Tyler Technologies, Inc. · NYSE:TYL

Tyler Technologies — Investor Presentation (March 2024)

68 slides from Tyler Technologies's investor presentation, March 2024

  1. Slide 1: Investor Presentation

    Investor Presentation Tyler Technologies | March 2024 © Tyler Technologies 2024

  2. Slide 2: Statement Regarding Use of Non-GAAP Measures

    Statement Regarding Use of Non-GAAP Measures Tyler Technologies has provided in this presentation financial measures that have not been prepared in accordance with generally accepted accounting principles (GAAP) and are therefore considered non-GAAP financial measures. This information includes non-

  3. Slide 3: Forward-Looking Statements

    Forward-Looking Statements This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends, expectat

  4. Slide 4: Tyler: A Winning Long-Term Growth Story

    Tyler: A Winning Long-Term Growth Story Accelerating Recurring Massive Opportunity, SaaS Revenue Growth Revenue Growth a Market Leader With Just 22% 27.7% ~5% CAGR CAGR share* since 2018 Since 2019 of fragmented $34B market Uniquely positioned to deliver the most comprehensive mission-critical digit

  5. Slide 5: The Leader in Software Solutions to the Public Sector

    A T A G L A N C E The Leader in Software Solutions to the Public Sector 1 MARKET 83% RECURRING 17% FREE CASH FLOW 98% GROSS CLIENT POSITION REVENUES 2023 MARG I N RETENTION R E V E N U E B R E A K D O W N * ERP / COURTS & PUBLIC PLATFORM APPRAISAL & CIVIC K-12 OTHER FINANCIAL JUSTICE SAFETY TECHNOLO

  6. Slide 6: Tyler: A Winning Long-Term Growth Story

    A G E N D A Tyler: A Winning Long-Term Growth Story Record of Market 2030 Vision & Accelerating Key Metrics & Success Leader Four Growth Pillars Cloud First Strategy Annual Guidance An impressive A clear leader in Recurring revenues, Three dimensions of Delivering superior FCF and track record attra

  7. Slide 7: Tyler: A Winning Long-Term Growth Story

    A G E N D A Tyler: A Winning Long-Term Growth Story Record of Market 2030 Vision & Accelerating Key Metrics & Success Leader Four Growth Pillars Cloud First Strategy Annual Guidance An impressive A clear leader in Recurring revenue, Three dimensions of Delivering superior FCF and track record attrac

  8. Slide 8: Tyler is Entering a New Growth Era

    Tyler is Entering a New Growth Era 1998 - 2017 2018 - 2022 2023+ Building Leadership Expanding the Vision: New Era of Sustained Growth and Position Strategic Investment FCF Generation Built a broad portfolio of software solutions Connected Communities, Shift to cloud-first, 2023 SaaS inflection poin

  9. Slide 9: Tyler's Path to Connected Communities

    Tyler’s Path to Connected Communities C O N N E C T E D C O M M U N I T I E S LAUNCH M I G R AT E T O A D D D ATA ADD LOW-CODE ADD THE VISION THE CLOUD & INSIGHTS P L AT F O R M EXPERTISE © Tyler Technologies 2024

  10. Slide 10: Connected Communities

    Family of Products BEST PRODUCTS FOR EACH AGENCY THE FIRST VISION OF Common Foundation CONSISTENT FUNCTIONALITY Connected Communities Shared Data CLOUD-BASED DATA SHARING Connected Apps & Personalized Portals A CUSTOMIZED EXPERIENCE © Tyler Technologies 2024 2023

  11. Slide 11: Tyler Transformation is Well Underway

    Tyler Transformation is Well Underway WITH HIGHER GROWTH, HIGHER LONG-TERM MARGIN PROFILE 2023 Non-Recurring 22% Revenues 17% CAGR IN 2010 $1.952B $1.2B RECURRING REVENUES Non-Recurring LAST 5 YEARS Revenues 83% 45% $289M $289M 55% Recurring Revenues Recurring Revenues 18.2% 23.0% N O N - G A A P O

