Item 1. Financial Statements

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Item 1. Financial Statements

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
		2025		2024
Revenues:
Subscriptions		$	374,989	$	313,243
Maintenance		112,801		117,218
Professional services		64,050		64,806
Software licenses and royalties		6,994		8,734
Hardware and other		6,331		8,358
Total revenues		565,165		512,359

Cost of revenues:
Subscriptions, maintenance, and professional services		278,053		268,870
Software licenses and royalties		1,910		1,565
Amortization of software development		5,379		4,363
Amortization of acquired software		9,294		9,239
Hardware and other		3,448		4,656
Total cost of revenues		298,084		288,693

Gross profit		267,081		223,666

Sales and marketing expense		36,473		36,427
General and administrative expense		79,452		72,710
Research and development expense		47,844		29,433
Amortization of other intangibles		14,139		18,118

Operating income		89,173		66,978

Interest expense		(1,246)		(2,184)
Other income, net		7,363		1,845
Income before income taxes		95,290		66,639
Income tax provision		14,238		12,469
Net income		$	81,052	$	54,170

Earnings per common share:
Basic		$	1.88	$	1.28
Diluted		$	1.84	$	1.26

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended March 31,
		2025		2024
Net income		$	81,052	$	54,170
Other comprehensive income, net of tax:
Securities available-for-sale and transferred securities:
Change in net unrealized holding gains on available-for-sale securities during the period		73		53

Reclassification adjustment for net loss on sale of available-for-sale securities, included in net income		1		—
Other comprehensive income, net of tax		74		53
Comprehensive income		$	81,126	$	54,223

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)


	March 31, 2025 (unaudited)		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	705,729	$	744,721
Accounts receivable (less allowance for losses and sales adjustments of $18,996 in 2025 and $17,325 in 2024)	559,873		587,634
Short-term investments	101,674		23,257
Prepaid expenses	92,077		65,135
Income tax receivable	—		11,975
Other current assets	7,585		8,057
Total current assets	1,466,938		1,440,779
Accounts receivable, long-term	7,205		7,153
Operating lease right-of-use assets	33,289		31,433
Property and equipment, net	160,972		163,775
Other assets:
Software development costs, net	75,837		76,117
Goodwill	2,542,017		2,531,653
Other intangibles, net	816,955		831,966
Non-current investments	3,032		10,758
Other non-current assets	85,889		86,381
	$	5,192,134	$	5,180,015
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	171,163	$	156,817
Accrued liabilities	127,578		197,709
Operating lease liabilities	9,281		9,643
Current income tax payable	12,533		—
Deferred revenue	642,379		701,438
Current portion of convertible senior notes due 2026, net	598,366		—
Total current liabilities	1,561,300		1,065,607


Convertible senior notes due 2026, net	—		597,934
Deferred revenue, long-term	22,376		22,376
Deferred income taxes	36,448		47,503
Operating lease liabilities, long-term	32,455		30,791
Other long-term liabilities	26,851		27,382
Total liabilities	1,679,430		1,791,593
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 and outstanding as of March 31, 2025 and December 31, 2024	481		481
Additional paid-in capital	1,581,856		1,539,301
Accumulated other comprehensive loss, net of tax	(83)		(157)
Retained earnings	1,947,851		1,866,799
Treasury stock, at cost; 5,035,280 and 5,184,092 shares in 2025 and 2024, respectively	(17,401)		(18,002)
Total shareholders' equity	3,512,704		3,388,422
	$	5,192,134	$	5,180,015

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2025		2024
Cash flows from operating activities:
Net income	$	81,052	$	54,170
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	34,621		40,097
Losses from sale of investments	1		—
Share-based compensation expense	37,660		26,866

Amortization of operating lease right-of-use assets	2,288		2,522
Deferred income tax benefit	(11,080)		(24,334)
Other	—		(35)
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable	28,176		69,376
Income tax payable	24,508		35,827
Prepaid expenses and other current assets	(26,154)		(20,240)
Accounts payable	14,346		(1,140)
Operating lease liabilities	(2,842)		(3,461)
Accrued liabilities	(67,490)		(48,006)
Deferred revenue	(60,099)		(61,334)
Other long-term liabilities	1,171		1,531
Net cash provided by operating activities	56,158		71,839

