泰勒科技 (TYL) 2026年第三季度业绩电话会议：SaaS增长、云迁移与AI

核心要点

• Tyler Technologies公布经常性收入增长11%，其中SaaS收入增长21.2%，同时营业利润率扩大150个基点。
• 季度自由现金流达到创纪录的2.77亿美元。由于公共部门的云端采用和现代化需求保持健旺，SaaS签约总额增长14%。
• 管理层预计，在Cloud Living推行、直接联系本地部署客户以及逐步停止对部分本地部署产品的支持和功能升级等举措的支撑下，云迁移将于2027年开始提速。
• 约300笔交易包含了AI功能。管理层表示，附加AI解决方案带来的收入提升仍维持在个位数，但正在增长。
• 今年迄今，Tyler已回购其约8.5%的已发行股份，授权额度下仍剩余近14亿美元。
• 管理层维持了全年EPS指引区间，并重申了对截至2030年实现约20%的SaaS收入增长这一长期目标的信心。

核心财务数据

业务与运营业绩

云迁移与Cloud Living

云迁移仍是Tyler 2030战略的核心组成部分。在向约2,500家本地部署企业客户展开外联后，销售代表直接联系了1,500多家客户。管理层称客户反馈反响非常热烈。

Tyler完成了面向某现有企业ERP客户的首个多租户解决方案实施。更广泛的Cloud Living推广仍计划于2027年初进行。通用代码模型旨在支持持续创新、自动化季度升级以及更高效的交付。

该公司还在加大迁移激励与约束机制。一款旗舰产品已开始公布终止支持计划，以及将接收新产品升级的最后一个本地部署版本。管理层预计类似举措将继续进行，并认为云转换将从2027年起做出更大贡献。

SaaS签约额与收入确认时点

管理层表示，全年SaaS销售前景未发生实质性变化，但有数份较大合同的签署晚于预期。这减少了2026年期间可确认的收入金额。

10月份的业务活动包括一份大型ERP合同——被描述为Tyler数年来最大的ERP交易——以及全州法院系统的云转换。管理层将大额交易的时点归因于特定客户的情况，而非市场需求疲软的迹象。

新SaaS协议的平均合同期限从2025财年第三季度的约三年缩短至2026财年第三季度的两年多一点。这约30%的缩短解释了SaaS ACV增长超过30%与SaaS签约总额增长14%之间的绝大部分差距。Tyler有意缩短了部分初始条款，许多转化合同均以一年期协议形式签署。

基于交易收费的软件

交易收入得益于将Tyler的支付平台嵌入现有和新的软件部署中。该公司还在数字机动车产权登记、监管系统和户外娱乐等领域签署了更多基于交易收费的软件合同。

这些合同未体现在SaaS收入或SaaS签约额中，不过管理层表示它们拥有类似于SaaS的利润率。这些项目通过用户付费而非政府预算拨款获得资金，从而降低了预算压力风险。由于业务活动可能取决于车辆销售额或州立公园入园人数等因素，收入波动性可能更大，但许多合同都包含底线承诺，且定价也反映了新增的不确定性。

AI商业化

Tyler旗下产品组合中有约300笔交易包含了AI。早期采用主要集中在嵌入式功能上，例如应付账款（AP）自动化、欺诈、风险与合规以及文档自动化。管理层表示，客户普遍更倾向于在Tyler系统内部使用AI功能，而不是第三方附加插件。

该公司目前已有11个智能体（Agent）全面可用，并计划在年底前达到25个。Tyler正在通过客户ROI、节省的时间和预算节约来衡量采用率，而非仅看智能体的可用数量。

管理层引用文档自动化作为切实的价值体现，某些法院工作流程从几周缩短至几天或几小时。管理层还提到，某大县使用AI支持的预算产品，在1,300万美元的预算赤字中识别出了900万美元的节约空间。

Tyler计划提供可预测的定价，因为基于使用量的可变AI定价对公共部门客户来说可能难以编制预算。管理层预计，新型生成式AI功能最早要到2027年下半年才会带来有意义的收入贡献。

产品与终端市场趋势

ERP销售表现强劲，中标率有所提升，且高端市场的业务活动增加。法院与司法部门（Courts & Justice）继续表现良好，并拥有庞大的潜在云转化客户群体。

公共安全资金投入保持强劲。Tyler在IACP会议上获得的意向客户数量约为历史水平的两倍，并且在收购CODY Systems后，在大型机构和低端市场看到了额外的增长机会。

州政府业务受益于通过企业协议进行的交叉销售，以及大约一年前建立的专门州级销售团队。联邦业务占总收入的比例仍低于5%，本季度也签署了多份合同。这些交易通常能带来六位数的年度经常性收入，且主要使用通过MicroPact收购的应用平台。

管理层业绩指引

Tyler维持了全年EPS指引区间。管理层表示，延迟的SaaS收入确认造成了温和的逆风，而股票回购减少了股本总数，但也降低了利息收入。

对于2026财年第四季度，Tyler预计上一年度完成的收购将贡献800万至900万美元的收入，其中FTR贡献最大。

管理层对其截至2030年实现约20%的SaaS收入增长的长期目标保持信心。预计在未来几个季度和几年中，云转化将成为更大的贡献因素，尽管合同签署与收入确认之间的时间间隔可能有所不同。

该公司未提供2027年收入指引。然而，管理层指出了云迁移、州和联邦需求、基于交易收费的软件以及AI商业化方面的积极趋势。公司计划在2027年进行额外的销售和营销投资，管理层指出这可能会影响费用项目。

