What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 162 added, 173 removed, 441 unchanged (43% of the section changed)

2 unchanged sentences

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would,” or the negative or plural of these words or similar expressions or variations, including statements regarding our expectations regarding customer renewals and our future financial and operating performance, anticipated expansion of the usage of partners to perform professional services, the increase of our subscriptions revenue as a percentage of total revenue, the fluctuation of gross margin on a quarterly basis, our future capital requirements, and our ability to meet our financial covenants under our Credit Agreement.

These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would,” or the negative or plural of these words or similar expressions or variations, including statements regarding our expectations regarding customer renewals and our future financial and operating performance, expansion of the usage of partners to perform professional services, the increase of our subscriptions revenue as a percentage of total revenue, the fluctuation of gross margin on a quarterly basis, our future capital requirements, and our ability to meet our financial covenants under our Credit Agreement.

Such forward-looking statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements.

80 unchanged sentences

Generally, our sales team targets its efforts at organizations with over 2,000 employees and $2 billion in annual revenue.

For the three and six months ended June 30, 2025, revenue generated from government agencies represented 34.1% and 33.8%, respectively, of total revenue, of which revenue from U.S.

federal government agencies was 25.9% and 24.9% of total revenue in each period.

For the three and six months ended June 30, 2024, revenue generated from government agencies represented 31.4% and 30.4%, respectively, of total revenue, of which revenue from U.S.

For the three and nine months ended September 30, 2025, revenue generated from government agencies represented 32.4% and 33.3%, respectively, of total revenue, of which revenue from U.S.

federal government agencies was 25.0% and 24.9% of total revenue, respectively.

For the three and nine months ended September 30, 2024, revenue generated from government agencies represented 31.0% and 30.6%, respectively, of total revenue, of which revenue from U.S.

federal government agencies was 23.2% and 22.5% of total revenue, respectively.

We offer our platform globally.

Our platform supports multiple languages to facilitate collaboration and address challenges in multinational organizations.

In the three and six months ended June 30, 2025, 38.4% and 37.3%, respectively, of our total revenue was generated from customers outside of the United States as compared to 38.2% and 37.7% in the three and six months ended June 30, 2024, respectively.

As of June 30, 2025, we operated in 16 countries.

In the three and nine months ended September 30, 2025, 39.7% and 38.2%, respectively, of our total revenue was generated from customers outside of the United States as compared to 36.3% and 37.2% in the three and nine months ended September 30, 2024, respectively.

As of September 30, 2025, we operated in 16 countries.

We believe we have a significant opportunity to continue to grow our international footprint, and we are investing in new geographies, including through investment in direct and indirect sales channels, professional services, and customer support and implementation partners.

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Over time, we expect a large portion of our customers to renew their subscriptions and purchase additional subscriptions as they continue to build more applications and add more users to our platform.

Over the last three completed fiscal years, we had an average cloud subscriptions gross renewal rate of 99%.

Over the last three years, we had a quarterly average cloud subscriptions gross renewal rate of 98%.

We calculate our cloud subscriptions gross renewal rate by dividing (i) the cloud subscriptions revenue from renewing cloud customers in the current 12-month period that were cloud customers during the entirety of the prior 12-month period, by (ii) our cloud subscriptions revenue from all cloud customers in the corresponding prior 12-month period that were cloud customers during the entirety of such prior 12-month period.

23 unchanged sentences

Cloud Subscriptions Revenue

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 % Change 2025 2024 % Change

5 unchanged sentences

Cloud Subscriptions Revenue Retention Rate

As of June 30,

As of September 30,

Cloud subscriptions revenue retention rate

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the mix of total subscriptions revenue and professional services revenue, subscription pricing, the costs associated with third-party hosting providers, and the extent to which we expand or reduce our professional services to support future changes in our growth.

Our gross margin may fluctuate from period to period based on the above factors.

Our gross margin may fluctuate from period to period based on the aforementioned factors.

Subscriptions Gross Margin

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In 2025, we expect general and administrative expense to increase in absolute dollars largely due to investments in our information technology team.

Other Non-Operating (Income) Expense

Other (Income) Expense, Net

Other (income) expense, net consists primarily of gains and losses related to changes in foreign currency exchange rates, interest income on our cash and cash equivalents and investments, and other sources of income or expense not related to our core business operations.

Other Non-Operating Expense (Income)

Other Income, Net

Other income, net consists primarily of gains and losses related to changes in foreign currency exchange rates, interest income on our cash and cash equivalents and investments, and other sources of income or expense not related to our core business operations.

