Item 16. FORM 10-K SUMMARY

None.

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 21, 2024						By:						/s/ H. Lynn Moore, Jr.
												H. Lynn Moore, Jr.
												President and Chief Executive Officer
												(principal executive officer)

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears below constitutes and appoints H. Lynn Moore, Jr. and Brian K. Miller, and each of them, as his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 21, 2024.

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 21, 2024						By:						/s/ John S. Marr, Jr.
												John S. Marr, Jr.
												Executive Chairman of the Board
												Director
Date: February 21, 2024						By:						/s/ H. Lynn Moore, Jr.
												H. Lynn Moore, Jr.
												President and Chief Executive Officer
												(principal executive officer)
Date: February 21, 2024						By:						/s/ Brian K. Miller
												Brian K. Miller
												Executive Vice President and Chief Financial Officer
												(principal financial officer)
Date: February 21, 2024						By:						/s/ Jason P. Durham
												Jason P. Durham
												Chief Accounting Officer
												(principal accounting officer)
Date: February 21, 2024						By:						/s/ Glenn A. Carter
												Glenn A. Carter
												Director
Date: February 21, 2024						By:						/s/ Brenda A. Cline
												Brenda A. Cline
												Director
Date: February 21, 2024						By:						/s/ Ronnie D. Hawkins, Jr.
												Ronnie D. Hawkins, Jr.
												Director
Date: February 21, 2024						By:						/s/ Mary Landrieu
												Mary Landrieu
												Director
Date: February 21, 2024						By:						/s/ Daniel M. Pope
												Daniel M. Pope
												Director
Date: February 21, 2024						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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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 21, 2024 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 Matter

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, 2023, 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. As part of its annual impairment test as of October 1, the Company performed a quantitative assessment for the platform technologies reporting unit which includes $1.7 billion, or 67%, of total goodwill as of December 31, 2023. The Company concluded that no impairment existed as of their annual assessment date. Auditing management’s quantitative assessment for goodwill impairment was complex and highly judgmental due to the significant judgment required to determine the fair value of this reporting unit. In particular, the Company’s fair value estimate for this reporting unit was 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 the quantitative goodwill impairment assessment, including controls over management’s review of the significant assumptions described above. To test the estimated fair value of the applicable reporting unit, 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 analysis. 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 unit 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 21, 2024

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, 2023, 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, 2023, 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, 2023 and 2022, 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, 2023, and the related notes and our report dated February 21, 2024 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 21, 2024

F-3

Tyler Technologies, Inc.

Consolidated Statements of Income

For the years ended December 31,

(In thousands, except per share amounts)

			2023						2022						2021
Revenues:
Subscriptions			$	1,159,512					$	1,012,304					$	784,435
Maintenance			466,661						468,455						474,287
Professional services			249,976						277,625						237,179
Software licenses and royalties			38,096						59,406						74,452
Hardware and other			37,506						32,414						21,934
Total revenues			1,951,751						1,850,204						1,592,287
Cost of revenues:
Subscriptions, maintenance and professional services			1,001,221						977,885						818,219
Software licenses and royalties			10,821						6,083						3,552
Amortization of software development			12,625						6,507						2,325
Amortization of acquired software			36,062						52,192						45,601
Hardware and other			29,923						23,674						12,946
Total cost of revenues			1,090,652						1,066,341						882,643
Gross profit			861,099						783,863						709,644
Sales and marketing expense			149,770						135,743						118,624
General and administrative expense			308,575						267,324						271,955
Research and development expense			109,585						105,184						93,481
Amortization of other intangibles			74,632						61,363						44,849
Operating income			218,537						214,249						180,735
Interest expense			(23,629)						(28,379)						(23,298)
Other income, net			3,328						1,723						1,544
Income before income taxes			198,236						187,593						158,981
Income tax provision (benefit)			32,317						23,353						(2,477)
Net income			$	165,919					$	164,240					$	161,458
Earnings per common share:
Basic			$	3.95					$	3.95					$	3.95
Diluted			$	3.88					$	3.87					$	3.82

See accompanying notes.

F-4

Tyler Technologies, Inc.

Consolidated Statements of Comprehensive Income

For the years ended December 31,

(In thousands)

			2023						2022						2021
Net income			$	165,919					$	164,240					$	161,458
Other comprehensive income (loss), net of tax:
Securities available-for-sale and transferred securities:
Change in net unrealized holding gains (losses) on available for sale securities during the period			518						(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 income (loss), net of tax			518						(798)						—
Comprehensive income			$	166,437					$	163,442					$	161,458

See accompanying notes.

F-5

Tyler Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except par value and share amounts)

			December 31, 2023						December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	165,493					$	173,857
Accounts receivable (less allowance for losses and sales adjustments of $22,829 in 2023 and $14,761 in 2022)			619,704						577,257
Short-term investments			10,385						37,030
Prepaid expenses			54,700						50,859
Other current assets			10,303						8,239
Total current assets			860,585						847,242
Accounts receivable, long-term			8,988						8,271
Operating lease right-of-use assets			39,039						50,989
Property and equipment, net			169,720						172,786
Other assets:
Software development costs, net			67,124						48,189
Goodwill			2,532,109						2,489,308
Other intangibles, net			928,870						1,002,164
Non-current investments			7,046						18,508
Other non-current assets			63,182						49,960
			$	4,676,663					$	4,687,417
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	146,339					$	104,813
Accrued liabilities			158,558						131,941
Operating lease liabilities			11,060						10,736
Current income tax payable			2,466						43,667
Deferred revenue			632,914						568,538
Current portion of term loans			49,801						30,000
Total current liabilities			1,001,138						889,695
Term loans, net			—						362,905
Convertible senior notes due 2026, net			596,206						594,484
Deferred revenue, long-term			291						2,037
Deferred income taxes			78,590						148,891
Operating lease liabilities, long-term			39,822						48,049
Other long-term liabilities			22,621						16,967
Total liabilities			1,738,668						2,063,028
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 2023 and 2022			481						481
Additional paid-in capital			1,354,787						1,209,725
Accumulated other comprehensive loss, net of tax			(326)						(844)
Retained earnings			1,603,773						1,437,854
Treasury stock, at cost; 5,858,476 and 6,364,991 shares in 2023 and 2022, respectively			(20,720)						(22,827)
Total shareholders' equity			2,937,995						2,624,389
			$	4,676,663					$	4,687,417

See accompanying notes.

