TYLER TECHNOLOGIES INC [TYL] Filings

10-Q 1 tyl-20240630.htm 10-Q tyl-20240630

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 June 30, 2024


☐			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. employer identification no.)


5101 TENNYSON PARKWAY	PLANO	Texas	75024
(Address of principal executive offices)	(City)	(State)	(Zip code)

(972) 713-3700

(Registrant’s telephone number, including area code)


Title of each class	Trading symbol	Name of each exchange on which registered
COMMON STOCK, $0.01 PAR VALUE	TYL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of common stock of registrant outstanding on July 29, 2024 was 42,672,664.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Subscriptions	$	333,682	$	297,789	$	646,925	$	578,254
Maintenance	115,309		116,539		232,527		231,670
Professional services	71,928		66,420		136,734		127,349
Software licenses and royalties	5,329		9,779		14,063		19,909
Hardware and other	14,728		13,752		23,086		18,951
Total revenues	540,976		504,279		1,053,335		976,133

Cost of revenues:
Subscriptions, maintenance, and professional services	277,145		255,789		546,015		508,204
Software licenses and royalties	1,560		2,432		3,125		4,745
Amortization of software development	4,484		2,896		8,847		5,485
Amortization of acquired software	9,240		8,924		18,479		17,844
Hardware and other	10,731		11,061		15,387		16,841
Total cost of revenues	303,160		281,102		591,853		553,119

Gross profit	237,816		223,177		461,482		423,014

Sales and marketing expense	41,565		37,103		77,992		74,206
General and administrative expense	75,420		77,681		148,130		150,041
Research and development expense	28,951		28,153		58,384		55,139
Amortization of other intangibles	13,845		18,366		31,963		36,774

Operating income	78,035		61,874		145,013		106,854

Interest expense	(1,253)		(6,387)		(3,437)		(14,071)
Other income, net	1,883		643		3,728		1,889
Income before income taxes	78,665		56,130		145,304		94,672
Income tax provision	10,927		7,000		23,396		14,667
Net income	$	67,738	$	49,130	$	121,908	$	80,005

Earnings per common share:
Basic	$	1.59	$	1.17	$	2.87	$	1.91
Diluted	$	1.57	$	1.15	$	2.82	$	1.87

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	67,738	$	49,130	$	121,908	$	80,005
Other comprehensive income (loss), net of tax:
Securities available-for-sale and transferred securities:
Change in net unrealized holding gain (loss) on available for sale securities during the period	55		(36)		108		58

Reclassification adjustment for net loss on sale of available for sale securities, included in net income	—		1		—		1
Other comprehensive income (loss), net of tax	55		(35)		108		59
Comprehensive income	$	67,793	$	49,095	$	122,016	$	80,064

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)


	June 30, 2024 (unaudited)		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	250,722	$	165,493
Accounts receivable (less allowance for losses and sales adjustments of $21,075 in 2024 and $22,829 in 2023)	700,825		619,704
Short-term investments	7,288		10,385
Prepaid expenses	76,726		54,700

Other current assets	6,771		10,303
Total current assets	1,042,332		860,585
Accounts receivable, long-term	7,928		8,988
Operating lease right-of-use assets	36,647		39,039
Property and equipment, net	167,635		169,720
Other assets:
Software development costs, net	74,069		67,124
Goodwill	2,531,899		2,532,109
Other intangibles, net	878,272		928,870
Non-current investments	3,879		7,046
Other non-current assets	76,818		63,182
	$	4,819,479	$	4,676,663
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	150,444	$	146,339
Accrued liabilities	153,032		158,558
Operating lease liabilities	11,179		11,060
Current income tax payable	20,375		2,466
Deferred revenue	652,302		632,914
Current portion of term loans	—		49,801
Total current liabilities	987,332		1,001,138


