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What changed in Tyler Technologies's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Tyler Technologies's 2024 and 2025 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 2025 report.

+250 added−255 removedSource: 10-K (2026-02-18) vs 10-K (2025-02-19)

Top changes in Tyler Technologies's 2025 10-K

250 paragraphs added · 255 removed · 197 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeTo 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.
Biggest changeThe half-day session is led by Tyler’s senior executive team and allows for meaningful interaction and expectation setting for new leaders. • Tyler team members completed over 31,000 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 capabilities across the Tyler workforce, 134 AWS certifications were attained in 2025, and communities of practice were established to facilitate learning and best practice sharing. • At Tyler, we recognize and value the expertise our team members bring, unique to our software, services and our public sector clients.
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 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, sheriffs’ offices, police departments, and probation officers keep their communities safe.
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.
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 to achieve career goals, strengthen management and business skills and effectively lead their teams.
We maintain deep, long-term relationships with state and local government agencies, including dedicated state-level offices in the 29 states in which we have enterprise contracts. Our professional information technology (“IT”) services include cloud-based software deployment, data conversion, and training.
We maintain deep, long-term relationships with state and local government agencies, including dedicated state-level offices in the 30 states in which we have enterprise contracts. Our professional information technology (“IT”) services include cloud-based software deployment, data conversion, and training.
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.
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 Software as a Service (“SaaS”) arrangements and transaction-based fees. We are able to provide the majority of our software products through our SaaS model.
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.
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 integrated payments platform for Tyler’s public sector clients, processing nearly half a billion transactions annually and covers the entire payments lifecycle, including integrated credit, debit and ACH processing, billing, invoice presentment, merchant onboarding, support, collections, reconciliation, and disbursements. • Platform Technologies: A low-code application development platform purpose-built for the public sector.
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 .
ARR increased approximately 11% compared to the prior period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements and expansion with existing clients. • Maximize economies of scale and take advantage of financial leverage in our business .
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.
We have a large recurring revenue base from subscription-based services and maintenance and support, which generated revenues of $2.0 billion, or 87% of total revenues, in 2025. We have historically experienced very low client turnover (approximately 2% annually), and recurring revenues continue to grow as the installed client base increases.
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.
Our other sources of revenue include software licenses and royalties and hardware equipment, which represented 2.5% and 3.2% of total revenues for the twelve months ended December 31, 2025 and 2024, respectively. STRATEGY Our objective is to grow our revenues and earnings organically, supplemented by focused strategic acquisitions.
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.
The most frequent factor cited by team members leaving Tyler in 2025 was career opportunities. While 29% of positions filled in 2025 were filled by existing Tyler team members, we continue to invest in talent development and career opportunities for team members, as discussed in further detail below.
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.
Subscription-based revenues have been our fastest growing revenue category over the past five years, increasing from $784.4 million in 2021 to $1.6 billion in 2025. We monitor Annualized Recurring Revenue (“ARR”), which is calculated based on quarter-to-date end total recurring revenues multiplied by four. ARR was $2.06 billion and $1.86 billion as of December 31, 2025, and 2024, respectively.
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.
Collaboration is an important part of our culture. We are dedicated to creating opportunities for our team members to connect in person, enhancing both our partially and fully office-based presence, while maintaining the flexibility that supports their productivity and well-being.
SEASONALITY Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services and are collected on a recurring basis during the contract term.
SEASONALITY Transaction-based fees are generally derived from multi-year contracts with our clients that generate fees from payment transactions and digital government services and are collected on a recurring basis during the contract term.
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.
As of December 31, 2025, we had approximately 7,800 team members. Approximately 93% of our team members work in one of our 63 U.S. offices or remotely in the U.S. Approximately 650 of our team members are in Canada, the Philippines, or India. Race and gender reporting is based on information provided by team members.
Voluntary workforce turnover (rolling 12-month attrition) was 8% as of December 31, 2024 and 2023, which was similar to pre COVID levels of turnover at Tyler that consistently outperform industry levels. The average tenure of our team members continues to be approximately eight years, and approximately 30% of our employees have been employed by Tyler for more than ten years.
Voluntary workforce turnover (rolling 12-month attrition) was 7% and 8% as of December 31, 2025 and 2024, respectively, and consistently outperforms industry levels. The average tenure of our team members is approximately eight years, and approximately 30% of employees have been employed by Tyler for more than ten years.
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.
Most maintenance contracts automatically renew unless the client or Tyler gives notice of termination prior to expiration. Similar maintenance and support services are provided to our SaaS clients and are included in their subscription fees, which are classified as subscription revenue. Professional Services We provide a variety of professional services to clients who utilize our software products.
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.
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. As of December 31, 2025, approximately 51% of team members work remotely and 49% of team members are either partially or fully office-based.
Nearly all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenue. We generally provide maintenance and support for our on-premises clients under annual, or in some cases multi-year, contracts, with a typical fee based on a percentage of the software product’s license fee.
We generally provide maintenance and support for our on-premises clients under annual, or in some cases multi-year, contracts, with a typical fee based on a percentage of the software product’s license fee. These fees can generally be increased on renewal and may also increase as new license fees increase. Maintenance and support fees are generally paid annually in advance.
For more complicated issues, our staff, with the clients’ permission, can log on to clients’ systems remotely. We maintain our clients’ software largely through releases that contain improvements and incremental additions of features and functionality, along with updates necessary because of legislative or regulatory changes.
We maintain our clients’ software largely through releases that contain improvements and incremental additions of features and functionality, along with updates necessary because of legislative or regulatory changes. Nearly all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenue.
We 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.
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 through an omni-channel approach including phone, knowledge base and client support portal experiences. For more complicated issues, our staff, with the clients’ permission, can log on to clients’ systems remotely.
The program also includes multiple leadership assessments, including 360-degree feedback, and a dedicated mentor to support their development.
The program also includes multiple leadership assessments, including 360-degree feedback, and a dedicated mentor to support their development. • Tyler launched a new process for onboarding new leaders to ensure integration into Tyler’s way of leading and to give participants a jump start for success.
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.
In redeploying talent impacted by position eliminations due to the evolving nature of our business, we demonstrate our values of community, inclusion and growth -- redeploying rather than reducing our workforce -- whenever possible to grow our business and strengthen our culture. 9 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.
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.
For example, in 2025: • Division presidents and corporate function executives conducted annual leadership assessment and talent reviews with their human resources’ leaders and leadership teams to identify development priorities within their teams. • Nearly 300 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 high performing teams.
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.
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.
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These fees can generally be increased on renewal and may also increase as new license fees increase. Maintenance and support fees are generally paid annually in advance. Most maintenance contracts automatically renew unless the client or Tyler gives notice of termination prior to expiration.
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Accordingly, 91% of eligible team members were redeployed and remain at Tyler through our Workforce Redeployment and Retention Program.
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We define leadership as positions which are one or two levels removed from our CEO with management responsibility.
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Consistent with our value of inclusion, in 2025, Tyler: • Launched the new leader orientation program referenced above to accelerate the ability of leaders new to Tyler to onboard and integrate across our team; • Expanded our Employee Resource Group (ERG) footprint with the launch of two new ERGs - Tyler Black and New@Tyler; • Increased the participation in our equity compensation grant program with over 13% of 2025 recipients representing first-time grantees; and • Retained and redeployed 91% of eligible team members impacted by position elimination to other roles within Tyler, respecting the value they bring to our clients and our team.
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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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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.
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The competencies were integrated into key people processes, including performance evaluations and 360 feedback assessments.
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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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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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Associated with Selling Products and Services into the Public Sector Marketplace Selling products and services into the public sector poses unique challenges. We derive substantially all of our revenues from sales of software and services to state, county, and city governments, other federal or municipal agencies, and other public entities.
Biggest changeWe derive substantially all of our revenues from sales of software and services to state, county, and city governments, other federal or municipal agencies, and other public entities. We expect that sales to public sector clients will continue to account for substantially all of our revenues in the future.
Threats to IT security can take, and have in the past taken, a variety of forms. Individuals and groups of hackers, and sophisticated organizations including state-sponsored organizations, may take steps that pose threats to our clients and our IT.
Threats to IT security can take, and have in the past taken, a variety of forms. Individuals, groups of hackers, and sophisticated organizations, including state-sponsored organizations, may take steps that pose threats to our clients and our IT.
The lost revenue and containment, remediation, investigation, legal and other costs could be significant and may exceed our insurance policy limits or may not be covered by insurance at all. Further, we may be subject to regulatory enforcement actions and litigation that could result in financial judgments or the payment of settlement amounts and disputes with insurance carriers concerning coverage.
