What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-22 · 139 added, 150 removed, 941 unchanged (23% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Qualys, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 21, 2025 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 1 to the consolidated financial statements, the Company has adopted new accounting guidance in 2024 related to the disclosure of segment information in accordance with Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) .

The adoption was retrospectively applied to 2023 and 2022.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We have served as the Company’s auditor since 2005.

San Jose, California

San Francisco, California

February 21, 2025

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/s/ GRANT THORNTON LLP

San Jose, California

San Francisco, California

February 21, 2025

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Additional paid-in capital 664,879 597,921

Accumulated other comprehensive loss ( 1,704 ) ( 1,947 )

Accumulated other comprehensive income (loss) 1,417 ( 1,704 )

Accumulated deficit ( 189,217 ) ( 228,080 )

48 unchanged sentences

Depreciation and amortization expense 18,513 26,991 34,622

Write off of noncurrent asset — — 625

Provision for credit losses 764 547 590

15 unchanged sentences

Purchases of property and equipment ( 12,334 ) ( 8,786 ) ( 15,361 )

Proceeds from disposal of property and equipment — — 6

Purchases of intangible assets — — ( 8,620 )

Maturity of note receivable — — 625

Net cash (used in) provided by investing activities ( 73,166 ) 145,068 ( 29,532 )

Net cash provided by (used in) investing activities ( 71,427 ) ( 73,166 ) 145,068

Cash flow from financing activities:

3 unchanged sentences

Proceeds from issuance of common stock through employee stock purchase plan 6,872 6,077 4,445

Principal payments under finance lease obligations — — ( 90 )

Payment of acquisition-related holdback ( 1,500 ) — —

Net cash used in financing activities ( 145,650 ) ( 141,493 ) ( 306,031 )

7 unchanged sentences

Purchases of property and equipment recorded in accounts payable and accrued liabilities $ 843 $ 144 $ 470

Accrual for repurchase of common stock $ 802 $ — $ —

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Comprehensive

Income (Loss) Retained

Income (Loss) Accumulated

Deficit Total

3 unchanged sentences

Net income — — — — 107,992 107,992

Other comprehensive income, net of tax — — — 1,491 — 1,491

Other comprehensive loss, net of tax — — — ( 2,954 ) — ( 2,954 )

Issuance of common stock upon exercise of stock options 468 — 24,483 — — 24,483

2 unchanged sentences

Taxes related to net share settlement of equity awards ( 132 ) — ( 17,615 ) — — ( 17,615 )

Issuance of common stock through employee stock purchase plan 45 — 4,445 — — 4,445

Stock-based compensation — — 53,408 — — 53,408

1 unchanged sentence

Net income — — — — 151,595 151,595

Other comprehensive loss, net of tax — — — ( 2,954 ) — ( 2,954 )

Other comprehensive income, net of tax — — — 243 — 243

Issuance of common stock upon exercise of stock options 582 1 45,575 — — 45,576

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GAAP as well as the instructions to Form 10-K and the rules and regulations of the SEC.

Certain prior year amounts have been reclassified to conform with the current year presentation.

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented.

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Cash, Cash Equivalents, Restricted cash and Short-Term and Long-Term Marketable Securities

Cash and cash equivalents include cash held in banks, highly liquid money market funds, and fixed-income U.S.

Treasury and government agencies, all with original maturities of three months or less when acquired.

Cash and cash equivalents include cash held in banks, highly liquid money market funds, commercial paper and fixed-income U.S.

Treasury and government agency securities, all with original maturities of three months or less when acquired.

The Company’s short-term and long-term marketable securities consist of fixed-income U.S.

and foreign government agency securities, corporate bonds, asset-backed securities and commercial paper.

Treasury and government agency securities, corporate bonds, asset-backed securities and commercial paper.

Management determines the appropriate classification of the Company's investments at the time of purchase and reevaluates such designation at each balance sheet date.

The Company classifies its marketable securities as either short-term or long-term based on each instrument's underlying remaining contractual maturity date.

As of December 31, 2023 and 2022, the Company had a restricted cash balance of $ 2.7 million, of which $ 1.5 million is related to cash held in escrow as part of the Blue Hexagon acquisition and $ 1.2 million in the form of a letter of credit issued to the landlord of the Company's California headquarter office lease as security deposit.

As of December 31, 2024 and 2023, the Company had a restricted cash balance of $ 1.2 million and $ 2.7 million, respectively, of which $ 1.2 million in the form of a letter of credit issued to the landlord of the Company's California headquarter office lease as security deposit and $ 1.5 million was related to cash held in escrow as part of the Blue Hexagon acquisition.

