TYLER TECHNOLOGIES INC

Previous wording

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends, expectations or beliefs with respect to our financial condition, results of operations or business. Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,” “plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risks and uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-looking statements. We presently consider the following to be among the important factors that could cause actual results to differ materially from our expectations and beliefs: (1) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks and security vulnerabilities; (3) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (4) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (5) material portions of our business require the Internet infrastructure to be adequately maintained; (6) our ability to achieve our financial forecasts due to various factors, including project delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (7) general economic, political and market conditions, including continued inflation and rising interest rates; (8) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (9) competition in the industry in which we conduct business and the impact of competition on pricing, client retention and pressure for new products or services; (10) the ability to attract and retain qualified personnel and dealing with rising labor costs, the loss or retirement of key members of management or other key personnel; and (11) costs of compliance and any failure to comply with government and stock exchange regulations. These factors and other risks that affect our business are described in Item 1A, “Risk Factors”. We expressly disclaim any obligation t…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical in nature and typically address future or anticipated events, trends, expectations or beliefs with respect to our financial condition, results of operations or business. Forward-looking statements often contain words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates,” “plans,” “intends,” “continues,” “may,” “will,” “should,” “projects,” “might,” “could” or other similar words or phrases. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. We believe there is a reasonable basis for our forward-looking statements, but they are inherently subject to risks and uncertainties and actual results could differ materially from the expectations and beliefs reflected in the forward-looking statements. We presently consider the following to be among the important factors that could cause actual results to differ materially from our expectations and beliefs: (1) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks, security vulnerabilities and software updates; (3) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (4) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (5) material portions of our business require the Internet infrastructure to be adequately maintained; (6) our ability to achieve our financial forecasts due to various factors, including project delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (7) general economic, political and market conditions, including continued inflation and rising interest rates; (8) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (9) competition in the industry in which we conduct business and the impact of competition on pricing, client retention and pressure for new products or services; (10) the ability to attract and retain qualified personnel and dealing with rising labor costs, the loss or retirement of key members of management or other key personnel; and (11) costs of compliance and any failure to comply with government and stock exchange regulations. These factors and other risks that affect our business are described in Item 1A, “Risk Factors”. We expressly disclai…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We provide integrated information management solutions and services for the public sector. We develop and market a broad line of software products and services to address the IT needs of public sector entities. We provide subscription-based services such as software as a service (“SaaS”) and transaction-based fees primarily related to digital government services and online payment processing. In addition, we provide professional IT services to our clients, including software and hardware installation, data conversion, training, and for certain clients, product modifications, along with continuing maintenance and support for clients using our systems. Additionally, we provide property appraisal outsourcing services for taxing jurisdictions.

Current wording

We provide integrated information management solutions and services for the public sector. We develop and market a broad line of software products and services to address the IT needs of public sector entities. We provide subscription-based services such as software as a service (“SaaS”) and transaction-based services primarily related to digital government services and payment processing. In addition, we provide professional IT services to our clients, including software and hardware installation, data conversion, training, and for certain clients, product modifications, along with continuing maintenance and support for clients using our systems. Additionally, we provide property appraisal services for taxing jurisdictions.

Previous wording

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 software solutions to platform and transformative solutions including digital solutions, payment processing, streamlined data processing, and improve operations and workflows.

Current wording

We report our results in two reportable segments. Business units that have met the aggregation criteria have been combined into ourtwo 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.

Previous wording

We evaluate performance based on several factors, of which 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 intercompany transactions relate to contracts involving more than one 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.

Current wording

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.

Previous wording

We did not complete any new acquisitions during the three months ended March 31, 2024.

Current wording

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

Previous wording

On October 31, 2023, we acquired Resource Exploration, Inc. (“ResourceX”), a leading provider of budgeting software to the public sector. Also on October 31, 2023, we acquired ARInspect, Inc. (“ARInspect”), a leading provider of AI powered machine learning solutions for public sector field operations. On August 8, 2023, we acquired Computing System Innovations, LLC (“CSI”), a leading provider of artificial intelligence automation, redaction, and indexing solution for courts, recorders, attorneys, and others. The actual operating results of CSI and ResourceX, from their respective dates of acquisition, are included in the operating results of the ES segment. The operating results of ARInspect are included in the operating results of the PT segment since the date of acquisition.

