Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends, expectations or beliefs with respect to our financial condition, results of operations or business. Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,” “plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risks and uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-looking statements. We presently consider the following to be among the important factors that could cause actual results to differ materially from our expectations and beliefs: (1) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks, security vulnerabilities and software updates; (3) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (4) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (5) material portions of our business require the Internet infrastructure to be adequately maintained; (6) our ability to achieve our financial forecasts due to various factors, including project delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (7) general economic, political and market conditions, including continued inflation and rising interest rates; (8) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (9) competition in the industry in which we conduct business and the impact of competition on pricing, client retention and pressure for new products or services; (10) the ability to attract and retain qualified personnel and dealing with rising labor costs, the loss or retirement of key members of management or other key personnel; and (11) costs of compliance and any failure to comply with government and stock exchange regulations. These factors and other risks that affect our business are described in Item 1A, “Risk Factors”. We expressly disclaim any obligation to publicly update or revise our forward-looking statements.

GENERAL

We provide integrated information management solutions and services for the public sector. We develop and market a broad line of software products and services to address the IT needs of public sector entities. We provide subscription-based services such as software as a service (“SaaS”) and transaction-based services primarily related to digital government services and payment processing. In addition, we provide professional IT services to our clients, including software and hardware installation, data conversion, training, and for certain clients, product modifications, along with continuing maintenance and support for clients using our systems. Additionally, we provide property appraisal services for taxing jurisdictions.

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.

Our Chief Operating Decision Maker (“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.

See Note 3, “Segment and Related Information,” in the notes to the financial statements for additional information.

Recent Acquisitions

2025

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 working capital holdbacks of $210,000. The actual operating results of MyGov are included with the operating results of the ES segment since the date of acquisition.

2024

We did not complete any acquisitions during the 2024 fiscal period.

Operating Result**s

For the three months ended March 31, 2025, total revenues increased 10% compared to the prior period, primarily due to an increase in subscription revenue.

Subscriptions revenue grew 20% for the three months ended March 31, 2025, compared to the prior period, primarily due to an ongoing shift toward SaaS arrangements for both new and existing clients, along with growth in certain transaction-based revenues.

Our total employee count increased to 7,462 as of March 31, 2025, including 12 employees who joined us through acquisitions completed since March 31, 2024, from 7,305 as of March 31, 2024.

Annualized Recurring Revenues

Annualized recurring revenues (ARR) - Subscriptions and maintenance are considered recurring revenue sources. ARR is calculated by annualizing the current quarter’s recurring revenues from maintenance and subscriptions as reported in our statement of income. Management believes ARR is an indicator of the annual run rate of our recurring revenues, as well as a measure of the effectiveness of the strategies we deploy to drive revenue growth over time. ARR is a metric widely used by companies in the technology sector and by investors, which we believe offers insight into the stability of our maintenance and subscription revenues to be recognized within the year.

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. Transaction-based revenues are historically highest in the second quarter, which coincides with peak outdoor recreation seasons and statutory filing deadlines in many jurisdictions, and lowest in the fourth quarter, due to fewer business days and lower transaction volumes around holidays. Because ARR is an annualized revenue amount, the metric can fluctuate from quarter to quarter due to this seasonality.

ARR was $1.95 billion and $1.72 billion as of March 31, 2025, and 2024, respectively. ARR increased approximately 13% compared to the prior period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements for both new and existing clients and expansion in transaction-based fee arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements. These condensed consolidated financial statements have been prepared following the requirements of GAAP for the interim period and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, potential impairment of intangible assets and goodwill, and share-based compensation expense. As these are condensed financial statements, one should also read expanded information about our critical accounting policies and estimates provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Form 10-K for the year ended December 31, 2024. There have been no material changes to our critical accounting policies and estimates from the information provided in our Form 10-K for the year ended December 31, 2024.

ANALYSIS OF RESULTS OF OPERATIONS

												Percent of Total Revenues
									Three Months Ended March 31,
															2025						2024
Revenues:
Subscriptions															66.4		%				61.2		%
Maintenance															20.0						22.9
Professional services															11.3						12.6
Software licenses and royalties															1.2						1.7
Hardware and other															1.1						1.6
Total revenues															100.0						100.0
Cost of revenues:
Subscriptions, maintenance, and professional services															49.1						52.5
Software licenses, royalties, and amortization of acquired software															1.9						2.1
Amortization of software development															1.0						0.9
Hardware and other															0.6						0.9
Sales and marketing expense															6.5						7.1
General and administrative expense															14.1						14.2
Research and development expense															8.5						5.7
Amortization of other intangibles															2.5						3.5
Operating income															15.8						13.1
Interest expense															(0.2)						(0.4)
Other income, net															1.3						0.4
Income before income taxes															16.9						13.1
Income tax provision															2.5						2.4
Net income															14.4		%				10.7		%

Revenues

Subscriptions

The following table sets forth a comparison of our subscriptions revenue for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
ES																														$	228,580					$	180,026					$	48,554					27		%
PT																														146,409						133,217						13,192						10
Total subscriptions revenue																														$	374,989					$	313,243					$	61,746					20		%

Subscriptions revenue consists of revenues derived from our SaaS arrangements and transaction-based fees primarily related to digital government services and payment processing.

