Tyler Investor Presentation - November 2017€¦ · from operations 2012-2016 = $631M, 1.6Xnon-GAAP net income Debt free balance sheet 9 Strategic Acquisitions Share Repurchases •

Investor PresentationNovember 2017

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Tyler has included in this presentation “forward-looking statements” within the meaning of Section 27A of the Securities Act of1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future oranticipated events, trends, expectations or beliefs with respect to our financial condition, results of operations or business.Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,”“plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly,statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-lookingstatements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risksand uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-lookingstatements. We presently consider the following to be among the important factors that could cause actual results to differmaterially from our expectations and beliefs: (1) changes in the budgets or regulatory environments of our customers, primarilylocal and state governments, that could negatively impact information technology spending; (2) our ability to protect clientinformation from security breaches and provide uninterrupted operations of data centers; (3) our ability to achieve growth oroperational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions toexisting operations; (4) material portions of our business require the Internet infrastructure to be adequately maintained; (5) ourability to achieve our financial forecasts due to various factors, including project delays by our customers, reductions intransaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for serviceagreements; (6) general economic, political and market conditions; (7) technological and market risks associated with thedevelopment of new products or services or of new versions of existing or acquired products or services; (8) competition in theindustry in which we conduct business and the impact of competition on pricing, customer retention and pressure for newproducts or services; (9) the ability to attract and retain qualified personnel and dealing with the loss or retirement of keymembers of management or other key personnel; and (10) costs of compliance and any failure to comply with government andstock exchange regulations. A detailed discussion of these factors and other risks that affect our business are described in ourfilings with the Securities and Exchange Commission, including the detailed “Risk Factors” contained in our most recent annualreport on Form 10-K. We expressly disclaim any obligation to publicly update or revise our forward-looking statements.

Forward-Looking Statements

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One of a Kind Company. Outgrowing a Growth Market.

Providerof software solutions to local / state governments

EPS growth

since 2002

Annualgrowthin $15Bmarket

Tyler annual revenue

growth since 2002

3

#1 23%CAGR

6-7% 14%CAGR

T H E T Y L E R S T O R Y


Powerful business model

One of a kind company

Large untapped market

Multiple growth and profit drivers

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Long-termSustained Growth• EPS growth averaging >20% annually

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A T A G L A N C E

Leading Provider of Software Solutions to Local Governments

Key Products(approx. % of revenues)

Powerful Model

Land & Vital Records

2% Appraisal& Tax10%

Courts& Justice20%

ERP | Financial50%

15,000+clients

$772M

62%

166 bpsannually

1.6x

2016 Non-GAAP revenues

Recurring revenues

Non-GAAP operating margin expansion – avg. last 10 yrs.Cash flow from ops to Non-GAAP net income– avg. last 5 yrs.

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K-12 Schools

5%

Public Safety13%

$134

$772

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162017 E

14%CAGR

Consistent Long-term Revenue Growth

Total Revenues($M) $841-

$849

64%Recurring• Maintenance• SaaS/Subscriptions

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11% organic, 3% acquisitions

Our Business Model is Proven and Scalable…

2010 2011 2012 2013 2014 2015 2016

+357%

100

Index2010=100 Free Cash Flow

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Free cash flow growing faster than earnings

+198%+167%

Recurring Revenue

Total Revenues

+300% Operating Profit

Delivering a Consistent Record of Strong Performance

TotalRevenues

(Non-GAAP)RecurringRevenues

EPS(Non-GAAP)

FreeCash Flow

$289M

$772M

10 16

$159M

$473M

10 16

$0.92

$3.49

10 16

$34M

$154M

10 16

18%CAGR

20%CAGR

25%CAGR

29%CAGR

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Using Strong Cash Flow to Build Shareholder Value

Invest in the Business• Industry leading product development• Capex of $53M - $55M in 2017

Cash FlowCumulative cash flow from operations 2012-2016 = $631M, 1.6X non-GAAP net income

