What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-20 · 131 added, 110 removed, 356 unchanged (40% of the section changed)

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A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 20, 2025.

We provide people-first, AI service software that organizations use to deliver exceptional customer and employee experiences.

We provide our solutions in two product families:

Customer Experience (CX) and Employee Experience (EX).

CX products include Freshdesk, Freshdesk Omni, Freshchat, Freshsales, and Freshmarketer.

EX products include Freshservice, Freshservice for Business Teams and Device42.

Our latest generative AI solutions, Freddy AI Agent and Freddy AI Copilot, further enhance the customer and employee experience.

Freddy AI Agent offers always-on, autonomous, personalized resolutions to customer and employee queries.

Freddy AI Copilot provides always-on contextual assistance for customer support, employee support, marketing and sales use cases to boost productivity.

Currently, over 72,000 companies choose Freshworks' uncomplicated solutions to increase efficiency and loyalty.

We provide people-first AI service software that organizations use to deliver exceptional employee and customer experiences.

Our employee experience (EX) products include Freshservice, Freshservice for Business Teams, Device42 and FireHydrant.

Our customer experience (CX) products include our Freshdesk suite of products.

Our AI offerings, which include Freddy AI Agent, Freddy AI Copilot and Freddy AI Insights, further enhance the employee and customer and employee experience and are designed to boost productivity.

In June 2024, we acquired all outstanding shares of D42 Parent, Inc., an IT asset management company for approximately $238.1 million, which primarily consisted of $225.3 million in cash, and approximately $12.9 million of common stock and stock options.

Our consolidated financial statements and key business metrics as of and for the year ended December 31, 2024 include D42 Parent, Inc.

Our consolidated financial statements and key business metrics include D42 Parent, Inc.

since the acquisition date.

In January 2026, the Company completed the acquisition of FireHydrant, Inc., a provider of AI-powered incident management software.

The Company will account for the transaction as a business combination.

Since the closing date of the acquisition occurred subsequent to the end of the reporting period, the allocation of purchase price to the underlying net assets has not yet been completed.

We generate revenue primarily from the sale of subscriptions for accessing our cloud-based software products over the contract term.

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We also sell professional services that include product configuration, data migration, systems integration, and training.

With the acquisition of D42 Parent, Inc.

in June 2024, we also sell software licenses with associated maintenance.

With the acquisition of D42 Parent, Inc., we also sell software licenses with associated maintenance.

Our customer base and operations have scaled over time.

Our total revenue was $838.8 million, $720.4 million and $596.4 million in the years ended December 31, 2025, 2024 and 2023, respectively, representing year-over-year growth rates of 16% and 21%, respectively.

We incurred operating losses of $138.6 million, $170.2 million and $233.4 million in the years ended December 31, 2024, 2023 and 2022, respectively, and our net losses were $95.4 million, $137.4 million and $232.1 million in the years ended December 31, 2024, 2023 and 2022, respectively.

We generated operating income of $13.2 million and incurred operating losses of $138.6 million and $170.2 million in the years ended December 31, 2025, 2024 and 2023, respectively, and recognized net income of $183.7 million and incurred net losses of $95.4 million and $137.4 million in the years ended December 31, 2025, 2024 and 2023, respectively.

Macroeconomic and Other Factors

Current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, and geopolitical developments have impacted and may continue to impact business spending and the overall economy, and in turn our business.

These macroeconomic events could adversely affect demand for our products and services.

For example, during fiscal 2024, our net dollar retention rate was adversely impacted by lower expansion within existing customers driven by macroeconomic pressures and we expect these pressures to persist for the foreseeable future.

These macroeconomic events could adversely affect demand for our products and services and we expect these pressures to persist for the foreseeable future.

Additionally, foreign currency exchange rate fluctuations negatively impacted our revenue growth historically and volatility in the foreign currency market may still exist.

For each of the years ended December 31, 2024, 2023, and 2022 we had approximately 27%, 27%, and 26%,

respectively, of revenue exposure related to the euro and British pound.

For each of the years ended December 31, 2025, 2024, and 2023 we had approximately 28%, 27%, and 27%, respectively, of revenue exposure related to the euro and British pound.

If adverse conditions arise, they could have a material adverse impact on our results and our ability to accurately predict our future results and earnings.

