10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number 1-10485

TYLER TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	75-2303920
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

5101 TENNYSON PARKWAY	PLANO	Texas	75024
(Address of principal executive offices)	(City)	(State)	(Zip code)

(972) 713-3700

(Registrant’s telephone number, including area code)

Title of each class	Trading symbol	Name of each exchange on which registered
COMMON STOCK, $0.01 PAR VALUE	TYL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ☒  No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   ☒     No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer," "accelerated filer,” "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   ☐     No   ☒

The number of shares of common stock of registrant outstanding on July 27, 2020 was 40,240,793.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Software licenses and royalties	$	17,025	$	20,675	$	35,762	$	42,468
Subscriptions	85,638		73,475		167,361		140,750
Software services	43,654		57,401		95,787		105,844
Maintenance	116,760		106,689		231,125		206,841
Appraisal services	4,696		6,233		10,459		11,447
Hardware and other	3,318		10,651		7,138		14,840
Total revenues	271,091		275,124		547,632		522,190
Cost of revenues:
Software licenses and royalties	1,130		891		1,870		1,709
Acquired software	8,006		7,988		16,033		14,670
Subscriptions, software services and maintenance	124,287		125,759		256,066		242,919
Appraisal services	3,976		3,758		8,361		7,210
Hardware and other	2,489		8,868		4,968		11,774
Total cost of revenues	139,888		147,264		287,298		278,282
Gross profit	131,203		127,860		260,334		243,908
Selling, general and administrative expenses	62,521		65,827		130,006		123,593
Research and development expense	21,949		20,101		44,310		39,042
Amortization of other intangibles	5,392		5,266		10,784		10,116
Operating income	41,341		36,666		75,234		71,157
Other income (expense), net	470		(247)		1,460		339
Income before income taxes	41,811		36,419		76,694		71,496
Income tax (benefit) provision	(12,081)		4,420		(24,748)		12,149
Net income	$	53,892	$	31,999	$	101,442	$	59,347
Earnings per common share:
Basic	$	1.35	$	0.83	$	2.54	$	1.54
Diluted	$	1.30	$	0.80	$	2.44	$	1.49

See accompanying notes.

2

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	June 30, 2020 (unaudited)		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	351,336	$	232,682
Accounts receivable (less allowance for losses and sales adjustments of $9,256 in 2020 and $5,738 in 2019)	405,731		374,089
Short-term investments	52,352		39,399
Prepaid expenses	33,343		24,717
Income tax receivable	27,935		6,482
Other current assets	3,245		2,328
Total current assets	873,942		679,697
Accounts receivable, long-term	21,121		22,432
Operating lease right-of-use assets	16,659		18,992
Property and equipment, net	174,967		171,861
Other assets:
Goodwill	840,028		840,117
Other intangibles, net	354,115		378,914
Non-current investments and other assets	101,764		79,601
Total assets	$	2,382,596	$	2,191,614
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	8,640	$	14,977
Accrued liabilities	56,368		75,234
Operating lease liabilities	6,217		6,387
Current income tax payable	—		—
Deferred revenue	423,037		412,495
Total current liabilities	494,262		509,093
Revolving line of credit	—		—
Deferred revenue, long-term	167		199
Deferred income taxes	44,713		48,442
Operating lease liabilities, long-term	14,126		16,822
Commitments and contingencies	—		—
Shareholders' equity:
Preferred stock, $10.00 par value; 1,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value; 100,000,000 shares authorized; 48,147,969 shares issued and outstanding as of June 30, 2020 and December 31, 2019	481		481
Additional paid-in capital	843,998		739,478
Accumulated other comprehensive loss, net of tax	(46)		(46)
Retained earnings	1,018,778		917,336
Treasury stock, at cost; 7,917,657 and 8,839,352 shares in 2020 and 2019, respectively	(33,883)		(40,191)
Total shareholders' equity	1,829,328		1,617,058
Total liabilities and shareholders' equity	$	2,382,596	$	2,191,614

See accompanying notes.

3

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	101,442	$	59,347
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	40,270		36,744
Share-based compensation expense	35,688		29,482
Operating lease right-of-use assets expense	2,843		2,551
Deferred income tax benefit	(3,729)		(7,440)
Changes in operating assets and liabilities, exclusive of effects of    acquired companies:
Accounts receivable	(30,332)		(69,058)
Income tax receivable	(21,453)		4,806
Prepaid expenses and other current assets	(9,870)		(9,987)
Accounts payable	(6,338)		550
Operating lease liabilities	(3,375)		(2,866)
Accrued liabilities	(19,136)		846
Deferred revenue	10,510		3,479
Net cash provided by operating activities	96,520		48,454
Cash flows from investing activities:
Additions to property and equipment	(16,268)		(24,052)
Purchase of marketable security investments	(79,747)		(10,117)
Proceeds from marketable security investments	40,020		39,688
Purchase of investment in common shares	(10,000)		—
Proceeds from the sale of investment in preferred shares	15,000		—
Investment in software	(2,695)		(2,232)
Cost of acquisitions, net of cash acquired	(261)		(199,220)
(Increase) decrease in other	(328)		432
Net cash used by investing activities	(54,279)		(195,501)
Cash flows from financing activities:
Increase in net borrowings on revolving line of credit	—		15,000
Purchase of treasury shares	(15,482)		(17,786)
Payment of contingent consideration	(5,619)		—
Proceeds from exercise of stock options	92,337		22,132
Contributions from employee stock purchase plan	5,177		4,609
Net cash provided by financing activities	76,413		23,955
Net increase (decrease) in cash and cash equivalents	118,654		(123,092)
Cash and cash equivalents at beginning of period	232,682		134,279
Cash and cash equivalents at end of period	$	351,336	$	11,187

See accompanying notes.

4

TYLER TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2020	48,148	$	481	$	798,089	$	(46)	$	964,886	(8,397)	$	(50,578)	$	1,712,832
Net income	—	—		—		—		53,892		—	—		53,892
Exercise of stock options and vesting of restricted stock units	—	—		27,642		—		—		482	18,459		46,101
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—		—		(12)	(4,591)		(4,591)
Stock compensation	—	—		18,386		—		—		—	—		18,386
Issuance of shares pursuant to employee stock purchase plan	—	—		(119)		—		—		10	2,827		2,708
Treasury stock purchases	—	—		—		—		—		—	—		—
Balance at June 30, 2020	48,148	$	481	$	843,998	$	(46)	$	1,018,778	(7,917)	$	(33,883)	$	1,829,328

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2019	48,148	$	481	$	731,073	$	(46)	$	798,157	(9,825)	$	(170,920)	$	1,358,745
Net income	—	—		—		—		31,999		—	—		31,999
Exercise of stock options and vesting of restricted stock units	—	—		(29,884)		—		—		239	45,488		15,604
Employee taxes paid for withheld shares upon equity award settlement	—	—		—		—		—		(9)	(2,044)		(2,044)
Stock compensation	—	—		15,066		—		—		—	—		15,066
Issuance of shares pursuant to employee stock purchase plan	—	—		(335)		—		—		13	2,595		2,260
Treasury stock purchases	—	—		—		—		—		—	—		—
Balance at June 30, 2019	48,148	$	481	$	715,920	$	(46)	$	830,156	(9,582)	$	(124,881)	$	1,421,630

5

TYLER TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2019	48,148	$	481	$	739,478	$	(46)	$	917,336	(8,839)	$	(40,191)	$	1,617,058
Net income	—	—		—		—		101,442		—	—		101,442
Exercise of stock options and vesting of restricted stock units	—	—		66,584		—		—		980	25,753		92,337
Employee taxes paid for withheld shares for taxes upon equity award	—	—		—		—		—		(19)	(6,892)		(6,892)
Stock compensation	—	—		35,688		—		—		—	—		35,688
Issuance of shares pursuant to employee stock purchase plan	—	—		2,248		—		—		20	2,929		5,177
Treasury stock purchases	—	—		—		—		—		(59)	(15,482)		(15,482)
Balance at June 30, 2020	48,148	$	481	$	843,998	$	(46)	$	1,018,778	(7,917)	$	(33,883)	$	1,829,328

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Shareholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2018	48,148	$	481	$	731,435	$	(46)	$	771,925	(9,872)	$	(178,949)	$	1,324,846
Retained earnings adjustment-adoption of Topic 842 Leases, net of taxes	—	—		—		—		(1,116)		—	—		(1,116)
Net income	—	—		—		—		59,347		—	—		59,347
Exercise of stock options and vesting of restricted stock units	—	—		(44,289)		—		—		350	66,421		22,132
Employee taxes paid for withheld shares for taxes upon equity award	—	—		—		—		—		(16)	(3,381)		(3,381)
Stock compensation	—	—		29,482		—		—		—	—		29,482
Issuance of shares pursuant to employee stock purchase plan	—	—		(708)		—		—		28	5,317		4,609
Treasury stock purchases	—	—		—		—		—		(72)	(14,289)		(14,289)
Balance at June 30, 2019	48,148	$	481	$	715,920	$	(46)	$	830,156	(9,582)	$	(124,881)	$	1,421,630

6

Tyler Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Tables in thousands, except per share data)

(1) Basis of Presentation

We prepared the accompanying condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States, or GAAP, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted for interim periods. Balance sheet amounts are as of June 30, 2020, and December 31, 2019, and operating result amounts are for the three and six months ended June 30, 2020, and 2019, respectively, and include all normal and recurring adjustments that we considered necessary for the fair summarized presentation of our financial position and operating results. As these are condensed financial statements, one should also read the financial statements and notes included in our latest Form 10-K for the year ended December 31, 2019. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. Certain amounts for the previous year have been reclassified to conform to the current year presentation.

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from non-owner sources and includes all components of net income (loss) and other comprehensive income (loss). We had no items of other comprehensive income (loss) for the three and six months ended June 30, 2020, and 2019.

(2) Accounting Standards and Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the accounting policies for ASU 2016-13, Financial Instruments - Credit Losses, (“ASU 2016-13”), there have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 19, 2020, that have had a material impact on our condensed consolidated financial statements and related notes.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 pandemic, which continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will 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, we do expect the current environment will negatively impact our revenues and other financial results for fiscal 2020.

Because an increasing portion of our revenues are recurring, the effect of COVID-19 on our results of operations may also not be fully reflected for some time. We expect to see some impact on our business in the near term, with delays in government procurement processes, and uncertainty around public sector budgets, as well as delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues. We are working to address those challenges through adapting the way we do business – encouraging web and video conferencing, conducting sales demonstrations and delivering professional services remotely.

Our priorities during this crisis are protecting the health and safety of our employees and our clients. Our IT systems and applications support a remote workforce. Prior to the pandemic, many of our employees worked remotely. In response to the pandemic, we encouraged all employees who are able to do so to work from home, equipping them with resources necessary to continue uninterrupted. We were able to transition the vast majority of our employees to this work-from-home posture. This reduces the number of team members in our offices to those uniquely needed for essential on-site services, such as network operations support staff, and allows for “social distancing” as directed by the Centers for Disease Control ("CDC").

The pandemic has delayed some government procurement processes and is expected to impact our ability to complete certain implementations, negatively impacting our revenue. It could also negatively impact the timing of client payments to us. We continue to monitor these trends in order to respond to the ever-changing impact of COVID-19 on our clients and Tyler’s operations.

7

For the second quarter of 2020, the impact of the COVID-19 pandemic resulted in lower revenues from software licenses, software services, appraisal services, and other revenues. Lower software licenses compared to prior periods are attributed to slower sales cycles as government procurement processes are delayed and contract signings have been pushed to future periods. Software services and appraisal services revenue declines are attributed to delays in implementations caused by travel restrictions and shelter-in-place orders in effect during the period. Other revenues were lower compared to prior periods primarily as a result of the cancellation of our 2020 Connect user conference. Lower revenues compared to prior periods were offset by cost savings attributed to lower spend on travel, user conferences and trade show expenses, health claims and other employee-related expenses. If and as travel restrictions and shelter-in-place orders are relaxed, we expect software services and appraisal services revenues to increase as the limited number of our clients who insist on or require that all or a portion of their services be delivered onsite will be able to receive those services. Also, we are adapting to the way we do business by encouraging web and video conferencing, conducting virtual sales demonstrations and delivering professional services remotely. Both of those factors result in increases in staff utilization rates and billable time.

Recurring revenues, from subscriptions and maintenance, for the six months ended June 30, 2020, comprised 75% of our total consolidated revenue, and include transaction-based revenue streams such as e-filing and online payments. As of June 30, 2020, we had $472.5 million in cash and investments and no outstanding borrowings under our credit facility. We also have substantial additional liquidity available through our undrawn $400.0 million credit facility, which can be expanded through an accordion feature. During the second quarter of 2020, we completed our annual assessment of goodwill which did not result in an impairment charge. No impairments of other assets were recorded as of the balance sheet date as no triggering events or changes in circumstances occurred as of period-end to require such an impairment; however, due to significant uncertainty surrounding the pandemic and market conditions, management’s judgment regarding this could change in the future.

USE OF ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price ("SSP") of performance obligations, variable consideration, and other obligations such as returns and refunds; loss contingencies; the estimated useful life of deferred commissions; the carrying amount of goodwill; the carrying amount and estimated useful lives of intangible assets; the carrying amount of operating lease right-of-use assets and operating lease liabilities; determining share-based compensation expense; the valuation allowance for receivables; and determining the potential outcome of future tax consequences of events that have been recognized on our consolidated financial statements or tax returns. Actual results could differ from estimates.

REVENUE RECOGNITION

Nature of Products and Services:

We earn revenue from software licenses, royalties, subscription-based services, software services, post-contract customer support (“PCS” or “maintenance”), hardware, and appraisal services. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We determine revenue recognition through the following steps:

•Identification of the contract, or contracts with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

8

Most of our software arrangements with customers contain multiple performance obligations that range from software licenses, installation, training, and consulting to software modification and customization to meet specific customer needs (services), hosting, and 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 software services, such as training or installation, are evaluated to determine whether the customer can benefit from the services either on their own or together with other resources readily available to the customer and whether the services are separately identifiable from other promises in the contract. The transaction price is allocated to the distinct performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. Revenue is recognized net of allowances for sales adjustments and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Significant Judgments:

Our contracts with customers often include multiple performance obligations to a customer. When a software arrangement (license or subscription) includes both software licenses and software services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software services and recognized over time.

The transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine SSP using the expected cost-plus margin approach.

For arrangements that involve significant production, modification or customization of the software, or where software services otherwise cannot be considered distinct, we recognize revenue as control is transferred to the customer over time using progress-to-completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred, or value added. The progress-to-completion method generally results in the recognition of reasonably consistent profit margins over the life of a contract because we can provide reasonably dependable estimates of contract billings and contract costs. We use the level of profit margin that is most likely to occur on a contract. If the most likely profit margin cannot be precisely determined, the lowest probable level of profit margin in the range of estimates is used until the results can be estimated more precisely. These arrangements are often implemented over an extended time period and occasionally require us to revise total cost estimates. Amounts recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost estimates. Changes to total estimated contract costs, if any, are recorded in the period they are determined. Estimated losses on uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.

Typically, the structure of our arrangements does not give rise to variable consideration. However, in those instances whereby variable consideration exists, we include in our estimates additional revenue for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably and its realization is probable.

Refer to Note 13 - "Disaggregation of Revenue" for further information, including the economic factors that affect the nature, amount, timing, and uncertainty of revenue and cash flows of our various revenue categories.

Contract Balances:

Accounts receivable and allowance for losses and sales adjustments

Timing of revenue recognition may differ from the timing of invoicing to customers. We record an unbilled receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. We record an unbilled receivable related to revenue recognized for on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses.

9

At June 30, 2020, and December 31, 2019, total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $426.9 million and $396.5 million, respectively. We have recorded unbilled receivables of $137.5 million and $134.0 million at June 30, 2020, and December 31, 2019, respectively. Included in unbilled receivables are retention receivables of $13.2 million and $13.1 million at June 30, 2020, and December 31, 2019, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings. Unbilled receivables expected to be collected within one year have been included with accounts receivable, current portion in the accompanying condensed consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with accounts receivable, long-term portion in the accompanying condensed consolidated balance sheets.

We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred. Since most of our clients are domestic governmental entities, we rarely incur a credit loss resulting from the inability of a client to make required payments. Events or changes in circumstances that indicate the carrying amount for the allowances for losses and sales adjustments may require revision, include, but are not limited to, managing our client’s expectations regarding the scope of the services to be delivered and defects or errors in new versions or enhancements of our software products. Our allowance for losses and sales adjustments of $9.3 million at June 30, 2020, does not include provisions for credit losses. As of January 1, 2020, we adopted ASU 2016-13 and primarily evaluated our historical experience with credit losses related to trade and other receivables. Because we have not experienced any historical credit losses with the majority of our clients, we have no basis to record a reserve for credit losses as defined by the standard.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

We assess goodwill for impairment annually as of April 1st, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable. We begin with the qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the quantitative assessment described below. If it is determined through the evaluation of events or circumstances that the carrying value may not be recoverable, we perform a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the estimated fair value of that reporting unit, the carrying value of the reporting unit's goodwill is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairment charge. The fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions. The assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value. We evaluate the reasonableness of the fair value calculations of our reporting units by comparing the total of the fair value of all of our reporting units to our total market capitalization.

During the second quarter, as part of our annual impairment test, we performed qualitative assessments for all reporting units except for the Data and insights reporting unit. As a result of these qualitative assessments, we determined that it was not more likely than not that an impairment existed; therefore, we did not perform a Step1 quantitative impairment test. We performed a quantitative assessment for goodwill of $75.7 million associated with our Data and insights business unit and concluded no impairment exists as of our annual assessment date. Most of our reporting units are comprised of goodwill relating to a combination of legacy and acquired businesses and as a result, have fair values that substantially exceed their underlying carrying values. Certain reporting units, in particular our Case management and business process management and Data and insights units are comprised entirely of recently acquired businesses and as a result, do not have significant excess fair values over carrying values. As of our annual assessment date, the Case management and business process management and Data and insights business units combined was $152.0 million, or 18%, of total goodwill as of June 30, 2020.

Determining the fair value of our reporting units involves the use of significant estimates and assumptions and considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Changes in market conditions or other factors outside of our control, such as the COVID-19 pandemic, could cause us to change key assumptions and our judgment about a reporting unit’s prospects. Similarly, in a specific period, a reporting unit could significantly underperform relative to its historical or projected future operating results. Either situation could result in a meaningfully different estimate of the fair value of our reporting units, and a consequent future impairment charge.

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Other Intangible Assets

We make judgments about the recoverability of purchased intangible assets other than goodwill whenever events or changes in circumstances indicate that an impairment may exist. Customer base and acquired software each comprise approximately half of our purchased intangible assets other than goodwill. We review our customer turnover each year for indications of impairment. Our customer turnover has historically been very low. If indications of impairment are determined to exist, we measure the recoverability of assets by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. There have been no impairments of intangible assets in any of the periods presented.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, available for-sale debt securities, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of an allowance for losses. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for a fiscal year beginning after December 15, 2018, including interim periods within that fiscal year. Entities apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. As of January 1, 2020, we adopted the new standard with no material impact of credit losses to our trade and other receivables, held-to-maturity debt securities and retained earnings included in our condensed consolidated financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, ("ASU 2019-12") which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new standard is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company does not expect adoption of this standard to have a material effect on the Company’s consolidated financial statements.

(3) Acquisitions

On February 28, 2019, we acquired all of the capital stock of MP Holdings Parent, Inc. dba MicroPact ("MicroPact"), a leading provider of commercial off-the-shelf solutions, including entellitrak®, a low-code application development platform for case management and business process management used extensively in the public sector. In the six months ended June 30, 2020, we paid $5.6 million in contingent consideration. We have no contingent consideration accrued as of June 30, 2020.

