Delighted to be on stage with Jeff Puckett, COO of Tyler Technologies, my colleague Maura Haggett to my right. Thank you for joining us. We really appreciate it. Thanks for having me. Jeff, one of the things that I really appreciate about Tyler, the company's been around since the 1960s, and you've been with Tyler Technologies since 1991. It's only been a software company since the late 1990s. I've been there 30-something years. I feel like you have a unique perspective here on how a company proves durable across multiple decades, multiple generations. What would you describe as Tyler's core competencies? How do you now translate that to an AI-first world? That's a great question. I think there are some things about Tyler that are somewhat unique, especially when people from Silicon Valley or other parts of the industry come to work at Tyler and they say, "Hey, this is different." The primary difference is the market that we serve, which is primarily state and local government, about 5% federal government, but mostly state and local. It's a slow-moving market. It's very conservative, very risk-averse. It requires us to have built a company that takes a very, very long view of the market. We don't make decisions around quarterly impacts, and in some cases, not even around annual impacts. We try to look out, you know, where do we want this 30-year customer relationship to go? That benefits us in a lot of ways. We do an implementation project, and the customer wants things or there's problems that require us to even lose money on the initial implementation. We're willing to do that because of the customer value that we're going to be able to play for over a much longer period of time. That's what I think Tyler's secret sauce has always been, is that long view. It leads really nicely to a question on what do you think the next 30 years? 30 years is a long time, so maybe we say the next three to five years. We all experience some of the government organizations that you work with from a consumer-facing or a user-facing standpoint, and the technology is really quite painful. Give us a little bit of a sense. What are you most excited about if you were to take enterprise financial software systems, for example, in terms of being able to move that technology stack forward? Are there one or two product cycles that you would put in front of us and watch the space? I think broadly across local government specifically, there's kind of a graying effect of the workforce in state and local government. What's happening behind the scenes is that local government is finding it increasingly difficult to fill open positions and to retain employees. That's putting a really significant impact on their workforce and on their service delivery. What we're seeing is a much higher demand for technology to compensate for what they've previously solved through labor. I think that opens all kinds of opportunities up for future use of AI in state and local government and in looking to basically rethink processes that are anchored in not just decades, but in some cases, hundreds of years of behavior and statute that govern the way that the government works. If you look forward to the next 30 years, their labor circumstances are going to force behavioral changes in government that have been elusive in the past. Yeah. It leads nicely into a question on some of the near-term priorities as well, because this year there has certainly been an elevated volume of conversation on modernizing government infrastructure, primarily at the federal level, but certainly there is an impact on state and local as well. The same forcing function could be had for state and local. Talk to us a little bit about, are you seeing more catalysts for change? On the flip side, has there been any incremental disruption into your typical sales processes and your conversations? Early in the year, I was paying attention to the newspapers at the beginning of the year. There was a lot of generalized anxiety in our marketplace around, okay, what's happening at the federal government level and how is this going to impact us? That did cause some delays and pauses and elongation of procurement processes. I think we've washed through all of that at this point in time. I think in the local government space specifically, that's been heavily discounted. It's not going to have any long-term impact. What happened at the federal government level? Less so at the state level. There are elements where state funding is derived through federal funding sources, and less about the DOGE initiative and so forth. Just the disruption in the flow of funds also creates some noise. I don't think it's structural, I think it's kind of a temporary effect on how fast procurements occur. Maybe the other way to ask this question, you're talking about the growing effect and the pressure on labor. What do you think needs to happen to accelerate change or to take the technology budgets, however you want to benchmark them at your cost of move? One could argue that the technology budget should be meaningfully higher on how state and local government thinks about technology adoption. Curious your thoughts on that. What do you think has to happen to level up to modernize? I think first, everybody has to have realistic expectations about what local government and state government can do and how fast they can move. All of the incentives are against them to make dramatic changes. The effect is going to be incremental improvement. Success