Cash flows from investing activities:
Additions to property and equipment	(2,335)		(7,282)
Purchase of marketable security investments	(71,993)		—
Proceeds and maturities from marketable security investments	1,756		3,271


Investment in software development	(5,550)		(7,386)
Cost of acquisitions, net of cash acquired	(18,024)		(1,302)
Other	(23)		18
Net cash used by investing activities	(96,169)		(12,681)

Cash flows from financing activities:

Payment on term loans	—		(50,000)





Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award settlement	1,526		10,033
Contributions from employee stock purchase plan	3,970		3,553
Other	(4,477)		—
Net cash provided (used) by financing activities	1,019		(36,414)

Net (decrease) increase in cash and cash equivalents	(38,992)		22,744
Cash and cash equivalents at beginning of period	744,721		165,493
Cash and cash equivalents at end of period	$	705,729	$	188,237

See accompanying notes.


	Three Months Ended March 31,
	2025		2024
Supplemental cash flow information:
Cash paid for interest	$	969	$	1,741
Cash received for income taxes, net	(323)		(680)
Non-cash investing and financing activities:
Non-cash additions to property and equipment	$	125	$	277

TYLER TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)


	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, 2024	48,148	$	481	$	1,539,301	$	(157)		$	1,866,799		(5,184)	$	(18,002)	$	3,388,422
Net income	—	—		—		—			81,052			—	—		81,052
Other comprehensive income, net of tax	—	—		—		74			—			—	—		74
Exercise of stock options and vesting of restricted stock units	—	—		958		—			—			165	15,486		16,444
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—			—			(24)	(14,918)		(14,918)
Share-based compensation	—	—		37,660		—			—			—	—		37,660
Issuance of shares pursuant to employee stock purchase plan	—	—		3,937		—			—			8	33		3,970

Balance at March 31, 2025	48,148	$	481	$	1,581,856	$	(83)		$	1,947,851		(5,035)	$	(17,401)	$	3,512,704


	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, 2023	48,148	$	481	$	1,354,787	$	(326)		$	1,603,773		(5,858)	$	(20,720)	$	2,937,995
Net income	—	—		—		—			54,170			—	—		54,170
Other comprehensive income, net of tax	—	—		—		53			—			—	—		53
Exercise of stock options and vesting of restricted stock units	—	—		(1,738)		—			—			195	22,978		21,240
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—			—			(26)	(11,207)		(11,207)
Share-based compensation	—	—		26,866		—			—			—	—		26,866
Issuance of shares pursuant to employee stock purchase plan	—	—		3,513		—			—			10	40		3,553
Reimbursement of shares from escrow	—	—		1,667		—			—			(28)	(11,202)		(9,535)
Balance at March 31, 2024	48,148	$	481	$	1,385,095	$	(273)		$	1,657,943		(5,707)	$	(20,111)	$	3,023,135

Tyler Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Tables in thousands, except per share data)

(1) Basis of Presentation

We prepared the accompanying condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“GAAP”), for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted for interim periods. Balance sheet amounts are as of March 31, 2025, and December 31, 2024, and operating result amounts are for the three months ended March 31, 2025, and 2024, and include all normal and recurring adjustments that we considered necessary for the fair summarized presentation of our financial position and operating results. As these are condensed financial statements, one should also read the financial statements and notes included in our latest Form 10-K for the year ended December 31, 2024. Revenues, expenses, assets, and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. Certain amounts for previous years have been reclassified to conform to the current year presentation.

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 three months ended March 31, 2025 and 2024, we had approximately $74,000 and $53,000, of other comprehensive income, net of taxes, from our available-for-sale investment holdings, respectively.

(2) Accounting Standards and Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025, that have had a material impact on our condensed consolidated financial statements and related notes. See Recently Pronounced Accounting Standard below.