Cash equivalents are stated at cost, which approximates fair market value.

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During the second quarter of 2023, the Company identified an observable price change in the investment and recognized an immaterial unrealized loss in other income (expense), net of the consolidated statement of operations.

In 2019, the Company made an advance payment of $ 0.6 million to the Investee for it to perform certain technology development work, which should either be settled in the form of royalty fee charges when the technology materializes and is licensed to the Company or, otherwise, should be repaid to the Company in cash.

The advance payment was recorded in other non-current assets in the consolidated balance sheet.

During the fourth quarter ended December 31, 2021, the technology has not been developed and the Company decided to no longer pursue the development of the technology or the collection of the advanced amount.

Accordingly, the entire amount of the advance payment was written off and recorded in the general and administrative expense during the year ended December 31, 2021.

Property and Equipment, net

7 unchanged sentences

The Company leases certain offices, computer equipment and its shared cloud platform facilities under finance leases and non-cancelable operating leases.

For both operating and finance leases, the Company recognizes a right-of-use asset, which represents the Company's right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company's obligation to make payments arising over the lease term.

For both operating and finance leases, the Company recognizes a right-of-use asset, which

represents the Company's right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company's obligation to make payments arising over the lease term.

Many of the Company's leases include rental escalation clauses, renewal options and/or termination options that are factored into the Company's determination of lease payments and lease terms when appropriate.

3 unchanged sentences

For leases with a term of one year or less, the Company has elected not to record the right-of-use asset or liability.

In arrangements where the Company is the lessor, the Company elected to apply the practical expedient to account for lease components (e.g., customer premise equipment) and non-lease components (e.g., service revenue) as combined components as revenue under ASC 606 as service revenues are the predominant components in the arrangements.

In arrangements where the Company is the lessor, the Company elected to apply the practical expedient to account for lease components (e.g., customer premise equipment) and non-lease components (e.g., service revenue) as combined components as revenue under Accounting Standards Codification ("ASC") 606 Revenue from Contracts with Customers as service revenues are the predominant components in the arrangements.

Impairment of Long-Lived Assets

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Software Development Costs

The costs to develop software that is marketed externally have not been capitalized as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility.

As such, all related software development costs are expensed as incurred and included in research and development expense on the Company's consolidated statements of operations.

Costs related to software developed, acquired or modified for internal use are capitalized and included in other noncurrent assets on the consolidated balance sheets.

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The Company applies the provisions of ASC 805 Business Combinations , in accounting for its acquisitions.

To determine whether transactions should be accounted for as asset acquisition or business combination, the Company evaluates whether substantially all of the fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), resulting in an asset acquisition, if not, resulting in a business combination.

To determine whether transactions should be accounted for as asset acquisition or business combination, the Company evaluates whether

substantially all of the fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), resulting in an asset acquisition, if not, resulting in a business combination.

In an asset acquisition, the cost of acquiring the asset group, including transaction costs, is allocated to the acquired assets or assumed liabilities based on their relative fair values without giving rise to goodwill.

15 unchanged sentences

The fair value of each stock option or stock purchase right is estimated on the date of grant using the Black-Scholes-Merton option pricing model and the fair value of each RSU is based on the Company's common stock price on the date of grant.

Compensation expenses for performance-based stock options (“PSOs”) and performance-based restricted stock units (“PSUs”) are recorded based on expected achievement of the performance metrics specified in the grant, which are assessed on a quarterly basis.

Compensation expenses for performance-based restricted stock units (“PRSUs”) are recorded based on expected achievement of the performance metrics specified in the grant, which are assessed on a quarterly basis.

Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture materially differs from original estimates.

42 unchanged sentences

The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

To make this assessment, the Company takes into account predictions of the amount and category of taxable income from various sources and all available positive and negative evidence about these possible sources of taxable income.

To make this assessment, the Company takes into account predictions of the

amount and category of taxable income from various sources and all available positive and negative evidence about these possible sources of taxable income.

The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which the strength of the evidence can be objectively verified.

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Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 requiring enhanced segment disclosures.

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , requiring enhanced segment disclosures.

The ASU requires disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM") included within segment operating profit or loss.

2 unchanged sentences

The Company's annual reporting requirements will be effective for fiscal 2024 and interim reporting requirements will be effective beginning with the first quarter of fiscal 2025.

Early adoption is permitted and retrospective application is required for all periods presented.

Retrospective application is required for all periods presented.

The Company adopted this ASU during fiscal year 2024.

See Note 13, "Segment and Geographic Area Information" for the additional required disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , requiring improvements to income tax disclosures.

The new ASU requires disclosure of disaggregated information about the effective tax rate and income taxes paid.