风险与关注事项

• SaaS收入确认对大型合同的签署和实施时点仍然较为敏感。
• 较短的合同期限会降低已公布的合同总价值，并可能导致ACV增长与SaaS签约总额增长之间产生差异。
• 基于交易收费的收入可能随经济活动、季节性和交易量而波动。
• 公共部门的AI采用情况仍然不均，因为客户需要明确的投资回报率（ROI）、可预测的成本、安全性以及可靠性。
• 在执政当局换届时，州选举可能会带来短期行政不确定性，不过管理层看到了更长期限内的现代化机会。
• 网络安全威胁依然是整个客户群关注的焦点，而管理层同时也把安全性视为推动云迁移的驱动力。

分析师问答亮点

什么因素将加速云转换？管理层指出了主动的客户外联、定价策略、仅限云端的AI功能，以及计划分阶段停止对特定本地部署产品的支持或新功能升级。客户的响应增强了管理层对实现2030年迁移目标的信心。

为何在ACV强劲的情况下SaaS收入增长有所放缓？较大的交易在今年晚些时候完成，推迟了收入确认。相较于年度合同价值，较短的合同期限也减少了签约总额。

目前AI的影响力有多大？约300笔交易包含了AI，但相关的提振作用仍维持在个位数。Tyler正在优先开发具有可衡量生产力或预算效益的嵌入式功能，而不是销售独立的AI产品。

公共部门的需求状况是否正在减弱？管理层表示，地方、州和联邦市场的需求保持健旺。大额合同的时点被描述为特定客户的正常差异，而非更广泛的市场问题。

Tyler将如何进行资本配置？管理层表示，目前股票回购仍然是更高的优先事项，而补充型收购将继续根据战略契合度和估值进行评估。公司预计将继续积极开展回购，不过节奏将取决于现金流和收购机会。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Hello, and welcome to Tyler Technologies Third Quarter 2026 Conference Call. Your host for today's call is Lynn Moore, Executive Chair, President and CEO of Tyler Technologies. [Operator Instructions] And as a reminder, this conference is being recorded today, October 29, 2026.

I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. Please go ahead.

Hala Elsherbini

Thank you, and welcome to our call. With me today is Lynn Moore, Executive Chair, President and CEO; and Brian Miller, our CFO. Also joining us today on today's call is Chief AI Officer, Franklin Williams.

Franklin will participate during portions of the discussion to provide additional context on our AI strategy, commercialization efforts and adoption trends across the business. While we expect Franklin to periodically join future earnings calls when relevant, he will not be a regular participant each quarter. In an effort to streamline our earnings communications and provide timely context around our quarterly earnings release, we published our prepared remarks yesterday shortly after posting our full quarterly results release to the News section of our Investor Relations website.

We have also posted on the Investor Relations section of our website under the Financials tab schedules with supplemental information and an earnings summary deck to supplement our prepared remarks. After I give the safe harbor statement, Lynn will have some opening remarks, and we'll move directly to our Q&A session.

During 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 refer you to our Form 10-K and other SEC filings for more information on those risks. Lynn?

H. Moore

Thanks, Hala. Our third quarter results reflect continued strong execution across the business. We delivered 11% recurring revenue growth, including SaaS revenue growth of 21.2%, expanded operating margins by 150 basis points and generated record quarterly free cash flow of $277 million. Public sector demand remains healthy, supported by ongoing modernization priorities, strong client engagement and an active pipeline.

Budgets remain supportive of continued investment in mission-critical technology and AI is increasingly being evaluated as an extension of broader modernization initiatives. Total SaaS bookings increased 14%, reflecting continued momentum in cloud adoption and digital transformation efforts across government.

We made meaningful progress on several of our strategic growth initiatives during the quarter. Cloud migration remains one of the most significant drivers of long-term value and momentum continues to build. Following our July outreach to on-premises enterprise clients, highlighting the value, incentives and urgency of moving to the cloud, we have seen strong engagement across our client base and increasing activity among large clients advancing their transition plans. We also reached a key milestone with our first implementation of our multi-tenant solution for an existing enterprise ERP client, representative of our complete Cloud Living commitment.

This is an important step toward a common code stream that enables continuous innovation, automated quarterly release upgrades and more efficient delivery. With broader Cloud Living rollouts on track for early 2027, we are well positioned for an accelerating pace of migrations beginning in '27. We also advanced our AI strategy with growing deployments, expanded agent capabilities and continued validation of our commercialization approach. Client adoption continues to grow with approximately 300 deals containing AI across the portfolio.

We also continue to execute our disciplined capital allocation strategy through the acquisition of CODY Systems and significant share repurchases. Year-to-date, we have repurchased approximately 8.5% of our shares outstanding with almost $1.4 billion remaining in our authorization. We entered the fourth quarter well positioned to deliver a strong finish to '26 and confident in the long-term growth initiatives that underpin our Tyler 2030 objectives. With that, let's open the call for questions.

Operator

We will now begin the question and answer session. [Operator Instructions].Your first question from the line of Matt VanVliet with Cantor.

分析师问答

Matthew VanVliet

I guess when -- if you look at the pace of SaaS flips that you've had over the last couple of quarters, we're seeing a little bit of an uptick, but maybe not an acceleration quite to the level that some were expecting.

Is there anything on a seasonal basis that you're seeing that is maybe limiting the upside in this quarter or just so far this year? And then how much of the Cloud Living initiative and sort of push there should actually catalyze maybe a further acceleration to get more customers to make that SaaS flip?

H. Moore

Yes. Sure, Matt. I don't think there's anything really seasonal to the flips. I think if you look at the way we've approached things over the last several years, our approach has changed. I think if you look back 4 or 5 years, we took a little more deliberate approach for a couple of reasons. One, I don't think the market was quite ready. And two, I'm not sure Tyler was quite ready.

