Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as part of this Annual Report:

(a)						(1)						The financial statements are filed as part of this Annual Report.
																		Page
												Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)						F-1
												Consolidated Statements of Income for the years ended December 31, 2022, 2021, and 2020						F-4
												Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021, and 2020						F-5
												Consolidated Balance Sheets as of December 31, 2022 and 2021						F-6
												Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020						F-7
												Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022, 2021, and 2020						F-9
												Notes to Consolidated Financial Statements						F-10
						(2)						Financial statement schedules:
												There are no financial statement schedules filed as part of this Annual Report, since the required information is included in the financial statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not present.
						(3)						Exhibits
												Certain of the exhibits to this Annual Report are hereby incorporated by reference, as specified:

Exhibit Number						Description
3.1						Restated Certificate of Incorporation of Tyler Three, as amended through May 14, 1990, and Certificate of Designation of Series A Junior Participating Preferred Stock (filed as Exhibit 3.1 to our Form 10-Q for the quarter ended June 30, 1990, and incorporated by reference herein).
3.2						Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.1 to our Form 8-K, dated February 19, 1998, and incorporated by reference herein).
3.3						Amended and Restated By-Laws of Tyler Technologies Inc., dated February 1, 2022 (filed as Exhibit 3.1 to our Form 8-K dated February 7, 2022, and incorporated by reference herein).
3.4						Certificate of Amendment dated May 19, 1999 to the Restated Certificate of Incorporation (filed as Exhibit 3.4 to our Form 10-K for the year ended December 31, 2000, and incorporated by reference herein).
4.1						Specimen of Common Stock Certificate (filed as Exhibit 4.1 to our registration statement no. 33-33505 and incorporated by reference herein).
4.2						Third Amendment to the Credit Agreement dated January 27, 2023, among Tyler Technologies, Inc. and Wells Fargo Bank, N. A. as Administrative Agent and other lenders party hereto (filed as Exhibit 4.2 to our Form 10-K dated February 22, 2023, and incorporated by reference herein).
4.3						Credit Agreement dated 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 April 21, 2021, and incorporated by reference herein).
4.4						Agreement and Plan of Merger, dated February 9, 2021 by and among Tyler Technologies, Inc., Topos Acquisition, Inc., and NIC, Inc.(filed as Exhibit 2.1 to our Form 8-K, dated February 10, 2021, and incorporated by reference herein).
4.5						Indenture, dated as of March 9, 2021, between Tyler Technologies, Inc. and U.S. Bank National Association, as trustee, relating to the 0.25% Convertible Senior Notes due 2026. (filed as Exhibit 4.1 to our Form 8-K, dated March 9, 2021, and incorporated by reference herein.)
10.1						Employee Stock Purchase Plan (filed as Exhibit 10.1 to our registration statement 333-182318 dated June 25, 2012 and incorporated by reference herein).
10.2						Employment and Non-Competition Agreement between Tyler Technologies, Inc. and John S. Marr Jr. effective February 26, 2018 (filed as Exhibit 10.1 to our Form 8-K dated March 9, 2018 and incorporated by reference herein).

Exhibit Number						Description
10.3						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).
10.4						Employment and Non-Competition Agreement between Tyler Technologies, Inc. and H. Lynn Moore, Jr effective February 26, 2018 (filed as Exhibit 10.2 to our Form 8-K dated March 9, 2018 and incorporated by reference herein).
10.5						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).
10.6						Tyler Technologies, Inc. 2018 Stock Option Plan effective as of May 9, 2018 (filed as Appendix A to the registrant's Proxy Statement filed with the Commission on March 28, 2018 and incorporated by reference herein).
*21.1						Subsidiaries of Tyler Technologies, Inc.
*23						Consent of Independent Registered Public Accounting Firm.
*31.1						Rule 13a-14(a) Certification by Principal Executive Officer.(a) Certification by Principal Executive Officer.
*31.2						Rule 13a-14(a) Certification by Principal Financial Officer.
*32.1						Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
*101.INS						Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags, including Cover Page XBRL tags, are embedded within the Inline XBRL Document.
*101.SCH						Inline XBRL Taxonomy Extension Schema Document.
*101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.LAB						Inline XBRL Extension Labels Linkbase Document.
*101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
*101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*			— Filed herewith.

A copy of each exhibit may be obtained at a price of 15 cents per page, with a $10.00 minimum order, by writing Investor Relations, 5101 Tennyson Parkway, Plano, Texas 75024.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

						TYLER TECHNOLOGIES, INC.
Date: February 22, 2023						By:						/s/ H. Lynn Moore, Jr.
												H. Lynn Moore, Jr.
												President and Chief Executive Officer
												(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the registrant and in the capacities and on the dates indicated have signed this report below.

Date: February 22, 2023						By:						/s/ John S. Marr, Jr.
												John S. Marr, Jr.
												Executive Chairman of the Board
												Director
Date: February 22, 2023						By:						/s/ H. Lynn Moore, Jr.
												H. Lynn Moore, Jr.
												President and Chief Executive Officer
												(principal executive officer)
Date: February 22, 2023						By:						/s/ Brian K. Miller
												Brian K. Miller
												Executive Vice President and Chief Financial Officer
												(principal financial officer)
Date: February 22, 2023						By:						/s/ Jason P. Durham
												Jason P. Durham
												Chief Accounting Officer
												(principal accounting officer)
Date: February 22, 2023						By:						/s/ Glenn A. Carter
												Glenn A. Carter
												Director
Date: February 22, 2023						By:						/s/ Brenda A. Cline
												Brenda A. Cline
												Director
Date: February 22, 2023						By:						/s/ Ronnie D. Hawkins, Jr.
												Ronnie D. Hawkins, Jr.
												Director
Date: February 22, 2023						By:						/s/ Mary Landrieu
												Mary Landrieu
												Director
Date: February 22, 2023						By:						/s/ Daniel M. Pope
												Daniel M. Pope
												Director
Date: February 22, 2023						By:						/s/ Dustin R. Womble
												Dustin R. Womble
												Director

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Tyler Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Tyler Technologies, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 22, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

F-1

			Goodwill impairment tests
Description of the Matter			As of December 31, 2022, the Company’s goodwill balance of $2.5 billion was attributable to multiple reporting units. As disclosed in Note 1 to the consolidated financial statements, goodwill is assessed for impairment annually, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable. The Company begins with a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying a quantitative assessment. During the fourth quarter of 2022, the Company performed a quantitative assessment for goodwill associated with reporting units comprised of more recently acquired businesses, which do not have significant excess fair values over carrying values. 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.

/s/ ERNST & YOUNG LLP

We have served as the Company’s auditor since 1966.

Dallas, Texas

February 22, 2023

F-2

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Tyler Technologies, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Tyler Technologies, Inc.’s internal control over financial reporting as of December 31, 2022, 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, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ERNST & YOUNG LLP

Dallas, Texas

February 22, 2023

F-3

Tyler Technologies, Inc.

Consolidated Statements of Income

For the years ended December 31,

(In thousands, except per share amounts)

			2022						2021						2020
Revenues:
Subscriptions			$	1,012,304					$	784,435					$	350,648
Maintenance			468,455						474,287						467,513
Professional services			243,117						209,391						186,409
Software licenses and royalties			59,406						74,452						73,164
Appraisal services			34,508						27,788						21,127
Hardware and other			32,414						21,934						17,802
Total revenues			1,850,204						1,592,287						1,116,663
Cost of revenues:
Subscriptions, maintenance and professional services			953,897						799,158						510,504
Software licenses and royalties			6,083						3,552						3,339
Amortization of software development			6,507						2,325						—
Amortization of acquired software			52,192						45,601						31,962
Appraisal services			23,988						19,061						15,945
Hardware and other			23,674						12,946						12,401
Total cost of revenues			1,066,341						882,643						574,151
Gross profit			783,863						709,644						542,512
Sales and marketing expense			135,743						118,624						98,466
General and administrative expense			267,324						271,955						161,095
Research and development expense			105,184						93,481						88,363
Amortization of other intangibles			61,363						44,849						21,662
Operating income			214,249						180,735						172,926
Interest expense			(28,379)						(23,298)						(1,013)
Other income, net			1,723						1,544						3,129
Income before income taxes			187,593						158,981						175,042
Income tax provision (benefit)			23,353						(2,477)						(19,778)
Net income			$	164,240					$	161,458					$	194,820
Earnings per common share:
Basic			$	3.95					$	3.95					$	4.87
Diluted			$	3.87					$	3.82					$	4.69

See accompanying notes.

F-4

Tyler Technologies, Inc.

Consolidated Statements of Comprehensive Income

For the years ended December 31,

(In thousands)

			2022						2021						2020
Net income			$	164,240					$	161,458					$	194,820
Other comprehensive loss, net of tax:
Securities available-for-sale and transferred securities:
Change in net unrealized holding losses on available for sale securities during the period			(850)						—						—
Reclassification adjustment of unrealized losses on securities transferred from held-to-maturity			(27)						—						—
Reclassification adjustment for net loss on sale of available for sale securities, included in net income			79						—						—
Other comprehensive loss, net of tax			(798)						—						—
Comprehensive income			$	163,442					$	161,458					$	194,820

See accompanying notes.

F-5

Tyler Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except par value and share amounts)

			December 31, 2022						December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	173,857					$	309,171
Accounts receivable (less allowance for losses and sales adjustments of $14,761 in 2022 and $12,086 in 2021)			577,257						521,059
Short-term investments			37,030						52,300
Prepaid expenses			50,859						55,513
Income tax receivable			—						18,137
Other current assets			8,239						8,151
Total current assets			847,242						964,331
Accounts receivable, long-term			8,271						13,937
Operating lease right-of-use assets			50,989						39,720
Property and equipment, net			172,786						181,193
Other assets:
Software development costs, net			48,189						28,489
Goodwill			2,489,308						2,359,674
Other intangibles, net			1,002,164						1,052,493
Non-current investments			18,508						46,353
Other non-current assets			49,960						45,971
			$	4,687,417					$	4,732,161
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	104,813					$	119,988
Accrued liabilities			131,941						158,424
Operating lease liabilities			10,736						10,560
Income tax payable			43,667						—
Deferred revenue			568,538						510,529
Current portion of term loans			30,000						30,000
Total current liabilities			889,695						829,501
Revolving line of credit			—						—
Term loans, net			362,905						718,511
Convertible senior notes due 2026, net			594,484						592,765
Deferred revenue, long-term			2,037						38
Deferred income taxes			148,891						228,085
Operating lease liabilities, long-term			48,049						36,336
Other long-term liabilities			16,967						2,893
Total liabilities			2,063,028						2,408,129
Commitments and contingencies			—						—
Shareholders' equity:
Preferred stock, $10.00 par value; 1,000,000 shares authorized; none issued			—						—
Common stock, $0.01 par value; 100,000,000 shares authorized; 48,147,969 shares issued in 2022 and 2021			481						481
Additional paid-in capital			1,209,725						1,075,650
Accumulated other comprehensive loss, net of tax			(844)						(46)
Retained earnings			1,437,854						1,273,614
Treasury stock, at cost; 6,364,991 and 6,832,640 shares in 2022 and 2021, respectively			(22,827)						(25,667)
Total shareholders' equity			2,624,389						2,324,032
			$	4,687,417					$	4,732,161

See accompanying notes.

F-6

Tyler Technologies, Inc.