The requirements of the ASU are effective for annual periods beginning after December 15, 2024 and are to be applied on a prospective basis.

The Company's annual reporting requirements will be effective for fiscal year 2025.

Companies can choose to early adopt and apply the guidance retrospectively.

The Company is in the process of analyzing the impact of the ASU on related disclosures.

In December 2023, the FASB issued ASU 2023-09 requiring enhanced income tax disclosures.

The ASU requires disclosure of specific categories and disaggregation of information in the rate reconciliation table.

The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations.

The requirements of the ASU are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted and the amendments should be applied on a prospective basis.

Retrospective application is permitted.

In November 2024, the FASB issued ASU 2024-03 - Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , requiring more detailed information about the types of expenses included in certain expense captions presented on the consolidated statements of operations.

Additionally, this amendment requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and the disclosure of the total amount of selling expenses.

The requirements of the ASU are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027 and are to be applied on a retrospective or prospective basis, with early adoption permitted.

The Company's annual reporting requirements will be effective for fiscal year 2027.

The Company is in the process of analyzing the impact of the ASU on related disclosures.

10 unchanged sentences

The Company's financial instruments consist of assets and liabilities measured using Level 1 and 2 inputs.

Level 1 assets include a highly liquid money market fund, which is valued using unadjusted quoted prices that are available in an active market for an identical asset.

Level 1 assets include a highly liquid money market fund, which is valued using unadjusted quoted prices that are available in an active market

for an identical asset.

Level 2 assets include fixed-income U.S.

Treasury and government agency securities, commercial paper, corporate bonds, asset-backed securities, foreign government securities and derivative financial instruments consisting of foreign currency forward contracts.

Treasury and government agency securities, commercial paper, corporate bonds, asset-backed securities, and derivative financial instruments consisting of foreign currency forward contracts.

The securities, bonds and commercial paper are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets, quoted prices of similar instruments in active markets, or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets.

17 unchanged sentences

Money market funds $ 87 $ — $ 87

Commercial paper — 54,279 54,279

Treasury and government agencies — 208,536 208,536

Foreign government — 1,006 1,006

Corporate bonds — 56,465 56,465

12 unchanged sentences

Money market funds $ 404 $ — $ — $ 404

Commercial paper 1,983 — — 1,983

Treasury and government agencies 33,939 4 — 33,943

20 unchanged sentences

Short-term marketable securities:

Commercial paper 54,254 32 ( 7 ) 54,279

Corporate bonds 23,013 1 ( 149 ) 22,865

Asset-backed securities 726 — ( 2 ) 724

Treasury and government agencies 144,901 52 ( 204 ) 144,749

Foreign government 1,008 — ( 2 ) 1,006

Total 222,168 85 ( 360 ) 221,893

12 unchanged sentences

Commercial paper $ 4,464 $ ( 2 ) $ — $ — $ 4,464 $ ( 2 )

Asset-backed securities — — 1,485 ( 6 ) 1,485 ( 6 )

Corporate bonds 27,154 ( 171 ) 672 ( 3 ) 27,826 ( 174 )

5 unchanged sentences

(in thousands)

Foreign government agencies $ 998 $ ( 2 ) $ — $ — $ 998 $ ( 2 )

Commercial paper $ 24,838 $ ( 7 ) $ — $ — $ 24,838 $ ( 7 )

Asset-backed securities — — 1,485 ( 6 ) 1,485 ( 6 )

11 unchanged sentences

Due within One Year $ 185,278 $ 185,571

Due after One Year through Two Years 27,814 27,982

Mature over Two Years 14,639 14,781

Due after One Year through Five 186,247 186,367

Asset-backed securities 7,427 7,520

2 unchanged sentences

Designated cash flow hedges

The Company enters into foreign currency forward contracts to reduce the risk of variability in future cash flow due to foreign currency exchange rate fluctuation from certain forecasted subscription revenue orders billed in GBP and EUR and operation expenses incurred in INR, which are designated as cash flow hedges.

The Company enters into foreign currency forward contracts to reduce the risk of variability in future cash flow due to foreign currency exchange rate fluctuation from certain forecasted subscription revenue orders billed in GBP and EUR and operating expenses incurred in INR, which are designated as cash flow hedges.

Hedge effectiveness is assessed at inception and at each reporting period utilizing regression analysis.

4 unchanged sentences

4,042.0 million.

As of December 31, 2023 , a net amount of unrealized loss of $ 1.5 million before tax on the foreign currency forward contracts for GBP and EUR reported in AOCI is expected to be reclassified into revenue within the next 12 months.

