What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 214 added, 92 removed, 351 unchanged (47% 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, 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 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.

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We have invested in our professional services organization to help ensure customers are able to build and deploy applications on our platform.

We also have several strategic partnerships, including with Accenture, Capgemini, Deloitte, Indra Group, KPMG, and PwC, which allow them to refer customers to us in order to purchase software subscriptions.

We also have several strategic partnerships, including with Accenture, Capgemini, Deloitte, Indra Group, KPMG, PwC, and TCS, which allow them to refer customers to us in order to purchase software subscriptions.

Our partners then provide professional services directly to the customers using our software.

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Generally, our sales team targets its efforts at organizations with over 2,000 employees and $2.0 billion in annual revenue.

For the three months ended March 31, 2026 and 2025, revenue generated from U.S.

For the three and six months ended June 30, 2026, revenue generated from U.S.

federal government agencies was 26.1% and 26.0% of total revenue, respectively.

No single end-customer accounted for more than 10% of our total revenue in the three months ended March 31, 2026 or 2025.

For the three and six months ended June 30, 2025, revenue generated from U.S.

federal government agencies was 25.9% and 24.9% of total revenue, respectively.

No single end-customer accounted for more than 10% of our total revenue in the three and six months ended June 30, 2026 or 2025.

We offer our platform globally.

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

In the three months ended March 31, 2026 and 2025, 37.6% and 36.2%, respectively, of our total revenue was generated from customers outside of the United States.

As of March 31, 2026, we operated in 16 countries.

In the three and six months ended June 30, 2026, 38.2% and 37.9%, respectively, of our total revenue was generated from customers outside of the United States as compared to 38.4% and 37.3% in the three and six months ended June 30, 2025, respectively.

As of June 30, 2026, 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.

Our business model focuses on maximizing the lifetime value of customer relationships, which is a function of the duration of a customer’s deployment of our platform as well as the price and number of subscriptions of our platform that a customer purchases.

We incur significant customer acquisition costs, including expenses associated with hiring new sales representatives, who can take anywhere from six months to a year to become productive

given the length of our sales cycle, and marketing costs which, with the exception of certain types of sales commissions, are expensed as incurred.

We incur significant customer acquisition costs, including expenses associated with hiring new sales representatives, who can take anywhere from six months to a year to become productive given the length of our sales cycle, and marketing costs which, with the exception of certain types of sales commissions, are expensed as incurred.

At the same time, we believe the costs we incur to retain customers and drive additional purchases of software are lower than our customer acquisition costs on a relative basis.

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Cloud Subscriptions Revenue

Three Months Ended March 31,

2026 2025 % Change

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

2026 2025 % Change 2026 2025 % Change

Cloud subscriptions revenue

1 unchanged sentence

Cloud subscriptions revenue includes cloud subscriptions bundled with maintenance and support and hosting services.

Our cloud subscriptions revenue for any customer is primarily determined by the number of users who access and utilize the applications built on our platform or by the number of application licenses purchased, as well as the price paid.

Our cloud subscriptions revenue is primarily determined by the number of users who access and utilize the applications built on our platform or by the number of application licenses purchased, as well as the price paid.

We believe increasing cloud subscriptions revenue is an indicator of the demand for our platform, the pace at which the market for our solutions is growing, the productivity of our sales team and strategic relationships in growing our customer base, and our ability to further penetrate our existing customer base.

Cloud Net Annualized Recurring Revenue (“ARR”) Expansion

As of March 31,

As of June 30,

Cloud net ARR expansion

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The cloud net ARR expansion represents the ratio between these two periods.

Note for purposes of the calculation, a customer is defined pursuant to our updated methodology, and the calculation is performed on a constant currency basis.

The cloud net ARR expansion calculation is performed on a constant currency basis.

Key Components of Results of Operations

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Personnel-related costs such as salaries, bonuses, commissions, payroll tax payments, and stock-based compensation expense are the most significant components of each of these expense categories.