What we've done in the last few years around version consolidation and yes, now with our Cloud Living initiatives, I think we're at the point where now we can be much more proactive, and we're starting to take those steps. So we talked about after the -- in the July call about the fact that I had sent out a letter to all of our local enterprise clients. Each of those clients then received a touch point, the direct contact from their reps, and we're putting together now pricing strategies to sort of help people make that move.

We're also in a position now where we're starting to starting to do things, I think, more on the -- what we traditionally call disincentives or sticks, which is we -- our first flagship product this past quarter actually started to announce with its client base end of life for support as well as the last version release with new product upgrades on the on-prem version. So we're going to continue to do those things in the coming quarters, which will, I think, continue to accelerate our cloud. I will say that the receptiveness from our clients with this new more proactive approach has been really strong.

They welcome it. We talked about this before. We talked about it with Connect and our Client Advisory Board. Some of our clients need that little push. They need that help selling the flips inside their own departments, and we're putting together the strategies to help accelerate that. So we feel confident about where we are today and our overall 2030 flip plan.

Operator

Your next question is from the line of Terry Tillman with Truist Securities.

Terrell Tillman

It's good to see the updates on the AI side and the deal activity, the early deal activity. I am getting some questions from folks on the SaaS revenue growth and the guide for the year. So I was going to ask about that. It's kind of a multiparter. I think you all brought down a little bit the high end of the SaaS revenue guidance range. There was something in prepared remarks around timing of new sales and just kind of when that plays out in the year.

So could you talk a little bit about, is there like a cadence dynamics that's changed a little bit on when you're signing the deals or some of the early revenue that you would see from these SaaS deals? And then also, like what would CODY provide in 4Q? I know it's small, but like what kind of SaaS revenue contribution there?

Brian Miller

Yes, Terry. If you look at our outlook for SaaS sales for the year, it really hasn't changed meaningfully from where we were a quarter ago or 2 quarters ago.

But the timing has moved a little bit. And so we've seen some deals, especially some larger deals that have signed either later in the quarter or later in the year. So it's become just a little bit more back-end loaded. Again, the sales -- total sales number pretty consistent. So as a result of that shift in the timing into a little bit later in the year, we've recognized or the revenue that we're able to recognize under those new deals and flips included in that has come down a bit. So it's really around timing. As we look at the fourth quarter, we're already off to a good start in terms of the fourth quarter.

We've already signed in October, a large ERP deal, probably the largest ERP deal we've signed in several years as well as the flip of the statewide court system. So again, really around timing within the year affecting on a really pretty marginal basis, the amount of revenues that we'll actually see this year from those new deals.

Operator

Your next question from the line of Tamjid Chowdhury with Guggenheim Securities.

Tamjid Md Moinuddin Chowdhury

Excluding the Texas contract churn, it seems like transaction revenue growth is actually pretty strong at like 14%. Can you give us more color on what's driving that? And I think in the prepared remarks, there was some language around transaction-funded deals, I think, in New Jersey State Police. Can you talk about like the pipeline of that sort of deal over the next 12 months?

Brian Miller

Yes. Transaction growth has been strong. It's exceeded our expectations a little bit this year. I think there are a couple of different vectors there. One is we continue to have a lot of success in our strategy of integrating our payments platform with our software solutions and selling transactions back into our existing customer base that use those systems that have payments embedded in them as well as with new software sales increasingly including payments.

So that continues to drive incremental growth. But as you mentioned, we do continue to see a number of new SaaS deals that are funded as transactions. And as a reminder, those deals don't show up in SaaS revenue growth or in SaaS bookings. They show up in transactions, but with SaaS-like margins. And these are things like digital motor vehicle titling solutions. This quarter, we had a deal in the regulatory space that was a different kind of solution funded under transaction. So these are funded with -- not through SaaS fees, but user fees that are associated with the transactions around -- that are managed by that software. And that is a part of the pipeline for next year. We have a number of opportunities in the digital motor vehicle titling arena as well as around regulatory and outdoor recreation is the other area where we've seen deals, and we had a couple of those this quarter, including the Louisiana State Parks.

So while it's not the primary way where our software model works. It is a model that's very attractive, especially to state government clients because they don't have to budget funds. They're not appropriated funds, and they're not affected by budget pressures. So it is a growing part of our SaaS new deals, and you need to keep that in mind as you look at our SaaS bookings growth and our SaaS revenue growth.

Operator

Your next question from the line of Saket Kalia with Barclays.

Saket Kalia

Brian, maybe just to dovetail on that last point. I want to talk about sort of SaaS bookings and ACV sort of broadly. I think ACV from new SaaS deals and conversions was up pretty strong, I think, north of 30%. SaaS bookings growth was, of course, slower. You talked about transaction-funded SaaS deals. But maybe you could also talk about how bookings duration, maybe the combination of those 2, how they might be impacting that SaaS bookings number?

Brian Miller

Yes. Clearly, the transaction-funded deals are not showing up in that number. And if they were under a traditional SaaS arrangement would actually contribute fairly significantly to that percentage growth. But duration is a factor here. Last year, for new SaaS deals, -- last year in Q3, our average duration of contracts was about 3 years.

This quarter, it was just a little over 2 years. So that 30% difference in the duration really accounts for that difference between the ACV growth and the TCV growth at 14% versus the 30% plus. And to some extent, that's intentional. We have continued to try to shorten the initial terms of our SaaS agreements.

And a lot of our flips come in as 1-year agreements and as well as some of our new deals. So that duration can bounce around a bit, but this quarter, it definitely was a factor in that difference between total bookings and ACV.

Operator

Your next question from the line of Ken Wong with Oppenheimer & Co.

Hoi-Fung Wong

I wanted to touch on the 300 AI deals that you mentioned, Lynn, when taking a look at how those deals might have played out under a normal situation versus embedding the AI, any comments you can put out there as far as what the uplift in TCV, ACV, basically the ARPU around those deals have looked like?