The lost revenue, containment, remediation, investigation, legal and other costs could be significant and may exceed our insurance policy limits or may not be covered by insurance at all. Further, we may be subject to regulatory enforcement actions and litigation that could result in financial judgments, the payment of settlement amounts and/or disputes with insurance carriers concerning coverage.
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.
Despite our 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.
Our software products are complex and have in the past, and may in the future, contain errors or defects, especially when first introduced or when new versions or enhancements are released. Any such defects could result in a loss of revenues or delay market acceptance. Our license agreements typically contain provisions designed to limit our exposure to potential liability.
Our software products are complex and have in the past, and may in the future, contain errors or defects, especially when first introduced or when new versions or enhancements are released. Any such defects could result in a loss of revenues or delay market acceptance. Our agreements typically contain provisions designed to limit our exposure to potential liability.
The Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 9, 2021, with U.S. Bank National Association as trustee. As of December 31, 2024, we had outstanding an aggregate principal amount of $600 million of our Convertible Senior Notes and none under our 2024 Credit Agreement.
The Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 9, 2021, with U.S. Bank National Association as trustee. As of December 31, 2025, we had outstanding an aggregate principal amount of $600 million of our Convertible Senior Notes and none under our 2024 Credit Agreement.
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.
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 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.
If we fail to adequately adapt to these risks and uncertainties, our financial performance could be adversely affected. 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.
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.
There have been periods of increased volatility in the financial and securities markets, as well as increased inflation and interest rates, which generally have made access to capital less certain and have increased the cost of obtaining new capital, and future volatility may create similar risks.
We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position, and research and development expense could adversely affect operating margins. Our stock price may be volatile. The market price of our common stock may be volatile.
We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position, and research and development expense could adversely affect operating margins. 18 Our stock price may be volatile. The market price of our common stock may be volatile.
Part of our future success continues to depend on the use of the Internet as a means to access public information and perform transactions electronically, including, for example, electronic filing of court documents and electronic payment processing.
Significant part of our future success continues to depend on the use of the Internet as a means to access public information and perform transactions electronically, including, for example, electronic filing of court documents and electronic payment processing.
We cannot assure you that such competitors will not develop products or offer services that are superior to our products or services or that achieve greater market acceptance. We also compete with internal, centralized IT departments of governmental entities, which requires us to persuade the end-user to stop the internal service and outsource to us.
We cannot assure investors that such competitors will not develop products or offer services that are superior to our products or services or that achieve greater market acceptance. We also compete with internal, centralized IT departments of governmental entities, which requires us to persuade the end-user to stop the internal service and outsource to us.
We rely on third-party providers—including Amazon Web Services—for hosting services and other technology-related services needed to deliver certain of our cloud solutions. Any disruption in the services provided by such third-party providers could adversely affect our business and subject us to liability.
We rely on third-party providers—including Amazon Web Services (AWS)—for hosting services and other technology-related services needed to deliver certain of our cloud solutions and other functionality. Any disruption in the services provided by such third-party providers could adversely affect our business and subject us to liability.
If these parties fail to satisfy their obligations to us or we are unable to maintain these relationships, our operating results and business prospects could be adversely affected. To satisfy our obligations under client contracts, we often engage third parties to provide certain deliverables or fulfill certain requirements.
If these parties fail to satisfy their obligations to us or we are unable to maintain these relationships, our operating results and business prospects could be adversely affected. To satisfy our obligations under client contracts, we often engage third parties to provide certain deliverables or fulfill certain software or services requirements.
In addition, the general insurance markets may experience volatility and/or restrictive coverage trends, which may lead to future increases in our general and administrative expense and negatively impact our operating results. Risks Related to Our Indebtedness Servicing our indebtedness requires a significant amount of cash.
In addition, the general insurance markets may experience volatility and/or restrictive coverage trends, which may lead to future increases in our general and administrative expenses and negatively impact our operating results. Risks Related to Our Indebtedness Servicing our indebtedness requires a significant amount of cash.
Sometimes, securities class action litigation is filed following periods of volatility in the market price of a particular company’s securities. We cannot assure you that similar litigation will not occur in the future with respect to us.
Sometimes, securities class action litigation is filed following periods of volatility in the market price of a particular company’s securities. We cannot assure investors that similar litigation will not occur in the future with respect to us.
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.
If a fundamental change occurs, 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, or to repay our indebtedness obligations under our 2024 Credit Agreement, each of which could adversely affect our business and results of operations.
They have in the past and may in the future develop and deploy malicious software to gain access to our internal networks, and/or to attack our products and services, gain access to data centers we use to host client deployments, or act in a coordinated manner to launch distributed denial of service or other coordinated attacks.
Bad actors have in the past and may in the future develop and deploy malicious software to gain access to our internal networks, and/or to attack our products and services, gain access to data centers we use to host client deployments, or act in a coordinated manner to launch distributed denial of service or other coordinated attacks.
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 material portion of our business is provided through software hosting services, which are generally hosted from and use computing infrastructure provided by third parties, including AWS.
We are not currently involved in any material intellectual property litigation; however, we may be a party to such litigation in the future to protect our proprietary information, trade secrets, know-how, and other intellectual property rights. We cannot assure you that third parties will not assert infringement or misappropriation claims against us with respect to current or future products.
We are not currently involved in any material intellectual property litigation; however, we may be a party to such litigation in the future to protect our proprietary information, trade secrets, know-how, and other intellectual property rights. We cannot provide assurance that third parties will not assert infringement or misappropriation claims against us with respect to current or future products.
Our actual results may differ materially from those projected in any such forward-looking statements due to a number of factors, including those set forth below and elsewhere in this Annual Report. Risks Associated with Our Business, Including Our Software Products Cyber-attacks and security vulnerabilities can disrupt our business and harm our competitive position.
Our actual results may differ materially from those projected in any such forward-looking statements due to a number of factors, including those set forth below and elsewhere in this Annual Report. Risks Associated with Our Business, Including Our Software Products Cyber-attacks, the use of artificial intelligence and security vulnerabilities can disrupt our business and harm our competitive position.
Our revenues and operating results can be difficult to predict and may fluctuate substantially from quarter to quarter for a variety of reasons, including: • The size of license transactions can vary significantly • Clients may unexpectedly postpone or cancel procurement processes due to changes in strategic priorities, project objectives, budget, or personnel • Client purchasing processes vary significantly and a client’s internal approval, expenditure authorization, and contract negotiation processes can be difficult and time consuming to complete, even after selection of a vendor • The number, timing, and significance of software product enhancements and new software product announcements by us and our competitors may affect purchase decisions • We may have to defer revenues under our revenue recognition policies and GAAP In each fiscal quarter, our expense levels, operating costs, and staffing levels are based to some extent on projections of future revenues and are relatively fixed.
Our revenues and operating results can be difficult to predict and may fluctuate substantially from quarter to quarter for a variety of reasons, including: • Clients may unexpectedly postpone or cancel procurement processes due to changes in strategic priorities, project objectives, budget, or personnel • Client purchasing processes vary significantly and a client’s internal approval, expenditure authorization, and contract negotiation processes can be difficult and time consuming to complete, even after selection of a vendor • The number, timing, and significance of software product enhancements and new software product announcements by us and our competitors may affect purchase decisions • The size of license transactions can vary significantly In each fiscal quarter, our expense levels, operating costs, and staffing levels are based to some extent on projections of future revenues and are relatively fixed.
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”).
On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lender parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”).
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.
Disclosure of personally identifiable information and/or other sensitive client data has resulted in the past, and may result in the future, in obligations to send “data breach” notifications under applicable state laws, or to assist our clients in doing so, which 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.
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 investors that we will be able to compete successfully against current and future competitors, and the failure to do so could have a material adverse effect upon our business. Fixed-price contracts may affect our profits.
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.
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 adapt to and implement technological changes to be remain competitive.
The labor costs associated with our business are subject to several external factors, including unemployment levels and the quality and the size of the labor market, prevailing wage rates, minimum wage laws, wages and other forms of remuneration and benefits offered to prospective employees by competitor employers, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation.
The labor costs associated with our business are subject to several external factors, including unemployment levels and the quality and the size of the labor market, prevailing wage rates, minimum wage laws, wages and other forms of remuneration and benefits offered to prospective employees by competitor employers, health insurance costs and other insurance costs, and changes in employment and labor legislation or other workplace regulation, such as changing immigration policies affecting the labor market.
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.