Current wording

On October 31, 2023, we acquired Resource Exploration, Inc. (“ResourceX”), a leading provider of budgeting software to the public sector. Also on October 31, 2023, we acquired ARInspect, Inc. (“ARInspect”), a leading provider of AI-powered machine learning solutions for public sector field operations. On August 8, 2023, we acquired Computing System Innovations, LLC (“CSI”), a leading provider of artificial intelligence automation, redaction, and indexing solution for courts, recorders, attorneys, and others. The actual operating results of CSI and ResourceX are included in the operating results of the ES segment from their respective dates of acquisition. The operating results of ARInspect are included in the operating results of the PT segment since the date of acquisition.

Previous wording

For the three months ended March 31, 2024, total revenues increased 9%, compared to the prior period primarily due to the increase in subscription revenue. Revenues from recent acquisitions contributed $3.0 million or 1% to the total revenue increase for the three months ended March 31, 2024, compared to the prior period.

Current wording

For the three and six months ended June 30, 2024, total revenues increased 7% and 8%, respectively, compared to the prior period primarily due to an increase in subscription revenue. Revenues from recent acquisitions contributed $3.8 million, or 1%, and $6.8 million, or 1%, to the total revenue increase for the three and six months ended June 30, 2024, respectively, compared to the prior period.

Previous wording

Subscriptions revenue grew 12% for the three months ended March 31, 2024, compared to the prior period, primarily due to an ongoing shift toward SaaS arrangements, along with growth in our transaction-based revenues such as e-filing and payment services. Subscription revenues from recent acquisitions contributed $1.0 million or 0.4% to the increase for the three months ended March 31, 2024.

Current wording

Subscriptions revenue grew 12% for both the three and six months ended June 30, 2024, respectively, compared to the prior period, primarily due to an ongoing shift toward SaaS arrangements for both new and existing clients, along with growth in certain transaction-based revenues. Subscription revenues from recent acquisitions contributed $1.4 million, or 0.5%, and $2.5 million, or 0.4%, to the increase for the three and six months ended June 30, 2024, respectively.

Previous wording

Our backlog as of March 31, 2024, was $2.02 billion, a 9.5% increase compared to March 31, 2023.

Current wording

Our backlog as of June 30, 2024, was $2.09 billion, a 10% increase compared to June 30, 2023.

Previous wording

Our total employee count increased to 7,305 at March 31, 2024, including 68 employees who joined us through acquisitions completed since March 31, 2023, from 7,229 at March 31, 2023.

Current wording

Our total employee count increased to 7,360 as of June 30, 2024, including 68 employees who joined us through acquisitions completed since June 30, 2023, from 7,247 as of June 30, 2023.

Previous wording

Subscriptions revenue primarily consists of revenues derived from our SaaS arrangements and transaction-based fees, which relate to digital government services, e-filing transactions, and payment processing. 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. Transaction-based fees are historically highest in the second quarter, which coincides with peak outdoor recreation seasons and statutory filing deadlines in many jurisdictions, and lowest in the fourth quarter due to fewer business days and lower transaction volumes around holidays. Because ARR is an annualized revenue amount, the metric can fluctuate from quarter to quarter due to this seasonality.

Current wording

Subscriptions revenue primarily consists of revenues derived from our SaaS arrangements and transaction-based fees. These revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services, and are collected on a recurring basis during the contract term. Transaction-based revenues are historically highest in the second quarter, which coincides with peak outdoor recreation seasons and statutory filing deadlines in many jurisdictions, and lowest in the fourth quarter due to fewer business days and lower transaction volumes around holidays. Because ARR is an annualized revenue amount, the metric can fluctuate from quarter to quarter due to this seasonality.

Previous wording

ARR was $1.72 billion and $1.58 billion as of March 31, 2024, and 2023, respectively. ARR increased 9% compared to the prior period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements.

Current wording

ARR was $1.80 billion and $1.66 billion as of June 30, 2024, and 2023, respectively. ARR increased 8% compared to the prior period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements for both new and existing clients.

Previous wording

The following table sets forth a comparison of our subscriptions revenue for the three months ended March 31 ($ in thousands):

Current wording

The following table sets forth a comparison of our subscriptions revenue for the three and six months ended June 30 ($ in thousands):

Previous wording

Subscriptions revenue consists of revenue derived from our SaaS arrangements and transaction-based fees primarily related to digital government services and payment processing. We also provide electronic document filing solutions (“e-filing”) that simplify the filing and management of court related documents for courts and law offices. E-filing revenue is derived from transaction fees and fixed fee arrangements.