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 client 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 clients 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 client
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 clients contain multiple performance obligations that range from software license deliveries, installation, training, consulting, software modification and customization to meet specific client needs; hosting; and PCS. For these contracts, we account for individual performance obligations separately when they are distinct. 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, client demographics, and the number and types of users within our contracts.

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 client over time using progress-to-completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred. 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.

Subscription-Based Services

Subscription-based services consist primarily of revenues derived from software as a service (“SaaS”) arrangements and transaction-based fees. For SaaS arrangements, we evaluate whether the client has the contractual right to take possession of our software at any time during the hosting period without significant penalty and whether the client can feasibly maintain the software on the client’s hardware or enter into another arrangement with a third party to host the software. We recognize SaaS services ratably over the term of the arrangement, which range from one to 10 years, but are most arrangements typically for periods of one to three 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 client access to the software.

Transaction-based fees primarily relate to digital government services and online payment services, which are sometimes offered with the assistance of third-party vendors. 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 client) 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 client an amount that directly corresponds with the value to the client of our performance to date. Therefore, we recognize revenues for these services over time based on the amount billable to the client. 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 associated with SaaS arrangements. Such direct and incremental costs are capitalized and amortized ratably over the period of benefit.

Post-Contract Client Support (Maintenance)

Our clients 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. 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.

Revenue is recognized net of allowances for sales adjustments and any taxes collected from clients, which are subsequently remitted to governmental authorities.

Refer to Note 4, “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 clients. 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 clients annually at the beginning of each annual coverage period.

Accounts receivable is as follows:


	March 31, 2025		December 31, 2024
Accounts receivable - current	$	559,873	$	587,634
Accounts receivable - long term	7,205		7,153
Total accounts receivable	$	567,078	$	594,787

Total accounts receivable, including total current and long-term accounts receivable, net of allowance for losses and sales adjustments was $567.1 million and $594.8 million, as of March 31, 2025, and December 31, 2024, respectively. We have recorded unbilled receivables of $108.2 million and $115.6 million as of March 31, 2025, and December 31, 2024, respectively. Unbilled receivables expected to be collected within one year have been included with the current portion of accounts receivable in the accompanying condensed consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with the long-term portion of accounts receivable in the accompanying condensed consolidated balance sheets. Unbilled receivables also include retention receivables of $11.1 million and $11.4 million as of March 31, 2025, and December 31, 2024, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings.

We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred. Because 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 allowances for losses and sales adjustments are $19.0 million and $17.3 million as of March 31, 2025, and December 31, 2024, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

We perform an impairment assessment annually on October 1, or more frequently if indicators of potential impairment exist, which includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of each reporting unit’s goodwill. If the conclusion of an impairment assessment is that it is more likely than not that the fair value of the reporting unit is more than its carrying value, goodwill is not considered impaired, and we are not required to perform the quantitative goodwill impairment test. If the conclusion of an impairment assessment is that it is more likely than not that the fair value is less than its carrying value, we perform the quantitative goodwill impairment test, which compares the fair value of the reporting unit to its carrying value. Impairments, if any, are based on the excess of the carrying amount over the fair value.

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. Client base and acquired software each comprise approximately half of our purchased intangible assets other than goodwill. We review our client turnover each year for indications of impairment. Our client 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.

For the three months ended March 31, 2025, no triggering event or changes to circumstances indicated that a potential impairment had occurred for goodwill and other intangibles assets.

RECENTLY PRONOUNCED ACCOUNTING STANDARDS

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2024-04 - Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. It is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. As of January 1, 2025, we have early-adopted this standard, and the new standard did not have a material impact on the Company’s financial statements.

In November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. It is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic ASC 740) Income Taxes. 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. This guidance is not expected to have a material impact on the Company’s financial statements.

(3) Segment and Related Information

Reportable operating segments are determined based on the Company’s management approach. The management approach, as defined by FASB ASC 280 “Segment Reporting,” is based on the way that the Chief Operating Decision Maker (“CODM”) organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for purposes of FASB ASC 280, is our chief executive officer.

