TYLER TECHNOLOGIES INC Q4 FY2025 earnings call

• The business demonstrated resilience in 2025, with recurring revenue and free cash flow surpassing expectations. Recurring revenues grew 11%, free cash flow was a fourth quarter record with a margin of 41%.
• Public sector market fundamentals remain strong with active pipelines and RFP activity. Sales organization delivered solid execution with SaaS bookings up 9.6%, including strong flips of on-premises clients.
• Key growth pillars include cloud transition, large client base leverage, transaction business growth, and new market expansion. The transaction-based business made progress with unified payment strategy and value-added services.
• Fourth quarter wins included expansions with state enterprise clients, SaaS contracts with school districts and counties, and sales success in transactions. AI initiatives saw progress with resident assistants in multiple states and commercial momentum, with plans for phased AI expansion.
• Strategic acquisitions in 2025 deepened capabilities, and a new share repurchase program of up to $1,000,000,000 was authorized.

Recurring revenues grew 11% in the fourth quarter, led by SaaS revenue growth of over 20% and transaction-based revenue growth of 12%. Subscription revenues increased 16.1%, with SaaS revenues growing 20.2% and reaching over $200,000,000 in a quarter. Transaction revenues grew 12.1% to $1,967,000,000. Total annualized recurring revenue was approximately $2,060,000,000, up 10.9%.

• Total revenues expected between $2,500,000,000 and $2,550,000,000, midpoint implies ~8.3% growth.
• GAAP diluted EPS expected $8.30-$8.61, non-GAAP diluted EPS $12.40-$12.65.
• Free cash flow margin expected 26%-28%.
• Subscription revenues expected to grow 12%-15%, SaaS 20.5%-22.5%, transaction 5%-7% (excluding Texas contract, 10%-12%). Maintenance revenues expected to decline 5%-7%, professional services 3%-5%, license 15%-17%, hardware other 17%-19%.

• Contract dispute with a state government client, unresolved as of the call. Regulatory approval risk for the pending acquisition of For The Record. General risks associated with forward-looking statements and market uncertainties affecting actual results.

Q: How should we think about the level of SaaS flips going forward and renewal cohorts?

A: We don't guide to a flip number, but expect flips to continue growing. Renewal rates are high, with timing varying, and we have success selling additional products/services to existing clients as they flip to the cloud.

Q: Can you remind us of the comp issues for ACV from new SaaS deals in Q4 and expectations for growth?

A: Last year's fourth quarter had large deals with longer durations, this year's mix is more normal. We expect SaaS bookings to grow in 2026 with market conditions supporting growth, and momentum from client successes helping.

Q: Double click into the state sales team's corrections deal and SaaS revenue sequencing?

A: The state sales team is in early stages but seeing success, with collaboration across Tyler. SaaS revenue growth midpoint is 21.5%, with growth expected to be fairly consistent across the year, varying with timing of signings and flips.

Q: Talk about partnerships with AI players in the traffic quarter?

A: We work with Anthropic, AWS, and OpenAI in AI development activities for integrating AI into our products.

Q: How comfortable are you with the ARPA dynamic limiting deals to 2025 and potential deals in 2026 and beyond?

A: Market looks healthy with strong win rates, high RFP activity, and healthy demand, giving confidence in the 2026 plan with no delays seen in deals at this point.