Consolidated Statements of Cash Flows

For the years ended December 31

(In thousands)

			2022						2021						2020
Cash flows from operating activities:
Net income			$	164,240					$	161,458					$	194,820
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			159,072						135,624						81,657
Losses from sale of investments			45						—						—
Share-based compensation expense			102,985						104,726						67,365
Provision for losses and sales adjustments - accounts receivable			2,781						2,831						3,517
Amortization of operating lease right-of-use assets			12,969						10,216						5,782
Deferred income tax benefit			(87,192)						(13,271)						(7,936)
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable			(51,410)						17,608						(10,733)
Income tax receivable			61,940						10,258						(15,117)
Prepaid expenses and other current assets			910						(23,863)						(8,304)
Accounts payable			(17,537)						(44,947)						(967)
Operating lease liabilities			(12,396)						(6,952)						(6,549)
Accrued liabilities			(24,344)						(24,822)						2,870
Deferred revenue			59,460						44,874						48,684
Other long-term liabilities			9,932						(1,987)						—
Net cash provided by operating activities			381,455						371,753						355,089
Cash flows from investing activities:
Additions to property and equipment			(22,529)						(33,919)						(22,690)
Purchase of marketable security investments			(29,935)						(77,450)						(156,618)
Proceeds and maturities from marketable security investments			71,034						131,449						82,742
Purchase of investment in common shares			—						—						(10,000)
Proceeds from the sale of investment in preferred shares			—						—						15,000
Investment in software development			(27,622)						(21,693)						(5,776)
Cost of acquisitions, net of cash acquired			(163,921)						(2,089,706)						(1,292)
Other			443						384						314
Net cash used by investing activities			(172,530)						(2,090,935)						(98,320)
Cash flows from financing activities:
Net borrowings on revolving credit facility			—						—						—
Payment on term loans			(360,000)						(145,000)						—
Proceeds from term loans			—						900,000						—
Proceeds from issuance of convertible senior notes			—						600,000						—
Payment of debt issuance costs			—						(27,165)						—
Purchase of treasury shares			—						(12,977)						(15,484)
Payment of contingent consideration			—						—						(5,619)
Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award			(890)						96,714						124,363
Contributions from employee stock purchase plan			16,651						13,158						10,912
Net cash (used) provided by financing activities			(344,239)						1,424,730						114,172
Net (decrease) increase in cash and cash equivalents			(135,314)						(294,452)						370,941
Cash and cash equivalents at beginning of period			309,171						603,623						232,682
Cash and cash equivalents at end of period			$	173,857					$	309,171					$	603,623

See accompanying notes.

F-7

			2022						2021						2020
Supplemental cash flow information:
Cash paid for interest			$	21,256					$	17,728					$	610
Cash paid for income taxes, net			38,490						2,212						3,263
Non-cash investing and financing activities:
Non-cash additions to property and equipment			$	169					$	233					$	189
Issuance of shares for acquisitions			18,169						—						—
Purchase consideration for conversion of unvested restricted stock awards			—						1,872						—

F-8

Tyler Technologies, Inc.

Consolidated Statements of Shareholders’ Equity

For the years ended December 31, 2022, 2021, and 2020

(In thousands)

			Common Stock												Additional Paid-in Capital						Accumulated Other Comprehensive Income (Loss)						Retained Earnings						Treasury Stock												Total Shareholders' Equity
			Shares						Amount															Shares						Amount
Balance at December 31, 2019			48,148						$	481					$	739,478					$	(46)					$	917,336					(8,839)						$	(40,191)					$	1,617,058
Net income			—						—						—						—						194,820						—						—						194,820
Issuance of shares pursuant to stock compensation plan			—						—						90,636						—						—						1,283						33,727						124,363
Employee taxes paid for withheld shares upon equity award settlement			—						—						—						—						—						(34)						(12,923)						(12,923)
Stock compensation			—						—						67,365						—						—						—						—						67,365
Issuance of shares pursuant to employee stock purchase plan			—						—						7,853						—						—						40						3,059						10,912
Treasury stock purchases			—						—						—						—						—						(59)						(15,484)						(15,484)
Balance at December 31, 2020			48,148						481						905,332						(46)						1,112,156						(7,609)						(31,812)						1,986,111
Net income			—						—						—						—						161,458						—						—						161,458
Exercise of stock options and vesting of restricted stock units			—						—						50,831						—						—						832						45,883						96,714
Employee taxes paid for withheld shares upon equity award settlement			—						—						—						—						—						(58)						(27,030)						(27,030)
Stock compensation			—						—						104,726						—						—						—						—						104,726
Issuance of shares pursuant to employee stock purchase plan			—						—						12,889						—						—						35						269						13,158
Treasury stock purchases			—						—						—						—						—						(33)						(12,977)						(12,977)
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
Net income			—						—						—						—						164,240						—						—						164,240
Other comprehensive loss, net of tax			—						—						—						(798)						—						—						—						(798)
Exercise of stock options and vesting of restricted stock units			—						—						(3,218)						—						—						433						29,547						26,329
Employee taxes paid for withheld shares upon equity award settlement			—						—						—						—						—						(70)						(27,219)						(27,219)
Stock compensation			—						—						102,985						—						—						—						—						102,985
Issuance of shares pursuant to employee stock purchase plan			—						—						16,365						—						—						49						286						16,651
Treasury stock purchases			—						—						—						—						—						—						—						—
Issuance of shares for acquisitions			—						—						17,943						—						—						56						226						18,169
Balance at December 31, 2022			48,148						$	481					$	1,209,725					$	(844)					$	1,437,854					(6,365)						$	(22,827)					$	2,624,389

See accompanying notes.

F-9

Tyler Technologies, Inc.

Notes to Consolidated Financial Statements

(Tables in thousands, except per share data)

(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

We provide integrated software systems and related services for the public sector. We develop and market a broad line of software solutions and services to address the information technology (“IT”) needs primarily of cities, counties, states, schools, federal agencies, and other government entities. We provide subscription-based services such as software as a service (“SaaS”), transaction-based fees primarily related to digital government services and online payment processing, and electronic document filing solutions (“e-filing”), which simplify the filing and management of court related documents. In addition, we provide professional IT services, including software and hardware installation, data conversion, training, and for certain customers, product modifications, along with continuing maintenance and support for customers using our systems. Additionally, we provide property appraisal outsourcing services for taxing jurisdictions.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include our parent company and 62 subsidiaries, which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all components of net income (loss) and other comprehensive income (loss). During the twelve months ended December 31, 2022, we had approximately $798,000 of other comprehensive loss, net of taxes, from our available-for-sale investment holdings. We did not have material items of other comprehensive income during the years ended December 31, 2021, and 2020.

RECLASSIFICATIONS

Certain amounts for previous years have been reclassified to conform to the current year presentation. We have elected to present amortization of software development, previously included in the cost of revenues software licenses and royalties line item, in a separate category line item on the consolidated statements of income for all reporting periods presented. We also have elected to present sales and marketing expense and general and administrative expense, previously disclosed as selling, general, and administrative expense, as separate category line items on the consolidated statements of income for all reporting periods presented.

CASH AND CASH EQUIVALENTS

Cash in excess of that necessary for operating requirements is invested in short-term, highly liquid, income-producing investments. Investments with original maturities of three months or less are classified as cash and cash equivalents, which primarily consist of cash on deposit with several banks and money market funds. Cash and cash equivalents are stated at cost, which approximates market value.

REVENUE RECOGNITION

Nature of Products and Services

We earn revenues from subscription-based services, post-contract customer support (“PCS” or “maintenance”), professional services, software licenses and royalties, appraisal services, and hardware and other. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We determine revenue recognition through the following steps:

• Identification of the contract, or contracts, with a customer

• Identification of the performance obligations in the contract

• Determination of the transaction price

• Allocation of the transaction price to the performance obligations in the contract

• Recognition of revenue when, or as, we satisfy a performance obligation

F-10

Our software arrangements with customers contain multiple performance obligations that range from software licenses, installation, training, and consulting to software modification and customization to meet specific customer needs (services), hosting, and PCS. For these contracts, we account for individual performance obligations separately when they are distinct. We evaluate whether separate performance obligations can be distinct or should be accounted for as one performance obligation. Arrangements that include professional services, such as training or installation, are evaluated to determine whether those services are highly interdependent or interrelated to the product’s functionality. The transaction price is allocated to the distinct performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. Revenue is recognized net of allowances for sales adjustments and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Subscription-Based Services:

Subscription-based services consist primarily of revenue derived from SaaS arrangements, digital government services, payment processing, and e-filing. For SaaS arrangements, we evaluate whether the customer has the contractual right to take possession of our software at any time during the hosting period without significant penalty and whether the customer can feasibly maintain the software on the customer’s hardware or enter into another arrangement with a third-party to host the software. We allocate contract value to each performance obligation of the arrangement that qualifies for treatment as a distinct element based on estimated SSP. We recognize SaaS services ratably over the term of the arrangement, which range from one to 10 years, but are typically for a period of three to five years. For professional services associated with certain SaaS arrangements, we have concluded that the services are not distinct, and we recognize the revenue ratably over the remaining contractual period once we have provided the customer access to the software. 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.

Transaction-based fees primarily relate to digital government services and online payment services, which are sometimes offered with the assistance of third-party vendors. In general, when we are the principal in a transaction, we record the revenue and related costs on a gross basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount billed to the customer) and record the net amount as revenue.

E-filing transaction fees primarily pertain to documents filed with the courts by attorneys and other third-parties via our e-filing services and retrieval of filed documents via our access services. For each document filed with a court, the filer generally pays a transaction fee and a court filing fee to us and we remit a portion of the transaction fee and the filing fee to the court. We record as revenue the transaction fee, while the portion of the transaction fee remitted to the courts is recorded as cost of revenues as we are acting as an agent in the arrangement. Court filing fees collected on behalf of the courts and remitted to the courts are recorded on a net basis and thus do not affect our consolidated statements of income.

For e-filing transaction fees and transaction-based revenues from digital government services and online payments, we have the right to charge the customer an amount that directly corresponds with the value to the customer of our performance to date. Therefore, we recognize revenues for these services over time based on the amount billable to the customer. In some cases, we are paid on a fixed fee basis and recognize the revenue ratably over the contractual period. Typically, the structure of our arrangements does not give rise to variable consideration. However, in those instances whereby variable consideration exists, we include in our estimates, additional revenues for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably and its realization is probable.

Costs of performing services under subscription-based arrangements are expensed as incurred, except for certain direct and incremental contract origination and set-up costs associated with SaaS arrangements. Such direct and incremental costs are capitalized and amortized ratably over the period of benefit.

Software Arrangements:

Software Licenses and Royalties

Many of our software arrangements involve “off-the-shelf” software. We recognize the revenue allocable to “off-the-shelf” software licenses and specified upgrades at a point in time when control of the software license transfers to the 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.

F-11

For arrangements that involve significant production, modification or customization of the software, or where professional services are otherwise not considered distinct, we recognize revenue over time by measuring progress-to-completion. 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 revenue we are entitled to and amounts are billed on a quarterly basis in the quarter immediately following the royalty reporting period, and adjustments have not been significant.

Professional Services

As noted above, some of our software arrangements include services considered highly interdependent or highly interrelated or require significant customization to meet the customer's desired functionality. For these software arrangements, both the software licenses and related professional services revenue are not distinct and are recognized over time using the progress-to-completion method. 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. Contract fees are typically billed on a milestone basis as defined within contract terms. We record amounts that have been invoiced in accounts receivable and in deferred revenue or revenues, depending on whether the revenue recognition criteria have been met. When professional services are distinct, the fee allocable to the service element is recognized over the time we perform the services and is billed on a time and material basis.

Post-Contract Customer Support

Our customers generally enter into PCS agreements when they purchase our software licenses. PCS includes telephone support, bug fixes, and rights to upgrades on a when-and-if available basis. PCS is considered distinct when purchased with our software licenses. Our PCS agreements are typically renewable annually. PCS is recognized over time on a straight-line basis over the period the PCS is provided. All significant costs and expenses associated with PCS are expensed as incurred.

Computer Hardware Equipment

Revenue allocable to computer hardware equipment is recognized at a point in time when control of the equipment is transferred to the customer.

