TYLER TECHNOLOGIES INC (Form: 10-Q, Received: 10/21/2015 16:42:24)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2015


¨	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)

(Zip code)

(972) 713-3700

(Registrant’s telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted 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 and post such files). Yes x No ¨

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

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨	Smaller Reporting Company	¨

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

The number of shares of common stock of registrant outstanding on October 16, 2015 was 33,939,000.

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015		2014
Revenues:
Software licenses and royalties	$	15,690	$	13,226		$	44,576	$	36,541
Subscriptions		29,036		22,694			81,273		64,135
Software services		36,398		31,159			101,765		85,594
Maintenance		61,018		54,713			177,829		156,904
Appraisal services		6,557		5,802			19,337		16,097
Hardware and other		2,146		1,070			7,326		6,390
Total revenues		150,845		128,664			432,106		365,661

Cost of revenues:
Software licenses and royalties		147		565			1,183		1,439
Acquired software		552		448			1,464		1,373
Software services, maintenance and subscriptions		72,764		61,428			207,819		174,701
Appraisal services		3,984		3,764			12,397		10,740
Hardware and other		1,565		667			5,278		4,528
Total cost of revenues		79,012		66,872			228,141		192,781

Gross profit		71,833		61,792			203,965		172,880

Selling, general and administrative expenses		31,869		27,344			90,810		80,130
Research and development expense		7,193		6,567			21,307		19,128
Amortization of customer and trade name intangibles		1,282		1,136			3,585		3,393

Operating income		31,489		26,745			88,263		70,229

Other income (expense), net		255		(47	)		621		(522	)
Income before income taxes		31,744		26,698			88,884		69,707
Income tax provision		11,602		9,698			32,633		26,084
Net income	$	20,142	$	17,000		$	56,251	$	43,623

Earnings per common share:
Basic	$	0.59	$	0.52		$	1.66	$	1.32
Diluted	$	0.55	$	0.48		$	1.56	$	1.23

Comprehensive income	$	20,142	$	17,000		$	56,251	$	43,623

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	September 30,
	2015			December 31,
	(unaudited)			2014
ASSETS
Current assets:
Cash and cash equivalents	$	238,614		$	206,167
Accounts receivable (less allowance for losses of $1,499 in 2015 and $1,725 in 2014)		129,228			112,660
Short-term investments		9,124			—
Prepaid expenses		18,044			17,851
Other current assets		6,821			358
Deferred income taxes		9,674			9,674
Total current assets		411,505			346,710

Accounts receivable, long-term portion		1,072			1,761
Property and equipment, net		68,092			65,910
Other assets:
Goodwill		125,932			124,142
Other intangibles, net		35,701			34,722
Cost method investment		15,000			—
Non-current investments and other assets		21,080			737
	$	678,382		$	573,982

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,385		$	4,119
Accrued liabilities		37,199			39,508
Deferred revenue		200,890			189,212
Total current liabilities		242,474			232,839

Deferred income taxes		4,813			4,170

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 in 2015 and 2014		481			481
Additional paid-in capital		230,840			201,389
Accumulated other comprehensive loss, net of tax		(46	)		(46	)
Retained earnings		317,401			261,150
Treasury stock, at cost; 14,218,757 and 14,678,782 shares in 2015 and 2014, respectively		(117,581	)		(126,001	)
Total shareholders' equity		431,095			336,973
	$	678,382		$	573,982

See accompanying notes.

TYLER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine months ended September 30,
	2015			2014
Cash flows from operating activities:
Net income	$	56,251		$	43,623
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization		11,586			10,936
Share-based compensation expense		14,459			10,887
Excess tax benefit from exercises of share-based arrangements		(10,801	)		(6,717	)
Changes in operating assets and liabilities, exclusive of effects of acquired companies:
Accounts receivable		(14,356	)		(5,851	)
Prepaid expenses and other current assets		717			(1,570	)
Income taxes		4,754			16,182
Accounts payable		(369	)		864
Accrued liabilities		(3,349	)		(1,815	)
Deferred revenue		11,021			28,592
Net cash provided by operating activities		69,913			95,131

Cash flows from investing activities:
Purchase of cost method investment		(15,000	)		—
Purchase of held-to-maturity securities		(29,391	)		—
Proceeds from sale of investments		—			808
Cost of acquisitions, net of cash acquired		(6,447	)		(3,242	)
Additions to property and equipment		(8,525	)		(8,037	)
Decrease in other		5			219
Net cash used by investing activities		(59,358	)		(10,252	)

Cash flows from financing activities:
Purchase of treasury shares		(645	)		(22,817	)
Proceeds from exercise of stock options		8,369			6,739
Contributions from employee stock purchase plan		3,367			3,037
Excess tax benefit from exercises of share-based arrangements		10,801			6,717
Net cash provided (used) by financing activities		21,892			(6,324	)

Net increase in cash and cash equivalents		32,447			78,555
Cash and cash equivalents at beginning of period		206,167			78,876
Cash and cash equivalents at end of period	$	238,614		$	157,431

See accompanying notes.

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 September 30, 2015 and December 31, 2014 and operating result amounts are for the three and nine months ended September 30, 2015 and 2014, 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, 2014. 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.

(2) Acquisitions

On May 29, 2015, we acquired all of the capital stock of Brazos Technology Corporation (“Brazos”), which provides mobile hand-held solutions primarily to law enforcement agencies for field accident reporting and electronically issuing citations. The purchase price, net of cash acquired of $312,000 and including debt assumed of $733,000, was $6.1 million in cash and 12,500 shares of Tyler common stock valued at $1.5 million. As of September 30, 2015, the purchase price allocation of Brazos is in process mainly due to completing the valuation of the acquired intangible assets. We currently expect to finalize the allocation of the purchase price in the fourth quarter. The impact of this acquisition on our operating results is not material.

(3) Other Assets

Cash and cash equivalents consist of cash on deposit with several domestic banks and money market funds.

As of September 2015, we have $29.4 million in investment grade corporate and municipal bonds with maturity dates ranging from 2015 through mid-2017. 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 value 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 included in short-term investments and non-current investments and other assets.

On January 30, 2015, we made a $15.0 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 settings. We do not believe we have the ability to significantly influence the day-to-day activities of Record Holdings and are accounting for this investment under the cost method.

(4) Shareholders’ Equity

The following table details activity in our common stock:

	Nine months ended September 30,
	2015						2014
	Shares			Amount			Shares			Amount
Stock option exercises		420		$	8,369			419		$	6,739
Employee stock plan purchases		33			3,367			39			3,037
Shares issued for acquisitions		13			1,519			17			1,473
Purchase of common stock		(5	)		(645	)		(294	)		(22,817	)

As of September 30, 2015, we had authorization from our board of directors to repurchase up to 1.4 million additional shares of Tyler common stock.

(5) Income Tax Provision

For the three and nine months ended September 30, 2015, we had an effective income tax rate of 36.5% and 36.7%, respectively, compared to an effective income tax rate of 36.3% and 37.4% for the three and nine months ended months September 30, 2014, respectively. The effective income tax rates for the periods presented were different from the statutory United States federal income

tax rate of 35% primarily due to state income taxes, non-deductible share-based compensation expense, the qualified manufacturing activities deduction, and non-deductible meals and e ntertainment costs.

We made federal and state tax payments of $27.2 million during the nine months ended September 30, 2015 compared to $9.9 million for the same period in the prior year.

(6) Earnings Per Share

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

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Numerator for basic and diluted earnings per share:
Net income	$	20,142	$	17,000	$	56,251	$	43,623
Denominator:
Weighted-average basic common shares outstanding		33,900		32,935		33,787		32,947
Assumed conversion of dilutive securities:
Stock options		2,449		2,349		2,376		2,392
Denominator for diluted earnings per share - Adjusted weighted-average shares		36,349		35,284		36,163		35,339
Earnings per common share:
Basic	$	0.59	$	0.52	$	1.66	$	1.32
Diluted	$	0.55	$	0.48	$	1.56	$	1.23

For the three and nine months ended September 30, 2015, stock options representing the right to purchase common stock of approximately 416,000 shares and 519,000 shares, respective ly, were not included in the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. For the three and nine months ended September 30, 2014, stock options representing the right to purchase common stock of approximately 651,000 shares and 540,000 shares, respectively, were not included in the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect.

