Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors.”
This section of this Form 10-K generally discusses 2025 and 2024 items and year over year comparisons between 2025 and 2024. Discussions of 2023 items and the year over year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Key Metrics and Current Trends
Average Annual Revenue Per Enterprise and Mid-market Customer (“ARPC”) and revenue retention are currently the key performance metrics our management uses to assess the health and trajectory of the Company. These metrics should be viewed independently of revenue, deferred revenue and remaining performance obligations. ARPC is a measure of the average recurring revenue per enterprise and mid-market customer over the trailing twelve months. ARPC increased to $680,000 in 2025, as compared to $625,000 in 2024. Revenue retention for our enterprise and mid-market customers on the LivePerson Platform, which represents the trailing-twelve-month change in total revenue from existing customers after upsells, downsells and attrition, was 78%, below our long-range target of 105% to 115%, a decline from the 82% retention rate in 2024.
We continue to observe slower than anticipated renewals and new business bookings, primarily driven by customer uncertainty regarding our financial stability as well as broader macroeconomic and industry factors extending enterprise buying cycles, including for high-value AI solutions, which can require additional approvals related to compliance reviews and other factors, with a corresponding impact on the Company’s revenue.
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Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. We base these estimates on our historical experience, future expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments that may not be readily apparent from other sources. We evaluate these estimates on an annual basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material. For further information on our significant accounting policies, see Note 1 – Description of Business and Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
The critical accounting policies, estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Revenue Recognition
The majority of our revenue is generated from hosted service revenues, including platform access, usage and related professional services . Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
Hosted Services Revenue
Hosted services revenue is reported at the amount that reflects the ultimate consideration expected to be received and primarily consists of fees that provide customers access to the LivePerson Platform. We have determined such access represents a stand-ready service provided continually throughout the contract term. As such, control and satisfaction of this stand-ready performance obligation is deemed to occur over time. We recognize this revenue over time on a ratable basis over the contract term, beginning on the date that access to the LivePerson Platform is made available to the customer. The passage of time is deemed to be the most faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit provided by our performance. Subscription contracts are generally one year or longer in length, billed monthly, quarterly or annually in advance.
Professional Services Revenue
Professional Services revenue is reported at the amount that reflects the ultimate consideration we expect to receive in exchange for such services. The Company’s professional services revenue consists of fees that provide customers with product support and updates during the term of the arrangement, which is typically one year or longer in length, billed monthly, quarterly or annually in advance. Revenue is generally recognized ratably over the contract term. The Company’s professional services revenue also includes custom support services, which differ from the Company’s standard product support. These custom support revenues are recognized as the services are completed.
Goodwill and Long-lived Assets Impairments
Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis on October 1, and more frequently whenever events or substantive changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its fair value. In performing the goodwill impairment test, we first assess qualitative factors to determine the existence of impairment. If the qualitative factors indicate that the carrying value of a reporting unit more likely than not exceeds its fair value, we proceed to a quantitative test to measure the existence and amount, if any, of goodwill impairment. We may also choose to bypass the qualitative assessment and proceed directly to the quantitative test. In performing the quantitative test, impairment loss is recorded to the extent that the carrying value of the reporting unit exceeds its assessed fair value. In connection with the annual impairment test performed as of October 1, 2025 and the interim test performed as of December 31, 2025 using the quantitative “Step 1” assessment, we determined the fair value of our reporting unit, using both an income approach and a market approach. The fair value determination using an income approach requires management to make significant estimates and assumptions related to forecasts of future revenues, EBITDA and the discount rate. The fair value determination using a market approach requires management to make significant assumptions related to marketplace multiples from within a peer public company group.
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Prior to testing goodwill for impairment, the Company first tests its long-lived assets for impairment. The carrying values are adjusted, if necessary, for the result of each impairment test prior to performing the next test. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition. If such review indicates that the carrying amount of an asset is not recoverable and the asset’s fair value is less than the carrying amount, an impairment charge is recognized.
