PLANO, Texas--(BUSINESS WIRE)--Tyler Technologies, Inc. (NYSE: TYL) announced the Wyoming State Parks’ new reservation site is now live and ready to accommodate bookings from visitors, whether it’s an RV hookup, tent camping under the stars, or glamping in comfort. Launched by Tyler, the new reservation site offers an enhanced user experience including photos and detailed, interactive maps, so visitors will know exactly what to expect when they arrive. Visitors can also stay updated on their reservation ...

PLANO, Texas--(BUSINESS WIRE)--Tyler Technologies, Inc. (NYSE: TYL) will participate in two investor conferences in January and February 2024. Brian Miller, Tyler’s executive vice president and chief financial officer, will attend the Needham Annual Growth Conference at the Lotte New York Palace Hotel in New York City on Wednesday, Jan. 17. Brian will participate in a 9:30 a.m. ET fireside chat and host one-on-one meetings throughout the day. Brian will also attend the Wolfe Research “March Madness” Softw ...

PLANO, Texas--(BUSINESS WIRE)--Tyler Technologies, Inc. (NYSE: TYL) will participate in two investor conferences in January and February 2024.Brian Miller, Tyler’s executive vice president and chief financial officer, will attend the Needham Annual Growth Conference at the Lotte New York Palace Hotel in New York City on Wednesday, Jan. 17. Brian will participate in a 9:30 a.m. ET fireside chat and host one-on-one meetings throughout the day.Brian will also attend the Wolfe Research “March Madness” Software ...

Tyler Technologies, Inc. (NYSE:TYL) Q3 2023 Earnings Conference Call November 2, 2023 10:00 AM ET Company Participants Hala Elsherbini - Senior Director-Investor Relations Lynn Moore - President & Chief Executive Officer Brian Miller - Chief Financial Officer Conference Call Participants Matthew VanVliet - BTIG Kirk Materne - Evercore ISI. Joshua Reilly - Needham Rob Oliver - Baird Connor Passarella - Truist Securities Alex Zukin - Wolfe Research Saket Kalia - Barclays Jonathan Ho - William Blair Clarke Jef ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2023 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File Number 1-10485 TYLER TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 75-2303920 (State or other jurisdiction of incorporation or organization) (I.R.S. em ...

Tyler Technologies, Inc. (NYSE:TYL) Q2 2023 Results Conference Call July 27, 2023 10:00 AM ET Company Participants Hala Elsherbini - Senior Director of IR Lynn Moore - President & CEO Brian Miller - CFO Conference Call Participants Pete Heckmann - D.A. Davidson Matthew VanVliet - BTIG Terry Tillman - Truist Securities Gabriela Borges - Goldman Sachs Josh Reilly - Needham Saket Kalia - Barclays Ethan Park - Wolfe Research Michael Turrin - Wells Fargo Securities Kirk Materne - Evercore ISI Charles Strauzer - ...

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of financial performance [ITEM 1. Financial Statements](index=2&type=section&id=ITEM%201.%20Financial%20Statements) This section presents Tyler Technologies' unaudited condensed consolidated financial statements and notes for Q2 2023 and FY2022 [Condensed Consolidated Statements of Income](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Presents the company's revenues, gross profit, operating income, net income, and EPS for the reported periods Condensed Consolidated Statements of Income (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Revenues:** | | | | | | Subscriptions | $297,789 | $255,816 | $578,254 | $501,259 | | Total revenues | $504,279 | $468,685 | $976,133 | $924,792 | | Gross profit | $223,177 | $193,448 | $423,014 | $385,866 | | Operating income | $61,874 | $56,757 | $106,854 | $112,625 | | Net income | $49,130 | $39,946 | $80,005 | $79,930 | | Basic EPS | $1.17 | $0.96 | $1.91 | $1.93 | | Diluted EPS | $1.15 | $0.94 | $1.87 | $1.88 | [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Details net income and other comprehensive income (loss) components, leading to total comprehensive income for the periods Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $49,130 | $39,946 | $80,005 | $79,930 | | Other comprehensive (loss) income, net of tax | $(35) | $(66) | $59 | $(763) | | Comprehensive income | $49,095 | $39,880 | $80,064 | $79,167 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | **ASSETS:** | | | | Cash and cash equivalents | $118,764 | $173,857 | | Accounts receivable, net | $638,726 | $577,257 | | Total current assets | $856,880 | $847,242 | | Goodwill | $2,489,084 | $2,489,308 | | Total assets | $4,635,549 | $4,687,417 | | **LIABILITIES:** | | | | Deferred revenue | $565,840 | $568,538 | | Term loans, net | $243,729 | $362,905 | | Convertible senior notes due 2026, net | $595,345 | $594,484 | | Total liabilities | $1,867,298 | $2,063,028 | | **SHAREHOLDERS' EQUITY:** | | | | Total shareholders' equity | $2,768,251 | $2,624,389 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash inflows and outflows from operating, investing, and financing activities for the periods Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $55,525 | $130,220 | | Net cash used by investing activities | $(492) | $(110,378) | | Net cash used by financing activities | $(110,126) | $(75,951) | | Net decrease in cash and cash equivalents | $(55,093) | $(56,109) | | Cash and cash equivalents at end of period | $118,764 | $253,062 | Supplemental Cash Flow Information (in thousands) | Supplemental Cash Flow Information (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Cash paid for interest | $12,286 | $5,716 | | Cash paid for income taxes, net | $92,933 | $24,286 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS'%20EQUITY) Details changes in shareholders' equity, including net income and stock compensation, over the reporting periods - Total shareholders' equity increased from **$2.62 billion** at December 31, 2022, to **$2.77 billion** at June 30, 2023, primarily driven by net income of **$80.01 million** and stock compensation of **$53.92 million**[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [(1) Basis of Presentation](index=9&type=section&id=(1)%20Basis%20of%20Presentation) Outlines the accounting principles and reclassifications used in preparing the interim financial statements - The financial statements are prepared in accordance with GAAP for interim reporting, with certain footnotes condensed or omitted. Appraisal services revenue and related costs have been reclassified and combined with professional services categories as of January 1, 2023, due to reduced significance[22](index=22&type=chunk) [(2) Accounting Standards and Significant Accounting Policies](index=9&type=section&id=(2)%20Accounting%20Standards%20and%20Significant%20Accounting%20Policies) Confirms no material changes to significant accounting policies and details revenue recognition principles - There have been no material changes to the Company's significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2022[24](index=24&type=chunk) - Revenue is recognized in accordance with ASC 606, primarily from subscription-based services (SaaS, transaction-based fees like e-filing and payment processing) and post-contract customer support (maintenance). Other revenue sources include professional services, software licenses, and hardware[25](index=25&type=chunk)[27](index=27&type=chunk) [(3) Segment and Related Information](index=12&type=section&id=(3)%20Segment%20and%20Related%20Information) Describes the company's two reportable segments, Enterprise Software and Platform Technologies, and their operating income - Tyler Technologies operates in two reportable segments: Enterprise Software (ES) focusing on 'back-office' functions, and Platform Technologies (PT) providing transaction processing and workflow solutions[34](index=34&type=chunk) Segment Operating Income (in thousands) | Segment Operating Income (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Enterprise Software (ES) | $111,185 | $102,090 | $211,165 | $208,619 | | Platform Technologies (PT) | $38,797 | $36,301 | $68,335 | $67,034 | | Corporate | $(60,818) | $(53,991) | $(118,028) | $(107,450) | | Total segment operating income | $89,164 | $84,400 | $161,472 | $168,203 | [(4) Disaggregation of Revenue](index=14&type=section&id=(4)%20Disaggregation%20of%20Revenue) Breaks down total revenue by timing of transfer and categorizes it into recurring versus non-recurring streams Revenue by Timing (in thousands) | Revenue by Timing (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Products and services transferred at