F-6

Tyler Technologies, Inc.

Consolidated Statements of Cash Flows

For the years ended December 31

(In thousands)

			2023						2022						2021
Cash flows from operating activities:
Net income			$	165,919					$	164,240					$	161,458
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			154,079						159,072						135,624
Losses from sale of investments			1						45						—
Share-based compensation expense			108,338						102,985						104,726
Provision for losses and sales adjustments - accounts receivable			8,233						2,781						2,831
Amortization of operating lease right-of-use assets			16,688						12,969						10,216
Deferred income tax benefit			(73,704)						(87,192)						(13,271)
Other			475						—						—
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable			(39,878)						(51,410)						17,608
Income tax payable			(41,201)						61,940						10,258
Prepaid expenses and other current assets			(19,668)						910						(23,863)
Accounts payable			41,485						(17,537)						(44,947)
Operating lease liabilities			(11,533)						(12,396)						(6,952)
Accrued liabilities			13,069						(24,344)						(24,822)
Deferred revenue			58,513						59,460						44,874
Other long-term liabilities			(376)						9,932						(1,987)
Net cash provided by operating activities			380,440						381,455						371,753
Cash flows from investing activities:
Additions to property and equipment			(20,519)						(22,529)						(33,919)
Purchase of marketable security investments			(10,617)						(29,935)						(77,450)
Proceeds and maturities from marketable security investments			49,412						71,034						131,449
Investment in software development			(32,490)						(27,622)						(21,693)
Cost of acquisitions, net of cash acquired			(62,759)						(163,921)						(2,089,706)
Other			13						443						384
Net cash used by investing activities			(76,960)						(172,530)						(2,090,935)
Cash flows from financing activities:
Payment on term loans			(345,000)						(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)
Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award			16,960						(890)						96,714
Contributions from employee stock purchase plan			16,196						16,651						13,158
Net cash (used) provided by financing activities			(311,844)						(344,239)						1,424,730
Net decrease in cash and cash equivalents			(8,364)						(135,314)						(294,452)
Cash and cash equivalents at beginning of period			173,857						309,171						603,623
Cash and cash equivalents at end of period			$	165,493					$	173,857					$	309,171

See accompanying notes.

F-7

			2023						2022						2021
Supplemental cash flow information:
Cash paid for interest			$	19,154					$	21,256					$	17,728
Cash paid for income taxes, net			142,820						38,490						2,212
Non-cash investing and financing activities:
Non-cash additions to property and equipment			$	3,123					$	169					$	233
Issuance of shares for acquisitions			5,675						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, 2023, 2022, and 2021

(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, 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
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
Net income			—						—						—						—						165,919						—						—						165,919
Other comprehensive income, net of tax			—						—						—						518						—						—						—						518
Exercise of stock options and vesting of restricted stock units			—						—						15,122						—						—						514						29,575						44,697
Employee taxes paid for withheld shares upon equity award settlement			—						—						—						—						—						(74)						(27,737)						(27,737)
Stock compensation			—						—						108,338						—						—						—						—						108,338
Issuance of shares pursuant to employee stock purchase plan			—						—						15,988						—						—						52						208						16,196
Issuance of shares for acquisitions			—						—						5,614						—						—						15						61						5,675
Balance at December 31, 2023			48,148						$	481					$	1,354,787					$	(326)					$	1,603,773					(5,858)						$	(20,720)					$	2,937,995

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 solutions. Additionally, we provide property appraisal outsourcing services for taxing jurisdictions.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include our parent company and 63 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, 2023 and 2022, we had approximately $518,000 of other comprehensive income, and $798,000 of other comprehensive loss, net of taxes, from our available-for-sale investment holdings, respectively. We did not have material items of other comprehensive income during the year ended December 31, 2021.

RECLASSIFICATIONS

Certain amounts for previous years have been reclassified to conform to the current year presentation. Beginning January 1, 2023, we no longer report the appraisal services revenue and related costs as separate categories in the statement of income due to less significance on our overall operating results. Therefore, we have combined the appraisal services revenue category with the professional services revenue category; and the related cost of revenue category for appraisal services is now combined with the cost of revenue category related to subscriptions, maintenance and professional services on the consolidated statements of income for all reporting periods presented.

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, loss contingencies; the recoverability of goodwill and other intangible assets and estimated useful lives of intangible assets; 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.

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.

F-10

REVENUE RECOGNITION

Nature of Products and Services

We account for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. We earn the majority of our revenues from subscription-based services and post-contract customer support (“PCS” or “maintenance”). Other sources of revenue are professional services, software licenses and royalties, and hardware and other. 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

Our software arrangements with customers contain multiple performance obligations that range from software licenses, installation, training, and consulting related to software modification and customization to meet specific customer needs (services), hosting, and PCS. 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 losses and sales adjustments and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Subscription-Based Services:

Subscription-based services consist primarily of revenues 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.

