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 (“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 March 31, 2026, and December 31, 2025, and operating result amounts are for the three months ended March 31, 2026, and March 31, 2025, 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, 2025. 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. As of January 1, 2026, we have elected to combine software license and royalties revenue and hardware and other revenue into a single revenue category, along with a corresponding adjustment within cost of revenues on the condensed consolidated statement of income for all reporting periods presented to simplify presentation and enhance the usefulness of our financial statements.
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 months ended March 31, 2026, we had approximately $268,000, of other comprehensive loss, net of taxes, from our available-for-sale investment holdings and $74,000, of other comprehensive income during the three months ended March 31, 2025.
(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, 2025, filed with the SEC on February 18, 2026, that have had a material impact on our condensed consolidated financial statements and related notes. See Recently Pronounced Accounting Standards below.
REVENUE RECOGNITION
Nature of Products and Services
We account for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Revenue is recognized upon transfer of control of promised products or services to clients 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 client
•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
We earn the majority of our revenues from subscription-based services and post-contract client support (“PCS” or “maintenance”). Subscription-based services consist primarily of revenues derived from SaaS arrangements and transaction-based fees. Other sources of revenue are professional services and other revenue including software licenses, royalties, hardware and other. Certain arrangements with clients contain multiple performance obligations that range from software license deliveries, installation, training, consulting, software modification and customization to meet specific client needs; software as a service (“SaaS”); transaction-based fees; and PCS. For these contracts, 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, client demographics, and the number and types of users within our contracts.
Revenue is recognized net of allowances for sales adjustments and any taxes collected from clients, which are subsequently remitted to governmental authorities.
Subscription-Based Services
Subscription-based services consist primarily of revenues derived from SaaS arrangements and transaction-based fees. For SaaS arrangements, we evaluate whether the client has the contractual right to take possession of our software at any time during the hosting period without significant penalty and whether the client can feasibly maintain the software on the client’s hardware or enter into another arrangement with a third party to host the software. We recognize SaaS services ratably over the term of the arrangement, which range from one to 10 years, but most arrangements are typically for periods of 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 client access to the software.
Transaction-based fees primarily relate to digital government services and online payment services, which are sometimes offered with the assistance of third-party vendors. When we are the principal in a transaction, we recognize revenue on a gross basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount billed to the client) and record the net amount as revenue.
For transaction-based revenues from digital government services and online payments, we have the right to charge the client an amount that directly corresponds with the value to the client of our performance to date. Therefore, we recognize revenues for these services over time based on the amount billable to the client. In some cases, we are paid on a fixed-fee basis and recognize the revenue ratably over the contractual period. Typically, the structure of our arrangements does not give rise to variable consideration. However, in those instances where variable consideration exists, we include in our estimates additional revenues for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably, and its realization is probable.
Costs of performing services under subscription-based arrangements are expensed as incurred, except for certain direct and incremental contract origination costs associated with SaaS arrangements. Such direct and incremental costs are capitalized and amortized ratably over the period of benefit.
Maintenance (Post-Contract Client Support)
Our clients generally enter into PCS agreements when they license our software. PCS includes telephone support, bug fixes, and rights to upgrades on a when-and-if available basis. PCS is considered distinct when purchased with our software licenses. Our PCS agreements are typically renewable annually. PCS is recognized over time on a straight-line basis over the period the PCS is provided. All significant costs and expenses associated with PCS are expensed as incurred.
Professional Services
When professional services are distinct, the fee allocable to the service obligation is recognized over the time we perform the services. Contract fees are typically billed on a time and material or a milestone basis as defined within contract terms. 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.
Depending on the contract, we measure progress-to-completion primarily using labor hours incurred. 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. Changes in these judgments or estimates could cause an increase or decrease in the amount of revenue or deferred revenue that we report in a particular period.
Other
Other revenue primarily consists of our software license arrangements, royalties from third-party agreements and computer hardware. Software license arrangements involve “off-the-shelf” software. We recognize the revenue allocable to “off-the-shelf” software licenses and specified upgrades at a point in time when control of the software license transfers to the client, unless the software is not considered distinct. For arrangements that involve significant production, modification or customization of the software, or where professional services are otherwise not considered distinct, we recognize revenue over time by measuring progress-to-completion generally using labor hours. Software license fees are billed in accordance with the contract terms. Typically, a majority of the fee is due when access to the software license is made available to the client and the remainder of the fee is due over a passage of time stipulated by the contract.
We recognize royalty revenue when the sale occurs under the terms of our third-party royalty arrangements. Currently, our third-party royalties are recognized on an estimated basis and adjusted if needed, when we receive notice of amounts we are entitled to receive.
Computer hardware is recognized at a point in time when control of the equipment is transferred to the client.
