TYLER TECHNOLOGIES INC [TYL] Filings

10-Q 1 tyl-20240930.htm 10-Q tyl-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 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 October 21, 2024 was 42,798,585.

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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues:
Subscriptions	$	347,170	$	295,190	$	994,095	$	873,444
Maintenance	115,587		117,484		348,114		349,154
Professional services	64,462		61,126		201,196		188,475
Software licenses and royalties	6,188		10,554		20,251		30,463
Hardware and other	9,930		10,330		33,016		29,281
Total revenues	543,337		494,684		1,596,672		1,470,817

Cost of revenues:
Subscriptions, maintenance, and professional services	283,750		247,781		829,765		755,985
Software licenses and royalties	1,870		3,120		4,995		7,865
Amortization of software development	4,961		3,083		13,808		8,568
Amortization of acquired software	9,244		9,035		27,723		26,879
Hardware and other	6,052		6,505		21,439		23,346
Total cost of revenues	305,877		269,524		897,730		822,643

Gross profit	237,460		225,160		698,942		648,174

Sales and marketing expense	38,203		35,898		116,195		110,104
General and administrative expense	72,460		78,519		220,590		228,560
Research and development expense	30,120		28,282		88,504		83,421
Amortization of other intangibles	13,850		18,526		45,813		55,300

Operating income	82,827		63,935		227,840		170,789

Interest expense	(1,235)		(5,808)		(4,672)		(19,879)
Other income, net	4,504		787		8,232		2,676
Income before income taxes	86,096		58,914		231,400		153,586
Income tax provision	10,199		11,903		33,595		26,570
Net income	$	75,897	$	47,011	$	197,805	$	127,016

Earnings per common share:
Basic	$	1.78	$	1.12	$	4.64	$	3.02
Diluted	$	1.74	$	1.10	$	4.56	$	2.97

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	75,897	$	47,011	$	197,805	$	127,016
Other comprehensive income, net of tax:
Securities available-for-sale and transferred securities:
Change in net unrealized holding gain on available for sale securities during the period	56		263		164		321

Reclassification adjustment for net income (loss) on sale of available for sale securities, included in net income	(1)		—		(1)		1
Other comprehensive income, net of tax	55		263		163		322
Comprehensive income	$	75,952	$	47,274	$	197,968	$	127,338

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)


	September 30, 2024 (unaudited)		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	538,296	$	165,493
Accounts receivable (less allowance for losses and sales adjustments of $18,404 in 2024 and $22,829 in 2023)	619,508		619,704
Short-term investments	5,985		10,385
Prepaid expenses	68,352		54,700

Other current assets	6,423		10,303
Total current assets	1,238,564		860,585
Accounts receivable, long-term	7,331		8,988
Operating lease right-of-use assets	34,741		39,039
Property and equipment, net	165,272		169,720
Other assets:
Software development costs, net	76,580		67,124
Goodwill	2,531,653		2,532,109
Other intangibles, net	855,099		928,870
Non-current investments	3,884		7,046
Other non-current assets	83,384		63,182
	$	4,996,508	$	4,676,663
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	145,386	$	146,339
Accrued liabilities	160,689		158,558
Operating lease liabilities	10,653		11,060
Current income tax payable	22,485		2,466
Deferred revenue	682,422		632,914
Current portion of term loans	—		49,801
Total current liabilities	1,021,635		1,001,138


Convertible senior notes due 2026, net	597,502		596,206
Deferred revenue, long-term	—		291
Deferred income taxes	36,660		78,590
Operating lease liabilities, long-term	33,674		39,822
Other long-term liabilities	31,925		22,621
Total liabilities	1,721,396		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 September 30, 2024 and December 31, 2023	481		481
Additional paid-in capital	1,491,935		1,354,787
Accumulated other comprehensive loss, net of tax	(163)		(326)
Retained earnings	1,801,578		1,603,773
Treasury stock, at cost; 5,361,877 and 5,858,476 shares in 2024 and 2023, respectively	(18,719)		(20,720)
Total shareholders' equity	3,275,112		2,937,995
	$	4,996,508	$	4,676,663

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	197,805	$	127,016
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	108,766		114,198
(Gains) losses from sale of investments	(2)		1
Share-based compensation expense	88,460		80,905

