Tyler Technologies (TYL) 10-K risk factor changes: FY2019 vs FY2018

[removed: Risks] [added: Risks] Associated with Our Software [removed: Products][added: Products]

[removed: Cyber-attacks] [added: *Cyber-attacks] and security vulnerabilities can disrupt our business and harm our competitive [removed: position.][added: position.*]

They [removed: may] [added: may, for example,] develop and deploy malicious software to attack our products and services [removed: and] [added: and/or] gain access to our networks and data centers, or act in a coordinated manner to launch distributed denial of service or other coordinated attacks.

[removed: Disclosure] [added: *Disclosure] of personally identifiable information and/or other sensitive client data could result in liability and harm our [removed: reputation.][added: reputation.*]

We store and process increasingly large amounts of personally identifiable [added: information] and other confidential information of our clients.

Despite our efforts to improve security controls, it is possible our security controls over personal data, our training of employees on data security, and other practices we follow may not prevent the improper disclosure of [added: sensitive] client data that we store and manage.

[removed: Hosting] [added: *Hosting] services for some of our products are dependent upon the uninterrupted operation of data [removed: centers.][added: centers.*]

[removed: We] [added: *We] run the risk of errors or defects with new products or enhancements to existing [removed: products.][added: products.*]

[removed: We] [added: *We] must timely respond to technological changes to be [removed: competitive.][added: competitive.*]

[removed: We] [added: *We] may be unable to protect our proprietary [removed: rights.][added: rights.*]

There has also [removed: recently] been an apparent evolution in the legal standards and regulations courts and the U.S. patent office may apply in favorably evaluating software patent rights.

We cannot assure you that [removed: third-parties] [added: third parties] will not assert infringement or misappropriation claims against us with respect to current or future products.

[removed: Clients] [added: *Clients] may elect to terminate our maintenance contracts and manage operations [removed: internally.][added: internally.*]

Additionally, they may inadvertently allow our intellectual property or other information to fall into the hands of [removed: third-parties,] [added: third parties,] including our competitors, which could adversely affect our business.

[removed: Material] [added: *Material] portions of our business require the Internet infrastructure to be [removed: further developed or adequately maintained.][added: reliable.*]

Part of our future success [removed: depends] [added: 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.

This in part requires [removed: the further development and] [added: ongoing] maintenance of the Internet [added: infrastructure, especially to prevent interruptions in service, as well as additional development of that] infrastructure.

[removed: Among other things, this further development and maintenance will require] [added: This requires] a reliable network backbone with the necessary speed, data capacity, security, and timely development of complementary products for providing reliable Internet access and services.

If this infrastructure fails to be [removed: further] [added: sufficiently] developed or be adequately maintained, our business would be harmed because users may not be able to access our government portals.

[removed: Risks] [added: Risks] Associated with Selling Products and Services into the Public Sector [removed: Marketplace][added: Marketplace]

[removed: Selling] [added: *Selling] products and services into the public sector poses unique [removed: challenges.][added: challenges.*]

We derive substantially all of our revenues from sales of software and services to state, county, and city governments, other [added: federal or] municipal agencies, and other public entities.

| • | Political resistance to the concept of contracting with [removed: third-parties] [added: third parties] to provide IT solutions |

| • | Legislative changes affecting a local government’s authority to contract with [removed: third-parties] [added: third parties] |

[removed: A] [added: *A] prolonged economic slowdown could harm our [removed: operations.][added: operations.*]

[removed: The] [added: *The] open bidding process creates uncertainty in predicting future contract [removed: awards.][added: awards.*]

[removed: We] [added: *We] face significant competition from other vendors and potential new entrants into our [removed: markets.][added: markets.*]

Current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with [removed: third-parties,] [added: third parties,] thereby increasing the ability of their products to address the needs of our prospective clients.

[removed: Fixed-price] [added: *Fixed-price] contracts may affect our [removed: profits.][added: profits.*]

[removed: Changes] [added: *Changes] in the insurance markets may affect our [removed: business.][added: business.*]

[removed: Risks] [added: Risks] Associated with Our Periodic Results and Stock [removed: Price][added: Price]

[removed: Fluctuations] [added: *Fluctuations] in quarterly revenue could adversely impact our operating results and stock [removed: price.][added: price.*]

[removed: Increases] [added: *Increases] in service revenue as a percentage of total revenues could decrease overall [removed: margins.][added: margins.*]

[removed: Our] [added: *Our] stock price may be [removed: volatile.][added: volatile.*]

Examples of factors that may significantly impact our stock price [removed: include:][added: include]

| • | Adoption of new accounting standards [removed: affecting the software industry] |

[removed: Our] [added: *Our] financial outlook may not be [removed: realized.][added: realized.*]

[removed: Risks] [added: Risks] Associated with Our Growth Strategy and Other General Corporate [removed: Risks][added: Risks]

[removed: We] [added: *We] may experience difficulties in executing our acquisition [removed: strategy.][added: strategy.*]

[removed: Our] [added: *Our] failure to properly manage growth could adversely affect our [removed: business.][added: business.*]

Alternatively, clients may elect to drop maintenance on certain modules that they ultimately decide not to use.

*Increases in investment in research and development could decrease overall margins.*

An important element of our corporate strategy is to continue to dedicate a significant amount of resources to research and development and related product and service opportunities both through internal investments and the acquisition of intellectual property from companies that we have acquired.

We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position.

Because we expense the majority of our research and development costs, increased investment could adversely affect operating margins.

We continue to expand our operations by pursuing existing and potential market opportunities.

Although we have not experienced material adverse effects from any such defects or errors to date, we cannot assure you that material defects and errors will not be found in the future.

We have expanded our operations significantly since 1998, when we entered the business of providing software solutions and services to the public sector.

We intend to continue expansion in the foreseeable future to pursue existing and potential market opportunities.

Our products generally automate [removed: seven] [added: eight] major functional areas: (1) financial management and education, (2) courts and justice, (3) public [removed: safety] [added: safety,] (4) property appraisal and tax, (5) planning, regulatory and [removed: maintenance] [added: maintenance,] (6) land and vital records [removed: management and] [added: management,] (7) data and [removed: insights.][added: insights and (8) case management and business process management.]

The Enterprise Software [removed: (“ES”)] [added: ("ES")] segment provides [removed: municipal and county governments and schools] [added: public sector entities] with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as: financial [removed: management;] [added: management and education,] courts and [removed: justice processes;] [added: justice,] public [removed: safety;] [added: safety,] planning, regulatory and [removed: maintenance;] [added: maintenance,] land and vital records [removed: management; and] [added: management,] data [removed: analytics.][added: and insights and case management and business management processes.]

Our total employee count increased to [removed: 4,525] [added: 5,368] at December 31, [removed: 2018,] [added: 2019,] from [removed: 4,069] [added: 4,525] at December 31, [removed: 2017.][added: 2018.]

For the twelve months ended December 31, [removed: 2018,] [added: 2019,] total revenues increased [removed: 11%] [added: 16%] compared to the prior year.

[removed: Organic revenue growth was 9% for the twelve months ended December 31, 2018, compared to the prior year period and revenues] [added: Revenues] from acquisitions contributed [removed: 2%] [added: 8%] of growth for the twelve months ended December 31, [removed: 2018.][added: 2019.]

Subscriptions revenue grew [removed: 28%] [added: 34%] for the twelve months ended December 31, [removed: 2018,] [added: 2019,] due to a gradual shift toward cloud-based, software as a service business, as well as continued strong growth in our e-filing revenues from courts and [removed: the addition of new subscription revenues from the acquisition of Socrata.][added: other transaction-based revenues.]

[removed: Organic] [added: Excluding the impact of acquisitions,] subscriptions revenue increased [removed: 21%] [added: 26%] for the twelve months ended December 31, [removed: 2018.][added: 2019.]

Our backlog at December 31, [removed: 2018] [added: 2019] was [removed: $1.25] [added: $1.46] billion, a [removed: 2%] [added: 17%] increase from last year.

[removed: Recent Acquisitions][added: *Recent Acquisitions*]

The total purchase price was approximately [removed: $6.2 million,] [added: $20.5 million] of which [removed: $5.4] [added: $19.1] million was paid in cash and approximately [removed: $759,000] [added: $1.4 million was] accrued for [removed: a] working capital [removed: holdback.][added: and indemnity holdbacks, subject to certain post-closing adjustments.]