Other components of each category include professional fees for third-party services such as legal, software development resources, contractors, and cloud computing services.

In addition, operating expenses include allocated overhead costs, which are primarily comprised of facility costs such as rent, employee medical benefits, employee relations expense, and information technology costs.

In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in enhancing our product and growing our business, although such growth is expected to be at a more measured rate than prior years.

Other components of these categories include, as applicable, professional fees for third-party services such as legal, software development, subcontracting, and cloud computing in addition to allocated overhead costs, which are primarily comprised of rent, employee medical benefits, employee relations expense, and information technology costs.

In general, our operating expenses are expected to continue to increase in absolute dollars as we invest resources in enhancing our product and growing our business.

Sales and Marketing Expense

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Our research and development efforts are focused on enhancing the capabilities, speed, and power of our software platform.

In 2022, we opened a new product development center in India.

We also have a product development center in India.

Although we expect research and development expense to continue to increase in absolute dollars, as such costs are critical to maintain and improve the quality of applications and our competitive position, we believe our product development center will continue to result in cost savings over time.

3 unchanged sentences

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.

Other Expense (Income), Net

Other expense (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 March 31,

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

2026 2025 2026 2025

Subscriptions $ 157,682 $ 132,657 $ 317,993 $ 267,009

13 unchanged sentences

150,183 132,670 294,796 255,890

Operating income (loss) 3,156 (834)

Operating loss (5,440) (10,984) (2,284) (11,818)

Other non-operating expense (income)

Other income, net

Other expense (income), net 827 (17,564) 743 (23,280)

Interest expense 3,780 5,319 7,952 10,637

Total other non-operating expense (income) 4,607 (12,245) 8,695 (12,643)

Loss before income taxes

(Loss) income before income taxes (10,047) 1,261 (10,979) 825

Income tax expense 1,770 1,573 2,363 2,314

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

Three Months Ended March 31,

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

2026 2025 2026 2025

Subscriptions 77.6 % 77.7 % 78.4 % 79.2 %

11 unchanged sentences

Total operating expenses 73.9 77.7 72.7 75.9

Operating income (loss) 1.6 (0.5)

Operating loss* (2.7) (6.4) (0.6) (3.5)

Other non-operating expense (income)

Other income, net — (3.4)

Other expense (income), net 0.4 (10.3) 0.2 (6.9)

Interest expense 1.9 3.1 2.0 3.2

Total other non-operating expense (income)*

Loss before income taxes (0.5) (0.3)

2.3 (7.2) 2.1 (3.8)

(Loss) income before income taxes* (4.9) 0.7 (2.7) 0.2

Income tax expense 0.9 0.9 0.6 0.7

1 unchanged sentence

* Totals may not foot due to rounding.

Comparison of the Three Months Ended March 31, 2026 and 2025

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2026 and 2025

Three Months Ended June 30,

2026 2025 $ Change % Change

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Total revenue $ 203,256 $ 170,640 $ 32,616 19.1 %

Total revenue increased $35.8 million, or 21.5%, in the three months ended March 31, 2026 compared to the same period in 2025 due to an increase in our subscriptions revenue of $26.0 million coupled with an increase in our professional services revenue of $9.8 million.

Total revenue increased $32.6 million, or 19.1%, in the three months ended June 30, 2026 compared to the same period in 2025 due to an increase in our subscriptions revenue of $25.0 million coupled with an increase in our professional services revenue of $7.6 million.

The increase in subscriptions revenue was driven by a $24.8 million increase in cloud subscriptions revenue and a $0.3 million increase in other subscriptions revenue.

With respect to new versus existing customers, there was a $4.7 million increase in subscriptions revenue from sales to new customers, while the remaining $20.4 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 $5.7 million increase in revenue from sales to new customers along with a $4.1 million increase in sales to existing customers.