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Our approach to acquiring new customers allows us to benefit from user-driven, organic adoption of our products across organizations of all sizes, as well as enable our customers to standardize on our products across the organization.

As of December 31, 2024 and 2023, we had more than 72,200 and 67,100 paying customers, respectively.

As of December 31, 2025 and 2024, we had nearly 75,000 and over 72,200 paying customers, respectively.

We have made and continue to make significant investments in strengthening our outbound sales motion to enable adoption of department-specific and organization-wide use cases for mid-market and enterprise customers.

We believe that larger businesses can benefit from implementing multiple Freshworks products, as once they are a customer they are able to expand their use of these products.

We define annual recurring revenue (ARR) as the sum total of the subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of the contract.

For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR.

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We have experienced, and expect to continue to experience that, over time, a significant portion of our revenue growth will come from our existing customers expanding their usage of our products and buying additional products.

We measure the rate of expansion within our customer base using net dollar retention rate (as defined under Key Business Metrics ), and we believe that our net dollar retention rate demonstrates our rate of expansion within our existing customer base.

We measure the rate of expansion within our customer base using net dollar retention rate (as defined under Key Business Metrics ), and we believe that our net dollar retentio n rate demonstrates our rate of expansion within our existing customer base.

Our net dollar retention rate was 108% and 103% as of December 31, 2025 and December 31, 2024, respectively.

On constant currency basis, our net dollar retention rate was 105% which was a decrease from prior year primarily due to lower expansion within existing customers driven by macroeconomic pressures offset by the addition of Device42 and a slight improvement in

our overall churn rate.

These macroeconomic events could adversely affect demand for our products and services and we expect these pressures to persist for the foreseeable future

On constant currency basis, our net dollar retention rate was 104% which was an increase from prior year primarily due to an improvement in our overall churn rate.

We have a significant opportunity to expand within our existing customer base and substantially increase the number of customers that purchase multiple Freshworks products.

As of December 31, 2024, approximately 36% of our customers purchased two or more Freshworks products, which includes customers on our Freshdesk Omni and Freshsales Suite subscription plans counting as customers who purchased multiple products.

As of December 31, 2025, approximately 31% of our customers purchased two or more Freshworks products.

These customers represented 45% of total ARR as of December 31, 2025, illustrating the large opportunity we have to sell additional products to our current customer base and drive growth.

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We believe that the number of customers contributing $50,000 or more in ARR indicates the strategic importance of our products for our customers and our ability to both initially land significant accounts or grow customers into significant accounts over time.

No single customer accounted for more than 1% of ARR and our top 10 customers represented less than 5% of ARR as of December 31, 2024, and we have no significant concentration in a specific industry vertical.

single customer accounted for more than 1% of ARR and our top 10 customers represented less than 5% of ARR as of December 31, 2025, and we have no significant concentration in a specific industry vertical.

Investing in Our Growth

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We have a track record of bringing new products to market and scaling these new products over time.

As of December 31, 2024, we have two primary products with over $100 million in ARR, Freshdesk and Freshservice.

As of December 31, 2025, we have two primary products with over $100 million in ARR, Freshservice and Freshdesk.

We intend to invest in growing our research and development team to extend the functionality of our solutions and continue to bring new solutions to market.

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We intend to invest aggressively in our direct and indirect sales and marketing capabilities, including investments in our outbound sales motion.

We have been global from our earliest product sales and our global footprint continues to expand, with customers in approximately 170 countries.

We have been global from our earliest product sales and our global footprint continues to expand, with customers in over 170 countries.

During the year ended December 31, 2025, 46%, 39%, and 15% of our revenue was derived from customers in North America;

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Ending ARR includes upsells, cross-sells, renewals, and expansion as a result of acquisitions during the measurement period and is net of any contraction or attrition over this period.

We define ARR as the sum total of subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of the contract.

For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR.

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Our net dollar retention rate was 108% and 103% as of December 31, 2025 and 2024, respectively.

Net dollar retention rate decreased from prior year primarily due to lower expansion within existing customers driven by macroeconomic pressures and an unfavorable foreign currency impact, offset by the addition of Device42 and a slight improvement in our overall churn rate.