[removed: The] [added: As of December 31, 2019, the purchase price allocation for CHT is not yet complete, therefore the] preliminary [added: valuation] estimates of fair value assumed at the acquisition date [removed: for] [added: including] intangible assets, receivables and deferred revenue [removed: and related deferred taxes] are subject to change as [removed: valuations are] [added: the valuation is] finalized.

The total purchase price was approximately [removed: $5.3] [added: $6.2] million in cash.

The [added: total] purchase price [removed: of $9.3 million] was [removed: paid] [added: $3.7 million] in cash.

[removed: The] [added: On February 1, 2019, we acquired all the assets of MyCivic for the] total purchase price [removed: was $11.6] [added: of $3.7] million paid in cash.

As of December 31, [removed: 2018,] [added: 2019,] the purchase price allocations for [removed: Sage, Socrata, CaseloadPro,] [added: MicroPact] and [removed: MobileEyes] [added: MyCivic] are complete.

The operating results of all [removed: 2018] [added: 2019] acquisitions are included with the operating results of the Enterprise Software segment since their date of acquisition.

Revenues from [removed: Socrata] [added: MicroPact] included in Tyler's results of operations totaled approximately [removed: $13.9] [added: $63.0] million and the net loss was [removed: $11.5 million] [added: approximately $98,000] for the twelve months ended December 31, [removed: 2018.][added: 2019.]

The impact of the [removed: Sage, CaseloadPRO, MobileEyes] [added: MyCivic] and [removed: SceneDoc] [added: CHT] acquisitions, individually and in the aggregate, on our operating results, assets and liabilities is not material.

Our balance sheet as of December 31, [removed: 2018,] [added: 2019,] reflects the allocation of the purchase price to the assets acquired based on their fair value at the date of each acquisition.

Subscriptions and maintenance are considered recurring revenue sources and comprised approximately [removed: 65%] [added: 67%] of our revenue in [removed: 2018.][added: 2019.]

During [removed: 2018,] [added: 2019,] based on our number of customers, turnover was approximately 2%.

As of December 31, [removed: 2018,] [added: 2019,] our total employee count increased to [removed: 4,525] [added: 5,368] from [removed: 4,069] [added: 4,525] at December 31, [removed: 2017.][added: 2018.]

[removed: Adoption] [added: *Adoption] of New [removed: Revenue] [added: Lease] Accounting [removed: Standard][added: Standard*]

The [removed: impacts] [added: impact] of adoption [removed: are] [added: is] reflected in the financial information herein.

For additional details, see Note 1 - [removed: "Summary] [added: Summary] of Significant Accounting Policies" to our consolidated financial statements in this report.

[removed: Recent] [added: *Recent] Accounting Guidance not yet [removed: Adopted][added: Adopted*]

[removed: Topic 842] [added: This update] is effective for fiscal years beginning after December 15, [removed: 2018,] [added: 2019,] including interim periods [removed: therein.][added: within those fiscal years.]

We [removed: expect to adopt ASU 2016-02 when effective,] [added: adopted Topic 842] using the transition method that allows us to initially apply the guidance at the adoption date of January 1, 2019, and [removed: recognize] [added: recognized] a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We [removed: expect to use] [added: used] the package of practical expedients that allows us to not reassess: (1) lease classification for any expired or existing leases and (2) initial direct costs for any expired or existing leases.

[removed: Outlook][added: *Outlook*]

The local government software market continues to be active, and our backlog at December 31, [removed: 2018] [added: 2019] reached [removed: $1.25] [added: $1.46] billion, a [removed: 2%] [added: 17%] increase from last year.

With our strong financial position and cash flow, we plan to continue to make significant investments in product development to better position us to continue to expand our [added: addressable market and strengthen our] competitive position in the public sector software market over the long term.

[added: *Revenue Recognition.*] We earn revenue from software licenses, royalties, subscription-based services, software services, post-contract customer support (“PCS” or “maintenance”), hardware, and appraisal services.

When software services are distinct, the fee allocable to the service element is recognized over the time we perform the services and is billed on a time and material [added: or milestones] basis.

We recognize [removed: hosting services] [added: SaaS arrangements] ratably over the term of the arrangement, which range from one to ten [removed: years] but are typically for a period of three to five years.

Since most of our customers are domestic governmental entities, we rarely incur a loss resulting from [added: credit risk associated with] the inability of a customer to make required payments.

[removed: Intangible] [added: *Intangible] Assets and [removed: Goodwill.][added: Goodwill*.]

Our annual goodwill impairment analysis, which we performed [removed: quantitatively] [added: qualitatively] during the second quarter of [removed: 2018,] [added: 2019,] did not result in an impairment charge.

During [removed: 2018,] [added: 2019,] we did not identify any triggering events that would require an update to our annual impairment review.

[added: *Share-Based Compensation.*] We have a stock incentive plan that provides for the grant of stock options, restricted stock units and performance stock units to key employees, directors and non-employee consultants.

Other transaction based fees primary relate to online payment services.

Excluding the impact of acquisitions, total revenues increased 8% compared to prior year.

On October 30, 2019, we acquired certain assets of Courthouse Technologies, Ltd ("CHT"), an industry-leading provider of jury management systems that offers a fully integrated, end-to-end software-as-a-service (SaaS) solution to manage all facets of juror management, from source list generation to juror processing and payment.

On February 28, 2019, we acquired all of the capital stock of MP Holdings Parent, Inc. dba MicroPact ("MicroPact"), a leading provider of commercial off-the-shelf ("COTS") solutions, including entellitrak®, a low-code application development platform for case management and business process management used extensively in the public sector.

The total purchase price, net of cash acquired of $2.0 million, was approximately $202.2 million consisting of $198.2 million paid in cash and accrued contingent consideration of $6.0 million, subject to the achievement of certain financial performance objectives.

We did not elect to use the hindsight application for evaluating the life of lease arrangements.

The impact of Topic 842 on our consolidated balance sheet beginning January 1, 2019, included the recognition of right-of-use ("ROU") assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged.

We had no finance leases prior to the adoption of Topic 842 and currently do not have any.

In June 2016, the FASB issued ASU 2016-13, *Financial Instruments - Credit Losses,* (“ASU 2016-13”).

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses.

Early adoption is permitted for a fiscal year beginning after December 15, 2018, including interim periods within that fiscal year.

Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

We will adopt the new standard in the first quarter of 2020 and believe the impact on our consolidated financial statements and results of operations will not be material.

Arrangements that include software services, such as training or installation, are evaluated to determine whether the customer can benefit from the services either on their own or together with other resources readily available to the customer and whether the services are separately identifiable from other promises in the contract.

We assess goodwill for impairment annually as of April 1st, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable.

We begin with the qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the quantitative assessment described below.

During 2019, we did not identify any triggering events that would indicate that the carrying amount of our intangible assets may not be recoverable.

*2019* *Compared to* *2018*

On February 28, 2019, we acquired all of the capital stock of MicroPact, a leading provider of COTS solutions, including entellitrak®, a low-code application development platform for case management and business process management used extensively in the public sector.

| Subscriptions | | 7,472 | | |

On October 30, 2019, we acquired certain assets of CHT, an industry-leading provider of jury management systems that offers a fully integrated, end-to-end SaaS solution to manage all facets of juror management, from source list generation to juror processing and payment.

On February 1, 2019, we acquired all the assets of MyCivic, a company that provides software solutions to connect communities.

| ES | | $ | 92,567 | | | $ | 83,735 | | | $ | 8,832 | | | 11 | % |

| A&T | | 7,638 | | | | 9,706 | | | | (2,068 | | ) | | (21 | ) |

The decline was primarily due to a shift in the mix of new software contracts toward more subscription agreements compared to the prior year.

| ($ in thousands) | | 2019 | | | | 2018 | | | | $ | | | | % | |

| ES | | $ | 285,092 | | | $ | 210,740 | | | $ | 74,352 | | | 35 | % |

| A&T | | 11,260 | | | | 9,807 | | | | 1,453 | | | | 15 | |

| Total subscriptions revenue | | $ | 296,352 | | | $ | 220,547 | | | $ | 75,805 | | | 34 | % |

Excluding the results of acquisitions, subscription-based revenue increased 26% compared to 2018.

| ($ in thousands) | | 2019 | | | | 2018 | | | | $ | | | | % | |

| ES | | $ | 185,892 | | | $ | 166,921 | | | $ | 18,971 | | | 11 | % |

| A&T | | 27,169 | | | | 24,348 | | | | 2,821 | | | | 12 | |

| Total software services revenue | | $ | 213,061 | | | $ | 191,269 | | | $ | 21,792 | | | 11 | % |

The slight increase is due to higher new contract volume and the addition of professional services staff to grow our capacity to deliver backlog.