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 clients. 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 clients annually at the beginning of each annual coverage period.
Accounts receivable is as follows:
| | | | | | | | | | | |
| | March 31, 2026 | | December 31, 2025 |
Accounts receivable - current | $ | 572,998 | | | $ | 638,798 | |
Accounts receivable - long term | 8,271 | | | 5,968 | |
Total accounts receivable | $ | 581,269 | | | $ | 644,766 | |
Total accounts receivable, including total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $581.3 million and $644.8 million, as of March 31, 2026, and December 31, 2025, respectively. We have recorded unbilled receivables of $91.1 million and $98.4 million as of March 31, 2026, and December 31, 2025, respectively. 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 the long-term portion of accounts receivable in the accompanying condensed consolidated balance sheets. Unbilled receivables also include retention receivables of $13.0 million and $12.3 million as of March 31, 2026, and December 31, 2025, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings.
We maintain allowances for losses and sales adjustments, which 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 $26.4 million and $32.0 million as of March 31, 2026, and December 31, 2025, respectively.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
We perform an impairment assessment annually on October 1, or more frequently if indicators of potential impairment exist. An impairment assessment includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of each reporting unit’s goodwill. If the conclusion of an impairment assessment is that it is more likely than not that the fair value of the reporting unit is more than its carrying value, goodwill is not considered impaired, and we are not required to perform the quantitative goodwill impairment test. If the conclusion of an impairment assessment is that it is more likely than not that the fair value is less than its carrying value, we perform the quantitative goodwill impairment test, which compares the fair value of the reporting unit to its carrying value. Impairments, if any, are based on the excess of the carrying amount over the fair value.
For the three months ended March 31, 2026, there have been no impairments to goodwill in any of the periods presented. Adverse changes in the qualitative factors, including possible further declines in our market capitalization or higher discount rates implied by market conditions could require us to perform a quantitative impairment test and may result in the recognition of a goodwill impairment in future periods.
Other Intangible Assets
We make judgments about the recoverability of purchased intangible assets other than goodwill whenever events or changes in circumstances indicate that an impairment may exist. Client base and acquired software each comprise approximately half of our purchased intangible assets other than goodwill. We review our client turnover each year for indications of impairment. If indications of impairment are determined to exist, we measure the recoverability of assets by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. For the three months ended March 31, 2026, there have been no significant impairments of intangible assets in any of the periods presented.
RECENTLY PRONOUNCED ACCOUNTING STANDARDS
In December 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2025-11 - Interim Reporting (Topic 270): Narrow-scope Improvement. This ASU clarifies and reorganizes existing interim reporting guidance in ASC 270 to improve readability and consistency, without adding new disclosure requirements. It also introduces a clear disclosure principle for material events and changes occurring since the last annual period, aligning GAAP more closely with prior SEC practice. It is effective for annual reporting periods beginning after December 15, 2028, and interim periods within those annual reporting periods, with early adoption permitted. This guidance is not expected to have a material impact on the Company’s financial statements.
In September 2025, the FASB issued ASU 2025-06 - Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update removes the prescriptive software development “project stages” and requires capitalization of software costs once (1) management authorizes and commits funding and (2) completion and use are probable. Entities must evaluate significant development uncertainty related to technological innovations or performance requirements. The amendments also require Subtopic 360-10 disclosures for all capitalized internal-use software costs and clarify that intangible asset disclosures under Subtopic 350-30 are not required. The standard is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial statements.
In November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This guidance requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. It is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial statements.
(3) Segment and Related Information
Reportable segments are determined based on the Company’s management approach. The management approach, as defined by FASB ASC 280 “Segment Reporting,” is based on the way that the Chief Operating Decision Maker (“CODM”) organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our CODM, for purposes of FASB ASC 280, is our chief executive officer.
We report our results in two reportable segments. Our reportable segments are organized on the basis of a combination of the products and services they deliver to clients and the function that the public sector client performs. Operating segments that have met the aggregation criteria have been combined into our two reportable segments. The Enterprise Software (“ES”) reportable segment provides public sector entities with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as: public administration solutions, courts and public safety solutions, education solutions, and property and recording solutions. The Platform Technologies (“PT”) reportable segment provides public sector entities with platform and transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and workflows.
