlie. Appreciate that. Our next question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open. Hi. Good morning. Thank you. I wanted to follow up on the prior commentary on the potential for flips to grow around 25% year-over-year. Give us a little bit of a sense of how this progresses from here. I think in the past, you've talked about peak flips being in 2027, 2028. Do you think that 25% can accelerate, or are we talking number of flips versus percentage growth rate? Maybe just a little color on where we go from here on the flips. Yeah. The 25% is number of flips. The dollar value of the flips or the size of the flips from those is the bigger factor. It's a little bit hard to predict. Likely, 2026 is probably something like another 25% on top of where we are in 2025. Acceleration from that to peak in 2027 and 2028. We're probably looking at something like a 25% increase year-over-year in ballpark over the next couple of years, with a continuous increase in the average dollar value of those flips as well. Certainly, compounds around from quarter to quarter. We're still probably on that kind of trajectory over the next couple of years till we get to the peak. I gotcha. Even if the number of flips % growth is steady to improving, the dollar value associated with that flip will be going up. That's correct. That's the trend we expect over the next couple of years, the dollar value increasing more than probably the number of flips. Yeah. Right. Especially as you get into the large court flips, some of those statewide courts, the large counties are multi-million dollar annual maintenance revenue streams. We're continuing to see a pretty consistent around that 1.7x uplift from maintenance to SaaS. Very helpful. Thank you. Our next question comes from the line of Mark Chappell with Loop Capital Markets. Your line is open. Thank you for taking my question and nice job in the quarter. Lynn, I was wondering if you could just provide some additional details around Emergency Networking, the acquisition just announced. Looks like a nice little pickup, but maybe just some additional information such as maybe number of employees or customers, were they a regional player, and were they profitable? Yes. Thanks, Mark. That's a good question. As we said, the primary solution is really in fire records and patient care reporting for EMS. Fire records has always been part of our public safety suite, but something that we actually have not been investing in significantly as we focus more on our CAD and our police records. They've got a cloud-native multi-tenant offering. We've been partners with them for probably two years to help fill that gap. Part of this is what we've called internally a partner-to-acquire model. We kind of tested them out. We've got to know them as people, got to know the culture, got to experience whether or not that product is portable and can move up market the way we expected that it could. It has proved that. There are some new compliance standards in this space. The space has seen a lot of consolidation recently. We talked about it being compliant with NERIS, the National Emergency Response Information System. That's where all these agencies, most of them are on what's called NFIRS, and they're required to move in the beginning of 2026. They've got that solution compliant. It's one of the things that we find really exciting about it. Shortly before or after LOI, but shortly before closing, they had just closed on a statewide Pennsylvania deal, which has garnered a lot of interest. We think we've got the best solution out there in the market. We're excited about it. It is a small company, several million in revenues, a little more than around break even. We believe that we can take this now and do what we've done traditionally with some of these tuck-in acquisitions. It rounds out our portfolio. It makes us even more competitive. With the sort of urgency around this regulatory compliance change and what we've seen with success in the market, we're really pretty excited about it. Thank you. Sounds like a nice pickup. The impact from Emergency Networking, although it's relatively immaterial, is included in our guidance for the year. Our next question comes from the line of Trevor Walsh with Citizens. Your line is open. Great. Thanks, Keene, for taking the question. Lynn, I appreciated all the color around kind of DOGE maybe taking a bit of a backseat or at least the noise around that diminishing and that kind of being a good, I guess, confirmation of stronger budgets at the state level. Have you seen anything, I guess, within the confines of your federal business? I know it's small, but just has that pressure released there? Maybe just get in that broader question, just give us an update on kind of where the opportunities might lie as you go more towards that part of the customer base. Thanks. Yeah, Trevor, you're right. Our federal business is a pretty small piece of our business, less than 5%. What we're seeing right now is that projects haven't been taken away. As you know, Q3 is the biggest quarter for that. It's still a little TBD, but I think, generally speaking, I don't see a material change in our outlook. There will be pockets in federal. As we mentioned in our opening remarks, while there has been some scattered stuff across our diversified portfolio, we don't view any of it as material. Our next question comes from the line of Kirk Materne with Evercore ISI. Your line is open. Hi. This is Dylan for Kirk, and thanks for taking my question. How should we think about trailing 12-month bookings numbers? Is it still a bit too lumpy? Should we look at it more over a trailing two-year basis? The lumpiness probably does sort of point you towards looking at it over a longer basis to get a more accurate trend. We've pointed out in the past, and we'll remind people that last year was a record year for SaaS bookings. We had a number of very large deals, particularly in the third and fourth quarters. We do face difficult comps with that. Just really a lot of it based on timing, but a lot of those came together in the third and fourth quarters of last year. We had large SaaS deals in courts in Arizona. We had a large resident portal deal in Maine. These were $15 million, $20 million kinds of deals. I think the longer, a little bit longer look back probably gives you a more accurate trend that eliminates a little bit more of that lumpiness. As we said, the pipeline, we're really happy with the pipeline, and the outlook for bookings in the second half of the year is solid, but it is up against a really tough comp from the last two quarters or last year's last two quarters. Just keep that in mind. Great. Thanks for taking my question. Our next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Good morning, guys. This is a question for you on bookings. As I look at the bookings here, obviously, it's not quite what you guys are growing in terms of revenue. In terms of your revenue, what do you guys recognize as perhaps not recorded in your bookings? Is there a gap there in terms of payments or whatever you see in revenue, but not in bookings? Payments doesn't show up in bookings at all. It shows up in bookings when the revenue is recognized. If we sign a new payments deal or other transaction-based deal, you won't see that show up in current quarter bookings because even though the revenue stream may be very predictable and there is a lot of comfort around that, it is dependent on the transaction. It doesn't go into the bookings number. New transaction deals, and as I mentioned, we're regularly doing deals where we're delivering software, but it's being paid for through transaction revenues. Those won't show up in that bookings number, but they will show up in revenue growth. There's kind of this hybrid model we have in many cases, which provides us with a strong competitive advantage of being able to deliver software and get paid under a transaction model, especially at the state level. That does have the impact of really kind of understating bookings, especially around the software. Yeah, Keith, a good example. Our ERP suite signed this past quarter a deal in Florida, I think, with the city of Apopka. I don't know how to pronounce it. Apopka, I think, Florida. That was a $370,000-ish annual ARR for SaaS. We expect $330,000 in transactions a year. It's about a $700,000 a year ARR. Of course, most of that transaction doesn't show up in bookings. Just another example. We signed a deal with the State of Oklahoma for our Cashiering product. There is a small SaaS fee associated with it, $140,000-some a year, with transaction revenues associated with it. It's $1 million of ARR. All that showed up in the bookings was $144,000. That’s why we have sort of de-emphasized backlog in bookings in favor of total ARR. Ladies and gentlemen, that concludes our question and answer session. I will now turn the call back over to Mr. Lynn Moore for closing remarks. Great. Thanks, Abby. Thanks, everybody, for joining us today. If you have any further questions, please feel free to reach out to Brian Miller or myself. Thanks, everybody. Have a great day. This concludes today's call, and we thank you for your participation. You may now disconnect.

Speaker 3: Ladies and gentlemen, hello and welcome to today's Tyler Technologies Second Quarter 2025 Conference Call. Your host for today's call is Lynn Moore, President and CEO of Tyler Technologies. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. 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. As a reminder, this conference is being recorded today, July 31, 2025. I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. Please go ahead. Ladies and gentlemen, hello and welcome to today's Tyler Technologies Second Quarter 2025 Conference Call. ladies and gentlemen hello and welcome to today's tyler technologies second quarter 2025 conference call Your host for today's call is Lynn Moore, President and CEO of Tyler Technologies. your host for today's call is lynn moore president and ceo of tyler technologies At this time, all participants are in a listen-only mode. 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. 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. 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. you may get back into the queue for a follow-up As a reminder, this conference is being recorded today, July 31, 2025. as a reminder this conference is being recorded today july 31 2025 I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. i would like to turn the call over to hala elsherbini tyler's senior director of investor relations Please go ahead. please go ahead

Speaker 19: Thank you, Abby, 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 updates on our annual guidance for 2025. Lynn will end with some additional comments, and then we'll take your questions. During this call, management may make statements that provide information other than historical information and may include projections concerning the company's future prospects, revenues, expenses, and profits. Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections. Thank you, Abby, and welcome to our call. thank you abby and welcome to our call With me today is Lynn Moore, our President and Chief Executive Officer, and Brian Miller, our Chief Financial Officer. 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 updates on our annual guidance for 2025. 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 updates on our annual guidance for 2025 Lynn will end with some additional comments, and then we'll take your questions. lynn will end with some additional comments and then we'll take your questions During this 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. during this call management may make statements that provide information other than historical information and may include projections concerning the company's future prospects revenues expenses and profits Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections. such statements are considered forward-looking statements under the safe harbor provision of the private securities litigation reform act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections We would refer you to our Form 10-K and other SEC filings for more information on those risks. 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, a schedule with supplemental information, including information about our quarterly recurring revenues and bookings. On the Events and Presentations tab, we posted an earnings summary with 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? We would refer you to our Form 10-K and other SEC filings for more information on those risks. we would refer you to our form 10-k and other sec filings for more information 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. 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. 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, a schedule with supplemental information, including information about our quarterly recurring revenues and bookings. we have also posted on the investor relations section of our website under the financials tab a schedule with supplemental information including information about our quarterly recurring revenues and bookings On the Events and Presentations tab, we posted an earnings summary with slide deck to supplement our prepared remarks. on the events and presentations tab we posted an earnings summary with 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. 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? lynn

