Financial Data and Key Metrics Changes - Total revenues for Q4 2022 were $452.2 million, an increase of 4.3% year-over-year, with organic growth of approximately 6% excluding COVID-related revenues [12][19] - Recurring revenues accounted for nearly 83% of quarterly revenues, with subscription revenues increasing by 11.9% and organic growth of 14.3% [5][14] - Non-GAAP annual recurring revenue (ARR) was approximately $1.50 billion, up 7.5%, while SaaS software ARR was $440.6 million, up 18.5% [15][19] - Operating margins were pressured due to the shift to cloud and increased R&D expenses, with an estimated impact of bubble costs on 2023 non-GAAP operating margin of approximately 130 basis points [15][25] Business Line Data and Key Metrics Changes - Subscription revenue growth was driven by a shift to SaaS, with 86% of new software contract value being SaaS compared to 77% in Q4 2021 [7][14] - The Digital Solutions division signed significant contracts, including a new contract with the Kansas Department of Revenue and several SaaS agreements with various states [8][9] - Professional services revenue rose 2.8%, with an organic growth of 8.5%, while licensed revenue declined over 60% due to the shift to SaaS [13][14] Market Data and Key Metrics Changes - The backlog at the end of Q4 2022 reached a new high of $1.89 billion, up 5.2% [15] - Bookings for the quarter were approximately $464 million, flat compared to the previous year, with organic bookings up 2% [16] - The company signed 571 new payments deals in 2022, contributing over $13 million in annual recurring revenue, with a significant portion sold to existing clients [10][19] Company Strategy and Development Direction - The company is focused on a cloud-first strategy, aiming to exit proprietary data centers by 2024 and 2025, with expectations of significant declines in licensed revenues replaced by recurring SaaS revenue [22][25] - Strategic acquisitions were made to enhance digital solutions and payments business, with three transactions completed in 2022 [24] - The company anticipates annual organic revenue growth in the 8% to 10% range over the next five to seven years, with consistent long-term margin expansion beginning in 2024 [27][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects, citing healthy budgets among clients and robust market conditions [37][64] - The company expects 2023 to be a margin trough year due to the transition to SaaS and associated costs, with a return to margin expansion anticipated in 2024 [25][36] - The impact of Section 174 tax changes is expected to significantly affect cash tax payments in 2023, potentially increasing cash taxes by around $100 million [21][61] Other Important Information - The company repaid $90 million of term debt in Q4 2022, with a total of $755 million paid down since the NIC acquisition [17] - The company received recognition for its environmental, social, and governance practices, being named to the Dow Jones Sustainability Index North America for the second consecutive year [30] Q&A Session Summary Question: Margin troughing in '23 and future expectations - Management indicated it is early to provide detailed projections for 2024 margins but expects an inflection point in 2023 as recurring revenues offset declines in licenses [31][32] Question: Impact of federal and state budgets on revenue - Management noted that client budgets are generally healthy, with access to federal funds contributing to a robust market environment [37][38] Question: Pace of conversions to SaaS - The company reported an increase in conversions, with 336 flips in 2022 compared to 239 in 2021, and expects this trend to continue [41] Question: Operating margin performance in Q4 - The decline in operating margins was attributed to a significant drop in licensed revenues and higher R&D expenses due to unexpected capitalization changes [42][43] Question: Subscription ARR growth expectations - Management expects subscription bookings and ARR to accelerate in 2023, driven by a strong pipeline and increased transaction activity [58] Question: Procurement cycles and market conditions - Current procurement cycles are normal, with no significant delays noted, and the market remains healthy with strong client budgets [64]

| --- | --- | |-------|------------------------------------| | | | | | | | | | | | Q4 and Fiscal 2022 Earnings Review | | | | Statement Regarding Use of Non-GAAP Measures Tyler Technologies has provided in this presentation financial measures that have not been prepared in accordance with generally accepted accounting principles (GAAP) and are therefore considered non-GAAP financial measures. This information includes non-GAAP revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income ...

Financial Data and Key Metrics Changes - Total revenues for Q3 2022 were $473.2 million, up 2.9% year-over-year, with organic revenue growth of 9% excluding COVID-related revenues [22][6] - Recurring revenues comprised 78.5% of total revenues, with subscription revenue growing 14.5% organically [7][6] - Non-GAAP ARR was approximately $1.49 billion, flat year-over-year but up 11.2% excluding COVID-related revenues [29] - Cash flows from operations were $129.4 million, down 37%, and free cash flow was $115.6 million, down 40% [34] Business Line Data and Key Metrics Changes - Subscription contract value reached a new high of approximately 91% of total new software contract value signed in Q3, compared to 74% in Q3 last year [27] - License revenue declined 10.6% due to the rapid shift to SaaS contracts [24] - Professional services revenues rose 15.7%, but are expected to face pressure as the implementation team ramps up [24] Market Data and Key Metrics Changes - NIC's COVID-related revenues for the quarter were $11.7 million, down from $43.3 million in the same quarter last year [23] - Transaction-based revenues were $148.9 million, down 13%, but grew 11.1% excluding COVID-related revenues [28] Company Strategy and Development Direction - The company is advancing its cloud-first strategy, with a significant shift towards SaaS contracts [6][42] - The acquisition of Rapid Financial Solutions is expected to enhance payment capabilities and expand market presence [16][18] - The company anticipates a continued decline in license revenue, projecting a decline in the 40% range for 2023 [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the public sector market's stability and ongoing demand for upgrading mission-critical systems [42] - The company expects to see further margin contraction in 2023 before rebounding in 2024 due to the accelerated shift to SaaS [46] - Despite macroeconomic uncertainties, the company remains focused on long-term growth strategies and capitalizing on recurring revenue models [49] Other Important Information - The backlog at the end of the quarter reached a new high of $1.88 billion, up 6.3% [30] - The company repaid $190 million of term debt during the quarter, with total outstanding debt at $1.085 billion [35] Q&A Session Summary Question: Characterization of ARPA project pipeline - Management noted that ARPA funds are being tracked, and while they see opportunities, there is no immediate urgency for clients to spend those funds [57][60] Question: Shift to software and license fee decline - Management indicated that the shift to SaaS is happening faster than anticipated, with licenses expected to decline more than previously expected [68][66] Question: Cross-sell opportunities with NIC - Management highlighted that analytics and payment solutions are performing well in cross-sell opportunities with NIC [75] Question: Impact of COVID-related revenues on margins - Management stated that the decline in high-margin license revenues will pressure margins, but the impact from COVID-related revenues is expected to be minimal [78][80] Question: Staffing and wage inflation - Management acknowledged ongoing labor challenges and wage pressures but noted some moderation in turnover rates [128][129] Question: Competitive landscape in public safety - Management expressed confidence in their competitive position, citing investments and market share gains against competitors [109]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides detailed financial statements, notes, management's analysis of operations and liquidity, and disclosures on market risks and internal controls [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) The financial statements present Tyler Technologies' performance for the three and nine months ended September 30, 2022, showing increased revenues and net income driven by subscription growth [Condensed Consolidated Statements of Income](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q3 2022, total revenues grew 2.9% to $473.2 million and net income increased 20.5% to $53.2 million, primarily driven by subscription revenue growth over the nine-month period Financial Metric (In thousands) | Financial Metric (In thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | YoY Change | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $473,191 | $459,873 | 2.9% | $1,397,983 | $1,158,750 | 20.6% | | Subscriptions Revenue | $254,346 | $252,942 | 0.6% | $755,604 | $554,979 | 36.2% | | **Operating Income** | $60,913 | $56,184 | 8.4% | $173,538 | $132,683 | 30.8% | | **Net Income** | $53,233 | $44,170 | 20.5% | $133,163 | $106,676 | 24.8% | | **Diluted EPS** | $1.26 | $1.04 | 21.2% | $3.14 | $2.53 | 24.1% | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets slightly decreased to $4.68 billion, while total liabilities significantly decreased to $2.13 billion, leading to an increase in shareholders' equity to $2.55 billion Balance Sheet Item (In thousands) | Balance Sheet Item (In thousands) | Sep 30, 2022 (unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $185,927 | $309,171 | | Total Current Assets | $860,150 | $964,331 | | Goodwill | $2,449,405 | $2,359,674 | | **Total Assets** | **$4,675,373** | **$4,732,161** | | Total Current Liabilities | $812,248 | $829,501 | | Term loans | $452,138 | $718,511 | | **Total Liabilities** | **$2,128,075** | **$2,408,129** | | **Total Shareholders' Equity** | **$2,547,298** | **$2,324,032** | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, operating cash flow was $259.6 million, with significant cash usage for acquisitions and term loan repayments, resulting in a $123.2 million net decrease in cash Cash Flow Activity (In thousands) | Cash Flow Activity (In thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $259,598 | $256,743 | | Net cash used by investing activities | ($125,754) | ($2,084,788) | | Net cash (used) provided by financing activities | ($257,088) | $1,458,550 | | **Net decrease in cash and cash equivalents** | **($123,244)** | **($369,495)** | - The primary use of cash in investing activities was **$117.7 million** for acquisitions, net of cash acquired[16](index=16&type=chunk) - Financing activities were dominated by a **$270.0 million** repayment on term loans[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, including the US eDirect acquisition, debt structure, segment realignment into Enterprise Software and Platform Technologies, and a $1.88 billion backlog [Note 3: Acquisitions](index=10&type=section&id=Note%203%3A%20Acquisitions) The company acquired US eDirect Inc. for approximately $116.6 million, resulting in $91.5 million in goodwill and $34.1 million in other intangible assets, integrated into the Platform Technologies segment - Acquired US eDirect Inc. on February 8, 2022, for a total purchase price of approximately **$116.6 million**, net of cash acquired[36](index=36&type=chunk) - The acquisition resulted in approximately **$91.5 million** of goodwill and **$34.1 million** of other identifiable intangible assets[38](index=38&type=chunk) [Note 4: Debt](index=12&type=section&id=Note%204%3A%20Debt) Total borrowings decreased to $1.085 billion from $1.355 billion due to $270.0 million in term loan repayments, with $500 million available under the revolving credit facility Debt Instrument (In thousands) | Debt Instrument (In thousands) | Sep 30, 2022 (Principal) | Dec 31, 2021 (Principal) | | :--- | :--- | :--- | | Term Loan A-1 | $380,000 | $585,000 | | Term Loan A-2 | $105,000 | $170,000 | | Convertible Senior Notes | $600,000 | $600,000 | | **Total borrowings** | **$1,085,000** | **$1,355,000** | - The company repaid **$270.0 million** of the Term Loans under the 2021 Credit Agreement during the nine months ended September 30, 2022[58](index=58&type=chunk) - As of September 30, 2022, the company had an available borrowing capacity of **$500 million** under its Revolving Credit Facility[58](index=58&type=chunk) [Note 14: Segment and Related Information](index=21&type=section&id=Note%2014%3A%20Segment%20and%20Related%20Information) Effective January 1, 2022, the company realigned into Enterprise Software and Platform Technologies segments, with Q3 2022 revenues of $327.9 million and $148.7 million respectively - As of January 1, 2022, the company realigned its structure into two reportable segments: Enterprise Software (ES) and Platform Technologies (PT)[94](index=94&type=chunk) Segment Performance (In thousands) | Segment Performance (In thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | **Enterprise Software (ES)** | | | | Total Revenues | $327,879 | $295,535 | | Segment Operating Income | $110,693 | $102,602 | | **Platform Technologies (PT)** | | | | Total Revenues | $148,704 | $169,392 | | Segment Operating Income | $33,466 | $40,182 | [Note 15: Disaggregation of Revenue](index=24&type=section&id=Note%2015%3A%20Disaggregation%20of%20Revenue) In Q3 2022, 94% of revenue ($444.7 million) was recognized over time, with recurring revenues, primarily maintenance and subscriptions, totaling $371.7 million or 78.6% of total revenues - Recurring revenues, comprised of maintenance and subscriptions, totaled **$371.7 million** for the three months ended September 30, 2022, representing **78.6%** of total revenues[99](index=99&type=chunk)[100](index=100&type=chunk) - Transaction-based fees, included in recurring revenues, were **$148.9 million** for Q3 2022, down from **$171.2 million** in Q3 2021[99](index=99&type=chunk) [Note 16: Deferred Revenue and Performance Obligations](index=25&type=section&id=Note%2016%3A%20Deferred%20Revenue%20and%20Performance%20Obligations) The company's backlog was $1.88 billion as of September 30, 2022, with approximately 46% expected to be recognized as revenue within the next 12 months - The company's backlog (remaining performance obligations) was **$1.88 billion** as of September 30, 2022[102](index=102&type=chunk) - Approximately **46%** of the backlog is expected to be recognized as revenue within the next 12 months[102](index=102&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a 2.9% revenue increase for Q3 2022, driven by professional and appraisal services, improved gross margin, and strong liquidity despite a decline in COVID-related transaction revenues [Analysis of Results of Operations](index=29&type=section&id=Analysis%20of%20Results%20of%20Operations) Q3 2022 revenue growth was 2.9%, impacted by a $37.2 million decline in COVID-related transaction revenues, while gross margin improved to 43.3% and operating income rose 8.4% - Total revenues for Q3 2022 increased **2.9%**, but excluding acquisitions, revenues grew **1.2%**[113](index=113&type=chunk) - The mix of new clients for the first nine months of 2022 was approximately **78%** subscription-based, up from **66%** in the prior year period, contributing to an **11%** decline in Q3 software license revenue[122](index=122&type=chunk) - Q3 subscriptions revenue growth was flat (**1%**) due to a **$37.2 million** decline in COVID-related transaction-based revenues, which offset growth from new SaaS clients[126](index=126&type=chunk) - Overall gross margin for Q3 2022 increased to **43.3%** from **42.7%** in Q3 2021, attributed to a decline in lower-margin COVID-related revenues[137](index=137&type=chunk) [Financial Condition and Liquidity](index=36&type=section&id=Financial%20Condition%20and%20Liquidity) The company maintains a strong financial position with $185.9 million in cash, $500 million available credit, and $259.6 million in operating cash flow for the first nine months of 2022 Liquidity Metric (In thousands) | Liquidity Metric (In thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $185,927 | $309,171 | | Available borrowing capacity | $500,000 | N/A | | Total Debt (Principal) | $1,085,000 | $1,355,000 | - Net cash provided by operating activities was **$259.6 million** for the nine months ended September 30, 2022[147](index=147&type=chunk) - Days Sales Outstanding (DSO) was **107 days** at September 30, 2022, compared to **108 days** at December 31, 2021[149](index=149&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) The company faces interest rate risk on its $485.0 million variable-rate debt, where a 0.25% change would alter annual interest expense by approximately $1.2 million - The primary market risk is interest rate risk on the **$485.0 million** of variable-rate debt outstanding as of September 30, 2022[160](index=160&type=chunk) - A **0.25%** change in interest rates would change annual interest expense by approximately **$1.2 million**[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2022[163](index=163&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2022[164](index=164&type=chunk) [Part II. OTHER INFORMATION](index=39&type=section&id=Part%20II.%20OTHER%20INFORMATION) This section details legal proceedings and updates on risk factors affecting the company's operations and financial outlook [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company filed a lawsuit on August 23, 2022, to recover approximately $15 million in contractually owed fees from a state client following a contract termination for convenience - The company is involved in a legal dispute with a state client following a contract termination for convenience[166](index=166&type=chunk) - The company filed a lawsuit on August 23, 2022, to recover approximately **$15 million** in contractually owed fees[166](index=166&type=chunk)[167](index=167&type=chunk) - The outcome of the dispute is currently unresolved and the amount of potential loss, if any, cannot be estimated[167](index=167&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported in the company's risk factors during the three months ended September 30, 2022, as previously disclosed in the annual report - No material changes were reported in the company's risk factors during the three months ended September 30, 2022[168](index=168&type=chunk)

Investor Presentation August 2022 | Forward-Looking Statements Tyler has included in this presentation "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," ...