Current wording

Subscriptions revenue consists of revenue derived from our SaaS arrangements and transaction-based fees primarily related to digital government services and payment processing. We also provide electronic document filing ("e-filing") solutions for which revenue is derived from transaction fees and fixed-fee arrangements.

Previous wording

Subscriptions revenue grew 12% for the three months ended March 31, 2024, compared to the prior period, primarily due to an ongoing shift toward SaaS arrangements, along with growth in our transaction-based revenues. Subscription revenues from recent acquisitions contributed $1.0 million or 0.4% to the increase for the three months ended March 31, 2024.

Current wording

Subscriptions revenue grew 12% for both the three and six months ended June 30, 2024, respectively, compared to the prior period, primarily due to an ongoing shift toward SaaS arrangements, along with growth in certain transaction-based revenues. Subscription revenues from recent acquisitions contributed $1.4 million, or 0.5%, and $2.5 million, or 0.4%, to the increase for the three and six months ended June 30, 2024, respectively.

Previous wording

Total subscriptions revenue derived from SaaS arrangements fees was $148.8 million for the three months ended March 31, 2024, compared to $121.9 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, SaaS fees grew $26.9 million, or 22% compared to prior period. New SaaS clients as well as existing on-premises clients who converted to our SaaS model provided the majority of the subscriptions revenue increase. In the three months ended March 31, 2024, we added 200 new SaaS clients and 90 on-premises existing clients elected to convert to our SaaS model. Since March 31, 2023, we have added 687 new SaaS clients while 355 existing on-premises clients converted to our SaaS offerings. Our new software contract mix for the three months ended March 31, 2024, was approximately 8% perpetual software license arrangements and approximately 92% subscription-based arrangements compared to total new contract mix for the three months ended March 31, 2023, of approximately 17% perpetual software license arrangements and approximately 83% subscription-based arrangements.

Current wording

Total subscriptions revenue derived from SaaS arrangements fees was $156.0 million and $304.8 million for the three and six months ended June 30, 2024, respectively, compared to $126.6 million and $248.5 million for the three and six months ended June 30, 2023, respectively. For both the three and six months ended June 30, 2024, SaaS fees grew 23%, or $29.4 million and $56.2 million, respectively, compared to prior period. New SaaS clients as well as existing on-premises clients who converted to our SaaS model provided the majority of the subscriptions revenue increase. In the three and six months ended June 30, 2024, we added 203 and 403 new SaaS clients, respectively, and 111 and 201 existing on-premises clients, respectively, elected to convert to our SaaS model. Since June 30, 2023, we have added 720 new SaaS clients, while 372 existing on-premises clients have converted to our SaaS offerings. Our new software contract mix for the six months ended June 30, 2024, was approximately 10% perpetual software license arrangements and approximately 90% subscription-based arrangements, compared to approximately 17% perpetual software license arrangements and approximately 83% subscription-based arrangements for the six month ended June 30, 2023.

Previous wording

Total subscriptions revenue derived from transaction-based fees was $164.5 million for the three months ended March 31, 2024, compared to $158.6 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, transaction-based fees grew $5.9 million, or 4% compared to prior period. Contributing to the growth in transaction-based fees for the three months ended March 31, 2024, are the new transaction customers and volume increases from online payments and e-filing services and the impact of transaction-based fees from recent acquisitions of $1.0 million, compared to prior period.

Current wording

Total subscriptions revenue derived from transaction-based fees was $177.7 million and $342.2 million for the three and six months ended June 30, 2024, respectively, compared to $171.2 million and $329.7 million for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024, transaction-based fees for both periods grew 4% or $6.5 million and $12.4 million, respectively, compared to prior period. Contributing to the growth in transaction-based fees for the three and six months ended June 30, 2024, are the new transaction customers and volume increases from online payments and e-filing services, as well as the impact of transaction-based fees from recent acquisitions of $1.4 million and $2.5 million, respectively, compared to prior period. These increases compared to prior period are partially offset by the change from the gross model to the net model for payments revenue under one of our state enterprise agreements.

Previous wording

The following table sets forth a comparison of our maintenance revenue for the three months ended March 31 ($ in thousands):

Current wording

The following table sets forth a comparison of our maintenance revenue for the three and six months ended June 30 ($ in thousands):

Previous wording

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue increased 2% for the three months ended March 31, 2024, compared to the prior period. For the three months ended March 31, 2024, maintenance revenue grew mainly due to annual maintenance rate increases and maintenance associated with new software license sales, partially offset by the impact of clients converting from on-premises license arrangements to SaaS.