Convertible senior notes due 2026, net	597,069		596,206
Deferred revenue, long-term	—		291
Deferred income taxes	41,584		78,590
Operating lease liabilities, long-term	35,624		39,822
Other long-term liabilities	25,762		22,621
Total liabilities	1,687,371		1,738,668
Commitments and contingencies	—		—
Shareholders' equity:
Preferred stock, $10.00 par value; 1,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value; 100,000,000 shares authorized; 48,147,969 shares issued and outstanding as of June 30, 2024 and December 31, 2023	481		481
Additional paid-in capital	1,425,536		1,354,787
Accumulated other comprehensive loss, net of tax	(218)		(326)
Retained earnings	1,725,681		1,603,773
Treasury stock, at cost; 5,523,783 and 5,858,476 shares in 2024 and 2023, respectively	(19,372)		(20,720)
Total shareholders' equity	3,132,108		2,937,995
	$	4,819,479	$	4,676,663

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	121,908	$	80,005
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	74,236		75,748
Gains (losses) from sale of investments	(1)		2
Share-based compensation expense	57,273		53,924
Change in fair value in available-for-sale investments	—		—
Amortization of operating lease right-of-use assets	4,865		6,569
Deferred income tax benefit	(36,807)		(39,665)
Other	190		445
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable	(89,785)		(51,508)
Income tax payable	17,909		(41,762)
Prepaid expenses and other current assets	(32,586)		(20,122)
Accounts payable	4,136		13,721
Operating lease liabilities	(6,426)		(5,324)
Accrued liabilities	(1,173)		(15,083)
Deferred revenue	19,263		(3,571)
Other long-term liabilities	3,141		2,146
Net cash provided by operating activities	136,143		55,525

Cash flows from investing activities:
Additions to property and equipment	(13,850)		(6,370)
Purchase of marketable security investments	—		(10,617)
Proceeds and maturities from marketable security investments	6,351		37,107


Investment in software development	(16,493)		(18,753)
Cost of acquisitions, net of cash acquired	(1,302)		(1,875)
Other	21		16
Net cash used by investing activities	(25,273)		(492)

Cash flows from financing activities:

Payment on term loans	(50,000)		(120,000)





Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award settlement	15,885		2,123
Contributions from employee stock purchase plan	8,474		7,751
Net cash used by financing activities	(25,641)		(110,126)

Net increase (decrease) in cash and cash equivalents	85,229		(55,093)
Cash and cash equivalents at beginning of period	165,493		173,857
Cash and cash equivalents at end of period	$	250,722	$	118,764

See accompanying notes.


	Six Months Ended June 30,
	2024		2023
Supplemental cash flow information:
Cash paid for interest	$	1,930	$	12,286
Cash paid for income taxes, net	39,062		92,933
Non-cash investing and financing activities:
Non-cash additions to property and equipment	$	45	$	368

TYLER TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2024	48,148	$	481	$	1,385,095	$	(273)	$	1,657,943	(5,707)	$	(20,111)	$	3,023,135
Net income	—	—		—		—		67,738		—	—		67,738
Other comprehensive income, net of tax	—	—		—		55		—		—	—		55
Exercise of stock options and vesting of restricted stock units	—	—		5,168		—		—		194	12,933		18,101
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—		—		(25)	(12,249)		(12,249)
Stock compensation	—	—		30,407		—		—		—	—		30,407
Issuance of shares pursuant to employee stock purchase plan	—	—		4,866		—		—		14	55		4,921

Balance at June 30, 2024	48,148	$	481	$	1,425,536	$	(218)	$	1,725,681	(5,524)	$	(19,372)	$	3,132,108


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2023	48,148	$	481	$	1,239,945	$	(750)	$	1,468,729	(6,244)	$	(22,272)	$	2,686,133
Net income	—	—		—		—		49,130		—	—		49,130
Other comprehensive loss, net of tax	—	—		—		(35)		—		—	—		(35)
Exercise of stock options and vesting of restricted stock units	—	—		1,692		—		—		173	11,042		12,734
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—		—		(26)	(10,452)		(10,452)
Stock compensation	—	—		26,028		—		—		—	—		26,028
Issuance of shares pursuant to employee stock purchase plan	—	—		4,650		—		—		16	63		4,713
Balance at June 30, 2023	48,148	$	481	$	1,272,315	$	(785)	$	1,517,859	(6,081)	$	(21,619)	$	2,768,251