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 • Payment terms that are subject to achieving implementation milestones, which have in the past and may in the future create differences in opinion 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 or budget initiatives Each of these risks is outside our control.
Any claims or litigation, with or without merit, could be time-consuming, costly, and a diversion to management. Any such claims and litigation could also cause product shipment delays or require us to enter into royalty or licensing arrangements. Such royalty or licensing arrangements, if required, may not be available on terms acceptable to us, if at all.
Any claims or litigation, with or without merit, could be time-consuming, costly, and divert the time and attention of management. Any such claims and litigation could also cause product shipment delays or require us to enter into royalty or licensing arrangements. Such royalty or licensing arrangements, if required, may not be available on terms acceptable to us, if at all.
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.
Because we cannot easily switch third-party hosting service providers, and in certain instances other third-party vendor arrangements, any disruption with respect to our current providers would impact our operations and our business could be adversely impacted. Problems faced by our third-party providers could adversely affect the experience of our clients.
We cannot assure you that we will successfully identify new product opportunities and develop and bring new products to market in a timely and cost-effective manner. The products, capabilities, or technologies developed by others could also render our products or technologies obsolete or noncompetitive.
We cannot make assurances that we will successfully identify new product opportunities and develop and bring new products to market in a timely and cost-effective manner. The products, capabilities, or technologies developed by others could also render our products or technologies outdated or noncompetitive.
We may also use third parties to ensure that our services and solutions integrate with the software, systems, or infrastructure requirements of other vendors and service providers.
We may also use third parties to ensure that our services and solutions integrate with the software, systems, or infrastructure requirements of other vendors and service providers used by us internally or by our clients.
Our ability to serve our clients and deliver our solutions in a timely manner depends on our ability to retain and maintain relationships with third-party vendors and service providers and the ability of these third parties to meet their obligations in a timely manner, as well as on our effective oversight of their performance.
Our ability to operate our internal systems and/or to serve our clients and deliver our solutions in a timely manner depends on our ability to retain and maintain relationships, including contractual arrangements, with third-party vendors and service providers and the ability of these third parties to meet their obligations in a timely manner, as well as on our effective oversight of their performance.
If any third party fails to perform on a timely basis the agreed-upon services, our ability to fulfill our obligations may be jeopardized. Third-party performance deficiencies could result in breaches of our obligations with respect to, or the termination for default of, one or more of our client contracts.
If any third party fails to perform on a timely basis the agreed-upon services, our ability to fulfill our obligations may be jeopardized. Third-party performance deficiencies could result in breaches of our obligations under, or terminations for defaults of, one or more of our client contracts.
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.
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.
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.
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 U.S labor market, generally, or as the result of changing U.S. policy could adversely affect our business, results of operations or financial condition.
Upon conversion of the Convertible Senior Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be obligated to make cash payments.
Upon conversion of the Convertible Senior Notes, we elect to deliver shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share).
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.
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, and we expect to continue to identify and pursue strategic acquisitions with suitable candidates.
To date, any such outages have been temporary, and any business interruptions were contained and immaterial. 12 We employ third-party licensed software and software components for use in or with our solutions, and the inability to maintain these licenses or the presence of errors or security vulnerabilities in the software we license could limit the functionality of our products and result in increased costs or reduced service levels, which would adversely affect our business.
We 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.
ITEM 1A. RISK FACTORS. An investment in our common stock involves a high degree of risk. Investors evaluating our company should carefully consider the factors described below and all other information contained in this Annual Report. Any of the following factors could materially harm our business, operating results, and financial condition.
ITEM 1A. RISK FACTORS. An investment in our common stock involves a high degree of risk. Investors evaluating our company should carefully consider the factors described below and all other information contained in this Annual Report.
If we incur additional indebtedness, the risks related to our business would increase and our ability to service or repay our indebtedness may be adversely impacted. 16 Pursuant to their terms, holders may convert their Convertible Senior Notes at their option prior to the scheduled maturities of their Convertible Senior Notes under certain circumstances.
If we incur additional indebtedness, the risks related to our business would increase and our ability to service or repay our indebtedness may be adversely impacted. 16 Holders may convert their Convertible Senior Notes at their option prior to the scheduled maturity date of the Convertible Senior Notes, March 15, 2026.
Examples of factors that may significantly impact our stock price include: • Actual or anticipated fluctuations in our operating results • Announcements of technological innovations, new products, or new contracts by us or our competitors • Developments with respect to patents, copyrights, or other proprietary rights • Conditions and trends in the software and other technology industries • Changes in financial estimates by securities analysts • Changes in interest rates • General economic and market conditions and other factors In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices of technology company stocks and may in the future adversely affect the market price of our stock.
Examples of factors that may significantly impact our stock price include: • Actual or anticipated fluctuations in our operating results • Announcements of technological innovations, new products, or new contracts by us or our competitors, including uncertainties surrounding new and evolving artificial intelligence tools that could be perceived automate functions that may reduce the demand for certain products and services • Developments with respect to patents, copyrights, or other proprietary rights • Conditions and trends in the software and other technology industries • Changes in financial estimates by securities analysts • Changes in interest rates and Federal Reserve monetary policy • General political, economic and market conditions and other factors In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices of technology company stocks, which have in the past and may in the future adversely affect the market price of our stock.
We face significant competition from other vendors and potential new entrants into our markets. We believe we are a leading provider of integrated software solutions for the public sector. Our market is highly fragmented with a large number of competitors that vary in size, product platform, and product scope.
We face significant competition from other vendors and potential new entrants into our markets. Our market is highly fragmented with a large number of competitors that vary in size, product platform, and product scope.
Third-party hosting service providers have no obligation to renew their agreements with us on commercially reasonable terms or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transition to a new provider and we may incur significant costs and possible service interruption in connection with doing so.
If we are unable to renew these agreements on commercially reasonable terms, we may be required to transition to a new provider and we may incur significant costs and possible service interruption or functional degradation in connection with doing so.
The market for our products is characterized by technological change, evolving industry standards in software technology, changes in client requirements, and frequent new product introductions and enhancements. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete and unmarketable.
The market for our products is characterized by rapid technological change, evolving industry standards, ever-changing client requirements, and frequent new product introductions and enhancements. New products, technologies and industry standards can render our existing products obsolete and unmarketable.
Because an increasing portion of our revenues are recurring, the effect of public health-related shutdown on our results of operations may also not be fully reflected for some time.
Because an increasing portion of our revenues are recurring, the effect of a public health-related shutdown on our results of operations may also not be fully reflected for some time. A prolonged economic slowdown could harm our operations. A prolonged economic slowdown or recession could reduce demand for our software products and services.
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.
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 and artificial intelligence threats. 12 Material portions of our business require the Internet infrastructure to be reliable.
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.
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.
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.
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 solutions. To date, any such outages have been temporary, and any business interruptions were contained and immaterial.
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.
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, the Federal Reserve’s monetary policy and our operating performance.
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.
While we are prioritizing a measured approach based on known best practices, the investments required, the need for specialized skills and expertise, and the shifting legal and regulatory landscape may expose us to operational, financial, and reputational risks. Additionally, AI-generated outputs may be misleading, insecure, inaccurate, harmful, or otherwise flawed, potentially resulting in adverse consequences to our business.
Alternatively, clients may elect to drop maintenance on certain modules that they ultimately decide not to use. This could adversely affect our revenues and profits. Additionally, they may inadvertently allow our intellectual property or other information to fall into the hands of third parties, including our competitors, which could adversely affect our business.
Alternatively, clients may elect to drop maintenance on certain modules that they ultimately decide not to use. This could adversely affect our revenues and profits.
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.
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 are not adopted and purchased by the market.
Additionally, AI-generated outputs may be misleading, insecure, inaccurate, harmful, or otherwise flawed, potentially resulting in adverse consequences to our business. We may be unable to protect our proprietary rights. Many of our product and service offerings incorporate proprietary information, trade secrets, know-how, and other intellectual property rights.
We may be unable to protect our proprietary rights. Many of our product and service offerings incorporate proprietary information, trade secrets, know-how, and other intellectual property rights. We rely on a combination of contract rights, copyrights, and trade secret laws to establish and protect our proprietary rights in our technology.
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.
We have elected net-share settlement related to the premium of the maturing Convertible Senior Note, we may settle our conversion obligation by delivering a potential number of shares of our common stock, which could cause dilution to our existing shareholders.
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If any of our data centers were to become inoperable for an extended period, we might be unable to fulfill our contractual commitments.
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These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future.
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There has also been an apparent evolution in the legal standards and regulations that courts and the U.S. patent office may apply in favorably evaluating software patent rights.