Excluding employees added with acquisitions, our implementation and support staff has grown by 232 employees since December 31, 2018.

| ($ in thousands) | | 2019 | | | | 2018 | | | | $ | | | | % | |

| ES | | $ | 405,063 | | | $ | 359,904 | | | $ | 45,159 | | | 13 | % |

| A&T | | 25,255 | | | | 24,617 | | | | 638 | | | | 3 | |

| Total maintenance revenue | | $ | 430,318 | | | $ | 384,521 | | | $ | 45,797 | | | 12 | % |

On December 7, 2018, we acquired certain assets and intellectual property of SceneDoc, Inc. ("SceneDoc"), a company that provides mobile-first, software-as-a-service (SaaS) field reporting for law enforcement agencies.

As of December 31, 2018, the purchase price allocation for SceneDoc is not yet complete.

On October 1, 2018, we acquired all of the equity interests of TradeMaster, Inc. dba MobileEyes ("MobileEyes"), a company that develops software to improve public safety by supporting fire prevention and suppression, emergency response, and structural safety.

On August 31, 2018, we acquired all of the assets of CaseloadPRO, L. P. ("CaseloadPro"), a company that provides a fully featured probation case management system.

On April 30, 2018, we acquired all of the capital stock of Socrata, Inc. ("Socrata"), a company that provides open data and data-as-a-service solutions including cloud-based data integration, visualization, analysis, and reporting solutions for federal, state and local government agencies.

The purchase price, net of cash acquired of $1.7 million, was $147.6 million in cash.

On April 30, 2018, we acquired all of the equity interests of Sage Data Security, LLC ("Sage"), a cybersecurity company offering a suite of services that supports an entire cybersecurity lifecycle, including program development, education and training, technical testing, advisory services, and digital forensics.

On January 1, 2018, we adopted ASU No. 2014-09, using the full retrospective method of transition, which requires that the new standard be applied to all periods presented.

Leases.

On February 25, 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases ("Topic 842").

Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

| | |

| --- | --- |

| • | A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and |

| • | A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. |

Early application is permitted for all business entities upon issuance.

Upon adoption, entities will be required to use a modified retrospective approach with an option to use certain practical expedients.

We expect ASU 2016-02 will impact our consolidated financial statements and related disclosures.

We are currently evaluating the extent of the impact and expect that most of our lease commitments will be subject to the updated guidance and recognized as lease liabilities and right-of-use assets on our consolidated balance sheets upon adoption.

Based on our current portfolio of leases, we estimate a range of $15.5 million to $17.8 million of lease assets and liabilities to be recognized on our balance sheet, primarily relating to office facilities.

Revenue Recognition.

Arrangements that include software services, such as training or installation, are evaluated to determine whether those services are highly interdependent or highly interrelated to the product’s functionality.

When it is determined that software is distinct and the customer has the ability to take control of the software, we recognize revenue allocable to the software license fee when access to the software license is made available to the customer.

Share-Based Compensation.

| | | | | As Adjusted | | | As Adjusted | |

On April 30, 2018, we acquired Socrata, a company that provides open data and data-as-a-service solutions for federal, state and local government agencies including cloud-based data integration, visualization, analysis, and reporting solutions.

| | | 2018 | | |

| Subscriptions | | 12,106 | | |

On December 7, 2018, we acquired SceneDoc, Inc., a company that provides mobile-first, software-as-a-service (SaaS) field reporting for law enforcement agencies.

On October 1, 2018, we acquired MobileEyes, a company that develops software to improve public safety by supporting fire prevention and suppression, emergency response, and structural safety.

On August 31, 2018, we acquired CaseloadPRO, a company that provides a fully featured probation case management system.

On April 30, 2018, we also acquired Sage, a cybersecurity company offering a suite of services that supports an entire cybersecurity lifecycle.

| | | | | | | As Adjusted | | | | | | | | | |

| | | | | | As Adjusted | | | | |

| 2020 | 15,350 | | |

| 2021 | 15,232 | | |

| 2022 | 14,740 | | |

| 2023 | 14,665 | | |

| Thereafter | 95,419 | | |

| | | | | | | | | | | | | | | |

In [removed: 2018,] [added: 2019,] our effective average interest rate for borrowings was [removed: 5.22%.][added: 3.84%.]

As of December 31, [removed: 2018,] [added: 2019,] our interest rate was [removed: 5.75%] [added: 4.88%] under the prime rate option or approximately [removed: 3.77%] [added: 2.89%] under the 30-day LIBOR option.

Loans under the Credit Facility bear interest, at Tyler’s option, at a per annum rate of either (1) [removed: the] Wells Fargo [removed: Bank] [added: Bank’s] prime rate (subject to certain higher rate determinations) plus a margin of [removed: 0.25%] [added: 0.125%] to [removed: 1.00%] [added: 0.75%] or (2) the [removed: 30, 60, 90] [added: one-, two-, three-,] or [removed: 180-day] [added: six-month] LIBOR rate plus a margin of [removed: 1.25%] [added: 1.125%] to [removed: 2.00%.][added: 1.75%.]

As of December 31, [removed: 2018,] [added: 2019,] we had no outstanding borrowings under the Credit Facility and therefore are not subject to any interest risk.

The Credit Facility is secured by substantially all of our assets.

[removed: Most] [added: A majority] of our clients have our software installed in-house.

The state and local government market is one of the largest and most decentralized IT markets in the country, consisting of all 50 states, approximately 3,000 counties, 36,000 cities and towns and [removed: 13,900] [added: 13,600] school districts.

Gartner, Inc., a leading information technology research and advisory company, estimates that state and local government application and vertical specific software spending will grow from [removed: $16.1] [added: $17.9] billion in [removed: 2019] [added: 2020] to [removed: $19.6] [added: $21.1] billion in [removed: 2022.][added: 2023.]

The professional services and support segments of the market are expected to expand from [removed: $31.6] [added: $27.5] billion in [removed: 2019] [added: 2020] to [removed: $35.2] [added: $29.9] billion in [removed: 2022.][added: 2023.]

Application and vertical specific software sales in the primary and secondary education segments of the market is expected to expand from [removed: $2.8] [added: $3.0] billion in [removed: 2019] [added: 2020] to [removed: $3.6] [added: $3.7] billion in [removed: 2022] [added: 2023] while professional services and support are expected to grow from [removed: $1.9] [added: $2.5] billion in [removed: 2019] [added: 2020] to [removed: $2.2] [added: $2.8] billion in [removed: 2022.][added: 2023.]

We design, develop, market and support a broad range of software solutions to serve mission-critical “back-office” functions of [added: the public sector with focus on] local governments.

Our software solutions and services are generally grouped in [removed: seven] [added: eight] major areas:

[removed: Financial] [added: *Financial] Management and [removed: Education][added: Education*]

Our financial management systems include modules for general ledger, budget preparation, fixed assets, requisitions, purchase orders, bid management, accounts payable, contract management, accounts receivable, investment management, inventory control, project and grant accounting, work orders, job [removed: costing, GASB reporting, payroll and human resources.]

[removed: Courts] [added: *Courts] and [removed: Justice][added: Justice*]

Our solutions help eliminate duplicate data entry, promote more effective business [removed: procedures] [added: procedures,] and improve efficiency across the entire justice process.