SaaS

The following table sets forth a comparison of our subscriptions revenue derived from SaaS fees for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
ES																														$	158,741					$	128,142					$	30,599					24		%
PT																														21,339						20,642						697						3
Total SaaS revenue																														$	180,080					$	148,784					$	31,296					21		%

For the three months ended March 31, 2025, SaaS fees grew 21%, or $31.3 million, compared to the prior period. That growth is primarily attributable to new SaaS clients as well as existing on-premises clients who converted to our SaaS model. Since March 31, 2024, we have added 672 new SaaS clients, while 431 existing on-premises clients have converted to our SaaS offerings. Our new software contract value mix for the three months ended March 31, 2025, was approximately 4% perpetual software license arrangements and approximately 96% subscription-based arrangements, compared to approximately 7% perpetual software license arrangements and approximately 93% subscription-based arrangements for the three months ended March 31, 2024.

Transaction-based fees

The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
ES																														$	69,839					$	51,884					$	17,955					35		%
PT																														125,070						112,575						12,495						11
Total Transaction-based fees revenue																														$	194,909					$	164,459					$	30,450					19		%

For the three months ended March 31, 2025, new transaction clients, volume increases from online payments and e-filing services, and price increases by certain third-party processing partners from whom we receive a share of revenues contributed to the growth in transaction-based fees compared to the prior period.

Maintenance

The following table sets forth a comparison of our maintenance revenue for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
ES																														$	106,979					$	111,182					$	(4,203)					(4)		%
PT																														5,822						6,036						(214)						(4)
Total maintenance revenue																														$	112,801					$	117,218					$	(4,417)					(4)		%

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue decreased compared to the prior period primarily due to the impact of clients converting from on-premises license arrangements to SaaS, partially offset by maintenance price increases.

Professional services

The following table sets forth a comparison of our professional services revenue for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
ES																														$	54,593					$	54,893					$	(300)					(1)		%
PT																														9,457						9,913						(456)						(5)
Total professional services revenue																														$	64,050					$	64,806					$	(756)					(1)		%

Professional services revenue primarily consists of professional services billed in connection with implementing our software, converting client data, training client personnel, custom development activities, consulting, and property appraisal services. New clients who implement our software generally contract with us to provide the related professional services. Existing clients also periodically purchase additional training, consulting and minor programming services. The decrease in professional services revenues compared to the prior period is as expected from lower custom development work and efficiencies.

Software licenses and royalties

The following table sets forth a comparison of our software licenses and royalties revenue for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
ES																														$	6,994					$	8,571					$	(1,577)					(18)		%
PT																														—						163						(163)						(100)
Total software licenses and royalties revenue																														$	6,994					$	8,734					$	(1,740)					(20)		%

The decrease in software licenses and royalties revenue compared to the prior period is primarily attributed to the shift in the mix of new software contracts toward more SaaS offerings.

Although the mix of new contracts between subscription-based and perpetual license arrangements may vary from quarter to quarter and year to year, we expect that software license revenues will continue to decline as we shift our model away from perpetual software licenses to SaaS. Subscription-based arrangements result in lower software license revenue in the initial year as compared to perpetual software license arrangements, but generate higher overall revenue over the term of the contract.

Cost of revenues and overall gross margins

The following table sets forth a comparison of the key components of our cost of revenues for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Subscriptions, maintenance, and professional services																														$	278,053					$	268,870					$	9,183					3		%
Software licenses and royalties																														1,910						1,565						345						22
Amortization of software development																														5,379						4,363						1,016						23
Amortization of acquired software																														9,294						9,239						55						1
Hardware and other																														3,448						4,656						(1,208)						(26)
Total cost of revenues																														$	298,084					$	288,693					$	9,391					3		%

Subscriptions, maintenance, and professional services.