The increase in professional services revenue was due primarily to a $5.1 million increase in revenue from sales to new customers along with a $2.5 million increase in sales to existing customers.

Cost of Revenue

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 $ Change % Change

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Total gross margin 71.2 % 71.3 %

Cost of revenue increased $10.4 million, or 23.5%, in the three months ended March 31, 2026 compared to the same period in 2025, primarily due to a $3.6 million increase in hosting costs coupled with a $3.6 million increase in professional services and product support personnel costs and a $2.3 million increase in contractor costs.

Hosting costs increased due to an increase in sales of our cloud offering during the three months ended March 31, 2026, 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 salaries and an 18% increase in headcount from March 31, 2025 to March 31, 2026.

Cost of revenue increased $9.6 million, or 19.5%, in the three months ended June 30, 2026 compared to the same period in 2025, primarily due to a $5.0 million increase in professional services and product support personnel costs coupled with a $2.7 million increase in hosting costs and a $1.2 million increase in contractor costs.

Professional services and product support personnel costs increased due to an increase in salaries and a 19% increase in headcount from June 30, 2025 to June 30, 2026.

Hosting costs increased due to an increase in sales of our cloud offering during the three months ended June 30, 2026, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Sales and Marketing Expense

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 $ Change % Change

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% of revenue 34.5 % 36.4 %

Sales and marketing expense increased $8.3 million, or 14.8%, in the three months ended March 31, 2026 compared to the same period in 2025, primarily due to a $5.4 million increase in sales and marketing personnel costs, a $1.5 million increase in travel and entertainment costs, and a $1.1 million increase in marketing expenses.

Sales and marketing personnel costs increased due to a 9% increase in headcount from March 31, 2025 to March 31, 2026.

Travel and entertainment expenses increased due to increases in airfare and lodging associated with a higher number of in-person events and engagements relative to the prior year.

In addition, marketing expenses increased due to higher spend on marketing materials and events relative to the prior year.

Sales and marketing expense increased $8.0 million, or 12.8%, in the three months ended June 30, 2026 compared to the same period in 2025, primarily due to a $5.2 million increase in sales and marketing personnel costs, a $1.1 million increase in marketing expenses, and a $1.0 million increase in travel and entertainment costs.

Sales and marketing personnel costs increased due to a 13% increase in headcount from June 30, 2025 to June 30, 2026.

Marketing expenses increased due to higher spend on marketing materials and events relative to the prior year.

In addition, travel and entertainment expenses increased due to increases in airfare and lodging associated with a higher number of in-person events and engagements relative to the prior year.

Research and Development Expense

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 $ Change % Change

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% of revenue 23.3 % 25.0 %

Research and development expense increased $4.5 million, or 10.7%, in the three months ended March 31, 2026 compared to the same period in 2025.

Research and development expense increased $4.7 million, or 10.9%, in the three months ended June 30, 2026 compared to the same period in 2025.

This change is primarily attributable to a $4.1 million increase in research and development personnel costs and a $1.0 million increase in cloud computing and software costs.

Research and development personnel costs increased due to a 6% increase in headcount period over period in addition to a $0.7 million increase in stock compensation expense.

Research and development personnel costs increased due to a 7% increase in headcount period over period.

General and Administrative Expense

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 $ Change % Change

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% of revenue 16.1 % 16.3 %

General and administrative expense increased $8.6 million, or 34.3%, in the three months ended March 31, 2026 compared to the same period in 2025 primarily due to a $5.9 million increase in professional fees and a $2.4 million increase in general and administrative personnel costs.

General and administrative expense increased $4.9 million, or 17.6%, in the three months ended June 30, 2026 compared to the same period in 2025 primarily due to a $4.6 million increase in professional fees and a $0.7 million increase in general and administrative personnel costs.

These increases were partially offset by a $1.6 million decrease in insurance expense.

