Hello. Here we go. All right, we're going to go ahead and get started. I just wanted to welcome everybody. It's great to see such a large turnout here in San Antonio, and I do want to welcome those joining us on the live webcast stream. Just a few items before we get started. Just, of course, to welcome everybody. Lynn's going to kick us off in just a minute. And, of course, our customary Safe Harbor statement. Just to remind everybody that statements made today may include forward-looking statements that are subject to risks and uncertainties, and our actual results could differ materially from those forward-looking statements. I'm not going to read the rest of it. I know you guys want me to, but I'm not going to. Risk factors are included in our SEC filings, so refer to those for more information. Of course, our presentation will also include non-GAAP financial measures, and we do have a reconciliation of our comparable GAAP metrics, and those can be found in the appendix. Now, our presentation will be posted to the website after the event, probably later this afternoon, and we'll have the replay of the program as well. For our agenda, we will have two Q&A sessions. One will be after Brian's financial progress update, and then we'll have an extended second session following our moderated executive panel discussion. This will replace a roundtable. I think we've had lunch. You guys have had enough time to kind of interact. We will wrap up about 2:15 today after that. We will be taking questions from the audience here today. Any questions from the website, from the webcast, can be just sent to me directly, and we'll follow up with that over the next few days. Please join me in welcoming our President and CEO, Lynn Moore. Thanks, Hala. Good afternoon, everyone. Welcome to Tyler's Investor Session. It's great to see everybody here today, and welcome also, as Hala said, to the people that are dialing in through the webcast. It's been about two years since we did our Investor Day up in Frisco, Texas. What we'd like to do today is really sort of catch you up on what we've been doing since Investor Day. Talk about our progress against the targets that we laid out two years ago, our 2025 targets and our 2030 targets, as well as take a little time and talk about what lies ahead, including some of the investments we've been making, some around innovation. I talked about some of those in the opening session, things around cloud, client experience, and artificial intelligence. This slide should look pretty familiar to all of you. This is a slide we introduced at the 2023 Investor Day. It shows our four growth pillars that really anchor our 2030 vision around our long-term goals of recurring revenue growth, improved margins, and expanded free cash flow. Those four growth pillars, of course, are leveraging our installed base: flips, upsell, cross-sell, as well as sort of tucking in acquisitions, getting more products through M&A, expanding our state and federal TAM, and really just expanding our TAM generally by leveraging M&A to get into new markets, continuing to make progress on our cloud transition, and, of course, transactions growth. All of that sits on the foundation of disciplined capital allocation. It's really using our free cash flow to fuel each of those four pillars. Okay. What you're going to hear today, again, you're going to hear about our financial progress and our current capital priorities. I'm going to touch on each of these briefly, and then we're going to have people come up behind me and go into a little more detail. We're going to talk about our financial progress since the Investor Day. I'm going to talk a little bit about our cloud journey, where we are, client experience, as well as where we are with AI. We're going to have a moderated Q&A panel after that, and we'll go a little bit deeper into each of those topics. Since Investor Day, Investor Day was June of 2023. We hit our margin trough in the Q3 of that. We signaled that back in 2022, and the trough really happened as we met our inflection between SaaS and our on-premises licenses. We also acquired three companies in the fall of 2023, all of them based around some AI technologies. That was CSI, AR Inspect, and ResourceX. 2024 was a year where we saw some—so we saw the shift right, and as we talked about going into it, we saw an expansion of our growth, some meaningful expansion of our operating margin and our free cash flow. We also paid down our term debt in 2024, as well as we started setting aside some capital for the convertible debt that is due next March. 2025, we have continued on the trajectory that we did in 2024, some meaningful growth, and we are continuing to invest in our client success, innovation around AI and the cloud. Again, we will go into that in a little more detail with the panel. The cloud—oops, that thing jumped ahead on me. Sorry about that. I thought this was going to sort of go up in phases. Our cloud transition, we have talked about this. It's much more than just where our systems are hosted. Internally, I've been talking about our transition sort of in two phases. I think I've talked a little bit about that externally as well. Phase one was really, goes back to a number of things. It was the decision to go from cloud-agnostic to cloud-first. It was the decision to align with a Public Cloud provider, AWS. It was doing things around planning to exit our data centers. We exited our Dallas data center last year. We're on track to exit our Yarmouth data center this year. It's around optimizing our products to run more efficiently in the cloud. It's flipping our clients, moving more clients, new clients, and old clients into AWS. Also a really concerted effort around version consolidation. Now, phase one is a phase that's actually going to keep going even as we start talking about phase two of our cloud transition. Clearly, we haven't moved all our clients into AWS yet, but we will have our data centers closed this year, our two main data centers. Version consolidation continues. Optimization still continues. That will still be going on in the background as we start talking about what we call phase two. Phase two, to me, is really about operationalizing the cloud. It's about realizing the full potential of what the cloud offers. It's all about Cloud Ops. It's things like single code stream, smaller digestible releases, continuous improvement, continuous delivery, all the things that you come to know from really native cloud providers. It's about getting all of our products and our division synced up into that world. This is something that we have kicked off. Russell Gainford, our CTO, is going to come up as part of the Q&A, and we're going to talk about that in a little more detail. Client experience. If y'all were there at the opening session today, you've heard us talk a lot about client experience. Our goal there is really to provide a consistent, predictable, and high-quality client experience across our entire portfolio. One of the things I've been saying with our executive team really for the last couple of years is we need to have a renewed focus on client experience. It's really foundational if we're going to reach our 2030 goals and beyond. Things I've been saying, I think y'all have heard me say it as well, is if our clients aren't happy, they're not going to flip to the cloud, they're not going to take our payments, and they're not going to buy more of our products. Putting a focus on client experience really is part and parcel with driving future growth and future sales. We've made a lot of investments, talked about them at the opening session, but there's still a lot more to do. We've hired Andrew Call as our new first-ever Chief Client Officer. I'm very excited about bringing Andrew on board. He's got a great background. He's hit the ground running. He's going to talk about that in just a few minutes. He'll talk a little about what he calls the client continuum, which is really the entire client lifecycle from sales to dev to implementation to support to client success, which then feeds back into sales. It is, again, client experience at the end of the day also fuels future sales, future growth. Excuse me. I've been talking a lot today. The last thing I want to touch on briefly is AI. As you know, we've been taking a very deliberate approach to AI. I talked about that again in the opening session. What we're doing is we're really trying to look at ways to add value both externally to our clients, but also internally. When we talk about AI, we really have honed in on three separate areas. One is decision-making, which is really helping decision-makers make better informed decisions with more evidence-based data. Service delivery, helping residents connect better with government and productivity, which is simply doing more with less. We have created proof of concepts around all of these areas, and in some cases, we have already delivered real value to our clients. Franklin Williams, who is our Deputy Chief Technology Officer, oversees our entire AI strategy and will be talking about all the things that we are doing Tyler-wide with AI. With that, I am going to turn it over to Brian. He is going to go a little bit deeper into the numbers, and then we will get deeper into these other topics later in our moderated Q&A. Okay. Thanks. Thanks, Lynn. Everyone, welcome to my hometown, San Antonio. Happy to have you here with us at Connect, and I really appreciate you guys taking the time to spend with us and further your understanding of Tyler and all the great things that are going on here. I'm going to talk a little bit, as Lynn said, more about the progress we've made since the 2023 Investor Day. That Investor Day was really a milestone for us. It was the first time we really laid out these long-term targets. We'd never really talked much more, talked about our strategic vision and our plans, but we really never set out concrete financial targets, certainly not five or seven years out. I want to talk a little bit about our progress towards those goals that we set out back in June of 2023. We have made really significant progress towards those goals over the last seven quarters since that Investor Day. The punchline is we are on track to meet or exceed all of those 2025 targets and the 2030 targets. I want to highlight the progress we have made around those key metrics that we have really pointed to as our North Star. Lynn mentioned those: recurring revenue and free cash flow. Those, at the end of the day, are the things that are most important to us. Over the last seven quarters, we have had an 11% CAGR in our recurring revenue growth, and we have more than doubled our free cash flow. We have improved our operating margin by 245 basis points, and we have expanded our free cash flow margin from 13.7% to 25.8%. You can see on the margin profile where that has come from. About 105 basis points of that has come from the gross margin line. Operating expenses, we've done a really good job of managing those and leveraging those. So we've gotten 140 basis points of improvement from operating expenses, resulting in the 245 basis point improvement in our operating margin on a non-GAAP basis. Free cash flow margin is certainly where we're well ahead of plan. We have already in 2024 exceeded the target that we set for 2025 and continue to have great opportunities in front of us with respect to that. Along the line, our revenue mix continues to improve. SaaS revenues have consistently grown in excess of 20%. I think last quarter was our 17th straight quarter of more than 20% SaaS growth. That has benefited from, or that has also been in concert with some of the lower margin revenue sources growing at a slower rate, notably professional services and hardware and other. Since 2023, we have flipped 692 on-prem customers to the cloud, and that has generated $82 million of new SaaS ARR. SaaS deals, the revenue mix around SaaS back at the last quarter before the Investor Day, we were at 82% of our new business with SaaS. Last quarter, we were at 96%. Very, very little new licenses being sold, only a couple of products where we sell any kind of new licenses at all, and there are still some licenses sold back to the existing customer base, but have largely gotten to almost completely SaaS in the new business. Payments continue to bring value to our clients. When we had our Investor Day in 2023, we were really at the very early days of driving the strategy that we talked about, about expanding the use of payments into our software customer base and selling it both with new software deals for things like utility billing, traffic courts, licensing and permitting, and