Hello, and welcome to today's Tyler Technologies First Quarter 2025 Conference Call. Your host for today's call is Lynn Moore, President and CEO of Tyler Technologies. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
In order to address your questions and stay within the allotted time, please limit your question to one question per person. You may get back into the queue for a follow-up. As a reminder, this conference is being recorded today, 04/24/2025. I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations.
Please go ahead..
Thank you, Rob. Welcome to our call. With me today is Lynn Moore, our president and chief executive officer, and Brian Miller, our chief financial officer. After I give the safe harbor statement, Lynn will have some initial comments on our quarter and then Brian will review the details of our results and update our annual guidance for 2025.
Lynn will end with some additional comments, and then we'll take your questions. During this 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. Also, in our earnings release, we have included non-GAAP measures that we believe facilitate understanding of our results and comparisons with peers in the software industry. A reconciliation of GAAP to non-GAAP measures is provided in our earnings release.
We have also posted on the Investor Relations section of our website under the Financial tab a schedule with supplemental information, including information about quarterly recurring revenue and bookings. On the events and presentations tab, we posted an earnings summary deck to supplement our prepared remarks.
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?.
completing our cloud transition, leveraging our large client base, growing our payments business, and expanding into new markets. I'd like to highlight a few first-quarter wins that illustrate our progress against our growth objectives.
These include a full enterprise justice on-premises to cloud migration with the Cleveland, Ohio Municipal Court for approximately $800,000 in ARR. Our courts and justice team executed this SaaS flip in just one weekend following a cybersecurity incident, with operations quickly and safely restored in a new cloud environment.
A five-year appraisal services privatization contract with Gwinnett County, Georgia, valued at a total of $8.7 million. A fast contract with Fulton County, Georgia, for enterprise records management representing $500,000 in ARR plus payments.
This cross-sell deal leveraged our strong existing presence in Fulton County with our enterprise appraisal and tax and enterprise justice solutions.
And building on our momentum from last quarter, we had seven wins for our AI-driven priority-based budgeting solution, including the cities of Dallas, Texas, Olympia, Washington, and Bloomington, Minnesota. For the quarter, we signed a total of 106 flips to the cloud of on-premises clients, with a 28% increase in total contract value from flips.
In our state enterprise business, we secured three-year extensions for our digital government services with the states of Connecticut and New Mexico, representing more than $8 million in ARR. We signed 96 new payment deals across Tyler software clients, representing approximately $4.4 million in projected ARR.
We also signed a five-year extension of our payment processing contract with the state of Florida, representing approximately $31 million in ARR. Now I'd like Brian to provide more detail on the results for the quarter and our annual guidance for 2025..
Thanks, Lynn. Total revenues for the quarter were $565.2 million, up 10.3%. Subscriptions revenue increased 19.7%. Within subscription, SaaS revenues grew 21% to $180.1 million. Keep in mind that there is often a lag from the signing of a new SaaS deal or a flip to the start of revenue recognition that can vary from one to several quarters.
Because of this, as well as the timing of SaaS renewals and related price increases, SaaS revenue growth both year over year and sequentially may fluctuate from quarter to quarter.
Transaction revenues grew 18.5% to $194.9 million, driven by higher transaction volumes from both new and existing clients and increased adoption and deployment of new transaction-based services, as well as rate increases by third-party payment processing partners. Total bookings for Q1 were down 1.9% year over year.
Transaction bookings exhibited solid growth, reflecting higher payment volumes from new and existing customers, as well as new services in areas such as outdoor recreation and digital motor vehicle titling. SaaS bookings declined from last year's Q1, which we attribute to several factors.
As we noted on the previous earnings call, some deals that would have signed this quarter were pulled forward into Q4 because of the year-end deadline for committing ARPA funds.
While we don't believe that there has been any fundamental change in demand, as evidenced by continued strength in new RFPs and our deep pipeline, we have seen some instances of longer sales processes that we believe represent timing changes rather than cancellation of procurement.
As Lynn noted, we believe that an increase in consultant-driven processes, as well as caution exhibited by some prospects in light of uncertain macroeconomic conditions, are contributing to those delays.
In addition, the timing of decisions in the market has always been lumpy, and this was a quarter where there simply were fewer procurements that reached the final decision or contract stage. SaaS deals comprised approximately 96% of our new software contract value compared to 93% last year.
During the quarter, we added 38 new SaaS arrangements and signed 106 SaaS flips of existing on-premises clients, with a total contract value of approximately $67 million. In Q1 of last year, we added 200 new SaaS arrangements and had 90 flips with a total contract value of approximately $78 million.