a point in time | $22,545 | $21,791 | $37,025 | $42,974 | | Products and services transferred over time | $481,734 | $446,894 | $939,108 | $881,818 | | Total revenues | $504,279 | $468,685 | $976,133 | $924,792 | Recurring vs Non-Recurring Revenue (in thousands) | Recurring vs Non-Recurring Revenue (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Recurring revenues | $414,328 | $372,631 | $809,924 | $735,103 | | Non-recurring revenues | $89,951 | $96,054 | $166,209 | $189,689 | [(5) Deferred Revenue and Performance Obligations](index=16&type=section&id=(5)%20Deferred%20Revenue%20and%20Performance%20Obligations) Details deferred revenue balances by segment and the total backlog of remaining performance obligations Deferred Revenue (in thousands) | Deferred Revenue (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------ | :------------ | :---------------- | | Enterprise Software | $536,663 | $533,902 | | Platform Technologies | $28,591 | $33,691 | | Corporate | $1,750 | $2,982 | | Totals | $567,004 | $570,575 | - Total backlog (transaction price allocated to remaining performance obligations) as of June 30, 2023, was **$1.90 billion**, with approximately **46%** expected to be recognized as revenue over the next 12 months[46](index=46&type=chunk) [(6) Deferred Commissions](index=16&type=section&id=(6)%20Deferred%20Commissions) Reports the balance of deferred commissions and the associated amortization expense for the periods Deferred Commissions (in thousands) | Deferred Commissions (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :------------ | :---------------- | | Deferred commissions balance | $44,900 | $43,800 | | Amortization expense (3 months) | $4,300 | $3,700 | | Amortization expense (6 months) | $8,600 | $7,200 | [(7) Acquisitions](index=16&type=section&id=(7)%20Acquisitions) Summarizes recent acquisition details, including purchase price, goodwill, and intangible assets recognized - On October 31, 2022, Tyler Technologies acquired Rapid Financial Solutions, LLC for approximately **$67.40 million** (net of cash acquired), resulting in **$40.00 million** in goodwill and **$27.60 million** in other identifiable intangible assets[48](index=48&type=chunk)[49](index=49&type=chunk) - The operating results of Rapid are included in the Platform Technologies segment since the acquisition date, with the purchase price allocation still preliminary as of June 30, 2023[50](index=50&type=chunk)[51](index=51&type=chunk) [(8) Debt](index=17&type=section&id=(8)%20Debt) Details outstanding borrowings, credit agreement terms, convertible senior notes, and interest expense Outstanding Borrowings (in thousands) | Outstanding Borrowings (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Term Loan A-1 | $250,000 | $290,000 | | Term Loan A-2 | $25,000 | $105,000 | | Convertible Senior Notes due 2026 | $600,000 | $600,000 | | Total borrowings | $875,000 | $995,000 | | Total borrowings, net | $869,074 | $987,389 | - The 2021 Credit Agreement, maturing April 20, 2026, includes a **$500 million** revolving credit facility, a **$600 million** Term Loan A-1, and a **$300 million** Term Loan A-2. The LIBOR reference rate was replaced with SOFR on January 28, 2023[53](index=53&type=chunk)[54](index=54&type=chunk) - The Convertible Senior Notes due 2026 have an aggregate principal amount of **$600.0 million**, accrue interest at **0.25%** per annum, and mature on March 15, 2026. Conversion rights are subject to certain events, none of which have been met as of June 30, 2023[58](index=58&type=chunk)[60](index=60&type=chunk)[62](index=62&type=chunk) Interest Expense (in thousands) | Interest Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contractual interest expense - Term Loans | $(4,565) | $(4,375) | $(10,206) | $(7,369) | | Amortization of debt discount and debt issuance costs | $(822) | $(1,149) | $(2,178) | $(2,271) | | Total interest expense | $(6,387) | $(6,214) | $(14,071) | $(11,018) | [(9) Financial Instruments](index=20&type=section&id=(9)%20Financial%20Instruments) Lists cash, investments, and equity holdings, describing their nature and valuation methods Financial Instruments (in thousands) | Financial Instruments (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $118,764 | $173,857 | | Available-for-sale investments | $29,216 | $55,538 | | Equity investments | $10,000 | $10,000 | | Total | $157,980 | $239,395 | - Available-for-sale investments primarily consist of investment grade corporate bonds, municipal bonds, and asset-backed securities, presented at fair value. Equity investments include an **18%** interest in BFTR, LLC, carried at cost[69](index=69&type=chunk)[72](index=72&type=chunk) [(10) Other Comprehensive Income (Loss)](index=21&type=section&id=(10)%20Other%20Comprehensive%20Income%20(Loss)) Reports changes in accumulated other comprehensive loss, primarily from unrealized gains on available-for-sale securities - Accumulated other comprehensive loss, net of tax, was **$(785) thousand** as of June 30, 2023, compared to **$(844) thousand** at December 31, 2022. The change reflects other comprehensive income of **$59 thousand** for the six months ended June 30, 2023[73](index=73&type=chunk)[75](index=75&type=chunk) [(11) Fair Value](index=22&type=section&id=(11)%20Fair%20Value) Categorizes financial instrument fair value measurements into a three-level hierarchy based on input observability Financial Instruments at Fair Value (in thousands) | Financial Instruments at Fair Value (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------------- | :------ | :-------- | :-------- | :-------- | | Available-for-sale investments | $29,216 | $— | $— | $29,216 | | Equity investments | $— | $— | $10,000 | $10,000 | | Term Loan A-1 | $— | $248,788 | $— | $248,788 | | Term Loan A-2 | $— | $24,942 | $— | $24,942 | | Convertible Senior Notes due 2026 | $— | $615,564 | $— | $615,564 | - Fair value measurements are categorized into a three-level hierarchy. Available-for-sale investments are Level 1, while Term Loans and Convertible Senior Notes are Level 2. Equity investments are Level 3, carried at cost due to lack of significant influence and readily determinable fair values[76](index=76&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[84](index=84&type=chunk) [(12) Income Tax Provision](index=24&type=section&id=(12)%20Income%20Tax%20Provision) Reports the income tax provision and effective tax rate, explaining factors influencing changes, including TCJA impacts Income Tax Provision (in thousands) | Income Tax Provision (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $7,000 | $10,813 | $14,667 | $22,258 | | Effective income tax rate | 12.5% | 21.3% | 15.5% | 21.8% | - The decrease in the effective tax rate for the three and six months ended June 30, 2023, was primarily due to increased research tax credit benefits and excess tax benefits from stock incentive awards, partially offset by higher liabilities for uncertain tax positions[87](index=87&type=chunk) - The Tax Cuts and Jobs Act of 2017 (TCJA) requires capitalization and amortization of R&D expenses, which temporarily increases U.S. federal and state cash tax payments and reduces cash flows in fiscal year 2023 and future years[89](index=89&type=chunk) [(13) Share-Based Compensation](index=24&type=section&id=(13)%20Share-Based%20Compensation) Details share-based compensation expense allocated across various functional categories for the periods Share-Based Compensation Expense (in thousands) | Share-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscriptions, maintenance, and professional services | $6,437 | $6,867 | $12,779 | $13,639 | | Sales and marketing expense | $2,367 | $2,224 | $4,760 | $4,364 | | General and administrative expense | $17,224 | $16,709 | $36,385 | $33,076 | | Total share-based compensation expense | $26,028 | $25,800 | $53,924 | $51,079 | [(14) Earnings Per Share](index=25&type=section&id=(14)%20Earnings%20Per%20Share) Presents basic and diluted earnings per common share, noting factors affecting diluted EPS calculations Earnings Per Common Share | Earnings Per Common Share | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | $1.17 | $0.96 | $1.91 | $1.93 | | Diluted | $1.15 | $0.94 | $1.87 | $1.88 | - Stock awards and Convertible Senior Notes were not included in diluted EPS calculations as their effect would be antidilutive, with no conversion features triggered[93](index=93&type=chunk)[94](index=94&type=chunk) [(15) Leases](index=25&type=section&id=(15)%20Leases) Describes operating lease agreements for facilities and