TYLER TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2023	48,148	$	481	$	1,354,787	$	(326)	$	1,603,773	(5,858)	$	(20,720)	$	2,937,995
Net income	—	—		—		—		121,908		—	—		121,908
Other comprehensive income, net of tax	—	—		—		108		—		—	—		108
Exercise of stock options and vesting of restricted stock units	—	—		3,430		—		—		389	35,911		39,341
Employee taxes paid for withheld shares for taxes upon equity award settlement	—	—		—		—		—		(51)	(23,456)		(23,456)
Stock compensation	—	—		57,273		—		—		—	—		57,273
Issuance of shares pursuant to employee stock purchase plan	—	—		8,379		—		—		24	95		8,474

Reimbursement of shares from escrow	—	—		1,667		—		—		(28)	(11,202)		(9,535)
Balance at June 30, 2024	48,148	$	481	$	1,425,536	$	(218)	$	1,725,681	(5,524)	$	(19,372)	$	3,132,108


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2022	48,148	$	481	$	1,209,725	$	(844)	$	1,437,854	(6,365)	$	(22,827)	$	2,624,389
Net income	—	—		—		—		80,005		—	—		80,005
Other comprehensive income, net of tax	—	—		—		59		—		—	—		59
Exercise of stock options and vesting of restricted stock units	—	—		1,023		—		—		309	19,844		20,867
Employee taxes paid for withheld shares for taxes upon equity award settlement	—	—		—		—		—		(52)	(18,744)		(18,744)
Stock compensation	—	—		53,924		—		—		—	—		53,924
Issuance of shares pursuant to employee stock purchase plan	—	—		7,643		—		—		27	108		7,751


Balance at June 30, 2023	48,148	$	481	$	1,272,315	$	(785)	$	1,517,859	(6,081)	$	(21,619)	$	2,768,251

Tyler Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Tables in thousands, except per share data)

(1) Basis of Presentation

We prepared the accompanying condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States, or GAAP, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted for interim periods. Balance sheet amounts are as of June 30, 2024, and December 31, 2023, and operating result amounts are for the three and six months ended June 30, 2024, and 2023, respectively, and include all normal and recurring adjustments that we considered necessary for the fair summarized presentation of our financial position and operating results. As these are condensed financial statements, one should also read the financial statements and notes included in our latest Form 10-K for the year ended December 31, 2023. Revenues, expenses, assets, and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. Certain amounts for previous years have been reclassified to conform to the current year presentation.

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all components of net income (loss) and other comprehensive income (loss). During the three and six months ended June 30, 2024, we had approximately $55,000 and $108,000 of other comprehensive income, net of taxes, from our available-for-sale investment holdings and $35,000 of other comprehensive loss and $59,000 of other comprehensive income, net of taxes, from our available-for-sale investment holdings during the three and six months ended June 30, 2023.

(2) Accounting Standards and Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024, that have had a material impact on our condensed consolidated financial statements and related notes. See Recently Adopted Accounting Pronouncements below.

REVENUE RECOGNITION

Nature of Products and Services

We earn the majority of our revenues from subscription-based services and post-contract customer support (“PCS” or “maintenance”). Other sources of revenue are professional services, software licenses and royalties, and hardware and other. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We determine revenue recognition through the following steps:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

Subscription-based services consist primarily of revenues derived from software as a service (“SaaS”) arrangements and transactions from digital government services; payment processing; and electronic filing (‘‘e-filing”). We recognize SaaS arrangements ratably over the terms of the arrangements, which range from one to 10 years, but are typically for periods of generally one to three years. For professional services associated with certain SaaS arrangements, we have concluded that the services are not distinct, and we recognize the revenue ratably over the remaining contractual period once we have provided the customer access to the software. We record amounts that have been invoiced in accounts receivable and in deferred revenue or revenues, depending on whether the revenue recognition criteria have been met.

