Episode Details

Welcome to Episode 16 of the Preferred Shares Podcast.

In this episode, Douglas Ott walks us through the origin story of Tyler Technologies to the present day.

In this episode

Introduction to Tyler Technologies [0:00-1:40]

Tyler Technologies is described as a “big fish in a small pond,” focusing on software solutions for municipalities and state/local governments.

The market is around $24 billion in total revenue, which is too small for larger tech companies but provides a good opportunity for Tyler.

Tyler's competition is typically small, private, unscaled players.

Early History as an Industrial Conglomerate [1:40-3:30]

Tyler’s history began in the late 1960s with Joseph McKinney, who formed a venture capital business.

McKinney formed Saturn Industries, acquiring several small businesses, then acquired Tyler Pipe in 1968, changing the company name to Tyler Corporation.

Over two decades, Tyler acquired various businesses including a trucking company, an explosives company, a specialty chemicals company, and an electronics distributor.

By 1987, Tyler reached $1 billion in revenues.

Divestment of Holdings [3:30-4:30]

In the late 1980s, McKinney started selling Tyler’s holdings, distributing over $400 million to shareholders by the mid-1990s.

By 1995, none of the former companies remained at Tyler Corporation, leaving a cash shell holding company.

Downturn and New Acquisitions [4:30-5:30]

McKinney acquired Forest City Auto Parts and Institutional Financing, which were different from Tyler’s B2B industrial focus.

These acquisitions performed poorly, leading to a $52 million write-down and McKinney’s departure by the end of 1996.

New Leadership and Strategic Shift [5:30-6:30]

Bruce Wilkinson was hired, aiming to return Tyler to its industrial roots.

Louis Waters acquired a 10% stake in Tyler and advocated for a shift to software and information services.

Louis Waters and Browning-Ferris Industries [6:30-9:30]

Waters co-founded Browning-Ferris Industries (BFI), a waste management company, and saw similarities between the fragmented waste management industry and the software market for local governments.

BFI grew rapidly through acquisitions due to new environmental regulations.

Waters saw a similar opportunity in the software space for municipalities.

Tyler’s Pivot to Software [9:30-11:00]

Waters won the debate, Wilkinson resigned, and Tyler began acquiring software companies.

By the end of 1997, Tyler acquired three software companies and stated its plan to consolidate the information industry for local governments.

In 1998, they made four more acquisitions for $90 million.

Tyler sold Forest City and Institutional Financing at a loss.

Acquisition of Munis and Key Personnel [11:00-12:00]

In 1999, Tyler acquired Munis, an ERP and land information management systems company.

The acquisition of Munis also brought in John Marr, who became CEO of Tyler in 2004 and later executive chairman.

Significant Acquisitions [12:00-14:00]

New World Systems was acquired in 2015 for $670 million, providing software for dispatchers, first responders, and financial management for state and government agencies.

Micropact was acquired in 2019 for $185 million, marking Tyler's foray into the federal customer segment.

NIC was acquired in 2021 for $2.3 billion; NIC designed and implemented websites for states and their agencies and was a payment processor specializing in state government payments.

Market Share and Financial Performance [14:00-15:00]

Tyler’s market share is estimated to be in the low teens, with si