(7) Share-Based Compensation

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

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Cost of software services, maintenance and subscriptions	$	902	$	569	$	2,349	$	1,595
Selling, general and administrative expenses		4,696		3,316		12,110		9,292
Total share-based compensation expenses	$	5,598	$	3,885	$	14,459	$	10,887

(8) Segment and Related Information

We are a major provider of 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 four business units, which focus on the following products:

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

financial management, municipal courts, and land and vital records management software solutions;

courts and justice software solutions; and

appraisal and tax software solutions and property appraisal services.

In accordance with ASC 280-10, Segment Repo rting, the financial management, education and planning, regulatory and maintenance software solutions unit; financial management, municipal courts and land and vital records management software solutions unit; and the courts and justice software solutions unit meet the criteria for aggregation and are presented in one reportable segment, Enterprise Software Solutions (“ESS”). The ESS segment provides municipal and county governments and schools with software systems and services to meet their information technology and automation needs for mission-critical “back-office” functions such as financial management and courts and justice processes. The Appraisal and Tax Software Solutions and Services (“ATSS”) segment provides systems and software that automate the appraisal and assessment of real and personal property as well as property appraisal outsourcing services for local governments and taxing authorities. Property appraisal outsourcing services include: the physical inspection of commercial and resident ial 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 noncash amortization of intangible assets associated with their acquisition, 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.

For the three months ended September 30, 2015
	Enterprise Software Solutions		Appraisal and Tax Software Solutions and Services		Corporate			Totals
Revenues
Software licenses and royalties	$	14,680	$	1,010	$	—		$	15,690
Subscriptions		27,772		1,264		—			29,036
Software services		33,210		3,188		—			36,398
Maintenance		56,451		4,567		—			61,018
Appraisal services		—		6,557		—			6,557
Hardware and other		2,162		—		(16	)		2,146
Intercompany		1,014		—		(1,014	)		—
Total revenues	$	135,289	$	16,586	$	(1,030	)	$	150,845
Segment operating income	$	37,853	$	4,420	$	(8,950	)	$	33,323



For the nine months ended September 30, 2015
	Enterprise Software Solutions		Appraisal and Tax Software Solutions and Services		Corporate			Totals
Revenues
Software licenses and royalties	$	40,563	$	4,013	$	—		$	44,576
Subscriptions		77,814		3,459		—			81,273
Software services		94,203		7,562		—			101,765
Maintenance		164,457		13,372		—			177,829
Appraisal services		—		19,337		—			19,337
Hardware and other		4,632		11		2,683			7,326
Intercompany		2,919		—		(2,919	)		—
Total revenues	$	384,588	$	47,754	$	(236	)	$	432,106
Segment operating income	$	104,513	$	11,391	$	(22,592	)	$	93,312

For the three months ended September 30, 2014
	Enterprise Software Solutions		Appraisal and Tax Software Solutions and Services		Corporate			Totals
Revenues
Software licenses and royalties	$	12,192	$	1,034	$	—		$	13,226
Subscriptions		21,725		969		—			22,694
Software services		28,398		2,761		—			31,159
Maintenance		50,486		4,227		—			54,713
Appraisal services		—		5,802		—			5,802
Hardware and other		1,079		—		(9	)		1,070
Intercompany		629		—		(629	)		—
Total revenues	$	114,509	$	14,793	$	(638	)	$	128,664
Segment operating income	$	31,797	$	3,230	$	(6,698	)	$	28,329



For the nine months ended September 30, 2014
	Enterprise Software Solutions		Appraisal and Tax Software Solutions and Services		Corporate			Totals
Revenues
Software licenses and royalties	$	34,336	$	2,205	$	—		$	36,541
Subscriptions		61,571		2,564		—			64,135
Software services		78,006		7,588		—			85,594
Maintenance		144,344		12,560		—			156,904
Appraisal services		—		16,097		—			16,097
Hardware and other		3,929		—		2,461			6,390
Intercompany		1,634		—		(1,634	)		—
Total revenues	$	323,820	$	41,014	$	827		$	365,661
Segment operating income	$	84,972	$	7,996	$	(17,973	)	$	74,995

	Three months ended September 30,						Nine months ended September 30,
Reconciliation of reportable segment operating income to the Company's consolidated totals:	2015			2014			2015			2014
Total segment operating income	$	33,323		$	28,329		$	93,312		$	74,995
Amortization of acquired software		(552	)		(448	)		(1,464	)		(1,373	)
Amortization of customer and trade name intangibles		(1,282	)		(1,136	)		(3,585	)		(3,393	)
Other income (expense), net		255			(47	)		621			(522	)
Income before income taxes	$	31,744		$	26,698		$	88,884		$	69,707

(9) 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.

(10) New Accounting Pronouncements

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” This ASU is the result of a convergence project between the FASB and the International Accounting Standards Board. The core principle behind ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in

exchange for delivering those goods and services. This model involves a five-step process that includes ide ntifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction prices to the performance obligations in the contract and recognizing revenue when (or as) the e ntity satisfies the performance obligations. The guidance in the ASU supersedes existing revenue recognition guidance and is effective for annual reporting periods beginning after December 15, 2016 with early application not permitted. The ASU allows two m ethods of adoption; a full retrospective approach where three years of financial information are presented in accordance with the new standard, and a modified retrospective approach where the ASU is applied to the most current period presented in the finan cial statements.

On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new standard and will issue an exposure draft proposing the deferral, with a 30-day comment period. The proposal would now require application of the new standard no later than annual reporting periods beginning after December 15, 2017, including interim reporting periods therein; however, under the proposal, public entities would be permitted to elect to early adopt the new standard as of the original effective date. We currently expect to adopt the new standard in fiscal year 2018 in accordance with the revised effective date.

We are currently assessing the financial impact of adopting the new standard and the methods of adoption; however, given the scope of the new standard, we are currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption of the new standard we will elect.

(11) Subsequent event

On September 30, 2015, we signed a definitive agreement (the “Merger Agreement”) to acquire privately held New World Systems Corporation (“NWS”) for $670.0 million in cash and stock. NWS is a leading provider of public safety and financial solutions for local governments.

Under the terms of the agreement, we will acquire all of the equity in NWS for $360.0 million in cash and approximately 2.1 million shares of Tyler's common stock, representing approximately 5.9% of Tyler's outstanding common shares post transaction, subject to customary post-closing adjustments. The transaction is expected to close in the fourth quarter of 2015 and is subject to regulatory approval and customary closing conditions. The cash portion of the purchase price will be funded from cash on hand and proceeds from a new revolving credit facility. We expect to enter into a credit arrangement that will provide for a revolving credit line of $300.0 million and mature in five years.

The Merger Agreement may be terminated by each of Tyler and NWS under certain circumstances, including if the merger is not consummated by December 31, 2015. The Merger Agreement also provides for certain termination rights for both Tyler and NWS. Tyler may also terminate the Merger Agreement if it determines that it is unable to obtain sufficient debt financing, which when coupled with Tyler’s available cash would be sufficient to fund the cash portion of the merger consideration. If Tyler terminates the Merger Agreement in this limited circumstance, Tyler will be required to pay NWS a termination fee of $45.0 million.

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) changes in the budgets or regulatory environments of our clients, primarily local and state governments, that could negatively impact information technology spending; (2) our ability to protect client information from security breaches and provide uninterrupted operations of data centers; (3) material portions of our business require the Internet infrastructure to be adequately maintained; (4) 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; (5) general economic, political and market conditions; (6) technological and market risks associated with the development of new products or services or of new versions of existing or acquired products or services; (7) our ability to successfully achieve growth or operational synergies through the integration of acquired businesses, while avoiding unanticipated costs and disruptions to existing operations; (8) 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; (9) 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 (10) 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 our filings with the Securities and Exchange Commission, including the detailed “Risk Factors” contained in our most recent annual report on Form 10-K. 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 information technology (“IT”) needs of cities, counties, schools and other local government 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 utilizes the Tyler private cloud, and electronic document filing solutions (“e-filing”), which simplify the filing and management of court related documents. We also provide property appraisal outsourcing services for taxing jurisdictions.

Our products generally automate five major functional areas: (1) financial management and education, (2) courts and justice, (3) property appraisal and tax, (4) planning, regulatory and maintenance, and (5) land and vital records management. We report our results in two segments. The Enterprise Software Solutions (“ESS”) segment provides municipal and county governments and schools 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; planning, regulatory and maintenance processes; and land and vital records management. The Appraisal and Tax Software Solutions and Services (“ATSS”) segment provides systems and software that automate the appraisal and assessment of real and personal property 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.

On January 30, 2015, we made a $15.0 million investment in convertible preferred stock representing a 20% interest in Record Holdings Pty Limited, a privately held Australian company specializing in digitizing the spoken word in court and legal settings.