Speaker 6: Thanks, Hala. Our second quarter results again exceeded expectations and reflect continued momentum with double-digit total revenue growth, strong profitability, and exceptional free cash flow. Our performance continues to be supported by stable market demand and strong execution as we advance our cloud-first strategy. SaaS revenues grew 21.5%, marking our 18th consecutive quarter of SaaS growth of 20% or more. Transaction-based revenue growth was especially robust and ahead of plan at 21.3%, as quarterly transaction revenue surpassed $200 million for the first time. Our non-GAAP operating margin expanded 200 basis points to 26.5%. In addition, free cash flow grew 80.9% to $88 million, significantly exceeding expectations. As we've discussed on prior calls, we operate in a market defined by inherently long sales cycles, particularly for larger deals, which can create quarterly variability but ultimately support long-term growth. Thanks, Hala. thanks hala Our second quarter results again exceeded expectations and reflect continued momentum with double-digit total revenue growth, strong profitability, and exceptional free cash flow. our second quarter results again exceeded expectations and reflect continued momentum with double-digit total revenue growth strong profitability and exceptional free cash flow Our performance continues to be supported by stable market demand and strong execution as we advance our cloud-first strategy. our performance continues to be supported by stable market demand and strong execution as we advance our cloud-first strategy SaaS revenues grew 21.5%, marking our 18th consecutive quarter of SaaS growth of 20% or more. saas revenues grew 21.5% marking our 18th consecutive quarter of saas growth of 20% or more Transaction-based revenue growth was especially robust and ahead of plan at 21.3%, as quarterly transaction revenue surpassed $200 million for the first time. transaction-based revenue growth was especially robust and ahead of plan at 21.3% as quarterly transaction revenue surpassed $200 million for the first time Our non-GAAP operating margin expanded 200 basis points to 26.5%. our non-gaap operating margin expanded 200 basis points to 26.5% In addition, free cash flow grew 80.9% to $88 million, significantly exceeding expectations. in addition free cash flow grew 80.9% to $88 million significantly exceeding expectations As we've discussed on prior calls, we operate in a market defined by inherently long sales cycles, particularly for larger deals, which can create quarterly variability but ultimately support long-term growth. as we've discussed on prior calls we operate in a market defined by inherently long sales cycles particularly for larger deals which can create quarterly variability but ultimately support long-term growth While we still are seeing some scattered delays or cancellations of procurement processes related to the macro environment and noise around federal funding, they are not material. Many of the sales processes that were delayed in Q1 were signed in Q2, and we saw solid sequential improvement in SaaS bookings in Q2. We're seeing no fundamental change in public sector demand or purchasing behavior, and our sales pipeline remains strong, supported by generally stable and healthy budgets, with funding priorities increasingly aligned to technology investments that drive long-term efficiencies through digital modernization. In addition, client conversations at our recent Connect Conference reinforced that the vast majority of Tyler clients do not expect federal funding, DOGE, or other macro factors to impact their spend with Tyler. While we still are seeing some scattered delays or cancellations of procurement processes related to the macro environment and noise around federal funding, they are not material. while we still are seeing some scattered delays or cancellations of procurement processes related to the macro environment and noise around federal funding they are not material Many of the sales processes that were delayed in Q1 were signed in Q2, and we saw solid sequential improvement in SaaS bookings in Q2. many of the sales processes that were delayed in q1 were signed in q2 and we saw solid sequential improvement in saas bookings in q2 We're seeing no fundamental change in public sector demand or purchasing behavior, and our sales pipeline remains strong, supported by generally stable and healthy budgets, with funding priorities increasingly aligned to technology investments that drive long-term efficiencies through digital modernization. we're seeing no fundamental change in public sector demand or purchasing behavior and our sales pipeline remains strong supported by generally stable and healthy budgets with funding priorities increasingly aligned to technology investments that drive long-term efficiencies through digital modernization In addition, client conversations at our recent Connect Conference reinforced that the vast majority of Tyler clients do not expect federal funding, DOGE, or other macro factors to impact their spend with Tyler. in addition client conversations at our recent connect conference reinforced that the vast majority of tyler clients do not expect federal funding doge or other macro factors to impact their spend with tyler Our cloud-first strategy is the foundation of our success and is anchored by unifying principles that drive toward a single release stream to better scale, innovate, and deliver improved time-to-value for our clients. By closely aligning our cloud strategy and client success efforts with our deliberate AI approach, we're unlocking the full potential of the cloud while creating deeper client connections through a unified experience that we believe will enhance cross-sell and up-sell opportunities. Our team continues to execute at a high level against our strategic roadmap, reinforcing our leadership position in the public sector and advancing our four key growth pillars: completing our cloud transition, leveraging our large client base, growing our payments business, and expanding into new markets. I'd like to highlight a few second quarter wins that illustrate progress against our growth objectives, with a broader list of key deals included in our quarterly earnings deck. Our cloud-first strategy is the foundation of our success and is anchored by unifying principles that drive toward a single release stream to better scale, innovate, and deliver improved time-to-value for our clients. our cloud-first strategy is the foundation of our success and is anchored by unifying principles that drive toward a single release stream to better scale innovate and deliver improved time-to-value for our clients By closely aligning our cloud strategy and client success efforts with our deliberate AI approach, we're unlocking the full potential of the cloud while creating deeper client connections through a unified experience that we believe will enhance cross-sell and up-sell opportunities. by closely aligning our cloud strategy and client success efforts with our deliberate ai approach we're unlocking the full potential of the cloud while creating deeper client connections through a unified experience that we believe will enhance cross-sell and up-sell opportunities Our team continues to execute at a high level against our strategic roadmap, reinforcing our leadership position in the public sector and advancing our four key growth pillars: completing our cloud transition, leveraging our large client base, growing our payments business, and expanding into new markets. our team continues to execute at a high level against our strategic roadmap reinforcing our leadership position in the public sector and advancing our four key growth pillars completing our cloud transition leveraging our large client base growing our payments business and expanding into new markets I'd like to highlight a few second quarter wins that illustrate progress against our growth objectives, with a broader list of key deals included in our quarterly earnings deck. i'd like to highlight a few second quarter wins that illustrate progress against our growth objectives with a broader list of key deals included in our quarterly earnings deck Our largest SaaS deal of the quarter was an $11 million contract that expands our relationship with the Arizona Supreme Court for our Enterprise Supervision Solution. We signed a contract for full enterprise justice on-premises to cloud migration with the Santa Clara County Superior Court in California, the sixth most populous county in the state. This is our first California court flip and represents more than $1 million in SaaS ARR. It was another strong sales quarter in public safety, including a multi-jurisdictional, multi-product, competitive SaaS win with the West Suburban Consolidated Dispatch in the Chicago area, and a full public safety suite SaaS win in Anoka County, Minnesota, worth more than $1 million in ARR. The City of Dallas, Texas, expanded its contract for our Priority-Based Budgeting Solution. Our largest SaaS deal of the quarter was an $11 million contract that expands our relationship with the Arizona Supreme Court for our Enterprise Supervision Solution. our largest saas deal of the quarter was an $11 million contract that expands our relationship with the arizona supreme court for our enterprise supervision solution We signed a contract for full enterprise justice on-premises to cloud migration with the Santa Clara County Superior Court in California, the sixth most populous county in the state. we signed a contract for full enterprise justice on-premises to cloud migration with the santa clara county superior court in california the sixth most populous county in the state This is our first California court flip and represents more than $1 million in SaaS ARR. this is our first california court flip and represents more than $1 million in saas arr It was another strong sales quarter in public safety, including a multi-jurisdictional, multi-product, competitive SaaS win with the West Suburban Consolidated Dispatch in the Chicago area, and a full public safety suite SaaS win in Anoka County, Minnesota, worth more than $1 million in ARR. it was another strong sales quarter in public safety including a multi-jurisdictional multi-product competitive saas win with the west suburban consolidated dispatch in the chicago area and a full public safety suite saas win in anoka county minnesota worth more than $1 million in arr The City of Dallas, Texas, expanded its contract for our Priority-Based Budgeting Solution. the city of dallas texas expanded its contract for our priority-based budgeting solution The City desired an accelerated deployment to leverage our AI-powered application to identify and prioritize the highest-value budget initiatives for the City and its constituents. The State of Alabama Department of Revenue selected our AI-driven resident assistance solution. This win builds on our resident assistant projects currently in deployment in four other states, including Hawaii, Indiana, Mississippi, and South Carolina. We see a strong pipeline behind these wins as we build upon these successes. We were recently recognized as a leader and visionary in the first-ever Gartner Magic Quadrant for Cloud-based ERP for U.S. local government. We believe this represents a clear testament to the strength of our competitive position, innovation, and the differentiated value of our uniquely integrated suite of public sector solutions. Before I turn the call over to Brian, I'd like to highlight the acquisition of Emergency Networking earlier this week. The City desired an accelerated deployment to leverage our AI-powered application to identify and prioritize the highest-value budget initiatives for the City and its constituents. the city desired an accelerated deployment to leverage our ai-powered application to identify and prioritize the highest-value budget initiatives for the city and its constituents The State of Alabama Department of Revenue selected our AI-driven resident assistance solution. the state of alabama department of revenue selected our ai-driven resident assistance solution This win builds on our resident assistant projects currently in deployment in four other states, including Hawaii, Indiana, Mississippi, and South Carolina. this win builds on our resident assistant projects currently in deployment in four other states including hawaii indiana mississippi and south carolina We see a strong pipeline behind these wins as we build upon these successes. we see a strong pipeline behind these wins as we build upon these successes We were recently recognized as a leader and visionary in the first-ever Gartner Magic Quadrant for Cloud-based ERP for U.S. local government. we were recently recognized as a leader and visionary in the first-ever gartner magic quadrant for cloud-based erp for u.s local government We believe this represents a clear testament to the strength of our competitive position, innovation, and the differentiated value of our uniquely integrated suite of public sector solutions. we believe this represents a clear testament to the strength of our competitive position innovation and the differentiated value of our uniquely integrated suite of public sector solutions Before I turn the call over to Brian, I'd like to highlight the acquisition of Emergency Networking earlier this week. before i turn the call over to brian i'd like to highlight the acquisition of emergency networking earlier this week Emergency Networking, a Tyler partner since 2023, is a leading provider of Cloud-native software for fire departments and emergency medical services agencies, including fire records management and Patient Care Reporting with advanced analytics. The addition of Emergency Networking solutions expands our TAM and adds an important piece to Tyler's public safety portfolio, solidifying our position as a market leader in compliant fire and EMS records management, including the National Emergency Response Information System, or NERIS. We believe Tyler now has the most comprehensive suite of solutions for public safety agencies, from law enforcement to first responders to EMS agencies. Now I'd like for Brian to provide more detail on results for the quarter and our updated annual guidance for 2025. Emergency Networking, a Tyler partner since 2023, is a leading provider of Cloud-native software for fire departments and emergency medical services agencies, including fire records management and Patient Care Reporting with advanced analytics. emergency networking a tyler partner since 2023 is a leading provider of cloud-native software for fire departments and emergency medical services agencies including fire records management and patient care reporting with advanced analytics The addition of Emergency Networking solutions expands our TAM and adds an important piece to Tyler's public safety portfolio, solidifying our position as a market leader in compliant fire and EMS records management, including the National Emergency Response Information System, or NERIS. the addition of emergency networking solutions expands our tam and adds an important piece to tyler's public safety portfolio solidifying our position as a market leader in compliant fire and ems records management including the national emergency response information system or neris We believe Tyler now has the most comprehensive suite of solutions for public safety agencies, from law enforcement to first responders to EMS agencies. we believe tyler now has the most comprehensive suite of solutions for public safety agencies from law enforcement to first responders to ems agencies Now I'd like for Brian to provide more detail on results for the quarter and our updated annual guidance for 2025. now i'd like for brian to provide more detail on results for the quarter and our updated annual guidance for 2025