(4)  Shareholders’ Equity

The following table details activity in our common stock:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Purchases of treasury shares	—	$	—	—	$	—	(59)	$	(15,482)	(72)	$	(14,289)
Stock option exercises	436	46,101		203	15,604		917	92,337		297	22,132
Employee stock plan purchases	10	2,708		13	2,260		20	5,177		28	4,609
Restricted stock units vested, net of withheld shares upon award settlement	33	$	(4,591)	27	$	(2,008)	43	$	(6,892)	37	$	(3,381)

As of June 30, 2020, we have authorization from our board of directors to repurchase up to 2.6 million additional shares of our common stock.

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(5) Deferred Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be three to seven years. Deferred commissions were $30.2 million and $29.8 million as of June 30, 2020, and December 31, 2019, respectively. Amortization expense was $3.6 million and $7.5 million for the three and six months ended June 30, 2020, respectively, and $4.1 million and $7.9 million for the three and six months ended June 30, 2019, respectively. There were no indicators of impairment in relation to the costs capitalized for the periods presented. Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term portion in the accompanying condensed consolidated balance sheets. Amortization expense related to deferred commissions is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.

(6) Other Assets

As of June 30, 2020, we have $121.2 million in investment grade corporate and municipal bonds with varying maturity dates through 2024. We intend to hold these bonds to maturity and have classified them as such. We believe cost approximates fair value because of the relatively short duration of these investments. The fair values of these securities are considered Level II as they are based on inputs from quoted prices in markets that are not active or other observable market data. These investments are presented at amortized cost and are included in short-term investments and non-current investments and other assets in the accompanying condensed consolidated balance sheets. As of June 30, 2020, we have an accrued interest receivable balance of $584,000 which is included in accounts receivable, net. We do not measure an allowance for credit losses for accrued interest receivables. We record any losses within the maturity period of the investment and any write-offs to accrued interest receivables are recorded as a reduction to interest income in the period of the loss. During the three and six months ended June 30, 2020, we have recorded no credit losses. Interest income and amortization of discounts and premiums are included in other income (expense), net in the accompanying condensed consolidated statements of income.

During the six months ended June 30, 2020, we sold our $15 million investment in convertible preferred stock representing a 20% interest in Record Holdings Pty Limited ("Record Holdings"), a privately held Australian company specializing in digitizing the spoken word in court and legal proceedings, to BFTR, LLC, a wholly owned subsidiary of Bison Capital Partners V L.P. During the same period, we purchased $10 million in common stock representing a 18% interest in BFTR, LLC. The investment in common stock is accounted under the cost method because we do not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values. Our investment is carried at cost less any impairment write-downs. Annually, our cost method investments are assessed for impairment. We do not reassess the fair value of cost method investments if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investments. No events or changes in have occurred during the period that require reassessment. This investment is included in non-current investments and other assets in the accompanying condensed consolidated balance sheets.

(7) Revolving Line of Credit

On September 30, 2019, we entered into a $400 million credit agreement with various lender parties and Wells Fargo Bank, National Association, as Administrative Agent (the “Credit Facility”). The Credit Facility provides for a revolving credit line up to $400 million, including a $25 million sublimit for letters of credit. The Credit Facility matures on September 30, 2024.

Borrowings under the Credit Facility bear interest at a rate of either (1) Wells Fargo Bank’s prime rate (subject to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, two-, three-, or six-month LIBOR rate plus a margin of 1.125% to 1.75%. As of June 30, 2020, the interest rates were 3.38% under the Wells Fargo Bank's prime rate and approximately 1.29% under the 30-day LIBOR option. The Credit Facility requires us to maintain certain financial ratios and other financial conditions and prohibits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens. As of June 30, 2020, we were in compliance with those covenants.

As of June 30, 2020, we had no outstanding borrowings under the Credit Facility, and available borrowing capacity was $400.0 million.

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(8) Income Tax Provision

We had an effective income tax rate of negative 28.9% and negative 32.3% for the three and six months ended June 30, 2020, respectively compared to 12.1% and 17.0% for the three and six months ended June 30, 2019, respectively. The decrease in the effective tax rates for the three and six months ended June 30, 2020, as compared to the same periods in 2019, was principally driven by an increase in the excess tax benefits related to stock incentive awards.

The effective income tax rates for the periods presented were different from the statutory United States federal income tax rate of 21% due to excess tax benefits related to stock incentive awards, state income taxes, non-deductible business expenses, and the tax benefit of research tax credits. The excess tax benefits related to stock incentive awards realized was $23.4 million and $45.5 million for the three and six months ended June 30, 2020, respectively, compared to $5.4 million and $7.0 million for the three and six months ended June 30, 2019, respectively. Excluding the excess tax benefits, the effective tax rate was 27.2% and 27.1% for the three and six months ended June 30, 2020, respectively, compared to 26.9% and 26.8% for the three and six months ended June 30, 2019, respectively.

We made tax payments of $422,000 and $14.8 million in the six months ended June 30, 2020, and 2019, respectively.

The Coronavirus Aid, Relief and Economic Security ("CARES") Act, which was signed into law on March 27, 2020, provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the U.S. economy. The assistance includes tax relief and government loans, and investments and grants for entities in affected industries (e.g., health care and airlines). The business tax provisions of the CARES Act include temporary changes to income and non-income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property. Measures not related to income-based taxes include (1) allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020, over the following two years and (2) allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds. We evaluated the CARES Act provisions and the enactment resulted in no cumulative adjustments to income taxes. We also do not believe that the income tax implications will be significant to our overall income tax liabilities going forward.

(9) Earnings Per Share

The following table details the reconciliation of basic earnings per share to diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic and diluted earnings per share:
Net income	$	53,892	$	31,999	$	101,442	$	59,347
Denominator:
Weighted-average basic common shares outstanding	39,963		38,402		39,984		38,462
Assumed conversion of dilutive securities:
Stock awards	1,453		1,411		1,548		1,344
Denominator for diluted earnings per share    - Adjusted weighted-average shares	41,416		39,813		41,532		39,806
Earnings per common share:
Basic	$	1.35	$	0.83	$	2.54	$	1.54
Diluted	$	1.30	$	0.80	$	2.44	$	1.49

For the three and six months ended June 30, 2020, and June 30, 2019, stock awards representing the right to purchase common stock of approximately 124,000 and 102,000 shares and 750,000 and 1.0 million shares, respectively, were not included in the computation of diluted earnings per share because their inclusion would have had an antidilutive effect. 

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(10) Leases

We lease office facilities for use in our operations, as well as transportation and other equipment. Most of our leases are non-cancelable operating lease agreements and they expire from one year to eight years. Some of these leases include options to extend for up to 10 years. We had no finance leases and no related party lease agreements as of June 30, 2020. Operating lease costs were approximately $2.5 million and $5.1 million for the three and six months ended June 30, 2020, respectively, and $2.6 million and $4.7 million for the three and six months ended June 30, 2019, respectively.

The components of operating lease expense were as follows:

Lease Costs	Financial Statement Classification	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019
Operating lease cost	Selling, general and administrative expenses	$	1,606	$	1,664	$	3,272	$	3,034
Short-term lease cost	Selling, general and administrative expenses	447		593		1,021		1,163
Variable lease cost	Selling, general and administrative expenses	454		368		848		531
Net lease cost		$	2,507	$	2,625	$	5,141	$	4,728

Right-of-use ("ROU") lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheets as follows:

	June 30, 2020		December 31, 2019
Assets:
Operating lease right-of-use assets	$	16,659	$	18,992
Liabilities:
Operating leases, short-term	6,217		6,387
Operating leases, long-term	14,126		16,822
Total lease liabilities	$	20,343	$	23,209

Supplemental information related to leases was as follows:

Other Information	Six Months Ended June 30,
	2020			2019
Cash flows:
Cash amounts paid included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,379		$	3,362
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	$	510		$	2,099
Lease term and discount rate:
Weighted average remaining lease term (years)	4			5
Weighted average discount rate	4.00		%	4.00		%

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As of June 30, 2020, maturities of lease liabilities were as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	3,978
2021	6,372
2022	4,049
2023	3,014
2024	2,555
Thereafter	2,130
Total lease payments	22,098
Less: Interest	(1,755)
Present value of operating lease liabilities	$	20,343

Rental Income from third parties

We own office buildings in Bangor, Falmouth and Yarmouth, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham, New York; and Moraine, Ohio. We lease space in some of these buildings to third-party tenants. The property we lease to others under operating leases consists primarily of specific facilities where one tenant obtains substantially all of the economic benefit from the asset and has the right to direct the use of the asset. These non-cancelable leases expire between 2020 and 2025, and some have options to extend the lease for up to five years. We determine if an arrangement is a lease at inception. None of our leases allow the lessee to purchase the leased asset.

Rental income from third-party tenants for the three and six months ended June 30, 2020, totaled $292,000 and $566,000, respectively, and for the three and six months ended June 30, 2019, totaled $270,000 and $554,000, respectively. Rental income is included in Hardware and other revenue on the condensed consolidated statements of income. As of June 30, 2020, future minimum operating rental income based on contractual agreements is as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	696
2021	1,372
2022	1,402
2023	1,432
2024	1,462
Thereafter	858
Total	$	7,222

As of June 30, 2020, we had no additional significant operating or finance leases that had not yet commenced.

(11) Share-Based Compensation

The following table summarizes share-based compensation expense related to share-based awards recorded in the condensed consolidated statements of income, pursuant to ASC 718, Stock Compensation:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Cost of subscriptions, software services and maintenance	$	4,369	$	3,756	$	8,621	$	7,554
Selling, general and administrative expenses	14,017		11,310		27,067		21,928
Total share-based compensation expense	$	18,386	$	15,066	$	35,688	$	29,482

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(12) Segment and Related Information

We provide integrated information management solutions and services for the public sector, with a focus on local governments.

We provide our software systems and services and appraisal services through six business units, which focus on the following products:

•financial management, education and planning, regulatory and maintenance software solutions;

•financial management, municipal courts, planning, regulatory and maintenance management software solutions;

•courts and justice and public safety software solutions;

•data and insights solutions;

•case management and business management solutions; and

•appraisal and tax software solutions, property appraisal services and land and vital records management software solutions.

In accordance with ASC 280-10, Segment Reporting, the financial management, education and planning, regulatory and maintenance software solutions unit; financial management, municipal courts, planning, regulatory and maintenance, and land and vital records management software solutions unit; courts and justice and public safety software solutions unit; the data and insights solutions unit; and case management and business management solutions units meet the criteria for aggregation and are presented in one reportable segment, the Enterprise Software (“ES”) segment. The ES 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: financial management and education, courts and justice, public safety, planning, regulatory and maintenance, and data and insights. The Appraisal and Tax (“A&T”) segment provides systems and software that automate the appraisal and assessment of real and personal property, land and vital records management as well as property appraisal outsourcing services for local governments and taxing authorities. Property appraisal outsourcing services include: the physical inspection of commercial and residential properties; data collection and processing; computer analysis for property valuation; preparation of tax rolls; community education; and arbitration between taxpayers and the assessing jurisdiction.

We evaluate performance based on several factors, of which the primary financial measure is business segment operating income. We define segment operating income for our business units as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense and income taxes. Segment operating income includes intercompany transactions. The majority of intercompany transactions relate to contracts involving more than one unit and are valued based on the contractual arrangement. Segment operating income for Corporate primarily consists of compensation costs for the executive management team and certain accounting and administrative staff and share-based compensation expense for the entire company. Corporate segment operating income also includes revenues and expenses related to a company-wide user conference. Due to the shelter-in-place orders caused by the COVID-19 pandemic, we cancelled our company-wide user conference for the current year.

As of January 1, 2020, the land and vital records management business unit, which was previously reported in the ES segment, was moved to the A&T segment. These changes were made to reflect changes in the way in which management makes operating decisions, allocates resources, and manages the growth and profitability of the Company. Prior year amounts for the ES and A&T segments have been adjusted to reflect the segment change.

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	14,683	$	2,342	$	—	$	17,025
Subscriptions	79,128		6,510		—		85,638
Software services	38,899		4,755		—		43,654
Maintenance	107,336		9,424		—		116,760
Appraisal services	—		4,696		—		4,696
Hardware and other	3,300		18		—		3,318
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091
Segment operating income	$	69,025	$	6,148	$	(20,434)	$	54,739

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For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	17,555	$	3,120	$	—	$	20,675
Subscriptions	69,386		4,089		—		73,475
Software services	48,404		8,997		—		57,401
Maintenance	97,641		9,048		—		106,689
Appraisal services	—		6,233		—		6,233
Hardware and other	4,493		5		6,153		10,651
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124
Segment operating income	$	59,668	$	7,923	$	(17,671)	$	49,920

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	30,634	$	5,128	$	—	$	35,762
Subscriptions	$	155,772	$	11,589	—		$	167,361
Software services	$	83,848	$	11,939	—		$	95,787
Maintenance	$	212,177	$	18,948	—		$	231,125
Appraisal services	$	0	$	10,459	—		$	10,459
Hardware and other	$	7,091	$	45	$	2	$	7,138
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632
Segment operating income	$	129,497	$	13,056	$	(40,502)	$	102,051

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	36,077	$	6,391	$	—	$	42,468
Subscriptions	132,641		8,109		—		140,750
Software services	88,860		16,984		—		105,844
Maintenance	188,829		18,012		—		206,841
Appraisal services	0		11,447		—		11,447
Hardware and other	8,623		67		6,150		14,840
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190
Segment operating income	$	115,142	$	15,018	$	(34,217)	$	95,943

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	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation of reportable segment operating income to the Company's consolidated totals:	2020		2019		2020		2019
Total segment operating income	$	54,739	$	49,920	$	102,051	$	95,943
Amortization of acquired software	(8,006)		(7,988)		(16,033)		(14,670)
Amortization of customer and trade name intangibles	(5,392)		(5,266)		(10,784)		(10,116)
Other income (expense), net	470		(247)		1,460		339
Income before income taxes	$	41,811	$	36,419	$	76,694	$	71,496

(13) Disaggregation of Revenue

The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows.

Timing of Revenue Recognition

Timing of revenue recognition by revenue category during the period is as follows:

For the three months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	14,468	$	2,557	$	17,025
Subscriptions	—		85,638		85,638
Software services	—		43,654		43,654
Maintenance	—		116,760		116,760
Appraisal services	—		4,696		4,696
Hardware and other	3,318		—		3,318
Total	$	17,786	$	253,305	$	271,091

For the three months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	15,802	$	4,873	$	20,675
Subscriptions	—		73,475		73,475
Software services	—		57,401		57,401
Maintenance	—		106,689		106,689
Appraisal services	—		6,233		6,233
Hardware and other	10,651		—		10,651
Total	$	26,453	$	248,671	$	275,124

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For the six months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	30,534	$	5,228	$	35,762
Subscriptions	—		167,361		167,361
Software services	—		95,787		95,787
Maintenance	—		231,125		231,125
Appraisal services	—		10,459		10,459
Hardware and other	7,138		—		7,138
Total	$	37,672	$	509,960	$	547,632

For the six months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	32,712	$	9,756	$	42,468
Subscriptions	—		140,750		140,750
Software services	—		105,844		105,844
Maintenance	—		206,841		206,841
Appraisal services	—		11,447		11,447
Hardware and other	14,840		—		14,840
Total	$	47,552	$	474,638	$	522,190

Recurring Revenue

The majority of our revenue is comprised of revenues from maintenance and subscriptions, which we consider to be recurring revenue. Virtually all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenue. We generally provide maintenance and support for our on-premises clients under annual, or in some cases, multi-year contracts. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of three to five years, providing a significant source of recurring revenues on an annual basis. We consider all other revenue categories to be non-recurring revenues.

Recurring revenues and non-recurring revenues recognized during the period are as follows:

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	186,464	$	15,934	$	—	$	202,398
Non-recurring revenues	56,882		11,811		—		68,693
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091

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For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	167,027	$	13,137	$	—	$	180,164
Non-recurring revenues	70,452		18,355		6,153		94,960
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	367,949	$	30,537	$	—	$	398,486
Non-recurring revenues	121,573		27,571		2		149,146
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	321,470	$	26,121	$	—	$	347,591
Non-recurring revenues	133,560		34,889		6,150		174,599
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190

(14) Deferred Revenue and Performance Obligations

Total deferred revenue, including long-term, by segment is as follows:

	June 30, 2020		December 31, 2019
Enterprise Software	$	396,405	$	375,838
Appraisal and Tax	25,437		35,487
Corporate	1,362		1,369
Totals	$	423,204	$	412,694

Changes in total deferred revenue, including long-term, were as follows:

	Six months ended June 30, 2020
Balance as of December 31, 2019	$	412,694
Deferral of revenue	508,126
Recognition of deferred revenue	(497,616)
Balance as of June 30, 2020	$	423,204

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Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized ("backlog"), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Backlog as of June 30, 2020, was $1.54 billion, of which we expect to recognize approximately 49% as revenue over the next 12 months and the remainder thereafter.

(15) Commitments and Contingencies

Other than routine litigation incidental to our business, there are no material legal proceedings pending to which we are party or to which any of our properties are subject.

(16) Subsequent Events

There have been no material events and transactions that occurred subsequent to June 30, 2020.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

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) the effects of the COVID-19 pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; (2) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (3) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (4) our ability to achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (5) material portions of our business require the Internet infrastructure to be adequately maintained; (6) our ability to achieve our financial forecasts due to various factors, including project delays by our clients, reductions in transaction size, fewer transactions, delays in delivery of new products or releases or a decline in our renewal rates for service agreements; (7) general economic, political and market conditions; (8) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (9) competition in the industry in which we conduct business and the impact of competition on pricing, client retention and pressure for new products or services; (10) the ability to attract and retain qualified personnel and dealing with the loss or retirement of key members of management or other key personnel; and (11) costs of compliance and any failure to comply with government and stock exchange regulations. A detailed discussion of 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.

GENERAL

We provide integrated information management solutions and services for the public sector, with a focus on local governments. We develop and market a broad line of software products and services to address the IT needs of public sector entities. 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. We also provide subscription-based services such as software as a service (“SaaS”), which primarily utilize the Tyler private cloud, and electronic document filing solutions (“e-filing”), which simplify the filing and management of court related documents. Revenues for e-filing are derived from transaction fees and, in some cases, fixed fee arrangements. Other transaction-based fees primarily relate to online payment services. We also provide property appraisal outsourcing services for taxing jurisdictions.

Our products generally automate seven major functional areas: (1) financial management and education, (2) courts and justice, (3) public safety (4) property appraisal and tax, (5) planning, regulatory and maintenance (6) land and vital records management, (7) data and insights and (8) case management and business process management. We report our results in two segments. The Enterprise Software (“ES”) 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: financial management; courts and justice processes; public safety; planning, regulatory and maintenance; and data analytics. The Appraisal and Tax (“A&T”) segment provides systems and software that automate the appraisal and assessment of real and personal property, land and vital records management as well as property appraisal outsourcing services for local governments and taxing authorities. Property appraisal outsourcing services include: the physical inspection of commercial and residential properties; data collection and processing; computer analysis for property valuation; preparation of tax rolls; community education; and arbitration between taxpayers and the assessing jurisdiction.

As of January 1, 2020, the land and vital records management business unit, which was previously reported in the ES segment, was moved to the A&T segment. These changes were made to reflect changes in the way in which management makes operating decisions, allocates resources, and manages the growth and profitability of the Company. Prior year amounts for the ES and A&T segments have been adjusted to reflect the segment change.

Our total employee count increased to 5,495 at June 30, 2020, from 5,164 at June 30, 2019.

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For the three and six months ended June 30, 2020, total revenues decreased 1.5% and increased 4.9%, respectively, compared to the prior year periods. 

Subscriptions revenue grew 16.6% and 18.9% for the three and six months ended June 30, 2020, respectively, compared to the prior year periods, due to an ongoing shift toward cloud-based, software as a service business, as well as continued growth in our transaction-based revenues related to online-payment services. Excluding the impact of recent acquisitions, subscriptions revenue increased 15.9% and 17.1% for the three and six months ended June 30, 2020, respectively, compared to the prior year periods.