equipment, including associated costs and future minimum rental income - The Company leases office facilities and equipment under non-cancelable operating lease agreements with maturities between one to 11 years, incurring **$7.51 million** in operating lease costs and **$5.87 million** in cash outflows for the six months ended June 30, 2023[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) Future Minimum Operating Rental Income (in thousands) | Future Minimum Operating Rental Income (in thousands) | Amount | | :------------------------------------ | :----- | | Year ending December 31, 2023 (Remaining) | $1,133 | | 2024 | $3,049 | | 2025 | $2,317 | | 2026 | $1,171 | | 2027 | $913 | | Thereafter | $733 | | Total | $9,316 | [(16) Related Party Transactions](index=26&type=section&id=(16)%20Related%20Party%20Transactions) Reports an arm's length lessor agreement with a company co-owned by a board member, generating rental income - In April 2023, the Company entered into an arm's length lessor agreement for office space with a company co-owned by a board member, recognizing **$75 thousand** in rental income for the six months ended June 30, 2023[100](index=100&type=chunk) [(17) Commitments and Contingencies](index=26&type=section&id=(17)%20Commitments%20and%20Contingencies) Details ongoing legal proceedings, including a lawsuit for contract termination, and future purchase commitments - The Company is involved in a lawsuit with a state government client regarding a contract termination for convenience, seeking approximately **$15.00 million** in owed fees, with the matter remaining unresolved[101](index=101&type=chunk)[102](index=102&type=chunk) - As of June 30, 2023, the Company had remaining aggregate minimum purchase commitments of approximately **$244.00 million** through 2031 for third-party technology and other services[103](index=103&type=chunk) [(18) Subsequent Events](index=27&type=section&id=(18)%20Subsequent%20Events) Confirms no material events or transactions occurred after the reporting period ended June 30, 2023 - There have been no material events or transactions that occurred subsequent to June 30, 2023[104](index=104&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operating results, business segments, acquisitions, and accounting policies [CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS](index=28&type=section&id=CAUTIONARY%20NOTE%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) Highlights that the document contains forward-looking statements subject to various business and economic risks - The document contains forward-looking statements subject to risks and uncertainties, including changes in client budgets, cyber-attacks, integration of acquisitions, internet infrastructure reliance, ability to meet forecasts, economic conditions, technological risks, competition, personnel retention, and regulatory compliance[106](index=106&type=chunk) [GENERAL](index=28&type=section&id=GENERAL) Provides an overview of Tyler Technologies' business, offering integrated information management solutions for the public sector - Tyler Technologies provides integrated information management solutions and services for the public sector, offering subscription-based services (SaaS, transaction-based fees), professional services, and continuing maintenance and support. The Company operates through two reportable segments: Enterprise Software (ES) and Platform Technologies (PT)[107](index=107&type=chunk)[108](index=108&type=chunk) [Recent Acquisitions](index=29&type=section&id=Recent%20Acquisitions) Summarizes recent acquisitions, including Rapid Financial Solutions and US eDirect, integrated into the PT segment - Recent acquisitions include Rapid Financial Solutions, LLC (October 2022) and US eDirect Inc. (February 2022), both integrated into the digital solutions business unit within the PT segment[111](index=111&type=chunk) [Operating Results](index=29&type=section&id=Operating%20Results) Summarizes key financial performance metrics, including revenue growth, subscription revenue, backlog, and employee count - Total revenues increased **7.6%** and **5.6%** for the three and six months ended June 30, 2023, respectively. Subscriptions revenue grew **16.4%** and **15.4%** for the same periods, driven by SaaS adoption and transaction-based revenue growth[112](index=112&type=chunk)[113](index=113&type=chunk) - Backlog as of June 30, 2023, increased **2.8%** to **$1.90 billion**. Employee count increased to **7,247** at June 30, 2023, from **7,143** at June 30, 2022[114](index=114&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=29&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Confirms no material changes to critical accounting policies and estimates from the prior annual report - There have been no material changes to the Company's critical accounting policies and estimates from those provided in the Form 10-K for the year ended December 31, 2022[115](index=115&type=chunk) [Reclassifications](index=29&type=section&id=Reclassifications) Details the reclassification of appraisal services revenue and costs into professional services categories - Effective January 1, 2023, appraisal services revenue and related costs are no longer reported as separate categories and have been combined with professional services revenue and cost of subscriptions, maintenance, and professional services, respectively[116](index=116&type=chunk) [ANALYSIS OF RESULTS OF OPERATIONS](index=30&type=section&id=ANALYSIS%20OF%20RESULTS%20OF%20OPERATIONS) Provides a detailed breakdown and analysis of the company's revenue and expense trends across various categories [Revenues](index=30&type=section&id=Revenues) Presents a breakdown of total revenues by category and their percentage contribution for the periods Revenue Category | Revenue Category | Three Months Ended June 30, 2023 (% of Total) | Three Months Ended June 30, 2022 (% of Total) | Six Months Ended June 30, 2023 (% of Total) | Six Months Ended June 30, 2022 (% of Total) | | :--------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Subscriptions | 59.1 % | 54.6 % | 59.2 % | 54.2 % | | Maintenance | 23.1 % | 24.9 % | 23.7 % | 25.3 % | | Professional services | 13.2 % | 15.4 % | 13.0 % | 15.3 % | | Software licenses and royalties | 1.9 % | 3.2 % | 2.0 % | 3.4 % | | Hardware and other | 2.7 % | 1.9 % | 2.1 % | 1.8 % | | Total revenues | 100.0 % | 100.0 % | 100.0 % | 100.0 % | [Subscriptions](index=30&type=section&id=Subscriptions) Analyzes subscription revenue growth, driven by new SaaS clients, conversions, and transaction-based fees Subscriptions Revenue (in thousands) | Subscriptions Revenue (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total subscriptions revenue | $297,789 | $255,816 | $41,973 | 16 % | $578,254 | $501,259 | $76,995 | 15 % | | Total subscriptions revenue excluding acquisitions | $293,182 | $255,816 | $37,366 | 15 % | $567,397 | $501,259 | $66,138 | 13 % | - Subscriptions revenue growth was primarily driven by new SaaS clients (**170** in Q2 2023, **315** in H1 2023) and existing on-premises clients converting to SaaS (**94** in Q2 2023, **167** in H1 2023). The mix of new software contract value shifted to approximately **85%** subscription-based arrangements in H1 2023, up from **76%** in H1 2022[121](index=121&type=chunk) - Transaction-based fees within subscriptions revenue grew by **$20.00 million** (**13.7%**) and **$30.20 million** (**10.4%**) for the three and six months ended June 30, 2023, respectively, largely due to online payments and e-filing services, and recent acquisitions, partially offset by a decline in COVID pandemic-related revenues[122](index=122&type=chunk) [Maintenance](index=31&type=section&id=Maintenance) Examines maintenance revenue trends, impacted by SaaS conversions, and reports Annualized Recurring Revenue (ARR) Maintenance Revenue (in thousands) | Maintenance Revenue (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total maintenance revenue | $116,539 | $116,815 | $(276) | — % | $231,670 | $233,844 | $(2,174) | (1)% | - Maintenance revenue remained flat for the three months and decreased **1%** for the six months ended June 30, 2023, primarily due to clients converting from on-premises licenses to SaaS, partially offset by annual rate increases and new software license sales[123](index=123&type=chunk) - Annualized Recurring Revenue (ARR) was **$1.66 billion** as of June 30, 2023, an **11.2%** increase compared to **$1.49 billion** at June 30, 2022, mainly due to increased subscriptions revenue from the shift to