On September 30, 2015, we signed a definitive agreement to acquire privately held New World Systems Corporation (“NWS”) for $670.0 million in cash and stock. This transaction is expected to close in the fourth quarter of 2015 and is subject to regulatory approval and customary closing conditions. Under the terms of the agreement, we will acquire all of the equity in NWS for $360.0 million in cash and approximately 2.1 million shares of Tyler's common stock, representing approximately 5.9% of Tyler's

outstanding common shares post transaction, subj ect to customary post-closing adjustments. The cash portion of the purchase price will be funded from cash on hand and proceeds from a new revolving credit facility. In the fourth quarter of 2015 , w e expect t o enter into a credit arrangement that will prov ide for a revolving credit line of $300.0 million and mature in five years.

Our total employee count increased to 3,075 at September 30, 2015 from 2,796 at September 30, 2014. This increase includes 39 employees added as the result of acquisitions.

Outlook

We believe activity in the local government market has returned to normal, pre-recession levels. Although we are seeing some pressure on margin expansion in 2015 as we absorb onboarding costs associated with staffing additions in recent quarters, make some strategic incremental product investments, and continue to grow our SaaS and e-filing client bases, our expectation is that 2015 will be another year of very solid revenue and earnings growth.

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, 2014. 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, 2014.

ANALYSIS OF RESULTS OF OPERATIONS

	Percent of Total Revenues
	Third Quarter						Nine Months
	2015			2014			2015			2014
Revenues:
Software licenses and royalties		10.4	%		10.3	%		10.3	%		10.0		%
Subscriptions		19.2			17.6			18.8			17.5
Software services		24.2			24.2			23.6			23.4
Maintenance		40.5			42.5			41.2			42.9
Appraisal services		4.3			4.5			4.5			4.4
Hardware and other		1.4			0.9			1.6			1.8
Total revenues		100.0			100.0			100.0			100.0
Operating Expenses:
Cost of software licenses, royalties and acquired software		0.6			0.8			0.6			0.8
Cost of software services, maintenance and subscriptions		48.2			47.7			48.1			47.8
Cost of appraisal services		2.6			2.9			2.9			2.9
Cost of hardware and other		1.0			0.5			1.2			1.2
Selling, general and administrative expenses		21.1			21.3			21.0			21.9
Research and development expense		4.8			5.1			4.9			5.2
Amortization of customer and trade name intangibles		0.8			0.9			0.8			1.0
Operating income		20.9			20.8			20.5			19.2
Other income (expense), net		—			—			—			(0.1	)
Income before income taxes		20.9			20.8			20.5			19.1
Income tax provision		7.6			7.6			7.5			7.2
Net income		13.3	%		13.2	%		13.0	%		11.9		%

Software licenses and royalties

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

	Third Quarter				Change							Nine Months				Change
($ in thousands)	2015		2014		$			%				2015		2014		$		%
ESS	$	14,680	$	12,192	$	2,488			20		%	$	40,563	$	34,336	$	6,227		18	%
ATSS		1,010		1,034		(24	)		(2	)			4,013		2,205		1,808		82
Total software licenses and royalties revenue	$	15,690	$	13,226	$	2,464			19		%	$	44,576	$	36,541	$	8,035		22	%

In August 2014, we acquired a company which provides civil process management, typically to county sheriff departments. In May 2015, we acquired a company which provides mobile hand-held solutions primarily to law enforcement agencies for field accident reporting and electronically issuing citations. The results of these two companies are included in our ESS segment from their respective dates of acquisition. Excluding the results of acquisitions, software license revenue increased 17% and 20% for the three and nine months ended September 30, 2015, respectively. The majority of this growth was due to a more active marketplace as the result of improvement in local government economic conditions, as well as our increasingly strong competitive position, which we attribute in part to our investment in product development in recent years. In addition, for the three and nine months ended September 30, 2015, add-on sales from our existing customer base increased approximately $800,000 and $1.4 million, respectively, for courts and justice related solutions that assist and support the transition to a paperless environment. Royalties on sales of Microsoft Dynamics AX by other Microsoft partners increased approximately $110,000 and $937,000 for the three and nine months ended September 30, 2015, respectively.

Although the mix of new contracts between subscription-based and perpetual license arrangement may vary from quarter to quarter and year-to-year, we expect our longer-term software license growth rate to be negatively impacted by a growing number of customers choosing our subscription-based options, rather than purchasing the software under a traditional perpetual software license arrangement. Subscription-based arrangements result in lower software license revenue in the initial year as compared to perpetual software license arrangements but generate higher overall revenue over the term of the contract. For the nine months ended September 30, 2015, approximately 76% of our new clients selected perpetual software license arrangements and approximately 24% selected subscription-based arrangements compared to approximately 71% perpetual software license arrangements and approximately 29% subscription-based arrangements for the same period in 2014. 35 and 101 new clients entered into subscription-based agreements in the three and nine months ended September 30, 2015, respectively, compared to 38 and 114 new clients in the three and nine months ended September 30, 2014, respectively.

Subscriptions

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

	Third Quarter				Change					Nine Months				Change
($ in thousands)	2015		2014		$		%			2015		2014		$		%
ESS	$	27,772	$	21,725	$	6,047		28	%	$	77,814	$	61,571	$	16,243		26	%
ATSS		1,264		969		295		30			3,459		2,564		895		35
Total subscriptions revenue	$	29,036	$	22,694	$	6,342		28	%	$	81,273	$	64,135	$	17,138		27	%

Subscriptions revenue primarily consists of revenue derived from SaaS arrangements, which 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. Revenue from e-filings are derived from transaction fees and fixed fee arrangements. The initial contract terms for SaaS arrangements are typically for periods of three to seven years.

Subscriptions revenue grew 28% and 27% for the three and nine months ending September 30, 2015, respectively, compared to the prior year periods. E-filing services contributed approximately $2.3 million and $5.9 million of the subscriptions revenue increase for the three and nine months ended September 30, 2015, respectively. Most of the e-filing revenue increase related to several statewide contracts, three of which implemented mandatory electronic filing near the end of 2014. New SaaS clients as well as existing clients who converted to our SaaS model provided the remainder of the subscriptions revenue increase. In the three and nine months ending September 30, 2015, we added 35 and 101 new SaaS clients, respectively, and 18 and 57 existing on-premises clients converted to our

SaaS model, respectively . Since September 30, 2014 , we have added 125 new SaaS c lients and 6 9 existing on-premise s c lients have converted to our SaaS model.

Software services

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

	Third Quarter				Change					Nine Months				Change
($ in thousands)	2015		2014		$		%			2015		2014		$			%
ESS	$	33,210	$	28,398	$	4,812		17	%	$	94,203	$	78,006	$	16,197			21	%
ATSS		3,188		2,761		427		15			7,562		7,588		(26	)		—
Total software services revenue	$	36,398	$	31,159	$	5,239		17	%	$	101,765	$	85,594	$	16,171			19	%

Software services revenue primarily consists of professional services billed in connection with implementing our software, converting client data, training client personnel, custom development activities and consulting. New clients who purchase our proprietary software licenses generally also contract with us to provide for the related software services. Existing clients also periodically purchase additional training, consulting and minor programming services. Excluding the results of acquisitions, software services revenue grew 16% and 18% for the three and nine months ended September 30, 2015, respectively, compared to the prior year periods. This growth is mainly due to much higher revenue from proprietary software arrangements, as well as additions to our implementation and support staff, which increased our capacity to deliver backlog.

Maintenance

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

	Third Quarter				Change					Nine Months				Change
($ in thousands)	2015		2014		$		%			2015		2014		$		%
ESS	$	56,451	$	50,486	$	5,965		12	%	$	164,457	$	144,344	$	20,113		14	%
ATSS		4,567		4,227		340		8			13,372		12,560		812		6
Total maintenance revenue	$	61,018	$	54,713	$	6,305		12	%	$	177,829	$	156,904	$	20,925		13	%

We provide maintenance and support services for our software products and third party software. Most of our clients who purchase our software license also contract with us for maintenance and support. Excluding the results of acquisitions, maintenance revenue increased 10% and 12%, respectively, for the three and nine months ended September 30, 2015, compared to the prior year periods, mainly due to growth in our installed customer base from new software license sales as well as maintenance rate increases.