breeds success, breeds success. If you can show a customer that, hey, you're doing this manually with, you know, 50 people, we can replace this at a higher level of accuracy, a higher level of service for, you know, 20% of the cost using AI, they'll do that every day of the week. I think they're going to be less prone to making speculative bets on technology or AI than what we'll see in the private sector, just out of their nature. Again, all the incentives are lined up against them taking those kinds of risks. They're going to look for the private sector to lead the way in innovation, and then they're going to copy and steal from that. Actually, it's a great opportunity to talk a little bit about AI and, more specifically, how do you get your customers comfortable at this early stage with some of the more leading-edge technology products that you have? Or is the answer you've just got to wait and see how this next phase of private adoption plays out? Part of it is waiting, is being a little bit patient. We've seen a lot of companies in both the private and the public sector rush features and capabilities to market that have a more elusive return on investment proposition. Yeah, we've resisted that, right? We want to be able to go to our customers with a very clear ROI that says, you know, this is how this feature is going to pay for itself, and we can demonstrate that to you. An example would be we're using AI, for example, to read unstructured court document filings and to extract and do data entry off of. That's a very easy conversation to have with a customer. You've got 35 or 40 people that do this all day long. It's a low-value, high-volume, low-complexity activity. It's perfect for AI. The way that they look at it is, you know, they're not going to lay those people off. They've got vacancies all over the place they can't fill. They're going to repurpose those people to higher-value activities and use AI to take care of the drudge work. Yeah, fantastic. I'll ask one more here and turn over to Maura. Priorities as a COO, I know you're entering, I'm guessing you're entering annual planning in the next several weeks. What are you most focused on? What are you most excited to work on? The things that I spend my time on are, and you know, I've joked with people that Tyler's the largest software company that nobody's ever heard of. If you dig below the covers of Tyler, it's really a portfolio of businesses serving different parts of the local and state government space. A lot of what I spend my time on are unifying the experience of the customer through all of those different businesses. Whether that's our cloud transition and making sure that customers have a consistent high-quality experience in the cloud, or it's the overall customer experience so that the way that we do implementations, the way that we deliver support is consistent. One of the things that we're trying to do because our install base has gotten so big over the years is when we look at our future sales prospects, most of our future sales are going to come from customers who already own another piece of software from Tyler. That referenceability of that customer is really important as an impact on those future sales. They want to have a good experience. They want to have a consistent experience. That means I've got to unify parts of our organization that have typically been successful by operating in a focused silo. Cloud, customer experience, AI, those are all of the things where it's important. What I'm spending a good portion of my time on, and probably the fourth one to round it out, is our payments operation, which is also something we are unifying across our entire business. Yeah, on the cloud transition, Tyler's made great progress to date. There's still a lot of work to do. Can you just level set us on the work that you've done, what you've learned from the conversions to date, and how that's informing the next cohorts that are approaching? If you look at our install base, our install base is not homogenous, right? There's different verticals, whether it's enterprise financial software systems or integrated software for courts and justice agencies or public safety software. Each of those have a different set of dynamics in their willingness to make the transition into a cloud environment. For example, public safety software, two years ago, we had zero sales in public safety SaaS arrangements. Today, two years later, it's 100%. There's also a big difference between a large customer where the complexity of the shift is high, but the sophistication of the customer is high as well. Compare that to a small customer, which we have a lot, where it's actually a fairly simple technical task to migrate them into a cloud environment, but the customer's sophistication is more limited. They need more help. We have to balance all of those in the way that we go to market with this cloud migration and the way that we try to act as a partner with the customer. For some customers, the journey is going to be 18 months. For other customers, it's going to be five years. We have to hold their hand along the way to make sure that we don't attrit a significant portion of that customer base we've fought so hard to build because we were sloppy in the way that we were going about transitioning them to a new state. On those larger customers, the on-prem base currently is more heavily tilted to those larger customers, just given the complexity. As you approach the flips that