Our backlog as of June 30, 2020, was $1.54 billion, a 7.4% increase from last year.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 pandemic, which continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will 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, we do expect the current environment will negatively impact our revenues and other financial results for fiscal 2020.

Because an increasing portion of our revenues are recurring, the effect of COVID-19 on our results of operations may also not be fully reflected for some time. We expect to see some impact on our business in the near term, with delays in government procurement processes, uncertainty around public sector budgets, as well as delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues. We are working to address those challenges through adapting the way we do business – encouraging web and video conferencing, conducting sales demonstrations and delivering professional services remotely.

Our priorities during this crisis are protecting the health and safety of our employees and our clients. Our IT systems and applications support a remote workforce. Prior to the pandemic, many of our employees worked remotely. In response to the pandemic, we encouraged all employees who are able to do so to work from home, equipping them with resources necessary to continue uninterrupted. We were able to transition the vast majority of our employees to this work-from-home posture. This reduces the number of team members in our offices to those uniquely needed for essential on-site services, such as network operations support staff, and allows for “social distancing” as directed by the Centers for Disease Control ("CDC").

The pandemic has delayed some government procurement processes and is expected to impact our ability to complete certain implementations, negatively impacting our revenue. It could also negatively impact the timing of client payments to us. We continue to monitor these trends in order to respond to the ever-changing impact of COVID-19 on our clients and Tyler’s operations.

For the second quarter of 2020, the impact of the COVID-19 pandemic resulted in lower revenues from software licenses, software services, appraisal services, and other revenues. Lower software licenses compared to prior periods are attributed to slower sales cycles as government procurement processes are delayed and contract signings have been pushed to future periods. Software services and appraisal services revenue declines are attributed to delays in implementations caused by travel restrictions and shelter-in-place orders in effect during the period. Other revenues were lower compared to prior periods primarily as a result of the cancellation of our 2020 Connect user conference. Lower revenues compared to prior periods were offset by cost savings attributed to lower spend on travel, user conferences and trade show expenses, health claims and other employee-related expenses. If and as travel restrictions and shelter-in-place orders are relaxed, we expect our software services and appraisal services revenues to increase as the limited number of our clients who insist on or require that all or a portion of their services be delivered onsite will be able to receive those services. Also, we are adapting to the way we do business by encouraging web and video conferencing, conducting virtual sales demonstrations and delivering professional services remotely. Both of those factors result in increases in staff utilization rates and billable time.

Recurring revenues, from subscriptions and maintenance, for the six months ended June 30, 2020, comprised 75% of our total consolidated revenue, and include transaction-based revenue streams such as e-filing and online payments. As of June 30, 2020, we had $472.5 million in cash and investments and no outstanding borrowings under our credit facility. We also have substantial additional liquidity available through our undrawn $400.0 million credit facility, which can be expanded through an accordion feature. During the second quarter of 2020, we completed our annual assessment of goodwill which did not result in an impairment charge. No impairments of other assets were recorded as of the balance sheet date as no triggering events or changes in circumstances occurred as of period-end to require such an impairment; however, due to significant uncertainty surrounding the pandemic and market conditions, management’s judgment regarding this could change in the future.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements. These condensed consolidated financial statements have been prepared following the requirements of accounting principles generally accepted in the United States (“GAAP”) for the interim period 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. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition and amortization and potential impairment of intangible assets and goodwill and share-based compensation expense. As these are condensed financial statements, one should also read expanded information about our critical accounting policies and estimates provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations", included in our Form 10-K for the year ended December 31, 2019. Except for the accounting policies for credit losses updated as a result of adopting ASU No. 2016-13, Financial Instruments - Credit losses, there have been no material changes to our critical accounting policies and estimates from the information provided in our Form 10-K for the year ended December 31, 2019.

Goodwill

During the second quarter, as part of our annual impairment test, we performed qualitative assessments for all reporting units except for the Data and insights reporting unit. As a result of these qualitative assessments, we determined that it was not more likely than not that an impairment existed; therefore, we did not perform a Step1 quantitative impairment test. We performed a quantitative assessment for goodwill of $75.7 million associated with our Data and insights business unit and concluded no impairment exists as of our annual assessment date. Most of our reporting units are comprised of goodwill relating to a combination of legacy and acquired businesses and as a result, have fair values that substantially exceed their underlying carrying values. Certain reporting units, in particular our Case management and business process management and Data and insights units are comprised entirely of recently acquired businesses and as a result, do not have significant excess fair values over carrying values. As of our annual assessment date, the Case management and business process management and Data and insights business units combined was $152.0 million, or 18%, of total goodwill as of June 30, 2020.

Determining the fair value of our reporting units involves the use of significant estimates and assumptions and considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Changes in market conditions or other factors outside of our control, such as the COVID-19 pandemic, could cause us to change key assumptions and our judgment about a reporting unit’s prospects. Similarly, in a specific period, a reporting unit could significantly underperform relative to its historical or projected future operating results. Either situation could result in a meaningfully different estimate of the fair value of our reporting units, and a consequent future impairment charge.

Refer to Footnote 2, Accounting Standards and Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements (Unaudited) of the Form 10-Q for more discussion of our annual assessment of goodwill.

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ANALYSIS OF RESULTS OF OPERATIONS

	Percent of Total Revenues
	Three Months Ended				Six Months Ended
	2020		2019		2020		2019
Revenues:
Software licenses and royalties	6.3	%	7.5	%	6.5	%	8.1	%
Subscriptions	31.6		26.7		30.6		27.0
Software services	16.1		20.9		17.5		20.3
Maintenance	43.1		38.7		42.2		39.6
Appraisal services	1.7		2.3		1.9		2.2
Hardware and other	1.2		3.9		1.3		2.8
Total revenues	100.0		100.0		100.0		100.0
Cost of revenues:
Software licenses, royalties and acquired software	3.4		3.2		3.3		3.1
Subscriptions, software services and maintenance	45.8		45.7		46.8		46.5
Appraisal services	1.5		1.4		1.5		1.4
Hardware and other	0.9		3.2		0.9		2.3
Selling, general and administrative expenses	23.1		23.9		23.7		23.7
Research and development expense	8.1		7.3		8.1		7.5
Amortization of customer and trade name intangibles	2.0		1.9		2.0		1.9
Operating income	15.2		13.4		13.7		13.6
Other income (expense), net	0.2		(0.1)		0.3		0.1
Income before income taxes	15.4		13.3		14.0		13.7
Income tax (benefit) provision	(4.5)		1.6		(4.5)		2.3
Net income	19.9	%	11.7	%	18.5	%	11.4	%

Revenues

On February 28, 2019, we acquired all of the capital stock of MP Holdings Parent, Inc. dba MicroPact ("MicroPact"), a leading provider of commercial off-the-shelf solutions, including entellitrak®, a low-code application development platform for case management and business process management used extensively in the public sector. The following table details revenue for MicroPact for the three and six months ended June 30, 2020 and 2019, which is included in our condensed consolidated statements of income from the date of acquisition:

	Three Months Ended				Six Months Ended
	2020		2019		2020		2019
Revenues:
Software licenses and royalties	$	1,924	$	46	3,334		760
Subscriptions	2,565		1,953		5,053		2,583
Software services	5,467		5,248		10,612		6,955
Maintenance	10,369		7,342		20,015		9,734
Appraisal services	—		—		—		—
Hardware and other	1		8		18		21
Total revenues	$	20,326	$	14,597	$	39,032	$	20,053

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Software licenses and royalties

The following table sets forth a comparison of our software licenses and royalties revenue for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
ES	$	14,683	$	17,555	$	(2,872)	(16)	%	$	30,634	$	36,077	$	(5,443)	(15)	%
A&T	2,342		3,120		(778)		(25)		5,128		6,391		(1,263)		(20)
Total software licenses and royalties revenue	$	17,025	$	20,675	$	(3,650)	(18)	%	$	35,762	$	42,468	$	(6,706)	(16)	%

Software licenses and royalties revenue decreased 18% and 16% for the three and six months ended June 30, 2020, respectively, compared to the prior year periods. The decline in software licenses and royalties revenue for the three and six months June 30, 2020, is primarily due to slower sales cycles attributed to our ERP, public safety and appraisal software products as the impact of COVID -19 has slowed government procurement processes and some contract signings have been pushed to future periods. Also contributing to the decline is a shift in the mix of new software contracts toward more subscription agreements compared to the prior year. Our total new client mix for the six months ended June 30, 2020, was approximately 37% perpetual software license arrangements and approximately 63% subscription-based arrangements compared to total new client mix for the six months ended June 30, 2019, of approximately 44% perpetual software license arrangements and approximately 56% subscription-based arrangements.

Although the mix of new contracts between subscription-based and perpetual license arrangements may vary from quarter to quarter and year to year, we expect our longer-term software license growth rate to slow as a growing number of clients choose our subscription-based options, rather than purchasing the software under a traditional perpetual software license arrangement. Subscription-based arrangements generally do not result in license revenue in the initial year as compared to perpetual software license arrangements but generate higher overall revenue over the term of the contract.

Subscriptions

The following table sets forth a comparison of our subscriptions revenue for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
ES	$	79,128	$	69,386	$	9,742	14	%	$	155,772	$	132,641	$	23,131	17	%
A&T	6,510		4,089		2,421		59		11,589		8,109		3,480		43
Total subscriptions revenue	$	85,638	$	73,475	$	12,163	17	%	$	167,361	$	140,750	$	26,611	19	%

Subscriptions revenue primarily consists of revenue derived from our SaaS arrangements, which generally utilize the Tyler private cloud. As part of our subscription-based services, we also provide e-filing arrangements that simplify the filing and management of court related documents for courts and law offices. E-filing revenue is derived from transaction fees and fixed fee arrangements. Other sources of subscription-based services are derived from transaction-based fees primarily related to online payment services.

Subscriptions revenue grew 17% and 19% for the three and six months ending June 30, 2020, respectively, compared to the prior year. New SaaS clients as well as existing clients who converted to our SaaS model provided the majority of the subscriptions revenue increase. In the three and six months ending June 30, 2020, respectively, we added 125 and 256 new SaaS clients and 42 and 61 existing on-premises clients converted to our SaaS model. Since June 30, 2019, we have added 570 new SaaS clients while 99 existing on-premises clients converted to our SaaS model. Also, transaction-based fees contributed $73,000 and $2.9 million to the increase in subscription revenue for the three and six months ended June 30, 2020 due to the increased volumes of online payments from utility billings, offset slightly by the decrease in e-filing services volumes.

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Software services

The following table sets forth a comparison of our software services revenue for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
ES	$	38,899	$	48,404	$	(9,505)	(20)	%	$	83,848	$	88,860	$	(5,012)	(6)	%
A&T	4,755		8,997		(4,242)		(47)		11,939		16,984		(5,045)		(30)
Total software services revenue	$	43,654	$	57,401	$	(13,747)	(24)	%	$	95,787	$	105,844	$	(10,057)	(10)	%

Software services revenue primarily consists of professional services delivered in connection with implementing our software, converting client data, training client personnel, custom development activities and consulting. New clients who acquire our software generally also contract with us to provide the related software services. Existing clients also periodically purchase additional training, consulting and minor programming services. Software services revenue decreased 24% and 10% for the three and six months ended June 30, 2020, respectively, compared to the prior year periods. The decline in software services is due to delays in client implementations caused by COVID-19 travel restrictions and shelter-in-place orders and the decline in billable travel revenue. Also contributing to the decline is the increase of clients selecting our cloud solutions instead of our on-premises license arrangements which typically require more professional services.

Maintenance

The following table sets forth a comparison of our maintenance revenue for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
ES	$	107,336	$	97,641	$	9,695	10	%	$	212,177	$	188,829	$	23,348	12	%
A&T	9,424		9,048		376		4		18,948		18,012		936		5.2
Total maintenance revenue	$	116,760	$	106,689	$	10,071	9	%	$	231,125	$	206,841	$	24,284	12	%

We provide maintenance and support services for our software products and certain third-party software. Maintenance revenue grew 9% and 12% for the three and six months ended June 30, 2020, respectively, compared to the prior year periods. Maintenance revenue increased mainly due to contributions of maintenance revenue from recent acquisitions and completing the recognition of the majority of acquisition-related deferred maintenance revenue that was fair valued at rates below Tyler's average maintenance rate in prior periods. The remainder of the increase is attributed to annual maintenance rate increases and growth in our installed customer base from new software license sales, partially offset by clients converting from on-premises license arrangements to SaaS.

Appraisal services

The following table sets forth a comparison of our appraisal services revenue for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
ES	$	—	$	—	$	—	—	%	$	—	$	—	$	—	—	%
A&T	4,696		6,233		(1,537)		(25)		10,459		11,447		(988)		(9)
Total appraisal services revenue	$	4,696	$	6,233	$	(1,537)	(25)	%	$	10,459	$	11,447	$	(988)	(9)	%

Appraisal services revenue for the three and six months ended June 30, 2020, decreased by 25% and 9%, respectively, compared to the prior year primarily due to the delays to several ongoing projects as a result of travel restrictions and shelter-in-place orders related to COVID-19. The appraisal services business is somewhat cyclical and driven in part by statutory revaluation cycles in various states.

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 Cost of Revenues and Gross Margins

The following table sets forth a comparison of the key components of our cost of revenues for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
Software licenses and royalties	$	1,130	$	891	$	239	27	%	$	1,870	$	1,709	$	161	9	%
Acquired software	8,006		7,988		18		0.2		16,033		14,670		1,363		9
Subscriptions, software services and maintenance	124,287		125,759		(1,472)		(1)		256,066		242,919		13,147		5
Appraisal services	3,976		3,758		218		6		8,361		7,210		1,151		16
Hardware and other	2,489		8,868		(6,379)		(72)		4,968		11,774		(6,806)		(58)
Total cost of revenues	$	139,888	$	147,264	$	(7,376)	(5)	%	$	287,298	$	278,282	$	9,016	3	%

The following table sets forth a comparison of gross margin percentage by revenue type for the periods presented as of June 30:

	Three Months Ended						Six Months Ended
	2020		2019		Change		2020		2019		Change
Software licenses, royalties and acquired software	46.3	%	57.1	%	(10.8)	%	49.9	%	61.4	%	(11.5)	%
Subscriptions, software services and maintenance	49.5		47.1		2.4		48.2		46.4		1.8
Appraisal services	15.3		39.7		(24.4)		20.1		37.0		(16.9)
Hardware and other	25.0		16.7		8.3		30.4		20.7		9.7
Overall gross margin	48.4	%	46.5	%	1.9	%	47.5	%	46.7	%	0.8	%

Software licenses, royalties and acquired software. Amortization expense for acquired software comprises the majority of costs of software licenses, royalties and acquired software. We do not have any direct costs associated with royalties. In the three and six months ended June 30, 2020, respectively, our software licenses, royalties and acquired software gross margin decreased 10.8% and 11.5% compared to the prior year periods due to lower revenue from software licenses and increased amortization expense for acquired software resulting from acquisitions.

Subscriptions, software services and maintenance. Cost of subscriptions, software services and maintenance primarily consists of personnel costs related to installation of our software, conversion of client data, training client personnel and support activities and various other services such as custom client development and ongoing operation of SaaS and e-filing arrangements. The subscriptions, software services and maintenance gross margin in the three and six months ended June 30, 2020, respectively, increased 2.4% and 1.8% from the comparable prior year periods. Although services revenue has declined period over period, margins have increased primarily due to cost savings attributed to lower travel expenses associated with implementation services. Our implementation and support staff has grown by 231 employees since June 30, 2019, as we accelerated hiring to ensure that we are well-positioned to deliver our current backlog and anticipated new business. Costs related to maintenance and various other services such as SaaS and e-filing typically grow at a slower rate than related revenue due to leverage in the utilization of support and maintenance staff and economies of scale.

Appraisal services. Appraisal services revenue was approximately 1.7% and 1.9% of total revenue for the three and six months ended June 30, 2020, respectively. The appraisal services gross margin for the three and six months ended June 30, 2020, respectively, decreased 24.4% and 16.9% compared to the same periods in 2019. The appraisal gross margin decline is attributed to lower staff utilization as a result of COVID-19 shelter-in-place orders. The appraisal services business is somewhat cyclical and driven in part by statutory revaluation cycles in various states.

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For the three and six months ended June 30, 2020, respectively, our overall gross margin increased 1.9% and 0.8% and compared to the prior year periods. The increase in overall margins is attributed to a higher revenue mix for subscription revenues compared to the prior year periods resulting in an increase in incremental margin related to software services, maintenance and subscriptions. Although software services revenue has declined period over period, margins have increased due to cost savings attributable to lower travel expenses associated with implementation services. Costs related to maintenance and various other services such as SaaS and e-filing typically grow at a slower rate than related revenue due to leverage in the utilization of support and maintenance staff and economies of scale. The increase in overall gross margin is offset by lower margins from software licenses due to lower software license revenue and higher amortization expense for acquired software resulting from acquisitions as well as lower staffing utilization attributable to appraisal services.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses consist primarily of salaries, employee benefits, travel, share-based compensation expense, commissions and related overhead costs for administrative and sales and marketing employees, as well as professional fees, trade show activities, advertising costs and other marketing related costs.

The following table sets forth a comparison of our SG&A expenses for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
Selling, general and administrative expenses	$	62,521	$	65,827	$	(3,306)	(5)	%	$	130,006	$	123,593	$	6,413	5	%

SG&A as a percentage of revenues was 23% and 24% for the three and six months ended June 30, 2020, respectively, compared to 24% for both the three and six months ended June 30, 2019. SG&A expense decreased 5% and increased 5% for the three and six months ended June 30, 2020, respectively. The decline in SG&A expense for the three months ended June 30, 2020 is mainly due to lower bonus and commission expense as a result of lower sales, lower travel expenses associated with sales and marketing activities, including trade shows, as a result of COVID-19 travel restrictions, and lower health claim expenses during the current period. These increases were offset by higher stock compensation expense compared to the prior periods.

The increase in SG&A expense for the six months ending June 30, 2020 is attributed to increased staffing levels and increased stock compensation expense compared to prior periods. We have added 54 SG&A employees, mainly to our sales and finance teams, since June 30, 2019. For the three and six months ended June 30, 2020, respectively, stock compensation expense rose $2.7 million and $5.1 million compared to the same period in 2019, primarily due to an increase in share-based awards issued in connection with our stock compensation plan coupled with the higher fair value of each share-based award due to the increase in our stock price.

Research and Development Expense

The following table sets forth a comparison of our research and development expense for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
Research and development expense	$	21,949	$	20,101	$	1,848	9	%	$	44,310	$	39,042	$	5,268	13	%

Research and development expense consists mainly of costs associated with development of new products and technologies from which we do not currently generate significant revenue.

Research and development expense in the three and six months ended June 30, 2020, respectively, increased 9% and 13% compared to the prior periods mainly due to a number of new Tyler product development initiatives across our product suites, as well as investments related to recently acquired businesses. To support these initiatives, our research and development staff has grown by 76 since June 30, 2019.

Amortization of Other Intangibles

Acquisition intangibles are comprised of the excess of the purchase price over the fair value of net tangible assets acquired that is primarily allocated to acquired software and customer and trade name intangibles. The remaining excess purchase price is allocated to goodwill that is not subject to amortization. Amortization expense related to acquired software is included with cost

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of revenues while amortization expense of customer and trade name intangibles is recorded as operating expense. The increase in amortization of other intangibles is primarily attributed to the acquisitions closed in 2019.