Interest Expense

2 unchanged sentences

The following table sets forth our consolidated statements of operations (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

12 unchanged sentences

Total operating expenses 128,597 124,125 394,642 401,729

Operating loss (10,984) (39,194) (11,818) (58,729)

Other non-operating (income) expense

Other (income) expense, net (17,564) (1,545) (23,280) 6,662

Operating income (loss) 13,114 (7,157) 1,296 (65,886)

Other non-operating expense (income)

Other income, net

(1,398) (12,544) (24,678) (5,882)

Interest expense 5,311 6,168 15,948 17,921

Total other non-operating (income) expense (12,245) 4,562 (12,643) 18,415

Total other non-operating expense (income) 3,913 (6,376) (8,730) 12,039

Income (loss) before income taxes

9,201 (781) 10,026 (77,925)

Income tax expense (benefit) 1,573 (164) 2,314 (629)

Net loss $ (312) $ (43,592) $ (1,489) $ (76,515)

Income tax expense 1,376 1,319 3,690 690

Net income (loss) $ 7,825 $ (2,100) $ 6,336 $ (78,615)

The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

14 unchanged sentences

68.8 80.6 75.3 89.2

Operating loss (6.4) (26.8) (3.5) (19.8)

Other non-operating (income) expense

Other (income) expense, net (10.3) (1.1) (6.9) 2.2

Operating income (loss)*

7.0 (4.6) 0.2 (14.6)

Other non-operating expense (income)

Other income, net

(0.7) (8.1) (4.7) (1.3)

Interest expense 2.8 4.0 3.0 4.0

Total other non-operating (income) expense*

Total other non-operating expense (income)

2.1 (4.1) (1.7) 2.7

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4.9 (0.5) 1.9 (17.3)

Income tax expense (benefit) 0.9 (0.1) 0.7 (0.2)

Income tax expense 0.7 0.9 0.7 0.2

Net income (loss)

4.2 % (1.4) % 1.2 % (17.5) %

* Totals may not foot due to rounding.

Comparison of the Three Months Ended June 30, 2025 and 2024

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

2025 2024 $ Change % Change

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Total revenue $ 187,004 $ 154,052 $ 32,952 21.4 %

Total revenue increased $24.2 million, or 17%, in the three months ended June 30, 2025 compared to the same period in 2024 due to an increase in our subscriptions revenue of $19.7 million coupled with an increase in our professional services revenue of $4.5 million.

The increase in subscriptions revenue was driven by an $18.5 million increase in cloud subscriptions revenue, a $0.5 million increase in term license subscriptions revenue, and a $0.7 million increase in maintenance and support revenue.

With respect to new versus existing customers, there was an $11.3 million increase in subscriptions revenue from sales to new customers, while the remaining $8.4 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

The increase in professional services revenue was due

primarily to a $6.1 million increase in revenue from sales to new customers customers, which was partially offset by a $1.6 million decrease in sales to existing customers.

Total revenue increased $33.0 million, or 21%, in the three months ended September 30, 2025 compared to the same period in 2024 due to an increase in our subscriptions revenue of $24.1 million coupled with an increase in our professional services revenue of $8.9 million.

The increase in subscriptions revenue was driven by a $19.5 million increase in cloud subscriptions revenue, a $3.5 million increase in term license subscriptions revenue, and a $1.0 million increase in maintenance and support revenue.

With respect to new versus existing customers, there was a $6.3 million increase in subscriptions revenue from sales to new customers, while the remaining $17.8 million

of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

The increase in professional services revenue was due primarily to a $6.5 million increase in revenue from sales to new customers along with a $2.4 million increase in sales to existing customers.

Cost of Revenue

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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Total gross margin 75.8 % 75.9 %

Cost of revenue increased $4.5 million, or 11%, in the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $3.4 million increase in hosting costs coupled with a $2.0 million increase in contractor costs.

These increases were partially offset by a $0.9 million decrease in professional services and product support personnel costs.

Hosting costs increased due to an increase in sales of our cloud offering during the three months ended June 30, 2025, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Professional services and product support personnel costs decreased due to a decrease headcount of 8% from June 30, 2024 to June 30, 2025.

Cost of revenue increased $8.2 million, or 22%, in the three months ended September 30, 2025 compared to the same period in 2024, primarily due to a $3.1 million increase in hosting costs coupled with a $2.5 million increase in contractor costs and a $2.2 million increase in professional services and product support personnel costs.

Hosting costs increased due to an increase in sales of our cloud offering during the three months ended September 30, 2025, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Professional services and product support personnel costs increased due to an increase in headcount from September 30, 2024 to September 30, 2025.

Sales and Marketing Expense

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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% of revenue 27.8 % 33.0 %

Sales and marketing expense decreased $6.1 million, or 9%, in the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $5.0 million decrease in sales and marketing personnel costs and a $0.7 million decrease in marketing expenses.

This decrease was partially offset by a $0.4 million increase in contractor costs.

Sales and marketing personnel costs decreased due to a decrease in sales and marketing headcount of 25% from June 30, 2024 to June 30, 2025.

Marketing expenses decreased due to reduced spending on marketing events and digital marketing.

