Tyler Technologies (TYL) 10-K risk factor changes: FY2021 vs FY2020

[added: 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 [added: Business, Including Our] Software Products

[removed: 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.

[removed: On] [added: In] September [removed: 29,] 2020, we filed a Current Report on Form 8-K reporting a security incident (the "Incident") involving ransomware disrupting access to some of our internal IT systems and telephone systems.

There [removed: is] [added: was] also no evidence of malicious activity on client networks associated with the Incident.

Although we [added: completed our investigation into the Incident and] believe we [removed: have] contained and recovered from the Incident, [removed: and that] we [removed: have taken and will continue to take appropriate remediation steps, we] are subject to risk and uncertainties as a result of the Incident.

[removed: We believe we are in the final phases of our investigation, but there] [added: There] can be no assurance as to what the ongoing impact of the Incident will be, if any.

*COVID-19 [removed: will] [added: may] adversely affect our business and results of operations.*

We expect that the continued global spread of COVID-19 [removed: (novel coronavirus) will] [added: may] negatively impact our business and financial results in fiscal year [removed: 2021.][added: 2022.]

As the virus [removed: has] [added: continues to] spread, it has resulted in authorities implementing [removed: numerous] [added: ongoing] measures to contain the virus, including travel bans and restrictions, quarantines, [removed: shelter-in-place orders,] and business limitations and shutdowns.

While we are unable to accurately predict the full impact that COVID-19 will [added: continue to] have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures and associated compliance, we do expect the pandemic [removed: will continue to] [added: may] negatively impact our revenues and other financial results.

We [removed: continue to] [added: may] see some [added: more immediate] impact on our business [removed: in the near term with] [added: should there be new] delays in government procurement processes and uncertainty around public sector budgets, [removed: as well as] [added: or new] delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues.

[removed: We expect appraisal] [added: Appraisal] and software implementations projects [removed: to] [added: may] be delayed [removed: as] [added: if] clients put projects on hold or slow projects by extending go-live dates.

Also, we expect software licenses and subscriptions revenues to be negatively affected [removed: due to] [added: if there are] delays in procurement processes.

For the twelve months ended December 31, [removed: 2020, 73%] [added: 2021, 79%] of our total revenue and earnings are relatively predictable as a result of our subscription and maintenance revenue, which is recurring in nature; thus the effect of the COVID-19 pandemic [removed: will] [added: may] not be fully reflected in our results of operations and overall financial performance until future periods.

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 [added: marketplace, an inability to successfully achieve internal forecasts or significant declines in our stock price, which may represent an indicator of impairment.]

- The attractiveness of our “evergreen” business [removed: strategy][added: model]

[removed: We believe our] [added: Our] market is highly fragmented with a large number of competitors that vary in size, product platform, and product scope.

We could face additional competition as other established and emerging companies enter the public sector software [removed: application] market and new products and technologies are introduced.

- Clients may elect subscription-based arrangements, which result in lower software license revenues in the initial year as compared to traditional, on-premise software license arrangements, but generate higher [removed: overall subscription-based] [added: recurring] revenues over the term of the contract

[removed: To maintain high standards of corporate governance, compliance, and public disclosure, we intend to invest all reasonably necessary resources to comply with evolving standards.This] [added: This] investment may result in an unforeseen increase in general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities, which may harm our operating results.

The lost revenue and containment, remediation, investigation, legal and other costs

We deployed supplemental remediation efforts as necessary and cooperated with law enforcement’s investigation.

*We depend on third parties with whom we engage or collaborate for certain projects, deliverables, and/or financial transaction processes.

If these parties fail to satisfy their obligations to us or we are unable to maintain these relationships, our operating results and business prospects could be adversely affected.*

To satisfy our obligations under client contracts, we often engage third parties to provide certain deliverables or fulfill certain requirements.

We may also use third parties to ensure that our services and solutions integrate with the software, systems, or infrastructure requirements of other vendors and service providers.

Our ability to serve our clients and deliver our solutions in a timely manner depends on our ability to retain and maintain relationships with third-party vendors and service providers and the ability of these third parties to meet their obligations in a timely manner, as well as on our effective oversight of their performance.

If any third party fails to perform on a timely basis the agreed-upon services, our ability to fulfill our obligations may be jeopardized.

Third-party performance deficiencies could result in breaches of our obligations with respect to, or the termination for default of, one or more of our client contracts.

A breach or termination for default could expose us to liability for damages and have an adverse effect on our business prospects, results of operations, cash flows and financial condition and our ability to compete for future contracts and orders.

A global economic slowdown, the COVID-19 pandemic, or similar circumstances could also adversely affect the businesses of our third-party providers, hindering their ability to provide the services on which we rely.

Our agreements with third parties typically are non-exclusive and do not prohibit them from working with our competitors.

If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenues could be impaired and our business, operating results or financial condition could be adversely affected.

In addition, we may act as subcontractor to a third-party prime contractor to secure new projects.

Subcontracting arrangements where we are not the prime contractor pose unique risks to us because we may not have control over the customer relationship, and our ability to generate revenue under such subcontracts may depend on the prime contractor, its performance and relationship with the customer, and its relationship with us.

We could suffer losses in the event a prime contract under which we serve as a subcontractor is terminated, whether for non-performance by the prime contractor or otherwise.

Upon a termination of the prime contract, our subcontract would similarly terminate, and the resulting contract loss could have an adverse effect on our business prospects, results of operations, cash flows, and financial condition and our ability to compete for future contracts and orders.

*We rely on third-party providers—including Amazon Web Services—for hosting services and other technology-related services needed to deliver certain of our cloud solutions.

Any disruption in the services provided by such third-party providers could adversely affect our business and subject us to liability.*

A material portion of our business is provided through software hosting services, which are sometimes hosted from and use computing infrastructure provided by third parties, including Amazon Web Services.

Third-party hosting service providers have no obligation to renew their agreements with us on commercially reasonable terms or at all.

If we are unable to renew these agreements on commercially reasonable terms, we may be required to transition to a new provider and we may incur significant costs and possible service interruption in connection with doing so.

In addition, such service providers could decide to close their facilities or change or suspend their service offerings without adequate notice to us.

Moreover, any financial difficulties, such as bankruptcy, faced by such service providers may have negative effects on our business, the nature and extent of which are difficult to predict.

Because we cannot easily switch third-party hosting service providers, any disruption with respect to our current providers would impact our operations and our business could be adversely impacted.

Problems faced by our hosting service providers could adversely affect the experience of our customers.

For example, Amazon Web Services has experienced significant service outages in the past and may do so again in the future.

In addition, the ongoing COVID-19 pandemic has disrupted and may continue to disrupt the supply chain of hardware needed to maintain these third-party systems or to run 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.*

We incorporate and include third-party software into and with certain of our products and solutions.

We also use third-party software and tools in certain areas of the development process for our solutions.

We anticipate that we will continue to rely on such third-party software and development tools in the future.

In addition, there can be no assurance that these third parties will continue to make their software or tools available to us on acceptable terms, or at all, not make their products available to our competitors on more favorable terms, invest the appropriate levels of resources in their products and services to maintain and enhance the capabilities of their software, or remain in business.

Any impairment in our relationship with these third parties or our ability to license or otherwise use their software or tools could have a material adverse effect on our business, results of operations, cash flow, and financial condition.

Although we believe that there are commercially reasonable alternatives to the third-party software and tools we currently license, this may not always be the case, or they may be difficult, time-consuming, or costly to replace.

In addition, although we maintain a supplier security evaluation process, if the third-party software or tools we use has or have errors, security vulnerabilities, or otherwise malfunctions, the functionality of our solutions may be negatively impacted, our customers may experience reduced service levels, and our business may suffer.

*Certain of our solutions utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could adversely affect our business.*

Certain of our solutions include software covered by open source licenses.

The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solutions.

It is possible under the terms of certain open source licenses, if we combine our proprietary software with open source software in a certain manner, that we could be required to release the source code of our proprietary software and make our proprietary software available under open source licenses.

Our

We will continue to deploy supplemental remediation efforts as necessary.

As part of our immediate response to the Incident, we (1) shut down points of access to external systems and began investigating and remediating the problem; (2) engaged outside IT security and forensics experts to conduct a detailed review and help securely restore affected systems; (3) implemented targeted monitoring systems to supplement the systems we already had in place; and (4) notified law enforcement.

We have cooperated with their investigation throughout.

The Incident caused an interruption in parts of our business.

We incurred $4.2 million in third party costs associated with the Incident as of December 31, 2020.

It is expected that we will continue to incur costs related to our response, remediation, and investigatory efforts relating to the Incident.

*Hosting services for some of our products are dependent upon the uninterrupted operation of data centers.*

A material portion of our business is provided through software hosting services.

In addition, some professional services relate to training and require the availability of the client.

We expect a negative impact on our software services and appraisal services revenues.

We perform our annual goodwill impairment analysis as of the first day of the second quarter of each year.

marketplace, an inability to successfully achieve internal forecasts or significant declines in our stock price, which may represent an indicator of impairment.

- Prospective clients’ contracting decisions are often made in the last few weeks of a quarter

*Increases in service revenue as a percentage of total revenues could decrease overall margins.*

We realize lower margins on software and appraisal service revenues than on license revenue.

The majority of our contracts include both software licenses and software services.

Therefore, an increase in the percentage of software service and appraisal service revenue compared to license revenue could have a detrimental impact on our overall gross margins and could adversely affect operating results.

- Adoption of new accounting standards

For a comparison of our Results of Operations for the years ended December 31, [removed: 2019] [added: 2020,] and [removed: 2018] [added: 2019,] and our Cash Flow discussion for the year ended December [removed: 2019,] [added: 2020,] see “Part II, Item 7.

