The company's transition to a SaaS model is evident in the increasing percentage of new software clients choosing cloud-based solutions (88% in 2024 vs 83% in 2023). This strategy is expected to continue driving revenue growth.

Revenues from recent acquisitions contributed $10.4 million, or 0.5%, to the total revenue increase. This suggests that while acquisitions are part of the growth strategy, organic growth remains the primary driver.

Transaction-based revenues increased 11% YoY, driven by new transaction clients, volume increases from online payments and e-filing services, and price increases by certain third-party processing partners. This indicates a successful diversification of revenue sources.

Operating income increased to $299.5 million, demonstrating effective cost management. The company has successfully controlled costs in areas such as general and administrative expenses, leading to improved profitability.

Research and development expenses increased to $117.9 million, reflecting ongoing investments in new solutions and upgrades. This commitment to innovation is crucial for maintaining a competitive edge.

The report indicates a successful transition from Tyler's proprietary data centers to Amazon Web Services (AWS) for cloud hosting. This strategic move optimizes products for efficient deployment in the public cloud.

The 10-K emphasizes the persistent threat of cyberattacks and security vulnerabilities, highlighting the potential for disruption to business operations and harm to the company's competitive position. The evolving use of AI increases the risk of cyberattacks and data breaches.

The company relies on third-party providers, including Amazon Web Services, for hosting services and other technology-related services. Any disruption in these services could adversely affect the business and subject the company to liability.

The company faces risks associated with selling to the public sector, including resource limitations caused by budgetary constraints, long and complex sales cycles, and political resistance to contracting with third parties.

Tyler Technologies believes it is a leading provider of integrated software solutions for the public sector in a highly fragmented market. The company competes with numerous local, regional, and national firms.

The company acknowledges the potential for increased competition as other established and emerging companies enter the public sector software market and new products and technologies, including AI and machine learning, are introduced.

Some of the company's contracts are structured on a fixed-price basis, which can lead to risks including failure to accurately estimate resources and time required, ineffective management of client expectations, and failure to timely and satisfactorily complete engagements within budget.

The cost of subscriptions, maintenance, and professional services grew 11% primarily due to increased hosting costs as the company expands its SaaS client base and transitions from its proprietary data centers to the public cloud, together with higher personnel costs.

G&A expense as a percentage of revenue was 14.1% in 2024 compared to 15.8% in 2023. G&A expense decreased 2% compared to the prior period, primarily attributed to lower facilities costs resulting from lease restructurings.

The company's transition from proprietary data centers to public cloud infrastructure, specifically AWS, is impacting its cost structure, with hosting costs increasing while facilities costs decrease.

Research and development expense increased 8% in 2024 compared to the prior period, mainly due to a number of new Tyler product development initiatives shifting from capitalized development projects to projects that are expensed to research and development.

The company continues to capitalize software development costs, indicating ongoing investment in new products and enhancements. Capitalized costs are amortized over the software's estimated economic life.

The company has a strategic collaboration agreement with AWS for cloud hosting services, which brings together Tyler, the nation's largest software company exclusively focused on the public sector, and AWS, the broadest and deepest cloud platform.

Cash and cash equivalents increased significantly from $165.5 million to $744.7 million, indicating a strong liquidity position.

The company repaid all amounts due under the Term Loans under the 2021 Credit Agreement and has no outstanding borrowings under the 2024 Credit Agreement, with an available borrowing capacity of $700.0 million.

The company continues to pursue strategic acquisitions, with $1.4 million paid in holdbacks related to acquisitions completed in 2023.

The company emphasizes its commitment to providing a welcoming and safe workplace, with a strong culture, compensation and benefits, and continual growth opportunities for its team members.

The company operates Tyler Together, with strategic pillars focused on culture, career development, and community impact. In 2024, achievements included improved metrics in talent attraction and retention efforts.

The company formalized a multi-layered security governance structure, with the goal of ensuring that responsibilities are clear, information is effectively communicated, priorities are coordinated, and proper oversight is provided.

The company notes that the public sector software market continues to experience heightened activity, suggesting a favorable environment for growth.

The company derives substantially all of its revenues from sales of software and services to state, county, and city governments, other federal or municipal agencies, and other public entities.

A prolonged economic slowdown or recession could reduce demand for our software products and services. Governments may face financial pressures that could in turn affect our growth rate and profitability in the future.