The CODM uses segment operating income or loss to assess performance and to allocate resources (including employees, property, and financial or capital resources) for each segment, predominantly in the annual budget and forecasting process. During the fiscal periods presented, we had no significant transactions between reportable segments. Corporate unallocated amounts are comprised of non-cash amortization of intangible assets associated with acquisitions, depreciation associated with unallocated property and equipment assets, compensation costs for the executive management team and certain shared services staff such as internal infrastructure costs and share-based compensation expense for the entire company. Corporate unallocated amounts also include incidental revenues and expenses related to a company-wide user conference and rental income.
| | | | | | | | | | | | | | | | | | | | |
| For the three months ended March 31, 2026 | | Enterprise
Software | | Platform Technologies | | Totals |
| Revenues | | | | | | |
| Subscriptions: | | | | | | |
| SaaS | | $ | 200,132 | | | $ | 22,224 | | | |
| Transaction-based fees | | 95,039 | | | 112,350 | | | |
| Maintenance | | 103,327 | | | 5,547 | | | |
| Professional services | | 53,258 | | | 7,549 | | | |
| Other revenues | | 12,997 | | | 393 | | | |
| Total segment revenues | | 464,753 | | | 148,063 | | | 612,816 | |
| Less: | | | | | | |
| Cost of revenues | | 192,863 | | | 103,341 | | | |
| Sales and marketing expense | | 25,376 | | | 4,907 | | | |
| General and administrative expense | | 11,520 | | | 18,014 | | | |
| Research and development expense | | 48,734 | | | 4,076 | | | |
Segment operating income | | $ | 186,260 | | | $ | 17,725 | | | $ | 203,985 | |
| | | | | | | | | | | | | | | | | | | | |
| For the three months ended March 31, 2025 | | Enterprise
Software | | Platform Technologies | | Totals |
| Revenues | | | | | | |
| Subscriptions: | | | | | | |
| SaaS | | $ | 158,741 | | | $ | 21,339 | | | |
| Transaction-based fees | | 69,839 | | | 125,070 | | | |
| Maintenance | | 106,979 | | | 5,822 | | | |
| Professional services | | 54,593 | | | 9,457 | | | |
| Other revenues | | 12,594 | | | 41 | | | |
| Total segment revenues | | 402,746 | | | 161,729 | | | 564,475 | |
| Less: | | | | | | |
| Cost of revenues | | 169,287 | | | 108,993 | | | |
| Sales and marketing expense | | 25,267 | | | 4,731 | | | |
| General and administrative expense | | 11,592 | | | 13,401 | | | |
| Research and development expense | | 37,680 | | | 4,318 | | | |
Segment operating income | | $ | 158,920 | | | $ | 30,286 | | | $ | 189,206 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| Reconciliation of reportable segment operating income to the Company's consolidated totals: | | 2026 | | 2025 | | | | |
| Total segment operating income | | $ | 203,985 | | | $ | 189,206 | | | | | |
Corporate unallocated: | | | | | | | | |
| Total revenues | | 687 | | | 690 | | | | | |
| Cost of revenues | | (20,865) | | | (19,804) | | | | | |
| Sales and marketing expense | | (8,514) | | | (6,475) | | | | | |
| General and administrative expense | | (54,431) | | | (54,459) | | | | | |
| Research and development expense | | (6,917) | | | (5,846) | | | | | |
| Amortization of other intangibles | | (14,133) | | | (14,139) | | | | | |
| Interest expense | | (1,066) | | | (1,246) | | | | | |
| Other income, net | | 7,676 | | | 7,363 | | | | | |
| Income before income taxes | | $ | 106,422 | | | $ | 95,290 | | | | | |
The following table presents reconciliations of segment revenues from external customers and other segment information to the Company’s consolidated totals: | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| Revenues: | | 2026 | | 2025 | | | | |
| ES | | $ | 464,753 | | | $ | 402,746 | | | | | |
| PT | | 148,063 | | | 161,729 | | | | | |
| Corporate unallocated | | 687 | | | 690 | | | | | |
| Total consolidated | | $ | 613,503 | | | $ | 565,165 | | | | | |
| | | | | | | | |
| Depreciation and amortization expense: | | | | | | | | |
| ES | | $ | 1,879 | | | $ | 973 | | | | | |
| PT | | 9,481 | | | 4,341 | | | | | |
| Corporate unallocated | | 27,589 | | | 29,307 | | | | | |
| Total consolidated | | $ | 38,949 | | | $ | 34,621 | | | | | |
| | | | | | | | |
| Software development expenditures: | | | | | | | | |
| ES | | $ | — | | | $ | 1,549 | | | | | |
| PT | | 1,260 | | | 3,991 | | | | | |
| Corporate | | — | | | 10 | | | | | |
| Total consolidated | | $ | 1,260 | | | $ | 5,550 | | | | | |
| | | | | | | | |
| Capital expenditures: | | | | | | | | |
| ES | | $ | 804 | | | $ | 730 | | | | | |
| PT | | 441 | | | 939 | | | | | |
| Corporate | | 1,992 | | | 666 | | | | | |
| Total consolidated | | $ | 3,237 | | | $ | 2,335 | | | | | |
| | | | | | | | | | | | | | |
| Segment assets: | | March 31, 2026 | | December 31, 2025 |
| ES | | $ | 461,269 | | | $ | 534,864 | |
| PT | | 386,632 | | | 416,998 | |
Corporate | | 3,950,718 | | | 4,687,046 | |
| Total consolidated | | $ | 4,798,619 | | | $ | 5,638,908 | |
Segment assets primarily consist of net accounts receivable, prepaid expenses and other current assets, and net property and equipment and software development costs, net. Corporate assets primarily consist of cash and investments; prepaid insurance; goodwill and intangibles associated with acquisitions; deferred income taxes; software development costs, net; and net property and equipment mainly related to unallocated information and technology assets. Certain depreciation and amortization expense for the prior period has been reclassified to corporate unallocated to be consistent with the current year presentation that better aligns with the classification of certain assets on the condensed consolidated balance sheets as corporate.