Speaker 14: Thanks, Lynn. Total revenues for the quarter were $596.1 million, up 10.2%. Subscriptions revenue increased 21.4%. Within subscriptions, SaaS revenues grew 21.5% to $189.6 million. As we've discussed previously, there's often a lag from the signing of a 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 and SaaS bookings, both year-over-year and sequentially, may fluctuate from quarter to quarter. Transaction revenues grew 21.3% to $215.5 million, driven by higher transaction volumes from both new and existing clients, increased adoption and deployment of new transaction-based services, and higher revenues from third-party payment processing partners. As a reminder, Q2 is typically our highest-volume quarter for transaction revenues, encompassing peak outdoor seasons along with tax filing deadlines. Thanks, Lynn. thanks lynn Total revenues for the quarter were $596.1 million, up 10.2%. total revenues for the quarter were $596.1 million up 10.2% Subscriptions revenue increased 21.4%. subscriptions revenue increased 21.4% Within subscriptions, SaaS revenues grew 21.5% to $189.6 million. within subscriptions saas revenues grew 21.5% to $189.6 million As we've discussed previously, there's often a lag from the signing of a new SaaS deal or a flip to the start of revenue recognition that can vary from one to several quarters. as we've discussed previously there's often a lag from the signing of a 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 and SaaS bookings, both year-over-year and sequentially, may fluctuate from quarter to quarter. because of this as well as the timing of saas renewals and related price increases saas revenue growth and saas bookings both year-over-year and sequentially may fluctuate from quarter to quarter Transaction revenues grew 21.3% to $215.5 million, driven by higher transaction volumes from both new and existing clients, increased adoption and deployment of new transaction-based services, and higher revenues from third-party payment processing partners. transaction revenues grew 21.3% to $215.5 million driven by higher transaction volumes from both new and existing clients increased adoption and deployment of new transaction-based services and higher revenues from third-party payment processing partners As a reminder, Q2 is typically our highest-volume quarter for transaction revenues, encompassing peak outdoor seasons along with tax filing deadlines. as a reminder q2 is typically our highest-volume quarter for transaction revenues encompassing peak outdoor seasons along with tax filing deadlines Professional services revenues declined 18.5% to $58.6 million due to both an intentional focus on de-emphasizing low-margin services, as well as the impact of reserves related to projects that were in the implementation phase with agencies in two states. Total bookings for Q2 were 28.8%, up sequentially from Q1, and up 5.1% year-over-year as some delayed Q1 decisions signed during Q2. SaaS bookings in total for Q2, including new SaaS deals, expansions, renewals, and flips, were solid, up 47.7% sequentially from Q1 and up 8.2% year-over-year. During the quarter, we added 172 new SaaS arrangements and signed 118 SaaS flips of existing on-premises clients, with a total contract value of approximately $91 million. Up 35.2% sequentially from Q1, but down 28.4% year-over-year against a difficult comparison, reflecting the lumpiness of large deals. Professional services revenues declined 18.5% to $58.6 million due to both an intentional focus on de-emphasizing low-margin services, as well as the impact of reserves related to projects that were in the implementation phase with agencies in two states. professional services revenues declined 18.5% to $58.6 million due to both an intentional focus on de-emphasizing low-margin services as well as the impact of reserves related to projects that were in the implementation phase with agencies in two states Total bookings for Q2 were 28.8%, up sequentially from Q1, and up 5.1% year-over-year as some delayed Q1 decisions signed during Q2. total bookings for q2 were 28.8% up sequentially from q1 and up 5.1% year-over-year as some delayed q1 decisions signed during q2 SaaS bookings in total for Q2, including new SaaS deals, expansions, renewals, and flips, were solid, up 47.7% sequentially from Q1 and up 8.2% year-over-year. saas bookings in total for q2 including new saas deals expansions renewals and flips were solid up 47.7% sequentially from q1 and up 8.2% year-over-year During the quarter, we added 172 new SaaS arrangements and signed 118 SaaS flips of existing on-premises clients, with a total contract value of approximately $91 million. during the quarter we added 172 new saas arrangements and signed 118 saas flips of existing on-premises clients with a total contract value of approximately $91 million Up 35.2% sequentially from Q1, but down 28.4% year-over-year against a difficult comparison, reflecting the lumpiness of large deals. up 35.2% sequentially from q1 but down 28.4% year-over-year against a difficult comparison reflecting the lumpiness of large deals Total ARR from new SaaS deals was approximately $15 million, which more than doubled sequentially from Q1, but was down 7% year-over-year. The average ARR from new SaaS contracts was approximately $87,000, up 65.1% sequentially from Q1 and up 9.8% over last year. The number of SaaS flips grew modestly over last year to 118. Total ARR from SaaS flips was approximately $13.3 million, up 10.9% sequentially from Q1, but down 9.2% year-over-year. Our total annualized recurring revenue was approximately $2.07 billion, up 15.2%. Our non-GAAP operating margin expanded to 26.5%, up 200 basis points from last year. The margin expansion reflects a positive shift in revenue mix towards higher-margin SaaS and transaction revenues, efficiency gains across our cloud operations, and favorable operating expense trends, including leverage in sales and marketing and G&A expenses. Total ARR from new SaaS deals was approximately $15 million, which more than doubled sequentially from Q1, but was down 7% year-over-year. total arr from new saas deals was approximately $15 million which more than doubled sequentially from q1 but was down 7% year-over-year The average ARR from new SaaS contracts was approximately $87,000, up 65.1% sequentially from Q1 and up 9.8% over last year. the average arr from new saas contracts was approximately $87,000 up 65.1% sequentially from q1 and up 9.8% over last year The number of SaaS flips grew modestly over last year to 118. the number of saas flips grew modestly over last year to 118 Total ARR from SaaS flips was approximately $13.3 million, up 10.9% sequentially from Q1, but down 9.2% year-over-year. total arr from saas flips was approximately $13.3 million up 10.9% sequentially from q1 but down 9.2% year-over-year Our total annualized recurring revenue was approximately $2.07 billion, up 15.2%. our total annualized recurring revenue was approximately $2.07 billion up 15.2% Our non-GAAP operating margin expanded to 26.5%, up 200 basis points from last year. our non-gaap operating margin expanded to 26.5% up 200 basis points from last year The margin expansion reflects a positive shift in revenue mix towards higher-margin SaaS and transaction revenues, efficiency gains across our cloud operations, and favorable operating expense trends, including leverage in sales and marketing and G&A expenses. the margin expansion reflects a positive shift in revenue mix towards higher-margin saas and transaction revenues efficiency gains across our cloud operations and favorable operating expense trends including leverage in sales and marketing and g&a expenses 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 included in both revenues and cost of revenues. We incurred merchant fees of approximately $53 million in Q2 compared to $45 million last year. Cash flows from operations and free cash flow were robust at $98.3 million and $88 million, respectively, driven by higher margins and working capital improvements. The recent passage of the One Big Beautiful Bill Act provided a permanent repeal of Section 174, which required capitalization of R&D expenditures for tax purposes, along with favorable changes in the treatment of tax bonus depreciation. 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 included in both revenues and cost of revenues. 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 included in both revenues and cost of revenues We incurred merchant fees of approximately $53 million in Q2 compared to $45 million last year. we incurred merchant fees of approximately $53 million in q2 compared to $45 million last year Cash flows from operations and free cash flow were robust at $98.3 million and $88 million, respectively, driven by higher margins and working capital improvements. cash flows from operations and free cash flow were robust at $98.3 million and $88 million respectively driven by higher margins and working capital improvements The recent passage of the One Big Beautiful Bill Act provided a permanent repeal of Section 174, which required capitalization of R&D expenditures for tax purposes, along with favorable changes in the treatment of tax bonus depreciation. the recent passage of the one big beautiful bill act provided a permanent repeal of section 174 which required capitalization of r&d expenditures for tax purposes along with favorable changes in the treatment of tax bonus depreciation As a result, we currently expect that our cash tax payments in the second half of 2025 will be approximately $55 million lower than previously expected, adding approximately 200 basis points to our free cash flow margin for the year. Similarly, we expect that our cash tax payments in 2026 will be minimal. We ended the quarter with $600 million of convertible debt outstanding and cash and investments of approximately $895 million, and net leverage of zero. In light of our strong second quarter results and our positive outlook for the balance of the year, we have revised our annual guidance for 2025 as follows. We expect total revenues will be between $2.33 billion and $2.36 billion. The midpoint of our guidance implies growth of approximately 10%. As a result, we currently expect that our cash tax payments in the second half of 2025 will be approximately $55 million lower than previously expected, adding approximately 200 basis points to our free cash flow margin for the year. as a result we currently expect that our cash tax payments in the second half of 2025 will be approximately $55 million lower than previously expected adding approximately 200 basis points to our free cash flow margin for the year Similarly, we expect that our cash tax payments in 2026 will be minimal. similarly we expect that our cash tax payments in 2026 will be minimal We ended the quarter with $600 million of convertible debt outstanding and cash and investments of approximately $895 million, and net leverage of zero. we ended the quarter with $600 million of convertible debt outstanding and cash and investments of approximately $895 million and net leverage of zero In light of our strong second quarter results and our positive outlook for the balance of the year, we have revised our annual guidance for 2025 as follows. in light of our strong second quarter results and our positive outlook for the balance of the year we have revised our annual guidance for 2025 as follows We expect total revenues will be between $2.33 billion and $2.36 billion. we expect total revenues will be between $2.33 billion and $2.36 billion The midpoint of our guidance implies growth of approximately 10%. the midpoint of our guidance implies growth of approximately 10% We expect GAAP diluted EPS will be between $7.40 and $7.70 and may vary significantly due to the impact of discrete tax items on the GAAP effective tax rate. We expect non-GAAP diluted EPS will be between $11.20 and $11.50. Our estimated non-GAAP tax rate for 2025 is expected to be 22.5%. We're currently evaluating potential impacts of the new tax bill on our tax rate going forward. We expect our free cash flow margin will be between 25% and 27%. We expect research and development expense will be in the range of $202 million to $205 million. Other details of our guidance are included in our earnings release and in the Q2 earnings deck posted on our website. I'd also like to add some additional color around our revenue guidance. Subscription revenues in total are expected to grow between 17% and 19%. We expect GAAP diluted EPS will be between $7.40 and $7.70 and may vary significantly due to the impact of discrete tax items on the GAAP effective tax rate. we expect gaap diluted eps will be between $7.40 and $7.70 and may vary significantly due to the impact of discrete tax items on the gaap effective tax rate We expect non-GAAP diluted EPS will be between $11.20 and $11.50. we expect non-gaap diluted eps will be between $11.20 and $11.50 Our estimated non-GAAP tax rate for 2025 is expected to be 22.5%. our estimated non-gaap tax rate for 2025 is expected to be 22.5% We're currently evaluating potential impacts of the new tax bill on our tax rate going forward. we're currently evaluating potential impacts of the new tax bill on our tax rate going forward We expect our free cash flow margin will be between 25% and 27%. we expect our free cash flow margin will be between 25% and 27% We expect research and development expense will be in the range of $202 million to $205 million. we expect research and development expense will be in the range of $202 million to $205 million Other details of our guidance are included in our earnings release and in the Q2 earnings deck posted on our website. other details of our guidance are included in our earnings release and in the q2 earnings deck posted on our website I'd also like to add some additional color around our revenue guidance. i'd also like to add some additional color around our revenue guidance Subscription revenues in total are expected to grow between 17% and 19%. subscription revenues in total are expected to grow between 17% and 19% Within subscriptions, SaaS revenue is expected to grow between 21% and 23%. Transaction revenues are expected to grow between 14% and 16%, with merchant fees up 7% to 9%. We now expect the majority of payment services under the Texas contract to continue through the end of 2025 or early 2026, with full-year revenues of approximately $41 million. Maintenance revenue is expected to decline 4% to 6%. Professional services revenue is expected to decline 3% to 6%. License revenues are expected to decline 16% to 18%. Hardware and other revenue is expected to grow between 3% and 5%. Now I'd like to turn the call back over to Lynn. Within subscriptions, SaaS revenue is expected to grow between 21% and 23%. within subscriptions saas revenue is expected to grow between 21% and 23% Transaction revenues are expected to grow between 14% and 16%, with merchant fees up 7% to 9%. transaction revenues are expected to grow between 14% and 16% with merchant fees up 7% to 9% We now expect the majority of payment services under the Texas contract to continue through the end of 2025 or early 2026, with full-year revenues of approximately $41 million. we now expect the majority of payment services under the texas contract to continue through the end of 2025 or early 2026 with full-year revenues of approximately $41 million Maintenance revenue is expected to decline 4% to 6%. maintenance revenue is expected to decline 4% to 6% Professional services revenue is expected to decline 3% to 6%. professional services revenue is expected to decline 3% to 6% License revenues are expected to decline 16% to 18%. license revenues are expected to decline 16% to 18% Hardware and other revenue is expected to grow between 3% and 5%. hardware and other revenue is expected to grow between 3% and 5% Now I'd like to turn the call back over to Lynn. now i'd like to turn the call back over to lynn

Speaker 6: Thanks, Brian. We closed the second quarter with strong performance and solid execution, positioning us well for the second half of the year. Our results reflect the competitive strength of our diversified business, delivering the broadest, most integrated portfolio of public sector solutions to lead our clients' digitally empowered future. In May, nearly 7,000 clients, sponsors, and team members came together at Tyler Connect 2025 in San Antonio. At the conference, we previewed our AI strategic roadmap with resounding client interest and indications of elevated adoption readiness. Our AI strategy, rooted in three core pillars: productivity, decision-making, and service delivery, will include the introduction of new AI features for multiple products by year-end. We've also worked to standardize our monetization strategy, focusing on a value-based SaaS model that provides the predictability that our clients need. Thanks, Brian. thanks brian We closed the second quarter with strong performance and solid execution, positioning us well for the second half of the year. we closed the second quarter with strong performance and solid execution positioning us well for the second half of the year Our results reflect the competitive strength of our diversified business, delivering the broadest, most integrated portfolio of public sector solutions to lead our clients' digitally empowered future. our results reflect the competitive strength of our diversified business delivering the broadest most integrated portfolio of public sector solutions to lead our clients' digitally empowered future In May, nearly 7,000 clients, sponsors, and team members came together at Tyler Connect 2025 in San Antonio. in may nearly 7,000 clients sponsors and team members came together at tyler connect 2025 in san antonio At the conference, we previewed our AI strategic roadmap with resounding client interest and indications of elevated adoption readiness. at the conference we previewed our ai strategic roadmap with resounding client interest and indications of elevated adoption readiness Our AI strategy, rooted in three core pillars: productivity, decision-making, and service delivery, will include the introduction of new AI features for multiple products by year-end. our ai strategy rooted in three core pillars productivity decision-making and service delivery will include the introduction of new ai features for multiple products by year-end We've also worked to standardize our monetization strategy, focusing on a value-based SaaS model that provides the predictability that our clients need. we've also worked to standardize our monetization strategy focusing on a value-based saas model that provides the predictability that our clients need We also highlighted our increased focus on and investments in improving the client experience, including presentations by our new Chief Client Officer, Andrew Coll. You may have seen our Form 8-K filed last week announcing John Marr's intention to end his service on Tyler's board of directors, effective after the company's annual meeting of shareholders in May of 2026. John joined Tyler through the acquisition of Munis, ultimately rising to President and CEO of Tyler. He joined the board of directors in 2002 and has chaired the board since 2017. John's impact on the company is immeasurable, and we look forward to celebrating him and his leadership next year. In the meantime, we extend both our profound thanks and our sincere congratulations to him. We also highlighted our increased focus on and investments in improving the client experience, including presentations by our new Chief Client Officer, Andrew Coll. we also highlighted our increased focus on and investments in improving the client experience including presentations by our new chief client officer andrew coll You may have seen our Form 8-K filed last week announcing John Marr's intention to end his service on Tyler's board of directors, effective after the company's annual meeting of shareholders in May of 2026. you may have seen our form 8-k filed last week announcing john marr's intention to end his service on tyler's board of directors effective after the company's annual meeting of shareholders in may of 2026 John joined Tyler through the acquisition of Munis, ultimately rising to President and CEO of Tyler. john joined tyler through the acquisition of munis ultimately rising to president and ceo of tyler He joined the board of directors in 2002 and has chaired the board since 2017. he joined the board of directors in 2002 and has chaired the board since 2017 John's impact on the company is immeasurable, and we look forward to celebrating him and his leadership next year. john's impact on the company is immeasurable and we look forward to celebrating him and his leadership next year In the meantime, we extend both our profound thanks and our sincere congratulations to him. in the meantime we extend both our profound thanks and our sincere congratulations to him We're also grateful that he made this decision months before his actual board service ends so that we have time to execute a thoughtful and responsible board transition. To that end, the independent directors of the board discussed and unanimously agreed that their current intention is to nominate me as the company's next board chair. The independent directors also unanimously agreed that they would continue to appoint a lead independent director for so long as the board chair is not independent. On a personal level, I want to thank John for the remarkable ride we've had together since 1999. I'm deeply grateful for his leadership of the company and the board, but also in my own career at Tyler. I remain fully committed to executing our mission, building momentum on the initiatives we have launched, and delivering value to our shareholders, clients, and Tyler team members. We're also grateful that he made this decision months before his actual board service ends so that we have time to execute a thoughtful and responsible board transition. we're also grateful that he made this decision months before his actual board service ends so that we have time to execute a thoughtful and responsible board transition To that end, the independent directors of the board discussed and unanimously agreed that their current intention is to nominate me as the company's next board chair. to that end the independent directors of the board discussed and unanimously agreed that their current intention is to nominate me as the company's next board chair The independent directors also unanimously agreed that they would continue to appoint a lead independent director for so long as the board chair is not independent. the independent directors also unanimously agreed that they would continue to appoint a lead independent director for so long as the board chair is not independent On a personal level, I want to thank John for the remarkable ride we've had together since 1999. on a personal level i want to thank john for the remarkable ride we've had together since 1999 I'm deeply grateful for his leadership of the company and the board, but also in my own career at Tyler. i'm deeply grateful for his leadership of the company and the board but also in my own career at tyler I remain fully committed to executing our mission, building momentum on the initiatives we have launched, and delivering value to our shareholders, clients, and Tyler team members. i remain fully committed to executing our mission building momentum on the initiatives we have launched and delivering value to our shareholders clients and tyler team members It's been a privilege to do that with John, and I'm as inspired as ever to continue writing more chapters in the incredible story that John helped write. Additionally, I'm pleased to announce the recent appointment of Ryan O’Connor as our Senior Vice President of Payment Strategy and Operations, a newly created executive role to support strategic objectives and further expand our payments market opportunities. Ryan brings more than 30 years of experience in the payments industry and a proven track record of driving innovation and operational excellence. He'll be responsible for Tyler's overall payments strategy, technology, third-party payments partnerships, and day-to-day payments operations. Ryan's strategic counsel will be key in this next phase of our growth as we realize the full potential of Tyler's payments business. Now we'd like to open the line for Q&A. It's been a privilege to do that with John, and I'm as inspired as ever to continue writing more chapters in the incredible story that John helped write. it's been a privilege to do that with john and i'm as inspired as ever to continue writing more chapters in the incredible story that john helped write Additionally, I'm pleased to announce the recent appointment of Ryan O’Connor as our Senior Vice President of Payment Strategy and Operations, a newly created executive role to support strategic objectives and further expand our payments market opportunities. additionally i'm pleased to announce the recent appointment of ryan o’connor as our senior vice president of payment strategy and operations a newly created executive role to support strategic objectives and further expand our payments market opportunities Ryan brings more than 30 years of experience in the payments industry and a proven track record of driving innovation and operational excellence. ryan brings more than 30 years of experience in the payments industry and a proven track record of driving innovation and operational excellence He'll be responsible for Tyler's overall payments strategy, technology, third-party payments partnerships, and day-to-day payments operations. he'll be responsible for tyler's overall payments strategy technology third-party payments partnerships and day-to-day payments operations Ryan's strategic counsel will be key in this next phase of our growth as we realize the full potential of Tyler's payments business. ryan's strategic counsel will be key in this next phase of our growth as we realize the full potential of tyler's payments business Now we'd like to open the line for Q&A. now we'd like to open the line for q&a