Debt free balance sheet

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Strategic Acquisitions

Share Repurchases• 27.0M shares repurchased

since 2002• 37.3M shares outstanding at

9/30/17

• 22 acquisitions since 2006• Add new products and technologies

or expand client base• Acquired New World Systems for

$699M in cash and stock on 11/16/15

New World Acquisition – November 2015

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Positions Tyler as a leader in Public Safety software1

Enables Tyler to provide an end-to-end solution spanning from Public Safety through Criminal Justice2

Enhances market reach and customer base across the Public Sector ERP market3Complementary products and markets creates a strong cross-sell opportunity; especially in Public Safety / Courts& Justice

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Provides a significant base of highly recurring revenues5

Immediately accretive to Tyler’s margins and cash flow6

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Unmatched Capabilities Provide Strong Competitive Advantage

Robust SaaS public sector solutions

National presence

Scalable solutions

“Evergreen” model for upgrades

Industry leader– high barriers to entry

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2

Singular focus on public sector 1

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Strong Competitive Advantages – Tilt the Landscape in Tyler’s Favor

Geographicscope

National

Local /Regional

Multi-focus

Single-focus

Focus on local government

OracleThomsonReuters

SAP

Infor

Unique: single- focus, national player

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Solutionsuniquely designed for

local government

Our Winning Client Proposition

Leader in R&Dand innovation

Strong Financial Resources

The Tyler Advantage

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“Evergreen” model for upgrades

Our Innovation Engine – Core to Our Success

Industry leading product development– ~15% of revenues, ~ 1,100 software developers

Enhancements– new features and

technologies delivered through “evergreen” upgrades

Continuous improvement of client

experience− High client retention− Increased recurring

revenues

Drives margin improvement

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Single Focus Drives High Retention

Depth of Relationship

Stic

kine

ss

Newclients

ServiceSatisfaction

Follow-on solutions& cross-sell

Loyalty

Reference

>97%Retention

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Exclusive Focus High Retention >97%







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Large Opportunity to Upgrade Government Software

>88,000

>450,000

1/3 provided by competitive vendors

2/3 provided by non-competitive vendors– systems 20+ years old

– “green screens”; COBOL– unsupported systems– home grown systems

O P P O R T U N I T Y

LocalGovernments

Total Potential Systems

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CountiesSchool districts

Local agencies

Cities & towns

3,00013,900

35,000

36,000

Massive Growth Potential for Tyler – Just Scratched the Surface

Large Market Opportunity Market Growing Steadily

6-7%annually

Total Market (1)

$15B

AddressableMarket Today (2)

$7B

Tyler$0.9B

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(1) Source – Gartner - Local & Regional Government and Primary & Secondary Education spending on applications and vertical specific software

(2) Source – Company estimate







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Our Business Model Will Continue to Deliver Strong, Sustainable Growth

6-7%

>20% annually

MarketGrowth

Long-termEPS Growth

• Multiple top linegrowth drivers– grow ~ 1.5-2X

faster than market

• Leverage scale– averaging 100+ bps

annually

1. Gain marketshare

2. Marginexpansion

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Key Growth and Profit Drivers Going Forward

• Maintain high win rates– e.g. Courts >85%

• Expand relationships with existing clients• Expand margins• Expand e-filing business

– recurring, high margins

• Continue to penetrate larger governments

• Continue to expand market share and margins• Broaden product line through acquisitions and

internal builds (i.e., public safety)• Continue gradual evolution toward more SaaS revenues• Expand e-filing business

– total TAM of ~$250-$300M

• Strategic acquisitions, $15-$50M• International opportunities

Near-Term: 1-2 Years

Longer-Term:

4-6 Years

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A C L O S E R L O O K

Fast Growing SaaS Business Complements Solid License Base

The SaaS Opportunity Smooth Long-term Transition to SaaS

• Fastest growing revenue stream,+27% in 2016

• 25-33% of new bookings are SaaS, trending upward

• Attractive model, high margin• Addresses local government IT challenges

$0M

$25M

$50M

$75M

$100M

$125M

$150M

20052016

SaaS/Subscription

Licenses

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e-Filing – Large Opportunity