We expect our net dollar retention rate could fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

Net dollar retention rate increased from prior year primarily due to a favorable foreign currency impact and an improvement in our churn rate.We expect our net dollar retention rate could fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

Critical Accounting Policies and Estimates

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We sell subscriptions for our cloud-based solutions directly to customers and indirectly through channel partners through arrangements that are non-cancelable and non-refundable.

Our subscription arrangements do not provide customers with the right to take possession of the software supporting the solutions and, as a result, are accounted for as

service arrangements.

Our subscription arrangements do not provide customers with the right to take possession of the software supporting the solutions and, as a result, are accounted for as service arrangements.

We also sell software licenses with associated maintenance and professional services based on product offerings introduced upon the acquisition of D42 Parent, Inc.

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Software license revenue consists of term licenses and is recognized upfront, upon making the software available to the customer.

The associated software maintenance revenue is generally recognized ratably over the contract term as support and updates are provided to the customers over the term of the arrangement.

The associated software maintenance revenue is generally recognized ratably over the contract term as support is provided to the customers over the term of the arrangement.

Customers with Multiple Performance Obligations

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Prior to our Initial Public Offering (IPO), we determined the fair value of the common stock underlying stock options and RSUs by considering numerous objective and subjective factors including, but not limited to:

(i) independent third-party

valuations, (ii) the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to its common stock, (iii) the lack of marketability of the common stock, (iv) current business conditions and financial projections, and (iv) the likelihood of achieving an IPO or sale event.

(i) independent third-party valuations, (ii) the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to its common stock, (iii) the lack of marketability of the common stock, (iv) current business conditions and financial projections, and (iv) the likelihood of achieving an IPO or sale event.

Subsequent to the IPO, the fair values of stock options and the stock purchase rights under the ESPP are estimated using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions.

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We determine whether an arrangement constitutes a lease and record lease liabilities and right-of-use assets on our consolidated balance sheets at the lease commencement date.

Lease liabilities are measured based on the present value of the total lease payments not yet paid, discounted based on either the rate implicit in the lease or our incremental borrowing rate (the estimated rate we would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease), whichever is more readily determinable.

Lease liabilities are measured based on the present value of the total lease payments not yet paid, discounted based on either the rate implicit in the lease or our incremental borrowing rate (the

estimated rate we would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease), whichever is more readily determinable.

The incremental borrowing rate is based on an estimate of our expected unsecured borrowing rate for our notes, adjusted for tenor and collateralized security features.

We estimate the incremental borrowing rate using yields for maturities that are in line with the duration of the lease payments.

We are subject to income taxes in the U.S.

and in other foreign jurisdictions.

We recognize current and deferred income taxes based on reported income before income taxes.

Deferred income taxes reflect the effect of temporary differences and carryforwards recognized for financial reporting and income tax purposes.

Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, utilizing tax rates that are expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.

We recognize valuation allowance to reduce deferred tax assets to the amount that we estimate, based on available evidence and management judgment, will more likely than not be realized.

We record a valuation allowance in the period the determination is made that all or part of the net deferred tax assets will not be realized.

We record interest and penalties related to unrecognized tax benefits in tax expense.

Non-GAAP Financial Measures

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• Restructuring charges.

financial measures, because we do not believe these expenses have a direct correlation to the operating performance of our business.

We exclude restructuring charges, which primarily consist of employee severance and other employee termination benefits associated with the restructuring plan initiated in November 2024, from our non-GAAP financial measures, because we do not believe these expenses have a direct correlation to the operating performance of our business.

• Gain on sale of non-marketable equity investments .

We exclude gains on sale of non-marketable equity investments from certain of our non-GAAP financial measures because we believe they are unrelated to our ongoing operating performance and are not expected to recur in our continuing operating results.

• Acquisition expenses .

We exclude acquisition expenses, which primarily consist of legal fees and due diligence costs, from our non-GAAP financial measures because we do not believe these expenses have a direct correlation to the operating performance of our business.

• Income tax effect and adjustments.

We exclude the income tax effect of the above adjustments and income tax effect associated with acquisitions from our non-GAAP financial measures.

We exclude the income tax effect of the above adjustments, income tax effect associated with acquisitions and tax charges or benefits that are a result of a change in valuation allowance on deferred tax assets and its related impacts, from our non-GAAP financial measures.

We exclude these costs because we do not believe these expenses have a direct correlation to the operating performance of our business.

