TYLER TECHNOLOGIES INC
For the period ended Jun 30, 2026. Filed Jul 29, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Jul 29, 2026
TYL$420.56-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-04-29.
0000860731-26-000032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-07-29.
0000860731-26-000050
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 108 previous paragraphs and 121 current paragraphs.
47 unchanged; 54 reworded; 19 added; 6 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 22 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
Revenue from certain product offerings, along with related expenses, for the prior period has been reclassified to conform to their current period presentation. Furthermore, certain depreciation and amortization expenses for the prior periods have been reclassified to corporate unallocated to be consistent with the current year presentation that better aligns with the Corporate classification of certain assets on the condensed consolidated balance sheets as Corporate. These changes had no impact on the Company's consolidated results of operations, financial position, or cash flows.
Current report
On April 14, 2026, we completed the acquisition of the remaining equity of BFTR, LLC (“For the Record” or “FTR”), a provider of cloud connected software that captures, stores, and manages courtroom audio and video with secure chain of custody. The actual operating results of FTR are included in the operating results of the ES segment beginning April 14, 2026.
Current report
On May 14, 2026, we issued 0.50% Convertible Senior Notes due in 2031 for the aggregate principal amount of $1.44 billion (the “2031 Notes”). The 2031 Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of May 14, 2026, between the Company and U.S. Bank Trust Company, National Association, as trustee. The net proceeds from the issuance of the 2031 Notes were $1.41 billion, net of initial purchasers’ discounts of $25.2 million and debt issuance costs of $4.4 million. On May 14, 2026, we used approximately $320.7 million of the net proceeds of the offering of the 2031 Notes to repurchase 1,026,900 shares of our common stock. Including this repurchase, we repurchased approximately 2.4 million shares under our share repurchase program, for the six months ended June 30, 2026.
Current report
The 2031 Notes accrue interest at a rate of 0.50% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2027. The 2031 Notes mature on July 15, 2031, unless earlier repurchased, redeemed or converted.
Current report
As of June 30, 2026, the aggregate amount due of the 2031 Notes was $1.44 billion.
Current report
2026 Credit Agreement
Current report
For the three and six months ended June 30, 2026, total revenues increased 8.2% and 8.4%, respectively, compared to the prior period, primarily due to an increase in subscriptions revenue. Revenues from recent acquisitions contributed $11.4 million and $15.3 million to the total revenue increase for the three and six months ended June 30, 2026, respectively, compared to the prior period.
Current report
Amortization of other intangibles increased 12% and 6%, respectively, for the three and six months ended June 30, 2026, compared to the prior period, primarily due to amortization of other intangibles from acquisitions completed in 2026 and fourth quarter of 2025.
Current report
ES segment
Current report
For the three and six months ended June 30, 2026, the ES segment operating income increased 3% and 10%, respectively. For the three months ended June 30, 2026, the increase is primarily driven by a $50.5 million rise in subscriptions revenues resulting from the continued shift toward SaaS arrangements for both new and existing clients, as well as growth in certain transaction-based revenues. This increase was partially offset by higher expenses, including a $16.2 million increase in merchant fees, a $9.1 million increase in personnel expenses, a $5.3 million increase in professional fees primarily from litigation-related expenses, and a $4.8 million increase in hosting fees. Partially offsetting the increase is a $8.6 million decline in maintenance revenue and professional services revenues.
Current report
PT segment
Current report
For the three and six months ended June 30, 2026, the PT segment operating income increased 31% and decreased 9%, respectively.
Current report
For the three months ended June 30, 2026, the increase in segment operating income is primarily driven by a $7.9 million increase in professional services revenue, due to timing of time and material projects and timing of specific reserves taken in prior periods, and other revenue from hardware sales. The increase is offset by a decline of approximately $12.5 million in transaction-based revenues, partially offset by a corresponding $11.0 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract.
Current report
Gain on remeasurement of equity investment
Current report
The following table sets forth a comparison of our gain on remeasurement of equity investment for the three and six months ended June 30 ($ in thousands):
Current report
For the three and six months ended June 30, 2026, the Company recognized a gain of $25.0 million as a result of remeasuring the previously held equity investment to its fair value on the acquisition date in connection with the FTR acquisition completed during the second quarter of 2026.