See Note 1 - Description of Business and Summary of Significant Accounting Policies, N ote 5 – Goodwill and Intangible Assets, Net and Note 6 - Property and Equipment, Net in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.
Senior Notes and Warrants
Convertible Senior Notes due 2029
We account for convertible debt and related transactions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470, Debt , ASC 815, Derivatives and Hedging , and ASC 480, Distinguishing Liabilities from Equity . We evaluate convertible debt instruments and related transactions at inception to determine if those contracts include embedded features that should be bifurcated as an embedded derivative.
The 2029 Notes issued during 2024 were accounted for as a liability. The transaction was accounted for as a debt extinguishment and a gain on extinguishment was recorded. The Company paid third party fees in connection with the transaction, which were capitalized as debt issuance costs. Unamortized debt issuance costs incurred in connection with securing the Company’s financing arrangements are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the outstanding borrowings, consistent with debt discounts. All deferred financing costs are amortized to interest expense. T he 2029 Notes include certain embedded features requiring bifurcation. The Company estimates the fair value of these features on a quarterly basis by assessing the likelihood of triggering events. The features do not have material values as of December 31, 2025, but they may have value in the future, should the estimates change, with any change in fair value recorded in the Company’s consolidated statements of operations.
Second Lien Senior Subordinated Secured Notes due 2029
We issued Second Lien Notes as part of our troubled debt restructuring in 2025. They are accounted for as a liability and a troubled debt restructuring gain was recorded in other income (expense), net. The Company paid third party fees in connection with the transaction, which reduced the gain recorded.
Warrants
The cash-settled and share-settled warrants (together, “Warrants”) issued by the Company are classified as current liabilities in the consolidated balance sheets and recorded at their fair value. Changes in fair value are recorded in Other income (expense), net in the Company’s consolidated statements of operations.
See Note 8 – Senior Notes, Capped Call Transactions, Warrants and Preferred Stock and Note 9 - Fair Value Measurements in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.
Recently Issued Accounting Standards
See Note 1 – Description of Business and Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information about recent accounting guidance not yet adopted and recently adopted accounting pronouncements.
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Results of Operations
We enable brands to leverage the LivePerson Platform’s sophisticated intelligence engine to connect with consumers through an integrated suite of mobile and online business messaging technologies. Our platform enables businesses to have conversations with millions of consumers as personally as they would with one consumer.
Revenue
The following tables set forth our results of operations for the years presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Revenue $ 243,742 $ 312,474 $ (68,732) (22) %
Revenue decreased by 22% to $243.7 million for the year ended December 31, 2025, from $312.5 million for the year ended December 31, 2024. Hosted services decreased by $54.1 million, primarily driven by customer cancellations and a decrease in customer commitments upon renewal of existing contracts. Included in hosted services is a decrease of $12.0 million in revenue that is variable based on interactions and usage for the year ended December 31, 2025 . In addition, Professional Services decreased by $14.7 million for the year ended December 31, 2025. Refer to Key Metrics and Current Trends within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of revenue trends.
Cost of Revenue (exclusive of depreciation and amortization shown separately below)
Cost of revenue consists of compensation costs relating to employees who provide customer service to our customers, compensation costs relating to our network support staff, outside labor provider costs, the cost of supporting our server and network infrastructure, and allocated occupancy costs and related overhead.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Cost of revenue $ 69,392 $ 77,395 $ (8,003) (10) %
Percentage of total revenue 28 % 25 %
Headcount (at period end) 146 187 (22) %
Cost of revenue decreased by 10% to $69.4 million for the year ended December 31, 2025, from $77.4 million for the year ended December 31, 2024 . This decrease in expense is primarily attributable to a decrease in salary, stock-based compensation and employee-related expenses of $6.7 million due to restructuring activities, and a decrease in business services and outsourced expenses of $5.1 million, partially offset by an increase in software and hosting expenses of $5.3 million.
