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, including local, state and federal government agencies, that could negatively impact information technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks, evolving use of artificial intelligence (“AI”), security vulnerabilities and software updates, or changes in our ability to access third-party software and services; (3) our ability to protect client information from security breaches or misuse through AI and to 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 actively monitor developments in AI regulation and ethical standards as we expect that future changes in the regulatory landscape may affect our product development timelines, compliance costs, and market opportunities related to AI; (7) our ability to achieve our financial forecasts due to various factors, including project delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (8) general economic, political and market conditions, including inflation and changes in interest rates; (9) technological and market risks associated with the development of new technologies, products or services or of new versions of existing or acquired products or services; (10) competition in the industry in which we conduct business and the impact of competition on pricing, client retention and pressure for new products or services; (11) the ability to attract and retain qualified personnel and dealing with rising labor costs, the loss or retirement of key members of management or other key personnel; and (12) costs of compliance and any failure to comply with government and stock exchange regulations. 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 information technology (“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 that 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 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 such as internal infrastructure costs 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

2026

We did not complete any new acquisitions during the three months ended March 31, 2026.

2025

On December 2, 2025, we acquired Edu.Link, Inc. (“Edulink”), a SaaS company focused on educator evaluation, performance management, professional development, and compliance tracking geared specifically to the unique needs of K-12 schools. On November 19, 2025, we acquired CloudGavel, LLC (“CG”), a SaaS company specializing in cloud electronic warrant solutions that allows for real time interaction for judges and law enforcement personnel. On July 28, 2025, we acquired Emergency Networking, Inc. (“EN”), a SaaS company specializing in cloud-native software for fire departments and emergency medical services agencies. On January 31, 2025, we acquired MyGov, LLC (“MyGov”), a provider of SaaS platform solutions for community development. The actual operating results of Edulink, CG, EN, and MyGov, from their respective dates of acquisition, are included in the operating results of the ES segment.

Operating Results

For the three months ended March 31, 2026, total revenues increased 9%, compared to the prior period, primarily due to an increase in subscription revenue.

Subscriptions revenue grew 14.6%, for the three months ended March 31, 2026, 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 7,703 as of March 31, 2026, including 118 employees who joined us through acquisitions completed since March 31, 2025. Our employee count was 7,462 as of March 31, 2025.

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 subscriptions and maintenance 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 subscription and maintenance 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 $2.15 billion and $1.95 billion as of March 31, 2026, and 2025, respectively. ARR increased approximately 10% 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 and potential impairment of intangible assets and goodwill. 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, 2025. 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, 2025.

Reclassifications

As of January 1, 2026, we have elected to combine software license and royalties revenue and hardware and other revenue into a single revenue category, along with a corresponding adjustment within cost of revenues on the condensed consolidated statement of income for all reporting periods presented to simplify presentation and enhance the usefulness of our financial statements.

ANALYSIS OF RESULTS OF OPERATIONS

			Percent of Total Revenues
			Three Months Ended March 31,
			2026						2025
Revenues:
Subscriptions			70.0		%				66.4		%
Maintenance			17.7						20.0
Professional services			9.9						11.3
Other			2.4						2.3
Total revenues			100.0						100.0
Cost of revenues:
Subscriptions, maintenance, and professional services			47.8						49.1
Amortization of software development			0.9						1.0
Amortization of acquired software			1.5						1.6
Other			1.5						0.9
Sales and marketing expense			6.3						6.5
General and administrative expense			13.7						14.1
Research and development expense			9.7						8.5
Amortization of other intangibles			2.3						2.5
Operating income			16.3						15.8
Interest expense			(0.2)						(0.2)
Other income, net			1.3						1.3
Income before income taxes			17.4						16.9
Income tax provision			4.1						2.5
Net income			13.3		%				14.4		%

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
						2026						2025						$						%
ES						$	295,171					$	228,580					$	66,591					29		%
PT						134,574						146,409						(11,835)						(8)
Total subscriptions revenue						$	429,745					$	374,989					$	54,756					15		%

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

SaaS fees

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
						2026						2025						$						%
ES						$	200,132					$	158,741					$	41,391					26		%
PT						22,224						21,339						885						4
Total SaaS fees revenue						$	222,356					$	180,080					$	42,276					23		%

For the three months ended March 31, 2026, SaaS fees grew 23%, compared to the prior period. The growth is primarily due to sales to new clients and expansions with existing clients, along with new SaaS revenues from existing on-premises clients converting to our SaaS offerings. Annual price increases for existing clients also contributed to the growth.