Appraisal Services:

For our property appraisal projects, we recognize revenue using the progress-to-completion method since many of these projects are executed over one to three-year periods and consist of various unique activities. Appraisal services require a significant level of integration and interdependency with various individual service components; therefore, the service components are not considered distinct. Appraisal services are recognized over time by measuring 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 executed 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. Contract fees are typically billed on a milestone basis as defined within contract terms. We record amounts that have been invoiced in accounts receivable and in deferred revenue or revenues, depending on whether the revenue recognition criteria have been met.

F-12

Significant Judgments:

Our contracts with customers often include multiple performance obligations to a customer. When a software arrangement (license or subscription) includes both software licenses and professional services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the professional services and recognized over time.

The transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine SSP using the expected cost-plus margin approach.

For arrangements that involve significant production, modification, or customization of the software, or where professional services otherwise cannot be considered distinct, we recognize revenue as control is transferred to the customer over time using progress-to-completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred, or value added. The progress-to-completion method generally results in the recognition of reasonably consistent profit margins over the life of a contract because we can provide reasonably dependable estimates of contract billings and contract costs. These arrangements are often implemented over an extended time 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.

Refer to Note 18 - "Disaggregation of Revenue” for further information, including the economic factors that affect the nature, amount, timing, and uncertainty of revenues and cash flows of our various revenue categories.

Contract Balances:

Accounts receivable and allowance for losses and sales adjustments

Timing of revenue recognition may differ from the timing of invoicing to customers. We record an unbilled receivable when revenue is recognized prior to invoicing, or deferred revenue when invoicing occurs prior to revenue recognition. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. We record an unbilled receivable related to revenue recognized for on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses.

In connection with our appraisal services contracts and certain professional services contracts, we may perform work prior to when the software and services are billable and/or payable pursuant to the contract. Unbilled revenue is not billable at the balance sheet date but is recoverable over the remaining life of the contract through billings made in accordance with contractual agreements. The termination clauses in most of our contracts provide for the payment for the value of products delivered or services performed in the event of early termination. We have historically recorded such unbilled receivables (costs and estimated profit in excess of billings) in connection with (1) property appraisal services contracts accounted for using progress-to-completion method of revenue recognition using labor hours as a measure of progress towards completion in which the services are performed in one accounting period but the billing normally occurs subsequently and may span another accounting period; (2) professional services contracts accounted for using progress-to-completion method of revenue recognition using labor hours as a measure of progress towards completion in which the services are performed in one accounting period but the billing for the software element of the arrangement may be based upon the specific phase of the implementation; (3) software revenue for which we have recognized revenue at the point in time when the software is made available to the customer but the billing has not yet been submitted to the customer; (4) some of our contracts which provide for an amount to be withheld from a progress billing (generally between 5% and 15% retention) until final and satisfactory project completion is achieved; and (5) in a limited number of cases, extended payment terms, which may be granted to customers with whom we generally have a long-term relationship and favorable collection history.

As of December 31, 2022, and December 31, 2021, total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $585.5 million and $535.0 million, respectively. We have recorded unbilled receivables of $135.4 million and $140.3 million at December 31, 2022, and December 31, 2021, respectively. Included in unbilled receivables are retention receivables of $8.6 million and $7.7 million at December 31, 2022, and December 31, 2021, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings. Unbilled receivables expected to be collected within one year have been included with accounts receivable, current portion in the accompanying consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with accounts receivable, long-term portion in the accompanying consolidated balance sheets.

F-13

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing. Examples include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period, and multi-year on-premises term licenses that are invoiced annually with revenue recognized upfront.

We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred. Since most of our clients are domestic governmental entities, we rarely incur a credit loss resulting from the inability of a client to make required payments. Events or changes in circumstances that indicate the carrying amount for the allowances for losses and sales adjustments may require revision, include, but are not limited to, managing our client’s expectations regarding the scope of the services to be delivered and defects or errors in new versions or enhancements of our software products. Our allowance for losses and sales adjustments of $14.8 million and $12.1 million at December 31, 2022, and December 31, 2021, respectively. Because we rarely experience credit losses with our clients, we have not recorded a material reserve for credit losses.

The following table summarizes the changes in the allowance for losses and sales adjustments:

			Years ended December 31,
			2022						2021
Balance at beginning of year			$	12,086					$	9,255
Provisions for losses and sales adjustments - accounts receivable			2,781						2,831
Collections of accounts previously written off			(106)						—
Balance at end of year			$	14,761					$	12,086

Deferred Revenue

The majority of deferred revenue consists of deferred subscription-based services revenue that has been billed based on contractual terms in the underlying arrangement, with the remaining balance consisting of payments received in advance of revenue being earned under maintenance, software licensing, software and appraisal services, and hardware installation. Refer to Note 19 - "Deferred Revenue and Performance Obligations" for further information, including deferred revenue by segment and changes in deferred revenue during the period.

Deferred Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be three to seven years. We utilized the “portfolio approach” practical expedient, which allows entities to apply the guidance to a portfolio of contracts with similar characteristics because the effects on the financial statements of this approach would not differ materially from applying the guidance to individual contracts. Using the “portfolio approach”, we determined the period of benefit by taking into consideration our customer contracts, our technology life-cycle and other factors. Sales commissions for renewal contracts are generally not paid in connection with the renewal of a contract. In the small number of instances where a commission is paid on a renewal, it is not commensurate with the commission paid on the initial sale and is recognized over the term of renewal, which is generally one year. Amortization expense related to deferred commissions is included in sales and marketing expense in the accompanying consolidated statements of income. Refer to Note 20 - “Deferred Commissions” for further information.

Prepaid expenses and other current assets include direct and incremental costs such as commissions associated with arrangements for which revenue recognition has been deferred. Such costs are expensed at the time the related revenue is recognized.

F-14

USE OF ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, determining the SSP of performance obligations, variable consideration, and other obligations such as returns and refunds; loss contingencies; the estimated useful life of deferred commissions; the fair value amount and estimated useful lives of intangible assets; the carrying amount of operating lease right-of-use assets and operating lease liabilities; determining share-based compensation expense; the allowance for losses and sales adjustments; and determining the potential outcome of future tax consequences of events that have been recognized on our consolidated financial statements or tax returns. Actual results could differ from estimates.

PROPERTY AND EQUIPMENT, NET

Property, equipment and purchased software are recorded at original cost and increased by the cost of any significant improvements after purchase. We expense maintenance and repairs when incurred. Depreciation and amortization is calculated using the straight-line method over the shorter of the asset’s estimated useful life or the term of the lease in the case of leasehold improvements. For income tax purposes, we use accelerated depreciation methods as allowed by tax laws.

RESEARCH AND DEVELOPMENT COSTS

We expensed research and development expense of $105.2 million in 2022, $93.5 million in 2021, and $88.4 million in 2020.

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as “temporary differences”. We record the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in the future periods) and “deferred tax liabilities” (generally items that we received a tax deduction for, which have not yet been recorded in the income statement). The deferred tax assets and liabilities are measured using enacted tax rules and laws that are expected to be in effect when the temporary differences are expected to be recovered or settled. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be "realized".

We do not recognize a tax benefit for uncertain tax positions unless management’s assessment concludes that it is “more likely than not” that the position is sustainable based on its technical merits. If the recognition threshold is met, we recognize a tax benefit based upon the largest amount of the tax benefit that is more likely than not probable, determined by cumulative probability, of being realized upon settlement with the taxing authority. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense in the consolidated statements of income.

Internal Revenue Code (“IRC”) Section 174

For the tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. Although Congress is considering legislation that would repeal or defer this capitalization and amortization requirement, it is not certain that this provision will be repealed or otherwise modified. If the requirement is not repealed or replaced, it will increase our U.S. federal and state cash tax payments and reduce cash flows in fiscal year 2023 and future years.

SHARE-BASED COMPENSATION

We have a share-based award plan that provides for the grant of stock options, restricted stock units, and performance share units to key employees, directors and non-employee consultants. Stock options generally vest after three to six years of continuous service from the date of grant and have a contractual term of 10 years. Restricted stock unit grants generally vest ratably over three to five years of continuous service from the date of grant. Each performance share unit represents the right to receive one share of our common stock based on our achievement of certain financial performance targets during applicable performance periods, which generally cliff vest in one or three years. We account for share-based compensation utilizing the fair value recognition pursuant to ASC 718, Stock Compensation. See Note 12, “Share-Based Compensation,” for further information.

F-15

BUSINESS COMBINATIONS

Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values. The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, management uses all available information.

For tangible and identifiable intangible assets acquired in a business combination, management estimates the fair value of assets acquired and liabilities assumed based on quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. The assumptions made in performing these valuations include, but are not limited to, discount rates, future revenues and operating costs, projections of capital costs, and other assumptions believed to be consistent with those used by principal market participants.

Due to the specialized nature of these calculations, we engage third-party specialists to assist management in evaluating our assumptions as well as appropriately measuring the fair value of assets acquired and liabilities assumed. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and circumstances that existed as of the closing date. If actual results are materially different than the assumptions we used to determine fair value of the assets acquired and liabilities assumed through a business combination as well as the estimated useful lives of the acquired intangible assets, it is possible that adjustments to the carrying values of such assets and liabilities will have a material impact on our financial position and results of operations. See Note 2, “Acquisitions,” for further information.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

We assess goodwill for impairment annually, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable. We begin with the qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the quantitative assessment described below. When testing goodwill for impairment quantitatively, we first compare the fair value of each reporting unit with its carrying amount. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. The fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions (Level 3 inputs). The assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. We evaluate the reasonableness of the fair value calculations of our reporting units by comparing the total of the fair value of all of our reporting units to our total market capitalization.

During the fourth quarter, as part of our annual impairment test as of October 1, we performed qualitative assessments for the reporting units containing the recently acquired data and insights, digital government and payments solutions, and development platform solutions, and concluded no impairment existed as of our annual assessment date. Approximately $1.7 billion, or 70%, of total goodwill as of December 31, 2022, relates to these reporting units, which as a result of these recent acquisitions, do not have significant excess fair values over carrying values. We performed qualitative assessments for the remaining reporting units in which we determined that it not more likely than not that the fair value exceeded the carrying value; therefore, we did not perform a Step 1 quantitative impairment test. Our annual goodwill impairment analysis did not result in an impairment charge. During 2022, we have recorded no impairment to goodwill as no triggering events or change in circumstances indicating a potential impairment has occurred as of period-end.

Determining the fair value of our reporting units involves the use of significant estimates and assumptions and considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Changes in market conditions or other factors outside of our control could cause us to change key assumptions and our judgment about a reporting unit’s prospects. Similarly, in a specific period, a reporting unit could significantly underperform relative to its historical or projected future operating results. Either situation could result in a meaningfully different estimate of the fair value of our reporting units, and a consequent future impairment charge.

There have been no impairments to goodwill in any of the periods presented. See Note 4, "Goodwill and Other Intangible Assets," for additional information.

F-16

Other Intangible Assets

We make judgments about the recoverability of purchased intangible assets other than goodwill whenever events or changes in circumstances indicate that an impairment may exist. Customer base and acquired software each comprise approximately half of our purchased intangible assets other than goodwill. We review our customer turnover each year for indications of impairment. Our customer turnover has historically been very low. If indications of impairment are determined to exist, we measure the recoverability of assets by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. There have been no impairments of intangible assets in any of the periods presented.

IMPAIRMENT OF LONG-LIVED ASSETS

We periodically evaluate whether current facts or circumstances indicate that the carrying value of our property and equipment or other long-lived assets to be held and used may not be recoverable. If such circumstances are determined to exist, we measure the recoverability of assets to be held and used by a comparison of the carrying amount of the asset or appropriate grouping of assets and the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment of long-lived assets in any of the periods presented.

