Hello, and welcome to today's Tyler Technologies First Quarter 2020 Conference Call. Your host for today's call is John Marr, Chairman of Tyler Technologies. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instruction will follow at that time. And as a reminder this conference is being recorded today, April 30, 2020. I would like to turn the call over to Mr. Marr. Please go ahead.

Thank you, Brent, and welcome to our first quarter 2020 earnings call. With me on the call today are Lynn Moore, our President and Chief Executive Officer; and Brian Miller, our Chief Financial Officer. First, I'd like for Brian to give the safe harbor statement. Next, Lynn will have some preliminary comments, and Brian will review the details of the first quarter results. This will be followed by a discussion of the impact and our responses related to the COVID-19 pandemic. And I'll have some final comments and we'll take your questions.

Thanks, John. During the course of this conference call management may make statements that provide information other than historical information and may include projections concerning the company's future prospects, revenues, expenses and profits. Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from these projections. We would refer you to our Form 10-K and other SEC filings for more information on those risks. Please note that all growth comparisons we make on the call today will relate to the corresponding period of last year unless we specify otherwise. Lynn?

Thanks, Brian. We got a very solid first quarter with a great deal of momentum going into the second half of March when we began to see the effects of the COVID-19 pandemic. The market was active, and we executed at a high level. This was our 34th consecutive quarter of double-digit revenue growth. As GAAP revenues grew 11.9% and non-GAAP revenues grew 11.3%. Organic revenue growth was 6.4% for GAAP revenues, and 5.7% for non-GAAP revenues. Our core software revenues from licenses and subscriptions grew 12.1% on a non-GAAP basis, with 8.3% organic growth. We continue to experience an increasing preference among clients for cloud offerings, as subscription arrangements represented 73% of new contract value signed this quarter. Of course, this put pressure on short-term revenue growth but generates higher revenues and margins over the long term. GAAP subscription revenues grew 21.5% and non-GAAP subscription revenues grew 20.5%. Subscription revenue growth has now exceeded 20% for 11 consecutive quarters and 52 of the last 57 quarters. Total recurring revenues from maintenance and subscriptions grew 17.1% on a GAAP basis and comprised approximately 71% of total revenues. It was another extremely strong quarter for bookings, which were up 39.8%, our second consecutive quarter of greater than 30% bookings growth. Our two largest SaaS deals in the quarter led the way, both were follow-on contracts with the state of North Carolina Administrative Office of the Courts. The first was for our new Odyssey e-warrant solution and was valued at approximately $24 million. The second contract, which we noted on our last earnings call, was for our Brazos e-citation solution, valued at approximately $14.5 million. Both of these 10-year SaaS agreements expand on the relationship with North Carolina that started with our largest SaaS agreement ever, an $85 million contract signed last June for Odyssey case management and e-filing solutions. They demonstrate our ability to grow our client relationships across our broad portfolio of integrated solutions. We signed two other SaaS deals in the quarter that each had a contract value of greater than $6 million. One with DuPage County, Illinois, for our IS World Appraisal solution, and one with the city of Richardson, Texas, where multi-suite arrangement for our Munis ERP, ExecuTime, time and attendance and EnerGov Civic Services, Incode Courts, and Socrata Data Insights Solutions takes full advantage of our connected communities vision. We also signed five new SaaS arrangements with contract values greater than $3 million. Four of those deals were for our Munis ERP solution with the cities of Merced, Napa, and Palm Springs, all in California, as well as Napa County, California. The fifth was with the South Carolina Department of Education for the first statewide implementation of our Versatrans school transportation solution. Our largest on-premises license deal of the quarter was a $6.3 million contract with Beaver County, Pennsylvania for our IS World Appraisal solution, which also included appraisal services. We continue to widen our market share lead in the California Court Case Management market with a $4.4 million on-premises license contract with Contra Costa County for the Odyssey Solution. We also signed a $2.7 million license arrangement with L.A. County for the EnerGov Civic Services solution. Now, I'd like Brian to provide more detail on the results for the quarter, and then we'll move to the discussion of COVID-19.