The average ARR from new SaaS contracts was approximately $53,000, down 3% over last year. The average ARR associated with our Q1 flips was flat with last year at approximately $113,000. Our total annualized recurring revenue was $1.95 billion, up 13.3%. Our non-GAAP operating margin expanded to 26.8%, up 300 basis points from last year.
The margin expansion reflects the impact of our cloud efficiency initiative, a positive change in our revenue mix with lower professional services and hardware, along with leverage in operating expenses.
As we discussed on previous calls, Merchant and Interchange fees from our payments business under the gross revenue model have a meaningful impact on our overall margins, as they are included in both revenues and cost of revenues. We incurred merchant fees of approximately $50 million in Q1 compared to $42 million last year.
Cash flows from operations and free cash flow were ahead of plan at $56.2 million and $48.3 million, respectively. We ended the quarter with $600 million of convertible debt outstanding, and cash and investments of approximately $810 million and net leverage of zero.
In light of our strong first-quarter results and our positive outlook for the balance of the year, we have revised our annual guidance for 2025 as follows. We expect total revenues will be between $2.31 billion and $2.35 billion. The midpoint of our guidance implies organic growth of approximately 9%.
We expect GAAP diluted EPS will be between $7.50 and $7.80 and may vary significantly due to the impact of discrete tax items on the GAAP effective tax rate. We expect non-GAAP diluted EPS will be between $11.05 and $11.35. Our estimated non-GAAP tax rate for 2025 is expected to be 22.5%.
We expect our free cash flow margin will be between 24% and 26%, including an estimated impact of approximately $40 million of cash taxes related to Section 174. We expect research and development expense will be in the range of $193 million to $198 million.
Other details of our guidance are included in our earnings release and in the Q1 earnings deck posted on our website. I'd like to add some additional color around our guidance.
While the annual growth ranges for most of our revenue lines are unchanged from our previous guidance, we now expect that transaction revenues will grow between 12% and 14%, with merchant fees essentially flat year over year.
This increase reflects the higher transaction volumes and rate increases that positively impacted the first quarter, as well as an expectation that some payment services under the Texas contract may extend beyond August.
We now expect that revenues for the year under the Texas contract will be approximately $37 million compared to $45 million last year. We also expect that sales and marketing expense for the year will decline 2% to 4% due to alignment of sales compensation structures across Tyler.
Excluding merchant fees that are absorbed under the gross revenue model, expected transactions growth in 2025 at the midpoint of our guidance would be approximately 17%, and total growth would be approximately 10%. Now I'd like to turn the call back over to Lynn..
productivity, decision-making, and service delivery. Our singular focus on the public sector allows us to leverage decades of experience to deliver software and services that empower our clients to create smarter, safer, and stronger communities.
We look forward to highlighting our AI strategy at Tyler Connect 2025, which will be held in San Antonio from May 11 to May 14. Some 5,500 Tyler clients and nearly 900 Tyler team members will gather to learn, share best practices, collaborate, and network.
We look forward to seeing many of you there, including at our investor session at Connect on May 12. We will review our progress since our 2023 Investor Day with plans to host a full investor day next year. We also look forward to introducing our recently appointed chief client officer, Andrew Call, at Connect.
Andrew's focus on enhancing client experience and building upon our One Tyler client-centric approach is vital to creating seamless client experiences across Tyler's vast public sector client base and to achieving our 2030 vision. I'd like to highlight additional recent leadership transitions and promotions.
Jeff Green has announced his intent to retire this June. Throughout his 22-year career with Tyler, Jeff has provided invaluable leadership and expertise, most recently as our chief technology officer.
Russell Gainford has been appointed to succeed Jeff as chief technology officer, where he now oversees the strategic leadership of our technology organization. Russell's vision for Tyler's technology discipline is an organizational structure that serves the needs of our clients, market, and business leaders.
Joining Russell in this effort is Franklin Williams, with an expanded role as deputy chief technology officer. He will work directly with Russell to drive our common technology strategy, developer experience, and adoption of emerging technologies, including AI.
Lastly, we recently published our sixth annual corporate responsibility report on our website. We're proud to share updates on our ongoing efforts that are aligned to our broader strategic and mix objectives and invite you to review the report to learn more about our corporate governance achievements, team member initiatives, and company impact.
Now we'd like to open the line for Q&A..