COSTS OF COMPUTER SOFTWARE

We capitalize software development costs upon the establishment of technological feasibility and prior to the availability of the product for general release to customers for software sold to third parties and for application development costs of software developed for internal use. Software development costs primarily consist of personnel costs. During the twelve months period ended December 31, 2022 and 2021, respectively, we capitalized approximately $27.6 million and $21.7 million of software development costs. We begin to amortize capitalized costs when a product is available for general release to customers and internal use software is ready for its intended use. Amortization expense is determined on a product-by-product basis at a rate not less than straight-line basis over the software’s remaining estimated economic life of, generally, three to five years.

CONTINGENT PURCHASE CONSIDERATION

Contingent future cash payments related to acquisitions are recognized at fair value as of the acquisition date and included in the determination of the acquisition date purchase price. Subsequent changes in the fair value of the contingent future cash payments are recognized in earnings in the period that the change occurs. We have no contingent consideration outstanding as of December 31, 2022.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, accounts receivable from trade customers, and investments in marketable securities. Our cash and cash equivalents primarily consist of operating account balances and money market funds, which are maintained at several major domestic financial institutions and the balances often exceed insured amounts. As of December 31, 2022, we had cash and cash equivalents of $173.9 million. We perform periodic evaluations of the credit standing of these financial institutions.

Concentrations of credit risk with respect to receivables are limited due to the size and geographical diversity of our customer base. As a result, we do not believe we have any significant concentrations of credit risk as of December 31, 2022.

We maintain allowances for losses and sales adjustments, which losses are recorded against revenues at the time the loss is incurred. Since most of our customers are domestic governmental entities, we rarely incur a loss resulting from the inability of a customer to make required payments. Events or changes in circumstances that indicate the carrying amount for the allowances for losses and sales adjustments may require revision include, but are not limited to, failure to manage our customer’s expectations regarding the scope of the services to be delivered, and defects or errors in new versions or enhancements of our software products. Historically, our credit losses have not been significant.

LEASES

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, and operating lease liabilities, current and long-term, on our consolidated balance sheets. We currently do not have any finance lease arrangements.

F-17

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date of the lease in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

INDEMNIFICATION

Most of our software license agreements indemnify our customers in the event that the software sold infringes upon the intellectual property rights of a third-party. These agreements typically provide that in such event we will either modify or replace the software so that it becomes non-infringing or procure for the customer the right to use the software. We have not recorded a liability associated with these indemnifications, as we are not aware of any pending or threatened infringement actions that are possible losses. We believe the estimated fair value of these intellectual property indemnification clauses is minimal.

We have also agreed to indemnify certain officers and our board members if they are named or threatened to be named as a party to any proceeding by reason of the fact that they acted in such capacity. We maintain directors’ and officers’ liability insurance coverage to protect against any such losses. We have not recorded a liability associated with these indemnifications. Because of our insurance coverage, we believe the estimated fair value of these indemnification agreements is minimal.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In October 2021, the FASB issued ASU 2021-08 - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASC 805) (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. Under this "Topic 606 approach," the acquirer applies the revenue model as if it had originated the contracts. This is a departure from the current requirement to measure contract assets and contract liabilities at fair value. ASU 2021-08 is effective for all public business entities in annual and interim periods starting after December 15, 2022, and early adoption is permitted. An entity that early adopts should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. We early adopted as of January 1, 2022. The adoption of ASU 2021-08 did not result in an adjustment to the fair value of the deferred revenue balances assumed in our 2022 acquisitions. See Note 2, “Acquisitions,” for further discussion.

NEW ACCOUNTING PRONOUNCEMENTS

There were no new not yet adopted accounting pronouncements currently issued that would affect the Company or have a material impact on its consolidated financial position or results of operations in future periods.

(2)ACQUISITIONS

2022

On October 31, 2022, we acquired Rapid Financial Solutions, LLC (Rapid), a provider of reliable, scalable, and secure payments with best-in-class card issuance and digital disbursement capabilities. The total purchase price, net of cash acquired of $2.2 million, was approximately $67.7 million, consisting of $51.2 million paid in cash, $18.2 million of common stock, and $500,000 related to working capital holdbacks, subject to certain post-closing adjustments.

We have performed a preliminary valuation analysis of the fair market value of Rapid’s assets and liabilities. In connection with this transaction, we acquired total tangible assets of $2.9 million and assumed liabilities of approximately $635,000. We recorded goodwill of approximately $40.0 million, all of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $27.6 million. The goodwill arising from this acquisition is primarily attributed to our ability to generate increased revenues, earnings and cash flow by expanding our addressable market and client base. The $27.6 million of intangible assets are attributable to customer relationships, acquired software, and trade name and will be amortized over a weighted average period of approximately 10 years.

On May 31, 2022, we completed the acquisition of Quatred, LLC (Quatred), a systems integrator and barcode technology solutions provider. The total cash price was approximately $637,000.

F-18

On February 8, 2022, we acquired US eDirect Inc. (US eDirect), a leading provider of technology solutions for campground and outdoor recreation management. The total purchase price, net of cash acquired of $6.4 million, was approximately $116.5 million, consisting of $118.8 million paid in cash and approximately $4.1 million related to indemnity holdbacks.

We have performed a valuation analysis of the fair market value of US eDirect's assets and liabilities. The following table summarizes the preliminary allocation of the purchase price as of the acquisition date:

Cash			$	6,361
Accounts receivable			1,730
Other current assets			594
Other noncurrent assets			698
Goodwill and identifiable intangible assets			125,541
Accounts payable			(1,881)
Accrued expenses			(357)
Other noncurrent liabilities			(742)
Deferred revenue			(688)
Deferred tax liabilities, net			(8,326)
Total consideration			$	122,930

In connection with this transaction, we acquired total tangible assets of $9.4 million and assumed liabilities of approximately $3.7 million. We recorded goodwill of approximately $91.4 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $34.1 million. The goodwill arising from this acquisition is primarily attributed to our ability to generate increased revenues, earnings, and cash flow by expanding our addressable market and client base. The identifiable intangible assets are attributable to customer relationships, acquired software, and trade name and will be amortized over a weighted average period of approximately 13 years. We recorded net deferred tax liabilities of $8.3 million related to the tax effect of our estimated fair value allocations. Since the acquisition date, we recorded adjustments to the preliminary opening balance sheet attributed to decreases in other current assets, other noncurrent assets, identifiable intangible assets, accrued expenses, and deferred revenue, and increases in accounts receivable, accounts payable, and deferred tax liabilities, resulting in a net increase to goodwill of approximately $10.3 million.

As of December 31, 2022, the purchase price allocations for US eDirect and Quatred are complete, while the purchase price allocation for Rapid is not final; therefore, certain preliminary valuation estimates of fair value assumed at the acquisition date for intangible assets, receivables, and related deferred taxes are subject to change as valuations are finalized. Our balance sheet as of December 31, 2022, reflects the allocation of the purchase price to the net assets acquired based on their estimated fair value at the date of the acquisition. The fair value of the assets and liabilities acquired are based on valuations using Level 3 unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Rapid and US eDirect are operated as a part of the digital government and payments solutions business unit (also known as the NIC division), therefore the following unaudited pro forma consolidated operating results information has been prepared as if the acquisitions of Rapid and US eDirect had occurred on January 1, 2021, and NIC had occurred on January 1, 2020, after giving effect to certain adjustments, including amortization of intangibles, transaction costs, and tax effects.

			Years ended December 31,
			2022						2021						2020
Revenues			$	1,867,011					$	1,785,623					$	1,577,117
Net income			147,028						157,765						183,994
Basic earnings per share			$	3.54					$	3.86					$	4.60
Diluted earnings per share			$	3.47					$	3.73					$	4.43

The pro forma information above does not include acquisitions that are not considered material to our results of operations. The pro forma information does not purport to represent what our results of operations actually would have been had such transaction occurred on the date specified or to project our results of operations for any future period.

F-19

The actual operating results of Rapid, US eDirect, and NIC from their respective dates of acquisition are included with the operating results of the Platform Technologies segment. The operating results of Quatred are included in the operating results of the Enterprise Software segment since the date of acquisition. The impact of the 2022 acquisitions on our operating results, assets, and liabilities is not material. In the twelve months ended December 31, 2022, we incurred fees of approximately $2.0 million for financial advisory, legal, accounting, due diligence, valuation, and other various services necessary to complete acquisitions. These costs were expensed in 2022 and are included in general and administrative expense in the accompanying consolidated statements of income.

2021

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. The total purchase price, net of cash acquired, was approximately $12.8 million.

On September 1, 2021, we acquired VendEngine, Inc., 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 $83.6 million, consisting of $81.6 million paid in cash, and approximately $3.8 million related to indemnity holdbacks.

In connection with this transaction, we acquired total tangible assets of $5.8 million and assumed liabilities of approximately $3.0 million. We recorded goodwill of approximately $54.3 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $37.9 million. The $37.9 million of intangible assets are attributable to customer relationships, acquired software, and trade name and will be amortized over a weighted average period of approximately 13 years. We recorded net deferred tax liabilities of $9.6 million related to the tax effect of our estimated fair value allocations. In the twelve months ended December 31, we recorded adjustments to the preliminary opening balance sheet attributed to a decrease to accounts receivable, accounts payable, deferred income taxes, and an adjustment to the accrual for indemnity holdbacks and increases in identifiable intangible assets and accrued expenses resulting in a net decrease to goodwill of approximately $4.4 million.

On April 21, 2021, we acquired NIC, Inc., 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.

We have performed the valuation analysis of the fair market value of NIC’s assets and liabilities. The following table summarizes the allocation of the purchase price as of the acquisition date:

Cash			$	331,783
Accounts receivable			149,515
Other current assets			12,988
Other noncurrent assets			20,974
Identifiable intangible assets			777,000
Goodwill			1,446,868
Accounts payable			(150,099)
Accrued expenses			(63,154)
Other noncurrent liabilities			(11,493)
Deferred revenue			(3,294)
Deferred tax liabilities, net			(190,596)
Total consideration			$	2,320,492

In connection with this transaction, we acquired total tangible assets of $515.3 million and assumed liabilities of approximately $228.0 million. We recorded goodwill of approximately $1.4 billion, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $777.0 million. The $777.0 million of intangible assets are attributable to customer relationships, acquired software, and trade name and will be amortized over a weighted average period of approximately 17 years. We recorded net deferred tax liabilities of $190.6 million related to the tax effect of our estimated fair value allocations. In the twelve months ended December 31, 2021, we recorded adjustments to the preliminary opening balance sheet attributed to a decrease to accounts receivable and increases in identifiable intangible assets, deferred revenue and related deferred taxes resulting in a net decrease to goodwill of approximately $17.2 million.

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. In addition, NIC has extensive

F-20

expertise and scale in the government payments arena which will accelerate our strategic payments initiatives. Therefore, the goodwill of approximately $1.4 billion arising from this acquisition is primarily attributed to our ability to generate increased revenues, earnings and cash flow by expanding our addressable market and client base.

On March 31, 2021, we acquired all the equity interest of Glass Arc, Inc. (dba ReadySub), a cloud-based platform that assists school districts with absence tracking, filling substitute teacher assignments, and automating essential payroll processes. The total cash price was approximately $6.2 million, net of cash acquired.

On March 31, 2021, we acquired substantially all assets of DataSpec, Inc. (DataSpec), a provider of a SaaS solution that allows for secure electronic claims submission to the federal Department of Veterans Affairs and reporting capabilities, in addition to scheduling, calendaring, and payments. The total cash purchase price was approximately $5.8 million.

The operating results of Arx, DataSpec, ReadySub, and VendEngine are included with the operating results of the Enterprise Software segment since their date of acquisition. The impact of the Arx, DataSpec, ReadySub, and VendEngine acquisitions, individually and in the aggregate, on our operating results, assets and liabilities is not material. The operating results of NIC are included in the Platform Technologies Segment. Revenues from NIC included in Tyler's results of operations totaled approximately $368.9 million and net income was approximately $37.2 million from the date of acquisition through December 31, 2021. In 2021, we incurred fees of approximately $23.5 million for financial advisory, legal, accounting, due diligence, valuation and other various services necessary to complete these acquisitions. The Company also incurred $1.6 million of expense related to a separation agreement with NIC's former Chief Executive Officer. These costs were expensed in 2021 and are included in general and administrative expense in the accompanying consolidated statements of income. As of December 31, 2022, the purchase price allocations for 2021 acquisitions are complete.