For 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.

F-11

Software Arrangements:

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.

Professional Services

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 or milestone basis. 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. 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.

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. 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.

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.

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.

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.

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.

F-12

Refer to Note 3 - "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.

In connection with 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) 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; (2) 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; (3) 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 (4) 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, 2023, and December 31, 2022, total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $628.7 million and $585.5 million, respectively. We have recorded unbilled receivables of $119.2 million and $135.4 million at December 31, 2023, and December 31, 2022, respectively. Included in unbilled receivables are retention receivables of $9.8 million and $8.6 million at December 31, 2023, and December 31, 2022, 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.

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. Consequently, we have not recorded a reserve for credit losses. 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 are $22.8 million and $14.8 million at December 31, 2023, and December 31, 2022, respectively.

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

			Years ended December 31,
			2023						2022
Balance at beginning of year			$	14,761					$	12,086
Provisions for losses and sales adjustments - accounts receivable			8,233						2,781
Collections of accounts previously written off			(165)						(106)
Balance at end of year			$	22,829					$	14,761

F-13

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, professional services, and hardware installation. Refer to Note 4 - "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 generally three to seven years. We utilize 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 determine 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 5 - “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.

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.

RESEARCH AND DEVELOPMENT COSTS

We expensed research and development expense of $109.6 million in 2023, $105.2 million in 2022, and $93.5 million in 2021.

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 related to unrecognized tax benefits in income tax expense in the consolidated statements of income.

F-14

Internal Revenue Code (“IRC”) Section 174

For 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. The requirement temporarily increases our U.S. federal and state cash tax payments and reduces cash flows in fiscal year 2023 and future years until the amortization deduction normalizes.

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 five 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 16, “Share-Based Compensation,” for further information.

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 6, “Acquisitions,” for further information.

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, 2023.

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 the likelihood of impairment of each reporting unit. If the conclusion of this assessment is that it is more likely than not that a reporting unit's fair value is more than its carrying value, we are not required to perform a quantitative impairment test. When testing goodwill for impairment quantitatively, we first compare the estimated fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds the fair value of that reporting unit, 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.

F-15

During the fourth quarter, as part of our annual impairment test as of October 1, we performed only qualitative assessments for reporting units that have significant excess fair value over carrying value. As a result of these qualitative assessments, we determined that it was more likely than not that the fair value exceeded the carrying value; therefore, we did not perform a Step 1 quantitative impairment test. However, we did perform a quantitative assessment for the platform technologies reporting unit and concluded no impairment existed as of our annual assessment date. Approximately $1.7 billion, or 67%, of total goodwill as of December 31, 2023, relates to this reporting unit, which, as a result of the recency of the acquisitions comprising the reporting unit, does not have significant excess fair value over carrying value. Our annual goodwill impairment analysis did not result in an impairment charge. During 2023, we recorded no impairment to goodwill because no triggering events or change in circumstances indicating a potential impairment had 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, 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. 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 8, "Goodwill and Other Intangible Assets," for additional information.

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 capitalize application development stage costs of software developed for internal use. Software development costs primarily consist of personnel costs. During the twelve months period ended December 31, 2023, 2022, and 2021, respectively, we capitalized approximately $32.5 million, $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 generally, three to five years.

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, 2023, we had cash and cash equivalents of $165.5 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, 2023.

F-16

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.

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.

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.

NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07 - Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances the disclosures required for reportable segments in annual and interim consolidated financial statements. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.

(2)SEGMENT AND RELATED INFORMATION

In accordance with ASC 280-10, Segment Reporting, we report our results in two reportable segments. Business units that have met the aggregation criteria have been combined into our 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: public administration solutions; courts and public safety solutions; education solutions, and property and recording solutions. The Platform Technologies ("PT") reportable segment provides public sector entities with software solutions to platform and transformative solutions including digital solutions, payment processing, streamline data processing, and improve operations and workflows.

As of January 1, 2023, our data and insights solutions business unit was integrated into the remaining business units across both reportable segments with no material change to the results of the reportable segments.

F-17

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 loss 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”.

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.

For the year ended December 31, 2023			Enterprise Software						Platform Technologies						Corporate						Totals
Revenues
Subscriptions:
SaaS			$	459,544					$	68,433					$	—					$	527,977
Transaction-based fees			174,718						456,817						—						631,535
Maintenance			442,781						23,880						—						466,661
Professional services			209,727						40,249						—						249,976
Software licenses and royalties			32,709						5,387						—						38,096
Hardware and other			30,176						—						7,330						37,506
Intercompany			23,566						—						(23,566)						—
Total revenues			$	1,373,221					$	594,766					$	(16,236)					$	1,951,751
Depreciation and amortization expense			25,445						110,354						18,280						154,079
Segment operating income			443,756						124,446						(238,971)						329,231
Software development expenditures			6,619						15,840						10,031						32,490
Capital expenditures			16,788						2,380						1,351						20,519
Segment assets			$	631,117					$	426,064					$	3,619,482					$	4,676,663

For the year ended December 31, 2022			Enterprise Software						Platform Technologies						Corporate						Totals
Revenues
Subscriptions:
SaaS			$	378,953					$	49,573					$	—					$	428,526
Transaction-based fees			147,370						436,408						—						583,778
Maintenance			444,143						24,312						—						468,455
Professional services			204,970						72,655						—						277,625
Software licenses and royalties			55,158						4,248						—						59,406
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-18

For the year ended December 31, 2021			Enterprise Software						Platform Technologies						Corporate						Totals
Revenues
Subscriptions:
SaaS			$	310,416					$	31,702					$	—					$	342,118
Transaction-based fees			114,662						327,655						—						442,317
Maintenance			439,589						34,698						—						474,287
Professional services			193,184						43,995						—						237,179
Software licenses and royalties			66,816						7,636						—						74,452
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