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
						2026						2025						$						%
ES						$	95,039					$	69,839					$	25,200					36		%
PT						112,350						125,070						(12,720)						(10)
Total transaction-based fees revenue						$	207,389					$	194,909					$	12,480					6		%

For the three months ended March 31, 2026, contributing to the growth in transaction-based fees compared to prior period are the new transaction clients and volume increases from online payments and e-filing services, somewhat offset by the decline in revenues of approximately $12.3 million due to the wind-down in the fourth quarter of 2025 of one state payment processing contract.

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
						2026						2025						$						%
ES						$	103,327					$	106,979					$	(3,652)					(3)		%
PT						5,547						5,822						(275)						(5)
Total maintenance revenue						$	108,874					$	112,801					$	(3,927)					(3)		%

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue decreased 3% for the three months ended March 31, 2026, compared to the prior period primarily due to the impact of 478 clients converting from on-premises license arrangements to SaaS since March 31, 2025, 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
						2026						2025						$						%
ES						$	53,258					$	54,593					$	(1,335)					(2)		%
PT						7,549						9,457						(1,908)						(20)
Total professional services revenue						$	60,807					$	64,050					$	(3,243)					(5)		%

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.

Professional services revenue decreased 5% for the three months ended March 31, 2026, compared to the prior period. The decline in professional services revenue compared to the prior period is related to an intentional reduction in custom development, as well as efficiencies in the delivery of professional services.

Other

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

						Three Months Ended												Change
						2026						2025						$						%
ES						$	12,997					$	12,594					$	403					3		%
PT						393						41						352						859
Other revenue						$	13,390					$	12,635					$	755					6		%

Other revenue primarily consists of software licenses, royalties and computer hardware. Other revenue increased 6% compared to the prior period primarily due to an increase in computer hardware revenue. The increase is somewhat offset by the decline in revenue from software licenses due to the ongoing shift in the mix of new software contracts toward more SaaS offerings. Refer to the SaaS fees section for further details on our revenue mix shift.

We expect that software license revenues will continue to decline as we shift our model away from perpetual software licenses to SaaS.

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
						2026						2025						$						%
Subscriptions, maintenance, and professional services						$	293,547					$	278,053					$	15,494					6		%
Amortization of software development						5,624						5,379						245						5
Amortization of acquired software						8,984						9,294						(310)						(3)
Other						8,914						5,358						3,556						66
Total cost of revenues						$	317,069					$	298,084					$	18,985					6		%

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
						2026						2025						$						%
Subscriptions, maintenance, and professional services						$	293,547					$	278,053					$	15,494					6		%

Cost of subscriptions, maintenance and professional services primarily consist of personnel costs related to implementation of our software, conversion of client data, training client personnel, public cloud hosting costs, support activities, 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.

The cost of subscriptions, maintenance, and professional services for the three months ended March 31, 2026 increased 6% compared to the prior period. The increase is primarily due to a $17.1 million increase in merchant fees and third-party fees related to higher activity, an increase of $5.9 million in hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud, and a $2.0 million increase in personnel expense. The increases were partially offset by a $10.5 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract. Also increases were partially offset by the redeployment of resources to research and development due to continued migration of clients to our SaaS products and the consolidation of versions of on-premises software products with support obligations.

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
						2026						2025						$						%
Amortization of software development						$	5,624					$	5,379					$	245					5		%

Amortization of software development costs included in cost of revenues primarily consists 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 seven years.

For the three months ended March 31, 2026, amortization of software development costs increased 5% 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
						2026						2025						$						%
Amortization of acquired software						$	8,984					$	9,294					$	(310)					(3)		%

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 five to 10 years.

For the three months ended March 31, 2026, amortization of acquired software declined 3% compared to the prior period due to assets becoming fully amortized in the fourth quarter of 2025.

Other

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

						Three Months Ended												Change
						2026						2025						$						%
Other						$	8,914					$	5,358					$	3,556					66		%

Other costs primarily consist of costs related to software licenses and computer hardware. Software license costs primarily consist of direct third-party software costs. Computer hardware costs primarily consist of the costs of purchased inventory and other direct fulfillment costs. We do not have any direct costs associated with royalties revenues.

Other costs for the three months ended March 31, 2026, increased 66% compared to the prior period. The increase was primarily driven by higher computer hardware sales.

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

						Three Months Ended
						2026						2025						Change
Total gross profit						$	296,434					$	267,081					$	29,353
Overall gross margin						48.3		%				47.3		%				1.0		%

Overall gross margin. For the three months ended March 31, 2026, our blended gross margin increased 1.0% compared to the prior period. For the three months ended March 31, 2026, the increase in overall gross margin compared to the prior period is primarily attributed to a shift in our revenue mix toward higher-margin SaaS revenues. The increase in the overall gross margin is partially offset by declines in software licenses, maintenance and professional services revenues and increases in merchant fees and third party fees, hosting costs, and software development amortization expense.

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
						2026						2025						$						%
Sales and marketing expense						$	38,797					$	36,473					$	2,324					6		%

S&M expense as a percentage of revenues was 6.3% for the three months ended March 31, 2026 compared to 6.5% for the three months ended March 31, 2025. S&M expense increased 6% compared to the prior period. The increase in S&M expense is primarily attributed to an increase in commission expense and higher personnel expense 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
						2026						2025						$						%
General and administrative expense						$	83,965					$	79,452					$	4,513					6		%

G&A expense as a percentage of revenue was 13.7% for the three months ended March 31, 2026 compared to 14.1% for the three months ended March 31, 2025. G&A expense increased 6% for the three months ended March 31, 2026, compared to the prior period. For the three months ended March 31, 2026, the increase in G&A expense was primarily attributable to a $4.7 million write-off of previously capitalized software projects.

Research and development expense

Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with product development. Research and development expense consists mainly of costs associated with development in our current products that do not qualify for capitalization. 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
						2026						2025						$						%
Research and development expense						$	59,727					$	47,844					$	11,883					25		%

Research and development expense increased 25% for the three months ended March 31, 2026, compared to the prior period, with the majority of the increase due to the redeployment of resources to research and development resulting from the continued migration of clients to our SaaS products and version consolidation of on-premises software products with support obligations, together with increased investments in a number of new Tyler product development initiatives across our product suites.

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
						2026						2025						$						%
Amortization of other intangibles						$	14,133					$	14,139					$	(6)					—		%

Amortization of other intangibles remained flat for the three months ended March 31, 2026, compared to the prior period.

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):

Segment Operating Income (loss):						Three Months Ended												Change
						2026						2025						$						%
ES						$	186,260					$	158,920					$	27,340					17		%
PT						17,725						30,286						(12,561)						(41)

For the three months ended March 31, 2026, the ES segment operating income increased 17%, primarily driven by a $66.6 million rise in subscription revenues resulting from the continued shift toward SaaS arrangements for both new and existing clients, as well as growth in certain transaction-based revenues. This increase was partially offset by higher expenses, including a $15.1 million increase in merchant fees, a $10.1 million increase in personnel expenses, and a $4.6 million increase in hosting fees. Also partially offsetting the increases is a $4.6 million decline in maintenance revenue, professional services revenue, and other revenues.

For the three months ended March 31, 2026, the PT segment operating income decreased 41%, driven by a $4.9 million increase in personnel expenses, higher G&A expenses, including a $4.7 million write-off related to previously capitalized software projects, and $1.9 million in lower professional services revenue. Also contributing to the decrease is a decline of approximately $12.3 million in transaction-based revenues, partially offset by a corresponding $10.5 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract.

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
						2026						2025						$						%
Interest expense						$	(1,066)					$	(1,246)					$	180					(14)		%

Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings. Interest expense in the three months ended March 31, 2026, decreased 14% compared to the prior period as a result of repayment of the Convertible Senior Notes during the current period.

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
						2026						2025						$						%
Other income, net						$	7,676					$	7,363					$	313					4		%

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, 2026, compared to the prior period is due to increased interest income generated from higher invested cash balances in during the first quarter of 2026 compared to 2025.

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
						2026						2025						$						%
Income tax provision						$	25,242					$	14,238					$	11,004					77		%
Effective income tax rate						23.7		%				14.9		%

The increase in the effective tax rate for the three months ended March 31, 2026, as compared to the prior period, is due to a decrease in excess tax benefits related to stock incentive awards and research tax credit benefits, and a slight increase in liabilities for uncertain tax positions.

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 state income taxes, liabilities for uncertain tax positions, and non-deductible business expenses, offset by the excess tax benefits related to stock incentive awards and the tax benefits of research tax credits.