In those instances where variable consideration exists, we include in our estimates additional revenue for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably, and its realization is probable. For transaction-based fees, we have the right to charge the customer an amount that directly corresponds with the value to the customer of our performance to date. Therefore, we recognize revenue for these services as invoiced based on the amount billable to the customer. In some cases, we are paid on a fixed-fee basis and recognize the revenue ratably over the contractual period.

Transaction-based fees primarily relate to digital government services and online payment services, which are sometimes offered with the assistance of third-party vendors. In general, when we are the principal in a transaction, we record the revenue and related costs on a gross basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount billed to the customer) and record the net amount as revenue.

Other software arrangements with customers contain multiple performance obligations that range from software licenses; services such as installation, training, consulting, software modification and customization to meet specific customer needs; hosting; and PCS. For these contracts, we account for individual performance obligations separately when they are distinct. We evaluate whether separate performance obligations can be distinct or should be accounted for as one performance obligation. Arrangements that include professional services, such as training or installation, are evaluated to determine whether those services are highly interdependent or interrelated to the product’s functionality. The transaction price is allocated to the distinct performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. For arrangements that involve significant production, modification, or customization of the software, or where professional services otherwise cannot be considered distinct, we recognize revenue as control is transferred to the customer over time using progress-to-completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred or value added. Amounts recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost estimates. Changes to total estimated contract costs, if any, are recorded in the period they are determined. Estimated losses on uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.

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

Refer to Note 4, “Disaggregation of Revenue” for further information, including the economic factors that affect the nature, amount, timing, and uncertainty of revenues and cash flows of our various revenue categories.

Contract Balances:

Accounts receivable and allowance for losses and sales adjustments

Timing of revenue recognition may differ from the timing of invoicing to customers. We record an unbilled receivable when revenue is recognized prior to invoicing, or deferred revenue when invoicing occurs prior to revenue recognition. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period.

As of June 30, 2024, and December 31, 2023, total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $708.8 million and $628.7 million, respectively. We have recorded unbilled receivables of $117.6 million and $119.2 million as of June 30, 2024, and December 31, 2023, respectively. Included in unbilled receivables are retention receivables of $10.3 million and $9.8 million as of June 30, 2024, and December 31, 2023, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings. Unbilled receivables expected to be collected within one year have been included with accounts receivable, with the current portion in the accompanying condensed consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with accounts receivable, with the long-term portion in the accompanying condensed consolidated balance sheets.

We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred. Because most of our clients are domestic governmental entities, we rarely incur a credit loss resulting from the inability of a client to make required payments. Consequently, we have not recorded a reserve for credit losses. Events or changes in circumstances that indicate the carrying amount for the allowances for losses and sales adjustments may require revision include, but are not limited to, managing our client’s expectations regarding the scope of the services to be delivered and defects or errors in new versions or enhancements of our software products. Our allowances for losses and sales adjustments are $21.1 million and $22.8 million as of June 30, 2024, and December 31, 2023, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

We assess goodwill for impairment annually, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable. We begin with the qualitative assessment of the likelihood of impairment of each reporting unit. If the conclusion of this assessment is that it is more likely than not that a reporting unit's fair value is more than its carrying value, we are not required to perform a quantitative impairment test. When testing goodwill for impairment quantitatively, we first compare the estimated fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds the fair value of that reporting unit, an impairment loss is recognized. The fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions (Level 3 inputs). The assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

Determining the fair value of our reporting units involves the use of significant estimates and assumptions and considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty, such as weighted average cost of capital and revenue growth rates which are forward-looking and affected by expectations about future market or economic conditions. Similarly, in a specific period, a reporting unit could significantly underperform relative to its historic or projected future operating results. Either situation could result in a meaningfully different estimate of the fair value of our reporting units, and a consequent future impairment charge.