S. Williams

Yes. So this is Franklin Williams. I'm happy to address that. So I think with a lot of the things we saw in those 300 deals, what you're seeing is that embedded strategy play out. You're seeing us basically be able to attach these solutions, whether it's AP Automation, Fraud, Risk & Compliance to broader deals that we're bringing into the market.

I think in each of those, the kind of attach, the uplift that we're seeing there is probably still in the single digits with some of those solutions, but it is very real, and it is very much growing as well.

H. Moore

I'd add to that, Franklin, that generally, what we're seeing, and I know we've had a lot of questions about this. But what we're seeing in the market and what we're seeing from our clients is they want these embedded solutions.

They are not looking for bolt-ons from outside sources. We're also not seeing RFPs that are specifically calling out AI for AI's sake. What they're wanting is functionality and that functionality that we're being able to deliver in our systems with AI capabilities to continue to differentiate our products.

Operator

Your next question from the line of Kirk Materne with Evercore ISI.

S. Kirk Materne

Actually, Lynn, I just want to follow up on that last point, which is you've obviously gone back to a lot of your customer base about flips over the next 12 months. Do they want that AI functionality as part of them flipping over? Or is it sort of like, look, get me over like-for-like and then we'll add to that?

I'd imagine that might be part of the reason you're maybe looking to shorten contract duration at the outset, so you can come back and upsell them new AI functionality sooner rather than later. But I was just kind of curious, where are we on that? Can they do sort of -- can they take on AI functionality at the time they're doing the flip? Or is it easier for them just to sort of go from on-prem to cloud and then address AI whenever a year or 2 down the road?

H. Moore

Yes. I think the AI piece of this -- and as it relates to flips will be sort of part of what we talk about that bucket of incentives so that as we move forward, AI features will only be in our cloud release and not in our on-prem release. And I think you'll continue to see us do that. To your first comment or one of your earlier comments, and I kind of touched on it in the last question is the spectrum of clients wanting AI is kind of all over the board.

The market is still -- has some slow receptiveness, but there's also some people that are a little more innovative. But they're not really calling out AI for AI's sake. There's still a lot of hesitation. They still are going to fall back on the things that I think really differentiate us from anybody else out there, which is the data and the trust that we provide. They're looking to us to help make their jobs better and their citizens' lives better. But again, they're wanting it to come from inside our systems, not external bolt-ons.

Operator

Your next question from the line of Parker Lane with Stifel.

J. Lane

Brian, you talked about some of the larger deals that you're signing coming in later in the quarter, later in the year. Is that simply a function of customer-specific factors? Or is there something more broadly that's causing that dynamic in the business?

Brian Miller

Yes, it's not really a market condition. It's really customer-specific. And it's been a part of our business for a really long time that large deals can be lumpy and the timing can be unpredictable. They tend to move a little bit more slowly through the pipeline.

And even when they get down to kind of the signing line, often there are delays that we see. And so it's hard to predict exactly where they fall. But -- and I think one of the keys is really even though we've had really strong SaaS bookings growth through the first 3 quarters of the year, it really hasn't been on the back of large deals.

It's really been driven by a lot of volume of kind of traditional midsized deals and smaller deals. While we've said that the pipeline does contain a normal volume of larger deals, and I think we'll see some of those in the fourth quarter. But it's really kind of customer-specific. -- no trend or kind of market dynamic that's affecting it. It's fairly normal.

Operator

Your next question from the line of Alex Zukin with Wolfe Research.

Aleksandr Zukin

Maybe just a 2-parter, Lynn, for you. Maybe if you can opine, is the current cybersecurity environment having any impact on accelerating flips or moves to both new business for your cloud or AI products?

And then, Brian, just to clarify, again, really strong SaaS ACV bookings, but the decel in organic SaaS revenue growth to 16%, maybe just detail a little bit more specifically about the timing impacts that are leading to that? And how should we think about this improving when sizing how SaaS growth should move back towards your mid- to long-term growth targets?

H. Moore

Yes. Thanks, Alex. On the first question, I think the short answer is yes. Cybersecurity continues to drive momentum to the cloud and will continue to drive all of our modernization and security features that are available both with the cloud.

And one of the things that we're principled about with our AI offerings is to make sure that the security is in there, and it goes back to the concept of trust with our clients.

You read about cybersecurity in the news, but I can assure you that there's a lot more issues going on within the client base that will be out there publicly. But yes, it is a driver.

Brian Miller

And in terms of the SaaS growth rate, we remain very confident in that long-term 20% through 2030 that we've set as a target. We're a bit below that right now. And for this year, again, the timing of some of the deals, especially some of the larger deals coming a little bit later in the year and therefore, delaying the start of revenue recognition a bit -- there also can be some variance around how long that lag is from when we sign a deal, whether it's a flip or a new SaaS deal to when we start to recognize revenues. And that's a factor affecting this year a bit.

But again, as we move into the fourth quarter, we're pretty confident around our sales objectives in the fourth quarter and that as we move into 2027 that we're on the right trajectory. And certainly, as we think about how flips contribute to that 20% or north of 20% SaaS revenue growth, there should be an increasing contribution from those over the coming quarters and years that push us above that level.

H. Moore

Yes. If I could just -- if I could dovetail on that, Alex. I'd say a couple of things. Coming into this year, if you looked at our sales quotas across the board, they were elevated, and we are outperforming sales from last year on our internal basis. But more holistically, we've got a lot of strategic initiatives going on.

We talk about them all the time. One of the things that we've been really looking at over the last couple of quarters is a more holistic review of our sales engine generally and how it complements with our marketing engine, looking at things like coverage, SAM, quotas, number of reps, et cetera, and starting to look at market data-driven insights to help drive sales.