Non-GAAP Income (Loss) From Operations and Non-GAAP Net Income (Loss)

We define non-GAAP income (loss) from operations as GAAP loss from operations excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, and restructuring charges.

We define non-GAAP net income (loss) as GAAP net loss, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, and restructuring charges, and income tax adjustments.

The following tables present a reconciliation of our GAAP loss from operations to our non-GAAP income (loss) from operations and our GAAP net loss to our non-GAAP net income (loss) for each of the periods presented (in thousands):

Non-GAAP Income (Loss) from Operations

Non-GAAP Income From Operations and Non-GAAP Net Income

We define non-GAAP income from operations as GAAP income (loss) from operations excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, restructuring charges and acquisition expenses.

We define non-GAAP net income as GAAP net income (loss), excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, restructuring charges, gain on sale of non-marketable equity investments, acquisition expenses and income tax adjustments.

The following tables present a reconciliation of our GAAP income (loss) from operations to our non-GAAP income from operations and our GAAP net income (loss) to our non-GAAP net income for each of the periods presented (in thousands):

Non-GAAP Income from Operations

Year Ended December 31,

2025 2024 2023

Loss from operations $ (138,610) $ (170,172) $ (233,372)

Income (loss) from operations

$ 13,205 $ (138,610) $ (170,172)

Non-GAAP adjustments:

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Restructuring charges

Non-GAAP income (loss) from operations

Acquisition expenses

Non-GAAP income from operations

$ 177,993 $ 99,143 $ 44,549

Non-GAAP Net Income (Loss)

Non-GAAP Net Income

Year Ended December 31,

2025 2024 2023

Net loss $ (95,368) $ (137,436) $ (232,132)

Net income (loss)

Non-GAAP adjustments:

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Restructuring charges

Acquisition expenses

Gain on sale of non-marketable equity investments

Income tax adjustments (1)

Non-GAAP net income (loss)

$ 130,368 $ 78,683 $ (19,040)

Non-GAAP net income

(1) During the year ended December 31, 2025, income tax adjustments primarily included approximately $151.7 million of tax benefit from a release of our valuation allowance on U.S.

deferred tax assets and $39.1 million of income tax effect of non-GAAP adjustments, partially offset by $38.9 million of transition impact as a result of releasing our valuation allowance.

During the year ended December 31, 2024, income tax adjustments included $14.3 million of income tax benefit associated with acquisitions.

Free Cash Flow

We define free cash flow as net cash provided by (used in) operating activities, less purchases of property and equipment, and capitalized internal-use software costs.

We define free cash flow as net cash provided by operating activities, less purchases of property and equipment, and capitalized internal-use software costs.

We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash from our core operations after purchases of property and equipment.

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2025 2024 2023

Net cash provided by (used in) operating activities $ 160,646 $ 86,178 $ (2,525)

Net cash provided by operating activities

$ 242,370 $ 160,646 $ 86,178

Purchases of property and equipment (5,700) (9,177) (2,069)

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$ 220,879 $ 145,984 $ 77,838

Net cash provided by (used in) investing activities

Net cash provided by investing activities

$ 206,133 $ 38,803 $ 158,499

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$ (436,658) $ (67,260) $ (60,619)

(1) Free cash flow includes $7.3 million of restructuring costs paid during the year ended December 31, 2024.

(1) Free cash flow includes $2.2 million and $7.3 million of restructuring costs paid during the years ended December 31, 2025 and 2024.

Components of Our Results of Operations

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Research and Development.

certain executives, software license fees, rental of office premises, third-party product development services and consulting expenses, and depreciation expense for equipment used in research and development activities.

Research and development expense consists primarily of personnel-related costs, including salaries, related benefits, and stock-based compensation expense for engineering and product development employees and certain executives, software license fees, rental of office premises, third-party hosting fees, third-party product development services and consulting expenses, and depreciation expense for equipment used in research and development activities.

We capitalize a portion of our research and development expenses that meet the criteria for capitalization of internal-use software.

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Sales and Marketing.

Sales and marketing expense consists primarily of personnel-related costs, including salaries, related benefits, and stock-based compensation expense for our sales personnel and certain executives, sales commissions for our sales force and reseller commissions for our channel sales partners, as well as costs associated with marketing activities, travel and entertainment costs, software license fees, and rental of office premises.