We report our results in two reportable segments. Our reportable segments are organized on the basis of a combination of the products and services they deliver to clients and the function the public sector client performs. Operating segments 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 platform and transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and workflows.

The CODM uses segment operating income or loss to assess performance and to allocate resources (including employees, property, and financial or capital resources) for each segment, predominantly in the annual budget and forecasting process. During the fiscal periods presented, we had no significant transactions between reportable segments. Corporate unallocated amounts are comprised of non-cash amortization of intangible assets associated with acquisitions, depreciation associated with unallocated property and equipment assets, compensation costs for the executive management team and certain shared services staff, and share-based compensation expense for the entire company. Corporate unallocated amounts also include incidental revenues and expenses related to a company-wide user conference and rental income.


For the three months ended March 31, 2025	Enterprise Software		Platform Technologies		Totals
Revenues
Subscriptions:
SaaS	$	158,741	$	21,339
Transaction-based fees	69,839		125,070
Maintenance	106,979		5,822
Professional services	54,593		9,457
Software licenses and royalties	6,994		—
Hardware and other	5,600		41
Total segment revenues	402,746		161,729		564,475
Less:
Cost of revenues	169,287		108,993

Sales and marketing expense	25,267		4,731
General and administrative expense	11,592		13,401
Research and development expense	37,680		4,318

Segment operating income	$	158,920	$	30,286	$	189,206


For the three months ended March 31, 2024	Enterprise Software		Platform Technologies		Totals
Revenues
Subscriptions:
SaaS	$	128,142	$	20,642
Transaction-based fees	51,884		112,575
Maintenance	111,182		6,036
Professional services	54,893		9,913
Software licenses and royalties	8,571		163
Hardware and other	8,358		—
Total segment revenues	363,030		149,329		512,359
Less:
Cost of revenues	170,805		98,538

Sales and marketing expense	25,226		5,664
General and administrative expense	11,448		13,493
Research and development expense	24,852		3,379

Segment operating income	$	130,699	$	28,255	$	158,954


	Three Months Ended March 31,
Reconciliation of reportable segment operating income to the Company's consolidated totals:		2025		2024
Total segment operating income		$	189,206	$	158,954
Corporate unallocated:
Total revenues		690		—
Cost of revenues		(19,804)		(19,350)
Sales and marketing expense		(6,475)		(5,537)
General and administrative expense		(54,459)		(47,769)
Research and development expense		(5,846)		(1,202)
Amortization of other intangibles		(14,139)		(18,118)
Interest expense		(1,246)		(2,184)
Other income, net		7,363		1,845
Income before income taxes		$	95,290	$	66,639

The following table presents reconciliations of segment revenues from external customers and other segment information to the Company’s consolidated totals:


	Three Months Ended March 31,
Revenues:	2025		2024
ES	$	402,746	$	363,030
PT	161,729		149,329
Corporate unallocated	690		—
Total consolidated	$	565,165	$	512,359

Depreciation and amortization expense:
ES	$	6,607	$	10,496
PT	22,217		23,756
Corporate unallocated	5,797		5,845
Total consolidated	$	34,621	$	40,097

Software development expenditures:
ES	$	1,549	$	1,621
PT	3,991		4,233
Corporate	10		1,532
Total consolidated	$	5,550	$	7,386

Capital expenditures:
ES	$	730	$	6,400
PT	939		687
Corporate	666		195
Total consolidated	$	2,335	$	7,282


Segment assets:	March 31, 2025		December 31, 2024
ES	$	500,481	$	572,224
PT	477,314		416,635
Corporate	4,214,339		4,191,156
Total consolidated	$	5,192,134	$	5,180,015

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; goodwill and intangibles associated with acquisitions; deferred income taxes; software development costs, net; and net property and equipment mainly related to unallocated information and technology assets. Certain presentation items from previous years have been adjusted to conform with current year presentation.

(4) 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.