Financial Data and Key Metrics Changes - Total revenues grew approximately 16% to $468.7 million, with organic growth of 6.2% on a GAAP basis and 5.8% on a non-GAAP basis [19][7][8] - Subscription revenues rose 28.2%, with strong organic growth of 14.1% [20][22] - Cash flows from operations reached $76.7 million, and free cash flow rose to $60 million from negative $33.5 million last year [24] - Non-GAAP ARR was approximately $1.49 billion, up 16.3% [22] - Backlog at the end of the quarter was a new high of $1.85 billion, up 13.9% [23] Business Line Data and Key Metrics Changes - Services revenues were flat on an organic basis, impacted by labor market challenges [8][20] - Software revenues rose 18.3%, while service revenues were essentially flat on an organic basis [20] - Transaction-based revenues, including NIC portal and payment processing, were $154.4 million, up 29.1% [22] - The company added 167 new subscription-based arrangements, representing approximately $115 million in total contract value [21] Market Data and Key Metrics Changes - The public sector market environment remains strong, with a 21% increase in bookings [6] - The company successfully extended enterprise contracts in multiple states, including West Virginia and Kentucky [11] - The active cross-sell pipeline doubled in value from Q1, indicating strong market demand [12] Company Strategy and Development Direction - The company is focused on leveraging its competitive position and ongoing investments in strategic initiatives to capitalize on the strong public sector market [31] - The integration of acquisitions, including NIC, VendEngine, and US eDirect, is expected to enhance cross-sell and upsell opportunities [32] - The company is prioritizing cash flow to reduce debt while retaining flexibility for strategic acquisitions [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating solid financial results despite rising inflation and interest rates [34] - The public sector market is viewed as more stable compared to the private sector, with recurring revenues comprising approximately 80% of total revenues [35] - The company is on track with major strategic initiatives, including cloud migration and product optimization [37] Other Important Information - The company expects total revenues for the full year to be between $1.835 billion and $1.870 billion, implying organic growth of approximately 9% [28] - Interest expense guidance was adjusted to approximately $30 million, reflecting increased costs due to rising interest rates [28][30] Q&A Session Summary Question: Sales cycle for larger deals and connection to state and local budgets - Management indicated that sales cycles are normal, with a healthy market environment and strong state and local budgets [41][44] Question: Progress on hiring for professional services - Management acknowledged challenges in hiring but plans to continue growing the implementation team [52][53] Question: Success in converting maintenance customers to SaaS - The primary success in conversions is seen in the ERP product suite, with expectations for continued momentum [66][67] Question: Impact of rising interest rates on margins - Management noted that margin impacts are expected as new hires ramp up to become billable [99][100] Question: Current state of public safety market - The public safety market is returning to normal, with competitive advantages noted in mobility and product integration [110][112]

PART I. FINANCIAL INFORMATION [Financial Statements](index=2&type=section&id=ITEM%201.%20Financial%20Statements) This section presents Tyler Technologies' unaudited condensed consolidated financial statements, including income, balance sheets, and cash flows, with detailed notes on accounting policies and acquisitions [Condensed Consolidated Financial Statements](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Tyler Technologies reported significant revenue and net income growth for the six months ended June 30, 2022, with increased assets and positive operating cash flow Condensed Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $924,792 | $698,877 | +32.3% | | **Gross Profit** | $385,866 | $326,268 | +18.3% | | **Operating Income** | $112,625 | $76,499 | +47.2% | | **Net Income** | $79,930 | $62,506 | +27.9% | | **Diluted EPS** | $1.88 | $1.48 | +27.0% | Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $253,062 | $309,171 | | Goodwill | $2,449,638 | $2,359,674 | | Total Assets | $4,787,046 | $4,732,161 | | Total Liabilities | $2,328,719 | $2,408,129 | | Total Shareholders' Equity | $2,458,327 | $2,324,032 | Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $130,220 | $51,356 | | Net cash used by investing activities | ($110,378) | ($1,998,692) | | Net cash (used) provided by financing activities | ($75,951) | $1,560,486 | | Net decrease in cash and cash equivalents | ($56,109) | ($386,850) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the US eDirect acquisition, debt structure, segment reorganization, and significant recurring revenue and backlog figures - Acquired US eDirect Inc., a provider of campground and outdoor recreation management solutions, on February **8**, **2022**, for a net purchase price of approximately **$116.7 million**. The acquisition resulted in goodwill of approximately **$91.7 million**[41](index=41&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - Effective January **1**, **2022**, the company realigned its reportable segments into two: Enterprise Software (ES) and Platform Technologies (PT). The former Appraisal & Tax (A&T) segment was moved into ES, and NIC solutions were moved to PT. Prior year figures were adjusted to reflect this change[99](index=99&type=chunk)[114](index=114&type=chunk) Total Outstanding Debt (June 30, 2022) | Debt Instrument | Amount (in thousands) | | :--- | :--- | | Term Loan A-1 | $570,000 | | Term Loan A-2 | $105,000 | | Convertible Senior Notes due 2026 | $600,000 | | **Total Borrowings** | **$1,275,000** | | Less: unamortized costs | ($11,912) | | **Total borrowings, net** | **$1,263,088** | - Total backlog, representing contracted revenue not yet recognized, was **$1.85 billion** as of June **30**, **2022**. Approximately **47%** of this is expected to be recognized as revenue over the next **12** months[107](index=107&type=chunk) - Recurring revenues (subscriptions and maintenance) for the six months ended June **30**, **2022**, totaled **$735.1 million**, accounting for **79.5%** of total revenues[104](index=104&type=chunk)[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=27&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting revenue growth driven by acquisitions and SaaS, gross margin impacts, and the company's strong liquidity position - Total revenues for the six months ended June **30**, **2022**, increased **32.3%** year-over-year. Excluding the impact of acquisitions from **2021** and **2022**, organic revenue growth was **6.5%**[117](index=117&type=chunk) - Subscription revenues grew **66.0%** for the first six months of **2022**, driven by the NIC acquisition and the ongoing strategic shift to SaaS arrangements. Organic subscription revenue growth was **12.3%**[118](index=118&type=chunk)[131](index=131&type=chunk) - The company's backlog increased by **13.9%** year-over-year to **$1.85 billion** as of June **30**, **2022**[119](index=119&type=chunk) [Results of Operations](index=29&type=section&id=Analysis%20of%20Results%20of%20Operations) Subscription revenue surged due to acquisitions and SaaS adoption, while overall gross margin declined due to lower-margin business and cloud transition costs Revenue by Type (Six Months Ended June 30) | Revenue Type | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Subscriptions | $501,259 | $302,037 | +66% | | Maintenance | $233,844 | $238,733 | -2% | | Software services | $124,622 | $100,977 | +23% | | Software licenses and royalties | $31,515 | $32,537 | -3% | - The shift to SaaS continues, with subscription-based arrangements making up approximately **78%** of the new client mix in H**1** **2022**, compared to **64%** in H**1** **2021**. This trend reduces upfront license revenue but is expected to generate higher overall revenue over the contract term[127](index=127&type=chunk)[128](index=128&type=chunk) - Overall gross margin for H**1** **2022** decreased by **5.0** percentage points to **41.7%**, primarily due to the inclusion of NIC's revenues which have historically lower margins, and increased costs related to the transition to AWS cloud services[135](index=135&type=chunk)[138](index=138&type=chunk) - The effective tax rate for H**1** **2022** was **21.8%**, up significantly from **2.9%** in H**1** **2021**. The increase was driven by a substantial decrease in excess tax benefits from stock incentive awards, which were **$4.7 million** in H**1** **2022** versus **$15.2 