We will now begin the question and answer session. To withdraw your request, again, press 1. As a reminder, please limit your question to one question so we may stay within the allotted time. We will pause momentarily to assemble our roster. Your first question comes from the line of Kirk Materne from Evercore ISI. Your line is open..
Yes. Thanks very much. Thanks, Lynn and Brian. Good to talk to you. Lynn, maybe just two. I'll ask them just consecutively. I guess, first, for you, Lynn, obviously, you guys have been through a lot of macro cycles.
What's the leading indicator you're looking at just in terms of sort of the health of the business? You guys mentioned RFPs, but I was just wondering if you could add a little color to what you're keeping an eye on just to make sure that the macro sort of volatility is not seeping into sort of customer thought processes.
And then, Brian, for you, you know, the ARR number was also down a little bit this quarter year over year. I assume it sort of plays into that broader commentary you had on SaaS deals, but I was wondering if you could just add a little bit more color on that as well. Thanks..
Yeah. Sure, Kirk. That's a good question. And you're right. We have been through, some of us have been here a long time. We've been through some of these cycles. What we do is, you know, look. We get together every quarter. We get with our sales teams. They give us an outlook.
We track going back multiple quarters RFP activity, demo activity, you know, deals that are not happening without our RFPs, and those are things we focus on. Our RFP activity has been elevated for the last couple of years, and it's staying steady at that level. Our demo activity similarly is steady and, in some cases, actually up. So, correct.
That, any changes really related to the decline in year-over-year lower bookings in the SaaS side, which I mentioned the reasons for..
Your question comes from the line of Ken Wong from Oppenheimer. Your line is open..
Perfect. Thanks for taking my question. And I guess this would go to Lynn or Brian.
But on that softer booking side, you guys called out, you know, kinda consultant deals maybe seeing a little bit of a push out or any reason to think that that could materialize into something more concerning? I mean, what's your confidence that those deals will get over the finish line versus, I mean, we've seen the headlines with, you know, significant slashes in IT services and just love any color there from either of you..
Yeah. I'll start, Ken. I would say, generally, if you go back historically, we also don't talk about contracts that have been awarded and not signed yet. And we've mentioned a few different things on bookings. One was we did pull forward some deals at the end of Q4, particularly in our public administration suite.
Our justice suite generally tends to be a little more lumpy, but I can have pretty good confidence that some of that lumpiness from Q1 will actually come back in Q2. I'd say the consultant thing is more anecdotal than really a driving factor right now. And so, you know, I think generally, again, I'd just mentioned it in my response to Kirk.
You know, every quarter, we get together, look at the results of the business, but we spend a lot of time from our sales leaders, you know, diving down, looking at their plans, looking at the deals that were closed, looking at the pipeline, you know, looking at the awards that we have, seeing where we track against our internal plans.
And so, you know, sitting here today, I would say Q1 was more of an anomaly than it was something of a trend..
Your next question comes from the line of Terry Tillman from Truist Securities. Your line is open..
Yeah. Hey, Lynn, Brian, and Hala. Hopefully, you can hear me okay. Hala. It's a question that might actually be two parts. But sorry about that ahead of time. But just one thing is on the bookings, it was good to see that the contract value on flips up though year over year. And then the new deals, obviously, was down year over year.
But as you look to the rest of the year, in terms of visibility and just kind of execution risk and what seems kind of easier to plan for, how does it feel on the flip side versus new SaaS bookings? And then, Brian, the contract duration, that was 2.7 years, that definitely came down from anything to think about going forward? Thank you..
Yeah. I'll start, Terry. You know, on the flip side, I think we're generally on pace when and as I look out for the rest of the year, you know, I don't see any change from our internal plan from where we started the year. There's, you know, always differences in different parts of the business.
But we're seeing, for example, in the court space, we're starting to see more and more interest in our flips. We highlighted recently, you know, our state of Idaho flip, and once you start getting some of that kind of traction, we're starting to see more interest there. On the flip side, I think we're fine.
And on SaaS, again, a little bit of softness this quarter, but it's not softness in the market. It was more softness around timing. And on the average duration, it, you know, just bounces around a little bit from quarter to quarter. Our standard sort of the standard term is three years.
And this quarter, there were deals that range from one year to five years. So I'd think, generally, we're gonna be close clustered around that three-year average, but just the mix on individual client preference can affect how we move around that standard three-year number..
Your next question comes from the line of Michael Turrin from Wells Fargo Securities. Your line is open..