FINANCIAL CONDITION AND LIQUIDITY

As of March 31, 2026, we have cash and cash equivalents of $316.0 million, compared to $1.0 billion as of December 31, 2025. We also have $81.8 million invested in investment grade corporate bonds, U.S. Treasuries and asset-backed securities as of March 31, 2026. 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):

						2026						2025
Cash flows provided (used) by:
Operating activities						$	107,262					$	56,158
Investing activities						55,975						(96,169)
Financing activities						(862,627)						1,019
Net decrease in cash and cash equivalents						$	(699,390)					$	(38,992)

For the three months ended March 31, 2026, operating activities provided cash of $107.3 million, compared to $56.2 million in the three months ended March 31, 2025. Operating activities that provided cash were primarily comprised of net income of $81.2 million, with adjustments for non-cash depreciation and amortization charges of $38.9 million, non-cash share-based compensation expense of $37.2 million, and non-cash amortization of operating lease right-of-use assets of $2.3 million. Changes in working capital, excluding cash, reduced cash provided by operating activities by approximately $52.3 million. The primary drivers of this net outflow were the decreases in deferred revenue and accrued liabilities and increases in prepaid expenses. These changes are consistent with the Company’s historical seasonal patterns, where the first quarter typically reflects the settlement of annual compensation and benefit accruals, the recognition of deferred revenue from prior period billings, and the payment of annual prepaid expenses. These decreases were offset by the timing of income tax payments, deferred taxes associated with stock activity during the period and timing of collections of annual maintenance renewals and subscription renewal billings that are billed in the prior fourth quarter.

Investing activities provided cash of $56.0 million in the three months ended March 31, 2026, compared to $96.2 million used in the three months ended March 31, 2025. We invested $1.4 million and received $61.9 million in proceeds from investment grade corporate bonds, U.S. Treasuries and asset-backed securities. Approximately $3.2 million was invested in property and equipment. Lastly, approximately $1.3 million of software development costs were capitalized.

Financing activities used cash of $862.6 million in the three months ended March 31, 2026, compared to $1.0 million provided in the three months ended March 31, 2025. On March 15, 2026, the Company repaid the $600.0 million aggregate principal amount of the Convertible Senior Notes in cash. In the three months ended March 31, 2026, we repurchased approximately $250.1 million of our common stock, paid $16.4 million from shares withheld for taxes upon equity awards settlement net of cash received from stock option exercises, and received $3.8 million from employee stock purchase plan activity.

On February 3, 2026, our Board of Directors authorized the repurchase of $1 billion of our common stock, which replaced and superseded all previous authorizations. 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 repurchases 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. As of April 29, 2026, we have remaining authorization from our Board of Directors to repurchase up to $653.4 million of our common stock.

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 sub-facilities 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.

We have no outstanding borrowings under the 2024 Credit Agreement, with an available borrowing capacity of $700.0 million as of March 31, 2026.

On March 15, 2026, the Company repaid the $600.0 million aggregate principal amount of its 0.25% Convertible Senior Notes due 2026 (the “Notes”) in cash at maturity. No conversions of the Notes occurred prior to or at maturity as the Company’s common stock price did not exceed the conversion price during the relevant periods for redemption, and no other conversion conditions were met. As a result, the entire principal amount was settled in cash, and no shares of common stock were issued upon settlement.

In the three months ended March 31, 2026, and 2025, we paid interest of $1.2 million and $1.0 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 made income tax payments, net of refunds, of $46,000 and received income tax refunds, net of taxes paid, of $323,000 in the three months ended March 31, 2026, and 2025, respectively.

On February 2, 2026, we signed a definitive agreement to acquire the remaining equity interest of a privately held company in which, as of March 31, 2026, we held a minority interest. The agreement, which was subject to the satisfaction of customary closing conditions and regulatory approvals, closed on April 14, 2026. The transaction has a cash purchase price of approximately $223 million subject to customary post-closing adjustments.

We anticipate that 2026 capital spending will be between $18.0 million and $20.0 million, including approximately $6.0 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 nine 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, 2025, as previously disclosed in our 2025 Annual Report on Form 10-K filed with the SEC on February 18, 2026. Our estimated future obligations consist of debt, uncertain tax positions, leases, and purchase commitments as of March 31, 2026. Refer to Note 8, “Debt,” Note 11, “Income Tax,” Note 15, “Leases,” and Note 16, “Commitments,” to the condensed consolidated financial statements for related discussions.