Appraisal services

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

	Third Quarter				Change					Nine Months				Change
($ in thousands)	2015		2014		$		%			2015		2014		$		%
ESS	$	—	$	—	$	—		—	%	$	—	$	—	$	—		—	%
ATSS		6,557		5,802		755		13			19,337		16,097		3,240		20
Total appraisal services revenue	$	6,557	$	5,802	$	755		13	%	$	19,337	$	16,097	$	3,240		20	%

The appraisal services business is somewhat cyclical and driven in part by statutory revaluation cycles in various states. Appraisal services revenue benefitted from the addition of several new revaluation contracts including the City of Detroit and the current appraisal cycle in Indiana, both of which began in mid-2014. In mid-2015, Franklin County, Ohio began a full reappraisal cycle, which also contributed to appraisal services revenue.

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 September 30:

	Third Quarter				Change							Nine Months				Change
($ in thousands)	2015		2014		$			%				2015		2014		$			%
Software licenses and royalties	$	147	$	565	$	(418	)		(74	)	%	$	1,183	$	1,439	$	(256	)		(18	)	%
Acquired software		552		448		104			23				1,464		1,373		91			7
Software services, maintenance and subscriptions		72,764		61,428		11,336			18				207,819		174,701		33,118			19
Appraisal services		3,984		3,764		220			6				12,397		10,740		1,657			15
Hardware and other		1,565		667		898			135				5,278		4,528		750			17
Total cost of revenues	$	79,012	$	66,872	$	12,140			18		%	$	228,141	$	192,781	$	35,360			18		%

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

	Third Quarter										Nine Months
	2015			2014			Change				2015			2014			Change
Software licenses, royalties and acquired software		95.5	%		92.3	%		3.2		%		94.1	%		92.3	%		1.8		%
Software services, maintenance and subscriptions		42.5			43.4			(0.9	)			42.4			43.0			(0.6	)
Appraisal services		39.2			35.1			4.1				35.9			33.3			2.6
Hardware and other		27.1			37.7			(10.6	)			28.0			29.1			(1.1	)
Overall gross margin		47.6	%		48.0	%		(0.4	)	%		47.2	%		47.3	%		(0.1	)	%

Software licenses, royalties and acquired software . Costs of software licenses, royalties and acquired software are primarily comprised of third party software costs and amortization expense for acquired software. We do not have any direct costs associated with royalties. In both the three and nine months ended September 30, 2015, our software licenses, royalties and acquired software gross margin percentage increased compared to the prior year periods due to much higher revenue from proprietary software arrangements.

Software services, maintenance and subscriptions . Cost of software services, maintenance and subscriptions 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 on-going operation of SaaS and e-filing arrangements. For both the three and nine months ended September 30, 2015, the software services, maintenance and subscriptions gross margin percentage declined compared to the prior year periods mainly due to onboarding costs associated with accelerated hiring to ensure that we are well-positioned to deliver our current backlog and anticipated new business. Excluding 31 employees added with acquisitions, our implementation and support staff has grown by 204 employees since September 30, 2014. The gross margin decline was somewhat offset in part because 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 our support and maintenance staff and economies of scale. Price increases also resulted in slightly higher rates on certain services.

For the three months ended September 30, 2015, our blended gross margin was negatively impacted by expenses associated with increased hiring of implementation and development staff in order to expand our capacity to implement our contract backlog. Our blended gross margin for the nine months ended September 30, 2015, declined 0.1% as the negative impact of these expenses was offset somewhat by a revenue mix that included more software license revenue and subscriptions revenue than the prior year period.

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 costs.

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

	Third Quarter				Change					Nine Months				Change
($ in thousands)	2015		2014		$		%			2015		2014		$		%
Selling, general and administrative expenses	$	31,869	$	27,344	$	4,525		17	%	$	90,810	$	80,130	$	10,680		13	%

SG&A as a percentage of revenues was 21.1 % and 2 1.0 % for the three and nine months ended September 30, 2015 , respectively, compared to 21.3 % and 21.9 % for the three and nine months ended September 30, 2014 , respectively . For the three and nine months ended September 30, 2015, SG & A expense includes $342,000 of costs related to the proposed NWS acquisition. The remaining SG&A expense increase is mainly due to compensation cost related to increased staff levels, higher stoc k compensation expense and increased commission expense as a result of higher sales . Excluding eight employees added with acquisitions, w e have added 15 employ ees to our sales a nd finance staff since September 30, 2014 . O ur stock compensation expense rose $ 1. 4 million and $2 . 8 million for the three and nine months ended September 30, 2015 , respectively, mainly due to a higher stock price over the last few years.

Research and Development Expense

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

	Third Quarter				Change					Nine Months				Change
($ in thousands)	2015		2014		$		%			2015		2014		$		%
Research and development expense	$	7,193	$	6,567	$	626		10	%	$	21,307	$	19,128	$	2,179		11	%

Research and development expense consists mainly of costs associated with development of new products and technologies from which we do not currently generate revenue, as well as costs related to the ongoing development efforts for Microsoft Dynamics AX. We expect that research and development expense in 2015 will increase at a lower rate than our revenue growth. In February 2015, we announced that our contractual research and development commitment to develop public sector functionality for Microsoft Dynamics AX expires with the release of Dynamics AX 7. We are currently discussing with Microsoft Corporation the possibility of additional research and development beyond Dynamics AX 7. If we cannot agree to terms of any future commitments we will continue to provide sustained engineering and technical support for the public sector functionality within Dynamics AX. We further expect that license and maintenance royalties for all applicable domestic and international sales of Dynamics AX to public sector entities will continue under the terms of the contract.

Amortization of Customer and Trade Name Intangibles

Acquisition intangibles are composed of the excess of the purchase price over the fair value of net tangible assets acquired that is 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 of revenues while amortization expense of customer and trade name intangibles is recorded as operating expense.

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

Third Quarter

Change

Nine Months

Change

($ in thousands)

2015

2014

2015

2014

Amortization of customer and trade name

intangibles

1,282

1,136

146

3,585

3,393

192

Other Income (Expense), Net

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

	Third Quarter					Change			Nine Months					Change
($ in thousands)	2015		2014			$		%	2015		2014			$		%
Other income (expense), net	$	255	$	(47	)	$	302	N/A	$	621	$	(522	)	$	1,143	N/A

Other income (expense) is comprised of interest income from invested cash, as well as non-usage and other fees associated with our revolving credit agreement, which matured in August 2014 and was not replaced.

Income Tax Provision

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

	Third Quarter						Change					Nine Months						Change
($ in thousands)	2015			2014			$		%			2015			2014			$		%
Income tax provision	$	11,602		$	9,698		$	1,904		20	%	$	32,633		$	26,084		$	6,549		25	%

Effective income tax rate		36.5	%		36.3	%							36.7	%		37.4	%

The effective income tax rates for the three and nine months ended September 30, 2015 and 2014, were different from the statutory United States federal income tax rate of 35% primarily due to state income taxes, non-deductible share-based compensation expense, the qualified manufacturing activities deduction, and non-deductible meals and entertainment costs. Our effective tax rate for the nine months ended September 30, 2015, declined compared to the prior year because we are currently estimating a higher qualified manufacturing activities deduction based on increased software licenses and subscriptions revenues.

In the past few years a relatively high amount of excess tax benefits related to stock option exercises have resulted in a reduction in our qualified manufacturing activities deduction. The qualified manufacturing activities deduction can be limited to a certain level of taxable income on the tax return. Therefore any significant items that reduce taxable income, such as excess tax benefits on stock options, can reduce the amount of the qualified manufacturing activities deduction. It is possible that significant excess tax benefits related to stock option exercises for the remainder of the year could reduce the qualified manufacturing activities deduction. A reduction in the qualified manufacturing activities deduction could result in a higher effective tax rate. The excess tax benefits for the three and nine months ended September 30, 2015, were $2.0 million and $10.8 million, respectively, and did not materially impact the tax rate.