SaaS[124](index=124&type=chunk) [Professional services](index=32&type=section&id=Professional%20services) Analyzes the decrease in professional services revenue, mainly due to a decline in COVID pandemic-related services Professional Services Revenue (in thousands) | Professional Services Revenue (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total professional services revenue | $66,420 | $71,937 | $(5,517) | (8)% | $127,349 | $141,952 | $(14,603) | (10)% | - Professional services revenue decreased **8%** and **10%** for the three and six months ended June 30, 2023, respectively, primarily due to a **$13.10 million** and **$25.00 million** decline in COVID pandemic-related rent relief services, partially offset by increased billable travel revenue from more onsite services[127](index=127&type=chunk) [Software licenses and royalties](index=32&type=section&id=Software%20licenses%20and%20royalties) Explains the decrease in software licenses and royalties revenue due to the shift towards subscription-based agreements Software Licenses and Royalties Revenue (in thousands) | Software Licenses and Royalties Revenue (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total software licenses and royalties revenue | $9,779 | $15,009 | $(5,230) | (35)% | $19,909 | $31,515 | $(11,606) | (37)% | - The decrease in software licenses and royalties revenue is primarily attributed to the ongoing shift in new software contracts towards subscription-based agreements, which generate lower initial revenue compared to perpetual licenses but higher overall revenue over the contract term[128](index=128&type=chunk)[129](index=129&type=chunk) [Cost of revenues and overall gross margin](index=33&type=section&id=Cost%20of%20revenues%20and%20overall%20gross%20margin) Analyzes cost of revenues and gross margin changes, influenced by subscription growth, COVID-related revenues, and personnel costs Cost of Revenues (in thousands) | Cost of Revenues (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Subscriptions, maintenance, and professional services | $255,789 | $250,168 | $5,621 | 2 % | $508,204 | $493,000 | $15,204 | 3 % | | Amortization of software development | $2,896 | $1,322 | $1,574 | 119 % | $5,485 | $2,486 | $2,999 | 121 % | | Amortization of acquired software | $8,924 | $14,039 | $(5,115) | (36)% | $17,844 | $27,260 | $(9,416) | (35)% | | Total cost of revenues | $281,102 | $275,237 | $5,865 | 2 % | $553,119 | $538,926 | $14,193 | 3 % | - Overall gross margin increased by **3.0%** and **1.6%** for the three and six months ended June 30, 2023, respectively, primarily due to growth in subscription revenues and a decline in low-margin COVID-related revenues, along with a decrease in amortization of acquired software expense. This was partially offset by higher personnel costs and duplicate hosting costs during the transition to the public cloud[138](index=138&type=chunk) [Sales and marketing expense](index=34&type=section&id=Sales%20and%20marketing%20expense) Examines the increase in sales and marketing expense, mainly driven by higher commission and bonus expenses Sales and Marketing Expense (in thousands) | Sales and Marketing Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Sales and marketing expense | $37,103 | $31,881 | $5,222 | 16 % | $74,206 | $67,087 | $7,119 | 11 % | - Sales and marketing expense increased by **16%** and **11%** for the three and six months ended June 30, 2023, respectively, mainly due to higher commission and bonus expenses resulting from improved operating results[139](index=139&type=chunk) [General and administrative expense](index=34&type=section&id=General%20and%20administrative%20expense) Analyzes the increase in general and administrative expense due to amortization, personnel costs, and lease restructuring General and Administrative Expense (in thousands) | General and Administrative Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | General and administrative expense | $77,681 | $67,820 | $9,861 | 15 % | $150,041 | $130,509 | $19,532 | 15 % | - General and administrative expense increased by **15%** for both the three and six months ended June 30, 2023, driven by higher amortization of internal-use software development, increased travel, personnel costs, health benefits, bonus expenses, and **$1.40 million** related to lease restructuring and asset write-offs in the six-month period[140](index=140&type=chunk) [Research and development expense](index=35&type=section&id=Research%20and%20development%20expense) Examines the increase in research and development expense, attributed to new product initiatives and acquired businesses Research and Development Expense (in thousands) | Research and Development Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Research and development expense | $28,153 | $23,386 | $4,767 | 20 % | $55,139 | $47,327 | $7,812 | 17 % | - Research and development expense increased by **20%** and **17%** for the three and six months ended June 30, 2023, respectively, primarily due to new product development initiatives across product suites and increased investments in R&D at recently acquired businesses[141](index=141&type=chunk) [Amortization of other intangibles](index=35&type=section&id=Amortization%20of%20other%20intangibles) Analyzes the increase in amortization of other intangibles due to recent acquisitions and branding changes Amortization of Other Intangibles (in thousands) | Amortization of Other Intangibles (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Amortization of other intangibles | $18,366 | $13,604 | $4,762 | 35 % | $36,774 | $28,318 | $8,456 | 30 % | - Amortization of other intangibles increased by **35%** and **30%** for the three and six months ended June 30, 2023, respectively, due to intangibles added from recent acquisitions and accelerated amortization of certain trade name intangibles from 2023 branding changes[142](index=142&type=chunk) [Interest expense](index=35&type=section&id=Interest%20expense) Examines the increase in interest expense, primarily due to accelerated debt repayments and higher interest rates Interest Expense (in thousands) | Interest Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Interest expense | $(6,387) | $(6,214) | $(173) | 3 % | $(14,071) | $(11,018) | $(3,053) | 28 % | - Interest expense increased by **3%** and **28%** for the three and six months ended June 30, 2023, respectively, primarily due to increased amortization expense related to debt issuance costs from accelerated term loan repayments and higher interest rates[143](index=143&type=chunk) [Other income, net](index=35&type=section&id=Other%20income,%20net) Analyzes the significant increase in other income, net, primarily driven by higher interest income from invested cash Other Income, Net (in thousands) | Other Income, Net (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Other income, net | $643 | $216 | $427 | 198 % | $1,889 | $581 | $1,308 | 225 % | - Other income, net, significantly increased by **198%** and **225%** for the three and six months ended June 30, 2023, respectively, primarily due to higher interest income generated from invested cash as a result of rising interest rates[144](index=144&type=chunk) [Income tax provision](index=36&type=section&id=Income%20tax%20provision) Reports the income tax provision and effective tax rate, explaining the decrease due to tax credits and stock awards Income Tax Provision (in thousands) | Income Tax Provision (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) | | :---------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Income tax provision | $7,000 | $10,813 | $(3,813) | (35)% | $14,667 | $22,258 | $(7,591) | (34)% | | Effective income tax rate | 12.5 % | 21.3 % | | | 15.5 % | 21.8 % | | | - The effective tax rate decreased due to increased research tax credit benefits and excess tax benefits from stock incentive awards, partially offset by higher liabilities for uncertain tax positions[145](index=145&type=chunk) [FINANCIAL CONDITION AND LIQUIDITY](index=36&type=section&id=FINANCIAL%20CONDITION%20AND%20LIQUIDITY) Assesses the company's cash position, cash flow activities, accounts receivable, and anticipated capital spending - As of June 30, 2023, cash and cash equivalents were **$118.76 million**, down from **$173.86 million** at December 31, 2022. The Company also held **$29.22 million** in investment grade securities[147](index=147&type=chunk) Cash Flows (in thousands) | Cash Flows (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------ | :----------------------------- | :----------------------------- | | Operating