Tyler Technologies(US:TYL)2022-02-18 02:59Financial Data and Key Metrics Changes - Total revenues for Q4 2021 were $433.5 million, up 53% year-over-year, with non-GAAP revenues at $434.2 million, also up 53.2% [21] - Organic growth for both GAAP and non-GAAP revenues was 9.2% [21] - Subscription revenues rose 144.1%, with a robust growth of 28.1% excluding NIC contributions [22] - Non-GAAP operating margin declined 330 basis points to 23.6% due to various factors including the shift to SaaS and lower margin revenues [10][28] Business Line Data and Key Metrics Changes - Recurring revenues comprised over 80% of quarterly revenues, with subscription revenues leading the growth [8] - NIC's core revenue growth was 7.5% excluding COVID-related revenues, with total COVID-related revenues at $16.6 million [6][7] - Transaction-based revenues, including NIC portal and payment processing, reached $137.1 million, up almost fivefold from last year [24] Market Data and Key Metrics Changes - The backlog at the end of Q4 was $1.8 billion, up 12.6%, with Tyler's backlog growing 11.1% excluding NIC [26] - Bookings for the quarter were $464 million, up 39.3%, with organic bookings at approximately $347 million, up 4.2% [27] Company Strategy and Development Direction - The company is focusing on a cloud-first strategy, with expectations that 80% of new software contract mix in 2022 will be SaaS [52] - The acquisition of USC Direct is expected to enhance the company's offerings in the outdoor recreation management market [36] - The company anticipates a decline in license revenues in the mid-single digits for 2022, while subscription revenues are expected to grow 25% to 30% [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong recovery of the public sector market, with RFP and demo activity at or above pre-COVID levels [34] - The company expects to see margin pressures in 2022 due to the transition to SaaS, but anticipates a return to margin expansion starting in 2024 [58] - Management highlighted the importance of cross-selling opportunities and the existing client base of over 37,000 installations as key growth drivers [62] Other Important Information - The company repaid $87.5 million of term debt in Q4 and has repaid $395 million since the NIC acquisition, ending the quarter with total outstanding debt of $1.34 billion [28] - The company is transitioning its hosting to AWS, which is expected to improve margins in the long term [51] Q&A Session Summary Question: Growth in government budgets and federal stimulus impact - Management noted that while property values remain strong, the majority of federal stimulus money has not yet been spent or committed [66][68] Question: Impact of SaaS mix on top line and margins - The shift towards SaaS is expected to impact revenue by approximately $28 million to $30 million, with a margin impact of about half a point for the year [70][72] Question: Deals above $5 million in total contract value - No deals above $5 million were reported in the quarter, with the largest deal being just under $4.5 million [76] Question: ERP demand outlook - Demand for ERP solutions is robust, with RFPs and demos at all-time highs, indicating strong growth potential [87] Question: AWS progress and new SaaS customers - New customers for ERP are being placed on AWS, but the full margin benefits will not be realized until products are optimized for the cloud [89] Question: NIC revenues and margin pressure - NIC's revenues are expected to be consistent with Tyler's overall margin for the year, with some improvement as COVID-related revenues decline [96][98] Question: Subscription revenue growth sustainability - Subscription revenue growth is expected to remain strong, with a mid-20% organic growth rate anticipated [114]