Management's Discussion and Analysis of Financial Conditions and Results of Operations” of our Annual Report on Form 10-K for the year ended December [removed: 2019] [added: 31, 2020,] as filed with the SEC on February [removed: 20, 2020.][added: 19, 2021.]

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) the [added: ongoing] effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; (2) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (3) disruption to our business and harm to our competitive position resulting from cyber-attacks and security vulnerabilities; (4) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (5) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (6) material portions of our business require the Internet infrastructure to be adequately maintained; (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; (9) technological and market risks associated with the development of new 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 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.

We provide integrated information management solutions and services for the public [removed: sector, with a focus on local governments.][added: sector.]

We develop and market a broad line of software products and services to address the IT needs of cities, counties, [removed: schools] [added: states, schools, federal agencies,] and other [removed: local] government entities.

We also provide subscription-based services such as software as a service (“SaaS”), [removed: which primarily utilize the Tyler private cloud,] [added: transaction] and [added: payment processing solutions, and] electronic document filing solutions (“e-filing”), which simplify the filing and management of court related documents.

Our products generally automate [removed: eight] [added: nine] major functional areas: (1) financial management and education, (2) courts and justice, (3) public safety, (4) property appraisal and tax, (5) planning, regulatory and maintenance, (6) land and vital records management, (7) data and [removed: insights and] [added: insights,] (8) platform [removed: technologies.][added: technologies, and (9) NIC digital government and payments.]

We report our results in [removed: two] [added: three] segments.

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

The Appraisal and Tax (“A&T”) segment provides systems and software that automate the appraisal and assessment of real and personal property, land and vital records management as well as [added: provides] property appraisal outsourcing services for local governments and taxing authorities.

As of January 1, [removed: 2020, the land and vital records management business unit,] [added: 2021, certain administrative costs related to information technology,] which [removed: was] [added: were] previously reported in the ES [removed: segment, was] [added: and A&T segments, were] moved to the [removed: A&T] [added: Corporate] segment to reflect changes in the way [removed: in which] management makes operating decisions, allocates resources, and manages the growth and profitability of the Company.

Prior year amounts for [removed: the ES and A&T] [added: all] segments have been adjusted to reflect the segment change.

See Note [removed: 14 -] [added: 15,] "Segment and Related [removed: Information"] [added: Information,"] in the notes to the consolidated financial statements for additional information.

For the twelve months ended December 31, [removed: 2020,] [added: 2021,] total revenues increased [removed: 2.8%] [added: 42.6%] compared to the prior year.

Excluding the impact of acquisitions, total revenues increased [removed: 1.4%] [added: 8.9%] compared to prior year.

Revenues from acquisitions contributed [removed: 1.4%] [added: 33.7%] of growth for the twelve months ended December 31, [removed: 2020.][added: 2021.]

Subscriptions revenue grew [removed: 18.3%] [added: 123.7%] for the twelve months ended December 31, [removed: 2020,] [added: 2021,] due to [removed: a gradual] [added: an ongoing] shift toward [added: a] cloud-based, software as a service [removed: business,] [added: business model,] as well as [removed: continued strong growth in our] [added: the inclusion of] transaction-based revenues from [removed: online payments] [added: NIC’s digital government] and [removed: e-filing revenues from courts.][added: payments processing businesses.]

Excluding the impact of recent acquisitions, subscriptions revenue increased [removed: 17.2%] [added: 23.4%] for the twelve months ended December 31, [removed: 2020.][added: 2021.]

Our backlog at December 31, [removed: 2020] [added: 2021] was [removed: $1.59] [added: $1.80] billion, a [removed: 9.4%] [added: 12.6%] increase from last year.

Subscriptions and maintenance are considered recurring revenue sources and comprised approximately [removed: 73.3%] [added: 79.1%] of our revenue in [removed: 2020.][added: 2021.]

In addition, we also monitor our customer base and [removed: churn as we] [added: turnover, which] historically [removed: have experienced] [added: is] very [removed: low customer turnover.][added: low.]

During [removed: 2020,] [added: 2021,] based on our number of customers, turnover was approximately 2%.

As of December 31, [removed: 2020,] [added: 2021,] our total employee count increased to [removed: 5,536] [added: 6,778] from [removed: 5,368] [added: 5,536] at December 31, [removed: 2019.][added: 2020, including 1,063 employees who joined Tyler through acquisitions in 2021.]

[removed: *Impact] [added: *Impacts] of the COVID-19 Pandemic*

[removed: We] [added: Also, we] have [removed: addressed those challenges through adapting] [added: adapted] the way we do business [removed: –] [added: by] encouraging web and video conferencing, conducting virtual sales demonstrations and delivering professional services [removed: remotely.][added: remotely, which result in increases in staff utilization rates and billable time.]

[removed: The] [added: Although market activity improved throughout 2021 in most sectors of our business and continues to trend to near or above pre-pandemic levels, the] pandemic [removed: has delayed] [added: continues to delay] some government procurement processes and is expected to impact our ability to complete certain implementations, negatively impacting our revenue.

For the twelve months ended December 31, [removed: 2020,] [added: 2021, excluding] the impact of [added: 2021 acquisitions,] the [added: impact of the] COVID-19 pandemic resulted in lower revenues from software [removed: licenses, software services, appraisal services, and other revenues.][added: services.]

Lower revenues compared to prior periods were [added: partially] offset by [added: continued] cost savings attributed to lower spend on [removed: travel,] [added: travel and] user conferences and trade show [removed: expenses, health claims and other employee-related] expenses.

[removed: Recurring revenues] [added: Revenues] from subscriptions and [removed: maintenance] [added: maintenance, which we consider recurring in nature,] comprised [removed: 73.3%] [added: 79.1%] of our total consolidated revenue for the twelve months ended December 31, [removed: 2020,] [added: 2021,] and include transaction-based revenue streams such as [removed: e-filing] [added: transaction] and [removed: online payments.][added: payment processing, e-filing, and digital government services.]

As of December 31, [removed: 2020,] [added: 2021,] we had [removed: $758.5] [added: $407.8] million in cash and investments and [removed: no outstanding borrowings] [added: available borrowing capacity of $500.0 million] under our [removed: credit facility.][added: 2021 Credit Agreement.]

During the [removed: second] [added: fourth] quarter of [removed: 2020,] [added: 2021,] we completed our annual assessment of goodwill which did not result in an impairment charge.

[removed: Since our assessment in the second quarter of 2020,] [added: During 2021,] we have recorded no impairment to goodwill as no triggering events or changes in circumstances [added: indicating a potential impairment have] occurred as of period-end.

[removed: We do not expect] [added: The] adoption of this standard [removed: to] [added: did not] have a material [removed: effect] [added: impact] on our consolidated financial statements.

The local government software market continues to be [removed: active,] [added: active with sales activity trending at or near pre-pandemic levels in most sectors of our business,] and our backlog at December 31, [removed: 2020] [added: 2021] reached [removed: $1.59] [added: $1.80] billion, a [removed: 9.4%] [added: 12.6%] increase from the prior year.

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

Subscription-based services consist of revenues derived from SaaS arrangements, which primarily utilize the Tyler private cloud, [added: transaction] and [added: payment processing,] electronic filing [removed: transactions.][added: transactions, and digital government services.]

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

However, in those instances whereby variable consideration exists, we include in our [removed: estimates] [added: estimates,] additional revenue for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably and its realization is probable.

We maintain allowances for losses and sales adjustments, which [added: losses] are [removed: provided] [added: recorded against revenue] at the time the [removed: revenue] [added: loss] is [removed: recognized.][added: incurred.]

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

On April 21, 2021, the Company acquired NIC, Inc. (“NIC”) resulting a new reportable segment, as its

operating results meet the criteria as a reportable segment.

The operating results of NIC are included with the operating results of the NIC segment from the date of acquisition.

*Recent Acquisitions*

On September 9, 2021, we acquired all the equity interest of Ultimate Information Systems, Inc. (dba Arx).

Arx is a cloud-based platform which creates accessible technology to enable a modern-day police force that is fully transparent, accountable, and a trusted resource to the community it serves.

On September 1, 2021, we acquired VendEngine, Inc (VendEngine) as contemplated by the Agreement and Plan of Merger dated June 3, 2021.

As result of the merger, VendEngine became a direct subsidiary of the Company.

VendEngine is a cloud-based software provider focused on financial technology for the corrections market.

The total purchase price, net of cash acquired of $1.7 million, was approximately $83.8 million, consisting of $80.2 million paid in cash, and approximately $5.4 million related to indemnity holdbacks, subject to certain post-closing adjustments.

On April 21, 2021 (“the Closing Date”), we acquired NIC as contemplated by the Agreement and Plan of Merger dated February 9, 2021.

As result of the merger, NIC became a direct subsidiary of the Company and NIC’s subsidiaries became indirect subsidiaries.

NIC is a leading digital government solutions and payment company that primarily serves federal and state government agencies.

The total purchase price, net of cash acquired of $331.8 million, was approximately $2.0 billion, consisting of cash paid of $2.3 billion and $1.9 million of purchase consideration related to the conversion of unvested restricted stock awards, subject to post-closing adjustments.

On March 31, 2021, we completed two acquisitions, Glass Arc, Inc. (dba ReadySub) and DataSpec, Inc. (DataSpec), for the combined purchase price of $12.1 million.