Recurring Revenues

The majority of our revenues are comprised of revenues from subscriptions and maintenance, which we consider to be recurring revenues. Subscription revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees. These revenues are considered recurring because revenues from these sources are expected to re-occur 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 one to three years. Nearly all of our on-premises software clients contract with us for maintenance and support. Maintenance and support are generally provided under auto-renewing annual contracts or 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 three months ended March 31, 2025	Enterprise Software		Platform Technologies		Corporate Unallocated		Totals
Revenues
Subscriptions:
SaaS	$	158,741	$	21,339	$	—	$	180,080
Transaction-based fees	69,839		125,070		—		194,909
Maintenance	106,979		5,822		—		112,801
Total recurring revenues	335,559		152,231		—		487,790

Professional services	54,593		9,457		—		64,050
Software licenses and royalties	6,994		—		—		6,994
Hardware and other	5,600		41		690		6,331
Total non-recurring revenues	67,187		9,498		690		77,375

Total	$	402,746	$	161,729	$	690	$	565,165


For the three months ended March 31, 2024	Enterprise Software		Platform Technologies		Corporate Unallocated		Totals
Revenues
Subscriptions:
SaaS	$	128,142	$	20,642	$	—	$	148,784
Transaction-based fees	51,884		112,575		—		164,459
Maintenance	111,182		6,036		—		117,218
Total recurring revenues	291,208		139,253		—		430,461

Professional services	54,893		9,913		—		64,806
Software licenses and royalties	8,571		163		—		8,734
Hardware and other	8,358		—		—		8,358
Total non-recurring revenues	71,822		10,076		—		81,898

Total	$	363,030	$	149,329	$	—	$	512,359

(5) Deferred Revenue and Performance Obligations

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


	March 31, 2025		December 31, 2024
Enterprise Software	$	628,333	$	683,909
Platform Technologies	29,479		36,117
Corporate	6,943		3,788
Totals	$	664,755	$	723,814

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


	Three months ended March 31, 2025
Balance as of December 31, 2024	$	723,814
Deferral of revenue	310,383
Recognition of deferred revenue	(369,442)
Balance as of March 31, 2025	$	664,755

Remaining Performance Obligations

We expect to recognize as revenue approximately 97% of our deferred revenue balance as of March 31, 2025, in the next 12 months, and the remainder thereafter. We believe the portion of transaction price allocated to the remaining performance obligations which is not included in our deferred revenue balance is not a meaningful indicator of future revenue due to contracts with transaction-based fees that vary with transaction activity, the variability in subscription term lengths, and termination provisions included in some contracts that limit inclusion and cause variability from period to period.

(6) Deferred Commissions

Deferred commissions are as follows:


	March 31, 2025		December 31, 2024
Prepaid commissions	$	19,113	$	18,037
Long-term deferred commissions	39,849		38,762
Total deferred commissions	$	58,962	$	56,799

Amortization expense related to deferred commissions is as follows:


	Three Months Ended March 31,
		2025		2024
Amortization expense		$	5,100	$	4,762

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 condensed consolidated balance sheets. Amortization expense related to deferred commissions is included in sales and marketing expense in the accompanying condensed consolidated statements of income.

(7) Acquisitions

On January 31, 2025, we acquired MyGov, LLC (“MyGov”), a provider of SaaS platform solutions for community development. The total purchase price, net of cash acquired of $215,000, was approximately $18.2 million, subject to certain post-closing adjustments including a working capital holdback of $210,000.

We have performed a preliminary valuation analysis of the fair market value of MyGov’s assets and liabilities. In connection with this transaction, we acquired total tangible assets of $0.7 million and assumed liabilities of approximately $1.1 million. We recorded goodwill of approximately $10.4 million, which is expected to be deductible for tax purposes, and other identifiable intangible assets of approximately $8.5 million. The operating results of MyGov are included with the operating results of the Enterprise segment since the inception date of the acquisition. Also, the impact of this acquisition on our operating results, assets, and liabilities is not material.

As of March 31, 2025, the purchase price allocation for MyGov is not final; therefore, certain preliminary valuation estimates of fair value assumed at the acquisition date for intangible assets, and receivables are subject to change as valuations are finalized. Our balance sheet as of March 31, 2025, 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.