Thanks, Lynn. Yesterday, Tyler Technologies reported its results for the first quarter ended March 31, 2020. In our earnings release, we've included non-GAAP measures that we believe facilitate understanding of our results in comparisons with peers in the software industry. A reconciliation of GAAP to non-GAAP measures is provided in our earnings release. We've also posted on the investor relations section of our website under the financial reports tab schedules with supplemental information provided on this call, including information about quarterly bookings, backlog, and recurring revenues. GAAP revenues for the first quarter were $276.5 million, up 11.9%. On a non-GAAP basis, revenues were $276.8 million, up 11.3%. Organic revenue growth was 6.4% on a GAAP basis and 5.7% on a non-GAAP basis. Our core software license and subscription revenues combined grew organically 8.3% on a non-GAAP basis. Subscription revenues for the quarter increased 21.5%. We added 131 new subscription-based arrangements and converted 19 existing on-premises clients, representing approximately $101 million in total contract value. In Q1 of last year, we added 128 new subscription-based arrangements and had 13 on-premises conversions, representing approximately $49 million in total contract value. Subscription contract value comprises approximately 73% of total new software contracts value signed this quarter compared to 54% in Q1 last year. The value-weighted average term of new SaaS contracts this quarter was 5.9 years, compared to 4.1 years in Q1 last year, with the increase caused by the two large 10-year contracts with the state of North Carolina mentioned earlier. Revenues from e-filing and online payments, which are included in subscriptions, increased 14.7% to $22 million. That amount includes e-filing revenue of $14.9 million, up 1.7% over last year, and e-payments revenue of $7.1 million, up 56.7%. For the first quarter, our annualized non-GAAP total recurring revenue or ARR was $785 million, up 16.2%. Non-GAAP ARR for SaaS arrangements for Q1 was approximately $239 million, up 22.8%, with transaction-based ARR approximately $88 million, up 14.7% and non-GAAP maintenance ARR approximately $458 million, up 13.3%. Our backlog at the end of the quarter reached a new high of $1.5 billion, up 19.2%. Backlog included $369 million of maintenance compared to $353 million a year ago. Subscription backlog was $668 million compared to $489 million last year, and includes approximately $128 million related to fixed-fee e-filing contracts. This includes our e-filing contract with the state of Texas, which was extended for one year through August of 2022 during the quarter. As Lynn noted, our bookings were very strong again this quarter at approximately $319 million, an increase of 39.8% from Q1 of last year. The trailing 12 months bookings were approximately $1.4 billion, up 37%. Our software subscription bookings in the quarter added $12.6 million in new annual recurring revenue, up 10.7% over last year's $11.4 million. For comparison, if all of our new subscription contracts had been under licensed arrangements, we estimated they would have represented additional license revenue of approximately $20 million. As a reminder, our bookings comparison in the second quarter will be a very tough one, irrespective of the impact of COVID-19. Last year's second quarter bookings were a record $452 million and included our largest contract in history, the $85 million SaaS contract for the North Carolina Courts, as well as the $20 million SaaS contract with Bear County, Texas Courts. Cash flow from operations more than doubled to $56.7 million and free cash flow quadrupled to $46 million, primarily due to strong collection of receivables. During the quarter, we repurchased 58,804 shares of our stock for a total of $15.5 million, or an average of approximately $263 per share. We ended the quarter with $393 million in cash and investments and no outstanding debt. Now I'd like to turn the call back over to Lynn for the discussion on the impact of and our responses to the COVID-19 pandemic. Lynn?