Sales and marketing expense increased $1.1 million, or 2%, in the three months ended September 30, 2025 compared to the same period in 2024, primarily due to a $1.3 million increase in marketing expenses and a $1.2 million increase in sales and marketing personnel costs.

These increases were partially offset by a $1.0 million decrease in contractor costs.

Although sales and marketing headcount decreased from September 30, 2024 to September 30, 2025, overall sales and marketing personnel costs increased due to higher bonuses and commissions expense.

Research and Development Expense

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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% of revenue 21.5 % 25.0 %

Research and development expense increased $0.9 million, or 2%, in the three months ended June 30, 2025 compared to the same period in 2024.

This change is primarily attributable to a $1.0 million increase in research

and development personnel costs, which was partially offset by a $0.3 million decline in contractor costs.

Although research and development headcount remained consistent period over period, overall personnel costs increased due to higher bonus expense and a $0.4 million increase in stock compensation expense.

Contractor costs decreased due to lower third-party consulting fees.

Research and development expense increased $1.7 million, or 4%, in the three months ended September 30, 2025 compared to the same period in 2024.

This change is primarily attributable to a $1.0 million increase in research and development personnel costs and a $0.5 million increase in information technology costs.

Although research and development headcount remained relatively consistent period over period, overall personnel costs increased due to higher bonus expense, while information technology costs increased primarily due to a $0.4 million increase in cloud computing services spend.

General and Administrative Expense

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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% of revenue 19.5 % 22.5 %

General and administrative expense decreased $3.3 million, or 8%, in the three months ended June 30, 2025 compared to the same period in 2024 primarily due to a $5.0 million decrease in rent expense.

In addition, insurance expense decreased $1.3 million due to lower amortization expense associated with our JPI policy.

These decreases were partially offset by increases of $1.2 million in professional fees and $1.0 million in general and administrative personnel costs.

Rent expense decreased due to $5.5 million of lease impairment charges recorded in the prior year period, with no such charges occurring in the current year.

Professional fees increased primarily due to a $1.8 million increase in litigation-related expenses attributable to the Pegasystems legal case.

Although general and administrative headcount was down 5% from June 30, 2024 to June 30, 2025, personnel costs increased due to higher bonus expense and a $0.5 million increase in stock compensation expense.

General and administrative expense increased $1.7 million, or 5%, in the three months ended September 30, 2025 compared to the same period in 2024 primarily due to a $1.3 million increase in general and administrative personnel costs and a $1.0 million increase in rent expense.

These increases were partially offset by a $0.8 million decrease in insurance expense.

Personnel costs increased due to an increase in headcount from September 30, 2024 to September 30, 2025 coupled with higher bonus expense and a $0.6 million increase in stock compensation expense.

Rent expense increased due to $0.8 million of lease impairment charges.

Insurance expense decreased due to a $0.5 million decrease in amortization of the judgment preservation insurance policy.

Other Income, Net

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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% of revenue (0.7) % (8.1) %

*** Indicates a percentage that is not meaningful.

Other income, net was $17.6 million in the three months ended June 30, 2025 compared to other income, net of $1.5 million in the three months ended June 30, 2024.

This change was primarily due to $15.6 million in foreign exchange gains in the three months ended June 30, 2025 as compared to $0.2 million in foreign exchange losses in the three months ended June 30, 2024.

Other income, net was $1.4 million in the three months ended September 30, 2025 compared to other income, net of $12.5 million in the three months ended September 30, 2024.

This change was primarily due to $0.3 million in foreign exchange losses in the three months ended September 30, 2025 as compared to $9.2 million in foreign exchange gains in the three months ended September 30, 2024, in addition to a $1.8 million decrease in other income attributable to short-swing profit disgorgement payments to us from a public stockholder of our Class A common stock during the three months ended September 30, 2024.

Interest Expense

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 2.8 % 4.0 %

Interest expense decreased by $0.8 million in the three months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to a lower effective interest rate and lower outstanding principal compared to the prior year period.

Income Tax Expense (Benefit)

Three Months Ended June 30,

Interest expense decreased by $0.9 million in the three months ended September 30, 2025 as compared to the corresponding period in 2024 primarily due to a lower effective interest rate and lower outstanding principal compared to the prior year period.

Income Tax Expense

Three Months Ended September 30,

2025 2024 $ Change % Change

(dollars in thousands)

Income tax expense (benefit)

$ 1,573 $ (164) $ 1,737 ***

0.9 % (0.1) %

*** Indicates a percentage that is not meaningful.

Income tax expense increased by $1.7 million in the three months ended June 30, 2025 as compared to the corresponding period in 2024.

This change was primarily driven by increased pre-tax book income in certain international subsidiaries for the three months ended June 30, 2025.

The change in pre-tax book income was primarily attributable to increases in unrealized foreign exchange gains.