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Sales and Marketing
Sales and marketing expenses consist of compensation and related expenses for sales and marketing personnel, as well as advertising, marketing events, public relations, trade show exhibit expenses and allocated occupancy costs and related overhead.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Sales and marketing $ 75,800 $ 97,337 $ (21,537) (22) %
Percentage of total revenue 31 % 31 %
Headcount (at period end) 129 224 (42) %
Sales and marketing expenses decreased by 22% to $75.8 million for the year ended December 31, 2025, from $97.3 million for the year ended December 31, 2024. This decrease was primarily attributable to a decrease in salary, stock-based compensation expense and employee-related expenses of $13.0 million due to restructuring activities, a decrease in marketing expenses of $3.3 million, a decrease in software and hosting expenses of $3.0 million, and a decrease in business services and outsourced expenses of $2.2 million.
General and Administrative
Our general and administrative expenses consist of compensation and related expenses for executive, accounting, legal, human resources and administrative personnel, professional fees and other general corporate expenses.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
General and administrative $ 44,441 $ 79,761 $ (35,320) (44) %
Percentage of total revenue 18 % 26 %
Headcount (at period end) 101 132 (23) %
General and administrative expenses decreased by 44% to $44.4 million for the year ended December 31, 2025, from $79.8 million for the year ended December 31, 2024. This is primarily attributable to a decrease in bad debt expense of $14.1 million, a decrease in legal and insurance costs of $12.1 million, a decrease in salary, stock-based compensation expense and employee-related expenses of $4.8 million due to restructuring activities, a decrease in leadership transition costs of $3.0 million, and a decrease in business services and outsourced expenses of $1.0 million, partially offset by an increase in software expenses of $0.5 million. In addition, the Company recognized $1.8 million of post-closing adjustments related to the Kasamba divestiture in 2024 that did not recur in 2025.
Product Development
Our product development expenses consist of compensation and related expenses for product development personnel as well as allocated occupancy costs and related overhead and outsourced labor and expenses for testing new versions of our software.
Year Ended December 31,
2025 2024 % Change % Change
(Dollars in thousands)
Product development $ 54,706 $ 79,784 $ (25,078) (31) %
Percentage of total revenue 22 % 26 %
Headcount (at period end) 239 405 (41) %
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Product development costs decreased by 31% to $54.7 million for the year ended December 31, 2025, from $79.8 million for the year ended December 31, 2024. This decrease is primarily related to a decrease in salary, stock-based compensation expense and employee-related expenses of $11.5 million due to restructuring activities, a decrease in software and hosting expenses of $6.8 million, and a decrease in business services and outsourced expenses of $5.5 million.
We continued to make investments in public cloud migration, and in the LivePerson Platform. While innovation remains a core component of our strategy, we are operating in a competitive environment characterized by aggressive investment in artificial intelligence and other technological innovation by competitors with significant resources and investment capital. During the years ended December 31, 2025 and 2024, $11.3 million and $19.3 million was capitalized, respectively.
Depreciation and Amortization
Our depreciation and amortization relates to depreciation and amortization of our property and equipment and to amortization of our intangible assets and finance leases.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Depreciation and amortization $ 22,732 $ 42,272 $ (19,540) (46) %
Percentage of total revenue 9 % 14 %
Depreciation and amortization costs decreased by 46% to $22.7 million for the year ended December 31, 2025, from $42.3 million for the year ended December 31, 2024. This decrease is primarily related to the reduction in asset balances due to impairments in 2024 of $37.4 million related to intangible assets and $9.5 million related to internal-use software development costs. Refer to Note 5 - Goodwill and Intangible Assets, Net and Note 6 - Property and Equipment, Net for additional information on the impairment charges.