The following table sets forth a comparison of amortization of customer and trade name intangibles for the periods presented as of June 30:

	Three Months Ended				Change				Six Months Ended				Change
	2020		2019		$		%		2020		2019		$		%
Amortization of other intangibles	$	5,392	$	5,266	$	126	2	%	$	10,784	$	10,116	$	668	7	%

 Other Income (Expense), Net

The following table sets forth a comparison of our other income, net, for the periods presented as of June 30:

	Three Months Ended				Change			Six Months Ended				Change
	2020		2019		$		%	2020		2019		$		%
Other income (expense), net	$	470	$	(247)	$	717	NM	$	1,460	$	339	$	1,121	NM

Other income (expense), net, is comprised of interest income from invested cash net of interest expense and non-usage and other fees associated with our revolving credit agreement. The increase in other income (expense), net, in the three and six months ended June 30, 2020, respectively, compared to the prior periods is attributed to the increased interest income from higher levels of invested cash, partially offset by lower interest rates.

Income Tax Provision

The following table sets forth a comparison of our income tax provision for the periods presented as of June 30:

	Three Months Ended						Change			Six Months Ended						Change
	2020			2019			$		%	2020			2019			$		%
Income tax (benefit) provision	$	(12,081)		$	4,420		$	(16,501)	NM	$	(24,748)		$	12,149		$	(36,897)	NM
Effective income tax rate	(28.9)		%	12.1		%				(32.3)		%	17.0		%

The change in effective tax rate for the three and six months ended June 30, 2020, respectively, as compared to the same period in 2019, was principally driven by an increase in the excess tax benefits related to stock incentive awards. The effective income tax rates for the three and six months ended June 30, 2020 and 2019, respectively, were different from the statutory United States federal income tax rate of 21% due to excess tax benefits related to stock incentive awards, state income taxes, non-deductible business expenses, and the tax benefit of research tax credits. The excess tax benefits related to stock incentive awards realized were $23.4 million and $45.5 million for the three and six months ended June 30, 2020, respectively, compared to $5.4 million and $7.0 million for the three and six months ended June 30, 2019, respectively. Excluding the excess tax benefits, the effective tax rate was 27.2% and 27.1% for the three and six months ended June 30, 2020, respectively, compared to 26.9% and 26.8% for the three and six months ended June 30, 2019, respectively.

The Coronavirus Aid, Relief and Economic Security ("CARES") Act, which was signed into law on March 27, 2020, provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the US economy. The assistance includes tax relief and government loans, and investments and grants for entities in affected industries (e.g., health care, airlines). The business tax provisions of the Act include temporary changes to income and non-income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property. Measures not related to income-based taxes include (1) allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020, over the following two years and (2) allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds. We evaluated the CARES Act provisions and the enactment resulted in no cumulative adjustments to income taxes. We also do not believe that the income tax implications will be significant to our overall income tax liabilities going forward.

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FINANCIAL CONDITION AND LIQUIDITY

As of June 30, 2020, we had cash and cash equivalents of $351.3 million compared to $232.7 million at December 31, 2019. We also had $121.2 million invested in investment grade corporate and municipal bonds as of June 30, 2020. These investments have varying maturity dates through 2024, and we intend to hold these investments until maturity. As of June 30, 2020, we believe our cash from operating activities, revolving line of credit, cash on hand and access to the capital markets provides us with sufficient flexibility to meet our long-term financial needs.

The following table sets forth a summary of cash flows for the six months ended June 30:

	2020		2019
Cash flows provided (used) by:
Operating activities	$	96,520	$	48,454
Investing activities	(54,279)		(195,501)
Financing activities	76,413		23,955
Net increase (decrease) in cash and cash equivalents	$	118,654	$	(123,092)

Net cash provided by operating activities continues to be our primary source of funds to finance operating needs and capital expenditures. Other potential capital resources include cash on hand, public and private issuances of debt or equity securities, and bank borrowings. It is possible that our ability to access the capital and credit markets in the future may be limited by economic conditions or other factors. We believe that cash provided by operating activities, cash on hand and available credit are sufficient to fund our working capital requirements, capital expenditures, income tax obligations, and share repurchases for at least the next twelve months.

For the six months ended June 30, 2020, operating activities provided cash of $96.5 million. Operating activities that provided cash were primarily comprised of net income of $101.4 million, non-cash depreciation and amortization charges of $40.3 million, non-cash share-based compensation expense of $35.7 million and a non-cash decrease in operating lease right-of-use assets of $2.8 million. Working capital, excluding cash, increased approximately $83.7 million mainly due to higher accounts receivable because of an increase in unbilled receivables attributed to revenues recognized prior to billings and our maintenance billing cycle peaking in June, the timing of bonuses and tax payments, timing of prepaid maintenance subscriptions, and deferred taxes associated with stock option activity during the period. These increases were offset by an increase in deferred revenue during the period. In general, changes in deferred revenue are cyclical and primarily driven by the timing of our maintenance renewal billings. Our renewal dates occur throughout the year, but our largest renewal billing cycles occur in the second and fourth quarters. In addition, subscription renewals are billed throughout the year.

Our days sales outstanding (“DSO”) was 135 days at June 30, 2020, compared to 117 days at December 31, 2019 and 125 days at June 30, 2019. The increase in DSO compared to December 31, 2019, is primarily attributed to our maintenance billing cycle, which typically peaks at its highest level in June and second highest level in December of each year, followed by collections in the subsequent quarter. DSO is calculated based on quarter-end accounts receivable divided by the quotient of annualized quarterly revenues divided by 360 days. The increase in DSO compared to June 30, 2019, is mainly due to an increase in unbilled receivables attributable to an increase in software services contracts accounted for using progress-to-completion method of revenue recognition in which the services are performed in one accounting period, but the billing normally occurs subsequently in another accounting period. Also contributing to increases in DSO are slower collections as government payment processes were impacted by delays caused by the COVID-19 pandemic.

Investing activities used cash of $54.3 million in the six months ending June 30, 2020. Approximately $16.3 million was invested in property and equipment, including $6.8 million related to real estate. In addition, approximately $2.7 million of software development was capitalized in the quarter. During the six months ending June 30, 2020, we received $15 million in proceeds from the sale of the investment in convertible preferred stock representing a 20% interest in Record Holdings to BFTR, LLC, a wholly owned subsidiary of Bison Capital Partners V.L.P. During the same period, we purchased $10 million in common stock representing a 18% interest in BFTR, LLC. The remaining additions were for computer equipment and furniture and fixtures in support of internal growth, particularly with respect to data centers supporting growth in our cloud-based offerings.

Investing activities used cash of $195.5 million in the six months ending June 30, 2019. On February 28, 2019, we acquired all of the capital stock of MicroPact. The total purchase price, net of cash acquired of $2.0 million, was approximately $204.2 million, including $197.5 million paid in cash, accrued contingent consideration of $7.0 million and $1.7 million accrued for certain holdbacks. On February 1, 2019, we acquired all the assets of MyCivic. The total purchase price was $3.7 million in cash paid. Approximately $24.1 million was invested in property and equipment, including $11.9 million related to real estate.

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Approximately $2.2 million of software development was capitalized in the quarter. The remaining additions were for computer equipment and furniture and fixtures in support of internal growth, particularly with respect to data centers supporting growth in our cloud-based offerings.

Financing activities provided cash of $76.4 million in the six months ended June 30, 2020, and were comprised of proceeds from stock option exercises and employee stock purchase plan activity. We paid $5.6 million in contingent consideration resulting from the MicroPact acquisition. During the six months ended June 30, 2020, we repurchased approximately 59,000 shares of our common stock for an aggregate purchase price of $15.5 million, with an average price per share of $263.28.

Financing activities provided cash of $24.0 million in the six months ended June 30, 2019, and were comprised of purchases of treasury shares, net borrowings from our revolving line of credit, proceeds from stock option exercises and employee stock purchase plan activity. During the six months ended June 30, 2019, we repurchased approximately 72,000 shares of our common stock for an aggregate purchase price of $14.3 million, with an average price per share of $199.03.

In February 2019, our board of directors authorized the repurchase of an additional 1.5 million shares of Tyler common stock. The repurchase program, which was approved by our board of directors, was originally announced in October 2002 and was amended at various times from 2003 through 2019. As of June 30, 2020, we have authorization from our board of directors to repurchase up to 2.6 million additional shares of Tyler common stock. Our share repurchase program allows us to repurchase shares at our discretion. Market conditions influence the timing of the buybacks and the number of shares repurchased, as well as the volume of employee stock option exercises. Share repurchases are generally funded using our existing cash balances and borrowings under our credit facility and may occur through open market purchases and transactions structured through investment banking institutions, privately negotiated transactions and/or other mechanisms. There is no expiration date specified for the authorization, and we intend to repurchase stock under the plan from time to time.

We made tax payments of $422,000 and $14.8 million in the six months ended June 30, 2020, and 2019, respectively.

On September 30, 2019, we entered into a $400 million credit agreement with various lender parties and Wells Fargo Bank, National Association, as Administrative Agent (the “Credit Facility”). The Credit Facility provides for a revolving credit line up to $400 million, including a $25 million sublimit for letters of credit. The Credit Facility matures on September 30, 2024.

We anticipate that 2020 capital spending will be between $34 million and $35 million, including approximately $10 million related to real estate and approximately $6 million of capitalized software development. We expect the majority of the other capital spending will consist of computer equipment and software for infrastructure replacements and expansion. Capital spending is expected to be funded from existing cash balances and cash flows from operations.

From time to time we engage in discussions with potential acquisition candidates. In order to pursue such opportunities, which could require significant commitments of capital, we may be required to incur debt or to issue additional potentially dilutive securities in the future. No assurance can be given as to our future acquisition opportunities and how such opportunities will be financed.

We lease office facilities, as well as transportation and other equipment used in our operations under non-cancelable operating lease agreements expiring at various dates through 2028.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may affect us due to adverse changes in financial market prices and interest rates.

As of June 30, 2020, we had no outstanding borrowings under our Credit Facility and available borrowing capacity under the Credit Agreement was $400.0 million.

Borrowings under the Credit Facility bear interest at a rate of either (1) Wells Fargo Bank’s prime rate (subject to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, two-, three-, or six-month LIBOR rate plus a margin of 1.125% to 1.75%.

As of June 30, 2020, our interest rate was 3.38% under the Wells Fargo Bank prime rate and approximately 1.29% under the 30-day LIBOR option.

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ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act) designed to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

ITEM 1. Legal Proceedings

Other than routine litigation incidental to our business, there are no material legal proceedings pending to which we are party or to which any of our properties are subject.

ITEM 1A. Risk Factors

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 2019 Annual Report on Form 10-K. 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 occurs or materializes. 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 three months ended June 30, 2020, except for the risk factors described below, 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, 2019.

COVID-19 will adversely affect our business and results of operations.

We expect that the global emergence of COVID-19 (novel coronavirus) will negatively impact our business and financial results in fiscal year 2020. As the virus has spread, it has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will 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, we do expect the pandemic will negatively impact our revenues and other financial results.

We expect to see some impact on our business in the near term, with delays in government procurement processes and uncertainty around public sector budgets, as well as delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues.

We expect appraisal and software implementations projects delays as clients put projects on hold or slow projects by extending go-lives dates. While we have the ability to deliver most of our professional services remotely, some of our professional services, including appraisal assessments, are more effective when performed on-site, and certain clients may insist on on-site services in any event. In addition, some professional services relate to training and require the availability of the client. We expect a negative impact on our software services and appraisal services revenues and respective margins throughout the fiscal year 2020. Also, we expect software licenses and subscriptions revenues to be negatively affected due to delays in procurement processes. Some clients may request changes to payment terms, negatively impacting the timing of collections of accounts

33

receivables in future periods. For the three months ended June 30, 2020, 75% of our total revenue and earnings are relatively predictable as a result of our subscription and maintenance revenue, which is recurring in nature, thus the effect of the COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods.

We perform our annual goodwill impairment analysis as of the first day of the second quarter of each year. Subsequent to our annual goodwill impairment analysis, we monitor for any events or changes in circumstances, such as significant adverse changes in business climate or operating results, changes in management’s business strategy, an inability to successfully introduce new products in the marketplace, an inability to successfully achieve internal forecasts or significant declines in our stock price, which may represent an indicator of impairment. The occurrence of any of these events, which could be caused or impacted by the COVID-19 pandemic, may require us to record future goodwill impairment charges.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

ITEM 3. Defaults Upon Senior Securities

None

ITEM 4. Submission of Matters to a Vote of Security Holders

None

ITEM 5. Other Information

None

ITEM 6. Exhibits

Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certifications Pursuant Certifications Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.INS	Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags, including Cover Page XBRL tags, are embedded within the Inline XBRL Document.
Exhibit 101.SCH	Inline XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.LAB	Inline XBRL Extenstion Labels Linkbase Document.
Exhibit 101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
Exhibit 101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Exhibit 104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TYLER TECHNOLOGIES, INC.
By:	/s/ Brian K. Miller
	Brian K. Miller
	Executive Vice President and Chief Financial Officer
	(principal financial officer and an authorized signatory)

Date: July 29, 2020

35

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, H. Lynn Moore, Jr., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tyler Technologies, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over our financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Tyler and have:

a.Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its divisions, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (The registrant’s first quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: July 29, 2020	By:	/s/ H. Lynn Moore, Jr.
		H. Lynn Moore, Jr.
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Brian K. Miller, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tyler Technologies, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over our financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Tyler and have:

a.Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its divisions, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (The registrant’s first quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: July 29, 2020	By:	/s/ Brian K. Miller
		Brian K. Miller
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

H. Lynn Moore, Jr., President and Chief Executive Officer of Tyler Technologies, Inc., (the “Company”) and Brian K. Miller, Executive Vice President and Chief Financial Officer of the Company, each certify pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 29, 2020	By:	/s/ H. Lynn Moore, Jr.
		H. Lynn Moore, Jr.
		President and Chief Executive Officer
Date: July 29, 2020	By:	/s/ Brian K. Miller
		Brian K. Miller
		Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Tyler Technologies, Inc. and will be retained by Tyler Technologies, Inc. and furnished to the Securities and Exchange Commission upon request.

XML

Cover - shares	6 Months Ended
	Jun. 30, 2020	Jul. 27, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	1-10485
Entity Registrant Name	TYLER TECHNOLOGIES, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	75-2303920
Entity Address, Address Line One	5101 TENNYSON PARKWAY
Entity Address, City or Town	PLANO
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75024
City Area Code	972
Local Phone Number	713-3700
Title of 12(b) Security	COMMON STOCK, $0.01 PAR VALUE
Trading Symbol	TYL
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		40,240,793
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000860731
Current Fiscal Year End Date	--12-31

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues:
Total revenues	$ 271,091	$ 275,124	$ 547,632	$ 522,190
Cost of revenues:
Total cost of revenues	139,888	147,264	287,298	278,282
Gross profit	131,203	127,860	260,334	243,908
Selling, general and administrative expenses	62,521	65,827	130,006	123,593
Research and development expense	21,949	20,101	44,310	39,042
Amortization of other intangibles	5,392	5,266	10,784	10,116
Operating income	41,341	36,666	75,234	71,157
Other income (expense), net	470	(247)	1,460	339
Income before income taxes	41,811	36,419	76,694	71,496
Income tax (benefit) provision	(12,081)	4,420	(24,748)	12,149
Net income	$ 53,892	$ 31,999	$ 101,442	$ 59,347
Earnings per common share:
Basic (usd per share)	$ 1.35	$ 0.83	$ 2.54	$ 1.54
Diluted (usd per share)	$ 1.30	$ 0.80	$ 2.44	$ 1.49
Software licenses and royalties
Revenues:
Total revenues	$ 17,025	$ 20,675	$ 35,762	$ 42,468
Cost of revenues:
Total cost of revenues	1,130	891	1,870	1,709
Subscriptions
Revenues:
Total revenues	85,638	73,475	167,361	140,750
Software services
Revenues:
Total revenues	43,654	57,401	95,787	105,844
Maintenance
Revenues:
Total revenues	116,760	106,689	231,125	206,841
Appraisal services
Revenues:
Total revenues	4,696	6,233	10,459	11,447
Cost of revenues:
Total cost of revenues	3,976	3,758	8,361	7,210
Hardware and other
Revenues:
Total revenues	3,318	10,651	7,138	14,840
Cost of revenues:
Total cost of revenues	2,489	8,868	4,968	11,774
Acquired software
Cost of revenues:
Total cost of revenues	8,006	7,988	16,033	14,670
Subscriptions, software services and maintenance
Cost of revenues:
Total cost of revenues	$ 124,287	$ 125,759	$ 256,066	$ 242,919

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 351,336	$ 232,682
Accounts receivable (less allowance for losses and sales adjustments of $9,256 in 2020 and $5,738 in 2019)	405,731	374,089
Short-term investments	52,352	39,399
Prepaid expenses	33,343	24,717
Income tax receivable	27,935	6,482
Other current assets	3,245	2,328
Total current assets	873,942	679,697
Accounts receivable, long-term	21,121	22,432
Operating lease right-of-use assets	16,659	18,992
Property and equipment, net	174,967	171,861
Other assets:
Goodwill	840,028	840,117
Other intangibles, net	354,115	378,914
Non-current investments and other assets	101,764	79,601
Total assets	2,382,596	2,191,614
Current liabilities:
Accounts payable	8,640	14,977
Accrued liabilities	56,368	75,234
Operating lease liabilities	6,217	6,387
Current income tax payable	0	0
Deferred revenue	423,037	412,495
Total current liabilities	494,262	509,093
Revolving line of credit	0	0
Deferred revenue, long-term	167	199
Deferred income taxes	44,713	48,442
Operating lease liabilities, long-term	14,126	16,822
Commitments and contingencies	0	0
Shareholders' equity:
Preferred stock, $10.00 par value; 1,000,000 shares authorized; none issued	0	0
Common stock, $0.01 par value; 100,000,000 shares authorized; 48,147,969 shares issued and outstanding as of June 30, 2020 and December 31, 2019	481	481
Additional paid-in capital	843,998	739,478
Accumulated other comprehensive loss, net of tax	(46)	(46)
Retained earnings	1,018,778	917,336
Treasury stock, at cost; 7,917,657 and 8,839,352 shares in 2020 and 2019, respectively	(33,883)	(40,191)
Total shareholders' equity	1,829,328	1,617,058
Total liabilities and shareholders' equity	$ 2,382,596	$ 2,191,614

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 9,256	$ 5,738
Preferred stock, par value (usd per share)	$ 10.00	$ 10.00
Preferred stock, shares authorized (shares)	1,000,000	1,000,000
Preferred stock, shares issued (shares)	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	100,000,000	100,000,000
Common stock, shares issued (shares)	48,147,969	48,147,969
Common stock, shares outstanding (shares)	48,147,969	48,147,969
Treasury stock (shares)	7,917,657	8,839,352

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net income	$ 101,442	$ 59,347
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	40,270	36,744
Share-based compensation expense	35,688	29,482
Operating lease right-of-use assets expense	2,843	2,551
Deferred income tax benefit	(3,729)	(7,440)
Changes in operating assets and liabilities, exclusive of effects of    acquired companies:
Accounts receivable	(30,332)	(69,058)
Income tax receivable	(21,453)	4,806
Prepaid expenses and other current assets	(9,870)	(9,987)
Accounts payable	(6,338)	550
Operating lease liabilities	(3,375)	(2,866)
Accrued liabilities	(19,136)	846
Deferred revenue	10,510	3,479
Net cash provided by operating activities	96,520	48,454
Cash flows from investing activities:
Additions to property and equipment	(16,268)	(24,052)
Purchase of marketable security investments	(79,747)	(10,117)
Proceeds from marketable security investments	40,020	39,688
Purchase of investment in common shares	(10,000)	0
Proceeds from the sale of investment in preferred shares	15,000	0
Investment in software	(2,695)	(2,232)
Cost of acquisitions, net of cash acquired	(261)	(199,220)
(Increase) decrease in other	(328)	432
Net cash used by investing activities	(54,279)	(195,501)
Cash flows from financing activities:
Increase in net borrowings on revolving line of credit	0	15,000
Purchase of treasury shares	(15,482)	(17,786)
Payment of contingent consideration	(5,619)	0
Proceeds from exercise of stock options	92,337	22,132
Contributions from employee stock purchase plan	5,177	4,609
Net cash provided by financing activities	76,413	23,955
Net increase (decrease) in cash and cash equivalents	118,654	(123,092)
Cash and cash equivalents at beginning of period	232,682	134,279
Cash and cash equivalents at end of period	$ 351,336	$ 11,187