Amortization of operating lease right-of-use assets	7,262		12,258
Deferred income tax benefit	(41,504)		(44,000)
Other	228		398
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable	(7,901)		(37,768)
Income tax payable	20,019		(51,300)
Prepaid expenses and other current assets	(28,157)		(11,594)
Accounts payable	(922)		27,848
Operating lease liabilities	(9,392)		(8,224)
Accrued liabilities	6,510		(10,607)
Deferred revenue	49,383		28,357
Other long-term liabilities	9,304		5,533
Net cash provided by operating activities	399,859		233,021

Cash flows from investing activities:
Additions to property and equipment	(16,734)		(12,506)
Purchase of marketable security investments	—		(10,617)
Proceeds and maturities from marketable security investments	7,700		45,452


Investment in software development	(24,412)		(27,447)
Cost of acquisitions, net of cash acquired	(1,395)		(35,540)
Other	168		48
Net cash used by investing activities	(34,673)		(40,610)

Cash flows from financing activities:

Payment on term loans	(50,000)		(255,000)


Payment of debt issuance costs	(2,637)		—


Proceeds from exercise of stock options, net of withheld shares for taxes upon equity award settlement	47,433		8,438
Contributions from employee stock purchase plan	12,821		11,780
Net cash provided (used) by financing activities	7,617		(234,782)

Net increase (decrease) in cash and cash equivalents	372,803		(42,371)
Cash and cash equivalents at beginning of period	165,493		173,857
Cash and cash equivalents at end of period	$	538,296	$	131,486

See accompanying notes.


	Nine Months Ended September 30,
	2024		2023
Supplemental cash flow information:
Cash paid for interest	$	2,860	$	16,820
Cash paid for income taxes, net	45,660		118,000
Non-cash investing and financing activities:
Non-cash additions to property and equipment	$	111	$	834

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 June 30, 2024	48,148	$	481	$	1,425,536	$	(218)	$	1,725,681	(5,524)	$	(19,372)	$	3,132,108
Net income	—	—		—		—		75,897		—	—		75,897
Other comprehensive income, net of tax	—	—		—		55		—		—	—		55
Exercise of stock options and vesting of restricted stock units	—	—		30,894		—		—		153	961		31,855
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—		—		(1)	(307)		(307)
Stock compensation	—	—		31,187		—		—		—	—		31,187
Issuance of shares pursuant to employee stock purchase plan	—	—		4,306		—		—		10	41		4,347
Reimbursement of shares from escrow	—	—		12		—		—		—	(42)		(30)
Balance at September 30, 2024	48,148	$	481	$	1,491,935	$	(163)	$	1,801,578	(5,362)	$	(18,719)	$	3,275,112


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at June 30, 2023	48,148	$	481	$	1,272,315	$	(785)	$	1,517,859	(6,081)	$	(21,619)	$	2,768,251
Net income	—	—		—		—		47,011		—	—		47,011
Other comprehensive income, net of tax	—	—		—		263		—		—	—		263
Exercise of stock options and vesting of restricted stock units	—	—		6,200		—		—		29	398		6,598
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—		—		(1)	(282)		(282)
Stock compensation	—	—		26,981		—		—		—	—		26,981
Issuance of shares pursuant to employee stock purchase plan	—	—		3,983		—		—		11	46		4,029
Balance at September 30, 2023	48,148	$	481	$	1,309,479	$	(522)	$	1,564,870	(6,042)	$	(21,457)	$	2,852,851

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	—	—		—		—		197,805		—	—		197,805
Other comprehensive income, net of tax	—	—		—		163		—		—	—		163
Exercise of stock options and vesting of restricted stock units	—	—		34,324		—		—		542	36,872		71,196
Employee taxes paid for withheld shares for taxes upon equity award settlement	—	—		—		—		—		(52)	(23,763)		(23,763)
Stock compensation	—	—		88,460		—		—		—	—		88,460
Issuance of shares pursuant to employee stock purchase plan	—	—		12,685		—		—		34	136		12,821

Reimbursement of shares from escrow	—	—		1,679		—		—		(28)	(11,244)		(9,565)
Balance at September 30, 2024	48,148	$	481	$	1,491,935	$	(163)	$	1,801,578	(5,362)	$	(18,719)	$	3,275,112


	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	—	—		—		—		127,016		—	—		127,016
Other comprehensive income, net of tax	—	—		—		322		—		—	—		322
Exercise of stock options and vesting of restricted stock units	—	—		7,223		—		—		338	20,242		27,465
Employee taxes paid for withheld shares for taxes upon equity award settlement	—	—		—		—		—		(53)	(19,026)		(19,026)
Stock compensation	—	—		80,905		—		—		—	—		80,905
Issuance of shares pursuant to employee stock purchase plan	—	—		11,626		—		—		38	154		11,780