  12. Slide 12: Tyler: A Winning Long-Term Growth Story

    A G E N D A Tyler: A Winning Long-Term Growth Story Record of Market 2030 Vision & Accelerating Key Metrics & Success Leader Four Growth Pillars Cloud First Strategy Annual Guidance An impressive A clear leader in Recurring revenues, Three dimensions of Delivering superior FCF and track record attra

  13. Slide 13: We have more than doubled our Software TAM in 5 years

    We have more than doubled our Software TAM in 5 years Strong Secular Tailwinds… 2018 2023 Many antiquated FEDERAL government systems no longer supported S TAT E , L O C A L , & E D U C AT I O N Governments shifting Total Software systems to the cloud Market1 Total $42B+ Subscription services Softwar

  14. Slide 14: Targeting a Large, Fragmented Market with Antiquated Systems

    Targeting a Large, Fragmented Market with Antiquated Systems >88,000 Local Governments >450,000 Potential Systems 1/3 2/3 Competitive Antiquated Deployments Deployments 20+ year old systems Legacy vendors Homegrown / custom COBOL systems 14 © Tyler Technologies 2024

  15. Slide 15: Strengths We Are Leveraging

    Strengths We Are Leveraging 1 Broadest, most integrated solutions 1 2 Singular vertical focus 32 Largest installed base Investments in innovation focused on 4 long-term results Uniquely positioned to deliver most comprehensive mission-critical 3 Strategic acquirer in a digital solutions to the publi

  16. Slide 16: Delivering the Broadest, Most Integrated Public Sector Solutions

    S T R E N G T H # 1 Delivering the Broadest, Most Integrated Public Sector Solutions PUBLIC COURTS & TRANSFORMATIVE HEALTH & HUMAN SCHOOLS ADMINISTRATION PUBLIC SAFETY TECHNOLOGY SERVICES Enterprise Financial Enterprise Justice School ERP Pro Data & Insights Veterans’ Benefits Management Enterprise

  17. Slide 17: Singular Vertical Focus With Deep Domain Expertise

    S T R E N G T H # 2 Singular Vertical Focus With Deep Domain Expertise D I F F E R E N T I A T O R S Broad Families Large R&D Large Robust Integrated Singular focus public sector of connected spend on public installed base SaaS Payments & on public sector solutions suites sector solutions to leverag

  18. Slide 18: Largest Installed Base

    S T R E N G T H # 3 Largest Installed Base – Provides Significant Cross-Sell and Upsell Opportunities L A R G E S T I N S TA L L E D B A S E O F F E R I N G U N I Q U E S A L E S S Y N E R G I E S 40,000 13,000 client installations client locations ~3 8-10 Average number of Potential products produc

  19. Slide 19: Strategic Innovation Focused on Long-Term Results

    S T R E N G T H # 4 Strategic Innovation Focused on Long-Term Results Increased R&D Anticipating client needs for digital 2X+ transformation $110M $110M $105M $93M Increased R&D spending further $88M $81M widens the moat $63M 2,050 innovative engineers* 40% of Tyler team members have worked in the p

  20. Slide 20: Acquisitions Are a Core Competency

    S T R E N G T H # 5 Acquisitions Are a Core Competency – Adds Capabilities and Accelerates Growth 15acquisitions Advantages last 5 years including: Expands TAM Socrata Invested Adds new products, CaseloadPRO 64% of free capabilities, and AI MicroPact technologies cash flow NIC last 5 years Adds clie

  21. Slide 21: Tyler: A Winning Long-Term Growth Story

    A G E N D A Tyler: A Winning Long-Term Growth Story Record of Market 2030 Vision & Accelerating Key Metrics & Success Leader Four Growth Pillars Cloud First Strategy Annual Guidance An impressive A clear leader in Recurring revenues, Three dimensions of Delivering superior FCF and track record attra

  22. Slide 22: Tyler 2030 Vision and Four Growth Pillars

    Tyler 2030 Vision and Four Growth Pillars GOAL Recurring revenue growth + Improved Margins & Expanded Free Cash Flow 1. Leveraging 2. Expanding TAM: 4. Transactions 3. Cloud Transition Installed Base State & Federal Growth • Flips / Upsell • Leverage M&A to • Cloud-first drives • Truly differentiate

