Tyler Technologies, Inc. · NYSE:TYL
Tyler Technologies — Investor Presentation (May 2024)
68 slides from Tyler Technologies's investor presentation, May 2024
Slide 1: Investor Presentation
Investor Presentation Tyler Technologies | May 2024
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-
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
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% ~6% CAGR CAGR share* since 2018 Since 2019 of fragmented $21B market Uniquely positioned to deliver the most comprehensive mission-critical digit
Slide 5: The Leader in Software Solutions to the Public Sector
The Leader in Software Solutions to the Public Sector AT A G L A N C E 1 MARKET 83% R E C U R R ING 16.8% FREE CASH FLOW 98% G R O SS C L I EN T POSITION REVENUES 2023 MAR G IN 2 023 R E T E N T ION 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 FINANCI
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
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
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
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 MIGRATE TO ADD DATA ADD LOW-CODE ADD THE VISION THE CLOUD & INSIGHTS PLATFORM EXPERTISE 9
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 10
Slide 11: Tyler Transformation is Well Underway
Tyler Transformation is Well Underway WITH HIGHER GROW TH, 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 55% Recurring Revenues Recurring Revenues 18.2% 23.0% NON-GAAP OPERATING MAR
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
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 government systems no longer supported INCLUDING FEDERAL Governments shifting STATE, LOCAL, systems to the cloud & EDUCATION Total Software Market1 Demand for digital modernization and online To
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
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 3 Strategic acquirer in a most comprehensive mission-critical digital solutions to the publi
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
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 Large R&D Singular focus Broad Families Large Robust Integrated spend on on public public sector of connected installed base SaaS Payments & public sector sector solutions suites to leverage solution
Slide 18: Largest Installed Base – Cross-Sell and Upsell Opportunities
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 SY N E R G I E S 40,000 13,000 client installations client locations ~3 8-10 Average number of Potential products product
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 2X+ digital transformation $105M $110M $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 public
Slide 20: Acquisitions Are a Core Competency
S T R E N G T H # 5 Acquisitions Are a Core Competency – Adding Capabilities and Accelerates Growth 15acquisitions Advantages last 5 years including: Socrata Expands TAM Invested CaseloadPRO Adds new products, 64% of free capabilities, and AI technologies MicroPact cash flow NIC last 5 years Adds cl
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
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
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
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
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
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
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
Slide 28: The Combination of Three Companies Produced Strategic Synergies
The Combination of Three Companies Produced Strategic Synergies 3 Companies Leading Player ONE 1 payments product team Tyler Technologies PAY M E N T S O R G A N I Z AT I O N All Tyler divisions serviced NIC 300+ sales professionals Rapid Financial $88B+ dollars processed
Slide 29: Significant Opportunity to Expand Payments Beyond Installed Base
Significant Opportunity to Expand Payments Beyond Current Installed Base State & Local Acquiring TAM $30B+ New Enterprise Opportunities Enterprise Contracts New cities, new states, non-install base clients Install Base TAM Increased adoption and $2.3B – $3.8B new state services Tyler local install b
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 AP & Payroll • Unemployment and rebates TAM $1.7B+ • Unclaimed property • Tax refunds • Child su
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 Revenues flow to Tyler who bears the Interchange and merchant processing risk of underlying interchange fees and risk is assumed by the and merchant processing fees – Tyler agency / customer
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 put Net Gross pressure on Tyler margins 7% 93% (-200bps in 2023) Free cash flow will be bolstered by a gro
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 33
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 1 Leverage local government installed base 34
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
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 36
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-
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
Slide 39: 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 revenue Headwind Software License / 1.7X- is ~ 1.7-2X Maintenance $400k 2X* greater Tailwind $200k than on-premises. Year 1 Annual Annual License Pu