Hey, great. Thanks. Appreciate you taking the question. I want to just try to tie some of the comments together. We're getting questions on the bookings and new deal metrics from Q1. Lynn mentioned some Q4 pull forward. So it sounds like maybe it's more of that than the consulting commentary that may have had an impact on Q1.
And then on the consulting commentary, is there anything you see internally that you can do on your side to just work around any impacts there on the fringe given you're more focused on software? I think the public sector spend focus is more on software than services spend.
I'm just wondering are any plays you can run that just can help continue to build on some of the momentum you're citing with RFPs. Thank you..
Yeah, Michael. I'll start. I'll reiterate that the comment on the consultants is again more anecdotal. I don't think that's, you know, a major driver. Obviously, all of our business isn't done through RFP, but that's where it flows through. We did have, we talked about it at the end of Q4 back in February.
We had a few deals that were pulled forward, as some of our clients were trying to use ARPA funds before the deadline. I think a lot of it has just been, you know, the business is there. What we've seen in certain parts of our business, awards have delayed a little bit. We've also continued to see the lumpiness in some of our other deals.
And I want to emphasize that as we look out to the year and we look out on our internal sales goals, a little bit of soft bookings is not causing a concern for me. I think you'll see a pickup of some of these deals that we've been awarded but not yet reached contract stage in Q1, following Q2..
And just to clarify around the consultant comment, we're referring to where a prospect is using a third-party consultant like a Gartner to manage the procurement process or assist them in the procurement process. We're not referring to where the deal is being where we're a sub to a systems integrator or a consultant in terms of the services delivery.
It's really how the procurement is being managed by the prospect..
Your next question comes from the line of Alexei Gogolev from JPMorgan. Your line is open..
Hello, everyone. Lynn, if I may ask, one more question about the flips. I think in the past, you suggested that you had about 400 flips last year. And we're hoping to see about 550 this year.
With 106 in Q1, are you still on track for that 550 target?.
I think, Alexei, I think we're I don't have that right in front of me. You know, flips vary from quarter to quarter. Our flips are up, what do they have? From last year up? 18%. In number. So, you know, if that holds, we'll be pushing close to 500. I think, importantly, we're also on track with our flip dollars for the year..
Yeah. I don't think we set an exact target number that specific, but we did talk about an expectation of being in the averaging 20 to 30 a quarter for the year, but not necessarily sequence or on a straight-line kind of a trajectory. So I think largely, we expect our expectations around flips for the year have not changed..
Your next question comes from the line of Joshua Reilly from Needham. Your line is open..
Alright. Thanks for taking my question. If we look at the payment business, volumes were quite strong this quarter.
How much of driver vehicle history record pulls maybe influenced that growth improvement? And is there any unusual transaction activity we should be considering in Q1? And do you expect the normal sequential increase in transaction volumes peaking in Q2 with historical trends? Thanks, guys..
Yeah. I think seasonally, there's not really any change in that normal pattern. Driver history records are kinda flat. So that really hasn't been a big driver in transaction. The strength was kinda evenly split between in terms of the increase over last year, between the state market. So our digital services, formerly NIC division, plus e-filing.
So we've seen strength in e-filing. We've got some of the new services like the California Parks deal that wasn't there last year that's now contributing. We saw strong performance in Florida around our payments contract there as well as in Texas. And also, they had some digital titling service revenues come online.
So all those have contributed to strength in the state payments market. In the local market, as we've called out, the new deals that we've added in recent quarters, as those come online, those are continuing to both deployments of new customers and added adoption with existing customers has contributed to strength there.
And then there has been some impact that we expect to continue through the year from rate increases by third-party payment partners..
Your next question comes from the line of Saket Kalia from Barclays. Your line is open..
Okay, great. Hey, guys. Thanks for taking my question here. Brian, maybe for you, just given all the questions on SaaS bookings or SaaS new ARR. I was wondering if we could unpack that just a little bit.
Then maybe the question is, how much if you had to estimate how much do you think was sort of pulled forward in Q4 roughly? And then is there a way to think about how much was maybe awarded this quarter but wasn't contracted, which maybe adds to some of that lumpiness? Does that make sense?.
Yeah. It does. I'd say, you know, it's hard to tell exactly just like it's hard to tell exactly how much deals or deal volume is directly attributed to ARPA, but I'd generally say it's probably in the $10 million range of bookings, give or take, that was pulled forward into last year's Q4.
And the second part of the question, we really don't disclose awards that are not signed. But, you know, further to Lynn's comment, especially in the courts business, we have a number of those.