Thanks, Brian. In response to the ongoing COVID-19 pandemic and its effect on the economy, I want to share information on how Tyler Technologies is approaching this challenge and its impact on our business. First, our operational response. Tyler's nearly 5,500 team members continue to provide a high standard of client service with minimal disruption. Our primary focus has been on ensuring that our employees and their families are safe and healthy, while supporting clients who provide essential services to the public. Most of our offices already had many staff members whose normal workdays involve remote work environments. Beginning in mid-March, we transitioned quickly to work from home for all of our staff, equipping our employees to continue their work uninterrupted and also curtailing travel for our employees. Our clients faced increasing disruption to their operations as they dealt with the effects of the pandemic on their communities and focused on providing vital services to their citizens. In March, we began seeing delays in some procurement processes, and finalizing some existing contract awards became logistically more difficult. Some implementation appraisal service projects were also delayed as clients were grappling with balancing local shelter-in-place and social-distance orders while conducting daily operations. Trade shows where large numbers of vendors and prospective clients gather in person were scheduled, rescheduled, or canceled. We are addressing the challenges imposed by the COVID-19 pandemic by adapting the way we do business, using web and video conferencing extensively for collaboration, conducting sales demos, providing client support and delivering professional services such as training remotely, and even executing complex go-lives virtually. With the spread of COVID-19, our clients’ needs for digital connectedness—both within their organization and directly with the public—have rapidly shifted from a vision to an urgent requirement. In recent weeks, we've seen many examples of our team members working with our clients to adapt to the current environment in truly inspiring ways. I'd like to highlight a few examples. San Bernardino County, California, pulled off a completely virtual go-live of our Odyssey court case management system by pivoting to our remote command center model. The go-live would ordinarily have involved a number of Tyler team members traveling to be on site. In response to the COVID-19 pandemic, we accelerated the launch of our new virtual core solution and are offering it without charge for 90 days, in order to help court clients serve their constituents without interruption. Since the official launch last month, more than 16 courts have selected this solution to handle cases remotely, removing the burden of having defendants physically appear in a courtroom while also broadening access to justice for disadvantaged or displaced defendants. The New York State Division of Veterans Affairs deployed our Entellitrak solution in under a week, so its staff could continue to approve claims remotely, ensuring that veterans in the state will continue to have access to benefits. Numerous law enforcement agencies optimized their new world computer-aided dispatch tools to flag calls for service or someone who might be a COVID-19 carrier, allowing officers to take necessary precautions. School districts are using the Tyler Traversa Ride 360 app, temporarily offered free of charge, to assist with parent communications during the crisis and are using our school bus routing software to plan meal deliveries to families in need. The Superior Court of San Luis Obispo, California, worked with Tyler teams over a single weekend to customize its Odyssey guide-and-file solution so domestic violence complaints could be filed online while shelter-in-place orders are in effect. Numerous cities are using our MyCivic app to provide up-to-date COVID-19 information to residents. I couldn't be prouder of how our dedicated professionals have embraced the challenge and are so adept in meeting the needs of our clients. I'm constantly inspired by the spirit, resilience, and compassion shown by our team members. With that backdrop, I'd like to make a few general comments about the financial impact of the pandemic on the quarter and the rest of 2020 as well as provide some thoughts on the long-term outlook and prospects for Tyler. While not material, the pandemic and responses by clients and prospects did affect first-quarter results. As I mentioned previously, a few sales were pushed out in the first quarter, and professional services revenues, including global travel, were also negatively impacted. We also canceled our annual user conference, Tyler Connect, which was scheduled to be held this week in Orlando. The costs associated with that cancellation, approximately $727,000, are included in our first-quarter results. We estimate that the total revenue impact of COVID-19 in the first quarter was approximately $6 million. As we look out over the rest of 2020, we anticipate a greater impact from COVID-19 in the second and third quarters. While we have not seen meaningful cancellations, we continue to see delays in procurement processes and lengthening sales cycles as public sector entities focus on issues related to the pandemic. Although the CARES Act provided approximately $424 billion in economic aid to state and local governments, and additional stimulus packages are expected to provide more assistance, many of our clients will face near-term budget pressures. We can deliver the majority of our professional services remotely, but we expect to see lower services revenues as some projects are delayed by client availability. In addition, a number of courts have limited operations during the pandemic, which will impact transaction-based e-filing revenues during this period. In addition to these core revenues, approximately $6 million of revenues classified as hardware and other revenues will be eliminated in the second quarter as a result of the cancellation of our Connect conference. Billable travel will also be impacted significantly in the second quarter but should return as we begin to transition back from shelter-in-place to more normal operations. While some of these variable revenue streams will continue to be impacted by the current environment, we anticipate that recurring revenues, which comprise approximately 70% of our total revenues, will not be significantly affected. We expect to continue to invest in product development and accelerate our move to the cloud at levels consistent with our initial plans for the year. We value the experience and expertise of our employees and do not expect to eliminate any positions, but anticipate that incremental hiring will be reduced somewhat from our original plans. We also expect to see reductions in some expenses, including travel and entertainment, trade shows, and health claims. As we remain confident in our long-term outlook, there are significant short-term uncertainties around the continuously evolving COVID-19 pandemic and its impact on our operations and those of our clients. For example, government response to the pandemic will continue to vary significantly from state to state and even from jurisdiction to jurisdiction within a state, thereby making the duration and scope of business restrictions within the public sector difficult to predict. As a result, we are suspending our guidance until such time as we have more clarity around the ultimate severity, duration, and impact of the pandemic. I expect to have more clarity on the impact of COVID-19 on our 2020 financial performance during our second-quarter earnings call. While our near-term outlook remains clouded by some uncertainty, given our high percentage of recurring revenues, it's my current expectation that Tyler revenues will still grow in the mid-single digits during 2020 with relatively flat operating margins compared to last year. As I look out beyond the uncertainties created by the pandemic, I am as confident as ever in Tyler's long-term outlook and prospects. Tyler's fundamentals have never been stronger. Tyler has endured trying times in the past, including Y2K, the dot-com bust, 9/11, and the great recession. Each time, we emerged as a stronger company with an improved competitive position. Unlike certain industries, the pandemic has not changed the underlying fundamentals and long-term demand for our software and services. Tyler exclusively serves the public sector, including local, state, and federal government. Our clients will not go out of business, and the solutions we provide are essential, whether managing revenue to keep communities operating, ensuring public safety to help the most vulnerable, or providing transparency and access to government for the residents of the jurisdictions they serve. Our software manages mission-critical functions such as 911 dispatch, courts, property taxes, utilities, and payroll. Often our clients are acquiring solutions to replace aging systems that are end of life and may be unreliable or unsupported. Replacing those essential services is generally a high priority, regardless of the economic environment. If anything, the current crisis is highlighting the reliance on outdated technology by large segments of the public sector. You likely have seen recent news around issues related to some of these decades-old COBOL-based systems. Long-term opportunities will emerge from this crisis as both Tyler and our clients examine historical business practices. For example, work-from-home postures further highlight the need and benefits of connectivity and cloud services, something we've been actively investing in and are continuing with our strategic collaboration with AWS. Clients will continue to appreciate the value of data and being connected with others, with other departments and jurisdictions, as well as with their citizens. This is our connected communities vision, a vision that only Tyler can execute. Clients may become more willing to accept remote delivery of services, something they've been more reluctant to do in the past. Doing so makes our employees even more productive and efficient. Our ability to deliver uninterrupted, high-quality support during these uncertain times only further strengthens our bonds with clients and reinforces Tyler's messages of both agility and stability. As I mentioned earlier, Tyler has endured challenging times in the past and emerged stronger than before. Today, we believe we are even better positioned to weather an economic slowdown. Recurring revenues comprise approximately 70% of our total, including newer transaction-based revenue streams, like e-filing and online payments. Our competitive position and win rates are stronger than ever, and we've significantly expanded our total addressable market through investments in a combination of M&A and research and development. Technology is an increasingly critical factor in helping government function effectively, especially in difficult times. Our financial position is also the strongest it's ever been, with zero debt, nearly $400 million in cash and investments, and substantial additional liquidity available through our $400 million undrawn credit facility, which can be further expanded through an accordion feature. As a result, we're able to continue to invest at a high level in all of our long-term strategic initiatives, something that companies with highly leveraged balance sheets or startups lacking the stability of a highly recurring revenue base may not be able to do. Our ability to actively invest during the great recession was one of the key differentiators that strengthened our overall market position when demand inevitably returned. We will continue to do the same during this crisis. We recognize this as an evolving situation. Tyler is fortunate to have a deep and broad base of knowledge and domain expertise across our employee group, which is approaching the situation with compassion and good humor. I am confident we will see our way through these unusual circumstances with a spirit of cooperation, integrity, and service that has been the hallmark of our company from the beginning. I can't be prouder and more excited to be part of Tyler than I am now. Now, I'd like to turn the call back to John for his comments.