Comparison of the Six Months Ended June 30, 2025 and 2024

Six Months Ended June 30,

Income tax expense $ 1,376 $ 1,319 $ 57 4.3 %

Income tax expense increased by $0.1 million in the three months ended September 30, 2025 as compared to the corresponding period in 2024.

This change was primarily driven by increased pre-tax book income in certain international subsidiaries for the three months ended September 30, 2025.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended September 30,

2025 2024 $ Change % Change

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Total revenue $ 524,070 $ 450,337 $ 73,733 16.4 %

Total revenue increased $40.8 million, or 14%, in the six months ended June 30, 2025 compared to the same period in 2024 due to an increase in our subscriptions revenue of $36.3 million as well as an increase in our professional services revenue of $4.4 million.

Total revenue increased $73.7 million, or 16%, in the nine months ended September 30, 2025 compared to the same period in 2024 due to an increase in our subscriptions revenue of $60.4 million as well as an increase in our professional services revenue of $13.3 million.

The increase in subscriptions revenue was driven by a $51.2 million increase in cloud subscriptions revenue, a $7.2 million increase in term license subscriptions revenue, and a $2.0 million increase in maintenance and support revenue.

With respect to new versus existing customers, there was an $18.5 million increase in subscriptions revenue from sales to new customers, while the remaining $17.8 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

With respect to new versus existing customers, there was a $15.1 million increase in subscriptions revenue from sales to new customers, while the remaining $45.3 million of the increase was attributable to expanded deployments, price increases on renewals, and corresponding sales of additional subscriptions to existing customers.

The increase in professional services revenue was due primarily to a $15.3 million increase in revenue from sales to new customers, which was partially offset by a $2.0 million decrease in sales to existing customers.

Cost of Revenue

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

7 unchanged sentences

Total gross margin 75.6 % 74.6 %

Cost of revenue increased $5.4 million, or 7%, in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $5.8 million increase in hosting costs coupled with a $2.4 million increase in

contractor costs.

Cost of revenue increased $13.6 million, or 12%, in the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to a $8.8 million increase in hosting costs coupled with a $4.9 million increase in contractor costs.

These increases were partially offset by a $0.3 million decrease in professional services and product support personnel costs.

Hosting costs increased due to an increase in sales of our cloud offering during the six months ended June 30, 2025, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Professional services and product support personnel costs decreased due to a decrease in cost of sales headcount of 8% from June 30, 2024 to June 30, 2025.

Hosting costs increased due to an increase in sales of our cloud offering during the nine months ended September 30, 2025, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Although professional services and product support headcount increased from September 30, 2024 to September 30, 2025, overall personnel costs decreased due to a $1.4 million decrease in severance expense as compared to the prior year.

Sales and Marketing Expense

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 31.9 % 39.0 %

Sales and marketing expense decreased $9.7 million, or 8%, in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $7.3 million decrease in sales and marketing personnel costs, a $1.6 million decrease in allocated costs such as rent and employee medical costs, and a $0.7 million decrease in marketing expenses.

These decreases were partially offset by a $0.7 million increase in travel and entertainment costs and a $0.6 million increase in contractor costs.

Sales and marketing personnel costs decreased due to a decrease in sales and marketing headcount of 25% from June 30, 2024 to June 30, 2025.

Travel and entertainment expense increased due to a higher number of in-person events and engagements relative to the prior year, while the increase in contractor costs was attributable to an increase in third-party consulting fees.

Sales and marketing expense decreased $8.7 million, or 5%, in the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to a $6.1 million decrease in sales and marketing personnel costs, and a $1.5 million decrease in information technology spend.

These decreases were partially offset by a $1.3 million increase in travel and entertainment costs.

Sales and marketing personnel costs decreased due to a decrease in sales and marketing headcount from September 30, 2024 to September 30, 2025.

Information technology costs declined largely due to lower cloud computing expense.

Travel and entertainment expense increased due to a higher number of in-person events and engagements relative to the prior year.

Research and Development Expense

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 22.9 % 26.2 %

Research and development expense increased $0.6 million, or 1%, in the six months ended June 30, 2025 compared to the same period in 2024.

This change is primarily attributable to a $0.6 million increase in research and development personnel costs.

Although research and development headcount remained consistent period over period, overall personnel costs increased due to higher stock compensation and severance expense, offset by a reduction in salaries expense.

Research and development expense increased $2.3 million, or 2%, in the nine months ended September 30, 2025 compared to the same period in 2024.

This change is primarily attributable to a $1.6 million increase in

research and development personnel costs and a $1.5 million increase in information technology costs.

Although research and development headcount remained consistent period over period, overall personnel costs increased due to higher bonus expense and stock compensation, partially offset by a reduction in salaries expense.

Information technology costs increased primarily due to higher spend on cloud computing services and computer software.

General and Administrative Expense

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

3 unchanged sentences

% of revenue 20.5 % 24.1 %

General and administrative expense decreased $2.5 million, or 3%, in the six months ended June 30, 2025 compared to the same period in 2024 primarily due to a $4.5 million decrease in rent expense.