Speaker 3: Thank you. We'll now begin the question-and-answer session. To ask a question, please press Star 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset and then press Star 1. If you would like to withdraw your request, press Star 1 a second time. As a reminder, please limit your question to one question so that we may stay within the allotted time. We'll pause just momentarily to assemble our roster. Our first question comes from the line of Terry Tillman with Truist Securities. Your line is open. Thank you. thank you We'll now begin the question-and-answer session. we'll now begin the question-and-answer session To ask a question, please press Star 1 on your touch-tone phone. to ask a question please press star 1 on your touch-tone phone If you are using a speakerphone, please pick up your handset and then press Star 1. if you are using a speakerphone please pick up your handset and then press star 1 If you would like to withdraw your request, press Star 1 a second time. if you would like to withdraw your request press star 1 a second time As a reminder, please limit your question to one question so that we may stay within the allotted time. as a reminder please limit your question to one question so that we may stay within the allotted time We'll pause just momentarily to assemble our roster. we'll pause just momentarily to assemble our roster Our first question comes from the line of Terry Tillman with Truist Securities. our first question comes from the line of terry tillman with truist securities Your line is open. your line is open

Speaker 2: Yeah, thanks. Good morning. First, I want to say congrats to John and all the best going forward. Hey, Lynn, Brian, and Hala. My one question, I'm going to focus on bookings, the SaaS bookings. I think there was some commentary in the prepared remarks about maybe some benefit from stuff from 1Q to 2Q actually materializing. If I just look at the SaaS bookings, the $148 million to $218 million, that is a substantial uplift sequentially and is higher than any bookings last year, including some quarters where there were some big deals. Just anything you can share more on that bookings because I know part of the definition of the SaaS bookings is not just new deals, but also extensions and renewals. Maybe unpack a little bit more around that SaaS bookings. Thank you. Yeah, thanks. yeah thanks Good morning. good morning First, I want to say congrats to John and all the best going forward. first i want to say congrats to john and all the best going forward Hey, Lynn, Brian, and Hala. hey lynn brian and hala My one question, I'm going to focus on bookings, the SaaS bookings. my one question i'm going to focus on bookings the saas bookings I think there was some commentary in the prepared remarks about maybe some benefit from stuff from 1Q to 2Q actually materializing. i think there was some commentary in the prepared remarks about maybe some benefit from stuff from 1q to 2q actually materializing If I just look at the SaaS bookings, the $148 million to $218 million, that is a substantial uplift sequentially and is higher than any bookings last year, including some quarters where there were some big deals. if i just look at the saas bookings the $148 million to $218 million that is a substantial uplift sequentially and is higher than any bookings last year including some quarters where there were some big deals Just anything you can share more on that bookings because I know part of the definition of the SaaS bookings is not just new deals, but also extensions and renewals. just anything you can share more on that bookings because i know part of the definition of the saas bookings is not just new deals but also extensions and renewals Maybe unpack a little bit more around that SaaS bookings. maybe unpack a little bit more around that saas bookings Thank you. thank you

Speaker 14: Yeah, Terry. The real strength in the SaaS bookings this quarter, although the new deals, the new logo, new name deals, did improve pretty significantly from Q1 sequentially. That did include the impact of some of the deals that we talked about in Q1 that were delayed. The strength there was around inside sales, which would be expansions, additional sales to existing customers, and renewals. It was a very strong renewal period. Some of that is just timing of when some of the SaaS deals, especially multi-year deals, deals that we signed last year in a very strong bookings year, have renewed. That's really what drove most of that strength. There's really four components there, as you mentioned: new names, additional sales to existing customers, renewals, and flips. The latter three were all pretty strong this quarter. Yeah, Terry. yeah terry The real strength in the SaaS bookings this quarter, although the new deals, the new logo, new name deals, did improve pretty significantly from Q1 sequentially. the real strength in the saas bookings this quarter although the new deals the new logo new name deals did improve pretty significantly from q1 sequentially That did include the impact of some of the deals that we talked about in Q1 that were delayed. that did include the impact of some of the deals that we talked about in q1 that were delayed The strength there was around inside sales, which would be expansions, additional sales to existing customers, and renewals. the strength there was around inside sales which would be expansions additional sales to existing customers and renewals It was a very strong renewal period. it was a very strong renewal period Some of that is just timing of when some of the SaaS deals, especially multi-year deals, deals that we signed last year in a very strong bookings year, have renewed. some of that is just timing of when some of the saas deals especially multi-year deals deals that we signed last year in a very strong bookings year have renewed That's really what drove most of that strength. that's really what drove most of that strength There's really four components there, as you mentioned: new names, additional sales to existing customers, renewals, and flips. there's really four components there as you mentioned new names additional sales to existing customers renewals and flips The latter three were all pretty strong this quarter. the latter three were all pretty strong this quarter

Speaker 2: Thank you. Thank you. thank you

Speaker 3: Our next question comes from the line of Alexei Gogolev with J.P. Morgan. Your line is open. Our next question comes from the line of Alexei Gogolev with J.P. our next question comes from the line of alexei gogolev with j.p Morgan. morgan Your line is open. your line is open

Speaker 7: Hello, everyone. Lynn, yesterday we've heard the Tenable call out improving federal spending environment. How have Tyler's sales cycle evolved since Q1, and what specific improvements are you observing in the pipeline as macro begins to improve? Hello, everyone. hello everyone Lynn, yesterday we've heard the Tenable call out improving federal spending environment. lynn yesterday we've heard the tenable call out improving federal spending environment How have Tyler's sales cycle evolved since Q1, and what specific improvements are you observing in the pipeline as macro begins to improve? how have tyler's sales cycle evolved since q1 and what specific improvements are you observing in the pipeline as macro begins to improve

Speaker 6: Yeah, Alexi, that's a good question. You're right. I think if you step back and look at the broader economy, you go back just three months ago, there was kind of a lot of noise going on on a lot of things, whether it was Doge or it was Terrace. Things seem to be stabilizing on a more broader level, I think. Reports recently, inflation's down. GDP, I think, was around 3% this past quarter, reflecting, I think, both a change in import-exports. I think there for Q1, there was a lot of pre-term imports coming in. Wages are up. There's an expectation of rate cuts coming. I think some of that market uncertainty is starting to loosen on a broader environment. What we're seeing is there was a little bit of uncertainty, I think, coming out of Q4, really into Q1 around that broader environment. Yeah, Alexi, that's a good question. yeah alexi that's a good question You're right. you're right I think if you step back and look at the broader economy, you go back just three months ago, there was kind of a lot of noise going on on a lot of things, whether it was Doge or it was Terrace. i think if you step back and look at the broader economy you go back just three months ago there was kind of a lot of noise going on on a lot of things whether it was doge or it was terrace Things seem to be stabilizing on a more broader level, I think. things seem to be stabilizing on a more broader level i think Reports recently, inflation's down. reports recently inflation's down GDP, I think, was around 3% this past quarter, reflecting, I think, both a change in import-exports. gdp i think was around 3% this past quarter reflecting i think both a change in import-exports I think there for Q1, there was a lot of pre-term imports coming in. i think there for q1 there was a lot of pre-term imports coming in Wages are up. wages are up There's an expectation of rate cuts coming. there's an expectation of rate cuts coming I think some of that market uncertainty is starting to loosen on a broader environment. i think some of that market uncertainty is starting to loosen on a broader environment What we're seeing is there was a little bit of uncertainty, I think, coming out of Q4, really into Q1 around that broader environment. what we're seeing is there was a little bit of uncertainty i think coming out of q4 really into q1 around that broader environment In our business, those deals don't go away. When we talk about our pipeline remains strong, it does remain strong. Even when there's been a little bit of a delay in some decisions, we're still delivering mission-critical systems to our clients. They have to have them. That demand doesn't go away. I think you're starting to see that, and we're seeing that in market activity. An anecdote, for example, in our ERP space, RFPs are up, I think, 25% since Q1. As I said, the demand doesn't go away. The pipeline is still there and robust, and we are starting to see decisions. I think as we continue throughout the year sequentially, we'll be seeing those increase in those decisions more back to what we were accustomed to the last several years. In our business, those deals don't go away. in our business those deals don't go away When we talk about our pipeline remains strong, it does remain strong. when we talk about our pipeline remains strong it does remain strong Even when there's been a little bit of a delay in some decisions, we're still delivering mission-critical systems to our clients. even when there's been a little bit of a delay in some decisions we're still delivering mission-critical systems to our clients They have to have them. they have to have them That demand doesn't go away. that demand doesn't go away I think you're starting to see that, and we're seeing that in market activity. i think you're starting to see that and we're seeing that in market activity An anecdote, for example, in our ERP space, RFPs are up, I think, 25% since Q1. an anecdote for example in our erp space rfps are up i think 25% since q1 As I said, the demand doesn't go away. as i said the demand doesn't go away The pipeline is still there and robust, and we are starting to see decisions. the pipeline is still there and robust and we are starting to see decisions I think as we continue throughout the year sequentially, we'll be seeing those increase in those decisions more back to what we were accustomed to the last several years. i think as we continue throughout the year sequentially we'll be seeing those increase in those decisions more back to what we were accustomed to the last several years

Speaker 7: Thank you, Lynn. Thank you, Lynn. thank you lynn

Speaker 3: Our next question comes from the line of Ken Wong with Oppenheimer. Your line is open. Our next question comes from the line of Ken Wong with Oppenheimer. our next question comes from the line of ken wong with oppenheimer Your line is open. your line is open

Speaker 11: Great. Thank you for taking my question. I realize that everyone's still digesting all the potential OVBA impacts. Any thoughts on as more responsibility is pushed down to states, specifically around things like Medicaid, and they're already stretched thin? Any concerns this could potentially influence buying behavior in the near term? Great. great Thank you for taking my question. thank you for taking my question I realize that everyone's still digesting all the potential OVBA impacts. i realize that everyone's still digesting all the potential ovba impacts Any thoughts on as more responsibility is pushed down to states, specifically around things like Medicaid, and they're already stretched thin? any thoughts on as more responsibility is pushed down to states specifically around things like medicaid and they're already stretched thin Any concerns this could potentially influence buying behavior in the near term? any concerns this could potentially influence buying behavior in the near term

Speaker 6: Yeah, Ken, that's not something that we're hearing, particularly when you talk about things being pushed down to the states. I mean, what we see is pretty normal budgets. I think NASBO recently came out with a report that state budgets are relatively flat over the past couple of years, and those budgets the last few years have been elevated. Just as a reminder, even in our state business, our DSD business, I think less than 15% of our deals are actually coming from state-funded expenditures as opposed to transaction-based funding. That's a small percent of our business. What I would say is we're not seeing any real change due to that, due to the One Big Beautiful Bill Act. Yeah, Ken, that's not something that we're hearing, particularly when you talk about things being pushed down to the states. yeah ken that's not something that we're hearing particularly when you talk about things being pushed down to the states I mean, what we see is pretty normal budgets. i mean what we see is pretty normal budgets I think NASBO recently came out with a report that state budgets are relatively flat over the past couple of years, and those budgets the last few years have been elevated. i think nasbo recently came out with a report that state budgets are relatively flat over the past couple of years and those budgets the last few years have been elevated Just as a reminder, even in our state business, our DSD business, I think less than 15% of our deals are actually coming from state-funded expenditures as opposed to transaction-based funding. just as a reminder even in our state business our dsd business i think less than 15% of our deals are actually coming from state-funded expenditures as opposed to transaction-based funding That's a small percent of our business. that's a small percent of our business What I would say is we're not seeing any real change due to that, due to the One Big Beautiful Bill Act. what i would say is we're not seeing any real change due to that due to the one big beautiful bill act

Speaker 11: Fantastic. Thanks for the color. Fantastic. fantastic Thanks for the color. thanks for the color

Speaker 3: Our next question comes from the line of Michael Turrin with Wells Fargo Securities. Your line is open. Our next question comes from the line of Michael Turrin with Wells Fargo Securities. our next question comes from the line of michael turrin with wells fargo securities Your line is open. your line is open