Reconciliation of reportable segment operating income to the Company's consolidated totals:			Years Ended December 31,
			2023						2022						2021
Total segment operating income			$	329,231					$	327,804					$	271,185
Amortization of acquired software			(36,062)						(52,192)						(45,601)
Amortization of other intangibles			(74,632)						(61,363)						(44,849)
Interest expense			(23,629)						(28,379)						(23,298)
Other income, net			3,328						1,723						1,544
Income before income taxes			$	198,236					$	187,593					$	158,981

(3) 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, 2023			Products and services transferred at a point in time						Products and services transferred over time						Total
Revenues:
Subscriptions:
SaaS			$	—					$	527,977					$	527,977
Transaction-based fees			—						631,535						631,535
Maintenance			—						466,661						466,661
Professional services			—						249,976						249,976
Software licenses and royalties			34,516						3,580						38,096
Hardware and other			37,506						—						37,506
Total			$	72,022					$	1,879,729					$	1,951,751

F-19

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
SaaS			$	—					$	428,526					$	428,526
Transaction-based fees			—						583,778						583,778
Maintenance			—						468,455						468,455
Professional services			—						277,625						277,625
Software licenses and royalties			50,302						9,104						59,406
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
SaaS			$	—					$	342,118					$	342,118
Transaction-based fees			—						442,317						442,317
Maintenance			—						474,287						474,287
Professional services			—						237,179						237,179
Software licenses and royalties			62,847						11,605						74,452
Hardware and other			21,934						—						21,934
Total			$	84,781					$	1,507,506					$	1,592,287

Recurring Revenues

The majority of our revenues are 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 and payment processing. These revenues are considered recurring because revenues from these sources are expected to recur in similar annual amounts for the term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services and are collected on a recurring basis during the contract term. 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. 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, 2023			Enterprise Software						Platform Technologies						Corporate						Totals
Recurring revenues			$	1,077,043					$	549,130					$	—					$	1,626,173
Non-recurring revenues			272,612						45,636						7,330						325,578
Intercompany			23,566						—						(23,566)						—
Total revenues			$	1,373,221					$	594,766					$	(16,236)					$	1,951,751

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

F-20

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

(4)DEFERRED REVENUE AND PERFORMANCE OBLIGATIONS

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

			December 31, 2023						December 31, 2022
Enterprise Software			$	589,295					$	533,902
Platform Technologies			39,597						33,691
Corporate			4,313						2,982
Totals			$	633,205					$	570,575

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

			2023
Balance at beginning of year			$	570,575
Deferral of revenue			1,391,795
Recognition of deferred revenue			(1,329,165)
Balance at end of year			$	633,205

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, 2023 was $2.03 billion, of which we expect to recognize approximately 46% as revenue over the next 12 months and the remainder thereafter.

(5)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 $49.2 million and $43.8 million as of December 31, 2023 and 2022, respectively. Amortization expense was $18.6 million, $15.4 million, and $13.4 million for the twelve months ended December 31, 2023, 2022, and 2021, 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.

F-21

(6)ACQUISITIONS

2023

On October 31, 2023, we acquired Resource Exploration, Inc. (“ResourceX”), a leading provider of budgeting software to the public sector. The total purchase price, net of cash acquired of $48,000, was approximately $16.3 million, consisting of $9.1 million paid in cash, $5.7 million of common stock and $1.5 million related to working capital and indemnity holdbacks, subject to certain post-closing adjustments.

We have performed a preliminary valuation analysis of the fair market value of ResourceX’s assets and liabilities. In connection with this transaction, we acquired total tangible assets of $388,000 and assumed liabilities of approximately $901,000. We recorded goodwill of approximately $10.0 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $7.6 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 intangible assets of $7.6 million are primarily attributable to customer relationships and acquired software and will be amortized over a weighted average period of approximately nine years. We recorded net deferred tax liabilities of $748,000 related to the tax effect of our estimated fair value allocations.

On October 31, 2023, we acquired ARInspect, Inc. (“ARInspect”), a leading provider of AI powered machine learning solutions for public sector field operations. The total purchase price, net of cash acquired of $1.0 million, was approximately $20.5 million, consisting of $19.1 million paid in cash and $2.4 million related to working capital and indemnity holdbacks, subject to certain post-closing adjustments.

We have performed a preliminary valuation analysis of the fair market value of ARInspect’s assets and liabilities. In connection with this transaction, we acquired total tangible assets of $1.8 million and assumed liabilities of approximately $1.5 million. We recorded goodwill of approximately $13.6 million, none of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $10.0 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 intangible assets of $10.0 million are primarily attributable to customer relationships and acquired software and will be amortized over a weighted average period of approximately 12 years. We recorded net deferred tax liabilities of $2.5 million related to the tax effect of our estimated fair value allocations.

On August 8, 2023, we acquired Computing System Innovations, LLC (“CSI”), a leading provider of artificial intelligence automation, redaction, and indexing solution for courts, recorders, attorneys, and others. The total purchase price, net of cash acquired of $415,000, was approximately $36.2 million, consisting of $33.4 million paid in cash and $3.3 million related to working capital and indemnity holdbacks, subject to certain post-closing adjustments.

We have performed a preliminary valuation analysis of the fair market value of CSI’s assets and liabilities. In connection with this transaction, we acquired total tangible assets of $1.2 million and assumed liabilities of approximately $2.4 million. We recorded goodwill of approximately $19.4 million, all of which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $18.5 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 intangible assets of $18.5 million are primarily attributable to customer relationships and acquired software and will be amortized over a weighted average period of approximately 13 years.