[removed: Public Safety][added: *Public Safety*]

[removed: Property] [added: *Property] Appraisal and [removed: Tax][added: Tax*]

[removed: Planning,] [added: *Planning,] Regulatory and [removed: Maintenance][added: Maintenance*]

[removed: Land] [added: *Land] and Vital Records [removed: Management][added: Managemen*t]

[removed: Data] [added: *Data] and [removed: Insights][added: Insights*]

Subscription-based revenue is primarily derived from our SaaS arrangements, which generally utilize the Tyler private cloud, as well as our transaction-based offerings such as e-filing [removed: solutions.][added: solutions, online dispute resolution solutions, and online payment services.]

Virtually all of our software clients contract with us for maintenance and [removed: support;] [added: support,] which provides us with a significant source of recurring revenue.

Our appraisal services business unit has [removed: been] [added: operated] in this business since 1938.

In some instances, we also [removed: sell] [added: provide] property tax and/or appraisal software products in connection with appraisal outsourcing projects, while other clients may only engage us to provide appraisal services.

We have a large recurring revenue base from maintenance and support and subscription-based services, which generated revenues of [removed: $605.1] [added: $726.7] million, or [removed: 65%] [added: 67%] of total revenues, in [removed: 2018.][added: 2019.]

Subscription-based revenues have been our fastest growing revenue category over the past five years, increasing from [removed: $87.8] [added: $111.9] million in [removed: 2014] [added: 2015] to [removed: $220.5] [added: $296.4] million in [removed: 2018.][added: 2019.]

Clients consist primarily of federal, [added: state,] county and municipal agencies, school districts and other [added: local] government offices.

During [removed: 2018,] [added: 2019,] approximately [removed: 41%] [added: 40%] of our revenue was attributable to ongoing support and maintenance agreements.

We also compete with national firms, some of which have greater financial and technical resources than we do, including Oracle Corporation, Infor, SAP AG, Workday, Inc., CentralSquare Technologies, Thomson Reuters Corporation, [added: Motorola Solutions, Inc., Axon Enterprise, Inc.,] and Constellation Software, Inc. In addition, we sometimes compete with consulting and systems integration firms, which develop custom systems, primarily for larger governments.

At December 31, [removed: 2018,] [added: 2019,] our revenue backlog was approximately [removed: $1.25] [added: $1.46] billion, compared to [removed: $1.23] [added: $1.25] billion [removed: (as adjusted)] at December 31, [removed: 2017.][added: 2018.]

Approximately [removed: $625.6] [added: $720.6] million, or [removed: 50%,] [added: 49%,] of the backlog is expected to be recognized during [removed: 2019.][added: 2020.]

At December 31, [removed: 2018,] [added: 2019,] we had [removed: 4,525] [added: 5,368] employees.

We make available free of charge through this site our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Forms 4 and 5, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it [removed: to,] [added: to] the SEC.

| • | Case Management and Business Process Management |

costing, GASB reporting, payroll and human resources.

We also offer a solution for online dispute resolution that automates the flow and resolution of common and historically time-consuming disputes including debt, landlord, tenant, small claims, child custody and other case types.

*Case Management and Business Process Management*

We offer a low-code application development platform solution for case management and business process management.

Whether based on premises or in the cloud, its Data-First™ approach allows the application to be implemented immediately and configured continuously, enabling clients to get to work quickly while keeping costs low.

Our low code application platform allows government agencies the ability to track, collaborate, and report on the data that drives activities forward.

Other transaction-based fees primary relate to online payment services, which are offered with the assistance of third-party vendors.

- Establish strategic alliances.

In October 2019, we announced a strategic collaboration agreement with Amazon Web Services ("AWS") for cloud hosting services.

This agreement brings together Tyler, the nation's largest software company exclusively focused on the public sector, and AWS, the broadest and deepest cloud platform.

Specifically, the agreement with AWS provides the framework for development, training and collaboration in order to support next-generation applications that have the scalability, resiliency, and security AWS offers.

It will assist Tyler in accelerating innovation and the development of strategic initiatives.

These initiatives will bring the most advanced cloud-native services to Tyler clients, improving the flow of information and providing a better experience for state, local, and federal governments.

| | |

| --- | --- |

Tyler was founded in 1966.

Prior to 1998, we operated as a diversified industrial conglomerate, with operations in various industrial, retail and distribution businesses, all of which have been divested.

In 1997, we embarked on a multi-phase growth plan focused on serving the specialized information management needs of local governments nationwide.

We entered the local government IT market through a series of strategic acquisitions in 1998 and 1999.

In November 2015, we significantly expanded our presence in the public safety software market through the acquisition of New World Systems Corporation.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: WASHINGTON,] [added: WASHINGTON,] D.C. [removed: 20549][added: 20549]

| [removed: FORM 10-K] [added: FORM] | [added: 10-K |]

| [removed: x] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the Fiscal Year [removed: Ended December] [added: Ended December] 31, [removed: 2018][added: 2019]

| [removed: ¨] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: Commission] [added: Commission] File [removed: Number 1-10485][added: Number 1-10485]

| [removed: TYLER TECHNOLOGIES, INC. (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)] [added: charter)] |

| [removed: DELAWARE] [added: Delaware] | [removed: 75-2303920] | [added: 75-2303920 |]

| [removed: (State] [added: (State] or other jurisdiction of [removed: incorporation or organization)] [added: incorporation or organization)] | [removed: (I.R.S. employer identification no.)] | [added: (I.R.S. employer identification no.) |]

| [removed: 5101] [added: 5101] Tennyson [removed: Parkway Plano, Texas] [added: Parkway] | [removed: 75024] | [added: |]

| [removed: (Address] [added: (Address] of principal executive [removed: offices)] [added: offices)] | [removed: (Zip code)] | [added: (Zip code) |]

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: [removed: (972) 713-3700][added: (972) 713-3700]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [removed: Name] [added: Trading symbol | Name] of each [removed: exchange on] [added: exchange on] which [removed: registered] [added: registered] |

| [removed: COMMON] [added: COMMON] STOCK, $0.01 PAR [removed: VALUE] [added: VALUE] | [removed: NEW YORK STOCK EXCHANGE] [added: TYL] | [added: New York Stock Exchange |]

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

| [removed: NONE] [added: NONE] |

[removed: YES ¨ NO x][added: Yes ☐ No ☒]

[removed: YES x NO ¨][added: Yes ☐ No ☒]

| Large accelerated filer | | [removed: x] [added: ☒] | | Accelerated [removed: filer] [added: Filer] | | ☐ |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) [removed: YES ¨ NO x][added: Yes ☐ No ☒]

The aggregate market value of the voting stock held by non-affiliates of the registrant was [removed: $8,417,174,000] [added: $8,172,267,000] based on the reported last sale price of common stock on June 30, [removed: 2018,] [added: 2019,] which is the last business day of the registrant’s most recently completed second fiscal quarter.

The number of shares of common stock of the registrant outstanding on February [removed: 19, 2019] [added: 18, 2020] was [removed: 38,293,000.][added: 39,396,000.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Certain information required by Part III of this annual report is incorporated by reference from the registrant’s definitive proxy statement for its annual meeting of stockholders to be held on May [removed: 7, 2019.][added: 12, 2020.]

[removed: TYLER] [added: | TYLER] TECHNOLOGIES, [removed: INC.][added: INC. |]