(3)PROPERTY AND EQUIPMENT, NET AND SOFTWARE DEVELOPMENT COSTS, NET

Property and equipment, net consists of the following at December 31:

			Useful Lives (years)						2022						2021
Land			—						$	22,908					$	22,523
Building and leasehold improvements			5-39						159,059						154,222
Computer equipment and purchased software			3-5						121,968						109,691
Furniture and fixtures			5						39,373						35,932
Transportation equipment			5						200						207
									343,508						322,575
Accumulated depreciation and amortization									(170,722)						(141,382)
Property and equipment, net									$	172,786					$	181,193

Depreciation expense was $29.5 million in 2022, $29.4 million in 2021, and $25.5 million in 2020.

We paid $4.5 million and $12.8 million for real estate and the expansion of existing facilities in 2022 and 2021, respectively.

Software development costs, net consists of the following at December 31:

			Useful Lives (years)						2022						2021
Software development costs			3-5						$	59,904					$	32,274
Accumulated amortization									(11,715)						(3,785)
Software development costs, net									$	48,189					$	28,489

Amortization expense for software development costs is recorded to cost of revenues and general and administrative expense. Amortization expense for software development costs recorded to cost of revenues was $6.5 million in 2022, $2.3 million in 2021, and no expense in 2020. Amortization expense for software development costs recorded to general and administrative expense was $1.4 million in 2022, no expense in 2021, and $1.2 million in 2020.

F-21

Estimated annual amortization expense related to software development costs:

2023			$	11,038
2024			12,440
2025			11,236
2026			8,247
2027			3,924
Thereafter			1,304
			$	48,189

(4)GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the two years ended December 31, 2022 are as follows:

			Enterprise Software						Platform Technologies						Total
Balance as of 12/31/2020			$	762,127					$	76,301					$	838,428
Goodwill acquired related to the purchase of NIC			—						1,446,868						1,446,868
Goodwill acquired related to the purchase of VendEngine			54,456						—						54,456
Goodwill acquired related to the purchase of other acquisitions			19,922						—						19,922
Balance as of 12/31/2021			836,505						1,523,169						2,359,674
Goodwill acquired related to the purchase of US eDirect			—						91,441						91,441
Goodwill acquired related to the purchase of Rapid			—						40,005						40,005
Purchase price adjustments related to the purchase of VendEngine			(204)						—						(204)
Purchase price adjustments related to the purchase of other acquisitions			(1,608)						—						(1,608)
Balance as of 12/31/2022			$	834,693					$	1,654,615					$	2,489,308

Other intangible assets and related accumulated amortization consists of the following at December 31:

			2022						2021
Gross carrying amount of other intangibles:
Customer related intangibles			$	990,545					$	949,844
Acquired software			456,137						433,800
Trade names			45,293						45,353
Leases acquired			5,037						5,037
			1,497,012						1,434,034
Accumulated amortization			(494,848)						(381,541)
Total other intangibles, net			$	1,002,164					$	1,052,493

Amortization expense for acquired software is recorded to cost of revenues. Amortization expense for customer related intangibles, trade names and leases acquired is recorded to amortization of other intangibles. Total amortization expense for other intangibles was $113.9 million in 2022, $90.8 million in 2021, and $53.9 million in 2020.

F-22

The amortization periods of other intangible assets is summarized in the following table:

			December 31, 2022																		December 31, 2021
			Gross Carrying Amount						Weighted Average Amortization Period						Accumulated Amortization						Gross Carrying Amount						Weighted Average Amortization Period						Accumulated Amortization
Non-amortizable intangibles:
Goodwill			$	2,489,308					—						$	—					$	2,359,674					—						$	—
Amortizable intangibles:
Customer related intangibles			$	990,545					20 years						$	209,501					$	949,844					21 years						$	157,077
Acquired software			456,137						5 years						260,642						433,800						7 years						208,451
Trade names			45,293						5 years						21,059						45,353						10 years						13,064
Leases acquired			5,037						9 years						3,646						5,037						9 years						2,949

Estimated annual amortization expense related to other intangibles:

2023			$	105,284
2024			89,192
2025			88,423
2026			80,722
2027			78,626
Thereafter			559,917
			$	1,002,164

(5)ACCRUED LIABILITIES

Accrued liabilities consist of the following at December 31:

			2022						2021
Accrued wages, bonuses and commissions			$	73,745					$	88,696
Other accrued liabilities			58,196						69,728
			$	131,941					$	158,424

(6)DEBT

The following table summarizes our total outstanding borrowings related to the 2021 Credit Agreement and Convertible Senior Notes:

			Rate						Maturity Date						December 31, 2022						December 31, 2021
2021 Credit Agreement
Revolving credit facility			L + 1.50%						April 2026						$	—					$	—
Term Loan A-1			L + 1.50%						April 2026						290,000						585,000
Term Loan A-2			L + 1.25%						April 2024						105,000						170,000
Convertible Senior Notes due 2026			0.25%						March 2026						600,000						600,000
Total borrowings															995,000						1,355,000
Less: unamortized debt discount and debt issuance costs															(7,611)						(13,724)
Total borrowings, net															987,389						1,341,276
Less: current portion of debt															(30,000)						(30,000)
Carrying value															$	957,389					$	1,311,276

F-23

2021 Credit Agreement

In connection with the completion of the acquisition of NIC on April 21, 2021, we, as borrower, entered into a new $1.4 billion Credit Agreement (the “2021 Credit Agreement”) with the various lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender. The 2021 Credit Agreement 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, and the loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any LIBOR breakage costs. In addition to the required amortization payments on the Term Loan A-1 of 5% annually, certain mandatory quarterly prepayments of the Term Loans and the Revolving Credit Facility will be required (i) upon the issuance or incurrence of additional debt not otherwise permitted under the 2021 Credit Agreement and (ii) upon the occurrence of certain asset sales and insurance and condemnation recoveries, subject to certain thresholds, baskets, and reinvestment provisions as provided in the 2021 Credit Agreement.

Borrowings under the Revolving Credit Facility and the Term Loan A-1 bear interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) (the “Base Rate”) plus a margin of 0.125% to 0.75% or (2) the one-, three-, six-, or, subject to approval by all lenders, twelve-month LIBOR rate plus a margin of 1.125% to 1.75%. The Term Loan A-2 bears 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-, six-, or, subject to approval by all lenders, twelve-month LIBOR rate plus a margin of 0.875% to 1.5%. The margin in each case is based upon the Company’s total net leverage ratio, as determined pursuant to the 2021 Credit Agreement. The 2021 Credit Agreement has customary benchmark replacement language with respect to the replacement of LIBOR once LIBOR becomes unavailable. In addition to paying interest on the outstanding principal of loans under the Revolving Credit Facility, the Company is required to pay a commitment fee on the average daily unused portion of the Revolving Credit Facility, currently 0.25% per annum, ranging from 0.15% to 0.3% based upon the Company’s total net leverage ratio.

LIBOR, the London Inter-Bank Offered Rate, is currently anticipated to be phased out in June 2023 and is expected to transition to a new standard rate, the Secured Overnight Financing Rate (“SOFR”), which will incorporate certain overnight repo market data collected from multiple data sets. In January 2023, we amended3 our 2021 Credit Agreement to replace the LIBOR reference rate with the SOFR reference rate. Assuming that SOFR replaces LIBOR and is appropriately adjusted to equate to one-month LIBOR, we expect that there should be minimal impact on our operations.

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. On the Closing Date, the Company paid approximately $2.3 billion in cash for the purchase of NIC. The Term Loans of $900 million and a portion of the proceeds of the Revolving Credit Facility, in the amount of $250 million, together with cash available to the Company of $609 million and the net proceeds of its Convertible Senior Notes of $594 million, were used to complete the acquisition and pay fees and expenses in connection with the acquisition and the 2021 Credit Agreement. The remaining portion of the Revolving Credit Facility may be used for working capital requirements, acquisitions, and capital expenditures of the Company and its subsidiaries.

The 2021 Credit Agreement requires us to maintain certain financial ratios and other financial conditions and prohibits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens. As of December 31, 2022, we were in compliance with those covenants.

The carrying amount is the par value of the Revolving Credit Facility and Term Loans less the debt discount and debt issuance costs that are amortized to interest expense using the effective interest method over the terms of the Term Loans. Interest expense is included in the accompanying consolidated statements of income.

3 The foregoing is a summary of the amended terms and conditions of the 2021 Credit Agreement and not a complete description of the Third Amendment to Credit Agreement, dated January 27,2023. Accordingly, the foregoing is qualified in its entirety by reference to the full text of the Third Amendment to Credit Agreement attached to this Current Report on Form 10-K as Exhibit 4.2, which is incorporated by reference.

F-24

Convertible Senior Notes due 2026

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.

Before September 15, 2025, holders of the Convertible Senior Notes have the right to convert their Convertible Senior Notes only upon the occurrence of certain events. Under the terms of the Indenture, the Convertible Senior Notes are convertible into common stock of Tyler Technologies, Inc. (referred to as “our common stock” herein) at the following times or circumstances:

• during any calendar quarter commencing after the calendar quarter ended June 30, 2021, if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

• during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “Measurement Period”) if the trading price per $1,000 principal amount of Convertible Senior Notes, as determined following a request by their holder in accordance with the procedures in the Indenture, for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

• upon the occurrence of certain corporate events or distributions on our common stock, including but not limited to a “Fundamental Change” (as defined in the Indenture);

• upon the occurrence of specified corporate events; or

• on or after September 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, March 15, 2026.

With certain exceptions, upon a change of control or other fundamental change (both as defined in the Indenture governing the Convertible Senior Notes), the holders of the Convertible Senior Notes may require us to repurchase all or part of the principal amount of the Convertible Senior Notes at a repurchase price equal to 100% of the principal amount of the Convertible Senior Notes, plus any accrued and unpaid interest to, but excluding, the redemption date.

As of December 31, 2022, none of the conditions allowing holders of the Convertible Senior Notes to convert have been met.

From and including September 15, 2025, holders of the Convertible Senior Notes may convert their Convertible Senior Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We will settle any conversions of the Convertible Senior Notes either entirely in cash or in a combination of cash and shares of our common stock, at our election. However, upon conversion of any Convertible Senior Notes, the conversion value, which will be determined over an “Observation Period” (as defined in the Indenture) consisting of 30 trading days, will be paid in cash up to at least the principal amount of the Notes being converted.

The initial conversion rate is 2.0266 shares of common stock per $1,000 principal amount of Convertible Senior Notes, which represents an initial conversion price of approximately $493.44 per share of common stock. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Convertible Senior Notes are redeemable, in whole or in part, at our option at any time, and from time to time, on or after March 15, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price

F-25

equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date, but only if the last reported sale price per share of our common stock exceeds 130% of the conversion price of the Notes on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice; and (ii) the trading day immediately before the date we send such notice. In addition, calling any Note for redemption constitutes a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

Effective Interest

The weighted average interest rates for the borrowings under the 2021 Credit Agreement and Convertible Senior Notes due 2026 were 5.82% and 0.25%, as of December 31, 2022, respectively. During the twelve months ended December 31, 2022, the effective interest rates for our borrowings were 3.79% and 0.54% for the 2021 Credit Agreement and the Convertible Senior Notes, respectively. The following sets forth the interest expense recognized related to the borrowings under the 2021 Credit Agreement and Convertible Senior Notes and is included in interest expense in the accompanying consolidated statements of income:

			Years Ended December 31,
			2022						2021						2020
Contractual interest expense - Revolving Credit Facility			$	(1,267)					$	(1,244)					$	—
Contractual interest expense - Term Loans			(18,583)						(9,341)						—
Contractual interest expense - Convertible Senior Notes			(1,500)						(1,213)						—
Amortization of debt discount and debt issuance costs			(7,029)						(3,297)						—
Interest expense and amortization of debt issuance costs - terminated 2019 Credit Agreement and Senior Unsecured Bridge loan facility			—						(8,203)						(1,013)
Total			$	(28,379)					$	(23,298)					$	(1,013)

As of December 31, 2022, we had one outstanding standalone letter of credit totaling $1.5 million. The letter of credit, which guarantees our performance under a client contract, renews automatically annually unless canceled in writing, and expires in the third quarter of 2026. For the twelve months ended December 31, 2022, we repaid $360 million of the Term Loans under the 2021 Credit Agreement.