Balance at September 30, 2023	48,148	$	481	$	1,309,479	$	(522)	$	1,564,870	(6,042)	$	(21,457)	$	2,852,851

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 September 30, 2024, and December 31, 2023, and operating result amounts are for the three and nine months ended September 30, 2024, and 2023, 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 nine months ended September 30, 2024 and 2023, we had approximately $55,000 and $163,000 and $263,000 and $322,000, respectively, of other comprehensive income, net of taxes, from our available-for-sale investment holdings.

(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. In certain cases, we have concluded that some services with SaaS arrangements are not distinct and therefore we recognize the revenue ratably of the remaining contractual period once we have provided the customer assess to the SaaS deliverable. 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 September 30, 2024, and December 31, 2023, total current and long-term accounts receivable, net of allowance for losses and sales adjustments was $626.8 million and $628.7 million, respectively. We have recorded unbilled receivables of $114.3 million and $119.2 million as of September 30, 2024, and December 31, 2023, respectively. Included in unbilled receivables are retention receivables of $11.1 million and $9.8 million as of September 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 the current portion of accounts receivable in the accompanying condensed consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with long-term portion of accounts receivable 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 $18.4 million and $22.8 million as of September 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 nine months ended September 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. This guidance will not 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 September 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	144,445	$	22,179	$	—	$	166,624
Transaction-based fees	61,561		118,985		—		180,546
Maintenance	109,346		6,241		—		115,587
Professional services	53,947		10,515		—		64,462
Software licenses and royalties	5,424		764		—		6,188
Hardware and other	9,025		905		—		9,930
Intercompany	6,983		4,765		(11,748)		—
Total revenues	$	390,731	$	164,354	$	(11,748)	$	543,337
Segment operating income (loss)	$	139,874	$	32,866	$	(66,819)	$	105,921


For the three months ended September 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	120,747	$	17,762	$	—	$	138,509
Transaction-based fees	45,176		111,505		—		156,681
Maintenance	111,574		5,910		—		117,484
Professional services	52,413		8,713		—		61,126
Software licenses and royalties	7,531		3,023		—		10,554
Hardware and other	10,371		—		(41)		10,330
Intercompany	5,943		—		(5,943)		—
Total revenues	$	353,755	$	146,913	$	(5,984)	$	494,684
Segment operating income (loss)	$	121,560	$	31,411	$	(61,475)	$	91,496


For the nine months ended September 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	408,632	$	62,754	$	—	$	471,386
Transaction-based fees	169,146		353,563		—		522,709
Maintenance	329,724		18,390		—		348,114
Professional services	167,571		33,625		—		201,196
Software licenses and royalties	19,314		937		—		20,251
Hardware and other	25,198		905		6,913		33,016
Intercompany	19,665		5,229		(24,894)		—
Total revenues	$	1,139,250	$	475,403	$	(17,981)	$	1,596,672
Segment operating income (loss)	$	404,159	$	96,030	$	(198,813)	$	301,376


For the nine months ended September 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Revenues
Subscriptions:
SaaS	$	338,128	$	48,894	$	—	$	387,022
Transaction-based fees	130,761		355,661		—		486,422
Maintenance	331,609		17,545		—		349,154
Professional services	159,168		29,307		—		188,475
Software licenses and royalties	25,078		5,385		—		30,463
Hardware and other	21,951		—		7,330		29,281
Intercompany	17,878		—		(17,878)		—
Total revenues	$	1,024,573	$	456,792	$	(10,548)	$	1,470,817
Segment operating income (loss)	$	332,725	$	99,746	$	(179,503)	$	252,968


	Three Months Ended September 30,				Nine Months Ended September 30,
Reconciliation of reportable segment operating income to the Company's consolidated totals:	2024		2023		2024		2023
Total segment operating income	$	105,921	$	91,496	$	301,376	$	252,968
Amortization of acquired software	(9,244)		(9,035)		(27,723)		(26,879)
Amortization of other intangibles	(13,850)		(18,526)		(45,813)		(55,300)
Interest expense	(1,235)		(5,808)		(4,672)		(19,879)
Other income, net	4,504		787		8,232		2,676
Income before income taxes	$	86,096	$	58,914	$	231,400	$	153,586