The following table sets forth a comparison of our costs of subscriptions, maintenance, and professional services for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Subscriptions, maintenance, and professional services																														$	278,053					$	268,870					$	9,183					3		%

Cost of subscriptions, maintenance and professional services primarily consist of personnel costs related to installation of our software, conversion of client data, training client personnel, public cloud hosting costs, and support activities, including enhancing existing solutions, and various other services such as custom development, ongoing operation of our SaaS solutions, property appraisal outsourcing activities, digital government services, and other transaction-based services such as e-filing. Other costs included are merchant and interchange fees required to process credit/debit card transactions and bank fees to process automated clearinghouse transactions related to our payments business.

For the three months ended March 31, 2025, the cost of subscriptions, maintenance, and professional services increased 3% primarily due to increased hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud, together with higher personnel costs. The increases were partially offset by redeployment of resources to research and development due to continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations.

Software licenses and royalties.

The following table sets forth a comparison of our costs of software licenses and royalties for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Software licenses and royalties																														$	1,910					$	1,565					$	345					22		%

Costs of software licenses and royalties primarily consist of direct third-party software costs. We do not have any direct costs associated with royalties.

The cost of software licenses and royalties for the three months ended March 31, 2025, increased 22%, compared to the prior period due to higher third-party software costs.

Amortization of software development.

The following table sets forth a comparison of our amortization of software development for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Amortization of software development																														$	5,379					$	4,363					$	1,016					23		%

Amortization software development costs included in cost of revenues primarily consist of personnel costs which were previously capitalized. We begin to amortize capitalized costs when a product is available for general release to clients. Amortization expense is determined on a product-by-product basis at a rate not less than straight-line basis over the software’s remaining estimated economic life of, generally, three to five years.

For the three months ended March 31, 2025, amortization of software development costs increased 23% compared to the prior period due to new capitalized software development projects going into service in the past year.

Amortization of acquired software.

The following table sets forth a comparison of our amortization of acquired software for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Amortization of acquired software																														$	9,294					$	9,239					$	55					1		%

Amortization expense related to acquired software attributed to business combinations is included with cost of revenues. The estimated useful lives of acquired software range from three to 10 years.

For the three months ended March 31, 2025, amortization of acquired software increased 1% compared to the prior period due to amortization of newly acquired software from recent acquisition completed in fiscal year 2025, partially offset by assets becoming fully amortized in the fourth quarter of 2024.

The following table sets forth a comparison of gross profit and overall gross margin for the periods presented as of March 31:

												Three Months Ended
																								2025						2024						Change
Total gross profit																								$	267,081					$	223,666					$	43,415
Overall gross margin																								47.3		%				43.7		%				3.6		%

Overall gross margin. For the three months ended March 31, 2025, our blended gross margin increased 3.6% compared to the prior period. The increase in overall gross margin compared to the prior period is primarily attributed to a higher revenue mix for subscription revenues compared to the prior period, resulting in an increase in incremental margin related to SaaS and transaction revenues. Also contributing to the increase in overall gross margin is the redeployment of resources to research and development due to continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations. The increase in the overall gross margin is partially offset by lower revenue from software licenses, maintenance and professional services, higher software development amortization expense, and higher personnel costs.

Sales and marketing expense

Sales and marketing (“S&M”) expense consists primarily of salaries, employee benefits, travel, share-based compensation expense, commissions and related overhead costs for sales and marketing employees, as well as professional fees, trade show activities, advertising costs and other marketing costs. The following table sets forth a comparison of our S&M expense for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Sales and marketing expense																														$	36,473					$	36,427					$	46					—		%

S&M expense as a percentage of revenues was 6.5%, for the three months ended March 31, 2025, compared to 7.1% for the three months ended March 31, 2024. S&M expense remained flat when compared to the prior period. S&M expense as a percentage of revenue was lower due to an increase in compensation capitalized as contract acquisition costs compared to the prior period.

General and administrative expense

General and administrative (“G&A”) expense consists primarily of personnel salaries and share-based compensation expense for general corporate functions including senior management, finance, accounting, legal, human resources and corporate development, as well as third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs, amortization of software development for internal use, acquisition-related expenses and other administrative expenses. The following table sets forth a comparison of our G&A expense for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
General and administrative expense																														$	79,452					$	72,710					$	6,742					9		%

G&A expense as a percentage of revenue was 14.1% for the three months ended March 31, 2025, compared to 14.2% for the three months ended March 31, 2024. G&A expense increased 9% for the three months ended March 31, 2025, compared to the prior period. For the three months ended March 31, 2025, the increase in G&A expense is primarily attributed to increases in amortization of software development for internal use and higher share-based compensation expense. For the three months ended March 31, 2025, share-based compensation expense grew $5.0 million compared to the prior period, primarily due to a higher stock price for share-based awards issued in the current period.