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References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
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We expect that sales to public sector clients will continue to account for substantially all of our revenues in the future.
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Some of our hosting operations have in the past, and may in the future, become unavailable or inoperable for an extended period, harming our ability to fulfill our contractual commitments.
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We may see some more immediate impact on our business should there be new delays in government procurement processes and uncertainty around public sector budgets, or new delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues.
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Third-party hosting service providers and other third-party vendors have no obligation to renew their agreements with us on commercially reasonable terms or at all.
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Appraisal projects and software implementations may be delayed if clients put projects on hold or slow projects by extending go-live dates.
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For example, AWS has experienced significant service outages in the past and may do so again in the future.
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While we have the ability to deliver most of our professional services remotely, some of our professional services, including appraisal assessments, are more effective when performed on-site, and certain clients may continue to insist on on-site services in any event. In addition, our delivery of some professional services requires the availability of client personnel.
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As we assess the challenges and opportunities of incorporating AI technologies into our products and services, we may fail to enhance our offerings in alignment with market demands, timing or industry expectations at a pace that matches our competitors. Delays in our adoption or innovation could render our offerings less competitive or obsolete. AI technology is rapidly evolving.
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There may be a negative impact on our revenues if we are unable to deliver these services. Also, we expect software licenses and subscriptions revenues to be negatively affected if there are delays in procurement processes. Some clients could request changes to payment terms, negatively impacting the timing of collections of accounts receivables in future periods.
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There has also been a recent change in the legal standards and regulations that courts and the U.S. patent office may apply in favorably evaluating software patent rights (see the United States Patent and Trademark Office Memorandum dated December 5, 2025 to the Patent Examining Corp from Charles Kim, Deputy Commissioner for Patents regarding the advance notice of change to the Manual of Patent Examining Procedure in light of Ex Parte Desjardins, Appeal No. 2024-000567 (PTAB September 26, 2025, Appeals Review Panel Decision)).
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We have historically evaluated goodwill for impairment annually as of October 1, or more frequently if impairment indicators arose.
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Additionally, clients may inadvertently allow our intellectual property or other information to fall into the hands of third parties, including our competitors, which could adversely affect our business. 14 Risks Associated with Selling Products and Services into the Public Sector Marketplace Selling products and services into the public sector poses unique challenges.
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Subsequent to our annual goodwill impairment analysis, we monitor for any events or changes in circumstances, such as significant adverse changes in business climate or operating results, changes in management’s business strategy, an inability to successfully introduce new products in the marketplace, an inability to successfully achieve internal forecasts or significant declines in our stock price, which may represent an indicator of impairment.
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Fluctuation in inflation and interest rate could adversely affect our financial condition and results of operations. Our liquidity and ongoing access to capital could be materially and negatively affected by volatility in the financial and securities markets, including increased inflation and interest rates.
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The occurrence of any of these events, which could be caused or impacted by a public health crisis similar to the COVID-19 pandemic, may require us to record future goodwill impairment charges. A prolonged economic slowdown could harm our operations. A prolonged economic slowdown or recession could reduce demand for our software products and services.
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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.
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If one or more holders elect to convert their Convertible Senior Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
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In addition, even if holders do not elect to convert their Convertible Senior Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
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Transactions relating to our Convertible Senior Notes may affect the value of our common stock. Our Convertible Senior Notes may become convertible in the future at the option of their holders under certain circumstances.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeMeasuring Cybersecurity Risks In order to evaluate whether a cybersecurity risk is material to Tyler, we take a multi-disciplinary approach to assessing qualitative and quantitative factors. The cross-functional team includes senior leadership from Tyler’s information security, legal, finance, and accounting teams, as well as senior leadership from the impacted business unit(s).
Biggest changeWe have over 100 security champions who can collaboratively advocate security tools throughout the lifecycle of our applications. Measuring Cybersecurity Risks In order to evaluate whether a cybersecurity risk is material to Tyler, we take a multi-disciplinary approach to assessing qualitative and quantitative factors.
We partner closely with our clients to assist them in following evolving best practices, and constantly evaluate our own policies and procedures to help ensure that we are implementing safeguards that protect their data and ours. The same cybersecurity threats that predominate across most industries challenge Tyler and our clients as well.
We partner closely with our clients to assist them in following evolving best practices and constantly evaluate our own policies and procedures to help ensure that we are implementing safeguards that protect their data and ours. The same cybersecurity threats that predominate across most industries challenge Tyler as well as our clients.
We are acutely aware that these same threats exist for our acquisition targets, our suppliers, and our third-party business partners, and a cybersecurity incident or vulnerability experienced by any of these entities could also materially and/or adversely impact our business operations and/or performance, both operational and financial, and could harm our reputation and/or competitive position.
We are acutely aware that these same threats exist for our acquisition targets, our suppliers, and our third-party business partners, and that a cybersecurity incident or vulnerability experienced by any of these entities could also materially and/or adversely impact our business operations and/or performance, both operational and financial, and could harm our reputation and/or competitive position.
In addition, vulnerabilities in our clients’ on-premises infrastructure have in the past and may in the future be exploited by bad actors, with the resulting impacts being linked to or attributed to, correctly or incorrectly, our software or services, which could also harm our business, reputation, and future financial results, even if our software or services were not the cause of the exploitation.
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 cause harm to our business, reputation, and future financial results, even if our software or services were not the cause of the exploitation.
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.
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.
Where a vulnerability or risk is identified, we generally require remediation by the target or attempt to ensure a remediation path post-closing, with contractual protections and liability parameters set forth in the purchase agreement. We strive to enhance our vendor risk analysis, with a goal of universalizing the use of form cybersecurity questionnaires and/or security addenda where applicable.
Where a vulnerability or risk is identified, we generally require remediation by the target or attempt to ensure a remediation path post-closing, with contractual protections and liability parameters set forth in the purchase agreement. We strive to continuously enhance our vendor risk analysis, with a goal of universalizing the use of form cybersecurity questionnaires and/or security addenda where applicable.
We identify their responsibilities as falling into three key areas: • Participating in training to identify and promptly report risks; • Staying informed by reading all pertinent information and security communications; and • Actively engaging in ongoing training initiatives. We observe Cybersecurity Awareness month with interactive weekly training, workshops, and additional resources on strong cybersecurity practices.
We identify their responsibilities as falling into three key areas: • Participating in training to identify and promptly report risks; • Staying informed by reading all pertinent information and security communications; and • Actively engaging in ongoing training initiatives. 22 We observe Cybersecurity Awareness month with interactive weekly training, workshops, and additional resources on strong cybersecurity practices.
The CISO reports directly to Tyler’s Chief Operations Officer (“COO”), who in turn reports to the President & Chief Executive Officer. Tyler believes this organizational structure provides a holistic and collaborative approach to cybersecurity risk management, as the COO also oversees Tyler’s information technology, technology, and cloud operations teams, with whom the CISO works regularly and closely.
The CISO reports directly to Tyler’s Chief Operating Officer (“COO”), who in turn reports to the President & Chief Executive Officer. Tyler believes this organizational structure provides a holistic and collaborative approach to cybersecurity risk management, as the COO also oversees Tyler’s information technology, technology, and cloud operations teams, with whom the CISO works regularly and closely.
The 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.
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. 21 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.
Each “layer” of the governance structure has unique meeting, reporting, and action cadences to help ensure consistent communication between our security working groups, our leadership team, and our Board of Directors. On at least a quarterly basis, Tyler’s CISO provides a formal report to the Audit Committee and to the Board of Directors.
Each “layer” of the governance structure has unique meeting, reporting, and action cadences to help ensure consistent communication between our security working groups, our leadership team, and our Board of Directors. On at least a quarterly basis, the CISO provides a formal report to the Audit Committee and to the Board of Directors.
Over the past several years, we have worked to formalize our security due diligence process for each acquisition target, such that security is a formally embedded component of our due diligence and typically involves our independent testing of the target technology prior to closing the acquisition.
Over the past several years, we have worked to formalize our security due diligence process for each acquisition target, such that security is a formally embedded component of our due diligence and typically involves our independent testing of the target’s technology prior to closing the acquisition.
Technology : Tyler also utilizes technology to help harden our environment from internal and external threats. We leverage a third-party endpoint detection management solution and threat intelligence software, as well as web-filtering tools, a multi-factor authentication tool, and related tools that support our “defense-in-depth” strategy.
