TYL 10-K & 10-Q changes, risk factors and insider trading

An investment in our common stock involves a high degree of risk. Investors evaluating our company should carefully consider the factors described below and all other information contained in this Annual Report. AnyThese ofdisclosures reflect the followingCompany’s beliefs and opinions as to factors that could materially harmand ouradversely business,affect operatingthe results,Company and financialits condition.securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. Additional factors and uncertainties not currently known to us or that we currently consider immaterial could also harm our business, operating results, and financial condition. This section should be read in conjunction with the Financial Statements and related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report. We may make forward-looking statements from time to time, both written and oral. We undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements. Our actual results may differ materially from those projected in any such forward-looking statements due to a number of factors, including those set forth below and elsewhere in this Annual Report.

Cyber-attacksCyber-attacks, the use of artificial intelligence and security vulnerabilities can disrupt our business and harm our competitive position.

Threats to IT security can take, and have in the past taken, a variety of forms. Individuals andIndividuals, groups of hackers, and sophisticated organizationsorganizations, including state-sponsored organizations, may take steps that pose threats to our clients and our IT. TheyBad actors have in the past and may in the future develop and deploy malicious software to gain access to our internal networks, and/or to attack our products and services, gain access to data centers we use to host client deployments, or act in a coordinated manner to launch distributed denial of service or other coordinated attacks. Cyber threats are constantly evolving, thereby increasing the difficulty of detecting and successfully defending against them. Cyber threats can have cascading impacts that unfold with increasing speed across our internal networks and systems and those of our partners and clients. Breaches of our internal network have disrupted and could in the future disrupt the security of our internal systems and business applications, and could impair our ability to provide services to our clients and protect the privacy of their data, result in product development delays, compromise confidential or technical business information harming our competitive position, result in theft or misuse of our intellectual property or other assets, require us to allocate more resources to improve technologies, or otherwise adversely affect our business. Our business policies and internal security controls may not keep pace with these evolving threats. For example, the evolving use of artificial intelligence (“AI”) increases the risk of cyberattacks and data breaches, which themselves can evolve more rapidly when artificial intelligence is used to facilitate the attack. Despite theour network and application security, threat intelligence services, internal control measures, and physical security procedures we employ to safeguard our systems, we may still be vulnerable to a security breach, intrusion, or loss or theft of confidential client data, transaction data, or proprietary company information, which may harm our business, reputation and future financial results. Use of artificial intelligence by our team members, whether authorized or unauthorized, could increase the risk that our intellectual property and other proprietary information may be unintentionally disclosed. In addition, vulnerabilities in our clients’ on-premises infrastructure have in the past and may in the future be exploited by a bad actor, with the resulting impacts being linked to or attributed to, correctly or incorrectly, our software or services, which could also harm our business, reputation, and future financial results, even if our software or services were not the cause of the exploitation. The lost revenue andrevenue, containment, remediation, investigation, legal and other costs could be significant and may exceed our insurance policy limits or may not be covered by insurance at all. Further, we may be subject to regulatory enforcement actions and litigation that could result in financial judgments orjudgments, the payment of settlement amounts and/or disputes with insurance carriers concerning coverage.

We store and process increasingly large amounts of personally identifiable information and other confidential information of our clients. The continued occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to information security. Despite our efforts to improve security controls, it is possible our security controls over personal data, our training of employees on data security, and other practices we follow may not prevent the improper disclosure of sensitive client data that we store and manage. The evolving threat landscape, including new technologies that leverage artificial intelligence, may increase the external threats to the data we store and process. Disclosure of personally identifiable information and/or other sensitive client data has resulted in the past, and may result in the future, in obligations to send “data breach” notifications under applicable state laws, or to assist our clients in doing so, and/orwhich could result in liability and harm our reputation.

To satisfy our obligations under client contracts, we often engage third parties to provide certain deliverables or fulfill certain software or services requirements. We may also use third parties to ensure that our services and solutions integrate with the software, systems, or infrastructure requirements of other vendors and service providers.providers used by us internally or by our clients. Our ability to operate our internal systems and/or to serve our clients and deliver our solutions in a timely manner depends on our ability to retain and maintain relationshipsrelationships, including contractual arrangements, with third-party vendors and service providers and the ability of these third parties to meet their obligations in a timely manner, as well as on our effective oversight of their performance. If any third party fails to perform on a timely basis the agreed-upon services, our ability to fulfill our obligations may be jeopardized. Third-party performance deficiencies could result in breaches of our obligations with respect to,under, or the terminationterminations for defaultdefaults of, one or more of our client contracts. A breach or termination for default could expose us to liability for damages and have an adverse effect on our business prospects, results of operations, cash flows and financial condition and our ability to compete for future contracts and orders. A global economic slowdown, a pandemic, or similar circumstances could also adversely affect the businesses of our third-party providers, hindering their ability to provide the services on which we rely. Our agreements with third parties typically are non-exclusive and do not prohibit them from working with our competitors or from engaging with our clients directly. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenues could be impairedimpaired, and our business, operating results or financial condition could be adversely affected.

