TYL
#We continue to work on details kind of structuring a new arrangement that is more representative of our relationship once the product is now deployed versus when it was in pre-release R&D.
And obviously in those early years we brought value in bringing our vertical expertise to the product.
That is largely reflected in the product and so our involvement on the R&D side will be brought down significantly.
Some of those resources will be redeployed and are being redeployed on the sales side and that is not all direct sales, a reasonable of those resources ---+ we have a lot of experience in RPs and demos and managing these marketplaces and all of these things that some of their very capable partners may not have that vertically oriented expertise.
And we will have a team that supports that and our interest for them to build out that channel.
So yes, at a high-level, our R&D spend will come down significantly.
Our sales and sales support spend will go up.
We will continue to build out to some degree a service business that we have established there.
But the net net of it will be a reduction in total spend probably in the 50% range.
So a significant reduction in total spend.
I will tell you it is a process and we have been in this process for some time but I would say this is an area that we can see accelerated growth and a stronger presence than what we have had traditionally.
So Brazos ---+ mobile is a big leader, it is a lot of the color and decisions these days and having a very strong mobile first kind of approach is exciting to our public safety offering.
In terms of standalone, no, I think we see our public safety offering ---+ we enjoy a very strong leadership position in courts and justice and I think as we grow our public safety position that we have the opportunity to have a complete end-to-end criminal justice solution that doesn't exist.
The competitors for the most part that we compete with in courts are different than the competitors we compete with in public safety and if we are able to have an integrated leadership position in both of those areas, there is very meaningful information that can come from that that is more difficult to produce from disintegrated systems.
So that is a big part of our strategy there.
Indiana actually started this quarter with a small amount of revenues, about $100,000.
It ramps up over the next year.
I think it is about $1.5 million this year and ---+ $1.5 million this year, $3.5 million next year and then $5 million a year in 2017, 2018 and 2019.
And then second, it ramps up to I think it is $650,000 a quarter in the last two quarters of the year.
Most of the other revenues in the e-filing growth right now beyond Indiana is the big contributor in a second half of the year.
We start to see some e-filing revenues in some of the California counties in the second half of the year.
Most of those are smaller volume counties so it is not going to be as significant but it is going to be a gradual ramp up in those counties.
The other statewide implementations where you get e-filing, places like Oregon, Rhode Island, Maryland are all still in a ramp up phase.
So it is more gradual with respect to most of our clients right now other than Indiana.
The simple answer is we don't know.
As we have said, we really have very little visibility to this marketplace and what comes to us indirectly through Microsoft.
I think it is reasonable to think that winning a significant deal at the Federal level is the result of a concerted effort to secure business there and if they execute well on this project, you would certainly think and hope that it wouldn't be a one-off.
So the encouraging of this ---+ this has not been explosive but I think the encouraging thing is that the direction of the royalty largely is up and the footprint of the market that they have established even though it hasn't exploded is very broad internationally.
I think there were 18 counties, 18 countries on our royalty report this past quarter.
That is typical.
The deals come from 12, 15, 18 countries, different levels of government, federal governments, state and local governments, complementary public sector businesses, universities, transit authorities, things like that.
Yes, we would hope and we would expect that if they have a successful significant engagement at the Federal level that they didn't establish that presence for a single deal, that that is something that they expect to be repeatable.
The royalty rates are pretty well-established for a very long period of time.
We don't get too granular on the agreement but many, many, many years and the changes from the original arrangement we expect ---+ if there are ---+ will be very modest.
So they can change very modestly based on our resource commitment, a number of other variables.
But no, largely the royalty rates are established and will be relatively stable over a long period of time.
With respect to last year's maintenance bookings.
Last year in Q2, we have about $7 million, more than $7 million of maintenance agreements that went into bookings that were longer than our normal one-year term.
So with the normal one-year maintenance booking last year in Q2, that would have renewed and showed up for the same or greater amount this year in Q2.
Because those extend for in some cases 18 months, some cases multiyear, you didn't get that renewal this year in Q2.
Some of those will renew in the fourth quarter of this year so they were 18 month initial agreements, some of those are multiyear agreements that we won't see the renewal again until 2016 or 2017.
So they will work off of that initial arrangement.
So that creates a little bit of a mismatch in the comparison.
You are correct.
If you go back over the last two years other than second quarter of last year, that is still the highest bookings quarter in the last two years.
Yes, even though is down from last year's Q2 and there is some moving parts in there, it is still the second best bookings quarter in the last two years.
It is probably about the same.
As I said, our strategy has evolved and I think it actually is more selective, more likely to do strategics than consolidation opportunities which theoretically could put higher values on deals.
If you look at EnerGov or if you look at our e-file, these acquisitions really while you want to be disciplined on value, they certainly can support a higher valuation given how they perform once in the Tyler Company.
So there's deals out there.
You know the T markets flush with cash and there are cases where valuation I think gets out of the neighborhood that we are comfortable in.
But it is reasonably active, it is just instead of doing a deal or two a quarter, we are probably more likely to do fewer deals that could be more significant in size.
At this time there appear to be no more questions.
Mr.
<UNK>, I will turn the call back over to you for closing remarks.
Thank you very much for joining us on the call today.
If there are any further questions, feel free to reach out to <UNK> or myself.
Have a great day.