Speaker 1: Hey, great. Thanks. Good morning. I appreciate you taking the question. Brian, I was hoping we could just go back to some of the free cash flow commentary and unpack it a bit more. I guess with Q2 specifically, I'm wondering if anything in terms of transactional performance at all impacts seasonality of free cash flow or anything we should be mindful of. The commentary on the bill impacts, was that 200 basis points for the full year? Just given the change in the second half assumptions, anything additional you can add just there in terms of seasonality as we're updating our forecast and just trying to get a bit more calibration around some of the changes there is helpful. Thank you. Hey, great. hey great Thanks. thanks Good morning. good morning I appreciate you taking the question. i appreciate you taking the question Brian, I was hoping we could just go back to some of the free cash flow commentary and unpack it a bit more. brian i was hoping we could just go back to some of the free cash flow commentary and unpack it a bit more I guess with Q2 specifically, I'm wondering if anything in terms of transactional performance at all impacts seasonality of free cash flow or anything we should be mindful of. i guess with q2 specifically i'm wondering if anything in terms of transactional performance at all impacts seasonality of free cash flow or anything we should be mindful of The commentary on the bill impacts, was that 200 basis points for the full year? the commentary on the bill impacts was that 200 basis points for the full year Just given the change in the second half assumptions, anything additional you can add just there in terms of seasonality as we're updating our forecast and just trying to get a bit more calibration around some of the changes there is helpful. just given the change in the second half assumptions anything additional you can add just there in terms of seasonality as we're updating our forecast and just trying to get a bit more calibration around some of the changes there is helpful Thank you. thank you

Speaker 14: Yeah, the 200 basis points is the impact of that $55 million lower cash tax payments for the full year. That is the impact on the full year margin. In terms of seasonality, it wasn't really strong. Seasonally, the second quarter is the strongest quarter for transaction revenues. This quarter was especially strong and exceeded the expectations around the cash flow from those transaction revenues, with higher volumes and some of the newer contracts that we've signed in recent quarters coming online. Yeah, the 200 basis points is the impact of that $55 million lower cash tax payments for the full year. yeah the 200 basis points is the impact of that $55 million lower cash tax payments for the full year That is the impact on the full year margin. that is the impact on the full year margin In terms of seasonality, it wasn't really strong. in terms of seasonality it wasn't really strong Seasonally, the second quarter is the strongest quarter for transaction revenues. seasonally the second quarter is the strongest quarter for transaction revenues This quarter was especially strong and exceeded the expectations around the cash flow from those transaction revenues, with higher volumes and some of the newer contracts that we've signed in recent quarters coming online. this quarter was especially strong and exceeded the expectations around the cash flow from those transaction revenues with higher volumes and some of the newer contracts that we've signed in recent quarters coming online The third quarter is still our biggest free cash flow quarter by a wide margin, and that continues to be the expectation, especially because we still have a lot of maintenance, the majority of which renews in the third quarter or that we collect the cash for in the third quarter. The really big change to the second half assumption is around the lower cash taxes.We really expect that we won't pay any meaningful federal cash taxes for the next year and a half almost. The third quarter is still our biggest free cash flow quarter by a wide margin, and that continues to be the expectation, especially because we still have a lot of maintenance, the majority of which renews in the third quarter or that we collect the cash for in the third quarter. the third quarter is still our biggest free cash flow quarter by a wide margin and that continues to be the expectation especially because we still have a lot of maintenance the majority of which renews in the third quarter or that we collect the cash for in the third quarter The really big change to the second half assumption is around the lower cash taxes. the really big change to the second half assumption is around the lower cash taxes We really expect that we won't pay any meaningful federal cash taxes for the next year and a half almost. we really expect that we won't pay any meaningful federal cash taxes for the next year and a half almost

Speaker 1: Thanks very much. Thanks very much. thanks very much

Speaker 3: Our next question comes from the line of Matt VanVliet with Cantor. Your line is open. Our next question comes from the line of Matt Van Vliet with Cantor. our next question comes from the line of matt van vliet with cantor Your line is open. your line is open

Speaker 16: Good morning. Thanks for taking the question. I guess when you look at the pipeline for cloud flips, curious on how that was trending into your Connect User Conference, how the conference helped support that. As you look towards the back half of the year, how should we think about the progress of cloud flips and the magnitude of the ARR flipped over? Good morning. good morning Thanks for taking the question. thanks for taking the question I guess when you look at the pipeline for cloud flips, curious on how that was trending into your Connect User Conference, how the conference helped support that. i guess when you look at the pipeline for cloud flips curious on how that was trending into your connect user conference how the conference helped support that As you look towards the back half of the year, how should we think about the progress of cloud flips and the magnitude of the ARR flipped over? as you look towards the back half of the year how should we think about the progress of cloud flips and the magnitude of the arr flipped over

Speaker 6: Yeah, Matt, I think I'll start. Brian, you might want to jump in with some specifics. I think generally speaking, as every quarter goes by and as more clients successfully flip to the cloud, it creates more momentum. I've got a phrase I use around Tyler, momentum creates momentum, and we're seeing that. I think the SaaS flip that we did in California is a good example. I can't remember exactly when it was, maybe a year and a half ago, two years ago when we did our first statewide court flip in Idaho, and we talked about how that reference would create more momentum. We're seeing that. Yeah, Matt, I think I'll start. yeah matt i think i'll start Brian, you might want to jump in with some specifics. brian you might want to jump in with some specifics I think generally speaking, as every quarter goes by and as more clients successfully flip to the cloud, it creates more momentum. i think generally speaking as every quarter goes by and as more clients successfully flip to the cloud it creates more momentum I've got a phrase I use around Tyler, momentum creates momentum, and we're seeing that. i've got a phrase i use around tyler momentum creates momentum and we're seeing that I think the SaaS flip that we did in California is a good example. i think the saas flip that we did in california is a good example I can't remember exactly when it was, maybe a year and a half ago, two years ago when we did our first statewide court flip in Idaho, and we talked about how that reference would create more momentum. i can't remember exactly when it was maybe a year and a half ago two years ago when we did our first statewide court flip in idaho and we talked about how that reference would create more momentum We're seeing that. we're seeing that I think the other thing is it's one of the things that I think also drives the elevated interest in AI is just some of the unique factors that are going on in the public sector, one being the changing workforce and really the reductions in workforce, which also is going to be driving as people retire, continue to retire, and they're having more difficulty hiring than, say, in the public sector. I think that's also going to continue to fuel momentum in our cloud flip business. I think the other thing is it's one of the things that I think also drives the elevated interest in AI is just some of the unique factors that are going on in the public sector, one being the changing workforce and really the reductions in workforce, which also is going to be driving as people retire, continue to retire, and they're having more difficulty hiring than, say, in the public sector. i think the other thing is it's one of the things that i think also drives the elevated interest in ai is just some of the unique factors that are going on in the public sector one being the changing workforce and really the reductions in workforce which also is going to be driving as people retire continue to retire and they're having more difficulty hiring than say in the public sector I think that's also going to continue to fuel momentum in our cloud flip business. i think that's also going to continue to fuel momentum in our cloud flip business

Speaker 14: With respect to the flips this year, it is a little bit more back-end weighted towards the second half of the year. I think our assumption around flips this year really hasn't changed from where we started out the year. We expect the number of flips to grow around 25% year over year. I would say that our client base, our on-prem client base, is still more heavily weighted towards large customers. As Lynn said, we've only flipped at this point one of our state courts customers. We have a big presence in California with counties that we just flipped the first county there. The timing of the bigger flips really impacts that ARR, and it can be somewhat unpredictable. We still see the sort of the peak of the flips, especially around the bigger customers, somewhere in that 2027, 2028 timeframe. With respect to the flips this year, it is a little bit more back-end weighted towards the second half of the year. with respect to the flips this year it is a little bit more back-end weighted towards the second half of the year I think our assumption around flips this year really hasn't changed from where we started out the year. i think our assumption around flips this year really hasn't changed from where we started out the year We expect the number of flips to grow around 25% year over year. we expect the number of flips to grow around 25% year over year I would say that our client base, our on-prem client base, is still more heavily weighted towards large customers. i would say that our client base our on-prem client base is still more heavily weighted towards large customers As Lynn said, we've only flipped at this point one of our state courts customers. as lynn said we've only flipped at this point one of our state courts customers We have a big presence in California with counties that we just flipped the first county there. we have a big presence in california with counties that we just flipped the first county there The timing of the bigger flips really impacts that ARR, and it can be somewhat unpredictable. the timing of the bigger flips really impacts that arr and it can be somewhat unpredictable We still see the sort of the peak of the flips, especially around the bigger customers, somewhere in that 2027, 2028 timeframe. we still see the sort of the peak of the flips especially around the bigger customers somewhere in that 2027 2028 timeframe We're working with customers all across our on-prem base to develop timelines for when they'll flip. I think with virtually every customer now, it's a matter of when and not whether they'll flip. We still see that peak a couple of years down the road. We're working with customers all across our on-prem base to develop timelines for when they'll flip. we're working with customers all across our on-prem base to develop timelines for when they'll flip I think with virtually every customer now, it's a matter of when and not whether they'll flip. i think with virtually every customer now it's a matter of when and not whether they'll flip We still see that peak a couple of years down the road. we still see that peak a couple of years down the road

Speaker 16: Great. Thank you. Great. great Thank you. thank you

Speaker 3: Our next question comes from the line of Saket Kalia with Barclays. Your line is open. Our next question comes from the line of Saket Kalia with Barclays. our next question comes from the line of saket kalia with barclays Your line is open. your line is open

Speaker 9: Hey, great. Hey, guys. Thanks for taking my question here. Great to see some of the stabilization. Brian, maybe for you. It was really good to see the SaaS bookings this quarter and that sequential growth. I noticed that you narrowed the SaaS revenue growth for the year just a little bit. It's really not that material. I was just wondering if you could just talk us through what were some of the puts and takes that you considered when doing that. Just broader, remind us what you said about the long-term model here with SaaS growth at Analyst Day. If I remember correctly, it was kind of a two-stage sort of model. Wanted to see if you could just remind us about what that two stages sort of said about SaaS growth. Thanks. Hey, great. hey great Hey, guys. hey guys Thanks for taking my question here. thanks for taking my question here Great to see some of the stabilization. great to see some of the stabilization Brian, maybe for you. brian maybe for you It was really good to see the SaaS bookings this quarter and that sequential growth. it was really good to see the saas bookings this quarter and that sequential growth I noticed that you narrowed the SaaS revenue growth for the year just a little bit. i noticed that you narrowed the saas revenue growth for the year just a little bit It's really not that material. it's really not that material I was just wondering if you could just talk us through what were some of the puts and takes that you considered when doing that. i was just wondering if you could just talk us through what were some of the puts and takes that you considered when doing that Just broader, remind us what you said about the long-term model here with SaaS growth at Analyst Day. just broader remind us what you said about the long-term model here with saas growth at analyst day If I remember correctly, it was kind of a two-stage sort of model. if i remember correctly it was kind of a two-stage sort of model Wanted to see if you could just remind us about what that two stages sort of said about SaaS growth. wanted to see if you could just remind us about what that two stages sort of said about saas growth Thanks. thanks

Speaker 14: Yeah, sure. As we look at the, just as we get further in the year now, halfway through the year, we just have more clarity and are able to narrow that range. I think the biggest variables around the SaaS growth in the current year is not as much the current year bookings. As you get into the second half of the year, they don't have much impact on the current year revenues. Really, fully understanding the timing around the start of revenues around those bookings in the first half of the year, more information around the timing of flips and when those revenue shifts from maintenance to SaaS will occur. Those are the biggest factors that enabled us to kind of narrow that range down a little bit. Really, no fundamental changes there. Yeah, sure. yeah sure As we look at the, just as we get further in the year now, halfway through the year, we just have more clarity and are able to narrow that range. as we look at the just as we get further in the year now halfway through the year we just have more clarity and are able to narrow that range I think the biggest variables around the SaaS growth in the current year is not as much the current year bookings. i think the biggest variables around the saas growth in the current year is not as much the current year bookings As you get into the second half of the year, they don't have much impact on the current year revenues. as you get into the second half of the year they don't have much impact on the current year revenues Really, fully understanding the timing around the start of revenues around those bookings in the first half of the year, more information around the timing of flips and when those revenue shifts from maintenance to SaaS will occur. really fully understanding the timing around the start of revenues around those bookings in the first half of the year more information around the timing of flips and when those revenue shifts from maintenance to saas will occur Those are the biggest factors that enabled us to kind of narrow that range down a little bit. those are the biggest factors that enabled us to kind of narrow that range down a little bit Really, no fundamental changes there. really no fundamental changes there In terms of the investor day targets, we talked about long-term between the time of the investor day and 2030, recurring revenues in total growing 10% to 12% CAGR with SaaS in the high teens, kind of a 20% CAGR through 2025. As you've seen, we're ahead of pace on that. As we get through that peak of the flips, it starts to move more towards that high teens over that total period, kind of low 20s up through the peak of the flips and then slowing down as we get on the downside of the flip chart. In terms of the investor day targets, we talked about long-term between the time of the investor day and 2030, recurring revenues in total growing 10% to 12% CAGR with SaaS in the high teens, kind of a 20% CAGR through 2025. in terms of the investor day targets we talked about long-term between the time of the investor day and 2030 recurring revenues in total growing 10% to 12% cagr with saas in the high teens kind of a 20% cagr through 2025 As you've seen, we're ahead of pace on that. as you've seen we're ahead of pace on that As we get through that peak of the flips, it starts to move more towards that high teens over that total period, kind of low 20s up through the peak of the flips and then slowing down as we get on the downside of the flip chart. as we get through that peak of the flips it starts to move more towards that high teens over that total period kind of low 20s up through the peak of the flips and then slowing down as we get on the downside of the flip chart