(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.
Recurring Revenues
The majority of our revenues are comprised of revenues from subscriptions and maintenance, which we consider to be recurring revenues. Subscription revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees. These revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services and are collected on a recurring basis during the contract term. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of 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 March 31, 2026 | | Enterprise Software | | Platform Technologies | | Corporate Unallocated | | Totals |
| Revenues | | | | | | | | |
| Subscriptions: | | | | | | | | |
| SaaS | | $ | 200,132 | | | $ | 22,224 | | | $ | — | | | $ | 222,356 | |
| Transaction-based fees | | 95,039 | | | 112,350 | | | — | | | 207,389 | |
| Maintenance | | 103,327 | | | 5,547 | | | — | | | 108,874 | |
| Total recurring revenues | | 398,498 | | | 140,121 | | | — | | | 538,619 | |
| | | | | | | | |
| Professional services | | 53,258 | | | 7,549 | | | — | | | 60,807 | |
| Other revenues | | 12,997 | | | 393 | | | 687 | | | 14,077 | |
| Total non-recurring revenues | | 66,255 | | | 7,942 | | | 687 | | | 74,884 | |
| | | | | | | | |
| Total revenues | | $ | 464,753 | | | $ | 148,063 | | | $ | 687 | | | $ | 613,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended March 31, 2025 | | Enterprise Software | | Platform Technologies | | Corporate Unallocated | | Totals |
| Revenues | | | | | | | | |
| Subscriptions: | | | | | | | | |
| SaaS | | $ | 158,741 | | | $ | 21,339 | | | $ | — | | | $ | 180,080 | |
| Transaction-based fees | | 69,839 | | | 125,070 | | | — | | | 194,909 | |
| Maintenance | | 106,979 | | | 5,822 | | | — | | | 112,801 | |
| Total recurring revenues | | 335,559 | | | 152,231 | | | — | | | 487,790 | |
| | | | | | | | |
| Professional services | | 54,593 | | | 9,457 | | | — | | | 64,050 | |
| Other revenues | | 12,594 | | | 41 | | | 690 | | | 13,325 | |
| Total non-recurring revenues | | 67,187 | | | 9,498 | | | 690 | | | 77,375 | |
| | | | | | | | |
| Total revenues | | $ | 402,746 | | | $ | 161,729 | | | $ | 690 | | | $ | 565,165 | |
(5) Deferred Revenue and Performance Obligations
Total deferred revenue, including long-term, by segment is as follows:
| | | | | | | | | | | | | | |
| | March 31, 2026 | | December 31, 2025 |
| Enterprise Software | | $ | 683,764 | | | $ | 755,894 | |
| Platform Technologies | | 39,341 | | | 39,443 | |
Corporate | | 7,734 | | | 6,489 | |
| Totals | | $ | 730,839 | | | $ | 801,826 | |
Changes in total deferred revenue, including long-term, were as follows:
| | | | | | | | |
| | Three Months Ended March 31, 2026 |
| Balance as of December 31, 2025 | | $ | 801,826 | |
| Deferral of revenue | | 345,462 | |
| Recognition of deferred revenue | | (416,449) | |
| Balance as of March 31, 2026 | | $ | 730,839 | |
Remaining Performance Obligations
We expect to recognize as revenue approximately 97% of our deferred revenue balance as of March 31, 2026, in the next 12 months, and the remainder thereafter. We believe the portion of transaction price allocated to the remaining performance obligations which is not included in our deferred revenue balance is not a meaningful indicator of future revenue due to contracts with transaction-based fees that vary with transaction activity, the variability in subscription term lengths, and termination provisions included in some contracts that limit inclusion and cause variability from period to period.