For the three and six months ended June 30, 2024, no triggering event or changes to circumstances indicated that a potential impairment had occurred.

RECENTLY PRONOUNCED ACCOUNTING STANDARDS

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07 - Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. ASU 2023-07 enhances the disclosures required for reportable segments in annual and interim consolidated financial statements. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.

(3) Segment and Related Information

We report our results in two reportable segments. Business units that have met the aggregation criteria have been combined into our two reportable segments. The Enterprise Software (“ES”) reportable segment provides public sector entities with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as: public administration solutions; courts and public safety solutions; education solutions; and property and recording solutions. The Platform Technologies (“PT”) reportable segment provides public sector entities with platform and transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and workflows.

We evaluate performance based on several factors. The primary financial measure is business segment operating income. We define segment operating income for our business units as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense, and income taxes. Segment operating income includes intercompany transactions. The majority of our intercompany transactions relate to contracts involving more than one business unit and are valued based on the contractual arrangement. Corporate segment operating loss primarily consists of compensation costs for the executive management team, certain shared services staff, and share-based compensation expense for the entire company. Corporate segment operating loss also includes revenues and expenses related to a Company-wide user conference.


For the three months ended June 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	136,045	$	19,933	$	—	$	155,978
Transaction-based fees	55,701		122,003		—		177,704
Maintenance	109,196		6,113		—		115,309
Professional services	58,731		13,197		—		71,928
Software licenses and royalties	5,319		10		—		5,329
Hardware and other	7,815		—		6,913		14,728
Intercompany	6,511		464		(6,975)		—
Total revenues	$	379,318	$	161,720	$	(62)	$	540,976
Segment operating income (loss)	$	133,586	$	34,909	$	(67,375)	$	101,120


For the three months ended June 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	111,019	$	15,579	$	—	$	126,598
Transaction-based fees	43,535		127,656		—		171,191
Maintenance	109,953		6,586		—		116,539
Professional services	55,256		11,164		—		66,420
Software licenses and royalties	9,479		300		—		9,779
Hardware and other	6,381		—		7,371		13,752
Intercompany	6,852		—		(6,852)		—
Total revenues	$	342,475	$	161,285	$	519	$	504,279
Segment operating income (loss)	$	111,185	$	38,797	$	(60,818)	$	89,164


For the six months ended June 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	264,187	$	40,575	$	—	$	304,762
Transaction-based fees	107,585		234,578		—		342,163
Maintenance	220,378		12,149		—		232,527
Professional services	113,624		23,110		—		136,734
Software licenses and royalties	13,890		173		—		14,063
Hardware and other	16,173		—		6,913		23,086
Intercompany	12,682		464		(13,146)		—
Total revenues	$	748,519	$	311,049	$	(6,233)	$	1,053,335
Segment operating income (loss)	$	264,285	$	63,164	$	(131,994)	$	195,455


For the six months ended June 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	217,381	$	31,132	$	—	$	248,513
Transaction-based fees	85,587		244,154		—		329,741
Maintenance	220,035		11,635		—		231,670
Professional services	106,755		20,594		—		127,349
Software licenses and royalties	17,547		2,362		—		19,909
Hardware and other	11,580		—		7,371		18,951
Intercompany	11,935		—		(11,935)		—
Total revenues	$	670,820	$	309,877	$	(4,564)	$	976,133
Segment operating income (loss)	$	211,165	$	68,335	$	(118,028)	$	161,472


	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation of reportable segment operating income to the Company's consolidated totals:	2024		2023		2024		2023
Total segment operating income	$	101,120	$	89,164	$	195,455	$	161,472
Amortization of acquired software	(9,240)		(8,924)		(18,479)		(17,844)
Amortization of other intangibles	(13,845)		(18,366)		(31,963)		(36,774)
Interest expense	(1,253)		(6,387)		(3,437)		(14,071)
Other income, net	1,883		643		3,728		1,889
Income before income taxes	$	78,665	$	56,130	$	145,304	$	94,672

(4) Disaggregation of Revenue

The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing, and uncertainty of revenues and cash flows.