*2021 Credit Agreement*

The 2021 Credit Agreement provides for (1) a senior unsecured revolving credit facility in an aggregate principal amount of up to $500 million, including sub-facilities for standby letters of credit and swingline loans (the “Revolving Credit Facility”), (2) an amortizing five-year term loan in the aggregate amount of $600 million (the “Term Loan A-1”), and (3) a non-amortizing three-year term loan in the aggregate amount of $300 million (the “Term Loan A-2”) and, together (the “Term Loans”).

The 2021 Credit Agreement matures on April 20, 2026.

The 2021 Credit Agreement replaces and terminates the Company’s previous $400 million credit facility pursuant to the Credit Agreement dated as of September 30, 2019 (the “2019 Credit Agreement”).

The Company’s previously announced commitment from Goldman Sachs Bank USA for a $1.6 billion 364-day senior unsecured bridge loan facility also terminated on the Closing Date.

The net proceeds from the borrowings under the 2021 Credit Agreement were $1.1 billion, net of debt discounts of $7.2 million and debt issuance costs of $4.9 million and $6.4 million of commitment fees paid related to the terminated $1.6 billion unsecured bridge loan facility.

As of December 31, 2021, we had $755.0 million in outstanding principal and available borrowing capacity of $500 million under our 2021 Credit Agreement.

*0.25% Convertible Senior Notes*

On March 9, 2021, we issued 0.25% Convertible Senior Notes due 2026 in the aggregate principal amount of $600.0 million (“the Convertible Senior Notes” or “the Notes”).

The Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 9, 2021, with U.S. Bank National Association, as trustee.

The net proceeds from the issuance of the Convertible Senior Notes were $591.4 million, net of initial purchasers’ discounts of $6.0 million and debt issuance costs of $2.6 million.

The Convertible Senior Notes are senior, unsecured obligations and are (i) equal in right of payment with our future senior, unsecured indebtedness; (ii) senior in right of payment to our future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to our future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries.

The Convertible Senior Notes accrue interest at a rate of 0.25% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021.

The Convertible Senior Notes mature on March 15, 2026, unless earlier repurchased, redeemed or converted.

As of December 31, 2021, we had outstanding an aggregate principal amount of $600 million of our Convertible Senior Notes.

*2021 Operating Results*

Software services revenues have been affected by a decline in billable travel revenue, as most services are now being delivered virtually rather than on-site.

As travel restrictions are relaxed, software services and appraisal services revenues are increasing.

For the twelve months ended December 31, 2021, total revenues include COVID-related subscriptions revenue and software services revenues of $75.0 million from NIC's TourHealth, pandemic unemployment services, and Virginia rent relief offerings.

We currently expect that these low margin COVID-related revenues from TourHealth and pandemic unemployment will wind down in the first half of 2022, while revenues from the Virginia rent relief program are expected to continue through 2022.

We had outstanding an aggregate principal amount of $600 million of our Convertible Senior Notes, and $755 million outstanding under our 2021 Credit Agreement as of December 31, 2021.

Therefore, we have recorded no impairment as of and for the period ended December 31, 2021.

We identified no indicators of impairment to long-lived and other assets and therefore, no impairment was recorded as of and for the period ended December 31, 2021.

However, due to significant uncertainty surrounding COVID-19 and market conditions, there are no assurances conditions will not deteriorate in the future.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 - *Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity* (“ASU 2020-06”), which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature.

Revenues for e-filing are derived from transaction fees and, in some cases, fixed fee arrangements.

Other transaction-based fees primary relate to online payment services.

In March 2020, the World Health Organization declared the outbreak of a COVID-19 pandemic, which continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns.

While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures and associated compliance, the current environment has negatively impacted our revenues for fiscal year 2020.

Because an increasing portion of our revenues are recurring, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We continue to see some impact on our business in the near term with delays in government procurement processes and uncertainty around public sector budgets, as well as delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues.

Our priorities during this crisis are protecting the health and safety of our employees and our clients.

Our IT systems and applications support a remote workforce.

Prior to the pandemic, many of our employees worked remotely.

In response to the pandemic, we encouraged all employees who are able to do so to work from home, equipping them with resources necessary to continue uninterrupted.

We were able to transition the vast majority of our employees to this work-from-home posture.

This reduces the number of team members in our offices to those uniquely needed for essential on-site services, such as network operations support staff, and allows for “social distancing” as directed by the Centers for Disease Control ("CDC").

It could also negatively impact the timing of client payments to us.

Lower software licenses compared to prior periods are attributed to slower sales cycles as government procurement processes are delayed and contract signings have been pushed to future periods.

Software services and appraisal services revenue declines are attributed to delays in implementations caused by travel restrictions and shelter-in-place orders in effect during the period.

Other revenues were lower compared to prior periods primarily as a result of the cancellation of our 2020 Connect user conference.

If and as travel restrictions are relaxed, we expect software services and appraisal services revenues to increase as the limited number of our clients who require that all or a portion of their services be delivered onsite will be able to receive those services.

Also, we are adapting by changing the way we do business, encouraging web and video conferencing, conducting virtual sales demonstrations and delivering professional services remotely, which result in increases in staff utilization rates and billable time.

We also have substantial additional liquidity available through our undrawn $400 million credit facility, which can be expanded through an accordion feature.

No impairments of other assets were recorded as of the balance sheet date as no triggering events or changes in circumstances indicating a potential impairment have occurred as of period-end to require such an impairment; however, due to significant uncertainty surrounding the pandemic and market conditions, management’s judgment regarding this could change in the future.

*Security Incident*

On September 29, 2020, we filed a Current Report on Form 8-K reporting a security incident (the "Incident") involving ransomware disrupting access to some of our internal IT systems and telephone systems.

There is no evidence that the environments where we host client applications were affected, and our hosting services to those clients were not interrupted.

There is also no evidence of malicious activity on client networks associated with the Incident.

We contained the Incident and recovered from it, resuming normal operations with our clients.

We will continue to deploy supplemental remediation efforts as necessary.

As part of our immediate response to the Incident, we (1) shut down points of access to external systems and began investigating and remediating the problem; (2) engaged outside IT security and forensics experts to conduct a detailed review and help securely restore affected systems; (3) implemented targeted monitoring systems to supplement the systems we already had in place; and (4) notified law enforcement.

We are have cooperated with their investigation throughout.

We promptly notified our clients of the Incident and provided timely updates to our clients through direct communications and updates to our website.

Although we believe we have contained and recovered from the Incident, and that we have taken and will continue to take appropriate remediation steps, we are subject to risk and uncertainties as a result of the Incident.

We believe we are in the final phases of our investigation, but there can be no assurance as to what the ongoing impact of the Incident will be, if any.

The Incident caused an interruption in parts of our business.

We estimate that as a result of the Incident, revenue (primarily software services) for the year ended December 31, 2020 was reduced by approximately $1.5 million; however, insurance reimbursements pertaining to lost revenue represent a contingent gain and any recovery of these revenues will be recorded when received.

We incurred $4.2 million in costs associated with the Incident as of December 31, 2020.

As of December 31, 2020, we have recorded $1.1 million of accrued insurance recoveries and received $2.4 million of insurance recoveries related to the Incident.

The recorded costs consisted primarily of payments to third-party service providers and consultants, including legal fees, and enhancements to our cybersecurity measures.

It is expected that we will continue to incur costs related to our response, remediation, and investigatory efforts relating to the Incident.

We maintain cybersecurity insurance coverage in an amount that we believe is adequate.

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, available for-sale debt securities, 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 an allowance for losses.

[removed: Loans] [added: Borrowings] under the [added: Revolving] Credit Facility [added: and the Term Loan A-1 will] bear interest, at [removed: Tyler’s] [added: the Company’s] option, at a per annum rate of either (1) [removed: Wells Fargo Bank’s] [added: the Administrative Agent’s] prime [added: commercial lending] rate (subject to certain higher rate determinations) [added: (the “Base Rate”)] plus a margin of 0.125% to 0.75% or (2) the one-, [removed: two-,] three-, [removed: or six-month] [added: six-, or, subject to approval by all lenders, twelve-month] LIBOR rate plus a margin of 1.125% to 1.75%.

As of December 31, 2021, we had $755.0 million in outstanding principal under our 2021 Credit Agreement and available borrowing capacity under the 2021 Credit Agreement was $500.0 million.

The Term Loan A-2 will bear interest, at the Company’s option, at a per annum rate of either (1) the Base Rate plus a margin of 0% to 0.5% or (2) the one-, three-, or six-, or, subject to approval by all lenders, twelve-month LIBOR rate plus a margin of 0.875% to 1.5%.

During the year ended December 31, 2021 our effective average interest rate for our borrowings was 1.84%.

As of December 31, 2021, our interest rate was 1.55% for our outstanding borrowings.

Based on the debt under the 2021 Credit Agreement, the aggregate outstanding principal as of December 31, 2021 is $755.0 million, and each quarter point change in interest rates would result in a $1.9 million change in annual interest expense.

As of December 31, 2020, our interest rate was 3.38% under the prime rate option or approximately 1.27% under the 30-day LIBOR option.

As of December 31, 2020, we had no outstanding borrowings under the Credit Facility and therefore are not subject to any interest risk.

Tyler Technologies, Inc. (“Tyler”) is a major provider of integrated information management solutions and services for the public [removed: sector, with a focus on local governments.][added: sector.]

[removed: For] [added: We offer our] clients [added: on-premises software solutions and for clients] who prefer not to physically acquire the software and hardware, most of our software applications can be delivered as software as a service [removed: (“SaaS”), which primarily utilize the Tyler private cloud.][added: (“SaaS”).]

[removed: In addition, we] [added: We] provide electronic document filing (“e-filing”) solutions, which simplify the filing and management of court documents.

In addition, the acquisition of new technology typically enables local governments to operate more efficiently, [added: more securely,] and often provides a measurable return on investment that justifies the purchase of software and related services.