Technology : Tyler also utilizes technology to help harden our environment from internal and external threats. We leverage a third-party endpoint detection & response solution and threat intelligence software, as well as web-filtering tools, a multi-factor authentication tool, and related tools that support our “defense-in-depth” strategy.
Given our technology in the courts and public safety markets, we also manage compliance with Criminal Justice Information Systems security standards that are established by the Federal Bureau of Investigation (“FBI”), and we partner with our clients and third-party Criminal Justice Information Services (“CJIS”) compliance consultants to ensure that we adhere to the requirements applicable to us.
Given our technology in the courts and public safety markets, we also manage compliance with the Criminal Justice Information Systems (“CJIS”) security standards that are established by the Federal Bureau of Investigation (“FBI”), and we partner with our clients and third-party CJIS compliance consultants to help ensure that we adhere to the requirements applicable to us.
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.
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, including security working groups and a security governance committee.
We expect third parties – including our clients – to report cybersecurity incidents to us so that we can assess the impact of the incident on us. Cybersecurity Governance In 2022, we formalized a multi-layered security governance structure, with the goal of ensuring that responsibilities are clear, information is effectively communicated, priorities are coordinated, and proper oversight is provided.
We expect third parties – including our clients – to report cybersecurity incidents to us so that we can assess the impact of any incident on us. Cybersecurity Governance Tyler has a formal multi-layered security governance structure, with the goal of ensuring that responsibilities are clear, information is effectively communicated, priorities are coordinated, and proper oversight is provided.
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.
The security governance committee, which meets on at least 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 presidents of each of Tyler’s three operating groups and Tyler’s President & CEO.
We track participation in training events and boast high participation rates, with continuous reflection on strategies for driving participation yet higher. In 2022, we expanded our Security Champions Program to identify a resource on our various application teams who proactively operationalizes security best practices on their team.
We track participation in training events and boast high participation rates, with continuous reflection on strategies for driving participation yet higher. Each application team at Tyler has a security champion who proactively operationalizes security best practices on his or her team. The security champion helps to ensure that security measures are built into our programs from development to deployment.
When an incident is reported, Tyler assembles its incident response team and initiates its incident response process as soon as possible.
The cross-functional team includes senior leadership from Tyler’s information security, legal, finance, and accounting teams, as well as senior leadership from the impacted business unit(s). When an incident is reported, Tyler assembles its incident response team and initiates its incident response process as soon as possible.
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This program helps to ensure that security measures are built into our programs from development to deployment. We have over 100 security champions who can collaboratively advocate security tools throughout the lifecycle of our applications.
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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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 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.
Biggest changeITEM 2. PROPERTIES. We occupy a total of approximately 1.4 million square feet of office space, of which approximately 777,000 square feet is in various office facilities we own.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest 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.
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.
ITEM 3. LEGAL PROCEEDINGS. During the first quarter of 2022, we received a notice of termination for convenience under a contractual arrangement with a state government client. Upon receipt of the termination notice, we ceased performing services under the contractual arrangement and sought payment of contractually owed fees of approximately $15 million in connection with the termination for convenience.
ITEM 3. LEGAL PROCEEDINGS. During the first quarter of 2022, we received a notice of termination for convenience under a contractual arrangement with a state government client. Upon receipt of the termination notice, we ceased performing services under the contractual arrangement and sought payment of contractually owed fees in connection with the termination for convenience.
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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
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The negotiations were not successful, and on March 20, 2024, we reinitiated our lawsuit. A December 2025 mediation did not result in a resolution of the dispute.
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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 39 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 40 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
Biggest changeThe level of this acquisition activity varies from period to period based upon the timing of award grants and vesting. 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, 2019. 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, 2020. Each of the three measures of cumulative total return assumes reinvestment of 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.
Most of our stockholders hold their shares in street name; therefore, there are substantially more than 869 beneficial owners of our common stock. We did not pay any cash dividends in 2025 or 2024. 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, 2024, we had approximately 953 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, 2025, we had approximately 869 stockholders of record.
There are no warrants or rights related to our equity compensation plans as of December 31, 2024.
There are no warrants or rights related to our equity compensation plans as of December 31, 2025.
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.
Number of securities to be issued upon exercise of outstanding options, warrants, purchase rights and vesting of restricted stock units as of December 31, 2025 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, 2025) Plan Category Equity compensation plans approved by security shareholders: 2018 Incentive Stock Plan 1,108,268 $ 381.78 3,852,369 Employee Stock Purchase Plan 9,850 385.86 443,397 1,118,118 $ 381.82 4,295,766 As of December 31, 2025, we had authorization to repurchase up to approximately 1.8 million additional shares of Tyler common stock.
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.
As of February 18, 2026, we have remaining authorization from our Board of Directors to repurchase up to $885.0 million of our common stock under the new repurchase plan. 1 I ncludes 84,113 shares withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
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.
A summary of the repurchase activity during 2025, 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 24,607 — $ 606.27 2,137,253 Three months ended June 30 34,248 — 572.66 2,103,005 Three months ended September 30 300,025 — 576.82 1,802,980 October 1 through October 31 — — — 1,802,980 November 1 through November 30 — — — 1,802,980 December 1 through December 31 28,300 — 469.57 1,774,680 387,180 — 570.48 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 2026.
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.
During 2025, we repurchased approximately 303,067 shares of our common stock for an aggregate purchase price of $174.7 million and approximately 84,113 shares to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards.
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
The stock performance shown on the graph below is not necessarily indicative of future price performance. Company / Index 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 Tyler Technologies, Inc. 100 123.24 73.86 95.78 132.10 103.99 S&P 500 Stock Index 100 128.71 105.40 133.10 166.40 196.16 S&P 600 Information Technology Index 100 126.85 98.48 119.11 118.14 140.68
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There is no expiration date specified for the authorization, and we may repurchase stock under the program from time to time.
Added
On February 3, 2026, our Board of Directors authorized the repurchase of $1.0 billion of our common stock,which replaced and superseded all previous authorizations. Our share repurchase program allows us to repurchase shares at our discretion. There is no expiration date specified for the authorization.
Removed
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 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.
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, 2025 and 2024: Percent of Total Revenues Years Ended December 31, 2025 2024 Revenues: Subscriptions 68.0 % 62.8 % Maintenance 19.1 21.7 Professional services 10.4 12.3 Software licenses and royalties 0.5 1.2 Hardware and other 2.0 2.0 Total revenues 100.0 100.0 Cost of revenues: Subscriptions, maintenance, and professional services 49.3 52.1 Software licenses, royalties, and amortization of acquired software 1.9 2.0 Amortization of software development 1.0 0.9 Hardware and other 1.3 1.2 Sales and marketing expense 6.4 7.4 General and administrative expense 13.6 14.1 Research and development expense 8.8 5.5 Amortization of other intangibles 2.4 2.8 Operating income 15.3 14.0 Interest expense (0.2) (0.3) Other income, net 1.6 0.7 Income before income taxes 16.7 14.4 Income tax provision 3.2 2.1 Net income 13.5 % 12.3 % 2025 Compared to 2024 Revenues Subscriptions The following table sets forth a comparison of our subscriptions revenue for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % ES $ 1,009,431 $ 794,475 $ 214,956 27 % PT 576,772 548,456 28,316 5 % Total subscriptions revenue $ 1,586,203 $ 1,342,931 $ 243,272 18 % 32 Subscriptions revenue consists of revenues derived from our SaaS arrangements and transaction-based fees primarily related to digital government services and payment processing.
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.
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 ESTIMATES Our discussion and analysis of our financial condition and results of operations is based upon our financial statements.
Research and development (“R&D”) expense – These costs include compensation costs for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to researching and developing new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and IT support costs.
Research and development (“R&D”) Expense – These costs include compensation costs and share-based compensation expense for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to researching and developing new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and IT support costs.
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.
ARR is a metric widely used by companies in the technology sector and by investors, which we believe offers insight into the stability of our maintenance and subscription revenues to be recognized within the year. 28 Subscription revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees.
During 2024, based on our number of clients, attrition was approximately 2%. Annualized Recurring Revenue (“ARR”) - Subscriptions and maintenance are considered recurring revenue sources. ARR is calculated by annualizing the current quarter ’ s recurring revenues from maintenance and subscriptions as reported in our statement of income.
During 2025, based on our number of clients, attrition was approximately 2%. Annualized Recurring Revenues (“ARR”) - Subscriptions and maintenance are considered recurring revenue sources. ARR is calculated by annualizing the current quarter ’ s recurring revenues from maintenance and subscriptions as reported in our statement of income.
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.