Speaker 9: Makes a ton of sense. Thank you. Makes a ton of sense. makes a ton of sense Thank you. thank you

Speaker 3: Our next question comes from the line of Joshua Reilly with Needham. Your line is open. Our next question comes from the line of Joshua Reilly with Needham. our next question comes from the line of joshua reilly with needham Your line is open. your line is open

Speaker 12: Yeah, thanks for taking my question. As we enter the second half of the year here, how should we think about the pipeline for big deals? I know specifically there's two states with RFPs for statewide court management contracts. Any update on how these are progressing and just the overall pipeline for big deals? Thank you. Yeah, thanks for taking my question. yeah thanks for taking my question As we enter the second half of the year here, how should we think about the pipeline for big deals? as we enter the second half of the year here how should we think about the pipeline for big deals I know specifically there's two states with RFPs for statewide court management contracts. i know specifically there's two states with rfps for statewide court management contracts Any update on how these are progressing and just the overall pipeline for big deals? any update on how these are progressing and just the overall pipeline for big deals Thank you. thank you

Speaker 6: I think, Josh. As we said, just generally, our pipeline is solid. I'm aware generally, I probably can assume which deals you're talking about. We always have a good pipeline in the court space. Those bigger deals in court tend to be lumpy. We expect some large RFPs to be coming out over the next several quarters. We expect to be extremely competitive in those deals. The timing of those is always a little bit uncertain. Even if RFPs were to be announced in the next quarter, say, it would take some time to get through the process and get those signed. I think, Josh. i think josh As we said, just generally, our pipeline is solid. as we said just generally our pipeline is solid I'm aware generally, I probably can assume which deals you're talking about. i'm aware generally i probably can assume which deals you're talking about We always have a good pipeline in the court space. we always have a good pipeline in the court space Those bigger deals in court tend to be lumpy. those bigger deals in court tend to be lumpy We expect some large RFPs to be coming out over the next several quarters. we expect some large rfps to be coming out over the next several quarters We expect to be extremely competitive in those deals. we expect to be extremely competitive in those deals The timing of those is always a little bit uncertain. the timing of those is always a little bit uncertain Even if RFPs were to be announced in the next quarter, say, it would take some time to get through the process and get those signed. even if rfps were to be announced in the next quarter say it would take some time to get through the process and get those signed

Speaker 14: I'd say at a high level, the mix of large deals in our pipeline is pretty consistent with what we've seen over a long period of time. As Lynn said, it's really hard to predict the timing until they actually get down to an award. Oftentimes, even when they have published timelines for procurements, they don't stick to them too religiously. I'd say that broadly, the mix of large deals in our pipeline is consistent with kind of our historical norms. I'd say at a high level, the mix of large deals in our pipeline is pretty consistent with what we've seen over a long period of time. i'd say at a high level the mix of large deals in our pipeline is pretty consistent with what we've seen over a long period of time As Lynn said, it's really hard to predict the timing until they actually get down to an award. as lynn said it's really hard to predict the timing until they actually get down to an award Oftentimes, even when they have published timelines for procurements, they don't stick to them too religiously. oftentimes even when they have published timelines for procurements they don't stick to them too religiously I'd say that broadly, the mix of large deals in our pipeline is consistent with kind of our historical norms. i'd say that broadly the mix of large deals in our pipeline is consistent with kind of our historical norms

Speaker 12: Thank you. Thank you. thank you

Speaker 3: Our next question comes from the line of Rob Oliver with Baird. Your line is open. Our next question comes from the line of Rob Oliver with Baird. our next question comes from the line of rob oliver with baird Your line is open. your line is open

Speaker 4: Great. Thank you. Good morning. My question is on cross-sell. Brian, I think you mentioned from the SaaS revenue in the quarter, there was a good contribution from inside sales and cross-sell. Lynn, my question for you is, and particularly coming out of Connect, you've done a lot to kind of change the culture internally at Tyler and to drive cross-sell. Two areas of focus. One, where are you seeing kind of the bulk of the cross-sell today, I guess within product sets? How are you seeing the evolution of kind of the One Tyler where you're creating a pipeline of ability to cross-sell, say, public safety into Munis and Odyssey into Munis and vice versa? Thanks very much. Great. great Thank you. thank you Good morning. good morning My question is on cross-sell. my question is on cross-sell Brian, I think you mentioned from the SaaS revenue in the quarter, there was a good contribution from inside sales and cross-sell. brian i think you mentioned from the saas revenue in the quarter there was a good contribution from inside sales and cross-sell Lynn, my question for you is, and particularly coming out of Connect, you've done a lot to kind of change the culture internally at Tyler and to drive cross-sell. lynn my question for you is and particularly coming out of connect you've done a lot to kind of change the culture internally at tyler and to drive cross-sell Two areas of focus. two areas of focus One, where are you seeing kind of the bulk of the cross-sell today, I guess within product sets? one where are you seeing kind of the bulk of the cross-sell today i guess within product sets How are you seeing the evolution of kind of the One Tyler where you're creating a pipeline of ability to cross-sell, say, public safety into Munis and Odyssey into Munis and vice versa? how are you seeing the evolution of kind of the one tyler where you're creating a pipeline of ability to cross-sell say public safety into munis and odyssey into munis and vice versa Thanks very much. thanks very much

Speaker 6: Yeah, sure. I think that last point is pretty important. The One Tyler initiative, which really encompasses a lot of things, will become foundational for future cross-sell and upsell. It's more than just things we're doing around our sales teams and how we're now quoting people. Even when we've talked recently about building out a state sales team, which is still in the early stages, it extends into things like how we're approaching the cloud, how we're approaching cloud living, how we're approaching client experience, trying to give all of our clients a single unified experience, both from sales to support to implementation. That's what's going to continue to drive more and more cross-sell and upsell. We're seeing those opportunities really, I'd say, just kind of consistently across the board. Yeah, sure. yeah sure I think that last point is pretty important. i think that last point is pretty important The One Tyler initiative, which really encompasses a lot of things, will become foundational for future cross-sell and upsell. the one tyler initiative which really encompasses a lot of things will become foundational for future cross-sell and upsell It's more than just things we're doing around our sales teams and how we're now quoting people. it's more than just things we're doing around our sales teams and how we're now quoting people Even when we've talked recently about building out a state sales team, which is still in the early stages, it extends into things like how we're approaching the cloud, how we're approaching cloud living, how we're approaching client experience, trying to give all of our clients a single unified experience, both from sales to support to implementation. even when we've talked recently about building out a state sales team which is still in the early stages it extends into things like how we're approaching the cloud how we're approaching cloud living how we're approaching client experience trying to give all of our clients a single unified experience both from sales to support to implementation That's what's going to continue to drive more and more cross-sell and upsell. that's what's going to continue to drive more and more cross-sell and upsell We're seeing those opportunities really, I'd say, just kind of consistently across the board. we're seeing those opportunities really i'd say just kind of consistently across the board I'd say we're still early in the process of capitalizing on the cross-sell upsell opportunities as we continue to build out that sort of One Tyler foundation that, for lack of a better term, sort of helps grease the skids for those types of sales. I continue to see that as one of our long-term growth drivers as we can continue to get more and more of our Tyler products into each of the clients' hands. I'd say we're still early in the process of capitalizing on the cross-sell upsell opportunities as we continue to build out that sort of One Tyler foundation that, for lack of a better term, sort of helps grease the skids for those types of sales. i'd say we're still early in the process of capitalizing on the cross-sell upsell opportunities as we continue to build out that sort of one tyler foundation that for lack of a better term sort of helps grease the skids for those types of sales I continue to see that as one of our long-term growth drivers as we can continue to get more and more of our Tyler products into each of the clients' hands. i continue to see that as one of our long-term growth drivers as we can continue to get more and more of our tyler products into each of the clients' hands

Speaker 4: Great. Thank you. Great. great Thank you. thank you

Speaker 3: Our next question comes from the line of Jonathan Ho with William Blair. Your line is open. Our next question comes from the line of Jonathan Ho with William Blair. our next question comes from the line of jonathan ho with william blair Your line is open. your line is open

Speaker 15: Hi, good morning. Let me echo my congratulations as well. In terms of the transaction-based revenue, what maybe drove the strong performance this quarter? Can you just unpack that for us a little bit more? What maybe causes us to drop back down to more normalized levels over the balance of the year? Thank you. Hi, good morning. hi good morning Let me echo my congratulations as well. let me echo my congratulations as well In terms of the transaction-based revenue, what maybe drove the strong performance this quarter? in terms of the transaction-based revenue what maybe drove the strong performance this quarter Can you just unpack that for us a little bit more? can you just unpack that for us a little bit more What maybe causes us to drop back down to more normalized levels over the balance of the year? what maybe causes us to drop back down to more normalized levels over the balance of the year Thank you. thank you

Speaker 14: There are a couple of things. Our Tyler payments revenues, as we've talked about, have a focus on a cross-sell focus really into bundling payments in an integrated manner with new Tyler software sales as well as back into our installed base. We've had a lot of success with that really over the last year and continue to work with existing customers to add payments to their software solutions. We've seen good growth in that. We've also seen growth in the revenues that we get from third-party payment relationships with some of our customers, and we've seen nice growth there. In new payment relationships, some of which are really what I kind of like to refer to as SaaS as a transaction, we're providing software but getting paid for it with transaction revenue. There are a couple of things. there are a couple of things Our Tyler payments revenues, as we've talked about, have a focus on a cross-sell focus really into bundling payments in an integrated manner with new Tyler software sales as well as back into our installed base. our tyler payments revenues as we've talked about have a focus on a cross-sell focus really into bundling payments in an integrated manner with new tyler software sales as well as back into our installed base We've had a lot of success with that really over the last year and continue to work with existing customers to add payments to their software solutions. we've had a lot of success with that really over the last year and continue to work with existing customers to add payments to their software solutions We've seen good growth in that. we've seen good growth in that We've also seen growth in the revenues that we get from third-party payment relationships with some of our customers, and we've seen nice growth there. we've also seen growth in the revenues that we get from third-party payment relationships with some of our customers and we've seen nice growth there In new payment relationships, some of which are really what I kind of like to refer to as SaaS as a transaction, we're providing software but getting paid for it with transaction revenue. in new payment relationships some of which are really what i kind of like to refer to as saas as a transaction we're providing software but getting paid for it with transaction revenue For example, the California Parks contract that we talked about last year went live last August, so that's still providing growth for us that wasn't in there last year. Some of our Digital Titling Solutions that are paid for with transaction revenues went live, for example, in the state of New Jersey with that. The Florida payments contract continues to grow as we went live actually last July with SunPass, the toll roads in Florida, so that's new revenue on a year-over-year basis. Texas, which is going away at some point, continues to have higher volumes as well. We saw some increase there. It's really volumes, new customers, and some of those new customers being cross-sells. I guess the things that would—some of the volumes can be seasonal somewhat. For example, the California Parks contract that we talked about last year went live last August, so that's still providing growth for us that wasn't in there last year. for example the california parks contract that we talked about last year went live last august so that's still providing growth for us that wasn't in there last year Some of our Digital Titling Solutions that are paid for with transaction revenues went live, for example, in the state of New Jersey with that. some of our digital titling solutions that are paid for with transaction revenues went live for example in the state of new jersey with that The Florida payments contract continues to grow as we went live actually last July with SunPass, the toll roads in Florida, so that's new revenue on a year-over-year basis. the florida payments contract continues to grow as we went live actually last july with sunpass the toll roads in florida so that's new revenue on a year-over-year basis Texas, which is going away at some point, continues to have higher volumes as well. texas which is going away at some point continues to have higher volumes as well We saw some increase there. we saw some increase there It's really volumes, new customers, and some of those new customers being cross-sells. it's really volumes new customers and some of those new customers being cross-sells I guess the things that would—some of the volumes can be seasonal somewhat. i guess the things that would—some of the volumes can be seasonal somewhat Over time, I think as we continue to mine the existing customer base, at some point, we'll sort of reach a peak there and have fewer opportunities or have worked through most of those opportunities. I think we're still some time away from having fully penetrated our customer base, but eventually we'll get there. Over time, I think as we continue to mine the existing customer base, at some point, we'll sort of reach a peak there and have fewer opportunities or have worked through most of those opportunities. over time i think as we continue to mine the existing customer base at some point we'll sort of reach a peak there and have fewer opportunities or have worked through most of those opportunities I think we're still some time away from having fully penetrated our customer base, but eventually we'll get there. i think we're still some time away from having fully penetrated our customer base but eventually we'll get there

Speaker 6: I think to add to that, Jonathan, just two things. I think you may have covered it, Brian, but we're getting better at accelerating onboarding of our payment streams. We also have some initiatives around trying to help increase adoption within our client base. All the things that Brian mentioned plus those two factors as well. I think to add to that, Jonathan, just two things. i think to add to that jonathan just two things I think you may have covered it, Brian, but we're getting better at accelerating onboarding of our payment streams. i think you may have covered it brian but we're getting better at accelerating onboarding of our payment streams We also have some initiatives around trying to help increase adoption within our client base. we also have some initiatives around trying to help increase adoption within our client base All the things that Brian mentioned plus those two factors as well. all the things that brian mentioned plus those two factors as well

Speaker 15: Thank you. Thank you. thank you

Speaker 3: Our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open. Our next question comes from the line of Alex Zukin with Wolfe Research. our next question comes from the line of alex zukin with wolfe research Your line is open. your line is open