(6) Deferred Commissions
Deferred commissions are as follows:
| | | | | | | | | | | | | | |
| | | March 31, 2026 | | December 31, 2025 |
Prepaid commissions | | $ | 21,809 | | | $ | 24,006 | |
Long-term deferred commissions | | 53,442 | | | 54,561 | |
Total deferred commissions | | $ | 75,251 | | | $ | 78,567 | |
Amortization expense related to deferred commissions is as follows:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
Amortization expense | $ | 6,419 | | | $ | 5,100 | | | | | |
Deferred commissions have been included with prepaid expenses for the current portion and other non-current 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 new acquisitions during the three months ended March 31, 2026.
(8) Debt
The following table summarizes our total outstanding borrowings:
| | | | | | | | | | | | | | | | | | | | | | | |
| Rate | | Maturity Date | | March 31, 2026 | | December 31, 2025 |
| | | | | | | |
| 2024 Credit Agreement - Revolving credit facility | S + 1.125% | | September 2029 | | $ | — | | | $ | — | |
| Convertible Senior Notes due 2026 | 0.25% | | March 2026 | | — | | | 600,000 | |
| Total borrowings | | | | | — | | | 600,000 | |
| Less: unamortized debt discount and debt issuance costs | | | | | — | | | (337) | |
| Total borrowings, net | | | | | — | | | 599,663 | |
| | | | | | | |
| | | | | | | |
| Current portion of convertible senior notes due 2026, net | | | | | — | | | 599,663 | |
| | | | | | | |
| Total Debt | | | | | $ | — | | | $ | 599,663 | |
2024 Credit Agreement
On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lender parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender (the “2024 Credit Agreement”). The 2024 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $700.0 million, including sub-facilities for standby letters of credit and swingline loans. The 2024 Credit Agreement matures on September 25, 2029, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any SOFR breakage costs.
The 2024 Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants, and defined events of defaults. The 2024 Credit Agreement requires us to maintain certain financial ratios and other financial conditions and limits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens. As of March 31, 2026, we had no outstanding borrowings, and we were in compliance with all covenants.
Loans under the revolving credit facility will bear interest, at the Company’s option, at a per annum rate of either (1) the Administrative Agent’s prime commercial lending rate (subject to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, three-, or six-month SOFR rate plus a margin of 1.125% to 1.75%. The margin in each case is based upon Tyler’s total net leverage ratio, as determined pursuant to the 2024 Credit Agreement. In addition to paying interest on the outstanding principal of loans under the revolving credit facility, the Company is required to pay a commitment fee initially in the amount of 0.125% per annum, which will subsequently range from 0.125% to 0.25% based upon the Company’s total net leverage ratio. Borrowings under the 2024 Credit Agreement may be used for general corporate purposes, including working capital requirements, acquisitions and capital expenditures.
Convertible Senior Notes due 2026
On March 15, 2026, the Company repaid the $600.0 million aggregate principal amount of its 0.25% Convertible Senior Notes due 2026 (the “Notes”) in cash at maturity. No conversions of the Notes occurred prior to or at maturity as the Company’s common stock price did not exceed the conversion price during the relevant periods for redemption, and no other conversion conditions were met. As a result, the entire principal amount was settled in cash, and no shares of common stock were issued upon settlement.
Effective Interest Rate
For the three months ended March 31, 2026, the effective interest rate was 0.53% for the Convertible Senior Notes. The following sets forth the interest expense recognized related to the borrowings and commitment fees for unused portions under the 2024 Credit Agreement and Convertible Senior Notes and is included in interest expense in the accompanying condensed consolidated statements of income:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Contractual interest expense - Revolving Credit Facility | $ | (218) | | | $ | (239) | | | | | |
| | | | | | | |
| Contractual interest expense - Convertible Senior Notes | (313) | | | (375) | | | | | |
| Amortization of debt discount and debt issuance costs | (535) | | | (632) | | | | | |
| Total | $ | (1,066) | | | $ | (1,246) | | | | | |
As of March 31, 2026, we had one outstanding letter of credit totaling $500,000. The letter of credit, which guarantees our performance under a client contract, automatically renews annually unless canceled in writing, and expires in the third quarter of 2026.
(9) Financial Instruments
The following table presents our financial instruments:
| | | | | | | | | | | | | | |
| | March 31, 2026 | | December 31, 2025 |
| Cash and cash equivalents | | $ | 316,010 | | | $ | 1,015,400 | |
| | | | |
| Available-for-sale investments | | 81,799 | | | 142,498 | |
Equity investment | | 10,000 | | | 10,000 | |
| Total | | $ | 407,809 | | | $ | 1,167,898 | |
Cash and cash equivalents consist primarily of money market funds with original maturity dates of three months or less, for which we determine fair value through quoted market prices.