And I think we're going to see some more investments in our sales and marketing coming into -- going into '27. You'll probably see a little bit of that in the revenue line next year, but there's a significant focus to continue to expand our sales and sales coverage, and it's something that's a strategic priority for us.

Operator

Your next question from the line of Allan Verkhovski with BTIG.

Allan M. Verkhovski

On the EPS guidance for the full year, you left that unchanged when in past Q3s, we've seen you take that up a bit. So can you highlight maybe what we should take away there besides maybe some of the impact from the revenue timing shift you called out for why with your buyback activity that we're not seeing the EPS guide come up?

Brian Miller

Yes. A little bit of that shift in timing and SaaS revenues has a small EPS impact. As we've continued our buyback, it is accretive. We see lower interest income as we use those funds, but the lower share count provides an EPS growth. But overall, we've left the range the same. We haven't narrowed the range, and we still expect to be within that range. So there's various puts and takes, but ultimately, we're still in that same range for the year.

Operator

Your next question from the line of Rob Oliver with Baird.

Robert Oliver

Lynn, in your prepared remarks, you talked a little bit about the accelerated pace of SaaS bookings and conversions for next year that you expect. It sounds like that's in response to kind of the letter you put out or the clarion call you put out to your customers back in the summer to get everybody on board with the cloud plan. I just would love to get a little bit more color on kind of the receptivity you've got to that. '27 sounds as if it's perhaps even a little bit more quickly than we expected. And were there particular areas of pushback, readiness issues? Any color there? And then as you think about that in the context of the kind of 2030 targets of getting up to 85% conversion, how you are comfortable relative to that?

H. Moore

Yes, I'd say the receptiveness to the letter, the proactive outreach by each of our reps that have contacts with the clients, the things we're doing around pricing strategies, it's becoming -- it's very welcomed in the market. I want to caution, we did say we would expect flips to accelerate. We expected that anyway.

Turning that excitement and receptiveness and trying to pinpoint exactly how that's going to play out in '27, I can't specifically speak to that today because there will always be other factors. However, the receptiveness that we've seen gives me even more confidence in our target for 2030. And I think that's still on track. I also mentioned we've talked before about disincentives, which are really more things geared around, hey, let's nudge a little bit more. When are we going to stop having new on-premise releases with value? When are we going to start doing end of life for support, things like that. Those are going to start rolling out. We already did one I mentioned with one of our major flagship products.

That messaging will continue into '27, which will continue to nudge the base. What we're hearing from our client advisory board and our other client focus groups is they appreciate the nudge and they are welcome and receptive to where we're heading.

Operator

Your next question from the line of Joshua Reilly with Needham.

Joshua Reilly

As we look at the public safety market, we were just at the IACP conference and a key theme there was around vendor lock-in and going all in with one vendor. What are you seeing given some of the PR challenges in that industry in terms of any impact to spending trends and this vendor diversification concept versus going all in with just one vendor, how might that help Tyler going forward?

H. Moore

Yes, Josh. Yes, this was I didn't attend the IACP conference, but I certainly got a debrief. My understanding was it's the largest conference ever, I think, over 19,000 attendees. The feedback that I've received is that the funding environment in public safety remains very strong. We left that conference with, I think, about 2x the leads that we have in the past.

We really like our position in public safety. Our competitiveness and our products is still really strong in the market. We don't talk about specific wins against competitors, but I can assure you, I take note each quarter of certain wins and certain competitors that we do favorably against. And so I really like our position.

It's also an area I talked earlier about sales and expanding our coverage, and we've been doing some things in sales there, I think, to continue to take advantage of our position in the market. In terms of the comment on sort of one vendor versus multi-vendors, I'm not -- I haven't seen anything that's driving a material difference in deals right now, but it's something we'll keep an eye on.

Operator

Your next question from the line of Andrew Sherman with TD Cowen.

Andrew Sherman

I wanted to ask about the state and also the federal business because you highlighted a bunch of those deals. What drove the strength there? How did those each track versus your expectation? And how are the pipelines for those looking into next year?

Brian Miller

Yes. I think the state business is an area where we continue to execute well with the cross-sell strategy and being able to leverage the deep relationships we have through our state enterprise agreements to sell more Tyler software products into those markets.

And we started to build out a dedicated state sales team about a year ago to really be that bridge between the Tyler software products and the enterprise state relationships. And that group is really starting to generate some meaningful opportunities, and we're seeing an excellent level of collaboration and cooperation between our different business units in the state market. The federal market actually was pretty strong this quarter. This -- we haven't talked a lot about federal, but we had some really nice deals this quarter.

The third quarter with -- coinciding with the federal budget cycle is typically one of the stronger quarters there for new business. But we saw some really nice deals with our platform there, and it was one of the -- definitely a bright spot in our bookings this quarter.

Operator

Your next question from the line of Alexei Gogolev JPMorgan.

Alexei Gogolev

Brian, I wanted to summarize maybe some of the comments that you made and try to get a clear view of '27 because it sounds like you have very strong federal state and local demand. There have been some delays and some timing of those large deals. But did I hear you correctly that you expect next year's SaaS organic growth to accelerate versus this year? You expect some of those larger deals to close. And then once Texas laps, we should see acceleration of transactional revenue.

So putting all this together as well as from what I remember you suggesting that AI implementation will become more visible next year. Does that imply a more visible acceleration of top line?

Brian Miller

Yes. We're certainly not ready to give guidance for any kind of revenue growth for 2027. But you're correct in that there are a number of positive trends. The timing around things, whether it's the timing of signing of new deals, when they start to generate revenues, we've already talked about the expectation that it's really at least the second half of next year before we start to see really meaningful contribution from a lot of the new GenAI capabilities that we're rolling out.