We also paid $2.6 million primarily related to a small acquisition completed during first quarter 2023 and holdbacks related to other acquisitions completed in 2022.

The actual operating results of CSI and ResourceX, from their respective dates of acquisition, are included with the operating results of the ES segment. The operating results of ARInspect are included in the operating results of the PT segment since the date of acquisition. Also, the impact of these acquisitions on our operating results, assets, and liabilities is not material, individually or in the aggregate. The purchase price allocation for CSI, ARInspect, and ResourceX are 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, 2023, 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.

In the twelve months ended December 31, 2023, we incurred fees of approximately $409,000 for financial advisory, legal, accounting, due diligence, valuation, and other various services necessary to complete acquisitions. These costs were expensed in 2023 and are included in general and administrative expense in the accompanying consolidated statements of income.

F-22

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 $67.4 million, consisting of $51.5 million paid in cash and, $18.2 million of common stock.

We performed a valuation analysis of the fair market value of Rapid’s assets and liabilities. In connection with this transaction, we acquired total tangible assets of $12.9 million and assumed liabilities of approximately $10.6 million. In the first quarter of 2023, we recorded $10.0 million for assumed liabilities related to litigation outstanding at the time of acquisition as the amount became probable and estimable and a related $10.0 million indemnification receivable from escrowed amounts established at acquisition. We recorded goodwill of approximately $39.8 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.

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 $122.9 million paid in cash.

We performed a valuation analysis of the fair market value of US eDirect's assets and liabilities. The following table summarizes the 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, 2023, the purchase price allocations for Rapid, US eDirect, and Quatred are complete. The actual operating results of Rapid and US eDirect, 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.

F-23

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

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

			Useful Lives (years)						2023						2022
Land			—						$	22,908					$	22,908
Building and leasehold improvements			5-39						172,094						159,059
Computer equipment and purchased software			3-5						118,178						121,968
Furniture and fixtures			5						34,881						39,373
Transportation equipment			5						222						200
									348,283						343,508
Accumulated depreciation and amortization									(178,563)						(170,722)
Property and equipment, net									$	169,720					$	172,786

Depreciation expense was $25.0 million in 2023, $29.5 million in 2022, and $29.4 million in 2021.

We paid $16.0 million and $4.5 million for real estate and the expansion of existing facilities in 2023 and 2022, respectively.

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

			Useful Lives (years)						2023						2022
Software development costs			3-5						$	92,395					$	59,904
Accumulated amortization									(25,271)						(11,715)
Software development costs, net									$	67,124					$	48,189

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 $12.6 million in 2023, $6.5 million in 2022, and $2.3 million in 2021. Amortization expense for software development costs recorded to general and administrative expense was $930,000 in 2023, $1.4 million expense in 2022, and no expense in 2021.

Estimated annual amortization expense related to software development costs:

2024			$	18,546
2025			17,031
2026			13,867
2027			9,286
2028			4,976
Thereafter			3,418
			$	67,124

F-24

(8)GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the two years ended December 31, 2023 are as follows:

			Enterprise Software						Platform Technologies						Total
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
Goodwill acquired related to the purchase of VendEngine			(204)						—						(204)
Goodwill acquired 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
Goodwill acquired related to the purchase of CSI			19,421						—						19,421
Goodwill acquired related to the purchase of ARInspect			—						13,627						13,627
Goodwill acquired related to the purchase of ResourceX			9,978						—						9,978
Purchase price adjustments related to the purchase of other acquisitions			—						(225)						(225)
Transfer from ES to PT			(27,090)						27,090						—
Balance as of 12/31/2023			$	837,002					$	1,695,107					$	2,532,109

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

			2023						2022
Gross carrying amount of other intangibles:
Customer related intangibles			$	1,015,919					$	990,545
Acquired software			466,253						456,137
Trade names			45,002						45,293
Leases acquired			5,037						5,037
			1,532,211						1,497,012
Accumulated amortization			(603,341)						(494,848)
Total other intangibles, net			$	928,870					$	1,002,164

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 $111.0 million in 2023, $113.9 million in 2022, and $90.8 million in 2021.

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

			December 31, 2023																		December 31, 2022
			Gross Carrying Amount						Weighted Average Amortization Period						Accumulated Amortization						Gross Carrying Amount						Weighted Average Amortization Period						Accumulated Amortization
Non-amortizable intangibles:
Goodwill			$	2,532,109					—						$	—					$	2,489,308					—						$	—
Amortizable intangibles:
Customer related intangibles			$	1,015,919					18 years						$	263,672					$	990,545					20 years						$	209,501
Acquired software			466,253						7 years						296,704						456,137						5 years						260,642
Trade names			45,002						7 years						38,838						45,293						5 years						21,059
Leases acquired			5,037						9 years						4,127						5,037						9 years						3,646

F-25

Estimated annual amortization expense related to other intangibles:

2024			$	96,113
2025			92,476
2026			84,965
2027			82,697
2028			79,978
Thereafter			492,641
			$	928,870

(9)ACCRUED LIABILITIES

Accrued liabilities consist of the following at December 31:

			2023						2022
Accrued wages, bonuses and commissions			$	81,679					$	73,745
Other accrued liabilities			76,879						58,196
			$	158,558					$	131,941

(10)DEBT

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

			Rate						Maturity Date						December 31, 2023						December 31, 2022
2021 Credit Agreement
Revolving credit facility			S + 1.25%						April 2026						$	—					$	—
Term Loan A-1			S + 1.25%						April 2026						50,000						290,000
Term Loan A-2			S + 1.00%						April 2024						—						105,000
Convertible Senior Notes due 2026			0.25%						March 2026						600,000						600,000
Total borrowings															650,000						995,000
Less: unamortized debt discount and debt issuance costs															(3,993)						(7,611)
Total borrowings, net															646,007						987,389
Less: current portion of debt															(49,801)						(30,000)
Carrying value															$	596,206					$	957,389

2021 Credit Agreement

In connection with the completion of the acquisition of NIC, Inc. on April 21, 2021, we, as borrower, entered into a $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 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.