The increase in professional fees was the result of a net $5.2 million increase in legal fees associated with our litigation against Pegasystems.

Personnel costs increased largely due to an increase in salaries and an 18% increase in headcount from March 31, 2025 to March 31, 2026 coupled with a $0.7 million increase in stock compensation expense.

The increase in professional fees was the result of a $3.8 million increase in legal fees associated with our litigation against Pegasystems.

Personnel costs increased largely due to an increase in salaries and a 17% increase in headcount from June 30, 2025 to June 30, 2026.

Insurance expense decreased due to a $1.2 million decrease in amortization expense related to our judgment preservation insurance policy due to a change in the estimated amortization period.

Other Income, Net

Three Months Ended March 31,

Other Expense (Income), Net

Three Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Other income, net $ (84) $ (5,716) $ 5,632 (98.5) %

Other expense (income), net $ 827 $ (17,564) $ 18,391 ***

% of revenue 0.4 % (10.3) %

Other income, net was $0.1 million in the three months ended March 31, 2026 compared to $5.7 million in the three months ended March 31, 2025.

This change was primarily due to $1.5 million in foreign exchange losses in the three months ended March 31, 2026 as compared to $4.1 million in foreign exchange gains in the three months ended March 31, 2025.

*** - Indicates a percentage that is not meaningful.

Other expense, net was $0.8 million in the three months ended June 30, 2026 compared to other income, net $17.6 million in the three months ended June 30, 2025.

This change was primarily due to $2.3 million in foreign exchange losses in the three months ended June 30, 2026 as compared to $15.6 million in foreign exchange gains in the three months ended June 30, 2025.

Interest Expense

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 $ Change % Change

2 unchanged sentences

% of revenue 1.9 % 3.1 %

Interest expense decreased by $1.1 million in the three months ended March 31, 2026 as compared to the corresponding period in 2025 primarily due to a lower effective interest rate and lower outstanding principal compared to the prior year period.

Interest expense decreased by $1.5 million in the three months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to a lower effective interest rate and lower outstanding principal compared to the prior year period.

Income Tax Expense

Three Months Ended March 31,

Three Months Ended June 30,

2026 2025 $ Change % Change

1 unchanged sentence

Income tax expense $ 1,770 $ 1,573 $ 197 12.5 %

Income tax expense decreased by $0.1 million in the three months ended March 31, 2026 as compared to the corresponding period in 2025.

This change was primarily driven by decreased pre-tax book income in certain international subsidiaries for the three months ended March 31, 2026.

Income tax expense increased by $0.2 million in the three months ended June 30, 2026 as compared to the corresponding period in 2025.

This change was primarily driven by increased U.S.

state taxes during the three months ended June 30, 2026.

Comparison of the Six Months Ended June 30, 2026 and 2025

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Subscriptions $ 317,993 $ 267,009 50,984 19.1 %

Professional services 87,443 70,057 17,386 24.8 %

Total revenue $ 405,436 $ 337,066 $ 68,370 20.3 %

Total revenue increased $68.4 million, or 20.3%, in the six months ended June 30, 2026 compared to the same period in 2025 due to an increase in our subscriptions revenue of $51.0 million as well as an increase in our professional services revenue of $17.4 million.

The increase in subscriptions revenue was driven by a $49.4 million increase in cloud subscriptions revenue and a $1.5 million increase in other subscriptions revenue.

With respect to new versus existing customers, there was a $7.7 million increase in subscriptions revenue from sales to new customers, while the remaining $43.3 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 $9.7 million increase in revenue from sales to new customers, along with a $7.6 million increase in sales to existing customers.