$0

$48M

>$75M

6 Years Ago Today 3-5 Years

e-Filing RevenuesStatus today• Provide e-filing for courts nationwide• Tyler revenues today greater than all other players

combined• 16 state-wide e-filing arrangements• Annualized revenue run rate of $48M at 9/30/17• Primarily transaction-based (fee per filing or fixed fee)

Opportunity• Expand e-filing to existing court clients and

new users• Expand product offerings, such as re:Search portal• High-margin incremental revenues, ~70%• TAM $250-$300M

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Leverage Scale, Expand Margins

Factors Driving Long-Term Margin Growth

• Changing revenue mix –more recurring revenues, less appraisal

• Highly leverageable model– high margins for incremental

license, subscription & maintenance revenues

– G&A and R&D expenses grow slower than revenues

11.1%

27.7%

35%+

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Goal

Tyler Blended OperatingMargin

(Non-GAAP)

A highly leverageable business

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Long Term Financial Targets – Annual Growth

RevenueGrowth

GrossMargin

EarningsGrowth

Cash FlowGrowth

Low double-digits

100+ bpsaverage annual

expansion~20% 20%+

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Backlog Remains Strong à High Revenue Visibility

$233M$281M

$340M $381M

$552M

$702M

$845M

$953M$1,050M

2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017

+27%YOY

+20%YOY

Backlog of Signed Contracts

Adding 15 new clients every week

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+45%YOY

+13%YOY

+12%YOY

$591M

$756M

2015 2016

2016 Results

Diluted EPS(2)($)

Revenues(1)($M)

$1.77

$2.82

2015 2016

$3.49

(1) Non-GAAP Revenues exclude write-downs of acquisition-related deferred revenue and leases.(2) Non-GAAP EPS excludes write-downs of acquisition-related deferred revenue and leases, stock compensation expense, acquisition-related

costs, amortization of acquisition intangibles, and the impact of ASU 2016-09 on our income tax provision.Please see reconciliation of non-GAAP measures to GAAP included in our press release filed with the SEC.

$2.54+29.8% +37.4%

$772M

Non-GAAP

GAAP

Non-GAAP

GAAP

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GAAP

GAAP

$594M

$563M$623M

Q3 2016 YTD Q3 2017 YTD

Q3 2017 YTD Results

Diluted EPS(2)($)

Revenues(1)($M)

$2.02

$2.60

Q3 2016 YTD Q3 2017 YTD

$2.85

(1) Non-GAAP Revenues exclude write-downs of acquisition-related deferred revenue and leases.(2) Non-GAAP EPS excludes write-downs of acquisition-related deferred revenue and leases, stock compensation expense, acquisition-related


$2.58

+8.2%+10.5%

$624M

Non-GAAP

GAAP

Non-GAAP

GAAP

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GAAP

GAAP

$576M

$756M

2016 2017 Guidance

2017 Outlook(1)

Diluted EPS(3)($)

Revenues(2)($M)

$2.82

2016 2017 Guidance

$3.86-$3.92

$3.46-$3.52

(1) Most recent 2017 guidance provided on 10/26/17.(2) Non-GAAP Revenues exclude write-downs of acquisition-related deferred revenue and leases.(3) Non-GAAP EPS excludes write-downs of acquisition-related deferred revenue and leases, stock compensation expense, acquisition-related


$3.49

+9.0%10.0%

+10.6%-12.3%

$841M-$849M

Non-GAAP

GAAP

Non-GAAP

GAAP

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GAAP

GAAP

$772M

$840M-$848M

I N S U M M A R Y






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www.tylertech.com

Brian Miller – Executive VP & CFO

[email protected]

972-713-3720

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Documents

Tyler Investor Presentation - November 2017€¦ · from operations 2012-2016 = $631M, 1.6Xnon-GAAP net income Debt free balance sheet 9 Strategic Acquisitions Share Repurchases •