In addition, insurance expense decreased $2.7 million due to lower amortization expense associated with our judgment preservation insurance policy.

These decreases were partially offset by increases of $1.8 million in professional fees, $1.2 million in information technology spending, and $0.7 million in general and administrative personnel costs.

Rent expense decreased due to $5.5 million of lease impairment charges recorded in the prior year period, with no

such charges occurring in the current year.

Professional fees increased primarily due to a $2.7 million increase in litigation-related expenses attributable to the Pegasystems legal case.

Other (Income) Expense, Net

Six Months Ended June 30,

General and administrative expense decreased $0.7 million, or 1%, in the nine months ended September 30, 2025 compared to the same period in 2024 primarily due to a $3.5 million decrease in rent expense and a $3.5 million decrease in insurance expense driven by lower amortization expense associated with our judgment preservation insurance policy.

Rent expense decreased due to $0.8 million of lease impairment charges in the nine months ended September 30, 2025 as compared to $5.5 million of lease impairment charges recorded in the prior year period.

These decreases were partially offset by increases of $2.0 million in general and administrative personnel costs, $1.8 million in professional fees, and $1.7 million in information technology spending.

Personnel costs increased due to an increase in headcount from September 30, 2024 to September 30, 2025 coupled with higher bonus expense and a $1.1 million increase in stock compensation expense.

Professional fees increased primarily due to a $2.9 million increase in expenses related to litigation with Pegasystems, while information technology spending increased due to higher spend on computer software and cloud computing.

Other Income, Net

Nine Months Ended September 30,

2025 2024 $ Change % Change

(dollars in thousands)

Other (income) expense, net

$ (23,280) $ 6,662 $ (29,942) ***

Other income, net $ (24,678) $ (5,882) $ (18,796) ***

% of revenue (4.7) % (1.3) %

*** Indicates a percentage that is not meaningful.

Other income, net was $23.3 million in the six months ended June 30, 2025 compared to other expense, net of $6.7 million in the six months ended June 30, 2024.

This change was primarily due to $19.7 million in foreign exchange gains in the six months ended June 30, 2025 as compared to $11.7 million in foreign exchange losses in the six months ended June 30, 2024.

In addition, there was a $1.4 million decrease in other income related to a non-recurring local government incentive payment that was received in the prior year.

Other income, net was $24.7 million in the nine months ended September 30, 2025 compared to other income, net of $5.9 million in the nine months ended September 30, 2024.

This change was primarily due to $19.4 million in foreign exchange gains in the nine months ended September 30, 2025 as compared to $2.5 million in foreign exchange losses in the nine months ended September 30, 2024.

In addition, there was a $3.2 million decrease in other income related to a non-recurring local government incentive payment and short-swing profit disgorgement payments to us from a public stockholder of our Class A common stock that were both received in the prior year.

Interest Expense

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

2 unchanged sentences

% of revenue 3.0 % 4.0 %

Interest expense decreased by $1.1 million in the six months ended June 30, 2025 as compared to the corresponding period in 2024 primarily due to a lower effective interest rate and lower outstanding principal across the comparable periods.

Income Tax Expense (Benefit)

Six Months Ended June 30,

Interest expense decreased by $2.0 million in the nine months ended September 30, 2025 as compared to the corresponding period in 2024 primarily due to a lower effective interest rate and lower outstanding principal across the comparable periods.

Income Tax Expense

Nine Months Ended September 30,

2025 2024 $ Change % Change

(dollars in thousands)

Income tax expense (benefit)

$ 2,314 $ (629) $ 2,943 ***

0.7 % (0.2) %

Income tax expense $ 3,690 $ 690 $ 3,000 ***

*** Indicates a percentage that is not meaningful.

Income tax expense increased by $2.9 million in the six months ended June 30, 2025 as compared to the corresponding period in 2024.

This change was primarily driven by increased pre-tax book income in certain international subsidiaries for the six months ended June 30, 2025.

Income tax expense increased by $3.0 million in the nine months ended September 30, 2025 as compared to the corresponding period in 2024.

This change was primarily driven by increased pre-tax book income in certain international subsidiaries for the nine months ended September 30, 2025.

The change in pre-tax book income was primarily attributable to increases in unrealized foreign exchange gains.

2 unchanged sentences

We use these non-GAAP financial performance measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

Management believes these non-GAAP financial measures provide meaningful

supplemental information regarding our performance by excluding certain expenses that may not be indicative of our recurring core business operating results.

Management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our recurring core business operating results.

We believe both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods.

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non-GAAP subscriptions cost of revenue, non-GAAP professional services cost of revenue, non-GAAP total cost of revenue, non-GAAP total operating expense, non-GAAP operating income (loss), non-GAAP income tax expense (benefit), non-GAAP net income (loss), and non-GAAP net income (loss) per share, basic and diluted.