During the three months ended March 31, 2025, we paid $4.5 million in cash for long-term indemnity holdbacks related to prior acquisitions.

(8) Debt

The following table summarizes our total outstanding borrowings:


	Rate	Maturity Date	March 31, 2025		December 31, 2024
2024 Credit Agreement
Revolving credit facility	S + 1.125%	September 2029	$	—	$	—
Convertible Senior Notes due 2026	0.25%	March 2026	600,000		600,000
Total borrowings			600,000		600,000
Less: unamortized debt discount and debt issuance costs			(1,634)		(2,066)
Total borrowings, net			598,366		597,934


Current portion of convertible senior notes due 2026, net			598,366		—
Long Term - convertible senior notes due 2026, net			—		597,934
Total Debt			$	598,366	$	597,934

2024 Credit Agreement

On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lender parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”). The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0 million, including subfacilities for standby letters of credit and swingline loans. The 2024 Credit Agreement matures on September 25, 2029, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any Secured Overnight Financing Rate (“SOFR”) breakage costs. The 2024 Credit Agreement replaced Tyler’s previous $500.0 million unsecured credit facility under the credit agreement dated April 21, 2021, among the Company and various lenders party thereto (the “2021 Credit Agreement”), which was scheduled to mature in April 2026.

The 2024 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of defaults. The 2024 Credit Agreement requires us to maintain certain financial ratios and other financial conditions and limits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens.

Loans under the revolving credit facility will bear interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, three-, or six-month SOFR rate plus a margin of 1.125% to 1.75%. The margin in each case is based upon Tyler’s total net leverage ratio, as determined pursuant to the 2024 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 initially in the amount of 0.125% per annum, which will subsequently range from 0.125% to 0.25% based upon the Company’s total net leverage ratio. Borrowings under the 2024 Credit Agreement may be used for general corporate purposes, including working capital requirements, acquisitions and capital expenditures.

Convertible Senior Notes due 2026

On March 9, 2021, we issued 0.25% Convertible Senior Notes due in 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 to 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. 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 herein as “our common stock”) at the following times or circumstances:

during any calendar quarter commencing after the calendar quarter ended June 30, 2021, if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “Measurement Period”) if the trading price per $1,000 principal amount of Convertible Senior Notes, as determined following a request by their holder in accordance with the procedures in the Indenture, for each trading day of the Measurement Period, was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;
upon the occurrence of certain corporate events or distributions on our common stock, including but not limited to a “Fundamental Change” (as defined in the Indenture);
upon the occurrence of specified corporate events; or
on or after September 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, March 15, 2026.

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

As of March 31, 2025, 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 rate for the borrowings under the Convertible Senior Notes was 0.25% as of March 31, 2025. For the three months ended March 31, 2025, the effective interest rate was 0.54% for the Convertible Senior Notes. The following sets forth the interest expense recognized related to the borrowings and commitment fees for unused portions under the 2024 Credit Agreement, the 2021 Credit Agreement and Convertible Senior Notes and is included in interest expense in the accompanying condensed consolidated statements of income:


	Three Months Ended March 31,
		2025		2024

Contractual interest expense - Revolving Credit Facility		$	(239)	$	(230)

Contractual interest expense - Term Loans		—		(761)
Contractual interest expense - Convertible Senior Notes		(375)		(375)
Amortization of debt discount and debt issuance costs		(632)		(818)

Total		$	(1,246)	$	(2,184)

As of March 31, 2025, we had one outstanding letter of credit totaling $500,000. The letter of credit, which guarantees our performance under a client contract, automatically renews annually unless canceled in writing, and expires in the third quarter of 2025.