selling it back into the thousands of customers that we already have that use all of those products from us. Good success to report there. Still a lot of opportunity ahead of us. We talked about just the TAM and the existing customer base, but we've now signed 1,500 new payments deals with our software customers that have added about $49 million of new ARR since that point. I'll talk a little bit more about some of the opportunities around transaction revenues. It's certainly much more than just payments. Transactions, there are a number of revenue streams that are flowing through our transaction revenues, and payment processing is certainly part of that, but there are a number of other revenue streams around that. State portal revenues, the traditional former NIC business, where we provide a wide range of services to our state customers on a transaction, kind of a self-funded model, which has proven to be especially effective in a period where there is a focus on government efficiency and tight budgets because we are generally not a line item in the state budget. It is being funded by the users. E-filing for the courts is an area that we continue to see growth, leveraging the really strong presence we have in the courts market with 17 states and some of the largest counties in the country and building on that with the transaction-based revenue stream. Disbursement services is something that we're really at the very early days of, but we're seeing some good examples around that. Also, more part of this is that we're seeing sort of a blurring of SaaS revenues and transaction revenues. We have a number of software products now that we have deployed that are being funded through transaction fees. We're providing a software solution, but it's not showing up on the SaaS line. It's showing up in the transaction revenues because it's being funded by user fees. I'll give a couple of examples of that. It shows the ability of us to create this hybrid model that really meets the customer's needs and provides them a solution under a model that works for them. A little bit more about each of these. Our transaction revenues fed at 10% CAGR since Q2 of 2023. I will point out that that has been impacted by the change along the way that you probably remember a little over a year ago where two of our states, but one of our larger states, Colorado, changed from a net to a gross to net model, which had an impact on the transaction revenue growth. Now that we have lapped that, our payments grew 18.5% last quarter. That certainly impacted that CAGR over the last seven quarters, but now that is behind us, and we're really seeing that high teens growth in transactions. What's driving that transactions growth? Really kind of four major drivers. One is new payment deals, what I just talked about, the number of new deals that we're signing with our software customers. Example of this, Riverside County, California. This was a longtime customer for our Enterprise Records, and we started talking to them about processing the payments around those records transactions going through our software. That evolved into actually a deal where we now do the enterprise-wide payments for Riverside County. It evolved into something even bigger than we initially anticipated, and we believe there are more opportunities around the enterprise payments model. Increased adoption and adding new state services has always been part of the NIC model, and we work very closely with our customers across all of our payment types to try to help them increase the adoption, drive more citizens to do things online, and then adding new services. Motor Vehicle Titling is one we have talked about on some of our recent calls. We've had several statewide implementations now in our NIC states with our motor vehicle titling solution that digitizes motor vehicle titles, but that's all paid for, again, through a transaction basis, even though there's a software solution behind it. New logos, so adding new customers on the payment side or the transaction side. California State Parks was a new client or a large new deal back in 2024 that has now gone live and continues to grow and ramp up. That is an example of that transaction-based software solution. We provide a number of software solutions from our Outdoor Recreation Suite that manage all of the aspects of the California State Parks, but it's all paid for by user fees. When you reserve a campground or rent a canoe or whatever you do with the state parks, there's a fee associated with that that the users pay that funds these. Again, the California budget isn't burdened by the cost of those solutions. Also, Florida Department of Corrections was another example of a large customer there that we were able to leverage a relationship in the state of Florida, but to go into the Department of Corrections, a new customer there, a large prison system with our transaction-based services for inmate services. Lastly, growing disbursements. Again, that's something that we're really in the early days of, but we believe it's a tremendous opportunity to expand our transaction-based revenues. State of Indiana is an example of that where we have put into place a solution to manage the payments associated with a program they have to subsidize childcare for underprivileged people. So paying a large number of vendors, and now that's outsourced to us, running through our transaction volumes, and there are many more examples of that that we're looking to expand upon. I have mentioned a bit about operating margins. When we go back historically, as Lynn said, 2023 really was the trough for us. We had talked about that leading up to Investor Day, that we believed that in 2023 that we would hit that inflection point where the SaaS transition would turn from a headwind to a tailwind. That was, in fact, the case. In September of 2023 was the trough in margins. We bottomed out at a 22.8% operating margin. Excuse me. Really right about that time, we hit the inflection point where our SaaS revenues now exceeded our on-prem revenues from maintenance and licenses. Since then, we've expanded our non-GAAP operating margin by that 245 basis points I talked about. Our guidance for this year implies about another 100 basis points of margin expansion in 2025. Talking a little bit about the factors that are driving that margin expansion, going back again to 2023 where we reached that inflection point around the SaaS transition and began to benefit from that favorable mix shift. In 2024, it really is more about operational improvements. We started to see the benefit of evacuating the first data center in Dallas. We were able to continue to optimize our facility portfolio and reduce rent expense by consolidating and terminating leases on some facilities. We started to see improvement in our professional services margins. We've talked about that as a key really to how we deliver our software and how we provide value to our customers and create a better implementation experience by providing those services with our own people, but we really do not make much money at that. We really do not want to grow professional services at a faster rate than we have to, and we want to be more efficient about that. We have a number of opportunities to continue to improve the margins around professional services, and we did see that begin to happen in 2024. We have continued to release the cloud-optimized versions of our software, which is clearly having an effect on our margins as we get the efficiencies and lower our hosting costs around those products. Lastly, we've also continued to expand our headcount in geographies that have lower costs, most notably the Philippines, where we really are expanding our workforce across a number of different functional areas. In 2025, as we move forward, as Lynn said, we're on track to evacuate our second data center at the end of this year, as we had talked about for some time. Talk more about reimagining the client experience and the impact that that can have on our margins as we go forward and enhancing our cross-sell opportunities. We continue to get leverage from both operating expenses, G&A, and sales and marketing, and that is having a significant impact this year on our margin expansion. AI and automation is clearly something we'll hear a lot more about and how that not only impacts our products, but impacts our internal operations. Version consolidation continues to be part of our story. We've made a lot of progress with that over the last couple of years, but there's still much more to come over the next, call it three or four years. We've also seen an impact, as we've talked about on our recent earnings calls, around our payments margins from third-party payment partners' rate enhancements that have flowed through to our margins. What are we doing with all of our cash that we're generating? We've generated about $900 million of cumulative free cash flow again since mid-2023. Our free cash flow performance has well exceeded our expectations, and we're certainly well ahead of that 17%-19% free cash flow margin that we originally targeted for 2025. We'll point out that 2024, as you know, benefited from about a $29 million multi-year SaaS prepayment from the state of Kentucky on their court system that was associated with ARPA funds. That gave us a little bit of an extra boost in 2024 that's not here in 2025. We also had a boost at the end of the year around the receipt of some client funds for a disbursement services contract, which turned around in Q1. We're certainly on track to achieve a free cash flow margin of 24-26% this year, which, as I said, is quite a bit ahead of that target that we had originally set out. When we look at free cash flow enhancement going forward, there's really three big drivers: working capital. We continue to and have seen, certainly as part of this pull forward of those targets, we've seen really good performance around improving cash collections and have brought our DSOs down pretty significantly. We're, I think, ahead of track with respect to that. We continue to see deferred revenues, and the revenue mix from SaaS and transactions certainly has really attracted free cash flow characteristics. We're either collecting that money in advance of recognizing the revenues or at the time we recognize the revenues. That will continue as that's a bigger and bigger part of our revenue mix that benefits us. Operating margin expansion flows through to the free cash flow, so cost control. We've also seen, as we've expanded the cash and as interest rates have remained relatively high, a pickup in interest income as well. Lastly, CapEx. CapEx, certainly with the cloud transition and the move out of our data centers into AWS, with some of our facilities consolidations, we've been able to really keep the growth in CapEx down, and now it's just about 2% of our last 12 months' revenues. From a capital allocation perspective, really our priorities haven't changed from what we've talked about for a number of years and what we talked about two years ago. Through early 2024, we really prioritized repaying our floating rate term debt that was associated with the NIC acquisition. We completed that well ahead of schedule, and that was all repaid fully in the first quarter of last year. We now have the liquidity with more than $800 million on our balance sheet. We clearly have the liquidity to repay the convert at maturity next spring, and we'll obviously continue to generate a lot of cash between now and then. We also have a $700 million untapped revolver available to us as well. What do we do with the cash now that the term debt is paid down and we're set up to repay the convert? Organic growth. Investing in R&D, especially around AI. You've seen our R&D is elevated a bit this year, so there are some of those investments we're making out of the free cash flow. We'll continue to invest in organic growth as the highest priority. M&A. Last year was the first year we didn't do any acquisitions in quite a while, partially because of the focus on the debt repayment, but partially because we talked about the bar was really been high for us with respect to acquisitions. You've heard about a lot of really important initiatives that we've been working on: the cloud transition, version consolidation, investments in AI, a lot of things that growing our payments business. A lot of management focus on those things, and we've had a really high bar in terms of M&A, at least large M&A. We continue to evaluate a lot of the more traditional tuck-in acquisition opportunities. We did one of those in January. I expect that you'll continue to see more of those in the near term from us. I