Current report
Financing activities used cash of $149.3 million in the six months ended June 30, 2026, compared to $2.8 million used in the six months ended June 30, 2025. On May 14, 2026, we issued $1.44 billion aggregate principal amount of 2031 Notes. The net proceeds from the issuance of the 2031 Notes were $1.41 billion, net of initial purchasers’ discounts of $25.2 million and debt issuance costs of $4.4 million. In connection with the issuance of the 2031 Notes, the Company entered into privately negotiated Capped Call transactions (the “Capped Calls”) with certain financial institutions at an aggregate cost of approximately $187.2 million. On March 15, 2026, the Company repaid the $600.0 million aggregate principal amount of the 2026 Notes in cash. In the six months ended June 30, 2026, we repurchased approximately $755.0 million of our common stock, excluding excise taxes, paid $22.1 million, net of cash proceeds received from stock option exercises, to satisfy employee tax-withholding obligation associated with settlement of equity awards, and received $9.2 million from employee stock purchase plan activity. Lastly, the Company incurred fees of $2.2 million in connection with the 2026 Credit Agreement signed on May 26, 2026.
Current report
As of June 30, 2026, we had an aggregate principal amount of $1.44 billion of our 2031 Notes and no borrowings under the 2026 Credit Agreement, that has available borrowing capacity of $1.0 billion. On March 15, 2026, the Company repaid the $600.0 million aggregate principal amount of its 2026 Notes at maturity with the entire principal amount settled in cash, and no shares of common stock were issued upon settlement. In the six months ended June 30, 2026, and 2025, we paid interest of $2.1 million and $1.0 million, respectively. See Note 8, “Debt,” to the condensed consolidated financial statements for discussions of the 2026 Notes, the 2031 Notes and the 2026 Credit Agreement.
Current report
On April 14, 2026, we completed the acquisition of the remaining equity of BFTR, LLC. The transaction had a cash purchase price, net of cash acquired of approximately $212.7 million, subject to customary post-closing adjustments.
Removed paragraphs (6)
Previous report
We did not complete any new acquisitions during the three months ended March 31, 2026.
Previous report
For the three months ended March 31, 2026, total revenues increased 9%, compared to the prior period, primarily due to an increase in subscription revenue.
Previous report
We expect that software license revenues will continue to decline as we shift our model away from perpetual software licenses to SaaS.
Previous report
Amortization of other intangibles remained flat for the three months ended March 31, 2026, compared to the prior period.
Previous report
Financing activities used cash of $862.6 million in the three months ended March 31, 2026, compared to $1.0 million provided in the three months ended March 31, 2025. On March 15, 2026, the Company repaid the $600.0 million aggregate principal amount of the Convertible Senior Notes in cash. In the three months ended March 31, 2026, we repurchased approximately $250.1 million of our common stock, paid $16.4 million from shares withheld for taxes upon equity awards settlement net of cash received from stock option exercises, and received $3.8 million from employee stock purchase plan activity.
Previous report
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.
Reworded paragraphs (54)
Previous wording
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.
Current wording
On March 15, 2026, we repaid the $600.0 million aggregate principal amount of its 0.25% Convertible Senior Notes due 2026 (the “2026 Notes”) in cash at maturity. No conversions of the 2026 Notes occurred prior to or at maturity as our 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.
Previous wording
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.
Current wording
On May 28, 2026, we entered into a $1.0 billion credit agreement (the “2026 Credit Agreement”) with the various lender parties thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender, and Issuing Lender. The 2026 Credit Agreement provides for an unsecured revolving credit facility in an aggregate principal amount of up to $1.0 billion, including sub-facilities for standby letters of credit and swingline loans. The 2026 Credit Agreement matures on May 28, 2031, and loans may be prepaid at any time, without premium or penalty, subject to certain minimum amounts and payment of any SOFR breakage costs. We incurred fees of $2.2 million in connection with the 2026 Credit Agreement. The 2026 Credit Agreement replaced the Company’s existing $700.0 million unsecured credit facility under the 2024 Credit Agreement dated September 25, 2024, which was scheduled to mature September 25, 2029.