As of December 31, 2022, the required annual maturities related to the 2021 Credit Agreement and the Convertible Senior Notes due 2026 were as follows:

Year ending December 31,			Annual Maturities
2023			$	30,000
2024			135,000
2025			30,000
2026			800,000
2027			—
Total required maturities			$	995,000

(7) FINANCIAL INSTRUMENTS

The following table presents our financial instruments:

			December 31, 2022						December 31, 2021
Cash and cash equivalents			$	173,857					$	309,171
Held-to-maturity investments			—						98,653
Available-for-sale investments			55,538						—
Equity investments			10,000						10,000
Total			$	239,395					$	417,824

Cash and cash equivalents consist primarily of money market funds with original maturity dates of three months or less, for which we determine fair value through quoted market prices.

F-26

Our available-for-sale securities were historically classified as held-to-maturity. Management determined that our investment portfolio would be transferred from held-to-maturity to available-for-sale, in order to have the flexibility to buy and sell investments and maximize cash liquidity for potential acquisitions or for debt repayments. Accordingly, our investment portfolio is now classified as available-for-sale as of December 31, 2022. Our available-for-sale investments primarily consist of investment grade corporate bonds, municipal bonds, and asset-backed securities with maturity dates through 2027. These investments are presented at fair value and are included in short-term investments and non-current investments in the accompanying consolidated balance sheets. Unrealized gains or losses associated with the investments are included in accumulated other comprehensive loss, net of tax in the accompanying consolidated balance sheets and statements of comprehensive income. For our available-for-sale investments, we do not have the intent to sell, nor is it more likely than not that we would be required to sell before recovery of their cost basis.

As of December 31, 2022, we have an accrued interest receivable balance of approximately $200,000 which is included in accounts receivable, net. We do not measure an allowance for credit losses for accrued interest receivables. We record any losses within the maturity period or at the time of sale of the investment and any write-offs to accrued interest receivables are recorded as a reduction to interest income in the period of the loss. During the twelve months ended December 31, 2022, we have recorded no credit losses for accrued interest receivables. Interest income and amortization of discounts and premiums are included in other income, net in the accompanying consolidated statements of income.

The following table presents the components of our available-for-sale investments:

			December 31, 2022						December 31, 2021
Amortized cost			$	56,670					$	—
Unrealized gains			16						—
Unrealized losses			(1,148)						—
Estimated fair value			$	55,538					$	—

As of December 31, 2022, we have $37.0 million of available-for-sale debt securities with contractual maturities of one year or less and $18.5 million with contractual maturities great than one year. As of December 31, 2022, 24 available-for-sale debt securities with a fair value of $25.8 million have been in a loss position for one year or less and 28 securities with a fair value of $23.1 million have been in a loss position for greater than one year.

The following table presents the activity on our available-for-sale or held-to-maturity investments:

			Years Ended December 31,
			2022						2021						2020
Proceeds from sales and maturities			$	71,034					$	131,449					$	82,742
Realized losses on sales, net of tax			(79)						—						—

Our equity investments consist of an 18% interest in BFTR, LLC., a wholly owned subsidiary of Bison Capital Partners V L.P. BFTR, LLC, a privately held Australian company specializing in digitizing the spoken word in court and legal proceedings. The investment in common stock is accounted for under the equity method because we do not have the ability to exercise significant influence over the investee; and as the securities do not have readily determinable fair values, our investment is carried at cost less any impairment write-downs.

F-27

(8) OTHER COMPREHENSIVE LOSS

The following tables present the changes in the balances of accumulated other comprehensive loss, net of tax by component:

			Unrealized Loss On Available-for-Sales Securities						Other						Accumulated Other Comprehensive Loss
Balance as of December 31, 2020			$	(46)					$	—					$	(46)
Other comprehensive income before reclassifications			—						—						—
Amounts reclassified to net income			—						—						—
Other comprehensive income (loss)			—						—						—
Balance as of December 31, 2021			$	(46)					$	—					$	(46)
Other comprehensive loss before reclassifications			(850)						—						(850)
Reclassification adjustment of unrealized losses on securities transferred from held-to-maturity			(27)						—						(27)
Reclassification adjustment for net loss on sale of available for sale securities, included in net income			79						—						79
Other comprehensive loss			(798)						—						(798)
Balance as of December 31, 2022			$	(844)					$	—					$	(844)

(9)FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for that asset or liability. Guidance on fair value measurements and disclosures establishes a valuation hierarchy for disclosure of inputs used in measuring fair value defined as follows:

• Level 1—Inputs are unadjusted quoted prices that are available in active markets for identical assets or liabilities.

• Level 2—Inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in non-active markets, inputs other than quoted prices that are observable, and inputs that are not directly observable, but are corroborated by observable market data.

• Level 3—Inputs that are unobservable and are supported by little or no market activity and reflect the use of significant management judgment.

The classification of a financial asset or liability within the hierarchy is determined based on the least reliable level of input that is significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We also consider the counterparty and our own non-performance risk in our assessment of fair value.

The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of December 31, 2022:

			Level 1						Level 2						Level 3						Total
Available-for-sale investments			$	—					$	55,538					$	—					$	55,538
Equity investments			—						—						10,000						10,000
2021 Credit Agreement
Revolving Credit Facility			—						—						—						—
Term Loan A-1			—						288,302						—						288,302
Term Loan A-2			—						104,603						—						104,603
Convertible Senior Notes due 2026			—						560,910						—						560,910

Assets that are Measured at Fair Value on a Recurring Basis

Cash and cash equivalents, accounts receivables, accounts payables, short-term obligations and certain other assets at cost approximate fair value because of the short maturity of these instruments.

F-28

As of December 31, 2022, we have $55.5 million in investment grade corporate bonds, municipal bonds, and asset-backed securities with maturity dates through 2027. The fair values of these securities are considered Level 2 as they are based on inputs from quoted prices in markets that are not active or other observable market data.

Assets that are Measured at Fair Value on a Nonrecurring Basis

As of December 31, 2022, we have an 18% interest in BFTR, LLC. The investment in common stock is accounted under the equity method because we do not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values. Our investment is carried at cost less any impairment write-downs. Periodically, our equity method investments are assessed for impairment. We do not reassess the fair value of equity method investments if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investments. No events or changes in circumstances have occurred during the period that require reassessment. There has been no impairment of our equity method investment for the periods presented. This investment is included in other non-current assets in the accompanying consolidated balance sheets.

We assess goodwill for impairment annually on October 1. In addition, we review goodwill, property and equipment, and other intangibles for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. During the fourth quarter of 2022, we completed our annual assessment of goodwill which did not result in an impairment charge. Further, 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, 2022.

Financial instruments measured at fair value only for disclosure purposes

The fair value of our borrowing under our 2021 Credit Agreement would approximate book value as of December 31, 2022, because our interest rates reset approximately every 30 days or less.

The carrying amount of the Revolving Credit Facility and Term Loans is the par value less the debt discount and debt issuance costs that are amortized to interest expense using the effective interest method over the terms of the Term Loans. Interest expense is included in the accompanying consolidated statements of income.

The fair value of our Convertible Senior Notes due 2026 is determined based on quoted market prices for a similar liability when traded as an asset in an active market, a Level 2 input. See Note 6, “Debt,” for further discussion.

The carrying amount of the Convertible Senior Notes is the par value less the debt discount and debt issuance costs that are amortized to interest expense using the effective interest method over the term of the Convertible Senior Notes. Interest expense is included in the accompanying consolidated statements of income.

The following table presents the fair value and carrying value, net, of the 2021 Credit Agreement and our Convertible Notes due 2026):

			Fair Value at December 31,												Carrying Value at December 31,
			2022						2021						2022						2021
2021 Credit Agreement
Revolving Credit Facility			$	—					$	—					$	—					$	—
Term Loan A-1			288,302						580,515						288,302						580,515
Term Loan A-2			104,603						167,997						104,603						167,996
Convertible Notes due 2026			560,910						736,662						594,484						592,765
			$	953,815					$	1,485,174					$	987,389					$	1,341,276

F-29

(10)INCOME TAX

Income tax provision (benefit) on income from operations consists of the following:

			Years Ended December 31,
			2022						2021						2020
Current:
Federal			$	84,570					$	7,591					$	(10,538)
State			25,975						3,203						(1,304)
			110,545						10,794						(11,842)
Deferred			(87,192)						(13,271)						(7,936)
			$	23,353					$	(2,477)					$	(19,778)

Reconciliation of the U.S. statutory income tax rate to our effective income tax expense rate for operations follows:

			Years Ended December 31,
			2022						2021						2020
Federal income tax expense at statutory rate			$	39,395					$	33,386					$	36,759
State income tax, net of federal income tax benefit			9,197						5,594						6,677
Net operating loss carryback			(261)						3,391						(3,445)
Excess tax benefits of share-based compensation			(7,752)						(47,675)						(60,190)
Tax credits			(31,334)						(4,999)						(3,867)
Non-deductible business expenses			5,425						7,542						4,199
Uncertain tax positions			8,338						(425)						—
Other, net			345						709						89
			$	23,353					$	(2,477)					$	(19,778)

In 2022, we completed a multi-year research and development tax credit study, which resulted in a $31.3 million research tax credit benefit.

The tax effects of the major items recorded as deferred tax assets and liabilities as of December 31 are:

			2022						2021
Deferred income tax assets:
Capitalized research and experimental expenditures			$	76,731					$	—
Operating expenses not currently deductible			17,263						16,639
Stock option and other employee benefit plans			21,373						19,596
Loss and credit carryforwards			8,589						18,604
Deferred revenue			4,405						4,717
Other			289						—
Total deferred income tax assets			128,650						59,556
Valuation allowance			—						—
Total deferred income tax assets, net of valuation allowance			128,650						59,556
Deferred income tax liabilities:
Intangible assets			(256,818)						(266,827)
Property and equipment			(11,220)						(12,272)
Prepaid expenses			(9,503)						(8,542)
Total deferred income tax liabilities			(277,541)						(287,641)
Net deferred income tax liabilities			$	(148,891)					$	(228,085)

As of December 31, 2022, the capitalization and amortization requirements of research and experimental expenditures pursuant to the TCJA changes to Internal Revenue Code Section 174 resulted in a deferred tax asset of $76.7 million.

F-30

As of December 31, 2022, we had federal net operating loss carryforwards of approximately $22.9 million, after-tax state net operating loss carryforwards of approximately $1.6 million, and tax credit carryforwards of approximately $4.1 million. The federal net operating loss carryforward will begin to expire in 2037, if not utilized, and a portion of the state net operating loss and tax credit carryforwards begin expiring in 2033, if not utilized.

The acquired carryforwards are subject to an annual limitation but are expected to be realized. We believe it is more likely than not that all other deferred tax assets will be realized. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of reversing taxable temporary differences are revised.