As of December 31, 2023 , an immaterial amount of unrealized loss before tax on the foreign currency forward contracts for INR reported in AOCI is expected to be reclassified into operating expenses within the next 12 months.

As of December 31, 2024 , the amount of net unrealized gains of $ 1.6 million before tax on the foreign currency forward contracts for GBP and EUR reported in AOCI is expected to be reclassified into revenue within the next 12 months.

As of December 31, 2024 , the amount of net unrealized loss of $ 1.2 million before tax on the foreign currency forward contracts for INR reported in AOCI is expected to be reclassified into operating expenses within the next 12 months.

Non-designated forward contracts

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The Company is not required to pledge nor is entitled to receive cash collateral related to the above contracts.

The counterparties to these derivatives are large, global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.

The counterparties to these derivatives are large, global financial

institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.

The following summarizes the gains (losses) recognized from forward contracts and other foreign currency transactions in other income (expense), net in the consolidated statements of operations:

2 unchanged sentences

(in thousands)

Net (losses) gains from non-designated forward contracts $ ( 198 ) $ 5,093 $ 2,452

Other foreign currency transactions losses ( 499 ) ( 6,864 ) ( 2,749 )

Total foreign exchange losses, net $ ( 697 ) $ ( 1,771 ) $ ( 297 )

Net gains (losses) from non-designated forward contracts $ 1,445 $ ( 198 ) $ 5,093

Other foreign currency transactions gains (losses) ( 4,637 ) ( 499 ) ( 6,864 )

Total foreign exchange gains (losses), net $ ( 3,192 ) $ ( 697 ) $ ( 1,771 )

Accumulated Other Comprehensive Income (Loss)

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During the same periods, there was no impairment loss related to the deferred costs to obtain contracts.

On October 4, 2022, the Company acquired certain assets of Blue Hexagon Inc., a privately held company incorporated in Delaware, for $ 10.0 million in cash, of which $ 8.5 million was paid on the acquisition date and the remaining $ 1.5 million will be due eighteen months from the acquisition date, subject to potential adjustment from possible indemnity claims.

In addition, the Company assumed $ 1.4 million deferred revenue.

3 unchanged sentences

The Company recognized intangible assets of $ 11.5 million for developed technology and $ 0.4 million for assembled workforce, which will be amortized over five years and two years , respectively.

On August 19, 2021, the Company acquired certain developed technology intangible assets of TotalCloud, a privately held company incorporated in India, for a total cash consideration of $ 1.2 million, of which $ 1.1 million was paid on the acquisition

date and the remaining $ 0.1 million was deferred and paid in August 2022.

TotalCloud's technology strengthens the Company's cloud security solution by allowing customers to build user-defined workflows for custom policies and execute them on-demand for simplified security and compliance.

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(in thousands) Weighted Average Life

(Years) Weighted Average

Remaining Life (Years) Cost Accumulated

(Years) Cost Accumulated

Amortization Net Book Value

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(in thousands) Weighted Average Life

(Years) Weighted Average

Remaining Life (Years) Cost Accumulated

(Years) Cost Accumulated

Amortization Net Book Value

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2025 $ 12,875

2030 and thereafter 1,840

Total minimum lease payments 55,858

3 unchanged sentences

Lease liabilities, noncurrent $ 37,500

The operating lease payments in the table above exclude approximately $ 4.1 million of legally binding minimum lease payments for a lease signed during the year ended December 31, 2024 that has yet to commence.

Commitment and Contingencies

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Significant judgment is required to determine both probability and the estimated amount.

The Company reviews these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.

reviews these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.

As of December 31, 2024, there has not been at least a reasonable possibility that the Company has incurred a material loss from any ongoing legal proceedings, individually or taken together.

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As of December 31, 2024, and 2023, there were no issued or outstanding shares of preferred stock.

Equity Incentive Plan

2012 Equity Incentive Plan

Equity Incentive Plans

Restated 2012 Equity Incentive Plan

The 2012 Equity Incentive Plan (“Previous 2012 Plan”) was adopted and approved in September 2012 and became effective on September 26, 2012.

1 unchanged sentence

The number of shares of common stock available for issuance under the Previous 2012 Plan is subject to an annual increase on January 1 of each year by an amount equal to the least of 3,050 thousand shares, 5 % of the outstanding shares of stock as of the last day of the immediately preceding fiscal year or an amount determined by the board of directors.

For the year ended December 31, 2023, no shares were added to the Previous 2012 Plan.

On June 8, 2022 ("Effective Date"), the Company's stockholders approved the Amended and Restated 2012 Equity Incentive Plan (the "Restated 2012 Plan").