Previous wording
In the three months ended March 31, 2026, and 2025, we paid interest of $1.2 million and $1.0 million, respectively. See Note 8, “Debt,” to the condensed consolidated financial statements for discussions of the Convertible Senior Notes and the 2024 Credit Agreement.
Current wording
We have no outstanding borrowings under the 2026 Credit Agreement, with an available borrowing capacity of $1.0 billion as of June 30, 2026. See Note 8, “Debt,” to the condensed consolidated financial statements for discussions of the 2026 Notes, the 2031 Notes and the 2026 Credit Agreement.
Previous wording
Subscriptions revenue grew 14.6%, for the three months ended March 31, 2026, 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 12.0% and 13.3%, respectively, for the three and six months ended June 30, 2026, 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. Revenues from recent acquisitions contributed $8.1 million and $11.7 million to the subscriptions revenue increase for the three and six months ended June 30, 2026, respectively, compared to the prior period.
Previous wording
Our total employee count increased to 7,703 as of March 31, 2026, including 118 employees who joined us through acquisitions completed since March 31, 2025. Our employee count was 7,462 as of March 31, 2025.
Current wording
Our total employee count increased to 7,879 as of June 30, 2026, including 237 employees who joined us through acquisitions completed since June 30, 2025. Our employee count was 7,542 as of June 30, 2025.
Previous wording
Annualized recurring revenues (“ARR”) - Subscriptions and maintenance are considered recurring revenue sources. ARR is calculated by annualizing the current quarter’s recurring revenues from subscriptions and maintenance as reported in our statement of income. Management believes ARR is an indicator of the annual run rate of our recurring revenues, as well as a measure of the effectiveness of the strategies we deploy to drive revenue growth over time. ARR is a metric widely used by companies in the technology sector and by investors, which we believe offers insight into the stability of our subscription and maintenance revenues to be recognized within the year.
Current wording
Annualized recurring revenues (“ARR”) - Subscriptions and maintenance are considered recurring revenue sources. ARR is calculated by annualizing the current quarter’s recurring revenues from subscriptions and maintenance as reported in our statement of income. Management believes ARR is an indicator of the annual run rate of our recurring revenues, as well as a measure of the effectiveness of the strategies we deploy to drive revenue growth over time. ARR is a metric widely used by companies in the technology sector and by investors, which we believe offers insight into the stability of our subscriptions and maintenance revenues to be recognized within the year.
Previous wording
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. 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.
Current wording
Subscriptions revenues primarily consist of revenues derived from our SaaS arrangements and transaction-based fees. These revenues are considered recurring because revenues from these sources are expected to re-occur in similar annual amounts for the term of our relationship with the client. Transaction-based fees are generally the result of multi-year contracts with our clients that result in fees generated by payment transactions and digital government services and are collected on a recurring basis during the contract term. 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 $2.15 billion and $1.95 billion as of March 31, 2026, and 2025, respectively. ARR increased approximately 10% 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 $2.24 billion and $2.07 billion as of June 30, 2026, and 2025, respectively. ARR increased approximately 8% compared to the prior period primarily due to an increase in subscriptions revenue resulting from an ongoing shift toward SaaS arrangements for both new and existing clients and expansion in transaction-based fee arrangements.
Previous wording
The following table sets forth a comparison of our subscriptions revenue for the three months ended March 31 ($ 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
The following table sets forth a comparison of our subscriptions revenue derived from SaaS fees for the three months ended March 31 ($ in thousands):
Current 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):
Previous wording
For the three months ended March 31, 2026, SaaS fees grew 23%, compared to the prior period. The growth is primarily due to sales to new clients and expansions with existing clients, along with new SaaS revenues from existing on-premises clients converting to our SaaS offerings. Annual price increases for existing clients also contributed to the growth.