Slide 40: Reached Cloud Revenue Inflection Point
Reached Cloud Revenue Inflection Point Tailwind from SaaS Growth will exceed Headwind from Declining License Fees $160 Inflection Point $140 $120 $100 License + Maintenance $80 $60 $40 SaaS $20 $0 2016 2017 2018 2019 2020 2021 2022 2023 Quarterly Revenues ($M) 40
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
Slide 42: Cloud Transformation Margin Drivers
Cloud Transformation Margin Drivers 1. 2. 3. Private cloud Tyler solution Version evacuation optimization consolidation 42
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 43
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
Slide 45: Tyler's Financial Algorithm Delivers Superior Free Cash Flow
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 45
Slide 46: Tyler's Organic Financial Goals: 2025 and 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
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 47
Slide 48: Recurring Revenue Growth has Accelerated
Recurring Revenue Growth has Accelerated $millions 22% $1,626 CAGR CAGR $1,481 ’18-’23 Drivers $1,261 Transactional 56% Cloud transition $819 Differentiated $731 SaaS 28% payments platform $609 Industry-leading customer retention Maintenance 4% 2018 2019 2020 2021 2022 2023 48
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 49
Slide 50: Capital Allocation Priorities Going Forward
Capital Allocation Priorities Going Forward 1 Pay down debt 2 Strategic acquisitions 3 Opportunistic share repurchase 50
Slide 51: Deleveraging Has Been Our Top Priority
P R I O R I T Y # 1 Deleveraging Has Been Our Top Priority $M 1,750 Repaid d $1.2B B off termm debtt since e NIC C Revolver acquisition n in n Aprill 2021 1,500 1,250 Net Leverage Term Debt 1,000 750 ~0.79X at 500 3/31/24 Convertible 250 Debt 0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23
Slide 52: Acquisition Playbook: Driving Long-term Strategic Value
P R I O R I T Y # 2 Acquisition Playbook: Driving Long-term Strategic Value Target Company Strategy Valuation Approach Profile • TAM expansion into 9 Accretive to Tyler growth • Acquisition multiples below adjacent markets and margins Tyler’s trading multiples • Functional “tuck-ins” to add 9 Sustai
Slide 53: Acquisitions complete suites, accelerating growth
Acquisitions complete “suites”, enabling sales to connected markets and significantly accelerating growth PURCHASED Tyler Enterprise Supervision ARR CASELOADPRO 10 IN 2018 9 8 7 IN MILLIONS 6 CAGR R ~80% 5 4 3 2 1 0 2018 2019 2020 2021 2022 2023 LAW W ENFORCEMENT CORRECTIONS S & SUPERVISION N COURTS
Slide 54: Opportunistic Share Repurchases
P R I O R I T Y # 3 Opportunistic Share Repurchases Cash Paid ($M) ~28M $146.6 Total shares repurchased since 2002 $27.0 $27.2 $27.7 $17.8 $15.5 $12.9 $13.0 $5.3 2018 2019 2020 2021 2022 2023 Open Market Repurchases Value of Shares Withheld for Taxes on Equity Awards1 1. Reflects the value of shares
Slide 55: 2030 Goals
2030 Goals ALIGNED WITH EXECUTIVE COMPENSATION Recurring Revenues Margin Expansion Free Cash Flow 10-12% organic recurring 30+% blended operating FCF margin high 20s% revenue growth margin Approx. $1B FCF in 2030 Total revenues: $3.6B-$3.8B Recurring revenue 90+% 55
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 $3 Aspire to Transactional high 40s / low 50s Key growth driver gross margin $2 10-13% long-term CAGR SaaS Aspire to $1 high 60s / low 70s Key growth driver High-teens lon
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
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
Slide 59: Majority of Operating Leverage to Come from Gross Margin
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 present
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 $1,400 High 20s Other $1,200 FCF Margin1 $1,000 Transactional 17-19% $800 Free Cash Flow $600 10-11% $1B $400 Impact of Sec 174 Recurring Software $200
Slide 61: 2024 Annual Guidance
© Tyler Technologies 2024 a
Slide 62: 2024 Annual Guidance
2024 Annual Guidance ACCELERATING SAAS SHIFT AND CLOUD TRANSITION PROGRESS R E V E N U E D R I V E R S Total Revenues Guidance midpoint implies organic growth of approx. 8.5% (approx. 9% excluding merchant fees) $2.110 - $2.140B Revenue range percentage growth expectations: $1.952B • Subscriptions g
Slide 63: 2024 Annual Guidance
2024 Annual Guidance Diluted EPS - GAAP1 Diluted EPS - Non-GAAP $3.88 $5.27 - $5.47 $9.10 - $9.30 $7.80 2023 2024 Guidance 2023 2024 Guidance Free Cash Flow Margin R&D Expense $109.6M $125.0 - $130.0M 17% - 19% 16.8% 2023 2024 Guidance 2024 Guidance 2023 Most recent 2024 guidance provided on 4/24/24
Slide 64: 2024 Annual Guidance
2024 Annual Guidance Quarterly Cadence Drivers Revenue e Guidance:: $2.110 0 - $2.140B • 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, with smaller sequential growth from Q2 t
Slide 65: Appendix
Appendix
Slide 66: Non-GAAP Measures
Non-GAAP Measures THE TABLE RECONCILES THE NON-GAAP MEASURES USED IN THIS PRESENTATION GAAP GA 66
Slide 67: Non-GAAP Measures
Non-GAAP Measures THE TABLE RECONCILES THE NON-GAAP MEASURES USED IN THIS PRESENTATION GAAP GAA 67
Slide 68: tylertech.com
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