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Treasury Stock
Balance at Dec. 31, 2018	$ 1,324,846	$ (1,116)	$ 481	$ 731,435	$ (46)	$ 771,925	$ (1,116)	$ (178,949)
Beginning balance (in shares) at Dec. 31, 2018			48,148					(9,872)
Increase (Decrease) in Stockholders' Equity
Net income	59,347					59,347
Exercise of stock options and vesting of restricted stock units	$ 22,132			(44,289)				$ 66,421
Exercise of stock options and vesting of restricted stock units (in shares)	297							350
Employee taxes paid for withheld shares upon equity award settlement	$ (3,381)							$ (3,381)
Employee taxes paid for withheld shares upon equity award settlement (in shares)								(16)
Stock compensation	29,482			29,482
Issuance of shares pursuant to employee stock purchase plan	$ 4,609			(708)				$ 5,317
Issuance of shares pursuant to employee stock purchase plan (in shares)	28							28
Treasury stock purchases	$ (14,289)							$ (14,289)
Treasury stock purchases (in shares)	(72)							(72)
Balance at Jun. 30, 2019	$ 1,421,630		$ 481	715,920	(46)	830,156		$ (124,881)
Ending balance (in shares) at Jun. 30, 2019			48,148					(9,582)
Increase (Decrease) in Stockholders' Equity
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201602Member
Balance at Mar. 31, 2019	$ 1,358,745		$ 481	731,073	(46)	798,157		$ (170,920)
Beginning balance (in shares) at Mar. 31, 2019			48,148					(9,825)
Increase (Decrease) in Stockholders' Equity
Net income	31,999					31,999
Exercise of stock options and vesting of restricted stock units	$ 15,604			(29,884)				$ 45,488
Exercise of stock options and vesting of restricted stock units (in shares)	203							239
Employee taxes paid for withheld shares upon equity award settlement	$ (2,044)							$ (2,044)
Employee taxes paid for withheld shares upon equity award settlement (in shares)								(9)
Stock compensation	15,066			15,066
Issuance of shares pursuant to employee stock purchase plan	$ 2,260			(335)				$ 2,595
Issuance of shares pursuant to employee stock purchase plan (in shares)	13							13
Treasury stock purchases	$ 0							$ 0
Treasury stock purchases (in shares)	0							0
Balance at Jun. 30, 2019	$ 1,421,630		$ 481	715,920	(46)	830,156		$ (124,881)
Ending balance (in shares) at Jun. 30, 2019			48,148					(9,582)
Balance at Dec. 31, 2019	1,617,058		$ 481	739,478	(46)	917,336		$ (40,191)
Beginning balance (in shares) at Dec. 31, 2019			48,148					(8,839)
Increase (Decrease) in Stockholders' Equity
Net income	101,442					101,442
Exercise of stock options and vesting of restricted stock units	$ 92,337			66,584				$ 25,753
Exercise of stock options and vesting of restricted stock units (in shares)	917							980
Employee taxes paid for withheld shares upon equity award settlement	$ (6,892)							$ (6,892)
Employee taxes paid for withheld shares upon equity award settlement (in shares)								(19)
Stock compensation	35,688			35,688
Issuance of shares pursuant to employee stock purchase plan	$ 5,177			2,248				$ 2,929
Issuance of shares pursuant to employee stock purchase plan (in shares)	20							20
Treasury stock purchases	$ (15,482)							$ (15,482)
Treasury stock purchases (in shares)	(59)							(59)
Balance at Jun. 30, 2020	$ 1,829,328		$ 481	843,998	(46)	1,018,778		$ (33,883)
Ending balance (in shares) at Jun. 30, 2020			48,148					(7,917)
Increase (Decrease) in Stockholders' Equity
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201602Member
Balance at Mar. 31, 2020	$ 1,712,832		$ 481	798,089	(46)	964,886		$ (50,578)
Beginning balance (in shares) at Mar. 31, 2020			48,148					(8,397)
Increase (Decrease) in Stockholders' Equity
Net income	53,892
Exercise of stock options and vesting of restricted stock units	$ 46,101			27,642				$ 18,459
Exercise of stock options and vesting of restricted stock units (in shares)	436							482
Employee taxes paid for withheld shares upon equity award settlement	$ (4,591)							$ (4,591)
Employee taxes paid for withheld shares upon equity award settlement (in shares)								(12)
Stock compensation	18,386			18,386
Issuance of shares pursuant to employee stock purchase plan	$ 2,708			(119)				$ 2,827
Issuance of shares pursuant to employee stock purchase plan (in shares)	10							10
Treasury stock purchases	$ 0							$ 0
Treasury stock purchases (in shares)	0							0
Balance at Jun. 30, 2020	$ 1,829,328		$ 481	$ 843,998	$ (46)	$ 1,018,778		$ (33,883)
Ending balance (in shares) at Jun. 30, 2020			48,148					(7,917)

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Basis of Presentation

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

We prepared the accompanying condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States, or GAAP, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted for interim periods. Balance sheet amounts are as of June 30, 2020, and December 31, 2019, and operating result amounts are for the three and six months ended June 30, 2020, and 2019, respectively, and include all normal and recurring adjustments that we considered necessary for the fair summarized presentation of our financial position and operating results. As these are condensed financial statements, one should also read the financial statements and notes included in our latest Form 10-K for the year ended December 31, 2019. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. Certain amounts for the previous year have been reclassified to conform to the current year presentation.

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from non-owner sources and includes all components of net income (loss) and other comprehensive income (loss). We had no items of other comprehensive income (loss) for the three and six months ended June 30, 2020, and 2019.

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Accounting Standards and Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Accounting Standards and Significant Accounting Policies

Accounting Standards and Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the accounting policies for ASU 2016-13, Financial Instruments - Credit Losses, (“ASU 2016-13”), there have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 19, 2020, that have had a material impact on our condensed consolidated financial statements and related notes.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 pandemic, which continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will 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, we do expect the current environment will negatively impact our revenues and other financial results for fiscal 2020.

Because an increasing portion of our revenues are recurring, the effect of COVID-19 on our results of operations may also not be fully reflected for some time. We expect to see some impact on our business in the near term, with delays in government procurement processes, and uncertainty around public sector budgets, as well as delays in implementations caused by travel restrictions, closed offices, or clients shifting focus to more pressing issues. We are working to address those challenges through adapting the way we do business – encouraging web and video conferencing, conducting sales demonstrations and delivering professional services remotely.

Our priorities during this crisis are protecting the health and safety of our employees and our clients. Our IT systems and applications support a remote workforce. Prior to the pandemic, many of our employees worked remotely. In response to the pandemic, we encouraged all employees who are able to do so to work from home, equipping them with resources necessary to continue uninterrupted. We were able to transition the vast majority of our employees to this work-from-home posture. This reduces the number of team members in our offices to those uniquely needed for essential on-site services, such as network operations support staff, and allows for “social distancing” as directed by the Centers for Disease Control ("CDC").

The pandemic has delayed some government procurement processes and is expected to impact our ability to complete certain implementations, negatively impacting our revenue. It could also negatively impact the timing of client payments to us. We continue to monitor these trends in order to respond to the ever-changing impact of COVID-19 on our clients and Tyler’s operations.

For the second quarter of 2020, the impact of the COVID-19 pandemic resulted in lower revenues from software licenses, software services, appraisal services, and other revenues. Lower software licenses compared to prior periods are attributed to slower sales cycles as government procurement processes are delayed and contract signings have been pushed to future periods. Software services and appraisal services revenue declines are attributed to delays in implementations caused by travel restrictions and shelter-in-place orders in effect during the period. Other revenues were lower compared to prior periods primarily as a result of the cancellation of our 2020 Connect user conference. Lower revenues compared to prior periods were offset by cost savings attributed to lower spend on travel, user conferences and trade show expenses, health claims and other employee-related expenses. If and as travel restrictions and shelter-in-place orders are relaxed, we expect software services and appraisal services revenues to increase as the limited number of our clients who insist on or require that all or a portion of their services be delivered onsite will be able to receive those services. Also, we are adapting to the way we do business by encouraging web and video conferencing, conducting virtual sales demonstrations and delivering professional services remotely. Both of those factors result in increases in staff utilization rates and billable time.

Recurring revenues, from subscriptions and maintenance, for the six months ended June 30, 2020, comprised 75% of our total consolidated revenue, and include transaction-based revenue streams such as e-filing and online payments. As of June 30, 2020, we had $472.5 million in cash and investments and no outstanding borrowings under our credit facility. We also have substantial additional liquidity available through our undrawn $400.0 million credit facility, which can be expanded through an accordion feature. During the second quarter of 2020, we completed our annual assessment of goodwill which did not result in an impairment charge. No impairments of other assets were recorded as of the balance sheet date as no triggering events or changes in circumstances occurred as of period-end to require such an impairment; however, due to significant uncertainty surrounding the pandemic and market conditions, management’s judgment regarding this could change in the future.

USE OF ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price ("SSP") of performance obligations, variable consideration, and other obligations such as returns and refunds; loss contingencies; the estimated useful life of deferred commissions; the carrying amount of goodwill; the carrying amount and estimated useful lives of intangible assets; the carrying amount of operating lease right-of-use assets and operating lease liabilities; determining share-based compensation expense; the valuation allowance for receivables; and determining the potential outcome of future tax consequences of events that have been recognized on our consolidated financial statements or tax returns. Actual results could differ from estimates.

REVENUE RECOGNITION

Nature of Products and Services:

We earn revenue from software licenses, royalties, subscription-based services, software services, post-contract customer support (“PCS” or “maintenance”), hardware, and appraisal services. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We determine revenue recognition through the following steps:

•Identification of the contract, or contracts with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

Most of our software arrangements with customers contain multiple performance obligations that range from software licenses, installation, training, and consulting to software modification and customization to meet specific customer needs (services), hosting, and 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 software services, such as training or installation, are evaluated to determine whether the customer can benefit from the services either on their own or together with other resources readily available to the customer and whether the services are separately identifiable from other promises in the contract. The transaction price is allocated to the distinct performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. Revenue is recognized net of allowances for sales adjustments and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Significant Judgments:

Our contracts with customers often include multiple performance obligations to a customer. When a software arrangement (license or subscription) includes both software licenses and software services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software services and recognized over time.

The transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine SSP using the expected cost-plus margin approach.

For arrangements that involve significant production, modification or customization of the software, or where software services otherwise cannot be considered distinct, we recognize revenue as control is transferred to the customer over time using progress-to-completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred, or value added. The progress-to-completion method generally results in the recognition of reasonably consistent profit margins over the life of a contract because we can provide reasonably dependable estimates of contract billings and contract costs. We use the level of profit margin that is most likely to occur on a contract. If the most likely profit margin cannot be precisely determined, the lowest probable level of profit margin in the range of estimates is used until the results can be estimated more precisely. These arrangements are often implemented over an extended time period and occasionally require us to revise total cost estimates. Amounts recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost estimates. Changes to total estimated contract costs, if any, are recorded in the period they are determined. Estimated losses on uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.

Typically, the structure of our arrangements does not give rise to variable consideration. However, in those instances whereby variable consideration exists, we include in our estimates additional revenue for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably and its realization is probable.

Refer to Note 13 - "Disaggregation of Revenue" for further information, including the economic factors that affect the nature, amount, timing, and uncertainty of revenue and cash flows of our various revenue categories.

Contract Balances:

Accounts receivable and allowance for losses and sales adjustments

Timing of revenue recognition may differ from the timing of invoicing to customers. We record an unbilled receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. We record an unbilled receivable related to revenue recognized for on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses.

At June 30, 2020, and December 31, 2019, total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $426.9 million and $396.5 million, respectively. We have recorded unbilled receivables of $137.5 million and $134.0 million at June 30, 2020, and December 31, 2019, respectively. Included in unbilled receivables are retention receivables of $13.2 million and $13.1 million at June 30, 2020, and December 31, 2019, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings. Unbilled receivables expected to be collected within one year have been included with accounts receivable, current portion in the accompanying condensed consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with accounts receivable, long-term portion in the accompanying condensed consolidated balance sheets.

We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred. Since most of our clients are domestic governmental entities, we rarely incur a credit loss resulting from the inability of a client to make required payments. Events or changes in circumstances that indicate the carrying amount for the allowances for losses and sales adjustments may require revision, include, but are not limited to, managing our client’s expectations regarding the scope of the services to be delivered and defects or errors in new versions or enhancements of our software products. Our allowance for losses and sales adjustments of $9.3 million at June 30, 2020, does not include provisions for credit losses. As of January 1, 2020, we adopted ASU 2016-13 and primarily evaluated our historical experience with credit losses related to trade and other receivables. Because we have not experienced any historical credit losses with the majority of our clients, we have no basis to record a reserve for credit losses as defined by the standard.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

We assess goodwill for impairment annually as of April 1st, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable. We begin with the qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the quantitative assessment described below. If it is determined through the evaluation of events or circumstances that the carrying value may not be recoverable, we perform a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the estimated fair value of that reporting unit, the carrying value of the reporting unit's goodwill is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairment charge. The fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions. The assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value. We evaluate the reasonableness of the fair value calculations of our reporting units by comparing the total of the fair value of all of our reporting units to our total market capitalization.

During the second quarter, as part of our annual impairment test, we performed qualitative assessments for all reporting units except for the Data and insights reporting unit. As a result of these qualitative assessments, we determined that it was not more likely than not that an impairment existed; therefore, we did not perform a Step1 quantitative impairment test. We performed a quantitative assessment for goodwill of $75.7 million associated with our Data and insights business unit and concluded no impairment exists as of our annual assessment date. Most of our reporting units are comprised of goodwill relating to a combination of legacy and acquired businesses and as a result, have fair values that substantially exceed their underlying carrying values. Certain reporting units, in particular our Case management and business process management and Data and insights units are comprised entirely of recently acquired businesses and as a result, do not have significant excess fair values over carrying values. As of our annual assessment date, the Case management and business process management and Data and insights business units combined was $152.0 million, or 18%, of total goodwill as of June 30, 2020.

Determining the fair value of our reporting units involves the use of significant estimates and assumptions and considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Changes in market conditions or other factors outside of our control, such as the COVID-19 pandemic, could cause us to change key assumptions and our judgment about a reporting unit’s prospects. Similarly, in a specific period, a reporting unit could significantly underperform relative to its historical or projected future operating results. Either situation could result in a meaningfully different estimate of the fair value of our reporting units, and a consequent future impairment charge.

Other Intangible Assets

We make judgments about the recoverability of purchased intangible assets other than goodwill whenever events or changes in circumstances indicate that an impairment may exist. Customer base and acquired software each comprise approximately half of our purchased intangible assets other than goodwill. We review our customer turnover each year for indications of impairment. Our customer turnover has historically been very low. If indications of impairment are determined to exist, we measure the recoverability of assets by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. There have been no impairments of intangible assets in any of the periods presented.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, available for-sale debt securities, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of an allowance for losses. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for a fiscal year beginning after December 15, 2018, including interim periods within that fiscal year. Entities apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. As of January 1, 2020, we adopted the new standard with no material impact of credit losses to our trade and other receivables, held-to-maturity debt securities and retained earnings included in our condensed consolidated financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, ("ASU 2019-12") which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new standard is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company does not expect adoption of this standard to have a material effect on the Company’s consolidated financial statements.

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Acquisitions	6 Months Ended
	Jun. 30, 2020
Business Combinations [Abstract]
Acquisitions	AcquisitionsOn February 28, 2019, we acquired all of the capital stock of MP Holdings Parent, Inc. dba MicroPact ("MicroPact"), a leading provider of commercial off-the-shelf solutions, including entellitrak®, a low-code application development platform for case management and business process management used extensively in the public sector. In the six months ended June 30, 2020, we paid $5.6 million in contingent consideration. We have no contingent consideration accrued

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Shareholders' Equity

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

The following table details activity in our common stock:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Purchases of treasury shares	—	$	—	—	$	—	(59)	$	(15,482)	(72)	$	(14,289)
Stock option exercises	436	46,101		203	15,604		917	92,337		297	22,132
Employee stock plan purchases	10	2,708		13	2,260		20	5,177		28	4,609
Restricted stock units vested, net of withheld shares upon award settlement	33	$	(4,591)	27	$	(2,008)	43	$	(6,892)	37	$	(3,381)

As of June 30, 2020, we have authorization from our board of directors to repurchase up to 2.6 million additional shares of our common stock.

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Deferred Commissions

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Deferred Commissions

Deferred CommissionsSales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be three to seven years. Deferred commissions were $30.2 million and $29.8 million as of June 30, 2020, and December 31, 2019, respectively. Amortization expense was $3.6 million and $7.5 million for the three and six months ended June 30, 2020, respectively, and $4.1 million and $7.9 million for the three and six months ended June 30, 2019, respectively. There were no indicators of impairment in relation to the costs capitalized for the periods presented. Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term portion in the accompanying condensed consolidated balance sheets. Amortization expense related to deferred commissions is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.Disaggregation of Revenue

The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows.

Timing of Revenue Recognition

Timing of revenue recognition by revenue category during the period is as follows:

For the three months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	14,468	$	2,557	$	17,025
Subscriptions	—		85,638		85,638
Software services	—		43,654		43,654
Maintenance	—		116,760		116,760
Appraisal services	—		4,696		4,696
Hardware and other	3,318		—		3,318
Total	$	17,786	$	253,305	$	271,091

For the three months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	15,802	$	4,873	$	20,675
Subscriptions	—		73,475		73,475
Software services	—		57,401		57,401
Maintenance	—		106,689		106,689
Appraisal services	—		6,233		6,233
Hardware and other	10,651		—		10,651
Total	$	26,453	$	248,671	$	275,124

For the six months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	30,534	$	5,228	$	35,762
Subscriptions	—		167,361		167,361
Software services	—		95,787		95,787
Maintenance	—		231,125		231,125
Appraisal services	—		10,459		10,459
Hardware and other	7,138		—		7,138
Total	$	37,672	$	509,960	$	547,632

For the six months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	32,712	$	9,756	$	42,468
Subscriptions	—		140,750		140,750
Software services	—		105,844		105,844
Maintenance	—		206,841		206,841
Appraisal services	—		11,447		11,447
Hardware and other	14,840		—		14,840
Total	$	47,552	$	474,638	$	522,190

Recurring Revenue

The majority of our revenue is comprised of revenues from maintenance and subscriptions, which we consider to be recurring revenue. Virtually all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenue. We generally provide maintenance and support for our on-premises clients under annual, or in some cases, multi-year contracts. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of three to five years, providing a significant source of recurring revenues on an annual basis. We consider all other revenue categories to be non-recurring revenues.

Recurring revenues and non-recurring revenues recognized during the period are as follows:

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	186,464	$	15,934	$	—	$	202,398
Non-recurring revenues	56,882		11,811		—		68,693
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091

For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	167,027	$	13,137	$	—	$	180,164
Non-recurring revenues	70,452		18,355		6,153		94,960
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	367,949	$	30,537	$	—	$	398,486
Non-recurring revenues	121,573		27,571		2		149,146
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	321,470	$	26,121	$	—	$	347,591
Non-recurring revenues	133,560		34,889		6,150		174,599
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190

Deferred Revenue and Performance Obligations

Total deferred revenue, including long-term, by segment is as follows:

	June 30, 2020		December 31, 2019
Enterprise Software	$	396,405	$	375,838
Appraisal and Tax	25,437		35,487
Corporate	1,362		1,369
Totals	$	423,204	$	412,694

Changes in total deferred revenue, including long-term, were as follows:

	Six months ended June 30, 2020
Balance as of December 31, 2019	$	412,694
Deferral of revenue	508,126
Recognition of deferred revenue	(497,616)
Balance as of June 30, 2020	$	423,204

Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized ("backlog"), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Backlog as of June 30, 2020, was $1.54 billion, of which we expect to recognize approximately 49% as revenue over the next 12 months and the remainder thereafter.

