Tyler Technologies, Inc.

Hello and welcome to today's Tyler Technologies second quarter 2023 conference call. Your host for today's call is Len Moore, President and CEO of Tyler Technologies. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. In order to address your questions and stay within the allotted time, Please limit your question to one question per person. As a reminder, this conference is being recorded today, July 27th, 2023. I would like to turn the call over to Hala El-Shabini, Tyler's Senior Director of Investor Relations. Please go ahead.

Thank you, Colby, and welcome to our call. With me today is Lynn Moore, our President and Chief Executive Officer, and Brian Miller, our Chief Financial Officer. After I give the safe harbor statement, Lynn will have some additional comments on our quarter and then Brian will review the details of our results and provide an update to our annual guidance. Lynn will end with some additional comments and then we'll take your questions. During this conference call, management may make statements that provide information other than historical information and may include projections concerning the company's future results, future prospects, revenues, expenses, and profits. Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from these projections. We would refer you to our Form 10-K and other SEC filings for more information on those risks. Also, in our earnings release, we have included non-GAAP measures that we believe facilitate understanding of our results and comparisons with peers in the software industry. A reconciliation of gap to non-gap measures is provided in our earnings release. We've also posted on the Investor Relations section of our website under the Financials tab schedules with supplemental information, including information about our quarterly bookings, backlog, and recurring revenues. On the Events and Presentations tab, we posted an earnings summary slide deck to supplement our prepared remarks. Please note that all growth comparisons we make on the call today will relate to the corresponding period of last year unless we specify otherwise. Len?

Thanks, Ella. Tyler delivered exceptionally strong second quarter results that exceeded expectations across our key performance measures. We also reached a new milestone for total quarterly revenues, surpassing the $500 million mark for the first time. Our results reflect a high level of execution and collaborative one-titler approach across our organization that is the foundation of our long-term growth strategy. Total revenue growth was 7.6% with 10.4% organic growth. Recurring revenue comprised 82% of our quarterly revenues and grew organically almost 11%. It's gratifying to achieve double-digit revenue growth even as the shift to SaaS and our new software contract mix continued to accelerate, with SaaS deals comprising 82% of our Q2 new software contract value. Most importantly, SaaS revenues grew organically 20%, our 10th consecutive quarter of SaaS revenue growth of 20% or more. At the start of the year, we characterized 2023 as a pivotal year in our cloud transition, where the significant decline in license revenue is replaced by valuable long-term recurring SAS revenue. Now halfway through the year, the accelerated pace of cloud adoption, coupled with our heightened focus on our cloud optimization and migration efforts, position us well to drive sustained long-term growth and operating margin improvement. While operating margins this quarter declined from last year as expected due to our cloud transitions, margins were better than planned because of operating efficiencies. We continue to deliver results that reflect our competitive strengths and market-leading position in the public sector. Key to our performance is our hyper-focus on leveraging our largest asset, our unmatched installed client base, to drive an increasing number of cross-sell and upsell wins, prioritize migration of on-premises clients to the cloud, and capture higher transaction volumes through our unified payment solution. Overall, sales activity is high in what we see as a robust demand environment. with leading indicators such as RFPs and demos generally at or above pre-COVID highs. In addition to software solutions, our unified payment strategy and our digital solutions division continue to prove their tremendous value to our growth algorithm. During the second quarter, we signed 132 new payment deals, including a contract with Cook County, Illinois for traffic court payments. We also signed renewals of our state enterprise contracts in Wisconsin and Connecticut and extensions of our state enterprise agreements in West Virginia, Illinois, Idaho, New Jersey, and Kentucky. Additionally, synergies from our disbursements business through our acquisition of rapid financial solutions and deals influenced by data and insights continue to materialize and provide compelling offerings in the state and federal markets. I'd like to highlight a few strategic second quarter deals that illustrate these successes. We've seen growing momentum in the public safety market with our best first half sales performance since we acquired New World in 2015. During the second quarter, we signed contracts with two state police organizations for enterprise CAD and mobility solutions. These marquee license agreements include a cloud deployment for the Oregon State Police and an on-premises deployment for the Missouri State Highway Patrol. Additionally, Harris County, Texas, the third largest county in the United States, selected Tyler's Enforcement Mobile Solution for eCitations and eCrash applications. We won a cross-sell opportunity with the Michigan Bureau of Elections, a Digital Solutions Division client, to replace an existing custom solution with Tyler's application platform, formerly IntelliTrack, with $1.7 million of ARR. We also added our enterprise licensing platform and one outdoor solution under our state enterprise agreement in Illinois, with $5.2 million of ARR. Ninety-four clients signed contracts to migrate on-premises Tyler Solutions to the cloud, including DeKalb County, Georgia, for their enterprise justice solution, Charleston, West Virginia, for their enterprise ERP solution, and the Wyoming State Control for their public safety solution. Now I'd like for Brian to provide more detail on the results for the quarter and our annual guidance for 2023.