[removed: FORM 10-K][added: FORM 10-K]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | [removed: PAGE] [added: PAGE] |

| Item 1. | [removed: [Business](#sD523CD7F8A0C50B78C919DD9648F35E2)] [added: [Business](#s60A6FF84F4FE5DA5ADC5C26D5A16D2D9)] | [removed: [3](#sD523CD7F8A0C50B78C919DD9648F35E2)] [added: [3](#s60A6FF84F4FE5DA5ADC5C26D5A16D2D9)] |

| Item 1A. | [Risk [removed: Factors](#s8A76800B0FBB509FBCEF1862F8AEEE7A)] [added: Factors](#s3AFA22498F03597791F484F540ABC509)] | [removed: [11](#s8A76800B0FBB509FBCEF1862F8AEEE7A)] [added: [11](#s3AFA22498F03597791F484F540ABC509)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#sA31BFF28EAB2526A92AC1C6A455015E9)] [added: Comments](#s0F196698946359EA940DBF45C4BB18CD)] | [removed: [17](#sA31BFF28EAB2526A92AC1C6A455015E9)] [added: [17](#s0F196698946359EA940DBF45C4BB18CD)] |

| Item 2. | [removed: [Properties](#sF1ECA3361569547198B0AA2BAE5A6ABF)] [added: [Properties](#sD8121525359555C79D324F8541AE5C5B)] | [removed: [17](#sF1ECA3361569547198B0AA2BAE5A6ABF)] [added: [17](#sD8121525359555C79D324F8541AE5C5B)] |

| Item 3. | [Legal [removed: Proceedings](#s07B07B8712D0593D8432C0A78B1DD5D5)] [added: Proceedings](#s40DE5B1255AE5074B10173B7364D1C2D)] | [removed: [17](#s07B07B8712D0593D8432C0A78B1DD5D5)] [added: [17](#s40DE5B1255AE5074B10173B7364D1C2D)] |

| Item 4. | [Submission of Matters to a Vote of Security [removed: Holders](#s86D067EF63AD5614A99FEA6C2F56836B)] [added: Holders](#sB983AC3E580B55EF940653D18516CB00)] | [removed: [17](#s86D067EF63AD5614A99FEA6C2F56836B)] [added: [17](#sB983AC3E580B55EF940653D18516CB00)] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sA2A70B8A6CED57E2AAEE06AE6BF23F34)] [added: Securities](#s133D32118AC75A119C1CC32B44C9A3C2)] | [removed: [18](#sA2A70B8A6CED57E2AAEE06AE6BF23F34)] [added: [18](#s133D32118AC75A119C1CC32B44C9A3C2)] |

| Item 6. | [Selected Financial [removed: Data](#s9B4E8391207E59758DD643EE3EF7F095)] [added: Data](#s924135EBA02151B79E01480848849B0B)] | [removed: [20](#s9B4E8391207E59758DD643EE3EF7F095)] [added: [20](#s924135EBA02151B79E01480848849B0B)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s505F71055DA45A4B89BD7025EED7808D)] [added: Operations](#sE6DB24F27AD15D209DB411C576A02394)] | [removed: [21](#s505F71055DA45A4B89BD7025EED7808D)] [added: [21](#sE6DB24F27AD15D209DB411C576A02394)] |

| Plano, | Texas | 75024 |

| --- | --- | --- |

Yes ☒ No ☐

Yes ☐ No ☒

Yes ☒ No ☐

TYLER TECHNOLOGIES, INC.

| --- | --- | --- |

| | [PART I](#s63873C3F57085B5581916D5F5EECADF0) | |

| | [PART II](#sC3152210576B5347802809354BB0EE5E) | |

| | | |

| | | |

| | [PART IV](#sD991F53E5FB6515A8CC70297FAAD4612) | |

| | | |

| | | |

| [Signatures](#sC81EB64D13FC54068976A8651175226E) | | [44](#sC81EB64D13FC54068976A8651175226E) |

10-K 1 tyl12312018-10k.htm 10-K

| |

| --- |

| | |

| --- | --- |

| | [PART I](#s6CDF62B9FDF2575BA03476DC5626DA6D) | |

| | [PART II](#s69DABF256ED555F8B94B28E07862326A) | |

| | [PART IV](#s561E20FBD6D756BEA5806D44FE7259F5) | |

| [Signatures](#s73FAADBA42055F028383FA15E7522063) | | [45](#s73FAADBA42055F028383FA15E7522063) |

We occupy a total of approximately [removed: 1.0] [added: 1.2] million square feet of office space, of which approximately 746,000 square feet is in various office facilities we own.

We own or lease offices for our major operations in the states of Arizona, Arkansas, California, Colorado, Georgia, Iowa, Maine, Massachusetts, Michigan, Missouri, Montana, New Hampshire, New York, [added: North Carolina,] Ohio, [added: Tennessee,] Texas, [added: Virginia, Washington,] Washington [removed: and] [added: D.C.,] Wisconsin, [added: Ontario] and [removed: in Ontario, Canada.][added: British Columbia, Canada and the Philippines.]

Our common stock is traded on the New York Stock Exchange under the symbol “TYL.” At December 31, [removed: 2018,] [added: 2019,] we had approximately [removed: 1,262] [added: 1,215] stockholders of record.

Most of our stockholders hold their shares in street name; therefore, there are substantially more than [removed: 1,262] [added: 1,215] beneficial owners of our common stock.

We did not pay any cash dividends in [removed: 2018] [added: 2019] or [removed: 2017.][added: 2018.]

There are no warrants or rights related to our equity compensation plans as of December 31, [removed: 2018.][added: 2019.]

| | Number of securities to be issued upon exercise of outstanding options, warrants, purchase rights and vesting of restricted stock units as of December 31, [removed: 2018] [added: 2019] | | | 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, [removed: 2018)] [added: 2019)] | |

As of December 31, [removed: 2018,] [added: 2019,] we had authorization to repurchase up to approximately [removed: 1.2] [added: 2.6] million additional shares of Tyler common stock.

During [removed: 2018,] [added: 2019,] we purchased approximately [removed: 781,000] [added: 72,000] shares of our common stock for an aggregate purchase price of [removed: $150.1] [added: $14.3] million.

A summary of the repurchase activity during [removed: 2018] [added: 2019] is as follows:

| Period | | Total number of shares repurchased | | | Additional number of shares authorized that may be repurchased | | | [removed: |] Average price paid per share | | | | Maximum number of shares that may be repurchased under current authorization | |

| Three months ended June 30 | | — | | | — | | | [removed: |] — | | | | [removed: 1,973,560] [added: 2,620,925] | |

| Three months ended September 30 | | — | | | — | | | [removed: |] — | | | | [removed: 1,973,560] [added: 2,620,925] | |

[removed: Subsequent to December 31, 2018,] [added: In February 2019,] our board of directors authorized the repurchase of an additional 1.5 million [removed: shares] of Tyler common stock.

As of February [removed: 20, 2019,] [added: 19, 2020,] we had remaining authorization to repurchase up to [removed: 2.7] [added: 2.6] million additional shares of our common stock.

[removed: Performance Graph][added: Performance Graph]

[removed: The] [added: *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 [removed: filing.][added: 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, [removed: 2013.][added: 2014.]

[removed: ][added: ]

| Company / Index | [removed: 12/31/13 | | |] 12/31/14 | | | 12/31/15 | | | 12/31/16 | | | 12/31/17 | | | 12/31/18 | | [added: | 12/31/19 | |]

| 2018 Incentive Stock Plan | 4,052,461 | | | $ | 155.92 | | | 3,097,303 | |

| Employee Stock Purchase Plan | 9,681 | | | 255.02 | | | | 701,837 | |

| | 4,062,142 | | | $ | 156.15 | | | 3,799,140 | |

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | |

| Three months ended March 31 | | 71,793 | | | 1,500,000 | | | $ | 199.03 | | | 2,620,925 | |

| October 1 through October 31 | | — | | | — | | | — | | | | 2,620,925 | |

| November 1 through November 30 | | — | | | — | | | — | | | | 2,620,925 | |

| December 1 through December 31 | | — | | | — | | | — | | | | 2,620,925 | |

| | | 71,793 | | | 1,500,000 | | | $ | 199.03 | | | | |

| Tyler Technologies, Inc. | 100 | | | 159.28 | | | 130.46 | | | 161.78 | | | 169.79 | | | 274.14 | |

| S&P 500 Stock Index | 100 | | | 101.38 | | | 113.51 | | | 138.29 | | | 132.23 | | | 173.86 | |

| S&P 600 Information Technology Index | 100 | | | 104.65 | | | 140.08 | | | 154.48 | | | 140.68 | | | 196.38 | |

| 2018 Incentive Stock Plan (a) | 4,425,728 | | | $ | 136.43 | | | 3,835,338 | |

| Employee Stock Purchase Plan | 14,869 | | | 157.95 | | | | 749,410 | |

| | 4,440,597 | | | $ | 136.50 | | | 4,584,748 | |

(a) In May 2018, stockholders approved our 2018 Stock Incentive Plan ("the 2018 Plan") which amended and restated the existing Tyler Technologies, Inc. 2010 Stock Option Plan ("the 2010 Plan").

Upon stockholder approval of the 2018 Plan, the remaining shares available for grant under the 2010 Plan were added to the shares authorized for grant under the 2018 Plan.

