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, including local, state and federal government agencies, 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 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 …

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, including local, state and federal government agencies, 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 actively monitor developments in artificial intelligence ("AI") regulation and ethical standards as we expect that future changes in the regulatory landscape may affect our product development timelines, compliance costs, and market opportunities related to AI; (7) 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; (8) general economic, political and market conditions, including inflation and changes in interest rates; (9) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (10) 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; (11) the ability to attract and retain qualified personnel and dealing with rising labor costs, the…

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 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.

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 information technology (“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

Our 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, 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.

Current wording

Our Chief Operating Decision Maker (“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, 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.

Previous wording

For both the three and six months ended June 30, 2025, total revenues increased 10%, compared to the prior period, primarily due to an increase in subscription revenue.

Current wording

For both the three and nine months ended September 30, 2025, total revenues increased 10%, compared to the prior period, primarily due to an increase in subscription revenue.

Previous wording

Subscriptions revenue grew 21.4% and 20.6%, respectively, for the three and six months ended June 30, 2025, 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.

Current wording

Subscriptions revenue grew 15.5% and 18.8%, respectively, for the three and nine months ended September 30, 2025, 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.

Previous wording

Our total employee count increased to 7,542 as of June 30, 2025, including 12 employees who joined us through acquisitions completed since June 30, 2024, from 7,360 as of June 30, 2024.

Current wording

Our total employee count increased to 7,689 as of September 30, 2025, including 29 employees who joined us through acquisitions completed since September 30, 2024, from 7,386 as of September 30, 2024.

Previous wording

ARR was $2.07 billion and $1.80 billion as of June 30, 2025, and 2024, respectively. ARR increased approximately 15% 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 and expansion in transaction-based fee arrangements.

Current wording

ARR was $2.05 billion and $1.85 billion as of September 30, 2025, and 2024, respectively. ARR increased approximately 11% 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 and expansion in transaction-based fee arrangements.

Previous wording

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

Current wording

The following table sets forth a comparison of our subscriptions revenue derived from SaaS fees for the three and nine months ended September 30 ($ in thousands):

Previous wording

For the three and six months ended June 30, 2025, SaaS fees grew 22% and 21%, respectively, compared to the prior period. That growth is primarily attributable to new SaaS clients as well as existing on-premises clients who converted to our SaaS model. Since June 30, 2024, we have added 641 new SaaS clients, while 438 existing on-premises clients have converted to our SaaS offerings. Our new software contract value mix for the six months ended June 30, 2025, was approximately 96% subscription-based arrangements and approximately 4% perpetual software license arrangements, compared to approximately 95% subscription-based arrangements and approximately 5% perpetual software license arrangements for the six months ended June 30, 2024.

Current wording

For the three and nine months ended September 30, 2025, SaaS fees grew 20% and 21%, respectively, compared to the prior period. That growth is primarily attributable to new SaaS clients as well as existing on-premises clients who converted to our SaaS model. Since September 30, 2024, we have added 608 new SaaS clients, while 451 existing on-premises clients have converted to our SaaS offerings. For both the nine months ended September 30, 2025, and September 30, 2024, our new software client mix was approximately 89% subscription-based arrangements and approximately 11% perpetual software license arrangements.

Previous wording

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

Current wording

The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the three and nine months ended September 30 ($ in thousands):

Previous wording

For the three and six months ended June 30, 2025, transaction-based fees grew 21% and 20%, respectively, compared to the prior period. For the three and six months ended June 30, 2025, volume increases from online payments from new and existing customers contributed approximately $22.7 million and $44.9 million, respectively, to the growth in transactions fees compared to prior period and price increases by certain third-party processing partners from whom we receive a share of revenues contributed the remainder of the growth for both periods, respectively, compared to the prior period.

Current wording

For the three and nine months ended September 30, 2025, transaction-based fees grew 11% and 17%, respectively, compared to the prior period. For the three and nine months ended September 30, 2025, volume increases from online payments from new and existing customers contributed approximately $13.9 million and $58.8 million, respectively, to the growth in transactions fees compared to prior period, and price increases by certain third-party processing partners from whom we receive a share of revenues contributed the remainder of the growth for both periods, respectively, compared to the prior period.

Previous wording

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

Current wording

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

Previous wording

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue decreased 3% for both the three and six months ended June 30, 2025, compared to the prior period primarily due to the impact of 438 clients converting from on-premises license arrangements to SaaS, partially offset by maintenance price increases.