million** in H**1** **2021**[83](index=83&type=chunk)[145](index=145&type=chunk) [Financial Condition and Liquidity](index=35&type=section&id=Financial%20Condition%20and%20Liquidity) The company maintains a strong liquidity position with substantial cash and credit availability, supported by operating cash flow and strategic debt repayments Summary of Cash Flows (Six Months Ended June 30, 2022) | Activity | Cash Flow (in thousands) | | :--- | :--- | | Operating Activities | $130,220 | | Investing Activities | ($110,378) | | Financing Activities | ($75,951) | - Days Sales Outstanding (DSO) improved to **115** days at June **30**, **2022**, compared to **131** days at June **30**, **2021**, attributed to better collection efforts[149](index=149&type=chunk) - The company repaid **$80.0 million** of its unsecured term loans during the first six months of **2022** and an additional **$100 million** in July **2022**[151](index=151&type=chunk)[109](index=109&type=chunk) - Anticipated capital spending for the full year **2022** is projected to be between **$58 million** and **$62 million**, including about **$34 million** for capitalized software development[158](index=158&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk involves exposure to interest rate fluctuations on its variable-rate debt under the 2021 Credit Agreement - The company is exposed to interest rate risk on its **$675.0 million** of outstanding variable-rate borrowings under the **2021** Credit Agreement[160](index=160&type=chunk) - A hypothetical **0.25%** change in interest rates would impact annual interest expense by approximately **$1.7 million**[162](index=162&type=chunk) [Controls and Procedures](index=37&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June **30**, **2022**[163](index=163&type=chunk) - No material changes to internal control over financial reporting occurred during the second quarter of **2022**[164](index=164&type=chunk) Part II. OTHER INFORMATION [Legal Proceedings](index=38&type=section&id=ITEM%201.%20Legal%20Proceedings) No material legal proceedings are pending against the company, beyond routine litigation incidental to its business - There are no material legal proceedings pending against the company[166](index=166&type=chunk) [Risk Factors](index=38&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes were reported in the company's risk factors compared to the prior annual report - No material changes were reported in the company's risk factors during the three months ended June **30**, **2022**[167](index=167&type=chunk) [Other Items (2, 3, 4, 5, 6)](index=38&type=section&id=Other%20Items) This section confirms no unregistered equity sales, defaults, or shareholder votes, and lists exhibits filed with the 10-Q report - Items **2**, **3**, **4**, and **5**, covering unregistered sales of equity, defaults, and shareholder votes, are all reported as "None"[168](index=168&type=chunk)

Tyler Technologies, Inc. (NYSE:TYL) Q1 2022 Results Conference Call April 28, 2022 11:00 AM ET Company Participants Lynn Moore - President, CEO Brian Miller - CFO Conference Call Participants Jonathan Ho - William Blair Pete Heckmann - D.A. Davidson Josh Reilly - Needham Terry Tillman - Truist Securities Matt VanVliet - BTIG Saket Kalia - Barclays Charles Strauzer - CJS Securities Kirk Materne - Evercore ISI Alex Zukin - Wolfe Research Keith Housum - Northcoast Research Brent Bracelin - Piper Sandler Operat ...

PART I. FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=2&type=section&id=ITEM%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements and notes for Q1 2022 and 2021 are presented [Condensed Consolidated Statements of Income](index=2&type=section&id=TYLER%20TECHNOLOGIES%2C%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) The company reported significant revenue growth for the three months ended March 31, 2022, primarily driven by subscriptions, leading to an increase in net income and earnings per share compared to the prior year period Condensed Consolidated Statements of Income | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Revenues | $456,108 | $294,802 | | Gross Profit | $192,418 | $144,207 | | Operating Income | $55,868 | $38,208 | | Net Income | $39,984 | $36,976 | | Basic EPS | $0.97 | $0.91 | | Diluted EPS | $0.94 | $0.88 | - Subscriptions revenue increased by **139.5%** from **$102.48 million** in 2021 to **$245.44 million** in 2022[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=TYLER%20TECHNOLOGIES%2C%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) The company's comprehensive income for the three months ended March 31, 2022, was **$39.3 million**, including a net unrealized holding loss on available-for-sale securities, which resulted in an other comprehensive loss Condensed Consolidated Statements of Comprehensive Income | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :------------------------------------------------------------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net income | $39,984 | $36,976 | | Other comprehensive loss, net of tax | $(697) | — | | Comprehensive income | $39,287 | $36,976 | - The other comprehensive loss in Q1 2022 was primarily due to net unrealized holding losses on available-for-sale securities[9](index=9&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=TYLER%20TECHNOLOGIES%2C%20INC.%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2022, total assets and liabilities slightly decreased, while shareholders' equity increased, reflecting changes in current assets and goodwill from acquisitions Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Current Assets | $859,899 | $964,331 | | Total Assets | $4,723,806 | $4,732,161 | | Total Current Liabilities | $766,460 | $829,501 | | Total Liabilities | $2,336,072 | $2,408,129 | | Total Shareholders' Equity | $2,387,734 | $2,324,032 | - Goodwill increased from **$2.36 billion** at December 31, 2021, to **$2.44 billion** at March 31, 2022, reflecting recent acquisitions[12](index=12&type=chunk) - Cash and cash equivalents decreased from **$309.17 million** to **$243.26 million**[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=TYLER%20TECHNOLOGIES%2C%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For Q1 2022, the company experienced a net decrease in cash and cash equivalents, primarily due to significant cash used in investing activities for acquisitions Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $53,541 | $71,703 | | Net cash used by investing activities | $(111,173) | $(39,694) | | Net cash (used) provided by financing activities | $(8,277) | $615,120 | | Net (decrease) increase in cash and cash equivalents | $(65,909) | $647,129 | | Cash and cash equivalents at end of period | $243,262 | $1,250,752 | - Investing activities included approximately **$116.70 million** for acquisitions, net of cash acquired, in Q1 2022[14](index=14&type=chunk) [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=TYLER%20TECHNOLOGIES%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY) Shareholders' equity increased for Q1 2022, driven by net income and stock compensation, partially offset by unrealized losses on available-for-sale securities Total Shareholders' Equity | Metric | Balance at Dec 31, 2021 (in thousands) | Net Income (in thousands) | Unrealized Loss (in thousands) | Balance at Mar 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------ | :----------------------------- | :------------------------------------- | | Total Shareholders' Equity | $2,324,032 | $39,984 | $(697) | $2,387,734 | - Stock compensation contributed **$25.28 million** to additional paid-in capital in Q1 2022[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes provide context for financial statements, detailing accounting policies, acquisitions, debt, financial instruments, and segment reporting [(1) Basis of Presentation](index=7&type=section&id=(1)%20Basis%20of%20Presentation) Financial statements are prepared under SEC and GAAP for interim reporting, with a **$697 thousand** other comprehensive loss in Q1 2022 - Interim financial statements are prepared under GAAP and SEC rules, with certain footnotes condensed or omitted[17](index=17&type=chunk) - Other comprehensive loss of approximately **($697)** (net of taxes) was recorded in Q1 2022, primarily from available-for-sale investment holdings[18](index=18&type=chunk) [(2) Accounting Standards and Significant Accounting Policies](index=7&type=section&id=(2)%20Accounting%20Standards%20and%20Significant%20Accounting%20Policies) This section outlines key accounting policies, including ASU 2021-08 adoption, use of estimates, revenue recognition, goodwill, and intangible assets [Summary of Significant Accounting Policies](index=7&type=section&id=SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) No material changes to significant accounting