3 unchanged sentences

Any remaining shares of 9,689 thousand available for grant under the Previous 2012 Plan as of the Effective Date were no longer available for future grants under the Restated 2012 Plan.

On June 12, 2024, the Company's stockholders approved an amendment and restatement to the Restated 2012 Plan to increase the number of shares of the Company's common stock reserved for issuance by 1,092 thousand shares.

As of December 31, 2024, 2,326 thousand shares are available for future grants.

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As of December 31, 2024, 435 thousand shares were available for future purchase.

Stock-based Compensation

The following table shows a summary of the stock-based compensation expenses included in the consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021:

Year Ended December 31,

2023 2022 2021

(in thousands)

Cost of revenues $ 7,300 $ 5,305 $ 3,782

Research and development 21,091 14,585 10,750

Sales and marketing 12,234 9,837 6,323

General and administrative 28,454 23,681 46,724

Total stock-based compensation, net of amounts capitalized (1) $ 69,079 $ 53,408 $ 67,579

(1) Total stock-based compensation expense capitalized was de minimis during the year ended December 31, 2023.

The income tax benefit related to the stock-based compensation expenses was $ 11.0 million, $ 8.3 million and $ 6.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The tax benefit realized from stock-based compensation vested or exercised was $ 5.9 million , $ 7.0 million , and $ 4.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023 , the Company had unrecognized stock-based compensation expenses of $ 23.3 million, $ 94.3 million, $ 1.4 million, and $ 0.3 million related to options, RSUs, performance-based RSUs, and ESPP, respectively, which are expected to be recognized over weighted-average periods of 2.6 years, 2.8 years, 0.6 years, and 0.1 years, respectively.

Performance-Based Stock Options and Restricted Stock Units

On December 21, 2018, the Compensation and Talent committee of the Company's board of directors (“Compensation Committee”) granted the equity award for 2019 to the Company’s former chief executive officer, Philippe Courtot (“Mr.

The first portion of the award consisted of 56 thousand RSUs that were scheduled to vest in 16 quarterly increments beginning on January 1, 2019.

The second portion of the award consisted of a target number of 33 thousand PSUs, which were scheduled to vest at the end of the three-year performance period from January 2019 through December 2021.

The actual number of PSUs eligible to vest ranged from 0 % to 200 % of the target number, depending on the level of achievement of goals related to revenue growth during the three-year performance period from January 2019 through December 2021 and Adjusted EBITDA margin for the fiscal year of 2021.

The third portion of the award consisted of a target number of 33 thousand PSUs, one third of which ( 11 thousand target PSUs) was scheduled to vest at the end of each fiscal year of 2019, 2020 and 2021.

The actual number of PSUs eligible to vest at each vesting date ranged from 0 % to 200 % of the target number, depending on the level of achievement of goals related to revenue growth and Adjusted EBITDA margin for each of those years.

On November 2, 2019, the Compensation Committee granted the equity award for 2020 to Mr.

The first portion of the award consisted of 49 thousand RSUs that were scheduled to vest in 16 quarterly installments beginning on December 1, 2019.

The second portion of the award consisted of a target number of 124 thousand PSOs, which were scheduled to vest at the end of the three-year performance period from January 2020 through December 2022.

The actual number of PSOs eligible to vest ranged from 0 % to 200 % of the target number, depending on the level of achievement of goals related to revenue growth and free cash flow per share growth during the performance period.

On December 10, 2020, the Compensation Committee granted the equity award for 2021 to Mr.

The first portion of the award consisted of 69 thousand RSUs that were scheduled to vest in 16 quarterly installments beginning on November 1, 2020.

The second portion of the award consisted of a target number of 224 thousand PSOs, which were scheduled to vest at the end of the three-year performance period from January 2021 through December 2023.

The vesting of the above awards was conditioned on Mr.

Courtot’s continued service through the vesting dates or, for PSOs and PSUs, the dates that performance is certified in addition to the achievement of performance goals.

Courtot’s employment was terminated (a) by reason of death or disability or (b) by the Company for reasons other than cause or good reason within 12 months following a change in control, then 100 % of any unvested portions of these awards would vest, with any vesting in connection with change in control terminations conditioned upon the effectiveness of a release of claims in favor of the Company.

In February 2021 and 2020, 22 thousand shares (representing 200 % of target number of awards) and 15 thousand shares (representing 135 % of target number of awards) under the equity award for 2019 for Mr.

Courtot, vested as a result of the Company achieving the corresponding level of performance goals for 2020 and 2019, respectively.

On March 19, 2021, Mr.

Courtot resigned from the Company due to health issues.

The Compensation Committee determined that Mr.

Courtot’s termination of employment was on account of disability.