Sales commissions that are considered incremental costs incurred to obtain contracts with customers, are deferred and amortized over the benefit period of three years.

Sales and marketing expense consists primarily of personnel-related costs, including salaries, related benefits, and stock-based compensation expense for our sales personnel and certain executives, sales commissions for our sales force and reseller commissions for our channel sales partners, as well as costs associated with marketing activities, travel and entertainment costs, amortization of acquired technology intangibles, software license fees, and rental of office premises.

Sales and reseller commissions that are considered incremental costs incurred to obtain contracts with customers, are deferred and amortized over the benefit period of three years.

Marketing activities include online lead generation, advertising, and promotional events.

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Provision for Income Taxes

Provision for income taxes consists primarily of income taxes related to U.S.

states and foreign jurisdictions in which we conduct business.

We maintain a full valuation allowance on our U.S.

federal and state net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Provision for income taxes could also include changes in valuation allowance.

We are subject to income taxes in U.S.

and in foreign jurisdictions.

We monitor the realizability of our deferred tax assets and take into account all relevant factors at each reporting period.

As of December 31, 2025, based on the relevant weight of positive and negative evidence, including the amount of our taxable income in the current year, which is objective and verifiable, we concluded that it is more likely than not that our U.S.

federal and state deferred tax assets are realizable.

As such, we released $151.7 million valuation allowance related to the U.S.

deferred tax assets during the year ended December 31,

Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions as well as non-deductible expenses, such as stock-based compensation, and changes in our valuation allowance.

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Total operating expenses 699,459 745,700 663,235

Loss from operations (138,610) (170,172) (233,372)

Income (loss) from operations

13,205 (138,610) (170,172)

Interest and other income, net 40,077 47,773 46,403

Loss before income taxes (90,837) (123,769) (220,790)

Provision for income taxes 4,531 13,667 11,342

Net loss $ (95,368) $ (137,436) $ (232,132)

Income (loss) before income taxes

53,282 (90,837) (123,769)

Provision for (benefit from) income taxes

(130,441) 4,531 13,667

Net income (loss)

$ 183,723 $ (95,368) $ (137,436)

__________________

(1) Includes stock-based compensation expense as follows:

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(1) Stock-based compensation expense recorded to research and development in the consolidated statements of operations excludes amounts that were capitalized for internal-use software.

(2) Sales and marketing expense for the years ended December 31, 2024, 2023, and 2022 includes $6.5 million, $9.6 million, and $3.2 million , respectively, of stock-based compensation expense associated with RSUs, PRSUs and options granted to the President.

After the appointment of the President as our Chief Executive Officer, stock-based compensation expenses were included in General and Administrative.

(3) General and administrative expense includes stock-based compensation expense associated with RSUs and PRSUs primarily granted to the Executive Chairman of $50.4 million, $55.9 million and $55.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The following table sets forth our consolidated statements of operations for the periods presented, as a percentage of revenue:

(2) General and administrative expense includes stock-based compensation expense associated with RSUs and PRSUs primarily granted to the Executive Chairman of $(5.1) million, $50.4 million and $55.9 million for the years ended December 31, 2025, 2024 and 2023, respectively, with 2025 including $38.7 million in forfeitures due to the departure of the Executive Chairman.

The following table sets forth our consolidated statements of operations data for the periods presented, as a percentage of revenue:

Year Ended December 31,

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Total operating expenses 83 104 112

Loss from operations (20) (29) (47)

Income (loss) from operations

Interest and other income, net 5 7 8

Loss before income taxes (13) (21) (45)

Provision for income taxes 1 2 2

Net loss (14) % (23) % (47) %

Income (loss) before income taxes

Provision for (benefit from) income taxes (16) 1 2

Net income (loss)

23 % (14) % (23) %

Comparison of Fiscal Years Ended December 31, 2025 and 2024

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Cost of revenue increased by $12.8 million, or 11%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This increase was primarily due to increases of $2.8 million in amortization of developed technology, $1.8 million in software license fees, $1.6 million in third-party hosting costs, $1.3 million in professional service fees, and $1.2 million in personnel-related costs.