think the larger acquisition opportunities will come at some point. We'll be in a really good position from the strength of our balance sheet as well as our management capacity to address those as those might emerge a little bit further down the road. We stayed really disciplined as we evaluate M&A opportunities around strategic fit, around cultural fit, as well as valuation. We're very disciplined about valuation, and there have been times certainly when we've been a frustrated acquirer sometimes because of valuations that didn't seem to make sense to us. I think we've always found those kinds of acquisitions that kind of meet all of those criteria for us. Lastly, stock buybacks. We've always been opportunistic about buybacks on dips that we don't think reflect kind of our three to five-year view of the company's opportunities. We haven't had a lot of those opportunities recently, especially when we've been focused on the debt paydown. We have repurchased some stock this quarter after the pullback after Q1 earnings. I'd say that stock buybacks continue to be a part of the capital allocation mix and that our philosophy around those really is still consistent with what it's been in the past. Lastly, just to wrap up, I want to remind you of what the 2025 and 2030 targets were and where our current guidance for 2025 stands in relation to those. With respect to revenues, we talked about 2025 being between $2.3 billion and $2.4 billion. Our current guidance is $2.31 billion-$2.35 billion, right in the middle of that range. Total recurring revenues, we talked about an 86%-87% range. That's right where our guidance is for this year. Operating margin, our target was about a 25% operating margin for 2025, and we'll be between 26%-27% based on the midpoint of our current guidance. The free cash flow margin, 17%-19%, was what we were looking for for 2025. Our current guidance implies or is for 24%-26% free cash flow margin. When you look at the 2030 targets, and I'll remind you that the 2030 targets really were on an organic basis, so they were exclusive of any M&A. We had a target of $3.6 billion-$3.8 billion in revenues, with 90% of that being recurring, at least a 30% operating margin, and a free cash flow margin in the high 20s. I want to reiterate that we remain confident around those 2030 targets. With that, we've got time for sort of a short Q&A session here for Lynn and myself, and then we'll move into our panel discussion with some of the other members of the team. We have microphones so that people on the webcast can also hear, as well as the people in the room. If you raise your hand, we'll bring you a microphone. If you'll state your name and the organization you're with so that we can all hear that. All right. Mic's on. Got it. Okay. Thanks today for the presentation so far. Josh Riley from Needham. With the free cash flow margin well ahead of the 2025 targets, is there anything that we should be considering that might cause a step back in the margin moving forward, or do you think the 24-26% is the right number moving forward with linear improvement towards the 2030 target? Almost nothing turns out to be linear with Tyler, and we've said that there are a lot of movements along the way. I wouldn't expect it'll necessarily be linear. There are certainly some things like closing the second data center, the continued version consolidation that'll likely have more impact over the next couple of years. Certainly, I think we haven't changed that longer-term target yet. It's really just been we've achieved it quite a bit faster. I'm, again, confident about kind of getting to that 30%-ish range by 2030, but it probably won't be linear. I think this point where we're at now is a good starting point. I think one thing we've said over the last several quarters, maybe four-six quarters, is each quarter continues to give us more confidence in our 2030 targets. I don't think sitting here today—I don't know that you are asking this, but you might have been inferring that we're sitting here today ready to raise any targets from our 2030. I'm not suggesting you were saying that, but I just want to make clear that we're not doing that. Thank you. Hi, Matt VanVliet from Cantor. I guess as we walk towards whether it's the 2030 targets or just a couple of years out, what is the realistic expectation of the customer base moving sort of all of their workloads to the cloud? Do we get to something pretty close to 100%? Is 80% an upper bound? And then what's the influence to maybe start using a little more of a stick-than-a-carrot approach here to get more of those margin gains from the version consolidation? Yeah, I'll start. I think right now, and I think it was buried in our 2030 numbers, was really sort of around 80% by 2030. That's not an upper bound. That's just sort of what we think the practicality is right now. Were you at the opening session this morning? Yeah. I talked a little bit about cloud and our investments in the cloud and talked about we spent a lot of time, and Russell will go on this a little bit more at the other Q&A, but prioritizing certain things that are only going to be in our cloud-released software, things like AI enhancements, certain upgrades. In a sense, that's a little bit of a stick. We're not putting the hard stick of we haven't put anything out right now, a solid data saying we're not no longer going to support this, but we believe we'll continue to move our customers there. There will always be stragglers. It'll always be sort of like a bell curve. There will be some that will be hanging on to the on-premise version probably seven, eight years from now, but I expect that to be a smaller and smaller minority as we move forward. That is another one of the things that will not be linear. We have talked about kind of a bell curve trajectory for the flips of the on-prem customers. Excuse me. We think that kind of the 2027, 2028 timeframe will be at the top of the bell curve, and then we will be more working with the laggards. Yeah, I guess whether you call new features being restricted to the cloud versions, whether that is a stick or a carrot, that is something that we are seeing that will become more active with. We also have pricing around maintenance as we get further along the road with stragglers. It is not the same for every product. Different products are certainly at different places right now, and customer bases are at different places in terms of their ability to move to the cloud. Then version consolidation, getting people on the current version of our products is certainly one of the gating items as we move towards having one cloud version that everyone's on. Those customers that are on older versions of the software need to upgrade to that version. The success we're having with version consolidation helps get more people in line to be in a position to be able to move to the cloud. Good afternoon, guys. Keith Housum of Northcoast Research. Again, appreciate the day. Brian, in terms of the theme of doing more with less, can you talk about your go-to-market strategy with your Salesforce and changes you've made over the past year, two years, and how that's helped to drive, I guess, further growth? Oh, I'm sorry. I didn't hear that. I'll restate that. Just trying to understand more of the theme of doing more with less in terms of your Salesforce and driving some of the growth and changes you've made in the Salesforce and your go-to-market strategy over the past year or two and how you envision that evolving here with the use of AI to help drive some of that more growth going forward. Yeah. If I understand your question right, I would say more with less may or may not apply to sales. We're actually expanding our sales forces. We have an issue. We created a whole new dedicated state sales team, which we're still trying to build out. It's not fully built out right now. We do use more with less in the fact that we actually use AI actively in our sales processes. We get a lot of data, a lot of intelligence of opportunities that are out there. We're getting data intelligence on competitors. We are using AI for that. In terms of I don't think we're getting leaner with our sales. If anything, we want to increase our Salesforce. Certainly with the big focus on cross-sell and up-sell and being able to leverage the power of that customer base, those do tend to be more efficient sales processes where we already have a relationship. We're able to leverage that. We've done a lot of work structurally in the last year or two around aligning commission structures and sales compensation to help drive that cross-sell. The state sales organization is another step along that way. Yeah, I'd say in the last 12 months, and we'll continue to do this as we go forward, look at sales territories, look at sales quotas, and continually evaluate. Do we have the right resources? Do we have the right coverage? I think that's something that we'll always do going forward. Hi, Ahmad Khalil here with Oppenheimer. I wanted to ask about your initiative in improving client experience. In the context of adding incremental investment, how does that impact or how does that factor into your long-term targets? What should we look for in terms of returns or signs of success to see that it's working? Thank you. I think incremental investment will actually yield to better efficiency and more productivity as we get going. We have had a lot of duplicative systems in our client success and client support. We're going to see more efficiencies too, just as we talk about some of the other things we've been talking about around version consolidation. The amount of resources that we apply, whether it's in the dev world or the support world, to support multiple versions is problematic. Getting people to where they are more efficient to handle customer-client issues, becoming more proactive. There will be some incremental investment in the near term, but in the long term, it should yield us to be more efficient. Yeah, I think for the last part of your question about what signs of success, how we measure it, I think we'll maybe defer that till the panel discussion we'll have in a minute. We'll let Andrew answer that in that context. Oh, there's one more. Hi, Arsenije Matovic from Wolfe Research. Just a little bit of color more on the larger M&A potentially being back on the table until 2030, if there's any area you think you'd particularly look to strengthen within Tyler today. We constantly evaluate M&A. Brian mentioned we didn't do an M&A, we didn't do an acquisition in 2024. The reality was we had one, we would have closed, but for reasons with diligence, it actually spilled over to 2025. We're constantly evaluating. We've got some strategic initiatives that we're looking at internally. There are some areas I really don't want to highlight those right now for both competitive reasons but also negotiating reasons. But there are things that we're looking at. We're constantly looking at it. I think the takeaway, as much as anything, is we did have a little bit of a higher bar. And the higher bar was because of debt, our priority on debt. It was also really management bandwidth and the opportunity cost that came with doing M&A. But I think probably the higher bar has been valuations have just still been ridiculously off the charts. I can't tell you how many people come in, and they've built a nice little business, but it's $5 million, $10 million, and they think they should get Tyler multiple minus 0.1. And it's a little frustrating. We try to educate, but there's still a lot of money out there in the PE world and the VC world that's snapping up companies with really high valuations. At the end, that's generally good for us. We're out there. We're out there. We're active. The fact that we didn't do any deals in 2024 was the higher bar, but it wasn't because we weren't looking. We didn't have a lot of discussions with a lot of people. Just a brief follow-up. In terms of the carrot and stick approach, I guess, from the carrot moves that you guys are making with your customer base, what's resonating today? On the stick side, if we're thinking of, "Hey, what can maybe be done?" Are there any paths forward where you're looking to end of life some existing products and then get those existing customers onto cloud a little bit faster than what we've even seen from your initial targets? Yeah. I think as you describe that stick, I don't think we're there yet across the board as a company. I think we're starting to see that in pockets, depending on each of our different products, where their current client base sits in terms of versions out there. It's a little bit different. There's no peanut