In accordance with the grant agreements of the equity awards for 2021, 2020 and 2019 for Mr.

Courtot, all remaining outstanding RSUs, PSUs and PSOs under these grants were subject to accelerated vesting and became fully vested at 100 % of the target number of awards as of the date of his termination of employment, which consist of 127 thousand RSUs, 44 thousand PSUs and 348 thousand PSOs.

As a result, the Company recognized an additional $ 27.3 million of stock-based compensation expense due to the accelerated vesting in the consolidated statements of operations for the year ended December 31, 2021.

On April 27, 2021, the Compensation Committee granted to the Company’s current president and chief executive officer an equity award consisting of certain RSUs and a target number of 10 thousand PSUs.

The PSUs are scheduled to vest at the end of the three-year performance period from January 2021 through December 2023.

The actual number of the PSUs eligible to vest range from 0 % to 200 % of the target number, depending on the level of achievement of goals related to revenue growth and free cash flow per share growth during the performance period.

If the Company's current president and chief executive officer is terminated (a) by reason of death or disability or (b) by the Company for reasons other than cause or good reason within 12 months following a change in control, then 100 % of any unvested portions of the award will vest, with any vesting in connection with terminations due to change in control conditioned upon the effectiveness of a release of claims in favor of the Company.

On October 28, 2021, the Compensation Committee approved to certain executive officers of the Company equity awards consisting of certain RSUs and an aggregate target number of 73 thousand PSUs.

The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2022 through December 2024.

Each annual installments at 200 % of the annual target will be considered granted when the performance targets for the corresponding performance year are determined and approved.

The actual number of the PSUs eligible to vest each year range from 0 % to 200 % of the annual target number, depending on the level of achievement of goals related to revenue growth and adjusted EBITDA margin corresponding to that year.

The vesting and release of the first and second installment is capped at 100 % of the target number at the end of the first and second year, respectively, with cumulative achievement over 100 %, if any, to be vested and released at the end of the third year, together with the vesting of the third installment.

On October 27, 2022, the Compensation Committee approved to certain executive officers of the Company equity awards consisting of certain RSUs and an aggregate target number of 86 thousand PSUs.

The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2023 through December 2025.

Each annual installments at 200 % of the annual target will be considered granted when the performance targets for the corresponding performance year is determined and approved.

On February 6, 2023 and July 27, 2023, the Compensation Committee approved to certain executive officers of the Company equity awards consisting of certain RSUs and an aggregate target number of 6 thousand and 9 thousand PSUs, respectively.

The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2023 through December 2025.

Each annual installments at 200 % of the annual target will be considered granted when the performance targets for the corresponding performance year are determined and approved.

The actual number of the PSUs eligible to vest each year ranges from 0 % to 200 % of the annual target number, depending on the level of achievement of goals related to revenue growth and adjusted EBITDA margin corresponding to that year.

On October 26, 2023, the Compensation Committee approved to certain executive officers of the Company equity awards consisting of certain RSUs and an aggregate target number of 81 thousand PSUs.

The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2024 through December 2026.

Each annual installments at 200 % of the annual target will be considered granted when the performance targets for the corresponding performance year is determined and approved.

The performance targets are determined and approved each year in the first quarter of the corresponding performance year.

Accordingly, such awards are not considered granted for accounting purposes as of December 31, 2023.

For the PSUs approved on October 28, 2021, October 27, 2022, February 6, 2023, July 27, 2023 and October 26, 2023, any unvested PSU award may be accelerated in part or in full upon the occurrence of certain events, such as death or disability, or a change in control, as defined in the grant agreement.

For the years ended December 31, 2023 , 2022 and 2021, stock-based compensation expenses of $[ nil ], $[ nil ] and $ 13.3 million for PSOs, respectively, and $ 7.4 million, $ 3.9 million and $ 5.3 million for PSUs, respectively, were recognized.

Stock Options

28 unchanged sentences

Restricted Stock Units

A summary of the Company’s RSU activity is as follows:

A summary of the Company’s RSU activity, inclusive of PRSU activity, is as follows:

Outstanding RSUs Weighted Average Grant Date

7 unchanged sentences

Outstanding and expected to vest as of December 31, 2024 859 $ 138.46

(1) Included 175 thousand PSUs granted to certain executive officers in 2022 and 2021.

(2) Included 10 thousand PSUs granted to certain executive officers in 2023

(3) Included 24 thousand PSUs granted to certain executive officers in 2021.

(4) Included 22 thousand PSUs granted to certain executive officers in 2022 and 2021.

(5) Included 139 thousand PSUs granted to certain executive officers in 2023, 2022 and 2021.