Additionally, any awards previously granted under the 2010 Plan that expire unexercised or are forfeited are added to the shares authorized for grant under the 2018 Plan.

Under the 2018 Plan, each award granted, other than stock options, reduces the number of securities available for issuance under the 2018 Plan by 2.5 shares.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Three months ended March 31 | | — | | | $ | — | | | $ | — | | | 1,973,560 | |

| October 1 through October 31 | | 154,739 | | | — | | | | 209.69 | | | | 1,818,821 | |

| November 1 through November 30 | | 457,503 | | | — | | | | 189.13 | | | | 1,361,318 | |

| December 1 through December 31 | | 168,600 | | | — | | | | 183.86 | | | | 1,192,718 | |

| | | 780,842 | | | — | | | | $ | 192.16 | | | | |

| Tyler Technologies, Inc. | 100 | | | 107.16 | | | 170.68 | | | 139.79 | | | 173.36 | | | 181.94 | |

| S&P 500 Stock Index | 100 | | | 113.69 | | | 115.26 | | | 129.05 | | | 157.22 | | | 150.33 | |

| S&P 600 Information Technology Index | 100 | | | 113.29 | | | 118.56 | | | 158.70 | | | 175.01 | | | 159.38 | |

| | [removed: 2018] [added: 2019 (a)] | | | | [removed: 2017 (a),(b)] [added: 2018] | | | | [removed: 2016 (a),(c)] [added: 2017 (b),(c)] | | | | [removed: 2015(d)] [added: 2016 (b)] | | | | [removed: 2014] [added: 2015] | | |

| Revenues | $ | [removed: 935,282] [added: 1,086,427] | | | $ | [removed: 840,899] [added: 935,282] | | | $ | [removed: 759,880] [added: 840,899] | | | $ | [removed: 591,022] [added: 759,880] | | | $ | [removed: 493,101] [added: 591,022] | |

| Cost of revenues | [removed: 495,704] [added: 569,527] | | | | [removed: 441,522] [added: 495,704] | | | | [removed: 400,692] [added: 441,522] | | | | [removed: 313,835] [added: 400,692] | | | | [removed: 259,730] [added: 313,835] | | |

| Selling, general and administrative expenses | [removed: 207,605] [added: 257,746] | | | | [removed: 175,914] [added: 207,605] | | | | [removed: 165,176] [added: 175,914] | | | | [removed: 133,317] [added: 165,176] | | | | [removed: 108,260] [added: 133,317] | | |

| Research and development expense | [removed: 63,264] [added: 81,342] | | | | [removed: 47,324] [added: 63,264] | | | | [removed: 43,154] [added: 47,324] | | | | [removed: 29,922] [added: 43,154] | | | | [removed: 25,743] [added: 29,922] | | |

| Amortization of customer and trade name intangibles | [removed: 16,217] [added: 21,445] | | | | [removed: 13,381] [added: 16,217] | | | | [removed: 13,202] [added: 13,381] | | | | [removed: 5,905] [added: 13,202] | | | | [removed: 4,546] [added: 5,905] | | |

| Operating income | [removed: 152,492] [added: 156,367] | | | | [removed: 162,758] [added: 152,492] | | | | [removed: 137,656] [added: 162,758] | | | | [removed: 108,043] [added: 137,656] | | | | [removed: 94,822] [added: 108,043] | | |

| Other [removed: income (expense),] [added: income,] net | [added: 3,471 | | | |] 3,378 | | | | 698 | | | | (1,998 | | ) | | 381 | | | [removed: | (355 | | ) |]

| Income before income taxes | [removed: 155,870] [added: 159,838] | | | | [removed: 163,456] [added: 155,870] | | | | [removed: 135,658] [added: 163,456] | | | | [removed: 108,424] [added: 135,658] | | | | [removed: 94,467] [added: 108,424] | | |

| Income tax (benefit) provision [removed: (b)] [added: (c)] | [added: 13,311 | | | |] 8,408 | | | | (6,115 | | ) | | 21,957 | | | | 43,555 | | | [removed: | 35,527 | | |]

| Net income | [removed: 147,462] [added: 146,527] | | | | [removed: 169,571] [added: 147,462] | | | | [removed: 113,701] [added: 169,571] | | | | [removed: 64,869] [added: 113,701] | | | | [removed: 58,940] [added: 64,869] | | |

| Net earnings per diluted share | $ | [removed: 3.68] [added: 3.65] | | | $ | [removed: 4.32] [added: 3.68] | | | $ | [removed: 2.92] [added: 4.32] | | | $ | [removed: 1.77] [added: 2.92] | | | $ | [removed: 1.66] [added: 1.77] | |

| Weighted average diluted shares [removed: (c)] | [removed: 40,123] [added: 40,105] | | | | [removed: 39,246] [added: 40,123] | | | | [removed: 38,961] [added: 39,246] | | | | [removed: 36,552] [added: 38,961] | | | | [removed: 35,401] [added: 36,552] | | |

| Cash flows provided by operating activities [removed: (c)] | $ | [removed: 250,203] [added: 254,720] | | | $ | [removed: 195,755] [added: 250,203] | | | $ | [removed: 191,859] [added: 195,755] | | | $ | [removed: 134,327] [added: 191,859] | | | $ | [removed: 142,839] [added: 134,327] | |

| Cash flows used by investing activities | [removed: (238,255] [added: (245,015] | | ) | | [removed: (85,395] [added: (238,255] | | ) | | [removed: (50,720] [added: (85,395] | | ) | | [removed: (398,459] [added: (50,720] | | ) | | [removed: (11,555] [added: (398,459] | | ) |

| Cash flows (used) provided by financing activities [removed: (c)] | [added: 88,698 | | | |] (63,595 | | ) | | 39,415 | | | | 138,075 | | | | 91,052 | | | [removed: | (3,993 | | ) |]

| Total assets | $ | [removed: 1,790,963] [added: 2,191,614] | | | $ | [removed: 1,611,351] [added: 1,790,963] | | | $ | [removed: 1,378,502] [added: 1,611,351] | | | $ | [removed: 1,356,570] [added: 1,378,502] | | | $ | [removed: 569,812] [added: 1,356,570] | |

| Revolving line of credit | — | | | | — | | | | [removed: 10,000] [added: —] | | | | [removed: 66,000] [added: 10,000] | | | | [removed: —] [added: 66,000] | | |

| Shareholders' equity | [removed: 1,324,846] [added: 1,617,058] | | | | [removed: 1,191,736] [added: 1,324,846] | | | | [removed: 934,540] [added: 1,191,736] | | | | [removed: 858,857] [added: 934,540] | | | | [removed: 336,973] [added: 858,857] | | |

[removed: (a)] [added: (b)] Reflects the impact of the adoption of [removed: Accounting Standards Update ("ASU")] ASU No. 2014-09, [removed: Revenue] [added: *Revenue] from Contracts with [removed: Customers] [added: Customers*] in fiscal year 2018.

[removed: (b)] [added: (c)] 2017 includes the significant impact of the enactment of the Tax Cuts and Jobs Act ("Tax Act").

The impact of the rate reduction on our 2017 income tax provision is a $26.0 million [removed: (as adjusted)] tax benefit due to the remeasurement of deferred tax assets and liabilities.

(a) Reflects the impact of the adoption of Accounting Standards Update ("ASU") ASU No. 2016-02, *Leases* ("Topic 842") in fiscal year 2019.

| | | | | | As Adjusted | | | | As Adjusted | | | | | | | | | | |

Refer to Note - 7 "Income Tax" for further discussion on the impact of the Tax Act.

(c) During 2016, we early adopted ASU No. 2016-09 Improvements to Employee Share-Based Payment Accounting requiring the recognition of excess tax benefits or tax deficiencies as a component of income tax expense; these benefits or deficiencies were historically recognized in equity.

As the standard requires a prospective method of adoption, our net income in 2016 includes a $29.6 million income tax benefit due to the adoption that did not occur in the comparable prior periods presented above.

In 2016, ASU No. 2016-09 updated the method of calculating diluted shares resulting in the inclusion of 519,000 additional shares in our diluted earnings per share calculation, which is not comparable to the other prior periods presented.