Timing of Revenue Recognition

Timing of revenue recognition by revenue category during the period is as follows:


For the three months ended June 30, 2024	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	155,978	$	155,978
Transaction-based fees	—		177,704		177,704
Maintenance	—		115,309		115,309
Professional services	—		71,928		71,928
Software licenses and royalties	4,551		778		5,329
Hardware and other	14,728		—		14,728
Total	$	19,279	$	521,697	$	540,976


For the three months ended June 30, 2023	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	126,598	$	126,598
Transaction-based fees	—		171,191		171,191
Maintenance	—		116,539		116,539
Professional services	—		66,420		66,420
Software licenses and royalties	8,793		986		9,779
Hardware and other	13,752		—		13,752
Total	$	22,545	$	481,734	$	504,279


For the six months ended June 30, 2024	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	304,762	$	304,762
Transaction-based fees	—		342,163		342,163
Maintenance	—		232,527		232,527
Professional services	—		136,734		136,734
Software licenses and royalties	12,651		1,412		14,063
Hardware and other	23,086		—		23,086
Total	$	35,737	$	1,017,598	$	1,053,335


For the six months ended June 30, 2023	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	248,513	$	248,513
Transaction-based fees	—		329,741		329,741
Maintenance	—		231,670		231,670
Professional services	—		127,349		127,349
Software licenses and royalties	18,074		1,835		19,909
Hardware and other	18,951		—		18,951
Total	$	37,025	$	939,108	$	976,133

Recurring Revenues

The majority of our revenues are comprised of revenues from subscriptions and maintenance, which we consider to be recurring revenues. Subscriptions revenue primarily consists of revenues derived from our SaaS arrangements and transaction-based fees. These revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services, and are collected on a recurring basis during the contract term. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of generally one to three years. Nearly all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenues. Maintenance and support are generally provided under auto-renewing annual contracts or multi-year contracts. We consider all other revenue categories to be non-recurring revenues.

Recurring revenues and non-recurring revenues recognized during the period are as follows:


For the three months ended June 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	300,942	$	148,049	$	—	$	448,991
Non-recurring revenues	71,865		13,207		6,913		91,985
Intercompany	6,511		464		(6,975)		—
Total revenues	$	379,318	$	161,720	$	(62)	$	540,976


For the three months ended June 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	264,507	$	149,821	$	—	$	414,328
Non-recurring revenues	71,116		11,464		7,371		89,951
Intercompany	6,852		—		(6,852)		—
Total revenues	$	342,475	$	161,285	$	519	$	504,279


For the six months ended June 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	592,150	$	287,302	$	—	$	879,452
Non-recurring revenues	143,687		23,283		6,913		173,883
Intercompany	12,682		464		(13,146)		—
Total revenues	$	748,519	$	311,049	$	(6,233)	$	1,053,335


For the six months ended June 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	523,003	$	286,921	$	—	$	809,924
Non-recurring revenues	135,882		22,956		7,371		166,209
Intercompany	11,935		—		(11,935)		—
Total revenues	$	670,820	$	309,877	$	(4,564)	$	976,133

(5) Deferred Revenue and Performance Obligations

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


	June 30, 2024		December 31, 2023
Enterprise Software	$	620,425	$	589,295
Platform Technologies	29,102		39,597
Corporate	2,775		4,313
Totals	$	652,302	$	633,205

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


	Six months ended June 30, 2024
Balance as of December 31, 2023	$	633,205
Deferral of revenue	716,239
Recognition of deferred revenue	(697,142)
Balance as of June 30, 2024	$	652,302

Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized (“backlog”), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Backlog as of June 30, 2024, was $2.09 billion, of which we expect to recognize approximately 45% as revenue over the next 12 months and the remainder thereafter.