  23. Slide 23: Leveraging Tyler's Vast Installed Base

    P I L L A R # 1 Leveraging Tyler’s Vast Installed Base • Leverage 13,000+ client locations through upsells and cross sells • Strategic acquisitions adding adjacent products and expanding TAM • Continued R&D to maintain market dominance and high retention rates • Enhanced focus on client satisfaction

  24. Slide 24: Expand TAM into State and Federal

    P I L L A R # 2 Expand TAM into State and Federal Leverage recent acquisitions to create compelling offerings for state and federal markets: • Data & Insights platform • Low code platform • State enterprise contracts

  25. Slide 25: Next Generation SaaS Business

    P I L L A R # 3 Next Generation SaaS Business • Complete cloud transition – margin expansion • Optimize products for the cloud • Consolidate product versions • Close private data centers • Migrate on-premises clients to AWS • Achieve 90+% recurring revenues

  26. Slide 26: Enhanced Citizen Engagement – Transactions Growth

    P I L L A R # 4 Enhanced Citizen Engagement – Transactions Growth • Grow payments business across installed base • Highly differentiated from commodity solutions • Sticky, predictable revenue streams • FCF contribution but lower margin

  27. Slide 27: Payments – A Channel for Driving Growth

    Payments – A Channel for Driving Growth Payments brings value to our clients and will be a channel for driving growth Payments will enhance Tyler free cash flow with acknowledged margin pressure from pass through processing and interchange fees Tyler is modeling 10% – 13% transaction revenue growth

  28. Slide 28: The Combination of Three Companies Produced Strategic Synergies

    The Combination of Three Companies Produced Strategic Synergies 3 Companies Leading Player ONE Tyler Technologies PAY M E N T S 1 payments product team O R G A N I Z AT I O N All Tyler divisions serviced NIC 300+ sales professionals Rapid Financial $88B+ dollars processed © Tyler Technologies 2024

  29. Slide 29: Significant Opportunity to Expand Payments Beyond Current Installed Base

    Significant Opportunity to Expand Payments Beyond Current Installed Base State & Local Acquiring TAM $30B+ New Enterprise Enterprise Contracts Opportunities New cities, new states, non-install Install Base TAM Increased base clients adoption and $2.3B – $3.8B new state services Tyler local install b

  30. Slide 30: Electronic Disbursements is an Entirely New Market

    Electronic Disbursements is an Entirely New Market With Equal Growth Potential State & Local Disbursements TAM $31B+ New Case Types: • Government payroll • AP automation New Case Types: • Utility refunds • Unemployment and rebates AP & Payroll • Unclaimed property TAM $1.7B+ • Tax refunds • Child su

  31. Slide 31: The Nature of the Contract Impacts Revenue, FCF, and Margin

    The Nature of the Contract Impacts Differently on Revenue, FCF, and Margin ‘Gross’ Contracts ‘Net’ Contracts Revenue Free Cash Flow Margin % Revenue Free Cash Margin % Flow © Tyler Technologies 2024

  32. Slide 32: Overwhelmingly, Tyler's Business is 'Gross' Revenue

    Overwhelmingly, Tyler’s Business is ‘Gross’ Revenue Payments Revenue by Contracting Model Impact on Financial Profile Tyler can command a premium price given its differentiators Payments growth will put Net Gross pressure on Tyler margins 7% 93% (-200bps in 2023) Free cash flow will be bolstered by

  33. Slide 33: Opportunity for Margin Expansion Exists

    Whether Gross or Net Contracts, Opportunity for Margin Expansion Exists 3 2 +100-200 bps 1 Interchange Economies of optimization Increased Tyler scale contribution from disbursements & premium services Tyler Gross 2030 Margin Today Tyler Gross Margin © Tyler Technologies 2024

  34. Slide 34: Payments Offers Multiple Growth Opportunities Ahead

    Payments Offers Multiple Growth Opportunities Ahead 4 Electronic disbursements 3 Expand beyond current installed base 2 Increase existing state services Leverage local 1 government installed base © Tyler Technologies 2024