are expected to peak in 2027 and 2028, how are you thinking about the kind of carrots versus sticks of getting those customers over? So far, we've been really heavy on the carrots, right? Exclusively. We haven't really pulled any sticks out at all. The carrots are all around putting features into the application that they can only access if they're a cloud customer, pricing incentives to help them manage the transition from a maintenance arrangement to a SaaS arrangement, additional services, and so forth. I think what my experience has been in these types of transitions is that it is a bell curve. You have early adopters on one side of the bell curve, and you have resistant objectors on the other side. As time goes by, that pool of resistant objectors is going to shrink. They're going to look around at their peers, and they're going to say, "Okay, this is actually working for everyone. I'm going to make the transition." Where we can help them is as that pool of customers starts to shrink that are still on on-prem maintenance arrangements, their maintenance rates will start to go up as a disincentive to remain in that state. We may start to telegraph, you know, end of life or end of support or reduced support types of arrangements over time. We haven't gotten to that point, but sometime between probably 2027 and 2030, we will. We'll start to introduce those disincentives to remain on-prem. That makes sense. Version consolidation has been another key goal of transitioning these clients over. Could you give us an update on the timeframe where you are with sunsetting some older versions? Sure. Across all of our major verticals, we've reduced the version footprint to two to three versions per product that are in the field. The challenge is, and this is also part of the cloud transition story, that's a moment-in-time snapshot because as long as the customer remains in control of when they take updates, the possibility for them to proliferate out to have multiple versions is still there. In order, as a prerequisite to flipping customers to the cloud, we have shrunk that footprint. The next turn for us is in those customers that are in the cloud in the 2027- 2028 timeframe, there's going to be a shift where the control over version update shifts from the customer to us. Once we have control of those version updates, that's going to allow us to really harmonize the number of the environments that are out there so that our install base is consistent. On consistent versions of software, it's also going to allow us to deliver value to them faster because we don't have to go through a dozen different versions of software that are in the field. We're really happy with where we're at. Again, it's just a moment in time. The real change and the thing that we've telegraphed is going to also produce impact on our gross margins going forward is shifting that update control from the customers back to us. That makes sense. Your partnership with AWS is crucial for this scalability. How are you thinking about that partnership evolving as more of the large and complex customers do begin to migrate over to the cloud? I have worked with all of the big hyperscalers, all of the big software companies. I'm going to be a little commercial for AWS. In my 30-plus years, they probably are, without question, the best partner we have ever worked with. Their MO has consistently been, how can we help? What can we do? Whether that's designing very creative business arrangements or it's technical assistance, or in some cases, they've even funded things for customers or for our R&D teams in order to shift this workload into their environment. It's been a really successful collaboration, and I expect that to continue. There has not been a scenario where we have asked AWS to help us with something where they have not produced a valuable solution. That has not been my experience, by the way, with the rest of the marketplace. We talked about how the public sector can be a bit slower moving to adopt these new technologies, but have you seen a shift in motivation to move over to the cloud just given these AI-driven solutions? I'd say that there's one single driver that's providing more of an incentive for customers to migrate into the cloud than anything else, and that is their security exposure. For every headline that you read about some local government or school district or state agency being the subject of cybercrime, there's 25 more that never make the papers. In some cases, it's not an attack on them, it's an attack on a neighboring jurisdiction, and they see how debilitating it is. We've been very responsive to customers that have been in that scenario, either they've been the subject of an attack or they're concerned about one, to escalate their transition into a cloud environment. I'd say that's probably the biggest single driver. That makes sense. Let's talk about payments. Okay. You've got a group of investors here, and we have our external data point. You have all of the incredible customer conversations that you're having, and you're on a ton of roadmap. How would you advise us to model payments? Meaning, how do you think about the trajectory of adoption? How do you think about being above your long-term target today, 14%-1 6% versus 10%-1 3%? Give us a little bit of a flavor for how you internally think about payments. Let me first, just by starting out, in the 2030 plan that we published in 2023, we showed a growth trajectory around our transactional