FINANCIAL CONDITION AND LIQUIDITY

As of September 30, 2015, we had cash and cash equivalents of $238.6 million compared to $206.2 million at December 31, 2014. We also had $29.4 million invested in investment grade corporate and municipal bonds as of September 30, 2015. These investments mature between 2015 and mid-2017 and we intend to hold these investments until maturity. As of September 30, 2015, we had no debt and an outstanding letter of credit totaling $1.5 million in connection with one contract. We do not believe this letter of credit will be required to be drawn upon. This letter of credit expires in mid-2016. We currently believe that cash on hand, cash from operating activities and access to the credit 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 nine months ended September 30:

($ in thousands)	2015			2014
Cash flows provided (used) by:
Operating activities	$	69,913		$	95,131
Investing activities		(59,358	)		(10,252	)
Financing activities		21,892			(6,324	)
Net increase in cash and cash equivalents	$	32,447		$	78,555

Net cash provided by operating activities continues to be our primary source of funds to finance operating needs and capital expenditures. Other capital resources include cash on hand, public and private issuances of debt or equity securities. 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. Excluding acquisitions, we currently believe that cash provided by operating activities, cash on hand and access to the credit markets 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 nine months ended September 30, 2015, operating activities provided cash of $69.9 million. Operating activities that provided cash were primarily comprised of net income of $56.3 million, non-cash depreciation and amortization charges of $11.6 million and non-cash share-based compensation expense of $14.5 million. However, changes in operating assets and liabilities negatively impacted cash from operations due to several factors. Working capital, excluding cash and investments, increased $12.4 million partly due to annual maintenance and subscription billings as well as milestone billings for several contracts. In addition, bonus payments were higher than the prior year period due to 2014 operating results and higher headcount. Tax payments in the nine months ended September 30, 2015 were $17.3 million higher than the prior year period mainly due to timing of utilization of excess tax credits related to stock option exercises and higher taxable income. These increases were offset somewhat by growth in deferred maintenance revenue.

In general, changes in deferred revenue are cyclica l and primarily driven by the timing of our maintenance renewal billings. Our renewal dates occur throughout the year but our heaviest renewal billing cycles occur in the second and fourth quarters. However, we recorded a significant amount of new software license arrangements in 2014, which is a factor in maintenance growth. The related maintenance billings for these new arrangements were processed at various times throughout 2014, rather than on our normal maintenanc e billing cycles which slightly altered our typical deferred revenue cycle. In addition , subscription renewals are billed throughout the year.

Our days sales outstanding (“DSO”) was 77 days at September 30, 2015, compared to 80 days at December 31, 2014 and 78 days at September 30, 2014. DSO is calculated based on quarter-end accounts receivable divided by the quotient of annualized quarterly revenues divided by 360 days.

Investing activities used cash of $59.4 million in the nine months ending September 30, 2015. On January 30, 2015, we made a $15.0 million investment in convertible preferred stock representing a 20% interest in Record Holdings Pty Limited. We also invested $29.4 million in investment grade corporate and municipal bonds maturing between 2015 and mid-2017. On May 29, 2015, we paid $6.1 million in cash, net of cash acquired and including debt assumed, to acquire all of the capital stock of Brazos. The remaining use of cash was for capital expenditures related to computer equipment, furniture and fixtures in support of internal growth, particularly with respect to growth in our cloud-based offerings.

Investing activities in the nine months ended September 30, 2014 used cash of $10.3 million. In August 2014, we completed the acquisition of SoftCode, Inc. and paid approximately $3.2 million, net of cash acquired. The remaining use of cash was comprised primarily of capital expenditures related to computer equipment, furniture and fixtures in support of our internal growth, particularly of with respect to growth in our cloud-based offerings.

These expenditures were funded from cash generated from operations and cash on hand.

Financing activities provided cash of $21.9 million in the nine months ended September 30, 2015 compared to $6.3 million cash used for the same period for 2014. Financing activities in the nine months ended September 30, 2015 were comprised of $11.7 million from stock option exercises and employee stock purchase plan activity and $10.8 million excess tax benefit from exercises of share-based arrangements. We also purchased approximately 5,400 shares of our common stock for an aggregate purchase price of $645,000 in the nine months ended September 30, 2015.

Cash used in financing activities in the nine months ended September 30, 2014 was primarily comprised of purchases of treasury shares, net of proceeds from stock option exercises and contribution from our employee stock purchase plan. We purchased approximately 294,000 shares of our common stock for an aggregate purchase price of $22.8 million and collected $9.8 million from stock option exercises and employee stock purchase plan activity and $6.7 million excess tax benefit from exercises of share-based arrangements.

At September 30, 2015, we had authorization to repurchase up to 1.4 million additional shares of Tyler common stock. The repurchase program, which was approved by our board of directors, was announced in October 2002, and was amended at various times from 2003 through 2011. There is no expiration date specified for the authorization and we intend to repurchase stock under the plan from time to time.

We made federal and state income tax payments of $27.2 million in the nine months ended September 30, 2015, compared to $9.9 million in for the same period in the prior year.

On September 30, 2015, we signed a definitive agreement (the “Merger Agreement”) to acquire privately held NWS for $670.0 million in cash and stock. This transaction is expected to close in the fourth quarter of 2015 and is subject to regulatory approval and customary closing conditions. Under the terms of the agreement, we will acquire all of the equity in NWS for $360.0 million in cash and approximately 2.1 million shares of Tyler's common stock, representing approximately 5.9% of Tyler's outstanding common shares post transaction, subject to customary post-closing adjustments. The cash portion of the purchase price will be funded from cash on hand and proceeds from a new revolving credit facility. In the fourth quarter of 2015, we expect to enter into a credit arrangement that will provide for a revolving credit line of $300.0 million and mature in five years.

Excluding acquisitions, w e anticipate that 2015 capital spending will be between $ 14.0 million and $15.0 million. We expect the majority of our capital expenditures will consist of computer equipment and software for infrastructure replacements and expansion. We currently do not e xpect to capitalize significant amounts related to software development in 2015, but the actual amount and timing of those costs, and whether they are capitalized or expensed may result in additional capitalized software. Capital spending is expected to be funded from existing cash balances and cash flows provided by operations.

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

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. We have no outstanding debt at September 30, 2015 and $29.4 million in investment grade corporate and municipal bonds which mature between 2015 and mid-2017. Due to the short duration of these arrangements we do not believe we have any material interest rate risk.

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 September 30, 2015.

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 September 30, 2015, 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 and except as described in this Quarterly Report, 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 2014 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 September 30, 2015, 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, 2014.

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 3.3		Amended and Restated By-Laws of Tyler Corporation, dated October 20, 2015

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 to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101		Instance Document

Exhibit 101		Schema Document

Exhibit 101		Calculation Linkbase Document

Exhibit 101		Labels Linkbase Document

Exhibit 101		Definition Linkbase Document

Exhibit 101		Presentation Linkbase Document

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: October 21, 2015

Exhibit 3.3

BYLAWS

TYLER TECHNOLOGIES, INC.

(as amended on October 20, 2015)

ARTICLE I

OFFICES

Section 1. Registered Office . The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware or at the office of the person or entity then acting as the corporation’s registered agent in the State of Delaware. The registered office and/or agent may be changed from time to time by resolution of the Board of Directors.

Section 2. Other Offices . The corporation may also have other offices at such other places as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Annual Meetings . The annual meeting of stockholders for the election of directors and the conduct of such other business as may properly come before the meeting in accordance with these Bylaws shall be held at such time and place as the Board of Directors designates and as stated in the notice of the meeting.

Section 2. Special Meetings . Special meetings of the stockholders may be called for any purpose(s) at any time by the Chairman of the Board or by order of the Board of Directors, and shall be called by the Chairman of the Board, Chief Executive Officer, or Secretary at the request in writing of a majority of the Board of Directors. Such request shall state the purpose(s) of the proposed special meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 3. Notice . Written notice of an annual or special meeting, stating the place, date, and hour of the meeting and the purpose(s) for which the meeting is called, shall be given to each stockholder of record entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the meeting. All such notices shall be deemed delivered, either: (a) personally; (b) by mail, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her, or its address as the same appears on the

records of the corporation ; or (c ) by a form of electronic transmission, including electronic mail, in the manner provided in and to the extent permitted by the General Corporation Law of the State of Delaware (the “ Delaware General Corporation Law ”). Any previously scheduled annual meeting of the stockholders may be postponed, and any previously scheduled special meeting of the stockholders may be postponed or cancelled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.

Section 4. Quorum . The holders of stock having a majority of the voting power of the stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders. If a quorum is not present, the chairman of the meeting or the holders of a majority of the voting shares present in person or represented by proxy at the meeting and entitled to vote at the meeting may adjourn the meeting to another time and/or place from time to time. When a quorum is once present to commence a meeting of stockholders, it shall not be broken by the subsequent withdrawal of the stockholders or their proxies.

Section 5. Adjourned Meetings . When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At any such adjourned meeting at which a quorum shall be present or represented, the corporation may transact any business which might have been transacted at the original meeting. Notwithstanding the foregoing, if the adjournment is for more than thirty (30) days or, if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in these Bylaws.

Section 6. Order of Business . The order of business at any meeting of stockholders shall be determined by the Chairman of the Board.

