Tyler Technologies(TYL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q4 2025 were $575.2 million, an increase of 6.3% year-over-year [13] - Recurring revenues grew by 11%, with SaaS revenue growth exceeding 20% and transaction-based revenue growth at 12% [6][15] - Free cash flow reached a record high in Q4, up nearly 10%, with a free cash flow margin of 41% [6][18] - Annualized recurring revenue was approximately $2.06 billion, up 10.9% [17] Business Line Data and Key Metrics Changes - SaaS revenues grew by 20.2%, surpassing $200 million in a quarter for the first time [15] - Transaction revenues increased by 12.1% to $196.7 million, driven by higher transaction volumes and new service deployments [15] - Total SaaS bookings grew by 9.6% year-over-year, with annual contract value from flips signed in Q4 rising 64.5% over last year [17] Market Data and Key Metrics Changes - The public sector market fundamentals remain strong, with healthy budgets supporting an active pipeline [6] - RFP and sales demo activity are at elevated levels as agencies prioritize modernization of critical systems [6] Company Strategy and Development Direction - The company focuses on four key growth pillars: completing the cloud transition, leveraging the client base, growing the transactions business, and expanding into new markets [8] - A unified payment strategy has been executed to capture greater value and drive operational efficiencies [8] - The company is transitioning to AI-enabled solutions, with plans for deeper integration into operational workflows [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver sustained growth through competitive strengths and digital transformation initiatives [24] - The company anticipates total revenues for 2026 to be between $2.5 billion and $2.55 billion, implying growth of approximately 8.3% [19] - The market is showing healthy demand, with strong sales activity and a high number of RFPs [53] Other Important Information - The company completed four strategic acquisitions in 2025 and announced a pending acquisition of For The Record, which is expected to enhance its courts and justice portfolio [28][29] - A new share repurchase program of up to $1 billion was authorized, reflecting confidence in the business trajectory [29] Q&A Session Summary Question: SaaS flips and future expectations - Management indicated that while they do not guide specific flip numbers, they expect flips to continue to grow from current levels, with a peak anticipated between 2027 and 2029 [33] Question: Annual Contract Value from new SaaS deals - Management noted that they expect SaaS bookings to grow in 2026, with Q4 showing solid sales numbers despite tough comparisons from large deals in the previous year [37] Question: State sales team performance - The state sales team has shown encouraging results, contributing to significant deals, and is expected to continue leveraging relationships for future sales [44] Question: AI partnerships and development - The company collaborates with major AI players like Anthropic, AWS, Microsoft, and OpenAI to enhance its product offerings [50] Question: Free cash flow and capital allocation - Management expects free cash flow to grow, with a focus on disciplined capital allocation between M&A opportunities and share repurchases [76][78]