This increase was primarily due to increases of $3.4 million in third-party hosting costs as we expand capacity to support our growing customer base, $2.7 million in employee related costs driven by annual compensation adjustments, higher variable incentive compensation and changes in retirement benefit obligations for employees in India, partially offset by lower headcount, $2.6 million in software license fees attributable to higher usage and renewal costs, $2.2 million in amortization of developed technology, and $1.8 million in amortization of internally capitalized software.

Our gross margin increased to 85% from 84% as we increased revenue and realized benefits from economies of scale primarily related to our third-party hosting costs.

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Total operating expenses $ 699,459 $ 745,700 $ (46,241) (6 %)

The increases in our operating expenses in the year ended December 31, 2024 compared to the year ended December 31, 2023 were primarily driven by increases in personnel-related costs due to annual compensation adjustments, net of certain changes in employee incentives, changes in stock-based compensation expense, and increases in advertising, marketing and branding expenses and professional service fees.

The $46.2 million, or 6%, decrease in our operating expenses in the year ended December 31, 2025 compared to the year ended December 31, 2024 were primarily driven by the cancellation of equity awards following the resignation of our former Executive Chairman and lower headcount following the November 2024 restructuring, which decreased stock-based compensation expenses and personnel-related costs.

The decrease is partially offset by the impact of annual compensation adjustments and higher variable incentive compensation which increased personnel-related costs.

Research and Development

Research and development expense increased by $26.8 million, or 19%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This increase was primarily due to increases of $17.8 million in personnel-related costs due to compensation adjustments, $4.0 million in stock-based compensation expense, and $2.2 million in software license and third-party hosting fees.

Research and development expense decreased by $1.4 million, or 1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This decrease was primarily driven by lower stock-based compensation expense of $6.7 million due to employee terminations and fully vested equity awards, as well as a $1.1 million decrease in personnel-related costs.

These decreases were partially offset by increases of $1.6 million in third-party hosting costs to support our development activities, $1.3 million in software license fees, $1.0 million each in professional service fees and allocated rent.

Sales and Marketing

Sales and marketing expense increased by $3.9 million, or 1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This increase was primarily due to increases of $16.9 million in personnel-related costs due to compensation adjustments, $4.7 million amortization of acquired intangible assets, $4.0 million in advertising, branding and event costs, $2.7 million in travel related expenses for events, $2.3 million in reseller commissions, $2.3 million in professional services fees, and $1.3 million in software license fees, partially offset by a decrease of $3.5 million in stock-based compensation expense.

This increase was primarily due to increases of $5.6 million in reseller commissions, $4.7 million in adverting, marketing and branding costs, $4.4 million in software license fees, and $3.6 million amortization of acquired intangible assets from the D42 Parent, Inc.

The increase was partially offset by lower stock-based compensation expense of $14.9 million from lower headcount following the November 2024 restructuring and the transition of our President to CEO mid 2024.

General and Administrative

General and administrative expense increased by $12.9 million, or 8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This increase was primarily due to increases of $7.1 million in personnel-related costs due to compensation adjustments, $5.8 million in stock-based compensation expenses, $1.1 million in professional services fees, comprised primarily of legal, accounting, and consulting fees, partially offset by decreases of $1.7 million in tax reserves in accordance with ASC 450 and $1.6 million in directors and officers insurance.

General and administrative expense decreased by $39.5 million, or 22%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This decrease was primarily driven by lower stock-based compensation expense of $47.6 million primarily due to the cancellation of equity awards following the resignation of our former Executive Chairman in December 2025.

The decrease was partially offset by an increase of $6.8 million in personnel-related costs primarily due to higher variable incentive compensation and annual compensation adjustments.

Restructuring Charges

Restructuring charges of $9.7 million for the year ended December 31, 2024, consisted of employee severance and termination benefits related to a restructuring plan that we initiated in November 2024.

Restructuring charges of $0.4 million and $9.7 million for the years ended December 31, 2025 and 2024, respectively, consisted of employee severance and termination benefits related to a restructuring plan that we initiated in November 2024.

The restructuring plan is complete, with no remaining liability as of December 31, 2025.

Interest and Other Income, Net

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• not meaningful

Interest income increased by $5.8 million primarily due to higher interest rates and increased interest income earned on larger balances maintained in our marketable securities portfolios.

Other income (expense), net changed by $4.4 million, primarily due to an unfavorable impact from changes in British pound against the U.S.