activities | $55,525 | $130,220 | | Investing activities | $(492) | $(110,378) | | Financing activities | $(110,126) | $(75,951) | - Operating cash flow decreased primarily due to higher tax payments (including IRC Section 174 impact), increased accounts receivable, and timing of bonus payments[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - Days sales outstanding (DSO) in accounts receivable improved to **112 days** at June 30, 2023, from **115 days** at December 31, 2022. The Company anticipates 2023 capital spending between **$63.00 million** and **$65.00 million**, including **$37.00 million** for software development[150](index=150&type=chunk)[159](index=159&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to market risks, particularly interest rate risk from variable-rate debt - As of June 30, 2023, the Company had **$275.00 million** in outstanding borrowings under its amended 2021 Credit Agreement, which bears interest at variable rates tied to SOFR. A quarter-point change in interest rates would result in a **$687.50 thousand** change in annual interest expense[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [ITEM 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2023. There were no material changes in internal control over financial reporting during the three months ended June 30, 2023[166](index=166&type=chunk)[167](index=167&type=chunk) Part II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, security holder votes, and exhibits [ITEM 1. Legal Proceedings](index=39&type=section&id=ITEM%201.%20Legal%20Proceedings) Details ongoing legal proceedings, specifically a lawsuit concerning a terminated state government contract - The Company filed a lawsuit on August 23, 2022, against a state government client to enforce contractual rights and remedies after a termination for convenience, seeking approximately **$15.00 million** in owed fees. The matter remains unresolved[169](index=169&type=chunk)[170](index=170&type=chunk) [ITEM 1A. Risk Factors](index=39&type=section&id=ITEM%201A.%20Risk%20Factors) Refers to the comprehensive discussion of risk factors in the latest Annual Report on Form 10-K - There were no material changes in the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, during the six months ended June 30, 2023[171](index=171&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) States no unregistered sales of equity securities or use of proceeds to report - None[172](index=172&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=39&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) Indicates no defaults upon senior securities - None[172](index=172&type=chunk) [ITEM 4. Submission of Matters to a Vote of Security Holders](index=39&type=section&id=ITEM%204.%20Submission%20of%20Matters%20to%20a%20Vote%20of%20Security%20Holders) Reports on the outcome of the advisory vote on executive compensation frequency - Stockholders voted to hold an annual advisory vote on executive compensation at the 2023 annual meeting, aligning with the board's recommendation[172](index=172&type=chunk) [ITEM 5. Other Information](index=39&type=section&id=ITEM%205.%20Other%20Information) Includes information on trading plans - No trading plans to report[173](index=173&type=chunk) [ITEM 6. Exhibits](index=40&type=section&id=ITEM%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q - The exhibits include Amended and Restated By-Laws, Revised Insider Trading Policy, Certifications pursuant to Sarbanes-Oxley Act (Sections 302 and 906), and Inline XBRL documents[174](index=174&type=chunk) [SIGNATURES](index=41&type=section&id=SIGNATURES) Contains the required signatures for the Form 10-Q filing - The report was signed on behalf of Tyler Technologies, Inc. by Brian K. Miller, Executive Vice President and Chief Financial Officer, on July 26, 2023[176](index=176&type=chunk)[177](index=177&type=chunk)

Financial Data and Key Metrics Changes - Total revenues for Q1 2023 were $471.9 million, an increase of 3.5% year-over-year, with organic revenue growth of 7.2% excluding COVID-related revenues [1][15] - Operating margins were pressured due to the shift to cloud services and a decline in license revenues, with expectations for margins to trough in 2023 and expand in 2024 [4][6] - Cash flow from operations was robust at $74.7 million, up 39.5%, and free cash flow was $63.6 million, up 55.1% [5] Business Line Data and Key Metrics Changes - License revenue declined by 39% as the company shifted towards SaaS, while professional services revenue decreased by 13% but rose 4.7% organically [2] - Subscription revenue increased by 14.3%, with SaaS revenues growing 24.4% to $126.6 million and transaction revenues growing 7.1% to $153.9 million [2][3] - The company added 145 new SaaS arrangements and converted 73 existing clients to SaaS, with a total new software contract value of approximately $86 million [3] Market Data and Key Metrics Changes - The public sector market showed strong demand, with a high level of request for proposals and demo activity, particularly in the ERP space [14][15] - SaaS deals comprised 87% of new software contract value in Q1, up from 80% the previous year, indicating a strong market shift towards cloud solutions [15] Company Strategy and Development Direction - The company is focused on cloud transition initiatives and enhancing its payments business, with over 120 new payment deals signed in Q1 [16][34] - The acquisition of Rapid Financial Solutions is expected to enhance payment capabilities and drive growth [16][60] - The company aims to strengthen its balance sheet while continuing to evaluate M&A opportunities that align with long-term strategic goals [5][117] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment and solid client budgets, despite challenges in the labor market affecting clients [28][112] - The company anticipates that operating margins will improve by Q4 2023, with a focus on intentionality in business operations beyond just cloud transition [48][76] - The upcoming Investor Day is expected to provide further insights into the company's strategic growth roadmap and financial targets [45][146] Other Important Information - The company expects total revenues for 2023 to be between $1.935 billion and $1.970 billion, implying organic growth of approximately 8% [6] - GAAP diluted EPS is expected to be between $3.65 and $3.80, while non-GAAP diluted EPS is projected to be between $7.50 and $7.65 [7] Q&A Session Summary Question: What is the current demand environment and pipeline opportunities? - Management noted that RFP volume and demo activity are at almost all-time highs, indicating strong demand, although it may take several quarters to convert into business [28] Question: Can you provide insights on margin expectations? - Management indicated that while Q1 margins were better than expected, they do not anticipate seeing year-over-year margin improvement until Q4 2023 [48][75] Question: How is the integration of Rapid Financial Solutions progressing? - The integration is progressing well, with early traction seen in upselling opportunities and synergies with existing services [60][83] Question: What is the outlook for free cash flow and tax impacts? - The company expects a significant impact on free cash flow due to cash tax payments related to Section 174, but anticipates a free cash flow margin in the mid-teens range [64][113] Question: How does the company view M&A opportunities? - The company continues to evaluate M&A opportunities, particularly those that align with its strategic goals, while focusing on deleveraging [117]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Tyler Technologies' unaudited condensed consolidated financial statements, highlighting income, balance sheet, and cash flow changes for Q1 2023 and 2022 [ITEM 1. Financial Statements](index=2&type=section&id=ITEM%201.