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What changed in Tyler Technologies's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Tyler Technologies's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+283 added−325 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-21)

Top changes in Tyler Technologies's 2024 10-K

283 paragraphs added · 325 removed · 221 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

47 edited+13 added−21 removed45 unchanged
Biggest changeThe average tenure of our team members continues to be approximately seven years and approximately 28% of our employees have been employed by Tyler for more than ten years. The most frequent factor cited by team members leaving Tyler in 2023 was career opportunities, with compensation also cited as a factor.
Biggest changeVoluntary 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.
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, talent management and development.
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.
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 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.
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.
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: As the leading platform for public sector payment 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.
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.
We typically license our software products under non-exclusive license agreements, which are generally non-transferable and have a perpetual term. 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.
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 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, 40% of team members worked remotely, primarily in sales and professional services roles.
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.
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. 7 • Pursue strategic acquisitions .
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 .
At the culmination of the implementation process, a data 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.
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.
These initiatives will 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. SALES, MARKETING AND CLIENTS We market our products and services primarily through direct sales and marketing personnel located throughout the United States.
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.
We maintain deep, long-term relationships with state and local government agencies, including dedicated state-level offices in the 28 states in which we have enterprise contracts. Our professional information technology (“IT”) services include cloud-based software deployment, data conversion, and training.
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.
Similar support is provided to our SaaS clients and is 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.
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.
We have a strategic collaboration agreement with Amazon Web Services ("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.
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.
ARR increased 8% 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 .
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 compete on a variety of factors, including price, service, name recognition, reputation, technological capabilities, and the ability to modify existing products and services to accommodate 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.
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.
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: Integrated public safety solutions designed to comply with state and federal reporting mandates, provide real-time information and instant data sharing across jurisdictions, and promote intelligence-led responses so that help arrives faster and more prepared.
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.
The clients who choose this model typically do not wish to maintain, update and operate these systems or make up-front capital expenditures to implement these advanced technologies. The contract terms for these arrangements range from one to ten years but are typically contracted for initial periods of three to five years.
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.
We believe we have achieved a reputation as a premium product and service provider to the government market. • Continue to expand our product and service offerings .
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 .
The tables below represent our workforce demographics as of December 31, 2023: Race: White Asian Black or African American Hispanic or Latino Two or more races Native Americans and Other Pacific Islanders Not specified Overall 70.5% 7.6% 4.7% 4.7% 2.1% 0.5% 9.9% Leadership 96.4% 1.8% —% —% —% 1.8% —% Gender: Male Female Non-Binary Not specified Overall 61.8% 37.2% 0.2% 0.8% Leadership 60.0% 40.0% —% —% 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 continuous survey feedback from Tyler team members, and our low turnover.
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.
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.
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.
We have a large recurring revenue base from subscription-based services and maintenance and support, which generated revenues of $1.6 billion, or 83% of total revenues, in 2023. We have historically experienced very low customer turnover (approximately 2% annually) and recurring revenues continue to grow as the installed customer base increases.
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.
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. Software Licenses and Royalties Many of our software arrangements involve “off-the-shelf” software.
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.
Revenues We derive our revenues from four primary sources: • Subscription-based services • Maintenance and support • Professional services • Software licenses and royalties 5 Subscription-Based Services Subscriptions revenue consists of revenues derived from our SaaS arrangements and transactions-based fees. We are able to provide the majority of our software products through our SaaS model.
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.
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 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.
Subscription-based revenues have been our fastest growing revenue category over the past five years, increasing from $296.4 million in 2019 to $1.2 billion in 2023. We monitor Annualized Recurring Revenue (“ARR”), which is calculated based on quarter-to-date end total recurring revenues multiplied by four. ARR was $1.61 billion and $1.50 billion as of December 31, 2023, and 2022, respectively.
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.
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. • Grow recurring revenues .
(“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 .
Our existing customer 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.
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.
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 culture, benefits, and continual growth opportunities for our team members. As of December 31, 2023, we had approximately 7,300 team members.
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.
ITEM 1. BUSINESS. DESCRIPTION OF BUSINESS Tyler Technologies, Inc. (“Tyler”) 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.
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.
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.
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 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 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.
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.
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.
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.
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.
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.
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.
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. 4 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.
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.
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.
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.
Approximately 95% of our team members work in one of our 66 U.S. offices or remotely in the U.S. Approximately 388 of our team members are in Canada, the Philippines, or India. Race and gender reporting are based on information provided by 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 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.
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 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.
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, 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.
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
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.
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.
Our talent assessment and development programs are designed to provide managers and employees with the resources needed to achieve career goals, strengthen management skills and effectively lead their teams. For example, in 2023: • 823 Tyler team members participated in approximately 11,000 hours of AWS cloud certification training.
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.
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 invest in the well-being of Tyler team members and their families.
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.