Current wording

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue decreased 4% and 3% for the three and nine months ended September 30, 2025, respectively, compared to the prior period primarily due to the impact of 451 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 and six months ended June 30 ($ in thousands):

Current wording

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

Previous wording

Professional services revenues decreased 19% and 10% for the three and six months ended June 30, 2025, respectively, compared to the prior period. The decrease for the three and six months ended June 30, 2025, respectively, is primarily due to loss reserves of approximately $8.5 million for contracts with agencies within two state governments. The remainder of the decrease in professional services revenues compared to the prior period is related to an intentional reduction in custom development work as well as efficiencies in the delivery of professional services.

Current wording

Professional services revenues were flat and decreased 7% for the three and nine months ended September 30, 2025, respectively, compared to the prior period. The decrease for the nine months ended September 30, 2025, is primarily due to loss reserves of approximately $8.5 million for contracts with agencies within two state governments. The remainder of the decrease in professional services revenues compared to the prior period is related to an intentional reduction in custom development work as well as efficiencies in the delivery of professional services.

Previous 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):

Current wording

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

Previous wording

For the three and six months ended June 30, 2025, software licenses and royalties revenue decreased 31% and 24%, respectively, compared to the prior period primarily because of the ongoing shift in the mix of new software contracts toward more SaaS offerings. Refer to the SaaS revenue section for further details on our revenue mix shift.

Current wording

For the three and nine months ended September 30, 2025, software licenses and royalties revenue decreased 18% and 22%, respectively, compared to the prior period primarily because of the ongoing shift in the mix of new software contracts toward more SaaS offerings. Refer to the SaaS revenue section for further details on our revenue mix shift.

Previous 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):

Current wording

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

Previous wording

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

Current wording

The following table sets forth a comparison of our costs of subscriptions, maintenance, and professional services for the three and nine months ended September 30 ($ in thousands):

Previous wording

The cost of subscriptions, maintenance, and professional services for the three and six months ended June 30, 2025, increased 6% and 5%, respectively, compared to the prior period. For the three and six months ended June 30, 2025, respectively, the increases are primarily due to $12.5 million and $24.0 million increases in merchant fees and other direct costs related to higher transaction volumes and increases of $5.6 million and $9.3 million, respectively, in hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud. The increases were partially offset by redeployment of resources to research and development due to continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations.

Current wording

The cost of subscriptions, maintenance, and professional services for the three and nine months ended September 30, 2025, increased 2% and 4%, respectively, compared to the prior period. For the three months ended September 30, 2025, the increase is primarily due to a $1.3 million increase in stock-based compensation expense, a $1.0 million increase in third-party fees related to higher transaction volumes, and an increase of $6.8 million in hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud. For the nine months ended September 30, 2025, the increase is primarily due to a $3.9 million increase in stock-based compensation expense, a $17.0 million increase in merchant fees and other third-party fees related to higher transaction volumes, and a $15.1 million increase in hosting costs. The increases for both comparative periods were partially offset by the redeployment of resources to research and development due to continued migration of clients to our SaaS products and the consolidation of versions of on-premises software products with support obligations.

Previous wording

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

Current wording

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

Previous wording

The cost of software licenses and royalties for the three and six months ended June 30, 2025, increased 18% and 20%, respectively, compared to the prior period due to higher third-party software costs.

Current wording

The cost of software licenses and royalties for the three and nine months ended September 30, 2025, decreased 11% and increased 8% respectively, compared to prior period. The decrease in the three month period was primarily due to timing of third-party software costs incurred, while the increase for the nine month period was driven by higher third-party software costs.

Previous wording

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

Current wording

The following table sets forth a comparison of our amortization of software development for the three and nine months ended September 30 ($ in thousands):

Previous wording

For both the three and six months ended June 30, 2025, amortization of software development costs increased 23% compared to the prior period due to new capitalized software development projects going into service in the past year.

Current wording

For the three and nine months ended September 30, 2025, amortization of software development costs increased 25% and 24%, respectively, compared to the prior period due to new capitalized software development projects going into service in the past year.

Previous wording

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

Current wording

The following table sets forth a comparison of our amortization of acquired software for the three and nine months ended September 30 ($ in thousands):

Previous wording

For both the three and six months ended June 30, 2025, amortization of acquired software increased 1% compared to the prior period due to amortization of newly acquired software from a recent acquisition completed in fiscal year 2025, partially offset by assets becoming fully amortized in the fourth quarter of 2024.