Restructuring Costs
We maintain restructuring initiatives to realign our cost structure with our current business model, in which we have flattened the Company’s organizational structure to align to more efficient sales and service support. While the Company’s restructuring efforts are ongoing, the 2024 restructuring activities were substantially completed by December 31, 2024, and the 2025 restructuring activities were substantially completed by December 31, 2025.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Restructuring costs $ 11,667 $ 11,139 $ 528 5 %
Percentage of total revenue 5 % 4 %
Restructuring costs increased by 5% to $11.7 million for the year ended December 31, 2025, from $11.1 million for the year ended December 31, 2024. This increase is attributable to a reversal of IT contract termination costs of $1.2 million in the comparable year which did not recur in the current year, partially offset by a decrease in severance and other associated costs of $0.7 million due to fewer reductions in our workforce compared to the year ended December 31, 2024. Refer to Note 12 – Restructuring for additional information about the restructuring initiative.
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Impairment of Goodwill
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Impairment of goodwill $ 41,595 $ 60,551 $ (18,956) (31)%
Percentage of total revenue 17 % 19%
Goodwill impairment was $41.6 million for the year ended December 31, 2025, as a result of our interim impairment test during the fourth quarter of fiscal 2025. Goodwill impairment was $60.6 million for the year ended December 31, 2024, primarily related to goodwill impairment of $56.9 million as a result of our impairment test on October 1, 2024, and to a lesser extent, goodwill impairment of $3.6 million related to the WildHealth business, which was sold during the second quarter of 2024. Refer to Note 5 - Goodwill and Intangible Assets, Net, for additional information about the impairments.
Impairment of Intangibles and Other Assets
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Impairment of intangibles and other assets
$ 2,108 $ 46,872 $ (44,764) (96)%
Percentage of total revenue 1 % 15%
Impairment of intangibles and other assets was $2.1 million for the year ended December 31, 2025, related to pending patents. Impairment of intangibles and other assets was $46.9 million and consisted of non-cash charges of $23.7 million related to developed technology, $11.0 million related to customer relationships, $0.5 million related to trademarks, $9.5 million related to property and equipment - internal-use software development costs, and $2.2 million attributable to the intangible assets associated with our WildHealth reporting unit, which was fully divested during 2024. Refer to Note 5 - Goodwill and Intangible Assets, net, for additional information about the impairments.
Total Other Income, net
Interest expense represents interest expense from our senior notes, and amortization of debt issuance costs and debt discount. Interest income represents interest earned from cash deposits. Other income (expense), net consists primarily of fair value adjustments for our Warrants and foreign currency gains and losses.
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Interest expense $ (31,530) $ (14,486) $ (17,044) (118)%
Interest income 4,751 5,860 (1,109) (19)%
Gain on troubled debt restructuring 27,720 — 27,720 —%
Gain on debt extinguishment — 73,083 (73,083) (100)%
Other income (expense), net 13,977 (12,800) 26,777 209%
Total other income, net $ 14,918 $ 51,657 $ (36,739) (71)%
Total other income, net decreased by $36.7 million to $14.9 million for the year ended December 31, 2025 from $51.7 million for the year ended December 31, 2024. The decrease is primarily due to a gain of $27.7 million on the troubled debt restructuring in the current period compared to a gain on debt extinguishment of $73.1 million in the comparable period. In addition, interest expense was higher in the current period by $17.0 million, primarily related to the issuance of the 2029 Notes in June 2024 and Delayed Draw Notes in December 2024. These were partially offset by a $13.2 million favorable adjustment to the fair value of our Warrants in the current period, compared to an unfavorable adjustment of $12.2 million in the comparable
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period. The remaining amount of total other income, net, is attributable to interest income on our money market accounts, and the impact of currency rate fluctuations.
Provision For Income Taxes
Year Ended December 31,
2025 2024 $ Change % Change
(Dollars in thousands)
Provision for income taxes $ 3,452 $ 2,735 $ 717 26%
We had a provision for income taxes of $3.5 million and $2.7 million for the years ended December 31, 2025 and 2024, respectively. Our consolidated effective tax rate was impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate, valuation allowance recorded against losses generated in the U.S. and Germany, a tax benefit related to an increase in tax receivables, and changes to unrecognized tax benefits in Israel. The overall tax provision recorded represents tax on non-U.S. earnings in the various jurisdictions in which we operate and the provision for U.S. state and local impacts. The total tax expense associated with non-U.S. jurisdictions is relatively consistent between periods.