policies occurred, except for the adoption of ASU 2021-08 on January 1, 2022 - No material changes to significant accounting policies except for the adoption of ASU 2021-08 on January 1, 2022[19](index=19&type=chunk) [Use of Estimates](index=7&type=section&id=USE%20OF%20ESTIMATES) Financial statements require estimates and assumptions for revenue recognition, loss contingencies, goodwill, intangible assets, and share-based compensation - Financial statements require estimates and assumptions for revenue recognition, loss contingencies, goodwill, intangible assets, lease assets/liabilities, share-based compensation, and tax consequences[20](index=20&type=chunk) [Revenue Recognition](index=7&type=section&id=REVENUE%20RECOGNITION) Revenue is earned from software licenses, subscriptions, services, maintenance, hardware, and appraisal services, recognized based on standalone selling price or over time - Revenue is earned from software licenses, royalties, subscription-based services, software services, post-contract customer support (maintenance), hardware, and appraisal services[21](index=21&type=chunk) - For contracts with multiple performance obligations, revenue is allocated based on relative standalone selling price (SSP) and recognized upon transfer of control[22](index=22&type=chunk)[24](index=24&type=chunk) - For arrangements involving significant customization or non-distinct services, revenue is recognized over time using progress-to-completion methods (e.g., labor hours incurred or value added)[25](index=25&type=chunk) - Transaction-based revenues (e-filing, online payments) are recognized over time based on the amount billable to the customer[26](index=26&type=chunk) [Contract Balances](index=10&type=section&id=Contract%20Balances) Contract balances include accounts receivable, unbilled receivables, and allowances for losses, with minimal credit losses due to the client base Contract Balances | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Accounts Receivable (net) | $515,900 | $535,000 | | Unbilled Receivables | $129,500 | $140,300 | | Allowance for losses and sales adjustments | $14,000 | $12,100 | - Unbilled receivables are recorded when revenue is recognized prior to invoicing, and deferred revenue when recognized subsequent to invoicing[28](index=28&type=chunk) - The company rarely incurs credit losses due to its client base of domestic governmental entities[30](index=30&type=chunk) [Goodwill and Other Intangible Assets](index=10&type=section&id=GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill is assessed for impairment annually or more frequently, with no impairment charge in Q4 2021 and no triggering events through March 31, 2022 - Goodwill is assessed for impairment annually (in Q4) or more frequently if circumstances indicate[31](index=31&type=chunk) - The annual assessment in Q4 2021 did not result in an impairment charge, and no triggering events occurred through March 31, 2022[33](index=33&type=chunk) [Recently Adopted Accounting Pronouncements](index=11&type=section&id=RECENTLY%20ADOPTED%20ACCOUNTING%20PRONOUNCEMENTS) ASU 2021-08 was early adopted on January 1, 2022, with no adjustments to deferred revenue balances from the US eDirect acquisition - Early adopted ASU 2021-08 (Accounting for Contract Assets and Contract Liabilities from Contracts with Customers) on January 1, 2022[34](index=34&type=chunk) - The adoption of ASU 2021-08 resulted in no adjustments to the fair value of deferred revenue balances assumed in the US eDirect acquisition[34](index=34&type=chunk) [(3) Acquisitions](index=11&type=section&id=(3)%20Acquisitions) US eDirect Inc. was acquired for **$116.7 million** on February 8, 2022, impacting goodwill and intangible assets - Acquired US eDirect Inc. on February 8, 2022, for approximately **$116.70 million** (net of cash acquired)[35](index=35&type=chunk) - Recorded approximately **$81.20 million** in goodwill and **$48.00 million** in other identifiable intangible assets (customer relationships, acquired software, trade name) from the US eDirect acquisition[37](index=37&type=chunk) - Acquisition costs of approximately **$1.00 million** were expensed in Q1 2022[39](index=39&type=chunk) Pro Forma Consolidated Operating Results (as if US eDirect acquired Jan 1, 2021) | Metric | 3 Months Ended March 31, 2022 (Pro Forma, in thousands) | 3 Months Ended March 31, 2021 (Pro Forma, in thousands) | | :----------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Revenues | $457,329 | $298,412 | | Net income | $28,207 | $36,019 | | Basic earnings per share | $0.68 | $0.89 | | Diluted earnings per share | $0.66 | $0.86 | [(4) Debt](index=12&type=section&id=(4)%20Debt) Outstanding borrowings, including the 2021 Credit Agreement and Convertible Senior Notes, totaled **$1.34 billion** as of March 31, 2022 Total Outstanding Borrowings | Debt Instrument | Rate | Maturity Date | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Revolving credit facility | L + 1.50% | April 2026 | $0 | $0 | | Term Loan A-1 | L + 1.50% | April 2026 | $577,500 | $585,000 | | Term Loan A-2 | L + 1.25% | April 2024 | $157,500 | $170,000 | | Convertible Senior Notes due 2026 | 0.25% | March 2026 | $600,000 | $600,000 | | Total borrowings | | | $1,335,000 | $1,355,000 | - The 2021 Credit Agreement includes a **$500 million** Revolving Credit Facility (unused as of March 31, 2022), a **$600 million** Term Loan A-1, and a **$300 million** Term Loan A-2[45](index=45&type=chunk)[48](index=48&type=chunk) - Convertible Senior Notes due 2026 have an aggregate principal amount of **$600.00 million**, accrue interest at **0.25%** per annum, and are convertible under certain events[49](index=49&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) Interest Expense | Interest Expense Component | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Contractual interest expense - Term Loans | $(2,994) | $0 | | Contractual interest expense - Convertible Senior Notes | $(375) | $(83) | | Amortization of debt discount and debt issuance costs | $(1,122) | $(95) | | Total Interest Expense | $(4,804) | $(178) | [(5) Financial Instruments](index=15&type=section&id=(5)%20Financial%20Instruments) Financial instruments include cash, equivalents, and investments, with the portfolio reclassified to available-for-sale in Q4 2021 for enhanced liquidity and flexibility Financial Instruments | Instrument | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cash and cash equivalents | $243,262 | $309,171 | | Held-to-maturity investments | $0 | $98,653 | | Available-for-sale investments | $79,315 | $0 | | Equity investments | $10,000 | $10,000 | | Total | $332,577 | $417,824 | - The investment portfolio was reclassified from held-to-maturity to available-for-sale in Q4 2021 for increased flexibility and liquidity[60](index=60&type=chunk) - Available-for-sale investments primarily consist of investment grade corporate bonds, municipal bonds, and asset-backed securities[60](index=60&type=chunk) [(6) Other Comprehensive Income](index=16&type=section&id=(6)%20Other%20Comprehensive%20Income) This section details changes in accumulated other comprehensive loss, net of tax, primarily showing an increase in unrealized losses on available-for-sale securities during Q1 2022 Changes in Accumulated Other Comprehensive Loss | Component | Balance as of Dec 31, 2021 (in thousands) | Other comprehensive loss before reclassifications (in thousands) | Reclassification adjustments (in thousands) | Balance as of Mar 31, 2022 (in thousands) | | :------------------------------------------------------------------------------------------------ | :------------------------------------------ | :------------------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Unrealized Loss On Available-For-Sales Securities | $(46) | $(629) | $(68) | $(743) | | Total Accumulated Other Comprehensive Loss | $(46) | $(629) | $(68) | $(743) | [(7) Fair Value](index=16&type=section&id=(7)%20Fair%20Value) Financial instruments are categorized by fair value hierarchy (Level 1, 2, 3 inputs), with most available-for-sale investments and debt instruments classified as Level 2 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable market data), and Level 3 (unobservable inputs)[68](index=68&type=chunk) Fair Values of Financial and Debt Instruments (March 31, 2022) | Instrument | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Available-for-sale investments | $0 | $79,315 | $0 | $79,315 | | Equity investments | $0 | $0 | $10,000 | $10,000 | | Term Loan A-1 | $0 | $573,274 | $0 | $573,274 | | Term Loan A-2 | $0 | $155,714 | $0 | $155,714 | | Convertible Senior Notes due 2026 | $0 | $662,148 | $0 | $662,148 | - The fair value of the 2021 Credit Agreement approximates book value due to frequent interest rate resets[71](index=71&type=chunk) [(8) Income Tax