Cost of Revenues and Gross Margins – Our primary cost components are hosting costs, merchant fees, and personnel expenses in connection with providing software implementation, subscription-based services and maintenance and support to our clients.
Sales commissions typically fluctuate with revenues and share-based compensation expense generally increases based on increased levels of awards issued during the period and as the market price of our stock increases. Other administrative expenses tend to grow at a slower rate than revenues.
Sales commissions typically fluctuate with revenues and share-based compensation expense generally increases based on increased levels of awards issued during the period and as the market price of our stock increases. Other S&M expenses tend to grow at a slower rate than revenues.
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.
For a comparison of our Results of Operations for the years ended December 31, 2024, and 2023, and our Cash Flow discussion for the year ended December 2024, see “Part II, Item 7.
Our reportable segments are organized on the basis of a combination of the products and services they deliver to clients and the function the public sector client performs. Business units that have met the aggregation criteria have been combined into our two reportable segments.
Our reportable segments are organized on the basis of a combination of the products and services they deliver to clients and the function that the public sector client performs. Operating segments that have met the aggregation criteria have been combined into our two reportable segments.
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.
Our estimated future obligations consist of debt, uncertain tax positions, leases, and purchase commitments as of December 31, 2025. Refer to Note 10, “Debt,” Note 13, “Income Tax,” Note 17, “Leases,” and Note 19, “Commitment and Contingencies,” to the consolidated financial statements for related discussions.
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.
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 87% of our revenues in 2025.
The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0 million, including subfacilities for standby letters of credit and swingline loans.
The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0 million, including sub-facilities for standby letters of credit and swingline loans.
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.
We develop and market a broad line of software products and services to address the information technology (“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.
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.
Subscriptions revenue grew 18.1% for the twelve months ended December 31, 2025, 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.
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.
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, 2024, as filed with the SEC on February 19, 2025.
Continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations could decrease support costs with resources redeployed toward development. As of December 31, 2024, our total employee count included in cost of revenues increased to 5,250 from 5,129 at December 31, 2023.
Continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations could decrease support costs with resources redeployed toward development. As of December 31, 2025, our total employee count included in cost of revenues declined to 5,073 from 5,250 at December 31, 2024.
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, we use all available information.
For tangible and identifiable intangible assets acquired in a business combination, management estimates the fair value of assets acquired and liabilities assumed based on quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses.
For tangible and identifiable intangible assets acquired in a business combination, management estimates the fair value of assets acquired, along with their useful lives, and liabilities assumed based on factors including quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses.
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.
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, including local, state and federal government agencies, that could negatively impact information technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks, evolving use of artificial intelligence (“AI”), security vulnerabilities and software updates, or changes in our ability to access third-party software and services; (3) our ability to protect client information from security breaches or misuse through AI and to 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 actively monitor developments in AI regulation and ethical standards as we expect that future changes in the regulatory landscape may affect our product development timelines, compliance costs, and market opportunities related to AI; (7) 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; (8) general economic, political and market conditions, including inflation and changes in interest rates; (9) technological and market risks associated with the development of new technologies, products or services or of new versions of existing or acquired products or services; (10) 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; (11) 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 (12) costs of compliance and any failure to comply with government and stock exchange regulations.
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.
FINANCIAL CONDITION AND LIQUIDITY As of December 31, 2025, we had cash and cash equivalents of $1.0 billion compared to $744.7 million as of December 31, 2024. We also had $142.5 million invested in investment grade corporate bonds, U.S. Treasuries and asset-backed securities as of December 31, 2025.
Our new software contract mix for the twelve months ended December 31, 2024, was 12% perpetual software license arrangements and approximately 88% subscription-based arrangements, compared to approximately 17% perpetual software license arrangements and approximately 83% subscription-based arrangements for the twelve months ended December 31, 2023.
Our new software contract mix for the twelve months ended December 31, 2025, was 11% perpetual software license arrangements and approximately 89% subscription-based arrangements, compared to approximately 12% perpetual software license arrangements and approximately 88% subscription-based arrangements for the twelve months ended December 31, 2024.
We repaid all amounts due under the Term Loans under the 2021 Credit Agreement and have no outstanding borrowings under the 2024 Credit Agreement, with an available borrowing capacity of $700.0 million as of December 31, 2024. As of December 31, 2024, we had $600.0 million in outstanding principal for the Convertible Senior Notes due 2026.
We have no outstanding borrowings under the 2024 Credit Agreement, with an available borrowing capacity of $700.0 million as of December 31, 2025. As of December 31, 2025, we had $600.0 million in outstanding principal for the Convertible Senior Notes due in 2026.
Outlook ARR was $1.86 billion and $1.61 billion as of December 31, 2024, and 2023, respectively, an increase of approximately 15% compared to the prior period. The public sector software market continues to experience heightened activity. We expect to continue to achieve solid growth in revenues and earnings.
Outlook ARR was $2.06 billion and $1.86 billion for the periods ending December 31, 2025, and 2024, respectively, an increase of approximately 11% compared to the prior period. The public sector software market continues to experience heightened activity. We expect to continue to achieve solid growth in revenues and earnings.
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.
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, measured by comparison of the carrying amount to estimated undiscounted future cash flows.
The 2024 Credit Agreement matures on September 25, 2029, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any SOFR breakage costs. The Company incurred issuance fees of $2.6 million in connection with the 2024 Credit Agreement.
The 2024 Credit Agreement matures on September 25, 2029, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any SOFR breakage costs.
The following table sets forth a comparison of our S&M expense for the years ended December 31 ($ 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.
The following table sets forth a comparison of our S&M expense for the years ended December 31 ($ in thousands): Change 2025 2024 $ % Sales and marketing expense $ 148,570 $ 157,731 $ (9,161) (6) % S&M expense as a percentage of revenues was 6.4% in 2025 compared to 7.4% in 2024.
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.
ARR was $2.06 billion and $1.86 billion for the periods ending December 31, 2025, and 2024, respectively. ARR increased approximately 11% 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 fee arrangements.
Amortization expense related to acquired software is included with cost of revenues while amortization expense of other intangibles is recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years.
The remaining excess purchase price is allocated to goodwill that is not subject to amortization. Amortization expense related to acquired software is included with cost of revenues while amortization expense of other intangibles is recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years.
The 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.
The share-based exercise and vesting activity in 2025 generated $15.0 million of excess tax benefits, while exercise and vesting activity in 2024 generated $21.1 million of excess tax benefits. 38 The effective income tax rates for the periods presented are different from the statutory United States federal income tax rate of 21% primarily due to the tax benefits of research tax credits and excess tax benefits related to stock incentive awards, offset by state income taxes, liabilities for uncertain tax positions, and non-deductible business expenses.
It is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.
It is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. As of January 1, 2025, we early adopted this standard, which did not have a material impact on the Company’s financial statements.
Other income, net The following table sets forth a comparison of our other income, net for the listed years ended December 31 ($ 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.
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 2025 2024 $ % Other income, net $ 37,637 $ 14,572 $ 23,065 158% Other income, net, is primarily comprised of interest income from invested cash.
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.
The following table sets forth a comparison of our G&A expense for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % General and administrative expense $ 316,447 $ 300,938 $ 15,509 5 % G&A expense as a percentage of revenue was 13.6% in 2025 compared to 14.1% in 2024.
The change in interest expense compared to the prior period is primarily attributable to lower interest incurred as a result of our repayment of the Term Loans in early 2024.
Interest expense decreased 16% compared to the prior period primarily due to a reduction in interest incurred as a result of our repayment of the Term Loans in early 2024.
Research and development expense Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with new product development. Research and development expense consists mainly of costs associated with development of new products and new functionality in our current SaaS products.
Research and development expense consists mainly of costs associated with development of new products and new functionality in our current SaaS products.
The following table sets forth a comparison of our research and development expense for the listed years ended December 31 ($ in thousands): Change 2024 2023 $ % Research and development expense $ 117,939 $ 109,585 $ 8,354 8 % Research and development expense as a percent of total revenue was 5.5% in 2024, compared to 5.6% in 2023.
The following table sets forth a comparison of our research and development expense for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % Research and development expense $ 204,588 $ 117,939 $ 86,649 73 % Research and development expense as a percentage of revenue was 8.8% in 2025 compared to 5.5% in 2024.
We do not have any direct costs associated with royalties. The cost of software licenses and royalties for the twelve months ended December 31, 2024, declined 42%, compared to the prior period due to lower third-party software costs. Amortization of software development. Software development costs included in cost of revenues primarily consist of personnel costs.