Interest income decreased by $13.5 million, primarily due to reduction in average balances held in our marketable securities portfolios as a result of our share repurchases.

Other income (expense), net changed by $5.8 million, primarily due to a $4.4 million favorable impact from changes in British pound and euro against the U.S.

dollar, and a $1.8 million gain on sale of non-marketable equity investments.

Provision for Income Taxes

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Provision for income taxes $ (130,441) $ 4,531 $ (134,972) *

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions.

For the years ended December 31, 2024 and 2023, we recorded a provision for income taxes of $4.5 million, and $13.7 million, respectively, on loss before taxes of $90.8 million and $123.8 million, respectively.

*not meaningful

We are subject to income taxes in the U.S.

and in foreign jurisdictions.

We monitor the realizability of our deferred tax assets and take into account all relevant factors at each reporting period.

federal and state deferred tax assets are realizable.

As such, we released $151.7 million valuation allowance related to the U.S.

federal and state deferred tax assets during the year ended December 31, 2025.

For the years ended December 31, 2025 and 2024, we recorded income tax provision (benefit) of $(130.4) million and $4.5 million, respectively, on income (loss) before taxes of $53.3 million and $(90.8) million, respectively.

The effective tax rates for the years ended December 31, 2025 and 2024 were (244.8)% and (5.0)% respectively.

The effective tax rates differ from the statutory rate of 21% primarily due to nondeductible compensation and change in the valuation allowance.

The $9.1 million decrease in tax expense was primarily related to the tax benefit of $14.3 million from D42 Parent, Inc.

acquisition, partially offset by higher tax expenses due to higher pre-tax earnings from foreign subsidiaries.

The effective tax rates differ from the statutory rate of 21% primarily due to the release of the U.S.

federal and state valuation allowance, profits from foreign jurisdictions, and nondeductible compensation.

The $135.0 million decrease in tax expense was primarily related to the tax benefit of $151.7 million related to U.S.

federal and state valuation allowance release, partially offset by higher expenses due to higher pre-tax earnings from foreign subsidiaries and nondeductible compensation.

Liquidity and Capital Resources

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As of December 31, 2025, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Our material cash requirements from known contractual obligations consists of our obligations under operating leases for office space and contractual obligations for third-party cloud infrastructure.

See Item 8 of Part I, "Financial Statements and Supplementary Data — Note 8—Leases and Note 9—Commitments and Contingencies" for additional discussion of our principal contractual commitments.

In November 2024, our board of directors approved the share repurchase program, which authorized the repurchase of up to $400 million of our outstanding Class A common stock.

Under the repurchase program, we may repurchase shares of our outstanding Class A common stock from time to time in the open market, through privately negotiated transactions and/or other means in compliance with the Exchange Act and the rules and regulations thereunder.

Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 under the Exchange Act.

We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares of common stock under this authorization.

The timing, manner, price, and amount of any repurchases will be determined by us at our discretion, and will depend on a variety of factors, including business, economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other considerations.

The repurchase program may be suspended or discontinued at any time.

For the year ended December 31, 2024, we repurchased a total of 985,234 shares of Class A common stock under this program in open market transactions for an aggregate purchase price of $15.5 million.

As of December 31, 2024, $384.5 million remained available for future share repurchases.

Our material cash requirements from known contractual obligations primarily consist of our obligations under operating leases for office space and contractual obligations for third-party cloud infrastructure.

See Item 8 of Part I, Financial Statements and Supplementary Data — Note 8—Leases and Note 9—Commitments and Contingencies for additional discussion of our principal contractual commitments and Note 16—Subsequent Events for details on transactions that occurred after December 31, 2025.

We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

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$ (436,658) $ (67,260) $ (60,619)

Operating Activities

Cash Flows from Operating Activities

Net cash provided by operating activities of $242.4 million for the year ended December 31, 2025 reflects our net income of $183.7 million, adjusted for non-cash items such as stock-based compensation of $146.8 million, amortization of deferred contract acquisition costs of $31.7 million, depreciation and amortization of $25.9 million, non-cash lease expense of $9.7 million, offset by $6.6 million from discount amortization on marketable securities and $1.8 million in gain on sale of non-marketable equity investments.

Additionally, net cash inflows from changes in operating assets and liabilities were $1.3 million.