In addition, we may act as a subcontractor to a third-party prime contractor to secure new projects. Subcontracting arrangements where we are not the prime contractor pose unique risks to us because we may not have control over the client relationship, and our ability to generate revenues under such subcontracts may depend on the prime contractor, its performance and relationship with the client, and its relationship with us. We could suffer losses in the event a prime contract under which we serve as a subcontractor is terminated, whether for non-performance by the prime contractor or otherwise. Upon a termination of the prime contract, our subcontract would similarly terminate, and the resulting contract loss could have an adverse effect on our business prospects, results of operations, cash flows,flows and financial condition and our ability to compete for future contracts and orders.

We rely on third-party providers—including Amazon Web Services (AWS)—for hosting services and other technology-related services needed to deliver certain of our cloud solutions.solutions and other functionality. Any disruption in the services provided by such third-party providers could adversely affect our business and subject us to liability.

A material portion of our business is provided through software hosting services, which are sometimesgenerally hosted from and use computing infrastructure provided by third parties, including AWS. These hosting services depend on the uninterrupted operation of data centers and the ability to protect computer equipment and information stored in these data centers against damage that may be caused by natural disaster, fire, power loss, telecommunications or Internet failure, acts of terrorism, unauthorized intrusion, computer viruses, and other similar damaging events. If anySome of our datahosting centersoperations werehave toin the past, and may in the future, become unavailable or inoperable for an extended period, weharming mightour be unableability to fulfill our contractual commitments. Although we take what we believe to be reasonable precautions against such occurrences, we can give no assurance that damaging events such as these will not result in a prolonged interruption of our services, which could result in client dissatisfaction, loss of revenues, and damage to our business.

Third-party hosting service providers and other third-party vendors have no obligation to renew their agreements with us on commercially reasonable terms or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transition to a new provider and we may incur significant costs and possible service interruption or functional degradation in connection with doing so. In addition, such service providers could decide to close their facilities or change or suspend their service offerings without adequate notice to us. Moreover, any financial difficulties, such as bankruptcy, faced by such service providers may have negative effects on our business, the nature and extent of which are difficult to predict. Because we cannot easily switch third-party hosting service providers, and in certain instances other third-party vendor arrangements, any disruption with respect to our current providers would impact our operations and our business could be adversely impacted. Problems faced by our hosting servicethird-party providers could adversely affect the experience of our clients. For example, AWS has experienced significant service outages in the past and may do so again in the future. As we continue to migrate legacy solutions deployed on premises to the cloud, and to optimize our solutions for the cloud, we may be exposed to additional cybersecurity and artificial intelligence threats.

PartSignificant part of our future success continues to depend on the use of the Internet as a means to access public information and perform transactions electronically, including, for example, electronic filing of court documents and electronic payment processing. This in part requires ongoing maintenance of the Internet infrastructure, especially to prevent interruptions in service, as well as additional development of that infrastructure. This requires a reliable network backbone with the necessary speed, data capacity, security, and timely development of complementary products for providing reliable Internet access and services. If this infrastructure fails to be sufficiently developed or be adequately maintained, our business would be harmed because users may not be able to access our government portals.solutions. To date, any such outages have been temporary, and any business interruptions were contained and immaterial.

Our software products are complex and have in the past, and may in the future, contain errors or defects, especially when first introduced or when new versions or enhancements are released. Any such defects could result in a loss of revenues or delay market acceptance. Our license agreements typically contain provisions designed to limit our exposure to potential liability. However, it is possible we may not always successfully negotiate such provisions in our client contracts or the limitation of liability provisions may not be effective due to existing or future federal, state, or local laws, ordinances, or judicial decisions. Although we maintain errors and omissions and general liability insurance, and we try to structure contracts to limit liability, we cannot guarantee that a successful claim could not be made or would not have a material adverse effect on our future operating results.

We must timely respondadapt to and implement technological changes to be remain competitive.

The market for our products is characterized by rapid technological change, evolving industry standardsstandards, in software technology, changes inever-changing client requirements, and frequent new product introductions and enhancements. TheNew introduction of products embodying newproducts, technologies and the emergence of new industry standards can render our existing products obsolete and unmarketable. As a result, our future success will depend, in part, upon our ability to enhance existing products and develop and introduce new products that keep pace with technological developments, satisfy increasingly sophisticated client requirements, and achieve market acceptance. We cannot assuremake youassurances that we will successfully identify new product opportunities and develop and bring new products to market in a timely and cost-effective manner. The products, capabilities, or technologies developed by others could also render our products or technologies obsoleteoutdated or noncompetitive. Our business may be adversely affected if we are unable to develop or acquire new software products or develop enhancements to existing products on a timely and cost-effective basis, or if such new products or enhancements doare not achieveadopted marketand acceptance.purchased by the market.