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: $19.5] [added: $23.6] billion in [removed: 2021] [added: 2022] to [removed: $25.1] [added: $32.3] billion in [removed: 2024.][added: 2025.]

The professional services and support segments of the market are expected to expand from [removed: $29.0] [added: $32.0] billion in [removed: 2021] [added: 2022] to [removed: $33.5] [added: $38.4] billion in [removed: 2024.][added: 2025.]

Application and vertical specific software sales in the primary and secondary education segments of the market is expected to expand from [removed: $3.0] [added: $4.9] billion in [removed: 2021] [added: 2022] to [removed: $4.3] [added: $6.0] billion in [removed: 2024] [added: 2025] while professional services and support are expected to grow from [removed: $3.0] [added: $5.1] billion in [removed: 2021] [added: 2022] to [removed: $3.7] [added: $6.3] billion in [removed: 2024.][added: 2025.]

We provide a comprehensive and flexible suite of products and services that addresses the information technology needs of cities, counties, [removed: schools] [added: states, schools, federal agencies,] and other [removed: local] government entities.

- [removed: Sales of software] [added: Software] licenses and royalties

- Subscription-based [removed: arrangements][added: services]

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

Many of our software applications include Internet-accessible solutions that allow for real-time public access to a variety of information or that allow the public to transact business with [removed: local] governments [removed: via the Internet.][added: online.]

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

We also offer SaaS [removed: arrangements, which generally utilize the Tyler private cloud,] [added: arrangements] for clients who do not wish to maintain, update and operate these systems or to make up-front capital expenditures to implement these advanced technologies.

Software Licenses [added: and Royalties]

Our financial management and education solutions are enterprise resource planning systems for [removed: local governments,] [added: the public sector,] which integrate information across all facets of a client organization.

Tyler’s financial management and education solutions include Web components that enhance [removed: local] governments’ service capabilities by facilitating online access to information for both employees and citizens and enabling online transactions.

Other transaction-based fees primarily relate to [added: digital government services and] online payment services, which are [added: sometimes] offered with the assistance of third-party vendors, and online dispute resolution solutions.

At the culmination of the implementation process, a data implementation team is generally onsite at the client’s facility [added: or available via remote video conferencing] to ensure the smooth go-live with the new system.

Training can be provided in our training centers, onsite at clients’ locations, [removed: or] at meetings and [removed: conferences] [added: conferences, or remotely,] and can be customized to meet clients’ requirements.

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

We compete on the basis of, among other things, delivering to clients our deep domain expertise in [removed: local] government operations through the highest value products and services in the market.

We believe we have achieved a reputation as a premium product and service provider to the [removed: local] government market.

We believe that the addition of [removed: such] [added: new] features [added: and applications] enhances the market appeal of our core products.

While we currently have clients in all 50 states, Canada, the Caribbean, the United Kingdom, Australia, and other international locations, [removed: not all] [added: some] of our solutions have [added: not fully] achieved nationwide geographic penetration.

We also intend to continue to expand our customer base to include [removed: more large governments.][added: larger jurisdictions.]

We have a large recurring revenue base from maintenance and support and subscription-based services, which generated revenues of [removed: $818.2 million,] [added: $1.3 billion,] or [removed: 73%] [added: 79%] of total revenues, in [removed: 2020.][added: 2021.]

Subscription-based revenues have been our fastest growing revenue category over the past five years, increasing from [removed: $142.7] [added: $173.5] million in [removed: 2016] [added: 2017] to [removed: $350.6] [added: $784.4] million in [removed: 2020.][added: 2021.]

We believe that our stable management team, financial strength and growth opportunities, as well as our leadership position in the [removed: local government] [added: public sector] market, enhance our attractiveness as an employer for highly skilled employees.

- Pursue [removed: selected] strategic acquisitions.

[removed: While we expect to primarily grow internally, from time to time we] [added: We] selectively pursue strategic acquisitions that provide us with one or more of the following:

[removed: It will assist Tyler] [added: AWS is assisting us] in accelerating innovation and the development of strategic initiatives.

We market our products and services [added: primarily] through direct sales and marketing personnel located throughout the United States.

We are active in numerous national, state, county, and local government [removed: associations,] [added: associations] and participate in annual meetings, trade shows, and educational events.

During [removed: 2020,] [added: 2021,] approximately [removed: 42%] [added: 30%] of our revenue was attributable to ongoing support and maintenance agreements.

Many of these competitors are smaller companies that may [removed: be able to] offer less expensive solutions than ours.

Many of these firms operate within a specific geographic area [removed: and/or] [added: and / or] in a narrow product or service niche.

We also occasionally compete with central internal information service departments of [removed: local] governments, which requires us to persuade the end-user department to discontinue service by its own personnel and outsource the service to us.

At December 31, [removed: 2020,] [added: 2021,] our revenue backlog was approximately [removed: $1.59] [added: $1.80] billion, compared to [removed: $1.46] [added: $1.59] billion at December 31, [removed: 2019.][added: 2020.]

The backlog generally represents signed contracts under which the revenue has not been [removed: recognized as of year-end.][added: recognized.]

In addition, we provide digital government services and payment solutions.

For the national and international government markets, application and vertical specific software sales is expected to expand from $38.5 billion in 2022 to $53.8 billion in 2025 while professional services and support are expected to grow from $63.1 billion in 2022 to $74.4 billion in 2025.

- NIC Digital Government Services

Also our product solutions provide a suite of financial and communications applications ranging from deposit technologies for commissary, ordering, and warehouse technology to a host of informational, electronic communications, security, accounting, and financial trust management components for correctional facilities.

*NIC Digital Government Services*

On April 21, 2021, we acquired NIC, Inc. (“NIC”).

NIC delivers user-friendly digital services that make it easier and more efficient for citizens and businesses to interact with government providing valuable conveniences like applying for unemployment insurance, submitting business filings, renewing licenses, accessing information and making secure payments without visiting a government office.

NIC digital government services designs, builds, and operates digital government services on an enterprise-wide basis on behalf of state and local governments desiring to provide access to government information and to complete secure government-based transactions through multiple digital channels.

These digital government services consist of websites and applications NIC has built that allow consumers, such as businesses and citizens, to access government information, complete transactions and make electronic payments.

NIC also provides payment processing services, software development and digital government services, other than those services provided under state enterprise contracts, to federal agencies as well as state and local governments.

Many of our software arrangements involve “off-the-shelf” software.

We recognize the revenue allocable to “off-the-shelf” software licenses and specified upgrades at a point in time when control of the software license transfers to the customer, unless the software is not considered distinct.

We consider "off-the-shelf" software to be distinct when it can be added to an arrangement with minor changes in the underlying code, it can be used by the customer for the customer’s purpose upon installation, and remaining services such as training are not considered highly interdependent or interrelated to the product's functionality.

For arrangements that involve significant production, modification or customization of the software, or where software services are otherwise not considered distinct, we recognize revenue over time by measuring progress-to-completion.

We measure progress-to-completion primarily using labor hours incurred as it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts.

These arrangements are often implemented over an extended period and occasionally require us to revise total cost estimates.

Amounts recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost estimates.

Changes to total estimated contract costs, if any, are recorded in the period they are determined.

Estimated losses on uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.

Software license fees are billed in accordance with the contract terms.

Typically, a majority of the fee is due when access to the software license is made available to the customer and the remainder of the fee due over a passage of time stipulated by the contract.

We record amounts that have been invoiced in accounts receivable and in deferred revenue or revenues, depending on whether the revenue recognition criteria have been met.

We recognize royalty revenue when the sale occurs under the terms of our third-party royalty arrangements.

Currently, our third-party royalties are recognized on an estimated basis and adjusted if needed, when we receive notice of amounts we are entitled to receive.

We typically receive notice of royalty revenues we are entitled to and billed on a quarterly basis in the quarter immediately following the royalty reporting period and adjustments have not been significant.

We regularly add new products and services to our portfolio through internal product development as well as acquisitions.

- Accelerate our move to the cloud.

We have offered most of our core products in both an on-premises license model and a cloud-based subscription model for several years and have seen a steady increase in the percentage of new software clients choosing our cloud model in recent years.

Beginning in late 2019, we moved our approach to sales from “cloud-neutral” to “cloud-first,” with an increasing preference to provide our solutions in the cloud.

We are making significant investments in optimizing our products to be deployed efficiently in the public cloud and over a multi-year period are transitioning from hosting clients in Tyler’s own data centers to utilizing Amazon Web Services (“AWS”) for cloud hosting.

In particular, we believe that the acquisition of NIC in April 2021 provides us with significant opportunities to sell Tyler software products into NIC’s client base and to provide NIC’s payment services to Tyler’s client base.

For certain products we also utilize a partner network for both sales and professional services, primarily in the state and federal markets.

At the state and federal levels, clients include Chief Information Officers and agency heads.

The majority of Tyler team members worked remotely for most of 2021 until we officially returned to our offices on January 24, 2022.

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 each week which we refer to as flex-work.

This represents an increase over 2020 turnover which decreased during the pandemic.

The most frequent factor cited by team members leaving Tyler in 2021 was career change with a notable number of team members returning to roles in the public sector or taking roles in the education or healthcare sector.

Compensation was also cited as a factor.

Job offer compensation levels for roles in the tech sector continued to increase in the last half of 2021 at levels we have not experienced in well over a decade.

For example, in 2021:

A majority of our clients have our software installed in-house.

Historically, we have had a greater proportion of our annual revenues in the second half of our fiscal year due to governmental budget and spending cycles and the timing of system implementations for clients desiring to “go live” at the beginning of the calendar year.