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Other Assets

6 Months Ended

Jun. 30, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

Other Assets

As of June 30, 2020, we have $121.2 million in investment grade corporate and municipal bonds with varying maturity dates through 2024. We intend to hold these bonds to maturity and have classified them as such. We believe cost approximates fair value because of the relatively short duration of these investments. The fair values of these securities are considered Level II as they are based on inputs from quoted prices in markets that are not active or other observable market data. These investments are presented at amortized cost and are included in short-term investments and non-current investments and other assets in the accompanying condensed consolidated balance sheets. As of June 30, 2020, we have an accrued interest receivable balance of $584,000 which is included in accounts receivable, net. We do not measure an allowance for credit losses for accrued interest receivables. We record any losses within the maturity period of the investment and any write-offs to accrued interest receivables are recorded as a reduction to interest income in the period of the loss. During the three and six months ended June 30, 2020, we have recorded no credit losses. Interest income and amortization of discounts and premiums are included in other income (expense), net in the accompanying condensed consolidated statements of income.

During the six months ended June 30, 2020, we sold our $15 million investment in convertible preferred stock representing a 20% interest in Record Holdings Pty Limited ("Record Holdings"), a privately held Australian company specializing in digitizing the spoken word in court and legal proceedings, to BFTR, LLC, a wholly owned subsidiary of Bison Capital Partners V L.P. During the same period, we purchased $10 million in common stock representing a 18% interest in BFTR, LLC. The investment in common stock is accounted under the cost method because we do not have the ability to exercise significant influence over the investee and the securities do not have readily determinable fair values. Our investment is carried at cost less any impairment write-downs. Annually, our cost method investments are assessed for impairment. We do not reassess the fair value of cost method investments if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investments. No events or changes in have occurred during the period that require reassessment. This investment is included in non-current investments and other assets in the accompanying condensed consolidated balance sheets.

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Revolving Line of Credit

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Revolving Line of Credit

Revolving Line of Credit

On September 30, 2019, we entered into a $400 million credit agreement with various lender parties and Wells Fargo Bank, National Association, as Administrative Agent (the “Credit Facility”). The Credit Facility provides for a revolving credit line up to $400 million, including a $25 million sublimit for letters of credit. The Credit Facility matures on September 30, 2024.

Borrowings under the Credit Facility bear interest at a rate of either (1) Wells Fargo Bank’s prime rate (subject to certain higher rate determinations) plus a margin of 0.125% to 0.75% or (2) the one-, two-, three-, or six-month LIBOR rate plus a margin of 1.125% to 1.75%. As of June 30, 2020, the interest rates were 3.38% under the Wells Fargo Bank's prime rate and approximately 1.29% under the 30-day LIBOR option. The Credit Facility requires us to maintain certain financial ratios and other financial conditions and prohibits us from making certain investments, advances, cash dividends or loans, and limits incurrence of additional indebtedness and liens. As of June 30, 2020, we were in compliance with those covenants.

As of June 30, 2020, we had no outstanding borrowings under the Credit Facility, and available borrowing capacity was $400.0 million.

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Income Tax Provision

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Tax Provision

Income Tax Provision

We had an effective income tax rate of negative 28.9% and negative 32.3% for the three and six months ended June 30, 2020, respectively compared to 12.1% and 17.0% for the three and six months ended June 30, 2019, respectively. The decrease in the effective tax rates for the three and six months ended June 30, 2020, as compared to the same periods in 2019, was principally driven by an increase in the excess tax benefits related to stock incentive awards.

The effective income tax rates for the periods presented were different from the statutory United States federal income tax rate of 21% due to excess tax benefits related to stock incentive awards, state income taxes, non-deductible business expenses, and the tax benefit of research tax credits. The excess tax benefits related to stock incentive awards realized was $23.4 million and $45.5 million for the three and six months ended June 30, 2020, respectively, compared to $5.4 million and $7.0 million for the three and six months ended June 30, 2019, respectively. Excluding the excess tax benefits, the effective tax rate was 27.2% and 27.1% for the three and six months ended June 30, 2020, respectively, compared to 26.9% and 26.8% for the three and six months ended June 30, 2019, respectively.

We made tax payments of $422,000 and $14.8 million in the six months ended June 30, 2020, and 2019, respectively.

The Coronavirus Aid, Relief and Economic Security ("CARES") Act, which was signed into law on March 27, 2020, provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the U.S. economy. The assistance includes tax relief and government loans, and investments and grants for entities in affected industries (e.g., health care and airlines). The business tax provisions of the CARES Act include temporary changes to income and non-income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property. Measures not related to income-based taxes include (1) allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020, over the following two years and (2) allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds. We evaluated the CARES Act provisions and the enactment resulted in no cumulative adjustments to income taxes. We also do not believe that the income tax implications will be significant to our overall income tax liabilities going forward.

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Earnings Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table details the reconciliation of basic earnings per share to diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic and diluted earnings per share:
Net income	$	53,892	$	31,999	$	101,442	$	59,347
Denominator:
Weighted-average basic common shares outstanding	39,963		38,402		39,984		38,462
Assumed conversion of dilutive securities:
Stock awards	1,453		1,411		1,548		1,344
Denominator for diluted earnings per share    - Adjusted weighted-average shares	41,416		39,813		41,532		39,806
Earnings per common share:
Basic	$	1.35	$	0.83	$	2.54	$	1.54
Diluted	$	1.30	$	0.80	$	2.44	$	1.49

For the three and six months ended June 30, 2020, and June 30, 2019, stock awards representing the right to purchase common stock of approximately 124,000 and 102,000 shares and 750,000 and 1.0 million shares, respectively, were not included in the computation of diluted earnings per share because their inclusion would have had an antidilutive effect.

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Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

Leases

We lease office facilities for use in our operations, as well as transportation and other equipment. Most of our leases are non-cancelable operating lease agreements and they expire from one year to eight years. Some of these leases include options to extend for up to 10 years. We had no finance leases and no related party lease agreements as of June 30, 2020. Operating lease costs were approximately $2.5 million and $5.1 million for the three and six months ended June 30, 2020, respectively, and $2.6 million and $4.7 million for the three and six months ended June 30, 2019, respectively.

The components of operating lease expense were as follows:

Lease Costs	Financial Statement Classification	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019
Operating lease cost	Selling, general and administrative expenses	$	1,606	$	1,664	$	3,272	$	3,034
Short-term lease cost	Selling, general and administrative expenses	447		593		1,021		1,163
Variable lease cost	Selling, general and administrative expenses	454		368		848		531
Net lease cost		$	2,507	$	2,625	$	5,141	$	4,728

Right-of-use ("ROU") lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheets as follows:

	June 30, 2020		December 31, 2019
Assets:
Operating lease right-of-use assets	$	16,659	$	18,992
Liabilities:
Operating leases, short-term	6,217		6,387
Operating leases, long-term	14,126		16,822
Total lease liabilities	$	20,343	$	23,209

Supplemental information related to leases was as follows:

Other Information	Six Months Ended June 30,
	2020			2019
Cash flows:
Cash amounts paid included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,379		$	3,362
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	$	510		$	2,099
Lease term and discount rate:
Weighted average remaining lease term (years)	4			5
Weighted average discount rate	4.00		%	4.00		%

As of June 30, 2020, maturities of lease liabilities were as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	3,978
2021	6,372
2022	4,049
2023	3,014
2024	2,555
Thereafter	2,130
Total lease payments	22,098
Less: Interest	(1,755)
Present value of operating lease liabilities	$	20,343

Rental Income from third parties

We own office buildings in Bangor, Falmouth and Yarmouth, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham, New York; and Moraine, Ohio. We lease space in some of these buildings to third-party tenants. The property we lease to others under operating leases consists primarily of specific facilities where one tenant obtains substantially all of the economic benefit from the asset and has the right to direct the use of the asset. These non-cancelable leases expire between 2020 and 2025, and some have options to extend the lease for up to five years. We determine if an arrangement is a lease at inception. None of our leases allow the lessee to purchase the leased asset.

Rental income from third-party tenants for the three and six months ended June 30, 2020, totaled $292,000 and $566,000, respectively, and for the three and six months ended June 30, 2019, totaled $270,000 and $554,000, respectively. Rental income is included in Hardware and other revenue on the condensed consolidated statements of income. As of June 30, 2020, future minimum operating rental income based on contractual agreements is as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	696
2021	1,372
2022	1,402
2023	1,432
2024	1,462
Thereafter	858
Total	$	7,222

As of June 30, 2020, we had no additional significant operating or finance leases that had not yet commenced.

Leases

Leases

We lease office facilities for use in our operations, as well as transportation and other equipment. Most of our leases are non-cancelable operating lease agreements and they expire from one year to eight years. Some of these leases include options to extend for up to 10 years. We had no finance leases and no related party lease agreements as of June 30, 2020. Operating lease costs were approximately $2.5 million and $5.1 million for the three and six months ended June 30, 2020, respectively, and $2.6 million and $4.7 million for the three and six months ended June 30, 2019, respectively.

The components of operating lease expense were as follows:

Lease Costs	Financial Statement Classification	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019
Operating lease cost	Selling, general and administrative expenses	$	1,606	$	1,664	$	3,272	$	3,034
Short-term lease cost	Selling, general and administrative expenses	447		593		1,021		1,163
Variable lease cost	Selling, general and administrative expenses	454		368		848		531
Net lease cost		$	2,507	$	2,625	$	5,141	$	4,728

Right-of-use ("ROU") lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheets as follows:

	June 30, 2020		December 31, 2019
Assets:
Operating lease right-of-use assets	$	16,659	$	18,992
Liabilities:
Operating leases, short-term	6,217		6,387
Operating leases, long-term	14,126		16,822
Total lease liabilities	$	20,343	$	23,209

Supplemental information related to leases was as follows:

Other Information	Six Months Ended June 30,
	2020			2019
Cash flows:
Cash amounts paid included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,379		$	3,362
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	$	510		$	2,099
Lease term and discount rate:
Weighted average remaining lease term (years)	4			5
Weighted average discount rate	4.00		%	4.00		%

As of June 30, 2020, maturities of lease liabilities were as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	3,978
2021	6,372
2022	4,049
2023	3,014
2024	2,555
Thereafter	2,130
Total lease payments	22,098
Less: Interest	(1,755)
Present value of operating lease liabilities	$	20,343

Rental Income from third parties

We own office buildings in Bangor, Falmouth and Yarmouth, Maine; Lubbock and Plano, Texas; Troy, Michigan; Latham, New York; and Moraine, Ohio. We lease space in some of these buildings to third-party tenants. The property we lease to others under operating leases consists primarily of specific facilities where one tenant obtains substantially all of the economic benefit from the asset and has the right to direct the use of the asset. These non-cancelable leases expire between 2020 and 2025, and some have options to extend the lease for up to five years. We determine if an arrangement is a lease at inception. None of our leases allow the lessee to purchase the leased asset.

Rental income from third-party tenants for the three and six months ended June 30, 2020, totaled $292,000 and $566,000, respectively, and for the three and six months ended June 30, 2019, totaled $270,000 and $554,000, respectively. Rental income is included in Hardware and other revenue on the condensed consolidated statements of income. As of June 30, 2020, future minimum operating rental income based on contractual agreements is as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	696
2021	1,372
2022	1,402
2023	1,432
2024	1,462
Thereafter	858
Total	$	7,222

As of June 30, 2020, we had no additional significant operating or finance leases that had not yet commenced.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

The following table summarizes share-based compensation expense related to share-based awards recorded in the condensed consolidated statements of income, pursuant to ASC 718, Stock Compensation:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Cost of subscriptions, software services and maintenance	$	4,369	$	3,756	$	8,621	$	7,554
Selling, general and administrative expenses	14,017		11,310		27,067		21,928
Total share-based compensation expense	$	18,386	$	15,066	$	35,688	$	29,482

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Segment and Related Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment and Related Information

Segment and Related Information

We provide integrated information management solutions and services for the public sector, with a focus on local governments.

We provide our software systems and services and appraisal services through six business units, which focus on the following products:

•financial management, education and planning, regulatory and maintenance software solutions;

•financial management, municipal courts, planning, regulatory and maintenance management software solutions;

•courts and justice and public safety software solutions;

•data and insights solutions;

•case management and business management solutions; and

•appraisal and tax software solutions, property appraisal services and land and vital records management software solutions.

In accordance with ASC 280-10, Segment Reporting, the financial management, education and planning, regulatory and maintenance software solutions unit; financial management, municipal courts, planning, regulatory and maintenance, and land and vital records management software solutions unit; courts and justice and public safety software solutions unit; the data and insights solutions unit; and case management and business management solutions units meet the criteria for aggregation and are presented in one reportable segment, the Enterprise Software (“ES”) segment. The ES 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: financial management and education, courts and justice, public safety, planning, regulatory and maintenance, and data and insights. The Appraisal and Tax (“A&T”) segment provides systems and software that automate the appraisal and assessment of real and personal property, land and vital records management as well as property appraisal outsourcing services for local governments and taxing authorities. Property appraisal outsourcing services include: the physical inspection of commercial and residential properties; data collection and processing; computer analysis for property valuation; preparation of tax rolls; community education; and arbitration between taxpayers and the assessing jurisdiction.

We evaluate performance based on several factors, of which the primary financial measure is business segment operating income. We define segment operating income for our business units as income before non-cash amortization of intangible assets associated with their acquisitions, interest expense and income taxes. Segment operating income includes intercompany transactions. The majority of intercompany transactions relate to contracts involving more than one unit and are valued based on the contractual arrangement. Segment operating income for Corporate primarily consists of compensation costs for the executive management team and certain accounting and administrative staff and share-based compensation expense for the entire company. Corporate segment operating income also includes revenues and expenses related to a company-wide user conference. Due to the shelter-in-place orders caused by the COVID-19 pandemic, we cancelled our company-wide user conference for the current year.

As of January 1, 2020, the land and vital records management business unit, which was previously reported in the ES segment, was moved to the A&T segment. These changes were made to reflect changes in the way in which management makes operating decisions, allocates resources, and manages the growth and profitability of the Company. Prior year amounts for the ES and A&T segments have been adjusted to reflect the segment change.

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	14,683	$	2,342	$	—	$	17,025
Subscriptions	79,128		6,510		—		85,638
Software services	38,899		4,755		—		43,654
Maintenance	107,336		9,424		—		116,760
Appraisal services	—		4,696		—		4,696
Hardware and other	3,300		18		—		3,318
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091
Segment operating income	$	69,025	$	6,148	$	(20,434)	$	54,739

For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	17,555	$	3,120	$	—	$	20,675
Subscriptions	69,386		4,089		—		73,475
Software services	48,404		8,997		—		57,401
Maintenance	97,641		9,048		—		106,689
Appraisal services	—		6,233		—		6,233
Hardware and other	4,493		5		6,153		10,651
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124
Segment operating income	$	59,668	$	7,923	$	(17,671)	$	49,920

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	30,634	$	5,128	$	—	$	35,762
Subscriptions	$	155,772	$	11,589	—		$	167,361
Software services	$	83,848	$	11,939	—		$	95,787
Maintenance	$	212,177	$	18,948	—		$	231,125
Appraisal services	$	0	$	10,459	—		$	10,459
Hardware and other	$	7,091	$	45	$	2	$	7,138
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632
Segment operating income	$	129,497	$	13,056	$	(40,502)	$	102,051

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	36,077	$	6,391	$	—	$	42,468
Subscriptions	132,641		8,109		—		140,750
Software services	88,860		16,984		—		105,844
Maintenance	188,829		18,012		—		206,841
Appraisal services	0		11,447		—		11,447
Hardware and other	8,623		67		6,150		14,840
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190
Segment operating income	$	115,142	$	15,018	$	(34,217)	$	95,943

	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation of reportable segment operating income to the Company's consolidated totals:	2020		2019		2020		2019
Total segment operating income	$	54,739	$	49,920	$	102,051	$	95,943
Amortization of acquired software	(8,006)		(7,988)		(16,033)		(14,670)
Amortization of customer and trade name intangibles	(5,392)		(5,266)		(10,784)		(10,116)
Other income (expense), net	470		(247)		1,460		339
Income before income taxes	$	41,811	$	36,419	$	76,694	$	71,496

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Disaggregation of Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Deferred CommissionsSales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be three to seven years. Deferred commissions were $30.2 million and $29.8 million as of June 30, 2020, and December 31, 2019, respectively. Amortization expense was $3.6 million and $7.5 million for the three and six months ended June 30, 2020, respectively, and $4.1 million and $7.9 million for the three and six months ended June 30, 2019, respectively. There were no indicators of impairment in relation to the costs capitalized for the periods presented. Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term portion in the accompanying condensed consolidated balance sheets. Amortization expense related to deferred commissions is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.Disaggregation of Revenue

The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows.

Timing of Revenue Recognition

Timing of revenue recognition by revenue category during the period is as follows:

For the three months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	14,468	$	2,557	$	17,025
Subscriptions	—		85,638		85,638
Software services	—		43,654		43,654
Maintenance	—		116,760		116,760
Appraisal services	—		4,696		4,696
Hardware and other	3,318		—		3,318
Total	$	17,786	$	253,305	$	271,091

For the three months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	15,802	$	4,873	$	20,675
Subscriptions	—		73,475		73,475
Software services	—		57,401		57,401
Maintenance	—		106,689		106,689
Appraisal services	—		6,233		6,233
Hardware and other	10,651		—		10,651
Total	$	26,453	$	248,671	$	275,124

For the six months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	30,534	$	5,228	$	35,762
Subscriptions	—		167,361		167,361
Software services	—		95,787		95,787
Maintenance	—		231,125		231,125
Appraisal services	—		10,459		10,459
Hardware and other	7,138		—		7,138
Total	$	37,672	$	509,960	$	547,632

For the six months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	32,712	$	9,756	$	42,468
Subscriptions	—		140,750		140,750
Software services	—		105,844		105,844
Maintenance	—		206,841		206,841
Appraisal services	—		11,447		11,447
Hardware and other	14,840		—		14,840
Total	$	47,552	$	474,638	$	522,190

Recurring Revenue

The majority of our revenue is comprised of revenues from maintenance and subscriptions, which we consider to be recurring revenue. Virtually all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenue. We generally provide maintenance and support for our on-premises clients under annual, or in some cases, multi-year contracts. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of three to five years, providing a significant source of recurring revenues on an annual basis. We consider all other revenue categories to be non-recurring revenues.

Recurring revenues and non-recurring revenues recognized during the period are as follows:

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	186,464	$	15,934	$	—	$	202,398
Non-recurring revenues	56,882		11,811		—		68,693
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091

For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	167,027	$	13,137	$	—	$	180,164
Non-recurring revenues	70,452		18,355		6,153		94,960
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	367,949	$	30,537	$	—	$	398,486
Non-recurring revenues	121,573		27,571		2		149,146
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	321,470	$	26,121	$	—	$	347,591
Non-recurring revenues	133,560		34,889		6,150		174,599
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190

Deferred Revenue and Performance Obligations

Total deferred revenue, including long-term, by segment is as follows:

	June 30, 2020		December 31, 2019
Enterprise Software	$	396,405	$	375,838
Appraisal and Tax	25,437		35,487
Corporate	1,362		1,369
Totals	$	423,204	$	412,694

Changes in total deferred revenue, including long-term, were as follows:

	Six months ended June 30, 2020
Balance as of December 31, 2019	$	412,694
Deferral of revenue	508,126
Recognition of deferred revenue	(497,616)
Balance as of June 30, 2020	$	423,204

Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized ("backlog"), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Backlog as of June 30, 2020, was $1.54 billion, of which we expect to recognize approximately 49% as revenue over the next 12 months and the remainder thereafter.