(1) Included 139 thousand PRSUs granted to certain executive officers in 2023, 2022 and 2021.

(2) Included 156 thousand PRSUs granted to certain executive officers in 2024

(3) Included 64 thousand PRSUs granted to certain executive officers in 2023, 2022 and 2021.

(4) Included 70 thousand PRSUs granted to certain executive officers in 2023, 2022 and 2021.

(5) Included 161 thousand PRSUs granted to certain executive officers in 2024, 2023, 2022 and 2021.

The aggregate fair value of RSUs vested for the years ended December 31, 2024, 2023 and 2022 was $ 56.2 million, $ 55.7 million and $ 43.9 million, respectively.

The Company, at times, grants PRSU under the Plans, to its executive officers and certain other members of its senior leadership team.

These PRSUs include both service-based and performance-based vesting conditions.

During the fourth quarter each year, the Company’s board of directors (the “Board”) or the Compensation and Talent Committee (“CTC”) approves the target value for the PRSUs.

The target PRSUs are scheduled to vest in three equal annual installments over a three-year period, beginning the year after approval.

The performance-based vesting condition is satisfied upon the achievement of certain Company annual performance metrics, including revenue growth and adjusted EBITDA margin, which are approved annually by the Board or the CTC.

Each annual installments at 200 % of the annual target will be considered granted when the performance metrics for the corresponding performance year is determined and approved.

The actual number of the PRSUs earned and eligible to vest ranges from 0 % to 200 % of the annual target, based on the weighted-average achievement of such Company annual performance metrics set for the corresponding annual performance period.

Up to 100 % of the first and second installment will vest and be released upon completion of the respective performance period following the certification by the Audit and Risk Committee (“ARC”), with cumulative achievement over 100 %, if any, to be vested and released at the end of the third year performance period, along with the third installment, following the certification by the ARC.

Under the Plan, any unvested PRSU award may be accelerated in part or in full upon the occurrence of certain events, such as death or disability, or a change in control, as defined in the grant agreement.

Employee Stock Purchase Plan

1 unchanged sentence

Year Ended December 31,

2024 2023 2022

Expected term (in years) 0.5 0.5 0.5

1 unchanged sentence

30.0 % to 43.8 %

41.1 % to 50.1 %

Risk-free interest rate 5.0 % to 5.3 %

5.0 % to 5.5 %

0.7 % to 3.1 %

Dividend yield — — —

4 unchanged sentences

The Company has not historically declared any dividends and does not expect to in the future.

Stock-based Compensation

The following table shows a summary of the stock-based compensation expenses included in the consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

2024 2023 2022

(in thousands)

Cost of revenues $ 8,129 $ 7,300 $ 5,305

Research and development 21,188 21,091 14,585

Sales and marketing 14,690 12,234 9,837

General and administrative 33,126 28,454 23,681

Total stock-based compensation, net of amounts capitalized (1) $ 77,133 $ 69,079 $ 53,408

(1) Total stock-based compensation expense capitalized was de minimis during the year ended December 31, 2024.

Of the total stock-based compensation expense in the table above, the Company recognized stock-based compensation expenses related to all PRSUs of $ 12.4 million, $ 7.4 million and $ 3.9 million for the years ended December 31, 2024 , 2023 and 2022, respectively.

The income tax benefit related to the stock-based compensation expenses was $ 11.6 million, $ 11.0 million and $ 8.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The tax benefit realized from stock-based compensation vested or exercised was $ 5.2 million , $ 5.9 million , and $ 7.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024 , the Company had unrecognized stock-based compensation expenses of $ 19.7 million, $ 94.1 million, $ 1.4 million, and $ 0.3 million related to options, RSUs, performance-based RSUs, and ESPP, respectively, which are expected to be recognized over weighted-average periods of 2.3 years, 2.9 years, 0.3 years, and 0.1 years, respectively.

Share Repurchase Program

10 unchanged sentences

February 9, 2023 100.0

February 7, 2024 200.0

Total as of December 31, 2024 $ 1,200.0

(1) Does not reflect the $ 200.0 million increase to the share repurchase program announced on February 6, 2025.

Shares may be repurchased from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act of 1934, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act.

7 unchanged sentences

As of December 31, 2024, $ 143.4 million remained available for share repurchases pursuant to the Company's share repurchase program.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 which contained provisions effective January 1, 2023, including a 1% excise tax on stock repurchases net of issue, which was immaterial to the Company's financial results and cash flows for the year ended December 31, 2023.

Excise tax on stock repurchases net of issue was immaterial to the Company's financial results and cash flows for the years ended December 31, 2024 and 2023 and the Company's financial position as of December 31, 2024 and 2023.