And those indicators give us confidence that in certain areas of our business that were a little lighter in Q1 in terms of timing of bookings that we'll see those come back in Q2. I'd say, you know, on top of that too is there's business out there that whatever reason, we expected awards and contracts in Q1, and the award hasn't happened.
So it's not just that we've had awards didn't get the contract, but we're also still waiting on some awards that we expected to happen in Q1..
Your next question comes from the line of Charles Strauzer from CJS Securities. Your line is open..
Hi, good morning. Just looking at the R&D line and the guidance this quarter versus the guidance that you gave initially the quarter. It seems to be another pretty good jump in the, you know, in R&D spend.
Any more color you can shed on that?.
Yeah. We talked about some of the drivers when we gave our initial guidance around the increases in R&D. As we talked about earlier, there's a shift as we redeploy people out of cost of sales expense onto the R&D line. That's largely unchanged from our original expectation around $35 million of a shift there.
We also have some cost development expense that we're resources that were devoted to capitalized projects last year that are now being expensed.
And then really the change from our initial guidance to now is that we, which affects the GAAP R&D number, but not the non-GAAP R&D number, is that we now are recording the stock compensation expense associated with those R&D employees in R&D. And in the past, that was included in the G&A line. So that's a geography change.
And, of course, it doesn't affect the non-GAAP number..
Your next question comes from the line of Rob Oliver from Baird. Your line is open..
Great. Thank you, guys. Appreciate it. Good morning. Could Lynn, just a two-part question for you. Just around some high-level trends. I guess, around ARPA. I just would be curious to hear from you.
There is some chatter coming from DC, particularly around the Department of Education around attempts to claw back some of the ARPA funds that have been already allocated. And the Trump administration has made clear they wanna get some of that money back.
And I just would be curious to hear I know you guys have some exposure to schools and what you're hearing there or hearing there generally. And is that the reason perhaps for some slightly slower contract activity? And then I just wanted to check on the federal side. For you guys on the BPM side.
Just, you know, if you guys have done any audit of that business to understand how you guys sit relative to those? I know it's a very small percentage portion of your business going back to the 2019 acquisition. Just wanted to check the box that we're comfortable there. Thank you for both. Appreciate it..
Yeah. Thanks, Rob. We're not hearing anything from our clients that would suggest that anything that's been funded by ARPA would be clawed back. And, again, we can't always specifically identify whether a deal was funded specifically by ARPA. There are isolated incidents where we can.
A lot of times, what have we talked about in the past? It was more freeing up also other resources. We did have one really small deal with the Department of Education that was in our federal space that was terminated. But, you know, that thing was maybe a $100,000 deal, give or take. So not really seeing anything there.
I'm trying what was the second question? Yeah. Just broadly around our federal book of business. Yeah. So there, Rob, I mean, you know, we've seen, first of all, as you pointed out, federal is less than 5% of our revenue. We've had a handful, literally, four, five maybe five terminations in the federal space. All adding up to less than a million dollars.
And you would was, you know, kind of the usual suspects, you know, would Department of Education. I just mentioned HHS. USAID. That doesn't come as much of a surprise. But, again, these were very small deals. We're watching another maybe million or so to see, but, again, pretty minimal.
Which is also, you know, reflective of the size of the materiality to our business..
Your next question comes from the line of Jonathan Ho from William Blair. Line is open..
Hi, good morning. Just wanted to better understand sort of your commentary around what's happened with some of the transaction fee increases and pass-throughs as well as the Texas contract. And maybe what your expectations are going forward? Thank you..
Yeah. As you know, we have some we have a variety of payment streams around transactions. Or revenue streams around transactions and payments. And in some cases, we have existing relationships with third-party payment processors that basically we act as a reseller for. That we get a revenue share from.
And to the extent that those third-party processors from time to time have rate increases or fee increases that in turn have flows through to our revenue share.
They're somewhat unpredictable, and so we've we have seen a history in the last couple of years of those increasing, and we saw some of those increases that were a little above what our expectation was hit this quarter. And that'll flow through for the rest of the year. So that now built into our model. In terms of Texas, I guess two things.
One, volume as with many of our payment processing volumes, Texas did have a little above our planned volumes this quarter. So that contributed to some of our transaction revenue outperformance.
But as they work through their transition with our contract to the new provider, it appears that some of the timing of that will go beyond for some of the service we'll go beyond that August 30 or 31 contract deadline.