Our investment portfolio is classified as available-for-sale in order to have the flexibility to buy and sell investments and maximize cash liquidity. Our available-for-sale investments primarily consist of investment grade corporate bonds, U.S. Treasuries, and asset-backed securities with maturity dates through 2027. These investments are presented at fair value and are included in short-term investments and non-current investments in the accompanying condensed consolidated balance sheets. Unrealized gains or losses associated with the investments are included in accumulated other comprehensive income (loss), net of tax in the accompanying condensed consolidated balance sheets and other comprehensive income (loss), net of tax in the statements of comprehensive income. For our available-for-sale investments, we do not have the intent to sell, nor is it more likely than not that we would be required to sell before recovery of their cost basis.
As of March 31, 2026 and December 31, 2025, we have an accrued interest receivable balance of approximately $0.8 million and $1.3 million, respectively, which is included in accounts receivable, net. We do not measure an allowance for credit losses for accrued interest receivables. We record any losses within the maturity period or at the time of sale of the investment, and any write-offs to accrued interest receivables are recorded as reductions to interest income in the period of the loss. During the three months ended March 31, 2026, we have recorded no losses for accrued interest receivables. Interest income and amortization of discounts and premiums are included in other income, net in the accompanying condensed consolidated statements of income.
The following table presents the components of our available-for-sale investments:
| | | | | | | | | | | |
| March 31, 2026 | | December 31, 2025 |
| Amortized cost | $ | 82,172 | | | $ | 142,515 | |
| Unrealized gains | 3 | | | 127 | |
| Unrealized losses | (376) | | | (144) | |
| Estimated fair value | $ | 81,799 | | | $ | 142,498 | |
As of March 31, 2026, we have $30.3 million of available-for-sale debt securities with contractual maturities of one year or less and $51.5 million with contractual maturities greater than one year. As of March 31, 2026, 66 available-for-sale securities with a fair value of $69.4 million have been in a loss position for one year or less and two securities with a fair value of $2.1 million have been in a loss position for greater than one year.
The following table presents the activity on our available-for-sale investments:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Proceeds from sales and maturities | $ | 61,858 | | | $ | 1,756 | | | | | |
| Realized gains (losses) on sales, net of tax | 3 | | | (1) | | | | | |
As of March 31, 2026, our equity investment consists of a minority interest in the common stock of a privately held company that is carried at cost less any impairment write-downs because we do not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values. On February 2, 2026, we signed a definitive agreement to acquire the remaining equity interest of this investment. The transaction closed on April 14, 2026. See Note 17, “Subsequent Events,” for more information.
(10) Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for that asset or liability. Guidance on fair value measurements and disclosures establishes a valuation hierarchy for disclosure of inputs used in measuring fair value defined as follows:
•Level 1—Inputs are unadjusted quoted prices that are available in active markets for identical assets or liabilities.
•Level 2—Inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in non-active markets, inputs other than quoted prices that are observable, and inputs that are not directly observable, but are corroborated by observable market data.
•Level 3—Inputs that are unobservable and are supported by little or no market activity and reflect the use of significant management judgment.
The classification of a financial asset or liability within the hierarchy is determined based on the least reliable level of input that is significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We also consider the counterparty and our own non-performance risk in our assessment of fair value.
The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of March 31, 2026:
| | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Cash and cash equivalents | $ | 316,010 | | | $ | — | | | $ | — | | | $ | 316,010 | |
| Available-for-sale investments | — | | | 81,799 | | | — | | | 81,799 | |
Equity investment | — | | | — | | | 10,000 | | | 10,000 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The following table presents fair values of our financial and debt instruments categorized by their fair value hierarchy as of December 31, 2025:
| | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Cash and cash equivalents | $ | 1,015,400 | | | $ | — | | | $ | — | | | $ | 1,015,400 | |
| Available-for-sale investments | — | | | 142,498 | | | — | | | 142,498 | |
Equity investment | — | | | — | | | 10,000 | | | 10,000 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Convertible Senior Notes due 2026 | — | | | 607,500 | | | — | | | 607,500 | |
Assets that are measured at fair value on a recurring basis
Accounts receivables, accounts payables, short-term obligations and certain other assets carrying value approximate fair value because of the short maturity of these instruments.
As of March 31, 2026, we have $81.8 million in investment grade corporate bonds, U.S. Treasuries, and asset-backed securities with maturity dates through 2027. The fair values of these securities are considered Level 2 as they are based on inputs from quoted prices in markets that are not active or other observable market data.
Assets that are measured at fair value on a nonrecurring basis
As of March 31, 2026, our equity investment consists of a minority interest in common stock of a privately held company. As we do not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values, our investment is carried at cost less any impairment write-downs. Periodically, our investment is assessed for impairment. We do not reassess the fair value of the investment if there are no identified events or changes in circumstances that indicate fair value of the investment or indicate impairment. No events or changes in circumstances have occurred during the period that require reassessment. There has been no impairment of this investment for the periods presented. This investment is included in other non-current assets in the accompanying condensed consolidated balance sheets. On February 2, 2026, we signed a definitive agreement to acquire the remaining equity interest of this investment. The transaction closed on April 14, 2026. See Note 17, “Subsequent Events,” for more information.
