Tyler Technologies Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Aleksandr Zukin - Wolfe Research - Analyst : Hey, guys. Maybe just -- the first -- I'll go with a tactical question first around some of the numbers and then maybe a high-level one. So maybe, Brian, for you, just understanding and helping us bridge the decline in kind of net new annual SaaS bookings year-to-date in the quarter on tough comps from last year, but the confidence in SaaS revenue growth for next year at 20%. Maybe just help -- give us a little bit of context for when the implementations when those conversions need to happen from that prior book business to hit that number? Like how much visibility do you have on that relative to previous years? And maybe some guardrails on those estimates for next year? And then why pull some of the segmented guidance for this year? I mean, just help on those two points then I've got a big picture one.

Question: Aleksandr Zukin - Wolfe Research - Analyst : Got it. And then, Lynn, maybe for you, maybe you talked about not really seeing an impact from budgets and budget cycles and DOGE which makes a lot of sense. When -- I guess it felt like the commentary around M&A was maybe a little bit more pointed. So maybe I'll just ask a question around how much should we anticipate from an organic from a total top line contribution maybe for fiscal '26 and beyond? Are -- is this a change in terms of the point or so from M&A that we've kind of come to expect? Are you thinking maybe more can come because the opportunity set is so much broader than it's been before because of AI? Or what's the signal that you want us to take away from that comment?

Question: Terry Tillman - Truist Securities - Analyst : Hey, Lynn, Brian, Hala. Good to see this flag on the ground on the 20% SaaS growth. I had a bunch of questions, but I'll keep it to one. And there's a maniacal focus on your supplemental information on your IR section of the website. And it is often on that new SaaS and flips SaaS bookings. I love how you brought up the idea of add-on sales. Could you maybe double-click on kind of approaches you all have been taking to be much more programmatic to drive those add-on sales and expansion? And just where are you in kind of getting the benefits of that focused effort? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2025 / 2:00PM, TYL.N - Q3 2025 Tyler Technologies Inc Earnings Call

Question: Terry Tillman - Truist Securities - Analyst : Thank you.

Question: Joshua Reilly - Needham & Company LLC - Analyst : Great. Thank you for taking my question. Can you just remind us the moving parts of how the Texas payments contract winding down is going to impact transaction revenue for the balance of the year and then offsetting that is the ramping of the California State Park deal? Is that at a full run rate now? And are there any other notable payments deals ramping in transactions disrupting the normal seasonality for decline into Q4? Thank you.

Question: Joshua Reilly - Needham & Company LLC - Analyst : Thank you.

Question: Saket Kalia - Barclays Services Corp - Analyst : Okay. Great. Hey, guys. Thank for taking my questions. Great to hear the 20% SaaS growth for next year as well. Maybe for my one question, Lynn, it's really for you. Really appreciated your points on AI in your prepared comments. And I want to marry that with kind of Tyler's move to SaaS. As more of the base moves to SaaS, what do you -- and without getting too specific, what do you sort of see on Tyler's road map that's going to maybe grow that revenue opportunity in terms of AI in the public sector? And maybe relatedly, have you seen any changes from competitors as perhaps AI becomes more of an offering in public sector? That's been -- that's been a question that I've gotten as well. Curious if you could comment.

Question: Saket Kalia - Barclays Services Corp - Analyst : Super helpful and thank you.

Question: Kirk Materne - Evercore Inc - Analyst : Thanks. It's interesting to hear about how some clients are starting to marry their software and labor budgets together. My question is pretty similar or at least a follow-on to what Saket asked on the AI front, which is, how are you -- I guess I realize it's early, but how are you envisioning discussing sort of pricing for AI functionality with your clients? I mean, you guys have had a long partnership with your clients, where I think there's been some sort of value exchange between you and your customers. Does that change at all in an AI world, meaning is it -- or is it just sort of we're delivering more we can take price as a result? Do you price per agent? Just trying to get a sense, and I realize it's early, but I was thinking more specifically around some -- as you bring in more AI functionality into the ERP suite, some of your core offerings. Thank you.

Question: Kirk Materne - Evercore Inc - Analyst : Thanks.

Question: Matthew Vanvliet - Cantor Fitzgerald LP - Analyst : Good morning. Thanks for taking the question. I guess when you look at the number of sort of sub verticals that you play in, it sounds like some of the courts and justice and then the ERP financial side have been particularly strong the last few quarters. Curious if there have been any areas where you've seen some weakness and maybe any reasons you've identified there, maybe any areas that have shown a little bit more of that ARPA hangover or even on the K-12 side, maybe the (inaudible) funds in addition to ARU? Just help us understand kind of where in the business is seeing some positives, maybe where some negatives are?

Question: Matthew Vanvliet - Cantor Fitzgerald LP - Analyst : Thank you.

Question: Ken Wong - Oppenheimer & Co Inc - Analyst : Brian, I wanted to maybe dig in a little deeper on Alex's question about '26 SaaS revenue. You touched on some of the components, the stuff coming off backlog, stuff coming in from new. At this stage in the planning cycle, any sense whether or not '26 might have a larger backlog component that gives you guys the confidence? Like how should we think about that relative to '25 or past years?