%20Financial%20Statements) This section provides Tyler Technologies' unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and shareholders' equity [Condensed Consolidated Statements of Income](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :--------- | :--------- | | **Revenues:** | | | | | | Subscriptions | $280,465 | $245,443 | $35,022 | 14.3% | | Maintenance | $115,130 | $117,029 | $(1,899) | -1.6% | | Professional services | $60,929 | $70,015 | $(9,086) | -13.0% | | Software licenses and royalties | $10,130 | $16,506 | $(6,376) | -38.6% | | Hardware and other | $5,199 | $7,115 | $(1,916) | -26.9% | | **Total revenues** | **$471,853** | **$456,108** | **$15,745** | **3.5%** | | **Gross profit** | **$199,837** | **$192,418** | **$7,419** | **3.9%** | | Operating income | $44,980 | $55,868 | $(10,888) | -19.5% | | Net income | $30,875 | $39,984 | $(9,109) | -22.8% | | Basic EPS | $0.74 | $0.97 | $(0.23) | -23.7% | | Diluted EPS | $0.73 | $0.94 | $(0.21) | -22.3% | [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change ($) | | :------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :--------- | | Net income | $30,875 | $39,984 | $(9,109) | | Other comprehensive income (loss), net of tax | $94 | $(697) | $791 | | **Comprehensive income** | **$30,969** | **$39,287** | **$(8,318)** | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change ($) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | :--------- | | Cash and cash equivalents | $130,845 | $173,857 | $(43,012) | | Total current assets | $745,663 | $847,242 | $(101,579) | | Total assets | $4,555,635 | $4,687,417 | $(131,782) | | Total current liabilities | $835,028 | $889,695 | $(54,667) | | Total liabilities | $1,869,502 | $2,063,028 | $(193,526) | | Total shareholders' equity | $2,686,133 | $2,624,389 | $61,744 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change ($) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :--------- | | Net cash provided by operating activities | $74,709 | $53,541 | $21,168 | | Net cash used by investing activities | $(600) | $(111,173) | $110,573 | | Net cash used by financing activities | $(117,121) | $(8,277) | $(108,844) | | Net decrease in cash and cash equivalents | $(43,012) | $(65,909) | $22,897 | | Cash and cash equivalents at end of period | $130,845 | $243,262 | $(112,417) | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Consolidated Statements of Shareholders' Equity (in thousands) | Metric | Balance at December 31, 2022 (in thousands) | Balance at March 31, 2023 (in thousands) | Change ($) | | :-------------------------------- | :------------------------------------------ | :--------------------------------------- | :--------- | | Total Shareholders' Equity | $2,624,389 | $2,686,133 | $61,744 | | Net income | $0 | $30,875 | $30,875 | | Other comprehensive gain, net of tax | $0 | $94 | $94 | | Stock compensation | $0 | $27,896 | $27,896 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies, segment information, revenue recognition, debt, and acquisitions, providing context for the financial statements [Basis of Presentation](index=8&type=section&id=Basis%20of%20Presentation) - As of January 1, 2023, appraisal services revenue and related costs are no longer reported as separate categories in the statement of income due to reduced significance, now combined with professional services revenue and subscriptions, maintenance, and professional services cost of revenue[21](index=21&type=chunk) [Accounting Standards and Significant Accounting Policies](index=8&type=section&id=Accounting%20Standards%20and%20Significant%20Accounting%20Policies) - No material changes to significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2022[23](index=23&type=chunk) - The majority of revenues are earned from subscription-based services (SaaS, transaction-based fees, e-filing) and post-contract customer support (maintenance)[24](index=24&type=chunk)[26](index=26&type=chunk) Contract Balance (in thousands) | Contract Balance | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Total current and long-term accounts receivable, net | $518,000 | $585,500 | | Unbilled receivables | $131,400 | $135,400 | | Allowance for losses and sales adjustments | $14,800 | $14,800 | [Segment and Related Information](index=10&type=section&id=Segment%20and%20Related%20Information) - The company operates in two reportable segments: Enterprise Software (ES) and Platform Technologies (PT), providing integrated information management solutions and services for the public sector[32](index=32&type=chunk)[33](index=33&type=chunk) Segment Performance (in thousands) | Segment | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :---------------------- | :------------------------------------------------ | :------------------------------------------------ | | **Total Revenues:** | | | | Enterprise Software | $328,344 | $310,987 | | Platform Technologies | $148,592 | $150,710 | | Corporate (Intercompany) | $(5,083) | $(5,589) | | **Total** | **$471,853** | **$456,108** | | **Segment Operating Income (Loss):** | | | | Enterprise Software | $99,980 | $106,529 | | Platform Technologies | $29,537 | $30,733 | | Corporate | $(57,210) | $(53,459) | | **Total Segment Operating Income** | **$72,307** | **$83,803** | [Disaggregation of Revenue](index=11&type=section&id=Disaggregation%20of%20Revenue) Disaggregation of Revenue (in thousands) | Revenue Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | **Recurring Revenues:** | | | | Subscriptions | $280,465 | $245,443 | | Maintenance | $115,130 | $117,029 | | **Total Recurring Revenues** | **$395,595** | **$362,472** | | **Non-Recurring Revenues:** | | | | Professional services | $60,929 | $70,015 | | Software licenses and royalties | $10,130 | $16,506 | | Hardware and other | $5,199 | $7,115 | | **Total Non-Recurring Revenues** | **$76,258** | **$93,636** | | **Total Revenues** | **$471,853** | **$456,108** | - The majority of revenue is comprised of subscriptions and maintenance, which are considered recurring revenues, with contract terms typically ranging from three to five years for subscriptions and annually for maintenance[41](index=41&type=chunk) [Deferred Revenue and Performance Obligations](index=12&type=section&id=Deferred%20Revenue%20and%20Performance%20Obligations) Deferred Revenue by Segment (in thousands) | Segment | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------- | :-------------------------------- | :--------------------------------- | | Enterprise Software | $462,043 | $533,902 | | Platform Technologies | $29,776 | $33,691 | | Corporate | $7,176 | $2,982 | | **Totals** | **$498,995** | **$570,575** | - Total deferred revenue decreased by **$71.6 million** from December 31, 2022, to March 31, 2023, primarily due to the recognition of deferred revenue[44](index=44&type=chunk) - Backlog as of March 31, 2023, was **$1.85 billion**, with approximately **46%** expected to be recognized as revenue over the next 12 months[45](index=45&type=chunk) [Deferred Commissions](index=13&type=section&id=Deferred%20Commissions) Deferred Commissions (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Deferred commissions | $44,300 | $43,800 | | Amortization expense (3 months ended March 31) | $4,300 | $3,500 | - Sales commissions are deferred and amortized over a period of benefit, generally **three to seven years**, with amortization expense included in sales and marketing[46](index=46&type=chunk) [Acquisitions](index=13&type=section&id=Acquisitions) - On October 31, 2022, Tyler Technologies acquired Rapid Financial Solutions, LLC for approximately **$67.4 million**, net of cash acquired[47](index=47&type=chunk) - The acquisition resulted in approximately **$40.0 million** in goodwill and **$27.6 million** in other identifiable intangible assets, primarily customer relationships, acquired software, and trade name[48](index=48&type=chunk) - The operating results of Rapid are included within the Platform Technologies segment since the acquisition date[49](index=49&type=chunk) [Debt](index=14&type=section&id=Debt) Debt Instruments (in thousands) | Debt Instrument | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Term Loan A-1 | $250,000 | $290,000 | | Term Loan A-2 | $25,000 | $105,000 | | Convertible Senior Notes due 2026 | $600,000 | $600,000 | | **Total borrowings** | **$875,000** | **$995,000** | | Less: unamortized debt discount and debt issuance costs | $(6,483) | $(7,611) | | **Total borrowings, net** | **$868,517** | **$987,389** | - The 2021 Credit Agreement was amended on January 28, 2023, to replace the LIBOR reference rate with the Secured Overnight Financing Rate (SOFR)[53](index=53&type=chunk) Interest Expense Components (in thousands) | Interest Expense Component | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Contractual interest expense - Revolving Credit Facility | $(313) | $(313) | | Contractual interest expense - Term Loans | $(5,641) | $(2,994) | | Contractual interest expense - Convertible Senior Notes | $(375) | $(375) | | Amortization of debt discount and debt issuance costs | $(1,355) | $(1,122) | | **Total Interest Expense** | **$(7,684)** | **$(4,804)** | - For the three months ended March 31, 2023, **$120.0 