These non-GAAP financial performance measures exclude the effect of stock-based compensation expense, unrealized foreign exchange rate gains and losses, certain non-ordinary litigation-related expenses consisting of legal and other professional fees associated with the Pegasystems cases (net of insurance reimbursements), or Litigation Expense, amortization of the judgment preservation insurance policy, or JPI Amortization, severance costs related to an involuntary reduction in our workforce, or Severance Costs, and lease impairment and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease Impairment and Lease-Related Charges.

These non-GAAP financial performance measures exclude the effect of stock-based compensation expense, unrealized foreign exchange rate gains and losses, certain non-ordinary litigation-related expenses consisting of legal and other professional fees associated with the Pegasystems cases (net of insurance reimbursements), or Litigation Expense, amortization of the judgment preservation insurance policy, or JPI Amortization, severance costs related to an involuntary reduction in our workforce, or Severance Costs, lease impairment and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease Impairment and Lease-Related Charges, and a short-swing profit disgorgement paid to us by an investor, or Short-Swing Profit Payment.

While some of these items may be recurring in nature and should not be disregarded in the evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur.

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We also discuss adjusted EBITDA, a non-GAAP financial performance measure we believe offers a useful view of the overall operation of our business.

We define adjusted EBITDA as net loss before (1) other (income) expense , net, (2) interest expense, (3) income tax expense (benefit), (4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) Litigation Expense, (7) JPI Amortization, (8) Severance Costs, and (9) Lease Impairment and Lease-Related Charges.

The most directly comparable GAAP financial measure to adjusted EBITDA is net loss.

Users should consider the limitations of using adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance.

Adjusted EBITDA is not intended to purport to be an alternative to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

We define adjusted EBITDA as net income (loss) before (1) other income,

net, (2) interest expense, (3) income tax expense, (4) depreciation expense and amortization of intangible assets, (5) stock-based compensation expense, (6) Litigation Expense, (7) JPI Amortization, (8) Severance Costs, and (9) Lease Impairment and Lease-Related Charges.

The most directly comparable GAAP financial measure to adjusted EBITDA is net income (loss).

Users should consider the limitations of using adjusted EBITDA, including the fact this measure does not provide a complete depiction of our operating performance.

Adjusted EBITDA is not intended to purport to be an alternative to net income (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

The following tables reconcile our non-GAAP measures to their nearest comparable GAAP measures (in thousands, except per share data):

GAAP Measure Stock-Based Compensation Litigation Expense JPI Amortization Lease Impairment and Lease-Related Charges

Unrealized Foreign Exchange Rate Gains and Losses Non-GAAP Measure

Three Months Ended June 30, 2025

GAAP Measure Stock-Based Compensation Litigation Expense JPI Amortization Lease Impairment and Lease-Related Charges Short-Swing Profit Payment Unrealized Foreign Exchange Rate Gains and Losses Non-GAAP Measure

Three Months Ended September 30, 2025

Subscriptions cost of revenue $ 17,762 $ (224) $ — $ — $ — $ — $ — $ 17,538

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Total operating expense 128,597 (8,637) (2,130) (3,153) (1,105) — — 113,572

Operating (loss) income

(10,984) 10,693 2,482 3,118 297 — 5,606

Operating income 13,114 10,260 2,130 3,153 1,105 — — 29,762

Non-operating (income) expense (1,398) — — — — — 110 (1,288)

(17,564) — — — — 16,754 (810)

Income tax impact of above items 1,376 375 — — — — (406) 1,345

1,573 295 — — — (1,059) 809

Net (loss) income

(312) 10,398 2,482 3,118 297 (15,695) 288

Net (loss) income per share, basic

Net income (loss) 7,825 9,885 2,130 3,153 1,105 — 296 24,394

Net income per share, basic

$ 0.11 $ 0.13 $ 0.03 $ 0.04 $ 0.01 $ — $ — $ 0.32

Net (loss) income per share, diluted (a)

Net income per share, diluted (a, c)

$ 0.10 $ 0.13 $ 0.03 $ 0.04 $ 0.01 $ — $ — $ 0.32

Six Months Ended June 30, 2025

Three Months Ended September 30, 2024

Subscriptions cost of revenue $ 14,082 $ (211) $ — $ — $ — $ — $ — $ 13,871

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Operating (loss) income (7,157) 9,505 1,979 3,635 324 — — 8,286

(11,818) 20,732 4,194 6,202 609 — 19,919

Non-operating (income) expense (12,544) — — — — 1,799 9,950 (795)

(23,280) — — — — 20,770 (2,510)

Income tax impact of above items 1,319 117 — — — — (327) 1,109

2,314 750 — — — (1,326) 1,738

Net (loss) income (2,100) 9,388 1,979 3,635 324 (1,799) (9,623) 1,804

(1,489) 19,982 4,194 6,202 609 (19,444) 10,054

Net (loss) income per share, basic

Net (loss) income per share, basic (c)

$ (0.03) $ 0.13 $ 0.03 $ 0.05 $ — $ (0.02) $ (0.13) $ 0.02

Net (loss) income per share, diluted (a,b)

Net (loss) income per share, diluted (b, c)

$ (0.03) $ 0.13 $ 0.03 $ 0.05 $ — $ (0.02) $ (0.13) $ 0.02

(a) Accounts for the impact of 0.6 million shares of dilutive securities.