We are making significant investments in optimizing our products to be deployed efficiently in the public cloud and over a multi-year period are transitioning from hosting clients in Tyler’s proprietary data centers to utilizing Amazon Web Services (“AWS”) for cloud hosting. • Expand our client base .
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.
Other sources of subscriptions revenue are derived from transaction-based fees primarily related to digital government services, online payment solutions, which are sometimes offered with the assistance of third-party vendors, and online dispute resolution solutions. Maintenance and Support Support is provided to clients over the phone or via the Web through help desks staffed by our client support representatives.
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.
There were 324 AWS accreditations and 102 certifications completed, as we continue to invest in developing cloud skills across the Tyler workforce. • Nearly 200 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, plus multiple leadership assessments, including 360-degree feedback, and a dedicated mentor to support their development.
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.
To date, 53% of our management leads have participated in the program. • Division presidents and corporate function executives conducted annual leadership assessment and talent reviews with their HR leaders and leadership teams to plan for succession and identify development priorities within their teams. • Tyler team members and managers completed over 30,000 hours of Tyler-sponsored AWS, management and compliance training to support continuous learning, professional training and development.
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.
We continue to invest in talent development and making career opportunities clear to team members and our 2023 efforts are 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.
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.
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Gartner, Inc., a leading information technology research and advisory company, estimates that: state and local government application and vertical specific software spending are expected to grow from $31.8 billion in 2024 to $46.9 billion in 2027; professional services and support segments of that market are expected to expand from $36.4 billion in 2024 to $46.8 billion in 2027; application and vertical specific software sales in the primary and secondary education segments of the market are expected to expand from $6.2 billion in 2024 to $8.6 billion in 2027 while related professional services and support are expected to grow from $5.7 billion in 2024 to $7.5 billion in 2027.
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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.
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For the national and international government markets, Gartner estimates that application and vertical specific software sales are expected to expand from $48.0 billion in 2024 to $71.9 billion in 2027, while related professional services and support are expected to grow from $71.6 billion in 2024 to $93.5 billion in 2027. 3 Tyler is a leading provider of integrated solutions for the public sector.
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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.
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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.
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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.
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The majority of our SaaS or hosting arrangements include additional professional services as well as maintenance and support services. In certain arrangements, the client may also acquire a license to the software.
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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.
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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 customer, unless the software is not considered distinct.
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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.
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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 customer for the customer’s purpose upon installation, and remaining services such as training are not considered highly interdependent or interrelated to the product's functionality.
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The competencies were integrated into key people processes, including performance evaluations and 360 feedback assessments.
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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 using labor hours incurred as it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts.
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The program also includes multiple leadership assessments, including 360-degree feedback, and a dedicated mentor to support their development.
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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 customer and the remainder of the fee due over a passage of time stipulated by the contract.
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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.
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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. We recognize royalty revenue when the sale occurs under the terms of our third-party royalty arrangements.
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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.
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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.
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To organize our efforts on this particular value, we operate Tyler Together, with strategic pillars focused on our culture, career development, and community impact.
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We typically receive notice of royalty revenue we are entitled to and billed on a quarterly basis in the quarter immediately following the royalty reporting period and adjustments have not been significant. 6 STRATEGY Our objective is to grow our revenues and earnings organically, supplemented by focused strategic acquisitions.
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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.
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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 customer base to include larger jurisdictions.
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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.
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At the state and federal levels, clients include Chief Information Officers and agency heads. Contracts for software products and services are generally implemented over periods of three months to one year, although some complex implementations may span multiple years, with annually renewing maintenance and support update agreements thereafter.
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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.
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Many of these firms operate within a specific geographic area and / or in a narrow product or service niche.
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We have not experienced any significant supply problems. 8 BACKLOG At December 31, 2023, our revenue backlog was approximately $2.03 billion compared to $1.89 billion at December 31, 2022. The backlog generally represents signed contracts under which the revenue has not been recognized. Approximately $937 million, or 46%, of the backlog is expected to be recognized during 2024.
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We believe that, due to the rapid rate of technological change in the computer software industry, trade secrets and copyright protection are less significant than factors such as the knowledge, ability and experience of our employees, frequent product enhancements, and timeliness and quality of support services.
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As of December 31, 2023, 63% of team members work remotely and 37% of team members are either partially or fully office based. 9 Voluntary workforce turnover (rolling 12-month attrition) was 8% as of December 31, 2023, a decrease from 2022 turnover of 10% and a return to pre-COVID levels of turnover at Tyler which consistently outperforms our industry peers.
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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 and our Diversity, Equity and Inclusion (“DEI”) efforts.
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We provide a range of offerings in support of mental and emotional, financial, and physical health and wellness not only for our team members, but also for their family members. Our team members continued to demonstrate elevated levels of mental, physical and financial stress in 2023. These levels increased during the pandemic and have been slow to moderate.
