Tyler Technologies (TYL) investor relations material

Demand environment and modernization trends

• Public sector demand remains stable and strong, with elevated RFP activity and consistent pipeline progression over the past two years.

• Disruptions from federal stimulus expiration and government events were temporary, with demand normalizing quickly.

• Governments are increasingly focused on efficiency, leading to earlier technology replacement and a shift from waiting for systems to fail.

• Modernization is still in early stages, with many systems over 20 years old, providing significant runway for future growth.

AI strategy and competitive positioning

• AI initiatives focus on domain-specific solutions, automating repetitive, mission-critical government workflows.

• Deep domain expertise and a large installed base provide a competitive moat, with strong governance and trust processes.

• AI adoption is accelerating, especially for low-risk, repetitive tasks like data entry and permit reviews, with broader adoption expected in 1–2 years.

• Document Automation product is delivering significant labor savings and gaining traction among court customers.

• Main competition comes from other SaaS and ERP providers, with limited threat from governments building in-house solutions.

Cloud migration and version consolidation

• Cloud adoption in the public sector is increasing, with nearly all new sales cloud-based and a 50/50 split between on-prem and cloud customers.

• Over half of government systems remain legacy, offering substantial replacement opportunities.

• Cloud migration is expected to peak in 2–3 years, with a goal of 80%+ cloud penetration by 2030.

• Migration pace is driven by client IT roadmaps, hardware refresh cycles, staffing challenges, and security concerns.

• Version sprawl is being reduced, with most customers now on recent versions, supporting margin improvement and easier cloud transitions.