Liquidity and Capital Resources
The following describes the Company’s cash flows for the years ended December 31, 2025 and 2024:
Year Ended December 31,
2025 2024
(In thousands)
Net cash used in operating activities $ (30,435) $ (15,130)
Net cash used in investing activities (13,727) (28,216)
Net cash (used in) provided by financing activities (45,503) 14,972
As of December 31, 2025, we had $95.0 million in cash and cash equivalents, a decrease of $88.2 million from December 31, 2024. The decrease is primarily attributable to cash paid of $45.0 million related to the troubled debt restructuring, various uses of cash for operating purposes, and purchases of property and equipment and capitalization of internal-use software development costs of $12.1 million.
Cash Flows from Operating Activities
Net cash used in operating activities was $30.4 million in the year ended December 31, 2025. Our net loss was $67.2 million, which includes the effect of non-cash expenses related to goodwill impairment of $41.6 million, depreciation and amortization of $22.0 million, non-cash interest expense of $15.3 million, stock-based compensation of $14.3 million, and amortization of debt issuance costs and accretion of discount of $7.6 million. These items were partially offset by a gain on troubled debt restructuring of $42.4 million and a gain on change in fair value of Warrants of $13.2 million. Net cash used in operating activities was further driven by a decrease in accounts payable, accrued expenses and other current liabilities of $19.8 million, a decrease in deferred revenue of $4.3 million, and a decrease in other liabilities of $3.7 million, partially offset by a decrease in contract acquisition costs of $10.4 million and a decrease in prepaid expenses and other current assets of $3.6 million.
Net cash used in operating activities was $15.1 million in the year ended December 31, 2024. Our net loss was $134.3 million, which includes the effect of non-cash expenses related to depreciation and amortization of $30.3 million, amortization of intangible assets and finance leases of $12.0 million, change in the fair value of Warrants of $12.2 million, non-cash interest expense of $5.8 million, amortization of debt issuance costs and accretion of discount of $4.5 million, allowance for credit losses of $15.0 million, and stock-based compensation of $22.0 million. In addition, we recorded a goodwill impairment of $60.6 million, and intangible and other assets impairments of $46.9 million primarily related to our developed technology and customer relationships, and to a lesser extent, related to our WildHealth reporting unit and internal-use software development costs. These items were partially offset by a gain on repurchase of convertible notes of $73.1 million. Net cash used in operating activities was further driven by a decrease in accounts payable, accrued expenses and other current liabilities of $44.5 million and a decrease in
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deferred revenue of $23.1 million, partially offset by a decrease in accounts receivable of $37.5 million, a decrease in prepaid expenses and other current assets of $7.3 million, and a decrease in contract acquisition costs of $3.3 million.
Cash Flows from Investing Activities
Net cash used in investing activities was $13.7 million in the year ended December 31, 2025 which was primarily driven by purchases of property and equipment and capitalization of internal-use software development costs.
Net cash used in investing activities was $28.2 million in the year ended December 31, 2024 which was primarily driven by purchases of property and equipment and capitalization of internal-use software development costs.
Cash Flows from Financing Activities
Net cash used in financing activities was $45.5 million in the year ended December 31, 2025 which was primarily driven by payments to lenders of $45.0 million related to the troubled debt restructuring.
Net cash provided by financing activities was $15.0 million in the year ended December 31, 2024, which was primarily driven by proceeds from issuance of 2029 Notes of $50.0 million, and proceeds from the Delayed Draw Notes of $50.0 million. These proceeds were partially offset by full repayment of the 0.750% Convertible Senior Notes due 2024 (the “2024 Notes”) of $72.5 million, repurchases of the 2026 Notes of $4.9 million, and payment of debt issuance costs of $7.6 million.