The adoption of ASU No. 2016-09 also required excess tax benefits, previously presented as financing activities, to be classified as operating activities.

As retrospective adoption for this component of the standard is allowable, we have adjusted all periods presented above to reflect this change in classification.

(d) On November 16, 2015, we completed the acquisition of New World Systems Corporation ("NWS").

Operating results for the twelve months ended December 31, 2015, include $5.9 million for non-recurring financial advisory, legal, accounting, due diligence, valuation and other expenses necessary to complete the NWS acquisition.

[removed: Evaluation] [added: *Evaluation] of Disclosure Controls and [removed: Procedures] [added: Procedures*] — We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act) designed to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management, with the participation of the chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, [removed: 2018.][added: 2019.]

Based on this evaluation, the chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of December 31, [removed: 2018.][added: 2019.]

[removed: Management’s] [added: *Management’s] Report on Internal Control Over Financial [removed: Reporting] [added: Reporting*] — Tyler’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Securities Exchange Act Rule 13a-15(f).

Management assessed the effectiveness of Tyler’s internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

Based on our assessment, we concluded that, as of December 31, [removed: 2018,] [added: 2019,] Tyler’s internal control over financial reporting was effective based on those criteria.

Tyler’s internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited Tyler’s financial statements.

[removed: Changes] [added: *Changes] in Internal Control Over Financial [removed: Reporting] [added: Reporting*] — During the quarter ended December 31, [removed: 2018,] [added: 2019,] there were no changes in our internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f), that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of MicroPact, which is included in our 2019 consolidated financial statements and constituted 11.5% of total assets as of December 31, 2019 and 5.8% of revenues for the year then ended.

| The information required under this item may be found under the section captioned “Proposals For Consideration – Proposal Two – Ratification of Our Independent Auditors for Fiscal Year [removed: 2019”] [added: 2020”] in our Proxy Statement when filed. | | |

| | | | | | [Reports of Independent Registered Public Accounting [removed: Firm](#s3EE0DB95DD5B51699EF2ECC0259B93BE)] [added: Firm](#s7DB38AA8553456E5A4D9E62213C0144F)] | | [removed: [F-1](#s3EE0DB95DD5B51699EF2ECC0259B93BE)] [added: [F-1](#s7DB38AA8553456E5A4D9E62213C0144F)] |

| | | | | | [Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s2BFEBE77F21154088484B21E68F1C239)] [added: 2017](#s5A0E8C2A5F8A511A86B536D298F1078B)] | | [removed: [F-3](#s2BFEBE77F21154088484B21E68F1C239)] [added: [F-4](#s5A0E8C2A5F8A511A86B536D298F1078B)] |

| | | | | | [Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#sBD33A5ACE9295538BD15F54FE2BB2882)] [added: 2018](#s1ECF17EEE8895E19A3183D7891524F96)] | | [removed: [F-4](#sBD33A5ACE9295538BD15F54FE2BB2882)] [added: [F-5](#s1ECF17EEE8895E19A3183D7891524F96)] |

| | | | | | [Consolidated Statements of Shareholders’ Equity for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s7C7633F2EDBC5A889719ED90209FE114)] [added: 2017](#s6A78663706FC50C5A2F605419CAFA780)] | | [removed: [F-6](#s7C7633F2EDBC5A889719ED90209FE114)] [added: [F-7](#s6A78663706FC50C5A2F605419CAFA780)] |

| | | | | | [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s2E1A134956005CD8AA6C8F2CE09A6A53)] [added: 2017](#sECEB9A33042450A898D7678E5B457523)] | | [removed: [F-5](#s2E1A134956005CD8AA6C8F2CE09A6A53)] [added: [F-6](#sECEB9A33042450A898D7678E5B457523)] |

| | | | | | [Notes to Consolidated Financial [removed: Statements](#sEDDC6305CEC85089A2A23174B294B7DF)] [added: Statements](#s10D664457D565EB38922339B293669BF)] | | [removed: [F-7](#sEDDC6305CEC85089A2A23174B294B7DF)] [added: [F-8](#s10D664457D565EB38922339B293669BF)] |

| [removed: Exhibit Number] [added: Exhibit Number] | | [removed: Description] [added: Description] |

| [4.2](http://www.sec.gov/Archives/edgar/data/860731/000119312515378245/d57735dex101.htm) | | [Credit Agreement dated [removed: November 16, 2015,] [added: September 30, 2019,] among Tyler Technologies, Inc. and Wells Fargo Bank, N. A. as Administrative Agent and other lenders party hereto (filed as Exhibit 10.1 to our Form 8-K dated [removed: November 16, 2015,] [added: October 02, 2019,] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000119312515378245/d57735dex101.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073119000039/exhibit101creditagreem.htm)] |

| [removed: [10.5](#s0C727D4DADD55298929E6CC17430320E)] [added: [10.5](#s08A784510D5A5D3CB764C712B16B3FB7)] | | [Agreement and plan of merger by and among Tyler Technologies, Inc. [removed: and Dedomena Acquisition,] [added: TMP Subsidiary,] Inc., [removed: Socrata, Inc] [added: MP Holding Parent, Inc.] (filed as Exhibit [removed: 10.4] [added: 10.7] to our Form [removed: 10-Q] [added: 10-K] dated [removed: May 10, 2018] [added: February 20, 2019] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000024/tyl3312018exhibit104.htm)] [added: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073119000009/plan_ofxmergermicropactexh.htm)] |

| [removed: [*23](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit-23.htm)] [added: [*23](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit-23.htm)] | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit-23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit-23.htm)] |

| [removed: [*31.1](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit311.htm)] [added: [*31.1](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit311.htm)] | | [Rule 13a-14(a) Certification by Principal Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit311.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit311.htm)] |

| [removed: [*31.2](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit312.htm)] [added: [*31.2](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit312.htm)] | | [Rule 13a-14(a) Certification by Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit312.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit312.htm)] |

| [removed: [*32](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit321.htm)] [added: [*32](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit321.htm)] | | [Section 1350 Certification of Principal Executive Officer and Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/tyl12312018exhibit321.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073120000008/tyl12312019exhibit321.htm)] |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ H. Lynn [removed: Moore] [added: Moore, Jr.] |

| | | | | H. Lynn [removed: Moore] [added: Moore, Jr.] |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ John S. [removed: Marr] [added: Marr, Jr.] |

| | | | | John S. [removed: Marr] [added: Marr, Jr.] |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ Brian K. Miller |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ W. Michael Smith |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ Donald R. Brattain |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ Glenn A. Carter |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ Brenda A. Cline |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ J. Luther King |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ Daniel M. Pope |

| Date: February [removed: 20, 2019] [added: 19, 2020] | | By: | | /s/ Dustin R.Womble |

[removed: To] [added: To] the Shareholders and the Board of Directors of Tyler Technologies, [removed: Inc.][added: Inc.]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of Tyler Technologies, Inc. (the Company) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of comprehensive income, [removed: cash flows and] shareholders’ equity [added: and cash flows] for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: Company’s] [added: Company's] internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 20, 2019] [added: 19, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: February 20,] 2019

[removed: Opinion] [added: Opinion] on Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited Tyler Technologies, Inc.’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Tyler Technologies, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), consolidated balance sheets of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes and our report dated February [removed: 20, 2019] [added: 19, 2020] expressed an unqualified opinion thereon.