On January 28, 2023, we amended our 2021 Credit Agreement to replace the LIBOR reference rate with the Secured Overnight Financing Rate (“SOFR”) reference rate.

F-26

In accordance with our amended 2021 Credit Agreement, the borrowings under the Revolving Credit Facility and the Term Loan A-1 bear interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) (the “Base Rate”) plus a margin of 0.125% to 0.75% or (2) the one-, three-, six-, or, subject to approval by all lenders, twelve-month SOFR rate plus a margin of 1.125% to 1.75%. 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 SOFR 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 amended 2021 Credit Agreement. 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. As of December 31, 2023, we have fully repaid amounts due under Term Loan A-2.

The amended 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, 2023, 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.

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.

F-27

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, 2023, 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 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 Rate

The weighted average interest rates for the borrowings under the amended 2021 Credit Agreement and Convertible Senior Notes due 2026 were 6.71% and 0.25%, as of December 31, 2023, respectively. For the twelve months ended December 31, 2023, the effective interest rate was 7.63% for borrowing under the amended 2021 Credit Agreement and 0.54% for the Convertible Senior Notes. The following sets forth the interest expense recognized related to the borrowings under the amended 2021 Credit Agreement and Convertible Senior Notes and is included in interest expense in the accompanying consolidated statements of income:

			Years Ended December 31,
			2023						2022						2021
Contractual interest expense - Revolving Credit Facility			$	(1,539)					$	(1,267)					$	(1,244)
Contractual interest expense - Term Loans			(16,016)						(18,583)						(9,341)
Contractual interest expense - Convertible Senior Notes			(1,500)						(1,500)						(1,213)
Amortization of debt discount and debt issuance costs			(4,574)						(7,029)						(3,297)
Interest expense and amortization of debt issuance costs - terminated 2019 Credit Agreement and Senior Unsecured Bridge loan facility			—						—						(8,203)
Total			$	(23,629)					$	(28,379)					$	(23,298)

As of December 31, 2023, we had one outstanding standalone letter of credit totaling $750,000. 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, 2023, we repaid $345 million of the Term Loans under the amended 2021 Credit Agreement.

F-28

As of December 31, 2023, the required annual maturities related to the amended 2021 Credit Agreement and the Convertible Senior Notes due 2026 were as follows:

Year ending December 31,			Annual Maturities
2024			$	50,000
2025			—
2026			600,000
2027			—
2028			—
Total required maturities			$	650,000

(11) FINANCIAL INSTRUMENTS

The following table presents our financial instruments:

			December 31, 2023						December 31, 2022
Cash and cash equivalents			$	165,493					$	173,857
Available-for-sale investments			17,431						55,538
Equity investments			10,000						10,000
Total			$	192,924					$	239,395

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.

Our investment portfolio is classified as 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. 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, 2023 and 2022, we have an accrued interest receivable balance of approximately $65,000 and $200,000, respectively, 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, 2023, 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, 2023						December 31, 2022
Amortized cost			$	17,866					$	56,670
Unrealized gains			—						16
Unrealized losses			(435)						(1,148)
Estimated fair value			$	17,431					$	55,538

As of December 31, 2023, we have $10.4 million of available-for-sale debt securities with contractual maturities of one year or less and $7.0 million with contractual maturities greater than one year. As of December 31, 2023, one available-for-sale debt security with a fair value of $3.0 million has been in a loss position for one year or less and 20 securities with a fair value of $14.2 million have been in a loss position for greater than one year.

F-29

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

			Years Ended December 31,
			2023						2022						2021
Proceeds from sales and maturities			$	49,412					$	71,034					$	131,449
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 is a privately held Australian company specializing in digitizing the spoken word in court and legal proceedings. The investment in common stock is carried at cost less any impairment write-downs because we do not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values.

(12) OTHER COMPREHENSIVE INCOME (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-Sale Securities						Other						Accumulated Other Comprehensive 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)
Other comprehensive income before reclassifications			518						—						518
Reclassification adjustment of unrealized gains (losses) on securities transferred from held-to-maturity			—						—						—
Reclassification adjustment for net loss (gain) on sale of available-for-sale securities, included in net income			—						—						—
Other comprehensive income			518						—						518
Balance as of December 31, 2023			$	(326)					$	—					$	(326)

(13)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.

F-30

The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of December 31, 2023:

			Level 1						Level 2						Level 3						Total
Cash and cash equivalents			$	165,493					$	—					$	—					$	165,493
Available-for-sale securities			—						17,431						—						17,431
Equity investments			—						—						10,000						10,000
2021 Credit Agreement
Revolving Credit Facility			—						—						—						—
Term Loan A-1			—						49,801						—						49,801
Term Loan A-2			—						—						—						—
Convertible Senior Notes due 2026			—						609,168						—						609,168

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
Cash and cash equivalents			$	173,857					$	—					$	—					$	173,857
Available-for-sale securities			—						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.

As of December 31, 2023, we have $17.4 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, 2023, we have an 18% interest in BFTR, LLC. As 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 investment is assessed for impairment. We do not reassess the fair value of the 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 2023, 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 year ended December 31, 2023.