As described in Note 2, “Summary of Significant Accounting Policies,” we assess goodwill for impairment annually on October 1. In addition, we review goodwill, property and equipment, and other intangibles for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. During the fourth quarter of 2025, we completed our annual assessment of goodwill which did not result in an impairment charge. Further, for the three months ended March 31, 2026, we identified no indicators of impairment to goodwill, property and equipment, and other intangibles; therefore, no impairment was recorded.
Financial instruments measured at fair value only for disclosure purposes
The fair value of our Convertible Senior Notes is determined based on quoted market prices for a similar liability when traded as an asset in an active market, a Level 2 input. See Note 8, “Debt,” for further discussion.
The carrying amount of the Convertible Senior Notes is the par value less the debt discount and debt issuance costs that are amortized to interest expense using the effective interest method over the term of the Convertible Senior Notes. Interest expense is included in the accompanying condensed consolidated statements of income.
The following table presents the fair value and carrying value, net, of our Convertible Senior Notes:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value at | | Carrying Value at |
| March 31, 2026 | | December 31, 2025 | | March 31, 2026 | | December 31, 2025 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Convertible Senior Notes due 2026 | $ | — | | | $ | 607,500 | | | $ | — | | | $ | 599,663 | |
| | | | | | | |
(11) Income Tax Provision
We had an effective income tax rate of 23.7% for the three months ended March 31, 2026, compared to 14.9% for the three months ended March 31, 2025. The increase in the effective tax rate for the three months ended March 31, 2026, as compared to the prior period, is due to a decrease in excess tax benefits related to stock incentive awards and research tax credit benefits, and a slight increase in liabilities for uncertain tax positions.
The effective income tax rates for the periods presented are different from the statutory United States federal income tax rate of 21% primarily due to state income taxes, liabilities for uncertain tax positions, and non-deductible business expenses, offset by the excess tax benefits related to stock incentive awards and the tax benefits of research tax credits.
We made income tax payments, net of refunds, of $46,000 and received income tax refunds, net of taxes paid, of $323,000 in the three months ended March 31, 2026, and 2025, respectively.
(12) Shareholders’ Equity
On February 3, 2026, our Board of Directors authorized the repurchase of $1.0 billion of our common stock, which replaced and superseded all previous share repurchase authorizations. Our share repurchase program allows us to repurchase shares at our discretion. There is no expiration date specified for the authorization.
The following table details activity in our common stock:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2026 | | 2025 | | | | |
| | Shares | | Amount | | Shares | | Amount | | | | | | | | |
| Treasury stock purchases | | (800) | | | $ | (250,063) | | | — | | | $ | — | | | | | | | | | |
| Exercise of stock options and vesting of restricted stock units | | 169 | | | 2,616 | | | 165 | | | 16,444 | | | | | | | | | |
| Issuance of shares pursuant to employee stock purchase plan | | 10 | | | 3,801 | | | 8 | | | 3,970 | | | | | | | | | |
| Employee taxes paid for withheld shares upon equity award settlement | | (53) | | | (18,981) | | | (24) | | | (14,918) | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
For the three months ended March 31, 2026, we repurchased approximately 800,000 shares of our common stock for an aggregate purchase price of approximately $250.1 million. As of April 29, 2026, we have remaining authorization from our Board of Directors to repurchase up to $653.4 million of our common stock.
(13) Share-Based Compensation
The following table summarizes share-based compensation expense related to share-based awards, which is recorded in the condensed consolidated statements of income:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2026 | | 2025 | | | | |
Cost of revenues | | $ | 9,474 | | | $ | 8,714 | | | | | |
Operating expenses | | 27,685 | | | 28,946 | | | | | |
| Total share-based compensation expense | | $ | 37,159 | | | $ | 37,660 | | | | | |
(14) Earnings Per Share
The following table details the reconciliation of basic earnings per share to diluted earnings per share:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Numerator for basic and diluted earnings per share: | | | | | | | |
| Net income | $ | 81,180 | | | $ | 81,052 | | | | | |
| Denominator: | | | | | | | |
| Weighted-average basic common shares outstanding | 42,805 | | | 43,024 | | | | | |
| Assumed conversion of dilutive securities: | | | | | | | |
| Stock awards | 342 | | | 713 | | | | | |
| Convertible Senior Notes | — | | | 206 | | | | | |
Denominator for diluted earnings per share
- Adjusted weighted-average shares | 43,147 | | | 43,943 | | | | | |
| Earnings per common share: | | | | | | | |
| Basic | $ | 1.90 | | | $ | 1.88 | | | | | |
| Diluted | $ | 1.88 | | | $ | 1.84 | | | | | |
For the three months ended March 31, 2026, and 2025, stock awards representing the right to purchase common stock of approximately 390,000 and 22,000 shares, respectively, were not included in the computation of diluted earnings per share because their inclusion would have had an antidilutive effect.