Current wording
For the three and six months ended June 30, 2026, SaaS fees grew 22% and 23%, respectively, compared to the prior period. The growth is primarily due to sales to new clients and expansions with existing clients, along with new SaaS revenues from existing on-premises clients converting to our SaaS offerings. Annual price increases for existing clients also contributed to the growth. SaaS revenues from recent acquisitions contributed $8.1 million and $11.6 million to the total SaaS revenue increase for the three and six months ended June 30, 2026, respectively, compared to the prior period.
Previous wording
The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the three months ended March 31 ($ in thousands):
Current 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):
Previous wording
For the three months ended March 31, 2026, contributing to the growth in transaction-based fees compared to prior period are the new transaction clients and volume increases from online payments and e-filing services, somewhat offset by the decline in revenues of approximately $12.3 million due to the wind-down in the fourth quarter of 2025 of one state payment processing contract.
Current wording
For the three and six months ended June 30, 2026, transaction-based fees grew 4% and 5%, respectively, compared to the prior period. The increase in transaction-based fees compared to prior period are from new transaction clients and volume increases from online payments and e-filing services, somewhat offset by the decline in revenues of approximately $12.5 million and $24.8 million, for the three and six months ended June 30, 2026, respectively, due to the wind-down in the fourth quarter of 2025 of one state’s payment processing contract.
Previous wording
The following table sets forth a comparison of our maintenance revenue for the three months ended March 31 ($ 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 decreased 3% for the three months ended March 31, 2026, compared to the prior period primarily due to the impact of 478 clients converting from on-premises license arrangements to SaaS since March 31, 2025, partially offset by maintenance price increases.
Current wording
We provide maintenance and support services for on-premises clients that license our software products and certain third-party software. Maintenance revenue decreased 6% and 5%, respectively, for the three and six months ended June 30, 2026, compared to the prior period primarily due to the impact of clients converting from on-premises license arrangements to SaaS since June 30, 2025, 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 decreased 5% for the three months ended March 31, 2026, compared to the prior period. The decline in professional services revenue compared to the prior period is related to an intentional reduction in custom development, as well as efficiencies in the delivery of professional services.
Current wording
Professional services revenue increased 8% and 1%, respectively, for the three and six months ended June 30, 2026, compared to the prior period. The increase in professional services revenues compared to prior period is primarily due to the timing of time and material projects and the timing of specific reserves taken in prior periods, partially offset by an intentional reduction in custom development, as well as efficiencies in the delivery of professional services.
Previous wording
The following table sets forth a comparison of other revenue for the three months ended March 31 ($ in thousands):
Current wording
The following table sets forth a comparison of other revenue for the three and six months ended June 30 ($ in thousands):
Previous wording
Other revenue primarily consists of software licenses, royalties and computer hardware. Other revenue increased 6% compared to the prior period primarily due to an increase in computer hardware revenue. The increase is somewhat offset by the decline in revenue from software licenses due to the ongoing shift in the mix of new software contracts toward more SaaS offerings. Refer to the SaaS fees section for further details on our revenue mix shift.
Current wording
Other revenue primarily consists of software licenses, royalties and computer hardware. Other revenue increased 14% and 10%, respectively, for the three and six months ended June 30, 2026, compared to the prior period. Other revenue increased primarily due to an increase in computer hardware revenue. The increase is somewhat offset by the decline in revenue from software licenses due to the ongoing shift in the mix of new software contracts to SaaS. Refer to the SaaS fees 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 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
The following table sets forth a comparison of our costs of subscriptions, maintenance, and professional services for the three months ended March 31 ($ in thousands):
Current 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):
Previous wording
The cost of subscriptions, maintenance, and professional services for the three months ended March 31, 2026 increased 6% compared to the prior period. The increase is primarily due to a $17.1 million increase in merchant fees and third-party fees related to higher activity, an increase of $5.9 million in hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud, and a $2.0 million increase in personnel expense. The increases were partially offset by a $10.5 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract. Also increases 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.