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, 2023, because our interest rates reset approximately every 30 days or less.

F-31

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 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 10, “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 amended 2021 Credit Agreement and our Convertible Notes due 2026):

			Fair Value at December 31,												Carrying Value at December 31,
			2023						2022						2023						2022
2021 Credit Agreement
Revolving Credit Facility			$	—					$	—					$	—					$	—
Term Loan A-1			49,801						288,302						49,801						288,302
Term Loan A-2			—						104,603						—						104,603
Convertible Notes due 2026			609,168						560,910						596,206						594,484
			$	658,969					$	953,815					$	646,007					$	987,389

(14)INCOME TAX

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

			Years Ended December 31,
			2023						2022						2021
Current:
Federal			$	86,218					$	84,570					$	7,591
State			19,803						25,975						3,203
			106,021						110,545						10,794
Deferred			(73,704)						(87,192)						(13,271)
			$	32,317					$	23,353					$	(2,477)

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

			Years Ended December 31,
			2023						2022						2021
Federal income tax expense at statutory rate			$	41,630					$	39,395					$	33,386
State income tax, net of federal income tax benefit			6,881						9,197						5,594
Net operating loss carryback			—						(261)						3,391
Excess tax benefits of share-based compensation			(9,325)						(7,752)						(47,675)
Tax credits			(20,494)						(31,334)						(4,999)
Non-deductible business expenses			5,191						5,425						7,542
Uncertain tax positions			7,647						8,338						(425)
Other, net			787						345						709
			$	32,317					$	23,353					$	(2,477)

F-32

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

			2023						2022
Deferred income tax assets:
Capitalized research and experimental expenditures			$	130,972					$	76,731
Operating expenses not currently deductible			22,180						17,263
Stock option and other employee benefit plans			21,864						21,373
Loss and credit carryforwards			7,430						8,589
Deferred revenue			1,923						4,405
Other			111						289
Total deferred income tax assets			184,480						128,650
Valuation allowance			—						—
Total deferred income tax assets, net of valuation allowance			184,480						128,650
Deferred income tax liabilities:
Intangible assets			(242,522)						(256,818)
Property and equipment			(8,659)						(11,220)
Prepaid expenses			(11,889)						(9,503)
Total deferred income tax liabilities			(263,070)						(277,541)
Net deferred income tax liabilities			$	(78,590)					$	(148,891)

As of December 31, 2023, 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 $131.0 million.

As of December 31, 2023, we had after-tax federal and state net operating loss and net tax credit carryforwards of $7.4 million, that will 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:

			2023						2022
Balance at beginning of period			$	14,044					$	4,400
Additions for tax positions of prior period			3,087						5,103
Reductions for tax positions of prior period			(338)						(169)
Additions for tax positions of current period			4,838						5,724
Settlements			—						—
Expiration of statutes of limitations			(762)						(1,014)
Balance at end of period			$	20,869					$	14,044

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense in the consolidated statements of income. As of December 31, 2023 and December 31, 2022, we had uncertain tax positions of $22.1 million and $14.6 million, including interest and penalties, respectively, recorded within deferred tax liabilities, other long-term assets, and other long-term liabilities in our consolidated balance sheets. The total amount of unrecognized tax benefits, net of the federal income tax benefit of state taxes, if recognized, that would affect the effective tax rate is $20.1 million as of December 31, 2023, and $13.3 million and $4.0 million as of December 31, 2022, and 2021, 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.

F-33

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 2019. As of February 21, 2024, no significant adjustments have been proposed by any taxing jurisdiction.

(15) SHAREHOLDERS’ EQUITY

The following table details activity in our common stock:

			Years Ended December 31,
			2023												2022												2021
			Shares						Amount						Shares						Amount						Shares						Amount
Purchases of treasury shares			—						$	—					—						$	—					(33)						$	(12,977)
Stock option exercises and vesting of restricted stock units			265						44,697						186						26,329						627						96,714
Employee stock plan purchases			52						16,196						49						16,651						35						13,158
Employee taxes paid for withheld shares upon equity award settlement			175						(27,737)						176						(27,219)						147						(25,158)
Shares issued for acquisition			15						5,675						56						18,169						—						—

As of February 21, 2024, we had authorization from our Board of Directors to repurchase up to 2.3 million additional shares of our common stock.

(16) 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.

We grant 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 five 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, 2023, there were 457,000 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.

F-34

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.

Forfeitures. We recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited (that is, we recognize the effect of forfeitures in compensation cost when they occur). Previously recognized compensation cost for an award is reversed in the period that the award is forfeited.

During fiscal period 2023, no stock option awards were issued; therefore no Black-Scholes model assumptions are reportable. The following weighted average assumptions were used for options granted in prior fiscal periods:

			Years Ended December 31,
			2023						2022						2021
Expected life (in years)			0.0						5.0						5.0
Expected volatility			—		%				28.3		%				26.1		%
Risk-free interest rate			—		%				3.3		%				1.0		%

Share-Based Award Activity

Stock Options

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, 2022			1,511						221.38
Granted			—						—
Exercised			(265)						168.60
Forfeited			(21)						403.78
Outstanding at December 31, 2023			1,225						$	229.63					4						$	234,787
Exercisable at December 31, 2023			1,127						$	216.52					4						$	229,829

We had unvested options to purchase approximately 98,000 shares with a weighted average grant date exercise price of $380.83 as of December 31, 2023, and unvested options to purchase approximately 267,000 shares with a weighted average grant date exercise price of $346.14 as of December 31, 2022.