revenue. Sometimes people conflate transactional revenue with payments. Payments is a component of that, but a significant portion of that transactional revenue stream is actually software that we are monetizing through transactions. In other words, we're providing an entire application suite for a customer, right? They don't pay us anything for it upfront. We're monetizing it through transactional revenue. In addition to that, there is a payments component to that. I think, first of all, when you model it, you've got to understand that there are different moving parts here. The second thing, the second reason it's important to understand that is that we don't really have any interest in being a commoditized payments provider, right? The race to the bottom with low margins. It's not sticky. It's too easy to replace. What we do is we look for opportunities to create arrangements where we are monetizing transactions with the public or vendors with government, where we can provide some significant value add that is worth the customer paying a premium price to us. That may be tight integration with the backend system. It may be helping them reconcile with their bank. There's a number of different ways that we can go about doing that. One of the characteristics of this payment strategy is we want it to be as sticky as our software businesses, right? We don't want to create a big segment of our business that has a high churn rate. That means the strategy has to also have these hooks that keep customers embedded. It's interesting that if you look at your payments revenue today, I know part of it is inherited, but how do you think about the percentage which is differentiated as you target versus the part that is commodity? The vast majority of it actually is differentiated. When we acquired NIC, there was a relatively small percentage of their total business that was pure commoditized payments. Most of that has turned off or is turning off. It's low margin, 10% or less margin on it. It's not an attractive business for us, and we think it'll be out of our portfolio within the next year or so. The flip side of that, though, is you have a number of customers that don't currently engage with you on payments. That's right. How do you think about that next tranche of customers for payments adoption? How do you target and then encourage those customers to adopt? A couple of different thoughts about that. One is if you look at, if you were to deconstruct all of our add-on sales where we're going to existing customers and upselling them on new capabilities, a significant, I don't have the percentage in front of me, but a significant percentage of that business is actually payment sales to new customers. In some cases, there's a fairly considerable lag between the time we contract for that versus the time the revenue starts to show up. I would say payments is probably the most highly demanded add-on feature inside our portfolio without a close competitor. It also has applicability across a broad array of our portfolio. Whether it's permitting or it's ERP or it's integrated software for courts and justice agencies, there is a payments component to what government does. Yeah, fantastic. The add-on discussion leads nicely to a discussion on cross-sell. Sure. Yeah, so currently your customers on average have two to three products in Tyler's portfolio, but there's a broad depth of products available. You've talked about driving that closer to eight to 10. To start off, what do you see as the most, not easy, but a cross-sell that makes the most sense where products are most complementary to each other? Where have you had the most success? What a lot of folks don't understand about the way that government works, and because in some cases it was intentionally designed to not work very well, is that many of the things that we do with government are very long-lived, multi-year processes that affect multiple government offices. I'll give you two examples. A simple example that everybody always understands is the justice system. You get arrested by a police agency, you go to a county jail, the prosecutor decides to file a case, it goes to court, you end up on probation. Those are five different government offices. That process that I just described can take a year or two years or three years to complete. The adjacency, if we have one customer that's in that long-lived process, a court, then we should be able to have a competitive advantage to unify the other pieces of those processes across those other agencies. Another example would be a property. You build a house, you have to get a permit, there's a deed that's recorded, there's construction and inspections that occur, there's taxes and assessments or appraisal that occurs. Eventually you go back and you add a swimming pool. Again, multiple government offices in multiple jurisdictions, you can have cities, counties, state agencies in that whole mix. Our ability to go in and say, "Look, you've already got this piece and this piece, but look at all the work you're doing to compensate for the fact that these other steps are in different or are using different solutions. Let's unify it into one comprehensive process." It's a very compelling value proposition to customers. How are you going to market? What's the sales motion look like for making sure that these local governments know that they have all these solutions available through Tyler? There's a lot of internal education of our own sales teams because our