investor presentation · 4/30/20 • 31 acquisitions since 2006 • add new products and...

Investor Presentation

May 2020

1

Tyler has included in this presentation “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, expectations or beliefs with respect to our financial condition, results of operations or business.

Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,”

“plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly,

statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking

statements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risks

and uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-looking

statements. We presently consider the following to be among the important factors that could cause actual results to differ

materially from our expectations and beliefs: (1) the effects of the COVID-19 pandemic, including its potential effects on the

economic environment, our customers and our operations, as wells as any changes to federal, state or local government laws,

regulations, or orders in connection with the pandemic; (2) changes in the budgets or regulatory environments of our customers,

primarily local and state governments, that could negatively impact information technology spending; (3) our ability to protect

client information from security breaches and provide uninterrupted operations of data centers; (4) our ability to achieve growth

or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to

existing operations; (5) material portions of our business require the Internet infrastructure to be adequately maintained; (6) our

ability to achieve our financial forecasts due to various factors, including project delays by our customers, reductions in

transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service

agreements; (7) general economic, political and market conditions; (8) technological and market risks associated with the

development of new products or services or of new versions of existing or acquired products or services; (9) competition in the

industry in which we conduct business and the impact of competition on pricing, customer retention and pressure for new

products or services; (10) the ability to attract and retain qualified personnel and dealing with the loss or retirement of key

members of management or other key personnel; and (11) costs of compliance and any failure to comply with government and

stock exchange regulations. These factors and other risks that affect our business are described in our filings with the Securities

and Exchange Commission, including the detailed “Risk Factors” contained in our most recent annual report on Form 10-K. We

expressly disclaim any obligation to publicly update or revise our forward-looking statements.

Forward-Looking Statements

2

One of a Kind Company. Outgrowing a Growth Market.

Providerof software solutions to local / state governments

EPS growth

since 2002

Annualgrowthin $21Bmarket

Tyler annual revenue

growth since 2002

3

#1 20%

CAGR7-8% 13%

CAGR

T H E T Y L E R S T O R Y


Powerful business model

One of a kind company

Large untapped market

Multiple growth and profit drivers

1

2

3

4

Long-termSustained Growth

• EPS growth

averaging

~20% annually

4

A T A G L A N C E

Leading Provider of Software Solutions to the Public Sector

Key Product Suites(approx. % of revenues)

Powerful Model

ERP/Financial, 44%

Courts & Justice, 17%

Public Safety, 11%

Appraisal & Tax, 9%

Platform Technologies,

8%

Civic Services, 4%

K-12 Schools, 4%

Land & Vital Records, 3%

26,000installations

$1.09B

~70%

67 bpsannually

1.2x

2019 Non-GAAP revenues

Recurring revenues

Non-GAAP operating margin expansion – avg. last 10 yrs.

Cash flow from ops to Non-GAAP net income– avg. last 5 yrs.

5

$134

$1,091

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

13%CAGR

Consistent Long-term Revenue Growth

Total Non-GAAP Revenues (a)

($M)

67%Recurring• Maintenance

• SaaS/Subscriptions

6

11% organic, 2% acquisitions

(a) 2002 through 2015 are reported under ASC 605. 2016 forward are reported under ASC 606.

Our Business Model is Proven and Scalable…

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

+571%

100

Index2010=100

Free Cash Flow

7

Free cash flow growing faster than earnings

+360%

+278%

Recurring Revenues

Total Revenues

+421% Operating Profit

Delivering a Consistent Record of Strong Performance

TotalRevenues

(Non-GAAP)

RecurringRevenues

EPS(Non-GAAP)