The net cash inflows from changes in operating assets and liabilities were due to increases of operating liabilities of $61.2 million in deferred revenue, $19.1 million in accrued and other liabilities and $9.6 million in accounts payable;

partially offset by increases in operating assets of $40.1 million in deferred contract acquisition costs, $28.1 million in accounts receivable, $11.9 million in prepaid expenses and other assets and decreases of operating liabilities of $8.5 million in operating lease liabilities.

Net cash provided by operating activities of $160.6 million for the year ended December 31, 2024 reflects our net loss of $95.4 million, adjusted for non-cash items such as stock-based compensation of $216.7 million, amortization of deferred contract acquisition costs of $28.6 million, depreciation and amortization of $19.4 million, non-cash lease expense of $8.8 million, offset by $16.0 million from discount amortization on marketable securities and $12.6 million from changes in deferred income taxes.

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partially offset by increases in operating assets of $34.5 million in deferred contract acquisition costs, $17.1 million in accounts receivable, $1.4 million in prepaid expenses and other assets and decreases of operating liabilities of $4.3 million in operating lease liabilities and $2.2 million in accounts payable.

Net cash provided by operating activities of $86.2 million for the year ended December 31, 2023 reflects our net loss of $137.4 million, adjusted for non-cash items such as stock-based compensation of $210.7 million, depreciation and amortization of $12.1 million, amortization of deferred contract acquisition costs of $24.0 million, non-cash lease expense of $7.7 million, premium amortization on marketable securities of $15.7 million, and net cash outflows of $14.1 million from changes in operating assets and liabilities.

The net cash outflows from changes in operating assets and liabilities were due to increases of operating assets of $27.0 million in deferred contract acquisition costs, $27.0 million in accounts receivable, $7.4 million in prepaid expenses and other assets and decreases of $12.9 million in operating lease liabilities and $2.4 million in accounts payable;

partially offset by increases in operating liabilities of $60.8 million in deferred revenue and $1.8 million in accrued and other liabilities.

Investing Activities

Cash Flows from Investing Activities

Net cash provided by investing activities of $206.1 million for the year ended December 31, 2025 consisted of $243.9 million in proceeds from maturities and sales, net of purchases of marketable securities and $2.0 million in proceeds from sale of non-marketable securities;

partially offset by $18.4 million advances paid for the business combination, $15.8 million related to the capitalization of internal-use software, and $5.6 million in purchases, net of proceeds from sale, of property and equipment.

Net cash provided by investing activities of $38.8 million for the year ended December 31, 2024 consisted of $267.1 million in proceeds from maturities and sales, net of purchases of marketable securities;

partially offset by $213.9 million cash paid for the business combination, net of cash acquired, $8.9 million in purchases, net of proceeds from sale, of property and equipment, and $5.5 million related to the capitalization of internal-use software.

Net cash provided by investing activities of $158.5 million for the year ended December 31, 2023 consisted of $166.7 million in proceeds from maturities and sales, net of purchases of marketable securities;

partially offset by $2.0 million in purchases, net of proceeds from sale of property and equipment, and $6.3 million related to the capitalization of internal-use software.

Financing Activities

Cash Flows from Financing Activities

Net cash used in financing activities of $436.7 million for the year ended December 31, 2025 consisted primarily of $386.3 million cash paid to repurchase shares of our common stock and $56.7 million in payment of withholding taxes on net share settlement of equity awards;

partially offset by $6.2 million in net proceeds from issuance of common stock under our employee stock purchase plan.

Net cash used in financing activities of $67.3 million for the year ended December 31, 2024 consisted primarily of $60.3 million in payment of withholding taxes on net share settlement of equity awards, $13.7 million cash paid to repurchase shares of our common stock;

partially offset by $6.6 million in proceeds from issuance of common stock under our employee stock purchase plan, net.

Net cash used in financing activities of $60.6 million for the year ended December 31, 2023 consisted primarily of $68.0 million in payment of withholding taxes on net share settlement of equity awards, partially offset by $7.3 million in proceeds from issuance of common stock under our employee stock purchase plan, net.

partially offset by $6.6 million in net proceeds from issuance of common stock under our employee stock purchase plan.

Recent Accounting Pronouncements

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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-K

Item 7. Management’s Discussion and Analysis