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Given this, we enhanced mental health resources for managers and team members in 2023 and increased the level of financial education resources available to staff at Tyler.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

50 edited+14 added−8 removed107 unchanged
Biggest changeAs of December 31, 2023, we had outstanding an aggregate principal amount of $600 million of our Convertible Senior Notes and $50 million under our 2021 Credit Agreement. In April 2021, we entered into the 2021 Credit Agreement with significantly increased borrowing capacity of up to $1.4 billion, and on the closing of the acquisition of NIC Inc.
Biggest changeThe 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 liquidity and ongoing access to capital could be materially and negatively affected by increased 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.
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.
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. We depend on third parties with whom we engage or collaborate for certain projects, deliverables, and/or financial transaction processes.
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.
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. 13 We must timely respond to technological changes to be competitive.
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.
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. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
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. 20 ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
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. Increases in our investment in research and development could decrease overall margins.
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.
We have at times experienced and 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.
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.
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 • 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.
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.
Subject to customary carve-outs, thresholds and baskets, the 2021 Credit Agreement (and the Indenture by means of a cross-default) restricts, absent consent of the agent and lenders under the 2021 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.
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.
If an event of default under the 2021 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.
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.
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 2021 Credit Agreement, each of which could adversely affect our business and results of operations.
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.
Should the lenders proceed against the guarantees, we cannot give assurance that we would have sufficient assets to pay amounts due on the 2021 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.
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.
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 customers may experience reduced service levels, and our business may suffer.
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.
Our borrowings under the 2021 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 continue to 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.
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.
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. We expect that a public health crisis, such as a pandemic, may negatively impact our business and financial results.
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.
Subcontracting arrangements where we are not the prime contractor pose unique risks to us because we may not have control over the customer relationship, and our ability to generate revenues under such subcontracts may depend on the prime contractor, its performance and relationship with the customer, and its relationship with us.
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.
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 customers.
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.
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 maintenance contracts and manage operations internally.
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.
The Indenture governing the Convertible Senior Notes and the 2021 Credit Agreement do contain, and our future indebtedness agreements may contain covenants that may restrict our ability to finance future operations or capital needs or to engage in other business activities.
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.
As seen with a 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.
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.
Despite the network and application security, 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.
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.
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 2021 Credit Agreement that may, in turn, result in a default under the Indenture.
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.
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 Amazon Web Services (AWS).
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.
A global economic slowdown, the lingering of 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.
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.
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.
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.
In addition, the 2021 Credit Agreement (and the Indenture by means of a cross-default) contains other customary affirmative and negative covenants, and events of default. The 2021 Credit Agreement is unsecured but requires us to maintain certain financial ratios regarding our total leverage and interest coverage and other financial conditions in addition to the restrictions described above.
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.
It is possible that our clients may elect to not renew maintenance 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).
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.
The margin in each case is based upon our total net leverage ratio, as determined pursuant to the 2021 Credit Agreement.
The margin in each case is based upon Tyler’s total net leverage ratio, as determined pursuant to the 2024 Credit Agreement.
There has been 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.
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 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.
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.
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.
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.
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.
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.
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. Inflation and interest rates.
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.
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.
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.
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. 19 Risks Associated with Our Growth Strategy and Other General Corporate Risks We may experience difficulties in executing our acquisition strategy.
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.
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.
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.
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. 18 Risks Associated with Our Periodic Results and Stock Price Fluctuations in quarterly revenues could adversely impact our operating results and stock price.
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.
Revolving credit facility loans and Term A-1 Loans under the 2021 Credit Agreement bear interest at a per annum rate equal to, at our option, 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%.
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%.
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.
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.
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.
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.
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.
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.
For example, AWS has experienced significant service outages in the past and may do so again in the future. 12 Material portions of our business require the Internet infrastructure to be reliable.
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.
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.
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.
Increased competition could 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.
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 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.
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.
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.
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.
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. We may be unable to protect our proprietary rights.
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.
There can be no assurance as to what the ongoing impact of the Incident will be, if any. 11 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.
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.
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. 20 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.
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.
Our business policies and internal security controls may not keep pace with these evolving threats.
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.
Removed
In September 2020, we filed a Current Report on Form 8-K reporting a security incident (the "Incident") involving ransomware disrupting access to some of our internal IT systems and telephone systems.
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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.
Removed
Although we completed our investigation into the Incident and believe we contained and recovered from the Incident, we are subject to risk and uncertainties as a result of the Incident.
Added
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.
Removed
The continued occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to information security.
Added
The evolving threat landscape, including new technologies that leverage artificial intelligence, may increase the external threats to the data we store and process.
Removed
(“NIC”) on April 21, 2021, we borrowed initial loans in the aggregate principal amount of $1.15 billion. The 2021 Credit Agreement also has an option to increase the amount available up to an additional $500 million subject to our leverage and other factors.
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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.
Removed
The proceeds from the issuance of our Convertible Senior Notes and from loans under the 2021 Credit Agreement were used as sources of funding for the acquisition of NIC.
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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.