FreeCash Flow

$289M

$1,091M

2010 2019

$159M

$731M

2010 2019

$0.92

$5.30

2010 2019

$34M

$213M

2010 2019

16%

CAGR

18%

CAGR21%

CAGR

23%

CAGR

8

Using Strong Cash Flow to Build Shareholder Value

Invest in the Business

• Industry leading product development

• Capex of $36M - $38M in 2020

Cash FlowCumulative cash flow from operations 2015-2019

= $982M,

1.2X non-GAAP net income

$300M+ of cash and investments and no debt

9

Strategic Acquisitions

Share Repurchases• 27.9M shares repurchased

since 2002

• 39.8M shares outstanding at 4/30/20

• 31 acquisitions since 2006

• Add new products and technologies or expand client base

• Acquired Socrata, Inc. for $150M in cash on 4/30/18

• Acquired MicroPact, Inc. for $197M in cash on 2/28/19

Expand for new opportunities in federal, state and local space

Add key competencies with MicroPact’s successful utilization of partner network

Leverage strategic off-shore operations in Philippines

Bring on solid management team with similar culture and philosophy

MicroPact Acquisition Expands our TAM, Including Entry into the Federal Space

10

+

Market leader in open data and data driven analytics for the public sector

Data-as-a-Service platform that sits above existing “data silos” within public sector agencies

Strengthens all major Tyler solutions and furthers our Connected Communities initiative

Clients include 21 federal agencies, 29 States, 350+ cities & counties, with a focus on the “Government 500”

Socrata Acquisition Positions us as the Leader in Public Sector Data

11

+







1

2

3

4


• EPS growth

averaging

~20% annually

12

Unmatched Capabilities Provide Strong Competitive Advantage

Robust SaaS public sector solutions

National presence

Scalable solutions

“Evergreen” model for upgrades

Industry leader

– high barriers to entry

5

4

3

2

Singular focus on public sector 1

13

Strong Competitive Advantages – Tilt the Landscape in Tyler’s Favor

Geographicscope

National

Local /Regional

Multi-focus

Single-focus

Focus on local government

Oracle

ThomsonReuters

SAP

Infor

Single- focus, national player

14

CentralSquare

Solutionsuniquely designed for the

public sector

Our Winning Client Proposition

Leader in R&Dand innovation

Strong Financial Resources

The Tyler Advantage

15

“Evergreen” model for upgrades

Our Innovation Engine – Core to Our Success

Industry leading product development

– ~15% of revenues, ~ 1,500 software developers

Enhancements

– new features and technologies delivered through “evergreen” upgrades

Continuous improvement of client

experience

− High client retention

− Increased recurring revenues

Drives competitive strength

1

16

23

Single Focus Drives High Retention

Depth of Relationship

Sti

ck

ine

ss

Newclients

Service

Satisfaction

Follow-on solutions& cross-sell

Loyalty

Reference

~98%

Retention

17

Exclusive Focus High Retention ~ 98%







1

2

3

4


• EPS growth

averaging

~20% annually

18

Large Opportunity to Upgrade Government Software

>88,000

>450,000

1/3 provided by

competitive vendors

2/3 provided by

non-competitive vendors

– systems 20+ years old – “green screens”; COBOL

– unsupported systems

– home grown systems

O P P O R T U N I T Y

LocalGovernments

Total Potential Systems

19

CountiesSchool districts

Local agencies

Cities & towns

3,00013,600

35,000

36,000

Municipal Computer Systems Make Headlines: Long Growth Runway

20

ILLUSTRATION: TOMI UM FOR BLOOMBERG BUSINESSWEEK

March 4, 2019 Issue

Chicken Wire and Duct Tape

Municipal offices across the country are

struggling to do their jobs with obsolete gear

that can often be expensive and time-

consuming to replace

Baltimore

Police departmentIssue: The system for storing and tracking

crime reports is more than 20 years old, doesn’t

comply with the national incident reporting

system, and can’t link to other databases.

Upgrade cost: $4 million

BOTTOM LINE - Behind San Francisco’s

gleaming office towers packed with tech

workers, city assessors are struggling to

manage with software that predates

“WarGames” and “Tron.”