Speaker 18: Hey, guys. Thanks for taking the question. Echo the congrats. I guess maybe just two quick ones for me. First, around the kind of macro timing impacts, is there kind of maybe gauge the level of conservatism still embedded in the outlook for those events just given the kind of maybe lower macro impacts that we've seen thus far? That's just the first one. I have a quick follow-up. Hey, guys. hey guys Thanks for taking the question. thanks for taking the question Echo the congrats. echo the congrats I guess maybe just two quick ones for me. i guess maybe just two quick ones for me First, around the kind of macro timing impacts, is there kind of maybe gauge the level of conservatism still embedded in the outlook for those events just given the kind of maybe lower macro impacts that we've seen thus far? first around the kind of macro timing impacts is there kind of maybe gauge the level of conservatism still embedded in the outlook for those events just given the kind of maybe lower macro impacts that we've seen thus far That's just the first one. that's just the first one I have a quick follow-up. i have a quick follow-up

Speaker 6: Yeah. I mean, as I mentioned earlier, I think there has been a little bit of a macro cloud, maybe the wrong word, but hanging around. What's going on in the general economy, I think, should free up some of that maybe uncertainty we experienced earlier. It's short-lived. I mean, as I said earlier, the demand hadn't gone away. The pipeline hasn't gone away. In terms of conservatism and the remaining outlook for the year, given the timing of even if we start seeing more deals and the timing of them getting online, I wouldn't think that there's really any conservatism right now in our approach for the rest of 2025. Yeah. yeah I mean, as I mentioned earlier, I think there has been a little bit of a macro cloud, maybe the wrong word, but hanging around. i mean as i mentioned earlier i think there has been a little bit of a macro cloud maybe the wrong word but hanging around What's going on in the general economy, I think, should free up some of that maybe uncertainty we experienced earlier. what's going on in the general economy i think should free up some of that maybe uncertainty we experienced earlier It's short-lived. it's short-lived I mean, as I said earlier, the demand hadn't gone away. i mean as i said earlier the demand hadn't gone away The pipeline hasn't gone away. the pipeline hasn't gone away In terms of conservatism and the remaining outlook for the year, given the timing of even if we start seeing more deals and the timing of them getting online, I wouldn't think that there's really any conservatism right now in our approach for the rest of 2025. in terms of conservatism and the remaining outlook for the year given the timing of even if we start seeing more deals and the timing of them getting online i wouldn't think that there's really any conservatism right now in our approach for the rest of 2025

Speaker 18: Got it. Brian, maybe just on the free cash flow raise, I guess. You have 200 basis points add from the bill. You increased it by 100. Maybe what's that delta tied to? Given that's a half-year number, should we kind of, I know we're not guiding to it yet, but as we kind of tune our models for next year, should we assume kind of a 4 to 500 basis point impact from that for next year on top of what we may have been modeling previously? Got it. got it Brian, maybe just on the free cash flow raise, I guess. brian maybe just on the free cash flow raise i guess You have 200 basis points add from the bill. you have 200 basis points add from the bill You increased it by 100. you increased it by 100 Maybe what's that delta tied to? maybe what's that delta tied to Given that's a half-year number, should we kind of, I know we're not guiding to it yet, but as we kind of tune our models for next year, should we assume kind of a 4 to 500 basis point impact from that for next year on top of what we may have been modeling previously? given that's a half-year number should we kind of i know we're not guiding to it yet but as we kind of tune our models for next year should we assume kind of a 4 to 500 basis point impact from that for next year on top of what we may have been modeling previously

Speaker 14: Yeah. No, I wouldn't do that. I think that would probably be overly aggressive. I think the difference is really around just the impact of higher margins and higher earnings. That's flowing through into cash, especially on the transaction side because the cash flow characteristics of the transaction revenues are really strong. We get the cash when the transaction takes place. Yeah. yeah No, I wouldn't do that. no i wouldn't do that I think that would probably be overly aggressive. i think that would probably be overly aggressive I think the difference is really around just the impact of higher margins and higher earnings. i think the difference is really around just the impact of higher margins and higher earnings That's flowing through into cash, especially on the transaction side because the cash flow characteristics of the transaction revenues are really strong. that's flowing through into cash especially on the transaction side because the cash flow characteristics of the transaction revenues are really strong We get the cash when the transaction takes place. we get the cash when the transaction takes place Those are the biggest factors: the tax change and just the higher earnings and particularly transaction revenues. I think your starting point is going to be probably somewhere around where we are this year. The impact of basically no federal cash taxes next year, which would have been probably in the $100 million range, but that impact on next year. Those are the biggest factors: the tax change and just the higher earnings and particularly transaction revenues. those are the biggest factors the tax change and just the higher earnings and particularly transaction revenues I think your starting point is going to be probably somewhere around where we are this year. i think your starting point is going to be probably somewhere around where we are this year The impact of basically no federal cash taxes next year, which would have been probably in the $100 million range, but that impact on next year. the impact of basically no federal cash taxes next year which would have been probably in the $100 million range but that impact on next year

Speaker 18: Got it. Thank you, guys. Got it. got it Thank you, guys. thank you guys

Speaker 3: Our next question comes from the line of Charlie Strauzer with CJS Securities. Your line is open. Our next question comes from the line of Charlie Strauzer with CJS Securities. our next question comes from the line of charlie strauzer with cjs securities Your line is open. your line is open

Speaker 10: Hi. Good morning. Just a personal thanks to John for the 23-plus years we've known each other. Thanks to him and you, Brian, especially for introducing us to the Tyler story at the very early days. Really, that's all I had for you guys. Just thank you. Hi. hi Good morning. good morning Just a personal thanks to John for the 23-plus years we've known each other. just a personal thanks to john for the 23-plus years we've known each other Thanks to him and you, Brian, especially for introducing us to the Tyler story at the very early days. thanks to him and you brian, especially for introducing us to the tyler story at the very early days Really, that's all I had for you guys. really that's all i had for you guys Just thank you. just thank you

Speaker 14: Thank you, Charlie. Appreciate that. Thank you, Charlie. thank you charlie Appreciate that. appreciate that

Speaker 3: Our next question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open. Our next question comes from the line of Gabriela Borges with Goldman Sachs. our next question comes from the line of gabriela borges with goldman sachs Your line is open. your line is open

Speaker 13: Hi. Good morning. Thank you. I wanted to follow up on the prior commentary on the potential for flips to grow around 25% year-over-year. Give us a little bit of a sense of how this progresses from here. I think in the past, you've talked about peak flips being in 2027, 2028. Do you think that 25% can accelerate, or are we talking number of flips versus percentage growth rate? Maybe just a little color on where we go from here on the flips. Hi. hi Good morning. good morning Thank you. thank you I wanted to follow up on the prior commentary on the potential for flips to grow around 25% year-over-year. i wanted to follow up on the prior commentary on the potential for flips to grow around 25% year-over-year Give us a little bit of a sense of how this progresses from here. give us a little bit of a sense of how this progresses from here I think in the past, you've talked about peak flips being in 2027, 2028. i think in the past you've talked about peak flips being in 2027 2028 Do you think that 25% can accelerate, or are we talking number of flips versus percentage growth rate? do you think that 25% can accelerate or are we talking number of flips versus percentage growth rate Maybe just a little color on where we go from here on the flips. maybe just a little color on where we go from here on the flips

Speaker 14: Yeah. The 25% is number of flips. The dollar value of the flips or the size of the flips from those is the bigger factor. It's a little bit hard to predict. Likely, 2026 is probably something like another 25% on top of where we are in 2025. Acceleration from that to peak in 2027 and 2028. We're probably looking at something like a 25% increase year-over-year in ballpark over the next couple of years, with a continuous increase in the average dollar value of those flips as well. Certainly, compounds around from quarter to quarter. We're still probably on that kind of trajectory over the next couple of years till we get to the peak. Yeah. yeah The 25% is number of flips. the 25% is number of flips The dollar value of the flips or the size of the flips from those is the bigger factor. the dollar value of the flips or the size of the flips from those is the bigger factor It's a little bit hard to predict. it's a little bit hard to predict Likely, 2026 is probably something like another 25% on top of where we are in 2025. likely 2026 is probably something like another 25% on top of where we are in 2025 Acceleration from that to peak in 2027 and 2028. acceleration from that to peak in 2027 and 2028 We're probably looking at something like a 25% increase year-over-year in ballpark over the next couple of years, with a continuous increase in the average dollar value of those flips as well. we're probably looking at something like a 25% increase year-over-year in ballpark over the next couple of years with a continuous increase in the average dollar value of those flips as well Certainly, compounds around from quarter to quarter. certainly compounds around from quarter to quarter We're still probably on that kind of trajectory over the next couple of years till we get to the peak. we're still probably on that kind of trajectory over the next couple of years till we get to the peak

Speaker 13: I gotcha. Even if the number of flips % growth is steady to improving, the dollar value associated with that flip will be going up. I gotcha. i gotcha Even if the number of flips % growth is steady to improving, the dollar value associated with that flip will be going up. even if the number of flips % growth is steady to improving the dollar value associated with that flip will be going up

Speaker 14: That's correct. That's the trend we expect over the next couple of years, the dollar value increasing more than probably the number of flips. That's correct. that's correct That's the trend we expect over the next couple of years, the dollar value increasing more than probably the number of flips. that's the trend we expect over the next couple of years the dollar value increasing more than probably the number of flips

Speaker 13: Yeah. Right. Yeah. yeah right Right. yeah right

Speaker 14: Especially as you get into the large court flips, some of those statewide courts, the large counties are multi-million dollar annual maintenance revenue streams. We're continuing to see a pretty consistent around that 1.7x uplift from maintenance to SaaS. Especially as you get into the large court flips, some of those statewide courts, the large counties are multi-million dollar annual maintenance revenue streams. especially as you get into the large court flips some of those statewide courts the large counties are multi-million dollar annual maintenance revenue streams We're continuing to see a pretty consistent around that 1.7x uplift from maintenance to SaaS. we're continuing to see a pretty consistent around that 1.7x uplift from maintenance to saas

Speaker 13: Very helpful. Thank you. Very helpful. very helpful Thank you. thank you

Speaker 3: Our next question comes from the line of Mark Chappell with Loop Capital Markets. Your line is open. Our next question comes from the line of Mark Chappell with Loop Capital Markets. our next question comes from the line of mark chappell with loop capital markets Your line is open. your line is open

Speaker 20: Thank you for taking my question and nice job in the quarter. Lynn, I was wondering if you could just provide some additional details around Emergency Networking, the acquisition just announced. Looks like a nice little pickup, but maybe just some additional information such as maybe number of employees or customers, were they a regional player, and were they profitable? Thank you for taking my question and nice job in the quarter. thank you for taking my question and nice job in the quarter Lynn, I was wondering if you could just provide some additional details around Emergency Networking, the acquisition just announced. lynn i was wondering if you could just provide some additional details around emergency networking the acquisition just announced Looks like a nice little pickup, but maybe just some additional information such as maybe number of employees or customers, were they a regional player, and were they profitable? looks like a nice little pickup but maybe just some additional information such as maybe number of employees or customers were they a regional player and were they profitable

Speaker 6: Yes. Thanks, Mark. That's a good question. As we said, the primary solution is really in fire records and patient care reporting for EMS. Fire records has always been part of our public safety suite, but something that we actually have not been investing in significantly as we focus more on our CAD and our police records. They've got a cloud-native multi-tenant offering. We've been partners with them for probably two years to help fill that gap. Part of this is what we've called internally a partner-to-acquire model. We kind of tested them out. We've got to know them as people, got to know the culture, got to experience whether or not that product is portable and can move up market the way we expected that it could. It has proved that. There are some new compliance standards in this space. The space has seen a lot of consolidation recently. Yes. yes Thanks, Mark. thanks mark That's a good question. that's a good question As we said, the primary solution is really in fire records and patient care reporting for EMS. as we said the primary solution is really in fire records and patient care reporting for ems Fire records has always been part of our public safety suite, but something that we actually have not been investing in significantly as we focus more on our CAD and our police records. fire records has always been part of our public safety suite but something that we actually have not been investing in significantly as we focus more on our cad and our police records They've got a cloud-native multi-tenant offering. they've got a cloud-native multi-tenant offering We've been partners with them for probably two years to help fill that gap. we've been partners with them for probably two years to help fill that gap Part of this is what we've called internally a partner-to-acquire model. part of this is what we've called internally a partner-to-acquire model We kind of tested them out. we kind of tested them out We've got to know them as people, got to know the culture, got to experience whether or not that product is portable and can move up market the way we expected that it could. we've got to know them as people got to know the culture got to experience whether or not that product is portable and can move up market the way we expected that it could It has proved that. it has proved that There are some new compliance standards in this space. there are some new compliance standards in this space The space has seen a lot of consolidation recently. the space has seen a lot of consolidation recently We talked about it being compliant with NERIS, the National Emergency Response Information System. That's where all these agencies, most of them are on what's called NFIRS, and they're required to move in the beginning of 2026. They've got that solution compliant. It's one of the things that we find really exciting about it. Shortly before or after LOI, but shortly before closing, they had just closed on a statewide Pennsylvania deal, which has garnered a lot of interest. We think we've got the best solution out there in the market. We're excited about it. It is a small company, several million in revenues, a little more than around break even. We believe that we can take this now and do what we've done traditionally with some of these tuck-in acquisitions. It rounds out our portfolio. It makes us even more competitive. We talked about it being compliant with NERIS, the National Emergency Response Information System. we talked about it being compliant with neris the national emergency response information system That's where all these agencies, most of them are on what's called NFIRS, and they're required to move in the beginning of 2026. that's where all these agencies most of them are on what's called nfirs and they're required to move in the beginning of 2026 They've got that solution compliant. they've got that solution compliant It's one of the things that we find really exciting about it. it's one of the things that we find really exciting about it Shortly before or after LOI, but shortly before closing, they had just closed on a statewide Pennsylvania deal, which has garnered a lot of interest. shortly before or after loi but shortly before closing they had just closed on a statewide pennsylvania deal which has garnered a lot of interest We think we've got the best solution out there in the market. we think we've got the best solution out there in the market We're excited about it. we're excited about it It is a small company, several million in revenues, a little more than around break even. it is a small company several million in revenues a little more than around break even We believe that we can take this now and do what we've done traditionally with some of these tuck-in acquisitions. we believe that we can take this now and do what we've done traditionally with some of these tuck-in acquisitions It rounds out our portfolio. it rounds out our portfolio It makes us even more competitive. it makes us even more competitive With the sort of urgency around this regulatory compliance change and what we've seen with success in the market, we're really pretty excited about it. With the sort of urgency around this regulatory compliance change and what we've seen with success in the market, we're really pretty excited about it. with the sort of urgency around this regulatory compliance change and what we've seen with success in the market we're really pretty excited about it