butter across all of Tyler where we're at. We're actively pursuing both the carrot process and the stick process because we have goals. We also think it's best for our clients. At the end of the day, getting them up on our latest cloud-released software is really, in the long term, best for them. And at the end, what's best for them is best for Tyler. Thank you. Hey, guys. This is Darren Baker from PrimeCap. A question for Brian, I think, mostly. So at your 2023 Investor Day, from my recollection, one of the things you really emphasized in terms of margin expansion was being able to get kind of the cloud gross margin up into a 70% plus range. It's more kind of in line with SaaS peers, right? And I mean, I know that the payments revenue is probably obscuring a little bit of some of the trends in the overall software gross margin. I thought it was notable when you kind of showed, "Hey, here's the progress that we've made so far from those 2023 numbers that we laid out," is that you actually had more of the margin expansion come from OpEx rather than gross margin, right? I wondered if you could just kind of update us with your latest thoughts on how important is the software gross margin contribution. Even if it's not linear, as you indicated a few minutes ago, what do you think will be the biggest factors that can help you kind of raise that number since it's arguably more so than any of the other line items? It's sort of the win-win, right? Where you don't have to take away investment, but you can really get some leverage just from efficiency. Yeah. Good question. I think, yeah, if you look back at the Investor Day materials, we did show most of that margin expansion of, call it, 100 basis points a year on average, most of that coming from gross margin. As you said, we've seen more of it come from the operating margin to date. I think what you mentioned has been a factor that as the transaction business has grown more rapidly, that's put a little pressure on that. It's grown above that low teens expectation, and that's put a little bit of pressure on the early gross margin expansion. We still believe that that gross margin expansion opportunity of, call it, 500 or 600 basis points is still there. Again, just through 2030, that's not the ceiling on things. To getting to more SaaS-like revenue or margins, at least around our SaaS revenues, I think the closure of the second data center and the version consolidation and the product optimization, those all still have a fair amount left to run. We have also talked about sort of the change in geography around some of our development expense. We have talked for a long time about how, and it is sort of a throwback to the on-prem development methods, that about half of our development expense has typically been up in the gross margin line, which has sort of made it harder to compare us. As each of our products achieves a certain point around its cloud transition, we are redeploying those development heads down into the R&D line. You'll see a shift over the next few years of what's about five percentage points of gross margin that'll be moving down to the R&D line, which also will help align that. Yeah, I think the timing has been a little bit earlier on the OpEx side, I think, but our expectation around the opportunity to improve the gross margins, especially around the SaaS business, is unchanged from what we thought about. I think we're just about at time to move on. One more up here? No? We're done? Okay. With that, we'll bring up the panel and move to the next step. Yeah. I don't think my mic is on quite yet. Hi, everybody. We're going to move into the executive panel. We are going to have a number of executives joining us today to talk about key strategic initiatives. My name is Kirsten Gaffelberg. I am joined today with Jeff Puckett, who is our Chief Operating Officer, Russell Gainford, our Chief Technology Officer, Andrew Call, our Chief Client Officer, and of course, Franklin Williams, who is responsible for our AI strategy and is our Deputy Chief Technology Officer. Jeff, let's go ahead and start with you. Tyler's cloud journey is a key strategic pillar. How are we progressing against that journey? I think it's probably helpful to go back to our Tyler 2030 presentation. There were originally three different vectors that we talked about in that presentation around our cloud journey, at least the first phase of this cloud journey. One of those was new clients. You saw in Brian's presentation the shift from a low 80% to north of 96% in terms of new clients. We've had some of our verticals, like public safety, for example, that when we started, they had almost no cloud customers. Now they've shifted to where most of their new, almost all of their new bookings are cloud bookings. In terms of that new customer vector, we're really satisfied with the progress that we've made and are right on track with the projections that we laid out in that 2030 plan. The second vector was we had several thousand clients in our private data centers. We set a goal to we had two data centers at the time. We were about to have to open a third. We did not want to be in the data center business. We set a plan out to migrate those customers out of our private cloud into the P ublic Cloud, close those data centers down. We have closed the first data center. We are on track to close the second data center by end of this year. That has progressed really well. The third vector was starting to convert or flip customers who are on-prem customers into the cloud. I think, as Brian and Lynn talked about that, we talked about it during the presentation. We expected it to be a bell curve. There were going to be some early adopters. There were also going to be some holdouts. The bulk of our client base was going to be in the middle of that bell curve. We are, through the early adopter phase, well into the meat of that bell curve at this point in time. I know there were several questions about carrots and sticks. At least my own experience with doing these kinds of change initiatives is that the secret sauce is making sure that the customers that we do flip into the cloud have a really positive experience. The creation of Andrew's role and the initiative around improved client experience is the single biggest driver we think is going to keep us from having to get into the stick battle, right? Our customers, unlike a lot of industries, all talk to each other. They do not compete against each other. If they have good experiences, that is going to incentivize other customers to move. It is going to give them confidence to move and really happy with where we are at. It is a key reason that this emphasis around client experience, the creation of Andrew's role, is really also tied into and linked with this cloud journey. Thank you. You touched on the client experience as being the key driver for the cloud or one of the key drivers. Can you also talk about just additional what this will mean for our clients, what a cloud transition will mean for them up and above the client experience? No, it is a good question. I think I was talking to somebody at one of the tables during lunch. If you talk to a customer about what they want, a customer that's on-prem today and why they're staying on-prem, a lot of times what they'll tell you is, "Well, they want to maintain control." You have to really dig past that answer to find out why do they want to maintain control. They want to maintain control because what they really want is they want to receive increasing value through innovations. They want to have some control over how those innovations are introduced into their operating environment. When we do release those innovations, they want those releases, those updates to be transparent and non-disruptive, right? When they need new capabilities, they want to see a really improved time to value over what they may have been able to experience in the on-premises world. Whether we're talking about gross margins or we're talking about client experience, the on-prem world really works against us in all three of those different lanes. It's difficult to really achieve the level of service and client satisfaction that a client wants when they fall three, four, five years behind in versions. They've got six different products, and the combinations and permutations of those make interoperability increasingly difficult over time. The second phase of this cloud journey is really about shifting our practices around how we release software to customers so that it's a better experience for them, but also it is a more efficient way for us to deliver services and a more predictable manager to customers. Great. Thank you. Russell, recently you expanded your role to Chief Technology Officer, really at the helm of our cloud journey. Can you talk to us about your areas of focus? Sure. So there's quite a few. If we talk about the cloud journey, I think I'll go into a little more detail on what Jeff said, and I'll go into what Lynn said on the two phases of the cloud journey. If you've been listening to us for a while, this phase two is kind of coming up just this year. I'll go beyond just numbering it a phase on what we're actually doing. If we start with the first phase of this cloud journey, I like to call it leveraging the cloud. Using what we've been doing and running it in a similar way inside the cloud environment and getting the most that we can out of it. There are really three categories that we've worked on in this phase, and we've been doing it since we really kicked this thing off in mid-2020 or so. The first one is consolidating on the cloud. You heard Jeff talk about that. We realized at the time we don't want to be in the data center business. We certainly don't want to be buying more data centers. We want to leverage the power that we're seeing in the cloud and the capabilities that's in there and consolidate on it. We did the whole look at the multi-cloud option and the stuff you hear in the marketing. All we saw was cost and less opportunity to scale. We made our preferred cloud vendor choice, and we started attacking those environments. We moved over and closed our largest data center last year. We are closing our second largest data center this year. What we do not talk about is we had a lot of other, kind of, Jeff likes to call them barnacle-type data centers from acquisitions that we had kept over a period of time with lower environments all closed, all gone. We have been closing those out at the same time. We have been getting all that consolidation. While we have built up that scale, another thing we do not talk about is we have still, as we built up over time through acquisition, we have had other hyperscaler cloud environments that we have been running. All of those have been getting migrated over. In addition to our data centers, in addition to the leftover lower environments, we are now moving and continuing to move over from other cloud vendors out there onto that AWS environment. You have seen it when some of the discussions today. We're seeing the scale from that. We're training our staff on all the expertise on one hyperscaler, and they're able to operate at increased efficiency. The second thing I'll focus on is really the moving our clients to SaaS. Actually, how we're doing that, I'd say there's kind of two categories. You heard the term version consolidation. Why were these customers on older versions? It was hard. We didn't have control of the environments. They would decide not to take certain updates, and they may go a certain period of time. As we started this journey, we invested in the deployment, even in the on-prem technology, so that we could upgrade our clients with non-disruptive updates in those environments so we could get them to those more recent versions. We've been investing in that heavily, as we've talked about, and that continues. We get them to the latest releases. One, that increases client satisfaction. Two, it prepares them significantly in a much better state for a movement to our cloud SaaS offering. That has been a heavy investment. The second part of that category is the automation to do it, right? We learned from the early movements of on-premises to cloud for each product, and we started accelerating it, and we started getting really good at it. You might be hearing customers here at the Conference at Connect tell you about stories where they had infrastructure failures or security issues, and they found themselves in the Tyler cloud in two, three, four days. These are very big environments. We got really good in that second category. The third one, which we really started to write as we made this decision, was