Massive Growth Potential for Tyler – Just Scratched the Surface

Large Market Opportunity Market Growing Steadily

7-8%annually

Total Market (1)

$21B

AddressableMarket Today (2)

$9B

Tyler$1.2B

21

(1) Source – Gartner - Local & Regional Government and Primary & Secondary Education spending on applications and vertical specific software and company estimates

(2) Source – Company estimate







1

2

3

4


• Cash flow and

EPS growing faster

than revenues

22

Our Business Model Will Continue to Deliver Strong, Sustainable Long-Term Growth

7-8%

>15% annually

MarketGrowth

Long-termEPS Growth

• Multiple top linegrowth drivers

• Leverage scale

1. Gain marketshare

2. Marginexpansion

23

Key Growth and Profit Drivers Going Forward

• Maintain high win rates– e.g. Courts >85%

• Expand relationships with existing clients

• Accelerate move to the cloud

• Expand e-filing and payments business

– recurring, high margins

• Continue to penetrate larger governments

• Continue to expand market share and margins

• Broaden product line through acquisitions and internal builds

• Expand transaction-based revenues– E-filing, on-line dispute resolution– Payments

• Strategic acquisitions, $15-$50M in revenues

• International opportunities

Near-Term: 1-3 Years

Longer-Term:

4-6 Years

24

A C L O S E R L O O K

Accelerating Our Move to the Cloud

Long-term Transition to Subscription

• Fastest growing revenue stream,+34% in 2019

• More than 50% of new software bookings

are SaaS, trending upward

• Entered into strategic collaboration

agreement with Amazon Web Services

in Q4 2019

• Driving innovation to optimize

products for the cloud

• Leveraging AWS to grow our cloud

capabilities

• Expanding long-term subscription margins

$0M

$50M

$100M

$150M

$200M

$250M

$300M

20052019

Subscription

Licenses

25

Revenues

Maintenance MaintenanceMaintenance

Maintenance

TransactionsTransactions

Transactions

TransactionsSaaS

SaaS

SaaS

SaaS

Q4 2016 Q4 2017 Q4 2018 Q4 2019

Annual Recurring Revenues Continue to Surge

+36%$560M+14%

26

$493M +22%

$636M+14%

$770M+21%

+39%

+24%

+29%

Note: Annual recurring revenues are calculated as non-GAAP revenues for the quarter multiplied by 4.

A C L O S E R L O O K

Leverage Scale, Expand Margins

Factors Driving Long-Term Margin Growth

• Changing revenue mix –more recurring revenues

• Highly leverageable model

– high margins for incremental license, subscription & maintenance revenues

– G&A expenses grow slower than revenues

– Significant increase in product investments, including acquisitions since 2017

28.2%26.6%

25.3%

35%+

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Goal

Tyler Blended OperatingMargin

(Non-GAAP (a))

A highly leverageable business

27

(a) 2007 through 2015 are reported under ASC 605. 2016 forward are under ASC 606.

Backlog Remains Strong → High Revenue Visibility

$340M$381M

$552M

$702M

$845M

$1,049M

$1,226M $1,247M

$1,458M$1,501M

2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q2020

Backlog of Signed Contracts (a)

Adding 20 new clients every week

28

+17%YOY

+17%YOY

(a) 2009 through 2015 are reported under ASC 605. 2016 forward are under ASC 606.

+19%YOY

$935M

$1,086M

2018 2019

2019 Results

Diluted EPS (2)

($)

Revenues (1)

($M)

$3.68$3.65

2018 2019

$4.80

(1) Non-GAAP Revenues exclude write-downs of acquisition-related deferred revenue and subleases.(2) Non-GAAP EPS excludes write-downs of acquisition-related deferred revenue and subleases, stock compensation expense, acquisition-

related costs, and amortization of acquisition intangibles.Please see reconciliation of non-GAAP measures to GAAP included in our press release filed with the SEC.

$5.30

+16.1% +10.4%

$1,091MNon-GAAP

GAAP GAAP

29

GAAP

GAAP

$940M

Non-GAAP

Non-GAAP Non-GAAP

(4)

I N S U M M A R Y






1

2

3

4


• EPS growth

averaging

~20% annually

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www.tylertech.com

Brian Miller – Executive VP & CFO

[email protected]

972-713-3720

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investor presentation · 4/30/20 • 31 acquisitions since 2006 • add new products and...

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