Removed
Our Term A-2 Loans bear interest, at our option, at a per annum rate of either (1) the Base Rate plus a margin of 0% to 0.5% or (2) the one-, three-, six-, or, subject to approval by all lenders, twelve-month SOFR rate plus a margin of 0.875% to 1.5%.
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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.
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Based on the debt under the 2021 Credit Agreement, the aggregate principal outstanding balance as of December 31, 2023 is $50.0 million, and each quarter of a point change in interest rates would result in a $125,000 change in annual interest expense.
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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.
Removed
In January 2023, we amended our 2021 Credit Agreement to replace the LIBOR reference rate with the SOFR reference rate. The conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and results of operations.
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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.
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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”).
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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”).
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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.
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Risks Associated with Our Periodic Results and Stock Price Fluctuations in quarterly revenues could adversely impact our operating results and stock price.
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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.
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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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese threats range from crude phishing attempts to distributed denial-of-service disruptions to sophisticated malware and ransomware, among others.
Biggest changeThese 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 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. Tyler staffs an internal incident response team designed to launch when a potential or suspected security incident is reported to or identified by Tyler.
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.
For example: 21 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.
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.
The incident response team’s goal is to confirm, contain, mitigate, and remediate the incident, as applicable, and conducts 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.
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.
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 an 8-K, if management believes the materiality threshold has been reached.
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.
External resources: Tyler leverages third-party assessments, 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.
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.
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 forensic and legal advisors that are called on as needed.
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.
Please see Item 1A, “Risk Factors,” for a discussion of cybersecurity risks. 23
Please see Item 1A, “Risk Factors,” for a discussion of cybersecurity risks.
Another Tyler director possesses more than 37 years of Department of Defense experience in cyberspace operations and major computer network architectures. 22 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.
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.
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 and once out in the field, including internal assessments of our flagship solutions.
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.
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, to work to identify and respond to information security risks.
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.
The CFO and CAO are expected to engage with the Company’s Chief Legal Officer (“CLO”) and Audit Chair to evaluate, holistically, not just the quantitative factors but the qualitative factors as well.
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.
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.
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.
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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.
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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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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, North Carolina, New York, Ohio, Tennessee, Texas, Virginia, Washington, Washington D.C., Wisconsin, Ontario and British Columbia, Canada, the Philippines and India.
Biggest changeWe 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 2. PROPERTIES. We occupy a total of approximately 1.3 million square feet of office space, of which approximately 762,000 square feet is in various office facilities we own.
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough 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.
Biggest changeThe 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.
The client was unresponsive to our outreach for several months. On August 23, 2022, we filed a lawsuit to enforce our rights and remedies under the applicable contractual arrangement, and since then have been engaged directly with the client on payment resolution.
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.
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ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 24 PART II
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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 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 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 40 Item 8.
Biggest changeItem 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of February 21, 2024, we had remaining authorization to repurchase up to 2.3 million additional shares of our common stock. 25 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.
Biggest changeAlso 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. 25 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, 2018. Each of the three measures of cumulative total return assumes reinvestment of dividends.
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.
There are no warrants or rights related to our equity compensation plans as of December 31, 2023.
There are no warrants or rights related to our equity compensation plans as of December 31, 2024.
Most of our stockholders hold their shares in street name; therefore, there are substantially more than 1,039 beneficial owners of our common stock. We did not pay any cash dividends in 2023 or 2022. Our bank credit agreement contains restrictions on the payment of cash dividends.
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.
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, 2023, we had approximately 1,039 stockholders of record.
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.
A summary of the repurchase activity during 2023 is as follows: Period Total number of shares repurchased 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 — — — 2,270,091 Three months ended June 30 — — — 2,270,091 Three months ended September 30 — — — 2,270,091 October 1 through October 31 — — — 2,270,091 November 1 through November 30 — — — 2,270,091 December 1 through December 31 — — — 2,270,091 — — — 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.
A summary of the repurchase activity during 2024 is as follows: Period Total number of shares repurchased 1 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.
Number of securities to be issued upon exercise of outstanding options, warrants, purchase rights and vesting of restricted stock units as of December 31, 2023 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, 2023) Plan Category Equity compensation plans approved by security shareholders: 2018 Incentive Stock Plan 1,870,812 283.09 456,556 Employee Stock Purchase Plan 9,997 355.4 525,881 Equity compensation plans not approved by security shareholders — — — 1,880,809 $ 283.47 982,437 As of December 31, 2023, we had authorization to repurchase up to approximately 2.3 million additional shares of Tyler common stock.
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.
The stock performance shown on the graph below is not necessarily indicative of future price performance. Company / Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Tyler Technologies, Inc. 100 161.46 234.92 289.50 173.51 225.01 S&P 500 Stock Index 100 131.49 155.68 200.37 164.08 207.21 S&P 600 Information Technology Index 100 139.59 178.41 226.31 175.70 212.50
The stock performance shown on the graph below is not necessarily indicative of future price performance. 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
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During 2023, we did not purchase any shares of our common stock.
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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.