Cost of Revenue

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Cost of revenue

Subscriptions $ 48,313 $ 39,228 $ 9,085 23.2 %

Professional services 64,611 53,766 10,845 20.2

Total cost of revenue $ 112,924 $ 92,994 $ 19,930 21.4 %

Gross Profit:

Subscriptions $ 269,680 $ 227,781

Professional services 22,832 16,291

Total gross profit $ 292,512 $ 244,072

Subscriptions gross margin 84.8 % 85.3 %

Professional services gross margin 26.1 % 23.3 %

Total gross margin 72.1 % 72.4 %

Cost of revenue increased $19.9 million, or 21.4%, in the six months ended June 30, 2026 compared to the same period in 2025, primarily due to a $8.6 million increase in professional services and product support personnel costs coupled with a $6.2 million increase in hosting costs and a $3.5 million increase in contractor costs.

Professional services and product support personnel costs increased due to an increase in salaries and a 19% increase in headcount from June 30, 2025 to June 30, 2026.

Hosting costs increased due to an increase in sales of our cloud offering during the six months ended June 30, 2026, while contractor costs increased due to an increase in the usage of subcontractors for professional services engagements.

Sales and Marketing Expense

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Sales and marketing $ 134,732 $ 118,467 $ 16,265 13.7 %

% of revenue 33.2 % 35.1 %

Sales and marketing expense increased $16.3 million, or 13.7%, in the six months ended June 30, 2026 compared to the same period in 2025, primarily due to a $10.7 million increase in sales and marketing personnel costs, a $2.4 million increase in travel and entertainment costs, and a $2.2 million increase in marketing expenses.

Sales and marketing personnel costs increased due to a 13% increase in sales and marketing headcount from June 30, 2025 to June 30, 2026.

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

In addition, marketing expenses increased due to higher spend on marketing materials and events relative to the prior year.

Research and Development Expense

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Research and development $ 93,629 $ 84,485 $ 9,144 10.8 %

% of revenue 23.1 % 25.1 %

Research and development expense increased $9.1 million, or 10.8%, in the six months ended June 30, 2026 compared to the same period in 2025.

This change is primarily attributable to a $6.8 million increase in research and development personnel costs, a $2.1 million increase in information technology costs, and a $0.9 million increase in contractor costs.

Research and development personnel costs increased due to a 7% increase in headcount period over period.

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,

2026 2025 $ Change % Change

(dollars in thousands)

General and administrative $ 66,435 $ 52,938 $ 13,497 25.5 %

% of revenue 16.4 % 15.7 %

General and administrative expense increased $13.5 million, or 25.5%, in the six months ended June 30, 2026 compared to the same period in 2025 primarily due to a $10.5 million increase in professional fees, a $3.2 million increase in personnel costs, and a $0.8 million increase in information technology costs.

These increases were partially offset by a $2.4 million decrease in insurance expense.

The increase in professional fees was the result of a $9.0 million increase in legal fees associated with our litigation against Pegasystems.

Personnel costs increased due to a 17% increase in headcount from June 30, 2025 to June 30, 2026, while information technology spending increased due to higher spend on computer software and cloud computing.

Insurance expense decreased due to a $2.2 million decrease in amortization expense related to our judgment preservation insurance policy due to a change in the estimated amortization period.

Other Expense (Income), Net

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Other expense (income), net $ 743 $ (23,280) $ 24,023 ***

% of revenue 0.2 % (6.9) %

*** - Indicates a percentage that is not meaningful.

Other expense, net was $0.7 million in the six months ended June 30, 2026 compared to other income, net of $23.3 million in the six months ended June 30, 2025.

This change was primarily due to $3.8 million in foreign exchange losses in the six months ended June 30, 2026 as compared to $19.7 million in foreign exchange gains in the six months ended June 30, 2025.

Interest Expense

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Interest expense $ 7,952 $ 10,637 (2,685) (25.2) %

% of revenue 2.0 % 3.2 %

Interest expense decreased by $2.7 million in the six months ended June 30, 2026 as compared to the corresponding period in 2025 primarily due to a lower effective interest rate and lower outstanding principal across the comparable periods.