Thanks, Lynn and Brian. Obviously, a little different call and unusual, and a lot of information to digest. Before we take your questions, I'd like to reinforce a few of the highlights. First, I want to add my recognition and appreciation to the entire Tyler team, as well as to the strong leadership that Lynn and his executive team have provided. We deliver and support a lot of great technology, but the true value of Tyler exists in our 5,500 incredible employees. These professionals are what differentiate Tyler from all other players in this space. Lynn and Brian provided a lot of data points in detail. I'll just add one of my own anecdotal observations. Nearly every day for the past month, I drive through the parking lots of the two larger facilities here in Maine, where normally there would be 500 or 600 cars. I need to admit, after seeing this company grow to this level over the past 20 years, it can be a little discouraging to see nearly completely empty parking lots. But then, as I talk to our leadership team, I'm told that the development and R&D projects are on schedule. Customer support issues are being handled and closures are better than the normal response times. And go-lives continue to move forward. As Lynn has been saying, it's not only impressive, it’s inspiring. From early in the morning until literally midnight or past there, thousands of Tyler employees are tunneled into the network and cranking out the work. These people have lives—children, homeschooling, spouses working, some of them in the healthcare professions, and their own commitments. One interesting fact is that the highest network activity is late at night, 8, 10, 12 o'clock. Literally hundreds, sometimes thousands are online getting the work done after the other challenges of the day have been satisfied. It's incredible to witness, and it's also gratifying to know that we have a business model strategy and we're in a position where these jobs are secure, and Tyler will only grow stronger. Yes, we will be impacted in the short and likely medium term. As you've heard, sales cycles will lengthen, our ability to travel to customer sites will have an impact, and there will be some incremental pressure on government budgets at all levels. But the fundamentals that we are built on aren’t changing. Everything we do is centered around essential enterprise applications. Our customers will survive, and we're aligning technology even more to recover. They're still going to run payrolls, manage courts, dispatch first responders, appraise properties, and on and on. But now, there is some uncertainty. That Tyler will grow this year, will be profitable, will strengthen our already strong balance sheet, and most importantly, will execute on all the key strategic and competitive initiatives. This simply won't be true for most of our competitors. Smaller startup types don't have the financial strength. Many of our competitors are peeking around and saddled with significant debt, limiting their investment flexibility. Other horizontal players, this isn't a first or highest priority, and they'll have to make difficult decisions. I'm not suggesting there won't be other good competitors on the other side of this thing. There always will be, but I'm certain that Tyler will be stronger on the other side. Whatever negative impact may occur over the next couple of quarters, it's just timing. If a decision or replacing system is delayed, that's all it is—delayed. We saw this in the great recession with a slow year, year and a half, and then a very robust recovery. It's a net zero game, and when those deals come back online, I'm confident our win rates will only be higher. Now Brent, we'll take questions.

We will now begin our question-and-answer session. Our first question will come from Kirk Materne with Evercore. Please go ahead.

I guess maybe for Lynn or John. And John, you sort of referred to the great recession, I was kind of curious. Obviously, your customer base is fairly unique, and correct me if I'm wrong, but I think a lot of the budget process maybe happens over the course of this summer as new fiscal year budgets are set. So, when you think you have a little bit more maybe insight as to how project planning might get impacted by the uncertainty brought on by COVID. Is this something you might have a little bit more visibility on by the end of the summer, as budgets are set? Or is this something that it's frankly just a totally open-ended question mark at this point.