(9) Financial Instruments

The following table presents our financial instruments:


	March 31, 2025		December 31, 2024
Cash and cash equivalents	$	705,729	$	744,721

Available-for-sale investments	104,706		34,015
Equity investment	10,000		10,000
Total	$	820,435	$	788,736

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. Our available-for-sale investments primarily consist of investment grade corporate bonds, U.S. Treasuries, 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 condensed consolidated balance sheets. Unrealized gains or losses associated with the investments are included in accumulated other comprehensive income (loss), net of tax in the accompanying condensed consolidated balance sheets and other comprehensive income (loss), net of tax in the 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 March 31, 2025 and December 31, 2024, we have an accrued interest receivable balance of approximately $532,000 and $227,000, 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 reductions to interest income in the period of the loss. During the three months ended March 31, 2025, we have recorded no losses for accrued interest receivables. Interest income and amortization of discounts and premiums are included in other income, net in the accompanying condensed consolidated statements of income.

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


	March 31, 2025		December 31, 2024
Amortized cost	$	104,817	$	34,225
Unrealized gains	48		3
Unrealized losses	(159)		(213)
Estimated fair value	$	104,706	$	34,015

As of March 31, 2025, we have $101.7 million of available-for-sale debt securities with contractual maturities of one year or less and $3.0 million with contractual maturities greater than one year. As of March 31, 2025, 60 available-for-sale securities with a fair value of $54.1 million have been in a loss position for one year or less and four securities with a fair value of $3.5 million have been in a loss position for greater than one year.

The following table presents the activity on our available-for-sale investments:


	Three Months Ended March 31,
		2025		2024
Proceeds from sales and maturities		$	1,756	$	3,271
Realized losses on sales, net of tax		(1)		—

Our equity investment consists 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.

(10) Fair Value

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

Level 1—Inputs are unadjusted quoted prices that are available in active markets for identical assets or liabilities.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in non-active markets, inputs other than quoted prices that are observable, and inputs that are not directly observable, but are corroborated by observable market data.
Level 3—Inputs that are unobservable and are supported by little or no market activity and reflect the use of significant management judgment.

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

The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of March 31, 2025:


	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	705,729	$	—	$	—	$	705,729
Available-for-sale investments	—		104,706		—		104,706
Equity investment	—		—		10,000		10,000


Convertible Senior Notes due 2026	—		729,372		—		729,372

The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of December 31, 2024:


	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	744,721	$	—	$	—	$	744,721
Available-for-sale investments	—		34,015		—		34,015
Equity investment	—		—		10,000		10,000



Convertible Senior Notes due 2026	—		731,310		—		731,310

Assets that are measured at fair value on a recurring basis

Accounts receivables, accounts payables, short-term obligations and certain other assets carrying value approximate fair value because of the short maturity of these instruments.

As of March 31, 2025, we have $104.7 million in investment grade corporate bonds, U.S. Treasuries, 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 March 31, 2025, 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 indicate fair value of the investment or indicate impairment. No events or changes in circumstances have occurred during the period that require reassessment. There has been no impairment of this investment for the periods presented. This investment is included in other non-current assets in the accompanying condensed consolidated balance sheets.

As described in Note 2, “Summary of Significant Accounting Policies,” 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 2024, we completed our annual assessment of goodwill which did not result in an impairment charge. Further, we identified no indicators of impairment to goodwill, property and equipment, and other intangibles. Therefore, no impairment was recorded as of or for the three months ended March 31, 2025.

Financial instruments measured at fair value only for disclosure purposes

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 8, “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 condensed consolidated statements of income.

The following table presents the fair value and carrying value, net, of our Convertible Senior Notes:


	Fair Value at				Carrying Value at
	March 31, 2025		December 31, 2024		March 31, 2025		December 31, 2024






Convertible Senior Notes due 2026	$	729,372	$	731,310	$	598,366	$	597,934

(11) Income Tax Provision

We had an effective income tax rate of 14.9% for the three months ended March 31, 2025, compared to 18.7% for the three months ended March 31, 2024. The decrease in the effective tax rate for the three months ended March 31, 2025, as compared to the prior period, is due to an increase in excess tax benefits related to stock incentive awards in the current year, a less significant impact from non-deductible business expenses, liabilities for uncertain tax positions and state taxes, partially offset by a less significant impact from research tax credit benefits.