  35. Slide 35: Tyler: A Winning Long-Term Growth Story

    A G E N D A Tyler: A Winning Long-Term Growth Story Record of Market 2030 Vision & Accelerating Key Metrics & Success Leader Four Growth Pillars Cloud First Strategy Annual Guidance An impressive A clear leader in Recurring revenue, Three dimensions Delivering superior FCF and track record attractiv

  36. Slide 36: Advancing Along Our Cloud-First Roadmap

    Advancing Along Our Cloud-First Roadmap 2019 • Launched Cloud First initiative • Strategic Collaboration Agreement with AWS 2016 • 30% of new Total Contract Value sold as SaaS 2011 • Tyler opens second datacenter in Dallas, Texas 2000 • Began offering solutions hosted in Tyler private cloud © Tyler

  37. Slide 37: Advancing Along Our Cloud-First Roadmap

    Advancing Along Our Cloud-First Roadmap Tyler 2030 2023 - 2025 • Evacuate/close our private cloud Data Centers • Launch cloud optimized releases & begin version consolidation • Accelerate on-premises maintenance-to-SaaS conversions 2022 • Align on a Data Center closure approach • Begin migrating on-

  38. Slide 38: Executing Progress on Three Dimensions of Cloud Transformation

    Executing Progress on Three Dimensions of Cloud Transformation 87% 60% 15% 1 2 3 New Clients Private Cloud Clients On-Premises Clients Goal: 100% of new Goal: Tyler’s private Goal: Tyler’s existing client contracts are cloud datacenters are on-premises clients are Software-as-a-Service completely ev

  39. Slide 39: The Transition to Cloud Creates Both Headwinds and Tailwinds

    The Transition to Cloud Creates Both Headwinds and Tailwinds On-premises Perpetual Revenue Growth SaaS Model License Model Potential $1M Cloud lifetime Headwind Software License / 1.7X- revenue is ~ 1.7-2X Maintenance $400k 2X* greater $200k than on-premises. Tailwi nd Year 1 Annual Annual License P

  40. Slide 40: We Are Now at the Cloud Revenue Inflection Point

    We Are Now at the Cloud Revenue Inflection Point Tailwind from SaaS Growth will exceed $160 Headwind from Declining License Fees Inflection Point $120 License + Maintenance $80 $40 SaaS $0 2016 2017 2018 2019 2020 2021 2022 2023 Quarterly Revenues ($M) © Tyler Technologies 2024

  41. Slide 41: Tyler by 2030 – A SaaS Company

    Tyler by 2030 – A SaaS Company, with ~$2B Software Recurring Revenues • Maintenance fees will decline as licensed clients convert to SaaS, but will not drop to zero by 2030 • Price increases on maintenance will continue ~$2B* • <10% of new contract value may still generate new CAGR CAGR maintenance

  42. Slide 42: Cloud Transformation Margin Drivers

    Cloud Transformation Margin Drivers 1. 2. 3. Private cloud evacuation Tyler solution optimization Version consolidation © Tyler Technologies 2024

  43. Slide 43: Expect 400-500 bps Contribution to Gross Margin by 2030

    Collectively, Expect 400-500 bps Contribution to Gross Margin by 2030 3 2 +400-500 bps 1 Version Tyler solution consolidation Private cloud optimization evacuation Tyler Gross 2030 Margin Today Tyler Gross Margin © Tyler Technologies 2024

  44. Slide 44: Tyler: A Winning Long-Term Growth Story

    A G E N D A Tyler: A Winning Long-Term Growth Story Record of Market 2030 Vision & Accelerating Key Metrics & Success Leader Four Growth Pillars Cloud First Strategy Annual Guidance An impressive A clear leader in Recurring revenues, Three dimensions of Delivering superior FCF and track record attra

  45. Slide 45: Sustained Value Creation

    Tyler’s Financial Algorithm Delivers Superior Free Cash Flow and Creates Sustained Value Sustained Value Creation Prudent Capital Allocation Strong Free Cash Flow Margin Expansion Organic Revenue Growth © Tyler Technologies 2024