So I'd say all those trends are positive. We have a lot of confidence in our long-term views. Certainly, flips, we expect to be a bigger contributor next year in terms of signings. Again, the timing will affect when those actually start to generate revenues. But generally, our trends are positive. We like our market position. We like our pipelines and the activity does seem to be growing across all of those areas.

Operator

Your next question is from the line of Trevor Walsh with Citizens JMP.

Trevor Walsh

Brian, maybe for you, but Lynn, feel free to chime in as well. As the book of business around transaction-funded deals grows, does the risk profile of that kind of portion of revenue change a little bit just given that it's going to be subject more to user fees, usage of the platform in whatever way you have that deal structured?

I know there's some seasonality, obviously, around some of the outdoor things you've talked about in the past. But just how do you think about that, I think, broadly? And then can you maybe refresh our memory on that front? Are these contracts structured such that you guys will have a minimum kind of takeaway in any given year regardless of kind of how the actual kind of flow of transactions and/or again, fees flow through?

Brian Miller

Yes. In a lot of cases, there is a floor. I would say that in most of these cases, there's a -- at least within a range, a fairly predictable volume of whether it's how many motor vehicle registrations there are in a state in a typical year or how many visitors to the state park that generate those fees that drive the revenues to us. But as you said, they can be seasonal. Some of those things can be affected by external factors.

For example, motor vehicle registrations are affected by car sales, and those are affected by the broader economy. So they're not a pro rata revenue recognition. They're not a fixed amount. So there is more variability in them or potential for that. But our pricing also reflects, to some extent, that additional uncertainty or risk that we take on. So we are compensated through that, and we expect -- generally expect those deals to be at least as profitable as they would have been had they been a SaaS deal. But the real key is that it takes it out of the budget pressure world. They're not subject to appropriated funds. They operate outside of the state or local government's budget. And so it really kind of insulates them from those kinds of pressures.

Operator

Your next question is from the line of Camden Levy with Wells Fargo.

Camden Levy

This is Camden Levy sitting in for Michael Turrin. I wanted to quickly touch on agent adoption. You have 11 agents generally available with the target of 25 by year-end. Curious what metrics should investors use to distinguish proliferation from like commercialization? And where are you guys seeing the highest uptake and interest of those agents across the portfolio of customers today?

S. Williams

Yes, I'm happy to talk about that. I think the uptake we're seeing pretty -- it's pretty broad across the portfolio. When we think about like the key metrics that we should be looking at the key metrics that we're looking at, a lot of it is really centered on the value that we're delivering to our clients, the ROI that we're returning to them, time we're putting back in their day, the money that we're putting back in their budget.

And so really, what we're looking at right now is how do we drive more adoption across that portfolio, how do we give our clients what they need, the predictability they need, the proof that they need and then all of the additional pieces that they need to know that they can trust these agents and that they can ultimately bring them in and deliver the value that we're promising.

And so when we think about the proliferation of this across the portfolio, I think it is important to realize that this market looks different than others. The adoption is going to move at a different pace than others. But we remain very optimistic that once we meet the mark that our clients are demanding, the trust, the proof, the predictability that they'll be adopting these solutions really kind of across the portfolio.

Operator

Your next question is from the line of Sownthar Periathambi with D.A. Davidson.

Sownthar Periathambi

This is Sownthar sitting in for Pete Heckman. My question revolves around the issue of AI discovering critical vulnerabilities. Could you really talk about how you respond to those and specifically the issues with running the patch with PHP over the last week?

S. Williams

One of the -- so this -- there's -- I think I take this maybe in a couple of parts. So I think the first part is as part of the value proposition that we offer to our clients from a SaaS perspective, we have a very robust security program that is continuing to get ahead of this problem. A robust security program that's making sure that vulnerabilities are discovered ahead of time, are quickly patched or quickly addressed. That security program is also starting to leverage AI to fight these vulnerabilities as well. There are -- there's work that we're doing with our frontier partners, work that we're doing with Anthropic, work that we're doing with others to bring in more advanced capabilities, capabilities that Tyler has been approved both by those frontier partners and the U.S. government to be able to deploy to further secure these solutions.

And we think that, that value proposition that we can offer is one of the additional things that we think will, over time, start to drive more and more SaaS adoption over the course of the coming years.

Operator

Your next question is from the line of Mark Schappel with Loop Capital Markets.

Mark Schappel

Brian, I was wondering if you could just comment on the areas of the business that are seeing some of the strongest growth such as ERP, Courts & Justice. And maybe also talk a little bit about which ones are maybe growing a little bit more modestly.

Brian Miller

Yes. I don't think there's a wide dispersion of growth across our portfolio. In terms of sales, ERP is having a strong year. We're seeing nice improvement in win rates and more activity, especially at the upper end of the market. Courts & Justice continues to be a strong performer for us.

We've got a lot of flip opportunities there. And with the FTR acquisition, we're really excited about the opportunities that brings us to continue to expand around our very large installed base there with new solutions. Public safety also is an area that we are very optimistic about the growth opportunities there as we continue to move those clients to the cloud.

We've seen success in recent quarters, especially at the higher end of the market there with some state police deals and larger opportunities. There's a lot of flip opportunities in that market as well. But with the acquisition of CODY, that gives us a really strong presence at the lower end of the market where we really didn't have a solution that fit well for that market. So we would expect to continue to see our public safety growth opportunities continue to expand.

Operator

[Operator Instructions] Our next question comes from Saket Kalia with Barclays.

Saket Kalia

Lynn, maybe for you. In the past, we've talked about how things like presidential elections, for example, don't really have an impact on spending at the state or local level.