It's hard to know, Kirk. Some of the budget cycles are actually different around the country. Some people go out, do their due diligence, go through a selection process, and then go to finance committees for funds. Others get the money appropriated and know they have it and then execute the process. So it'll be a little bit all over the place. That's obviously why we suspended guidance. As we've said, 70% of our business is recurring; we don't see it to be affected in a meaningful way. A lot of the other 30% comes out of backlog and is pretty essential and has to occur. And so you end up with a small piece of our business that's important to us. But it's a little less predictable at this point in time, and we'll just kind of have to see how things unfold. As I've said, and what we experienced in the great recession was that the deals that got pushed all occurred. Back then, we actually had a flat revenue year and we were down negative $1 million, the only time that's ever happened. And then we had several very strong years following that. So it's really just a shift in the timing. If they need new systems, they simply need them and they will replace them. But I think the next few quarters will be hard to see, other than the fact that in our case, they are on a small percentage of our business, that's a risk, and the vast majority of it stays in place.

Yes, that'll make sense. And maybe just in terms of still early on and so fluid that just maybe in terms of your conversations with customers right now, in terms of maybe their propensity to think more about subscription models in terms of maybe some of the CapEx savings versus OpEx, I guess there's the state local governments sort of thinking that same way that a lot of the commercial companies do in terms of CapEx savings versus OpEx stand, and does that help or bring about I guess maybe even faster transition towards subscription? I'm just curious how you guys think that's going to be.

I think the bigger driver from this incident is just the availability of technology. So with everybody working from home, with the citizen and partner-facing applications, much of that is just much more reliable in the cloud. So some of these people on legacy systems that are hosted in city halls, county offices, courthouses, it's been much more difficult for them to provide that kind of access in a reliable fashion. Partnering with somebody that runs a modern technology, advanced cloud system gives them far greater flexibility. So I think that will be the bigger driver to accelerate the movement to the cloud.

Hi John, Lynn, and thank you for taking my questions. My first question is about the similarities you noted with 2008. John, you mentioned the expectation that deals are back, and I'm curious about what sets today apart from 2008. You've provided guidance and some uncertainties through your comments, and it's interesting that the visibility of the business seems to differ from 2008 or 2009. Is that the right perspective, and are there any other distinctions you would highlight today?

Scott, I think, obviously, one of the clearest examples of difference between '08, '09 and today is the speed and the shutdown and the impact. As John mentioned earlier, back then, after coming out of the great recession we had a year where we were essentially flat, maybe even a little down in revenues, but that wasn't until 2010. The impact on the economy was a little bit slower. Here we obviously have a much more forced, self-imposed closure. So I think the compression of the effects may be a little bit stronger. So it's still hard to know. I do think, as we said earlier, our Q2 and Q3, we're going to learn a little bit more as we go into some more budget cycles. But I would say the speed of the compression and any associated lag may be a little shorter. Another difference for us personally, and one of the things that makes me even more positive today is the position that Tyler's in today versus where we were 12 years ago. We talked about our balance sheet, we talked about our cash position; go back to 2008, 2009, our balance sheet was a lot different story. We probably had somewhere around only 10 million in cash and probably around equal amount in debt. Today we're in a different position. Our recurring revenues as a model, I think back then, were less than half of our overall revenues. Today they're approaching 70%, 71%. We've been investing; back then one of our biggest initiatives was to invest during that time, we've been doing that leading up to that. So a lot of investments we've been making are primed to come online and poised to take really take position of where we are when we come out of this. So at a high level, that's what I'd say, the difference. There certainly are some similarities, but it's certainly not identical. It gives me a lot of comfort to know that this company has been through that; being able to talk with, and obviously, I was here part of this team, but we've got senior leaders up and down the management team who were part of this company, let it through there. It gives us confidence in what we've done in the past and what we can do in the future. And that's really something that's great to lean on. It's good to be able to lean on each other and know that we're on the right course.

Got it quite helpful. Thanks for that, Lynn. And then from a follow-up perspective, both in the press release and on the call here, you all called out the impact of some of your ability to deliver professional services. It sounds clear that this can be moved from only but you've had a decent amount that's been delivered on-premise. Can you help quantify maybe what that impact looks like in the short-term? Or is it still just too difficult to build, maybe ascertain in terms of the impact of them in the court? Thank you.

Scott, this is Brian. There are a couple of pieces to it. One, we're delivering the vast majority of our services remotely. And as we mentioned earlier, we are seeing customers who typically just expected that those things would be on site, even if we have the ability to do it remotely, that they are certainly now more flexible about it. I'd say we were probably delivering somewhere around 85% of what we would have planned. And there's also a little bit of short-term adjustment as customers also all in one place to be able to accept some of the training or services. So I think that will continue to moderate as we go through this longer. One of the other factors is that included in services revenues, a significant amount of billable travel; something on the order of $5 million a quarter of revenues that we recognize that are effectively little to no margin on those, but certainly affect our revenues. So they're grossed up on our income statement. And we've seen that go to just about zero. And again, we don't know exactly how rapidly that travel will resume. But likely some services will permanently be delivered remotely. And from an efficiency standpoint, utilization of our staff standpoint, that's a positive, but it will have a negative effect on revenues and positive effect on margins.