Question: Jonathan Ho - William Blair Capital Partners - Analyst : Hi. Good afternoon or good morning. So I just wanted to understand when it comes to some of your newer products like emergency response and prison transactions, can you help us understand the growth opportunity here and potential cross-sell synergies with some of your other systems?

Question: Jonathan Ho - William Blair Capital Partners - Analyst : Thank you.

Question: Gabriela Borges - Goldman Sachs Group Inc - Analyst : Hey. Good morning. Thank you. Lynn, I want to follow up on your comments on the AI because there's been some frustration in the software ecosystem this year, just how long it's taking to see real productivity gains in knowledge workers and at the application layer. And so my question for you is there is a perception that government typically moves slower than enterprise? Based on your conversations, what are you seeing in terms of the (inaudible) customers being willing to engage? Are there some products that they're more willing to engage and then others for AI use cases specifically? And to the extent there are limiting factors, what do you as the company doing to address those limiting factors directly? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2025 / 2:00PM, TYL.N - Q3 2025 Tyler Technologies Inc Earnings Call

Question: Gabriela Borges - Goldman Sachs Group Inc - Analyst : Thank you so much.

Question: Mark Schappel - Loop Capital Markets LLC - Analyst : Hi. Thank you for taking my question. Lynn, it sounds like it was a strong quarter for your public safety business. Q4 also tends to be a strong period for public safety. I was wondering if you could just provide some additional color on maybe your public sector -- excuse me, public safety pipeline and a setup for Q4, if you could.

Question: Mark Schappel - Loop Capital Markets LLC - Analyst : Great. Thanks. And then, Brian, just building an earlier question around flips. I believe flips were growing about 25% this year. Just wondering if you could just comment on growth expectations for flips next year? And also, if you can maybe just provide an update on maybe what percent of the installed base has moved to SaaS.

Question: Mark Schappel - Loop Capital Markets LLC - Analyst : It was around the growth expectations, I think, for flips next year -- oh, I'm sorry, what percentage of the installed base has moved to SaaS.

Question: Mark Schappel - Loop Capital Markets LLC - Analyst : Thank you.

Question: Peter Heckmann - DA Davidson & Co - Analyst : Hey. Good morning. A lot of my questions have been answered, but just a couple of follow-ups. Remind me, this was a big year for R&D catch-up. What are we thinking as -- I think in the longer term, framework that you had provided, you were thinking that R&D would approximate maybe 5% of revenue in 2030. But it looks to me like it's certainly above that now. And so we truly expect it to plateau and then come down as a percentage of revenue grows? Or would we expect it to continue to maybe grow at an accelerated rate in 2026?

Question: Peter Heckmann - DA Davidson & Co - Analyst : Okay. That's helpful and a good reminder on the reallocation. And then just in terms of with the Texas payments deal deconversion, really the majority of that happening for next year, that creates a bit of a drag. And if we're thinking of SaaS growth at 20%, I guess what's the underlying REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2025 / 2:00PM, TYL.N - Q3 2025 Tyler Technologies Inc Earnings Call growth rate of payments that we should be thinking about to get to kind of thinking about where subscriptions growth ends up next year in terms of thinking about like is the right way to think about transaction revenue growth ex the Texas payments, something in the high teens?

Question: Peter Heckmann - DA Davidson & Co - Analyst : Okay. Low-double digit. Okay. So certainly, on a combined basis just because of Texas, we will see subscription revenue growth fall kind of more towards the mid-teens next year versus what looks like it's going to be 18% this year. Is that the right way to think about it?

Question: Peter Heckmann - DA Davidson & Co - Analyst : Okay. That's helpful. I appreciate that. Thank you.

Question: Trevor Walsh - Citizens JMP Securities LLC - Analyst : Hi. Thanks for taking my question. Great. Brian, maybe for you, but Lynn, feel free to weigh in as well. I appreciate all the color around kind of 2026 and kind of top line type of outlook. But can you maybe just give us a sense of how, from a profitability standpoint, kind of where are some of the levers you think going in '26 that might be pulled? And also on that front, could you give us an update on the data center closure? I think there was one targeted for the end of this year. And if my memory serves that was (inaudible) locations kind of in the early part of next year. So maybe if we could just get an update on that process, just as part of your answer, that would be terrific. Thanks.

Question: Clarke Jeffries - Piper Jaffray Inc - Analyst : Hello. Thank you for taking the question. I just wanted to do a follow-up on some of the commentary on the flips. I just -- Lynn, Brian, how much is version consolidation still limiting factor across the product base? I think it was framed at the beginning of the year you were ahead of schedule with ERP at a 95% level, Justice at 75%. I just wanted to wonder -- I just wanted to ask about 2026 going into next year, where are you at in that version of consolidation? What are limiting factors really are left just to frame the ability to really have capacity for greater flips next year? Thank you.

Question: Charles Strauzer - CJS Securities - Analyst : Hi. Good morning. Just on the flip conversation, just looking at the time it takes the customer to go live in the cloud once they've signed on to flip, are you seeing noticeable improved efficiencies, allowing you to convert to customers at a faster clip?