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As of February 19, 2025, we had remaining authorization to repurchase up to 2.2 million additional shares of our common stock. 1 I ncludes 77,953 shares withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
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The level of this acquisition activity varies from period to period based upon the timing of award grants and vesting.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changePercentage of Total Revenues Years Ended December 31, 2023 2022 2021 Revenues: Subscriptions 59.4 % 54.7 % 49.3 % Maintenance 23.9 25.3 29.8 Professional services 12.8 15.0 14.9 Software licenses and royalties 2.0 3.2 4.6 Hardware and other 1.9 1.8 1.4 Total revenues 100.0 100.0 100.0 Cost of revenues: Subscriptions, maintenance, and professional services 51.3 52.9 51.5 Software licenses, royalties, and amortization of acquired software 2.4 3.1 3.1 Amortization of software development 0.6 0.4 0.1 Hardware and other 1.5 1.3 0.8 Sales and marketing expense 7.7 7.3 7.4 General and administrative expense 15.8 14.4 17.1 Research and development expense 5.6 5.7 5.9 Amortization of other intangibles 3.8 3.3 2.8 Operating income 11.3 11.6 11.3 Interest expense (1.2) (1.5) (1.5) Other income, net 0.2 0.1 0.1 Income before income taxes 10.3 10.2 9.9 Income tax provision (benefit) 1.7 1.3 (0.2) Net income 8.6 % 8.9 % 10.1 % 33 2023 Compared to 2022 Revenues Subscriptions.
Biggest changeThis 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.
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 software licenses and royalties, subscription-based services, and maintenance and support.
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.
Significant items subject to such estimates and assumptions include the application of the progress toward completion methods of revenue recognition, estimation for revenue recognition and multiple performance obligation arrangements, and the recoverability of goodwill and other intangible assets and estimated useful lives of intangible assets.
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 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 and security vulnerabilities; (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.
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.
Our working capital needs are fairly stable throughout the year with the significant components of cash outflows being payment of personnel expenses offset by cash inflows representing collection of accounts receivable and cash receipts from clients in advance of revenue being earned.
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.
Subscription-based arrangements generally result in lower revenue in the initial year as compared to perpetual software license arrangements but generate higher overall revenue over the term of the contract.
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.
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. Because ARR is an annualized revenue amount, the metric can fluctuate from quarter to quarter due to this seasonality.
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.
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 customer support (“PCS” or “maintenance”). Other sources of revenue are professional services, software licenses and royalties, and hardware and other.
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.
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 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.
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 fees primarily related to digital government services and online payment processing.
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.
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, 2022, as filed with the SEC on February 21, 2023.
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.
For a comparison of our Results of Operations for the years ended December 31, 2022, and 2021, and our Cash Flow discussion for the year ended December 2022, see “Part II, Item 7.
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.
We begin to amortize capitalized costs when a product is available for general release to customers. 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 generally, three to five years.
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.
These indicators include the following: 28 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 83% of our revenues in 2023.
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.
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 outsourcing services for taxing jurisdictions .
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.
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.
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.
Amortization expense related to acquired software is included with cost of revenues while amortization expense of customer related, trade name, and leases acquired intangibles is recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years.
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.
As of February 21, 2024, we have authorization from our Board of Directors to repurchase up to 2.3 million additional shares of our common stock. Our share repurchase program allows us to repurchase shares at our discretion.
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.
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.
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.
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. Liquidity and Cash Flows – The primary driver of our cash flows is net income.
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.
The effective income tax rates for the periods presented were 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 from share-based compensation, offset by liabilities for uncertain tax positions, state income taxes, and non-deductible business expenses.
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.
Cost of Revenues and Gross Margins – Our primary cost component is personnel expenses in connection with providing software implementation, subscription-based services and maintenance and support to our clients.
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.
The share-based exercise and vesting activity in 2023 generated $9.3 million of excess tax benefits, while exercise and vesting activity in 2022 generated $7.8 million of excess tax benefits.
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.
We do not have any direct costs associated with royalties. The cost of software licenses and royalties for the twelve months ended December 31, 2023, increased $4.7 million or 78% compared to the prior period due to higher third-party software costs. 35 Amortization of software development. Software development costs included in cost of revenues primarily consist of personnel 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.
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.
(“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.
In 2023, amortization of software development costs increased $6.1 million or 94%, respectively, compared to the prior period and is attributable to new capitalized software development projects going into service in the past year. Amortization of acquired software. Amortization expense related to acquired software attributed to business combinations is included with cost of revenues.
In 2024, amortization of software development costs increased 49% compared to the prior period due to new capitalized software development projects going into service in the past year. Amortization of acquired software. Amortization expense related to acquired software attributed to business combinations is included with cost of revenues.
The change in other income, net, compared to the prior period is due to increased interest income generated from invested cash as a result of higher interest rates in 2023 compared to 2022.
The change in other income, net, compared to the prior period is due to increased interest income generated from higher invested cash balances in 2024 compared to 2023.