Our next question will come from Peter Heckmann with D.A. Davidson.

Hey, good morning. Thanks for all the information. Just a little follow-up on the pulling guidance and some of your commentary around maybe a more likely range for revenue growth. Your prior guidance was calling for 11% to 13% growth and if I heard you correctly, they said maybe mid-single digits might be more likely. When we think about that, I mean, is there a reasonable chance that the non-recurring portion of revenue could be down for the year versus prior expectations?

Yes, so Peter, as we said before, there's a little bit of uncertainty right now. There are still deals going forward. What we see is particularly deals that are in their later stages are going forward. We talked earlier, Scott was asking about implementation services, same thing; those that are more in the middle of projects versus the beginning of the projects are continuing. What we see right now, that's sort of our best guess for the rest of the year. We met with management last week, as we do every quarter. We had them really give us their best guess on the impact of COVID on their particular business units. And it varies a little bit from business unit to business unit. Our business units recognize revenue differently. Some are more PLC-based. Some work at a backlog; some are a little more dependent on quarterly licensed sales. But we met with them, we talked with them, and we had them present what they considered sort of bear case, bull case, and best case and we as a management team got together and said, this is sort of where we think we're going to land. As we said in my earlier comments, I'd expect you to have a lot more clarity in our Q2 conference call. And I'd probably like to reserve until the end to make much more detail on that.

Okay. And then just a follow-up. I didn't hear you say at the Brian, look like the average term on subscription deals was a little over 50%. Can you talk about year-over-year growth of bookings on a constant term basis?

Yes. The term had been the same bookings growth for the quarter were right at 20%. There were, as you mentioned, two large $24 million and a $14 million SaaS deals both with the state of North Carolina that were 10-year deals consistent with our tenure, court case management deal. If you had taken those two deals out, the average term would have been about 4.3 years on all the rest of the contracts. But yes, it would have been right at 20% without the term being in the same as last year's Q1.

Our next question will come from Matt Vanvliet with BTIG. Please go ahead.

I guess I wanted to dig in a little bit on some of the dynamics of the bookings through the quarter through April and what the pipeline is looking like and sort of what the sales forecasts are maybe seeking out on a sort of three to six-month basis. But you're looking at what your sales teams are focused on. Is there been a greater focus on contacting existing customers where you have the relationship and getting more response rates and sort of seeing what you can do from sort of virtual and work from home type elements with those customers? Are you seeing traction on new customers? Just curious on what the focus is then there? And then across the product platform, are you narrowing your focus for the next couple of months on specific areas that are allowing more e-filing and allowing more remote contact? Or are you continuing to see sort of a broad-based approach to the sales leadership?

Yes, thanks, Matt. So I guess initially, you talk about pipeline. And I just want to reiterate our comments that we made earlier. There may be a slight demand pause, but there's no real fundamental change in our industry demand. And right now, we don't really see a change in our pipeline. Although we do recognize there will be delays. We really haven't seen any meaningful cancellations. As it relates to sales, it varies a little bit, as I said, some processes that were already well down the road, those are continuing. We are doing remote demos, which are a little more different; in fact, we just finished one last week and received an award after 13 hours of doing virtual remote demos. It’s a little bit new. Some of the things we talked about internally—what are things, mitigation things steps that we can make, but also what types of opportunities are out there. One of the things I think Tyler's always been really good about is while keeping their discipline, also staying opportunistic. Some of the things you're missing you were talking about are some things we're talking about. We do believe that this will help accelerate the move to the cloud. So you see our sales people will start talking about that; they'll start promoting cloud and they start promoting our flips. We will put more emphasis on our mobile solutions, things like in our public safety mobility, even our payments, and things like MyCivic. You talked about messaging. I think there was a question earlier, this is a really good opportunity to really sort of start honing our message on ROI. I mean, it's something that we know internally, but may not have always been a top priority for some of our customers. So, I think some of those things we're doing, and again, the impact of sales is sort of, you talked about reaching out to clients. Sometimes, as I mentioned in my earlier comments, just there's some logistical difficulties right now because you have work from home environments, but we've talked about those messages and make sure that we're going to be equipped for when things return to normal.

Great. And then as you talk about unlikely to have to remove any positions, but maybe hiring gets pulled back a little bit. Are there specific areas where in the near term you’re focusing on reducing hiring versus previous plans? Or is it just a general pause now to reassess over the next weeks and months of where business is picking back up and more of the focus is from a hiring perspective?