sales teams, again, have operated historically in silos serving particular sub-verticals. Part of it is going to a piece of market where we have a position of strength. We have a very large install base in a particular area and identifying what are those areas of adjacency, what kinds of programs can we put into place that can create awareness. It's a lot of restructuring inside Tyler to make that a more effective movement. That makes sense. Tyler has had an M&A story for a while. How do you ensure that all of these products come together cohesively? It feels like one product. I know you hired Andrew Kahl as the first Chief Client Officer. How does that fit into the whole portfolio? Great question. When we acquire a new company, there are a number of different dimensions that we evaluate on making it look like, you know, first of all, it has to look like a Tyler product. There is a whole cosmetic refresh that typically occurs to meet with a standard so that it, you know, this was like I bought software from the same company. There is an integration of consistency, APIs, and so forth, so there's a couple of years' worth of technical alignment. That's an element that our CTO manages. Andrew Kahl, is our new Chief Client Officer, his focus is on making sure that the client has the same implementation experience, the same support experience, even that we're using the same nouns and verbs when we're talking to the customer about their environments. The last piece is an enhanced customer success capability where we're going into customers that have been implemented and making sure that they are getting all of the value out of the solution that they paid for, which often then turns into upsell opportunities for us because we can see something that's adjacent to their current footprint. Given the breadth of the portfolio and the install base, obviously cross-sell is such a big part of this story. How are you thinking about the white space? Just both state and local government is still, there's a lot of room to run. There is. How do you think about that versus cross-sell and prioritization? Part of it is a mental shift. Like I said, the way that we're looking at it right now is if I go back in time 15 years ago, when we sold a piece of software to a city or to a county or to a state, it was likely the first piece of software they had ever purchased from Tyler. Today, that's not true. They already know who we are, so the referenceability of that customer, that implementation that I already have, has a direct bearing on my ability to sell them payments, to flip them into the cloud, to sell them the pieces of software. That's why you guys have heard our CEO get up and talk so much about recommitting to that consistent, high-quality customer experience across our whole portfolio. That's what Andrew wakes up every day trying to improve. Are there any specific initiatives, since I know he's fairly new to the role, that you've seen customers speak to or that have been driving more customers? Yeah, we are just now starting to introduce the work product from Andrew's team into that environment. I'll give you an example of one that our whole organization has started to embrace, and that is essentially a no wrong door philosophy. What that means is it doesn't matter which service organization a customer starts with. What we don't want to do is have them go there and say, "Well, that's not us. You need to call those people over there." Right? Yeah. Regardless of which door the customer goes through, it's the right door. We are going to get them to the right people who can solve their problem without a lot of finger pointing. You see really good customer response from that. It's a lot more effort, and it requires a lot more technical infrastructure for us to be able to even be able to hand customers off from one office in one city to another office in another city in a seamless way. The impact on the customer experience is significant. Yeah, actually reminds me a lot. We had a similar issue a few years ago with Goldman Sachs and all of the different pieces of Goldman Sachs, and we came up with the One GS initiative. I guess my question for you is, you mentioned the technical infrastructure. Maybe give us a couple of examples of that. That's not easy, what you're describing, to get all of these pieces of Tyler, which have been around since the 1960s in various shapes or forms, to communicate. How are you doing that internally? Maybe give us a little more depth there. A lot of it is through, I mean, I think you see this in any company as it matures. There is a tension in any company between people who are closest to the field having autonomy to basically do what they need to do to be successful, and centralization and consistency and efficiency. What's happened over time with Tyler is that needles has really shifted closer to the, no, this needs to be a Tyler solution, not a public safety solution. Right? That's changed the decision-making. It's changed the way that we, and a good example of that, again, is all of the telecommunications technology that's in place for us to interact with customers. That's interesting. If you go back five years ago, there were probably eight different solutions. It wasn't a problem for most customers who only had an arrangement with that one division. This cross-selling, now that they have relationships with multiple divisions, multiple product lines, they don't want to have nine different numbers to call and have