The effective income tax rates for the periods presented are different from the statutory United States federal income tax rate of 21% primarily due to the tax benefits of research tax credits and excess tax benefits related to stock incentive awards, offset by state income taxes, liabilities for uncertain tax positions, and non-deductible business expenses.

We received income tax refunds, net of taxes paid, of $323,000 and $680,000 in the three months ended March 31, 2025, and March 31, 2024, respectively.

(12) Share-Based Compensation

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


	Three Months Ended March 31,
		2025		2024
Cost of revenues		$	8,714	$	7,390
Operating expenses		28,946		19,476

Total share-based compensation expense		$	37,660	$	26,866

(13) Earnings Per Share

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


	Three Months Ended March 31,
		2025		2024
Numerator for basic and diluted earnings per share:
Net income		$	81,052	$	54,170
Denominator:
Weighted-average basic common shares outstanding		43,024		42,332
Assumed conversion of dilutive securities:
Stock awards		713		768
Convertible Senior Notes		206		—
Denominator for diluted earnings per share - Adjusted weighted-average shares		43,943		43,100
Earnings per common share:
Basic		$	1.88	$	1.28
Diluted		$	1.84	$	1.26

For the three months ended March 31, 2025, and 2024, stock awards representing the right to purchase common stock of approximately 22,000 shares and 162,000 shares, respectively, 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 on our diluted net income per share if our average stock price for the period exceeded the conversion price of $493.44 per share of common stock. Under the if-converted method, the Notes are assumed to be converted at the beginning of the period and the resulting common shares, if dilutive, are included in the denominator of the diluted earnings per share calculation for the entire period being presented. For the three months ended March 31, 2025, our average stock price for the period exceeded the conversion price resulting in a dilutive impact of the if-converted method as reflected in the table above. For the three months ended March 31, 2024, our average stock price for the period did not exceed the conversion price, therefore there was no dilutive impact as reflected in the table above.

(14) Leases

We lease office facilities, transportation, and other equipment for use in our operations. Most of our leases are non-cancelable operating lease agreements with remaining terms of one to 10 years. Some of these leases include options to extend for up to six years. We have no finance leases as of March 31, 2025. Right-of-use lease assets and lease liabilities for our operating leases are recorded in the condensed consolidated balance sheets.

The components of operating lease expense were as follows:


Lease Costs	Three Months Ended March 31,
		2025		2024
Operating lease cost		$	2,344	$	2,165
Short-term lease cost		564		551
Variable lease cost		248		238
Net lease cost		$	3,156	$	2,954

Supplemental information related to leases is as follows:


Other Information	Three Months Ended March 31,
	2025			2024
Cash flows:
Cash paid amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,131		$	3,185

Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	$	3,795		$	1,389

Lease term and discount rate:
Weighted average remaining lease term (years)	5.8			6.6
Weighted average discount rate	3.16		%	1.67		%

Rental income from third parties

We own office buildings in Bangor, Falmouth, Yarmouth and Orono, 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 2025 and 2032, 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 for the three months ended March 31, 2025 and 2024, totaled $806,000 and $761,000, respectively. Rental income is included in hardware and other revenue on the condensed consolidated statements of income. As of March 31, 2025, future minimum operating rental income based on contractual agreements is as follows:


Year ending December 31,	Amount
2025 (Remaining)	$	1,676
2026	2,124
2027	1,850
2028	1,590
2029	903
Thereafter	2,569
Total	$	10,712

(15) 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, and on August 23, 2022, we filed a lawsuit to enforce our rights and remedies under the applicable contractual arrangement. The client subsequently asked us to negotiate directly with the client to attempt to resolve the dispute. The negotiations were not successful, and on March 20, 2024, we reinitiated our lawsuit. Although we believe our products and services were delivered in accordance with the terms of our contract and that we are entitled to payment in connection with the termination for convenience, at this time the matter remains unresolved. 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 that we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of March 31, 2025, the remaining aggregate minimum purchase commitment under these arrangements was approximately $629.3 million through 2031.

(16) Subsequent Events

There have been no material events or transactions that occurred subsequent to March 31, 2025.

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