Section 7. New Business at Annual Meetings .

(a) At an annual meeting of stockholders, only such new business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before the annual meeting. For any new business proposed by the Board of Directors to be properly brought before the annual meeting, such new business shall be approved by the Board of Directors and shall be stated in writing and filed with the Secretary of the corporation at least five (5) days before the date of the annual meeting, and all business so approved, stated, and filed shall be considered at the annual meeting.

(b) Any stockholder may make any other proposal at the annual meeting, but unless properly brought before the annual meeting, such proposal shall not be acted upon at the annual meeting. For a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must have given

proper and timely notice thereof in writing to the Secretary of the corporation as specified in these Bylaws. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not later than the date that corresponds to one hundred and twenty ( 120 ) days prior to the date that the corporation’s proxy statement was released to stockholders in connection with the previous year’s annual meeting of stockholders. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting:

(i) a description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting;

(ii) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any other stockholders known by such stockholder to be supporting such proposal;

(iii) the class and number of shares of stock that are held of record, beneficially owned, and represented by proxy on the date of such stockholder notice and on the record date of the meeting (if such date shall have been publicly made available) by the stockholder;

(iv) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of stock of the corporation;

(v) any financial interest of the stockholder in such proposal; and

(vi) all other information that would be required to be filed with the United States Securities and Exchange Commission (the “ SEC ”) if, with respect to any such item of business, such stockholder or stockholders were a participant in a solicitation subject to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “ Exchange Act ”).

(c) The Board of Directors may reject any stockholder proposal not made strictly in accordance with these Bylaws. Alternatively, if the Board of Directors fails to consider the validity of any stockholder proposal, the presiding officer of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that the stockholder proposal was not made in strict accordance with these Bylaws and, if he or she should so determine, he or she shall so declare at the annual meeting, and any such business or proposal not properly brought before the annual meeting shall not be acted upon at the annual meeting. This provision shall not prevent the consideration and approval or

disapproval at the annual meeting of reports of officers, directors, and committees of the Board of Directors, but, in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed, and received as provided in these Bylaws.

Section 8. Stock Records . It shall be the duty of the Secretary or other officer of the corporation who shall have charge of its stock ledger, either directly or through another officer of the corporation designated by him or her, or through a transfer agent appointed by the Board of Directors, to prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders of record entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days before said meeting, either at a place within the city where said meeting is to be held, which place shall be specified in the notice of said meeting, or, if not so specified, at the place where the meeting is to be held. The stock ledger shall constitute the only evidence as to who are the stockholders entitled to examine the stock ledger, such list, or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders.

ARTICLE IIA

VOTING AT MEETINGS OF STOCKHOLDERS

Section 1. Voting Rights . Except as otherwise provided by the Delaware General Corporation Law, the certificate of incorporation of the corporation (the “ Certificate of Incorporation ”), or these Bylaws, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder on the applicable record date as provided in these Bylaws. Shares of its own stock belonging to the corporation shall not be entitled to vote.

Section 2. Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize another person(s) to act for him or her by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy specifically provides for a longer period. Each proxy shall be in writing executed by the stockholder giving the proxy or by his or her duly authorized attorney. Each proxy shall be revocable, unless expressly provided therein to be irrevocable or unless otherwise made irrevocable by law. At each meeting of the stockholders, and before any voting commences, all proxies shall be submitted to and examined by the Secretary or a person designated by the Secretary of the corporation or the secretary of the meeting, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular.

Sec tion 3 . Voting by Stockholders on Matters Other Than the Election of Directors . With respect to any matters as to which no other voting requirement is specified by the Delaware General Corpo ration Law, the Certificate of I ncorporation , or these Bylaws, the affirmative vote required for stockholder action shall be that of a majority of the shares present in person or represented by proxy (as counted for purposes of determining the existence of a quorum) and entitled to vote at a meeting of stockholders at which a quorum is present.

Section 4. Voting by Stockholders in the Election of Directors . Each director to be elected by the stockholders shall be elected by a majority of the votes cast at any meeting held for the purpose of the election of directors at which a quorum is present, subject to the following provisions:

(a) Resignation of Incumbent Director Who Fails to Receive a Majority Vote : In any non-contested election of directors, any director nominee who is an incumbent director who receives a greater number of votes “withheld” from his or her election (or “against” or “no” votes) than votes “for” such election shall immediately tender his or her resignation to the Board of Directors, which resignation shall be irrevocable. Thereafter, the Board of Directors shall decide, through a process managed by the Nominating and Governance Committee (and excluding the nominee in question from all Board of Directors and Committee deliberations), whether to accept such resignation within ninety (90) days of the date of such resignation. Absent a “compelling reason” for the director to remain on the Board of Directors (as determined by the Board of Directors), the Board of Directors shall accept the resignation from the director. To the extent that the Board of Directors determines that there is a “compelling reason” for the director to remain on the Board of Directors and does not accept the resignation, the Board of Directors’ explanation of its decision shall be disclosed promptly in a Current Report on Form 8-K filed with the SEC.

(b) Definition of “Compelling Reason” : For purposes of this Article IIA , Section 4 , a “compelling reason” shall be determined by the Board of Directors (excluding the nominee in question from all Board of Directors and Committee deliberations) and could include, by way of example and without limitation, situations in which a director nominee was the target of a “vote no” or “withhold” campaign on what the Board of Directors believes to be an illegitimate or inappropriate basis or if the resignation would cause the corporation to be in violation of its constituent documents or regulatory requirements.

(c) Consequences of the Board of Directors’ Acceptance or Non-Acceptance of a Director’s Resignation : If such incumbent director’s resignation is accepted by the Board of Directors, then such director shall immediately cease to be a member of the Board of Directors upon the date of action taken by the Board of Directors to accept such resignation. If the incumbent director’s resignation is not accepted by the Board of Directors, such director will continue to serve until the next annual meeting, or until his or her subsequent resignation.

(d) Failure of a Non-Incumbent Director to Win Election : If any nominee for director who is not an incumbent fails in a non-contested election to receive a majority vote for his or her election at any meeting for the purpose of the election of directors at which a quorum is present, such candidate shall not be elected and shall not take office.

(e) Filling Vacancies : If an incumbent director’s resignation is accepted by the Board of Directors pursuant to this Article IIA , Section 4 , or if a non-incumbent nominee for director is not elected, the Board of Directors may fill any resulting vacancy or may decrease the size of the Board of Directors pursuant to the provisions of these Bylaws.

(f) Majority Vote Defined : For purposes of this Article IIA , Section 4 , a majority of votes cast shall mean that the number of shares voted “for” a director’s election exceeds 50% of the total number of votes cast with respect to that director’s election. Votes “cast” shall include votes to withhold authority and votes “against” and “no” votes, but shall exclude abstentions with respect to a director’s election or with respect to the election of directors in general.

(g) Vote Standard in Contested Elections : Notwithstanding anything to the contrary contained in this Article IIA , Section 4 , in the event of a contested election, directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of directors at which a quorum is present. For purposes of this Bylaw, a contested election shall mean any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected, with the determination thereof being made by the Secretary: (i) as of the close of the applicable notice of nomination period set forth in Article III , Section 4 , based on whether one or more notice(s) of nomination were timely filed in accordance with these Bylaws; or (ii) if later, reasonably promptly following the determination by any court or other tribunal of competent jurisdiction that one or more notice(s) of nomination were timely filed in accordance with these Bylaws; provided , however , that the determination that an election is a contested election by the Secretary pursuant to clause (i) or (ii) shall be determinative only as to the timeliness of a notice of nomination and not otherwise as to its validity. If, prior to the time the

corporation mails its initial proxy statement in connection with such election of directors, one or more notices of nomination are withdrawn (or declared invalid or untimely by any court or other tribunal of competent jurisdiction) such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the election shall not be c onsidered a contested election; in all other cases, once an election is determined to be a contested election, directors shall be elected by the vote of a plurality of the votes cast.

Section 5. Inspector of Votes . The chairman of the meeting may appoint up to two inspectors of votes to act at each meeting of stockholders, unless the Board of Directors previously made such appointments. Each inspector of votes shall first subscribe an oath or affirmation faithfully to execute the duties of an inspector of votes at a meeting with strict impartiality and according to the best of his or her ability. Such inspector of votes, if any, shall take charge of the ballots, if any, at the meeting, and after the balloting on any question, shall count the ballots cast and shall make a report to the secretary of the meeting of the results. An inspector of ballots need not be a stockholder of the corporation, and any officer of the corporation may be an inspector of votes on any question other than a vote for or against his or her election to any position with the corporation or on any other question in which he or she may be directly interested.