Provision](index=17&type=section&id=(8)%20Income%20Tax%20Provision) The effective income tax rate significantly increased to **22.3%** in Q1 2022 from **3.4%** in Q1 2021, primarily due to decreased excess tax benefits and increased state income tax reserves Income Tax Provision | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Income tax provision | $11,444 | $1,320 | | Effective income tax rate | 22.3% | 3.4% | - The increase in effective tax rate was driven by a decrease in excess tax benefits from stock incentive awards (**$3.00 million** in 2022 vs. **$8.80 million** in 2021) and increased state income tax reserves[75](index=75&type=chunk)[76](index=76&type=chunk) [(9) Shareholders' Equity](index=18&type=section&id=(9)%20Shareholders%27%20Equity) This section summarizes common stock activity for Q1 2022 and 2021, including stock option exercises, employee stock plan purchases, and restricted stock unit vesting, and notes the remaining share repurchase authorization Common Stock Activity | Activity | 3 Months Ended March 31, 2022 (Shares) | 3 Months Ended March 31, 2022 (Amount, in thousands) | 3 Months Ended March 31, 2021 (Shares) | 3 Months Ended March 31, 2021 (Amount, in thousands) | | :------------------------------------------------ | :--------------------------------------- | :------------------------------------------- | :--------------------------------------- | :------------------------------------------- | | Stock option exercises | 50 | $8,045 | 120 | $18,102 | | Employee stock plan purchases | 8 | $3,678 | 8 | $3,038 | | Restricted stock units vested, net of withheld shares | 78 | $(12,587) | 56 | $(8,958) | - The company has authorization from its board of directors to repurchase up to **2.40 million** additional shares of common stock[78](index=78&type=chunk) [(10) Share-Based Compensation](index=18&type=section&id=(10)%20Share-Based%20Compensation) Share-based compensation expense totaled **$25.3 million** in Q1 2022, slightly down from **$25.7 million** in Q1 2021, primarily allocated to selling, general and administrative expenses Share-Based Compensation Expense | Expense Category | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Subscriptions, software services and maintenance | $6,772 | $5,000 | | Selling, general and administrative expenses | $18,507 | $20,724 | | Total share-based compensation expense | $25,279 | $25,724 | [(11) Earnings Per Share](index=18&type=section&id=(11)%20Earnings%20Per%20Share) This section reconciles basic to diluted earnings per share, detailing weighted-average shares outstanding and the impact of dilutive securities, noting that Convertible Senior Notes were anti-dilutive in Q1 2022 Earnings Per Common Share Reconciliation | Metric | 3 Months Ended March 31, 2022 | 3 Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (Numerator) | $39,984 | $36,976 | | Weighted-average basic common shares outstanding | 41,364 | 40,611 | | Assumed conversion of dilutive securities: Stock awards | 1,079 | 1,445 | | Assumed conversion of dilutive securities: Convertible Senior Notes | 0 | 0 | | Denominator for diluted EPS - Adjusted weighted-average shares | 42,443 | 42,056 | | Basic EPS | $0.97 | $0.91 | | Diluted EPS | $0.94 | $0.88 | - Convertible Senior Notes were not included in the diluted EPS calculation for Q1 2022 as their effect would be anti-dilutive[81](index=81&type=chunk) [(12) Leases](index=19&type=section&id=(12)%20Leases) The company leases office facilities and equipment under non-cancelable operating lease agreements, with total net lease costs of **$4.3 million** in Q1 2022 - The company primarily uses non-cancelable operating lease agreements for office facilities and equipment, with maturities between one to ten years[82](index=82&type=chunk) Lease Costs | Lease Costs | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Operating lease cost | $3,422 | $1,722 | | Short-term lease cost | $506 | $481 | | Variable lease cost | $370 | $431 | | Net lease cost | $4,298 | $2,634 | - Weighted average remaining lease term was **5.4 years** and weighted average discount rate was **1.72%** as of March 31, 2022[83](index=83&type=chunk) - Rental income from third-party tenants was **$305 thousand** in Q1 2022, with future minimum operating rental income of **$6.99 million**[85](index=85&type=chunk) [(13) Commitments and Contingencies](index=20&type=section&id=(13)%20Commitments%20and%20Contingencies) No material legal proceedings are pending against the company, beyond routine litigation incidental to its business - No material legal proceedings are pending against the company[86](index=86&type=chunk) [(14) Segment and Related Information](index=20&type=section&id=(14)%20Segment%20and%20Related%20Information) The company operates in two reorganized segments, Enterprise Software (ES) and Platform Technologies (PT), providing public sector solutions - The company operates in two reportable segments: Enterprise Software (ES) and Platform Technologies (PT)[86](index=86&type=chunk) - Effective January 1, 2022, the Appraisal & Tax business unit moved to ES, and NIC digital government and payments solutions moved to PT, reflecting changes in management's operating decisions[88](index=88&type=chunk) Segment Revenues (3 Months Ended March 31, 2022) | Revenue Category | Enterprise Software (in thousands) | Platform Technologies (in thousands) | Corporate (in thousands) | Totals (in thousands) | | :-------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------- | :-------------------- | | Software licenses and royalties | $16,105 | $401 | $0 | $16,506 | | Subscriptions | $120,316 | $125,127 | $0 | $245,443 | | Software services | $42,649 | $18,848 | $0 | $61,497 | | Maintenance | $110,695 | $6,334 | $0 | $117,029 | | Appraisal services | $8,518 | $0 | $0 | $8,518 | | Hardware and other | $7,115 | $0 | $0 | $7,115 | | Total revenues | $310,987 | $150,710 | $(5,589) | $456,108 | Segment Operating Income (Loss) | Segment | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Enterprise Software | $106,529 | $98,854 | | Platform Technologies | $30,733 | $3,223 | | Corporate | $(53,459) | $(50,493) | | Total segment operating income | $83,803 | $51,584 | [(15) Disaggregation of Revenue](index=22&type=section&id=(15)%20Disaggregation%20of%20Revenue) Revenue is disaggregated by timing of recognition and recurring vs. non-recurring categories, with the majority being recurring from maintenance and subscriptions [Timing of Revenue Recognition](index=22&type=section&id=Timing%20of%20Revenue%20Recognition) Revenue is disaggregated by timing of recognition: point in time versus over time Revenue by Timing of Recognition (3 Months Ended March 31, 2022) | Revenue Category | Products and services transferred at a point in time (in thousands) | Products and services transferred over time (in thousands) | Total (in thousands) | | :-------------------------------- | :---------------------------------------------------------------- | :------------------------------------------------------- | :-------------------- | | Software licenses and royalties | $14,069 | $2,437 | $16,506 | | Subscriptions | $0 | $245,443 | $245,443 | | Software services | $0 | $61,497 | $61,497 | | Maintenance | $0 | $117,029 | $117,029 | | Appraisal services | $0 | $8,518 | $8,518 | | Hardware and other | $7,115 | $0 | $7,115 | | Total | $21,184 | $434,924 | $456,108 | [Recurring Revenue](index=22&type=section&id=Recurring%20Revenue) Recurring versus non-recurring revenues are detailed, with maintenance and subscriptions forming the majority - The majority of revenue is comprised of maintenance and subscriptions, which are considered recurring revenue[92](index=92&type=chunk) Recurring vs. Non-Recurring Revenues (3 Months Ended March 31, 2022) | Revenue Type | Enterprise Software (in thousands) | Platform Technologies (in thousands) | Corporate (in thousands) | Totals (in thousands) | | :-------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------- | :-------------------- | | Recurring revenues | $231,011 | $131,461 | $0 | $362,472 | | Non-recurring revenues | $74,387 | $19,249 | $0 | $93,636 | | Total revenues | $310,987 | $150,710 | $(5,589) | $456,108 | [(16) Deferred Revenue and Performance Obligations](index=23&type=section&id=(16)%20Deferred%20Revenue%20and%20Performance%20Obligations) Deferred revenue balances and **$1.76 billion** backlog are detailed, with **46%** expected within 12 months Total Deferred Revenue by Segment | Segment | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Enterprise Software | $420,830 | $479,048 | | Platform Technologies | $28,054 | $29,705 | | Corporate | $5,794 | $1,814 | | Totals | $454,678 | $510,567 | - Backlog as of March 31, 2022, was **$1.76 billion**, with approximately **46%** expected to be recognized as revenue over the next 12 months[95](index=95&type=chunk) [(17) Deferred