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Software licenses and royalties | $ | [removed: 93,441] [added: 100,205] | | | $ | [removed: 86,242] [added: 93,441] | | | $ | [removed: 83,733] [added: 86,242] | |

| Subscriptions | [removed: 220,547] [added: 296,352] | | | | [removed: 172,176] [added: 220,547] | | | | [removed: 142,657] [added: 172,176] | | |

| Exhibit Number | | Description |

| *101.INS | | Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags, including Cover Page XBRL tags, are embedded within the Inline XBRL Document. |

| *101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |

| *101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |

| *101.LAB | | Inline XBRL Extenstion Labels Linkbase Document. |

| *101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |

| *101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |

| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

| Date: February 19, 2020 | | By: | | /s/ H. Lynn Moore, Jr. |

| | | | | H. Lynn Moore, Jr. |

Report of Independent Registered Public Accounting Firm

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

| | Estimation of hours for certain progress-to-completion (POC) arrangements |

| *Description of* *the Matter* | As described in Note 1"Summary of Significant Accounting Policies" to the consolidated financial statements under "Revenue Recognition," many of the Company’s software arrangements involve "off-the-shelf" software. For arrangements that involve significant production, modification or customization of the software, or where software services are otherwise not considered distinct, the Company recognizes revenue over time based on a measurement of progress-to-completion (POC). The Company measures POC primarily using labor hours incurred, believing it best depicts the pattern of transfer of control to the customer, which occurs as the Company incurs costs on its contracts. Estimates of budgeted total hours for these arrangements requires management judgment. Auditing management’s estimates of total budgeted contract hours required additional audit effort due to the existence of management judgment required to make these estimates for arrangements that are completed over an extended period. These estimates require ongoing monitoring by management and may require revision over time. |

| *How We Addressed the Matter in Our Audit* | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to review contract progress-to-date and total budgeted hours, inclusive of executed contract amendments and change orders. To test the appropriateness of management’s assessment of contract progress-to-date, our audit procedures included, among others, obtaining an understanding of any increase or decrease to budgeted hours via contract amendments or change orders, observing quarterly POC meetings where the Company discussed contract progress-to-date and evaluated the appropriateness of contract estimated hours to complete, reviewing signed Company attestations as to the contracts’ progress toward completion, performing a sensitivity analysis to assess the impact of changes to the budgeted hours on the amount of revenue recognized, and performing an analysis of completed contracts to compare actual hours incurred upon completion to the original budget. |

| | Accounting for the acquisition of MP Holdings Parent, Inc. |

| *Description of* *the Matter* | As described in Note 2 "Acquisitions" to the consolidated financial statements, the Company completed three acquisitions during 2019 for net consideration of $226.5 million. The most significant of these was the acquisition of MP Holdings Parent, Inc. (MicroPact) for net consideration of $202.2 million. The transactions were accounted for as business combinations. Auditing the Company’s accounting for the MicroPact acquisition was more complex due to the significant estimations used by management in determining the fair values of assets acquired and liabilities assumed, in particular the fair values of identified intangible assets of $136.1 million, the most significant of which consisted of customer relationships and developed technology, both of which utilize prospective financial information. The Company valued customer relationships using the multi-period excess earnings model. The significant assumptions used in this model included the attrition rate, weighted average cost of capital and existing customer growth. The Company valued the developed technology using the relief-from-royalty method. The significant assumptions used in this method included the obsolescence rate and weighted average cost of capital. The significant assumptions used in the valuation of the intangible assets are forward-looking and could be affected by future economic and market conditions. |

| *How We Addressed the Matter in Our Audit* | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over its accounting for the MicroPact acquisition. For example, we tested controls over the recognition and measurement of consideration transferred, as well as management’s review of the valuation methods and significant underlying assumptions for each identified intangible asset. To test the estimated fair values of the acquired customer relationships and developed technology, we performed audit procedures that included, among others, evaluating the Company’s selection of the valuation methodology, evaluating the significant assumptions used in the Company’s valuation calculations and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. Additionally, we performed sensitivity analyses and compared significant assumptions to forecasts, the assumptions used to value similar assets in other acquisitions and to historical financial results of both the Company and the acquiree, among other procedures. We also evaluated the Company’s acquisition and related purchase accounting disclosures included in Note 2 "Acquisitions". |

February 19, 2020

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of MP Holdings Parent, Inc. (MicroPact), which is included in the 2019 consolidated financial statements of the Company and constituted 11.5% of total assets as of December 31, 2019 and 5.8% of total revenue for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of MicroPact.

Basis for Opinion

February 19, 2020

| Operating lease right-of-use assets | 18,992 | | | | — | | |

| | $ | 2,191,614 | | | $ | 1,790,963 | |

| Operating lease liabilities | 6,387 | | | | — | | |

| Operating lease liabilities, long-term | 16,822 | | | | — | | |

| | $ | 2,191,614 | | | $ | 1,790,963 | |

*See accompanying notes.*

| Net income | $ | 146,527 | | | $ | 147,462 | | | $ | 169,571 | |

| Provision for losses and sales adjustments - accounts receivable | 1,636 | | | | (569 | | ) | | 2,031 | | |

| Operating lease right-of-use assets - non cash | 5,397 | | | | — | | | | — | | |

| Accounts receivable | (65,738 | | ) | | (50,916 | | ) | | (33,091 | | ) |

| Operating lease liabilities | (6,113 | | ) | | — | | | | — | | |

| Capitalized software development costs | (4,804 | | ) | | — | | | | — | | |

*See accompanying notes.*

| Net income | — | | | — | | | | — | | | | — | | | | 146,527 | | | | — | | | — | | | | 146,527 | | |

| Retained earnings adjustment-adoption of Topic 842 Leases, net of taxes | — | | | — | | | | — | | | | — | | | | (1,116 | | ) | | — | | | — | | | | (1,116 | | ) |

| | | |

| [10.7](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/plan_ofxmergermicropactexh.htm) | | [Agreement and Plan of Merger by and among Tyler Technologies, Inc, TMP, Subsidiary, Inc, MP Holding Parent, Inc.](https://www.sec.gov/Archives/edgar/data/860731/000086073119000009/plan_ofxmergermicropactexh.htm) |

| *101 | | Instance Document |

| *101 | | Schema Document |

| *101 | | Calculation Linkbase Document |

| *101 | | Labels Linkbase Document |

| *101 | | Definition Linkbase Document |

| *101 | | Presentation Linkbase Document |

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | As Adjusted | | | | As Adjusted | | |

| | | | | | As Adjusted | | |

| | $ | 1,790,963 | | | $ | 1,611,351 | |

| Provision for losses - accounts receivable | 2,286 | | | | 4,110 | | | | 4,484 | | |

| Accounts receivable | (53,771 | | ) | | (35,170 | | ) | | (34,760 | | ) |

| Balance at December 31, 2015 (As Adjusted) | 48,148 | | | $ | 481 | | | $ | 607,755 | | | $ | (46 | ) | | $ | 341,191 | | | (11,374 | ) | | $ | (75,352 | ) | | $ | 874,029 | |

| Net income | — | | | — | | | | — | | | | — | | | | 113,701 | | | | — | | | — | | | | 113,701 | | |

| Issuance of shares pursuant to stock compensation plan | — | | | — | | | | (82,273 | | ) | | — | | | | — | | | | 827 | | | 105,800 | | | | 23,527 | | |

When it is determined that software is distinct, and the customer has the ability to take control of the software, we recognize revenue allocable to the software license fee when access to the software license is made available to the customer.

| Provisions for losses - accounts receivable | 2,286 | | | | 4,110 | | | | 4,484 | | |

| Deductions for accounts charged off or credits issued | (3,066 | | ) | | (2,079 | | ) | | (2,728 | | ) |

As of December 31, 2018, and December 31, 2017, total current and long-term accounts receivable, net of allowance for doubtful accounts, was $314.9 million and $258.3 million (as adjusted), respectively.

The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits and deductions for individuals and businesses.

See Note 7 - "Income Tax" for further discussion related to the Tax Act.

We did not record any goodwill impairment charges for the years ended December 31, 2018 and 2017.

We believe cost approximates fair value because of the relatively short duration of these investments.

Revenue from Contracts with Customers.

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers.

ASU No. 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations.

Topic 606 also includes Subtopic 340-40 Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer.

Collectively, we refer to ASU No. 2014-09 and Subtopic 340-40 as the "new standard."

We adopted the requirements of the new standard as of January 1, 2018, utilizing the full retrospective method of transition.

Adoption of the new standard resulted in changes to our accounting policies for revenue recognition, trade and other receivables, and deferred commissions as detailed below.

We applied the new standard using a practical expedient where the consideration allocated to the remaining performance obligations or an explanation of when we expect to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed.

The impact of adopting ASU No. 2014-09 on our total revenues for 2017 and 2016 was not material.

The impact of adopting the new standard on our retained earnings and deferred commissions is material.

The most significant impact of the new standard relates to our accounting for software license revenue.

Specifically, under the new standard, software license fees under perpetual agreements are no longer subject to 100% discount allocations from other performance obligations in the contract.