million** of Term Loans under the 2021 Credit Agreement were repaid[65](index=65&type=chunk) [Financial Instruments](index=16&type=section&id=Financial%20Instruments) Financial Instrument Balances (in thousands) | Financial Instrument | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Cash and cash equivalents | $130,845 | $173,857 | | Available-for-sale investments | $43,354 | $55,538 | | Equity investments | $10,000 | $10,000 | | **Total** | **$184,199** | **$239,395** | Available-for-Sale Investments (in thousands) | Available-for-Sale Investments | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Amortized cost | $44,360 | $56,670 | | Unrealized gains | $2 | $16 | | Unrealized losses | $(1,008) | $(1,148) | | Estimated fair value | $43,354 | $55,538 | - Available-for-sale investments primarily consist of investment grade corporate bonds, municipal bonds, and asset-backed securities with maturity dates through **2027**[67](index=67&type=chunk) [Other Comprehensive Income (Loss)](index=17&type=section&id=Other%20Comprehensive%20Income%20%28Loss%29) Accumulated Other Comprehensive Loss (in thousands) | Component | Balance as of December 31, 2022 (in thousands) | Other comprehensive income (loss) before reclassifications (3 months ended March 31, 2023) | Balance as of March 31, 2023 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :----------------------------------------------------------------------------------------- | :--------------------------------------- | | Unrealized Loss On Available-for-Sale Securities | $(844) | $94 | $(750) | | **Accumulated Other Comprehensive Loss** | **$(844)** | **$94** | **$(750)** | - The company experienced an other comprehensive gain of **$94,000** in Q1 2023, a positive shift from a **$697,000 loss** in Q1 2022, primarily from available-for-sale investment holdings[22](index=22&type=chunk)[71](index=71&type=chunk) [Fair Value](index=18&type=section&id=Fair%20Value) Fair Value of Financial Instruments (in thousands) | Financial Instrument | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | :--------------------- | | Available-for-sale investments | $43,354 | $0 | $0 | $43,354 | | Equity investments | $0 | $0 | $10,000 | $10,000 | | Term Loan A-1 | $0 | $248,679 | $0 | $248,679 | | Term Loan A-2 | $0 | $24,924 | $0 | $24,924 | | Convertible Senior Notes due 2026 | $0 | $576,714 | $0 | $576,714 | - The fair value of available-for-sale investments is considered **Level 1**, based on unadjusted quoted prices in active markets[75](index=75&type=chunk) - The fair value of Convertible Senior Notes due 2026 is determined based on quoted market prices for similar liabilities, classified as a **Level 2** input[80](index=80&type=chunk) [Income Tax Provision](index=19&type=section&id=Income%20Tax%20Provision) Income Tax Provision (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Income tax provision | $7,667 | $11,444 | | Effective income tax rate | 19.9% | 22.3% | - The decrease in the effective tax rate was primarily driven by an increase in research tax credit benefits, offset by a decrease in excess tax benefits related to stock incentive awards and liabilities for uncertain tax positions[82](index=82&type=chunk)[139](index=139&type=chunk) - The Tax Cuts and Jobs Act of 2017 (TCJA) requires capitalization and amortization of R&D expenses, temporarily increasing U.S. federal and state cash tax payments in fiscal year **2023** and future years[84](index=84&type=chunk)[152](index=152&type=chunk) [Share-Based Compensation](index=19&type=section&id=Share-Based%20Compensation) Share-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Subscriptions, maintenance, and professional services | $6,342 | $6,772 | | Sales and marketing expense | $2,393 | $2,140 | | General and administrative expense | $19,161 | $16,367 | | **Total share-based compensation expense** | **$27,896** | **$25,279** | [Earnings Per Share](index=20&type=section&id=Earnings%20Per%20Share) Earnings Per Share Data | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $30,875 | $39,984 | | Weighted-average basic common shares outstanding (in thousands) | 41,832 | 41,364 | | Weighted-average diluted common shares outstanding (in thousands) | 42,506 | 42,443 | | Basic EPS | $0.74 | $0.97 | | Diluted EPS | $0.73 | $0.94 | - Stock awards of approximately **501,000 shares** (2023) and **215,000 shares** (2022) were excluded from diluted EPS calculation due to their antidilutive effect[86](index=86&type=chunk) - The **1.2 million** common shares related to Convertible Senior Notes were not included in diluted EPS as their effect would be antidilutive, given no conversion features were triggered[87](index=87&type=chunk) [Leases](index=20&type=section&id=Leases) Lease Cost Components (in thousands) | Lease Cost Component | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Operating lease cost | $4,391 | $3,422 | | Short-term lease cost | $523 | $506 | | Variable lease cost | $320 | $370 | | **Net lease cost** | **$5,234** | **$4,298** | - The weighted average remaining lease term for operating leases increased to **7.1 years** (from **5.4 years** in 2022), with a weighted average discount rate of **1.59%** (down from **1.72%** in 2022)[90](index=90&type=chunk) Future Minimum Operating Rental Income (in thousands) | Year Ending December 31, | Future Minimum Operating Rental Income (in thousands) | | :-------------------------------- | :---------------------------------------------------- | | 2023 (Remaining) | $1,412 | | 2024 | $1,906 | | 2025 | $1,363 | | 2026 | $408 | | 2027 | $131 | | Thereafter | $0 | | **Total** | **$5,220** | [Commitments and Contingencies](index=21&type=section&id=Commitments%20and%20Contingencies) - The company is involved in a lawsuit to enforce contractual rights and remedies for approximately **$15 million** in fees owed from a state client due to a termination for convenience[93](index=93&type=chunk)[94](index=94&type=chunk) - As of March 31, 2023, remaining aggregate minimum purchase commitments for third-party technology and other services totaled approximately **$254 million** through **2028**[95](index=95&type=chunk) [Subsequent Events](index=22&type=section&id=Subsequent%20Events) - No material events or transactions occurred subsequent to March 31, 2023[96](index=96&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and operations for Q1 2023, highlighting revenue growth, expense increases, and cash flow dynamics [Cautionary Note Concerning Forward-Looking Statements](index=23&type=section&id=Cautionary%20Note%20Concerning%20Forward-Looking%20Statements) - The document contains forward-looking statements subject to risks and uncertainties, including economic conditions, client budgets, cyber-attacks, integration of acquisitions, and competition[98](index=98&type=chunk) [General Business Overview](index=23&type=section&id=General%20Business%20Overview) - Tyler Technologies provides integrated information management solutions and services for the public sector, primarily through subscription-based services (SaaS, transaction-based fees, e-filing) and professional services[99](index=99&type=chunk) - The company reports results in two segments: Enterprise Software (ES) for 'back-office' functions and Platform Technologies (PT) for transaction processing and workflow solutions[100](index=100&type=chunk) [Recent Acquisitions](index=24&type=section&id=Recent%20Acquisitions) - Rapid Financial Solutions, LLC (Oct 2022) and US eDirect Inc. (Feb 2022) were acquired and integrated into the Platform Technologies segment, contributing to digital solutions[103](index=103&type=chunk) [Operating Results Summary](index=24&type=section&id=Operating%20Results%20Summary) - Total revenues increased by **3.5%** (**2.1%** excluding recent acquisitions) for the three months ended March 31, 2023, compared to the prior period[104](index=104&type=chunk) - Subscriptions revenue grew **14.3%** (**11.7%** excluding recent acquisitions), driven by **145 new SaaS clients** and **73 existing clients** converting to the SaaS model[105](index=105&type=chunk) - Backlog as of March 31, 2023, was **$1.85 billion**, a **5.1% increase** from the prior year[106](index=106&type=chunk) - Total employee count increased to **7,229** at March 31, 2023, including **50 employees** from recent acquisitions[106](index=106&type=chunk) [Critical Accounting Policies and Estimates](index=24&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No material changes to critical accounting policies and estimates from the information provided in the Form 10-K for the year ended December 31, 2022[107](index=107&type=chunk) [Analysis of Results of Operations](index=25&type=section&id=Analysis%20of%20Results%20of%20Operations) [Revenues](index=25&type=section&id=Revenues) Revenues (in thousands) | Revenue Category | 3 Months Ended March 31, 2023 (in thousands) | 3 Months Ended March 31, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Subscriptions | $280,465 | $245,443 | $35,022 | 14% | | Maintenance | $115,130 | $117,029 | $(1,899) | (2)% | | Professional services | $60,929 | $70,015 | $(9,086) | (13)% | | Software licenses and royalties | $10,130 | $16,506 | $(6,376) | (39)% | | Hardware and other | $5,199 | $7,115 | $(1,916) | (27)% | | **Total Revenues** | **$471,853** | **$456,108** | **$15,745** | **3%** | - Subscriptions revenue increased by **14%** (**12%** excluding acquisitions), driven by **145 new SaaS clients** and **73 existing clients** converting to the SaaS model[113](index=113&type=chunk) - Professional services revenue decreased by **13%**, primarily due to a **$11.9 million** decline in COVID pandemic-related rent relief services, partially offset by increased billable travel revenue[119](index=119&type=chunk) - Software licenses and royalties revenue decreased by **39%**, attributed to a shift in new software contracts towards subscription-based agreements[120](index=120&type=chunk)[121](index=121&type=chunk) [Cost of Revenues and Overall Gross Margin](index=27&type=section&id=Cost%20of%20Revenues%20and%20Overall%20Gross%20Margin) Cost of Revenues and Overall Gross Margin (in thousands) | Cost of Revenues Component | 3 Months Ended March 31, 2023 (in thousands) | 3 Months Ended March 31, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Subscriptions, maintenance, and professional services | $252,415 | $242,832 | $9,583 | 4% | | Software licenses and royalties | $2,313 | $1,445 | $868 | 60% | | Amortization of software development | $2,588 | $1,164 | $1,424 | 122% | | Amortization of acquired software | $8,920 | $13,221 | $(4,301) | (33)% | | Hardware and other | $5,780 | $5,028 | $752 | 15% | | **Total Cost of Revenues** | **$272,016** | **$263,690** | **$8,326** | **3%** | | **Overall Gross Margin** | **42.4%** | **42.2%** | **0.2%** | | - Cost of subscriptions, maintenance, and professional services increased by **4%** due to higher personnel costs (including onboarding new employees) and duplicate hosting costs during the transition to the public cloud[125](index=125&type=chunk) - Amortization of software development increased by **122%** due to new capitalized software development projects going into service[128](index=128&type=chunk) - Overall gross margin increased by **0.2%** (**0.4%** excluding acquisitions), driven by growth in subscriptions and a decline in low-margin COVID-related revenues, partially offset by higher personnel and hosting costs[129](index=129&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) Operating Expenses (in thousands) | Operating Expense | 3 Months Ended March 31, 2023 (in thousands) | 3 Months Ended March 31, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Sales and marketing expense | $37,103 | $35,206 | $1,897 | 5% | | General and administrative expense | $72,360 | $62,689 | $9,671 | 15% | | Research and development expense | $26,987 | $23,941 | $3,046 | 13% | | Amortization of other intangibles | $18,407 | $14,714 | $3,693 | 25% | - General and administrative expense increased by **15%**, primarily due to higher amortization of internal-use software development, increased travel, and higher personnel costs including share-based compensation[132](index=132&type=chunk) - Research and development expense increased by **13%**, driven by new product development initiatives and increased investments in recently acquired businesses[134](index=134&type=chunk) - Amortization of other intangibles increased by **25%** due to intangibles from recent acquisitions and accelerated amortization of certain trade name intangibles from branding changes[135](index=135&type=chunk) [Other Income/Expense and Taxes](index=30&type=section&id=Other%20Income%2FExpense%20and%20Taxes) Other Income/Expense and Taxes (in thousands) | Item | 3 Months Ended March 31, 2023 (in thousands) | 3 Months Ended March 31, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------- | :--------- | | Interest expense | $(7,684) | $(4,804) | $(2,880) | 60% | | Other income, net | $1,246 | $364 | $882 | 242% | | Income tax provision | $7,667 | $11,444 | $(3,777) | (33)% | | Effective income tax rate | 19.9% | 22.3% | | | - Interest expense increased by **60%** due to higher interest rates and increased amortization expense from accelerated repayment of term loans[136](index=136&type=chunk) - Other income, net, increased by **242%** due to higher interest income from invested cash as a result of increased interest rates[137](index=137&type=chunk) - The income tax provision decreased by **33%**, with the effective tax rate falling to **19.9%** from **22.3%**, primarily due to increased research tax credit benefits[138](index=138&type=chunk)[139](index=139&type=chunk) [Financial Condition and Liquidity](index=31&type=section&id=Financial%20Condition%20and%20Liquidity) Financial Condition and Liquidity (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Cash and cash equivalents | $130,845 | $173,857 | | Investment grade corporate bonds, municipal bonds and asset-backed securities | $43,400 | N/A | | Outstanding borrowings under 2021 Credit Agreement | $275,000 | N/A | | Available borrowing capacity under 2021 Revolving Credit Facility | $500,000 | N/A | Cash Flow Activities (in thousands) | Cash Flow Activity | 3 Months Ended March 31, 2023 (in thousands) | 3 Months Ended March 31, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Operating activities | $74,709 | $53,541 | | Investing activities | $(600) | $(111,173) | | Financing activities | $(117,121) | $(8,277) | | **Net decrease in cash and cash equivalents** | **$(43,012)** | **$(65,909)** | - Days sales outstanding (DSO) in accounts receivable improved to **95 days** at March 31, 2023, from **115 days** at December 31, 2022, due to improved collection efforts[144](index=144&type=chunk) - Financing activities used **$117.1 million**, primarily due to the repayment of **$120.0 million** of term debt[146](index=146&type=chunk)[149](index=149&type=chunk) - Anticipated **2023** capital spending is between **$63 million** and **$65 million**, including **$37 million** for real estate and **$37 million** for software development[153](index=153&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from variable-rate debt, with a quarter-point change impacting annual interest expense - The effective interest rate for borrowings under the 2021 Credit Agreement was **6.98%** for the three months ended March 31, 2023[159](index=159&type=chunk) - A quarter-point change in interest rates would result in a **$687,500** change in annual interest expense, based on **$275.0 million** outstanding principal under the 2021 Credit Agreement as of March 31, 2023[159](index=159&type=chunk) [ITEM 4. Controls and Procedures](index=33&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023[160](index=160&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023[161](index=161&type=chunk) [Part II. OTHER INFORMATION](index=34&type=section&id=Part%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, and a list of exhibits [ITEM 1. Legal Proceedings](index=34&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in a lawsuit seeking approximately $15 million in fees from a state client due to a contract termination - A lawsuit was filed on August 23, 2022, to enforce rights and remedies under a contractual arrangement with a state client, seeking approximately **$15 million** in fees for a termination for convenience[163](index=163&type=chunk)[164](index=164&type=chunk) [ITEM 1A. Risk Factors](index=34&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the 2022 Annual Report on Form 10-K occurred during Q1 2023 - No material changes in the information regarding risk factors contained in the Annual Report on Form 10-K for the year ended December 31, 2022[165](index=165&type=chunk) [ITEM 6. Exhibits](index=35&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications, credit agreement amendments, and XBRL documents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-10485 TYLER TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 75-2303920 (State or other jurisdiction of incorporation or organization) 5101 Ten ...