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

			2023						2022						2021
Weighted average grant-date fair value of stock options granted			$	—					$	108.99					$	113.18
Total intrinsic value of stock options exercised			$	58,261					$	43,160					$	215,062

F-35

Restricted Stock Units and Performance Stock Units

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, 2022			568						$	376.07
Granted			355						374.09
Vested			(249)						349.35
Forfeited			(28)						384.17
Unvested at December 31, 2023			646						$	384.43

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,
			2023						2022						2021
Subscriptions, maintenance and professional services			$	26,607					$	27,486					$	23,705
Sales and marketing expense			10,118						8,800						8,834
General and administrative expense			71,613						66,699						72,187
Total share-based compensation expense			108,338						102,985						104,726
Total tax benefit			(32,997)						(27,599)						(63,456)
Net decrease in net income			$	75,341					$	75,386					$	41,270

As of December 31, 2023, we had $191.6 million of total unrecognized compensation cost related to unvested options and restricted stock units which is expected to be amortized over a weighted average amortization period of 2.4 years.

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, 2023, there were 526,000 shares available for future issuances under the ESPP from the 2.0 million shares previously approved by the stockholders.

(17) EARNINGS PER SHARE

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

			Years Ended December 31,
			2023						2022						2021
Numerator for basic and diluted earnings per share:
Net income			$	165,919					$	164,240					$	161,458
Denominator:
Weighted-average basic common shares outstanding			42,024						41,544						40,848
Assumed conversion of dilutive securities:
Stock awards			745						855						1,382
Convertible Senior Notes			—						—						14
Denominator for diluted earnings per share - Adjusted weighted-average shares			42,769						42,399						42,244
Earnings per common share:
Basic			$	3.95					$	3.95					$	3.95
Diluted			$	3.88					$	3.87					$	3.82

F-36

Share-based awards representing the right to purchase common stock of 343,000 shares in 2023, 372,000 shares in 2022, and 117,000 shares in 2021, 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, 2023, as their effect would be antidilutive given none of the conversion features have been triggered. See Note 10, “Debt,” for discussion on the conversion features related to the Convertible Senior Notes.

(18) 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 remaining terms of one to 11 years. Some of these leases include options to extend for up to six years. We have no finance leases and one related party lessor agreement (see Note 20, "Related party transactions") as of December 31, 2023. Right-of-use lease assets and lease liabilities for our operating leases are recorded in the consolidated balance sheets. We incurred lease restructuring costs, resulting in an additional $6.4 million and $1.7 million of operating lease costs during 2023 and 2022, respectively.

The components of operating lease expense were as follows:

Lease Costs									Years ended December 31,
									2023						2022						2021
Operating lease cost									$	19,468					$	14,743					$	11,095
Short-term lease cost									2,121						2,166						2,308
Variable lease cost									1,009						1,047						1,659
Net lease cost									$	22,598					$	17,956					$	15,062

Supplemental information related to leases is as follows:

Other Information			Years ended December 31,
			2023						2022						2021
Cash flows:
Cash paid amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases			$	12,555					$	13,562					$	11,432
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases			$	3,383					$	25,171					$	20,140
Lease term and discount rate:
Weighted average remaining lease term (years)			7						7						6
Weighted average discount rate			1.59		%				1.57		%				1.81		%

F-37

As of December 31, 2023, maturities of lease liabilities were as follows:

Year ending December 31,			Amount
2024			$	11,482
2025			10,059
2026			7,551
2027			6,232
2028			3,919
Thereafter			13,960
Total lease payments			53,203
Less: Interest			(2,321)
Present value of operating lease liabilities			$	50,882

Rental Income from third parties

We own office buildings in Bangor, Falmouth and Yarmouth, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham, New York; Moraine, Ohio; and Kingston Springs, Tennessee. 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 2024 and 2028, 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 $2.1 million in 2023, $1.7 million in 2022, and $1.2 million in 2021. 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
2024			$	3,049
2025			2,317
2026			1,171
2027			913
2028			734
Thereafter			—
Total			$	8,184

As of December 31, 2023, we had no additional significant operating or finance leases that had not yet commenced.

(19) 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 $18.6 million in 2023, $17.5 million in 2022, and $15.6 million in 2021.

(20) RELATED PARTY TRANSACTIONS

In April 2023, we entered into an arm's length lessor agreement under which we lease to a company co-owned by a member of our Board of Directors 25,000 square feet of office space in our Lubbock, Texas, facility. The lease agreement, which commenced on April 1, 2023, has an initial term of five years with a pro-rata base rent of $25,000 per month until December 1, 2023, and a base rent of $60,000 per month thereafter. We recognized rental income of $256,000 under this lease for the year ended December 31, 2023.

F-38

(21) COMMITMENTS AND CONTINGENCIES

Litigation

During the first quarter of 2022, we received a notice of termination for convenience under a contractual arrangement with a state government client. Upon receipt of the termination notice, we ceased performing services under the contractual arrangement and sought payment of contractually owed fees of approximately $15 million in connection with the termination for convenience.

The client was unresponsive to our outreach for several months. On August 23, 2022, we filed a lawsuit to enforce our rights and remedies under the applicable contractual arrangement, and since then have been engaged directly with the client on payment resolution. 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 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, 2023, the remaining aggregate minimum purchase commitment under these arrangements was approximately $678 million through 2031. Future minimum payments related to purchase commitments based on contractual agreements are as follows:

Year ending December 31,			Amount
2024			$	67,888
2025			65,696
2026			72,990
2027			78,043
2028			85,936
Thereafter			307,809
Total			$	678,362

(22) SUBSEQUENT EVENTS

There have been no material events or transactions that occurred subsequent to December 31, 2023.

F-39