Current wording

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue decreased 1% for the three months ended June 30, 2024, and was flat for the six months ended June 30, 2024, compared to the prior period. For the three and six months ended June 30, 2024, maintenance revenue declined primarily due to the impact of clients converting from on-premises license arrangements to SaaS, partially offset by maintenance price increases.

Previous wording

The following table sets forth a comparison of our professional services revenue for the three months ended March 31 ($ in thousands):

Current wording

The following table sets forth a comparison of our professional services revenue for the three and six months ended June 30 ($ in thousands):

Previous wording

Professional services revenue primarily consists of professional services billed in connection with implementing our software, converting client data, training client personnel, custom development activities, consulting and property appraisal outsourcing services. New clients who purchase our proprietary software licenses or subscriptions generally also contract with us to provide the related professional services. Existing clients also periodically purchase additional training, consulting and minor programming services.

Current wording

Professional services revenue primarily consists of professional services billed in connection with implementing our software, converting client data, training client personnel, custom development activities, consulting, and property appraisal services. New clients who implement our software generally contract with us to provide the related professional services. Existing clients also periodically purchase additional training, consulting and minor programming services.

Previous wording

Professional services revenue increased 6% for the three months ended March 31, 2024, compared to the prior period that increase is primarily attributable to higher new contract volume with increased billable rates and the addition of professional services staff to grow our capacity to deliver backlog.

Current wording

Professional services revenue increased 8% and 7% for the three and six months ended June 30, 2024, respectively, compared to the prior period. The increase is primarily attributable to higher new contract volume along with increased billing rates.

Previous wording

The following table sets forth a comparison of our software licenses and royalties revenue for the three months ended March 31 ($ in thousands):

Current wording

The following table sets forth a comparison of our software licenses and royalties revenue for the three and six months ended June 30 ($ in thousands):

Previous wording

Software licenses and royalties revenue decreased 14% for the three months ended March 31, 2024, compared to the prior period. The decrease is primarily attributed to the shift in the mix of new software contracts toward more subscription-based agreements compared to the prior period.

Current wording

Software licenses and royalties revenue decreased 46% and 29% for the three and six months ended June 30, 2024, respectively, compared to the prior period. The decrease is primarily attributed to the shift in the mix of new software contracts toward more SaaS.

Previous wording

Although the mix of new contracts between subscription-based and perpetual license arrangements may vary from quarter to quarter and year to year, we expect the decline in software license revenues will accelerate as we continue to shift our model away from perpetual licenses to SaaS. Subscription-based arrangements result in lower software license revenue in the initial year as compared to perpetual software license arrangements but generate higher overall revenue over the term of the contract.

Current wording

Although the mix of new contracts between subscription-based and perpetual license arrangements may vary from quarter to quarter and year to year, we expect that software license revenues will continue to decline as we shift our model away from perpetual licenses to SaaS. Subscription-based arrangements result in lower software license revenue in the initial year as compared to perpetual software license arrangements, but generate higher overall revenue over the term of the contract.

Previous wording

The following table sets forth a comparison of the key components of our cost of revenues for the three months ended March 31 ($ in thousands):

Current wording

The following table sets forth a comparison of the key components of our cost of revenues for the three and six months ended June 30 ($ in thousands):

Previous wording

Subscriptions, maintenance, and professional services. Cost of subscriptions, maintenance and professional services primarily consist of personnel costs related to installation of our software, conversion of client data, training client personnel and support activities, including enhancing existing solutions, and various other services such as custom client development, on-going operation of SaaS, property appraisal outsourcing activities, digital government services, and other transaction-based services such as e-filing. Other costs included are interchange fees required to process credit/debit card transactions and bank fees to process automated clearinghouse transactions related to our payments business.

Current wording

Subscriptions, maintenance, and professional services. Cost of subscriptions, maintenance and professional services primarily consist of personnel costs related to installation of our software, conversion of client data, training client personnel and support activities, including enhancing existing solutions, and various other services such as custom development, ongoing operation of SaaS, property appraisal outsourcing activities, digital government services, and other transaction-based services such as e-filing. Other costs included are interchange fees required to process credit/debit card transactions and bank fees to process automated clearinghouse transactions related to our payments business.

