ANNUAL REPORT 2024
A Letter to Our Shareholders
As we reflect on 2024, I am incredibly proud of what our team
accomplished. Building on the foundation we set in 2023, we
not only exceeded our financial and operational targets but also
made significant progress toward the long-term goals outlined
in our Tyler 2030 vision. This was a year defined by exceptional
performance, disciplined execution, and continued leadership
in the public sector.
Our achievements in 2024 validate the strength of our strategy
and the resilience of our markets. More importantly, they
reinforce our unwavering commitment to helping our clients
create smarter, safer, and stronger communities.
PROGRESS TOWARD OUR TYLER 2030 VISION
2024 marked our first full year of executing the long-term strategy outlined in
our Tyler 2030 vision. Introduced at our 2023 Investor Day, Tyler 2030 serves as
our guiding framework for sustainable growth. It is centered on four key pillars:
completing our cloud transition, leveraging our large client base, growing our
payments business, and expanding into new markets. In 2024, we made significant
progress across all of these areas. At the same time, we continued investing in key
initiatives such as client success and artificial intelligence (AI).
2024 PERFORMANCE AT A GLANCE
In 2024, we achieved or exceeded our objectives across virtually all key financial,
operational, and strategic metrics. Total revenues reached $2.138 billion, reflecting
9.5% growth. Recurring revenues grew 11%, comprising 84.5% of total revenues.
Software as a service (SaaS) revenues rose 22%, surpassing our target of a 20%
CAGR through 2025. SaaS arrangements represented 96% of total new software
contract value, underscoring the growing adoption of cloud technology among
our clients.
We also delivered strong profitability, with our non-GAAP operating margin improving
by 150 basis points to 24.5%, driven by operational efficiencies from our cloud
transition and leverage in operating expenses. GAAP net income was up 58.5%
at $263.0 million, or $6.05 per diluted share, while non-GAAP net income grew
24.5% to $415.3 million, or $9.55 per diluted share. Free cash flow growth was
exceptionally strong at 75.5%, driven by earnings growth and effective working
capital management.
Beyond our financial results, we achieved significant milestones in advancing
our strategic initiatives. From accelerating cloud adoption to enhancing our sales
alignment and strengthening our balance sheet, we continue to position Tyler to
deliver durable growth and value for the long term.
MARKET ENVIRONMENT
The public sector market remained active in 2024, with robust demand for solutions
supported by healthy budgets and a growing focus on digital modernization. Leading
sales indicators, including volumes of RFPs and sales demonstrations, remain stable
at elevated levels and our competitive position and win rates remain strong.
Our success continues to be driven by our deep relationships with government
agencies at all levels, with approximately 97% of our revenue derived from the
state and local government markets. This stability, combined with our leadership in
providing essential, high-value solutions, positions Tyler as a safe haven in times of
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES
market uncertainty. Our technology drives efficiencies and productivity — critical
themes for governments across the nation.
STRATEGIC GROWTH PILLARS
Cloud-First Strategy
We accelerated our cloud-first transformation in 2024. We successfully exited our
Dallas, Texas, data center and are on track to exit our Yarmouth, Maine, facility by
the end of 2025, as we move our clients to the public cloud. Cloud adoption among
our clients continued to grow, with SaaS arrangements accounting for 88% of new
software business mix. We also signed 415 on-premises to cloud client flips, with
an increase of 26.4% in the average annual recurring revenue of flips. These efforts
position us well to achieve our goal of migrating more than 80% of our on-premises
clients to the cloud by 2030.
Notably, SaaS adoption accelerated significantly with our public safety clients,
and cloud deployments comprised a significant majority of new contracts in 2024,
marking a pivotal shift in a traditionally cloud- averse sector. We also demonstrated
our ability to rapidly migrate clients into secure cloud environments, further solidifying
our leadership in mission-critical software.
Notable wins across Tyler’s portfolio in 2024 include:
•
Four state police agency contracts for our Enterprise Public Safety suite, which
included three SaaS wins with Idaho, Iowa, and Michigan, and an on-premises
contract with Nebraska.
•
The Kentucky Court of Justice adopted our Enterprise Justice suite, including
Case Management, eFiling, Court Analytics, and integrated payments. This marks
our 17th statewide courts client and our third statewide deployment of Enterprise
Justice in the cloud, reinforcing our leadership in cloud-based judicial solutions.
•
Fulton County, Georgia, executed an Enterprise Assessment & Tax SaaS flip
on an accelerated timeline, completing the transition and going live in just one
month. Following this success, Fulton County also transitioned its Enterprise
Justice solution to the cloud, demonstrating the growing preference for cloud-
based solutions among large jurisdictions and further validating our cloud
migration strategy.
Leveraging our Client Base
Tyler’s unmatched installed client base continues to be a cornerstone of our growth
strategy. In 2024, we enhanced alignment across our sales teams, streamlined
incentive structures, and achieved strong inside sales growth. These efforts have
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES
reduced barriers and encouraged collaboration, enabling us to cross-sell and upsell
more effectively.
Notable wins in 2024 include:
•
A multiyear contract with the Texas Office of Court Administration for our Texas
Connected Justice Data Cloud, which includes Alliance Exchange, Enterprise Data
Platform, Open Data Platform, and our Digital Solutions Division’s Engagement
Builder platform. This integrated solution captures real-time online data across
every jurisdiction in the state and exemplifies our connected communities vision
by creating a digital infrastructure for data sharing and decision-useful business
intelligence and reporting.
•
A joint effort with our Justice Group leveraged our Digital Solution Division’s
strong relationships in Florida for an agreement with the Florida Department
of Corrections to manage all aspects of money transfer services for correctional
facilities across the state. The contract brings together disbursement solutions,
inmate trust and accounting, and e-communications, together with payments.
Transactions and Payments
Our unified payments organization delivered exceptional results in 2024, signing
nearly 1,000 new deals and further expanding and integrating payments capabilities
across our portfolio. These efforts have expanded our addressable market and driven
higher recurring revenue streams, with transaction revenue growth exceeding our plan
for the year.
These wins underscore the demand for Tyler’s differentiated approach to payments,
which focuses on delivering integrated, high-value solutions that have a competitive
advantage relative to commodity payment processors.
Notable wins in 2024 include:
•
Riverside County, California, an existing property and recording software client,
became Tyler’s first enterprise payments win in California. This collaboration
expanded from an initial property and recording payments contract to processing
payments for more than 10 agencies across the county, which is the fourth most
populous county in the state.
•
We added to our growing footprint in Outdoor Recreation, signing a multiyear
SaaS arrangement, including payments, with the South Carolina State Parks,
under our State Enterprise Master Agreement. This includes retail payments
management for 45 state parks.
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES
CAPITAL ALLOCATION AND BALANCE SHEET STRENGTH
In 2024, we reinforced our commitment to disciplined capital allocation and
maintaining a strong balance sheet. We repaid the remaining balance of the term debt
associated with the NIC acquisition, exiting the year with zero net leverage.
We fortified our balance sheet by enhancing our revolving credit facility — replacing
our existing $500 million unsecured facility with a new $700 million facility that
extends maturity to 2029 with improved terms. These actions position us to pursue
strategic acquisitions and investments while maintaining financial flexibility.
While we did not complete any acquisitions in 2024, the January 2025 acquisition
of MyGov exemplifies the type of strategic opportunities we continue to pursue. This
acquisition expands our reach into the small-to-midsize ERP market and aligns with
our focus on acquiring culturally compatible businesses that complement our existing
portfolio and are accretive to growth.
2024 AWARDS AND RECOGNITION
We are honored to have received several awards in 2024, including Amazon Web
Services’ State or Local Government Technology Partner of the Year — Global;
inclusion in the GovTech 100 list; and recognition on Newsweek’s America’s Greenest
Companies list. Our workplaces in Plano, Texas, and Troy, Michigan, earned Top
Workplace accolades, further affirming our commitment to a corporate culture that
allows our team members to thrive.
INVESTING IN INNOVATION
As we look to the future, we are making thoughtful investments in areas such as
AI, leveraging acquisitions that brought AI capabilities and responding to growing
client focus on efficiency. By the end of 2025, every flagship product roadmap will
feature clear AI-driven capabilities designed to deliver enhanced performance and
greater value to our clients. Our approach to AI is both strategic and responsible,
prioritizing productivity, decision-making, and service delivery while ensuring security
and transparency.
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES
LOOKING FORWARD
As we enter 2025, we are excited to build on the momentum of 2024. Our
confidence in achieving our 2025 and 2030 goals stems from our progress
in growing recurring revenues, expanding margins, and delivering sustained
free cash flow growth. The durability of our business model, combined with
the strength of our markets, positions us for continued success as we work
toward our Tyler 2030 vision.
To support this trajectory, we have continued to evolve our senior leadership
team. We appointed Andrew Kahl as our first chief client officer to enhance
our client experience, strengthen long-term relationships, and help drive
growth through cross-sell and upsell opportunities. Abby Diaz, formerly chief
legal officer, was elevated to the newly created role of chief administrative
officer, strengthening alignment across Legal, Internal Audit, Data Privacy,
Corporate Governance and Responsibility, and Corporate Communications
functions. Additionally, we promoted Bill Van Asselt to chief legal officer and
named Arik Flanders chief marketing officer, succeeding Samantha Crosby,
who will retire in June 2025 following 16 years of exemplary leadership.
With our strong leadership team, continued investments in innovation, and
unwavering focus on client success, we are well-positioned to shape the
future of public sector technology.
Thank you for your continued support as we create lasting impact for
governments and the communities they serve.
H. Lynn Moore Jr.
President & Chief Executive Officer
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
(In thousands, except per share data)
RECONCILIATION OF NON-GAAP GROSS PROFIT AND MARGIN
2024
2023
2022
GAAP Gross profit
$935,761
$861,099
$783,863
Non-GAAP adjustments:
Add: Share-based compensation expense included in cost of revenues
31,322
26,607
27,486
Add: Amortization of acquired software
36,964
36,062
52,192
Non-GAAP gross profit
$1,004,047
$923,768
$863,541
GAAP gross margin
43.8%
44.1%
42.4%
Non-GAAP gross margin
47.0%
47.3%
46.7%
RECONCILIATION OF NON-GAAP OPERATING PROFIT AND MARGIN
GAAP operating profit
$299,526
$218,537
$214,249
Non-GAAP adjustments:
Add: Share-based compensation expense
122,813
108,338
102,985
Add: Employer portion of payroll tax related to employee stock transactions
3,606
1,873
1,571
Add: Acquisition-related costs
29
409
1,971
Add: Lease restructuring costs and other
1,250
8,220
2,782
Add: Amortization of acquired software
36,964
36,062
52,192
Add: Amortization of other intangibles
59,627
74,632
61,363
Non-GAAP adjustments subtotal
$224,289
$229,534
$222,864
Non-GAAP operating income
$523,815
$448,071
$437,113
GAAP operating margin
14.0%
11.2%
11.6%
Non-GAAP operating margin
24.5%
23.0%
23.6%
RECONCILIATION OF NON-GAAP NET INCOME AND EARNINGS PER SHARE
GAAP net income
$263,026
$165,919
$164,240
Add: Total non-GAAP adjustments to operating income
224,289
229,534
222,864
Less: Income tax impact
(71,999)
(61,792)
(68,999)
Non-GAAP net income
$415,316
$333,661
$318,105
GAAP earnings per diluted share
$6.05
$3.88
$3.87
Non-GAAP earnings per diluted share
$9.55
$7.80
$7.50
DETAILS OF SHARE-BASED COMPENSATION EXPENSE
Subscriptions, maintenance and professional services
$31,322
$26,607
$27,486
Sales and marketing expense
12,840
10,118
8,800
General and administrative expense
78,651
71,613
66,699
Total share-based compensation expense
$122,813
$108,338
$102,985
RECONCILIATION OF FREE CASH FLOW
Net cash provided by operating activities
$624,633
$380,440
$381,455
Less: additions to property and equipment
(20,535)
(20,519)
(22,529)
Less: investments in software development
(29,401)
(32,490)
(27,622)
Free cash flow
$574,697
$327,431
$331,304
Free cash flow margin
26.9%
16.8%
17.9%
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10485
TYLER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
75-2303920
(State or other jurisdiction of incorporation
or organization)
(I.R.S. employer
identification no.)
5101 Tennyson Parkway
Plano, Texas
75024
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (972) 713-3700
__________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange
on which registered
COMMON STOCK, $0.01 PAR VALUE
TYL
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-
T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
☒
Accelerated Filer
☐
Non-accelerated Filer (Do not check if smaller reporting company)
☐
Smaller Reporting Company
☐
Emerging Growth Company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). Yes ☐ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant was $21,332,091,018 based on the reported last sale price of common stock on June 30,
2024, which is the last business day of the registrant’s most recently completed second fiscal quarter.
The number of shares of common stock of the registrant outstanding on February 18, 2025 was 43,013,800.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this annual report is incorporated by reference from the registrant’s definitive proxy statement for its annual meeting of
stockholders to be held on May 6, 2025.
TYLER TECHNOLOGIES, INC.
FORM 10-K
TABLE OF CONTENTS
PAGE
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
21
Item 1C.
Cybersecurity
21
Item 2.
Properties
23
Item 3.
Legal Proceedings
24
Item 4.
Mine Safety Disclosures
24
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
25
Item 6.
[Reserved]
26
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
39
Item 8.
Financial Statements and Supplementary Data
39
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
39
Item 9A.
Controls and Procedures
39
Item 9B.
Other Information
40
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
40
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
41
Item 11.
Executive Compensation
41
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
41
Item 13.
Certain Relationships and Related Transactions, and Director Independence
41
Item 14.
Principal Accounting Fees and Services
41
PART IV
Item 15.
Exhibits, Financial Statement Schedules
42
Item 16.
Form 10-K Summary
44
Signatures
45
2
PART I
ITEM 1. BUSINESS.
DESCRIPTION OF BUSINESS
Tyler Technologies, Inc. (“Tyler” or “Company”) is a leading provider of integrated software and technology management solutions
for the public sector. Our solutions empower local, state, and federal government entities to create smarter, safer, and stronger
communities. We offer the broadest range of software solutions and services designed for every level of public sector government
agency. Our solutions deliver mission-critical technology to support the essential functions of government, including public safety,
justice, public health, taxation and budgeting, infrastructure and land use, outdoor recreation, utility and civic services, regulation,
K-12 education, and social services. We provide both the back-office systems-of-record that serve the operational needs of specific
government agencies, as well as platform technology solutions that are designed to integrate with our back-office solutions and be
deployed and connected across many agencies. Examples of transformative platform technologies include our market-leading
payments platform, data platform, low-code application development platform, and digital resident experience solutions.
We maintain deep, long-term relationships with state and local government agencies, including dedicated state-level offices in the 29
states in which we have enterprise contracts. Our professional information technology (“IT”) services include cloud-based software
deployment, data conversion, and training. We also provide continuing client support services to ensure product performance and
reliability, providing us with long-term client relationships and a significant base of recurring revenue.
MARKET OVERVIEW
The federal, state, and local public sector market is one of the largest and most decentralized IT markets in the country, consisting of
hundreds of federal agencies, all 50 states, approximately 3,000 counties, 36,000 cities and towns, and 12,600 school districts. This
market is also comprised of approximately 40,000 special districts and other agencies, each with specialized delegated responsibilities
and unique information management requirements.
Today, government agencies play an essential role in all aspects of society, including providing protection and security, delivering
public services, ensuring public health, effectively administrating public resources, developing and enforcing regulations, and
maintaining engagement with the public. In an increasingly digital world, constituents expect more transparency, frictionless service,
and better online experiences from public entities. As a result, government entities recognize the increasing value of information
management systems and services to, among other things, improve transactional revenue collection, provide transparency and
increased access to information, and streamline the delivery of services to their constituents. Government bodies recognize “digital
government” is not just a modern convenience, but a requirement for good governance. From integrated public safety and justice
information systems to systems that integrate tax, finance, infrastructure, and land use processes, many jurisdictions have benefited
significantly from the implementation of jurisdiction-wide systems that allow different agencies or government offices to share data
and provide a more comprehensive approach to information management.
Agencies at all levels of government face challenges in attracting and retaining the staff necessary to support their IT operations. As a
result, they seek to establish long-term relationships with reliable providers of high-quality IT products and services such as Tyler.
Although governments often face budgetary constraints in their operations, their primary revenue sources are usually property,
business, and sales tax revenue, as well as transactional fees and service charges, which historically tend to be relatively stable.
Government agencies increasingly rely on digital payment solutions to streamline the collection and distribution of government funds.
In addition, the acquisition of modern technology typically enables governments to operate more efficiently and securely and often
provides a measurable return on investment that justifies the purchase of software and related services.
Tyler management believes we compete based on several key factors, including:
•
The breadth, depth, and quality of our product and service offerings
•
Deep industry expertise with proven implementation success
•
Technological innovation
•
Name recognition, reputation, and references
•
Value and return-on-investment
•
Financial strength and stability
3
PRODUCTS AND SERVICES
We provide a comprehensive and flexible suite of products and services that addresses the information technology needs of cities,
counties, states, schools, federal agencies, and other government entities.
We design, develop, market, and support a broad range of software solutions to serve mission-critical “back-office” functions of the
public sector. Many of our back-office software applications integrate with our transformative platform solutions, such as our unified
payments platform, data and insights platform, and digital public engagement solutions that allow for real-time public access to a
variety of information or that allow the public to transact business with governments online.
Each of our core software solutions consists of several fully integrated applications. In some of the product areas, such as financial
management and education and property appraisal and tax, we offer multiple solutions designed to meet the needs of different sized
governments.
A description of our primary suites of products and services follows:
Platform & Transformative Technology Solutions
Our platform and transformative technology solutions create the foundation for government innovation and enhance our clients’ ability
to connect with constituents, conduct business, collect and disburse funds, safeguard systems, and leverage data to its fullest. Many of
these solutions are integrated into our products, while others can be leveraged as add-on solutions. Our platform & transformative
technology solutions include:
•
Cybersecurity: Augments government agencies’ resources with access to advanced expertise for program design, 24/7 threat
detection and response, customized employee training, vulnerability testing, and more.
•
Data & Insights: Allows agencies to transform data into insights about financial, operational, and strategic outcomes by
making it easier to surface meaningful data for informing government decisions and citizens.
•
Digital Solutions: Provides a seamless cross-department experience so that agencies can deliver a unified citizen experience
and achieve better outcomes while helping workers and policymakers share, communicate, and leverage data more
effectively.
•
Payments: The leading platform for public sector payments that processes nearly half a billion transactions annually and
covers the entire payments life cycle, including billing, presentment, merchant onboarding, collections, reconciliation, and
disbursements.
•
Platform Technologies: A low-code application development platform purpose-built for the public sector. Enables
government workers to quickly build solutions and applications that suit their needs.
•
Outdoor Recreation: Designed specifically for local, state, and federal outdoor agencies, our solutions encompass campsite
reservations, activity registrations, licensing sales and renewals, and real-time data for conservation and park management.
Public Administration Solutions
Our public administration solutions connect the dots between departments, agencies, municipalities, and states to deliver the core
business functions of the public sector. By making it easier to manage the business side of the public sector, agencies can focus on
delivering the resources and services required to make their community a place where people want to live. Our public administration
solutions include:
•
Civic Services: Business management and community development solutions manage permitting, enforcement, health and
safety inspections, compliance, maintenance and work orders, 311 requests, and more.
•
ERP: Integrates core financial applications with human resources, revenue management, tax billing, utilities, asset
management, and payment processing.
•
Property & Recording: Manages all aspects of the property tax life cycle, including appraisal services, valuation, tax billing
and collections, assessment administration, and land and official records.
•
Regulatory: Permitting, licensing and regulatory management help local, state, and federal government agencies and
departments of any size simplify every aspect of regulatory compliance.
4
Courts & Public Safety Solutions
Our integrated courts and public safety solutions are used at the municipal, county, state, and federal levels to help courts, prosecutors,
defenders, jails, sheriff’s offices, police departments, and probation officers keep their communities safe. Our courts and public safety
solutions include:
•
Corrections: Connects courts, public safety, and supervision agencies to ensure safer and more efficient operations for
correctional facilities.
•
Courts & Justice: Provides case management and shares data with all justice partners by connecting courts, prosecutors,
public defenders, and the filing community.
•
Public Safety: Provides real-time information and instant data sharing across jurisdictions and promotes intelligence-led
responses so that help arrives faster and more prepared while complying with state and federal reporting mandates.
K-12 Education Solutions
Our integrated school solutions enable districts to operate as a single system across campuses and functions. By bringing data together
and making it accessible as needed to administrators, teachers, students, bus drivers, and parents, we are able to improve everyone’s
ability to support the educational journey. Our K–12 Education solutions include:
•
School ERP: Manages K-12 schools’ most essential business functions by integrating financial, budgeting, and procurement
data. Our suite of human resource management tools helps schools efficiently manage payroll and employee information and
hire and retain qualified teachers, staff, and substitutes.
•
Student Transportation: Manages every aspect of the student transportation operation with integrated software and telematic
hardware solutions to help ensure operational efficiency and cost-effectiveness.
Health & Human Services Solutions
Our integrated solutions enable health and human service agencies to leverage data and optimize operations to better maintain the
well-being of communities. Our health & human services solutions include:
•
Environmental Health: Streamlines the process of issuing permits, performing health inspections, running reports, and
investigating complaints.
•
Disability & Benefits: Helps programs and agencies administer benefits and makes it easier to manage the complexity of
services like medical cannabis regulation, veterans’ benefits, vocational rehabilitation, workers’ compensation, and more.
Revenues
We derive our revenues from three primary sources:
•
Subscription-based services
•
Maintenance and support
•
Professional services
Subscription-Based Services
Subscriptions revenue consists of revenues derived from our SaaS arrangements and transaction-based fees. We are able to provide the
majority of our software products through our SaaS model. The clients who choose this model typically do not wish to maintain,
update and operate these systems directly, or make up-front capital expenditures to implement these advanced technologies. The
contract terms for these arrangements range from one to 10 years but are typically contracted for periods of generally one to three
years. The majority of our SaaS or hosting arrangements include additional professional services as well as maintenance and support
services.
Transaction-based fees primarily relate to digital government services, online payment solutions (which are sometimes offered with
the assistance of third-party vendors), and online dispute resolution solutions. Digital government services consist of websites and
applications that allow consumers, such as businesses and citizens, to access government information, complete transactions and make
electronic payments. Our online payments solution covers the entire payments life cycle, including billing, presentment, merchant
onboarding, collections, reconciliation, and disbursements. We also provide electronic document filing solutions (“e-filing”) that
simplify the filing and management of court related documents for courts and law offices.
5
Maintenance and Support
Support is provided to clients over the phone or via the Internet through help desks staffed by our client support representatives. For
more complicated issues, our staff, with the clients’ permission, can log on to clients’ systems remotely. We maintain our clients’
software largely through releases that contain improvements and incremental additions of features and functionality, along with
updates necessary because of legislative or regulatory changes.
Nearly all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant
source of recurring revenue. We generally provide maintenance and support for our on-premises clients under annual, or in some cases
multi-year, contracts, with a typical fee based on a percentage of the software product’s license fee. These fees can generally be
increased on renewal and may also increase as new license fees increase. Maintenance and support fees are generally paid annually in
advance. Most maintenance contracts automatically renew unless the client or Tyler gives notice of termination prior to expiration.
Similar maintenance and support services are provided to our SaaS clients and are included in their subscription fees, which are
classified as subscription-based revenue.
Professional Services
We provide a variety of professional services to clients who utilize our software products. Our clients contract with us for installation,
training, and data conversion services in connection with their implementation of Tyler’s software solutions, whether through a SaaS
arrangement or on-premise software license. The complete implementation process for a typical system includes planning, design, data
conversion, set-up and testing. At the culmination of the implementation process, an implementation team is generally onsite at the
client’s facility or available via remote video conferencing to help ensure the smooth go-live with the new system. Implementation
fees are charged separately to clients on either a fixed-fee or hourly charge basis, depending on the contract.
Both in connection with the installation of new systems and on an ongoing basis, we provide extensive training services and programs
related to our products and services. Training can be provided in our training centers, onsite at clients’ locations, at meetings and
conferences, or remotely, and can be customized to meet clients’ requirements. The vast majority of our clients contract with us for
training services, both to improve their employees’ proficiency and productivity and to fully utilize the functionality of our systems.
Training services are generally billed on an hourly or daily basis, along with travel and other expenses.
Our other sources of revenue include software licenses and royalties and computer hardware equipment, which represent 3% and 4%
of total revenues for the twelve months ended December 31, 2024 and 2023, respectively.
STRATEGY
Our objective is to grow our revenues and earnings organically, supplemented by focused strategic acquisitions. The key components
of our business strategy are to:
•
Provide high quality, value–added products and services to our clients. We compete on the basis of, among other things,
delivering to clients our deep domain expertise in government operations through the high value products and services in
the market. We believe we have achieved a reputation as a premium product and service provider to the public sector
market.
•
Continue to expand our product and service offerings. While we already have what we believe to be the broadest line of
software products for the public sector, we continually strive to upgrade our core software applications and expand our
complementary product and service offerings to respond to technological advancements and the changing needs of our
clients. We regularly add new products and services to our portfolio through internal product development as well as
acquisitions. We believe that the addition of new features and applications enhances the market appeal of our core
products. We have also broadened our offerings of consulting and business process reengineering services.
•
Accelerate our move to the cloud. We have offered most of our core products in both an on-premises license model and a
cloud-based subscription model for several years and have seen a steady increase in the percentage of new software
clients choosing our cloud model in recent years. Beginning in late 2019, we moved our approach to sales from “cloud-
neutral” to “cloud-first,” with an increasing preference to provide our solutions in the cloud. We are making significant
investments in optimizing our products to be deployed efficiently in the public cloud. Over a multi-year period we have
been transitioning from hosting clients in Tyler’s proprietary data centers to utilizing Amazon Web Services (“AWS”)
for cloud hosting.
6
•
Expand our client base. We seek to establish long-term relationships with new clients primarily through our sales and
marketing efforts. While we currently have clients in all 50 states, Canada, the Caribbean, the United Kingdom,
Australia, and other international locations, some of our solutions have not fully achieved nationwide geographic
penetration. We intend to continue to expand into new geographic markets by adding sales staff and targeting marketing
efforts by solutions in those areas. We also intend to continue to expand our client base to include larger jurisdictions.
While our traditional market focus has primarily been on small and mid-sized governments, our increased size and
market presence, together with the technological advances and improved scalability of certain of our solutions, are
allowing us to achieve increasing success in selling to larger clients. We also expect to expand our presence in
international markets by leveraging our leadership position in the United States through the disciplined pursuit of
selected opportunities in other countries.
•
Expand our existing client relationships. Our existing client base offers significant opportunities for additional sales of
solutions and services that we currently offer, but that existing clients do not fully utilize. Add-on sales to existing clients
typically involve lower sales and marketing expense than sales to new clients. In particular, since the acquisition of NIC
Inc. (“NIC”) in April 2021, we have been successfully selling Tyler software products into NIC’s client base and in turn
providing NIC’s payment services to Tyler’s client base. We expect those opportunities to continue to expand.
•
Grow recurring revenues. We have a large recurring revenue base from subscription-based services and maintenance and
support, which generated revenues of $1.8 billion, or 84% of total revenues, in 2024. We have historically experienced
very low client turnover (approximately 2% annually), and recurring revenues continue to grow as the installed client
base increases. Subscription-based revenues have been our fastest growing revenue category over the past five years,
increasing from $350.6 million in 2020 to $1.3 billion in 2024. We monitor Annualized Recurring Revenue (“ARR”),
which is calculated based on quarter-to-date end total recurring revenues multiplied by four. ARR was $1.86 billion and
$1.61 billion as of December 31, 2024, and 2023, respectively. ARR increased approximately 15% compared to the prior
period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements.
•
Maximize economies of scale and take advantage of financial leverage in our business. We seek to build and maintain a
larger client base to create economies of scale, enabling us to provide value-added products and services to our clients
while expanding our operating margins. In addition, we believe that we have a marketing and administrative
infrastructure in place that can be leveraged to accommodate significant long-term growth without proportionately
increasing sales and marketing and general and administrative expenses.
•
Attract and retain highly qualified employees. We believe that the depth and quality of our management and staff is one
of our significant strengths, and that the ability to retain such employees is crucial to our continued growth and success.
We believe that our stable management team, financial strength and growth opportunities, as well as our leadership
position in the public sector market, enhance our attractiveness as an employer for highly skilled employees.
•
Pursue strategic acquisitions. We selectively pursue strategic acquisitions that provide us with one or more of the
following:
◦
New products and services to complement our existing offerings
◦
Entry into new markets related to the public sector
◦
New clients and/or geographic expansion
•
Establish strategic alliances. We have a strategic collaboration agreement with AWS for cloud hosting services, which
brings together Tyler, the nation’s largest software company exclusively focused on the public sector, and AWS, the
broadest and deepest cloud platform. Specifically, the agreement with AWS provides the framework for development,
training and collaboration in order to support next-generation applications that have the scalability, resiliency, and
security AWS offers. AWS is assisting us in accelerating innovation and the development of strategic initiatives. These
initiatives bring the most advanced cloud-native services to Tyler clients to help improve the flow of information and
provide a better experience for state, local, and federal governments.
7
SALES, MARKETING AND CLIENTS
We market our products and services primarily through direct sales and marketing personnel located throughout the United States.
Other in-house sales staff focus on add-on sales, professional services and support. For certain products, we also utilize a partner
network for both sales and professional services, primarily in the state and federal markets.
Sales of new systems are typically generated from referrals from other government offices or departments within a county or
municipality, referrals from other local governments, relationships established between sales representatives and county or local
officials, contacts at trade shows, direct mailings, and direct contact from prospects already familiar with us. We are active in
numerous national, state, county, and local government associations and participate in annual meetings, trade shows, and educational
events.
Clients consist primarily of federal, state, county and municipal agencies, school districts and other local government offices. In
counties, clients include the auditor, treasurer, tax assessor/collector, county clerk, district clerk, county and district court judges,
probation officers, sheriff, and county appraiser. At municipal government sites, clients include directors from various departments,
including administration, finance, utilities, public works, code enforcement, personnel, purchasing, taxation, municipal court and
police. At the state and federal levels, clients include Chief Information Officers and agency heads.
COMPETITION
We compete with numerous local, regional, and national firms that provide or offer some or many of the same solutions and services
that we provide. Many of these competitors are smaller companies that may offer less expensive solutions than ours. Many of these
firms operate within a specific geographic area and/or in a narrow product or service niche. We also compete with national firms,
some of which have greater financial and technical resources than we do, including Oracle Corporation, Infor, SAP AG, Workday,
Inc., CentralSquare Technologies, Thomson Reuters Corporation, Motorola Solutions, Inc., Axon Enterprise, Inc., and Constellation
Software, Inc. In addition, we sometimes compete with consulting and systems integration firms, which develop custom systems,
primarily for larger governments. We also occasionally compete with central internal information service departments of governments,
which requires us to persuade the end-user department to discontinue service by its own personnel and outsource the service to us.
We compete on a variety of factors, including price, service, name recognition, reputation, technological capabilities, and the ability to
configure products and services to address the individual requirements of the client. Our ability to offer an integrated system of
applications for several offices or departments is often a competitive advantage. Governmental units often are required to seek
competitive proposals through a request for proposal process, and some prospective clients use consultants to assist them with the
proposal and vendor selection process.
SUPPLIERS
Substantially all of the computers, peripherals, printers, scanners, operating system software, office automation software, and other
equipment necessary for the implementation and provision of our software systems and services are presently available from several
third-party sources. Hardware is purchased on original equipment manufacturer or distributor terms at discounts from retail. We have
not experienced any significant supply problems.
SEASONALITY
Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment
transactions and digital government services and are collected on a recurring basis during the contract term. Transaction-based fees are
historically highest in the second quarter, which coincides with peak outdoor recreation seasons and statutory filing deadlines in many
jurisdictions, and lowest in the fourth quarter due to fewer business days and lower transaction volumes around holidays.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS, AND LICENSES
We regard certain features of our internal operations, software, and documentation as confidential and proprietary and rely on a
combination of contractual restrictions, trade secret laws and other measures to protect our proprietary intellectual property. We
generally do not rely on patents. We typically license our software products under non-exclusive license agreements, which are
generally non-transferable and have a perpetual term.
8
HUMAN CAPITAL RESOURCES
Human Capital
Our experienced, collaborative team is one of the most significant contributors to our success in empowering the public sector to
create smarter, safer, and stronger communities. Our effectiveness in attracting and developing talented team members, many of whom
spend the majority of their careers at Tyler serving our public sector clients, demonstrates our commitment to providing a welcoming
and safe workplace, with a strong culture, compensation and benefits, and continual growth opportunities for our team members.
As of December 31, 2024, we had approximately 7,400 team members. Approximately 94% of our team members work in one of our
54 U.S. offices or remotely in the U.S. Approximately 450 of our team members are in Canada, the Philippines, or India. Race and
gender reporting are based on information provided by team members. We define leadership as positions which are one or two levels
removed from our CEO with management responsibility. The tables below represent our workforce demographics as of December 31,
2024:
Race:
White
Asian
Black or
African
American
Hispanic or
Latino
Two or more
races
Native
Americans and
Other Pacific
Islanders
Not specified
Overall
69.6%
7.7%
4.7%
4.9%
2.1%
0.5%
10.5%
Leadership
84.0%
6.3%
2.9%
3.1%
1.4%
0.4%
1.9%
Gender:
Male
Female
Non-Binary
Not specified
Overall
60.6%
37.1%
2.0%
0.3%
Leadership
62.1%
37.9%
—%
—%
We believe our efforts in managing and supporting our workforce are effective, as evidenced by current levels of applicants, team
member tenure, high levels of engagement reported through survey feedback from Tyler team members, and low team member
turnover.
Our team continues to work collaboratively with and for our clients and partners across multiple work arrangements: fully office-
based, fully remote and a blended approach of office-based and remote work. Prior to COVID, approximately 40% of team members
worked remotely, primarily in sales and professional services roles. As of December 31, 2024, approximately 55% of team members
work remotely and 45% of team members are either partially or fully office-based. Collaboration is an important part of our culture.
We are dedicated to creating opportunities for our team members to connect in person, enhancing both our partially and fully office-
based presence, while maintaining the flexibility that supports their productivity and well-being.
Voluntary workforce turnover (rolling 12-month attrition) was 8% as of December 31, 2024 and 2023, which was similar to pre
COVID levels of turnover at Tyler that consistently outperform industry levels. The average tenure of our team members continues to
be approximately eight years, and approximately 30% of our employees have been employed by Tyler for more than ten years. The
most frequent factor cited by team members leaving Tyler in 2024 was career opportunities. While 27% of positions filled in 2024
were filled by existing Tyler team members, we continue to invest in talent development and making career opportunities clear to team
members, as discussed in further detail below.
Investments in Talent
We are committed to providing Tyler team members with career growth opportunities and the training and resources necessary to
continually strengthen their skills. Our talent assessment and development programs are designed to provide managers and individual
contributors with the resources needed to achieve career goals, strengthen management skills and effectively lead their teams.
For example, in 2024:
•
Division presidents and corporate function executives conducted annual leadership assessment and talent reviews with their
HR leaders and leadership teams to identify development priorities within their teams.
•
The executive team, in partnership with HR, updated the leadership competencies required to execute our Tyler 2030 vision
and beyond. The competencies were integrated into key people processes, including performance evaluations and 360
feedback assessments. They also served as the foundation for a new leadership framework to build a pipeline of talent from
new leaders through executive level leadership.
9
•
Nearly 250 Tyler managers participated in our nine-month Tyler Manager Development program which includes more than
50 hours of interactive, experiential learning focused on developing skills managers need to lead a high performing team. The
program also includes multiple leadership assessments, including 360-degree feedback, and a dedicated mentor to support
their development. To date, 50% of Tyler managers have participated in the program.
•
Tyler enhanced our investment in our enterprise-wide mentoring platform to support mentoring relationships for targeted skill
building and formal mentoring engagements.
•
Tyler team members completed over 25,000 hours of Tyler-sponsored leadership training, professional development, and
compliance training to support continuous learning and career development.
•
As we continue our multi-year investment in developing cloud skills across the Tyler workforce, 657 Tyler team members
participated in approximately 13,000 hours of AWS cloud training, resulting in 99 AWS certifications and 227 accreditations
completed.
Oversight and Management
Our human resources team is tasked with leading and supporting our organization in managing employment-related matters, including
recruiting and hiring, onboarding and training, compensation planning, and talent management and development. Our executive team
is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as our
management development and succession planning practices. Management periodically reports to the Board of Directors and its
committees regarding human capital measures and results that guide how we attract, retain and develop a workforce to enable our
business strategies.
Health & Safety
We continually invest in the well-being of Tyler team members and their families, providing a range of resources in support of mental
and emotional, financial, and physical health and wellness.
Inclusion
One of Tyler’s stated core values is inclusion, which we define as respecting and valuing each other. To organize our efforts on this
particular value, we operate Tyler Together, with strategic pillars focused on our culture, career development, and community impact.
In 2024, achievements included:
•
Improved metrics in our talent attraction and retention efforts;
•
Extending equity grants to a broader segment of our workforce, with over 20% of 2024 grantees representing first-time
grantees; and
•
The re-launch or first-time launch of Employee Resource Groups (“ERGs”) including Tyler Women, Tyler Military Veterans,
and the Tyler LGBTQ+ Network, each with defined business objectives.
INTERNET WEBSITE AND AVAILABILITY OF PUBLIC FILINGS
We file annual, quarterly, current and other reports, proxy statements and other information with the Securities and Exchange
Commission, or SEC, pursuant to the Securities Exchange Act. You may read and copy any materials we file with the SEC at the
SEC’s Public Reference Room by calling the SEC at 1-800-732-0330. The SEC maintains an Internet site that contains reports, proxy
and other information statements, and other information regarding issuers, including us, that file electronically with the SEC. The
address of this site is http://www.sec.gov.
We also maintain a website at www.tylertech.com. We make available free of charge through this site our Annual Report on Form 10-
K, Quarterly Reports on Form 10-Q, Forms 4 and 5, Current Reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material
with, or furnish it to the SEC. In addition, copies of our annual report will be made available, free of charge, upon written request.
Our “Code of Business Conduct and Ethics” is also available on our website. We intend to satisfy the disclosure requirements
regarding amendments to, or waivers from, a provision of our Code of Business Conduct and Ethics by posting such information on
our website.
10
ITEM 1A.
RISK FACTORS.
An investment in our common stock involves a high degree of risk. Investors evaluating our company should carefully consider the
factors described below and all other information contained in this Annual Report. Any of the following factors could materially harm
our business, operating results, and financial condition. Additional factors and uncertainties not currently known to us or that we
currently consider immaterial could also harm our business, operating results, and financial condition. This section should be read in
conjunction with the Financial Statements and related Notes and Management’s Discussion and Analysis of Financial Condition and
Results of Operations included in this Annual Report. We may make forward-looking statements from time to time, both written and
oral. We undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements. Our
actual results may differ materially from those projected in any such forward-looking statements due to a number of factors, including
those set forth below and elsewhere in this Annual Report.
Risks Associated with Our Business, Including Our Software Products
Cyber-attacks and security vulnerabilities can disrupt our business and harm our competitive position.
Threats to IT security can take, and have in the past taken, a variety of forms. Individuals and groups of hackers, and sophisticated
organizations including state-sponsored organizations, may take steps that pose threats to our clients and our IT. They have in the past
and may in the future develop and deploy malicious software to gain access to our internal networks, and/or to attack our products and
services, gain access to data centers we use to host client deployments, or act in a coordinated manner to launch distributed denial of
service or other coordinated attacks. Cyber threats are constantly evolving, thereby increasing the difficulty of detecting and
successfully defending against them. Cyber threats can have cascading impacts that unfold with increasing speed across our internal
networks and systems and those of our partners and clients. Breaches of our internal network have disrupted and could in the future
disrupt the security of our internal systems and business applications, and could impair our ability to provide services to our clients
and protect the privacy of their data, result in product development delays, compromise confidential or technical business information
harming our competitive position, result in theft or misuse of our intellectual property or other assets, require us to allocate more
resources to improve technologies, or otherwise adversely affect our business. Our business policies and internal security controls may
not keep pace with these evolving threats. For example, the evolving use of artificial intelligence (“AI”) increases the risk of
cyberattacks and data breaches, which themselves can evolve more rapidly when artificial intelligence is used to facilitate the attack.
Despite the network and application security, threat intelligence services, internal control measures, and physical security procedures
we employ to safeguard our systems, we may still be vulnerable to a security breach, intrusion, or loss or theft of confidential client
data, transaction data, or proprietary company information, which may harm our business, reputation and future financial results. Use
of artificial intelligence by our team members, whether authorized or unauthorized, could increase the risk that our intellectual
property and other proprietary information may be unintentionally disclosed. In addition, vulnerabilities in our clients’ on-premises
infrastructure have in the past and may in the future be exploited by a bad actor, with the resulting impacts being linked to or attributed
to, correctly or incorrectly, our software or services, which could also harm our business, reputation, and future financial results, even
if our software or services were not the cause of the exploitation. The lost revenue and containment, remediation, investigation, legal
and other costs could be significant and may exceed our insurance policy limits or may not be covered by insurance at all. Further, we
may be subject to regulatory enforcement actions and litigation that could result in financial judgments or the payment of settlement
amounts and disputes with insurance carriers concerning coverage.
Disclosure of personally identifiable information and/or other sensitive client data could result in liability and harm our reputation.
We store and process increasingly large amounts of personally identifiable information and other confidential information of our
clients. The continued occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to
information security. Despite our efforts to improve security controls, it is possible our security controls over personal data, our
training of employees on data security, and other practices we follow may not prevent the improper disclosure of sensitive client data
that we store and manage. The evolving threat landscape, including new technologies that leverage artificial intelligence, may increase
the external threats to the data we store and process. Disclosure of personally identifiable information and/or other sensitive client data
has resulted in obligations to send “data breach” notifications under applicable state laws, or to assist our clients in doing so, and/or
could result in liability and harm our reputation.
11
We depend on third parties with whom we engage or collaborate for certain projects, deliverables, and/or financial transaction
processes. If these parties fail to satisfy their obligations to us or we are unable to maintain these relationships, our operating results
and business prospects could be adversely affected.
To satisfy our obligations under client contracts, we often engage third parties to provide certain deliverables or fulfill certain
requirements. We may also use third parties to ensure that our services and solutions integrate with the software, systems, or
infrastructure requirements of other vendors and service providers. Our ability to serve our clients and deliver our solutions in a timely
manner depends on our ability to retain and maintain relationships with third-party vendors and service providers and the ability of
these third parties to meet their obligations in a timely manner, as well as on our effective oversight of their performance. If any third
party fails to perform on a timely basis the agreed-upon services, our ability to fulfill our obligations may be jeopardized. Third-party
performance deficiencies could result in breaches of our obligations with respect to, or the termination for default of, one or more of
our client contracts. A breach or termination for default could expose us to liability for damages and have an adverse effect on our
business prospects, results of operations, cash flows and financial condition and our ability to compete for future contracts and orders.
A global economic slowdown, a pandemic, or similar circumstances could also adversely affect the businesses of our third-party
providers, hindering their ability to provide the services on which we rely. Our agreements with third parties typically are non-
exclusive and do not prohibit them from working with our competitors or from engaging with our clients directly. If we are
unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to
grow our revenues could be impaired and our business, operating results or financial condition could be adversely affected.
In addition, we may act as a subcontractor to a third-party prime contractor to secure new projects. Subcontracting arrangements
where we are not the prime contractor pose unique risks to us because we may not have control over the client relationship, and our
ability to generate revenues under such subcontracts may depend on the prime contractor, its performance and relationship with the
client, and its relationship with us. We could suffer losses in the event a prime contract under which we serve as a subcontractor is
terminated, whether for non-performance by the prime contractor or otherwise. Upon a termination of the prime contract, our
subcontract would similarly terminate, and the resulting contract loss could have an adverse effect on our business prospects, results of
operations, cash flows, and financial condition and our ability to compete for future contracts and orders.
We rely on third-party providers—including Amazon Web Services—for hosting services and other technology-related services needed
to deliver certain of our cloud solutions. Any disruption in the services provided by such third-party providers could adversely affect
our business and subject us to liability.
A material portion of our business is provided through software hosting services, which are sometimes hosted from and use computing
infrastructure provided by third parties, including AWS. These hosting services depend on the uninterrupted operation of data centers
and the ability to protect computer equipment and information stored in these data centers against damage that may be caused by
natural disaster, fire, power loss, telecommunications or Internet failure, acts of terrorism, unauthorized intrusion, computer viruses,
and other similar damaging events. If any of our data centers were to become inoperable for an extended period, we might be unable to
fulfill our contractual commitments. Although we take what we believe to be reasonable precautions against such occurrences, we can
give no assurance that damaging events such as these will not result in a prolonged interruption of our services, which could result in
client dissatisfaction, loss of revenues, and damage to our business.
Third-party hosting service providers have no obligation to renew their agreements with us on commercially reasonable terms or at all.
If we are unable to renew these agreements on commercially reasonable terms, we may be required to transition to a new provider and
we may incur significant costs and possible service interruption in connection with doing so. In addition, such service providers could
decide to close their facilities or change or suspend their service offerings without adequate notice to us. Moreover, any financial
difficulties, such as bankruptcy, faced by such service providers may have negative effects on our business, the nature and extent of
which are difficult to predict. Because we cannot easily switch third-party hosting service providers, any disruption with respect to our
current providers would impact our operations and our business could be adversely impacted. Problems faced by our hosting service
providers could adversely affect the experience of our clients. For example, AWS has experienced significant service outages in the
past and may do so again in the future. As we continue to migrate legacy solutions deployed on premises to the cloud, and to optimize
our solutions for the cloud, we may be exposed to additional cybersecurity threats.
Material portions of our business require the Internet infrastructure to be reliable.
Part of our future success continues to depend on the use of the Internet as a means to access public information and perform
transactions electronically, including, for example, electronic filing of court documents and electronic payment processing. This in
part requires ongoing maintenance of the Internet infrastructure, especially to prevent interruptions in service, as well as additional
development of that infrastructure. This requires a reliable network backbone with the necessary speed, data capacity, security, and
timely development of complementary products for providing reliable Internet access and services. If this infrastructure fails to be
sufficiently developed or be adequately maintained, our business would be harmed because users may not be able to access our
government portals. To date, any such outages have been temporary, and any business interruptions were contained and immaterial.
12
We employ third-party licensed software and software components for use in or with our solutions, and the inability to maintain these
licenses or the presence of errors or security vulnerabilities in the software we license could limit the functionality of our products and
result in increased costs or reduced service levels, which would adversely affect our business.
We incorporate and include third-party software into and with certain of our products and solutions. We also use third-party software
and tools in certain areas of the development process for our solutions. We anticipate that we will continue to rely on such third-party
software and development tools in the future. There can be no assurance that these third parties will continue to make their software or
tools available to us on acceptable terms, or at all, not make their products available to our competitors on more favorable terms,
invest the appropriate levels of resources in their products and services to maintain and enhance the capabilities of their software, or
remain in business. Any impairment in our relationship with these third parties or our ability to license or otherwise use their software
or tools could have a material adverse effect on our business, results of operations, cash flow, and financial condition. Although we
believe that there are commercially reasonable alternatives to the third-party software and tools we currently license, this may not
always be the case, or they may be difficult, time-consuming, or costly to replace. In addition, although we maintain a supplier
security evaluation process, if the third-party software or tools we use has or have errors, security vulnerabilities, or otherwise
malfunctions, the functionality of our solutions may be negatively impacted, our clients may experience reduced service levels, and
our business may suffer. To the extent a third-party relies on artificial intelligence, improper processing of data by those service
providers could harm our reputation, business and clients, or expose us to legal liability.
Certain of our solutions utilize open source software, and any failure to comply with the terms of one or more of these open source
licenses could adversely affect our business.
Certain of our solutions include software covered by open source licenses. The terms of various open source licenses have not been
interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions
or restrictions on our ability to market our solutions. It is possible under the terms of certain open source licenses, if we combine our
proprietary software with open source software in a certain manner, that we could be required to release the source code of our
proprietary software and make our proprietary software available under open source licenses. In the event that portions of our
proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected
portions of our source code, re-engineer all or a portion of our solutions, or otherwise be limited in the licensing of our solutions, each
of which could reduce or eliminate the value of our solutions. In addition to risks related to license requirements, use of open source
software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide
warranties or controls on the origin of the software. Many of the risks associated with the use of open source software cannot be
eliminated and could adversely affect our business.
We run the risk of errors or defects with new products or enhancements to existing products.
Our software products are complex and have in the past, and may in the future, contain errors or defects, especially when first
introduced or when new versions or enhancements are released. Any such defects could result in a loss of revenues or delay market
acceptance. Our license agreements typically contain provisions designed to limit our exposure to potential liability. However, it is
possible we may not always successfully negotiate such provisions in our client contracts or the limitation of liability provisions may
not be effective due to existing or future federal, state, or local laws, ordinances, or judicial decisions. Although we maintain errors
and omissions and general liability insurance, and we try to structure contracts to limit liability, we cannot guarantee that a successful
claim could not be made or would not have a material adverse effect on our future operating results.
We must timely respond to technological changes to be competitive.
The market for our products is characterized by technological change, evolving industry standards in software technology, changes in
client requirements, and frequent new product introductions and enhancements. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing products obsolete and unmarketable. As a result, our
future success will depend, in part, upon our ability to enhance existing products and develop and introduce new products that keep
pace with technological developments, satisfy increasingly sophisticated client requirements, and achieve market acceptance. We
cannot assure you that we will successfully identify new product opportunities and develop and bring new products to market in a
timely and cost-effective manner. The products, capabilities, or technologies developed by others could also render our products or
technologies obsolete or noncompetitive. Our business may be adversely affected if we are unable to develop or acquire new software
products or develop enhancements to existing products on a timely and cost-effective basis, or if such new products or enhancements
do not achieve market acceptance.
13
As we assess the challenges and opportunities of incorporating AI technologies into our products and services, we may not
successfully enhance our offerings in alignment with market demands or industry expectations at a pace that matches our competitors.
Delays in adoption or innovation could render our offerings less competitive or obsolete. AI technology is rapidly evolving, and while
we are prioritizing a measured approach based on known best practices, the investments required, the need for specialized skills and
expertise, and the shifting legal and regulatory landscape may expose us to operational, financial, and reputational risks. Additionally,
AI-generated outputs may be misleading, insecure, inaccurate, harmful, or otherwise flawed, potentially resulting in adverse
consequences to our business.
We may be unable to protect our proprietary rights.
Many of our product and service offerings incorporate proprietary information, trade secrets, know-how, and other intellectual
property rights. We rely on a combination of contracts, copyrights, and trade secret laws to establish and protect our proprietary rights
in our technology. We cannot be certain that we have taken all appropriate steps to deter misappropriation of our intellectual property,
including to the extent our data is consumed by generative artificial intelligence technology. There has also been an apparent evolution
in the legal standards and regulations that courts and the U.S. patent office may apply in favorably evaluating software patent rights.
We are not currently involved in any material intellectual property litigation; however, we may be a party to such litigation in the
future to protect our proprietary information, trade secrets, know-how, and other intellectual property rights. We cannot assure you
that third parties will not assert infringement or misappropriation claims against us with respect to current or future products. Any
claims or litigation, with or without merit, could be time-consuming, costly, and a diversion to management. Any such claims and
litigation could also cause product shipment delays or require us to enter into royalty or licensing arrangements. Such royalty or
licensing arrangements, if required, may not be available on terms acceptable to us, if at all. Therefore, litigation to defend and enforce
our intellectual property rights could have a material adverse effect on our business, regardless of the final outcome of such litigation.
Clients may elect to terminate our recurring contracts and manage operations internally.
We provide annually recurring maintenance contracts for clients who are deployed on-premises, and recurring Software as a Service
contracts for clients who are deployed in the cloud. It is possible that our clients may elect to not renew recurring contracts for our
software, trying instead to maintain and operate the software themselves using their perpetual license rights (excluding software
applications that we provide on a hosted or software as a service basis), or migrating to a different cloud solution. Alternatively, clients
may elect to drop maintenance on certain modules that they ultimately decide not to use. This could adversely affect our revenues and
profits. Additionally, they may inadvertently allow our intellectual property or other information to fall into the hands of third parties,
including our competitors, which could adversely affect our business.
Risks Associated with Selling Products and Services into the Public Sector Marketplace
Selling products and services into the public sector poses unique challenges.
We derive substantially all of our revenues from sales of software and services to state, county, and city governments, other federal or
municipal agencies, and other public entities. We expect that sales to public sector clients will continue to account for substantially all
of our revenues in the future. We face many risks and challenges associated with contracting with governmental entities, including:
•
Resource limitations caused by budgetary constraints, which may provide for a termination of executed contracts due to
a lack of future funding
•
Long and complex sales cycles
•
Contract payments at times are subject to achieving implementation milestones, and we may have differences with
clients as to whether milestones have been achieved
•
Political resistance to the concept of contracting with third parties to provide IT solutions, or resistance to adopting cloud
solutions
•
Legislative changes affecting a local government’s authority to contract with third parties
•
Varying bid procedures and internal processes for bid acceptance
•
Various other political factors, including changes in governmental administrations and personnel
Each of these risks is outside our control. If we fail to adequately adapt to these risks and uncertainties, our financial performance
could be adversely affected.
14
Global health crises, such as a pandemic, may adversely affect our business and results of operations.
A public health crisis, such as a pandemic, may negatively impact our business and financial results. As seen with the COVID
pandemic, certain infection rates or virus strains may result in government authorities imposing measures to contain the virus,
including travel bans and restrictions, quarantines, and business limitations and shutdowns. While we are unable to accurately predict
the full impact that a health crisis or pandemic would have on our results from operations, financial condition, liquidity and cash flows
due to numerous uncertainties, including the duration and severity of the pandemic and containment measures and associated
compliance, a pandemic may negatively impact our revenues and other financial results.
Because an increasing portion of our revenues are recurring, the effect of public health-related shutdown on our results of operations
may also not be fully reflected for some time. We may see some more immediate impact on our business should there be new delays
in government procurement processes and uncertainty around public sector budgets, or new delays in implementations caused by
travel restrictions, closed offices, or clients shifting focus to more pressing issues.