Income Tax Expense

Six Months Ended June 30,

2026 2025 $ Change % Change

(dollars in thousands)

Income tax expense $ 2,363 $ 2,314 $ 49 2.1 %

% of revenue 0.6 % 0.7 %

Income tax expense was consistent between the six months ended June 30, 2026 and the corresponding period in 2025.

Pre-tax book income in certain international subsidiaries decreased for the six months ended June 30, 2026, partially offset by increased U.S.

state taxes and withholding taxes.

Non-GAAP Financial Measures

6 unchanged sentences

Our non-GAAP financial performance measures include the following:

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.

non-GAAP subscriptions cost of revenue, non-GAAP professional services cost of revenue, non-GAAP total cost of revenue, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP total operating expense, non-GAAP operating (loss) income, non-GAAP non-operating (expense) income, non-GAAP income tax expense (benefit), non-GAAP net (loss) income, and non-GAAP net (loss) income 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, and lease impairments and lease-related charges associated with actions taken to reduce the footprint of our leased office spaces, or Lease Impairment and Lease-Related Charges.

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.

Therefore, while we may incur or recognize these types of expenses in the

future, we believe removing these items for purposes of calculating our non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.

Therefore, while we may incur or recognize these types of expenses in the future, we believe removing these items for purposes of calculating our non-GAAP financial measures provides investors with a more focused presentation of our ongoing operating performance.

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, 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, and (8) Lease Impairment and Lease-Related Charges.

We define adjusted EBITDA as net loss before (1) other expense (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, and (8) Lease Impairment and Lease-Related Charges.

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

4 unchanged sentences

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 March 31, 2026

Three Months Ended June 30, 2026

Subscriptions cost of revenue $ 25,409 $ (497) $ — $ — $ — $ — 24,912

5 unchanged sentences

Total operating expense 150,183 (8,543) (6,293) (1,957) (279) — 133,111

Operating income

3,156 11,889 6,948 2,055 302 — 24,350

Non-operating income

Operating (loss) income (5,440) 10,560 6,293 1,957 279 — 13,649

Non-operating expense (income) 827 — — — — (2,523) (1,696)

Income tax impact of above items 1,770 504 — — — 95 2,369

Net (loss) income (11,817) 10,056 6,293 1,957 279 2,428 9,196

Net (loss) income per share, basic $ (0.16) $ 0.14 $ 0.09 $ 0.03 $ — $ 0.03 $ 0.13

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

$ (0.16) $ 0.14 $ 0.09 $ 0.03 $ — $ 0.03 $ 0.13

Three Months Ended June 30, 2025

Subscriptions cost of revenue $ 20,707 $ (418) $ — $ — $ — $ — 20,289

Professional services cost of revenue 28,247 (1,400) — — — — 26,847

Total cost of revenue 48,954 (1,818) — — — — 47,136

Sales and marketing expense 62,157 (2,087) — — — — 60,070

Research and development expense 42,655 (3,357) — — — — 39,298

General and administrative expense 27,858 (3,431) (2,482) (3,118) (297) 18,530

Total operating expense 132,670 (8,875) (2,482) (3,118) (297) — 117,898

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

Non-operating (income) expense (17,564) — — — — 16,754 (810)

Income tax impact of above items 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 $ (0.00) $ 0.14 $ 0.03 $ 0.04 $ — $ (0.21) $ 0.00

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

$ (0.00) $ 0.14 $ 0.03 $ 0.04 $ — $ (0.21) $ 0.00

(a) Accounts for the impact of 0.4 million shares of dilutive securities.