In 2010, we began providing e-filing for courts and law offices, which simplifies the filing and management of court related documents.

We believe revenue from e-filing solutions will continue to grow over time as more local and state governments mandate electronic document filings.

We also offer solutions that allow the public to access data and conduct transactions with local governments, such as paying traffic tickets, property taxes and utility bills online.

Because we sell primarily “off-the-shelf” software, increased sales of the same solutions result in incrementally higher gross margins.

The COVID-19 pandemic had a significant impact on our human capital management practices as the majority of our workforce pivoted to work remotely in March 2020.

The COVID-19 pandemic created stressful conditions in 2020.

In response to the pandemic, we implemented significant changes that we determined were in the best interest of our employees, including moving the vast majority of our employees to work from home, while implementing additional safety measures for employees continuing critical on-site work.

In addition to safety protocols and the establishment of local site Return-To-Office teams, we:

a.Introduced enhanced mental health benefits and resources for team members and their families through our employee assistance programs in the U.S., Canada and the Philippines

b.Covered telehealth visits for medical and mental health services at 100%

c.Provided coverage of all COVID-19 testing and treatment under all Company medical plans at no cost to employees and dependents

d.Provided unlimited paid time off for any team member who was awaiting or had received a positive COVID-19 test result or was unable to perform their duties from home, whether due to the nature of their work or a client request.

We continue to invest in recruiting diverse technical talent, in part through our partnership with the Ada Developer’s Academy, a non-profit, tuition-free coding school for women and gender diverse adults.

In 2020, our diversity, equity and inclusion (DEI) efforts included focused DEI discussions at the executive and local team levels, assessment of DEI effectiveness across the HR lifecycle, hiring manager training, the development of a Women’s Leadership Mentoring program, and support and advocacy for local DEI councils at Tyler.

We encourage you to review our 2020 Corporate Responsibility Report located at http://www.tylertech.com for more detailed information regarding our Human Capital programs and initiatives.

For the Fiscal Year Ended December 31, [removed: 2020][added: 2021]

The aggregate market value of the voting stock held by non-affiliates of the registrant was [removed: $13,728,101,720] [added: $18,292,141,436] based on the reported last sale price of common stock on June 30, [removed: 2020,] [added: 2021,] 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: 17, 2021] [added: 22, 2022] was [removed: 40,576,730][added: 41,348,917]

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: 11, 2021.][added: 12, 2022.]

| Item 1. | | | [removed: [Business](#i8b7048d9282b49808c9b0dc46622e6f3_13)] [added: [Business](#i70c5999dd4304fe59500a9cbbfd041cc_13)] | | | [removed: [3](#i8b7048d9282b49808c9b0dc46622e6f3_13)] [added: [3](#i70c5999dd4304fe59500a9cbbfd041cc_13)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i8b7048d9282b49808c9b0dc46622e6f3_16)] [added: Factors](#i70c5999dd4304fe59500a9cbbfd041cc_16)] | | | [removed: [11](#i8b7048d9282b49808c9b0dc46622e6f3_16)] [added: [12](#i70c5999dd4304fe59500a9cbbfd041cc_16)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i8b7048d9282b49808c9b0dc46622e6f3_19)] [added: Comments](#i70c5999dd4304fe59500a9cbbfd041cc_19)] | | | [removed: [18](#i8b7048d9282b49808c9b0dc46622e6f3_19)] [added: [21](#i70c5999dd4304fe59500a9cbbfd041cc_19)] | | |

| Item 2. | | | [removed: [Properties](#i8b7048d9282b49808c9b0dc46622e6f3_22)] [added: [Properties](#i70c5999dd4304fe59500a9cbbfd041cc_22)] | | | [removed: [18](#i8b7048d9282b49808c9b0dc46622e6f3_22)] [added: [21](#i70c5999dd4304fe59500a9cbbfd041cc_22)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i8b7048d9282b49808c9b0dc46622e6f3_25)] [added: Proceedings](#i70c5999dd4304fe59500a9cbbfd041cc_25)] | | | [removed: [18](#i8b7048d9282b49808c9b0dc46622e6f3_25)] [added: [21](#i70c5999dd4304fe59500a9cbbfd041cc_25)] | | |

| Item 4. | | | [Submission of Matters to a Vote of Security [removed: Holders](#i8b7048d9282b49808c9b0dc46622e6f3_28)] [added: Holders](#i70c5999dd4304fe59500a9cbbfd041cc_28)] | | | [removed: [18](#i8b7048d9282b49808c9b0dc46622e6f3_28)] [added: [21](#i70c5999dd4304fe59500a9cbbfd041cc_28)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#i8b7048d9282b49808c9b0dc46622e6f3_34)] [added: Securities](#i70c5999dd4304fe59500a9cbbfd041cc_34)] | | | [removed: [19](#i8b7048d9282b49808c9b0dc46622e6f3_34)] [added: [22](#i70c5999dd4304fe59500a9cbbfd041cc_34)] | | |

| Item 6. | | | [Selected Financial [removed: Data](#i8b7048d9282b49808c9b0dc46622e6f3_37)] [added: Data](#i70c5999dd4304fe59500a9cbbfd041cc_37)] | | | [removed: [20](#i8b7048d9282b49808c9b0dc46622e6f3_37)] [added: [23](#i70c5999dd4304fe59500a9cbbfd041cc_37)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i8b7048d9282b49808c9b0dc46622e6f3_40)] [added: Operations](#i70c5999dd4304fe59500a9cbbfd041cc_40)] | | | [removed: [21](#i8b7048d9282b49808c9b0dc46622e6f3_40)] [added: [24](#i70c5999dd4304fe59500a9cbbfd041cc_40)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#i8b7048d9282b49808c9b0dc46622e6f3_61)] [added: Risk](#i70c5999dd4304fe59500a9cbbfd041cc_61)] | | | [removed: [36](#i8b7048d9282b49808c9b0dc46622e6f3_61)] [added: [40](#i70c5999dd4304fe59500a9cbbfd041cc_61)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i8b7048d9282b49808c9b0dc46622e6f3_64)] [added: Data](#i70c5999dd4304fe59500a9cbbfd041cc_64)] | | | [removed: [36](#i8b7048d9282b49808c9b0dc46622e6f3_64)] [added: [40](#i70c5999dd4304fe59500a9cbbfd041cc_64)] | | |

| Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i8b7048d9282b49808c9b0dc46622e6f3_67)] [added: Disclosure](#i70c5999dd4304fe59500a9cbbfd041cc_67)] | | | [removed: [36](#i8b7048d9282b49808c9b0dc46622e6f3_67)] [added: [41](#i70c5999dd4304fe59500a9cbbfd041cc_67)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i8b7048d9282b49808c9b0dc46622e6f3_70)] [added: Procedures](#i70c5999dd4304fe59500a9cbbfd041cc_70)] | | | [removed: [37](#i8b7048d9282b49808c9b0dc46622e6f3_70)] [added: [41](#i70c5999dd4304fe59500a9cbbfd041cc_70)] | | |

| Item 9B. | | | [Other [removed: Information](#i8b7048d9282b49808c9b0dc46622e6f3_73)] [added: Information](#i70c5999dd4304fe59500a9cbbfd041cc_73)] | | | [removed: [37](#i8b7048d9282b49808c9b0dc46622e6f3_73)] [added: [41](#i70c5999dd4304fe59500a9cbbfd041cc_73)] | | |

| | | | [PART [removed: III](#i8b7048d9282b49808c9b0dc46622e6f3_76)] [added: III](#i70c5999dd4304fe59500a9cbbfd041cc_76)] | | | | | |

| Item 10. | | | [Directors, Executive Officers and Corporate [removed: Governance](#i8b7048d9282b49808c9b0dc46622e6f3_79)] [added: Governance](#i70c5999dd4304fe59500a9cbbfd041cc_79)] | | | [removed: [38](#i8b7048d9282b49808c9b0dc46622e6f3_79)] [added: [42](#i70c5999dd4304fe59500a9cbbfd041cc_79)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i8b7048d9282b49808c9b0dc46622e6f3_82)] [added: Compensation](#i70c5999dd4304fe59500a9cbbfd041cc_82)] | | | [removed: [38](#i8b7048d9282b49808c9b0dc46622e6f3_82)] [added: [42](#i70c5999dd4304fe59500a9cbbfd041cc_82)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i8b7048d9282b49808c9b0dc46622e6f3_85)] [added: Matters](#i70c5999dd4304fe59500a9cbbfd041cc_85)] | | | [removed: [38](#i8b7048d9282b49808c9b0dc46622e6f3_85)] [added: [42](#i70c5999dd4304fe59500a9cbbfd041cc_85)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i8b7048d9282b49808c9b0dc46622e6f3_88)] [added: Independence](#i70c5999dd4304fe59500a9cbbfd041cc_88)] | | | [removed: [38](#i8b7048d9282b49808c9b0dc46622e6f3_88)] [added: [42](#i70c5999dd4304fe59500a9cbbfd041cc_88)] | | |

| Item 14. | | | [Principal Accounting Fees and [removed: Services](#i8b7048d9282b49808c9b0dc46622e6f3_91)] [added: Services](#i70c5999dd4304fe59500a9cbbfd041cc_91)] | | | [removed: [38](#i8b7048d9282b49808c9b0dc46622e6f3_91)] [added: [42](#i70c5999dd4304fe59500a9cbbfd041cc_91)] | | |

| Item 15. | | | [Exhibits, Financial Statement [removed: Schedules](#i8b7048d9282b49808c9b0dc46622e6f3_97)] [added: Schedules](#i70c5999dd4304fe59500a9cbbfd041cc_97)] | | | [removed: [39](#i8b7048d9282b49808c9b0dc46622e6f3_97)] [added: [43](#i70c5999dd4304fe59500a9cbbfd041cc_97)] | | |

