Tyler Technologies(US:TYL)2022-07-28 19:05Financial Data and Key Metrics Changes - Total revenues grew approximately 16% to $468.7 million, with organic growth of 6.2% on a GAAP basis and 5.8% on a non-GAAP basis [19][7][8] - Subscription revenues rose 28.2%, with strong organic growth of 14.1% [20][22] - Cash flows from operations reached $76.7 million, and free cash flow rose to $60 million from negative $33.5 million last year [24] - Non-GAAP ARR was approximately $1.49 billion, up 16.3% [22] - Backlog at the end of the quarter was a new high of $1.85 billion, up 13.9% [23] Business Line Data and Key Metrics Changes - Services revenues were flat on an organic basis, impacted by labor market challenges [8][20] - Software revenues rose 18.3%, while service revenues were essentially flat on an organic basis [20] - Transaction-based revenues, including NIC portal and payment processing, were $154.4 million, up 29.1% [22] - The company added 167 new subscription-based arrangements, representing approximately $115 million in total contract value [21] Market Data and Key Metrics Changes - The public sector market environment remains strong, with a 21% increase in bookings [6] - The company successfully extended enterprise contracts in multiple states, including West Virginia and Kentucky [11] - The active cross-sell pipeline doubled in value from Q1, indicating strong market demand [12] Company Strategy and Development Direction - The company is focused on leveraging its competitive position and ongoing investments in strategic initiatives to capitalize on the strong public sector market [31] - The integration of acquisitions, including NIC, VendEngine, and US eDirect, is expected to enhance cross-sell and upsell opportunities [32] - The company is prioritizing cash flow to reduce debt while retaining flexibility for strategic acquisitions [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating solid financial results despite rising inflation and interest rates [34] - The public sector market is viewed as more stable compared to the private sector, with recurring revenues comprising approximately 80% of total revenues [35] - The company is on track with major strategic initiatives, including cloud migration and product optimization [37] Other Important Information - The company expects total revenues for the full year to be between $1.835 billion and $1.870 billion, implying organic growth of approximately 9% [28] - Interest expense guidance was adjusted to approximately $30 million, reflecting increased costs due to rising interest rates [28][30] Q&A Session Summary Question: Sales cycle for larger deals and connection to state and local budgets - Management indicated that sales cycles are normal, with a healthy market environment and strong state and local budgets [41][44] Question: Progress on hiring for professional services - Management acknowledged challenges in hiring but plans to continue growing the implementation team [52][53] Question: Success in converting maintenance customers to SaaS - The primary success in conversions is seen in the ERP product suite, with expectations for continued momentum [66][67] Question: Impact of rising interest rates on margins - Management noted that margin impacts are expected as new hires ramp up to become billable [99][100] Question: Current state of public safety market - The public safety market is returning to normal, with competitive advantages noted in mobility and product integration [110][112]