Research and development expense

Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with new product development. Research and development expense consists mainly of costs associated with development of new products and new functionality in our current SaaS products. The following table sets forth a comparison of our research and development expense for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Research and development expense																														$	47,844					$	29,433					$	18,411					63		%

Research and development expense increased 63% for the three months ended March 31, 2025, compared to the prior period, and is primarily due to the redeployment of resources to research and development due to continued migration of clients to our SaaS products and version consolidation of on-premises software products with support obligations. Also contributing to the increase was a shift in new product development initiatives from capitalized development projects to other development activities that are expensed to research and development, as well as higher related share-based compensation expense.

Amortization of other intangibles

Other intangibles represents the portion of purchase price allocated to the identified intangible assets for client-related intangibles, trade names and leases acquired. The remaining excess purchase price is allocated to goodwill that is not subject to amortization. Amortization expense related to acquired software is included with cost of revenues, while amortization expense of other intangibles is recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years. The following table sets forth a comparison of amortization of other intangibles for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Amortization of other intangibles																														$	14,139					$	18,118					$	(3,979)					(22)		%

For the three months ended March 31, 2025, amortization of other intangibles decreased 22% compared to the prior period due to the impact of certain trade name intangible assets becoming fully amortized as a result of accelerated amortization expense in 2024.

Segment Operating Income

The following table sets forth a comparison of the operating income by reportable segments for the three months ended March 31 ($ in thousands):

Operating Income (loss):						Three Months Ended												Change
						2025						2024						$						%
ES						$	158,920					$	130,699					$	28,221					22		%
PT						30,286						28,255						2,031						7
Corporate unallocated						(100,033)						(91,976)						(8,057)						9
Total operating income						$	89,173					$	66,978					$	22,195					33		%

The increase in the ES segment operating income is primarily due to higher subscription revenues as a result of the ongoing shift toward SaaS arrangements for both new and existing clients, along with growth in certain transaction-based revenues. These increases are partially offset by lower revenue from software licenses, maintenance, and hardware and other. Also offsetting the increase in segment operating income are higher expenses related to a shift in new product development initiatives from capitalized development projects to projects that are expensed to research and development.

The increase in the PT segment operating income is primarily due to growth in transaction-based revenues and a reduction in headcount in sales and marketing personnel, partially offset by higher merchant fees.

The increase in Corporate unallocated is primarily due to higher share-based compensation expense. For the three months ended March 31, 2025, total share-based compensation expense grew $10.8 million compared to the prior period, generally due to a higher stock price for share-based awards issued in the current period. This increase was partially offset by the decline in amortization of other intangibles compared to the prior period due to the impact of certain trade name intangible assets becoming fully amortized as a result of accelerated amortization expense in 2024.

See Note 3 “Segment and Related Information” for a reconciliation between our operating segment and consolidated financial results for the periods presented.

Interest expense

The following table sets forth a comparison of our interest expense for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Interest expense																														$	(1,246)					$	(2,184)					$	938					(43)		%

Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings. The change in interest expense in the three months ended March 31, 2025, compared to the prior period is primarily attributable to lower interest incurred as a result of our repayment of the Term Loans in early 2024.

Other income, net

The following table sets forth a comparison of our other income, net, for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Other income, net																														$	7,363					$	1,845					$	5,518					299		%

Other income, net, is primarily comprised of interest income from invested cash. The change in other income, net, in the three months ended March 31, 2025, compared to the prior period is due to increased interest income generated from higher invested cash balances in 2025 compared to 2024.

Income tax provision

The following table sets forth a comparison of our income tax provision for the three months ended March 31 ($ in thousands):

																		Three Months Ended												Change
																														2025						2024						$						%
Income tax provision																														$	14,238					$	12,469					$	1,769					14%
Effective income tax rate																														14.9		%				18.7		%

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.

FINANCIAL CONDITION AND LIQUIDITY

As of March 31, 2025, we had cash and cash equivalents of $705.7 million, compared to $744.7 million as of December 31, 2024. We also had $104.7 million invested in investment grade corporate bonds, U.S. Treasuries and asset-backed securities as of March 31, 2025. These investments have varying maturity dates through 2027 and are held as available-for-sale. Net cash provided by operating activities continues to be our primary source of funds to finance operating needs and capital expenditures. Other potential capital resources include cash on hand, public and private issuances of debt or equity securities, and our revolving credit facility. It is possible that our ability to access the capital and credit markets in the future may be limited by economic conditions or other factors. We believe that our cash on hand, cash provided by operating activities, and available credit are sufficient to fund our working capital requirements and capital expenditures for at least the next twelve months.

The following table sets forth a summary of cash flows for the three months ended March 31 ($ in thousands):

						2025						2024
Cash flows provided (used) by:
Operating activities						$	56,158					$	71,839
Investing activities						(96,169)						(12,681)
Financing activities						1,019						(36,414)
Net (decrease) increase in cash and cash equivalents						$	(38,992)					$	22,744

For the three months ended March 31, 2025, operating activities provided cash of $56.2 million, compared to $71.8 million in the three months ended March 31, 2024. Operating activities that provided cash were primarily comprised of net income of $81.1 million, non-cash depreciation and amortization charges of $34.6 million, non-cash share-based compensation expense of $37.7 million, and non-cash amortization of operating lease right-of-use assets of $2.3 million. Changes in working capital, excluding cash, decreased cash provided by operating activities by approximately $99.5 million, mainly due to the decline in deferred revenue balances, timing of prepaid renewals, timing of bonus payments, timing of payroll related tax payments, and decreases in operating lease liabilities and deferred taxes associated with stock option activity during the period. These decreases were offset by the timing of income tax payments and timing of collections of annual maintenance renewals and subscription renewal billings that are billed in the fourth quarter. In general, changes in deferred revenue are cyclical and primarily driven by the timing of our maintenance and subscription renewal billings. Our renewal dates occur throughout the year, but our largest maintenance billing cycles occur in the second and fourth quarters. Subscription renewals are billed throughout the year.

Investing activities used cash of $96.2 million in the three months ended March 31, 2025, compared to $12.7 million in the three months ended March 31, 2024. 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 invested $72.0 million and received $1.8 million in proceeds from investment grade corporate bonds, U.S. Treasuries and asset-backed securities. Approximately $5.6 million of software development costs were capitalized. Approximately $2.3 million was invested in property and equipment.

Financing activities provided cash of $1.0 million in the three months ended March 31, 2025, compared to used cash of $36.4 million in the three months ended March 31, 2024. We received $1.5 million from stock option exercises, net of withheld shares for taxes, upon equity awards settlement, and $4.0 million from employee stock purchase plan activity. We also paid $4.5 million in cash for long-term indemnity holdbacks related to prior acquisitions.

In February 2019, our Board of Directors authorized the repurchase of an additional 1.5 million shares of our common stock. The repurchase program, which was approved by our Board of Directors, was originally announced in October 2002 and was amended at various times from 2003 through 2019. As of April 25, 2025, we have authorization from our Board of Directors to repurchase up to 2.1 million additional shares of our common stock. Our share repurchase program allows us to repurchase shares at our discretion. Market conditions, as well as the volume of employee stock option exercises, influence the timing of the buybacks and the number of shares repurchased. Share repurchases are generally funded using our existing cash balances and borrowings under our credit facility and may occur through open market purchases and transactions structured through investment banking institutions, privately negotiated transactions and/or other mechanisms. There is no expiration date specified for the authorization.

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 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.

We have no outstanding borrowings under the 2024 Credit Agreement, with an available borrowing capacity of $700.0 million as of March 31, 2025.

As of March 31, 2025, we had $600.0 million in outstanding principal for the Convertible Senior Notes due in 2026.

We will settle any conversions of Convertible Senior Notes either entirely in cash or in a combination of cash and shares of our common stock, at our election. As of March 31, 2025, none of the conditions allowing holders of the Convertible Senior Notes to convert have been met.

In the three months ended March 31, 2025, and 2024, we paid interest of $1.0 million and $1.7 million, respectively. See Note 8, “Debt,” to the condensed consolidated financial statements for discussions of the Convertible Senior Notes and the 2024 Credit Agreement.

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

We anticipate that 2025 capital spending will be between $32.0 million and $34.0 million, including approximately $19.0 million of software development. We expect the majority of the other capital spending will consist of computer equipment and software for infrastructure replacements and expansion. Capital spending and cash tax payments are expected to be funded from existing cash balances and cash flows from operations.

From time to time we engage in discussions with potential acquisition candidates. In order to pursue such opportunities, which could require significant commitments of capital, we may be required to incur debt or to issue additional potentially dilutive securities in the future. No assurance can be given as to our future acquisition opportunities and how such opportunities will be financed.

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.

There were no material changes to our future minimum contractual obligations since December 31, 2024, as previously disclosed in our 2024 Annual Report on Form 10-K filed with the SEC on February 19, 2025. Our estimated future obligations consist of debt, uncertain tax positions, leases, and purchase commitments as of March 31, 2025. Refer to Note 8, “Debt,” Note 11, “Income Tax,” Note 14, “Leases,” and Note 15, “Commitments and Contingencies,” to the condensed consolidated financial statements for related discussions.