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Deferred Revenue and Performance Obligations

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Deferred Revenue and Performance Obligations

Deferred CommissionsSales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized commensurate with the recognition of associated revenue over a period of benefit that we have determined to be three to seven years. Deferred commissions were $30.2 million and $29.8 million as of June 30, 2020, and December 31, 2019, respectively. Amortization expense was $3.6 million and $7.5 million for the three and six months ended June 30, 2020, respectively, and $4.1 million and $7.9 million for the three and six months ended June 30, 2019, respectively. There were no indicators of impairment in relation to the costs capitalized for the periods presented. Deferred commissions have been included with prepaid expenses for the current portion and non-current other assets for the long-term portion in the accompanying condensed consolidated balance sheets. Amortization expense related to deferred commissions is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.Disaggregation of Revenue

The tables below show disaggregation of revenue into categories that reflect how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows.

Timing of Revenue Recognition

Timing of revenue recognition by revenue category during the period is as follows:

For the three months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	14,468	$	2,557	$	17,025
Subscriptions	—		85,638		85,638
Software services	—		43,654		43,654
Maintenance	—		116,760		116,760
Appraisal services	—		4,696		4,696
Hardware and other	3,318		—		3,318
Total	$	17,786	$	253,305	$	271,091

For the three months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	15,802	$	4,873	$	20,675
Subscriptions	—		73,475		73,475
Software services	—		57,401		57,401
Maintenance	—		106,689		106,689
Appraisal services	—		6,233		6,233
Hardware and other	10,651		—		10,651
Total	$	26,453	$	248,671	$	275,124

For the six months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	30,534	$	5,228	$	35,762
Subscriptions	—		167,361		167,361
Software services	—		95,787		95,787
Maintenance	—		231,125		231,125
Appraisal services	—		10,459		10,459
Hardware and other	7,138		—		7,138
Total	$	37,672	$	509,960	$	547,632

For the six months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	32,712	$	9,756	$	42,468
Subscriptions	—		140,750		140,750
Software services	—		105,844		105,844
Maintenance	—		206,841		206,841
Appraisal services	—		11,447		11,447
Hardware and other	14,840		—		14,840
Total	$	47,552	$	474,638	$	522,190

Recurring Revenue

The majority of our revenue is comprised of revenues from maintenance and subscriptions, which we consider to be recurring revenue. Virtually all of our on-premises software clients contract with us for maintenance and support, which provides us with a significant source of recurring revenue. We generally provide maintenance and support for our on-premises clients under annual, or in some cases, multi-year contracts. The contract terms for subscription arrangements range from one to 10 years but are typically contracted for initial periods of three to five years, providing a significant source of recurring revenues on an annual basis. We consider all other revenue categories to be non-recurring revenues.

Recurring revenues and non-recurring revenues recognized during the period are as follows:

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	186,464	$	15,934	$	—	$	202,398
Non-recurring revenues	56,882		11,811		—		68,693
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091

For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	167,027	$	13,137	$	—	$	180,164
Non-recurring revenues	70,452		18,355		6,153		94,960
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	367,949	$	30,537	$	—	$	398,486
Non-recurring revenues	121,573		27,571		2		149,146
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	321,470	$	26,121	$	—	$	347,591
Non-recurring revenues	133,560		34,889		6,150		174,599
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190

Deferred Revenue and Performance Obligations

Total deferred revenue, including long-term, by segment is as follows:

	June 30, 2020		December 31, 2019
Enterprise Software	$	396,405	$	375,838
Appraisal and Tax	25,437		35,487
Corporate	1,362		1,369
Totals	$	423,204	$	412,694

Changes in total deferred revenue, including long-term, were as follows:

	Six months ended June 30, 2020
Balance as of December 31, 2019	$	412,694
Deferral of revenue	508,126
Recognition of deferred revenue	(497,616)
Balance as of June 30, 2020	$	423,204

Transaction Price Allocated to the Remaining Performance Obligations

The aggregate amount of transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized ("backlog"), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Backlog as of June 30, 2020, was $1.54 billion, of which we expect to recognize approximately 49% as revenue over the next 12 months and the remainder thereafter.

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Commitments and Contingencies	6 Months Ended
	Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and ContingenciesOther than routine litigation incidental to our business, there are no material legal proceedings pending to which we are party or to which any of our properties are subject.

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Subsequent Events	6 Months Ended
	Jun. 30, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events There have been no material events and transactions that occurred subsequent to June 30, 2020.

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Accounting Standards and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Use of estimates

USE OF ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price ("SSP") of performance obligations, variable consideration, and other obligations such as returns and refunds; loss contingencies; the estimated useful life of deferred commissions; the carrying amount of goodwill; the carrying amount and estimated useful lives of intangible assets; the carrying amount of operating lease right-of-use assets and operating lease liabilities; determining share-based compensation expense; the valuation allowance for receivables; and determining the potential outcome of future tax consequences of events that have been recognized on our consolidated financial statements or tax returns. Actual results could differ from estimates.

Goodwill

GoodwillWe assess goodwill for impairment annually as of April 1st, or more frequently whenever events or changes in circumstances indicate its carrying value may not be recoverable. We begin with the qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the quantitative assessment described below. If it is determined through the evaluation of events or circumstances that the carrying value may not be recoverable, we perform a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the estimated fair value of that reporting unit, the carrying value of the reporting unit's goodwill is reduced to its fair value through an adjustment to the goodwill balance, resulting in an impairment charge. The fair values calculated in our impairment tests are determined using discounted cash flow models involving several assumptions. The assumptions that are used are based upon what we believe a hypothetical marketplace participant would use in estimating fair value. We evaluate the reasonableness of the fair value calculations of our reporting units by comparing the total of the fair value of all of our reporting units to our total market capitalization.

Other Intangible Assets

Other Intangible AssetsWe make judgments about the recoverability of purchased intangible assets other than goodwill whenever events or changes in circumstances indicate that an impairment may exist. Customer base and acquired software each comprise approximately half of our purchased intangible assets other than goodwill. We review our customer turnover each year for indications of impairment. Our customer turnover has historically been very low. If indications of impairment are determined to exist, we measure the recoverability of assets by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the assets exceeds their estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Revenue recognition

REVENUE RECOGNITION

Nature of Products and Services:

We earn revenue from software licenses, royalties, subscription-based services, software services, post-contract customer support (“PCS” or “maintenance”), hardware, and appraisal services. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We determine revenue recognition through the following steps:

•Identification of the contract, or contracts with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

Most of our software arrangements with customers contain multiple performance obligations that range from software licenses, installation, training, and consulting to software modification and customization to meet specific customer needs (services), hosting, and 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 software services, such as training or installation, are evaluated to determine whether the customer can benefit from the services either on their own or together with other resources readily available to the customer and whether the services are separately identifiable from other promises in the contract. The transaction price is allocated to the distinct performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. Revenue is recognized net of allowances for sales adjustments and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Significant Judgments:

Our contracts with customers often include multiple performance obligations to a customer. When a software arrangement (license or subscription) includes both software licenses and software services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the software services and recognized over time.

The transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the applications sold, customer demographics, and the number and types of users within our contracts. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine SSP using the expected cost-plus margin approach.

For arrangements that involve significant production, modification or customization of the software, or where software services otherwise cannot be considered distinct, we recognize revenue as control is transferred to the customer over time using progress-to-completion methods. Depending on the contract, we measure progress-to-completion primarily using labor hours incurred, or value added. The progress-to-completion method generally results in the recognition of reasonably consistent profit margins over the life of a contract because we can provide reasonably dependable estimates of contract billings and contract costs. We use the level of profit margin that is most likely to occur on a contract. If the most likely profit margin cannot be precisely determined, the lowest probable level of profit margin in the range of estimates is used until the results can be estimated more precisely. These arrangements are often implemented over an extended time period and occasionally require us to revise total cost estimates. Amounts recognized in revenue are calculated using the progress-to-completion measurement after giving effect to any changes in our cost estimates. Changes to total estimated contract costs, if any, are recorded in the period they are determined. Estimated losses on uncompleted contracts are recorded in the period in which we first determine that a loss is apparent.

Typically, the structure of our arrangements does not give rise to variable consideration. However, in those instances whereby variable consideration exists, we include in our estimates additional revenue for variable consideration when we believe we have an enforceable right, the amount can be estimated reliably and its realization is probable.

Contract balances

Contract Balances:

Accounts receivable and allowance for losses and sales adjustments

Timing of revenue recognition may differ from the timing of invoicing to customers. We record an unbilled receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. We record an unbilled receivable related to revenue recognized for on-premises licenses as we have an unconditional right to invoice and receive payment in the future related to those licenses.

At June 30, 2020, and December 31, 2019, total current and long-term accounts receivable, net of allowance for losses and sales adjustments, was $426.9 million and $396.5 million, respectively. We have recorded unbilled receivables of $137.5 million and $134.0 million at June 30, 2020, and December 31, 2019, respectively. Included in unbilled receivables are retention receivables of $13.2 million and $13.1 million at June 30, 2020, and December 31, 2019, respectively, which become payable upon the completion of the contract or completion of our fieldwork and formal hearings. Unbilled receivables expected to be collected within one year have been included with accounts receivable, current portion in the accompanying condensed consolidated balance sheets. Unbilled receivables and retention receivables expected to be collected past one year have been included with accounts receivable, long-term portion in the accompanying condensed consolidated balance sheets.We maintain allowances for losses and sales adjustments, which losses are recorded against revenue at the time the loss is incurred. Since most of our clients are domestic governmental entities, we rarely incur a credit loss resulting from the inability of a client to make required payments. Events or changes in circumstances that indicate the carrying amount for the allowances for losses and sales adjustments may require revision, include, but are not limited to, managing our client’s expectations regarding the scope of the services to be delivered and defects or errors in new versions or enhancements of our software products. Our allowance for losses and sales adjustments of $9.3 million at June 30, 2020, does not include provisions for credit losses.

Recently adopted pronouncements

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, available for-sale debt securities, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of an allowance for losses. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for a fiscal year beginning after December 15, 2018, including interim periods within that fiscal year. Entities apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. As of January 1, 2020, we adopted the new standard with no material impact of credit losses to our trade and other receivables, held-to-maturity debt securities and retained earnings included in our condensed consolidated financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, ("ASU 2019-12") which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new standard is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company does not expect adoption of this standard to have a material effect on the Company’s consolidated financial statements.

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Summary of details activity in our common stock

The following table details activity in our common stock:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Purchases of treasury shares	—	$	—	—	$	—	(59)	$	(15,482)	(72)	$	(14,289)
Stock option exercises	436	46,101		203	15,604		917	92,337		297	22,132
Employee stock plan purchases	10	2,708		13	2,260		20	5,177		28	4,609
Restricted stock units vested, net of withheld shares upon award settlement	33	$	(4,591)	27	$	(2,008)	43	$	(6,892)	37	$	(3,381)

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Computation of reconciliation of basic earnings per share to diluted earnings per share

The following table details the reconciliation of basic earnings per share to diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic and diluted earnings per share:
Net income	$	53,892	$	31,999	$	101,442	$	59,347
Denominator:
Weighted-average basic common shares outstanding	39,963		38,402		39,984		38,462
Assumed conversion of dilutive securities:
Stock awards	1,453		1,411		1,548		1,344
Denominator for diluted earnings per share    - Adjusted weighted-average shares	41,416		39,813		41,532		39,806
Earnings per common share:
Basic	$	1.35	$	0.83	$	2.54	$	1.54
Diluted	$	1.30	$	0.80	$	2.44	$	1.49

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Schedule of lease cost

The components of operating lease expense were as follows:

Lease Costs	Financial Statement Classification	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019
Operating lease cost	Selling, general and administrative expenses	$	1,606	$	1,664	$	3,272	$	3,034
Short-term lease cost	Selling, general and administrative expenses	447		593		1,021		1,163
Variable lease cost	Selling, general and administrative expenses	454		368		848		531
Net lease cost		$	2,507	$	2,625	$	5,141	$	4,728

Supplemental information related to leases was as follows:

Other Information	Six Months Ended June 30,
	2020			2019
Cash flows:
Cash amounts paid included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,379		$	3,362
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	$	510		$	2,099
Lease term and discount rate:
Weighted average remaining lease term (years)	4			5
Weighted average discount rate	4.00		%	4.00		%

Schedule of leases assets and liabilities

Right-of-use ("ROU") lease assets and lease liabilities for our operating leases were recorded in the condensed consolidated balance sheets as follows:

	June 30, 2020		December 31, 2019
Assets:
Operating lease right-of-use assets	$	16,659	$	18,992
Liabilities:
Operating leases, short-term	6,217		6,387
Operating leases, long-term	14,126		16,822
Total lease liabilities	$	20,343	$	23,209

Schedule of supplemental information related to leases

Supplemental information related to leases was as follows:

Other Information	Six Months Ended June 30,
	2020			2019
Cash flows:
Cash amounts paid included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,379		$	3,362
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases	$	510		$	2,099
Lease term and discount rate:
Weighted average remaining lease term (years)	4			5
Weighted average discount rate	4.00		%	4.00		%

Schedule of operating lease maturity

As of June 30, 2020, maturities of lease liabilities were as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	3,978
2021	6,372
2022	4,049
2023	3,014
2024	2,555
Thereafter	2,130
Total lease payments	22,098
Less: Interest	(1,755)
Present value of operating lease liabilities	$	20,343

Schedule of future minimum operating rental income

As of June 30, 2020, future minimum operating rental income based on contractual agreements is as follows:

Year ending December 31,	Amount
2020 (Remaining 2020)	$	696
2021	1,372
2022	1,402
2023	1,432
2024	1,462
Thereafter	858
Total	$	7,222

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Summary of share-based compensation expense related to share-based awards recorded in the statements of income

The following table summarizes share-based compensation expense related to share-based awards recorded in the condensed consolidated statements of income, pursuant to ASC 718, Stock Compensation:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Cost of subscriptions, software services and maintenance	$	4,369	$	3,756	$	8,621	$	7,554
Selling, general and administrative expenses	14,017		11,310		27,067		21,928
Total share-based compensation expense	$	18,386	$	15,066	$	35,688	$	29,482

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Segment and Related Information (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Schedule of segment revenues and operations

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	14,683	$	2,342	$	—	$	17,025
Subscriptions	79,128		6,510		—		85,638
Software services	38,899		4,755		—		43,654
Maintenance	107,336		9,424		—		116,760
Appraisal services	—		4,696		—		4,696
Hardware and other	3,300		18		—		3,318
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091
Segment operating income	$	69,025	$	6,148	$	(20,434)	$	54,739

For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	17,555	$	3,120	$	—	$	20,675
Subscriptions	69,386		4,089		—		73,475
Software services	48,404		8,997		—		57,401
Maintenance	97,641		9,048		—		106,689
Appraisal services	—		6,233		—		6,233
Hardware and other	4,493		5		6,153		10,651
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124
Segment operating income	$	59,668	$	7,923	$	(17,671)	$	49,920

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	30,634	$	5,128	$	—	$	35,762
Subscriptions	$	155,772	$	11,589	—		$	167,361
Software services	$	83,848	$	11,939	—		$	95,787
Maintenance	$	212,177	$	18,948	—		$	231,125
Appraisal services	$	0	$	10,459	—		$	10,459
Hardware and other	$	7,091	$	45	$	2	$	7,138
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632
Segment operating income	$	129,497	$	13,056	$	(40,502)	$	102,051

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Revenues
Software licenses and royalties	$	36,077	$	6,391	$	—	$	42,468
Subscriptions	132,641		8,109		—		140,750
Software services	88,860		16,984		—		105,844
Maintenance	188,829		18,012		—		206,841
Appraisal services	0		11,447		—		11,447
Hardware and other	8,623		67		6,150		14,840
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190
Segment operating income	$	115,142	$	15,018	$	(34,217)	$	95,943

Reconciliation of operating income from segments to consolidated

	Three Months Ended June 30,				Six Months Ended June 30,
Reconciliation of reportable segment operating income to the Company's consolidated totals:	2020		2019		2020		2019
Total segment operating income	$	54,739	$	49,920	$	102,051	$	95,943
Amortization of acquired software	(8,006)		(7,988)		(16,033)		(14,670)
Amortization of customer and trade name intangibles	(5,392)		(5,266)		(10,784)		(10,116)
Other income (expense), net	470		(247)		1,460		339
Income before income taxes	$	41,811	$	36,419	$	76,694	$	71,496

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Disaggregation of Revenue (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Schedule of disaggregation of revenue

Timing of revenue recognition by revenue category during the period is as follows:

For the three months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	14,468	$	2,557	$	17,025
Subscriptions	—		85,638		85,638
Software services	—		43,654		43,654
Maintenance	—		116,760		116,760
Appraisal services	—		4,696		4,696
Hardware and other	3,318		—		3,318
Total	$	17,786	$	253,305	$	271,091

For the three months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	15,802	$	4,873	$	20,675
Subscriptions	—		73,475		73,475
Software services	—		57,401		57,401
Maintenance	—		106,689		106,689
Appraisal services	—		6,233		6,233
Hardware and other	10,651		—		10,651
Total	$	26,453	$	248,671	$	275,124

For the six months ended June 30, 2020
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	30,534	$	5,228	$	35,762
Subscriptions	—		167,361		167,361
Software services	—		95,787		95,787
Maintenance	—		231,125		231,125
Appraisal services	—		10,459		10,459
Hardware and other	7,138		—		7,138
Total	$	37,672	$	509,960	$	547,632

For the six months ended June 30, 2019
	Products and services transferred at a point in time		Products and services transferred over time		Total
Revenues
Software licenses and royalties	$	32,712	$	9,756	$	42,468
Subscriptions	—		140,750		140,750
Software services	—		105,844		105,844
Maintenance	—		206,841		206,841
Appraisal services	—		11,447		11,447
Hardware and other	14,840		—		14,840
Total	$	47,552	$	474,638	$	522,190

Recurring revenues and non-recurring revenues recognized during the period are as follows:

For the three months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	186,464	$	15,934	$	—	$	202,398
Non-recurring revenues	56,882		11,811		—		68,693
Intercompany	4,533		2		(4,535)		—
Total revenues	$	247,879	$	27,747	$	(4,535)	$	271,091

For the three months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	167,027	$	13,137	$	—	$	180,164
Non-recurring revenues	70,452		18,355		6,153		94,960
Intercompany	3,576		84		(3,660)		—
Total revenues	$	241,055	$	31,576	$	2,493	$	275,124

For the six months ended June 30, 2020
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	367,949	$	30,537	$	—	$	398,486
Non-recurring revenues	121,573		27,571		2		149,146
Intercompany	8,534		20		(8,554)		—
Total revenues	$	498,056	$	58,128	$	(8,552)	$	547,632

For the six months ended June 30, 2019
	Enterprise Software		Appraisal and Tax		Corporate		Totals
Recurring revenues	$	321,470	$	26,121	$	—	$	347,591
Non-recurring revenues	133,560		34,889		6,150		174,599
Intercompany	7,060		153		(7,213)		—
Total revenues	$	462,090	$	61,163	$	(1,063)	$	522,190

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Deferred Revenue and Performance Obligations (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Changes in deferred revenue

Total deferred revenue, including long-term, by segment is as follows:

	June 30, 2020		December 31, 2019
Enterprise Software	$	396,405	$	375,838
Appraisal and Tax	25,437		35,487
Corporate	1,362		1,369
Totals	$	423,204	$	412,694

Changes in total deferred revenue, including long-term, were as follows:

	Six months ended June 30, 2020
Balance as of December 31, 2019	$	412,694
Deferral of revenue	508,126
Recognition of deferred revenue	(497,616)
Balance as of June 30, 2020	$	423,204