Current wording

For both the three and nine months ended September 30, 2025, amortization of acquired software increased 1% compared to the prior period due to amortization of newly acquired software from recent acquisitions completed in 2025, partially offset by assets becoming fully amortized in the fourth quarter of 2024.

Previous wording

Overall gross margin. For the three and six months ended June 30, 2025, our blended gross margin increased 1.8% and 2.7%, respectively, compared to the prior period. For the three and six months ended June 30, 2025, the increase in overall gross margin compared to the prior period is primarily attributed to a shift in our revenue mix toward higher-margin SaaS revenues, as well as an increase in transaction margins. Also contributing to the increase in overall gross margin for the three and six months ended June 30, 2025, respectively, is the redeployment of resources to research and development due to continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations. The increase in the overall gross margin is partially offset by declines in software licenses, maintenance and professional services and an increase in merchant fees and software development amortization expense.

Current wording

Overall gross margin. For the three and nine months ended September 30, 2025, our blended gross margin increased 3.5% and 3.0%, respectively, compared to the prior period. For the three and nine months ended September 30, 2025, the increase in overall gross margin compared to the prior period is primarily attributed to a shift in our revenue mix toward higher-margin SaaS revenues. Also contributing to the increase in overall gross margin for the three and nine months ended September 30, 2025, respectively, is the redeployment of resources to research and development due to continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations. The increase in the overall gross margin is partially offset by declines in software licenses, maintenance and professional services revenues and increases in merchant fees, hosting costs, and software development amortization expense.

Previous 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):

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 nine months ended September 30 ($ in thousands):

Previous wording

S&M expense as a percentage of revenues was 6.1% and 6.3%, respectively, for the three and six months ended June 30, 2025, compared to 7.7% and 7.4%, respectively, for the three and six months ended June 30, 2024. S&M expense decreased 13% and 7%, respectively, when compared to the prior period. The decrease in S&M expense is primarily attributed to an increase in compensation capitalized as contract acquisition costs compared to the prior period.

Current wording

S&M expense as a percentage of revenues was 6.3% for both the three and nine months ended September 30, 2025, compared to 7.0% and 7.3%, respectively, for the three and nine months ended September 30, 2024. S&M expense decreased 2% and 5%, respectively, when compared to the prior period. The decrease in S&M expense is primarily attributed to an increase in compensation capitalized as contract acquisition costs compared to the prior period.

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 and six months ended June 30 ($ 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 nine months ended September 30 ($ in thousands):

Previous wording

G&A expense as a percentage of revenue was 12.8% and 13.4%, respectively, for the three and six months ended June 30, 2025, compared to 13.9% and 14.1%, respectively, for the three and six months ended June 30, 2024. G&A expense increased 2% and 5%, respectively, for the three and six months ended June 30, 2025, compared to the prior period. For the three and six months ended June 30, 2025, the increase in G&A expense is primarily attributable to $1.1 million and $6.1 million increases, respectively, in share-based compensation expense due to a higher stock price for share-based awards issued in the current period.

Current wording

G&A expense as a percentage of revenue was 13.4% for both the three and nine months ended September 30, 2025, compared to 13.3% and 13.8%, respectively, for the three and nine months ended September 30, 2024. G&A expense increased 10% and 7%, respectively, for the three and nine months ended September 30, 2025, compared to the prior period. For the three months ended September 30, 2025, the increase in G&A expense is primarily attributable to an increase of $4.2 million in personnel expenses, a $1.4 million increase in professional fees expense, and a $1.6 million increase in certain IT-related costs. For the nine months ended September 30, 2025, the G&A expense increase is attributed to a $7.2 million increase in personnel expenses, a $2.8 million increase in professional fees expense, and a $6.1 million increase in share-based compensation expense due to the higher stock price for share-based awards issued in the current period.

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

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 new functionality in our current SaaS products. The following table sets forth a comparison of our research and development expense for the three and nine months ended September 30 ($ in thousands):

Previous wording

Research and development expense increased 76% and 69%, respectively, for the three and six months ended June 30, 2025, compared to the prior period, with the majority of the increase due the redeployment of resources to research and development resulting from the continued migration of clients to our SaaS products and version consolidation of on-premises software products with support obligations, together with increased investments in a number of new Tyler product development initiatives across our product suites. The remainder of the increase is attributed to $4.9 million and $8.8 million increases related to share-based compensation expense for the three and six months ended June 30, 2025, respectively, compared to the prior period.