The following table provides a reconciliation of the gross unrecognized tax benefits from uncertain tax positions for the years ended December 31:

			2022						2021
Balance at beginning of period			$	4,635					$	1,929
Additions for tax positions of prior period			5,522						4,508
Reductions for tax positions of prior period			(170)						(10)
Additions for tax positions of current period			5,804						212
Settlements			—						—
Expiration of statutes of limitations			(1,160)						(2,004)
Balance at end of period			$	14,631					$	4,635

As of December 31, 2022, $1.9 million of the unrecognized tax benefits are reflected as a decrease in deferred income taxes and $12.7 million are included in other long-term liabilities in our consolidated balance sheets. The total amount of unrecognized tax benefits, net of federal income tax benefit of state taxes, if recognized, that would affect the effective tax rate is $13.9 million as of December 31, 2022, and $4.3 million and $1.9 million as of December 31, 2021, and 2020, respectively. It is reasonably possible that events will occur during the next 12 months that would cause the total amount of unrecognized tax benefits to increase or decrease. However, we do not expect such increases or decreases to be material to the financial condition or results of operations.

We are subject to U.S. federal income tax, as well as income tax of multiple state, local and foreign jurisdictions. We are routinely subject to income tax examinations by these taxing jurisdictions, but we do not have a history of, nor do we expect any material adjustments as a result of these examinations. With few exceptions, major U.S. federal, state, local and foreign jurisdictions are no longer subject to examination for years before 2018. As of February 22, 2023, no significant adjustments have been proposed by any taxing jurisdiction.

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense in the consolidated statements of income. Accrued interest and penalty amounts were not significant at December 31, 2022.

(11)SHAREHOLDERS’ EQUITY

The following table details activity in our common stock:

			Years Ended December 31,
			2022												2021												2020
			Shares						Amount						Shares						Amount						Shares						Amount
Purchases of treasury shares			—						$	—					(33)						$	(12,977)					(59)						$	(15,484)
Stock option exercises			186						26,329						627						96,714						1,174						124,363
Employee stock plan purchases			49						16,651						35						13,158						40						10,912
Restricted stock units vested, net of withheld shares upon award settlement			176						(27,219)						147						(25,158)						76						(12,923)
Shares issued for acquisition			56						18,169						—						—						—						—

As of February 22, 2023, we had authorization from our board of directors to repurchase up to 2.3 million additional shares of our common stock.

F-31

(12)SHARE-BASED COMPENSATION

Share-Based Compensation Plan

In May 2018, stockholders approved the Tyler Technologies, Inc. 2018 Stock Incentive Plan (“the 2018 Plan”) which amended and restated the existing Tyler Technologies, Inc. 2010 Stock Option Plan (“the 2010 Plan”). Upon stockholder approval of the 2018 Plan, the remaining shares available for grant under the 2010 Plan were added to the shares authorized for grant under the 2018 Plan. Additionally, any awards previously granted under the 2010 Plan that expire unexercised or are forfeited are added to the shares authorized for grant under the 2018 Plan.

During fiscal year 2022, we granted stock awards under the 2018 Plan in the form of stock options, restricted stock units and performance share units. Stock options generally vest after three to six years of continuous service from the date of grant and have a contractual term of 10 years. Once options become exercisable, the employee can purchase shares of our common stock at the market price on the date we granted the option. Restricted stock unit grants generally vest ratably over three to five years of continuous service from the date of grant. Each performance share unit represents the right to receive one share of our common stock based on our achievement of certain financial performance targets during applicable performance periods. We account for share-based compensation utilizing the fair value recognition pursuant to ASC 718, Stock Compensation.

As of December 31, 2022, there were 1.3 million shares available for future grants under the 2018 Plan from the 22.9 million shares previously approved by the shareholders.

Determining Fair Value of Stock Compensation

Valuation and Amortization Method. We estimate the fair value of stock option awards granted using the Black-Scholes option valuation model. For restricted stock unit and performance stock unit awards, we estimate fair value as market value on the date of grant. We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The expected life represents the weighted-average period the stock options are expected to be outstanding based primarily on the options’ vesting terms, remaining contractual life and the employees’ expected exercise based on historical patterns.

Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock.

Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Expected Dividend Yield. We have not paid any cash dividends on our common stock in more than ten years and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model.

Expected Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We record share-based compensation only for those awards that are expected to vest.

The following weighted average assumptions were used for options granted:

			Years Ended December 31,
			2022						2021						2020
Expected life (in years)			5.0						5.0						5.0
Expected volatility			28.3		%				26.1		%				27.0		%
Risk-free interest rate			3.3		%				1.0		%				0.4		%
Expected forfeiture rate			—		%				—		%				—		%

F-32

Share-Based Award Activity

The following table summarizes restricted stock unit and performance stock unit activity during the periods presented (shares in thousands):

			Number of Shares						Weighted Average Grant Date Fair Value per Share
Unvested at December 31, 2021			600						$	355.43
Granted			240						374.16
Conversion of Unvested Restricted Stock Awards			—						—
Vested			(246)						316.10
Forfeited			(26)						392.35
Unvested at December 31, 2022			568						$	376.07

Options granted, exercised, forfeited and expired are summarized as follows:

			Number of Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Life (Years)						Aggregate Intrinsic Value
Outstanding at December 31, 2021			1,620						206.06
Granted			90						349.05
Exercised			(186)						141.54
Forfeited			(13)						292.50
Outstanding at December 31, 2022			1,511						$	221.38					5						$	175,246
Exercisable at December 31, 2022			1,249						$	195.54					5						$	167,620

We had unvested options to purchase approximately 267,000 shares with a weighted average grant date exercise price of $346.14 as of December 31, 2022, and unvested options to purchase approximately 445,000 shares with a weighted average grant date exercise price of $293.84 as of December 31, 2021.

Other information pertaining to option activity was as follows during the twelve months ended December 31:

			2022						2021						2020
Weighted average grant-date fair value of stock options granted			$	108.99					$	113.18					$	98.69
Total intrinsic value of stock options exercised			$	43,160					$	215,062					$	292,394

Share-Based Compensation Expense

The following table summarizes share-based compensation expense related to share-based awards which is recorded in the consolidated statements of income:

			Years Ended December 31,
			2022						2021						2020
Subscriptions, maintenance and professional services			$	27,486					$	23,705					$	18,125
Sales and marketing expense			8,800						8,834						7,904
General and administrative expense			66,699						72,187						41,336
Total share-based compensation expense			102,985						104,726						67,365
Total tax benefit			(27,599)						(63,456)						(66,241)
Net decrease in net income			$	75,386					$	41,270					$	1,124

As of December 31, 2022, we had $175.6 million of total unrecognized compensation cost related to unvested options and restricted stock units, net of expected forfeitures, which is expected to be amortized over a weighted average amortization period of 2.7 years.

F-33

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan (“ESPP”) participants may contribute up to 15% of their annual compensation to purchase common shares of Tyler. The purchase price of the shares is equal to 85% of the closing price of Tyler shares on the last day of each quarterly offering period. As of December 31, 2022, there were 576,000 shares available for future issuances under the ESPP from the 2.0 million shares previously approved by the stockholders.

(13)EARNINGS PER SHARE

The following table details the reconciliation of basic earnings per share to diluted earnings per share:

			Years Ended December 31,
			2022						2021						2020
Numerator for basic and diluted earnings per share:
Net income			$	164,240					$	161,458					$	194,820
Denominator:
Weighted-average basic common shares outstanding			41,544						40,848						40,035
Assumed conversion of dilutive securities:
Stock awards			855						1,382						1,491
Convertible Senior Notes			—						14						—
Denominator for diluted earnings per share - Adjusted weighted-average shares			42,399						42,244						41,526
Earnings per common share:
Basic			$	3.95					$	3.95					$	4.87
Diluted			$	3.87					$	3.82					$	4.69

Share-based awards representing the right to purchase common stock of 372,000 shares in 2022, 117,000 shares in 2021, and 132,000 shares in 2020, were not included in the computation of diluted earnings per share because their inclusion would have had an antidilutive effect.

We have used the if-converted method for calculating any potential dilutive effect of the Convertible Senior Notes due 2026 on our diluted net income per share. Under the if-converted method, the Notes are assumed to be converted at the beginning of the period and the resulting common shares are included in the denominator of the diluted earnings per share calculation for the entire period being presented and interest expense, net of tax, recorded in connection with the Convertible Senior Notes is not added back to the numerator, only in the periods in which such effect is dilutive. The approximately 1.2 million remaining resulting common shares related to the Notes are not included in the dilutive weighted-average common shares outstanding calculation for the twelve months ended December 31, 2022, as their effect would be antidilutive given none of the conversion features have been triggered. See Note 6, “Debt,” for discussion on the conversion features related to the Convertible Senior Notes.

(14) LEASES

We lease office facilities for use in our operations, as well as transportation and other equipment. Most of our leases are non-cancelable operating lease agreements with original maturities between one to 12 years. Some of these leases include options to extend for up to six years. We have no finance leases and no related party lease agreements as of December 31, 2022. Right-of-use lease assets and lease liabilities for our operating leases are recorded in the consolidated balance sheets. During 2022, we incurred lease restructuring costs, resulting in an additional $1.7 million of operating lease costs.

The components of operating lease expense were as follows:

Lease Costs									Years ended December 31,
									2022						2021						2020
Operating lease cost									$	14,743					$	11,095					$	6,524
Short-term lease cost									2,166						2,308						1,940
Variable lease cost									1,047						1,659						1,760
Net lease cost									$	17,956					$	15,062					$	10,224

F-34

Supplemental information related to leases is as follows:

Other Information			Years ended December 31,
			2022						2021
Cash flows:
Cash paid amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases			$	13,562					$	11,432
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases			$	25,171					$	20,140
Lease term and discount rate:
Weighted average remaining lease term (years)			7						6
Weighted average discount rate			1.57		%				1.81		%

As of December 31, 2022, maturities of lease liabilities were as follows:

Year ending December 31,			Amount
2023			$	11,054
2024			10,878
2025			8,942
2026			7,022
2027			5,943
Thereafter			17,876
Total lease payments			61,715
Less: Interest			(2,930)
Present value of operating lease liabilities			$	58,785

Rental Income from third parties

We own office buildings in Bangor, Falmouth and Yarmouth, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham, New York; and Moraine, Ohio. We lease space in some of these buildings to third-party tenants. The property we lease to others under operating leases consists primarily of specific facilities where one tenant obtains substantially all of the economic benefit from the asset and has the right to direct the use of the asset. These non-cancelable leases expire between 2023 and 2027, and some have options to extend the lease for up to 10 years. We determine if an arrangement is a lease at inception. None of our leases allow the lessee to purchase the leased asset.

Rental income from third-party tenants was $1.7 million in 2022, $1.2 million in 2021, and $1.1 million in 2020. Rental income is included in hardware and other revenue on the consolidated statements of income. Future minimum operating rental income based on contractual agreements is as follows:

Year ending December 31,			Amount
2023			$	1,881
2024			1,904
2025			1,363
2026			408
2027			131
Thereafter			—
Total			$	5,687

As of December 31, 2022, we had no additional significant operating or finance leases that had not yet commenced.

F-35

(15)EMPLOYEE BENEFIT PLANS

We provide a defined contribution plan for the majority of our employees meeting minimum service requirements. Eligible employees can contribute up to 30% of their current compensation to the plan subject to certain statutory limitations. We contribute up to a maximum of 3% of an employee’s compensation to the plan. We made contributions to the plan and charged operating results $17.5 million in 2022, $15.6 million in 2021, and $12.7 million in 2020.

(16)COMMITMENTS AND CONTINGENCIES

Litigation

During the first quarter 2022, the Company received a notice of termination for convenience for professional services under a contractual arrangement with a state client. Upon receipt of the termination notice, we ceased performing services under the contractual arrangement and sought payment of contractually owed fees of approximately $15 million in connection with the termination for convenience. As of December 31, the total exposure in our financial statements included the remaining balance of net billed accounts receivable for licenses and services rendered under the contract of approximately $12 million.