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Accounting Standards and Significant Accounting Policies - Additional Information (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle
Recurring revenue percentage of total revenue (percent)	75.00%
Cash and investments	$ 472,500,000
Revolving line of credit	0	$ 0
Accounts receivable, net	426,900,000	396,500,000
Allowance for losses	9,300,000
Unbilled Revenues
New Accounting Pronouncements or Change in Accounting Principle
Accounts receivable, net	137,500,000	134,000,000.0
Unbilled Revenues | Retention Receivable
New Accounting Pronouncements or Change in Accounting Principle
Accounts receivable, net	13,200,000	$ 13,100,000
Case Management, Business Process Management, Data and Insight
New Accounting Pronouncements or Change in Accounting Principle
Goodwill assessed for impairment	$ 152,000,000.0
Percentage of total goodwill (percent)	18.00%
Data and Insight
New Accounting Pronouncements or Change in Accounting Principle
Goodwill assessed for impairment	$ 75,700,000
Revolving Credit Facility | Credit Agreement
New Accounting Pronouncements or Change in Accounting Principle
Revolving line of credit	0
Line of credit facility, unused borrowing capacity	$ 400,000,000.0

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Acquisitions - Narrative (Details) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Business Acquisition
Payment of contingent consideration	$ 5,619,000	$ 0
Contingent consideration	0
MicroPact
Business Acquisition
Payment of contingent consideration	$ 5,600,000

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Shareholders' Equity - Summary of Activities in Common Stock (Detail) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Equity [Abstract]
Purchases of treasury shares	$ 0	$ 0	$ (15,482)	$ (14,289)
Purchases of treasury (in shares)	0	0	(59)	(72)
Stock option exercises	$ 46,101	$ 15,604	$ 92,337	$ 22,132
Stock option exercises (in shares)	436	203	917	297
Employee stock plan purchases	$ 2,708	$ 2,260	$ 5,177	$ 4,609
Employee stock plan purchases (in shares)	10	13	20	28
Restricted stock units vested, net of withheld shares upon award settlement	$ (4,591)	$ (2,008)	$ (6,892)	$ (3,381)
Restricted stock units vested, net of withheld shares upon award settlement (in shares)	33	27	43	37

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Shareholders' Equity - Additional Information (Detail) shares in Millions	Jun. 30, 2020 shares
Equity [Abstract]
Number of shares authorized to be repurchased (in shares)	2.6

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Deferred Commissions (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Capitalized Contract Cost
Deferred commissions	$ 30,200,000		$ 30,200,000		$ 29,800,000
Deferred commissions amortization	3,600,000	$ 4,100,000	7,500,000	$ 7,900,000
Deferred commissions impairment	$ 0	$ 0	$ 0	$ 0
Minimum
Capitalized Contract Cost
Sales commissions amortization period			3 years
Maximum
Capitalized Contract Cost
Sales commissions amortization period			7 years

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Other Assets (Detail) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Schedule of Equity Method Investments
Investment grade corporate and municipal bond held to maturity	$ 121,200,000	$ 121,200,000
Interest receivable	584,000	584,000
Allowance for credit loss	$ 0	0
Proceeds from the sale of investment in preferred shares		15,000,000	$ 0
Purchase of equity investment common shares		10,000,000	$ 0
Record Holdings
Schedule of Equity Method Investments
Proceeds from the sale of investment in preferred shares		$ 15,000,000
Ownership percentage (percent)	18.00%	18.00%		20.00%
Purchase of equity investment common shares		$ 10,000,000

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Revolving Line of Credit (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Line Of Credit Facility
Outstanding borrowings	$ 0	$ 0
Revolving Credit Facility | Credit Agreement
Line Of Credit Facility
Revolving credit facility, maximum borrowing capacity			$ 400,000,000
Outstanding borrowings	0
Line of credit facility, unused borrowing capacity	$ 400,000,000.0
Revolving Credit Facility | Credit Agreement | Prime Commercial Lending Rate
Line Of Credit Facility
Effective percentage interest rate	3.38%
Revolving Credit Facility | Credit Agreement | Libor Rate
Line Of Credit Facility
Effective percentage interest rate	1.29%
Revolving Credit Facility | Credit Agreement | Minimum | Prime Commercial Lending Rate
Line Of Credit Facility
Line of credit facility interest rate	0.125%
Revolving Credit Facility | Credit Agreement | Minimum | Libor Rate
Line Of Credit Facility
Line of credit facility interest rate	1.125%
Revolving Credit Facility | Credit Agreement | Maximum | Prime Commercial Lending Rate
Line Of Credit Facility
Line of credit facility interest rate	0.75%
Revolving Credit Facility | Credit Agreement | Maximum | Libor Rate
Line Of Credit Facility
Line of credit facility interest rate	1.75%
Revolving Credit Facility | Credit Agreement | Letter of Credit
Line Of Credit Facility
Revolving credit facility, maximum borrowing capacity			$ 25,000,000

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Income Tax Provision (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Effective income tax rates (percent)	(28.90%)	12.10%	(32.30%)	17.00%
Excess tax benefit	$ 23,400	$ 5,400	$ 45,500	$ 7,000
Effective income tax rate excluding excess tax benefit (percent)	27.20%	26.90%	27.10%	26.80%
Income tax payments			$ 422	$ 14,800

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Earnings Per Share - Computation of Basic Earnings and Diluted Earnings Per Share Data (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Numerator for basic and diluted earnings per share:
Net income	$ 53,892	$ 31,999	$ 101,442	$ 59,347
Denominator:
Weighted-average basic common shares outstanding (in shares)	39,963	38,402	39,984	38,462
Assumed conversion of dilutive securities:
Stock awards (in shares)	1,453	1,411	1,548	1,344
Denominator for diluted earnings per share - Adjusted weighted-average shares (in shares)	41,416	39,813	41,532	39,806
Earnings per common share:
Basic (usd per share)	$ 1.35	$ 0.83	$ 2.54	$ 1.54
Diluted (usd per share)	$ 1.30	$ 0.80	$ 2.44	$ 1.49

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Earnings Per Share - Additional Information (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per shares (in shares)	124	750	102	1,000

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Leases - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lessee, Lease, Description
Operating lease renewal term (up to)	10 years		10 years
Operating lease, cost	$ 2,507	$ 2,625	$ 5,141	$ 4,728
Lessor, operating lease renewal term	5 years		5 years
Rental income	$ 292	$ 270	$ 566	$ 554
Minimum
Lessee, Lease, Description
Operating lease term	1 year		1 year
Maximum
Lessee, Lease, Description
Operating lease term	8 years		8 years

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Leases - Schedule of lease cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Operating lease cost	$ 1,606	$ 1,664	$ 3,272	$ 3,034
Short-term lease cost	447	593	1,021	1,163
Variable lease cost	454	368	848	531
Net lease cost	$ 2,507	$ 2,625	$ 5,141	$ 4,728

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Leases - Schedule of leases assets and liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Assets:
Operating lease right-of-use assets	$ 16,659	$ 18,992
Liabilities:
Operating leases, short-term	6,217	6,387
Operating leases, long-term	14,126	16,822
Total lease liabilities	$ 20,343	$ 23,209

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Leases - Schedule of other information related to leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Operating cash outflows from operating leases	$ 3,379	$ 3,362
Operating leases	$ 510	$ 2,099
Weighted average remaining lease term (years)	4 years	5 years
Weighted average discount rate	4.00%	4.00%

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Leases - Maturity of lease liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Operating Leases
2020 (Remaining 2020)	$ 3,978
2021	6,372
2022	4,049
2023	3,014
2024	2,555
Thereafter	2,130
Total lease payments	22,098
Less: Interest	(1,755)
Present value of operating lease liabilities	$ 20,343	$ 23,209

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Leases - Schedule of future minimum operating rental income (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Leases [Abstract]
2020 (Remaining 2020)	$ 696
2021	1,372
2022	1,402
2023	1,432
2024	1,462
Thereafter	858
Total	$ 7,222

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Share-Based Compensation (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	$ 18,386	$ 15,066	$ 35,688	$ 29,482
Cost of subscriptions, software services and maintenance
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	4,369	3,756	8,621	7,554
Selling, general and administrative expenses
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	$ 14,017	$ 11,310	$ 27,067	$ 21,928

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Segment and Related Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2020 Business_Unit Segment
Segment Reporting Information
Number of business units | Business_Unit	6
Enterprise Software
Segment Reporting Information
Number of reportable segment | Segment	1

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Segment and Related Information - Schedule of Segment Revenues and Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information
Total revenues	$ 271,091	$ 275,124	$ 547,632	$ 522,190
Segment operating income	41,341	36,666	75,234	71,157
Intercompany
Segment Reporting Information
Total revenues	(4,535)	(3,660)	(8,554)	(7,213)
Intercompany | Enterprise Software
Segment Reporting Information
Total revenues	4,533	3,576	8,534	7,060
Intercompany | Appraisal and Tax
Segment Reporting Information
Total revenues	2	84	20	153
Operating segments | Enterprise Software
Segment Reporting Information
Total revenues	247,879	241,055	498,056	462,090
Segment operating income	69,025	59,668	129,497	115,142
Operating segments | Appraisal and Tax
Segment Reporting Information
Total revenues	27,747	31,576	58,128	61,163
Segment operating income	6,148	7,923	13,056	15,018
Corporate
Segment Reporting Information
Total revenues	(4,535)	2,493	(8,552)	(1,063)
Segment operating income	(20,434)	(17,671)	(40,502)	(34,217)
Operating segment and corporate non-segment
Segment Reporting Information
Total revenues				0
Segment operating income	54,739	49,920	102,051	95,943
Software licenses and royalties
Segment Reporting Information
Total revenues	17,025	20,675	35,762	42,468
Software licenses and royalties | Enterprise Software
Segment Reporting Information
Total revenues	14,683	17,555	30,634	36,077
Software licenses and royalties | Appraisal and Tax
Segment Reporting Information
Total revenues	2,342	3,120	5,128	6,391
Software licenses and royalties | Corporate
Segment Reporting Information
Total revenues	0	0	0	0
Subscriptions
Segment Reporting Information
Total revenues	85,638	73,475	167,361	140,750
Subscriptions | Enterprise Software
Segment Reporting Information
Total revenues	79,128	69,386	155,772	132,641
Subscriptions | Appraisal and Tax
Segment Reporting Information
Total revenues	6,510	4,089	11,589	8,109
Subscriptions | Corporate
Segment Reporting Information
Total revenues	0	0	0	0
Software services
Segment Reporting Information
Total revenues	43,654	57,401	95,787	105,844
Software services | Enterprise Software
Segment Reporting Information
Total revenues	38,899	48,404	83,848	88,860
Software services | Appraisal and Tax
Segment Reporting Information
Total revenues	4,755	8,997	11,939	16,984
Software services | Corporate
Segment Reporting Information
Total revenues	0	0	0	0
Maintenance
Segment Reporting Information
Total revenues	116,760	106,689	231,125	206,841
Maintenance | Enterprise Software
Segment Reporting Information
Total revenues	107,336	97,641	212,177	188,829
Maintenance | Appraisal and Tax
Segment Reporting Information
Total revenues	9,424	9,048	18,948	18,012
Maintenance | Corporate
Segment Reporting Information
Total revenues	0	0	0	0
Appraisal services
Segment Reporting Information
Total revenues	4,696	6,233	10,459	11,447
Appraisal services | Enterprise Software
Segment Reporting Information
Total revenues	0	0	0	0
Appraisal services | Appraisal and Tax
Segment Reporting Information
Total revenues	4,696	6,233	10,459	11,447
Appraisal services | Corporate
Segment Reporting Information
Total revenues	0	0	0	0
Hardware and other
Segment Reporting Information
Total revenues	3,318	10,651	7,138	14,840
Hardware and other | Enterprise Software
Segment Reporting Information
Total revenues	3,300	4,493	7,091	8,623
Hardware and other | Appraisal and Tax
Segment Reporting Information
Total revenues	18	5	45	67
Hardware and other | Corporate
Segment Reporting Information
Total revenues	$ 0	$ 6,153	$ 2	$ 6,150

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Segment and Related Information - Reconciliation of Operating Income from Segments to Consolidated (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information
Total segment operating income	$ 41,341	$ 36,666	$ 75,234	$ 71,157
Other income (expense), net	470	(247)	1,460	339
Income before income taxes	41,811	36,419	76,694	71,496
Operating segment and corporate non-segment
Segment Reporting Information
Total segment operating income	54,739	49,920	102,051	95,943
Segment reconciling items
Segment Reporting Information
Other income (expense), net	470	(247)	1,460	339
Segment reconciling items | Acquired software
Segment Reporting Information
Amortization of intangibles assets	(8,006)	(7,988)	(16,033)	(14,670)
Segment reconciling items | Customer and trade name
Segment Reporting Information
Amortization of intangibles assets	$ (5,392)	$ (5,266)	$ (10,784)	$ (10,116)

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Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue
Total revenues	$ 271,091	$ 275,124	$ 547,632	$ 522,190
Operating segments | Enterprise Software
Disaggregation of Revenue
Total revenues	247,879	241,055	498,056	462,090
Operating segments | Appraisal and Tax
Disaggregation of Revenue
Total revenues	27,747	31,576	58,128	61,163
Intercompany
Disaggregation of Revenue
Total revenues	(4,535)	(3,660)	(8,554)	(7,213)
Intercompany | Enterprise Software
Disaggregation of Revenue
Total revenues	4,533	3,576	8,534	7,060
Intercompany | Appraisal and Tax
Disaggregation of Revenue
Total revenues	2	84	20	153
Corporate
Disaggregation of Revenue
Total revenues	(4,535)	2,493	(8,552)	(1,063)
Corporate and Elimination
Disaggregation of Revenue
Total revenues	(4,535)	2,493	(8,552)	(1,063)
Operating segment and corporate non-segment
Disaggregation of Revenue
Total revenues				0
Recurring revenues
Disaggregation of Revenue
Total revenues	202,398	180,164	398,486	347,591
Recurring revenues | Enterprise Software
Disaggregation of Revenue
Total revenues	186,464	167,027	367,949	321,470
Recurring revenues | Appraisal and Tax
Disaggregation of Revenue
Total revenues	15,934	13,137	30,537	26,121
Recurring revenues | Corporate
Disaggregation of Revenue
Total revenues	0	0	0	0
Non-recurring revenues
Disaggregation of Revenue
Total revenues	68,693	94,960	149,146	174,599
Non-recurring revenues | Enterprise Software
Disaggregation of Revenue
Total revenues	56,882	70,452	121,573	133,560
Non-recurring revenues | Appraisal and Tax
Disaggregation of Revenue
Total revenues	11,811	18,355	27,571	34,889
Non-recurring revenues | Corporate
Disaggregation of Revenue
Total revenues	0	6,153	2	6,150
Software licenses and royalties
Disaggregation of Revenue
Total revenues	17,025	20,675	35,762	42,468
Software licenses and royalties | Enterprise Software
Disaggregation of Revenue
Total revenues	14,683	17,555	30,634	36,077
Software licenses and royalties | Appraisal and Tax
Disaggregation of Revenue
Total revenues	2,342	3,120	5,128	6,391
Software licenses and royalties | Corporate
Disaggregation of Revenue
Total revenues	0	0	0	0
Subscriptions
Disaggregation of Revenue
Total revenues	85,638	73,475	167,361	140,750
Subscriptions | Enterprise Software
Disaggregation of Revenue
Total revenues	79,128	69,386	155,772	132,641
Subscriptions | Appraisal and Tax
Disaggregation of Revenue
Total revenues	6,510	4,089	11,589	8,109
Subscriptions | Corporate
Disaggregation of Revenue
Total revenues	0	0	0	0
Software services
Disaggregation of Revenue
Total revenues	43,654	57,401	95,787	105,844
Software services | Enterprise Software
Disaggregation of Revenue
Total revenues	38,899	48,404	83,848	88,860
Software services | Appraisal and Tax
Disaggregation of Revenue
Total revenues	4,755	8,997	11,939	16,984
Software services | Corporate
Disaggregation of Revenue
Total revenues	0	0	0	0
Maintenance
Disaggregation of Revenue
Total revenues	116,760	106,689	231,125	206,841
Maintenance | Enterprise Software
Disaggregation of Revenue
Total revenues	107,336	97,641	212,177	188,829
Maintenance | Appraisal and Tax
Disaggregation of Revenue
Total revenues	9,424	9,048	18,948	18,012
Maintenance | Corporate
Disaggregation of Revenue
Total revenues	0	0	0	0
Appraisal services
Disaggregation of Revenue
Total revenues	4,696	6,233	10,459	11,447
Appraisal services | Enterprise Software
Disaggregation of Revenue
Total revenues	0	0	0	0
Appraisal services | Appraisal and Tax
Disaggregation of Revenue
Total revenues	4,696	6,233	10,459	11,447
Appraisal services | Corporate
Disaggregation of Revenue
Total revenues	0	0	0	0
Hardware and other
Disaggregation of Revenue
Total revenues	3,318	10,651	7,138	14,840
Hardware and other | Enterprise Software
Disaggregation of Revenue
Total revenues	3,300	4,493	7,091	8,623
Hardware and other | Appraisal and Tax
Disaggregation of Revenue
Total revenues	18	5	45	67
Hardware and other | Corporate
Disaggregation of Revenue
Total revenues	0	6,153	2	6,150
Products and services transferred at a point in time
Disaggregation of Revenue
Total revenues	17,786	26,453	37,672	47,552
Products and services transferred at a point in time | Software licenses and royalties
Disaggregation of Revenue
Total revenues	14,468	15,802	30,534	32,712
Products and services transferred at a point in time | Subscriptions
Disaggregation of Revenue
Total revenues	0	0	0	0
Products and services transferred at a point in time | Software services
Disaggregation of Revenue
Total revenues	0	0	0	0
Products and services transferred at a point in time | Maintenance
Disaggregation of Revenue
Total revenues	0	0	0	0
Products and services transferred at a point in time | Appraisal services
Disaggregation of Revenue
Total revenues	0	0	0	0
Products and services transferred at a point in time | Hardware and other
Disaggregation of Revenue
Total revenues	3,318	10,651	7,138	14,840
Products and services transferred over time
Disaggregation of Revenue
Total revenues	253,305	248,671	509,960	474,638
Products and services transferred over time | Software licenses and royalties
Disaggregation of Revenue
Total revenues	2,557	4,873	5,228	9,756
Products and services transferred over time | Subscriptions
Disaggregation of Revenue
Total revenues	85,638	73,475	167,361	140,750
Products and services transferred over time | Software services
Disaggregation of Revenue
Total revenues	43,654	57,401	95,787	105,844
Products and services transferred over time | Maintenance
Disaggregation of Revenue
Total revenues	116,760	106,689	231,125	206,841
Products and services transferred over time | Appraisal services
Disaggregation of Revenue
Total revenues	4,696	6,233	10,459	11,447
Products and services transferred over time | Hardware and other
Disaggregation of Revenue
Total revenues	$ 0	$ 0	$ 0	$ 0

XML

Disaggregation of Revenue - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020
Minimum
Disaggregation of Revenue
Contract term	1 year
Typical contract term	3 years
Maximum
Disaggregation of Revenue
Contract term	10 years
Typical contract term	5 years

XML

Deferred Revenue and Performance Obligations - Deferred Revenue (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Disaggregation of Revenue
Deferred revenue	$ 423,204
Contract With Customer Liability
Beginning balance	412,694
Deferral of revenue	508,126
Recognition of deferred revenue	(497,616)
Ending balance	423,204
Operating segments | Enterprise Software
Disaggregation of Revenue
Deferred revenue	375,838
Contract With Customer Liability
Beginning balance	375,838
Ending balance	396,405
Operating segments | Appraisal and Tax
Disaggregation of Revenue
Deferred revenue	35,487
Contract With Customer Liability
Beginning balance	35,487
Ending balance	25,437
Corporate
Disaggregation of Revenue
Deferred revenue	1,369
Contract With Customer Liability
Beginning balance	1,369
Ending balance	$ 1,362

XML

Deferred Revenue and Performance Obligations - Additional Information (Details) $ in Millions	Jun. 30, 2020 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligations	$ 1,540
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Revenue, remaining performance obligation, percentage	49.00%
Expected timing of satisfaction period	12 months

XML

Commitments and Contingencies (Detail)	Jun. 30, 2020 LegalMatter
Commitments and Contingencies Disclosure [Abstract]
Number of material legal proceedings pending	0