We do not have any direct costs associated with royalties. The cost of software licenses and royalties for the twelve months ended December 31, 2025, grew 28%, compared to the prior period due to higher third-party software costs. Amortization of software development.
CAPITALIZATION At December 31, 2024, our capitalization consisted of $597.9 million of outstanding debt and $3.4 billion of shareholders’ equity.
CAPITALIZATION At December 31, 2025, our capitalization consisted of $599.7 million of outstanding debt and $3.7 billion of shareholders’ equity.
S&M expense increased approximately 5% compared to the prior period, resulting from higher personnel, bonus, commission, and trade show expenses, offset by lower professional fees related to marketing and advertising. 35 General and administrative expense General and administrative (“G&A”) expense consists primarily of personnel salaries and share-based compensation expense for general corporate functions including senior management, finance, accounting, legal, human resources and corporate development, as well as third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs, amortization of software development for internal use, acquisition-related expenses and other administrative expenses.
General and administrative expense General and administrative (“G&A”) expense consists primarily of personnel salaries and share-based compensation expense for general corporate functions including senior management, finance, accounting, legal, human resources and corporate development, as well as third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs, amortization of software development for internal use, acquisition-related expenses and other administrative expenses.
The following table sets forth a comparison of amortization of other intangibles for the listed years ended December 31 ($ in thousands): Change 2024 2023 $ % Amortization of other intangibles $ 59,627 $ 74,632 $ (15,005) (20) % In 2024, amortization of other intangibles decreased 20% compared to the prior period due to the impact of certain trade name intangible assets becoming fully amortized as a result of accelerated amortization expense in the fourth quarter of 2023 and partially in 2024.
The following table sets forth a comparison of amortization of other intangibles for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % Amortization of other intangibles $ 56,419 $ 59,627 $ (3,208) (5) % In 2025, amortization of other intangibles decreased 5% compared to the prior period due to the impact of certain trade name intangible assets becoming fully amortized as a result of accelerated amortization expense in 2024, partially offset by the impact of amortization of new other intangibles from acquisitions completed in 2025.
Transaction-based fees The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the listed years ended December 31 ($ in thousands): Change 2024 2023 $ % ES $ 234,633 $ 174,718 $ 59,915 34 % PT 463,519 456,817 6,702 1 % Total subscriptions revenue derived from transaction-based fees $ 698,152 $ 631,535 $ 66,617 11 % For the twelve months ended December 31, 2024, contributing to the growth in transaction-based fees compared to prior period are the new transaction clients, volume increases from online payments and e-filing services, price increases by certain third-party processing partners from whom we receive a share of revenues, and the impact of transaction-based fees from recent acquisitions of $4.2 million.
Transaction-based fees The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % ES $ 318,143 $ 234,633 $ 83,510 36 % PT 490,291 463,519 26,772 6 % Total transaction-based fees revenue $ 808,434 $ 698,152 $ 110,282 16 % For the twelve months ended December 31, 2025, contributing to the growth in transaction-based fees compared to prior period are the new transaction clients, volume increases from online payments and e-filing services, and price increases by certain third-party processing partners from whom we receive a share of revenues.
Capital spending and cash tax payments are expected to be funded from existing cash balances and cash flows from operations. From time to time we engage in discussions with potential acquisition candidates.
We expect the majority of the other capital spending will consist of computer equipment and software for infrastructure replacements and expansion. Capital spending and cash tax payments are expected to be funded from existing cash balances and cash flows from operations. From time to time we engage in discussions with potential acquisition candidates.
The following table sets forth a comparison of our maintenance revenue for the listed years ended December 31 ($ in thousands): Change 2024 2023 $ % ES $ 438,455 $ 442,781 $ (4,326) (1) % PT 24,677 23,880 797 3 Total maintenance revenue $ 463,132 $ 466,661 $ (3,529) (1) % We provide maintenance and support services for our software products and certain third-party software.
Maintenance The following table sets forth a comparison of our maintenance revenue for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % ES $ 422,886 $ 438,455 $ (15,569) (4) % PT 22,728 24,677 (1,949) (8) Total maintenance revenue $ 445,614 $ 463,132 $ (17,518) (4) % We provide maintenance and support services for our software products and certain third-party software.
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.
The change in other income, net, compared to the prior period is due to increased interest income generated from higher invested cash balances in 2025 compared to 2024. Also contributing to the increase in other income is dividend income of $1.8 million received in 2025; no dividend income received in 2024.
Other costs included are merchant and interchange fees required to process credit/debit card transactions and bank fees to process automated clearinghouse transactions related to our payments business.
Other costs included are merchant and interchange fees required to process credit/debit card transactions and bank fees to process automated clearinghouse transactions related to our payments business. In 2025, the cost of subscriptions, maintenance and professional services grew 3% compared to the prior period.
As of December 31, 2024, our total employee count included in R&D expense increased to 870 from 830 at December 31, 2023 Liquidity and Cash Flows – The primary driver of our cash flows is net income. Uses of cash include acquisitions, capital investments in property and equipment and software development, debt repayment and discretionary purchases of treasury stock.
Liquidity and Cash Flows – The primary driver of our cash flows is net income. Uses of cash include acquisitions, capital investments in property and equipment and software development, debt repayment and discretionary purchases of treasury stock.
Cost of subscriptions, maintenance and professional services primarily consist of personnel costs related to installation of our software, conversion of client data, training client personnel, public cloud hosting costs, and support activities, including enhancing existing solutions, and various other services such as custom development, ongoing operation of our SaaS solutions, property appraisal outsourcing activities, digital government services, and other transaction-based services such as e-filing.
The following table sets forth a comparison of our costs of subscriptions, maintenance, and professional services for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % Subscriptions, maintenance, and professional services $ 1,148,889 $ 1,112,778 $ 36,111 3 % 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, support activities, 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 gross profit and overall gross margin for the periods presented as of December 31: 2024 2023 Change Gross profit $ 935,761 $ 861,099 $ 74,662 Overall gross margin 43.8 % 44.1 % (0.3) % Overall gross margin . Our 2024 blended gross margin decreased 0.3% compared to 2023.
The following table sets forth a comparison of gross profit and overall gross margin for the periods presented as of December 31: 2025 2024 Change Total gross profit $ 1,083,700 $ 935,761 $ 147,939 Overall gross margin 46.5 % 43.8 % 2.7 % Overall gross margin . Our 2025 blended gross margin increased 2.7% compared to 2024.
The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic ASC 740) Income Taxes . The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.
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.
In 2025, amortization of software development costs increased 21% compared to the prior period due to new capitalized software development projects going into service in the past year. 35 Amortization of acquired software.
The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. As of December 31, 2024, we adopted the new standard which has been applied retrospectively by the Company. This change did not have a significant impact on the Company’s financial statements and disclosures.
It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early adoption permitted. As of December 31, 2025, we adopted this standard and it has been applied prospectively. This change did not have a significant impact on the Company’s financial statements and disclosures.
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.
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 2025 2024 $ % Income tax provision $ 74,715 $ 45,141 $ 29,574 66 % Effective income tax rate 19.1 % 14.6 % The increase in the income tax provision in 2025 compared to the prior period is primarily due to higher income before taxes and state income taxes and decreases in excess tax benefits from share-based compensation and research tax credits, offset by lower uncertain tax positions.
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 estimated useful lives of acquired software range from five to 10 years. In 2025, amortization of acquired software increased 1% compared to the prior period due to amortization of newly acquired software from recent acquisitions completed in fiscal year 2025.
Cost of revenues and overall gross margins The following table sets forth a comparison of the key components of our cost of revenues for the listed years ended December 31 ($ in thousands): Change 2024 2023 $ % Subscriptions, maintenance, and professional services $ 1,112,778 $ 1,001,221 $ 111,557 11 % Software licenses and royalties 6,277 10,821 (4,544) (42) Amortization of software development 18,806 12,625 6,181 49 Amortization of acquired software 36,964 36,062 902 3 Hardware and other 27,217 29,923 (2,706) (9) Total cost of revenues $ 1,202,042 $ 1,090,652 $ 111,390 10 % 34 Subscriptions, maintenance, and professional services .
Cost of 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 2025 2024 $ % Subscriptions, maintenance, and professional services $ 1,148,889 $ 1,112,778 $ 36,111 3 % Software licenses and royalties 8,006 6,277 1,729 28 Amortization of software development 22,663 18,806 3,857 21 Amortization of acquired software 37,435 36,964 471 1 Hardware and other 31,647 27,217 4,430 16 Total cost of revenues $ 1,248,640 $ 1,202,042 $ 46,598 4 % 34 Subscriptions, maintenance, and professional 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.