As we assess the challenges and opportunities of incorporating AI technologies into our products and services, we may notfail successfullyto enhance our offerings in alignment with market demandsdemands, timing or industry expectations at a pace that matches our competitors. Delays in our adoption or innovation could render our offerings less competitive or obsolete. AI technology is rapidly evolving,evolving. and whileWhile we are prioritizing a measured approach based on known best practices, the investments required, the need for specialized skills and expertise, and the shifting legal and regulatory landscape may expose us to operational, financial, and reputational risks. Additionally, AI-generated outputs may be misleading, insecure, inaccurate, harmful, or otherwise flawed, potentially resulting in adverse consequences to our business.

Many of our product and service offerings incorporate proprietary information, trade secrets, know-how, and other intellectual property rights. We rely on a combination of contracts,contract rights, copyrights, and trade secret laws to establish and protect our proprietary rights in our technology. We cannot be certain that we have taken all appropriate steps to deter misappropriation of our intellectual property, including to the extent our data is consumed by generative artificial intelligence technology. There has also been ana apparentrecent evolutionchange in the legal standards and regulations that courts and the U.S. patent office may apply in favorably evaluating software patent rights.rights (see the United States Patent and Trademark Office Memorandum dated December 5, 2025 to the Patent Examining Corp from Charles Kim, Deputy Commissioner for Patents regarding the advance notice of change to the Manual of Patent Examining Procedure in light of Ex Parte Desjardins, Appeal No. 2024-000567 (PTAB September 26, 2025, Appeals Review Panel Decision)). We are not currently involved in any material intellectual property litigation; however, we may be a party to such litigation in the future to protect our proprietary information, trade secrets, know-how, and other intellectual property rights. We cannot assureprovide youassurance that third parties will not assert infringement or misappropriation claims against us with respect to current or future products. Any claims or litigation, with or without merit, could be time-consuming, costly, and adivert diversionthe totime and attention of management. Any such claims and litigation could also cause product shipment delays or require us to enter into royalty or licensing arrangements. Such royalty or licensing arrangements, if required, may not be available on terms acceptable to us, if at all. Therefore, litigation to defend and enforce our intellectual property rights could have a material adverse effect on our business, regardless of the final outcome of such litigation.

We provide annually recurring maintenance contracts for clients who are deployed on-premises,on-premises and recurring Softwaresoftware as a Serviceservice contracts for clients who are deployed in the cloud. It is possible that our clients may elect to not renew recurring contracts for our software, trying instead to maintain and operate the software themselves using their perpetual license rights (excluding software applications that we provide on a hosted or software as a service basis), or migrating to a different cloud solution. Alternatively, clients may elect to drop maintenance on certain modules that they ultimately decide not to use. This could adversely affect our revenues and profits. Additionally, theyclients may inadvertently allow our intellectual property or other information to fall into the hands of third parties, including our competitors, which could adversely affect our business.

•ContractPayment paymentsterms at timesthat are subject to achieving implementation milestones, which have in the past and we may havein the future create differences in opinion with clients as to whether milestones have been achieved

•Various other political factors, including changes in governmental administrations and personnel or budget initiatives Each of these risks is outside our control. If we fail to adequately adapt to these risks and uncertainties, our financial performance could be adversely affected.

A public health crisis, such as a pandemic, may negatively impact our business and financial results. As seen with the COVID pandemic, certainCertain infection rates or virus strains may result in government authorities imposing measures to contain the virus, including travel bans and restrictions, quarantines, and business limitations and shutdowns. While we are unable to accurately predict the full impact that a health crisis or pandemic would have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures and associated compliance, a pandemic may negatively impact our revenues and other financial results. Because an increasing portion of our revenues are recurring, the effect of a public health-related shutdown on our results of operations may also not be fully reflected for some time.

Our market is highly fragmented with a large number of competitors that vary in size, product platform, and product scope. Our competitors include consulting firms, publicly held companies that focus on selected segments of the public sector market, and a significant number of smaller, privately held companies. Certain competitors have greater technical, marketing, and financial resources than we do. We cannot assure youinvestors that such competitors will not develop products or offer services that are superior to our products or services or that achieve greater market acceptance.

Increased competition could also result in pricing pressure, fewer client orders, reduced gross margins, and loss of market share. Current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, thereby increasing the ability of their products to address the needs of our prospective clients. It is possible that new competitors or alliances may emerge and rapidly gain significant market share. We cannot assure youinvestors that we will be able to compete successfully against current and future competitors, and the failure to do so wouldcould have a material adverse effect upon our business.

Some of our clients, primarily those for our property appraisal services, require that we secure performance bonds before they will select us as their vendor. In addition, we have in the past been required to provide letters of credit as security for the issuance of a performance bond. We cannot guarantee that we will be able to secure such performance bonds in the future on terms that are favorable to us, if at all. Our inability to obtain performance bonds on favorable terms or at all could impact our future ability to win some contract awards, particularly large property appraisal services contracts, which could negatively impact revenues. In addition, the general insurance markets may experience volatility and/or restrictive coverage trends, which may lead to future increases in our general and administrative expenseexpenses and negatively impact our operating results.