Current wording
The cost of subscriptions, maintenance, and professional services for both the three and six months ended June 30, 2026, increased 5%, compared to the prior period. For the three months ended June 30, 2026, the increase is primarily due to a $19.0 million increase in merchant fees related to higher activity and an increase in interchange fee rates, an increase of $5.5 million in hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud, and a $3.3 million increase from recent acquisitions. The increases were partially offset by an $11.0 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract, and the redeployment of resources to research and development due to continued migration of clients to our SaaS products and the consolidation of versions of on-premises software products with support obligations.
Previous wording
The following table sets forth a comparison of our amortization of software development for the three months ended March 31 ($ in thousands):
Current 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):
Previous wording
For the three months ended March 31, 2026, amortization of software development costs increased 5% 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 six months ended June 30, 2026, amortization of software development costs increased 1% and 3%, respectively, compared to the prior period due to new products released in the past year.
Previous wording
The following table sets forth a comparison of our amortization of acquired software for the three months ended March 31 ($ in thousands):
Current 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):
Previous wording
Amortization expense related to acquired software attributed to business combinations is included with cost of revenues. The estimated useful lives of acquired software range from five to 10 years.
Current wording
Amortization expense related to acquired software attributable to business combinations is included with cost of revenues. The estimated useful lives of acquired software range from five to 10 years.
Previous wording
For the three months ended March 31, 2026, amortization of acquired software declined 3% compared to the prior period due to assets becoming fully amortized in the fourth quarter of 2025.
Current wording
For the three and six months ended June 30, 2026, amortization of acquired software declined 8% and 6%, respectively, compared to the prior period due to assets becoming fully amortized in the fourth quarter of 2025, partially offset by amortization of acquired software from new acquisitions completed in 2026.
Previous wording
The following table sets forth a comparison of other costs for the three months ended March 31 ($ in thousands):
Current wording
The following table sets forth a comparison of other costs for the three and six months ended June 30 ($ in thousands):
Previous wording
Other costs for the three months ended March 31, 2026, increased 66% compared to the prior period. The increase was primarily driven by higher computer hardware sales.
Current wording
Other costs for the three and six months ended June 30, 2026, increased 11% and 25%, respectively, compared to the prior period. The increase was primarily driven by higher computer hardware sales.
Previous wording
Overall gross margin. For the three months ended March 31, 2026, our blended gross margin increased 1.0% compared to the prior period. For the three months ended March 31, 2026, 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. 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 and third party fees, hosting costs, and software development amortization expense.
Current wording
Overall gross margin. For the three and six months ended June 30, 2026, our blended gross margin increased 1.8% and 1.4%, respectively, compared to the prior period. For the three and six months ended June 30, 2026, the increase in overall gross margin compared to the prior period is primarily attributable to a shift in our revenue mix toward higher-margin SaaS revenues. That increase in the overall gross margin is partially offset by declines in software licenses and maintenance 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 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 expense as a percentage of revenues was 6.3% for the three months ended March 31, 2026 compared to 6.5% for the three months ended March 31, 2025. S&M expense increased 6% compared to the prior period. The increase in S&M expense is primarily attributed to an increase in commission expense and higher personnel expense compared to the prior period.
Current wording
S&M expense as a percentage of revenues was 6.2% for both the three and six months ended June 30, 2026 compared to 6.1% and 6.3%, respectively, for the three and six months ended June 30, 2025. S&M expense increased 10% and 8%, respectively, compared to the prior period. The increase in S&M expense is primarily attributed to an increase in commission expense and higher personnel expense 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 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 expense as a percentage of revenue was 13.7% for the three months ended March 31, 2026 compared to 14.1% for the three months ended March 31, 2025. G&A expense increased 6% for the three months ended March 31, 2026, compared to the prior period. For the three months ended March 31, 2026, the increase in G&A expense was primarily attributable to a $4.7 million write-off of previously capitalized software projects.