Commissions](index=23&type=section&id=(17)%20Deferred%20Commissions) Sales commissions are deferred and amortized over three to seven years, totaling **$37.8 million** as of March 31, 2022 Deferred Commissions | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Deferred commissions | $37,800 | $38,100 | | Amortization expense (3 months ended Mar 31) | $3,500 | $3,000 | - Sales commissions for initial contracts are deferred and amortized over a period of benefit of generally three to seven years[96](index=96&type=chunk) [(18) Subsequent Events](index=23&type=section&id=(18)%20Subsequent%20Events) No material events or transactions occurred subsequent to March 31, 2022 - No material subsequent events occurred after March 31, 2022[97](index=97&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022 financial performance, liquidity, revenue drivers, cost trends, acquisitions, and SaaS transition [Cautionary Note Concerning Forward-Looking Statements](index=24&type=section&id=CAUTIONARY%20NOTE%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) The document contains forward-looking statements subject to risks and uncertainties, including COVID-19, client budgets, cyber-attacks, and integration of acquired businesses - The document contains forward-looking statements that are inherently subject to risks and uncertainties, and actual results could differ materially from expectations[99](index=99&type=chunk) - Key risk factors include the effects of the COVID-19 pandemic, changes in client budgets, cyber-attacks, and the ability to integrate acquired businesses[99](index=99&type=chunk) [General](index=24&type=section&id=GENERAL) Tyler Technologies provides integrated information management solutions for the public sector, with increased employee count and significant revenue growth in Q1 2022 - Tyler Technologies provides integrated information management solutions and services for the public sector, covering nine major functional areas[100](index=100&type=chunk)[101](index=101&type=chunk) - Employee count increased to **6,959** at March 31, 2022, including **1,103** employees from 2021 acquisitions, up from **5,579** at March 31, 2021[103](index=103&type=chunk) - Total revenues increased **54.7%** year-over-year for Q1 2022; excluding the impact of 2021 and 2022 acquisitions, revenue increased **7.3%**[105](index=105&type=chunk) - Subscriptions revenue grew **139.5%** year-over-year, primarily due to the NIC acquisition and an ongoing shift toward SaaS arrangements[106](index=106&type=chunk) - Backlog as of March 31, 2022, was **$1.76 billion**, a **13.8%** increase from the prior year[107](index=107&type=chunk) [Critical Accounting Policies and Estimates](index=25&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) No material changes to critical accounting policies and estimates from the 2021 Form 10-K, except for business combinations due to ASU 2021-08 adoption - No material changes to critical accounting policies and estimates from the 2021 Form 10-K, except for the accounting policies for business combinations as a result of adopting ASU 2021-08[108](index=108&type=chunk) [Analysis of Results of Operations](index=26&type=section&id=ANALYSIS%20OF%20RESULTS%20OF%20OPERATIONS) This section analyzes the company's revenues, cost of revenues, gross margins, and operating expenses for the period, highlighting key drivers and changes Percent of Total Revenues and Expenses | Metric | 3 Months Ended March 31, 2022 (%) | 3 Months Ended March 31, 2021 (%) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Revenues: Software licenses and royalties | 3.6% | 5.1% | | Revenues: Subscriptions | 53.8% | 34.7% | | Revenues: Software services | 13.5% | 16.2% | | Revenues: Maintenance | 25.7% | 40.4% | | Operating income | 12.2% | 13.0% | | Net income | 8.8% | 12.6% | [Revenues](index=26&type=section&id=Revenues) Revenue growth was significantly impacted by the US eDirect and NIC acquisitions, with detailed breakdowns by software licenses, subscriptions, and services - The US eDirect acquisition (February 8, 2022) and NIC acquisition (April 21, 2021) significantly impacted revenue growth[112](index=112&type=chunk)[113](index=113&type=chunk) NIC Revenue (3 Months Ended March 31, 2022) | Revenue Category | NIC Revenue (in thousands) | | :-------------------------------- | :------------------------- | | Subscriptions | $121,382 | | Software services | $13,109 | | Maintenance | $202 | | Total revenues | $134,693 | [Software licenses and royalties](index=27&type=section&id=Software%20licenses%20and%20royalties) Software licenses and royalties revenue increased **11%**, driven by large on-premise sales but partially offset by a shift towards SaaS offerings Software Licenses and Royalties Revenue | Segment | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | ES | $16,105 | $14,372 | $1,733 | 12% | | PT | $401 | $561 | $(160) | (29)% | | Total | $16,506 | $14,933 | $1,573 | 11% | - The **11%** increase was attributed to several large on-premise sales, partially offset by more clients choosing SaaS offerings. New client mix shifted from approximately **45%** perpetual/**55%** subscription in Q1 2021 to **23%** perpetual/**77%** subscription in Q1 2022[118](index=118&type=chunk) [Subscriptions](index=27&type=section&id=Subscriptions) Subscriptions revenue grew **140%**, primarily due to the NIC acquisition and new SaaS clients, with a **16.7%** increase excluding acquisitions Subscriptions Revenue | Segment | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | ES | $120,316 | $99,329 | $20,987 | 21% | | PT | $125,127 | $3,150 | $121,977 | 3,872% | | Total | $245,443 | $102,479 | $142,964 | 140% | - Subscriptions revenue grew **140%**, primarily due to the inclusion of NIC's revenues. Excluding acquisitions, subscriptions revenue increased **16.7%** due to **149** new SaaS clients and **88** existing on-premises client conversions[122](index=122&type=chunk) [Software services](index=28&type=section&id=Software%20services) Software services revenue increased **29%**, with a **1.2%** increase excluding acquisitions, driven by improved professional services staff utilization Software Services Revenue | Segment | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | ES | $42,649 | $42,417 | $232 | 1% | | PT | $18,848 | $5,223 | $13,625 | 261% | | Total | $61,497 | $47,640 | $13,857 | 29% | - Software services revenue increased **29%**, with a **1.2%** increase excluding acquisitions, attributed to improved utilization of professional services staff due to virtual delivery, partially offset by clients selecting cloud solutions[124](index=124&type=chunk) [Maintenance](index=28&type=section&id=Maintenance) Maintenance revenue decreased **2%** due to attrition from a legacy solution and client conversions to SaaS, partially offset by rate increases and new sales Maintenance Revenue | Segment | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | ES | $110,695 | $109,469 | $1,226 | 1% | | PT | $6,334 | $9,643 | $(3,309) | (34)% | | Total | $117,029 | $119,112 | $(2,083) | (2)% | - Maintenance revenue decreased **2%** due to attrition related to a legacy case management solution and client conversions to SaaS, partially offset by annual maintenance rate increases and new software license sales[126](index=126&type=chunk) [Appraisal services](index=29&type=section&id=Appraisal%20services) Appraisal services revenue increased **32%** due to the ramp-up of services for several new revaluation contracts Appraisal Services Revenue | Segment | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | ES | $8,518 | $6,465 | $2,053 | 32% | | PT | $0 | $0 | $0 | 0% | | Total | $8,518 | $6,465 | $2,053 | 32% | - Appraisal services revenue increased **32%** due to the ramp-up of services for several new revaluation contracts[128](index=128&type=chunk) [Cost of Revenues and Gross Margins](index=29&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Margins) Overall gross margin decreased **6.7%** primarily due to NIC's lower margins and increased amortization expense related to acquired software Cost of Revenues | Cost Component | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | Software licenses and royalties | $2,609 | $1,236 | $1,373 | 111% | | Acquired software | $13,221 | $7,964 | $5,257 | 66% | | Subscriptions, software services, and maintenance | $236,896 | $134,320 | $102,576 | 76% | | Appraisal services | $5,936 | $4,617 | $1,319 | 29% | | Hardware and other | $5,028 | $2,458 | $2,570 | 105% | | Total cost of revenues | $263,690 | $150,595 | $113,095 | 75% | Gross Margin Percentage by Revenue Type | Revenue Type | 3 Months Ended March 31, 2022 (%) | 3 Months Ended March 31, 2021 (%) | Change (%) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :--------- | | Software licenses, royalties and acquired software | 4.1% | 38.4% | (34.3)% | | Subscriptions, software