Servicing our indebtedness requires a significant amount of cash. WeIf a fundamental change occurs, we may not have sufficient cash flow from our business to pay our indebtedness, and we may not otherwise have the ability to raise the funds necessary to settle for cash conversions of the Convertible Senior Notes or to repurchase the Convertible Senior Notes upon a fundamental change,Notes, or to repay our indebtedness obligations under our 2024 Credit Agreement, each of which could adversely affect our business and results of operations.

On September 25, 2024, the Company entered into a $700.0 million credit agreement with the various lenderslender partyparties 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 subfacilities for standby letters of credit and swingline loans. On March 9, 2021, we issued 0.25% Convertible Senior Notes due in 2026 in the aggregate principal amount of $600.0 million (“the Convertible Senior Notes” or “the Notes”). The Convertible Senior Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 9, 2021, with U.S. Bank National Association as trustee.

Pursuant to their terms, holdersHolders may convert their Convertible Senior Notes at their option prior to the scheduled maturitiesmaturity date of theirthe Convertible Senior NotesNotes, underMarch certain15, circumstances.2026. Upon conversion of the Convertible Senior Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be obligated to make cash payments.. In addition, holders of our Convertible Senior Notes will have the right to require us to repurchase their Convertible Senior Notes upon the occurrence of a fundamental change (as defined in the Indenture, dated as of March 9, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”) (the “Indenture”)), at a repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest, if any. Although it is our intention, and we currently expect to have the ability, to settle the Convertible Senior Notes in cash, there is a risk that we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Senior Notes surrendered or Convertible Senior Notes being converted. In addition, our ability to make payments may be limited by law, by regulatory authority, or by agreements governing our future indebtedness. Our failure to repurchase Convertible Senior Notes at a time when the repurchase is required by the Indenture or to pay any cash payable on future conversions of the Convertible Senior Notes as required by the Indenture would constitute a default under the Indenture. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our other existing or future indebtedness. If the repayment of other indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the other indebtedness and repurchase the Convertible Senior Notes or make cash payments upon conversions thereof. We have elected net-share settlement related to the premium of the maturing Convertible Senior Note, we may settle our conversion obligation by delivering a potential number of shares of our common stock, which could cause dilution to our existing shareholders.

Our liquidity and ongoing access to capital could be materially and negatively affected by volatility in the financial and securities markets, including increased inflation and interest rates. Our continued access to sources of liquidity depends on multiple factors, including global macroeconomic conditions, the condition of global financial markets, the availability of sufficient amounts of financingfinancing, the Federal Reserve’s monetary policy and our operating performance. There have been periods of increased volatility in the financial and securities markets, as well as increased inflation and interest rates, which generally hashave made access to capital less certain and hashave increased the cost of obtaining new capital, and future volatility may create similar risks. We may need to obtain equity, equity-linked, or debt financing in the future to fund our operations, including our acquisition strategy, and there is no guarantee that such debt financing will be available in the future, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding.

•We may have to defer revenues under our revenue recognition policies and GAAP In each fiscal quarter, our expense levels, operating costs, and staffing levels are based to some extent on projections of future revenues and are relatively fixed. If our actual revenues fall below expectations, we could experience a reduction in earnings. Also, if actual revenues or earnings for any given quarter fall below expectations, it may lead to a decline in our stock price.

•Announcements of technological innovations, new products, or new contracts by us or our competitorscompetitors, including uncertainties surrounding new and evolving artificial intelligence tools that could be perceived automate functions that may reduce the demand for certain products and services

•Changes in interest rates and Federal Reserve monetary policy

•General political, economic and market conditions and other factors In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices of technology company stocksstocks, which have in the past and may in the future adversely affect the market price of our stock. Sometimes, securities class action litigation is filed following periods of volatility in the market price of a particular company’s securities. We cannot assure youinvestors that similar litigation will not occur in the future with respect to us. Such litigation could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect upon our financial performance.

A material portion of our historical growth has resulted from strategic acquisitions.acquisitions, Although our current focus is on organic internal growth,and we willexpect to continue to identify and pursue strategic acquisitions with suitable candidates. These transactions involve significant challenges and risks, including risks that a transaction does not advance our business strategy; that we do not achieve the expected return on our investment; that we have difficulty integrating business systems and technology; that we have difficulty retaining or integrating new employees; that the transactions distract management from our other businesses; that we acquire unforeseen liabilities; and other unanticipated events. Our future success will depend, in part, on our ability to successfully integrate future acquisitions into our operations. It may take longer than expected to realize the full benefits of these transactions, such as increased revenue, enhanced efficiencies, or increased market share, or the benefits may be ultimately less than we expected. Although we conduct due diligence reviews of potential acquisition candidates, we may not identify all material liabilities or risks related to acquisition candidates. There can be no assurance that any such strategic acquisitions will be accomplished on favorable terms or will result in profitable operations.

Increases in labor costs, including wages, and an overall tightening of the U.S labor market, generally, or as the result of changing U.S. policy could adversely affect our business, results of operations or financial condition.

The labor costs associated with our business are subject to several external factors, including unemployment levels and the quality and the size of the labor market, prevailing wage rates, minimum wage laws, wages and other forms of remuneration and benefits offered to prospective employees by competitor employers, health insurance costs and other insurance costscosts, and changes in employment and labor legislation or other workplace regulation.regulation, such as changing immigration policies affecting the labor market. If we are unable to mitigate wage rate increases driven by increases to the competitive labor market through automation and other labor savings initiatives, our labor costs may increase. Furthermore, high inflation rates could also push up our labor costs. There is no assurance that our revenues will increase at the same rate as these labor cost increases to maintain the same level of profitability.

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, primarilyincluding locallocal, state and statefederal governments,government agencies, that could negatively impact information technology spending; (2) disruption to our business and harm to our competitive position resulting from cyber-attacks, evolving use of artificial intelligence (“AI”), security vulnerabilities and software updatesupdates, or changes in our ability to access third-party software and services; (3) our ability to protect client information from security breaches or misuse through AI and to 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 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; (78) general economic, political and market conditions, including continued inflation and risingchanges in interest rates; (89) technological and market risks associated with the development of new technologies, products or services or of new versions of existing or acquired products or services; (910) 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; (1011) 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 (1112) 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 to publicly update or revise our forward-looking statements.

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.

We report our results in two reportable segments. Our reportable segments are organized on the basis of a combination of the products and services they deliver to clients and the function that the public sector client performs. BusinessOperating unitssegments that have met the aggregation criteria have been combined into our two reportable segments. The Enterprise Software (“ES”) reportable segment provides public sector entities with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as: public administration solutions, courts and public safety solutions, education solutions, and property and recording solutions. The Platform Technologies (“PT”) reportable segment provides public sector entities with platform and transformative solutions including digital solutions, payment processing, streamlined data processing, and improved operations and workflows.

The primaryChief financialOperating measuresDecision usedMaker by(“CODM”) the CODM for assessing performance and allocating resources areuses segment operating income or loss fromto operations.assess The CODM uses segment income or loss from operations before income taxes, not including gainsperformance and losses on investments, to allocate resources (including employees, property, and financial or capital resources) for each segmentsegment, predominantly in the annual budget and forecasting process. Segment gross profit for our operating segments units is defined as gross profit before non-cash amortization of acquired software associated with acquisitions. Segment operating income for our reportable segments is defined as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense, and income taxes. During the fiscal periods presented, we had no significant transactiontransactions between reportable segments. Corporate segmentunallocated operatingamounts lossare primarily consistscomprised 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,team and certain shared services staff, and share-based compensation expense for the entire company. Corporate segmentunallocated operating lossamounts also includesinclude incidental revenues and expenses related to a company-wide user conference.conference Certainand presentationrental itemsincome. fromThe previousaccounting yearspolicies haveof beenthe adjustedreportable segments are the same as those described in Note 1, “Summary of Significant Accounting Policies See Note 2, “Segment and Related Information,” in the notes to conformthe withfinancial currentstatements yearfor presentation.additional information.

For the twelve months ended December 31, 2024,2025, total revenues increased 9.5%9.1% compared to the prior period.period, Revenuesprimarily from recent acquisitions contributed $10.4 million or 0.5%,due to thean totalincrease revenuein increase.subscription revenue.

Annualized Recurring RevenueRevenues (“ARR”) - Subscriptions and maintenance are considered recurring revenue sources. ARR is calculated by annualizing the current quarter’s recurring revenues from maintenance and subscriptions 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 tointo the stability of our maintenance and subscription revenues to be recognized within the year.

SubscriptionsSubscription 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. ARR was $1.86 billion and $1.61 billion as of December 31, 2024, and 2023, 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 fees.

Cost of Revenues and Gross Margins – Our primary cost components are hosting costscosts, merchant fees, and personnel expenses in connection with providing software implementation, subscription-based services and maintenance and support to our clients. We can improve gross margins by controlling headcount and related costs and by expanding our revenue base, especially from those products and services that produce incremental revenue with relatively low incremental cost, such as subscription-based services, maintenance and support and software licenses and royalties. Continued migration of clients to our SaaS products and consolidation of versions of on-premises software products with support obligations could decrease support costs with resources redeployed toward development. As of December 31, 2024,2025, our total employee count included in cost of revenues increaseddeclined to 5,2505,073 from 5,1295,250 at December 31, 2023.2024.

Sales and Marketing (“S&M”) Expense – The primary components of S&M expense include sales personnel salaries and share-based compensation expense, sales commissions, travel-related expenses, advertising and marketing materials, and allocated depreciation, facilities, and IT support. Sales commissions typically fluctuate with revenues and share-based compensation expense generally increases based on increased levels of awards issued during the period and as the market price of our stock increases. Other administrativeS&M expenses tend to grow at a slower rate than revenues.

Research and development (“R&D”) expenseExpense – These costs include compensation costs and share-based compensation expense for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to researching and developing new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and IT support costs. Share-based compensation expense generally increases based on increased level of awards issued during the period and as the market price of our stock increases. As of December 31, 2024,2025, our total employee count included in R&D expense increased to 8701,368 from 830870 at December 31, 2023 Liquidity and Cash Flows – The primary driver of our cash flows is net income. Uses of cash include acquisitions, capital investments in property and equipment and software development, debt repayment and discretionary purchases of treasury stock. Our working capital needs are fairly stable throughout the year with the significant components of cash inflows representing collection of accounts receivable and cash receipts from clients in advance of revenue being earned, offset by cash outflows, primarily payment of personnel expenses. In recent years, we have also received significant amounts of cash from employees exercising stock options and contributing to our Employee Stock Purchase Plan.2024.

ARR was $2.06 billion and $1.86 billion andfor $1.61the billionperiods as ofending December 31, 2024,2025, and 2023,2024, respectively, an increase of approximately 15%11% compared to the prior period. The public sector software market continues to experience heightened activity. We expect to continue to achieve solid growth in revenues and earnings. With our strong financial position and cash flow, we plan to continue to make significant investments in product development and continue to accelerate our move to the cloud to better position us to continue to expand our addressable market and strengthen our competitive position over the long term.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements. These financial statements have been prepared following the requirements of accounting principles generally accepted in the United States (“GAAP”) and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Notes to the Financial Statements included as part of this Annual Report describe our significant accounting policies used in the preparation of the financial statements. Significant items subject to such estimates and assumptions include the recoverability of goodwill and other intangible assets and estimated useful lives of intangible assets, the application of the progress toward completion methods of revenue recognition, estimation for revenue recognition and multiple performance obligation arrangements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies require significant judgments and estimates used in the preparation of our financial statements. The discussion below supplements Note 1, “Summary of Significant Accounting Policies,” within the notes to the consolidated financial statements.

Revenue Recognition. We earn the majority of our revenues from subscription-based services and post-contract client support (“PCS” or “maintenance”). Other sources of revenue are professional services, software licenses and royalties, and hardware and other. Our software arrangements with clients contain multiple performance obligations that range frominclude software licenses,license deliveries, installation, training, consulting, software modification and customization to meet specific client needs; hosting; and PCS.post-contract client support (“PCS”). For these contracts, we account for individual performance obligations separately when they are distinct. We evaluate whether separate performance obligations can be distinct or should be accounted for as one performance obligation. Arrangements that include professional services, such as training or installation, are evaluated to determine whether those services are highly interdependent or interrelated to the product’s functionality. The transaction price is allocated to the distinct performance obligations on a relative standalone selling price (“SSP”) basis.

Business Combinations. Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values. The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, managementwe usesuse all available information.

For tangible and identifiable intangible assets acquired in a business combination, management estimates the fair value of assets acquiredacquired, along with their useful lives, and liabilities assumed based on factors including quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. The assumptions made in performing these valuations include, but are not limited to, discount rates, future revenues and operating costs, projections of capital costs, and other assumptions believed to be consistent with those used by principal market participants.

Due to the specialized nature of these calculations, we engage third-party specialists to assist management in evaluating our assumptions as well as appropriately measuring the fair value of assets acquired and liabilities assumed. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and circumstances that existed as of the closing date. If actual results are materially different than the assumptions we used to determine fair value of the assets acquired and liabilities assumed through a business combination as well as the estimated useful lives of the acquired intangible assets, it is possible that adjustments to the carrying values of such assets and liabilities will have a material impact on our financial position and results of operations.

All intangible assets (other than goodwill) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of other intangible assets isrecoverable, measured by comparison of the carrying amount to estimated undiscounted future cash flows. The assessment of recoverability or of the estimated useful life for amortization purposes will be affected if the timing or the amount of estimated future operating cash flows is not achieved. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and reductions in growth rates. In addition, products, capabilities, or technologies developed by others may render our software products obsolete or non-competitive. Any adverse change in these factors could have a significant impact on the recoverability of goodwill or other intangible assets. During 2024, we did not identify any triggering events that would indicate that the carrying amount of our intangible assets may not be recoverable.

In November 2024, the FASB issued ASU 2024-04 - Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. It is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. ThisAs guidanceof isJanuary 1, 2025, we early adopted this standard, which did not expected to have a material impact on the Company’s financial statements.

Subscriptions.Subscriptions

SaaS fees

For the twelve months ended December 31, 2024, the increase in2025, SaaS fees increased compared to the prior periodperiod. The growth is primarily attributable to new SaaS clients as well as existing on-premises clients who converted to our SaaS model. Since December 31, 2023,2024, we have added 734612 new SaaS clients, while 415488 existing on-premises clients have converted to our SaaS offerings. Our new software contract mix for the twelve months ended December 31, 2024,2025, was 11% perpetual software license arrangements and approximately 89% subscription-based arrangements, compared to approximately 12% perpetual software license arrangements and approximately 88% subscription-based arrangements, compared to approximately 17% perpetual software license arrangements and approximately 83% subscription-based arrangements for the twelve months ended December 31, 2023.2024.

For the twelve months ended December 31, 2024,2025, contributing to the growth in transaction-based fees compared to prior period are the new transaction clients, volume increases from online payments and e-filing services, and price increases by certain third-party processing partners from whom we receive a share of revenues, and the impact of transaction-based fees from recent acquisitions of $4.2 million. These increases are partially offset by a change from the gross revenue model to the net revenue model for payments revenue under one of our state enterprise agreements that results in merchant fees recorded as a reduction in revenue rather than as cost of revenues.

Maintenance.Maintenance

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue decreased 4% compared to the prior period primarily due to the impact of 488 clients converting from on-premises license arrangements to SaaS, partially offset by maintenance price increases.

Software licenses and royalties.royalties

The decrease in softwareSoftware licenses and royalties revenue decreased 51% compared to the prior period primarily due to a loss reserve for remaining exposure related to a contract dispute previously disclosed. The remainder of the decline is primarily attributeddue to 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.

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, public cloud hosting costs, and support activities, including enhancing existing solutions, and various other services such as custom development, ongoing operation of our SaaS solutions, property appraisal outsourcing activities, digital government services, and other transaction-based services such as e-filing. Other costs included are merchant and interchange fees required to process credit/debit card transactions and bank fees to process automated clearinghouse transactions related to our payments business.

In addition to the other information set forth in this report, one should carefully consider the discussion of various risks and uncertainties contained in Part I, “Item 1A. Risk Factors” in our 2025 Annual Report on Form 10-K filed on February 18, 2026. We believe those risk factors are the most relevant to our business and could cause our results to differ materially from the forward-looking statements made by us. Please note, however, that those are not the only risk factors facing us. Additional risks that we do not consider material, or of which we are not currently aware, may also have an adverse impact on us. Our business, financial condition and results of operations could be seriously harmed if any of these risks or uncertainties actually occur or materialize. In that event, the market price for our common stock could decline, and our shareholders may lose all or part of their investment. During the threesix months ended MarchJune 31,30, 2026, there were no material changes in the information regarding risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2025.

For the three and six months ended MarchJune 31,30, 2026, total revenues increased 9%,8.2% and 8.4%, respectively, compared to the prior period, primarily due to an increase in subscriptionsubscriptions 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.

Subscriptions revenue grew 14.6%,12.0% and 13.3%, respectively, for the three and six months ended MarchJune 31,30, 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.

Our total employee count increased to 7,7037,879 as of MarchJune 31,30, 2026, including 118237 employees who joined us through acquisitions completed since MarchJune 31,30, 2025. Our employee count was 7,4627,542 as of MarchJune 31,30, 2025.

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 subscriptionsubscriptions and maintenance revenues to be recognized within the year.

SubscriptionSubscriptions 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.

ARR was $2.15$2.24 billion and $1.95$2.07 billion as of MarchJune 31,30, 2026, and 2025, respectively. ARR increased approximately 10%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.

The following table sets forth a comparison of our subscriptions revenue for the three and six months ended MarchJune 3130 ($ in thousands):

The following table sets forth a comparison of our subscriptions revenue derived from SaaS fees for the three and six months ended MarchJune 3130 ($ in thousands):

For the three and six months ended MarchJune 31,30, 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.

The following table sets forth a comparison of our subscriptions revenue derived from transaction-based fees for the three and six months ended MarchJune 3130 ($ in thousands):

For the three and six months ended MarchJune 31,30, 2026, contributingtransaction-based fees grew 4% and 5%, respectively, compared to the growthprior period. The increase in transaction-based fees compared to prior period are thefrom new transaction clients and volume increases from online payments and e-filing services, somewhat offset by the decline in revenues of approximately $12.3$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 statestate’s payment processing contract.

The following table sets forth a comparison of our maintenance revenue for the three and six months ended MarchJune 3130 ($ in thousands):

We provide maintenance and support services for on-premises clients that license our software products and certain third-party software. Maintenance revenue decreased 3%6% and 5%, respectively, for the three and six months ended MarchJune 31,30, 2026, compared to the prior period primarily due to the impact of 478 clients converting from on-premises license arrangements to SaaS since MarchJune 31,30, 2025, partially offset by maintenance price increases.

The following table sets forth a comparison of our professional services revenue for the three and six months ended MarchJune 3130 ($ in thousands):

Professional services revenue decreasedincreased 5%8% and 1%, respectively, for the three and six months ended MarchJune 31,30, 2026, compared to the prior period. The declineincrease in professional services revenuerevenues compared to the prior period is relatedprimarily 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.

The following table sets forth a comparison of other revenue for the three and six months ended MarchJune 3130 ($ in thousands):

Other revenue primarily consists of software licenses, royalties and computer hardware. Other revenue increased 6%14% and 10%, respectively, for the three and six months ended June 30, 2026, compared to the prior periodperiod. 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 towardto more SaaS offerings.SaaS. Refer to the SaaS fees section for further details on our revenue mix shift.