| [removed: [Signatures](#i8b7048d9282b49808c9b0dc46622e6f3_100)] [added: [Signatures](#i70c5999dd4304fe59500a9cbbfd041cc_100)] | | | | | | [removed: [41](#i8b7048d9282b49808c9b0dc46622e6f3_100)] [added: [45](#i70c5999dd4304fe59500a9cbbfd041cc_100)] | | |

| | | | [PART I](#i70c5999dd4304fe59500a9cbbfd041cc_10) | | | | | |

| | | | [PART II](#i70c5999dd4304fe59500a9cbbfd041cc_31) | | | | | |

| | | | [PART IV](#i70c5999dd4304fe59500a9cbbfd041cc_94) | | | | | |

| | | | [PART I](#i8b7048d9282b49808c9b0dc46622e6f3_10) | | | | | |

| | | | [PART II](#i8b7048d9282b49808c9b0dc46622e6f3_31) | | | | | |

| | | | [PART IV](#i8b7048d9282b49808c9b0dc46622e6f3_94) | | | | | |

We occupy a total of approximately [removed: 1.1] [added: 1.4] 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, Connecticut, Georgia, Illinois, Iowa, [added: Kansas,] Maine, Massachusetts, Michigan, Missouri, Montana, New Hampshire, New York, North Carolina, Ohio, Tennessee, Texas, Virginia, Washington, Washington D.C., Wisconsin, Ontario and British Columbia, Canada, the Philippines and the Bahamas.

At December 31, [removed: 2020,] [added: 2021,] we had approximately [removed: 1,143] [added: 1,090] stockholders of record.

Most of our stockholders hold their shares in street name; therefore, there are substantially more than [removed: 1,143] [added: 1,090] beneficial owners of our common stock.

We did not pay any cash dividends in [removed: 2020] [added: 2021] or [removed: 2019.][added: 2020.]

There are no warrants or rights related to our equity compensation plans as of December 31, [removed: 2020.][added: 2021.]

| | | | 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: 2020] [added: 2021] | | | | | | 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: 2020)] [added: 2021)] | | |

As of December 31, [removed: 2020,] [added: 2021,] we had authorization to repurchase up to approximately [removed: 2.5] [added: 2.4] million additional shares of Tyler common stock.

During [removed: 2020,] [added: 2021,] we purchased approximately [removed: 59,000] [added: 33,000] shares of our common stock for an aggregate purchase price of [removed: $15.5] [added: $13.0] million.

A summary of the repurchase activity during [removed: 2020] [added: 2021] is as follows:

| Three months ended March 31 | | | | | | [removed: 58,804] [added: —] | | | | | | — | | | | | | $ | [removed: 263.26] [added: —] | | | | | [removed: 2,505,472] [added: 2,447,176] | | |

| Three months ended June 30 | | | | | | [removed: —] [added: 32,600] | | | | | | — | | | | | | [removed: —] [added: 398.00] | | | | | | [removed: 2,505,472] [added: 2,414,576] | | |

| Three months ended September 30 | | | | | | [removed: 7] [added: —] | | | | | | — | | | | | | [removed: 361.19] [added: —] | | | | | | [removed: 2,505,465] [added: 2,414,576] | | |

As of February [removed: 19, 2021,] [added: 23, 2022,] we had remaining authorization to repurchase up to [removed: 2.5] [added: 2.4] million additional shares of our common stock.

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: 2015.][added: 2016.]

[removed: ][added: ]

| Company / Index | | | [removed: 12/31/15] [added: 12/31/16] | | | | | | [removed: 12/31/16] [added: 12/31/17] | | | | | | [removed: 12/31/17] [added: 12/31/18] | | | | | | [removed: 12/31/18] [added: 12/31/19] | | | | | | [removed: 12/31/19] [added: 12/31/20] | | | | | | [removed: 12/31/20] [added: 12/31/21] | | |

| 2018 Incentive Stock Plan | | | 1,777,620 | | | | | | $ | 234.87 | | | | | 1,867,041 | | |

| Employee Stock Purchase Plan | | | 8,044 | | | | | | 457.26 | | | | | | 628,719 | | |

| | | | 1,785,664 | | | | | | $ | 235.87 | | | | | 2,495,760 | | |

| October 1 through October 31 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,414,576 | | |

| November 1 through November 30 | | | | | | 3 | | | | | | — | | | | | | 541.89 | | | | | | 2,414,579 | | |

| December 1 through December 31 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,414,579 | | |

| | | | | | | 32,603 | | | | | | — | | | | | | $ | 398.01 | | | | | | | |

| Tyler Technologies, Inc. | | | 100 | | | | | | 124.01 | | | | | | 130.15 | | | | | | 210.14 | | | | | | 305.75 | | | | | | 376.79 | | |

| S&P 500 Stock Index | | | 100 | | | | | | 121.83 | | | | | | 116.49 | | | | | | 153.17 | | | | | | 181.35 | | | | | | 233.41 | | |

| S&P 600 Information Technology Index | | | 100 | | | | | | 110.28 | | | | | | 100.43 | | | | | | 140.19 | | | | | | 179.18 | | | | | | 227.28 | | |

| 2018 Incentive Stock Plan | | | 2,763,414 | | | | | | $ | 203.05 | | | | | 2,480,878 | | |

| Employee Stock Purchase Plan | | | 8,186 | | | | | | 371.04 | | | | | | 663,502 | | |

| | | | 2,771,600 | | | | | | $ | 203.55 | | | | | 3,144,380 | | |

| October 1 through October 31 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,505,465 | | |

| November 1 through November 30 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,505,465 | | |

| December 1 through December 31 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,505,465 | | |

| | | | | | | 58,811 | | | | | | — | | | | | | $ | 263.27 | | | | | | | |

| Tyler Technologies, Inc. | | | 100 | | | | | | 81.90 | | | | | | 101.57 | | | | | | 106.60 | | | | | | 172.11 | | | | | | 250.41 | | |

| S&P 500 Stock Index | | | 100 | | | | | | 111.96 | | | | | | 136.40 | | | | | | 130.42 | | | | | | 171.49 | | | | | | 203.04 | | |

| S&P 600 Information Technology Index | | | 100 | | | | | | 133.85 | | | | | | 147.62 | | | | | | 134.43 | | | | | | 187.65 | | | | | | 239.83 | | |

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: 2020.][added: 2021.]

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: 2020.][added: 2021.]

Management assessed the effectiveness of Tyler’s internal control over financial reporting as of December 31, [removed: 2020.][added: 2021.]

Based on our assessment, we concluded that, as of December 31, [removed: 2020,] [added: 2021,] 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: 2020] [added: 2021] has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited Tyler’s financial statements.

*Changes in Internal Control Over Financial Reporting* — During the quarter ended December 31, [removed: 2020,] [added: 2021,] 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.

| 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: 2020”] [added: 2021”] in our Proxy Statement when filed. | | | | | | | | |

| | | | | | | | | | | | | [Reports of Independent Registered Public Accounting [removed: Firm](#i8b7048d9282b49808c9b0dc46622e6f3_103)] [added: Firm](#i70c5999dd4304fe59500a9cbbfd041cc_103) (PCAOB ID: 42)] | | | | | | [removed: [F-1](#i8b7048d9282b49808c9b0dc46622e6f3_103)] [added: [F-1](#i70c5999dd4304fe59500a9cbbfd041cc_103)] | | |

| | | | | | | | | | | | | [Consolidated Statements of Comprehensive Income for the years ended December [removed: 31,](#i8b7048d9282b49808c9b0dc46622e6f3_106) [2020,](#i8b7048d9282b49808c9b0dc46622e6f3_106) [2019](#i8b7048d9282b49808c9b0dc46622e6f3_106) [](#i8b7048d9282b49808c9b0dc46622e6f3_106)[and](#i8b7048d9282b49808c9b0dc46622e6f3_106) [2018](#i8b7048d9282b49808c9b0dc46622e6f3_106)] [added: 31, 202](#i70c5999dd4304fe59500a9cbbfd041cc_106)[1](#i70c5999dd4304fe59500a9cbbfd041cc_106)[, 20](#i70c5999dd4304fe59500a9cbbfd041cc_106)[20](#i70c5999dd4304fe59500a9cbbfd041cc_106)[,](#i70c5999dd4304fe59500a9cbbfd041cc_106) [and 201](#i70c5999dd4304fe59500a9cbbfd041cc_106)[9](#i70c5999dd4304fe59500a9cbbfd041cc_106)[](#i70c5999dd4304fe59500a9cbbfd041cc_106)] | | | | | | [removed: [F-4](#i8b7048d9282b49808c9b0dc46622e6f3_106)] [added: [F-4](#i70c5999dd4304fe59500a9cbbfd041cc_106)] | | |

| | | | | | | | | | | | | [Consolidated Balance Sheets as of December 31, [removed: 20](#i8b7048d9282b49808c9b0dc46622e6f3_109)[20](#i8b7048d9282b49808c9b0dc46622e6f3_109)] [added: 202](#i70c5999dd4304fe59500a9cbbfd041cc_109)[1](#i70c5999dd4304fe59500a9cbbfd041cc_109)] [and [removed: 201](#i8b7048d9282b49808c9b0dc46622e6f3_109)[9](#i8b7048d9282b49808c9b0dc46622e6f3_109)] [added: 20](#i70c5999dd4304fe59500a9cbbfd041cc_109)[20](#i70c5999dd4304fe59500a9cbbfd041cc_109)] | | | | | | [removed: [F-5](#i8b7048d9282b49808c9b0dc46622e6f3_109)] [added: [F-5](#i70c5999dd4304fe59500a9cbbfd041cc_109)] | | |