services and maintenance | 44.1% | 50.1% | (6.0)% | | Appraisal services | 30.3% | 28.6% | 1.7% | | Hardware and other | 29.3% | 41.1% | (11.8)% | | Overall gross margin | 42.2% | 48.9% | (6.7)% | - Overall gross margin decreased **6.7%** primarily due to the inclusion of NIC's revenues, which historically have lower margins than Tyler, and increased amortization expense related to acquired software[130](index=130&type=chunk)[133](index=133&type=chunk) - Subscriptions, software services, and maintenance gross margin decreased **6.0%** due to NIC's lower margins, lower maintenance revenue, higher employee headcount, and cloud transition costs[131](index=131&type=chunk) [Selling, General and Administrative Expenses](index=30&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) SG&A expenses increased **24%** but decreased as a percentage of revenues to **21.5%**, with a **1.8%** increase excluding acquisitions SG&A Expenses | Expense | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | Selling, general and administrative expenses | $97,895 | $78,774 | $19,121 | 24% | - SG&A as a percentage of revenues decreased to **21.5%** from **26.7%**. Excluding acquisitions, SG&A increased **1.8%** due to higher commission expense, partially offset by lower stock compensation and travel expenses[134](index=134&type=chunk) [Research and Development Expense](index=30&type=section&id=Research%20and%20Development%20Expense) R&D expense increased **10%**, or **5.7%** excluding acquisitions, driven by new product development initiatives R&D Expense | Expense | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | Research and development expense | $23,941 | $21,813 | $2,128 | 10% | - R&D expense increased **10%**, or **5.7%** excluding acquisitions, due to new product development initiatives, partially offset by a shift of some development resources to capitalized projects[136](index=136&type=chunk) [Amortization of Other Intangibles](index=31&type=section&id=Amortization%20of%20Other%20Intangibles) Amortization expense for other intangibles increased **172%** due to acquisitions completed in 2021 and 2022 Amortization of Other Intangibles | Expense | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | Amortization of other intangibles | $14,714 | $5,412 | $9,302 | 172% | - Amortization expense increased **172%** due to acquisitions completed in 2021 and 2022[138](index=138&type=chunk) [Interest Expense](index=31&type=section&id=Interest%20Expense) Interest expense increased significantly by **905%** due to higher borrowing levels from the 2021 Credit Agreement and Convertible Senior Notes, and increased interest rates Interest Expense | Expense | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | Interest expense | $(4,804) | $(478) | $(4,326) | 905% | - Interest expense increased significantly (**905%**) due to higher borrowing levels from the 2021 Credit Agreement and Convertible Senior Notes, and increased interest rates[140](index=140&type=chunk) [Other Income, Net](index=31&type=section&id=Other%20Income%2C%20Net) Other income, net, decreased by **36%** due to lower levels of invested cash Other Income, Net | Income | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | :--------- | | Other income, net | $364 | $566 | $(202) | (36)% | - Other income, net, decreased due to lower levels of invested cash[142](index=142&type=chunk) [Income Tax Provision](index=31&type=section&id=Income%20Tax%20Provision) The effective income tax rate increased from **3.4%** to **22.3%** primarily due to decreased excess tax benefits from stock incentive awards and increased state income tax reserves Income Tax Provision | Metric | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Income tax provision | $11,444 | $1,320 | | Effective income tax rate | 22.3% | 3.4% | - The effective tax rate increased from **3.4%** to **22.3%** primarily due to decreased excess tax benefits from stock incentive awards and increased state income tax reserves[144](index=144&type=chunk) [Financial Condition and Liquidity](index=32&type=section&id=FINANCIAL%20CONDITION%20AND%20LIQUIDITY) Cash and cash equivalents decreased to **$243.3 million** at March 31, 2022, with investing activities for acquisitions being the primary cash outflow - Cash and cash equivalents were **$243.30 million** at March 31, 2022, down from **$309.20 million** at December 31, 2021[145](index=145&type=chunk) - The company believes its cash from operating activities, revolving credit facility, cash on hand, and access to capital markets provide sufficient long-term financial flexibility[145](index=145&type=chunk) Summary of Cash Flows | Cash Flow Activity | 3 Months Ended March 31, 2022 (in thousands) | 3 Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Operating activities | $53,541 | $71,703 | | Investing activities | $(111,173) | $(39,694) | | Financing activities | $(8,277) | $615,120 | | Net (decrease) increase in cash and cash equivalents | $(65,909) | $647,129 | - Investing activities used **$111.20 million**, primarily for the US eDirect acquisition (**$116.70 million** net of cash acquired) and capitalized software development (**$7.90 million**)[149](index=149&type=chunk) - Anticipated 2022 capital spending is between **$62 million** and **$67 million**, including approximately **$36 million** of capitalized software development[154](index=154&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) Primary market risk is interest rate fluctuations on variable-rate debt, impacting annual interest expense by **$1.8 million** per quarter-point change - Market risk primarily relates to interest rate changes on variable-rate debt under the 2021 Credit Agreement[156](index=156&type=chunk)[157](index=157&type=chunk) - As of March 31, 2022, with **$735.00 million** outstanding under the 2021 Credit Agreement, each quarter-point change in interest rates would result in a **$1.80 million** change in annual interest expense[158](index=158&type=chunk) [ITEM 4. Controls and Procedures](index=34&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control [Evaluation of Disclosure Controls and Procedures](index=34&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022 - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022[160](index=160&type=chunk) [Changes in Internal Control over Financial Reporting](index=34&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the three months ended March 31, 2022 - There were no material changes in internal control over financial reporting during the three months ended March 31, 2022[161](index=161&type=chunk) Part II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=35&type=section&id=ITEM%201.%20Legal%20Proceedings) No material legal proceedings are pending against the company, beyond routine litigation incidental to its business - No material legal proceedings are pending to which the company is a party or to which any of its properties are subject, other than routine litigation incidental to its business[163](index=163&type=chunk) [ITEM 1A. Risk Factors](index=35&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes in risk factors occurred during Q1 2022, referring to the 2021 Form 10-K for detailed discussion - No material changes in risk factors were identified during the three months ended March 31, 2022, referring to the 2021 Annual Report on Form 10-K for detailed discussion[164](index=164&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - None to report[165](index=165&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=35&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None to report[165](index=165&type=chunk) [ITEM 4. Submission of Matters to a Vote of Security Holders](index=35&type=section&id=ITEM%204.%20Submission%20of%20Matters%20to%20a%20Vote%20of%20Security%20Holders) No matters were submitted to a vote of security holders during the period - None to report[165](index=165&type=chunk) [ITEM 5. Other Information](index=35&type=section&id=ITEM%205.%20Other%20Information) No other information was disclosed for the period - None to report[165](index=165&type=chunk) [ITEM 6. Exhibits](index=35&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the report, including certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL documents - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and Inline XBRL documents[165](index=165&type=chunk) [SIGNATURES](index=36&type=section&id=SIGNATURES) The report is signed by Brian K. Miller, Executive Vice President and Chief Financial Officer, for Tyler Technologies, Inc. - The report was signed by Brian K. Miller, Executive Vice President and Chief Financial Officer, on April 27, 2022[168](index=168&type=chunk)

Investor Presentation March 2022 2 | Forward-Looking Statements Tyler has included in this presentation "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," ...