Employee Benefits Plan

38 unchanged sentences

Accrual to return adjustments and Other ( 0.6 ) ( 2.9 ) ( 0.2 )

Uncertain tax positions ( 1.4 ) — —

Income tax provision 17.2 % 15.1 % 19.2 %

17 unchanged sentences

Deferred tax liabilities

Fixed assets — ( 1,745 )

Operating leases - right of use asset ( 7,919 ) ( 5,999 )

9 unchanged sentences

Accordingly, the Company has recorded a valuation allowance of $ 12.5 million and $ 12.4 million against such deferred tax assets as of December 31, 2024 and 2023, respectively.

The decrease in valuation allowance was mainly associated with the California research and development credit generated during the year ended December 31, 2023 offset by a decrease in unrealized loss on available for sale securities that will not likely be realized in the foreseeable future.

The increase in valuation allowance was mainly associated with the California research and development credits generated during the year ended December 31, 2024.

As of December 31, 2024 and 2023, the Company had $ 18.4 million and $ 17.0 million, respectively, of California research and development credit carryforwards.

California research and development credits are carried forward indefinitely.

As of December 31, 2023 and 2022, the Company had foreign tax credit carryforwards of $ 1.0 million and $ 0.9 million, respectively, which begin to expire in 2028.

As of December 31, 2024 and 2023, the Company had foreign tax credit carryforwards of zero and $ 1.0 million, respectively.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

10 unchanged sentences

The remaining amount would result in the recognition of a corresponding deferred tax asset that is then offset by a full valuation allowance.

As of December 31, 2023 , the Company does not believe that its estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next twelve months.

As of December 31, 2024 , the Company does not believe that its estimates, as otherwise provided for, on such tax positions will significantly increase within the next twelve months.

It is reasonably possible that the Company may recognize approximately $ 1.9 million of its unrecognized tax benefits within the next twelve months if the statutes lapse in certain jurisdictions without an examination.

The Company has elected to include interest and penalties as a component of income tax expense.

2 unchanged sentences

The Company’s subsidiaries file tax returns in India and various other foreign jurisdictions.

The tax years 2001 through 2023 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax.

The tax years 2001 through 2023 still remain open to examination by certain major taxing jurisdictions in which the Company is subject to tax.

The Company is also currently subject to tax audits in various jurisdictions.

6 unchanged sentences

Segment and Geographic Area Information

Under ASC 280 Segment Reporting, operating segments are defined as components of an entity about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company operates in one segment and has only one reportable segment.

Under ASC 280 Segment Reportin g, operating segments are defined as components of an entity about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company operates in one operating segment and has only one reportable segment.

The Company’s chief operating decision maker is the Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.

All of the Company’s principal operations and decision-making functions are located in the United States.

The key measure of segment profit or loss that the CODM uses to allocate resources and in assessing performance is the Company’s consolidated net income, as reported on the Consolidated Statements of Operations.

The CODM uses net income to monitor actual results against budgeted and prior period operating results for the purpose of evaluating operational efficiency, and to evaluate income generated from the assets in making strategic decisions on organizational resource allocation, as well as to benchmark segment performance against industry competitors.

The CODM manages the business using consolidated expense information.

The following table sets forth the Company's reported segment revenue, segment profit or loss, and significant segment expenses:

Year Ended December 31,

2024 2023 2022

(in thousands)

$ 607,571 $ 554,458 $ 489,723

Significant segment expenses

Cost of revenues (exclusive of stock-based compensation and amortization of intangible assets)

100,516 97,198 92,136

Research and development (exclusive of stock-based compensation and amortization of intangible assets)

90,598 89,281 86,262

Sales and marketing (exclusive of stock-based compensation) 113,613 99,457 87,384

General and administrative (exclusive of stock-based compensation) 35,612 33,287 34,300

Other segment items (1) ( 3,158 ) ( 1,323 ) ( 2,038 )

Stock-based compensation 77,133 69,079 53,408

Amortization of intangible assets 2,903 3,087 5,686

Interest income 25,784 16,905 5,191

Income tax provision 36,142 27,056 25,708

Consolidated net income $ 173,680 $ 151,595 $ 107,992

(1) Other segment items included in Segment net income includes interest expense, realized and unrealized gain/loss on foreign exchange transactions, and unrealized loss on non-marketable securities.

Revenue by geographic area, based on the customer's billing address, is as follows:

5 unchanged sentences

Total revenues $ 607,571 $ 554,458 $ 489,723

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Long-lived assets, which consist of Property and equipment, net and Operating leases - right of use asset, by geographic area, are as follows:

29 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-K

Item 8. Financial Statements and Supplementary Data