Lynn Moore Jr.
President And Chief Executive Officer at Tyler Technologies
Thanks, Hala. Our 4th-quarter results provided a solid finish to an exceptional year of growth and profitability as we executed on our key objectives across financial, operational and strategic initiatives. We exceeded our expectations across our key financial metrics with recurring revenue growth of nearly 15%, driven by SaaS revenue growth of 23%, our 16th consecutive quarter of SaaS revenue growth of 20% or more. SaaS adoption continued to accelerate with both new and existing clients with 97% of our new software contract value in the cloud. Transaction revenues set a new quarterly high and grew nearly 21%. Our non-GAAP operating margin expanded to 24.4%, benefiting from the mix-shift to higher SaaS revenues. In addition, free-cash flow of $216 million significantly exceeded our expectations, reaching a new high for the 4th-quarter. In 2023, we passed a cloud revenue inflection point where long-term recurring SaaS revenues surpassed on-premise license and maintenance revenues. At our 2023 Investor Day, we unveiled our Tyler 2030 vision and multi-year strategic direction, including drivers of revenue growth and margin expansion. We also laid out our 2025 and 2030 targets for key metrics around revenues, margins and cash-flow. We're pleased with our progress in 2024 toward those goals. As planned, we closed our Dallas data center midyear and are on-track to close our main data center at the end of 2025. We delivered SaaS revenue growth that exceeded our 20% growth target and transaction revenues were well-above plan. We made significant progress with our cloud operations initiatives, delivering better-than-expected operating margin expansion through version consolidation and releasing cloud-optimized products. These proof points give us confidence in achieving our 2025 targets as well as our long-range goals of organic recurring revenue CAGR of 10% to 12%, sustainable margin expansion with non-GAAP operating margins of 30% or more and expanded free-cash flow of $1 billion with free-cash flow margins in the high-20s. The public sector market remains strong with robust demand supported by healthy budgets, especially at the state and local levels, which comprise approximately 95% of our total revenue. The public sector's drive towards digital modernization continues to accelerate as aging mission-critical systems reach end-of-life, cybersecurity threats continue to increase and governments at all levels face a growing demand for an improved citizen experience and seek operational efficiencies to enable them to do more with limited resources. While the new Federal Department of Government Efficiency or DOSE is still in its early days, we don't envision its effort having a significant impact on funding or demand for our software and services, which power what are generally essential functions. In fact, we view an increased focus on government efficiency at any level as an opportunity rather than a risk for Tyler, and we believe that technology is ultimately the greatest driver of improved efficiency. The elevated market activity we've discussed for the past few quarters, along with excellent execution by our sales teams is reflected in our new software bookings this quarter with new SaaS contract value of approximately $141 million, up 37% over last year. Our market-leading position and competitive strengths, including our deep domain expertise, broad portfolio of solutions, and most importantly, our client base serve as the foundation for our long-term strategic focus on four key growth pillars: executing on our cloud-first strategy, leveraging our unmatched installed-base, expanding into new markets and growing our differentiated payments business. Our cloud transition is anchored by our unifying principles toward a single release stream to better scale, innovate and deliver an enhanced client experience. We've made significant progress with our cloud optimization efforts with cloud-optimized releases launched across many of our flagship products, driving an accelerated pace of on-premise client migrations to the cloud with more flips of larger clients taking place. For the quarter, we inked a total of 106 flips of on-premises clients. The total contract value from flips signed this quarter grew 58% over last year's 4th-quarter and the average ARR of signed in the quarter rose nearly 32%. As we previously discussed, we are executing multiple cloud transitions across our product solutions, each with its own nuanced roadmap and timeline. We're pleased with the current trajectory of flips from on-premises to cloud deployments and currently envision flips peaking in 2027 and 2028 as we work towards migrating more than 80% of our on-premises clients to Tyler's next-generation cloud by 2030. We continue to lead with cloud across all product solutions and during the quarter, we saw increased momentum from clients selecting multiple integrated solutions from Tyler. Our largest SaaS deal this quarter was an $11.4 million multi-suite contract with the City of Kenosha, Wisconsin for enterprise ERP, enterprise permitting licensing, enterprise asset management, municipal justice and enterprise assessment and tax solutions. The win, which adds $1.3 million in ARR, leveraged our expanding footprint and strong client references in Wisconsin, combined with our unique ability to offer multiple integrated solutions from a single platform. This is what we refer to as a total Tyler client engagement. Notable multiproduct SaaS contracts include Hernando County, Florida and the City of Warner Robbins, Georgia for our enterprise ERP, enterprise permitting licensing and enterprise asset management solutions had added almost $1.3 million in ARR. We're also pleased to see growing adoption of our AI-driven priority-based budgeting solution, which we acquired with Resource X in the fall of 2023. Priority-based budgeting enables informed decision-making and efficiencies by linking financial resources to strategic funding priorities and goals. There were three key wins for the solution in Q4 with large clients, including LA County, California, Kansas City, Missouri and Johnson County, Kansas, adding a total of nearly $1.8 million in ARR. We're excited to partner with these clients as they implement their data-driven budgeting applications, leveraging our deep domain expertise and industry-leading best practices. We continue to drive higher cloud adoption for our public safety solutions with both new competitive wins and a growing number of flips. Notable SaaS wins included the Southwest Regional Communications Center, a Texas 911 consortium in the Dallas-Fort Worth area and Peoria, Illinois, which dispatches for 10 different agencies, each contracting for our full enterprise public safety suite. We also continue to build momentum at the state-level with our public safety solutions. We signed three enterprise public safety deals with state agencies in the quarter, including SaaS contracts with the Iowa Department of Public Safety, which was a competitive effort leveraging our Digital Solutions division's state enterprise relationship and contract vehicle and also the Michigan State Police. We also signed a license deal with the Nebraska State Patrol. We now count nine state police agencies as enterprise public safety clients. In our state and federal business, we signed an eight-year contract with the state of Maine for our resident engagement portal, adding $2.2 million in ARR. This competitive win leveraged our strong state relationship as a trusted partner, offering deep public sector domain expertise and strong references from other successful implementations of our resident engagement platform. At the core of our growth strategy is leveraging our unmatched installed-base through cross-sell and upsell initiatives. We added to our growing footprint in outdoor recreation, signing a multi-year SaaS arrangement with the South Carolina State Parks under our State Enterprise master agreement. Additionally, we signed a contract with the Colorado Department of Corrections for inventory warehouse management solution, leveraging our Colorado State Enterprise relationship to add $612,000 in ARR. Driving transaction revenue growth through our integrated payments business is another key element of our growth strategy. Our payment strategy is centered on a high-value unified platform that seamlessly integrates with our software solutions and proprietary back-office services, creating opportunities for higher margins. Demand for our differentiated payment solutions continues to be strong, and in the 4th-quarter, we signed 244 new payment deals across Tyler software clients, representing approximately $8.1 million in projected ARR. For the year, we signed 995 new payments deals. In our state enterprise business, we secured a two-year extension for our digital government and payment processing services with the state of Utah, representing approximately $11.5 million in ARR. Now I'd like to Brian to provide more detail on the results for the quarter and our annual guidance for 2025.