  46. Slide 46: Tyler's Organic Financial Goals: Near-Term 2025 and Mid-Term 2030

    Tyler’s Organic Financial Goals: Near-Term 2025 and Mid-Term 2030 Revenues 2025E 2030E Total revenues $2.3-2.4B $3.6-3.8B % recurring 86-87% ~90% Margin Profile 2025E 2030E Revenues 100% 100% Gross Margin 47-48% 53-55% S&M % of Revenue ~7% 6-7% G&A % of Revenue ~11% 9-10% R&D % of Revenue ~5% ~5% Op

  47. Slide 47: Recurring Revenues and Free Cash Flow are the Best Measures

    Recurring Revenues and Free Cash Flow are the Best Measures of Our Performance Top-Line Performance Bottom-Line Performance Recurring Revenues Free Cash Flow • Total Recurring Revenues • LTM Free Cash Flow ‒ Software (SaaS & Maintenance) ‒ Transactional © Tyler Technologies 2024

  48. Slide 48: Recurring Revenue Growth has Accelerated

    Recurring Revenue Growth has Accelerated $millions 22% CAGR CAGR ’18-’23 Drivers $1,627 Transactional 56% $1,481 Cloud transition $1,258 Differentiated SaaS 28% payments platform $818 $727 $605 Industry-leading customer retention Maintenance 4% 2018 2019 2020 2021 2022 2023 © Tyler Technologies 2024

  49. Slide 49: Powerful Cash Generating Engine

    Powerful Cash Generating Engine – Converts Efficiently from Earnings FCF / Non-GAAP Net Income Conversion 109% average L A S T 5 Y E A R S © Tyler Technologies 2024

  50. Slide 50: Capital Allocation Priorities Going Forward

    Capital Allocation Priorities Going Forward 1 Pay down debt 2 Strategic acquisitions 3 Opportunistic share repurchase © Tyler Technologies 2024

  51. Slide 51: Deleveraging Remains Our Top Priority

    P R I O R I T Y # 1 Deleveraging Remains Our Top Priority $M 1,750 Repaid $1.1B of term debt since NIC Revolver acquisition in April 2021 1,313 Net Leverage Term Debt ~0.97X at 875 year end 438 2023 Convertible Debt 0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 © Tyler Technologies 2

  52. Slide 52: Acquisition Playbook: Driving Long-term Strategic Value

    P R I O R I T Y # 2 Acquisition Playbook: Driving Long-term Strategic Value Target Company Strategy Valuation Approach Profile • TAM expansion into ✓ Accretive to Tyler growth • Acquisition multiples below adjacent markets and margins Tyler’s trading multiples • Functional “tuck-ins” to ✓ Sustainabl

  53. Slide 53: Acquisitions complete suites, accelerating growth

    Acquisitions complete “suites”, enabling sales to connected markets and significantly accelerating growth PURCHASED Tyler Enterprise Supervision ARR CASELOADPR O IN 2018 10 7.5 IN MILLIONS CAGR ~80% 5 2.5 0 2018 2019 2020 2021 2022 2023 LAW ENFORCEMENT CORRECTIONS & SUPERVISION COURTS & PROSECUTION

  54. Slide 54: Opportunistic Share Repurchases

    P R I O R I T Y # 3 Opportunistic Share Repurchases Cash Paid ($M) ~28 M $146,553.0 Total shares repurchased since 2002 $17,786.0 $15,484.0 $12,977.0 $0.0 $0.0 2018 2019 2020 2021 2022 2023 Open Market Repurchases Value of Shares Withheld for Taxes on Equity Awards1 1. Reflects the value of shares w

  55. Slide 55: 2030 Goals

    2030 Goals ALIGNED WITH EXECUTIVE COMPENSATION Recurring Revenues Margin Expansion Free Cash Flow 10-12% organic recurring revenue growth 30+% blended operating FCF margin high 20s% Total revenues: $3.6B-$3.8B margin Approx. $1B FCF in 2030 Recurring revenue 90+% © Tyler Technologies 2024