The client was unresponsive to company outreach for several months. On August 23, 2022, the Company filed a lawsuit to enforce our rights and remedies under the applicable contractual arrangement. The client has not filed responsive pleadings and no other significant activity has occurred in the lawsuit. Although we believe our products and services were delivered in accordance with the terms of our contract and that we are entitled to payment in connection with the termination for convenience, at this time the matter remains unresolved. We are unable to estimate the probability of a favorable or unfavorable outcome with respect to the dispute or estimate the amount of potential loss, if any, related to this matter. We can provide no assurances that we will not incur additional costs as we pursue our rights and remedies under the contract.

Purchase Commitments

We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of December 31, 2022, the remaining aggregate minimum purchase commitment under these arrangements was approximately $264 million through 2028. Future minimum payments related to purchase commitments based on contractual agreements is as follows:

Year ending December 31,			Amount
2023			$	41,210
2024			41,862
2025			39,730
2026			42,681
2027			42,734
Thereafter			56,245
Total			$	264,462

(17)SEGMENT AND RELATED INFORMATION

We provide integrated information management solutions and services for the public sector.

We provide our software systems and related professional services and appraisal services through seven business units, which focus on the following products:

• financial management, education and planning, regulatory, and maintenance software solutions;

• financial management, municipal courts, planning, regulatory, and maintenance software solutions;

• courts and justice and public safety software solutions;

• data and insights solutions;

• appraisal and tax software solutions, land and vital records management software solutions, and property appraisal services;

• development platform solutions including case management and business process management; and

• digital government and payments solutions.

F-36

In accordance with ASC 280-10, Segment Reporting, we report our results in two reportable segments. The Enterprise Software ("ES") reportable segment provides public sector entities with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as: financial management and education; planning, regulatory and maintenance; courts and justice; public safety; data and insights; appraisal and tax software solutions; land and vital records management software solutions; and property appraisal services. The Platform Technologies ("PT") reportable segment provides public sector entities with software solutions to perform transaction processing, streamline data processing, and improve operations and workflows such as digital government and payments solutions and development platform solutions.

We evaluate performance based on several factors, of which the primary financial measure is business segment operating income. We define segment operating income for our business units as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense, and income taxes. Segment operating income includes intercompany transactions. The majority of intercompany transactions relate to contracts involving more than one unit and are valued based on the contractual arrangement. Corporate segment operating loss primarily consists of compensation costs for the executive management team, certain shared services staff, and share-based compensation expense for the entire company. Corporate segment operating income also includes revenues and expenses related to a company-wide user conference. The accounting policies of the reportable segments are the same as those described in Note 1, “Summary of Significant Accounting Policies”.

As of January 1, 2022, the appraisal and tax software solutions, land and vital records management software solutions, and property appraisal service business unit, which was previously reported in the Appraisal & Tax ("A&T") reportable segment, was moved to the ES reportable segment. The digital government and payments solutions, which was previously reported in the NIC reportable segment, and development platform solutions moved to the PT reportable segment to reflect changes in the way in which management makes operating decisions, allocates resources, and manages the growth and profitability of the Company. As a result of the changes in our reportable segments, the former A&T and NIC reportable segments are no longer considered separate segments. Prior periods amounts for the ES and PT reportable segments have been adjusted to reflect the segment change.

Segment assets primarily consist of net accounts receivable, prepaid expenses and other current assets and net property and equipment, and software development costs. Corporate assets primarily consist of cash and investments, prepaid insurance, intangibles associated with acquisitions, deferred income taxes and net property and equipment mainly related to unallocated information and technology assets.

The ES segment capital expenditures included $3.6 million in 2022 and $12.8 million in 2021 for the expansion of existing buildings and purchases of buildings. The PT segment had $863,000 capital expenditures in 2022 and had no capital expenditures in 2021 for the expansion of existing buildings.

For the year ended December 31, 2022			Enterprise Software						Platform Technologies						Corporate						Totals
Revenues
Subscriptions			$	526,323					$	485,981					$	—					$	1,012,304
Maintenance			444,143						24,312						—						468,455
Professional services			170,462						72,655						—						243,117
Software licenses and royalties			55,158						4,248						—						59,406
Appraisal services			34,508						—						—						34,508
Hardware and other			26,592						—						5,822						32,414
Intercompany			21,636						—						(21,636)						—
Total revenues			$	1,278,822					$	587,196					$	(15,814)					$	1,850,204
Depreciation and amortization expense			55,389						84,609						19,074						159,072
Segment operating income			418,776						123,291						(214,263)						327,804
Software development expenditures			3,790						14,581						9,251						27,622
Capital expenditures			8,972						6,845						6,712						22,529
Segment assets			$	636,377					$	362,610					$	3,688,430					$	4,687,417

F-37

For the year ended December 31, 2021			Enterprise Software						Platform Technologies						Corporate						Totals
Revenues
Subscriptions			$	425,078					$	359,357					$	—					$	784,435
Maintenance			439,589						34,698						—						474,287
Professional services			165,396						43,995						—						209,391
Software licenses and royalties			66,816						7,636						—						74,452
Appraisal services			27,788						—						—						27,788
Hardware and other			18,876						31						3,027						21,934
Intercompany			22,033						—						(22,033)						—
Total revenues			$	1,165,576					$	445,717					$	(19,006)					$	1,592,287
Depreciation and amortization expense			54,011						55,539						26,074						135,624
Segment operating income			401,382						92,582						(222,779)						271,185
Software development expenditures			3,504						12,332						5,857						21,693
Capital expenditures			19,213						3,696						11,010						33,919
Segment assets			$	601,390					$	359,919					$	3,770,852					$	4,732,161

For the year ended December 31, 2020			Enterprise Software						Platform Technologies						Corporate						Totals
Revenues
Subscriptions			$	339,842					$	10,806					$	—					$	350,648
Maintenance			427,813						39,700						—						467,513
Professional services			165,022						21,387						—						186,409
Software licenses and royalties			67,979						5,185						—						73,164
Appraisal services			21,127						—						—						21,127
Hardware and other			17,755						36						11						17,802
Intercompany			19,131						—						(19,131)						—
Total revenues			$	1,058,669					$	77,114					$	(19,120)					$	1,116,663
Depreciation and amortization expense			52,715						15,717						13,225						81,657
Segment operating income			355,679						15,569						(144,698)						226,550
Software development expenditures			—						5,776						—						5,776
Capital expenditures			14,246						652						7,792						22,690
Segment assets			$	561,324					$	57,420					$	1,988,530					$	2,607,274

Reconciliation of reportable segment operating income to the Company's consolidated totals:			Years Ended December 31,
			2022						2021						2020
Total segment operating income			$	327,804					$	271,185					$	226,550
Amortization of acquired software			(52,192)						(45,601)						(31,962)
Amortization of other intangibles			(61,363)						(44,849)						(21,662)
Interest expense			(28,379)						(23,298)						(1,013)
Other income, net			1,723						1,544						3,129
Income before income taxes			$	187,593					$	158,981					$	175,042

F-38

(18) DISAGGREGATION OF REVENUE

The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing, and uncertainty of revenues and cash flows.

Timing of Revenue Recognition

Timing of revenue recognition by revenue category during the period is as follows:

For the year ended December 31, 2022			Products and services transferred at a point in time						Products and services transferred over time						Total
Revenues:
Subscriptions			$	—					$	1,012,304					$	1,012,304
Maintenance			—						468,455						468,455
Professional services			—						243,117						243,117
Software licenses and royalties			50,302						9,104						59,406
Appraisal services			—						34,508						34,508
Hardware and other			32,414						—						32,414
Total			$	82,716					$	1,767,488					$	1,850,204

For the year ended December 31, 2021			Products and services transferred at a point in time						Products and services transferred over time						Total
Revenues:
Subscriptions			$	—					$	784,435					$	784,435
Maintenance			—						474,287						474,287
Professional services			—						209,391						209,391
Software licenses and royalties			62,847						11,605						74,452
Appraisal services			—						27,788						27,788
Hardware and other			21,934						—						21,934
Total			$	84,781					$	1,507,506					$	1,592,287

For the year ended December 31, 2020			Products and services transferred at a point in time						Products and services transferred over time						Total
Revenues:
Subscriptions			$	—					$	350,648					$	350,648
Maintenance			—						467,513						467,513
Professional services			—						186,409						186,409
Software licenses and royalties			62,029						11,135						73,164
Appraisal services			—						21,127						21,127
Hardware and other			17,802						—						17,802
Total			$	79,831					$	1,036,832					$	1,116,663

F-39

Recurring Revenues

The majority of our revenue is comprised of revenues from subscriptions and maintenance, which we consider to be recurring revenues. Subscriptions revenue primarily consists of revenues derived from our SaaS arrangements and transaction-based fees, which relate to digital government services, e-filing transactions, and payment processing. Total subscriptions revenue derived from transaction-based fees included in total recurring revenues was $600.8 million, $454.8 million, and $91.0 million, respectively, for the twelve months ended December 31, 2022, 2021, and 2020, respectively. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of three to five years. Virtually all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenues. That maintenance and support is generally provided under annual, or in some cases, multi-year contracts. We consider all other revenue categories to be non-recurring revenues.

Recurring revenues and non-recurring revenues recognized during the period are as follows:

For the year ended December 31, 2022			Enterprise Software						Platform Technologies						Corporate						Totals
Recurring revenues			$	970,466					$	510,293					$	—					$	1,480,759
Non-recurring revenues			286,720						76,903						5,822						369,445
Intercompany			21,636						—						(21,636)						—
Total revenues			$	1,278,822					$	587,196					$	(15,814)					$	1,850,204

For the year ended December 31, 2021			Enterprise Software						Platform Technologies						Corporate						Totals
Recurring revenues			$	864,667					$	394,055					$	—					$	1,258,722
Non-recurring revenues			278,876						51,662						3,027						333,565
Intercompany			22,033						—						(22,033)						—
Total revenues			$	1,165,576					$	445,717					$	(19,006)					$	1,592,287

For the year ended December 31, 2020			Enterprise Software						Platform Technologies						Corporate						Totals
Recurring revenues			$	767,655					$	50,506					$	—					$	818,161
Non-recurring revenues			271,883						26,608						11						298,502
Intercompany			19,131						—						(19,131)						—
Total revenues			$	1,058,669					$	77,114					$	(19,120)					$	1,116,663

(19) DEFERRED REVENUE AND PERFORMANCE OBLIGATIONS

Total deferred revenue, including long-term, by segment is as follows:

			December 31, 2022						December 31, 2021
Enterprise Software			$	533,902					$	479,048
Platform Technologies			33,691						29,705
Corporate			2,982						1,814
Totals			$	570,575					$	510,567

Changes in total deferred revenue, including long-term, were as follows:

			2022
Balance at beginning of year			$	510,567
Deferral of revenue			1,267,937
Recognition of deferred revenue			(1,207,929)
Balance at end of year			$	570,575

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Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized (“backlog”), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Backlog as of December 31, 2022 was $1.89 billion, of which we expect to recognize approximately 47% as revenue over the next 12 months and the remainder thereafter.

(20) DEFERRED COMMISSIONS

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be generally three to seven years. Deferred commissions were $43.8 million and $38.1 million as of December 31, 2022 and 2021, respectively. Amortization expense was $15.4 million, $13.4 million, and $11.9 million for the twelve months ended December 31, 2022, 2021, and 2020, respectively. There were no indicators of impairment in relation to the costs capitalized for the periods presented. Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term portion in the accompanying consolidated balance sheets. Amortization expense related to deferred commissions is included in sales and marketing expense in the accompanying consolidated statements of income.

(21) SUBSEQUENT EVENTS

There have been no material events or transactions that occurred subsequent to December 31, 2022.

F-41