The following table sets forth a comparison of the key components of our cost of revenues for the three and six months ended MarchJune 3130 ($ in thousands):

The following table sets forth a comparison of our costs of subscriptions, maintenance, and professional services for the three and six months ended MarchJune 3130 ($ in thousands):

The cost of subscriptions, maintenance, and professional services for both the three and six months ended MarchJune 31,30, 20262026, increased 6%5%, compared to the prior period. TheFor the three months ended June 30, 2026, the increase is primarily due to a $17.1$19.0 million increase in merchant fees and third-party fees related to higher activity,activity and an increase in interchange fee rates, an increase of $5.9$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 $2.0$3.3 million increase infrom personnelrecent expense.acquisitions. The increases were partially offset by aan $10.5$11.0 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract.contract, Also increases were partially offset byand 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.

The following table sets forth a comparison of our amortization of software development for the three and six months ended MarchJune 3130 ($ in thousands):

For the three and six months ended MarchJune 31,30, 2026, amortization of software development costs increased 5%1% and 3%, respectively, compared to the prior period due to new capitalizedproducts software development projects going into servicereleased in the past year.

The following table sets forth a comparison of our amortization of acquired software for the three and six months ended MarchJune 3130 ($ in thousands):

Amortization expense related to acquired software attributedattributable to business combinations is included with cost of revenues. The estimated useful lives of acquired software range from five to 10 years.

For the three and six months ended MarchJune 31,30, 2026, amortization of acquired software declined 3%8% and 6%, respectively, compared to the prior period due to assets becoming fully amortized in the fourth quarter of 2025.2025, partially offset by amortization of acquired software from new acquisitions completed in 2026.

The following table sets forth a comparison of other costs for the three and six months ended MarchJune 3130 ($ in thousands):

Other costs for the three and six months ended MarchJune 31,30, 2026, increased 66%11% and 25%, respectively, compared to the prior period. The increase was primarily driven by higher computer hardware sales.

The following table sets forth a comparison of gross profit and overall gross margin for the periods presented as of MarchJune 3130 ($ in thousands):

Overall gross margin. For the three and six months ended MarchJune 31,30, 2026, our blended gross margin increased 1.0%1.8% and 1.4%, respectively, compared to the prior period. For the three and six months ended MarchJune 31,30, 2026, the increase in overall gross margin compared to the prior period is primarily attributedattributable to a shift in our revenue mix toward higher-margin SaaS revenues. TheThat increase in the overall gross margin is partially offset by declines in software licenses, maintenancelicenses and professional servicesmaintenance revenues and increases in merchant fees and third party fees, hosting costs, and software development amortization expense.

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 MarchJune 3130 ($ in thousands):

S&M expense as a percentage of revenues was 6.3%6.2% for both the three and six months ended June 30, 2026 compared to 6.1% and 6.3%, respectively, for the three monthsand ended March 31, 2026 compared to 6.5% for the threesix months ended MarchJune 31,30, 2025. S&M expense increased 6%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.

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 MarchJune 3130 ($ in thousands):

G&A expense as a percentage of revenue was 13.7%14.5% and 14.1%, respectively, for the three and six months ended MarchJune 31,30, 2026 compared to 14.1%12.8% and 13.4%, respectively, for the three and six months ended MarchJune 31,30, 2025. G&A expense increased 6%22% and 14%, respectively, for the three and six months ended MarchJune 31,30, 2026, compared to the prior period. For the three months ended MarchJune 31,30, 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.projects, a $1.7 million increase in software/hardware expense, and a $2.6 million increase in G&A expense from recent acquisitions.

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 MarchJune 3130 ($ in thousands):

Research and development expense increased 25%24%, for both the three and six months ended MarchJune 31,30, 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.

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 MarchJune 3130 ($ in thousands):

Amortization of other intangibles remainedincreased flat12% and 6%, respectively, for the three and six months ended MarchJune 31,30, 2026, compared to the prior period.period, primarily due to amortization of other intangibles from acquisitions completed in 2026 and fourth quarter of 2025.

The following table sets forth a comparison of the operating income by reportable segments for the three and six months ended MarchJune 3130 ($ in thousands):

For the three and six months ended MarchJune 31,30, 2026, the ES segment operating income increased 17%,3% and 10%, respectively. For the three months ended June 30, 2026, the increase is primarily driven by a $66.6$50.5 million rise in subscriptionsubscriptions 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$16.2 million increase in merchant fees, a $10.1$9.1 million increase in personnel expenses, a $5.3 million increase in professional fees primarily from litigation-related expenses, and a $4.6$4.8 million increase in hosting fees. Also partiallyPartially offsetting the increasesincrease is a $4.6$8.6 million decline in maintenance revenue,revenue and professional services revenue, and other revenues.

For the three months ended MarchJune 31,30, 2026, the PTincrease in segment operating income decreasedis 41%,primarily driven by a $4.9$7.9 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.revenue, Also contributingdue to thetiming decreaseof 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 $12.3$12.5 million in transaction-based revenues, partially offset by a corresponding $10.5$11.0 million reduction in merchant fees, following the wind-down in the fourth quarter of 2025 of a state payment processing contract.

The following table sets forth a comparison of our interest expense for the three and six months ended MarchJune 3130 ($ in thousands):