nine different experiences and nine different types of services arrangements. Harmonizing that and making it consistent is not about just the lowest common denominator. It's about defining where is the standard. This is what we want our customers to experience and lifting everybody up to that level. Yeah, I know you're pretty early days. Is this a multi-year initiative? How soon do you think before you're at the holy grail of the company working seamlessly on projects like this? I don't know that there ever is a finish line. Yeah, sir. Right. We have set internal goals for us to be able to get up in front of our customers at every one of our Connect Conferences every year for the next two or three years and show significant improvements in the way that they experience us. The mantra is, we don't want the experience to be worse the more products you have. We want the experience to be better the more products you have. Yeah, right. Everything is geared around, you know, that value proposition. You know, there's a lot of commoditization in any kind of business, and often what makes the difference is the relationship and the service experience, right? Yeah. You guys experienced that in your own organization, right? Yeah. That has got to be something front of mind for us as well. There's an obvious way to measure success, which is number of products per customer. I'm curious, what are the metrics you're tracking internally? Because customer experience, there are all kinds of ways you can measure that. Products per customer, ARR per customer. We talk about payments, for example. One of the reasons we're excited about payments is you can take a customer that's paying you X in SaaS fees, and by overlaying payments on top of that, you can move it to 2X in annual recurring revenue, right? Really at no cost in many cases to the actual jurisdiction itself because they're monetizing this through user fees. That's another big metric. I'd say probably those are the two things that we look at the most: what is the average ARR that we're driving from a customer and how much have we increased that ARR over time and how many products do they have? Yeah. Last one from that. Maura already touched on some of the M&A success that you've had. As COO, what is the number one learning that you've taken away from all of the numerous M&A deals that you've done that's now informing your go-forward M&A strategy? Yeah. When I talk to my CEO about this or a couple of the different things that he often says that always have sunk in, one is that some of the worst decisions he's ever made is when he had too much money, right? Being disciplined around not just chasing that bow on the windshield that looks like a shiny toy, but really making sure that there is a strategy behind why, what problems are we trying to solve, what kinds of companies are we looking to fill them. The second piece is that in addition to all the financial characteristics that everybody looks at when they go to do an acquisition and how it impacts our trading multiples and all that kind of stuff, there is a cultural match that is just as important, if not more important, than the financial synergy. Are these people that are going to fit within Tyler's culture and adopt Tyler's values and interact with their customers in the same way? That has had more to do with our success at successfully integrating companies probably than anything else over time, is being that selective about not wanting to just go hire a company, go buy a company where the principals and key employees are all immediately going to depart for the next paycheck. We want people who are invested, who care about their customers, and who want to see it grow. We reward them for doing that. Sorry, I'll stop. Jeff, thank you so much for your time. Yes. Please join me in thanking Tyler. Please, question in the back. Yes. Thank you for your presentation. To the company, it's been really nice hearing and knowing you. Could you help me understand what's the, if there are, like as it was, the mode or the structural protections that the company has that stops new entrants? I was talking about if there is a minimum R&D expenditure that you need to do to remain competitive. I mean, what keeps some of the other folks downstairs coming and attacking you guys? There are two or three things. The first one is this marketplace is a very slow-moving marketplace. It takes a long time. I've worked with customers where getting a contract signed is a year or two years or three years. A lot of new businesses can't survive that kind of tempo. They need the wins. They need the revenues. The second one is it's not enough to just have a product. You have to be able to successfully implement it and successfully service it. What we see is a lot of companies can't make that transition. They can bring a product to market, but two years later, they're out of business because they basically had to make a bunch of promises that they couldn't deliver during the services piece. The third piece I would say is it took us 30 years to build the install base that we have today. Our attrition, our churn rate is in low single digits, 1.5%, 2%. Everything that we do at Tyler is built around accommodating the pace of the marketplace and on making sure that churn rate is as close to zero as we can make it. That takes a lot of oxygen out of the space for other companies to thrive into. Yeah, Hagget, thank you for the question. Thank you, Jeff. Thank you. Appreciate your time.