(b) Per share amounts do not foot due to rounding.

GAAP Measure Stock-Based Compensation Litigation Expense JPI Amortization Severance Costs Lease Impairment and Lease-Related Charges Unrealized Foreign Exchange Rate Gains and Losses Non-GAAP Measure

Three Months Ended June 30, 2024

(b) Accounts for the impact of 1.8 million shares of dilutive securities.

GAAP Measure Stock-Based Compensation Litigation Expense JPI Amortization Severance Costs Lease Impairment and Lease-Related Charges Short-Swing Profit Payment Unrealized Foreign Exchange Rate Gains and Losses Non-GAAP Measure

Nine Months Ended September 30, 2025

Subscriptions cost of revenue $ 49,810 $ (672) $ — $ — $ — $ — $ — $ — $ 49,138

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Total operating expense 394,642 (26,159) (6,324) (9,355) — (1,714) — — 351,090

Operating (loss) income (39,194) 9,900 721 4,504 5,534 5,462 — (13,073)

Non-operating income

(1,545) — — — — — (959) (2,504)

Operating income 1,296 30,992 6,324 9,355 — 1,714 — — 49,681

Non-operating (income) expense (24,678) — — — — — — 20,879 (3,799)

Income tax impact of above items 3,690 1,125 — — — — — (1,732) 3,083

Net (loss) income (43,592) 9,363 721 4,504 4,438 5,462 856 (18,248)

Net (loss) income per share, basic and diluted

Net income (loss) 6,336 29,867 6,324 9,355 — 1,714 — (19,147) 34,449

Net income (loss) per share, basic

$ 0.09 $ 0.40 $ 0.09 $ 0.13 $ — $ 0.02 $ — $ (0.26) $ 0.47

Six Months Ended June 30, 2024

Net income (loss) per share, diluted (a)

$ 0.08 $ 0.40 $ 0.08 $ 0.13 $ — $ 0.02 $ — $ (0.26) $ 0.46

Nine Months Ended September 30, 2024

Subscriptions cost of revenue $ 39,614 $ (641) $ — $ — $ — $ — $ — $ — $ 38,973

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Operating (loss) income (65,886) 30,011 3,442 12,643 5,534 5,786 — — (8,470)

Non-operating expense (income) 6,662 — — — — — (12,807) (6,145)

Non-operating (income) expense

(5,882) — — — — — 1,799 (2,856) (6,939)

Income tax impact of above items 690 1,258 — — 1,096 — — 81 3,125

Net (loss) income (78,615) 28,753 3,442 12,643 4,438 5,786 (1,799) 2,775 (22,577)

Net (loss) income per share, basic and diluted

$ (1.05) $ 0.27 $ 0.02 $ 0.12 $ 0.06 $ 0.08 $ 0.16 $ (0.34)

The following table reconciles GAAP net loss to adjusted EBITDA for the three and six months ended June 30, 2025 and 2024 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Net (loss) income per share, basic and diluted (b)

$ (1.08) $ 0.40 $ 0.05 $ 0.17 $ 0.06 $ 0.08 $ (0.02) $ 0.04 $ (0.31)

GAAP net loss $ (312) $ (43,592) $ (1,489) $ (76,515)

Other (income) expense, net

(a) Accounts for the impact of 0.5 million shares of dilutive securities.

(b) Per share amounts do not foot due to rounding.

The following table reconciles GAAP net income (loss) to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

GAAP net income (loss) $ 7,825 $ (2,100) $ 6,336 $ (78,615)

Other income, net (1,398) (12,544) (24,678) (5,882)

Interest expense 5,311 6,168 15,948 17,921

Income tax expense (benefit)

1,573 (164) 2,314 (629)

Income tax expense 1,376 1,319 3,690 690

Depreciation expense and amortization of intangible assets

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Severance Costs

— 5,534 — 5,534

Lease Impairment and Lease-Related Charges

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Liquidity and Capital Resources

The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of June 30, 2025 and December 31, 2024:

June 30, 2025 December 31, 2024

The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of September 30, 2025 and December 31, 2024:

September 30, 2025 December 31, 2024

Cash and cash equivalents $ 125,249 $ 118,552

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The total cost of the policy was $57.3 million, which we paid with operating cash on hand.