We lease office facilities for use in our operations, as well as transportation and other equipment. Most of our leases are non-cancelable operating lease agreements with remaining terms of one to 11 years.
We lease office facilities, transportation and other equipment for use in our operations. Most of our leases are non-cancelable operating lease agreements with remaining terms of one to 10 years. Some of these leases include options to extend for up to six years.
The following table sets forth a comparison of our G&A expense for the years ended December 31 ($ in thousands): Change 2023 2022 $ % General and administrative expense $ 308,575 $ 267,324 $ 41,251 15 % G&A as a percentage of revenue was 15.8% in 2023 compared to 14.4% in 2022.
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.
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 software license revenues will decline over the next several years as we continue to focus our sales efforts on SaaS arrangements.
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.
The following table sets forth a comparison of our R&D expense for the years ended December 31 ($ in thousands): Change 2023 2022 $ % Research and development expense $ 109,585 $ 105,184 $ 4,401 4 % R&D expense as a percent of total revenue was 5.6% in 2023, compared to 5.7% in 2022.
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.
Estimated annual amortization expense relating to customer 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): 2024 $ 59,278 2025 55,672 2026 55,044 2027 54,429 2028 53,766 Thereafter 481,132 Interest expense The following table sets forth a comparison of our interest expense for the years ended December 31 ($ in thousands): Change 2023 2022 $ % Interest expense $ (23,629) $ (28,379) $ 4,750 (17)% Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings .
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 following table sets forth a comparison of our S&M expense for the years ended December 31 ($ in thousands): Change 2023 2022 $ % Sales and marketing expense $ 149,770 $ 135,743 $ 14,027 10 % S&M as a percentage of revenue was 7.7% in 2023 compared to 7.3% in 2022.
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.
In recent years, we have also received significant amounts of cash from employees exercising stock options and contributing to our Employee Stock Purchase Plan.
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.
Annualized recurring revenue (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.
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 was $1.61 billion and $1.50 billion as of December 31, 2023, and 2022, respectively. ARR increased 8% compared to the prior period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements.
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.
Operating activities that provided cash were primarily comprised of net income of $165.9 million, non-cash depreciation and amortization charges of $154.1 million, non-cash share-based compensation expense of $108.3 million and non-cash amortization of operating lease right-of-use assets of $16.7 million.
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.
Some of these leases include options to extend for up to six years. 39 Our estimated future obligations consist of debt, uncertain tax positions, leases, and purchase commitments as of December 31, 2023. Refer to Note 10, “Debt,” Note 14, “Income Tax,” Note 18, “Leases,” and Note 21, “Commitment and Contingencies,” to the consolidated financial statements for related discussions.
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.
These decreases were offset by the timing of payments of payroll expense and vendor invoices and an increase in deferred revenue during the period. In general, changes in deferred revenue are cyclical and primarily driven by the timing of our maintenance renewal billings.
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.
CAPITALIZATION At December 31, 2023, our capitalization consisted of $646.0 million of outstanding debt and $2.9 billion of shareholders’ equity.
CAPITALIZATION At December 31, 2024, our capitalization consisted of $597.9 million of outstanding debt and $3.4 billion of shareholders’ equity.
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.
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.
Financing activities used cash of $311.8 million in 2023 compared to $344.2 million in 2022, primarily attributable to repayment of $345.0 million of term debt, partially offset by payments received from stock option exercises, net of withheld shares for taxes upon equity award and employee stock purchase plan activity.
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 $2.6 million in debt issuances costs related to our newly signed 2024 Credit Agreement.
Cost of subscriptions, maintenance and professional services primarily consists of personnel costs related to installation of our software, conversion of client data, training client personnel and support activities and various other services such as custom development; costs related to our SaaS operations, including hosting costs; and costs related to providing digital government services.
Cost of subscriptions, maintenance and professional services primarily consist of personnel costs related to installation of our software, conversion of client data, training client personnel, public cloud hosting costs, and support activities, including enhancing existing solutions, and various other services such as custom development, ongoing operation of our SaaS solutions, property appraisal outsourcing activities, digital government services, and other transaction-based services such as e-filing.
The following table sets forth a comparison of our maintenance revenues for the years ended December 31 ($ in thousands): Change 2023 2022 $ % ES $ 442,781 $ 444,143 $ (1,362) — % PT 23,880 24,312 (432) (2) Total maintenance revenues $ 466,661 $ 468,455 $ (1,794) — % We provide maintenance and support services for our on-premises software products and certain third-party software.
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.
ARR is a metric we believe is 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, which are considered recurring in nature, with some seasonality.
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.
Other potential capital resources include cash on hand, public and private issuances of debt or equity securities, and bank borrowings. 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.
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.
If the conclusion of this assessment is that it is more likely than not that a reporting unit's fair value is more than its carrying value, we are not required to perform a quantitative impairment test. When testing goodwill for impairment quantitatively, we first compare the estimated fair value of each reporting unit with its carrying amount.
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.
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 amounts for previous years have been reclassified to conform to the current year presentation.
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.
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.
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.
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, third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses.
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 estimated useful lives of acquired software intangibles range from five to 10 years. In 2023, amortization of acquired software declined $16.1 million or 31% compared to the prior period due to assets becoming fully amortized in 2022, offset by amortization of newly acquired software from recent acquisitions completed in 2022 and 2023.
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 overall gross margin for the periods presented as of December 31: 2023 2022 Change Overall gross margin 44.1 % 42.4 % 1.7 % Overall gross margin . Our 2023 blended gross margin increased 1.7% compared to 2022.
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.
New clients who purchase our proprietary software licenses or subscriptions generally also contract with us to provide the related professional services. Existing clients also periodically purchase additional training, consulting and minor programming 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.
Amortization of other intangibles Other intangibles are comprised of the excess of the purchase price over the fair value of net tangible assets acquired that are allocated to acquired software and customer related, trade name, and leases acquired intangibles. The remaining excess purchase price is allocated to goodwill that is not subject to amortization.
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.
The actual operating results of Rapid and US eDirect, from their respective dates of acquisition, are included in the operating results of the PT segment. 2023 Operating Results For the twelve months ended December 31, 2023, total revenues increased 5.5% compared to the prior period. Revenues from recent acquisitions comprised $22.3 million or 1.2%, of the increase.
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 $10.4 million or 0.5%, to the total revenue increase.
Any adverse change in these factors could have a significant impact on the recoverability of goodwill or other intangible assets.
Any adverse change in these factors could have a significant impact on the recoverability of goodwill or other intangible assets. During 2024, we did not identify any triggering events that would indicate that the carrying amount of our intangible assets may not be recoverable.
Cost of revenues and overall gross margins The following table sets forth a comparison of the key components of our cost of revenues for the years ended December 31 ($ in thousands): Change 2023 2022 $ % Subscriptions, maintenance, and professional services $ 1,001,221 $ 977,885 $ 23,336 2 % Software licenses and royalties 10,821 6,083 4,738 78 Amortization of software development 12,625 6,507 6,118 94 Amortization of acquired software 36,062 52,192 (16,130) (31) Hardware and other 29,923 23,674 6,249 26 Total cost of revenues $ 1,090,652 $ 1,066,341 $ 24,311 2 % Subscriptions, maintenance, and professional services .
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 .
Maintenance revenue declined slightly compared to the prior period, mainly due to clients converting from on-premises license arrangements to SaaS. The decline was partially offset by annual maintenance rate increases and maintenance associated with new software license sales. Professional services.
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.
Income tax provision The following table sets forth a comparison of our income tax provision for the years ended December 31 ($ in thousands): Change 2023 2022 $ % Income tax provision (benefit) $ 32,317 $ 23,353 $ 8,964 38 % Effective income tax rate 16.3 % 12.4 % The increase in the income tax provision and the effective income tax rate in 2023, compared to the prior period, is principally driven by a decrease in research tax credit benefits, offset by a decrease in liabilities for uncertain tax positions and state taxes and an increase in excess tax benefits from share-based compensation.
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.
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.
The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, management uses all available information.
The following table sets forth a comparison of our professional services revenues for the years ended December 31 ($ in thousands): Change 2023 2022 $ % ES $ 209,727 $ 204,970 $ 4,757 2 % PT 40,249 72,655 (32,406) (45) Total professional services revenues $ 249,976 $ 277,625 $ (27,649) (10) % 34 Professional services revenues primarily consist of professional services provided in connection with implementing our software, converting client data, training client personnel, custom development activities and consulting.
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.
Our renewal dates occur throughout the year, but our largest renewal billing cycles occur in the second and fourth quarters. Subscription renewals are billed throughout the year. Investing activities used cash of $77.0 million in 2023 compared to $172.5 million in 2022. Investing activities included payments for acquisitions of $62.8 million, net of cash acquired.
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.
The tax benefits related to research tax credits totaled $20.5 million in 2023 compared to $31.3 million in 2022, as a result of completing a multiyear research and development tax credit study during 2022. The tax expense related to uncertain tax positions in 2023 was $7.6 million compared to $8.3 million in 2022.
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.
FINANCIAL CONDITION AND LIQUIDITY As of December 31, 2023, we had cash and cash equivalents of $165.5 million compared to $173.9 million at December 31, 2022. We also had $17.4 million invested in investment grade corporate bonds, municipal bonds and asset-backed securities as of December 31, 2023. These investments have varying maturity dates through 2027 and are held as available-for-sale.
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.
The following table sets forth a summary of cash flows for the years ended December 31 (in thousands): 2023 2022 2021 Cash flows provided (used) by: Operating activities $ 380,440 $ 381,455 $ 371,753 Investing activities (76,960) (172,530) (2,090,935) Financing activities (311,844) (344,239) 1,424,730 Net decrease in cash and cash equivalents $ (8,364) $ (135,314) $ (294,452) Net cash provided by operating activities continues to be our primary source of funds to finance operating needs and capital expenditures.