product investments and innovation. Getting our products more formulated for operating elastic compute in the cloud. Multi-year investments we started around that time. You have heard we are already starting to roll those out. These are products that are on Kubernetes and scaling on demand and using managed services versus human-managed oversight of database environments. Those products have been worked on for quite a while, and we really started rolling those out last year. Those three phases, that is phase one of our cloud journey. Three categories, one phase. Now we know that is going to continue. I think you heard Brian just talk about there is a bell curve that we are expecting with customers. We can talk about carrots and sticks, but we know that is going to continue for a while. Phase two is something that we've really jumped into in the last eight, nine months, which is this idea of completing the cloud transformation. That means time to value. We're going to roll out a common highway, we're calling it, operational highway that allows us to deploy using common tooling and standards and approach, product updates that are non-disruptive, continually released to our customers, and then a more aligned way of providing them new values and features that is in partnership with Tyler that is no longer kind of a big bang event. It's no longer we're waiting, we're holding a lot of value, and we're giving to the customer once a year or once a year and a half. We're giving it to them on a monthly or quarterly basis. We're switching to that in our phase two. The whole idea is that every interaction with us produces a quicker time to value on the product delivery and operation side. Those are our two really top focus areas right now for the cloud transformation. You have been busy. We have talked a lot about how our cloud journey has also been very intertwined with the client experience. Can you expand a little bit more on that topic? Yeah. I think it is the foundation of getting us to the level of client experience that we want. I mean, all the great work that we are going to be doing and continue to do as a company on service delivery is paramount. If we can't change the paradigm on how we distribute the software and how frequent it is, and we also don't change the commonality for customers that have multiple product sets, right, where they might feel a little bit of those seams that things are done a different way. You've heard Lynn talk for a while around one Tyler and how important that is. To me, this is a paramount project and initiative. We're going forward on that. That's going to bring so much of our organization together. When we move clients to AWS today, we have seen the client experience, the client success is higher. The CSAT scores are higher than when they're running in their own private data center. It's not changing the entire experience of how we deliver the software. This phase two that we're implementing today, and we call it living in the cloud or cloud living, not just leveraging the cloud, our whole operational model will be focused on this value stream delivered to our clients on a regular basis, but done in a way across Tyler that is common. Think of a single pane of glass. We might have different teams behind, but the client's engagement is going to be similar across the board. That means if they work with us and they decide they're getting value from an additional Tyler product, they're going to get the same experience, the same support content, verbiage, nouns, when updates are being provided, and how they're going to be provided. Bringing that together, we believe will provide the utmost basis of client experience. There is all of the service delivery that we will continue to work on on top of that. The improved client experience is really the driver behind this. A lot of folks have asked, again, asked questions about gross margins. What we do today with on-prem customers and managing all of these disparate environments, it is a very expensive way for us to deliver new content, new value to them. When we get on the other side of this initiative that Russell is talking about, it will provide us with a much more efficient way to deliver a higher quality of service to customers in a way that meets those tests I talked about earlier. It is not disruptive, higher time to value, and improved quality. Perfect. Andrew, as the newest member of the team, our new Chief Client Officer, talk to us about the first not even six months. What's it been like? It’s been fantastic. I don't say that lightly. I mean, this is hopefully everybody has a sense. This is an incredibly collaborative team. One of the things that drew me to this organization is the quality of the people. You want to work with good people. At least I hope you do. I know I do. The first six months have been fantastic. Very welcoming. A lot to learn, no doubt. I've bifurcated my time in really three areas. Number one, internally. Understanding how we operate. We've got eight different divisions. We've got different support models, different services models. I really want to understand how we've been taking care of our clients and what the decisions were behind those. We got to where we are through a lot of good decisions over time. We're now at a point where we have to step back and say, "Okay, what is the right model going forward?" A lot of internal conversations have been happening across the organization. Second, externally. I'm a big believer that anytime you want to implement the right strategy, you have to have that external perspective, specifically clients. What are they saying? How do they feel? I've had a number of conversations with very happy clients and conversations with some unhappy clients. I actually welcome those. For the unhappy clients, I will say that everyone has said, "Hey, we're not happy because we're frustrated with this element. We want Tyler to succeed." That is the common denominator that I've heard. Every single person internally and externally wants clients to succeed. That gives me great confidence that we'll be able to build the right model. The third area that I've been trying to spend my time with is really getting everybody aligned around the client continuum. Lynn alluded to that. Just from a clarity standpoint, too many organizations where I see mistakes made is they think client experience is the responsibility of one function or one department. By and large, a lot of organizations have Chief Customer Officer, Chief Client Officer titles, but all they're focused on is the post-sale delivery. Maybe it's customer support or services or success. Those are incredibly important. That is the long tail of the relationship. Client experience starts at the very beginning. It's a holistic cycle. That infinity loop I talk about really is the team that's creating the product that is being built. Are we building a product to serve a market? Once we get that, how do we market it? How do we sell it? How do we install it? How do we support it? How do we manage it through client success? We take the feedback that we get on the post-sale side and we feed that back into the engineering team so we can build the right products. For me, it's been internal conversations. It's been external conversations. It's been really centering the organization, my peers, around this entire continuum that client experience is everybody's responsibility. Each group owns a piece, but it's also bridging those functional areas together to create a holistic experience. That's what I've been spending my first six months on. Great. Thank you. A bit of a listening tour, both internally and externally. Talk to us a little bit about your initiatives internally and externally, kind of new and existing programs that will be your focus. Yeah. I mean, I will start with the cloud living, if you will. This is a new way for our customers, our clients, excuse me, to consume our products. What we want to do is we want to make sure that we're putting processes in place, workflows. We have the right metrics to measure the success of those cloud flips and the transitions to the cloud so that we can take care of those clients. I like to think of it this way. Clients that have a good experience come back and buy more. Probably in your own life. You go to a restaurant, you have a good experience. You're going to go back to that restaurant. We want to have those clients continue to go back. A lot of it is understanding the workflows that we're going to be putting in place. Standardizing on metrics is something else that's very, very important. We want to have continuity and a common way that we measure the success of our clients and also measure ourselves. Are we responding on time? Do we have the right knowledge in place? The other investment I think is really important is, and Franklin will touch on what we're doing from an AI standpoint externally, but we want to leverage AI internally as well. Things like the right knowledge-centered supports, our community environments, chatbots that actually help you handle some of those initial triage questions. Those are some of the initial areas I'm starting to focus on right now. Perfect. Thank you. Franklin, in your role, you've been focused on Tyler's approach to artificial intelligence. Talk to us about your efforts and what we're doing with AI. Yeah. We'd love to. To understand a little bit about what we're up to with AI, I think it's important to first understand where our clients are today. When we go to talk to clients, we have talked to a lot of clients about this. When we go talk to clients today, we see them almost universally wrestling with three big problems. The first big problem that we see out there is that their workforce is changing and changing in a really significant way. We see a lot of folks that have 30%-40% of folks that are eligible to retire. They have roles that they just simply cannot fill. That all adds up to a scenario where they are being forced to do more with less. Otherwise, their staff gets burdened, and the services that they deliver become very, very difficult to deliver. That is the first thing we hear from them. The second thing that we hear from them is that in spite of all the advancements that we made in data and analytics and BI, it is still really hard for decision-makers, particularly non-technical decision-makers, to get access to the information that they need. All that adds up to a real impact on residents, where residents simply cannot access the services that they need, and the public sector really struggles to reach them. are a number of barriers that get in the way between the agencies, between residents, between the simple knowledge of what is available and how to get it that really results in a degraded resident experience and a gap between the services that the public sector provides and also the residents that need them the most. Where we get pretty excited is we see where AI can be really a transformative solution to each one of those problems. You heard Lynn talk a little bit about those three pillars. Those three pillars are really designed around how we go and solve and help our clients solve these three big problems. We talk about productivity. We talk about doing more with less, helping people be more efficient so that they maybe do not have to go make that next hire or fill that next role. We talk about decision-making, lowering all the barriers to find the right data, to find the right insight that you need. The final piece is we talk about connecting the public sector with residents and knocking down all those barriers that get in the way of residents and the public servants that serve the public. What is neat about this is that is the first part of our strategy, which is taking just a practical, deliberate, intentional approach to each one of those areas. What is super neat about this is those same areas, doing more with less, making better decisions, delivering services to our clients, those are the same things we need to do. We see similar opportunities as we look internally to Tyler to really change how we operate and to really drive some really what we hope to be transformative experiences for how our clients experience Tyler as well. I can tell that you're excited about AI. I could talk about this for hours. Do you have some examples to share as well? We'd love to. Yeah. Yeah. Let me talk about a couple of them. Let me talk about some of the things from a client perspective, and let me talk about some of the things from an internal perspective as well. On the client perspective, you heard Lynn talk a little bit about some of the acquisitions we've made, CSI, so helping people