ARTICLE III

BOARD OF DIRECTORS

Section 1. General Powers . The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, which shall have and may exercise all powers of the corporation and take all lawful acts as are not by statute, the Certificate of Incorporation, or these Bylaws directed or required to be exercised or taken by the stockholders.

Section 2. Number, Qualification, and Term of Office . The number of directors that shall constitute the Board of Directors shall be established from time to time by a vote of a majority of the entire Board of Directors; provided, however, that the number of directors shall be no fewer than three (3) and no more than fifteen (15). Except as provided in Section 5 of this Article III , the Board of Directors shall be elected at the annual meeting of the stockholders by written ballot and each director elected shall hold office until the next annual meeting of stockholders or until a successor is duly elected and qualified or until his or her earlier resignation or removal as hereinafter provided.

Section 3. Resignation . Any director may resign at any time upon written notice to the corporation. Such written resignation shall take effect at the time specified therein, and if no time is specified, immediately upon receipt by the corporation. Unless

otherwise specified in the notice, acceptance of a resignation shall not be necessary to make it effective.

Section 4. Nominations .

(a) Only persons nominated in accordance with this Article III , Section 4 , shall be eligible for election to the Board of Directors.

(b) If a person is to be elected to the Board of Directors because of an existing vacancy, nomination shall be made only by the entire Board of Directors or the Nominating and Governance Committee. The entire Board of Directors or the Nominating and Governance Committee shall also make nominations for the directors to be elected by the stockholders of the corporation at an annual meeting of the stockholders as provided in these Bylaws.

(c) Nominations of individuals for election to the Board of Directors at an annual meeting of stockholders may be made by any stockholder of the corporation entitled to vote for the election of directors at that meeting who complies with the procedures set forth in this Article III , Section 4 . To be timely, a stockholder’s notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than seventy-five (75) days prior to the date of the annual meeting of stockholders nor more than eighty-five (85) days prior to the date of such annual meeting; provided, however, that if less than seventy-five (75) days’ notice or prior public disclosure of the date of the annual meeting is given or made, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the tenth (10 ^th ) day following the earlier of (i) the day on which such notice of the date of the annual meeting was mailed or (ii) the day on which such public disclosure was made. Such stockholder’s notice shall set forth:

(i) as to each person whom the stockholder proposes to nominate for election or re-election to the Board of Directors:

(A) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitations of proxies for election of directors in a contested election pursuant to the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and

(B) a description of all direct and indirect compensation and other material monetary agreements, arrangements, and understandings during the past three (3) years, and any other

material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

(ii) as to the stockholder giving notice:

(A) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any other stockholders known by such stockholder to be supporting such proposal;

(B) the class and number of shares of stock that are held of record, beneficially owned, and represented by proxy on the date of such stockholder notice and on the record date of the meeting (if such date shall have been publicly made available) by the stockholder; and

(C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of stock of the corporation.

The Board of Directors may reject any nomination by a stockholder not made in strict compliance with the terms of this Article III , Section 4 . Alternatively, if the Board of Directors fails to consider the validity of any nominations by a stockholder, the presiding officer of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in strict accordance with the terms of this Article III , Section 4 , and, if he should so determine, he shall so declare at the annual meeting and the defective nomination shall be disregarded.

Section 5. Vacancies . Vacancies and newly created directorships resulting from any increase in the authorized number of directors may only be filled by (a) a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, or (b) the vote of the stockholders at an annual meeting of stockholders. Each director

so chosen shall hold office until the next annual meeting of stockholders , or until a successor is duly elected and qualified , or until his or her earlier resignation . If there are no directors in office, then an election of directors may be held as provided by statute.

MEETINGS OF BOARD OF DIRECTORS

Section 6. Time and Place of Meeting . The Board of Directors may hold meetings, both regular and special, at such times and places as it determines.

Section 7. Annual Meetings . The annual meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders, and no notice of such meeting to the newly elected directors shall be necessary in order to legally constitute the meeting, provided a quorum is present. If such meeting is not held immediately following the annual meeting of stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

Section 8. Regular Meetings and Notice . Regular meetings of the Board of Directors may be held without notice.

Section 9. Special Meetings and Notice . Special meetings of the Board of Directors may be called (a) by the Chairman of the Board on at least twenty-four (24) hours prior notice to each director, or (b) upon the request of at least one-third of the directors, by the Secretary on at least twenty-four (24) hours prior notice to each director. Notice may be given either personally, by telephone, by mail, by telecopy, or by e-mail. Notice need not be given to any director if waived by him or her in accordance with these Bylaws, or if he or she shall be present at the meeting.

Section 10. Chairman of the Board; Lead Director . The Chairman of the Board shall be appointed by resolution of the Board of Directors and shall preside at all meetings of the Board of Directors. If the Chairman of the Board is not considered by the Board of Directors to be an independent director, the independent directors will elect one to serve as Lead Director. The Lead Director, if any, will chair meetings of independent directors, will facilitate communications between other members of the Board of Directors and the Chairman of the Board, and will assume other duties that the independent directors as a whole may designate from time to time.

Section 11. Quorum, Required Vote, and Adjournment . At all meetings of directors, fifty percent (50%) of the total number of directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting in which a quorum is present shall be the act of the Board of Directors, except as otherwise provided by Delaware General Corporation Law or by the Certificate of Incorporation or these Bylaws. If a quorum shall not be present at any meeting of the

Board of Directors , the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 12. Remuneration . The Board of Directors shall have the authority to fix the compensation of directors by written resolution. The Board of Directors may also provide that the corporation shall reimburse each director for any expenses paid by him or her for attendance at any meeting. Nothing herein shall be construed to preclude any director from serving the corporation in any other capacity as an officer, employee, agent, or otherwise, and receiving compensation therefor.

COMMITTEES OF DIRECTORS

Section 13. Committees of the Board . The corporation shall have the following committees: (a) Audit Committee; (b) Compensation Committee; and (c) Nominating and Governance Committee. Each committee shall consist of at least a majority of independent directors as required by the rules and regulations of the New York Stock Exchange, any other exchange on which the Company’s securities are traded, the Exchange Act, and other rules and regulations promulgated by the SEC. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate other committees, and each such other committee shall consist of two or more of the directors of the corporation. Such committee or committees (including the members thereof) shall serve at the pleasure of the Board of Directors and have such name or names and have as many members as may be determined from time to time by resolution adopted by the Board of Directors. Any member of the Board of Directors may participate in the meetings of any such committee, subject to the approval of the chairman of such committee. The Board of Directors shall adopt a charter for each committee it designates (other than special committees), and each committee shall assess the adequacy of such charter annually and recommend any changes to the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

Section 14. Quorum and Voting . At any meeting of a committee, a majority of the members of the committee shall constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of a committee.

GENERAL

Section 15. Written Consent . Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmissions are filed with the minutes of proceedings of the

Board of Directors or committee.

Section 16. Presence at Meetings by Means of Communications Equipment . Members of the Board of Directors or any committee thereof may participate in and act at any meeting of the Board of Directors or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute attendance and presence in person at the meeting of the person or persons so participating.

ARTICLE IV

NOTICE

Section 1. Notice . Whenever a notice is required to be given to any director or stockholder by any provision of law, these Bylaws, or the Certificate of Incorporation, the requirement shall not be construed to mean personal notice, but such notice may be given in writing, in person, or by mail, addressed to such director or stockholder at his or her address as it appears on the records of the corporation, with postage paid thereon, and such notice shall be deemed to be given at the time when it shall be deposited in the United States mail. Notice to stockholders and directors may also be given in any manner permitted by these Bylaws and shall be deemed to be given at the time when first transmitted by the method of communication so permitted.

Section 2. Waiver of Notice . Whenever a notice is required to be given by any provision of law, these Bylaws, or the Certificate of Incorporation, a written waiver, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the sole and express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Section 3. Authorized Notices . Unless otherwise specified in these Bylaws, the Secretary or such other person(s) as the Chairman of the Board designates shall be authorized to give notices for the corporation.

ARTICLE V

OFFICERS

Section 1. Positions . The officers of the corporation may consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (who may be designated as Corporate Vice Presidents, Senior Vice Presidents, Executive Vice

Presidents, or Group Vice Presidents), a Secretary, and a Treasurer as appointed by t he Board of Directors or Chief Executive Officer . The corporation may have such additional or assistant officers (sometimes referred to as “additional officers”) as the Board of Directors or Chief Executive Officer may deem necessary for its business from time to time. The Board of Directors shall also have the authority to designate officers as the Chief Financial Officer, Chief Operating Officer, Controller, or similar such titles. Any two or more offices may be held by the same person .