Appraisal projects and software implementations may be delayed if clients put projects on hold or slow projects by extending go-live
dates. While we have the ability to deliver most of our professional services remotely, some of our professional services, including
appraisal assessments, are more effective when performed on-site, and certain clients may continue to insist on on-site services in any
event. In addition, our delivery of some professional services requires the availability of client personnel. There may be a negative
impact on our revenues if we are unable to deliver these services. Also, we expect software licenses and subscriptions revenues to be
negatively affected if there are delays in procurement processes. Some clients could request changes to payment terms, negatively
impacting the timing of collections of accounts receivables in future periods.
We have historically evaluated goodwill for impairment annually as of October 1, or more frequently if impairment indicators arose.
Subsequent to our annual goodwill impairment analysis, we monitor for any events or changes in circumstances, such as significant
adverse changes in business climate or operating results, changes in management’s business strategy, an inability to successfully
introduce new products in the marketplace, an inability to successfully achieve internal forecasts or significant declines in our stock
price, which may represent an indicator of impairment. The occurrence of any of these events, which could be caused or impacted by a
public health crisis similar to the COVID-19 pandemic, may require us to record future goodwill impairment charges.
A prolonged economic slowdown could harm our operations.
A prolonged economic slowdown or recession could reduce demand for our software products and services. Governments may face
financial pressures that could in turn affect our growth rate and profitability in the future. There is no assurance that government
spending levels will be unaffected by declining or stagnant general economic conditions, and if budget shortfalls occur, they may
negatively impact government IT spending and could adversely affect our business.
The open bidding process creates uncertainty in predicting future contract awards.
Many governmental agencies purchase products and services through an open bidding process. Generally, a governmental entity will
publish an established list of requirements requesting potential vendors to propose solutions for the established requirements. To
respond successfully to these requests for proposals, we must accurately estimate our cost structure for servicing a proposed contract,
the time required to establish operations for the prospective client, and the likely terms of any other third-party proposals submitted.
We cannot guarantee that we will win any bids in the future through the request for proposal process, or that any winning bids will
ultimately result in contracts on favorable terms. Our failure to secure contracts through the open bidding process, or to secure such
contracts on favorable terms, may adversely affect our revenues and gross margins.
We face significant competition from other vendors and potential new entrants into our markets.
We believe we are a leading provider of integrated software solutions for the public sector.
Our market is highly fragmented with a large number of competitors that vary in size, product platform, and product scope. Our
competitors include consulting firms, publicly held companies that focus on selected segments of the public sector market, and a
significant number of smaller, privately held companies. Certain competitors have greater technical, marketing, and financial
resources than we do. We cannot assure you that such competitors will not develop products or offer services that are superior to our
products or services or that achieve greater market acceptance.
We also compete with internal, centralized IT departments of governmental entities, which requires us to persuade the end-user to stop
the internal service and outsource to us. In addition, our clients and prospective clients could elect to provide information management
services internally through new or existing departments, which could reduce the market for our services.
15
We could face additional competition as other established and emerging companies enter the public sector software market and new
products and technologies are introduced. The development of next-generation solutions that utilize advanced features, including
artificial intelligence and machine learning, may require us to make predictions about the willingness of the public sector market to
adopt such offerings. As we choose to invest in such technologies, we may be required to commit significant resources to maintain the
competitiveness of our offerings before knowing whether we have correctly predicted market receptiveness to them.
Increased competition could also result in pricing pressure, fewer client orders, reduced gross margins, and loss of market share.
Current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the needs of our prospective clients. It is possible that new
competitors or alliances may emerge and rapidly gain significant market share. We cannot assure you that we will be able to compete
successfully against current and future competitors, and the failure to do so would have a material adverse effect upon our business.
Fixed-price contracts may affect our profits.
Some of our contracts are structured on a fixed-price basis, which can lead to various risks, including:
•
The failure to accurately estimate the resources and time required for an engagement
•
The failure to effectively manage our clients’ expectations regarding the scope of services delivered for a fixed fee
•
The failure to timely and satisfactorily complete fixed-price engagements within budget
If we do not adequately assess and manage these and other risks, we may be subject to cost overruns and penalties, which may harm
our financial performance.
Changes in the insurance markets may affect our business.
Some of our clients, primarily those for our property appraisal services, require that we secure performance bonds before they will
select us as their vendor. In addition, we have in the past been required to provide letters of credit as security for the issuance of a
performance bond. We cannot guarantee that we will be able to secure such performance bonds in the future on terms that are
favorable to us, if at all. Our inability to obtain performance bonds on favorable terms or at all could impact our future ability to win
some contract awards, particularly large property appraisal services contracts, which could negatively impact revenues. In addition, the
general insurance markets may experience volatility and/or restrictive coverage trends, which may lead to future increases in our
general and administrative expense and negatively impact our operating results.
Risks Related to Our Indebtedness
Servicing our indebtedness requires a significant amount of cash. We may not have sufficient cash flow from our business to pay our
indebtedness, and we may not otherwise have the ability to raise the funds necessary to settle for cash conversions of the Convertible
Senior Notes or to repurchase the Convertible Senior Notes upon a fundamental change, or to repay our indebtedness obligations
under our 2024 Credit Agreement, each of which could adversely affect our business and results of operations.
On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lenders party thereto and Wells
Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”).
The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0
million, including subfacilities for standby letters of credit and swingline loans. On March 9, 2021, we issued 0.25% Convertible
Senior Notes due in 2026 in the aggregate principal amount of $600.0 million (“the Convertible Senior Notes” or “the Notes”). The
Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 9, 2021,
with U.S. Bank National Association as trustee.
As of December 31, 2024, we had outstanding an aggregate principal amount of $600 million of our Convertible Senior Notes and
none under our 2024 Credit Agreement. Our indebtedness may increase our vulnerability to any generally adverse economic and
industry conditions, and we and our subsidiaries may, subject to the limitations in the terms of our existing and future indebtedness,
incur additional debt, secure existing or future debt or recapitalize our debt. If we incur additional indebtedness, the risks related to our
business would increase and our ability to service or repay our indebtedness may be adversely impacted.
16
Pursuant to their terms, holders may convert their Convertible Senior Notes at their option prior to the scheduled maturities of their
Convertible Senior Notes under certain circumstances. Upon conversion of the Convertible Senior Notes, unless we elect to deliver
solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will
be obligated to make cash payments. In addition, holders of our Convertible Senior Notes will have the right to require us to
repurchase their Convertible Senior Notes upon the occurrence of a fundamental change (as defined in the Indenture, dated as of
March 9, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”) (the “Indenture”)), at a
repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid
interest, if any. Although it is our intention, and we currently expect to have the ability, to settle the Convertible Senior Notes in cash,
there is a risk that we may not have enough available cash or be able to obtain financing at the time we are required to make
repurchases of Convertible Senior Notes surrendered or Convertible Senior Notes being converted. In addition, our ability to make
payments may be limited by law, by regulatory authority, or by agreements governing our future indebtedness. Our failure to
repurchase Convertible Senior Notes at a time when the repurchase is required by the Indenture or to pay any cash payable on future
conversions of the Convertible Senior Notes as required by the Indenture would constitute a default under the Indenture. A default
under the Indenture or the fundamental change itself could also lead to a default under agreements governing our other existing or
future indebtedness. If the repayment of other indebtedness were to be accelerated after any applicable notice or grace periods, we may
not have sufficient funds to repay the other indebtedness and repurchase the Convertible Senior Notes or make cash payments upon
conversions thereof.
Our ability to make scheduled payments of the principal and interest on our indebtedness when due or to make payments upon
conversion or repurchase demands with respect to our Convertible Senior Notes, or to refinance our indebtedness as we may need or
desire, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under our
existing indebtedness, and any future indebtedness we may incur, and to make necessary capital expenditures. If we are unable to
generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital
expenditures, selling assets, refinancing, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our
ability to refinance existing or future indebtedness will depend on the capital markets and our financial condition at such time. We
may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on
our existing or future indebtedness and have a material adverse effect on our business, results of operations, and financial condition.
Covenant restrictions under our indebtedness may limit our ability to operate our business and may adversely affect our financial
condition, results of operations, and earnings per share.
The Indenture governing the Convertible Senior Notes and the 2024 Credit Agreement do contain, and our future indebtedness
agreements may contain, covenants that restrict our ability to finance future operations or capital needs or to engage in other business
activities. Subject to customary carve-outs, thresholds and baskets, the 2024 Credit Agreement (and the Indenture by means of a cross-
default) restricts, absent consent of the agent and lenders under the 2024 Credit Agreement, our ability and the ability of our restricted
subsidiaries to, among other things:
•
Incur additional indebtedness,
•
Permit liens on our assets,
•
Make certain investments, acquisitions and dispositions,
•
Make certain specified fundamental changes, and
•
Make certain restricted payments.
In addition, the 2024 Credit Agreement (and the Indenture by means of a cross-default) contains other customary affirmative and
negative covenants, and events of default. The 2024 Credit Agreement is unsecured but requires us to maintain certain financial ratios
regarding our total leverage and other financial conditions in addition to the restrictions described above. Events beyond our control,
including changes in general economic and business conditions, may result in a breach of any of these covenants and result in a default
under the 2024 Credit Agreement that may, in turn, result in a default under the Indenture. If an event of default under the 2024 Credit
Agreement occurs, the lenders could terminate all commitments to lend and elect to declare all amounts outstanding thereunder,
together with accrued interest, to be immediately due and payable. If we were unable to pay such amounts, the lenders could proceed
against the guarantees by our direct and indirect material domestic subsidiaries. Should the lenders proceed against the guarantees, we
cannot give assurance that we would have sufficient assets to pay amounts due on the 2024 Credit Agreement and the Convertible
Senior Notes.
17
Variable rate indebtedness subjects the Company to interest rate risk, which could cause our debt service obligations to increase
significantly.
Our borrowings under the 2024 Credit Agreement are, and are expected to continue to be, at variable rates of interest and expose us to
interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though
the amount borrowed remained the same, and our net income would decrease. Loans under the revolving credit facility will bear
interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime commercial lending rate (subject
to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, three-, or six-month SOFR rate plus a margin
of 1.125% to 1.75%. The margin in each case is based upon Tyler’s total net leverage ratio, as determined pursuant to the 2024 Credit
Agreement. In addition to paying interest on the outstanding principal of loans under the revolving credit facility, the Company is
required to pay a commitment fee initially in the amount of 0.125% per annum, which will subsequently range from 0.125% to 0.25%
based upon the Company’s total net leverage ratio.
The conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and
results of operations.
In the event the conditional conversion feature of the notes is triggered, holders of our Convertible Senior Notes will be entitled to
convert the Convertible Senior Notes at any time during specified periods at their option. If one or more holders elect to convert their
Convertible Senior Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other
than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation
through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their
Convertible Senior Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding
principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Transactions relating to our Convertible Senior Notes may affect the value of our common stock.
Our Convertible Senior Notes may become convertible in the future at the option of their holders under certain circumstances. If
holders of our Convertible Senior Notes elect to convert their notes, we may settle our conversion obligation by delivering to them a
significant number of shares of our common stock, which would cause dilution to our existing shareholders.
Fluctuation in inflation and interest rate could adversely affect our financial condition and results of operations.
Our liquidity and ongoing access to capital could be materially and negatively affected by volatility in the financial and securities
markets, including increased inflation and interest rates. Our continued access to sources of liquidity depends on multiple factors,
including global macroeconomic conditions, the condition of global financial markets, the availability of sufficient amounts of
financing and our operating performance. There have been periods of increased volatility in the financial and securities markets, as
well as increased inflation and interest rates, which generally has made access to capital less certain and has increased the cost of
obtaining new capital, and future volatility may create similar risks. We may need to obtain equity, equity-linked, or debt financing in
the future to fund our operations, including our acquisition strategy, and there is no guarantee that such debt financing will be
available in the future, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources
of funding.
Risks Associated with Our Periodic Results and Stock Price
Fluctuations in quarterly revenues could adversely impact our operating results and stock price.
Our revenues and operating results can be difficult to predict and may fluctuate substantially from quarter to quarter for a variety of
reasons, including:
•
The size of license transactions can vary significantly
•
Clients may unexpectedly postpone or cancel procurement processes due to changes in strategic priorities, project
objectives, budget, or personnel
•
Client purchasing processes vary significantly and a client’s internal approval, expenditure authorization, and contract
negotiation processes can be difficult and time consuming to complete, even after selection of a vendor
•
The number, timing, and significance of software product enhancements and new software product announcements by us
and our competitors may affect purchase decisions
•
We may have to defer revenues under our revenue recognition policies and GAAP
In each fiscal quarter, our expense levels, operating costs, and staffing levels are based to some extent on projections of future
revenues and are relatively fixed. If our actual revenues fall below expectations, we could experience a reduction in earnings. Also, if
actual revenues or earnings for any given quarter fall below expectations, it may lead to a decline in our stock price.
18
Increases in our investment in research and development could decrease overall margins.
An important element of our corporate strategy is to continue to dedicate a significant amount of resources to research and
development and related product and service opportunities, both through internal investments and the acquisition of intellectual
property from companies that we have acquired. We believe that we must continue to dedicate a significant amount of resources to our
research and development efforts to maintain our competitive position, and research and development expense could adversely affect
operating margins.
Our stock price may be volatile.
The market price of our common stock may be volatile. Examples of factors that may significantly impact our stock price include:
•
Actual or anticipated fluctuations in our operating results
•
Announcements of technological innovations, new products, or new contracts by us or our competitors
•
Developments with respect to patents, copyrights, or other proprietary rights
•
Conditions and trends in the software and other technology industries
•
Changes in financial estimates by securities analysts
•
Changes in interest rates
•
General economic and market conditions and other factors
In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly
affected the market prices of technology company stocks and may in the future adversely affect the market price of our stock.
Sometimes, securities class action litigation is filed following periods of volatility in the market price of a particular company’s
securities. We cannot assure you that similar litigation will not occur in the future with respect to us. Such litigation could result in
substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect upon our
financial performance.
Our financial outlook may not be realized.
From time to time, in press releases and otherwise, we may publish forecasts or other forward-looking statements regarding our
results, including estimated revenues or earnings. Any forecast of our future performance reflects various assumptions. These
assumptions are subject to significant uncertainties, and as a matter of course, any number of them may prove to be incorrect. Further,
the achievement of any forecast depends on numerous risks and other factors (including those described in this discussion), many of
which are beyond our control. As a result, we cannot be certain that our performance will be consistent with any management
forecasts or that the variation from such forecasts will not be material and adverse. Current and potential stockholders are cautioned
not to base their entire analysis of our business and prospects upon isolated predictions, but instead are encouraged to utilize our entire
publicly available mix of historical and forward-looking information, as well as other available information regarding us, our products
and services, and the software industry when evaluating our prospective results of operations.
Risks Associated with Our Growth Strategy and Other General Corporate Risks
We may experience difficulties in executing our acquisition strategy.
A material portion of our historical growth has resulted from strategic acquisitions. Although our current focus is on organic internal
growth, we will continue to identify and pursue strategic acquisitions with suitable candidates. These transactions involve significant
challenges and risks, including risks that a transaction does not advance our business strategy; that we do not achieve the expected
return on our investment; that we have difficulty integrating business systems and technology; that we have difficulty retaining or
integrating new employees; that the transactions distract management from our other businesses; that we acquire unforeseen liabilities;
and other unanticipated events. Our future success will depend, in part, on our ability to successfully integrate future acquisitions into
our operations. It may take longer than expected to realize the full benefits of these transactions, such as increased revenue, enhanced
efficiencies, or increased market share, or the benefits may be ultimately less than we expected. Although we conduct due diligence
reviews of potential acquisition candidates, we may not identify all material liabilities or risks related to acquisition candidates. There
can be no assurance that any such strategic acquisitions will be accomplished on favorable terms or will result in profitable operations.
Our failure to properly manage growth could adversely affect our business.
We continue to expand our operations by pursuing existing and potential market opportunities. This growth places significant
demands on management and operational resources. In order to manage growth effectively, we must implement and improve our
operational systems, procedures, and controls on a timely basis. If we fail to implement these systems, our business may be materially
adversely affected.
19
Increases in labor costs, including wages, and an overall tightening of the labor market, could adversely affect our business, results of
operations or financial condition.
The labor costs associated with our business are subject to several external factors, including unemployment levels and the quality and
the size of the labor market, prevailing wage rates, minimum wage laws, wages and other forms of remuneration and benefits offered
to prospective employees by competitor employers, health insurance costs and other insurance costs and changes in employment and
labor legislation or other workplace regulation. If we are unable to mitigate wage rate increases driven by increases to the competitive
labor market through automation and other labor savings initiatives, our labor costs may increase. Furthermore, high inflation rates
could also push up our labor costs. There is no assurance that our revenues will increase at the same rate as these labor cost increases
to maintain the same level of profitability.
In the event we must offer increased wages or other competitive benefits and incentives to attract and retain qualified personnel and
fail to do so, the quality of our workforce could decline, causing certain aspects of our business to suffer. Increases in labor costs could
force us to increase our prices, which could adversely impact sales. Although we have not experienced any material labor shortage to
date, we have observed an overall tightening and increasingly competitive labor market and have recently experienced and expect to
continue to experience some labor cost pressures. If we are unable to hire and retain capable employees, manage labor cost pressures,
or if mitigating measures we take in response to increased labor costs have unintended negative effects, including on client service or
retention, our business would be adversely affected. If competitive pressures or other factors prevent us from offsetting increased labor
costs, our profitability may decline and could have an adverse effect on our business, results of operations or financial condition.
We may be unable to hire, integrate, and retain qualified personnel.
Our continued success will depend upon the availability and performance of our key management, sales, marketing, client support, and
product development personnel. The loss of key management or technical personnel could adversely affect us. We believe that our
continued success will depend in large part upon our ability to attract, integrate, and retain such personnel. We have at times
experienced and may continue to experience challenges in recruiting qualified personnel. Competition for qualified software
development, sales, and other personnel is intense, and we cannot assure you that we will be successful in attracting and retaining such
personnel. In addition, competitive job markets may increase our costs relating to compensation packages due to higher salary
expectations and pressures.
Compliance with changing regulation of corporate governance may result in additional expenses.
Changing laws, regulations, and standards relating to corporate governance, compliance, and public disclosure can create uncertainty
for public companies. The costs required to comply with such evolving laws across the various states and at the federal level are
difficult to predict and/or harmonize. To maintain high standards of corporate governance, compliance, and public disclosure, we
intend to invest all reasonably necessary resources to comply with evolving standards. This investment may result in an unforeseen
increase in general and administrative expense and a diversion of management’s time and attention from revenue-generating activities,
which may harm our operating results.
Evolving legal and regulatory landscape over artificial intelligence technologies creates uncertainties.
There is uncertainty about the extent to which privacy and data protection laws apply to artificial intelligence technologies, and any
delay in addressing those concerns may result in liability or regulatory investigations and fines, as well as harms to our business and
reputation. In addition, issues related to intellectual property rights in artificial intelligence technologies have not been fully addressed
by the courts or regulators. As such, to the extent we implement generative artificial intelligence technologies into our products and/or
services, we may face resulting exposure to claims related to copyright infringement or other intellectual property misappropriation.
We do not foresee paying dividends on our common stock.
We have not declared nor paid a cash dividend since we entered the software business in 1998. We intend to retain earnings for use in
the operation and expansion of our business. We do not anticipate paying cash dividends on our common stock in the foreseeable
future.
Provisions in our certificate of incorporation, bylaws, and Delaware law could deter takeover attempts.
Our Board of Directors may issue up to 1,000,000 shares of preferred stock and may determine the price, rights, preferences,
privileges, and restrictions, including voting and conversion rights, of these preferred shares. These determinations may be made
without any further vote or action by our stockholders. The rights of the holders of our common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock
may make it more difficult for a third-party to acquire a majority of our outstanding voting stock. In addition, some provisions of our
Certificate of Incorporation, Bylaws, and the Delaware General Corporation Law could also delay, prevent, or make more difficult a
merger, tender offer, or proxy contest involving us.
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ITEM 1B.
UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 1C.
CYBERSECURITY.
Tyler is committed to remaining vigilant in an ever-changing security environment. Our public sector clients are attractive, data-rich
targets for threat actors. We partner closely with our clients to assist them in following evolving best practices, and constantly evaluate
our own policies and procedures to help ensure that we are implementing safeguards that protect their data and ours.
The same cybersecurity threats that predominate across most industries challenge Tyler and our clients as well. These threats range
from crude phishing attempts to distributed denial-of-service disruptions to sophisticated malware and ransomware, among others. The
evolving use of artificial intelligence increases the risk of cyberattacks and data breaches, which themselves can evolve more rapidly
when artificial intelligence is used to facilitate the attack. We are acutely aware that these same threats exist for our acquisition targets,
our suppliers, and our third-party business partners, and a cybersecurity incident or vulnerability experienced by any of these entities
could also materially and/or adversely impact our business operations and/or performance, both operational and financial, and could
harm our reputation and/or competitive position. In addition, vulnerabilities in our clients’ on-premises infrastructure have in the past
and may in the future be exploited by bad actors, with the resulting impacts being linked to or attributed to, correctly or incorrectly,
our software or services, which could also harm our business, reputation, and future financial results, even if our software or services
were not the cause of the exploitation. Given the criticality of a strong cybersecurity posture, we continuously and conscientiously
invest in our security infrastructure, tooling, and related resources.
Cyber Risk Management Strategy
The Board of Directors is responsible for overseeing Tyler’s senior management in the execution of its risk-management
responsibilities and for assessing Tyler’s overall approach to risk management. The Board exercises these responsibilities periodically
as part of its meetings and through its committees, each of which examines various components of enterprise risk. The Audit
Committee oversees management of financial risks, as well as Tyler’s policies with respect to risk assessment and risk management,
including but not limited to information security risk.
Tyler’s Chief Information Security Office (“CISO”) leads the information security responsibility at Tyler. He has spent his career in
information security, joining Tyler in 2018 and previously working in the payments and semiconductor manufacturing industries. He
is a Certified Information Systems Security Professional (“CISSP”) and a Certified Data Privacy Solutions Engineer (“CDPSE”).
The CISO reports directly to Tyler’s Chief Operations Officer (“COO”), who in turn reports to the President & Chief Executive
Officer. Tyler believes this organizational structure provides a holistic and collaborative approach to cybersecurity risk management,
as the COO also oversees Tyler’s information technology, technology, and cloud operations teams, with whom the CISO works
regularly and closely. The CISO also has a dotted line to the Chair of the Audit Committee.
The CISO leads a full-time Security Risk & Compliance team that assesses, identifies and manages material risks from cybersecurity
threats and oversees our Information Security Risk Management Program. These efforts include the identification, assessment, and
treatment of potential harms to Tyler’s technology, data, and intellectual property. The team continually monitors the potential for
harm to help manage the level of risk.
To help protect client information and Tyler data, Tyler leverages both internal and external resources, including third-party
assessments and threat intelligence services, to work to identify and respond to information security risks. For example:
Internal Resources: Our full-time information security team focuses on managing incoming security risks and developing preventative
responses to potential future risks, using tools targeted at people, processes, and technology. These efforts include security training for
all employees at hire and on an annual basis thereafter, unannounced security testing (particularly on topics such as phishing), and
periodic security alert messages for education or urgent security communications.
We repeatedly test our software during the development cycle, including internal assessments of our flagship solutions. We work
closely with Tyler’s Data Privacy Officer and her team to educate Tyler team members on complementary privacy-by-design
principles. We continuously iterate on access management policies for both technological and physical resources.
21
Tyler staffs an internal incident response team designed to launch when a potential or suspected security incident is reported to or
identified by Tyler. That team is composed of a multi-disciplinary group of Tyler team members, including representatives from the
security, privacy, communications, and relevant business unit teams, as well as outside threat intelligence, forensic and legal advisors
that are called on as needed. The incident response team’s goal is to confirm, contain, mitigate, and remediate the incident, as
applicable, and to conduct a “lessons learned” process when the incident response is completed.
To help ensure disaster recovery and business continuity, Tyler maintains a business continuity plan with comprehensive procedures
designed to recover Tyler and client assets quickly and effectively following a service disruption. Tyler’s policies and procedures with
respect to disaster recovery, as well as its process to help recover critical technology platforms, data center infrastructure, and
operations, are updated regularly, tested annually, and reviewed by third-party auditors. We also partner with our Internal Audit team
to regularly assess and respond to evolving risk management findings.
External resources: Tyler leverages third-party assessments, intelligence services, audits, and reporting obligations to provide
additional layers of accountability, monitoring and testing. This includes a bug reporting program that we publish that invites any third
party to report a security vulnerability they have identified. We also use a Qualified Security Assessor to perform an annual Payment
Card Industry Data Security Standards assessment that tests our credit card data controls, and we undergo an annual System &
Organizational Control audit to generate a report of our key compliance controls and objectives, among other things. Given our
technology in the courts and public safety markets, we also manage compliance with Criminal Justice Information Systems security
standards that are established by the Federal Bureau of Investigation (“FBI”), and we partner with our clients and third-party Criminal
Justice Information Services (“CJIS”) compliance consultants to ensure that we adhere to the requirements applicable to us.
Technology: Tyler also utilizes technology to help harden our environment from internal and external threats. We leverage a third-
party endpoint detection management solution and threat intelligence software, as well as web-filtering tools, a multi-factor
authentication tool, and related tools that support our “defense-in-depth” strategy. These tools are operated by subject-matter experts
that report to the CISO, and Tyler employees are educated on the tooling to the extent applicable.
Third Parties: Our management of third-party security risks is an area of heightened focus for us. Over the past several years, we have
worked to formalize our security due diligence process for each acquisition target, such that security is a formally embedded
component of our due diligence and typically involves our independent testing of the target technology prior to closing the acquisition.
Where a vulnerability or risk is identified, we generally require remediation by the target or attempt to ensure a remediation path post-
closing, with contractual protections and liability parameters set forth in the purchase agreement.
We strive to enhance our vendor risk analysis, with a goal of universalizing the use of form cybersecurity questionnaires and/or
security addenda where applicable. We consider the results of a security and privacy review of material vendor contracts, as well as
our material contracts with business partners. Our goal is to proactively identify and manage potential security risks and
vulnerabilities, and to clearly articulate the responsibility – whether shared, divided, flow-down, or otherwise – of Tyler, our
acquisition targets, our vendors, and/or our business partners. We expect third parties – including our clients – to report cybersecurity
incidents to us so that we can assess the impact of the incident on us.
Cybersecurity Governance
In 2022, we formalized a multi-layered security governance structure, with the goal of ensuring that responsibilities are clear,
information is effectively communicated, priorities are coordinated, and proper oversight is provided. Each “layer” of the governance
structure has unique meeting, reporting, and action cadences to help ensure consistent communication between our security working
groups, our leadership team, and our Board of Directors.
On at least a quarterly basis, Tyler’s CISO provides a formal report to the Audit Committee and to the Board of Directors. Our Audit
Committee Chair and CISO also communicate on an as-needed basis between those quarterly reports. In 2022, Tyler’s Lead
Independent Director completed the requirements to receive the CERT Certificate in Cybersecurity Oversight from the Software
Engineering Institute at Carnegie Mellon University. Another Tyler director possesses more than 38 years of Department of Defense
experience in cyberspace operations and major computer network architectures.
Tyler’s governance practices are supported by several segments of Tyler’s senior leadership, management, and teams. This includes
security working groups and a security governance committee. The security governance committee, which meets on a quarterly basis
to review the threat landscape and security initiatives at Tyler, is led by the CISO and includes senior leadership from Tyler’s legal
and operational teams, as well as the president of each of Tyler’s three operating groups and Tyler’s President & CEO.
22
Operationalizing Cybersecurity Risk Management
We firmly believe – and communicate regularly – that all Tyler team members have a vital role to play in cybersecurity risk
management. We identify their responsibilities as falling into three key areas:
•
Participating in training to identify and promptly report risks;
•
Staying informed by reading all pertinent information and security communications; and
•
Actively engaging in ongoing training initiatives.
We observe Cybersecurity Awareness month with interactive weekly training, workshops, and additional resources on strong
cybersecurity practices. In addition to Cybersecurity Awareness month, additional cybersecurity training and awareness initiatives
occur throughout the calendar year, including annual security compliance training; a monthly Cybersecurity Awareness Series
composed of articles and training highlighting current cybersecurity concerns; company-wide communication as necessary to alert
team members of potential threats; and weekly security-related videos with opportunities to win prizes through participation. We track
participation in training events and boast high participation rates, with continuous reflection on strategies for driving participation yet
higher.
In 2022, we expanded our Security Champions Program to identify a resource on our various application teams who proactively
operationalizes security best practices on their team. This program helps to ensure that security measures are built into our programs
from development to deployment. We have over 100 security champions who can collaboratively advocate security tools throughout
the lifecycle of our applications.
Measuring Cybersecurity Risks
In order to evaluate whether a cybersecurity risk is material to Tyler, we take a multi-disciplinary approach to assessing qualitative and
quantitative factors. The cross-functional team includes senior leadership from Tyler’s information security, legal, finance, and
accounting teams, as well as senior leadership from the impacted business unit(s).
When an incident is reported, Tyler assembles its incident response team and initiates its incident response process as soon as possible.
Working with the incident response team, the CISO aims to take an initial measurement of qualitative and quantitative metrics,
typically within 24 hours of the incident report, to help determine whether Tyler’s Chief Financial Officer (“CFO”) and Chief
Accounting Officer (“CAO”) should be engaged to do a deeper analysis of quantitative factors. The CFO and CAO are expected to
engage with the Company’s Chief Legal Officer (“CLO”), Chief Administrative Officer (“CAdO”), and Audit Committee Chair to
evaluate, holistically, not just the quantitative factors but the qualitative factors as well. If that team determines that the incident may
represent a risk of national security, the CLO may contact the US attorney general for a disclosure delay of up to 30 days, or if
applicable the team may coordinate to prepare and publish a Form 8-K, if management believes the materiality threshold has been
reached. Whether or not the incident is deemed material, the incident response team will monitor the incident on an ongoing basis to
attempt to ensure containment, mitigation, and remediation, as well as to monitor for evolving factors that subsequently push the
incident to a materiality threshold that requires disclosure and reporting.
Quantitative metrics for evaluating a security incident include the potential or actual financial loss, the costs of impacted data records,
remediation costs, and/or third-party expenses. Qualitative factors include potential or actual impacts to Tyler’s reputation and/or
competitiveness, disruptions to Tyler’s business, and/or risk of litigation or regulatory action. In evaluating an incident, Tyler also
works to assess whether the incident is related to another recent incident and whether the incident may represent a threat to national
security. Tyler does not expect an incident to rise to that level unless Tyler infrastructure is deemed “critical infrastructure” by the
Cybersecurity and Infrastructure Security Agency (“CISA”).
Notwithstanding these ongoing efforts and our multi-layered approach to cybersecurity, we may not be successful in preventing or
mitigating a cybersecurity incident that could have a material adverse effect on us. While Tyler maintains cybersecurity insurance, the
costs related to cybersecurity threats or disruptions may not be fully insured.
Please see Item 1A, “Risk Factors,” for a discussion of cybersecurity risks.
ITEM 2.
PROPERTIES.
We occupy a total of approximately 1.4 million square feet of office space, of which approximately 787,000 square feet is in various
office facilities we own. We own or lease offices for our major operations in the states of Arkansas, Arizona, California, Colorado,
Connecticut, Georgia, Illinois, Indiana, Kansas, Massachusetts, Maine, Michigan, Missouri, Montana, New York, Ohio, Tennessee,
Texas, Virginia, Washington, Washington D.C., Wisconsin, Ontario and British Columbia, Canada, the Philippines and India.
23
ITEM 3.
LEGAL PROCEEDINGS.
During the first quarter of 2022, we received a notice of termination for convenience under a contractual arrangement with a state
government client. Upon receipt of the termination notice, we ceased performing services under the contractual arrangement and
sought payment of contractually owed fees of approximately $15 million in connection with the termination for convenience.
The client was unresponsive to our outreach for several months, and on August 23, 2022, we filed a lawsuit to enforce our rights and
remedies under the applicable contractual arrangement. The client subsequently asked us to negotiate directly with the client to
attempt to resolve the dispute. The negotiations were not successful, and on March 20, 2024, we reinitiated our lawsuit. Although we
believe our products and services were delivered in accordance with the terms of our contract and that we are entitled to payment in
connection with the termination for convenience, at this time the matter remains unresolved. We can provide no assurances that we
will not incur additional costs as we pursue our rights and remedies under the contract.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
24
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the New York Stock Exchange under the symbol “TYL”. At December 31, 2024, we had
approximately 953 stockholders of record. Most of our stockholders hold their shares in street name; therefore, there are substantially
more than 953 beneficial owners of our common stock.
We did not pay any cash dividends in 2024 or 2023. Our bank credit agreement contains restrictions on the payment of cash dividends.
We intend to retain earnings for use in the operation and expansion of our business and do not anticipate paying a cash dividend in the
foreseeable future.
The following table summarizes certain information related to our stock incentive plan, restricted stock units and our employee stock
purchase plan. There are no warrants or rights related to our equity compensation plans as of December 31, 2024.
Number of securities to
be issued upon exercise
of outstanding options,
warrants, purchase rights
and vesting of restricted
stock units as of
December 31, 2024
Weighted average
exercise price of
outstanding options
and unvested restricted
stock units
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in initial column
as of December 31, 2024)
Plan Category
Equity compensation plans approved by security
shareholders:
2018 Incentive Stock Plan
1,400,126 $
336.60
4,385,446
Employee Stock Purchase Plan
8,100
490.14
484,293
1,408,226 $
337.48
4,869,739
As of December 31, 2024, we had authorization to repurchase up to approximately 2.2 million additional shares of Tyler common
stock. During 2024, we did not repurchase any shares of our common stock, except to satisfy the minimum tax obligations of
employees due upon vesting of restricted stock awards and units as described below.
A summary of the repurchase activity during 2024 is as follows:
Period
Total number of
shares repurchased1
Additional number
of shares authorized
that may be
repurchased
Average price paid
per share
Maximum number of
shares that may be
repurchased under
current authorization
Three months ended March 31
53,362
— $
419.95
2,216,729
Three months ended June 30
25,506
—
480.23
2,191,223
Three months ended September 30
615
—
567.53
2,190,608
October 1 through October 31
273
—
586.23
2,190,335
November 1 through November 30
2,714
—
601.65
2,187,621
December 1 through December 31
25,761
—
629.06
2,161,860
108,231
—
489.74
The repurchase program, which was approved by our Board of Directors, was announced in October 2002, and was amended at
various times from 2003 through 2019. There is no expiration date specified for the authorization, and we may repurchase stock under
the program from time to time.
As of February 19, 2025, we had remaining authorization to repurchase up to 2.2 million additional shares of our common stock.
25
1 Includes 77,953 shares withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units. The level of this
acquisition activity varies from period to period based upon the timing of award grants and vesting. Also includes 30,278 shares for the settlement of certain fully
indemnified matters related to two acquisitions completed in prior years resulting in the reimbursement of shares of our common stock from escrow.
Performance Graph
The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the
Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the
Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by
reference into such filing.
The following table compares total shareholder returns for Tyler over the last five years to the Standard and Poor’s 500 Stock Index
and the Standard and Poor’s 600 Information Technology Index assuming a $100 investment made on December 31, 2019. Each of
the three measures of cumulative total return assumes reinvestment of dividends. The stock performance shown on the graph below is
not necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
Tyler Technologies, Inc.
S&P 500 Stock Index
S&P 600 Information Technology Index
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
$0
$75
$150
$225
$300
$375
Company / Index
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
Tyler Technologies, Inc.
100
145.50
179.30
107.46
139.36
192.20
S&P 500 Stock Index
100
118.40
152.39
124.79
157.59
197.02
S&P 600 Information Technology Index
100
127.81
162.12
125.86
152.23
151.00
ITEM 6. [RESERVED]
This section has been eliminated as a result of adopting the November 19, 2020, amendment to Item 301 of Regulation S-K.
26
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes
included in Item 8 of this Annual Report on Form 10-K. For a comparison of our Results of Operations for the years ended
December 31, 2023, and 2022, and our Cash Flow discussion for the year ended December 2023, see “Part II, Item 7. Management's
Discussion and Analysis of Financial Conditions and Results of Operations” of our Annual Report on Form 10-K for the year ended
December 31, 2023, as filed with the SEC on February 21, 2024.
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends,
expectations or beliefs with respect to our financial condition, results of operations or business. Forward-looking statements often
contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,” “plans,” “intends,” “continues,”
“may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly, statements that describe our
business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. We believe there is a reasonable
basis for our forward-looking statements, but they are inherently subject to risks and uncertainties and actual results could differ
materially from the expectations and beliefs reflected in the forward-looking statements. We presently consider the following to be
among the important factors that could cause actual results to differ materially from our expectations and beliefs: (1) changes in the
budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information
technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks, security
vulnerabilities and software updates; (3) our ability to protect client information from security breaches and provide uninterrupted
operations of data centers; (4) our ability to achieve growth or operational synergies through the integration of acquired businesses,
while avoiding unanticipated costs and disruptions to existing operations; (5) material portions of our business require the Internet
infrastructure to be adequately maintained; (6) our ability to achieve our financial forecasts due to various factors, including project
delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in
our renewal rates for service agreements; (7) general economic, political and market conditions, including continued inflation and
rising interest rates; (8) technological and market risks associated with the development of new products or services or of new versions
of existing or acquired products or services; (9) competition in the industry in which we conduct business and the impact of
competition on pricing, client retention and pressure for new products or services; (10) the ability to attract and retain qualified
personnel and dealing with rising labor costs, the loss or retirement of key members of management or other key personnel; and (11)
costs of compliance and any failure to comply with government and stock exchange regulations. These factors and other risks that
affect our business are described in Item 1A, “Risk Factors”. We expressly disclaim any obligation to publicly update or revise our
forward-looking statements.
OVERVIEW
General
We provide integrated information management solutions and services for the public sector. We develop and market a broad line of
software products and services to address the IT needs of public sector entities. We provide subscription-based services such as
software as a service (“SaaS”) and transaction-based services primarily related to digital government services and payment processing.
In addition, we provide professional IT services to our clients, including software and hardware installation, data conversion, training,
and for certain clients, product modifications, along with continuing maintenance and support for clients using our systems.
Additionally, we provide property appraisal services for taxing jurisdictions.
We report our results in two reportable segments. Our reportable segments are organized on the basis of a combination of the products
and services they deliver to clients and the function the public sector client performs. Business units that have met the aggregation
criteria have been combined into our two reportable segments. The Enterprise Software (“ES”) reportable segment provides public
sector entities with software systems and services to meet their information technology and automation needs for mission-critical
“back-office” functions such as: public administration solutions, courts and public safety solutions, education solutions, and property
and recording solutions. The Platform Technologies (“PT”) reportable segment provides public sector entities with platform and
transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and
workflows.
27
The primary financial measures used by the CODM for assessing performance and allocating resources are segment income or loss
from operations. The CODM uses segment income or loss from operations before income taxes, not including gains and losses on
investments, to allocate resources (including employees, property, and financial or capital resources) for each segment predominantly
in the annual budget and forecasting process. Segment gross profit for our operating segments units is defined as gross profit before
non-cash amortization of acquired software associated with acquisitions. Segment operating income for our reportable segments is
defined as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense, and income
taxes. During the fiscal periods presented, we had no significant transaction between reportable segments. Corporate segment
operating loss primarily consists of compensation costs for the executive management team, certain shared services staff, and share-
based compensation expense for the entire company. Corporate segment operating loss also includes revenues and expenses related to
a company-wide user conference. Certain presentation items from previous years have been adjusted to conform with current year
presentation.
Recent Acquisitions
2024
We did not complete any acquisitions during the twelve months ended December 31, 2024,.
2023
On October 31, 2023, we acquired Resource Exploration, Inc. (“ResourceX”), a leading provider of budgeting software to the public
sector, and ARInspect, Inc. (“ARInspect”), a leading provider of AI powered machine learning solutions for public sector field
operations.
On August 8, 2023, we acquired Computing System Innovations, LLC (“CSI”), a leading provider of artificial intelligence automation,
redaction, and indexing solution for courts, recorders, attorneys, and others.
The actual operating results of CSI and ResourceX are included in the operating results of the ES segment from their respective dates
of acquisition. The operating results of ARInspect are included in the operating results of the PT segment since the date of acquisition.
2024 Operating Results
For the twelve months ended December 31, 2024, total revenues increased 9.5% compared to the prior period. Revenues from recent
acquisitions contributed $10.4 million or 0.5%, to the total revenue increase.
Subscriptions revenue grew 15.8% for the twelve months ended December 31, 2024, primarily due to an ongoing shift toward SaaS
arrangements for both new and existing clients, along with growth in certain transaction-based revenues. We monitor and analyze
several key performance indicators in order to manage our business and evaluate our financial and operating performance. These
indicators include the following:
Revenues – We derive our revenues from four primary sources: subscription-based arrangements from SaaS and transaction-based
fees; maintenance; professional services; and software licenses and royalties. Subscriptions and maintenance are considered
recurring revenue sources and comprised approximately 84% of our revenues in 2024. The number of new SaaS clients and the
number of existing clients who convert from our traditional software arrangements to our SaaS model are a significant driver of
our revenue growth, together with transaction-based revenues and maintenance rate increases. In addition, we also monitor our
client base and attrition, which historically is very low. During 2024, based on our number of clients, attrition was approximately
2%.
Annualized Recurring Revenue (“ARR”) - Subscriptions and maintenance are considered recurring revenue sources. ARR is
calculated by annualizing the current quarter’s recurring revenues from maintenance and subscriptions as reported in our
statement of income. Management believes ARR is an indicator of the annual run rate of our recurring revenues, as well as a
measure of the effectiveness of the strategies we deploy to drive revenue growth over time. ARR is a metric widely used by
companies in the technology sector and by investors, which we believe offers insight to the stability of our maintenance and
subscription revenues to be recognized within the year.
28
Subscriptions revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees. These
revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the
term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that
result in fees generated by payment transactions and digital government services and are collected on a recurring basis during the
contract term. Transaction-based revenues are historically highest in the second quarter, which coincides with peak outdoor
recreation seasons and statutory filing deadlines in many jurisdictions, and lowest in the fourth quarter due to fewer business days
and lower transaction volumes around holidays. Because ARR is an annualized revenue amount, the metric can fluctuate from
quarter to quarter due to this seasonality. ARR was $1.86 billion and $1.61 billion as of December 31, 2024, and 2023,
respectively. ARR increased approximately 15% compared to the prior period primarily due to an increase in subscriptions
revenue resulting from an ongoing shift toward SaaS arrangements for both new and existing clients and expansion in transaction-
based fees.
Cost of Revenues and Gross Margins – Our primary cost components are hosting costs and personnel expenses in connection with
providing software implementation, subscription-based services and maintenance and support to our clients. We can improve
gross margins by controlling headcount and related costs and by expanding our revenue base, especially from those products and
services that produce incremental revenue with relatively low incremental cost, such as subscription-based services, maintenance
and support and software licenses and royalties. Continued migration of clients to our SaaS products and consolidation of versions
of on-premises software products with support obligations could decrease support costs with resources redeployed toward
development. As of December 31, 2024, our total employee count included in cost of revenues increased to 5,250 from 5,129 at
December 31, 2023.
Sales and Marketing (“S&M”) Expense – The primary components of S&M expense include sales personnel salaries and share-
based compensation expense, sales commissions, travel-related expenses, advertising and marketing materials, and allocated
depreciation, facilities, and IT support. Sales commissions typically fluctuate with revenues and share-based compensation
expense generally increases based on increased levels of awards issued during the period and as the market price of our stock
increases. Other administrative expenses tend to grow at a slower rate than revenues.
General and Administrative (“G&A”) Expense – The primary components of G&A expense include personnel salaries and share-
based compensation expense for general corporate functions, including senior management, finance, accounting, legal, human
resources and corporate development, third-party professional fees, travel-related expenses, insurance, allocation of depreciation,
facilities and IT support costs, acquisition-related expenses and other administrative expenses. Share-based compensation expense
generally increases based on increased level of awards issued during the period and as the market price of our stock increases.
Other administrative expenses tend to grow at a slower rate than revenues.
Research and development (“R&D”) expense – These costs include compensation costs for engineering and product management
personnel, third-party contractor expenses, software development tools and other expenses related to researching and developing
new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation,
facilities and IT support costs. As of December 31, 2024, our total employee count included in R&D expense increased to 870
from 830 at December 31, 2023
Liquidity and Cash Flows – The primary driver of our cash flows is net income. Uses of cash include acquisitions, capital
investments in property and equipment and software development, debt repayment and discretionary purchases of treasury stock.
Our working capital needs are fairly stable throughout the year with the significant components of cash inflows representing
collection of accounts receivable and cash receipts from clients in advance of revenue being earned, offset by cash outflows,
primarily payment of personnel expenses. In recent years, we have also received significant amounts of cash from employees
exercising stock options and contributing to our Employee Stock Purchase Plan.
Balance Sheet – Cash, accounts receivable and deferred revenue balances are important indicators of our business.
Outlook
ARR was $1.86 billion and $1.61 billion as of December 31, 2024, and 2023, respectively, an increase of approximately 15%
compared to the prior period. The public sector software market continues to experience heightened activity. We expect to continue to
achieve solid growth in revenues and earnings. With our strong financial position and cash flow, we plan to continue to make
significant investments in product development and continue to accelerate our move to the cloud to better position us to continue to
expand our addressable market and strengthen our competitive position over the long term.
29
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations is based upon our financial statements. These financial
statements have been prepared following the requirements of accounting principles generally accepted in the United States (“GAAP”)
and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. The Notes to the Financial Statements included as part of this Annual Report
describe our significant accounting policies used in the preparation of the financial statements. Significant items subject to such
estimates and assumptions include the recoverability of goodwill and other intangible assets and estimated useful lives of intangible
assets, the application of the progress toward completion methods of revenue recognition, estimation for revenue recognition and
multiple performance obligation arrangements. We base our estimates on historical experience and on various other assumptions that
we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
We believe the following critical accounting policies require significant judgments and estimates used in the preparation of our
financial statements.
Revenue Recognition. We earn the majority of our revenues from subscription-based services and post-contract client support (“PCS”
or “maintenance”). Other sources of revenue are professional services, software licenses and royalties, and hardware and other. Our
software arrangements with clients contain multiple performance obligations that range from software licenses, installation, training,
consulting, software modification and customization to meet specific client needs; hosting; and PCS. For these contracts, we account
for individual performance obligations separately when they are distinct. We evaluate whether separate performance obligations can
be distinct or should be accounted for as one performance obligation. Arrangements that include professional services, such as training
or installation, are evaluated to determine whether those services are highly interdependent or interrelated to the product’s
functionality. The transaction price is allocated to the distinct performance obligations on a relative standalone selling price (“SSP”)
basis.
For arrangements that involve significant production, modification or customization of the software, or where professional services
otherwise cannot be considered distinct, we recognize revenue as control is transferred to the client over time using progress-to-
completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred. Amounts
recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost
estimates. Changes to total estimated contract costs, if any, are recorded in the period they are determined. Estimated losses on
uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.
Business Combinations. Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets
acquired and liabilities assumed at their respective fair values. The determination of fair value requires the use of significant estimates
and assumptions, and in making these determinations, management uses all available information.
For tangible and identifiable intangible assets acquired in a business combination, management estimates the fair value of assets
acquired and liabilities assumed based on quoted market prices, the carrying value of the acquired assets and widely accepted
valuation techniques, including discounted cash flows and market multiple analyses. The assumptions made in performing these
valuations include, but are not limited to, discount rates, future revenues and operating costs, projections of capital costs, and other
assumptions believed to be consistent with those used by principal market participants.
Due to the specialized nature of these calculations, we engage third-party specialists to assist management in evaluating our
assumptions as well as appropriately measuring the fair value of assets acquired and liabilities assumed. We adjust the preliminary
purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and
circumstances that existed as of the closing date. If actual results are materially different than the assumptions we used to determine
fair value of the assets acquired and liabilities assumed through a business combination as well as the estimated useful lives of the
acquired intangible assets, it is possible that adjustments to the carrying values of such assets and liabilities will have a material impact
on our financial position and results of operations.
Goodwill and Other Intangible Assets. We perform an impairment assessment annually on October 1, or more frequently if indicators
of potential impairment exist, which includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment
of each reporting unit’s goodwill. If the conclusion of an impairment assessment is that it is more likely than not that the fair value of
the reporting unit is more than its carrying value, goodwill is not considered impaired, and we are not required to perform the
quantitative goodwill impairment test. If the conclusion of an impairment assessment is that it is more likely than not that the fair
value is less than its carrying value, we perform the quantitative goodwill impairment test, which compares the fair value of the
reporting unit to its carrying value. Impairments, if any, are based on the excess of the carrying amount over the fair value. There have
been no impairments to goodwill in any of the periods presented. See Note 8, “Goodwill and Other Intangible Assets,” for additional
information.
30
All intangible assets (other than goodwill) are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of other intangible assets is measured by comparison of the
carrying amount to estimated undiscounted future cash flows. The assessment of recoverability or of the estimated useful life for
amortization purposes will be affected if the timing or the amount of estimated future operating cash flows is not achieved. Such
indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in stock price
and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and
reductions in growth rates. In addition, products, capabilities, or technologies developed by others may render our software products
obsolete or non-competitive. Any adverse change in these factors could have a significant impact on the recoverability of goodwill or
other intangible assets. During 2024, we did not identify any triggering events that would indicate that the carrying amount of our
intangible assets may not be recoverable.
Recent adoption of new accounting pronouncements
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (ASU) 2023-07 -
Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances the disclosures required
for reportable segments in annual and interim consolidated financial statements. The guidance is effective for fiscal years beginning
after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.
As of December 31, 2024, we adopted the new standard which has been applied retrospectively by the Company. This change did not
have a significant impact on the Company’s financial statements and disclosures. See Note 2, “Segment and Related Information,” for
further discussion.
New accounting pronouncements
In January 2025, the FASB issued ASU 2025-01 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies that all public business entities must adopt the
guidance in ASU 2024-03 for annual reporting periods beginning after December 15, 2026, and for interim periods within annual
reporting periods beginning after December 15, 2027, with early adoption permitted. This guidance is not expected to have a material
impact on the Company’s financial statements.
In November 2024, the FASB issued ASU 2024-04 - Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced
Conversions of Convertible Debt Instruments. This guidance clarifies the requirements for determining whether certain settlements of
convertible debt instruments should be accounted for as an induced conversion. It is effective for annual reporting periods beginning
after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. This guidance is
not expected to have a material impact on the Company’s financial statements.
In November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires public entities to disclose
additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. It is
effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027,
with early adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the
transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate
reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the
effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early
adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.
31
ANALYSIS OF RESULTS OF OPERATIONS AND OTHER
The following discussion compares the historical results of operations on a basis consistent with GAAP for the years ended
December 31, 2024 and 2023:
Percentage of Total Revenues
Years Ended December 31,
2024
2023
Revenues:
Subscriptions
62.8 %
59.4 %
Maintenance
21.7
23.9
Professional services
12.3
12.8
Software licenses and royalties
1.2
2.0
Hardware and other
2.0
1.9
Total revenues
100.0
100.0
Cost of revenues:
Subscriptions, maintenance, and professional services
52.1
51.3
Software licenses, royalties, and amortization of acquired software
2.0
2.4
Amortization of software development
0.9
0.6
Hardware and other
1.2
1.5
Sales and marketing expense
7.4
7.7
General and administrative expense
14.1
15.8
Research and development expense
5.5
5.6
Amortization of other intangibles
2.8
3.8
Operating income
14.0
11.3
Interest expense
(0.3)
(1.2)
Other income, net
0.7
0.2
Income before income taxes
14.4
10.3
Income tax provision
2.1
1.7
Net income
12.3 %
8.6 %
2024 Compared to 2023
Revenues
Subscriptions.
The following table sets forth a comparison of our subscriptions revenue for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
ES
$
794,475 $
634,262 $
160,213
25 %
PT
548,456
525,250
23,206
4 %
Total subscriptions revenue
$
1,342,931 $
1,159,512 $
183,419
16 %
Subscriptions revenue consists of revenues derived from our SaaS arrangements and transaction-based fees primarily related to digital
government services and payment processing.
32
SaaS
The following table sets forth a comparison of our subscriptions revenue derived from SaaS fees for the listed years ended
December 31 ($ in thousands):
Change
2024
2023
$
%
ES
$
559,842 $
459,544 $
100,298
22 %
PT
84,937
68,433
16,504
24 %
Total subscriptions revenue derived from SaaS fees
$
644,779 $
527,977 $
116,802
22 %
For the twelve months ended December 31, 2024, the increase in SaaS fees compared to prior period is primarily attributable to new
SaaS clients as well as existing on-premises clients who converted to our SaaS model. Since December 31, 2023, we have added 734
new SaaS clients, while 415 existing on-premises clients have converted to our SaaS offerings. Our new software contract mix for the
twelve months ended December 31, 2024, was 12% perpetual software license arrangements and approximately 88% subscription-
based arrangements, compared to approximately 17% perpetual software license arrangements and approximately 83% subscription-
based arrangements for the twelve months ended December 31, 2023.
Transaction-based fees
The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the listed years ended
December 31 ($ in thousands):
Change
2024
2023
$
%
ES
$
234,633 $
174,718 $
59,915
34 %
PT
463,519
456,817
6,702
1 %
Total subscriptions revenue derived from transaction-based fees
$
698,152 $
631,535 $
66,617
11 %
For the twelve months ended December 31, 2024, contributing to the growth in transaction-based fees compared to prior period are the
new transaction clients, volume increases from online payments and e-filing services, price increases by certain third-party processing
partners from whom we receive a share of revenues, and the impact of transaction-based fees from recent acquisitions of $4.2 million.
These increases are partially offset by a change from the gross revenue model to the net revenue model for payments revenue under
one of our state enterprise agreements that results in merchant fees recorded as a reduction in revenue rather than as cost of revenues.
Maintenance.
The following table sets forth a comparison of our maintenance revenue for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
ES
$
438,455 $
442,781 $
(4,326)
(1) %
PT
24,677
23,880
797
3
Total maintenance revenue
$
463,132 $
466,661 $
(3,529)
(1) %
We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue
decreased compared to prior period primarily due to the impact of clients converting from on-premises license arrangements to SaaS,
partially offset by maintenance price increases.
33
Professional services.
The following table sets forth a comparison of our professional services revenue for the listed years ended December 31 ($ in
thousands):
Change
2024
2023
$
%
ES
$
219,933 $
209,727 $
10,206
5 %
PT
44,058
40,249
3,809
9
Total professional services revenue
$
263,991 $
249,976 $
14,015
6 %
Professional services revenue primarily consists of professional services billed in connection with implementing our software,
converting client data, training client personnel, custom development activities, consulting, and property appraisal services. New
clients who implement our software generally contract with us to provide the related professional services. Existing clients also
periodically purchase additional training, consulting and minor programming services.
The increase in professional services revenues compared to prior period is primarily attributable to higher new contract volume along
with increased billing rates.
Software licenses and royalties.
The following table sets forth a comparison of our software licenses and royalties revenue for the listed years ended December 31 ($ in
thousands):
Change
2024
2023
$
%
ES
$
25,292
$
32,709 $
(7,417)
(23) %
PT
1,065
5,387
(4,322)
(80)
Total software licenses and royalties revenue
$
26,357
$
38,096 $
(11,739)
(31) %
The decrease in software licenses and royalties revenue compared to prior period is primarily attributed to the shift in the mix of new
software contracts toward more SaaS offerings.
Although the mix of new contracts between subscription-based and perpetual license arrangements may vary from quarter to quarter
and year to year, we expect that software license revenues will continue to decline as we shift our model away from perpetual software
license to SaaS. Subscription-based arrangements result in lower software license revenue in the initial year as compared to perpetual
software license arrangements, but generate higher overall revenue over the term of the contract.
Cost of revenues and overall gross margins
The following table sets forth a comparison of the key components of our cost of revenues for the listed years ended December 31 ($
in thousands):
Change
2024
2023
$
%
Subscriptions, maintenance, and professional services
$
1,112,778 $
1,001,221 $
111,557
11 %
Software licenses and royalties
6,277
10,821
(4,544)
(42)
Amortization of software development
18,806
12,625
6,181
49
Amortization of acquired software
36,964
36,062
902
3
Hardware and other
27,217
29,923
(2,706)
(9)
Total cost of revenues
$
1,202,042 $
1,090,652 $
111,390
10 %
34
Subscriptions, maintenance, and professional services. Cost of subscriptions, maintenance and professional services primarily consist
of personnel costs related to installation of our software, conversion of client data, training client personnel, public cloud hosting costs,
and support activities, including enhancing existing solutions, and various other services such as custom development, ongoing
operation of our SaaS solutions, property appraisal outsourcing activities, digital government services, and other transaction-based
services such as e-filing. Other costs included are merchant and interchange fees required to process credit/debit card transactions and
bank fees to process automated clearinghouse transactions related to our payments business.
In 2024, the cost of subscriptions, maintenance and professional services grew 11% primarily due to increased hosting costs as we
expand our SaaS client base and transition from our proprietary data centers to the public cloud, together with higher personnel costs.
Our professional services staff grew by 121 employees since December 31, 2023, as we increased hiring to ensure that we are well-
positioned to serve our growing client base. The increases were partially offset by a reduction in merchant fee expense associated with
the change from the gross model to the net model for payments revenue under one of our state enterprise agreements.
Software licenses and royalties. Costs of software licenses and royalties primarily consist of direct third-party software costs. We do
not have any direct costs associated with royalties. The cost of software licenses and royalties for the twelve months ended December
31, 2024, declined 42%, compared to the prior period due to lower third-party software costs.
Amortization of software development. Software development costs included in cost of revenues primarily consist of personnel costs.
We begin to amortize capitalized costs when a product is available for general release to clients. Amortization expense is determined
on a product-by-product basis at a rate not less than straight-line basis over the software’s remaining estimated economic life of,
generally, three to seven years.
In 2024, amortization of software development costs increased 49% compared to the prior period due to new capitalized software
development projects going into service in the past year.
Amortization of acquired software. Amortization expense related to acquired software attributed to business combinations is included
with cost of revenues. The estimated useful lives of acquired software ranges from three to 10 years.
In 2024, amortization of acquired software increased 3% compared to the prior period due to amortization of newly acquired software
from recent acquisitions completed in fiscal year 2023, partially offset by assets becoming fully amortized in the fourth quarter 2023.
The following table sets forth a comparison of gross profit and overall gross margin for the periods presented as of December 31:
2024
2023
Change
Gross profit
$
935,761
$
861,099
$
74,662
Overall gross margin
43.8 %
44.1 %
(0.3) %
Overall gross margin. Our 2024 blended gross margin decreased 0.3% compared to 2023. The decline in the overall gross margin
compared to the prior period is attributed to lower revenue from software licenses and maintenance, higher software development
amortization expense, and higher personnel costs. The declines in overall gross margin were partially offset by a higher revenue mix
for subscription revenues compared to the prior period, resulting in an increase in incremental margin related to subscriptions,
maintenance and professional services.
Sales and marketing expense
Sales and marketing (“S&M”) expense consists primarily of salaries, employee benefits, travel, share-based compensation expense,
commissions and related overhead costs for sales and marketing employees, as well as professional fees, trade show activities,
advertising costs and other marketing costs. The following table sets forth a comparison of our S&M expense for the years ended
December 31 ($ in thousands):
Change
2024
2023
$
%
Sales and marketing expense
$
157,731 $
149,770 $
7,961
5 %
S&M expense as a percentage of revenues was 7.4% in 2024 compared to 7.7% in 2023. S&M expense increased approximately 5%
compared to the prior period, resulting from higher personnel, bonus, commission, and trade show expenses, offset by lower
professional fees related to marketing and advertising.
35
General and administrative expense
General and administrative (“G&A”) expense consists primarily of personnel salaries and share-based compensation expense for
general corporate functions including senior management, finance, accounting, legal, human resources and corporate development, as
well as third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs,
amortization of software development for internal use, acquisition-related expenses and other administrative expenses. The following
table sets forth a comparison of our G&A expense for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
General and administrative expense
$
300,938 $
308,575 $
(7,637)
(2) %
G&A expense as a percentage of revenue was 14.1% in 2024 compared to 15.8% in 2023. G&A expense decreased 2% compared to
the prior period. The decline in G&A expense is primarily attributed to lower facilities costs resulting from lease restructurings,
partially offset by higher share-based compensation costs and an increase in software and other IT support costs.
Research and development expense
Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with new
product development. Research and development expense consists mainly of costs associated with development of new products and
new functionality in our current SaaS products. The following table sets forth a comparison of our research and development expense
for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
Research and development expense
$
117,939 $
109,585 $
8,354
8 %
Research and development expense as a percent of total revenue was 5.5% in 2024, compared to 5.6% in 2023. Research and
development expense increased 8% in 2024 compared to the prior period, mainly due to a number of new Tyler product development
initiatives shifting from capitalized development projects to projects that are expensed to research and development.
Amortization of other intangibles
Other intangibles represents the portion of the purchase price allocated to the identified intangible assets for client-related intangibles,
trade names, and leases acquired. The remaining excess purchase price is allocated to goodwill that is not subject to amortization.
Amortization expense related to acquired software is included with cost of revenues while amortization expense of other intangibles is
recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years. The following table sets
forth a comparison of amortization of other intangibles for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
Amortization of other intangibles
$
59,627 $
74,632 $
(15,005)
(20) %
In 2024, amortization of other intangibles decreased 20% compared to the prior period due to the impact of certain trade name
intangible assets becoming fully amortized as a result of accelerated amortization expense in the fourth quarter of 2023 and partially in
2024.
Estimated annual amortization expense relating to client related, trade name, and leases acquired intangibles, excluding acquired
software for which the amortization expense is recorded as cost of revenues, for the next five years and thereafter is as follows (in
thousands):
2025
$
55,274
2026
54,820
2027
54,440
2028
53,783
2029
53,250
Thereafter
427,816
36
Interest expense
The following table sets forth a comparison of our interest expense for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
Interest expense
$
(5,931) $
(23,629) $
17,698
(75)%
Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings. The change in interest
expense compared to the prior period is primarily attributable to lower interest incurred as a result of our repayment of the Term Loans
in early 2024.
Other income, net
The following table sets forth a comparison of our other income, net for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
Other income, net
$
14,572 $
3,328 $
11,244
338%
Other income, net, is primarily comprised of interest income from invested cash. The change in other income, net, compared to the
prior period is due to increased interest income generated from higher invested cash balances in 2024 compared to 2023.
Income tax provision
The following table sets forth a comparison of our income tax provision for the listed years ended December 31 ($ in thousands):
Change
2024
2023
$
%
Income tax provision
$
45,141
$
32,317
$
12,824
40 %
Effective income tax rate
14.6 %
16.3 %
The increase in the income tax provision in 2024 compared to the prior period is primarily due to higher income before taxes,
increased liabilities for uncertain tax positions, and higher state income taxes. This was partially offset by an increase in excess tax
benefits from share-based compensation and research tax credits and a decrease in non-deductible business expense. The decrease in
the effective income tax rate in 2024, compared to the prior period is driven by higher excess tax benefits from share-based
compensation and decreases in liabilities for uncertain tax positions, state income taxes, and non-deductible business expenses offset
by a decrease in research tax credit benefits relative to income before taxes. The tax benefits related to research tax credits totaled
$22.1 million in 2024 compared to $20.5 million in 2023. The tax expense related to uncertain tax positions in 2024 was $10.1 million
compared to $7.6 million in 2023. The share-based exercise and vesting activity in 2024 generated $21.1 million of excess tax
benefits, while exercise and vesting activity in 2023 generated $9.3 million of excess tax benefits.
The effective income tax rates for the periods presented are different from the statutory United States federal income tax rate of 21%
primarily due to the tax benefits of research tax credits and excess tax benefits related to stock incentive awards, offset by state income
taxes, liabilities for uncertain tax positions, and non-deductible business expenses.
FINANCIAL CONDITION AND LIQUIDITY
As of December 31, 2024, we had cash and cash equivalents of $744.7 million compared to $165.5 million as of December 31, 2023.
We also had $34.0 million invested in investment grade corporate bonds, U.S. Treasuries and asset-backed securities as of
December 31, 2024. These investments have varying maturity dates through 2027 and are held as available-for-sale. Net cash provided
by operating activities continues to be our primary source of funds to finance operating needs and capital expenditures. Other potential
capital resources include cash on hand, public and private issuances of debt or equity securities, and our revolving credit facility. It is
possible that our ability to access the capital and credit markets in the future may be limited by economic conditions or other factors.
We believe that our cash on hand, cash provided by operating activities, and available credit are sufficient to fund our working capital
requirements and capital expenditures for at least the next twelve months.
37
The following table sets forth a summary of cash flows for the listed years ended December 31 (in thousands):
2024
2023
2022
Cash flows provided (used) by:
Operating activities
$
624,633 $
380,440 $
381,455
Investing activities
(67,612)
(76,960)
(172,530)
Financing activities
22,207
(311,844)
(344,239)
Net increase (decrease) in cash and cash equivalents
$
579,228 $
(8,364) $
(135,314)
In 2024, operating activities provided cash of $624.6 million, compared to $380.4 million in 2023. Operating activities that provided
cash were primarily comprised of net income of $263.0 million, non-cash depreciation and amortization charges of $143.4 million,
non-cash share-based compensation expense of $122.8 million and non-cash amortization of operating lease right-of-use assets of $8.9
million. Changes in working capital, excluding cash, increased cash provided by operating activities by approximately $91.7 million
mainly due to timing of prepaid expenses, timing of payments for operating leases, timing of payments related to income taxes and
deferred taxes associated with stock option activity during the period. These decreases were offset by an increase in deferred revenue
during the period, an increase in accrued expenses due to timing of payments and increased collections from accounts receivables. In
general, changes in deferred revenue are cyclical and primarily driven by the timing of our maintenance and subscription renewal
billings. Our renewal dates occur throughout the year, but our largest maintenance billing cycles occur in the second and fourth
quarters. Subscription renewals are billed throughout the year.
Investing activities used cash of $67.6 million in 2024 compared to $77.0 million in 2023. We invested $32.4 million and received
$16.0 million in proceeds from investment grade corporate bonds, U.S. Treasuries and asset-backed securities. Approximately $29.4
million of software development costs were capitalized. Approximately $20.5 million was invested in property and equipment,
including $7.5 million related to real estate. The remaining additions were for computer equipment and furniture and fixtures in
support of growth. We also paid approximately $1.4 million in holdbacks related to acquisitions completed in 2023.
Financing activities provided cash of $22.2 million in 2024 compared to used cash of $311.8 million in 2023, primarily attributable to
cash received of $74.8 million from stock option exercises, net of withheld shares for taxes upon equity award settlement and
employee stock purchase plan activity, partially offset by the repayment of $50.0 million of Term debt related to our 2021 Credit
Agreement and payment of $2.6 million in debt issuances costs related to our newly signed 2024 Credit Agreement.
In February 2019, our Board of Directors authorized the repurchase of an additional 1.5 million shares of our common stock. The
repurchase program, which was approved by our Board of Directors, was originally announced in October 2002 and was amended at
various times from 2003 through 2019. As of February 19, 2025, we have authorization from our Board of Directors to repurchase up
to 2.2 million additional shares of our common stock. Our share repurchase program allows us to repurchase shares at our discretion.
Market conditions as well as the volume of employee stock option exercises, influence the timing of the buybacks and the number of
shares repurchased. Share repurchases are generally funded using our existing cash balances and borrowings under our credit facility
and may occur through open market purchases and transactions structured through investment banking institutions, privately
negotiated transactions and/or other mechanisms. There is no expiration date specified for the authorization.
On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lenders party thereto and Wells
Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”).
The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0
million, including subfacilities for standby letters of credit and swingline loans. The 2024 Credit Agreement matures on September 25,
2029, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any
SOFR breakage costs. The Company incurred issuance fees of $2.6 million in connection with the 2024 Credit Agreement. The 2024
Credit Agreement replaced Tyler’s previous $500.0 million unsecured credit facility under the credit agreement dated April 21, 2021,
among the Company and various lenders party thereto (the “2021 Credit Agreement”), which was scheduled to mature in April 2026.
We repaid all amounts due under the Term Loans under the 2021 Credit Agreement and have no outstanding borrowings under the
2024 Credit Agreement, with an available borrowing capacity of $700.0 million as of December 31, 2024.
As of December 31, 2024, we had $600.0 million in outstanding principal for the Convertible Senior Notes due 2026. We will settle
any conversions of the Convertible Senior Notes either entirely in cash or in a combination of cash and shares of our common stock, at
our election. As of December 31, 2024, none of the conditions allowing holders of the Convertible Senior Notes to convert have been
met.
We paid interest of $3.1 million in 2024 and $19.2 million in 2023. See Note 10, “Debt,” to the consolidated financial statements for
discussions of the Convertible Senior Notes and the 2024 Credit Agreement.
38
We paid income taxes, net of refunds received, of $84.2 million in 2024 compared to $142.8 million in 2023.
We anticipate that 2025 capital spending will be between $32 million and $34 million, including approximately $19 million of
software development. We expect the majority of the other capital spending will consist of computer equipment and software for
infrastructure replacements and expansion. Capital spending and cash tax payments are expected to be funded from existing cash
balances and cash flows from operations.
From time to time we engage in discussions with potential acquisition candidates. In order to pursue such opportunities, which could
require significant commitments of capital, we may be required to incur debt or to issue additional potentially dilutive securities in the
future. No assurance can be given as to our future acquisition opportunities and how such opportunities will be financed.
We lease office facilities, transportation and other equipment for use in our operations. Most of our leases are non-cancelable
operating lease agreements with remaining terms of one to 10 years. Some of these leases include options to extend for up to six years.
Our estimated future obligations consist of debt, uncertain tax positions, leases, and purchase commitments as of December 31, 2024.
Refer to Note 10, “Debt,” Note 13, “Income Tax,” Note 16, “Leases,” and Note 19, “Commitment and Contingencies,” to the
consolidated financial statements for related discussions.
CAPITALIZATION
At December 31, 2024, our capitalization consisted of $597.9 million of outstanding debt and $3.4 billion of shareholders’ equity.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the risk of loss that may affect us due to adverse changes in financial market prices and interest rates.
As of December 31, 2024, we had no outstanding borrowings under our 2024 Credit Agreement and available borrowing capacity
under the 2024 Credit Agreement was $700.0 million.
Loans under the revolving credit facility will bear interest, at the Company’s option, at a per annum rate of either (1) the
Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) plus a margin of 0.125% to
0.75% or (2) the one-, three-, or six-month SOFR rate plus a margin of 1.125% to 1.75%.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The reports of our independent registered public accounting firm and our financial statements, related notes, and supplementary data
are included as part of this Annual Report beginning on page F-1.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act) designed to provide
reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These include controls
and procedures designed to ensure that this information is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosures. Management,
with the participation of the chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls
and procedures as of December 31, 2024. Based on this evaluation, the chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures were effective as of December 31, 2024.
39
Management’s Report on Internal Control Over Financial Reporting
Tyler’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in
Securities Exchange Act Rule 13a-15(f). Tyler’s internal control over financial reporting is designed to provide reasonable assurance
to Tyler’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.
Management assessed the effectiveness of Tyler’s internal control over financial reporting as of December 31, 2024. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) (the COSO criteria). Based on our assessment, we concluded that, as of December 31, 2024, Tyler’s internal control
over financial reporting was effective based on those criteria.
Tyler’s internal control over financial reporting as of December 31, 2024 has been audited by Ernst & Young LLP, the independent
registered public accounting firm who also audited Tyler’s financial statements. Ernst & Young’s attestation report on Tyler’s internal
control over financial reporting appears on page F-1 hereof.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the three months ended December 31, 2024, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
(c) Trading Plans.
None
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
40
PART III
See the information under the following captions in Tyler’s definitive Proxy Statement, which is incorporated herein by reference.
Only those sections of the Proxy Statement that specifically address the items set forth herein are incorporated by reference. Such
incorporation by reference does not include the Compensation Discussion and Analysis, the Compensation Committee Report or the
Audit Committee Report, which are included in the Proxy Statement.
Headings in Proxy Statement
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND
CORPORATE GOVERNANCE.
“Tyler Management” and “Corporate Governance Principles and
Board Matters”
ITEM 11.
EXECUTIVE COMPENSATION.
“Executive Compensation”
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
“Security Ownership of Certain Beneficial Owners and
Management”
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
"Executive Compensation" and
“Certain Relationships and Related Transactions”
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required under this item may be found under the section captioned “Proposals For Consideration – Proposal Two – Ratification of
Our Independent Auditors for Fiscal Year 2024” in our Proxy Statement when filed.
41
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this Annual Report:
(a)
(1) The financial statements are filed as part of this Annual Report.
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
F-1
Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022
F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022
F-4
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
F-6
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024, 2023, and 2022
F-8
Notes to Consolidated Financial Statements
F-9
(2) Financial statement schedules:
There are no financial statement schedules filed as part of this Annual Report, since the required information is included in
the financial statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not
present.
(3) Exhibits
Certain of the exhibits to this Annual Report are hereby incorporated by reference, as specified:
42
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation of Tyler Three, as amended through May 14, 1990, and Certificate of Designation
of Series A Junior Participating Preferred Stock (filed as Exhibit 3.1 to our Form 10-Q for the quarter ended June 30, 1990, and
incorporated by reference herein), as amended by the Certificate of Amendment to the Restated Certificate of Incorporation (filed as
Exhibit 3.1 to our Form 8-K, dated February 19, 1998, and incorporated by reference herein), as amended by Certificate of
Amendment dated May 19, 1999 to the Restated Certificate of Incorporation (filed as Exhibit 3.4 to our Form 10-K for the year ended
December 31, 2000, and incorporated by reference herein).
3.2
Amended and Restated By-Laws of Tyler Technologies Inc., dated May 11, 2023, (filed as Exhibit 3.1 to our Form 8-K dated May
15, 2023, and incorporated by reference herein).
4.1
Specimen of Common Stock Certificate (filed as Exhibit 4.1 to our registration statement no. 33-33505 and incorporated by reference
herein).
4.2
Indenture, dated as of March 9, 2021, between Tyler Technologies, Inc. and U.S. Bank National Association, as trustee, relating to the
0.25% Convertible Senior Notes due 2026 (filed as Exhibit 4.1 to our Form 8-K, dated March 9, 2021, and incorporated by reference
herein).
10
Credit Agreement dated September 25, 2024, among Tyler Technologies, Inc. and Wells Fargo Bank, N. A. as Administrative Agent
and other lenders party hereto (filed as Exhibit 10.1 to our Form 8-K dated September 30, 2024, and incorporated by reference herein)
10.1
Employee Stock Purchase Plan (filed as Exhibit 10.1 to our registration statement 333-182318 dated June 25, 2012 and incorporated
by reference herein).
10.2
Amended and Restated Executive Employment Agreement, effective as of May 12, 2022, by and between Tyler Technologies, Inc.
and John S. Marr, Jr.(filed as Exhibit 10.1 to our Form 8-K dated May 18, 2022 and incorporated by reference herein).
10.3
Amended and Restated Executive Employment Agreement, effective as of May 12, 2022, by and between Tyler Technologies, Inc.
and H. Lynn Moore, Jr. (filed as Exhibit 10.2 to our Form 8-K dated May 18, 2022 and incorporated by reference herein).
10.4
Amended and Restated Executive Employment Agreement, effective as of May 12, 2022, by and between Tyler Technologies, Inc.
and Brian K. Miller (filed as Exhibit 10.3 to our Form 8-K dated May 18, 2022 and incorporated by reference herein).
10.5
Executive Employment Agreement, effective as of May 12, 2022, by and between Tyler Technologies, Inc. and Jeffrey D. Puckett
(filed as Exhibit 10.4 to our Form 8-K dated May 18, 2022 and incorporated by reference herein).
10.6
Tyler Technologies, Inc. Amended and Restated 2018 Incentive Plan, effective as of May 9, 2024 (filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed with the Commission on May 9, 2024 and incorporated by reference herein).
14
Code of Business Conduct and Ethics of Tyler Technologies, Inc. dated May 9, 2024 (filed as Exhibit 14 to our form 10-K dated
February 19, 2025, and incorporated by reference herein).
19
Revised Insider Trading Policy of Tyler Technologies, Inc., dated July 20, 2023,(filed as exhibit 10.1 to our Form 10-Q dated July 26,
2023, and incorporated by reference herein).
43
Exhibit
Number
Description
*21
Subsidiaries of Tyler Technologies, Inc.
*23
Consent of Independent Registered Public Accounting Firm.
*31.1
Rule 13a-14(a) Certification by Principal Executive Officer.(a) Certification by Principal Executive Officer.
*31.2
Rule 13a-14(a) Certification by Principal Financial Officer.
*32.1
Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
*101.INS
Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags,
including Cover Page XBRL tags, are embedded within the Inline XBRL Document.
*101.SCH
Inline XBRL Taxonomy Extension Schema Document.
*101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.LAB
Inline XBRL Extension Labels Linkbase Document.
*101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
*101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
— Filed herewith.
A copy of each exhibit may be obtained at a price of 15 cents per page, with a $10.00 minimum order, by writing Investor Relations,
5101 Tennyson Parkway, Plano, Texas 75024.
ITEM 16.
FORM 10-K SUMMARY
None.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
TYLER TECHNOLOGIES, INC.
Date: February 19, 2025
By:
/s/ H. Lynn Moore, Jr.
H. Lynn Moore, Jr.
President and Chief Executive Officer
(principal executive officer)
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature appears below constitutes and appoints H. Lynn Moore,
Jr. and Brian K. Miller, and each of them, as his attorney-in-fact, with the power of substitution, for him in any and all capacities, to
sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on February 19, 2025.
45
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the registrant and in
the capacities and on the dates indicated have signed this report below.
Date: February 19, 2025
By:
/s/ John S. Marr, Jr.
John S. Marr, Jr.
Executive Chairman of the Board
Director
Date: February 19, 2025
By:
/s/ H. Lynn Moore, Jr.
H. Lynn Moore, Jr.
President and Chief Executive Officer
(principal executive officer)
Date: February 19, 2025
By:
/s/ Brian K. Miller
Brian K. Miller
Executive Vice President and Chief Financial Officer
(principal financial officer)
Date: February 19, 2025
By:
/s/ Jason P. Durham
Jason P. Durham
Chief Accounting Officer
(principal accounting officer)
Date: February 19, 2025
By:
/s/ Glenn A. Carter
Glenn A. Carter
Director
Date: February 19, 2025
By:
/s/ Margot L. Carter
Margot L. Carter
Director
Date: February 19, 2025
By:
/s/ Brenda A. Cline
Brenda A. Cline
Director
Date: February 19, 2025
By:
/s/ Ronnie D. Hawkins, Jr.
Ronnie D. Hawkins, Jr.
Director
Date: February 19, 2025
By:
/s/ Andrew D. Teed
Andrew D. Teed
Director
Date: February 19, 2025
By:
/s/ Daniel M. Pope
Daniel M. Pope
Director
46
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Tyler Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tyler Technologies, Inc. (the Company) as of December 31, 2024
and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the
three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework), and our report dated February 19, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required
to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1966.
Dallas, Texas
February 19, 2025
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Tyler Technologies, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Tyler Technologies, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Tyler Technologies, Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States)
(the PCAOB) and in accordance with auditing standards generally accepted in the United States of America, the consolidated balance
sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income,
shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our
report dated February 19, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Dallas, Texas
February 19, 2025
F-2
Tyler Technologies, Inc.
Consolidated Statements of Income
For the years ended December 31,
(In thousands, except per share amounts)
2024
2023
2022
Revenues:
Subscriptions
$
1,342,931 $
1,159,512 $
1,012,304
Maintenance
463,132
466,661
468,455
Professional services
263,991
249,976
277,625
Software licenses and royalties
26,357
38,096
59,406
Hardware and other
41,392
37,506
32,414
Total revenues
2,137,803
1,951,751
1,850,204
Cost of revenues:
Subscriptions, maintenance and professional services
1,112,778
1,001,221
977,885
Software licenses and royalties
6,277
10,821
6,083
Amortization of software development
18,806
12,625
6,507
Amortization of acquired software
36,964
36,062
52,192
Hardware and other
27,217
29,923
23,674
Total cost of revenues
1,202,042
1,090,652
1,066,341
Gross profit
935,761
861,099
783,863
Sales and marketing expense
157,731
149,770
135,743
General and administrative expense
300,938
308,575
267,324
Research and development expense
117,939
109,585
105,184
Amortization of other intangibles
59,627
74,632
61,363
Operating income
299,526
218,537
214,249
Interest expense
(5,931)
(23,629)
(28,379)
Other income, net
14,572
3,328
1,723
Income before income taxes
308,167
198,236
187,593
Income tax provision
45,141
32,317
23,353
Net income
$
263,026 $
165,919 $
164,240
Earnings per common share:
Basic
$
6.17 $
3.95 $
3.95
Diluted
$
6.05 $
3.88 $
3.87
See accompanying notes.
F-3
Tyler Technologies, Inc.
Consolidated Statements of Comprehensive Income
For the years ended December 31,
(In thousands)
2024
2023
2022
Net income
$
263,026 $
165,919 $
164,240
Other comprehensive income (loss), net of tax:
Securities available-for-sale and transferred securities:
Change in net unrealized holding gains (losses) on available-for-sale securities during
the period
151
518
(850)
Reclassification adjustment of unrealized losses on securities transferred from held-
to-maturity
—
—
(27)
Reclassification adjustment for net loss on sale of available-for-sale securities,
included in net income
18
—
79
Other comprehensive income (loss), net of tax
169
518
(798)
Comprehensive income
$
263,195 $
166,437 $
163,442
See accompanying notes.
F-4
Tyler Technologies, Inc.
Consolidated Balance Sheets
(In thousands, except par value and share amounts)
December 31, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
744,721 $
165,493
Accounts receivable (less allowance for losses and sales adjustments of $17,325 in 2024 and
$22,829 in 2023)
587,634
619,704
Short-term investments
23,257
10,385
Prepaid expenses
65,135
54,700
Income tax receivable
11,975
—
Other current assets
8,057
10,303
Total current assets
1,440,779
860,585
Accounts receivable, long-term
7,153
8,988
Operating lease right-of-use assets
31,433
39,039
Property and equipment, net
163,775
169,720
Other assets:
Software development costs, net
76,117
67,124
Goodwill
2,531,653
2,532,109
Other intangibles, net
831,966
928,870
Non-current investments
10,758
7,046
Other non-current assets
86,381
63,182
$
5,180,015 $
4,676,663
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
156,817 $
146,339
Accrued liabilities
197,709
158,558
Operating lease liabilities
9,643
11,060
Current income tax payable
—
2,466
Deferred revenue
701,438
632,914
Current portion of term loans
—
49,801
Total current liabilities
1,065,607
1,001,138
Convertible senior notes due 2026, net
597,934
596,206
Deferred revenue, long-term
22,376
291
Deferred income taxes
47,503
78,590
Operating lease liabilities, long-term
30,791
39,822
Other long-term liabilities
27,382
22,621
Total liabilities
1,791,593
1,738,668
Commitments and contingencies
—
—
Shareholders' equity:
Preferred stock, $10.00 par value; 1,000,000 shares authorized; none issued
—
—
Common stock, $0.01 par value; 100,000,000 shares authorized; 48,147,969 shares
issued in 2024 and 2023
481
481
Additional paid-in capital
1,539,301
1,354,787
Accumulated other comprehensive loss, net of tax
(157)
(326)
Retained earnings
1,866,799
1,603,773
Treasury stock, at cost; 5,184,092 and 5,858,476 shares in 2024 and 2023, respectively
(18,002)
(20,720)
Total shareholders' equity
3,388,422
2,937,995
$
5,180,015 $
4,676,663
See accompanying notes.
F-5
Tyler Technologies, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31
(In thousands)
2024
2023
2022
Cash flows from operating activities:
Net income
$
263,026 $
165,919 $
164,240
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
143,437
154,079
159,072
Losses from sale of investments
24
1
45
Share-based compensation expense
122,813
108,338
102,985
Provision (reductions in reserve) for losses and sales adjustments - accounts receivable
(5,504)
8,233
2,781
Amortization of operating lease right-of-use assets
8,932
16,688
12,969
Deferred income tax benefit
(30,663)
(73,704)
(87,192)
Other
207
475
—
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable
28,795
(39,878)
(51,410)
Income tax (payable) receivable
(14,441)
(41,201)
61,940
Prepaid expenses and other current assets
(29,775)
(19,668)
910
Accounts payable
10,509
41,485
(17,537)
Operating lease liabilities
(11,650)
(11,533)
(12,396)
Accrued liabilities
43,387
13,069
(24,344)
Deferred revenue
90,775
58,513
59,460
Other long-term liabilities
4,761
(376)
9,932
Net cash provided by operating activities
624,633
380,440
381,455
Cash flows from investing activities:
Additions to property and equipment
(20,535)
(20,519)
(22,529)
Purchase of marketable security investments
(32,448)
(10,617)
(29,935)
Proceeds and maturities from marketable security investments
15,994
49,412
71,034
Investment in software development
(29,401)
(32,490)
(27,622)
Cost of acquisitions, net of cash acquired
(1,395)
(62,759)
(163,921)
Other
173
13
443
Net cash used by investing activities
(67,612)
(76,960)
(172,530)
Cash flows from financing activities:
Payment on term loans
(50,000)
(345,000)
(360,000)
Payment of debt issuance costs
(2,637)
—
—
Proceeds from exercise of stock options, net of withheld shares for taxes upon equity
award settlement
57,213
16,960
(890)
Contributions from employee stock purchase plan
17,631
16,196
16,651
Net cash provided (used) by financing activities
22,207
(311,844)
(344,239)
Net increase (decrease) in cash and cash equivalents
579,228
(8,364)
(135,314)
Cash and cash equivalents at beginning of period
165,493
173,857
309,171
Cash and cash equivalents at end of period
$
744,721 $
165,493 $
173,857
See accompanying notes.
F-6
2024
2023
2022
Supplemental cash flow information:
Cash paid for interest
$
3,095 $
19,154 $
21,256
Cash paid for income taxes, net
84,204
142,820
38,490
Non-cash investing and financing activities:
Non-cash additions to property and equipment
$
254 $
3,123 $
169
Issuance of shares for acquisitions
—
5,675
18,169
F-7
Tyler Technologies, Inc.
Consolidated Statements of Shareholders’ Equity
For the years ended December 31, 2024, 2023, and 2022
(In thousands)
Common Stock
Additional
Paid-in
Capital
Other
Comprehensive
Income (Loss)
Retained
Earnings
Treasury Stock
Total
Shareholders'
Equity
Shares
Amount
Shares
Amount
Balance at December 31, 2021
48,148
$
481 $ 1,075,650 $
(46) $ 1,273,614 (6,833) $ (25,667) $ 2,324,032
Net income
—
—
—
— 164,240
—
—
164,240
Other comprehensive loss, net of tax
—
—
—
(798)
—
—
—
(798)
Exercise of stock options and vesting of
restricted stock units
—
—
(3,218)
—
—
433
29,547
26,329
Employee taxes paid for withheld shares
upon equity award settlement
—
—
—
—
—
(70) (27,219)
(27,219)
Stock compensation
—
— 102,985
—
—
—
—
102,985
Issuance of shares pursuant to employee
stock purchase plan
—
—
16,365
—
—
49
286
16,651
Issuance of shares for acquisitions
—
—
17,943
—
—
56
226
18,169
Balance at December 31, 2022
48,148
481 1,209,725
(844) 1,437,854
(6,365) (22,827) 2,624,389
Net income
—
—
—
— 165,919
—
—
165,919
Other comprehensive income, net of tax
—
—
—
518
—
—
—
518
Exercise of stock options and vesting of
restricted stock units
—
—
15,122
—
—
514
29,575
44,697
Employee taxes paid for withheld shares
upon equity award settlement
—
—
—
—
—
(74) (27,737)
(27,737)
Stock compensation
—
— 108,338
—
—
—
—
108,338
Issuance of shares pursuant to employee
stock purchase plan
—
—
15,988
—
—
52
208
16,196
Issuance of shares for acquisitions
—
—
5,614
—
—
15
61
5,675
Balance at December 31, 2023
48,148
481 1,354,787
(326) 1,603,773
(5,858) (20,720) 2,937,995
Net income
—
—
—
— 263,026
—
—
263,026
Other comprehensive income, net of tax
—
—
—
169
—
—
—
169
Exercise of stock options and vesting of
restricted stock units
—
—
41,926
—
—
739
55,548
97,474
Employee taxes paid for withheld shares
upon equity award settlement
—
—
—
—
—
(78) (40,261)
(40,261)
Stock compensation
—
— 122,813
—
—
—
—
122,813
Issuance of shares pursuant to employee
stock purchase plan
—
—
17,456
—
—
43
175
17,631
Reimbursement of shares from escrow
—
—
2,319
—
—
(30) (12,744)
(10,425)
Balance at December 31, 2024
48,148
$
481 $ 1,539,301 $
(157) $ 1,866,799 (5,184) $ (18,002) $ 3,388,422
See accompanying notes.
F-8
Tyler Technologies, Inc.
Notes to Consolidated Financial Statements
(Tables in thousands, except per share data)
(1)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
We provide integrated software systems and related services for the public sector. We develop and market a broad line of software
solutions and services to address the information technology (“IT”) needs primarily of cities, counties, states, schools, federal
agencies, and other government entities. We provide subscription-based services such as software as a service (“SaaS”), transaction-
based fees primarily related to digital government services and online payment processing, and electronic document filing solutions
(“e-filing”), which simplify the filing and management of court related documents. In addition, we provide professional IT services,
including software and hardware installation, data conversion, training, and for certain clients, product modifications, along with
continuing maintenance and support for clients using our solutions. Additionally, we provide property appraisal outsourcing services
for taxing jurisdictions.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include our parent company and 62 subsidiaries, which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in consolidation. Comprehensive income (loss) is defined as the change
in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and
includes all components of net income (loss) and other comprehensive income (loss). During the twelve months ended December 31,
2024, 2023 and 2022, we had approximately $169,000 and $518,000 other comprehensive income, net of taxes, and $798,000 of other
comprehensive loss, net of tax, from our available-for-sale investment holdings, respectively.
USE OF ESTIMATES
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States
(“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Significant items subject to such estimates and assumptions include revenue recognition, determining the nature and
timing of satisfaction of performance obligations and loss contingencies; the recoverability of goodwill and other intangible assets and
estimated useful lives of intangible assets; and determining the potential outcome of future tax consequences of events that have been
recognized on our consolidated financial statements or tax returns. Actual results could differ from estimates.
CASH AND CASH EQUIVALENTS
Cash in excess of that necessary for operating requirements is invested in short-term, highly liquid, income-producing investments.
Investments with original maturities of three months or less are classified as cash and cash equivalents, which primarily consist of cash
on deposit with several banks and money market funds. Cash and cash equivalents are stated at cost, which approximates market
value.
REVENUE RECOGNITION
Nature of Products and Service
We account for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with
Customers. We earn the majority of our revenues from subscription-based services and post-contract client support (“PCS” or
“maintenance”). Other sources of revenue are professional services, software licenses and royalties, and hardware and other. Revenue
is recognized upon transfer of control of promised products or services to clients in an amount that reflects the consideration we expect
to receive in exchange for those products or services. We determine revenue recognition through the following steps:
•
Identification of the contract, or contracts, with a client
•
Identification of the performance obligations in the contract
•
Determination of the transaction price
•
Allocation of the transaction price to the performance obligations in the contract
•
Recognition of revenue when, or as, we satisfy a performance obligation
F-9
Our software arrangements with clients contain multiple performance obligations that range from software licenses, installation,
training, consulting, software modification and customization to meet specific client needs; hosting; and PCS. For these contracts, we
account for individual performance obligations separately when they are distinct. We evaluate whether separate performance
obligations can be distinct or should be accounted for as one performance obligation. Arrangements that include professional services,
such as training or installation, are evaluated to determine whether those services are highly interdependent or interrelated to the
product’s functionality. The transaction price is allocated to the distinct performance obligations on a relative standalone selling price
(“SSP”) basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other
factors, including the value of our contracts, the applications sold, client demographics, and the number and types of users within our
contracts.
For arrangements that involve significant production, modification, or customization of the software, or where professional services
otherwise cannot be considered distinct, we recognize revenue as control is transferred to the client over time using progress-to-
completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred. Amounts
recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost
estimates. Changes to total estimated contract costs, if any, are recorded in the period they are determined. Estimated losses on
uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.
Revenue is recognized net of allowances for losses and sales adjustments and any taxes collected from clients, which are subsequently
remitted to governmental authorities.
Subscription-Based Services
Subscription-based services consist primarily of revenues derived from SaaS arrangements and transaction-based fees. For SaaS
arrangements, we evaluate whether the client has the contractual right to take possession of our software at any time during the hosting
period without significant penalty and whether the client can feasibly maintain the software on the client’s hardware or enter into
another arrangement with a third party to host the software. We recognize SaaS services ratably over the term of the arrangement,
which range from one to 10 years, but are typically for periods of generally one to three years. For professional services associated
with certain SaaS arrangements, we have concluded that the services are not distinct, and we recognize the revenue ratably over the
remaining contractual period once we have provided the client access to the software.
Transaction-based fees primarily relate to digital government services and online payment services, which are sometimes offered with
the assistance of third-party vendors. When we are the principal in a transaction, we record the revenue and related costs on a gross
basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount billed to the client) and
record the net amount as revenue.
For transaction-based revenues from digital government services and online payments, we have the right to charge the client an
amount that directly corresponds with the value to the client of our performance to date. Therefore, we recognize revenues for these
services over time based on the amount billable to the client. In some cases, we are paid on a fixed fee basis and recognize the revenue
ratably over the contractual period. Typically, the structure of our arrangements does not give rise to variable consideration. However,
in those instances whereby variable consideration exists, we include in our estimates, additional revenues for variable consideration
when we believe we have an enforceable right, the amount can be estimated reliably and its realization is probable.
Costs of performing services under subscription-based arrangements are expensed as incurred, except for certain direct and
incremental contract origination associated with SaaS arrangements. Such direct and incremental costs are capitalized and amortized
ratably over the period of benefit.
Post-Contract Client Support (Maintenance)
Our clients generally enter into PCS agreements when they purchase our software licenses. PCS includes telephone support, bug fixes,
and rights to upgrades on a when-and-if available basis. PCS is considered distinct when purchased with our software licenses. Our
PCS agreements are typically renewable annually. PCS is recognized over time on a straight-line basis over the period the PCS is
provided. All significant costs and expenses associated with PCS are expensed as incurred.
Professional Services
When professional services are distinct, the fee allocable to the service element is recognized over the time we perform the services
and is billed on a time and material or milestone basis. Contract fees are typically billed on a milestone basis as defined within contract
terms. We record amounts that have been invoiced in accounts receivable and in deferred revenue or revenues, depending on whether
the revenue recognition criteria have been met.
F-10
Software Licenses and Royalties
Many of our software arrangements involve “off-the-shelf” software. We recognize the revenue allocable to “off-the-shelf” software
licenses and specified upgrades at a point in time when control of the software license transfers to the client, unless the software is not
considered distinct. We consider “off-the-shelf” software to be distinct when it can be added to an arrangement with minor changes in
the underlying code, it can be used by the client for the client’s purpose upon installation, and remaining services such as training are
not considered highly interdependent or interrelated to the product's functionality. For arrangements that involve significant
production, modification or customization of the software, or where professional services are otherwise not considered distinct, we
recognize revenue over time by measuring progress-to-completion.
Software license fees are billed in accordance with the contract terms. Typically, a majority of the fee is due when access to the
software license is made available to the client and the remainder of the fee is due over a passage of time stipulated by the contract.
We recognize royalty revenue when the sale occurs under the terms of our third-party royalty arrangements. Currently, our third-party
royalties are recognized on an estimated basis and adjusted if needed, when we receive notice of amounts we are entitled to receive.
We typically receive notice of royalty revenue we are entitled to and amounts are billed on a quarterly basis in the quarter immediately
following the royalty reporting period, and adjustments have not been significant.
Computer Hardware Equipment
Revenue allocable to computer hardware equipment is recognized at a point in time when control of the equipment is transferred to the
client.
Refer to Note 3 - “Disaggregation of Revenue” for further information, including the economic factors that affect the nature, amount,
and uncertainty of revenues and cash flows of our various revenue categories.
Contract Balances
Accounts receivable and allowance for losses and sales adjustments
Timing of revenue recognition may differ from the timing of invoicing to clients. We record an unbilled receivable when revenue is
recognized prior to invoicing, or deferred revenue when invoicing occurs prior to revenue recognition. For multi-year agreements, we
generally invoice clients annually at the beginning of each annual coverage period.
In connection with certain professional services contracts, we may perform work prior to when the software and services are billable
and/or payable pursuant to the contract. Unbilled revenue is not billable at the balance sheet date but is recoverable over the remaining
life of the contract through billings made in accordance with contractual agreements. The termination clauses in most of our contracts
provide for the payment for the value of products delivered or services performed in the event of early termination. We have
historically recorded such unbilled receivables (costs and estimated profit in excess of billings) in connection with (1) professional
services contracts accounted for using progress-to-completion method of revenue recognition using labor hours as a measure of
progress towards completion in which the services are performed in one accounting period but the billing for the software element of
the arrangement may be based upon the specific phase of the implementation; (2) software revenue for which we have recognized
revenue at the point in time when the software is made available to the client but the billing has not yet been submitted to the client;
(3) some of our contracts which provide for an amount to be withheld from a progress billing (generally between 5% and 15%
retention) until final and satisfactory project completion is achieved; and (4) in a limited number of cases, extended payment terms,
which may be granted to clients with whom we generally have a long-term relationship and favorable collection history.
Accounts receivable is as follows:
Years ended December 31,
2024
2023
Accounts receivable - current
$
587,634 $
619,704
Accounts receivable - long term
7,153
8,988
Total accounts receivable
$
594,787 $
628,692
F-11
Total accounts receivable, including total current and long-term accounts receivable, net of allowance for losses and sales adjustments,
was $594.8 million and $628.7 million, at December 31, 2024, and December 31, 2023, respectively. We have recorded unbilled
receivables of $115.6 million and $119.2 million at December 31, 2024, and December 31, 2023, respectively. Unbilled receivables
expected to be collected within one year have been included with the current portion of accounts receivable in the accompanying
consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included
with long-term portion of accounts receivable in the accompanying consolidated balance sheets. Included in unbilled receivables are
retention receivables of $11.4 million and $9.8 million at December 31, 2024, and December 31, 2023, respectively, which become
payable upon the completion of the contract or completion of our fieldwork and formal hearings.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days.
In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally
do not include a significant financing component. The primary purpose of our invoicing terms is to provide clients with simplified and
predictable ways of purchasing our products and services, not to receive financing from our clients or to provide clients with
financing. Examples include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract
period, and multi-year on-premises term licenses that are invoiced annually with revenue recognized upfront.
We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred.
Because most of our clients are domestic governmental entities, we rarely incur a credit loss resulting from the inability of a client to
make required payments. Consequently, we have not recorded a reserve for credit losses. Events or changes in circumstances that
indicate the carrying amount for the allowances for losses and sales adjustments may require revision, include, but are not limited to,
managing our client’s expectations regarding the scope of the services to be delivered and defects or errors in new versions or
enhancements of our software products. Our allowances for losses and sales adjustments are $17.3 million and $22.8 million at
December 31, 2024, and December 31, 2023, respectively.
The following table summarizes the changes in the allowance for losses and sales adjustments:
Years ended December 31,
2024
2023
Balance at beginning of year
$
22,829 $
14,761
Provisions (reductions in reserve) for losses and sales adjustments - accounts receivable
(5,504)
8,233
Collections of accounts previously written off
—
(165)
Balance at end of year
$
17,325 $
22,829
Deferred Revenue
The majority of deferred revenue consists of deferred subscription-based services revenue that has been billed based on contractual
terms in the underlying arrangement, with the remaining balance consisting of payments received in advance of revenue being earned
under maintenance, software licensing, professional services, and hardware installation. Refer to Note 4 - “Deferred Revenue and
Performance Obligations” for further information, including deferred revenue by segment and changes in deferred revenue during the
period.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a client.
Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over
a period of benefit that we have determined to be generally three to seven years. We utilize the “portfolio approach” practical
expedient, which allows entities to apply the guidance to a portfolio of contracts with similar characteristics because the effects on the
financial statements of this approach would not differ materially from applying the guidance to individual contracts. Using the
“portfolio approach”, we determine the period of benefit by taking into consideration our client contracts, our technology life-cycle
and other factors. Sales commissions for renewal contracts are generally not paid in connection with the renewal of a contract. In the
small number of instances where a commission is paid on a renewal, it is not commensurate with the commission paid on the initial
sale and is recognized over the term of renewal, which is generally one year.
Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term
portion in the accompanying consolidated balance sheets. Amortization expense related to deferred commissions is included in sales
and marketing expense in the accompanying consolidated statements of income. There were no indicators of impairment in relation to
the costs capitalized for the periods presented. Refer to Note 5 - “Deferred Commissions” for further information.
F-12
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred taxes arise because of different treatment between
financial statement accounting and tax accounting, known as “temporary differences”. We record the tax effect of these temporary
differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in the future periods) and “deferred
tax liabilities” (generally items that we received a tax deduction for, which have not yet been recorded in the income statement). The
deferred tax assets and liabilities are measured using enacted tax rules and laws that are expected to be in effect when the temporary
differences are expected to be recovered or settled. A valuation allowance is established to reduce deferred tax assets if it is more
likely than not that a deferred tax asset will not be “realized”.
We do not recognize a tax benefit for uncertain tax positions unless management’s assessment concludes that it is “more likely than
not” that the position is sustainable based on its technical merits. If the recognition threshold is met, we recognize a tax benefit based
upon the largest amount of the tax benefit that is more likely than not probable, determined by cumulative probability of being realized
upon settlement with the taxing authority. We recognize interest and penalties, if any, related to unrecognized tax benefits in income
tax expense in the consolidated statements of income.
SHARE-BASED COMPENSATION
We have a share-based award plan that provides for the grant of stock options, restricted stock units, and performance share units to
key employees, directors and non-employee consultants. Stock options generally vest after three to five years of continuous service
from the date of grant and have a contractual term of 10 years. Restricted stock unit grants generally vest ratably over three to five
years of continuous service from the date of grant. Each performance share unit represents the right to receive one share of our
common stock based on our achievement of certain financial performance targets during applicable performance periods, which
generally cliff vest in one or three years. We account for share-based compensation utilizing the fair value recognition pursuant to
ASC 718, Stock Compensation. See Note 14, “Share-Based Compensation,” for further information.
BUSINESS COMBINATIONS
Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities
assumed at their respective fair values. The determination of fair value requires the use of significant estimates and assumptions, and
in making these determinations, management uses all available information.
For tangible and identifiable intangible assets acquired in a business combination, management estimates the fair value of assets
acquired and liabilities assumed based on quoted market prices, the carrying value of the acquired assets and widely accepted
valuation techniques, including discounted cash flows and market multiple analyses. The assumptions made in performing these
valuations include, but are not limited to, discount rates, future revenues and operating costs, projections of capital costs, and other
assumptions believed to be consistent with those used by principal market participants.
Due to the specialized nature of these calculations, we engage third-party specialists to assist management in evaluating our
assumptions as well as appropriately measuring the fair value of assets acquired and liabilities assumed. We adjust the preliminary
purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and
circumstances that existed as of the closing date. If actual results are materially different than the assumptions we used to determine
fair value of the assets acquired and liabilities assumed as well as the estimated useful lives of the intangible assets acquired through a
business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have a material impact on
our financial position and results of operations. See Note 6 , “Acquisitions,” for further information.
Contingent future cash payments related to acquisitions are recognized at fair value as of the acquisition date and included in the
determination of the acquisition date purchase price. Subsequent changes in the fair value of the contingent future cash payments are
recognized in earnings in the period that the change occurs. We have no contingent consideration outstanding as of December 31,
2024.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
We perform an impairment assessment annually on October 1, or more frequently if indicators of potential impairment exist, which
includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of each reporting unit’s goodwill. If
the conclusion of an impairment assessment is that it is more likely than not that the fair value of the reporting unit is more than its
carrying value, goodwill is not considered impaired, and we are not required to perform the quantitative goodwill impairment test. If
the conclusion of an impairment assessment is that it is more likely than not that the fair value is less than its carrying value, we
perform the quantitative goodwill impairment test, which compares the fair value of the reporting unit to its carrying value.
Impairments, if any, are based on the excess of the carrying amount over the fair value.
F-13
There have been no impairments to goodwill in any of the periods presented. See Note 8, “Goodwill and Other Intangible Assets,” for
additional information.
Other Intangible Assets
We make judgments about the recoverability of purchased intangible assets other than goodwill whenever events or changes in
circumstances indicate that an impairment may exist. Client base and acquired software each comprise approximately half of our
purchased intangible assets other than goodwill. We review our client turnover each year for indications of impairment. Our client
turnover has historically been very low. If indications of impairment are determined to exist, we measure the recoverability of assets
by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the
amount by which the carrying amount of the assets exceeds the fair value of the assets. There have been no impairments of intangible
assets in any of the periods presented.
PROPERTY AND EQUIPMENT, NET
Property, equipment and purchased software are recorded at original cost and increased by the cost of any significant improvements
after purchase. We expense maintenance and repairs when incurred. Depreciation and amortization is calculated using the straight-line
method over the shorter of the asset’s estimated useful life or the term of the lease in the case of leasehold improvements.
To assess potential impairment, we periodically evaluate whether current facts or circumstances indicate that the carrying value of our
property and equipment or other long-lived assets to be held and used may not be recoverable. If such circumstances are determined to
exist, we measure the recoverability of assets to be held and used by a comparison of the carrying amount of the asset or appropriate
grouping of assets and the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of
the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount
of the assets exceeds the fair value of the assets. There was no impairment of long-lived assets in any of the periods presented.
SOFTWARE DEVELOPMENT COSTS
Software development costs primarily consist of personnel costs. We capitalize software development costs upon the establishment of
technological feasibility and prior to the availability of the product for general release to clients for software sold to third parties and
capitalize application development stage costs of software developed for internal use. During the twelve months period ended
December 31, 2024, 2023, and 2022, respectively, we capitalized approximately $29.4 million, $32.5 million, and $27.6 million of
software development costs. We begin to amortize capitalized costs when a product is available for general release to clients or when
internal use software is ready for its intended use. Amortization expense is determined on a product-by-product basis at a rate not less
than straight-line basis over the software’s remaining estimated economic life of, generally, three to seven years.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred and include compensation costs for engineering and product management
personnel, third-party contractor expenses, software development tools and other expenses related to researching and developing new
solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and
IT support costs. We expensed research and development costs of $117.9 million in 2024, $109.6 million in 2023, and $105.2 million
in 2022.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash
equivalents, accounts receivable from trade clients, and investments in marketable securities. Our cash and cash equivalents primarily
consist of operating account balances and money market funds, which are maintained at several major domestic financial institutions
and the balances often exceed insured amounts. As of December 31, 2024, we had cash and cash equivalents of $744.7 million. We
perform periodic evaluations of the credit standing of these financial institutions.
Concentrations of credit risk with respect to receivables are limited due to the size and geographical diversity of our client base. As a
result, we do not believe we have any significant concentrations of credit risk as of December 31, 2024.
LEASES
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets
and operating lease liabilities, current and long-term, on our consolidated balance sheets. We currently do not have any finance lease
arrangements.
F-14
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease
payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental
borrowing rate based on the information available at commencement date of the lease in determining the present value of future
payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred less lease incentives
received. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that
option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial
term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis
over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for as a single
lease component.
INDEMNIFICATION
Most of our software license agreements indemnify our clients in the event that the software sold infringes upon the intellectual
property rights of a third party. These agreements typically provide that in such event we will either modify or replace the software so
that it becomes non-infringing or procure for the client the right to use the software. We have not recorded a liability associated with
these indemnifications, as we are not aware of any pending or threatened infringement actions that are possible losses. We believe the
estimated fair value of these intellectual property indemnification clauses is minimal.
We have also agreed to indemnify certain officers and our Board members if they are named or threatened to be named as a party to
any proceeding by reason of the fact that they acted in such capacity. We maintain directors’ and officers’ liability insurance coverage
to protect against any such losses. We have not recorded a liability associated with these indemnifications. Because of our insurance
coverage, we believe the estimated fair value of these indemnification agreements is minimal.
RECENT ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07 - Segment Reporting (Topic 280), Improvements
to Reportable Segment Disclosures. ASU 2023-07 enhances the disclosures required for reportable segments in annual and interim
consolidated financial statements. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024, with early adoption is permitted. As of December 31, 2024, we adopted the
new standard which has been applied retrospectively by the Company. This change did not have a significant impact on the
Company’s financial statements and disclosures. See Note 2, “Segment and Related Information,” for further discussion.
NEW ACCOUNTING PRONOUNCEMENTS
In January 2025, the FASB issued ASU 2025-01 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies that all public business entities must adopt the
guidance in ASU 2024-03 for annual reporting periods beginning after December 15, 2026, and for interim periods within annual
reporting periods beginning after December 15, 2027, with early adoption permitted. This guidance is not expected to have a material
impact on the Company’s financial statements.
In November 2024, the FASB issued ASU 2024-04 - Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced
Conversions of Convertible Debt Instruments. This guidance clarifies the requirements for determining whether certain settlements of
convertible debt instruments should be accounted for as an induced conversion. It is effective for annual reporting periods beginning
after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. This guidance is
not expected to have a material impact on the Company’s financial statements.
In November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires public entities to disclose
additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. It is
effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027,
with early adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the
transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate
reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the
effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early
adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.
F-15
(2)
SEGMENT AND RELATED INFORMATION
Reportable operating segments are determined based on the Company’s management approach. The management approach, as defined
by FASB ASC 280 “Segment Reporting” is based on the way that the Chief Operating Decision Maker (“CODM”) organizes the
segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for
purposes of FASB ASC 280, is our Chief Executive Officer.
We report our results in two reportable segments. Our reportable segments are organized on the basis of a combination of the products
and services they deliver to clients and the function the public sector client performs. Business units that have met the aggregation
criteria have been combined into our two reportable segments. The Enterprise Software (“ES”) reportable segment provides public
sector entities with software systems and services to meet their information technology and automation needs for mission-critical
“back-office” functions such as: public administration solutions, courts and public safety solutions, education solutions, and property
and recording solutions. The Platform Technologies (“PT”) reportable segment provides public sector entities with platform and
transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and
workflows.
The primary financial measures used by the CODM for assessing performance and allocating resources are segment income or loss
from operations. The CODM uses segment income or loss from operations before income taxes, not including gains and losses on
investments, to allocate resources (including employees, property, and financial or capital resources) for each segment predominantly
in the annual budget and forecasting process. Segment gross profit for our operating segments units is defined as gross profit before
non-cash amortization of acquired software associated with acquisitions. Segment operating income for our reportable segments is
defined as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense, and income
taxes. During the fiscal periods presented, we had no significant transaction between reportable segments. Corporate segment
operating loss primarily consists of compensation costs for the executive management team, certain shared services staff, and share-
based compensation expense for the entire company. Corporate segment operating loss also includes revenues and expenses related to
a company-wide user conference. The accounting policies of the reportable segments are the same as those described in Note 1,
“Summary of Significant Accounting Policies”.
Segment assets primarily consist of net accounts receivable, prepaid expenses and other current assets, and net property and equipment
and software development costs. Corporate assets primarily consist of cash and investments, prepaid insurance, intangibles associated
with acquisitions, deferred income taxes, and net property and equipment mainly related to unallocated information and technology
assets. Certain presentation items from previous years have been adjusted to conform with current year presentation.
For the year ended December 31, 2024
Enterprise
Software
Platform
Technologies
Corporate
Totals
Revenues
Subscriptions:
SaaS
$
559,842 $
84,937 $
— $
644,779
Transaction-based fees
234,633
463,519
—
698,152
Maintenance
438,455
24,677
—
463,132
Professional services
219,933
44,058
—
263,991
Software licenses and royalties
25,292
1,065
—
26,357
Hardware and other
33,447
992
6,953
41,392
Total revenues
1,511,602
619,248
6,953
2,137,803
Cost of revenues excluding amortization of acquired software
706,952
411,351
46,775
1,165,078
Segment gross profit
804,650
207,897
(39,822)
972,725
Sales and marketing expense
109,981
21,618
26,132
157,731
General and administrative expense
48,072
57,627
195,239
300,938
Research and development expense
100,182
12,126
5,631
117,939
Segment operating income
546,415
116,526
(266,824)
396,117
Depreciation and amortization expense
37,179
89,372
16,886
143,437
Software development expenditures
7,612
15,558
6,231
29,401
Capital expenditures
15,283
4,168
1,084
20,535
Segment assets
$
572,224 $
416,635 $ 4,191,156 $
5,180,015
F-16
For the year ended December 31, 2023
Enterprise
Software
Platform
Technologies
Corporate
Totals
Revenues
Subscriptions:
SaaS
$
459,544 $
68,433 $
— $
527,977
Transaction-based fees
174,718
456,817
—
631,535
Maintenance
442,781
23,880
—
466,661
Professional services
209,727
40,249
—
249,976
Software licenses and royalties
32,709
5,387
—
38,096
Hardware and other
30,176
—
7,330
37,506
Total revenues
1,349,655
594,766
7,330
1,951,751
Cost of revenues excluding amortization of acquired software
653,407
368,017
33,166
1,054,590
Segment gross profit
696,248
226,749
(25,836)
897,161
Sales and marketing expense
102,325
25,196
22,249
149,770
General and administrative expense
57,481
64,406
186,688
308,575
Research and development expense
92,686
12,701
4,198
109,585
Segment operating income
443,756
124,446
(238,971)
329,231
Depreciation and amortization expense
25,445
110,354
18,280
154,079
Software development expenditures
6,619
15,840
10,031
32,490
Capital expenditures
16,788
2,380
1,351
20,519
Segment assets
$
631,117 $
426,064 $ 3,619,482 $
4,676,663
For the year ended December 31, 2022
Enterprise
Software
Platform
Technologies
Corporate
Totals
Revenues
Subscriptions:
SaaS
$
378,953 $
49,573 $
— $
428,526
Transaction-based fees
147,370
436,408
583,778
Maintenance
444,143
24,312
—
468,455
Professional services
204,970
72,655
—
277,625
Software licenses and royalties
55,158
4,248
—
59,406
Hardware and other
26,592
—
5,822
32,414
Total revenues
1,257,186
587,196
5,822
1,850,204
Cost of revenues excluding amortization of acquired software
606,379
370,571
37,199
1,014,149
Segment gross profit
650,807
216,625
(31,377)
836,055
Sales and marketing expense
100,786
23,224
11,733
135,743
General and administrative expense
39,083
61,191
167,050
267,324
Research and development expense
92,162
8,919
4,103
105,184
Segment operating income
418,776
123,291
(214,263)
327,804
Depreciation and amortization expense
55,389
84,609
19,074
159,072
Software development expenditures
3,790
14,581
9,251
27,622
Capital expenditures
8,972
6,845
6,712
22,529
Segment assets
$
636,377 $
362,610 $ 3,688,430 $
4,687,417
F-17
Reconciliation of reportable segment gross profit to the Company's consolidated totals:
Years Ended December 31,
2024
2023
2022
Segment gross profit
$
972,725 $
897,161 $
836,055
Amortization of acquired software
(36,964)
(36,062)
(52,192)
Gross profit
$
935,761 $
861,099 $
783,863
Reconciliation of reportable segment operating income to the Company's consolidated totals:
Years Ended December 31,
2024
2023
2022
Total segment operating income
$
396,117 $
329,231 $
327,804
Amortization of acquired software
(36,964)
(36,062)
(52,192)
Amortization of other intangibles
(59,627)
(74,632)
(61,363)
Interest expense
(5,931)
(23,629)
(28,379)
Other income, net
14,572
3,328
1,723
Income before income taxes
$
308,167 $
198,236 $
187,593
(3)
DISAGGREGATION OF REVENUE
The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing,
and uncertainty of revenues and cash flows.
Recurring Revenues
The majority of our revenues are comprised of revenues from subscriptions and maintenance, which we consider to be recurring
revenues. Subscriptions revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees. These
revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the term
of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in
fees generated by payment transactions and digital government services and are collected on a recurring basis during the contract term.
The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of one to
three years. Nearly all of our on-premises software clients contract with us for maintenance and support. Maintenance and support are
generally provided under auto-renewing annual contracts or multi-year contracts. We consider all other revenue categories to be non-
recurring revenues.
Recurring revenues and non-recurring revenues recognized during the period are as follows:
For the year ended December 31, 2024
Enterprise
Software
Platform
Technologies
Corporate
Totals
Revenue:
Subscriptions:
SaaS
$
559,842 $
84,937 $
— $
644,779
Transaction-based fees
234,633
463,519
—
698,152
Maintenance
438,455
24,677
—
463,132
Total recurring revenues
1,232,930
573,133
—
1,806,063
Professional services
219,933
44,058
—
263,991
Software licenses and royalties
25,292
1,065
—
26,357
Hardware and other
33,447
992
6,953
41,392
Total non-recurring revenues
278,672
46,115
6,953
331,740
Total revenues
$
1,511,602 $
619,248 $
6,953 $
2,137,803
F-18
For the year ended December 31, 2023
Enterprise
Software
Platform
Technologies
Corporate
Totals
Revenue:
Subscriptions:
SaaS
$
459,544 $
68,433 $
— $
527,977
Transaction-based fees
174,718
456,817
—
631,535
Maintenance
442,781
23,880
—
466,661
Total recurring revenues
1,077,043
549,130
—
1,626,173
Professional services
209,727
40,249
—
249,976
Software licenses and royalties
32,709
5,387
—
38,096
Hardware and other
30,176
—
7,330
37,506
Total non-recurring revenues
272,612
45,636
7,330
325,578
Total revenues
$
1,349,655 $
594,766 $
7,330 $
1,951,751
For the year ended December 31, 2022
Enterprise
Software
Platform
Technologies
Corporate
Totals
Revenue:
Subscriptions:
SaaS
$
378,953 $
49,573 $
— $
428,526
Transaction-based fees
147,370
436,408
—
583,778
Maintenance
444,143
24,312
—
468,455
Total recurring revenues
970,466
510,293
—
1,480,759
Professional services
204,970
72,655
—
277,625
Software licenses and royalties
55,158
4,248
—
59,406
Hardware and other
26,592
—
5,822
32,414
Total non-recurring revenues
286,720
76,903
5,822
369,445
Total revenues
$
1,257,186 $
587,196 $
5,822 $
1,850,204
(4)
DEFERRED REVENUE AND PERFORMANCE OBLIGATIONS
Total deferred revenue, including long-term, by segment is as follows:
December 31, 2024
December 31, 2023
Enterprise Software
$
683,909 $
589,295
Platform Technologies
36,117
39,597
Corporate
3,788
4,313
Totals
$
723,814 $
633,205
Changes in total deferred revenue, including long-term, were as follows:
2024
Balance at beginning of year
$
633,205
Deferral of revenue
1,514,168
Recognition of deferred revenue
(1,423,559)
Balance at end of year
$
723,814
F-19
Remaining Performance Obligations
We expect to recognize as revenue approximately 97% of our deferred revenue balance as of December 31, 2024, in the next 12
months, and the remainder thereafter. We believe the portion of transaction price allocated to the remaining performance obligations
which is not included in our deferred revenue balance is not a meaningful indicator of future revenue due to contracts with transaction-
based fees that vary with transaction activity, the variability in subscription term lengths, and termination provisions included in some
contracts that limit inclusion and cause variability from period to period.
(5)
DEFERRED COMMISSIONS
Deferred commissions are as follows:
December 31, 2024
December 31, 2023
Prepaid commissions
$
18,037 $
18,262
Long-term deferred commissions
38,762
30,924
Total deferred commissions
$
56,799 $
49,186
Amortization expense related to deferred commissions is as follows:
Years Ended December 31,
2024
2023
2022
Amortization expense
$
19,916 $
18,589 $
15,448
(6)
ACQUISITIONS
2024
We did not complete any new acquisitions during twelve months ended December 31, 2024.
In 2024, the Company settled certain fully indemnified matters related to two acquisitions completed in prior years resulting in the
reimbursement of shares of our common stock from escrow for $10.4 million.
In 2024, we also paid $1.4 million in cash for holdbacks related to other acquisitions completed in 2023.
2023
On October 31, 2023, we acquired Resource Exploration, Inc. (“ResourceX”), a leading provider of budgeting software to the public
sector. The total purchase price, net of cash acquired of $48,000, was approximately $16.3 million, consisting of $9.1 million paid in
cash, $5.7 million of common stock and $1.5 million related to working capital and indemnity holdbacks, subject to certain post-
closing adjustments.
We performed a valuation analysis of the fair market value of ResourceX’s assets and liabilities. In connection with this transaction,
we acquired total tangible assets of $388,000 and assumed liabilities of approximately $901,000. We recorded goodwill of
approximately $10.0 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of
approximately $7.6 million. The goodwill arising from this acquisition is primarily attributed to our ability to generate increased
revenues, earnings and cash flow by expanding our addressable market and client base. The intangible assets of $7.6 million are
primarily attributable to client relationships and acquired software and will be amortized over a weighted average period of
approximately nine years. We recorded net deferred tax liabilities of $748,000 related to the tax effect of our estimated fair value
allocations.
On October 31, 2023, we acquired ARInspect, Inc. (“ARInspect”), a leading provider of AI powered machine learning solutions for
public sector field operations. The total purchase price, net of cash acquired of $1.0 million, was approximately $20.5 million,
consisting of $19.1 million paid in cash and $2.4 million related to working capital and indemnity holdbacks, subject to certain post-
closing adjustments.
F-20
We performed a valuation analysis of the fair market value of ARInspect’s assets and liabilities. In connection with this transaction,
we acquired total tangible assets of $1.8 million and assumed liabilities of approximately $1.5 million. We recorded goodwill of
approximately $13.6 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of
approximately $10.0 million. The goodwill arising from this acquisition is primarily attributed to our ability to generate increased
revenues, earnings and cash flow by expanding our addressable market and client base. The intangible assets of $10.0 million are
primarily attributable to client relationships and acquired software and will be amortized over a weighted average period of
approximately 12 years. We recorded net deferred tax liabilities of $2.5 million related to the tax effect of our estimated fair value
allocations.
On August 8, 2023, we acquired Computing System Innovations, LLC (“CSI”), a leading provider of artificial intelligence automation,
redaction, and indexing solution for courts, recorders, attorneys, and others. The total purchase price, net of cash acquired of $415,000,
was approximately $36.2 million, consisting of $33.4 million paid in cash and $3.3 million related to working capital and indemnity
holdbacks, subject to certain post-closing adjustments.
We performed a valuation analysis of the fair market value of CSI’s assets and liabilities. In connection with this transaction, we
acquired total tangible assets of $1.2 million and assumed liabilities of approximately $2.4 million. We recorded goodwill of
approximately $19.4 million, all of which is expected to be deductible for tax purposes, and other identifiable intangible assets of
approximately $18.5 million. The goodwill arising from this acquisition is primarily attributed to our ability to generate increased
revenues, earnings and cash flow by expanding our addressable market and client base. The intangible assets of $18.5 million are
primarily attributable to client relationships and acquired software and will be amortized over a weighted average period of
approximately 13 years.
The actual operating results of CSI and ResourceX, from their respective dates of acquisition, are included with the operating results
of the ES segment. The operating results of ARInspect are included in the operating results of the PT segment since the date of
acquisition. Also, the impact of these acquisitions on our operating results, assets, and liabilities is not material, individually or in the
aggregate. As of December 31, 2024, the purchase price allocations for CSI, ARInspect, and ResourceX are final.
In the twelve months ended December 31, 2024, we incurred fees of approximately $29,000 for financial advisory, legal, accounting,
due diligence, valuation, and other various services necessary to complete acquisitions. These costs were expensed in 2024 and are
included in general and administrative expense in the accompanying consolidated statements of income.
(7)
PROPERTY AND EQUIPMENT, NET AND SOFTWARE DEVELOPMENT COSTS, NET
Property and equipment, net consists of the following at December 31:
Useful
Lives
(years)
2024
2023
Land
— $
23,163 $
22,908
Building and leasehold improvements
5-39
181,066
172,094
Computer equipment and purchased software
3-5
99,156
118,178
Furniture and fixtures
5
34,495
34,881
Transportation equipment
5
222
222
338,102
348,283
Accumulated depreciation and amortization
(174,327)
(178,563)
Property and equipment, net
$
163,775 $
169,720
Depreciation expense was $23.3 million in 2024, $25.0 million in 2023, and $29.5 million in 2022.
We paid $7.5 million and $16.0 million for real estate and the expansion of existing facilities in 2024 and 2023, respectively.
F-21
Software development costs, net consists of the following at December 31:
Useful
Lives
(years)
2024
2023
Software development costs
3-7
$
118,698 $
92,395
Accumulated amortization
(42,581)
(25,271)
Software development costs, net
$
76,117 $
67,124
Amortization expense for software development costs is recorded to cost of revenues and general and administrative expense:
2024
2023
2022
Amortization expense for software development costs recorded to cost of revenues
$
18,806 $
12,625 $
6,507
Amortization expense for software development costs recorded to general and administrative
expense
1,601
930
1,424
Total
$
20,407 $
13,555 $
7,931
Estimated annual amortization expense related to software development costs:
2025
$
23,050
2026
20,082
2027
15,162
2028
11,168
2029
5,348
Thereafter
1,307
$
76,117
(8)
GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the two years ended December 31, 2024 are as follows:
Enterprise
Software
Platform
Technologies
Total
Balance as of 12/31/2022
$
834,693 $
1,654,615 $
2,489,308
Goodwill acquired related to the purchase of CSI
19,421
—
19,421
Goodwill acquired related to the purchase of ARInspect
—
13,627
13,627
Goodwill acquired related to the purchase of ResourceX
9,978
—
9,978
Goodwill acquired related to the purchase of other acquisitions
—
(225)
(225)
Transfer from ES to PT
(27,090)
27,090
—
Balance as of 12/31/2023
837,002
1,695,107
2,532,109
Purchase price adjustments related to the purchase of prior year acquisitions
(235)
(221)
(456)
Balance as of 12/31/2024
$
836,767 $
1,694,886 $
2,531,653
Other intangible assets and related accumulated amortization consists of the following at December 31:
2024
2023
Gross carrying amount of other intangibles:
Client related intangibles
$
958,924 $
1,015,919
Acquired software
284,900
466,253
Trade names
5,320
45,002
Leases acquired
4,585
5,037
1,253,729
1,532,211
Accumulated amortization
(421,763)
(603,341)
Total other intangibles, net
$
831,966 $
928,870
F-22
Amortization expense for acquired software is recorded to cost of revenues. Amortization expense for client related intangibles, trade
names and leases acquired is recorded to amortization of other intangibles. Total amortization expense for other intangible assets was
$96.9 million in 2024, $111.0 million in 2023, and $113.9 million in 2022.
The amortization periods of other intangible assets is summarized in the following table:
December 31, 2024
December 31, 2023
Gross
Carrying
Amount
Weighted
Average
Amortization
Period
Accumulated
Amortization
Gross
Carrying
Amount
Weighted
Average
Amortization
Period
Accumulated
Amortization
Non-amortizable intangibles:
Goodwill
$ 2,531,653
—
$
—
$ 2,532,109
—
$
—
Amortizable intangibles:
Client related intangibles
$
958,924
18 years
$
261,407
$ 1,015,919
18 years
$
263,672
Acquired software
284,900
8 years
152,317
466,253
7 years
296,704
Trade names
5,320
12 years
3,902
45,002
7 years
38,838
Leases acquired
4,585
7 years
4,137
5,037
9 years
4,127
Estimated annual amortization expense related to other intangible assets:
2025
$
92,208
2026
84,871
2027
82,777
2028
79,983
2029
62,143
Thereafter
429,984
$
831,966
(9)
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
2024
2023
Accrued wages, bonuses and commissions
$
109,207 $
81,679
Other accrued liabilities
88,502
76,879
$
197,709 $
158,558
F-23
(10)
DEBT
The following table summarizes our total outstanding borrowings:
Rate
Maturity Date
December 31,
2024
December 31,
2023
2024 Credit Agreement
Revolving credit facility
S + 1.125%
September 2029
$
— $
—
2021 Credit Agreement
Revolving credit facility
S + 1.125%
April 2026
—
—
Term Loan A-1
S + 1.125%
April 2026
—
50,000
Convertible Senior Notes due 2026
0.25%
March 2026
600,000
600,000
Total borrowings
600,000
650,000
Less: unamortized debt discount and debt issuance costs
(2,066)
(3,993)
Total borrowings, net
597,934
646,007
Less: current portion of debt
—
(49,801)
Carrying value
$
597,934 $
596,206
2024 Credit Agreement
On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lenders party thereto and Wells
Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”).
The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0
million, including subfacilities for standby letters of credit and swingline loans. The 2024 Credit Agreement matures on September 25,
2029, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any
SOFR breakage costs. The Company incurred issuance fees of $2.6 million in connection with the 2024 Credit Agreement. The 2024
Credit Agreement replaced Tyler’s previous $500.0 million unsecured credit facility under the credit agreement dated April 21, 2021,
among the Company and various lenders party thereto (the “2021 Credit Agreement”), which was scheduled to mature in April 2026.
The 2024 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants, and events
of defaults. The 2024 Credit Agreement requires us to maintain certain financial ratios and other financial conditions and limits us
from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens.
Loans under the revolving credit facility will bear interest, at the Company’s option, at a per annum rate of either (1) the
Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) plus a margin of 0.125% to
0.75% or (2) the one-, three-, or six-month SOFR rate plus a margin of 1.125% to 1.75%. The margin in each case is based upon
Tyler’s total net leverage ratio, as determined pursuant to the 2024 Credit Agreement. In addition to paying interest on the outstanding
principal of loans under the revolving credit facility, the Company is required to pay a commitment fee initially in the amount of
0.125% per annum, which will subsequently range from 0.125% to 0.25% based upon the Company’s total net leverage ratio.
Borrowings under the 2024 Credit Agreement may be used for general corporate purposes, including working capital requirements,
acquisitions and capital expenditures.
2021 Credit Agreement
In connection with the completion of a prior acquisition the Company entered into a $1.4 billion Credit Agreement (the “2021 Credit
Agreement”) with the various lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline
Lender, and Issuing Lender. The 2021 Credit agreement included a senior unsecured revolving credit facility (which has been replaced
by the 2024 credit agreement discussed above) and an amortizing five-year term loan in the aggregate amount of $600 million (the
“Term Loan A-1”).
The Term Loan A-1 bore interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime
commercial lending rate (subject to certain higher rate determinations) (the “Base Rate”) plus a margin of 0.125% to 0.75% or (2) the
one-, three-, six-, or, subject to approval by all lenders, twelve-month SOFR rate plus a margin of 1.125% to 1.75%.
During the twelve months ended December 31, 2024, we repaid $50.0 million of the Term Loans and had no borrowings outstanding
under the 2021 Credit Agreement prior to its termination on September 25, 2024.
F-24
As of December 31, 2024, we had no borrowings outstanding and were in compliance with our covenants under the 2024 Credit
Agreement.
Convertible Senior Notes due 2026
On March 9, 2021, we issued 0.25% Convertible Senior Notes due in 2026 in the aggregate principal amount of $600.0 million (“the
Convertible Senior Notes” or “the Notes”). The Convertible Senior Notes were issued pursuant to, and are governed by, an indenture
(the “Indenture”), dated as of March 9, 2021, with U.S. Bank National Association as trustee. The net proceeds from the issuance of
the Convertible Senior Notes were $591.4 million, net of initial purchasers’ discounts of $6.0 million and debt issuance costs of
$2.6 million.
The Convertible Senior Notes are senior, unsecured obligations and are (i) equal in right of payment to our future senior, unsecured
indebtedness; (ii) senior in right of payment to our future indebtedness that is expressly subordinated to the Notes; (iii) effectively
subordinated to our future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv)
structurally subordinated to all future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder
thereof) preferred equity, if any, of our subsidiaries.
The Convertible Senior Notes accrue interest at a rate of 0.25% per annum, payable semi-annually in arrears on March 15 and
September 15 of each year. The Convertible Senior Notes mature on March 15, 2026, unless earlier repurchased, redeemed, or
converted.
Before September 15, 2025, holders of the Convertible Senior Notes have the right to convert their Convertible Senior Notes only
upon the occurrence of certain events. Under the terms of the Indenture, the Convertible Senior Notes are convertible into common
stock of Tyler Technologies, Inc. (referred to as “our common stock” herein) at the following times or circumstances:
•
during any calendar quarter commencing after the calendar quarter ended June 30, 2021, if the last reported sale price per
share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not
consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately
preceding calendar quarter;
•
during the five consecutive business days immediately after any five consecutive trading day period (such five
consecutive trading day period, the “Measurement Period”) if the trading price per $1,000 principal amount of
Convertible Senior Notes, as determined following a request by their holder in accordance with the procedures in the
Indenture, for each trading day of the Measurement Period was less than 98% of the product of the last reported sale
price per share of our common stock on such trading day and the conversion rate on such trading day;
•
upon the occurrence of certain corporate events or distributions on our common stock, including but not limited to a
“Fundamental Change” (as defined in the Indenture);
•
upon the occurrence of specified corporate events; or
•
on or after September 15, 2025, until the close of business on the second scheduled trading day immediately preceding
the maturity date, March 15, 2026.
With certain exceptions, upon a change of control or other fundamental change (both as defined in the Indenture governing the
Convertible Senior Notes), the holders of the Convertible Senior Notes may require us to repurchase all or part of the principal amount
of the Convertible Senior Notes at a repurchase price equal to 100% of the principal amount of the Convertible Senior Notes, plus any
accrued and unpaid interest up to, but excluding, the redemption date.
As of December 31, 2024, none of the conditions allowing holders of the Convertible Senior Notes to convert have been met.
From and including September 15, 2025, holders of the Convertible Senior Notes may convert their Convertible Senior Notes at any
time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We will
settle any conversions of the Convertible Senior Notes either entirely in cash or in a combination of cash and shares of our common
stock, at our election. However, upon conversion of any Convertible Senior Notes, the conversion value, which will be determined
over an “Observation Period” (as defined in the Indenture) consisting of 30 trading days, will be paid in cash up to at least the
principal amount of the Notes being converted.
The initial conversion rate is 2.0266 shares of common stock per $1,000 principal amount of Convertible Senior Notes, which
represents an initial conversion price of approximately $493.44 per share of common stock. The conversion rate and conversion price
will be subject to adjustment upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-
Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased
for a specified period of time.
F-25
The Convertible Senior Notes are redeemable, in whole or in part, at our option at any time, and from time to time, on or after
March 15, 2024, and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price
equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the
redemption date, but only if the last reported sale price per share of our common stock exceeds 130% of the conversion price of the
Notes on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and
including, the trading day immediately before the date we send the related redemption notice; and (ii) the trading day immediately
before the date we send such notice. In addition, calling any Note for redemption constitutes a Make-Whole Fundamental Change with
respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain
circumstances if it is converted after it is called for redemption.
Effective Interest Rate
The weighted average interest rate for the borrowings under the Convertible Senior Notes was 0.25% as of December 31, 2024. For
the twelve months ended December 31, 2024, the effective interest rate was 8.66% for the Term Loans under the 2021 Credit
Agreement and 0.54% for the Convertible Senior Notes. The following sets forth the interest expense recognized related to the
borrowings and commitment fees for unused portions under the 2024 Credit Agreement, the 2021 Credit Agreement and Convertible
Senior Notes and is included in interest expense in the accompanying consolidated statements of income:
Years Ended December 31,
2024
2023
2022
Contractual interest expense - 2024 Revolving Credit Facility
$
(253) $
— $
—
Contractual interest expense - 2021 Revolving Credit Facility
(671)
(1,539)
(1,267)
Contractual interest expense - Term Loans
(761)
(16,016)
(18,583)
Contractual interest expense - Convertible Senior Notes
(1,500)
(1,500)
(1,500)
Amortization of debt discount and debt issuance costs
(2,746)
(4,574)
(7,029)
Total
$
(5,931) $
(23,629) $
(28,379)
As of December 31, 2024, we had one outstanding standalone letter of credit totaling $500,000. The letter of credit, which guarantees
our performance under a client contract, automatically renews annually unless canceled in writing, and expires in the third quarter of
2025.
(11)
FINANCIAL INSTRUMENTS
The following table presents our financial instruments:
December 31, 2024
December 31, 2023
Cash and cash equivalents
$
744,721 $
165,493
Available-for-sale investments
34,015
17,431
Equity investments
10,000
10,000
Total
$
788,736 $
192,924
Cash and cash equivalents consist primarily of money market funds with original maturity dates of three months or less, for which we
determine fair value through quoted market prices.
Our investment portfolio is classified as available-for-sale in order to have the flexibility to buy and sell investments and maximize
cash liquidity. Our available-for-sale investments primarily consist of investment grade corporate bonds, U.S. Treasuries, and asset-
backed securities with maturity dates through 2027. These investments are presented at fair value and are included in short-term
investments and non-current investments in the accompanying consolidated balance sheets. Unrealized gains or losses associated with
the investments are included in accumulated other comprehensive income (loss), net of tax in the accompanying consolidated balance
sheets and other comprehensive income (loss), net of tax in the statements of comprehensive income. For our available-for-sale
investments, we do not have the intent to sell, nor is it more likely than not that we would be required to sell before recovery of their
cost basis.
As of December 31, 2024 and 2023, we have an accrued interest receivable balance of approximately $227,000 and $65,000,
respectively, which is included in accounts receivable, net. We do not measure an allowance for credit losses for accrued interest
receivables. We record any losses within the maturity period or at the time of sale of the investment and any write-offs to accrued
interest receivables are recorded as reductions to interest income in the period of the loss. During the twelve months ended
December 31, 2024, we have recorded no losses for accrued interest receivables. Interest income and amortization of discounts and
premiums are included in other income, net in the accompanying consolidated statements of income.
F-26
The following table presents the components of our available-for-sale investments:
December 31, 2024
December 31, 2023
Amortized cost
$
34,225 $
17,866
Unrealized gains
3
—
Unrealized losses
(213)
(435)
Estimated fair value
$
34,015 $
17,431
As of December 31, 2024, we have $23.3 million of available-for-sale debt securities with contractual maturities of one year or less
and $10.8 million with contractual maturities greater than one year. As of December 31, 2024, 22 available-for-sale securities with a
fair value of $13.5 million have been in a loss position for one year or less and seven securities with a fair value of $7.7 million have
been in a loss position for greater than one year.
The following table presents the activity on our available-for-sale or held-to-maturity investments:
Years Ended December 31,
2024
2023
2022
Proceeds from sales and maturities
$
15,994 $
49,412 $
71,034
Realized losses on sales, net of tax
(18)
—
(79)
Our equity investments consist of an 18% interest in BFTR, LLC, a wholly owned subsidiary of Bison Capital Partners V L.P. BFTR,
LLC is a privately held Australian company specializing in digitizing the spoken word in court and legal proceedings. The investment
in common stock is carried at cost less any impairment write-downs because we do not have the ability to exercise significant
influence over the investee and the securities do not have readily determinable fair values.
(12)
FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or most advantageous market for that asset or liability. Guidance on fair
value measurements and disclosures establishes a valuation hierarchy for disclosure of inputs used in measuring fair value defined as
follows:
•
Level 1—Inputs are unadjusted quoted prices that are available in active markets for identical assets or liabilities.
•
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in non-active
markets, inputs other than quoted prices that are observable, and inputs that are not directly observable, but are
corroborated by observable market data.
•
Level 3—Inputs that are unobservable and are supported by little or no market activity and reflect the use of significant
management judgment.
The classification of a financial asset or liability within the hierarchy is determined based on the least reliable level of input that is
significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of
observable inputs and minimize the use of unobservable inputs to the extent possible. We also consider the counterparty and our own
non-performance risk in our assessment of fair value.
The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of
December 31, 2024:
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
744,721 $
— $
—
$
744,721
Available-for-sale investments
—
34,015
—
34,015
Equity investments
—
—
10,000
10,000
Convertible Senior Notes due 2026
—
731,310
—
731,310
F-27
The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of
December 31, 2023:
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
165,493 $
— $
—
$
165,493
Available-for-sale investments
—
17,431
—
17,431
Equity investments
—
—
10,000
10,000
2021 Credit Agreement
Term Loan A-1
—
49,801
—
49,801
Convertible Senior Notes due 2026
—
609,168
—
609,168
Assets that are measured at fair value on a recurring basis
Accounts receivables, accounts payables, short-term obligations and certain other assets carrying value approximate fair value because
of the short maturity of these instruments.
As of December 31, 2024, we have $34.0 million in investment grade corporate bonds, U.S. Treasuries and asset-backed securities
with maturity dates through 2027. The fair values of these securities are considered Level 2 as they are based on inputs from quoted
prices in markets that are not active or other observable market data.
Assets that are measured at fair value on a nonrecurring basis
As of December 31, 2024, we have an 18% interest in BFTR, LLC. As we do not have the ability to exercise significant influence over
the investee and the securities do not have readily determinable fair values, our investment is carried at cost less any impairment write-
downs. Periodically, our investment is assessed for impairment. We do not reassess the fair value of the investments if there are no
identified events or changes in circumstances that indicate fair value of the investment or indicate impairment. No events or changes in
circumstances have occurred during the period that require reassessment. There has been no impairment of this investment for the
periods presented. This investment is included in other non-current assets in the accompanying consolidated balance sheets.
As described in Note 1, “Summary of Significant Accounting Policies”, we assess goodwill for impairment annually on October 1. In
addition, we review goodwill, property and equipment, and other intangibles for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable. During the fourth quarter of 2024, we completed our annual
assessment of goodwill which did not result in an impairment charge. Further, we identified no indicators of impairment to goodwill,
property and equipment, and other intangibles. Therefore, no impairment was recorded as of or for the year ended December 31, 2024.
Financial instruments measured at fair value only for disclosure purposes
For the twelve months ended December 31, 2024, we repaid the remainder of the Term Loans and had no borrowings outstanding
under the 2021 Credit Agreement prior to its termination on September 25, 2024. The carrying amount of the Term Loan under the
2021 Credit Agreement was the par value less the debt discount and debt issuance costs that are amortized to interest expense using
the effective interest method over the term of the Term Loan. Interest expense is included in the accompanying consolidated
statements of income.
The fair value of our Convertible Senior Notes is determined based on quoted market prices for a similar liability when traded as an
asset in an active market, a Level 2 input. See Note 10, “Debt,” for further discussion.
The carrying amount of the Convertible Senior Notes is the par value less the debt discount and debt issuance costs that are amortized
to interest expense using the effective interest method over the term of the Convertible Senior Notes. Interest expense is included in
the accompanying consolidated statements of income.
The following table presents the fair value and carrying value, net, of the Term Loan under the 2021 Credit Agreement and our
Convertible Senior Notes:
Fair Value at December 31,
Carrying Value at December 31,
2024
2023
2024
2023
2021 Credit Agreement
Term Loan A-1
$
— $
49,801 $
— $
49,801
Convertible Notes due 2026
731,310
609,168
597,934
596,206
$
731,310 $
658,969 $
597,934 $
646,007
F-28
(13)
INCOME TAX
Income tax provision on income from operations consists of the following:
Years Ended December 31,
2024
2023
2022
Current:
Federal
$
60,997 $
86,218 $
84,570
State
14,807
19,803
25,975
75,804
106,021
110,545
Deferred
(30,663)
(73,704)
(87,192)
$
45,141 $
32,317 $
23,353
Reconciliation of the U.S. statutory income tax rate to our effective income tax expense rate for operations follows:
Years Ended December 31,
2024
2023
2022
Federal income tax expense at statutory rate
$
64,715 $
41,630 $
39,395
State income tax, net of federal income tax benefit
8,917
6,881
9,197
Net operating loss carryback
—
—
(261)
Excess tax benefits of share-based compensation
(21,143)
(9,325)
(7,752)
Tax credits
(22,095)
(20,494)
(31,334)
Non-deductible business expenses
4,786
5,191
5,425
Uncertain tax positions
10,109
7,647
8,338
Other, net
(148)
787
345
$
45,141 $
32,317 $
23,353
The tax effects of the major items recorded as deferred tax assets and liabilities as of December 31 are:
2024
2023
Deferred income tax assets:
Capitalized research and experimental expenditures
$
157,812 $
130,972
Operating expenses not currently deductible
8,593
22,180
Stock option and other employee benefit plans
22,095
21,864
Loss and credit carryforwards
5,836
7,430
Deferred revenue
1,670
1,923
Other
55
111
Total deferred income tax assets
196,061
184,480
Valuation allowance
(794)
—
Total deferred income tax assets, net of valuation allowance
195,267
184,480
Deferred income tax liabilities:
Intangible assets
(223,459)
(242,522)
Property and equipment
(5,624)
(8,659)
Prepaid expenses
(13,687)
(11,889)
Total deferred income tax liabilities
(242,770)
(263,070)
Net deferred income tax liabilities
$
(47,503) $
(78,590)
As of December 31, 2024, the capitalization and amortization requirements of research and experimental expenditures pursuant to the
Tax Cuts and Jobs Act of 2017 (“TCJA”) changes to Internal Revenue Code Section 174 resulted in a deferred tax asset of $157.8
million.
F-29
As of December 31, 2024, we had after-tax federal and state net operating loss and net tax credit carryforwards of $5.8 million, that
will begin expiring in 2033, if not utilized. The acquired carryforwards are subject to an annual limitation but are expected to be
realized. A valuation allowance was recorded against a state research and development credit carryforward in 2024 for $0.8 million
due to state taxable income limitations on credit utilization. We believe it is more likely than not that all other deferred tax assets will
be realized. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of taxable
income or reversing taxable temporary differences are revised.
The following table provides a reconciliation of the gross unrecognized tax benefits from uncertain tax positions for the years ended
December 31:
2024
2023
Balance at beginning of period
$
20,869 $
14,044
Additions for tax positions of prior period
4,970
3,087
Reductions for tax positions of prior period
—
(338)
Additions for tax positions of current period
4,346
4,838
Expiration of statutes of limitations
(430)
(762)
Balance at end of period
$
29,755 $
20,869
As of December 31, 2024 and December 31, 2023, we had uncertain tax positions of $32.2 million and $22.1 million, including
interest and penalties, respectively, recorded within deferred tax liabilities, other long-term assets, and other long-term liabilities in our
consolidated balance sheets. The total amount of unrecognized tax benefits, net of the federal income tax benefit of state taxes, if
recognized, that would affect the effective tax rate is $28.6 million, $20.1 million and $13.3 million as of December 31, 2024, 2023,
and 2022, respectively. It is reasonably possible that events will occur during the next 12 months that would cause the total amount of
unrecognized tax benefits to increase or decrease. However, we do not expect such increases or decreases to be material to the
Company’s financial condition or results of operations.
We are subject to U.S. federal income tax, as well as income tax of multiple state, local and foreign jurisdictions. We are routinely
subject to income tax examinations by these taxing jurisdictions, but we do not have a history of, nor do we expect any material
adjustments as a result of these examinations. With few exceptions, major U.S. federal, state, local and foreign jurisdictions are no
longer subject to examination for years before 2020. As of February 19, 2025, no significant adjustments have been proposed by any
taxing jurisdiction.
(14)
SHARE-BASED COMPENSATION
Share-Based Compensation Plan
In May 2024, stockholders approved the Tyler Technologies, Inc. amended and restated 2018 Stock Incentive Plan (“the Amended and
Restated 2018 Plan”) which amended and restated the existing Tyler Technologies, Inc. 2018 Stock Option Plan (“the 2018 Plan”).
Upon stockholder approval of the Amended and Restated 2018 Stock Incentive Plan, the remaining shares available for grant under
the 2018 Plan were added to the shares authorized for grant under the Amended and Restated 2018 Stock Incentive Plan. Additionally,
any awards previously granted under the 2018 Plan that expire unexercised or are forfeited are added to the shares authorized for grant
under the Amended and Restated 2018 Stock Incentive Plan.
We grant stock awards under the Amended and Restated 2018 Stock Incentive Plan in the form of stock options, restricted stock units
and performance share units. Stock options generally vest after three to five years of continuous service from the date of grant and
have a contractual term of 10 years. Once options become exercisable, the employee can purchase shares of our common stock at the
market price on the date we granted the option. Restricted stock unit grants generally vest ratably over three to five years of
continuous service from the date of grant. Each performance share unit represents the right to receive one share of our common stock
based on our achievement of certain financial performance targets during applicable performance periods. We account for share-based
compensation utilizing the fair value recognition pursuant to ASC 718, Stock Compensation.
As of December 31, 2024, there were 4.4 million shares available for future grants under the Amended and Restated 2018 Stock
Incentive Plan from the 27.5 million shares previously approved by the shareholders.
Determining Fair Value of Stock Compensation
Valuation and Amortization Method. We estimate the fair value of stock option awards granted using the Black-Scholes option
valuation model. For restricted stock unit and performance stock unit awards, we estimate fair value as market value on the date of
grant. We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the
vesting periods.
F-30
Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The
expected life represents the weighted-average period the stock options are expected to be outstanding based primarily on the options’
vesting terms, remaining contractual life and the employees’ expected exercise based on historical patterns.
Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of
grant based on the historical volatility of our common stock.
Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield
currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.
Expected Dividend Yield. We have not paid any cash dividends on our common stock in more than ten years and we do not anticipate
paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes
option valuation model.
Forfeitures. We recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited (that
is, we recognize the effect of forfeitures in compensation cost when they occur). Previously recognized compensation cost for an
award is reversed in the period that the award is forfeited.
During fiscal years 2024 and 2023, no stock option awards were issued; therefore no Black-Scholes model assumptions are reportable.
The following weighted average assumptions were used for options granted in 2022:
Years Ended December 31,
2024
2023
2022
Expected life (in years)
—
—
5.0
Expected volatility
—
—
28.3 %
Risk-free interest rate
—
—
3.3 %
Share-Based Award Activity
Stock Options
Options granted, exercised, forfeited and expired are summarized as follows:
Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(Years)
Aggregate
Intrinsic Value
Outstanding at December 31, 2023
1,225 $
229.63
Granted
—
—
Exercised
(486)
200.84
Forfeited
—
—
Outstanding at December 31, 2024
739 $
248.53
4
$
242,627
Exercisable at December 31, 2024
699 $
241.48
4
$
234,381
We had unvested options to purchase approximately 40,000 shares with a weighted average grant date exercise price of $371.20 as of
December 31, 2024, and unvested options to purchase approximately 98,000 shares with a weighted average grant date exercise price
of $380.83 as of December 31, 2023.
Other information pertaining to option activity was as follows during the twelve months ended December 31:
2024
2023
2022
Weighted average grant-date fair value of stock options granted
$
— $
— $
108.99
Total intrinsic value of stock options exercised
$
159,022 $
58,261 $
43,160
F-31
Restricted Stock Units and Performance Stock Units
The following table summarizes restricted stock unit and performance stock unit activity during the periods presented (shares in
thousands):
Number of Shares
Weighted Average
Grant Date Fair
Value per Share
Unvested at December 31, 2023
646 $
384.43
Granted
290
512.31
Vested
(254)
395.87
Forfeited
(21)
408.12
Unvested at December 31, 2024
661 $
435.18
Share-Based Compensation Expense
The following table summarizes share-based compensation expense related to share-based awards which is recorded in the
consolidated statements of income:
Years Ended December 31,
2024
2023
2022
Subscriptions, maintenance and professional services
$
31,322 $
26,607 $
27,486
Sales and marketing expense
12,840
10,118
8,800
General and administrative expense
78,651
71,613
66,699
Total share-based compensation expense
122,813
108,338
102,985
Total tax benefit
(62,593)
(32,997)
(27,599)
Net decrease in net income
$
60,220 $
75,341 $
75,386
As of December 31, 2024, we had $208.7 million of total unrecognized compensation cost related to unvested options and restricted
stock units which is expected to be amortized over a weighted average amortization period of 2.2 years.
Employee Stock Purchase Plan
Under our Employee Stock Purchase Plan (“ESPP”) participants may contribute up to 15% of their annual compensation to purchase
common shares of Tyler. The purchase price of the shares is equal to 85% of the closing price of Tyler shares on the last day of each
quarterly offering period. As of December 31, 2024, there were 484,000 shares available for future issuances under the ESPP from the
2.0 million shares previously approved by the stockholders.
(15)
EARNINGS PER SHARE
The following table details the reconciliation of basic earnings per share to diluted earnings per share:
Years Ended December 31,
2024
2023
2022
Numerator for basic and diluted earnings per share:
Net income
$
263,026 $
165,919 $
164,240
Denominator:
Weighted-average basic common shares outstanding
42,611
42,024
41,544
Assumed conversion of dilutive securities:
Stock awards
793
745
855
Convertible Senior Notes
93
—
—
Denominator for diluted earnings per share - Adjusted weighted-average shares
43,497
42,769
42,399
Earnings per common share:
Basic
$
6.17 $
3.95 $
3.95
Diluted
$
6.05 $
3.88 $
3.87
F-32
Stock awards representing the right to purchase common stock of approximately 67,000 shares in 2024, 343,000 shares in 2023, and
372,000 shares in 2022, were not included in the computation of diluted earnings per share because their inclusion would have had an
antidilutive effect.
We have used the if-converted method for calculating any potential dilutive effect of the Convertible Senior Notes on our diluted net
income per share if our average stock price for the period exceeded the conversion price of $493.44 per share of common stock. Under
the if-converted method, the Notes are assumed to be converted at the beginning of the period and the resulting common shares, if
dilutive, are included in the denominator of the diluted earnings per share calculation for the entire period being presented. For the
twelve months ended December 31, 2024, our average stock price for the period exceeded the conversion price resulting in a dilutive
impact of the if-converted method as reflected in the table above. For the twelve months ended December 31, 2023 and 2022, our
average stock price for the period did not exceed the conversion price, therefore there was no dilutive impact as reflected in the table
above.
(16)
LEASES
We lease office facilities, transportation and other equipment for use in our operations. Most of our leases are non-cancelable
operating lease agreements with remaining terms of one to 10 years. Some of these leases include options to extend for up to six years.
We have no finance leases as of December 31, 2024. Right-of-use lease assets and lease liabilities for our operating leases are
recorded in the consolidated balance sheets. We incurred no lease restructuring costs during 2024, $6.4 million in 2023 and $1.7
million in 2022, respectively.
The components of operating lease expense were as follows:
Lease Costs
Years ended December 31,
2024
2023
2022
Operating lease cost
$
9,166 $
19,468 $
14,743
Short-term lease cost
2,124
2,121
2,166
Variable lease cost
768
1,009
1,047
Net lease cost
$
12,058 $
22,598 $
17,956
Supplemental information related to leases is as follows:
Other Information
Years ended December 31,
2024
2023
2022
Cash flows:
Cash paid amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases
$
12,578
$
12,555
$
13,562
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases
$
4,404
$
3,383
$
25,171
Lease term and discount rate:
Weighted average remaining lease term (years)
6
7
7
Weighted average discount rate
3.22 %
1.59 %
1.57 %
F-33
As of December 31, 2024, maturities of lease liabilities were as follows:
Year ending December 31,
Amount
2025
$
10,675
2026
8,387
2027
7,458
2028
4,624
2029
3,698
Thereafter
10,742
Total lease payments
45,584
Less: Interest
(5,150)
Present value of operating lease liabilities
$
40,434
Rental income from third parties
We own office buildings in Bangor, Falmouth, Yarmouth and Orono, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham,
New York; Moraine, Ohio; and Kingston Springs, Tennessee. We lease space in some of these buildings to third-party tenants, one of
which was formerly a related party (see Note 18, “Related Party Transactions”). The property we lease to others under operating leases
consists primarily of specific facilities where one tenant obtains substantially all of the economic benefit from the asset and has the
right to direct the use of the asset. These non-cancelable leases expire between 2025 and 2028, and some have options to extend the
lease for up to 10 years. We determine if an arrangement is a lease at inception. None of our leases allow the lessee to purchase the
leased asset.
Rental income from third-party tenants was $3.2 million in 2024, $2.1 million in 2023, and $1.7 million in 2022. Rental income is
included in hardware and other revenue on the consolidated statements of income. Future minimum operating rental income based on
contractual agreements is as follows:
Year ending December 31,
Amount
2025
$
2,270
2026
1,274
2027
982
2028
704
2029
—
Total
$
5,230
As of December 31, 2024, we had no additional significant operating or finance leases that had not yet commenced.
(17)
EMPLOYEE BENEFIT PLANS
We provide a defined contribution plan for the majority of our employees meeting minimum service requirements. Eligible employees
can contribute up to 30% of their current compensation to the plan subject to certain statutory limitations. We contribute up to a
maximum of 3% of an employee’s compensation to the plan. We made contributions to the plan and charged operating results $19.1
million in 2024, $18.6 million in 2023, and $17.5 million in 2022.
(18)
RELATED PARTY TRANSACTIONS
In April 2023, we entered into an arm’s length lease agreement under which we lease 25,000 square feet of office space in our
Lubbock, Texas, office facility to a company co-owned by a former member of our Board of Directors. The lease agreement, which
commenced on April 1, 2023, and was amended on April 8, 2024, has an initial term of five years with a pro-rata base rent of $25,000
per month until December 1, 2023, followed by a base rent of $58,000 for the next year and a 2.5% annual increase thereafter. We
recognized rental income of $697,000 and $150,000 under this lease for the years ended December 31, 2024 and 2023, respectively.
F-34
(19)
COMMITMENTS AND CONTINGENCIES
Litigation
During the first quarter of 2022, we received a notice of termination for convenience under a contractual arrangement with a state
government client. Upon receipt of the termination notice, we ceased performing services under the contractual arrangement and
sought payment of contractually owed fees of approximately $15 million in connection with the termination for convenience.
The client was unresponsive to our outreach for several months, and on August 23, 2022, we filed a lawsuit to enforce our rights and
remedies under the applicable contractual arrangement. The client subsequently asked us to negotiate directly with the client to
attempt to resolve the dispute. The negotiations were not successful, and on March 20, 2024, we reinitiated our lawsuit. Although we
believe our products and services were delivered in accordance with the terms of our contract and that we are entitled to payment in
connection with the termination for convenience, at this time the matter remains unresolved. We can provide no assurances that we
will not incur additional costs as we pursue our rights and remedies under the contract.
Purchase Commitments
We have contractual obligations for third-party technology used in our solutions and for other services that we purchase as part of our
normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of December 31,
2024, the remaining aggregate minimum purchase commitment under these arrangements was approximately $646 million through
2031. Future minimum payments related to purchase commitments based on contractual agreements are as follows:
Year ending December 31,
Amount
2025
$
79,154
2026
86,202
2027
82,282
2028
90,213
2029
93,436
Thereafter
214,373
Total
$
645,660
(20)
SUBSEQUENT EVENTS
On January 31, 2025, we completed an acquisition for the total consideration of approximately $18.5 million, paid in all cash, subject
to certain post-closing adjustments including working capital holdbacks.
F-35
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES
CORPORATE OFFICERS
H. Lynn Moore Jr.
President & Chief Executive Officer
Brian K. Miller
Executive Vice President &
Chief Financial Officer
Jeffrey D. Puckett
Chief Operating Officer
Abigail M. Diaz
Chief Administrative Officer
Jason P. Durham
Chief Accounting Officer
Arik J. Flanders
Chief Marketing Officer
Russell A. Gainford
Chief Cloud Officer
Jeffrey S. Green
Chief Technology Officer
Kevin W. Iwersen
Chief Information Officer
Andrew S. Kahl
Chief Client Officer
Kelley B. Shimansky
Chief Human Resources Officer
William A. Van Asselt
Chief Legal Officer
Jeremy M. Ward
Chief Information Security Officer
BOARD OF DIRECTORS
John S. Marr Jr.1
Executive Chairperson of the Board
Tyler Technologies, Inc.
H. Lynn Moore Jr. 1
President & Chief Executive Officer
Tyler Technologies, Inc.
Glenn A. Carter 2,3,4,5
Retired Chief Executive Officer
DataProse, Inc.
Brenda A. Cline 2,3
Chief Financial Officer
Kimbell Art Foundation
Ronnie D. Hawkins Jr. 4
President
Angelo State University
Margot L. Carter 3
President
Living Mountain Capital
Daniel M. Pope 2,4
Executive Chairman
Victory Financial Corporation
Andrew D. Teed
Chief Executive Officer
ECO Parking Technologies
1.
Executive Committee
2.
Audit Committee
3.
Nominating and Governance Committee
4.
Compensation Committee
5.
Lead Independent Director
OPERATIONAL LEADERSHIP
S. Franklin Williams III
President
Data & Insights Division
Russell J. Smith
Group President
Justice Group
State & Federal Group
JUSTICE GROUP
Andrew B. Hittle
President
Public Safety Division
Brian A. McGrath
President
Courts & Justice Division
STATE & FEDERAL GROUP
Brian T. Combs
President
Platform Solutions Division
Elizabeth A. Thomas
President
Digital Solutions Division
PUBLIC ADMINISTRATION GROUP
Dane L. Womble
Group President
Public Administration Group
Mark A. Hawkins
President
Property & Recording Division
Sean P. Marlow
President
Municipal & Schools Division
Christopher J. Webster
President
ERP & Civic Division
CORPORATE HEADQUARTERS
5101 Tennyson Parkway
Plano, Texas 75024
972.713.3700
tylertech.com
Communications regarding change of
address, transfer of stock ownership,
or lost stock certificates should be
sent directly to:
Equiniti Trust Company, LLC
PO Box 500
Newark, NJ 07101
800.937.5449
helpast@equiniti.com
www.equiniti.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Dallas, Texas
ANNUAL MEETING OF
STOCKHOLDERS
Tuesday, May 6, 2025
9:00 a.m. Central Time
Virtual
www.virtualshareholdermeeting.com/
TYL2025
CERTIFICATIONS
We submitted an unqualified Annual
CEO Certification to the New York
Stock Exchange (NYSE) as required
by the NYSE Listed Company rules.
We also filed with the Securities and
Exchange Commission the Chief
Executive Officer and Chief Financial
Officer certifications required under
Section 302 of the Sarbanes-Oxley
Act as exhibits to our Annual Report
on Form 10-K.
INVESTOR INFORMATION
Our annual report on Form 10-K is
available on the company’s website
at www.tylertech.com. A copy of the
Form 10-K or other information may
also be obtained by contacting the
Investor Relations Department at
corporate headquarters.
INVESTOR RELATIONS
972.713.3714
info@tylertech.com
COMMON STOCK
Listed on the New York Stock
Exchange under the symbol “TYL”
ABOUT TYLER TECHNOLOGIES, INC.
Tyler Technologies (NYSE: TYL) is a leading provider of integrated software
and technology services for the public sector. Tyler’s end-to-end solutions
empower local, state, and federal government entities to operate efficiently
and transparently with residents and each other. By connecting data and
processes across disparate systems, Tyler’s solutions transform how clients
turn actionable insights into opportunities and solutions for their communities.
Tyler has more than 45,000 successful installations across 13,000 locations,
with clients in all 50 states, Canada, the Caribbean, Australia, and other
international locations. Tyler has been recognized numerous times for growth
and innovation, including on Government Technology’s GovTech 100 list. More
information about Tyler Technologies, an S&P 500 company headquartered in
Plano, Texas, can be found at tylertech.com.
ANNUAL REPORT 2024 | TYLER TECHNOLOGIES