Current wording

Research and development expense increased 72% and 70%, respectively, for the three and nine months ended September 30, 2025, compared to the prior period, with the majority of the increase due the redeployment of resources to research and development resulting from the continued migration of clients to our SaaS products and version consolidation of on-premises software products with support obligations, together with increased investments in a number of new Tyler product development initiatives across our product suites. The remainder of the increase is attributed to $3.8 million and $12.6 million increases related to share-based compensation expense for the three and nine months ended September 30, 2025, respectively, compared to the prior period.

Previous wording

Other intangibles represents the portion of purchase price allocated to the identified intangible assets for client-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 other 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 and six months ended June 30 ($ in thousands):

Current wording

Other intangibles represents the portion of purchase price allocated to the identified intangible assets for client-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 other 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 and nine months ended September 30 ($ in thousands):

Previous wording

Amortization of other intangibles was flat for the three months ended June 30, 2025, and decreased 12% for the six months ended June 30, 2025, compared to the prior period due to the impact of certain trade name intangible assets becoming fully amortized as a result of accelerated amortization expense in 2024.

Current wording

Amortization of other intangibles increased 3% for the three months ended September 30, 2025, due to amortization of other intangibles from acquisitions completed during the 2025 fiscal year. For the nine months ended September 30, 2025, amortization of other intangibles decreased 8% for the nine months ended September 30, 2025, compared to the prior period due to the impact of certain trade name intangible assets becoming fully amortized as a result of accelerated amortization expense in 2024.

Previous wording

The following table sets forth a comparison of the operating income by reportable segments for the three and six months ended June 30 ($ in thousands):

Current wording

The following table sets forth a comparison of the operating income by reportable segments for the three and nine months ended September 30 ($ in thousands):

Previous wording

For the three and six months ended June 30, 2025 the increase of 28% and 25%, respectively, in the ES segment operating income is primarily due to the $56.1 million and $104.7 million, respectively, increase in subscription revenues as a result of the ongoing shift toward SaaS arrangements for both new and existing clients, along with growth in certain transaction-based revenues from new and existing customers. For the three and six months ended June 30, 2025, these increases are partially offset by lower revenue of $5.8 million and $11.8 million, respectively, compared to prior period from software licenses, maintenance, and professional services. Also offsetting the increase in segment operating income for the three and six months ended June 30, 2025, are higher expenses of $14.7 million and $27.5 million, respectively, compared to the prior period related to a shift in new product development initiatives as part of our increased investment in research and development.

Current wording

For both the three and nine months ended September 30, 2025, the increase of 25% in the ES segment operating income is primarily due to the $50.7 million and $155.4 million, respectively, increase in subscription revenues as a result of the ongoing shift toward SaaS arrangements for both new and existing clients, along with growth in certain transaction-based revenues from new and existing customers. For the three and nine months ended September 30, 2025, these increases are partially offset by lower revenue of $2.4 million and $14.2 million, respectively, compared to prior period from software licenses, maintenance, and professional services. Also partially offsetting the increase in segment operating income for the three and nine months ended September 30, 2025, are increases in total personnel expenses of $13.6 million and $27.7 million, respectively and increases in total hosting costs of $4.5 million and $13.1 million compared to the prior period.

Previous wording

The decrease for the three and six months ended June 30, 2025, respectively, in the PT segment operating income is primarily due to a decline in professional services revenue attributed to loss reserves of approximately $8.5 million for contracts with agencies within two state governments.

Current wording

The decreases for the three and nine months ended September 30, 2025, in the PT segment operating income are primarily due to the $13.5 million decline in professional services revenue attributed to loss reserves of approximately $8.5 million for contracts with agencies within two state governments. Higher merchant fees also contributed to the decline in operating income.

Previous wording

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

Current wording

The following table sets forth a comparison of our interest expense for the three and nine months ended September 30 ($ in thousands):

Previous wording

Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings. The change in interest expense in the three months ended June 30, 2025, is flat compared to the prior period. The change for the six months ended June 30, 2025, compared to the prior period is primarily attributable to lower interest incurred as a result of our repayment of the Term Loans in early 2024.

Current wording

Interest expense is comprised of interest expense and non-usage and other fees associated with our borrowings. Interest expense in the three months ended September 30, 2025, was flat compared to the prior period. The 20% decline for the nine months ended September 30, 2025, compared to the prior period is primarily attributable to lower interest incurred as a result of our repayment of the Term Loans in early 2024.