Previous wording

The cost of subscriptions, maintenance, and professional services for the three months ended March 31, 2024, increased $16.5 million or 7%, compared to the prior period. The impact from recent acquisitions was $1.5 million for the three months ended March 31, 2024. The remaining subscriptions, maintenance and professional services expenses increased 6% for the three months ended March 31, 2024, due to duplicate hosting costs as we transition from our proprietary data centers to the public cloud and higher personnel costs. Excluding employees from recent acquisitions, our professional services staff grew by 96 employees since March 31, 2023, as we increased hiring to ensure that we are well-positioned to deliver our current backlog and anticipated new business.

Current wording

The cost of subscriptions, maintenance, and professional services for the three and six months ended June 30, 2024, increased $21.4 million, or 8%, and $37.8 million, or 7%, respectively, compared to the prior period. The impact from recent acquisitions was $2.2 million and $3.7 million for the three and six months ended June 30, 2024, respectively. The remaining subscriptions, maintenance and professional services expenses increased 7% for both the three and six months ended June 30, 2024, respectively, due to increased hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud, together with higher personnel costs. Our professional services staff grew by 74 employees since June 30, 2023, as we increased hiring to ensure that we are well-positioned to deliver our current backlog and anticipated new business. The increases were partially off set by the change from the gross model to the net model for payments revenue under one of our state enterprise agreements.

Previous wording

The cost of software licenses and royalties for the three months ended March 31, 2024, decreased $0.7 million or 32%, compared to the prior period due to lower third-party software costs.

Current wording

The cost of software licenses and royalties for the three and six months ended June 30, 2024, decreased $0.9 million, or 36%, and $1.6 million, or 34%, respectively, compared to the prior period due to lower third-party software costs.

Previous wording

For the three months ended March 31, 2024, amortization of software development costs increased $1.8 million or 69%, compared to the prior period and is attributable to new capitalized software development projects going into service in the past year.

Current wording

For the three and six months ended June 30, 2024, amortization of software development costs increased $1.6 million, or 55%, and $3.4 million, or 61.3%, respectively, compared to the prior period, and is attributable to new capitalized software development projects going into service in the past year.

Previous wording

For the three months ended March 31, 2024, amortization of acquired software increased $0.3 million or 4%, compared to the prior period due to amortization of newly acquired software from recent acquisitions completed in fiscal year 2023, offset by assets becoming fully amortized in the fourth quarter 2023.

Current wording

For both the three and six months ended June 30, 2024, amortization of acquired software increased 4%, or $0.3 million, and $0.6 million, respectively, compared to the prior period, due to amortization of newly acquired software from recent acquisitions completed in fiscal year 2023, partially offset by assets becoming fully amortized in the fourth quarter 2023.

Previous wording

Overall Gross Margin. For the three months ended March 31, 2024, our overall gross margin increased 1.3%, compared to the prior period. The increase in overall gross margin compared to the prior period is attributed to a higher revenue mix for subscription revenues compared to the prior period resulting in an increase in incremental margin related to software services, maintenance and subscriptions. Costs related to maintenance and various other services such as SaaS typically grow at a slower rate than related revenue due to leverage in the utilization of support and maintenance staff and economies of scale. The margin increases are partially offset by lower revenue from software licenses, higher software development amortization expense, duplicate hosting costs as we transition from our proprietary data centers to the public cloud, and higher personnel costs.

Current wording

Overall Gross Margin. For the three and six months ended June 30, 2024, our overall gross margin decreased 0.3% and increased 0.5%, respectively, compared to the prior period. For the three months ended June 30, 2024, the decline in the overall gross margin compared to prior period is attributed to lower revenue from software licenses and maintenance, higher software development amortization expense, higher personnel costs. For the six months ended June 30, 2024, the increase in overall gross margin compared to the prior period is attributed to a higher revenue mix for subscription revenues compared to the prior period, resulting in an increase in incremental margin related to software services, maintenance and subscriptions.

Previous wording

Sales and marketing expense (“S&M”) consists primarily of salaries, employee benefits, travel, share-based compensation expense, commissions and related overhead costs for sales and marketing employees, as well as professional fees, trade show activities, advertising costs and other marketing costs. The following table sets forth a comparison of our S&M expense for the three months ended March 31 ($ in thousands):

Current wording

Sales and marketing (“S&M”) expense consists primarily of salaries, employee benefits, travel, share-based compensation expense, commissions and related overhead costs for sales and marketing employees, as well as professional fees, trade show activities, advertising costs and other marketing costs. The following table sets forth a comparison of our S&M expense for the three and six months ended June 30 ($ in thousands):

Previous wording

S&M as a percentage of revenues was 7.1% for the three months ended March 31, 2024, compared to 7.9% for the three months ended March 31, 2023. For the three months ended March 31, 2024, S&M expense decreased approximately 2%, compared to the prior period. The decrease in S&M for the three months ended March 31, 2024, is primarily attributed to lower professional fees and trade-show event activities, offset by higher bonus and commission expenses.