(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 September 30, 2024	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	166,624	$	166,624
Transaction-based fees	—		180,546		180,546
Maintenance	—		115,587		115,587
Professional services	—		64,462		64,462
Software licenses and royalties	5,346		842		6,188
Hardware and other	9,930		—		9,930
Total	$	15,276	$	528,061	$	543,337


For the three months ended September 30, 2023	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	138,509	$	138,509
Transaction-based fees	—		156,681		156,681
Maintenance	—		117,484		117,484
Professional services	—		61,126		61,126
Software licenses and royalties	9,946		608		10,554
Hardware and other	10,330		—		10,330
Total	$	20,276	$	474,408	$	494,684


For the nine months ended September 30, 2024	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	471,386	$	471,386
Transaction-based fees	—		522,709		522,709
Maintenance	—		348,114		348,114
Professional services	—		201,196		201,196
Software licenses and royalties	17,997		2,254		20,251
Hardware and other	33,016		—		33,016
Total	$	51,013	$	1,545,659	$	1,596,672


For the nine months ended September 30, 2023	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Subscriptions:
SaaS	$	—	$	387,022	$	387,022
Transaction-based fees	—		486,422		486,422
Maintenance	—		349,154		349,154
Professional services	—		188,475		188,475
Software licenses and royalties	28,020		2,443		30,463
Hardware and other	29,281		—		29,281
Total	$	57,301	$	1,413,516	$	1,470,817

Recurring Revenues

The majority of our revenues are comprised of revenues from subscriptions and maintenance, which we consider to be recurring revenues. Subscriptions revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees. These revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services and are collected on a recurring basis during the contract term. 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. 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 September 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	315,352	$	147,405	$	—	$	462,757
Non-recurring revenues	68,396		12,184		—		80,580
Intercompany	6,983		4,765		(11,748)		—
Total revenues	$	390,731	$	164,354	$	(11,748)	$	543,337


For the three months ended September 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	277,497	$	135,177	$	—	$	412,674
Non-recurring revenues	70,315		11,736		(41)		82,010
Intercompany	5,943		—		(5,943)		—
Total revenues	$	353,755	$	146,913	$	(5,984)	$	494,684


For the nine months ended September 30, 2024	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	907,502	$	434,707	$	—	$	1,342,209
Non-recurring revenues	212,083		35,467		6,913		254,463
Intercompany	19,665		5,229		(24,894)		—
Total revenues	$	1,139,250	$	475,403	$	(17,981)	$	1,596,672


For the nine months ended September 30, 2023	Enterprise Software		Platform Technologies		Corporate		Totals
Recurring revenues	$	800,498	$	422,100	$	—	$	1,222,598
Non-recurring revenues	206,197		34,692		7,330		248,219
Intercompany	17,878		—		(17,878)		—
Total revenues	$	1,024,573	$	456,792	$	(10,548)	$	1,470,817

(5) Deferred Revenue and Performance Obligations

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


	September 30, 2024		December 31, 2023
Enterprise Software	$	641,616	$	589,295
Platform Technologies	38,478		39,597
Corporate	2,328		4,313
Totals	$	682,422	$	633,205

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


	Nine months ended September 30, 2024
Balance as of December 31, 2023	$	633,205
Deferral of revenue	1,110,313
Recognition of deferred revenue	(1,061,096)
Balance as of September 30, 2024	$	682,422

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 September 30, 2024, was $2.13 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 $53.1 million and $49.2 million as of September 30, 2024, and December 31, 2023, respectively. Amortization expense was $4.8 million and $14.5 million for the three and nine months ended September 30, 2024, respectively, and $5.0 million and $13.6 million for the three and nine months ended September 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 nine months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company resolved an outstanding matter related to the acquisition of Resource Exploration, Inc. (“ResourceX”) for $60,000. The matter was fully indemnified and reimbursed using a combination of cash from acquisition date holdback and return of shares of our common stock from escrow.

During the nine months ended September 30, 2024, the Company settled litigation for $9.5 million related to a case 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.

(8) Debt

The following table summarizes our outstanding borrowings:


	Rate	Maturity Date	September 30, 2024		December 31, 2023
2024 Credit Agreement
Revolving credit facility	S + 1.125%	September 2029	$	—	$	—
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			(2,498)		(3,993)
Total borrowings, net			597,502		646,007

Less: current portion of debt			—		(49,801)
Carrying value			$	597,502