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

Six Months Ended June 30, 2026

Subscriptions cost of revenue $ 48,313 $ (1,056) $ — $ — $ — $ — 47,257

Professional services cost of revenue 64,611 (3,158) — — — — 61,453

Total cost of revenue 112,924 (4,214) — — — — 108,710

Sales and marketing expense 134,732 (4,366) — — — — 130,366

Research and development expense 93,629 (7,117) — — — — 86,512

General and administrative expense 66,435 (6,752) (13,241) (4,012) (581) — 41,849

Total operating expense 294,796 (18,235) (13,241) (4,012) (581) — 258,727

Operating (loss) income (2,284) 22,449 13,241 4,012 581 — 37,999

Non-operating expense (income) 743 — — — — (3,371) (2,628)

Income tax impact of above items 2,363 1,011 — — — 294 3,668

Net (loss) income (13,342) 21,438 13,241 4,012 581 3,077 29,007

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

$ (0.18) $ 0.29 $ 0.18 $ 0.05 $ 0.01 $ 0.04 $ 0.40

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

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

$ (0.18) $ 0.29 $ 0.18 $ 0.05 $ 0.01 $ 0.04 $ 0.39

Three Months Ended March 31, 2025

Six Months Ended June 30, 2025

Subscriptions cost of revenue $ 39,228 $ (916) $ — $ — $ — $ — 38,312

9 unchanged sentences

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

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

$ (0.02) $ 0.13 $ 0.02 $ 0.04 $ — $ (0.05) $ 0.13

Net (loss) income per share, basic $ (0.02) $ 0.27 $ 0.06 $ 0.08 $ 0.01 $ (0.26) $ 0.14

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

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The following table reconciles GAAP net loss to adjusted EBITDA for the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

The following table reconciles GAAP net loss to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 (in thousands):

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

2026 2025 2026 2025

GAAP net loss

$ (11,817) $ (312) $ (13,342) $ (1,489)

Other income, net (84) (5,716)

Other expense (income), net 827 (17,564) 743 (23,280)

Interest expense 3,780 5,319 7,952 10,637

1 unchanged sentence

Depreciation expense and amortization of intangible assets

2,507 2,524 4,780 4,970

Stock-based compensation expense 10,560 10,693 22,449 20,732

Litigation Expense

6,293 2,482 13,241 4,194

JPI Amortization

1,957 3,118 4,012 6,202

Lease Impairment and Lease-Related Charges

279 297 581 609

Adjusted EBITDA $ 16,156 $ 8,130 $ 42,779 $ 24,889

Liquidity and Capital Resources

The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

The following table presents selected financial information and statistics pertaining to liquidity and capital resources as of June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

Cash and cash equivalents $ 121,111 $ 135,810

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* Defined as current assets net of current liabilities.

We believe our existing cash and cash equivalents and short-term investments and marketable securities, together with any positive cash flows from operations and available borrowings under our revolving credit facility, will be sufficient to support working capital and capital expenditure requirements for at least the next twelve months.

Sources of Funds

We have historically financed our operations in large part with equity financing arrangements.

Our last public offering was completed in June 2020.

Through these public offerings, we received net proceeds of $344.8 million.

To further help strengthen our financial position and support our growth initiatives, in November 2022 we entered into a Senior Secured Credit Facilities Credit Agreement, or the Credit Agreement, which, as amended to date, provides for a five-year term loan facility in an aggregate principal amount of $200.0 million and, in addition, up to $100.0 million for a revolving credit facility, including a letter of credit sub-facility in the aggregate availability amount of $20.0 million and a swingline sub-facility in the aggregate availability amount of $10.0 million (as a sublimit of the revolving loan facility).

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We are currently in compliance with all covenants, had used borrowing capacity of $62.0 million under our $100.0 million revolving credit facility, and had outstanding letters of credit totaling $7.8 million in connection with securing our leased office space.

On August 5, 2026, we entered into a new Senior Secured Credit Agreement by and among the Company, Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as administrative agent and collateral agent for the lenders party thereto (the “New Credit Agreement”), providing for aggregate commitments of $300.0 million, consisting of a $240.0 million revolving credit facility and a $60.0 million term loan facility.