automate document processing and understanding, priority-based budgeting, making better decisions around their budget, making sure that the outcomes match the dollars that are being spent. Those are, we see, some pretty big impacts and some great resonance in the market. One of the things that I'm equally excited about is some of the innovation that we're seeing coming out of our product development teams, teams that are embracing these capabilities, these tools, and driving some pretty compelling innovation on behalf of clients. Russell, you have to keep me honest on this stat. One of the things I want to talk about is public safety. Did y'all know that it takes, I think, what is it, 60% of officers spend more than three hours? Three and a half hours. Three and a half hours every day writing reports. Think about that. Three and a half hours out of every officer's day is sitting behind a desk authoring a report instead of being out in the public keeping the public safe. If you think about if you actually take a look at what goes into that, well, there's the work that goes into writing the narrative itself, which takes time. There's also a lot of time that they spend doing data entry, like with the reports that they're writing. Our team had looked at this. They looked at some of the capabilities that generative AI brought, some of the capabilities that some of these new capabilities brought. They put these pieces together in a way to where we think that we're going to be able to save significant time from officers because they're no longer going to have to, in their report, say, "I was in pursuit of a 2024 Corolla," and then go find the 2024 Corolla dropdown. That's going to get completely streamlined. Those officers are going to get back into the field, and the public is going to be better served by those officers. We've got similar stories when we look at our permitting and licensing. Permitting and licensing today, when somebody comes to apply for a permit, one of the very first things they try to figure out is, "Hey, what can I build here?" It turns out that a lot of public servants today don't know. The reason that they do not know is because the codes are so big and so dense that basically every time somebody asks that question, it is a research exercise. In your research, you are not just looking through a phone book. We are partnering with one of the largest counties in the country. You are looking through 26 phone books to try to find the answer. What that team realized, what we realized in partnership with AWS, is that we could bring generative AI to bear on that, synthesize that information, surface that information, hand that to the developers, hand that to the planners, and in doing so, really transform the pre-application process and make sure that the permits that were coming in make it much, much more likely so that when they landed on a planner's desk, it was correct. We did not have to have a bunch of back and forth for weeks. We did get, in this county's case, a lot more homes built and make that planning department a lot more efficient. They came to us and said, "We would have to hire a ton more people to do that. We just simply cannot. Can you help us from an AI perspective?" We said, "We think we can." Great. Thank you. Everyone in the industry is talking about AI. Talk to us about what makes Tyler unique here. Yeah. Absolutely. I think the first thing you have to acknowledge, and I think probably everybody in this room has seen it, is that it is easier than ever to basically get to a demo or a proof of concept. The capabilities that exist with these new models, these foundational models, can get you to a proof of concept really pretty quickly. However, what is insanely difficult to do is take that from a proof of concept to something that a client can trust and something that can be deployed at scale. The difference in being able to do that comes down to three specific things that Tyler has that we think other people are going to struggle to replicate. Those three things are the three things that really are the foundation of any solid, strong AI system. It's data, it's domain expertise, and then it's technical know-how. When we think about Tyler's advantage, wow, we've got all those in spades. We've got 14,000 clients that are producing critical data from their systems every day. We've got decades of experience in how public safety should work, how courts should work, how ERPs should work, how permitting should work. Through the work that our product teams are doing, through the deep partnerships that we've got with AWS, with OpenAI, we're really building a strong muscle in the know-how as well to be able to drive some really, really transformative outcomes. What I think is equally important, and Lynn touched on this in the keynote, is that there's another aspect of this which we know is important in the public sector, and that's trust. Our clients have to trust that the work that we're doing, that the solutions that we're developing, that our application of AI is something that they can trust. That is another advantage that I think Tyler brings, where our very deliberative approach comes into play, where I think a lot of our governance processes and practices come into play. We are building these pieces on a foundation of trust so that people know that when they deploy this, they can stand behind it. It is not going to embarrass them. They are not going to end up on the front page in The New York Times because their bot said, "Hey, you can serve moldy cheese in a restaurant." It is something that they can really trust and stand behind. One of my favorite examples of this recently came in from the state of Iowa. The state of Iowa reached out to us and said, "Hey, we have been using our neighbor. We have been using the Indiana resident assistant. We cannot trip it up. Everything we throw at it, it just handles it with no issue whatsoever. Good questions, bad questions, adversarial questions. It just handles it with no problem at all. "How did you do it?" The answer that the state of Indiana gave them was, "We went with Tyler." Tyler had a very deliberate approach where we went through scenario by scenario and built out thousands of different questions, positive, adversarial, everything that we could do to trip up the bot so that when we launched it, we had something that we could stand behind. We had something that was trustworthy. We had something now that other states, Iowa, South Carolina, Hawaii, Department of Natural Resources, are knocking on our door and saying, "Okay, you figured this out. Help us do the same thing with our state." That is just one of those key examples where we can bring all these three pieces together to do some things that I do not think anybody else out there can really do. Awesome. Exciting times. Thank you. We are now at the point of the program where we are going to have Lynn and Brian come back up and join the panel for some additional Q&A. Is Mike over here? Is that it? Go ahead, try that. Test. Okay. There we go. Thanks, gents, for hosting. Trevor Walsh from Citizens. We have not talked about the obligatory competition kind of angle yet. Maybe Lynn or for any of you all who are up there, first, could you give us just sort of maybe an update on trends you're seeing around competition? I think really the question for me, I think my second question is, as you get through that bell curve of the flips and you've done the work of getting people onto the cloud, does that shift the competition kind of landscape because you've got now kind of a more SaaS-type related offering and people that can kind of come in more quickly and displace you because, again, you've done the work and people have got them off-prem, but now there's a little bit more of that added risk? Just curious to hear your perspectives on that. Let me take the second question first, and we'll circle back around. I think we've already started to see that. I know in our Public Safety Market, for example, when we started this cloud journey, generally across the Public Safety Marketplace, there was not a perceived high appetite for cloud-based solutions. What we've seen now is that we are now leading that space in cloud-based solutions. We think it does drive business. It does drive demand. I think when you get on the other side of that bell curve, being positioned as the leader in the cloud space for state and local government will produce exactly that kind of increased activity and outcomes. What was the first question again? Just general trends now. It's hard to talk about competition monolithically in our space. Every little subvertical that we serve has a different set of competitors, different levels of sophistication, different numbers of competitors. I think my perception is that the competitive landscape today is not dissimilar from what it has been over the last few years. There's no dramatic change in the competitive landscape. Would you agree with that? Yeah. I mean, I think it's the same. It's similar with the exception of what Jeff pointed out on public safety and us sort of being the leader now and moving to the cloud, which I think has changed that dynamic. If you look at sort of our other major business lines, it's always been sort of we call certain things sort of these subverticals. You look at courts and you look at tax. We've always held a dominant position there. When you're looking more where there's crossover, companies that can maybe play in the commercial sphere, you look at the ERP stuff, that always tends to be more competitive. Now, that being said, even when we're talking about public safety, it's still a very competitive environment for us. I think we've been a leader in moving to the cloud, and I think that's helped differentiate us as well as our success of getting people in the cloud. When we talk about some of the drivers behind some of the flips, one of the drivers we've talked about sometimes on earnings calls is, and knock on wood, we don't want this on anybody, but it's a ransomware attack. Our Public Safety Team has gotten really good at responding to a ransom attack and getting them up, at least with a base version where they can function in a really short period of time, really in a matter of days, certainly a week at most. Now it may not be full functionality, but the ability to do that has really helped them both with their messaging in the cloud, but also just competitively in the market. Hi, Matt VanVliet from Cantor. I guess going back to a couple of the acquisitions, whether it's the Socrata data layer and NIC bringing maybe more functionality that cuts across different departments, even within the same jurisdiction that were always a little more difficult to sell because there wasn't someone over the top like a CEO saying, "We need to do all of this across our entire city." Now that you've had the cross-sell motion in place more, you've built up that team, where do you feel like you're at from a productivity on that level of the business? How much more improvement can you get? When you look at some of those elements, whether it's from public safety to courts and justice into the penitentiary system or things of that nature where you have that connectivity, do you feel like you're penetrated well enough, at least in one or two of those verticals, to really be the right vendor to go in and sell the other components to that? It's kind of a multi-pronged question, but where are you on the evolution of both building up that system but now executing on it? One of the advantages that Tyler has over really any of our competitors is no other company has the breadth of solutions, the coverage of solutions. The number of scenarios that we can provide solution coverage of, our competitive peers would have to partner together in order to put together a solution to do that. When they did partner together, very likely the out-of-the-box solutions would not interoperate without a lot of one-off integration work. We have focused our attention on this connected community's vision on very specific use cases where we think that there is a very long-lived process that can be served with an integration that flows from one product to the next. Usually in that space, we do have a dominant position in one of those products that we can then radiate out from. Is that what you are asking? I think it is both. I think, and maybe I do not want to, there are parts of our connected community's vision where I think it is really resonating in the market. I think when you're also talking broader about cross-sells into a certain jurisdiction, I think we're making good progress there, but I think the runway is still pretty far in front of us. You go back to the slide that we put up at Investor Day two years ago, which is our average client has two to three products, and we think we can get them to 9, 10, 12 products. There is a lot of muscle still left to go there. Part of the things we're doing around sales, but it's also part of the reason why we've made such an enhanced focus on client experience that really started internally about two years ago. We now have our new Chief Client Officer. It is all on you now, Andrew. If we do not get it done. I think that's part and parcel of there's a lot of elements that go into that. It's what we're doing with the cloud. It's client experience. It's all of that. I think the runway is still pretty large on our whole cross-sell upsell opportunity. Yeah. Terry Tillman, Truist Securities. Thanks for hosting us today. The office of CFO space is a large standalone market, and that's beyond just ERP, but the priority-based budgeting. I've been intrigued over the last couple of quarters. Y'all have called out six-figure transactions. I'm just curious, was that some of the opportunistic stuff where you could just add some distribution? Is this going to start ramping from those kind of early volumes into a volume and velocity business? I always have multiple parts. That's the way I am. Are you tending to sell these early deals into a Tyler ERP customer? Or is it a wedge potentially into a situation that they were not using you as the core ERP as well? Thank you. I think it has been a little bit of both. A little bit of both. I think we recently sold a deal in LA, and that was not an ERP customer. So it has been a little bit of both. It is like a lot of things that we do. Jeff alluded to earlier about our customers talking, getting that information out there. Momentum builds momentum. I want you to be out there selling it because you are going to go sell us a bunch more six-figure deals. It is something that I think we are excited about, but it is still relatively new in the market. And like any new product, it takes time. The more that it shows success, we talk about client references and people communicating, the more that people understand it and see the benefits, and the more that they talk, I think there's more leverage that will come from it. It's an exciting deal that we got. Chris Fabian, the founder, he's sort of known as the, what do we call it, the evangelist of priority-based budgeting. I'd put him in front of anybody, and he can go sell the whole nation. We just got to get people lined up. Yeah. He's presenting here at the conference. If you make a point to go see one of his presentations, you'll probably want to buy a copy for yourself before you go to the house. Yeah. For your household. Yeah. Yeah, I think some of the bigger priority-based budgeting deals we've talked about were not Tyler ERP customers. Los Angeles County, Kansas City, Missouri, City of Dallas most recently. I was talking to Chris about it this morning because in the Dallas paper last week, I saw an article about Dallas's budget challenges. He was telling me that they're in the budget cycle right now, and they were able to implement it within less than two months. They're using it in the current budget cycle, not fully, but it's having an impact on solving their current budget problems, and they're looking forward to next year. These are places like Los Angeles County is a courts customer of ours. City of Dallas uses other products from Tyler, but not our ERP. We do think there's a huge runway with our massive ERP base around priority-based budgeting as well. It's also nice to use this as a unique product that Tyler has to expand our relationships with some of these really big tier-one customers. Yeah. I'd like for him to scale it down so I can sell it to my kids. Great, guys. Thanks again. Keith Housum from Northcoast Research. Many of you guys have been in the industry for decades now, so a lot of vast experience. As we're looking at the current environment, would you say that the move to AI and everything else, cybersecurity, ransomware, whatever it might be, has this really accelerated the move of the agencies to do their RFPs more often? I mean, it's been common that a lot of these systems have been out there 10, 20 years. Are you seeing now that the need or the want to replace this is accelerated? I'm assuming the runway is still a long way to go, but maybe give a bit of context of where you're seeing that. Is it the large agencies, small agencies? Is it certain end markets versus others? Right. Thanks. Specifically, are you talking about the AI adoption aspect? Are we talking about just the, are we seeing this accelerate, people wanting to just, just for any reason? Okay. Perfect. I'll speak to what we're seeing from just the AI perspective. Then we can talk a little bit more about some of the flips and that type of thing. What we are seeing in our client base is we are seeing our client base continue to be a little bit cautious, a little bit, but I am personally seeing a lot more eagerness to adopt these solutions than perhaps I have with prior ones. I think we have a lot of clients that are out there. They see the opportunity that exists. They see the opportunity to solve some of those big problems that I talked about. If you can present basically the solution, show that it is trustworthy, address some of the key fears that they have, we see a client base that is pretty eager to move forward with some of the AI capabilities that we have out there. In terms of the impact on client flips and that type of thing, I think it is probably still a little bit too early to say. I think all the things you mentioned are seeds for the future. We saw it with COVID. We've seen it with cybersecurity attacks. It starts to build. I mean, we talk all the time about how slow-moving our market is. It was mentioned earlier about aging workforce with our clients, with older technology not being able to backfill. Those are all seeds that will continue to build momentum. As of today, is it something material that we're seeing driving new RFPs? No. Our RFP activities, we've talked about on earnings calls, RFP activity, demo activity remains pretty steady at slightly elevated levels. I don't think there's a driving force based on those factors that you mentioned. I mean, I think. Every one of our clients that has their own historical environments that they've built up, their internal environments and infrastructure, their own data centers in some case, they're going through a mini type of cloud journey of their own that we see in local government, specifically in county and cities. They're trying to map their own path. That may involve a new RFP and a replacement. Maybe they're with a vendor that doesn't have a cloud offering or doesn't operate outside their data center. They're trying to map out their own way of doing this. I talk to a lot of these CIOs on we do webinars and different things in partnership with AWS and with our clients as well. They're trying to deal with the talent gap. This kind of goes back to some of the AI and the productivity and how much it can benefit the public sector specifically as a workforce. They have only a certain number of resources. They are trying to map it out. There are budget constraints. They are doing it in phases, and they need to skill set their own staff along the way to do that. Yes, it is driving action, but the only time we are seeing an immediate turn on something is when, unfortunately, an incident happens with a customer. Otherwise, they are taking a phased approach based on the skill set of their staff and the budget they have available. Yeah. I think AI is a piece of that, but in general, this greater emphasis on government efficiency, something that starting with DOGE and DOGE-like organizations at the state level or at the local level, many of which were already in place before this administration. This is not just a new last six months thing. This increased focus on government efficiency, really, we believe, is starting to change, not a groundswell of change, but starting to change the way customers think about replacing software and what software can do for them. Because ultimately, technology is how they will sustainably become more efficient. Often, they're inefficient, not because they have hundreds or thousands of employees that aren't doing anything, but because their processes are driven by old technology that doesn't allow for online access or citizen self-service and those kinds of things or support remote work. They struggle with inefficient processes. We have talked about for a long time that the sort of frustrating aspect of our business is that the governments are slow to move. They do not have competition, so they do not really have to change. They tend to not replace software until they absolutely are forced to because the old system is dying. Even though there is often a really clear ROI and a clear value to replacing that software, now it seems that there is starting to be a little bit different way of looking at technology. We believe that, again, not in the next quarter or two, but that it is starting to change the way they think about replacing software sooner as a tool to do more with less and to achieve the efficiency gains that they want to do, as well as provide better service to the system. We saw that back in 2008 during the Great Recession. Some of the new clients that we picked up during that period, the whole reason that they started to pursue, more aggressively pursue, technology was because their headcount was under pressure, and the only way they could meet demand was with technology to solve those problems. Hi, I am Arsenije Matovic from Wolfe Research. I think, Russell, when you were talking about customer satisfaction scores being higher at existing cloud customers, that is encouraging, especially as we are moving through more transitions. Even Franklin, your story on the state of Iowa wanting the state of Indiana's AI solution that Tyler made seems like really positive for existing cloud customers wanting more from Tyler. I guess just outside of the continued momentum we're seeing in the cloud transition journey, do you think the opportunity you see today versus two years ago from expansion growth at existing cloud customers is larger than it was two years ago? Does that maybe lead to that added confidence in medium-term targets being maybe not like a ceiling, but a good guardrail for expectations today? The opportunity as far as within our current base, expanding the two to three products, I think that opportunity has grown, and it continues to be a great area for us. Now, when I say it's grown, I think it's grown just because with the momentum, more customers moving into that cloud environment, that's what we're doing in phase two, where this client experience allows us to give the value-add where more Tyler products give you additional value with less overhead. You're not learning multiple different support paths, or you're not finding out about issues within an environment by two or three different ways. It's one common way. As you add a new product, your staff already knows how to interact with the organization. It goes beyond that vendor consolidation. It goes to that there's more efficiency with adding on those products. That's the opportunity that we see, and that's where phase two really plays into that with more that client experience focus, both with working tandem with Andrew and then the technology behind it. It's going to provide more value to our customers as they add additional Tyler products. Does that answer your question? Yeah. This will be my last one. I promise it's Terry again from Truist. On the payment side, it's kind of in the weeds on transaction and payments business. I mean, payment processing, junky old payment portals, replacing that, it's a sweet spot. Plus, you can reconcile on your ERP, so it totally makes sense. I get that. On the disbursement side, you all bought a company in the past. Is disbursements more of a it's not a brownfield situation. You're just trying to get them off of sending out checks and maybe an update on disbursements. I don't recall hearing as much about that the last couple of quarters. How's that coming along in terms of that part of the business? Thank you. You want to take it or me take it? I'll start, and you can jump in. There are some specific use cases where we have some pretty well-established solutions in the disbursements lane. For example, jury payments, that can all be done electronically through cards and what have you. Releasing money from jailed inmates when they get out of jail, whatever balance they have in their commissary account gets published to a card. I know there have been some use cases where there are statewide programs to reimburse people for childcare. Different people want that money to come in in different forms, some through debit cards, some through ACHs, and so forth, something like Venmo. We've seen an increasing interest from customers in being able to disburse funds in a purely electronic, non-paper-based way. I think we're still really early in our development of that as a solution across our portfolio. There's lots of unfulfilled use cases that we have identified for us to go pursue. Yeah. I'd say we've kind of taken the same approach we took with AI, which is a pretty deliberative approach. Rapid Financial, the company we bought, had some specific use cases. We've been able to take that and leverage it. Just like building out use cases for AI, we have a whiteboard full of potential use cases for disbursements, things like AP automation, things like which we've made progress on, things like what's it called when you get paid before your payday? What is it? Earned wage access. Earned wage access. Sorry. I should know this. It's been a long day. We have a lot of use cases. We have a team that's dedicated and focused on it, but we're taking a pretty long-term view. We're not going to take a shotgun approach and spend a bunch of resources. We're going to build out those cases, take our time. We still believe that the disbursement side carries almost as much, if not as much, as we do on the ultimate payment side. Just a longer-term play. Remember me talking earlier about bandwidth and opportunity costs and all that? We got some of that going on too. Josh Riley from Needham again. How do you prioritize what adjacent product areas to build AI internally? Do you have specific requests from customers? Kind of how are you managing that? Will you be charging on a standalone basis for many of these tools, like use the report writing tool as an example? Lynn has a saying that he often uses when people ask us how to prioritize different things. He said it needs to go at the top of the priority list with all the other priorities. It is true. It is often driven by demonstrated customer demand in an area. If we are seeing activity from customers or demand from customers in an area, that is most often what will cause us to focus in on one area versus another. We also try to get ahead of customers in certain areas where we can be the first to market. We can demonstrate our leadership in that space. There is not a secret formula, though. It is a case-by-case basis. Frank, when you want to talk generally about monetization strategy, generally? Absolutely. Yeah. When we think about monetizing this, we think that in a lot of these cases, there is going to be just significant value driven to our clients, and we'll be able to basically capture some piece of that. As we go talk to our clients, we're still trying to figure out what that looks like over the course of the next couple of years. We are seeing a willingness to pay for a lot of these solutions because it's time, dollars back in the public sectors, back in the public sectors first. Our market is pretty unique. When we do think about monetizing this, we think it will look like some of the other software that we've monetized. There will be SaaS-based, fee-based that will try to align to that value so that people have predictability around it so that they can control their costs. That is some of our early thinking around monetization. When we look at prioritizing this, when we look at it, we have gone through kind of a discovery process across our product lines where we're weighing what we're seeing in the market, where we're weighing the monetization opportunities, the cost to build these things and operate them, and trying to put those together to get a clean picture of where do we go next, for example, with report writing, decision engine, any number of these different investments. I feel like it's my general obligation to go ahead and say we're still early in this process. We're being very deliberate about it. We are thinking about that, and we're working with clients and proof of concepts. It certainly will be additive down the road at some point, but we're not in any position to quantify that or the timing of that. Hey, guys. Darren Baker here again from PrimeCap. I'd love to ask you just a really kind of big-picture question, right? From an investor perspective, I think a lot of people look at Tyler and say there's so many positives in terms of just the need that exists in the marketplace, right? The sort of resiliency of demand coming from all these municipalities who are not maybe subject to the same market forces that commercial customers might be, that sort of thing, right? We agree with them. All of those, all the technology assets that you guys are bringing to the table. On the other hand, one of the things that I think gives people pause is that because these customers are not maybe influenced by market forces in the same way, it seems like the process of change can just be much slower, right, among your client base versus what you might see from sort of traditional enterprises or something like that. You have spoken to a few of the factors, obviously the cloud investments that you are making, the product enhancements, and so on, talking about the AI tools that could really be sort of a step change in terms of some functionality. Even some of those factors like demographics with the existing employees coming up on retirement, right? I guess what I would love to hear your viewpoint on is, do you think, to use a word we used earlier in the conversation, linearity, right? Do you think that there's anything kind of coming up in the next, call it, five years, right, where you could really see sort of a major change in the way that your state and local customers are thinking about the need to kind of modernize, right? Or would you expect this just to be kind of that steady drip, slow burn, whatever analogy you want, of just people continuing to kind of feel that pressure, continuing to look kind of gradually at what you're offering, and just one by one sort of they eventually come on board? I guess that's what I'm really wondering is, do you think it'll continue to be fairly linear, or could something change that you think would really catalyze a faster shift for these clients who all have similar kind of needs and are facing those similar needs? Yeah. So let me start. Thanks. I'll start, and I think something everybody can jump in. We had a futurist as our keynote speaker, so I'm going to tell you right now, I don't qualify as a futurist. Someone asked me, how do you qualify as a futurist? I'm not sure. I know he qualifies as a historian, but not a futurist. I think it's one of our competitive advantages is that we take a long-term view of this market. We're in it for the long haul. Our clients know we're in it for the long haul. When we talk about being a frustrated acquirer and PE firms are coming in, their model doesn't work here because they're looking to flip the business, and they just do these bolt-on barnacle acquisitions. Bolt-ons, they may or may not fit. They're eventually going to cut. That's been one of our key differentiators for a long time. I think when you talk too about long-term free cash flow and terminal value, it's that long-term view, that long-term TAM of the market, which I think builds underlying value to Tyler. Is there a technology event that would shift that? I got to tell you, if I could predict that stuff, I wouldn't be sitting here. I'd be sitting on a beach somewhere. Could AI be that initiative? It could be. What we've been talking about today is our market's going to be slower to adopt, slower to accept, more deliberate to build out the cases. Hopefully, we're their trusted partner to do that, and we're taking that deliberate approach. I don't know that I see a big bang, but there's been big bangs in technology and in the world that a lot of people didn't see. The thing about our market moving slowly, absent some sort of external technology revolution, is that you generally will see it coming. The other side of that coin is there's nothing a competitor is doing right now that's going to stir up the market and take that business. I think the current thing right now is just the continued what we've been talking about today. What's going on with our clients? Are young kids today looking to grow up and work on these old systems for cities and counties? I don't think so. I think AI could be that. I think that's a way. I don't think it's five years that something like that could be that material or that meaningful. Anybody have different thoughts or? I'll just add, with my early listening to ours, spent a lot of time at user groups listening directly from clients. One of the things that they're saying to us time and time again is we need to serve our constituents better. We need to serve them in a faster way. They are not necessarily asking for us, what is the next great widget? They are pushing us to think in terms of how to support the municipality or the city or the state in a new and different way. I liken this to 20 years I spent in cybersecurity. When I started in cybersecurity in 2001, it was antivirus and firewall. I thought, boy, this market is right. Then we came around and we created an encryption solution. That is three areas that we thought, boy, cybersecurity cannot get any better. You look at cybersecurity today, identity management and risk management and threat detection and all these different elements. The point behind saying that is those came about because new threats evolved, new things popped up, and companies were able to react to them. I look at it the same way. Our clients are pushing us and asking for us to be their trusted partner so that as a new way to serve the citizenry pops up, are we going to be able to be there? Are we going to be able to create the right solution to help move them along? I agree with Lynn. Neither one of us are futurists, but you have to read the tea leaves. You have to understand what the clients are asking for so that we can build the right product, serve them the right way, and help them evolve to where they want to be 18, 36, 72 months from now. It's actually why we invest in things like Connect and Executive Forum in our courts and justice, the state leadership forum that we're doing today, because we get our clients out of the day-to-day, and we get them isolated. We get them rooms, and we sit and we talk, and we talk about their problems, and we try to figure out where we want to go together. That makes us unique. This is a big investment we've made here, and we do it every year. We do these types of things in pockets all around our company. We do not talk about that kind of stuff, but it is part of being a trusted partner to our clients because they feel like they are part of it, and they are collaborating, and we are listening and helping them solve and figure out how to solve not just the problems of the day, but the things that are coming around the corner. I think it is also just if there were to be some kind of seismic driver in the future, state and local government is going to lag what the private sector does. The private sector is going to lead the way on that. It is not like something is going to sneak up on us, whether it is AI or when cloud was first introduced, it was going to change everything. In a lot of ways, it has. We are still working on that in state and local government. Yep. We want to be the last company standing. And we plan to be. We talk to people. Just everything about our company is built around the pace of this market and the appetite for change and the risk aversion. Everything is built around that. Other organizations that might spend multiple verticals, this is a challenge for them because it just does not move as fast as maybe some other more attractive markets might. Any more questions? Okay. All right. Awesome. Lynn, I guess I will close. Okay. I really appreciate everybody taking the time to be here today, both in person and on the webcast. I hope you found today's meeting to be informational and helpful. We were actually planning to do another full-blown investor day in 2026, targeting sometime in Q2. We do not have a date set. We do not have a place set, but we are planning to do that. We'll obviously probably get that out maybe later in the fall, probably late Q4 or something, mid-Q4. In the meantime, as always, if you all have any questions, do not hesitate to reach out to Brian, Hala, Bobby, or me. Thanks, everybody, for coming. Appreciate the time.