Section 2. Appointment . The officers of the corporation may be appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders or at any other time. At any time and from time to time the Board of Directors may delegate to any officer their power to appoint any other officer or agent.

Section 3. Chairman and Vice Chairman of the Board . The Chairman of the Board shall preside, when present, at all meetings of the Board of Directors. The Chairman shall advise and counsel the Chief Executive Officer and other officers of the corporation, and shall exercise such powers and perform such duties that shall be assigned to or required of him or her by the Board of Directors. The Chairman of the Board may be an executive officer of the corporation. The Vice Chairman of the Board, if any is elected or appointed, shall assume the duties and powers of the Chairman of the Board in his or her absence and shall otherwise have such duties and powers as shall be designated from time to time by the Board of Directors.

Section 4. Chief Executive Officer . The Chief Executive Officer shall have general charge and supervision of the business of the corporation, shall see that all orders, actions, and resolutions of the Board of Directors are carried out, and shall have such other authority and shall perform such other duties as set forth in these Bylaws or, to the extent consistent with these Bylaws, such other authorities and duties prescribed by the Board of Directors. The Chief Executive Officer shall have the power to execute any and all instruments and documents on behalf of the corporation and to delegate to any other officer of the corporation the power to execute any and all such instruments and documents.

Section 5. Secretary and Assistant Secretary . The Secretary shall record all proceedings of the stockholders, of the Board of Directors, and of committees of the Board of Directors in a book or series of books to be kept therefor and shall file therein all writings of or related to action by stockholder or director consent. In the absence of the Secretary from any meeting, an Assistant Secretary, or if there be none or he or she is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed, the Secretary shall keep or cause to be kept the stock and transfer records of the corporation, which shall contain the names and record addresses of all stockholders and the number of shares registered in the name of each stockholder. He or she shall have such other duties and powers as

designated by the Board of Directors or the Chief Executive Officer. Any Assistant Secretaries shall have such duties and powers as designated by the Board of Directors, the Chief Executive Officer, or the Secretary.

Section 6. Treasurer and Assistant Treasurer . Except as otherwise voted by the Board of Directors, the Treasurer shall be the Chief Financial Officer of the corporation and shall be in charge of its funds and valuable papers, and shall have such other duties and powers as designated by the Board of Directors or Chief Executive Officer. Any Assistant Treasurers shall have such duties and powers as designated by the Board of Directors, Chief Executive Officer, or Treasurer.

Section 7. Authority and Duties of Other Officers . Subject to the Delaware General Corporation Law, the Certificate of Incorporation, and to the other provisions of these Bylaws, each officer shall have, in addition to the duties and powers set forth in this Article V , such duties and powers as are commonly incident to such office and such additional duties and powers as prescribed by the Board of Directors, the Chief Executive Officer, or by an officer authorized by the Board of Directors to prescribe the duties of such officer. Any designation of duties by the Chief Executive Officer or other officer shall be subject to the review by the Board of Directors but shall be in full force and effect in the absence of such review.

Section 8. Term of Office . Each officer shall hold office until a successor shall have been appointed and qualified or until his or her earlier death, resignation, or removal.

Section 9. Compensation and Contract Rights . The Board of Directors shall have the authority to (a) fix the compensation, whether in the form of salary, bonus, stock options, stock awards, or otherwise, of all officers and employees of the corporation, either specifically or by formula applicable to particular classes of officers or employees, and (b) authorize officers of the corporation to fix the compensation of subordinate employees; provided, however, that the Compensation Committee shall fix the compensation of the “Named Executive Officers” as defined by the Exchange Act. The appointment of an officer shall not of itself create contract rights.

Section 10. Resignation or Removal . Any officer of the corporation may resign at any time by giving written notice to the Board of Directors. Any such resignation shall be effective when the notice is given, unless the notice specifies a later date, and shall be without prejudice to the contract rights, if any, of the officer. The Board of Directors may, by majority vote, remove any officer, with or without cause. An officer duly appointed by the Chief Executive Officer or other officer may be removed by such appointing officer. The removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 11 . Vacancies . If any office becomes vacant by any reason, the Board of Directors may (a) appoint a successor or successors who shall hold office for the unexpired term or (b) leave such office vacant.

Section 12. Reservation of Authority . All other powers not expressly delegated or provided for herein, or in the Delaware General Corporation Law, to any officer are expressly reserved to the Board of Directors and may be delegated by it to any officer by resolution adopted from time to time by the Board of Directors.

ARTICLE VI

INDEMNIFICATION

Section 1. Damaged and Expenses . To the full extent permitted by law, the corporation shall indemnify and pay the expenses of any party who is or was made, or threatened to be made, a party to any action or proceeding (whether civil, criminal, administrative, or investigative) by reason of the fact that he or she is or was a director, officer, or employee of the corporation or served any other corporation, trust, or enterprise in any capacity at the request of the corporation.

Section 2. Prepaid Expenses . Expenses incurred in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding, as authorized by the Board of Directors.

Section 3. Insurance . The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under this Article VI .

Section 4. Merger or Consolidation . For purposes of this Article VI , references to “the corporation” shall include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, or agents, so that any person who is or was a director, officer, employee, or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this Article VI with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

ARTICLE VII

CERTIFICATES OF STOCK

Section 1. Right to Certificate . Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman of the Board or the Chief Executive Officer, and by the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by such stockholder. If the corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, and preferences and relative, participating, option, or other special rights of each class of stock or series thereof, and the qualifications, limitations, or restrictions of such preferences or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that except as otherwise provided in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the corporation will issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences, and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of such preferences or rights.

Section 2. Electronic or facsimile signatures . Any or all of the signatures on the certificate may be electronic or facsimile. In case any officer, transfer agent, or registrar who has signed or whose electronic or facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.

Section 3. New Certificates . The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to indemnify the corporation or to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft, or destruction of any such certificate or the issuance of such new certificate.

Section 4. Transfers . Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation, or authority to transfer, it shall be the duty of the

corporation, subject to any proper restrictions on transfer, to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books.

Section 5. Registered Stockholders . The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share(s) on the part of any other person, whether or not provided by the Delaware General Corporation Law.

ARTICLE VIII

GENERAL PROVISIONS

Section 1. Dividends . Dividends upon the capital stock of the corporation, if any, may be declared by the Board of Directors pursuant to law. Dividends may be paid in cash, in property, or in shares of capital stock or other securities.

Section 2. Reserves . Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum(s) as the Board of Directors from time to time, in their absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

Section 3. Checks . All checks or demands for money and promissory notes of the corporation shall be signed by such officer(s) or such other person(s) as the Board of Directors may prescribe from time to time.

Section 5. Fiscal Year . The fiscal year of the corporation shall be determined by the Board of Directors.

Section 6. Corporate Seal . The Board of Directors may provide a corporate seal, which shall be in the form of a circle and shall have inscribed thereon the name of the corporation, the year of its organization, and the words “Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed, affixed, reproduced, or otherwise.

Section 7. Certificate of Incorporation . These Bylaws are subject to the terms of the Certificate of Incorporation.

ARTICLE I X

AMENDMENTS

These Bylaws may be amended, altered, or repealed or new bylaws adopted only in accordance with the Certificate of Incorporation and any other requirements specified in these Bylaws.

Exhibit 31.1

CERTIFICATION

I, John S. Marr Jr., certify that:

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

Based on my knowledge, this quarterly 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 period presented in this report;

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 financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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 consolidated divisions, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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;

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

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 third 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 registrant’s board of directors (or persons performing the equivalent function):

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

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.

Dated: October 21, 2015	By:	/s/ John S. Marr Jr.
		John S. Marr Jr.
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Brian K. Miller, certify that:

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

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 period presented in this report;

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 registrant’s board of directors (or persons performing the equivalent function):

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.

Dated: October 21, 2015	By:	/s/ Brian K. Miller
		Brian K. Miller
		Executive Vice President and Chief Financial Officer

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

John S. Marr 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:

The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

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

By:	/s/ John S. Marr Jr.
	John S. Marr Jr.
	President and Chief Executive Officer
By:	/s/ Brian K. Miller
	Brian K. Miller
	Executive Vice President and Chief Financial Officer

Dated: October 21, 2015

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.