We used the if-converted method for calculating any potential dilutive effect of the Notes on our diluted net income per share if our average stock price for the period exceeded the conversion price of $493.44 per share of common stock. Under the if-converted method, the Notes are assumed to be converted at the beginning of the period and the resulting common shares, if dilutive, are included in the denominator of the diluted earnings per share calculation for the entire period being presented .During the three months ended March 31, 2026, the Company repaid the $600.0 million aggregate principal amount of the Notes with no conversions, therefore no dilutive impact as reflected in the table above. For the three months ended March 31, 2025, our average stock price for the period exceeded the conversion price resulting in a dilutive impact of the if-converted method as reflected in the table above.
(15) Leases
We lease office facilities, transportation, and other equipment for use in our operations. Most of our leases are non-cancelable operating lease agreements with remaining terms of one to nine years. Some of these leases include options to extend for up to six years. We have no finance leases as of March 31, 2026. Right-of-use lease assets and lease liabilities for our operating leases are recorded in the condensed consolidated balance sheets.
The components of operating lease expense were as follows:
| | | | | | | | | | | | | | | | | | |
| Lease Costs | | Three Months Ended March 31, | | |
| | 2026 | | 2025 | | | | |
| Operating lease cost | | $ | 2,824 | | | $ | 2,344 | | | | | |
| Short-term lease cost | | 506 | | | 564 | | | | | |
| Variable lease cost | | 427 | | | 248 | | | | | |
| Net lease cost | | $ | 3,757 | | | $ | 3,156 | | | | | |
Supplemental information related to leases is as follows:
| | | | | | | | | | | | | | |
| Other Information | | Three Months Ended March 31, |
| | 2026 | | 2025 |
Cash flows: | | | | |
| Cash paid amounts included in the measurement of lease liabilities: | | | | |
| Operating cash outflows from operating leases | | $ | 2,931 | | | $ | 3,131 | |
| | | | |
| Right-of-use assets obtained in exchange for lease obligations (non-cash): | | | | |
| Operating leases | | $ | 7,175 | | | $ | 3,795 | |
| | | | |
| Lease term and discount rate: | | | | |
| Weighted average remaining lease term (years) | | 5.3 | | 5.8 |
| Weighted average discount rate | | 3.70 | % | | 3.16 | % |
Rental income from third parties
We own office buildings in Falmouth, Yarmouth and Orono, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham, New York; Moraine, Ohio; and Kingston Springs, Tennessee. We lease space in some of these buildings to third-party tenants. The property we lease to others under operating leases consists primarily of specific facilities where one tenant obtains substantially all of the economic benefit from the asset and has the right to direct the use of the asset. These non-cancelable leases expire between 2027 and 2035, and some have options to extend the lease for up to 10 years. We determine if an arrangement is a lease at inception. None of our leases allow the lessee to purchase the leased asset.
Rental income from third-party tenants for the three months ended March 31, 2026 and 2025, totaled $664,000 and $806,000, respectively. Rental income is included in hardware and other revenue on the condensed consolidated statements of income. As of March 31, 2026, future minimum operating rental income based on contractual agreements is as follows:
| | | | | | | | |
| Year ending December 31, | | Amount |
| 2026 (Remaining) | | $ | 2,014 | |
| 2027 | | 2,417 | |
| 2028 | | 2,169 | |
| 2029 | | 1,495 | |
| 2030 | | 1,526 | |
| Thereafter | | 4,525 | |
| Total | | $ | 14,146 | |
(16) Commitments and Contingencies
Litigation
In the normal course of business, we are subject to various legal proceedings arising both in and outside the ordinary course of its business. The Company is not presently a party to any legal proceedings that it believes, if determined adversely to the Company, would have a material adverse effect on the Company.
Purchase Commitments
We have contractual obligations for third-party technology used in our solutions and for other services that we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of March 31, 2026, the remaining aggregate minimum purchase commitment under these arrangements was approximately $562.0 million through 2031.
(17) Subsequent Events
On February 2, 2026, we signed a definitive agreement to acquire the remaining equity interest of a privately held company in which, as of March 31, 2026, we held a minority interest. The agreement, which was subject to the satisfaction of customary closing conditions and regulatory approvals, closed on April 14, 2026. The transaction has a cash purchase price of approximately $223 million, subject to customary post-closing adjustments.