Yes. So, I would say the message I’ve sort of given to the team is cautious optimism. We need to see how things play out. But let's not forget the optimism part. We already had made some significant hires this year as part of our plans. As we've mentioned before, we're going to continue to invest in our long-term strategic initiatives and so all those debt projects are going to keep going and when you step back and you look at potential projects being delayed and things like that, there may be some slight pause in hiring some of those services components. But overall, we're committed to our workforce committed to running the business in such a way that our current employees won't be impacted. We will continue to do some hiring. And as the year unfolds, and when we start seeing a return to normal, we'll start seeing some of that hiring again.

And just to give you a little perspective, our plans for the year going into the year were to add about 500 net new heads. So we have a fair amount of flexibility there leavers to pull with respect to the timing and the volume of there’s—but everyone said most likely on the professional services and implementation where we, I think, can plan to hire a couple of hundred people during the year that will likely be adjustments to that hiring, reflecting the change in more than being delivered remotely and delay.

Good morning, guys. I just trying to reconcile the commentary in terms of deals being pushed off and the ability to maintain the operating margin, is really that a function of the fact that perhaps your hiring isn't going to be as great? I guess the concern here is that your revenues are not going to grow as much as you anticipated?

I think the biggest factor there is, yes, there'll be less hiring and your expenses there; there are some offsets to expenses, particularly travel expenses we mentioned health claims are down significantly and travel. I'd say the other big thing is that a lot of the revenues that are being reduced are our lowest margin revenues. I mentioned billable travel, which has almost no margin. The professional services, as you know, are very low margin revenues for us. Even removing Connect, we mentioned we’ll take $6 million of revenues out of Q2, but that had no margin associated with it. So, the higher margin revenues—the subscription, some of the transaction-based revenues—those are growing nicely. So the change in the profile of net sales to something we believe we can still maintain flattish margins with last year, which was the expectations we came into the year.

Well, I think that's a possibility. As John alluded to earlier, there are different ways that projects are funded; there are different budget cycles. There are significantly still a lot of funding resources. One of the things that people tend to forget or may not emphasize is that they're a lot of funding sources; property taxes are still probably the major funding source for state and local governments, really for local government, excuse me, for counties and cities. They comprise an overwhelming proportion of revenues as opposed to say sales tax. If you look at sales tax revenues, which are generally considered to be down, those comprise more around 7% of a budget for a county or city. I also expect that there will be some more funding coming from the federal government. I think you may have seen earlier this week that the Fed announced that it was broadening the number of local governments from which it would allow them to buy debt for them. Originally, they had talked about doing things for counties that were only 2 million and up, and that's been reduced to the populations of 500,000 cities to 250. But there will be some impact. I think the experience in the great recession, as I mentioned earlier, the impact was really felt a little bit later. The thing about this is that there may be a little bit more compression in that impact. But again, I think we'll have a little bit more clarity as we get through the year, particularly as we get through Q2, see the impacts, see what's happening as the states and local jurisdictions are returning to work, and then I think we'll be in a lot better position to answer that question.

Our next question will come from Jonathan Ho with William Blair. Please go ahead.

I guess, just going back to your comments around past crises and the opportunity to maybe invest. Where do you see maybe the most opportunity to do so this time around?

Yes, Jonathan, it's a good point. I think—one thing I want to emphasize is something we've talked about for the last couple of years, which we have been— we have already been investing at an elevated level. We've done that for a number of reasons. As I mentioned earlier, these projects, to me, that's an opportunity that we have initiated and those elevated investments across the board. I think you're going to continue to see us invest in our cloud initiatives; those are not going away. And if anything, we may try to accelerate some of those. All the things that we've been talking about that are long-term strategic initiatives, we're going to continue to keep doing. And then we'll continue across the broad base through our products. But again, I anticipate that this crisis will accelerate, further accelerate both the receptiveness and willingness as well as the move to the cloud. And I think we're going to continue to invest there heavily in the next couple of years.

And then just as a quick follow-up. Are there potentially any projects that maybe get pulled forward or emergency buying for things like virtual courts or MyCivic? Just wanted to see if there's any maybe new demand that could come out of this that's unexpected?

We have a number of success stories out there, but I would consider some quick responses from some of our divisions. We talked about virtual courts; we talked about what was going on in public safety. And I think we've seen some of that. We have had a couple of deals where some local governments have tapped into emergency funding. I wouldn't say it's a significant number, but we've seen a little bit of that.

Great. Thank you guys very much for taking my question. I can't remember a one-month time period in my career where local and municipal software has been in the news as much as it has over the past month or six weeks. I wanted to just ask about the North Carolina deals, you guys have to be extremely pleased with the follow-on, the sizeable follow-on wins in North Carolina. And I was just wondering if we could get a little bit more color on those? And then obviously, in the near term, there'll be some uncertainty but the extent to which you guys are able to template your success in North Carolina and for that to other states would love to hear more. And I have one follow-up.