But as we go into kind of midterm election season here that, of course, are at the state level and for all the years and decades that you've been around the business, I'm curious what you've seen historically just in terms of spending around those times and whether there's anything that you're seeing here as we look at Q3, Q4. It doesn't seem like it, but I just want to make sure we address it.

H. Moore

Well, first of all, Saket, you're dating me by talking about all the years and decades around the business. Yes. Obviously, in the state market, the midterms had a little more meaning. There's a number of governor elections going on. Obviously, some of those happen in the presidential election cycle. We haven't seen anything really leading up to this, but it can create a little bit of uncertainty when there's new administrations that come in.

There could be a little bit of disruption as they try to get their agenda set, particularly if it's a little bit of a different agenda. But on the flip side, I think it actually drives a lot of opportunity because a lot of the candidates -- they run on things that we actually provide. They run on agendas based on efficiency and accountability and public safety and oversight.

So maybe sort of in the short term, there could be a little bit of uncertainty. But in the long term, particularly based on the things that are top of mind with a lot of people today around government spending and trying to become more efficient, all the things that go right into our playbook, to me, it creates opportunities over the long term.

Operator

Your next question from the line of Billy Fitzsimmons with Piper Sandler.

William Fitzsimmons

So we've talked a little bit on this call about AI readiness for the customer base potentially being uneven with many clients interested in better functionality, but not necessarily seeking AI for AI's sake. I imagine it varies on a case-by-case basis, but any anecdotes you can share on what differentiates those customers moving ahead versus those taking the wait-and-see approach?

Is it that those customers are potentially in a better place from a data readiness standpoint or these customers potentially having processes where they see a more tangible immediate ROI? And then for those customers taking the wait-and-see approach, what key hurdles are there that you can kind of help them get over as they potentially adopt these solutions?

S. Williams

Yes. I think you really nailed it when you talked about basically places where they can see a clear ROI. I'll give you an anecdote from the Courts & Justice Executive Forum over this past -- that we recently held. So those products, document automation, for example, really helps compress the amount of time that people spend docketing, filing and processing documents.

What we're seeing there is we're seeing that move from a "you should do this" to you must do this. So the reason that we're seeing that is because the ROI for those types of solutions are becoming just super clear. We're compressing time from weeks down to days, sometimes hours. And when we can put that in front of our clients, we can tell that story. People are adopting it and they're really starting to basically bring that into their enterprise.

And so that's where we're basically looking to kind of run that playbook again and again and again through our intentional rollout process for these agent solutions, moving into a very close tight private preview with some of our trusted customers making sure that we can prove ROI. We can put time back in their day, we can put money back in their budget. And once we can do that, we can basically demonstrate that very tangible, very practical ROI to our other customers. And when we do that, we find that those customers are very enthusiastic to move forward because every one of them, I think, philosophically knows that they should be doing something here and philosophically knows that AI can transform their work.

They just need help discovering how. And so when we can put that tangible ROI in front of them, we can help them understand the how. We're going to see more and more and more of these solutions start to look like our document automation does, where it goes from something that you should do to something that you'd be irresponsible not to do.

H. Moore

Yes. I would add to sort of cover the other side of the coin where there are pockets of hesitation is AI is still -- it's a little bit political. There's still a little bit of unknown. There's concerns and fears out there. Public officials are hearing from their citizens, whether it's, "We don't want data centers here. We don't want our jobs taken away." So there's some of that. So when I talk about you don't see in RFPs, people seeking AI. What they're seeking it for is better value and the return on investment that we can show them that Franklin just mentioned. So it is a bit of a balancing act. And it's like any other technology, you're going to have people on the forefront who are the innovators who are leading the charge and you're going to have people who are going to be lagging behind, taking a wait-and-see approach.

And whether that's in the private sector or the public sector, we know the public sector it traditionally lags regardless. But we're providing that value, and we're embedding in our systems to show our clients -- and sometimes we don't need to actually lead with the phrase AI. It's more about here's what we can do to make you more efficient. Here's how you can serve your constituents better.

Operator

Your next question is from the line of Terry Tillman with Truist Securities.

Terrell Tillman

I promise I won't get back in for a third time, okay. But I did notice earlier the commentary on federal government deals. And if I wasn't mistaken, that was the smallest business over time, and you had some acquisitions that got you into that space as well, but it was like 5% or something of the business.

And you can correct me if I'm wrong on that. But I noticed in your slides, Department of Veterans Affairs, Department of Justice, Department of Ag, workforce case management. I'm curious, is there some selling efforts that are paying off? Are you expanding share? And who would you be competing against in some of these deals because they are big agencies. I just don't know the scope of the deals. But just some more color would be great.

Brian Miller

Yes. These are deals that are typically 6-figure ARR. Most of these federal deals are utilizing our application platform that came from -- originally from our acquisition of MicroPact several years ago, which got us really into the federal space. Federal is still a market that is less than 5% of our total revenues. But that product is very competitive. It's an application platform, a low-code platform that has prebuilt modules or accelerators that manage various processes at -- across a wide range of federal agencies. So things like the workforce case management, managing EEOC claims, labor relations, security checks and background checks and security clearances across a number of federal agencies.

And these are just part of their modernization efforts.

I think as we've now moved a year away from a lot of the uncertainty and pressures we saw around DOGE and the noise around that, that some of the contracting we're seeing at the federal level is returning to sort of a more normal environment.

And most -- a lot of those opportunities, we'd be competing with other sort of platform providers. We do have a really wide network of partners systems integrators and partner that we work with at the federal level. And a lot of the business is driven through those partners.

Operator

Your next question is from the line of Allan Verkhovski with BTIG.

Allan M. Verkhovski

Lynn, can you talk about -- talk more about what stood out most to you from on-premise customer reactions to your letters about moving to the cloud and how that impacted your confidence in reaching your 2030 migration target? And Brian, just quickly for you, what amount of inorganic revenue are you assuming in Q4 SaaS revenue?