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. Professional services revenue decreased 8% compared to the prior period. The decrease is primarily due to loss reserves related to agencies within two state governments.
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.
The following table sets forth a summary of cash flows for the listed years ended December 31 (in thousands): 2025 2024 2023 Cash flows provided (used) by: Operating activities $ 653,543 $ 624,633 $ 380,440 Investing activities (222,494) (67,612) (76,960) Financing activities (160,370) 22,207 (311,844) Net increase (decrease) in cash and cash equivalents $ 270,679 $ 579,228 $ (8,364) In 2025, operating activities provided cash of $653.5 million, compared to $624.6 million in 2024.
In February 2019, our Board of Directors authorized the repurchase of an additional 1.5 million shares of our common stock. The repurchase program, which was approved by our Board of Directors, was originally announced in October 2002 and was amended at various times from 2003 through 2019.
On February 3, 2026, our Board of Directors authorized the repurchase of $1.0 billion of our common stock. The authorization replaced prior authorizations under our repurchase program originally announced in October 2002 and amended at various times from 2003 through 2019. Our share repurchase program allows us to repurchase shares at our discretion.
The tax benefits related to research tax credits totaled $22.1 million in 2024 compared to $20.5 million in 2023. The tax expense related to uncertain tax positions in 2024 was $10.1 million compared to $7.6 million in 2023.
The tax expense related to uncertain tax positions in 2025 was $2.1 million compared to $10.1 million in 2024.
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. 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.
In November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis.
The Company is currently evaluating the impact of this guidance on the Company’s financial statements. In November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.
Since December 31, 2023, we have added 734 new SaaS clients, while 415 existing on-premises clients have converted to our SaaS offerings.
The growth is primarily attributable to new SaaS clients as well as existing on-premises clients who converted to our SaaS model. Since December 31, 2024, we have added 612 new SaaS clients, while 488 existing on-premises clients have converted to our SaaS offerings.
The Platform Technologies (“PT”) reportable segment provides public sector entities with platform and transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and workflows. 27 The primary financial measures used by the CODM for assessing performance and allocating resources are segment income or loss from operations.
The 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 Chief Operating Decision Maker (“CODM”) uses segment operating income or loss to assess performance and to allocate resources (including employees, property, and financial or capital resources) for each segment, predominantly in the annual budget and forecasting process.
There is no expiration date specified for the authorization. On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”).
We paid income taxes, net of refunds received, of $40.8 million in 2025, compared to $84.2 million in 2024. 39 On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lender parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”).
We will settle any conversions of the Convertible Senior Notes either entirely in cash or in a combination of cash and shares of our common stock, at our election. As of December 31, 2024, none of the conditions allowing holders of the Convertible Senior Notes to convert have been met.
We will settle any conversions of the Convertible Senior Notes in a combination of cash and shares of our common stock.
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 remainder of the increase is attributed to a $16.7 million increase in share-based compensation expense in 2025 compared to the prior period. Amortization of other intangibles Other intangibles represents the portion of the purchase price allocated to the identified intangible assets for client-related intangibles, trade names, and leases acquired.
The following table sets forth a comparison of our professional services revenue for the listed years ended December 31 ($ 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.
Maintenance revenue decreased 4% compared to the prior period primarily due to the impact of 488 clients converting from on-premises license arrangements to SaaS, partially offset by maintenance price increases. 33 Professional services The following table sets forth a comparison of our professional services revenue for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % ES $ 213,749 $ 219,933 $ (6,184) (3) % PT 28,951 44,058 (15,107) (34) Total professional services revenue $ 242,700 $ 263,991 $ (21,291) (8) % 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.
The decrease in the effective income tax rate in 2024, compared to the prior period is driven by higher excess tax benefits from share-based compensation and decreases in liabilities for uncertain tax positions, state income taxes, and non-deductible business expenses offset by a decrease in research tax credit benefits relative to income before taxes.
The increase in the effective income tax rate in 2025 is driven by lower excess tax benefits from share-based compensation and research tax credit benefits and an increase in state taxes, offset by lower uncertain tax positions. The tax benefits related to research tax credits totaled $18.4 million in 2025 compared to $22.1 million in 2024.
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.
Operating activities that provided cash were primarily comprised of net income of $315.6 million, adjusted for non-cash depreciation and amortization charges of $138.4 million, non-cash share-based compensation expense of $151.3 million and non-cash amortization of operating lease right-of-use assets of $9.5 million. Changes in working capital, excluding cash, were approximately $24.1 million mainly due to higher accounts receivable.
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.
See Note 10, “Debt,” to the consolidated financial statements for discussions of the Convertible Senior Notes and the 2024 Credit Agreement.
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.
Our software arrangements with clients contain multiple performance obligations that include software license deliveries, installation, training, consulting, software modification and customization to meet specific client needs; hosting; and post-contract client support (“PCS”). For these contracts, we evaluate whether separate performance obligations can be distinct or should be accounted for as one performance obligation.
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.
During the fiscal periods presented, we had no significant transactions between reportable segments. Corporate unallocated amounts are comprised of non-cash amortization of intangible assets associated with acquisitions, depreciation associated with unallocated property and equipment assets, compensation costs for the executive management team and certain shared services staff, and share-based compensation expense for the entire company.
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 remainder of the decline is due to the ongoing shift in the mix of new software contracts toward more SaaS offerings. Refer to the SaaS revenue section for further details on our revenue mix shift. We expect that software license revenues will continue to decline as we shift our model away from perpetual software license to SaaS.
It is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements. In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic ASC 740) Income Taxes .
This guidance requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. It is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.
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.
Also contributing to the decrease in working capital are the timing of prepaid expenses, payroll related payments, payments for operating leases and income tax payments. These decreases were offset by timing of payments to and receipts from our government partners, increases in deferred revenues and deferred taxes associated with stock option activity during the period.
Estimated losses on uncompleted contracts are recorded in the period in which we first determine that a loss is apparent. Business Combinations. Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values.
Arrangements that include professional services, such as training or installation, are evaluated to determine whether those services are highly interdependent or interrelated to the product’s functionality. Business Combinations. Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values.
The 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 $10.4 million or 0.5%, to the total revenue increase.
The actual operating results of Edulink,CG, EN, and MyGov, from their respective dates of acquisition, are included in the operating results of the ES segment. 2024 We did not complete any acquisitions during the twelve months ended December 31, 2024. 2025 Operating Results For the twelve months ended December 31, 2025, total revenues increased 9.1% compared to the prior period, primarily due to an increase in subscription revenue.
The following table sets forth a comparison of our software licenses and royalties revenue for the listed years ended December 31 ($ 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.
Software licenses and royalties The following table sets forth a comparison of our software licenses and royalties revenue for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % ES $ 13,049 $ 25,292 $ (12,243) (48) % PT (233) 1,065 (1,298) (122) Total software licenses and royalties revenue $ 12,816 $ 26,357 $ (13,541) (51) % Software licenses and royalties revenue decreased 51% compared to the prior period primarily due to a loss reserve for remaining exposure related to a contract dispute previously disclosed.
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 .
Interest expense The following table sets forth a comparison of our interest expense for the listed years ended December 31 ($ in thousands): Change 2025 2024 $ % Interest expense $ (4,995) $ (5,931) $ 936 (16)% Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings .
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.
Net of withheld shares for taxes upon equity award settlement, we received $3.1 million from stock option exercises and received $18.8 million from employee stock purchase plan activity. We also paid $7.7 million in cash for long-term indemnity holdbacks related to prior acquisitions. We paid interest of $2.2 million in 2025 and $3.1 million in 2024.
The declines in overall gross margin were partially offset by a higher revenue mix for subscription revenues compared to the prior period, resulting in an increase in incremental margin related to subscriptions, maintenance and professional services.
The increase in overall gross margin compared to the prior period is primarily attributed to a shift in our revenue mix toward higher-margin SaaS revenues.
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.
We believe the following critical accounting policies require significant judgments and estimates used in the preparation of our financial statements. The discussion below supplements Note 1, “Summary of Significant Accounting Policies,” within the notes to the consolidated financial statements. Revenue Recognition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 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.
Biggest changeITEM 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, 2025, we had no outstanding borrowings under our 2024 Credit Agreement and available borrowing capacity under the 2024 Credit Agreement was $700.0 million.
Loans under the revolving credit facility will bear interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, three-, or six-month SOFR rate plus a margin of 1.125% to 1.75%.
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%. 40

Other TYL 10-K year-over-year comparisons