| | | | | | | | | | | | | [Consolidated Statements of Cash Flows for the years ended December [removed: 31, 2020, 2019 and 2018](#i8b7048d9282b49808c9b0dc46622e6f3_115)] [added: 31,](#i70c5999dd4304fe59500a9cbbfd041cc_112) [2021,](#i70c5999dd4304fe59500a9cbbfd041cc_112) [2020,](#i70c5999dd4304fe59500a9cbbfd041cc_112) [and](#i70c5999dd4304fe59500a9cbbfd041cc_112) [2019](#i70c5999dd4304fe59500a9cbbfd041cc_112)] | | | | | | [removed: [F-6](#i8b7048d9282b49808c9b0dc46622e6f3_115)] [added: [F-6](#i70c5999dd4304fe59500a9cbbfd041cc_112)] | | |

| | | | | | | | | | | | | [Consolidated Statements of Shareholders’ Equity for the years ended December [removed: 31,](#i8b7048d9282b49808c9b0dc46622e6f3_118) [2020,](#i8b7048d9282b49808c9b0dc46622e6f3_118) [2019](#i8b7048d9282b49808c9b0dc46622e6f3_118) [and](#i8b7048d9282b49808c9b0dc46622e6f3_118) [2018](#i8b7048d9282b49808c9b0dc46622e6f3_118)] [added: 31,](#i70c5999dd4304fe59500a9cbbfd041cc_115) [2021,](#i70c5999dd4304fe59500a9cbbfd041cc_115) [2020,](#i70c5999dd4304fe59500a9cbbfd041cc_115) [and](#i70c5999dd4304fe59500a9cbbfd041cc_115) [2019](#i70c5999dd4304fe59500a9cbbfd041cc_115)] | | | | | | [removed: [F-7](#i8b7048d9282b49808c9b0dc46622e6f3_118)] [added: [F-7](#i70c5999dd4304fe59500a9cbbfd041cc_115)] | | |

| | | | | | | | | | | | | [Notes to Consolidated Financial [removed: Statements](#i8b7048d9282b49808c9b0dc46622e6f3_121)] [added: Statements](#i70c5999dd4304fe59500a9cbbfd041cc_118)] | | | | | | [removed: [F-8](#i8b7048d9282b49808c9b0dc46622e6f3_121)] [added: [F-8](#i70c5999dd4304fe59500a9cbbfd041cc_118)] | | |

| [removed: [3.3](http://www.sec.gov/Archives/edgar/data/860731/000156459015008522/tyl-ex33_112.htm)] [added: [3.3](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)] | | | | | | [Amended and Restated By-Laws of [removed: Tyler Corporation, dated October 20, 2015 (filed] [added: Tyler](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [Technologies Inc.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)[, dated](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [February](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [1](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)[, 2022](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [(filed] as Exhibit [removed: 3.3 to] [added: 3.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)[1](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [to] our [removed: Form 10-Q for the quarter ended September 30, 2015,] [added: Form](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [8-K](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)[dated February](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm) [7](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)[, 2022](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)[,] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000156459015008522/tyl-ex33_112.htm)] [added: herein).](https://www.sec.gov/Archives/edgar/data/860731/000086073122000005/amendedandrestatedby-law.htm)] | | |

| [removed: [4.2](http://www.sec.gov/Archives/edgar/data/860731/000119312515378245/d57735dex101.htm)] [added: [4.2](https://www.sec.gov/Archives/edgar/data/860731/000086073121000020/exhibit101wellsfargo_tyl.htm)] | | | | | | [Credit Agreement dated [removed: September 30, 2019,] [added: April 21, 2021,] 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: October 02, 2019,] [added: April 21, 2021,] and incorporated by reference [removed: herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073119000039/exhibit101creditagreem.htm)] [added: herein).](https://www.sec.gov/Archives/edgar/data/860731/000086073121000020/exhibit101wellsfargo_tyl.htm)] | | |

| [4.3](https://www.sec.gov/Archives/edgar/data/860731/000086073121000005/nicagreement2921.htm) | | | | | | [Agreement and Plan of Merger, dated February 9, 2021 by and among Tyler Technologies, Inc., Topos Acquisition, Inc., and NIC, [removed: Inc.(file](https://www.sec.gov/Archives/edgar/data/860731/000086073121000005/nicagreement2921.htm)[d](https://www.sec.gov/Archives/edgar/data/860731/000086073121000005/nicagreement2921.htm) [as] [added: Inc.(filed as] Exhibit 2.1 to our Form 8-K, dated February 10, 2021, and incorporated by reference herein).](https://www.sec.gov/Archives/edgar/data/860731/000086073121000005/nicagreement2921.htm) | | |

| [10.3](http://www.sec.gov/Archives/edgar/data/860731/000119312513067262/d487966dex105.htm) | | | | | | [Employment and Non-Competition Agreement between Tyler Technologies, Inc. and Brian K. Miller effective February 26, 2018 (filed as Exhibit 10.3 to our Form 8-K dated March 9, 2018 and incorporated by reference herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073118000013/a103exhibit2018execemplagm.htm) [removed: .] | | |

| [removed: [10.5](#i8b7048d9282b49808c9b0dc46622e6f3_1)] [added: [10.5](#i70c5999dd4304fe59500a9cbbfd041cc_1)] | | | | | | [Agreement and plan of merger by and among Tyler Technologies, Inc. TMP Subsidiary, Inc., MP Holding Parent, Inc. (filed as Exhibit 10.7 to our Form 10-K dated February 20, 2019 and incorporated by reference herein).](http://www.sec.gov/Archives/edgar/data/860731/000086073119000009/plan_ofxmergermicropactexh.htm) | | |

| [removed: [*23](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit-23.htm)] [added: [*23](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit-23.htm)] | | | | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit-23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit-23.htm)] | | |

| [removed: [](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit311.htm)[*31.1](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit311.htm)] [added: [*31.1](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit311.htm)] | | | | | | [Rule 13a-14(a) Certification by Principal Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit311.htm)[(a)] [added: Officer.(a)] Certification by Principal Executive [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit311.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit311.htm)] | | |

| [removed: [*31.2](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit312.htm)] [added: [*31.2](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit312.htm)] | | | | | | [Rule 13a-14(a) Certification by Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit312.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit312.htm)] | | |

| [removed: [*32.1](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit321.htm)] [added: [*32.1](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit321.htm)] | | | | | | [Section 1350 Certification of Principal Executive Officer and Principal Financial [removed: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073121000014/tyl12312020exhibit321.htm)] [added: Officer.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit321.htm)] | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ H. Lynn Moore, Jr. | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ John S. Marr, Jr. | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ Brian K. Miller | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ W. Michael Smith | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ Glenn A. Carter | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ Brenda A. Cline | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ Mary Landrieu | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ Daniel M. Pope | | |

| Date: February [removed: 19, 2021] [added: 23, 2022] | | | | | | By: | | | | | | /s/ Dustin R.Womble | | |

We have audited the accompanying consolidated balance sheets of Tyler Technologies, Inc. (the Company) as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] 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: 2020,] [added: 2021,] 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: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] 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: 19, 2021] [added: 23, 2022] expressed an unqualified opinion thereon.

Critical Audit [removed: Matter][added: Matters]

The critical audit [removed: matter] [added: matters] communicated below [removed: is a matter] [added: are matters] arising from the current period audit of the financial statements that [removed: was] [added: were] communicated or required to be communicated to the audit committee and that: (1) [removed: relates] [added: 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 [removed: the] critical audit [removed: matter] [added: 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 [removed: matter] [added: matters] below, providing [removed: a] separate [removed: opinion] [added: opinions] on the critical audit [removed: matter] [added: matters] or on the [removed: account] [added: accounts] or [removed: disclosure] [added: disclosures] to which [removed: it relates.][added: they relate.]

[removed: February 19,] 2021

We have audited Tyler Technologies, Inc.’s internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] 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: 2020,] [added: 2021,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), [added: the] consolidated balance sheets of the Company as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] 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: 2020,] [added: 2021,] and the related notes and our report dated February [removed: 19, 2021] [added: 23, 2022] expressed an unqualified opinion thereon.

| | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Software licenses and royalties | | | $ | [removed: 73,164] [added: 74,452] | | | | | $ | [removed: 100,205] [added: 73,164] | | | | | $ | [removed: 93,441] [added: 100,205] | |

| Subscriptions | | | [removed: 350,648] [added: 784,435] | | | | | | [removed: 296,352] [added: 350,648] | | | | | | [removed: 220,547] [added: 296,352] | | |

| Software services | | | [removed: 186,409] [added: 209,391] | | | | | | [removed: 213,061] [added: 186,409] | | | | | | [removed: 191,269] [added: 213,061] | | |

| Maintenance | | | [removed: 467,513] [added: 474,287] | | | | | | [removed: 430,318] [added: 467,513] | | | | | | [removed: 384,521] [added: 430,318] | | |

| Appraisal services | | | [removed: 21,127] [added: 27,788] | | | | | | [removed: 23,479] [added: 21,127] | | | | | | [removed: 21,846] [added: 23,479] | | |

| [*](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit211.htm)[21.1](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit211.htm) | | | | | | [Subsidiaries of Tyler Technologies, Inc.](https://www.sec.gov/Archives/edgar/data/860731/000086073122000011/tyl12312021exhibit211.htm) | | |

| Date: February 23, 2022 | | | | | | By: | | | | | | /s/ H. Lynn Moore, Jr. | | |

| Date: February 23, 2022 | | | | | | By: | | | | | | /s/ Ronnie D. Hawkins, JR. | | |

| | | | | | | | | | | | | Ronnie D. Hawkins, Jr. | | |

| | | | Goodwill impairment tests | | |

| *Description of the Matter* | | | As of December 31, 2021, the Company’s goodwill asset balance of $2.4 billion was attributable to multiple reporting units. As disclosed in Note 1 to the consolidated financial statements, goodwill is assessed annually for impairment, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company performs a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value. If it is determined through the evaluation of events or circumstances that the carrying value may not be recoverable, the Company performs a quantitative analysis comparing an estimated fair value of the reporting unit to its carrying value. Auditing management’s quantitative analyses for goodwill impairment was complex and highly judgmental due to the significant judgement required to determine the fair value of these reporting units. In particular, the Company’s fair value estimates for these reporting units were sensitive to significant assumptions, such as weighted average cost of capital and revenue growth rates, which are forward looking and affected by expectations about future market or economic conditions. | | |

| *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 review process for quantitative goodwill impairment assessments, including controls over management’s review of the significant assumptions described above. To test the estimated fair value of the applicable reporting units, we performed audit procedures that included, among others, assessing the methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analyses. We evaluated management’s forecasted revenue to identify, understand and evaluate changes as compared to historical results and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. We also involved internal valuation specialists to assist in evaluating management’s methodologies and significant assumptions applied in developing the fair value estimates. | | |

| | | | Valuation of Acquired Intangible Assets in a Business Combination | | |

| *Description of the Matter* | | | As described in Note 2 to the consolidated financial statements, the Company acquired NIC, Inc. (NIC) during 2021 for a total purchase price, net of cash acquired of $2.0 billion. The transaction was accounted for as a business combination. Auditing the Company's accounting for its acquisition of NIC was complex due to the significant size of the transaction and the estimation uncertainty in the Company’s determination of the fair value of identified intangible assets related to customer relationships and developed technology which aggregated to $777 million. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to the significant underlying assumptions required in the valuation models used to value the intangible assets and the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. The Company valued customer relationships using a discounted cash flow model. The significant assumptions used in this model included the customer attrition rate, weighted average cost of capital, existing customer revenue growth and operating margins. The Company valued the developed technology using the relief-from-royalty method. The significant assumptions used in this method included the royalty rate, obsolescence rate and weighted average cost of capital. These are forward looking assumptions which are affected by expectations about future market or economic 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 internal controls over its accounting for the valuation of these intangible assets. For example, we tested controls over the Company’s process to identify and value acquired intangible assets as well as controls over management's review of the valuation models and the significant assumptions described above used to develop such estimates. 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 methodologies, evaluating the significant assumptions used in the Company’s valuation calculations and testing the completeness and accuracy of the underlying data supporting the significant assumptions. We involved our valuation specialists to assist with our evaluation of the methodologies used by the Company and significant assumptions included in the fair value estimates. Additionally, we performed sensitivity analyses and compared significant assumptions to forecasts and to historical financial results of both the Company and the acquiree, among other procedures. | | |

February 23, 2022

February 23, 2022

| Interest expense | | | (23,298) | | | | | | (1,013) | | | | | | (2,027) | | |

| Other income, net | | | 1,544 | | | | | | 3,129 | | | | | | 5,498 | | |

| | | | 12/31/2021 | | | | | | 12/31/2020 | | |

| Cash and cash equivalents | | | $ | 309,171 | | | | | $ | 603,623 | |

| Software development costs, net | | | 28,489 | | | | | | 9,121 | | |

| Other intangibles, net | | | 1,052,493 | | | | | | 322,068 | | |

| | | | $ | 4,732,161 | | | | | $ | 2,607,274 | |

| Current portion of term loans | | | 30,000 | | | | | | — | | |

| Term loans, net | | | 718,511 | | | | | | — | | |

| Convertible senior notes due 2026, net | | | 592,765 | | | | | | — | | |

| Other long-term liabilities | | | 2,893 | | | | | | — | | |

| Total liabilities | | | 2,408,129 | | | | | | 621,163 | | |

| | | | $ | 4,732,161 | | | | | $ | 2,607,274 | |

| Net income | | | $ | 161,458 | | | | | $ | 194,820 | | | | | $ | 146,527 | |

| Increase in other long-term liabilities | | | (1,987) | | | | | | — | | | | | | — | | |

| Investment in software | | | (21,693) | | | | | | (5,776) | | | | | | (4,804) | | |

| Payment on term loans | | | (145,000) | | | | | | — | | | | | | — | | |

| Proceeds from term loans | | | 900,000 | | | | | | — | | | | | | — | | |

| Proceeds from issuance of convertible senior notes | | | 600,000 | | | | | | — | | | | | | — | | |

| Payment of debt issuance costs | | | (27,165) | | | | | | — | | | | | | — | | |

| Net income | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 161,458 | | | | | | — | | | | | | — | | | | | | 161,458 | | |

| Employee taxes paid for withheld shares upon equity award settlement | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (58) | | | | | | (27,030) | | | | | | (27,030) | | |

| Purchase consideration for conversion of unvested restricted stock awards | | | — | | | | | | — | | | | | | 1,872 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,872 | | |

| Balance at December 31, 2021 | | | 48,148 | | | | | | $ | 481 | | | | | $ | 1,075,650 | | | | | $ | (46) | | | | | $ | 1,273,614 | | | | | (6,833) | | | | | | $ | (25,667) | | | | | 2,324,032 | | |

On April 21, 2021, we acquired NIC, Inc. (“NIC”) as contemplated by the Agreement and Plan of Merger dated February 9, 2021.

NIC delivers user-friendly digital services that make it easier and more efficient for citizens and businesses to interact with government providing valuable conveniences like applying for unemployment insurance, submitting business filings, renewing licenses, accessing information and making secure payments without visiting a government office.

NIC digital government services designs, builds, and operates digital government services on an enterprise-wide basis on behalf of state and local governments desiring to provide access to government information and to complete secure government-based transactions through multiple digital channels.

These digital government services consist of websites and applications NIC has built that allow consumers, such as businesses and citizens, to access government information, complete transactions and make electronic payments.

| Date: February 19, 2021 | | | | | | By: | | | | | | /s/ Donald R. Brattain | | |

| | | | | | | | | | | | | Donald R. Brattain | | |

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

| *Description of the Matter* | | | As described in Note 1 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 appropriateness of remaining budgeted hours and trend of progress on the contracts and performing an analysis of completed contracts to compare actual hours incurred upon completion to the original budget. | | |

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

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| Other income, net | | | 2,116 | | | | | | 3,471 | | | | | | 3,378 | | |

| Other intangibles, net | | | 331,189 | | | | | | 378,914 | | |

| | | | $ | 2,607,274 | | | | | $ | 2,191,614 | |

| Cash and cash equivalents at beginning of period | | | 232,682 | | | | | | 134,279 | | | | | | 185,926 | | |

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

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

| Balance at December 31, 2017 | | | 48,148 | | | | | | $ | 481 | | | | | $ | 626,867 | | | | | $ | (46) | | | | | $ | 624,463 | | | | | (10,262) | | | | | | $ | (60,029) | | | | | $ | 1,191,736 | |

| Net income | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 147,462 | | | | | | — | | | | | | — | | | | | | 147,462 | | |

In March 2020, the World Health Organization declared the outbreak of a COVID-19 pandemic ("COVID-19"), which continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns.

While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures and associated compliance, the current environment has negatively impacted our revenues for fiscal year 2020.

Because an increasing portion of our revenues are considered recurring in nature, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We continue to see some impact on our business in the near term with delays in government procurement processes and uncertainty around public sector budgets, as well as delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues.

Our priorities during this crisis are protecting the health and safety of our employees and our clients.

Our IT systems and applications support a remote workforce.

Prior to the pandemic, many of our employees worked remotely.

In response to the pandemic, we encouraged all employees who are able to do so to work from home, equipping them with resources necessary to continue uninterrupted.

We were able to transition the vast majority of our employees to this work-from-home posture.

This reduces the number of team members in our offices to those uniquely needed for essential on-site services, such as network operations support staff, and allows for “social distancing” as directed by the Centers for Disease Control ("CDC").

It could also negatively impact the timing of client payments to us.

Lower software licenses compared to prior periods are attributed to slower sales cycles as government procurement processes are delayed and contract signings have been pushed to future periods.

Software services and appraisal services revenue declines are attributed to delays in implementations caused by travel restrictions and shelter-in-place orders in effect during the period.

Other revenues were lower compared to prior periods primarily as a result of the cancellation of our 2020 Connect user conference.

If, and as travel restrictions are relaxed, we expect software services and appraisal services revenues to increase as the limited number of our clients who require that all or a portion of their services be delivered onsite will be able to receive those services.

Also, we are adapting by changing the way we do business, encouraging web and video conferencing, conducting virtual sales demonstrations and delivering professional services remotely, which result in increases in staff utilization rates and billable time.

We also have substantial additional liquidity available through our undrawn $400 million credit facility, which can be expanded through an accordion feature.

However, due to significant uncertainty surrounding COVID-19 and market conditions, there are no assurances conditions will not deteriorate in the future.

Revenue from subscription-based services is generally recognized over time on a ratable basis over the contract term, beginning on the date that our service is made available to the customer.

Our subscription contracts are generally three to five years or longer in length and billed annually in advance.

If it is determined through the evaluation of events or circumstances that the carrying value may not be recoverable, we perform a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit.

The impairment is limited to the amount of goodwill in that reporting unit.

Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated.

The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

We have not capitalized any internal use software development costs in any of the periods presented.