Current wording
G&A expense as a percentage of revenue was 14.5% and 14.1%, respectively, for the three and six months ended June 30, 2026 compared to 12.8% and 13.4%, respectively, for the three and six months ended June 30, 2025. G&A expense increased 22% and 14%, respectively, for the three and six months ended June 30, 2026, compared to the prior period. For the three months ended June 30, 2026, the increase in G&A expense was primarily attributable to a $7.1 million increase in professional fees primarily from ligation-related expenses, a $3.3 million increase in share-based compensation expense, a $2.3 million increase in acquisition and restructuring costs, and a $2.4 million increase in G&A expense from recent acquisitions. For the six months ended June 30, 2026, the G&A expense increase is attributable to a $6.9 million increase in professional services primarily from litigation-related expenses, a $4.7 million write-off of previously capitalized software projects, a $1.7 million increase in software/hardware expense, and a $2.6 million increase in G&A expense from recent acquisitions.
Previous wording
Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with product development. Research and development expense consists mainly of costs associated with development in our current products that do not qualify for capitalization. The following table sets forth a comparison of our research and development expense for the three months ended March 31 ($ in thousands):
Current wording
Research and development expense consists primarily of salaries, employee benefits and related overhead costs associated with product development. Research and development expense consists mainly of costs associated with development of new functionality in our current products that do not qualify for capitalization. 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 25% for the three months ended March 31, 2026, compared to the prior period, with the majority of the increase due to 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.
Current wording
Research and development expense increased 24%, for both the three and six months ended June 30, 2026, compared to the prior period, with the majority of the increase due to 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.
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 months ended March 31 ($ 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 six months ended June 30 ($ in thousands):
Previous wording
The following table sets forth a comparison of the operating income by reportable segments for the three months ended March 31 ($ in thousands):
Current 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):
Previous wording
For the three months ended March 31, 2026, the ES segment operating income increased 17%, primarily driven by a $66.6 million rise in subscription revenues resulting from the continued shift toward SaaS arrangements for both new and existing clients, as well as growth in certain transaction-based revenues. This increase was partially offset by higher expenses, including a $15.1 million increase in merchant fees, a $10.1 million increase in personnel expenses, and a $4.6 million increase in hosting fees. Also partially offsetting the increases is a $4.6 million decline in maintenance revenue, professional services revenue, and other revenues.
Current wording
For the six months ended June 30, 2026, the increase is primarily driven by an $117.1 million rise in subscriptions revenues resulting from the continued shift toward SaaS arrangements for both new and existing clients, as well as growth in certain transaction-based revenues. This increase was partially offset by higher expenses, including a $31.4 million increase in merchant fees, a $19.1 million increase in personnel expenses, a $9.3 million increase in hosting fees, a $6.2 million increase in professional services. Also partially offsetting the increase is a $13.5 million decline in maintenance revenue and professional services revenues.
Previous wording
For the three months ended March 31, 2026, the PT segment operating income decreased 41%, driven by a $4.9 million increase in personnel expenses, higher G&A expenses, including a $4.7 million write-off related to previously capitalized software projects, and $1.9 million in lower professional services revenue. Also contributing to the decrease is a decline of approximately $12.3 million in transaction-based revenues, partially offset by a corresponding $10.5 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract.
Current wording
For the six months ended June 30, 2026, the decrease in segment operating income is primarily driven by higher G&A expenses, including a $4.7 million write-off related to previously capitalized software projects. Also contributing to the decrease is a decline of approximately $24.8 million in transaction-based revenues, partially offset by a corresponding $21.5 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract. Offsetting the decline in the PT operating income was a $6.4 million increase in the professional services revenue and other revenues from hardware sales.
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Current report — wording carried from elsewhere
For the six months ended June 30, 2026, the increase is primarily due to a $36.0 million increase in merchant fees related to higher activity and an increase in interchange fee rates, an increase of $11.4 million in hosting costs as we expand our SaaS client base and transition from our proprietary data centers to the public cloud, and a $4.3 million increase from recent acquisitions. The increases were partially offset by a $21.5 million reduction in merchant fees following the wind-down in the fourth quarter of 2025 of a state payment processing contract, and 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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We have no outstanding borrowings under the 2024 Credit Agreement, with an available borrowing capacity of $700.0 million as of March 31, 2026.