  56. Slide 56: Growth, Revenue Mix, and Margin Improvement Reshape Financial Profile by 2030

    Growth, Revenue Mix, and Margin Improvement will Reshape Tyler’s Financial Profile by 2030 $B $5 Acquisitions1 $4 Non-recurring2 Aspire to Transactional high 40s / low 50s $3 gross margin Key growth driver 10-13% long-term CAGR SaaS $1 Aspire to high 60s / low 70s Key growth driver blended High-teen

  57. Slide 57: Clear Runway for Double-Digit Recurring Revenue Growth

    Clear Runway for Double-Digit Recurring Revenue Growth 10-12% Recurring Rev. CAGR excl. M&A M&A 10-13% CAGR Assumes ~80% of Incremental on-prem base Low-teens transactional converts by 2030 CAGR Net expansion >1.7x1 and new software Converted Gross uplift recurring maintenance on flips revenues (exc

  58. Slide 58: Cloud is a Significant Margin Expansion Lever

    Cloud is a Significant Margin Expansion Lever Category P&L Impact Potential Drivers • Datacenter evacuations Cloud Operations Cost of Revenue • AWS efficiency / cloud optimization of products Development & Support Cost of Revenue / R&D • Version consolidation and more streamlined focus on cloud port

  59. Slide 59: Majority of Operating Leverage to Come from Gross Margin Improvement

    Majority of Operating Leverage to Come from Gross Margin Improvement Gross Margin Operating Expense 1-2% <1% <1% 30+% ~1% 1-2% R&D 4-5% S&M G&A Services Payments 23% Cloud Ops 2023 Non-GAAP OP Margin1 2030E Non-GAAP OP Margin 1. See reconciliation of GAAP to Non-GAAP measures included in this presen

  60. Slide 60: Free Cash Flow Grows to ~$1B by 2030

    Free Cash Flow Grows to ~$1B by 2030 Free Cash Flow (FCF) 2030 Estimated FCF Contribution Growing to ~$1B – One Third From Transactional Business $M $1,200 High 20s Other FCF Margin1 $900 17-19% Transactional Free Cash Flow $1B $600 10-11% Impact of Sec 174 $300 Recurring Software $0 2023E 2025E 203

  61. Slide 61: 2024 Annual Guidance

    2024 Annual Guidance © Tyler Technologies 2024

  62. Slide 62: 2024 Annual Guidance

    2024 Annual Guidance A C C E L E R AT I N G S A A S S H I F T A N D C L O U D T R A N S I T I O N P R O G R E S S R E V E N U E D R I V E R S Total Revenues Guidance midpoint implies organic growth of approx. 8% Revenue range percentage growth expectations: $2.095 - $2.135B • Subscriptions growth in

  63. Slide 63: 2024 Annual Guidance

    2024 Annual Guidance Diluted EPS - GAAP1 Diluted EPS - Non-GAAP1 $3.88 $5.17 - $5.37 $8.90 - $9.10 $7.70 GAAP to non-GAAP guidance reconciliation 2024 GAAP diluted earnings per share (1) $5.17 - $5.37 Plus: Share-based compensation expense 2.92 Amortization of acquired software and other intangibles

  64. Slide 64: 2024 Annual Guidance

    2024 Annual Guidance Quarterly Cadence Drivers Revenue Guidance: $2.095 - $2.135B • Slightly weighted toward second half 2024: ~49% 1H vs ~51% 2H • SaaS revenues grow sequentially throughout the year • Transaction revenues grow sequentially in Q1 and Q2, relatively flat from Q2 to Q3, and decline in

  65. Slide 65: Appendix

    Appendix © Tyler Technologies 2024

  66. Slide 66: Non-GAAP Measures

    Non-GAAP Measures THE TABLE RECONCILES THE NON- GAAP MEASURES USED IN THIS PRESENTATION GAAP 66 © Tyler Technologies 2024

  67. Slide 67: Non-GAAP Measures

    Non-GAAP Measures THE TABLE RECONCILES THE NON- GAAP MEASURES USED IN THIS PRESENTATION GAAP 67 © Tyler Technologies 2024

  68. Slide 68: tylertech.com

    © Tyler Technologies 2024 tylertech.com

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