We have incurred significant expenses to develop our technology and services and to hire employees in our customer service and sales and marketing departments, as well as acquisition costs and non-cash compensation costs. Historically, we have incurred net losses and negative cash flows for various quarterly and annual periods since our inception, including during numerous quarters and annual periods in the past several years. As of December 31, 2025, we had an accumulated deficit of $1,058.5 million.
Our principal sources of liquidity are the net proceeds from the issuance of our convertible senior notes, after deducting purchaser discounts as applicable and debt issuance costs paid by us, and payments received from customers using our products. We anticipate that our current cash and cash equivalents will be sufficient to satisfy our working capital and capital requirements for at least the next 12 months. However, we cannot assure you that we will not require additional funds prior to such time, and we would then seek to sell additional equity or debt securities through public financings, or seek alternative sources of financi ng. W e cannot assure you that additional funding will be available on favorable terms, when needed, if at all. If we are unable to obtain any necessary financing, we may be required to further reduce the scope of our planned sales and marketing and product development efforts, which could materially adversely affect our financial condition and operating results. In addition, we may require additional funds in order to fund more rapid expansion, to develop new or enhanced services or products or to invest in or acquire complementary businesses, technologies, services or products.
The indenture governing the 2029 Notes includes a financial covenant that requires the Company to maintain a minimum cash balance of $60.0 million (excluding the proceeds of the 2029 Notes) at all times. Proceeds of the 2029 Notes may be used only to (i) pay interest, or cash settle, the 2029 Notes, (ii) cash settle the Warrants, (iii) exchange, repurchase, redeem, replace or otherwise refinance 2026 Notes (or refund or replenish cash of the Company or any of its subsidiaries used to do so), or (iv) pay or reimburse certain fees, costs and expenses related to the foregoing and the other transactions contemplated by the Exchange and Purchase Agreement as amended or otherwise modified from time to time.
Upon conversion or exercise, the 2029 Notes and cash-settled warrants would be settled for cash. In addition, the 2026 Notes, the 2029 Notes and the Second Lien Notes are subject to repurchase at the option of holders if the Company undergoes a “Fundamental Change” (as defined in the indentures governing the 2026 Notes, the 2029 Notes and the Second Lien Notes, as applicable), and the 2026 Notes, the 2029 Notes and the Second Lien Notes are subject to events of default customary for notes issued in connection with similar transactions, which could result in the acceleration of amounts owed. See Note 8 – Senior Notes, Capped Call Transactions, Warrants and Preferred Stock for additional information.
The Company may from time to time, subject to board authorization and any applicable restrictions under contracts to which it may be or become a party, depending upon market conditions and the Company’s financing needs, use available funds to refinance or repurchase its outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms the Company deems
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appropriate (which, in the case of debt securities, may be below par) and subject to the Company’s cash requirements for other purposes and other factors management deems relevant.
We do not engage in off-balance sheet financing arrangements.
Capital Expenditures
Total capital expenditures in 2025 were $12.1 million, primarily related to internal-use software development costs. We anticipate that our current cash and cash equivalents and cash from operations will be sufficient to fund our capital expenditures for at least the next 12 months.
Indemnifications
We enter into service and license agreements in the ordinary course of business. Pursuant to some of these agreements, we agree to indemnify certain customers from and against certain types of claims and losses suffered or incurred by them as a result of using our products.
We also have agreements whereby certain of our officers and our directors are indemnified for certain events or occurrences. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a directors and officers insurance policy that reduces our exposure and enables us to recover a portion of any future amounts paid subject to customary deductibles. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Currently, we have no liabilities recorded for these agreements as of December 31, 2025.
Contractual Obligations
Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2025, the value of our non-cancelable unconditional purchase obligations was $74.4 million, primarily relating to contracts with vendors in connection with IT infrastructure. See Note 10 – Commitments and Contingencies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information regarding our purchase obligations.
We also lease certain facilities under non-cancelable operating lease arrangements that expire at various dates through 2027. See Note 1 – Description of Business and Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information regarding our lease obligations.