Yes, thanks, Rob. Yes. North Carolina has been a real success story for us, and you're right; we're very excited. We talked about it last summer when we announced the North Carolina Courts deal. One of the things we specifically talked about was some of the potential upside sell opportunities; we called out Brazos in particular. We spent a lot of time talking about the Brazos e-citations deal at the end of Q4, which was a really great deal, the largest deal in Brazos history. Running in AWS, it's a great story. Shifting gears to something that we haven't talked a lot in detail as much as this Odyssey e-warrants. And again, this is a really great story. This is for a lot of reasons. Our Odyssey e-warrants is really all about its electronic transmissions of warrant applications between police officers in the field and a judge who may be sitting in a courtroom or maybe at home at night. These are things that are time sensitive, potentially middle of the night evidentiary matters, maybe drawing blood on someone at a DUI accident or doing something that's really of time-sensitive nature. This was a legacy product that the state of North Carolina had. They talked with us about it and we said, hey, we can build that, and they trusted us, building on that relationship. It's a 100% cloud-based solution built in AWS; it’s going to be spun up very quickly. The target go-live is actually next year. We expect to have about 49,000 users. It's a great story and it really further evidences our connected communities vision as we realize that you're connecting the agencies; you're connecting the police agencies with the courts. I think it can be a differentiator, not only on our court side but also on our public safety side. So it's a really good opportunity. It's something that I'm extremely excited about. You said it builds on that earlier big contract with the state of North Carolina. Your question about thinking a little bit broader—I think that e-warrants opportunity in North Carolina is a nice statewide opportunity. I think as you look out, I don't know that as you go to other jurisdictions it will be on a statewide basis; I think you'll see a lot more deals more locally at the county level. You'll see things in some of our larger clients. So nobody else has this out in the market. I think it's something that's exciting as we look forward.

And then maybe going back to the first question that Kirk Materne asked. Obviously, your customers are showing a greater appetite for subscription; you guys have been kind of consistently beating the subscription number. And I know as John said, short and medium term, we're likely to see impact here from COVID. But as we all know, going back and trying to look for patterns in comparison. So we go back to the recovery; and I know that flattest slightly down here, you guys had, obviously that was a perpetual license model at that point and come to get people to make big purchases. Just wondering, if you could perhaps speculate on how the trajectory might be different. And if there's any early signs of that subscription buying could help change the trajectory out of this downturn this time. Appreciate it, guys. Thank you very much.

Well, you raised a good point. We weren't a lot different model back then in 2008, 2009. And certainly, as we go back to even say the 911 or Y2K. I think coming around 2009, Tyler's subscription revenues were only about 17 million a year. Today, we're north of 300 million, which is obviously a different situation. The trajectory, as we talked about, was a little bit delayed there. The impact was a little bit longer lasting. But as you look at a couple of years, I think past, as past the recovery, I think Tyler's revenue growth was more in the 18% range. So the question is, how quick does that come? As we talk a lot of times, as we continue to move more to a subscription model, it's obviously a lot better long-term; it won't have necessarily the same pop into short-term. But as John's comments mentioned earlier, we feel really confident about our ability to be positioned to capture an overwhelming piece of our share of the business as this pent-up demand, I believe, will return as we get on the other side of this.

Our next question will come from Tyler Wood with Northland Securities. Please go ahead.

Just one from me. You mentioned last quarter public safety win with Orlando and kind of your optimism there with large cities. Can you give us an update on that, maybe how the pipeline looks at that high end of the market in Q1 before things ground to a halt? And then just more generally, a little bit of color on your thinking around the COVID impact and how it will vary between those larger Tier 1 to Tier 2 cities versus smaller local cities?

Yes, sure Tyler. It's interesting when I talked earlier about the different business units. We've talked about that some times in the past as to how their customer base may be or may not be more or less receptive to certain things. I would say in Q1, of all of our business segments, public safety probably was impacted a little bit more than our others. And primarily because the market they serve, first responders, are extremely focused on really more pressing local needs. We just spent a lot of time at the last call talking about the momentum in the market. That momentum is there; it's real. There are a number of large opportunities. I can say that a couple of them have been pushed. But as you look, and we track our ability to move up the market, larger deals, larger license deals, deals in excess of 1 million, approaching 2 million, but also the size of the customer in terms of calls for service as you approached over 500,000 to approaching a million. And those opportunities are continuing to be there. We did have some delays there. I think we also saw in the public safety area that the customer base was probably a little bit more reluctant in the first quarter and since to accept the remote delivery of services. But in terms of overall demand and our ability to fill that demand, we are as confident as we were last quarter. The investments we've made are paying off. We're continuing to invest in those products; we're continuing to do things that we've talked about like mobility that are only going to make our products even that much more available or more desirable.

At this time, there appears to be no more questions. Mr. John Marr, I will turn the call back over to you for closing remarks.

Great. Thanks, Brent. Thanks for joining us on the call today. We appreciate your interest. Obviously, in an interesting time, and we appreciate all the questions. If you have any further questions, feel free to reach out to Brian, Lynn or myself. Thank you very much. Stay safe. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.