Tyler Technologies, Inc.

Hello, and welcome to Tyler Technologies' third quarter 2026 conference call. Your host for today's call is Lynn Moore, Executive Chair, 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 everyone's questions and stay within the allotted time, please limit your question to one question. And as a reminder, this conference is being recorded today, October 29, 2026. I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. Please go ahead.

Thank you. and welcome to our call. With me today is Lynn Moore, Executive Chair, President and CEO, and Brian Miller, our CFO. Also joining us today on today's call is Chief AI Officer Franklin Williams. Franklin will participate during portions of the discussion to provide additional context on our AI strategy, commercialization efforts and adoption trends across the business. While we expect Franklin to periodically join future earnings calls when relevant, Thank you for joining us today. After I give the safe harbor statement, Lynn will have some opening remarks and we'll move directly to our Q&A session. During this conference call, management may make statements that provide information other than historical information and may include projections concerning the company's 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 refer you to our Form 10-K and other SEC filings for more information on those risks. Lynn?

Thanks, Hala. Our third quarter results reflect continued strong execution across the business. We delivered 11% recurring revenue growth, including SAS revenue growth of 21.2%, expanded operating margins by 150 basis points and generated record quarterly free cash flow of $277 million. Public sector demand remains healthy, supported by ongoing modernization priorities, strong client engagement, and an active pipeline. Budgets remain supportive of continued investment in mission-critical technology, and AI is increasingly being evaluated as an extension of broader modernization initiatives. Total SAS bookings increased 14%, reflecting continued momentum in cloud adoption and digital transformation efforts across government. We made meaningful progress on several of our strategic growth initiatives during the quarter. Cloud migration remains one of the most significant drivers of long-term value, and momentum continues to build. Following our July outreach to on-premises enterprise clients, highlighting the value, incentives, and urgency of moving to the cloud, We have seen strong engagement across our client base and increasing activity among large clients advancing their transition plans. We also reached a key milestone with our first implementation of our multi-tenant solution for an existing enterprise ERP client, representative of our complete cloud living commitment. This is an important step toward a common code stream that enables continuous innovation, automated quarterly release upgrades, and more efficient delivery. With broader cloud living rollouts on track for early 2027, we are well positioned for an accelerating pace of migrations beginning in 2027. We also advanced our AI strategy with growing deployments, expanded agentic capabilities, and continued validation of our commercialization approach. Client adoption continues to grow, with approximately 300 deals containing AI across the portfolio. We also continue to execute our disciplined capital allocation strategy through the acquisition of Kodi Systems and significant share repurchases. Year-to-date, we have repurchased approximately 8.5% of our shares outstanding, with almost $1.4 billion remaining in our authorization. We enter the fourth quarter well-positioned to deliver a strong finish to 26 and confident in the long-term growth initiatives that underpin our Tyler 2030 objectives. With that, let's open the call for questions.