So we do have an extension in place that provides a structure where if necessary, we can continue to provide some of those services during the transition period. So we'll see how that timing plays out. But some of those revenues could extend a little bit beyond August..
Yeah. Jonathan, just to follow-up on that, the extension was signed for August of year, but the expectation still is that Texas will move away by the end of the year. But most of the service is still winding down. Really through September and maybe some smaller ones continuing through December.
Perhaps, you know, adding another $3 to $3.5 million of low-margin revenue, as you know, to our top line this year..
Your next question comes from the line of Gabriela Borges from Goldman Sachs..
Lynn and Brian, your comments throughout the last forty-five minutes have been very consistent in saying the areas where you see an impact from DOGE or from deal scrutiny, all of those areas are very small.
So my question for you is how do you think about the risk that some of these fringe issues on the margin become more mainstream as we go through the year? What would be a scenario where you see more of an impact as we go through the year, and how do you think about sizing that? Thank you..
Yeah, Gabriela. I mean, obviously, we talk about it. We keep an eye on it through, you know, regularly. We've been keeping an eye on it for the last several quarters. We see areas where there are, you know, potential.
But at the same time, we're also in contact with our clients and the feedback we're getting from our clients is giving us the comfort to make the commentary we're making today. I'll give you one anecdotal piece, for example.
One of our clients in Arizona who's talking about DOGE and the potential impacts of DOGE there, was talking about how that, you know, they may be required to cut some services, but what that's gonna do is require them to have more automation and, in fact, wanna buy more of our products.
So, you know, right now, we're just watching it, but we're also in contact with our clients. And that's sort of the basis for our commentary today..
Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open..
Hey, guys. Thanks for taking the question. I guess maybe just a two-parter for me.
On new SaaS deals versus on-premise SaaS flips, is it should we assume that new SaaS deal ARR, versus last year is gonna be a little bit less around some of the pause and caution that you called or saw in Q1? And will conversions, the flips drive more of the SaaS growth this year than new SaaS deals? And then on kind of leading from that, if you look at the performance of SaaS, maybe help us just a little bit state the year on the SaaS revenue line, and what are the puts and takes to kind of hitting the low end versus the high end of your full-year guide on the SaaS revenue line?.
I'd say on the SaaS revenue guide, that, you know, current year sales don't have as big an impact on the current year revenue.
Given the lag from the time we signed something to the time that we start to see that revenue stream hit the income statement, so the biggest driver around the variability of where we fall within that revenue guidance range is really around the flips, both the number of the flips and the timing of the flips.
Which order they hit in, and how quickly we're able to start to see those revenue streams. We've talked about an expectation that the number of flips and the dollar value of flips will grow this year and continue to grow over the next couple of years. So that will be a bigger contributor to the SaaS bookings growth.
But we do expect we don't give guidance on bookings, but I wouldn't say that we expect SaaS bookings for the year to be down. Last year was a very strong year for SaaS bookings. But as we said, the RFP level, the pipeline remains very solid, including with some larger deals in it.
The last of quarters, we haven't seen those big deals, but they can be very lumpy. But I wouldn't necessarily expect SaaS bookings will actually be down for the year..
Your next question comes from the line of Keith Housum from Northcoast Research. Your line is open..
Good morning. Brian, I just wanna revisit the comment you made regarding the sales and marketing expenses being down. I think it was 2% to 4% year over year.
Correct? Can you provide a little more color on that? And did they have a benefit in the first quarter? And what you guys are doing there?.
Yeah. We are expanding. We've talked about some of our expansion of sales resources. In terms of adding a dedicated state sales team that will be coming online this year. So there are some increases in expenses. We're being pretty thoughtful about how we spend some of our other sales and marketing dollars.
But the biggest impact driving that reduction for the year is around commissions expenses. So under GAAP, certain commissions expenses, most commissions expenses are required to be capitalized and amortized over the period they benefit. Which for us is now a five-year period.
And as we've restructured some of our sales compensation structure, and we've talked about the changes we've made generally in some of the sales compensation as we look to standardize across Tyler in an effort to further support cross-sell activities.
So that has resulted in some sales compensation expense that was formerly expensed in the current period now being capitalized under GAAP. And so that change from last year is primarily responsible for that reduction in sales and marketing expense..
That concludes our question and answer session. I will now turn the call back over to Lynn Moore for closing remarks..
Thanks, Rob, and thanks, everybody, for joining us today. If you have any further questions, please feel free to contact Brian Miller or myself. Everybody, have a great day..
This concludes today's conference call. Thank you for your participation. You may now disconnect..