The proceeds from the new facility, which matures on August 5, 2031, were used to refinance the Company’s existing indebtedness and will provide ongoing liquidity for working capital requirements, general corporate purposes, and other strategic initiatives.

In connection with the closing of the New Credit Agreement, we reduced our cash balance by $36.6 million to reduce our indebtedness.

As of August 5, 2026, we had used borrowing capacity of $140.0 million under our $240.0 million revolving credit facility and had $60.0 million outstanding on the term loan facility.

The foregoing description of the New Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the New Credit Agreement, to be filed as an exhibit to our Quarterly Report on Form 10-Q for the quarter ending September 30, 2026.

We expect future sources of funds to consist primarily of cash generated from sales of subscriptions and the related professional services.

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We have also initiated several share repurchase programs as follows (in thousands except average price paid per share):

Board approval date

Value of shares authorized

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February 2026 1

$ 100,000 2,691 $ 24.41 $ 65,736

1 On May 5, 2026, the Board of Directors approved an additional $50.0 million for the Share Repurchase Program, bringing the total aggregate authorization under the program to $100.0 million.

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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 months ended March 31, 2026 and 2025 totaled $16.2 million and $10.4 million, respectively.

Spending under this agreement for the three and six months ended June 30, 2026 totaled $17.2 million and $33.4 million, respectively.

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

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

Historical Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

2026 2025 $ Change % Change

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Investing activities:

Net cash used by investing activities (5,283) (24,077) 18,794 (78.1)

Net cash provided by (used by) investing activities 1,722 (33,093) 34,815 ***

Financing activities:

1 unchanged sentence

Effect of exchange rates (1,075) 2,687 (3,762) ***

Net increase in cash and cash equivalents

14,215 16,430 (2,215) (13.5)

Net decrease in cash and cash equivalents (14,699) (6,345) (8,354) ***

Ending cash and cash equivalents $ 121,111 $ 112,207 $ 8,904 7.9 %

1 unchanged sentence

Operating Activities

Net cash provided by operating activities was $48.8 million for the three months ended March 31, 2026 as compared to $45.0 million of net cash provided by operating activities for the three months ended March 31, 2025.

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 2025 and the first three months of 2026, as well as our continuing cost management activities.

Net cash provided by operating activities was $60.9 million for the six months ended June 30, 2026 as compared to $43.0 million of net cash provided by operating activities for the six months ended June 30, 2025.

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 2025 and throughout the first six months of 2026, as well as our continuing cost management activities.

Investing Activities

Net cash used by investing activities was $5.3 million for the three months ended March 31, 2026 as compared to $24.1 million in net cash used by investing activities for the three months ended March 31, 2025.

This change was primarily driven by a $26.2 million increase in proceeds from the maturity of investments.

This increase was partially offset by a $7.8 million decrease in purchases of short-term investments.

Net cash provided by investing activities was $1.7 million for the six months ended June 30, 2026 as compared to $33.1 million in net cash used by investing activities for the six months ended June 30, 2025.

This change was primarily driven by a $21.1 million increase in proceeds from the maturity of investments coupled with a $14.4 million decrease in purchases of short-term investments.

Financing Activities

Net cash used by financing activities was $28.8 million for the three months ended March 31, 2026 as compared to $5.5 million of net cash used by financing activities for the three months ended March 31, 2025.

The increase in net cash used by financing activities was primarily due to a $21.8 million increase in repurchases of common stock and a $1.9 million increase in payments for employee taxes related to the net share settlement of equity awards during the three months ended March 31, 2026.

Net cash used by financing activities was $76.3 million for the six months ended June 30, 2026 as compared to $19.0 million of net cash used by financing activities for the six months ended June 30, 2025.

The increase in net cash used by financing activities was primarily due to a $55.7 million increase in repurchases of common stock and a $1.9 million increase in payments for employee taxes related to the net share settlement of equity awards during the six months ended June 30, 2026.

Critical Accounting Estimates

4 unchanged sentences

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