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.
In 2023, the cost of subscriptions, maintenance and professional services grew 2% compared to the prior period. $13 million or 1% of the increase is attributed to the 2023 impact of recent acquisitions and the remaining increase of 1% is due to higher personnel costs and duplicate hosting costs as we transition from our proprietary data centers to the public cloud.
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.
Working capital, excluding cash, decreased approximately $73.3 million mainly due to timing of higher tax payments and deferred taxes associated with IRC Section 174, timing of payments to and receipts from our government partners, timing of prepaid expenses and deferred taxes associated with stock option activity during the period.
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.
Under our amended 2021 Credit Agreement, we had $50 million in outstanding principal for the Term Loans, no outstanding borrowings under the 2021 Revolving Credit Facility, and an available borrowing capacity of $500 million as of December 31, 2023. As of December 31, 2023, we had one outstanding letter of credit totaling $750,000.
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.
Subscription revenues primarily consists of revenues derived from our SaaS arrangements and transaction-based fees, which relate to digital government services, including e-filing transactions and payment processing. These revenues are considered recurring because revenues from these sources are expected to reoccur in similar annual amounts for the term of our relationship with the client.
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.
R&D expense increased 4% in 2023 compared to the prior period, mainly due to a number of new Tyler product development initiatives across our product suites, including increased investments in research and development at recently acquired businesses.
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.
Recent Acquisitions 2023 On October 31, 2023, we acquired Resource Exploration, Inc. (“ResourceX”), a leading provider of budgeting software to the public sector.
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.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amounts of revenues, cost of revenues and expenses during the reporting period, and related disclosure of contingencies.
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 following table sets forth a comparison of our software licenses and royalties revenues for the years ended December 31 ($ in thousands): Change 2023 2022 $ % ES $ 32,709 $ 55,158 $ (22,449) (41) % PT 5,387 4,248 1,139 27 Total software licenses and royalties revenues $ 38,096 $ 59,406 $ (21,310) (36) % Software licenses and royalties revenues decreased 36% compared to the prior period.
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.
ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.
ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early adoption permitted.
The letter of credit, which guarantees our performance under a client contract, renews automatically annually unless canceled in writing and expires in the third quarter of 2026. We paid interest of $19.2 million in 2023 and $21.3 million in 2022. See Note 10, “Debt,” to the consolidated financial statements for discussions of the Convertible Senior Notes and the Credit Agreement.
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 $142.8 million in 2023.
The increase in overall gross margin compared to the prior period is due to growth in subscription revenues and the decline in low margin COVID-related revenues and related costs and the decline in amortization of acquired software expense compared to the prior period.
The decline in the overall gross margin compared to the prior period is attributed to lower revenue from software licenses and maintenance, higher software development amortization expense, and higher personnel costs.
The change in interest expense compared to the prior period is primarily attributable to lower interest incurred as a result of our accelerated repayment of term debt, offset by accelerated amortization expense related to debt issuance costs and an increase in interest rates in 2023 compared to 2022. 37 Other income, net The following table sets forth a comparison of our other income, net for the years ended December 31 ($ in thousands): Change 2023 2022 $ % Other income, net $ 3,328 $ 1,723 $ 1,605 93% Other income, net, is primarily comprised of interest income from invested cash.
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 Platform Technologies ("PT") reportable segment provides public sector entities with software solutions to platform and transformative solutions including digital solutions, payment processing, streamline data processing, and improve operations and workflows.
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.
Subscriptions revenue grew 15% compared to 2022, primarily due to an ongoing shift toward SaaS arrangements with both new and existing clients, along with growth in our transaction-based revenues. Subscription revenues from recent acquisitions comprised $18.3 million or 1.8% of the 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.
We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • 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 Our software arrangements with customers contain multiple performance obligations that range from software licenses, installation, training, and consulting related to software modification and customization to meet specific customer needs (services), hosting, and PCS.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−3 removed0 unchanged
Biggest changeIn accordance with our amended 2021 Credit Agreement, the borrowings under the Revolving Credit Facility and the Term Loan A-1 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) (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%.
Biggest changeLoans 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 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.
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.
Removed
As of December 31, 2023, we had $50.0 million of outstanding borrowings under our amended 2021 Credit Agreement and available borrowing capacity under the amended 2021 Credit Agreement was $500.0 million.
Removed
As of December 31, 2023, we have fully repaid amounts due under Term Loan A-2. For the twelve months ended December 31, 2023, the effective interest rate for our borrowings was 7.63%.
Removed
Based on the aggregate outstanding principal balance under the amended 2021 Credit Agreement as of December 31, 2023, of $50.0 million, each quarter of a point change in interest rates would result in a $125,000 change in annual interest expense.

Other TYL 10-K year-over-year comparisons