Current wording

S&M expense as a percentage of revenues was 7.7% and 7.4%, respectively, for the three and six months ended June 30, 2024, compared to 7.4% and 7.6%, for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024, S&M expense increased approximately 12% and 5%, compared to the prior period. The increase in S&M expense is primarily attributed to higher bonus and commission expenses.

Previous wording

General and administrative (“G&A”) expense consists primarily of personnel salaries and share-based compensation expense for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development as well as third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs, amortization of software development for internal use, acquisition-related expenses and other administrative expenses. The following table sets forth a comparison of our G&A expense for the three months ended March 31 ($ in thousands):

Current wording

General and administrative (“G&A”) expense consists primarily of personnel salaries and share-based compensation expense for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, as well as third-party professional fees, travel-related expenses, insurance, allocation of depreciation, facilities and IT support costs, amortization of software development for internal use, acquisition-related expenses and other administrative expenses. The following table sets forth a comparison of our G&A expense for the three and six months ended June 30 ($ in thousands):

Previous wording

G&A as a percentage of revenue was 14.2% for the three months ended March 31, 2024, compared to 15.3% for the three months ended March 31, 2023. G&A expense remained flat for the three months ended March 31, 2024, compared to the prior period. The decrease in G&A as a percentage of revenue is primarily attributed to lower share-based compensation expense as a result of a lower number of awards granted and lower facilities costs from lease restructuring compare to prior period, offset by increase in total revenue, higher amortization of software development for internal use and higher bonus expense due to improved operating results.

Current wording

G&A expense as a percentage of revenue was 13.9% and 14.1%, respectively, for the three and six months ended June 30, 2024, compared to 15.4% for both the three and six months ended June 30, 2023. G&A expense decreased 3% and 1% for the three and six months ended June 30, 2024, respectively, compared to the prior period. For the three months ended June 30, 2024, the decrease in G&A expense, compared to prior period, is primarily attributed to lower facilities costs from lease restructuring along with lower depreciation expense. For the six months ended June 30, 2024, the decline in G&A expense is primarily attributed to lower facilities costs from lease restructuring, offset by an increase in software and other IT support costs.

Previous wording

Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with new product development. Research and development expense consists mainly of costs associated with development of new products and technologies from which we do not currently generate significant revenue.

Current wording

Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with new product development. Research and development expense consists mainly of costs associated with development of new products and technologies.

Previous wording

The following table sets forth a comparison of our research and development expense for the three months ended March 31 ($ in thousands):

Current wording

The following table sets forth a comparison of our research and development expense for the three and six months ended June 30 ($ in thousands):

Previous wording

Research and development expense increased 9% for the three months ended March 31, 2024, compared to the prior period, mainly due to a number of product development initiatives shifting from capitalized development projects to projects that are expensed to research and development.

Current wording

Research and development expense increased 3% and 6%, respectively, for the three and six months ended June 30, 2024, compared to the prior period, mainly due to a number of product development initiatives shifting from capitalized development projects to projects that are expensed to research and development.

Previous wording

Other intangibles are comprised of the excess of the purchase price over the fair value of net tangible assets acquired that are allocated to acquired software and customer related, trade name, and leases acquired intangibles. The remaining excess purchase price is allocated to goodwill that is not subject to amortization. Amortization expense related to acquired software is included with cost of revenues while amortization expense of customer related, trade name, and leases acquired intangibles is recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years. The following table sets forth a comparison of amortization of other intangibles for the three months ended March 31 ($ in thousands):

Current wording

Other intangibles represents the portion of purchase price allocated to the identified intangible assets for customer-related intangibles, trade names and leases acquired. The remaining excess purchase price is allocated to goodwill that is not subject to amortization. Amortization expense related to acquired software is included with cost of revenues, while amortization expense of customer related intangibles, trade name, and leases acquired is recorded as operating expense. The estimated useful lives of other intangibles range from one to 25 years. The following table sets forth a comparison of amortization of other intangibles for the three and six months ended June 30 ($ in thousands):