Speaker 20: Thank you. Sounds like a nice pickup. Thank you. thank you Sounds like a nice pickup. sounds like a nice pickup

Speaker 14: The impact from Emergency Networking, although it's relatively immaterial, is included in our guidance for the year. The impact from Emergency Networking, although it's relatively immaterial, is included in our guidance for the year. the impact from emergency networking although it's relatively immaterial is included in our guidance for the year

Speaker 3: Our next question comes from the line of Trevor Walsh with Citizens. Your line is open. Our next question comes from the line of Trevor Walsh with Citizens. our next question comes from the line of trevor walsh with citizens Your line is open. your line is open

Speaker 17: Great. Thanks, Keene, for taking the question. Lynn, I appreciated all the color around kind of DOGE maybe taking a bit of a backseat or at least the noise around that diminishing and that kind of being a good, I guess, confirmation of stronger budgets at the state level. Have you seen anything, I guess, within the confines of your federal business? I know it's small, but just has that pressure released there? Maybe just get in that broader question, just give us an update on kind of where the opportunities might lie as you go more towards that part of the customer base. Thanks. Great. great Thanks, Keene, for taking the question. thanks keene for taking the question Lynn, I appreciated all the color around kind of DOGE maybe taking a bit of a backseat or at least the noise around that diminishing and that kind of being a good, I guess, confirmation of stronger budgets at the state level. lynn i appreciated all the color around kind of doge maybe taking a bit of a backseat or at least the noise around that diminishing and that kind of being a good i guess confirmation of stronger budgets at the state level Have you seen anything, I guess, within the confines of your federal business? have you seen anything i guess within the confines of your federal business I know it's small, but just has that pressure released there? i know it's small but just has that pressure released there Maybe just get in that broader question, just give us an update on kind of where the opportunities might lie as you go more towards that part of the customer base. maybe just get in that broader question just give us an update on kind of where the opportunities might lie as you go more towards that part of the customer base Thanks. thanks

Speaker 6: Yeah, Trevor, you're right. Our federal business is a pretty small piece of our business, less than 5%. What we're seeing right now is that projects haven't been taken away. As you know, Q3 is the biggest quarter for that. It's still a little TBD, but I think, generally speaking, I don't see a material change in our outlook. There will be pockets in federal. As we mentioned in our opening remarks, while there has been some scattered stuff across our diversified portfolio, we don't view any of it as material. Yeah, Trevor, you're right. yeah trevor you're right Our federal business is a pretty small piece of our business, less than 5%. our federal business is a pretty small piece of our business less than 5% What we're seeing right now is that projects haven't been taken away. what we're seeing right now is that projects haven't been taken away As you know, Q3 is the biggest quarter for that. as you know q3 is the biggest quarter for that It's still a little TBD, but I think, generally speaking, I don't see a material change in our outlook. it's still a little tbd but i think generally speaking i don't see a material change in our outlook There will be pockets in federal. there will be pockets in federal As we mentioned in our opening remarks, while there has been some scattered stuff across our diversified portfolio, we don't view any of it as material. as we mentioned in our opening remarks while there has been some scattered stuff across our diversified portfolio we don't view any of it as material

Speaker 3: Our next question comes from the line of Kirk Materne with Evercore ISI. Your line is open. Our next question comes from the line of Kirk Materne with Evercore ISI. our next question comes from the line of kirk materne with evercore isi Your line is open. your line is open Hi. This is Dylan for Kirk, and thanks for taking my question. How should we think about trailing 12-month bookings numbers? Is it still a bit too lumpy? Should we look at it more over a trailing two-year basis? Hi. hi This is Dylan for Kirk, and thanks for taking my question. this is dylan for kirk and thanks for taking my question How should we think about trailing 12-month bookings numbers? how should we think about trailing 12-month bookings numbers Is it still a bit too lumpy? is it still a bit too lumpy Should we look at it more over a trailing two-year basis? should we look at it more over a trailing two-year basis

Speaker 14: The lumpiness probably does sort of point you towards looking at it over a longer basis to get a more accurate trend. We've pointed out in the past, and we'll remind people that last year was a record year for SaaS bookings. We had a number of very large deals, particularly in the third and fourth quarters. We do face difficult comps with that. Just really a lot of it based on timing, but a lot of those came together in the third and fourth quarters of last year. We had large SaaS deals in courts in Arizona. We had a large resident portal deal in Maine. These were $15 million, $20 million kinds of deals. I think the longer, a little bit longer look back probably gives you a more accurate trend that eliminates a little bit more of that lumpiness. The lumpiness probably does sort of point you towards looking at it over a longer basis to get a more accurate trend. the lumpiness probably does sort of point you towards looking at it over a longer basis to get a more accurate trend We've pointed out in the past, and we'll remind people that last year was a record year for SaaS bookings. we've pointed out in the past and we'll remind people that last year was a record year for saas bookings We had a number of very large deals, particularly in the third and fourth quarters. we had a number of very large deals particularly in the third and fourth quarters We do face difficult comps with that. we do face difficult comps with that Just really a lot of it based on timing, but a lot of those came together in the third and fourth quarters of last year. just really a lot of it based on timing but a lot of those came together in the third and fourth quarters of last year We had large SaaS deals in courts in Arizona. we had large saas deals in courts in arizona We had a large resident portal deal in Maine. we had a large resident portal deal in maine These were $15 million, $20 million kinds of deals. these were $15 million $20 million kinds of deals I think the longer, a little bit longer look back probably gives you a more accurate trend that eliminates a little bit more of that lumpiness. i think the longer a little bit longer look back probably gives you a more accurate trend that eliminates a little bit more of that lumpiness As we said, the pipeline, we're really happy with the pipeline, and the outlook for bookings in the second half of the year is solid, but it is up against a really tough comp from the last two quarters or last year's last two quarters. Just keep that in mind. As we said, the pipeline, we're really happy with the pipeline, and the outlook for bookings in the second half of the year is solid, but it is up against a really tough comp from the last two quarters or last year's last two quarters. as we said the pipeline we're really happy with the pipeline and the outlook for bookings in the second half of the year is solid but it is up against a really tough comp from the last two quarters or last year's last two quarters Just keep that in mind. just keep that in mind Great. Thanks for taking my question. Great. great Thanks for taking my question. thanks for taking my question

Speaker 3: Our next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Our next question comes from the line of Keith Housum with Northcoast Research. our next question comes from the line of keith housum with northcoast research Your line is open. your line is open

Speaker 5: Good morning, guys. This is a question for you on bookings. As I look at the bookings here, obviously, it's not quite what you guys are growing in terms of revenue. In terms of your revenue, what do you guys recognize as perhaps not recorded in your bookings? Is there a gap there in terms of payments or whatever you see in revenue, but not in bookings? Good morning, guys. good morning guys This is a question for you on bookings. this is a question for you on bookings As I look at the bookings here, obviously, it's not quite what you guys are growing in terms of revenue. as i look at the bookings here obviously it's not quite what you guys are growing in terms of revenue In terms of your revenue, what do you guys recognize as perhaps not recorded in your bookings? in terms of your revenue what do you guys recognize as perhaps not recorded in your bookings Is there a gap there in terms of payments or whatever you see in revenue, but not in bookings? is there a gap there in terms of payments or whatever you see in revenue but not in bookings

Speaker 14: Payments doesn't show up in bookings at all. It shows up in bookings when the revenue is recognized. If we sign a new payments deal or other transaction-based deal, you won't see that show up in current quarter bookings because even though the revenue stream may be very predictable and there is a lot of comfort around that, it is dependent on the transaction. It doesn't go into the bookings number. New transaction deals, and as I mentioned, we're regularly doing deals where we're delivering software, but it's being paid for through transaction revenues. Those won't show up in that bookings number, but they will show up in revenue growth. There's kind of this hybrid model we have in many cases, which provides us with a strong competitive advantage of being able to deliver software and get paid under a transaction model, especially at the state level. Payments doesn't show up in bookings at all. payments doesn't show up in bookings at all It shows up in bookings when the revenue is recognized. it shows up in bookings when the revenue is recognized If we sign a new payments deal or other transaction-based deal, you won't see that show up in current quarter bookings because even though the revenue stream may be very predictable and there is a lot of comfort around that, it is dependent on the transaction. if we sign a new payments deal or other transaction-based deal you won't see that show up in current quarter bookings because even though the revenue stream may be very predictable and there is a lot of comfort around that it is dependent on the transaction It doesn't go into the bookings number. it doesn't go into the bookings number New transaction deals, and as I mentioned, we're regularly doing deals where we're delivering software, but it's being paid for through transaction revenues. new transaction deals and as i mentioned we're regularly doing deals where we're delivering software but it's being paid for through transaction revenues Those won't show up in that bookings number, but they will show up in revenue growth. those won't show up in that bookings number but they will show up in revenue growth There's kind of this hybrid model we have in many cases, which provides us with a strong competitive advantage of being able to deliver software and get paid under a transaction model, especially at the state level. there's kind of this hybrid model we have in many cases which provides us with a strong competitive advantage of being able to deliver software and get paid under a transaction model especially at the state level That does have the impact of really kind of understating bookings, especially around the software. That does have the impact of really kind of understating bookings, especially around the software. that does have the impact of really kind of understating bookings especially around the software

Speaker 6: Yeah, Keith, a good example. Our ERP suite signed this past quarter a deal in Florida, I think, with the city of Apopka. I don't know how to pronounce it. Apopka, I think, Florida. That was a $370,000-ish annual ARR for SaaS. We expect $330,000 in transactions a year. It's about a $700,000 a year ARR. Of course, most of that transaction doesn't show up in bookings. Yeah, Keith, a good example. yeah keith a good example Our ERP suite signed this past quarter a deal in Florida, I think, with the city of Apopka. our erp suite signed this past quarter a deal in florida i think with the city of apopka I don't know how to pronounce it. i don't know how to pronounce it Apopka, I think, Florida. apopka i think florida That was a $370,000-ish annual ARR for SaaS. that was a $370,000-ish annual arr for saas We expect $330,000 in transactions a year. we expect $330,000 in transactions a year It's about a $700,000 a year ARR. it's about a $700,000 a year arr Of course, most of that transaction doesn't show up in bookings. of course most of that transaction doesn't show up in bookings

Speaker 14: Just another example. We signed a deal with the State of Oklahoma for our Cashiering product. There is a small SaaS fee associated with it, $140,000-some a year, with transaction revenues associated with it. It's $1 million of ARR. All that showed up in the bookings was $144,000. That’s why we have sort of de-emphasized backlog in bookings in favor of total ARR. Just another example. just another example We signed a deal with the State of Oklahoma for our Cashiering product. we signed a deal with the state of oklahoma for our cashiering product There is a small SaaS fee associated with it, $140,000-some a year, with transaction revenues associated with it. there is a small saas fee associated with it $140,000-some a year with transaction revenues associated with it It's $1 million of ARR. it's $1 million of arr All that showed up in the bookings was $144,000. all that showed up in the bookings was $144,000 That’s why we have sort of de-emphasized backlog in bookings in favor of total ARR. that’s why we have sort of de-emphasized backlog in bookings in favor of total arr

Speaker 3: Ladies and gentlemen, that concludes our question and answer session. I will now turn the call back over to Mr. Lynn Moore for closing remarks. Ladies and gentlemen, that concludes our question and answer session. ladies and gentlemen that concludes our question and answer session I will now turn the call back over to Mr. Lynn Moore for closing remarks. i will now turn the call back over to mr lynn moore for closing remarks

Speaker 6: Great. Thanks, Abby. Thanks, everybody, for joining us today. If you have any further questions, please feel free to reach out to Brian Miller or myself. Thanks, everybody. Have a great day. Great. great Thanks, Abby. thanks abby Thanks, everybody, for joining us today. thanks everybody for joining us today If you have any further questions, please feel free to reach out to Brian Miller or myself. if you have any further questions please feel free to reach out to brian miller or myself Thanks, everybody. thanks everybody Have a great day. have a great day

Speaker 3: This concludes today's call, and we thank you for your participation. You may now disconnect. This concludes today's call, and we thank you for your participation. this concludes today's call and we thank you for your participation You may now disconnect. you may now disconnect