(6) Deferred Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be generally three to seven years. Deferred commissions were $50.8 million and $49.2 million as of June 30, 2024, and December 31, 2023, respectively. Amortization expense was $4.9 million and $9.6 million for the three and six months ended June 30, 2024, respectively, and $4.3 million and $8.6 million for the three and six months ended June 30, 2023, respectively. There were no indicators of impairment in relation to the costs capitalized for the periods presented. Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term portion in the accompanying condensed consolidated balance sheets. Amortization expense related to deferred commissions is included in sales and marketing expense in the accompanying condensed consolidated statements of income.

(7) Acquisitions

We did not complete any acquisitions during the six months ended June 30, 2024.

During the six months ended June 30, 2024, we settled litigation that was assumed with the 2022 purchase of Rapid Financial Solutions, LLC. Our purchase agreement included an escrow that fully indemnified and reimbursed Tyler under the terms of the purchase agreement by the return of 27,702 shares of our common stock, with the approximate value of $9.5 million, that were held in an escrow account at the time of the acquisition.

(8) Debt

The following table summarizes our outstanding borrowings:


	Rate	Maturity Date	June 30, 2024		December 31, 2023
2021 Credit Agreement
Revolving credit facility	S + 1.125%	April 2026	$	—	$	—
Term Loan A-1	S + 1.125%	April 2026	—		50,000
Convertible Senior Notes due 2026	0.25%	March 2026	600,000		600,000
Total borrowings			600,000		650,000
Less: unamortized debt discount and debt issuance costs			(2,931)		(3,993)
Total borrowings, net			597,069		646,007

Less: current portion of debt			—		(49,801)
Carrying value			$	597,069	$	596,206

Amended 2021 Credit Agreement

In connection with the acquisition of NIC, Inc. on April 21, 2021, we, as borrower, entered into a $1.4 billion Credit Agreement (the “2021 Credit Agreement”) with the various lender parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender. The 2021 Credit Agreement provides for (1) a senior unsecured revolving credit facility in an aggregate principal amount of up to $500 million, including sub-facilities for standby letters of credit and swingline loans (the “Revolving Credit Facility”), (2) an amortizing five-year term loan in the aggregate amount of $600 million (the “Term Loan A-1”), and (3) a non-amortizing three-year term loan in the aggregate amount of $300 million (the “Term Loan A-2” together with the “Term Loan A-1”). On January 28, 2023, we amended our 2021 Credit Agreement to replace the LIBOR reference rate with the Secured Overnight Financing Rate (“SOFR”) reference rate. The amended 2021 Credit Agreement matures on April 20, 2026, and the loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any breakage costs. The Company is required to pay a commitment fee on the average daily unused portion of the Revolving Credit Facility, currently 0.15% per annum, ranging from 0.15% to 0.3% based upon the Company’s total net leverage ratio. The amended 2021 Credit Agreement requires us to maintain certain financial ratios and other financial conditions and prohibits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens.

For the six months ended June 30, 2024, we repaid $50.0 million of the Term Loans and have fully repaid amounts due under the amended 2021 Credit Agreement. As of June 30, 2024, we were in compliance with our covenants under the amended 2021 Credit Agreement.

Convertible Senior Notes due 2026

On March 9, 2021, we issued 0.25% Convertible Senior Notes due in 2026 in the aggregate principal amount of $600.0 million (“the Convertible Senior Notes” or “the Notes”). The Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 9, 2021, with U.S. Bank National Association as trustee. The net proceeds from the issuance of the Convertible Senior Notes were $591.4 million, net of initial purchasers’ discounts of $6.0 million and debt issuance costs of $2.6 million.

The Convertible Senior Notes are senior, unsecured obligations and are (i) equal in right of payment to our future senior, unsecured indebtedness; (ii) senior in righ