H. Moore

I didn't hear the first part of the question.

Brian Miller

The reaction from clients around your letter.

H. Moore

Again, it's been extremely well received. And the fact that it wasn't just a letter that went out, that it was followed up. Well, the letter actually contained a QR code where they could be directed to our website, talking about them, how they could start their Tyler Cloud journey, but then followed up with direct contact from our sales reps. So it's not just anecdotal messages that I'm getting. We've had contact with, I think, over 1,500 clients directly through our sales reps.

I think the letter went out to 2,500. But it's the direct feedback that I'm hearing through our sales channels that gives us that confidence that our base is actually now ready to make the move.

Brian Miller

And with regard to inorganic contribution to Q4, we're estimating somewhere in the range of $8 million to $9 million of revenues that are coming from acquisitions that we've closed within the last year. And the biggest share of that is coming from FTR.

Operator

Your next question from the line of Tamjid Chowdhury with Guggenheim Securities.

Tamjid Md Moinuddin Chowdhury

I guess for Frank, can you maybe talk about -- as your customers adopt like these AI and Agentic solutions, can you talk about what you're hearing from them from their cost perspective? Like is there a heightened sense of like caution when it comes to keeping like lid on the costs associated with these like Agentic workflows that we hear about in the news in general?

S. Williams

Yes. I think there is. And so let's maybe take this from kind of 2 perspectives. Let's take it from the -- what we're hearing in terms of the value that they're getting out of these and then let's take it from the perspective of the unique concerns that they bring to the table.

So when we think about the value that they're getting from these, we're hearing people that are basically telling us that it's like basically having extra staff that's part of their team. We launched a product -- our priority-based budgeting team launched a strategist that our client this past quarter. And the feedback in private preview was pretty overwhelming. People are basically saying it's like having a management consultant available to us 24/7 that can help us identify opportunities for savings. And many of those clients are finding significant savings. We had one large county that had a $13 million budget crunch able to basically find $9 million in savings.

The reason they were able to do that was because they were able to use agentic AI, able to use this kind of 24/7 management consultant to identify, surface and then help them act on that. Seeing very similar things with other agent solutions like grant writing, grant researching, where if I'm in a small town, there's a bunch of grants that are available to me, but I don't have the staff to really find those. I don't have the staff to maintain those. I don't have the staff to apply for those.

And so those grants go unused. Our agentic solutions are basically helping expand their staff, helping augment their teams and able to help them in our private preview, find several million dollars in grants, help find $20 million that they could be applying for as well. And so when we think about the value that's being delivered and how our clients are talking about it, whether it's the ones that we launched here, whether it's our existing solutions like document automation, they're really viewing it as augmenting staff and having folks that are available to them that they just simply haven't had -- now you raised the second question, though, which is a really great question around cost and cost overruns. And this is something that we've heard loud and clear from our clients.

We also had our Customer Advisory Board join us this last quarter. We spent about 3 hours with them talking about AI, talking about the state of the state of market, our direction. And one of the things we heard loud and clear from them was that the current variable metered pricing that many of the frontier providers are doing like simply does not work in the public sector. Like they need predictability. They need reliability. Like they can't be going back to council month after month after month asking for increases.

And so one of the things that we at Tyler talked to them about, one of the things that we at Tyler like believe that we can offer our clients is that predictability. -- that we can build these solutions, we can govern these solutions, and we can deliver these solutions in a way that provides them that peace of mind and that predictability so that they know what they're spending ahead of time, they can budget for it and they can ultimately capture that value that I talked about originally, while also making sure that they're protected from all these various cost overruns.

Operator

Your next question from the line of Alek Zukin with Wolfe Research.

Aleksandr Zukin

I just wanted to ask about the cadence for buybacks from here. Is it rational for us to expect a continued strong buyback cadence into the remainder of the year? And then maybe just any kind of further update on how to think about tuck-in M&A and capital allocation on tuck-in M&A versus buyback, particularly given kind of where shares are trading?

H. Moore

Yes, sure, Alex. We're always going to be looking at -- let me take the last one first. We're always going to be looking at tuck-in M&A. I've said many times that there are deals that get presented to us literally every week. A lot of brokers reach out to us. That process will always continue. It's been part of our history. You heard me say M&A is part of our DNA, and that's part of it. We're going to continue to be smart around that. There are certain areas that we would certainly like to continue to explore, but it's all -- like everything else, it's all a matter of valuation, which I think segues into the share buybacks. We've been very active. I think right now, we will continue to be active.

Will we be as active as we were a few months ago? Part of that is looking at our cash flow, part of it is looking at our opportunities with M&A. But it's -- to me, right now, share buybacks remain a higher priority. When you talk about the value of the stock, I mean, it's I look at it more as -- what do I have confidence in our 2030 vision. And I have a lot of confidence in our 2030 vision. I tell our teams all the time, we have the right strategic initiatives and we have the right people in place to execute on them.

And so then I look out at 2030 and I look at our free cash flow, I discount it back to today, I put in other variables and say, okay, what's a reasonable buy today? And to me, it's still very compelling. And so to me, it's our confidence in our vision. And I think you will see us continue to buy back stock. And I've used the phrase term, "reduce and maintain." I think you'll see over the next coming years as we continue to chip away at our outstanding shares that we will also be probably be a little more proactive with offsetting dilution on stock-based comp, which, as you know, at Tyler is pretty minimal compared to other software companies.

Operator

There are no further questions at this time. I will now turn the call back to Lynn Moore for closing remarks.

H. Moore

Thanks, Freda, and thanks, everybody, for joining our call today. If you have any other questions, please feel free to contact Brian Miller or myself. Thanks, everybody. Have a great day.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.