Over the past two years, we have also initiated several share repurchase programs as follows:

• In February 2024, our Board of Directors authorized a share repurchase program, under which we repurchased approximately 1.3 million shares of our common stock for approximately $50.0 million during the first quarter of 2024.

In addition, in May 2025, our Board of Directors authorized a second program to repurchase up to $10.0 million of our common stock from May 2025 to December 2025.

• In May 2025, our Board of Directors authorized a second program to repurchase up to $10.0 million of our common stock from May 2025 to December 2025.

In the second quarter of 2025, we repurchased 0.3 million shares under this program at an average share price of $31.91 and totaling $10.0 million.

Outside of the above items and cash used by operations, other uses of cash in 2025 to date have included capital expenditures related to the expansion of the new leased facilities and principal repayments of our term loan debt.

• In August 2025, our Board of Directors authorized a third program to repurchase up to $10.0 million of our common stock from August 2025 to August 2027.

In the third quarter of 2025, we repurchased 0.3 million shares under this program at an average share price of $30.60 and totaling $10.0 million.

Outside of the above items and cash used by operations, other uses of cash in 2025 to date have included capital expenditures related to the expansion of new leased facilities and principal repayments of our term loan debt.

Furthermore, we have a non-cancellable cloud hosting arrangement with AWS that contains provisions for minimum purchase commitments.

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The agreement, which was originated in July 2021 and amended in October 2024, currently contains minimum annual spending requirements of $44.0 million from November 2024 to October 2029.

Spending under this agreement for the three and six months ended June 30, 2025 totaled $12.9 million and $23.3 million, respectively.

Spending under this agreement for the three and six months ended June 30, 2024 totaled $10.7 million and $21.0 million, respectively.

Spending under this agreement for the three and nine months ended September 30, 2025 totaled $14.3 million and

$37.6 million, respectively.

Spending under this agreement for the three and nine months ended September 30, 2024 totaled $10.8 million and $31.8 million, respectively.

We expect to meet our minimum annual spending requirement during the term of the arrangement.

Historical Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

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Operating activities:

Net loss (1,489) (76,515) 75,026 (98.1)

Net income (loss) 6,336 (78,615) 84,951 ***

Stock-based compensation and other non-cash adjustments 18,830 45,648 (26,818) (58.7)

Changes in working capital 36,571 25,974 10,597 40.8

Net cash provided by operating activities 43,026 1,251 41,775 ***

Net cash provided by (used by) operating activities 61,737 (6,993) 68,730 ***

Investing activities:

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Operating Activities

Net cash provided by operating activities was $43.0 million for the six months ended June 30, 2025 as compared to $1.3 million provided by operating activities for the six months ended June 30, 2024.

The increase in net cash provided by operating activities was primarily driven by increased cash collections stemming from strong contract bookings in the fourth quarter of 2024 and first half of 2025 as well as our continuing cost management activities.

Net cash provided by operating activities was $61.7 million for the nine months ended September 30, 2025 as compared to $7.0 million of net cash used by operating activities for the nine months ended September 30, 2024.

The increase in net cash provided by operating activities was primarily driven by increased cash collections stemming from strong contract bookings in the fourth quarter of 2024 and the first nine months of 2025, as well as our continuing cost management activities.

Investing Activities

Net cash used by investing activities was $33.1 million for the six months ended June 30, 2025 as compared to $21.6 million in net cash used by investing activities for the six months ended June 30, 2024.

This change was primarily driven by a $30.9 million increase in purchases of short-term investments.

This increase was partially offset by an $18.3 million increase in proceeds from the maturity of investments and a $1.1 million decrease in capital expenditure payments.

Net cash used by investing activities was $27.5 million for the nine months ended September 30, 2025 as compared to $34.3 million in net cash used by investing activities for the nine months ended September 30, 2024.

This change was primarily driven by a $22.6 million increase in proceeds from the maturity of investments.

This increase was partially offset by a $16.6 million increase in purchases of short-term investments.

Financing Activities

Net cash used by financing activities was $19.0 million for the six months ended June 30, 2025 as compared to $6.7 million of net cash used by financing activities for the six months ended June 30, 2024.

The increase in net cash used by financing activities was primarily due to a $50.0 million decrease in proceeds from borrowings, which was partially offset by a $40.0 million decrease in repurchases of common stock and a $2.5 million increase in debt repayments during the six months ended June 30, 2025.

Net cash used by financing activities was $30.1 million for the nine months ended September 30, 2025 as compared to $8.5 million of net cash used by financing activities for the nine months ended September 30, 2024.

The increase in net cash used by financing activities was primarily due to a $50.0 million decrease in proceeds from borrowings, which was partially offset by a $30.0 million decrease in repurchases of common stock, a $1.3 million

increase in debt repayments, and a $1.0 million increase in payments for employee taxes related to the net share settlement of equity awards during the nine months ended September 30, 2025.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis