What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-28 compared with 2024-02-26 · 425 added, 321 removed, 814 unchanged (48% of the section changed)

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Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

To the Stockholders and the Board of Directors

Rapid7, Inc.:

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We have audited the accompanying consolidated balance sheets of Rapid7, Inc.

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matter

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over products revenue

Sufficiency of audit evidence over product subscriptions revenue

As discussed in Note 2 to the consolidated financial statements, the Company derives revenue primarily from product subscriptions revenue which consists of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with its software licenses.

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February 28, 2025

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CONSOLIDATED BALANCE SHEETS

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Accounts payable $ 18,908 $ 15,812

Accrued expenses 84,489 80,306

Accrued expenses and other current liabilities 88,802 85,025

Convertible senior notes, current portion, net 45,895 —

Operating lease liabilities, current portion 15,493 13,452

Deferred revenue, current portion 461,118 455,503

Other current liabilities 536 1,663

Total current liabilities 630,216 569,792

Convertible senior notes, net 929,996 815,948

Convertible senior notes non-current portion, net 888,356 929,996

Operating lease liabilities, non-current portion 68,430 81,130

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Total liabilities $ 1,634,323 $ 1,623,527

Stockholders’ deficit:

Stockholders’ equity (deficit):

Preferred stock, $ 0.01 par value per share;

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63,496,965 and 61,714,051 shares outstanding at December 31, 2024 and 2023, respectively

Treasury stock, at cost, 569,579 and 486,808 shares at December 31, 2023 and December 31, 2022, respectively

Treasury stock, at cost, 570,255 and 569,579 shares at December 31, 2024 and 2023, respectively

( 4,765 ) ( 4,765 )

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Accumulated deficit ( 988,034 ) ( 1,013,560 )

Total stockholders’ deficit ( 118,179 ) ( 120,074 )

Total liabilities and stockholders’ deficit $ 1,505,348 $ 1,358,991

Total stockholders’ equity (deficit) 17,711 ( 118,179 )

Total liabilities and stockholders’ equity (deficit) $ 1,652,034 $ 1,505,348

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

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2024 2023 2022

Products $ 740,168 $ 647,535 $ 500,843

Product subscriptions $ 808,906 $ 740,168 $ 647,535

Professional services 35,101 37,539 37,548

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Cost of revenue:

Products 202,904 182,212 140,773

Product subscriptions 225,547 203,140 182,212

Professional services 25,488 28,906 32,137

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Total operating expenses 557,937 629,949 582,348

Loss from operations ( 80,733 ) ( 111,614 ) ( 120,065 )

Income (loss) from operations 35,035 ( 84,288 ) ( 111,614 )

Other income (expense), net:

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Interest expense ( 10,963 ) ( 64,700 ) ( 10,982 )

Other income (expense), net ( 14,522 ) ( 1,522 ) ( 1,921 )

Loss before income taxes ( 149,778 ) ( 122,305 ) ( 135,913 )

(Benefit from) provision for income taxes ( 518 ) 2,412 10,421

Net loss $ ( 149,260 ) $ ( 124,717 ) $ ( 146,334 )

Net loss per share, basic and diluted $ ( 2.46 ) $ ( 2.13 ) $ ( 2.65 )

Weighted-average common shares outstanding, basic and diluted 60,756,087 58,552,065 55,270,998

Other expense, net ( 3,680 ) ( 14,522 ) ( 1,522 )

Income (loss) before income taxes 41,455 ( 153,333 ) ( 122,305 )

Provision for (benefit from) income taxes 15,929 ( 518 ) 2,412

Net income (loss) $ 25,526 $ ( 152,815 ) $ ( 124,717 )

Net income (loss) per share, basic $ 0.41 $ ( 2.52 ) $ ( 2.13 )

Net income (loss) per share, diluted $ 0.40 $ ( 2.52 ) $ ( 2.13 )

Numerator used to calculate earnings per share (Note 15)

Basic $ 25,526 $ ( 152,815 ) $ ( 124,717 )

Diluted $ 25,526 $ ( 152,815 ) $ ( 124,717 )

Weighted-average common shares outstanding, basic 62,607,583 60,756,087 58,552,065

Weighted-average common shares outstanding, diluted 63,183,651 60,756,087 58,552,065

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

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2024 2023 2022

Net loss $ ( 149,260 ) $ ( 124,717 ) $ ( 146,334 )

Net income (loss) $ 25,526 $ ( 152,815 ) $ ( 124,717 )

Other comprehensive income (loss):

Change in fair value of cash flow hedges ( 1,723 ) 797 ( 3,874 )

Adjustment for net losses realized on cash flow hedges and included in net loss, net of taxes 724 4,053 —

Total change in unrealized gains (losses) on cash flow hedges 1,521 179 ( 86 )

Change unrealized gains (losses) on investments 1,234 ( 778 ) ( 1,043 )

Adjustment for net gains realized and included in net loss — — ( 137 )

Total change in unrealized gains (losses) on investments 1,234 ( 778 ) ( 1,180 )

Total other comprehensive income (loss) 2,755 ( 599 ) ( 1,266 )

Comprehensive loss $ ( 146,505 ) $ ( 125,316 ) $ ( 147,600 )

Adjustment for net (gains)/ losses realized on cash flow hedges and included in net income (loss), net of taxes ( 546 ) 724 4,053

Total change in unrealized (losses) gains on cash flow hedges ( 2,269 ) 1,521 179

Change in unrealized gains (losses) on investments ( 280 ) 1,234 ( 778 )

Total other comprehensive (loss) income ( 2,549 ) 2,755 ( 599 )

Comprehensive income (loss) $ 22,977 $ ( 150,060 ) $ ( 125,316 )

See accompanying notes to consolidated financial statements.

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RAPID7, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

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Issuance of common stock upon exercise of stock options 480 5 — — 3,313 — — 3,318

Purchase of capped calls related to convertible senior notes — — — — ( 76,020 ) — — ( 76,020 )

Issuance of common stock in connection with redemption, repurchase and conversion of convertible senior notes 2,897 29 — — ( 3,094 ) — — ( 3,065 )

Issuance of common stock in connection with inducement of convertible senior notes 35 — — — 2,740 — — 2,740

Issuance of common stock related to acquisition 341 4 — — ( 4 ) — — —

Cumulative-effect adjustment for the adoption of ASU 2020-06 — — — — ( 99,026 ) — 27,585 ( 71,441 )

Other comprehensive income — — — — — ( 1,266 ) — ( 1,266 )

Net loss — — — — — — ( 146,334 ) ( 146,334 )

Balance, December 31, 2021 57,695 $ 577 487 $ ( 4,764 ) $ 615,032 $ ( 812 ) $ ( 736,028 ) $ ( 125,995 )

Stock-based compensation expense — — — — 123,441 — — 123,441

Issuance of common stock under employee stock purchase plan 218 2 — — 11,941 — — 11,943

Vesting of restricted stock units 1,482 15 — — ( 15 ) — — —

Shares withheld for employee taxes ( 105 ) ( 1 ) — — ( 7,461 ) — — ( 7,462 )

Issuance of common stock upon exercise of stock options 480 5 — — 3,313 — — 3,318

Issuance of common stock in connection with conversion of convertible senior notes — — — — ( 3 ) — — ( 3 )

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Repurchase of common stock issued in relation to acquisition ( 83 ) ( 1 ) 1 —

Other comprehensive income — — — — — ( 599 ) — ( 599 )

Other comprehensive income (loss) — — — — — ( 599 ) — ( 599 )

Net loss — — — — — — ( 124,717 ) ( 124,717 )

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Repurchase and inducement of convertible senior notes — — — — 35,881 — — 35,881

Other comprehensive loss — — — — — 2,755 — 2,755

Other comprehensive income (loss) — — — — — 2,755 — 2,755

Net loss — — — — — — ( 152,815 ) ( 152,815 )

Balance, December 31, 2023 61,714 $ 617 570 $ ( 4,765 ) $ 898,185 $ 1,344 $ ( 1,013,560 ) $ ( 118,179 )

Stock-based compensation expense — — — — 105,179 — — 105,179

Issuance of common stock under employee stock purchase plan 292 3 — — 9,243 — — 9,246

Vesting of restricted stock units 1,435 15 — — ( 15 ) — — —

Shares withheld for employee taxes ( 104 ) ( 1 ) — — ( 4,729 ) — — ( 4,730 )

Vesting of equity awards previously classified as liabilities 27 — — — 1,652 — — 1,652

Issuance of common stock upon exercise of stock options 133 1 — — 1,565 — — 1,566

Repurchase of common stock issued in relation to acquisition — — 1 — — — — —

Other comprehensive income (loss) — — — — — ( 2,549 ) — ( 2,549 )

Net income — — — — — — 25,526 25,526

Balance, December 31, 2024 63,497 $ 635 571 $ ( 4,765 ) $ 1,011,080 $ ( 1,205 ) $ ( 988,034 ) $ 17,711

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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Cash flows from operating activities:

Net loss $ ( 149,260 ) $ ( 124,717 ) $ ( 146,334 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ 25,526 $ ( 152,815 ) $ ( 124,717 )

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 44,893 45,939 41,038

Amortization of debt discount and issuance costs 4,138 4,085 3,982

Amortization of debt issuance costs 4,447 4,138 4,085

Stock-based compensation expense 107,961 111,636 119,902

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Sales and maturities of investments 250,500 150,450 121,304

Other investments 2,710 ( 1,000 ) ( 3,000 )

Other investing activities 360 2,710 ( 1,000 )

Net cash used in investing activities ( 46,522 ) ( 178,754 ) ( 39,988 )

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net of issuance costs of $ 7,909 and $ 14,976 for the years ended December 31, 2023 and 2021, respectively

292,091 — 585,024

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 7,909

Purchase of capped calls related to convertible senior notes — ( 36,570 ) —

Payment of debt issuance costs — — ( 71 )

Payments for redemption, repurchase and conversion of convertible senior notes ( 199,998 ) ( 12 ) ( 230,000 )

Payments for repurchase of convertible senior notes — ( 199,998 ) ( 12 )

Payments related to business acquisitions ( 500 ) ( 2,250 ) ( 300 )

Proceeds from capped calls settlement 17,518 — —

Proceeds from capped call settlement — 17,518 —

Taxes paid related to net share settlement of equity awards ( 4,730 ) ( 5,570 ) ( 7,462 )

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Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2,756 ) 1,202 ( 2,845 )

Net increase (decrease) in cash, cash equivalents and restricted cash 6,323 42,787 ( 8,600 )

Net increase in cash, cash equivalents and restricted cash 127,974 6,323 42,787

Cash, cash equivalents and restricted cash, beginning of period 214,127 207,804 165,017

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Cash and cash equivalents $ 334,686 $ 213,629 $ 207,287

Restricted cash included in prepaid expenses and other assets 498 517 435

Restricted cash included in prepaid expenses and other current assets and other assets 7,415 498 517

Total cash, cash equivalents and restricted cash $ 342,101 $ 214,127 $ 207,804

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

(1) Nature of Business

and subsidiaries (“we,” “us” or “our”) are advancing security with visibility, analytics, and automation delivered through our platform solutions.

and subsidiaries (“we,” “us” or “our”) are advancing security with visibility, analytics, and automation delivered through our Command Platform.

Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks.

Immaterial Correction of an Error

During the fourth quarter of 2024, we identified an immaterial error related to stock-based compensation expense associated with certain restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted during fiscal years 2023 and 2024 attributable to an improper valuation of the underlying awards, resulting in an understatement of stock-based compensation expense in 2023 and 2024.

Based on an analysis of quantitative and qualitative factors in accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality , and SAB No.

108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , and as described further in Note 20, Immaterial Correction of an Error , we evaluated the errors and determined the related impacts were not material to our consolidated financial statements for the prior periods when they occurred, but that correcting the cumulative errors in the period detected would have been material to our results of operations for that period.

Accordingly, we revised previously reported financial information presented herein for such immaterial errors.

(2) Summary of Significant Accounting Policies

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The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The management estimates include, but are not limited to the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition costs, the useful lives and recoverability of long-lived assets, the valuation for credit losses, the valuation of stock-based compensation, the fair value of assets acquired and liabilities assumed in business combinations, the incremental borrowing rate for operating leases and the valuation for deferred tax assets.

The management estimates include, but are not limited to the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition costs, the useful lives and recoverability of long-lived assets, the valuation for credit losses, the valuation of stock-based compensation, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of contingent consideration in business combinations, the incremental borrowing rate for operating leases and the valuation for deferred tax assets.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable.

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We generate revenue primarily from:

(1) product subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses and (2) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

(1) product subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with

our software licenses and (2) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

We recognize revenue when a customer obtains control of promised products or services.

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The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring products or services to the customer.

Variable consideration is included in the transaction

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price if, in our judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur.

Variable consideration is included in the transaction price if, in our judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur.

In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component.

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• For our term software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, we recognize the license revenue over the contractual term of the content subscription.

For our term software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

• Content subscriptions and our maintenance and support services are sold with our term software licenses.

Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period.

Maintenance and support services are distinct from

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the perpetual and term software license and revenue attributable to maintenance and support services is recognized ratably over the contractual period.

Professional Services

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As of December 31, 2024 and 2023, we have no contract assets recorded on our consolidated balance sheet.

(d) Cash and Cash Equivalents

(d) Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid instruments with original maturities of three months or less at the date of purchase to be cash equivalents.

Cash and cash equivalents are recorded at cost, which approximates fair value.

As of December 31, 2024, we had $ 7.4 million of restricted cash recorded on our consolidated balance sheet as a component of prepaid expenses and other current assets associated with cash collateralized letters of credit with expirations within twelve months of the balance sheet date which relate to certain long-term office space leases.

(e) Investments

Our investments consist of commercial paper, corporate bonds, U.S.

Government agencies and agency bonds.

Our investments consist o f U.S.

Government agencies.

We classify our investments as available-for-sale and record these investments at fair value.

When the fair value of an investment declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in our consolidated statements of operations.

When the fair value of an investment declines below its amortized cost

basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in our consolidated statements of operations.

When the fair value of the investment declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in accumulated other comprehensive income (loss), and are recognized in our consolidated statement of operations only if we sell or intend to sell the security before recovery of its cost basis.

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We do not have any off-balance sheet credit exposure related to our customers.

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(g) Concentration of Credit Risk

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Costs related to software developed, acquired or modified for internal use are capitalized.

Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation stages

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of the project are expensed as incurred.

Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation stages of the project are expensed as incurred.

Costs incurred during the application development stage of the project are capitalized.

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We capitalized $ 14.2 million , $ 15.9 million and $ 17.1 million of costs related to software developed for internal use in the years ended December 31, 2024, 2023 and 2022, respectively.

In the years ended December 31, 2024 and 2023, we had impairment losses of capitalized internal-use software projects of $ 0.7 million and $ 3.5 million, respectively, which was expensed within research and development expense in our consolidated statements of operations.

Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

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If such assets or asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying value exceeds the fair value of the assets or asset groups.

For the year ended December 31, 2023, we determined that triggering events occurred which indicated that the carrying value of our ROU and other lease-related assets related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas, Los Angeles, California, and Toronto, Canada may not be fully recoverable.

Los Angeles, California;

and Toronto, Canada may not be fully recoverable.

As a result, we utilized discounted cash flow models to estimate the fair value of the asset groups taking into consideration the time period it will take to obtain sublessees, the applicable discount rate and the anticipated sublease income and calculated the corresponding impairment loss.

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A restructuring plan generally includes significant actions involving employee-related severance charges, employee-related benefits, and other charges associated with the restructuring (collectively, “restructuring expense”).

Restructuring expense is recorded within restructuring in the condensed consolidated statement of operations.

The restructuring

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liability accrued but not paid at the end of the reporting period is included within accrued expenses in the condensed consolidated balance sheet.

Restructuring expense is recorded within restructuring in the consolidated statement of operations.

The restructuring liability accrued but not paid at the end of the reporting period is included within accrued expenses in the consolidated balance sheet.

(n) Business Combinations

We allocate the fair value of purchase consideration to the tangible asset acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair value these identifiable assets and liabilities is recorded as goodwill.

The excess of the fair value of purchase consideration over the fair value of these identifiable assets and liabilities is recorded as goodwill.

During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the final determination of the fair value of assets acquired or liabilities assumed, any subsequent adjustments are recorded to the consolidated statements of operations.

Determining the fair value of the tangible assets acquired, liabilities assumed and intangible assets requires management to make significant estimates and assumptions, especially with respect to intangible assets.

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While we use our best estimates and judgements, our estimates are inherently uncertain and subject to refinement.

Upon the conclusion of the final determination of the fair value of assets acquired or liabilities assumed any subsequent adjustments are recorded to the consolidated statements of operations.

Contingent consideration arising from business combinations is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date.

Changes in fair value are recorded in general and administrative expense in the consolidated statements of operations.

Determining the fair value of the contingent consideration each period requires management to make assumptions and judgments.

These estimates involve inherent uncertainties, and if different assumptions had been used, the fair value of contingent consideration could have been materially different from the amounts recorded.

Acquisition-related transaction costs are expensed as incurred.

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For our goodwill impairment analysis, we operate with a single reporting unit.

To test goodwill impairment, we perform a single-step goodwill impairment test to identify potential goodwill impairment.

To test goodwill impairment, we

perform a single-step goodwill impairment test to identify potential goodwill impairment.

The single-step impairment test begins with an estimation of the fair value of a reporting unit.

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Foreign currency denominated expenses are re-measured using the average exchange rates for the period.

Foreign currency transaction and re-measurement gains and losses are included in other income (expense), net in the condensed consolidated statement of operations.

Foreign currency transaction and re-measurement gains and losses are included in other income (expense), net in the consolidated statement of operations.

In 2024, foreign currency transact ion gains a nd foreign currency re-measurement gains were $ 0.6 million and $ 3.8 million, respectively.

In 2023, foreign currency transaction losses and foreign currency re-measurement losses were $ 1.4 million and $ 0.4 million, respectively.

In 2022, foreign currency transaction gains were $ 1.4 million and foreign currency re-measurement gains (losses) were not material.

(q) Derivative and Hedging Activities

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Derivatives designated as cash flow hedges are classified in our consolidated statements of cash flow in the same manner as the underlying hedged transaction, primarily within cash flow from operating activities.

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As of December 31, 2024 and 2023, our cash flow hedges have contractual maturities of eighteen months or less, and as of December 31, 2024 and 2023, outstanding forward contracts had a total notional value of $ 50.4 million and $ 49.5 million, respectively.

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The actual number of PSUs earned and eligible to vest are determined based on the performance conditions defined when the awards are granted.

We recognize share-based compensation expense for the PSUs on a straight-line basis over the requisite service period for each separately vesting portion of the award when it is probable that the performance conditions will be achieved.

We recognize share-based compensation expense for the PSUs on a straight-line basis over the requisite service period for

each separately vesting portion of the award when it is probable that the performance conditions will be achieved.

We reassess the probability of vesting at each reporting period for awards with performance conditions and adjust stock-based compensation cost based on its probability assessment.

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(u) Net Income (Loss) per Share

We calculate basic net loss per share by dividing our net loss by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed by giving effect to all potentially dilutive securities, including stock options, RSUs, PSUs, the impact of our ESPP, common shares

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issued in connection with acquisitions and the impact of our convertible senior notes (“Notes”).

We calculate basic net income (loss) per share by dividing our net loss by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed by giving effect to all potentially dilutive securities, including stock options, RSUs, PSUs, the impact of our ESPP, common shares issued in connection with acquisitions and the impact of our convertible senior notes (“Notes”).

We intend to settle any conversion of our Notes in cash, shares, or a combination thereof.

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(v) Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures.

The amendments of this update are related to the rate reconciliation and income taxes paid, requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We do not plan to early adopt this standard.

We are currently evaluating the effect of adopting this standard on our disclosures.

Accounting Pronouncements Recently Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures (“ASU 2023-07”) , to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses on an interim and annual basis.

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ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for the fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented.

We adopted this standard for our fiscal year beginning on January 1, 2024 and have provided the required disclosures in Note 18, Segment Information and Information About Geographic Areas.

Accounting Pronouncements Not Yet Effective

In November 2024, the FASB issued ASU 2024-04, Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”).

This new guidance is intended to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20 for (a) convertible debt instruments with cash conversion features and (b) debt instruments that are not currently convertible.

ASU 2024-04 is effective for

fiscal years beginning after December 15, 2026.

Early adoption is permitted.

We do not plan to early adopt this standard.

We are currently evaluating the effect of adoption of this standard to our consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”).

Entities are required to disaggregate any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable:

(1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other depletion expenses.

Such disclosures must be made on an annual and interim basis in a tabular format in the footnotes to the financial statements.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2027.

Early adoption is permitted.

We do not plan to early adopt this standard.

We are currently evaluating the effect of adoption of this standard to our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

We are currently evaluating the effect of adopting this standard on our disclosures.

(3) Revenue from Contracts with Customers

The following table summarizes revenue from contracts with customers for the years ended December 31, 2023, 2022, and 2021:

Year Ended December 31,

2023 2022 2021

(in thousands)

Product subscriptions $ 738,819 $ 643,247 $ 492,608

Professional services 37,539 37,548 34,561

Other 1,349 4,288 8,235

Total revenue $ 777,707 $ 685,083 $ 535,404

The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use our product or service for the years ended December 31, 2024, 2023 and 2022:

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(in thousands)

United States $ 579,025 $ 515,894 $ 414,856

All other 198,682 169,189 120,548

North America $ 643,405 $ 607,448 $ 541,812

Rest of world 200,602 170,259 143,271

Total revenue $ 844,007 $ 777,707 $ 685,083

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The estimated revenues do not include unexercised contract renewals.

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Next Twelve Months Thereafter

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(4) Business Combinations

Minerva Labs Ltd.

On March 14, 2023, we acquired Minerva Labs Ltd.

(“Minerva”), a leading provider of anti-evasion and ransomware prevention technology, for a purchase price with an aggregate fair value of $ 34.6 million.

The purchase consideration consisted of $ 35.0 million paid in cash at closing and a $ 0.4 million receivable for purchase price adjustments.

Additionally, we issued an aggregate of 73,846 shares of our common stock to the founders of Minerva with a fair value of $ 3.6 million.

The 73,846 shares of common stock will be accounted for as stock-based compensation expense over a 24-month period as continued service is required for the founders to receive their full amount of common stock.

For the year ended December 31, 2023, we recognized stock-based compensation expense related to such shares in the amount of $ 1.4 million.

The following table summarizes the allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Noetic Cyber, Inc.

On July 3, 2024, we acquired Noetic Cyber, Inc.

(“Noetic”) a provider of cyber asset attack surface management, to extend Rapid7’s security operations platform by unlocking more accessible and accurate asset inventory in order to provide customers more comprehensive visibility to their attack surface, for a purchase price with an aggregate fair value of $ 51.2 million.

The purchase consideration consisted of $ 38.6 million in cash paid at closing, $ 12.1 million of contingent consideration and $ 0.5 million of deferred cash payments.

The deferred cash payments were held by Rapid7 to satisfy certain post-closing purchase price adjustments and payment was made during the fourth quarter of 2024.

Subject to the terms of the merger agreement, we are required to pay consideration of up to $ 20.0 million to Noetic shareholders based on the achievement of certain performance targets (the “Earnout Consideration”), measured

annually upon the first, second and third anniversaries of the closing date of the transaction (the “Earnout Period”).

If all performance targets are achieved, approximately $ 13.1 million of Earnout Consideration will be paid in cash, and the remaining $ 6.9 million of Earnout Consideration will be issued to certain employees in the form of shares of our common stock subject to continued employment requirements over the Earnout Period.

The approximate $ 6.9 million of the Earnout Consideration that is subject to continued employment will be recognized as stock-based compensation expense over the required employment period.

The fair value of the portion of the Earnout Consideration that is not subject to continued employment is included as part of purchase consideration at the date of the acquisition.

As of July 3, 2024, we determined the fair value of the contingent purchase consideration to be $ 12.1 million.

The fair value of the contingent purchase consideration will be reassessed each reporting period and any required adjustment will be recorded to general and administrative expense.

As of December 31, 2024, the fair value of the contingent purchase consideration was $ 12.4 million, of which $ 6.9 million was recorded within accrued expenses and other current liabilities and $ 5.5 million was recorded within other liabilities in our consolidated balance sheet.

In the year ended December 31, 2024, we recorded approximately $ 0.4 million of accretion expense related to the contingent purchase consideration to general and administrative expense.

In connection with the acquisition, we expect to issue an aggregate value of $ 2.3 million of our common stock to two key employees of Noetic in three installments over a 36 -month period following the closing date of the transaction, subject to continued employment requirements (the “Key Employee Consideration”) and therefore will be recognized as stock-based compensation expense over the required employment period.

The number of shares to be issued at each issuance date for both the Earnout Consideration and the Key Employee Consideration shares will be determined by dividing the aggregate value by the fair market value of our common stock on the issuance date, and therefore will be liability-classified until the final issuance dates.

In the year ended December 31, 2024 , we recognized stock-based compensation expense related to such shares in the amount of $ 2.1 million.

The following table summarizes the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Consideration:

Cash $ 38,597

Estimated purchase price adjustment receivable ( 365 )

Deferred cash consideration 500

Contingent consideration 12,055

Fair value of total consideration transferred $ 51,152

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Cash and cash equivalents $ 1,296

Other current assets 1,792

Other assets 43

Accounts payable and other current liabilities ( 438 )

Accounts receivable 510

Prepaid and other current assets 102

Property and equipment, net 19

Accrued expenses and other current liabilities ( 220 )

Deferred revenue ( 910 )

Other long-term liabilities ( 62 )

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Goodwill 38,917

Net purchase price $ 34,612

These preliminary amounts are subject to subsequent adjustment as we obtain additional information to finalize certain components of working capital and deferred income taxes.

Total purchase price allocation $ 51,152

We identified developed technology as the sole acquired intangible asset.

The estimated fair value of the developed technology intangible asset was $ 12.8 million which was based on a valuation using the income approach.

The estimated fair value of the developed technology intangible asset was $ 11.5 million which was based on a valuation using a probability weighted expected return model (“PWERM”).

The estimated useful life of the developed technology is 7 years.

The excess of the purchase price over the tangible assets acquired, the identifiable intangible asset acquired and assumed liabilities was recorded as goodwill.

We believe that the amount of goodwill reflects the expected synergistic benefits of being able to leverage the integration of the technology acquired with our existing product offerings and being able to successfully market and sell these new features to our customer base.

The excess of the purchase price over the tangible assets acquired, identifiable intangible asset acquired and assumed liabilities was recorded as goodwill.

to successfully market and sell these new features to our customer base.

The goodwill was allocated to our one reporting unit.

The acquired goodwill and intangible asset were not deductible for tax purposes.

For the year ended December 31, 2023, we recorded $ 0.4 million of acquisition-related transaction costs related to the acquisition of Minerva to general and administrative expense.

Our revenue and net loss attributable to the Minerva business for the year ended December 31, 2023 was not material.

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Pro forma results of operations have not been included, as the acquisition of Minerva was not material to our results of operations for any periods presented.

IntSights Cyber Intelligence Ltd.

On July 16, 2021, we acquired IntSights Cyber Intelligence Ltd.

(“IntSights”), a provider of contextualized external threat intelligence and proactive threat remediation, for a purchase price with an aggregate fair value of $ 322.3 million.

The purchase consideration consisted of $ 319.2 million in cash paid at closing, $ 3.4 million in deferred cash payments and a $ 0.3 million receivable for purchase price adjustments.

The deferred cash payments were held by us to satisfy indemnification obligations and certain post-closing purchase price adjustments for a period of eighteen months from the acquisition date and were paid in January 2023.

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.

The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill.

The fair value of net assets acquired, goodwill and intangible assets were $ 61.1 million, $ 260.9 million and $ 65.2 million, respectively.

The goodwill was allocated to our one reporting unit.

The acquired goodwill and intangible assets were not deductible for tax purposes.

Velocidex Enterprises Pty Ltd

On April 12, 2021, we acquired Velocidex Enterprises Pty Ltd (“Velocidex”), a leading open-source technology and community used for endpoint monitoring, digital forensics, and incident response.

The purchase price consisted of $ 2.7 million paid in cash and $ 0.3 million in deferred cash payments paid in April 2022.

The purchase price was allocated to developed technology intangible asset which has an estimated useful life of 6 years.

Alcide.IO Ltd.

On January 28, 2021, we acquired Alcide.IO Ltd.

(“Alcide”), a leading provider of Kubernetes security, for a purchase price of $ 50.5 million, which was funded in cash.

In the year ended December 31, 2024 , we recorded $ 0.8 million of acquisition-related transaction costs related to the acquisition of Noetic to general and administrative expense.

Our revenue and net loss attributable to the Noetic business for the year ended December 31, 2024 was not material.

Minerva Labs Ltd.

On March 14, 2023, we acquired Minerva Labs Ltd.

(“Minerva”), a leading provider of anti-evasion and ransomware prevention technology, for a purchase price with an aggregate fair value of $ 34.6 million .

The purchase consideration consisted of $ 35.0 million paid in cash at closing and a $( 0.4 ) million receivable for purchase price adjustments.

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.

The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill.

The fair value of net assets acquired, goodwill and intangible assets were $( 0.7 ) million, $ 40.8 million and $ 10.4 million, respectively.

The fair value of net assets acquired (including intangible assets), goodwill and intangible assets were $ 13.9 million , $ 20.7 million and $ 12.8 million , respectively.

The goodwill was allocated to our one reporting unit.

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U.S government agencies $ 224,187 $ 328 $ ( 216 ) $ 224,299

Agency bonds 2,500 — ( 7 ) 2,493

Total $ 224,187 $ 328 $ ( 216 ) $ 224,299

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U.S government agencies $ 222,820 $ 467 $ ( 65 ) $ 223,222

Corporate bonds 14,351 — ( 230 ) 14,121

Commercial paper 7,944 — — 7,944

Agency bonds 2,500 — ( 7 ) 2,493

Total $ 225,320 $ 467 $ ( 72 ) $ 225,715

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As of December 31, 2024, our available-for-sale investments had maturities ranging from 1 to 17 months.

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We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers.

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The following table presents our financial assets measured and recorded at fair value on a recurring basis using the above input categories:

The following table presents our financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories:

As of December 31, 2024

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(in thousands)

Money market funds $ 124,506 $ — $ — $ 124,506

government agencies $ 224,299 $ — $ — $ 224,299

Agency bonds — 2,493 — 2,493

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets and other assets) — 1,322 — 1,322

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 96 — 96

Total assets $ 224,299 $ 96 $ — $ 224,395

Foreign currency forward contracts designated as cash flow hedges (other current liabilities) — 55 — 55

Contingent consideration (other current liabilities and other long-term liabilities) $ — $ — $ 12,422 $ 12,422

Foreign currency forward contracts designated as cash flow hedges (other current and long-term liabilities) — 1,415 — 1,415

Total liabilities $ — $ 1,415 $ 12,422 $ 13,837

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(in thousands)

Money market funds $ 88,039 $ — $ — $ 88,039

government agencies $ 223,222 $ — $ — $ 223,222

Corporate bonds — 14,121 — 14,121

Commercial paper — 7,944 — 7,944

Agency bonds — 2,493 — 2,493

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Total liabilities $ — $ 55 $ — $ 55

Cash and cash equivalents are excluded from the table above as carrying amounts reported in our consolidated balance sheet equal or approximate fair value.

As of December 31, 2024, the fair value of our 2.25 %, 0.25 % and 1.25 % convertible senior notes due 2025, 2027 and 2029, as further described in Note 11, Debt , was $ 45.2 million, $ 553.5 million and $ 284.1 million , respectively, based upon quoted market prices.

We consider the fair value of the Notes to be a Level 2 measurement due to limited trading activity of the Notes.

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We consider the fair value of the Notes (as defined in Note 11, Debt ) to be a Level 2 measurement due to limited trading activity of the Notes.

(7) Property and Equipment

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Leasehold improvements 57,051 56,151

56,151 66,180

Total 96,800 93,443

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Property and equipment, net $ 32,245 $ 39,642

(1) As of December 31, 2023, leasehold improvements with a net book value of $ 8.6 million were recorded as an impairment of long-lived assets related to certain idle office space at our corporate headquarters in Boston, Massachusetts and idle office space in Los Angeles, California, and Toronto, Canada.

Refer to Note 12, Leases, for further details on the impairment of long-lived assets.

We recorded depreciation expense of $ 14.0 million, $ 13.6 million and $ 12.3 million in 2023, 2022 and 2021, respectively.

We recorded depreciation expense of $ 11.1 million, $ 14.0 million and $ 13.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(8) Goodwill and Intangibles

Goodwill was $ 575.3 million and $ 536.4 million as of December 31, 2024 and December 31, 2023, respectively.

There were no goodwill impairment charges in 2023, 2022 or 2021.

The following table displays the changes in the gross carrying amount of goodwill:

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Balance at December 31, 2022 $ 515,631

IntSights acquisition adjustments 373

Balance at December 31, 2022 $ 515,631

Minerva acquisition 20,720

Balance at December 31, 2023 $ 536,351

Noetic acquisition 38,917

Balance at December 31, 2024 $ 575,268

The following table presents details of our intangible assets which include acquired identifiable intangible assets and capitalized internal-use software costs:

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Intangible assets are expensed on a straight-line basis over the useful life of the asset.

Amortization expense was $ 31.9 million, $ 27.5 million and $ 21.2 million in 2023, 2022 and 2021, respectively.

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Amortization expense was $ 33.8 million, $ 31.9 million and $ 27.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of December 31, 2024 was as follows (in thousands):

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Total $ 75,875

The table above excludes the impact of $ 7.7 million of capitalized internal-use software costs for projects that have not been completed as of December 31, 2023, and therefore, we have not determined the useful life of the software, nor have all the costs associated with these projects been incurred.

For the year ended December 31, 2023, we recorded a $ 3.5 million impairment of capitalized internal-use software costs to research and development expense in our consolidated statement of operations for projects that have been discontinued and will not be placed into service.

The table above excludes the impact of $ 9.8 million of capitalized internal-use software costs for projects that have not been completed as of December 31, 2024, and therefore, all the costs associated with these projects have not been incurred.

(9) Deferred Contract Acquisitions and Fulfillment Costs

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the years ended December 31, 2023 and 2022:

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs, which primarily consist of capitalized sales commissions, for the years ended December 31, 2024 and 2023:

Year Ended December 31,

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Convertible Senior Notes

In May 2020, we issued $ 230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the “2025 Notes”) and in March 2021, we issued $ 600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the “2027 Notes”) and in September 2023, we issued $ 300.0 million aggregate principal amount of convertible senior notes due March 15, 2029 (the “2029 Notes”) (collectively, the “Notes”).

In May 2020, we issued $ 230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the “2025 Notes”), in March 2021, we issued $ 600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the “2027 Notes”) and in September 2023, we issued $ 300.0 million aggregate principal amount of convertible senior notes due March 15, 2029 (the “2029 Notes”) (collectively, the “Notes”).

In September 2023, we used $ 201.0 million of the proceeds from the issuance of the 2029 Notes to repurchase and retire $ 184.0 million aggregate principal amount of the 2025 Notes and paid accrued and unpaid interest thereon.

Further details of the Notes are as follows:

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2029 Notes March 15, 2029 1.25 % March 15, 2024 1.69 % March 15 and September 15 15.4213 $ 64.85 4.6

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The 2025 Notes, the 2027 Notes and the 2029 Notes are senior unsecured obligations, do not contain any financial covenants and are governed by indentures between the Company, as issuer, and U.S.

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The total net proceeds from the 2025 Notes, the 2027 Notes and the 2029 Notes offerings, after deducting initial purchase discounts and debt issuance costs, were $ 222.8 million, $ 585.0 million and $ 292.0 million, respectively.

Terms of the Notes

The holders of the Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 for the 2025 Notes, March 20, 2024 for the 2027 Notes and September 21, 2026 for the 2029 Notes (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price of the respective Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period for the 2025 Notes and any ten consecutive trading day period for the 2027 Notes and the 2029 Notes (the “measurement periods”) in which the trading price (as defined in the Indentures) per $1,000 principal amount of the applicable series of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate of the respective Notes on each such trading day;

• if we call any or all of the respective Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the respective redemption date;

• upon the occurrence of specified corporate events (as set forth in the Indentures).

As of December 31, 2023, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holders.

As of December 31, 2024, the 2027 Notes and the 2029 Notes were not convertible at the option of the holders.

The 2025 Notes became convertible at the option of the holders effective November 1, 2024.

The holders may convert the 2025 Notes, the 2027 Notes and the 2029 Notes at any time on or after November 1, 2024, December 15, 2026 and December 15, 2028, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the circumstances set forth above.

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In addition, following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, in each case as described in the Indentures, we will increase the conversion rate for a holder of the Notes who elects to convert its Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

The 2025 Notes, the 2027 Notes and the 2029 Notes are redeemable after May 6, 2023, March 20, 2024 and September 21, 2026 (the “Redemption Dates”), respectively.

On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2025 Notes, the 2027 Notes or the 2029 Notes, at our option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding, the date on which we provide the redemption notice at a redemption price equal to 100 % principal amount of the 2025 Notes, the 2027 Notes or the 2029 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Partial Repurchase and Conversion of the 2023 Notes

On March 16, 2021, we used a portion of the proceeds from the issuance of the 2027 Notes, together with 2.2 million shares of our common stock, to repurchase and retire $ 182.6 million aggregate principal amount of the 2023 Notes, and paid accrued and unpaid interest thereon (the 2023 Notes Repurchase Transaction).

The 2023 Notes Repurchase Transaction was accounted for as an induced conversion in accordance with Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20) .

The total fair value of the additional common stock issued to induce the conversion of $ 2.7 million was recognized as an inducement expense and classified as a

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component of interest expense in our consolidated statement of operations.

The remaining cash and common stock consideration issued under the original terms of the 2023 Notes was accounted for under the general conversion accounting guidance where the difference between the carrying amount of the 2023 Notes retired, including unamortized debt issuance cost of $ 2.7 million, and the cash consideration paid and the par amount of the common stock issued, was recorded in additional paid-in capital.

During the first quarter of 2021, holders of the 2023 Notes elected to convert Notes with a principal amount of $ 2.0 million.

Cash was paid for the principal and the excess conversion spread was paid in 23,123 shares of our common stock.

Redemption of the 2023 Notes

On September 16, 2021, we issued a redemption notice for the remaining $ 45.4 million aggregate principal amount outstanding of the 2023 Notes.

Pursuant to the redemption notice, on November 30, 2021 we paid $ 43.4 million in cash and issued 697,262 shares of our common stock to the holders of the 2023 Notes who submitted conversion notices, and the remaining $ 2.0 million of 2023 Notes were redeemed in cash, plus accrued and unpaid interest.

Partial Repurchase and Conversion of the 2025 Notes

As a result of the induced conversion, we recorded $ 53.9 million in non-cash induced conversion expense which is included in interest expense in our consolidated statement of operations.

The induced conversion expense represents the fair value of the consideration issued upon conversion in excess of the fair value of the securities issuable under the original terms of the 2025 Notes.

Accounting for the Notes

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Balance at December 31, 2023 $ 45,992 $ ( 404 ) $ 45,588 $ 600,000 $ ( 8,077 ) $ 591,923 $ 300,000 $ ( 7,515 ) $ 292,485

Issuance — — — — — — 300,000 ( 7,909 ) 292,091

Partial repurchase ( 184,000 ) 2,010 ( 181,990 ) — — — — — —

Amortization of debt issuance costs — 307 307 — 2,513 2,513 — 1,435 1,435

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2024 2023 2022

2025 Notes 2027 Notes 2029 Notes Total 2025 Notes 2027 Notes Total 2023 Notes 2025 Notes 2027 Notes Total

2025 Notes 2027 Notes 2029 Notes Total 2025 Notes 2027 Notes 2029 Notes Total 2025 Notes 2027 Notes Total

Contractual interest expense $ 1,035 $ 1,500 $ 3,749 $ 6,284 $ 3,795 $ 1,500 $ 1,167 $ 6,462 $ 5,174 $ 1,502 $ 6,676

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Total interest expense $ 1,342 $ 4,013 $ 5,184 $ 10,539 $ 58,750 $ 3,987 $ 1,561 $ 64,298 $ 6,599 $ 3,970 $ 10,569

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In connection with the offering of the 1.25 % convertible senior notes due 2023 (the “2023 Notes”), the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2023 Capped Calls, “2025 Capped Calls”, “2027 Capped Calls” and “2029 Capped Calls”) (collectively, the “Capped Calls”).

In connection with the offering of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2025 Capped Calls”, “2027 Capped Calls” and “2029 Capped Calls”) (collectively, the “Capped Calls”).

The Capped Calls are expected to reduce potential dilution to our common stock upon conversion of a given series of notes and/or offset any cash payments that we are required to make in excess of the principal amount of converted notes of such series, as the case may be, with such reduction and/or offset subject to a cap.

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The following table sets forth other key terms and premiums paid for the Capped Calls related to each series of Notes:

Capped Calls Entered into in Connection with the Issuance of the 2023 Notes Capped Calls Entered into in Connection with the Issuance of the 2025 Notes Capped Calls Entered into in Connection with the Issuance of the 2027 Notes Capped Calls Entered into in Connection with the Issuance of the 2029 Notes

Capped Calls Entered into in Connection with the Issuance of the 2025 Notes Capped Calls Entered into in Connection with the Issuance of the 2027 Notes Capped Calls Entered into in Connection with the Issuance of the 2029 Notes

Initial strike price, subject to certain adjustments $ 61.02 $ 103.38 $ 64.85

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Total premium paid (in thousands) $ 27,255 $ 76,020 $ 36,570

Expiration dates June 2, 2023 - August 1, 2023 March 4, 2025 - April 29, 2025 January 1, 2027 - March 11, 2027 February 13, 2029 - March 13, 2029

For accounting purposes, the 2023 Capped Calls, the 2025 Capped Calls, the 2027 Capped Calls and the 2029 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes, the 2025 Notes, the 2027 Notes and the 2029 Notes.

The 2023 Notes, 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

The 2025 Capped Calls were not redeemed with the partial repurchase of the 2025 Notes and remain outstanding.

The 2023 Capped Calls were not redeemed with the repayment of the 2023 Notes in 2021.

In accordance with the terms of the Capped Calls agreements, we elected to cash-settle the 2023 Capped Calls via written notice provided to the counterparties on May 31, 2023 (the “Notice Date”).

The 2023 Capped Calls were settled over a 40-day trading period from June 2, 2023 to August 1, 2023, with a settlement date of August 3, 2023.

Since cash settlement was elected, pursuant to ASC 815, the 2023 Capped Calls were deemed to meet the definition of a derivative instrument, requiring reclassification from stockholder's equity to a derivative asset at the fair value on the Notice Date, with subsequent changes in fair value to be recorded to earnings through the settlement date.

The fair value on the Notice Date of $ 33.0 million was reclassified from stockholders' equity (additional paid-in capital) to derivative assets.

The change in fair value of the derivative asset from the Notice Date to September 30, 2023 was $ 15.5 million and recorded to other income (expense) on our consolidated statement of operations.

On August 3, 2023, we received $ 17.5 million in cash from the settlement of the 2023 Capped Calls.

Expiration dates March 4, 2025 - April 29, 2025 January 1, 2027 - March 11, 2027 February 13, 2029 - March 13, 2029

For accounting purposes, the 2025 Capped Calls, the 2027 Capped Calls and the 2029 Capped Calls are separate transactions, and not part of the terms of the 2025 Notes, the 2027 Notes and the 2029 Notes.

The 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

Credit Agreement

In April 2020, we entered into a Credit and Security Agreement (the Credit Agreement), with KeyBank National Association that provided for a $ 30.0 million revolving credit facility, with a letter of credit sublimit of $ 15.0 million and an accordion feature under which we could increase the credit facility to up to $ 70.0 million.

In April 2020, we entered into a Credit and Security Agreement, with KeyBank National Association that provided for a $ 30.0 million revolving credit facility, with a letter of credit sublimit of $ 15.0 million and an accordion feature under which we could increase the credit facility to up to $ 70.0 million.

In May 2020, we utilized the accordion feature to increase the credit facility to $ 50.0 million.

In December 2021, we entered into an Amendment Agreement (the Amendment) in respect of our Credit and Security Agreement (as amended, the Credit Agreement), with KeyBank National Association, to, among other things, increase the credit facility from $ 50.0 million to $ 100.0 million and extend the maturity date to December 22, 2024.

The Credit Agreement provides for a $ 100.0 million revolving credit facility, with a letter of credit sublimit of $ 15.0 million, and an accordion feature under which we can increase the credit facility to up to $ 150.0 million.

We incurred fees of $ 0.4 million in connection with entering into the Credit Agreement.

The fees are recorded in other current assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement.

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commitment fee of 0.2 % per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the consolidated statement of operations.

The Credit Agreement contains certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts.

In December 2021, we entered into an Amendment Agreement in respect of our Credit and Security Agreement (as amended, the "Credit Agreement"), with KeyBank National Association, to, among other things, increase the credit facility from $ 50.0 million to $ 100.0 million and extend the maturity date to December 22, 2024.

The Credit Agreement provided for a $ 100.0 million revolving credit facility, with a letter of credit sublimit of $ 15.0 million, and an accordion feature under which we could increase the credit facility to up to $ 150.0 million.

We incurred fees of

$ 0.4 million in connection with entering into the Credit Agreement, which were recorded in other current assets on the consolidated balance sheet and amortized on a straight-line basis over the contractual term of the arrangement.

The commitment fee of 0.2 % per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the consolidated statement of operations.

The Credit Agreement contained certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts.

The borrowings under the Credit Agreement bear interest, at our option, at a rate equal to either (i) term SOFR plus a credit spread adjustment of 0.10 % per annum plus a margin of 2.50 % per annum or (ii) the alternate base rate (subject to a floor), plus an applicable margin equal to 0 % per annum.

As of December 31, 2023, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of December 31, 2023, we had a total of $ 8.8 million in letters of credit outstanding as collateral for certain office space leases and corporate credit card programs which reduce the amount of borrowing available under our Credit Agreement.

Our leases primarily relate to office facilities that have remaining terms of up to 8.3 years, some of which include one or more options to renew with renewal terms of up to 5 years and some of which include options to terminate the leases within 4 years.

As noted above, the Credit Agreement matured on December 22, 2024.

Our leases primarily relate to office facilities that have remaining terms of up to 7.3 years , some of which include one or more options to renew with renewal terms of up to 5 years and some of which include options to terminate the leases within 1 year .

All of our leases are classified as operating leases.

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ROU assets obtained in exchange for new lease obligations $ 4,488 $ 8,119

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Maturities of operating lease liabilities as of December 31, 2024 were as follows (in thousands):

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Total $ 83,923

During the year ended December 31, 2023, we determined that triggering events occurred which indicated that the carrying value of our right-of-use (“ROU”) and other lease-related assets related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas, Los Angeles, California, and Toronto, Canada may not be fully recoverable.

office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas;

Los Angeles, California;

and Toronto, Canada may not be fully recoverable.

We used prices and other relevant information generated by recent market transactions involving similar or comparable assets, as well as our historical experience in real estate transactions.

In the year ended December 31, 2023, we recorded impairment losses of $ 30.8 million, respectively, related to these idle office spaces.

consisting of $ 22.2 million, related to ROU assets and $ 8.6 million related to leasehold improvements associated with these leased office spaces.

In the year ended December 31, 2023, we recorded impairment losses of $ 30.8 million, respectively, related to these idle office spaces, consisting of $ 22.2 million, related to ROU assets and $ 8.6 million related to leasehold improvements associated with these leased office spaces.

(13) Stock-Based Compensation

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As of December 31, 2024, the shares of common stock authorized to be issued under the 2015 Plan totaled 25,042,693 and there were 6,118,316 shares of common stock available for grant.

We recognize stock-based compensation expense for all awards on a straight-line basis over the applicable vesting period, which is generally four years .

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Stock-based compensation expense for restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), stock options and purchase rights issued under our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

We recognize stock-based compensation expense for all awards on a straight-line basis over the applicable vesting period, which is generally three to four years .

Stock-based compensation expense for restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), stock options, purchase rights issued under our employee stock purchase plan (“ESPP”) and earnout consideration and key employee consideration shares related to acquisitions was classified in the accompanying consolidated statements of operations as follows:

Year Ended December 31,

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Total stock-based compensation expense $ 107,961 $ 111,636 $ 119,902

We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years .

The unrecognized stock-based compensation expense and estimated weighted average amortization periods remaining at December 31, 2024 was as follows:

Unrecognized Compensation Expense Weighted-Average Amortization Period Remaining

(in thousands) (in years)

RSUs and PSUs $ 137,525 1.9

Purchase rights under our ESPP $ 1,734 0.6

Earnout and key employee consideration shares $ 7,391 1.8

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2024, 2023 and 2022 bonus plans, including permitting our executive officers and certain other employees the opportunity to receive payment of their earned bonuses in the form of common stock (in lieu of cash).

During the years ended December 31, 2023, 2022, and 2021 we recognized stock-based compensation expense related to such bonuses in the amount of $ 1.6 million, $ 1.0 million and $ 4.7 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of December 31, 2023, 2022 and 2021.

For the years ended December 31, 2024, 2023, and 2022, we recognized stock-based compensation expense related to such bonuses in the amount of $ 0.9 million, $ 1.6 million and $ 1.0 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of December 31, 2024, 2023 and 2022.

For employees, including executive officers, who elect to receive their bonuses in the form of common stock (in lieu of cash), the payouts are expected to be made in the form of fully vested stock awards in the first quarter of the following year pursuant to our 2015 Equity Incentive Plan, as amended.

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Unvested balance as of December 31, 2024 2,853,235 $ 57.25

As of December 31, 2023, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 145.1 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.1 years.

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In February 2023, our Compensation Committee awarded 173,103 PSUs that required the achievement of an annualized recurring revenue (“ARR”) target for the 2023 full-year to earn any payout and include a non-GAAP operating income margin modifier.

In addition, the portion of the PSUs that are earned would be capped at a maximum of 200 % of the target level payout and if certain ARR or non-GAAP operating income margin goals were not met, no PSUs will be earned.

(1) The weighted average grant date fair values for RSUs and PSUs granted, vested and forfeited during fiscal year 2023, as well as the weighted average grant date fair value of awards unvested as of December 31, 2023 have been revised from prior period disclosures.

Refer to Note 20, Immaterial Correction of an Error , for further information.

In January 2024, our Compensation Committee awarded 279,570 PSUs that required the achievement of net annualized recurring revenue (“Net ARR”) and Adjusted EBITDA targets for the 2024 full-year to earn any payout.

Net ARR is defined as the change in the annual value of all recurring revenue related to contracts in place at year end.

In addition, the portion of the PSUs that are earned would be capped at a maximum of 200 % of the target level payout and if certain net ARR or Adjusted EBITDA goals were not met, no PSUs will be earned.

The PSUs have a performance period of one year and the earned PSUs will vest in three equal installments following each of the first, second and third anniversary of the vesting commencement date, subject to the participant’s continuous service as of each such date.

The 2023 targets for these PSUs were not met and therefore no stock-based compensation expense was recorded in 2023 related to these PSUs.

The 2024 target level attainment was 50 % and in the year ended December 31, 2024, we recorded $ 3.4 million of stock-based compensation expense related to these PSUs based on that level of attainment of the performance criteria.

In July 2024, our Compensation Committee awarded 19,605 PSUs that required the achievement of certain milestones related to the integration of Noetic.

The PSUs have three measurement and vesting dates through September 15, 2025, subject to the participant's continuous service as of each such date.

If the milestones are not achieved, no PSUs will be earned.

In the year ended December 31, 2024, we recorded $ 0.6 million of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

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Vested and exercisable as of December 31, 2024 582,638 $ 12.38 1.2 $ 16,225

The total fair value of stock options vested in 2022 and 2021 was $ 0.1 million, and $ 0.6 million, respectively.

All outstanding stock options were fully vested as of December 31, 2022.

(d) Employee Stock Purchase Plan

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We have not paid dividends on our common stock nor do we expect to pay dividends in the foreseeable future.

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The following table reflects the assumptions used in the Black-Scholes option pricing model to calculate the expense related to the ESPP:

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$ 33.78 $ 34.71 $ 45.31 $ 67.59 and $ 81.37

$ 28.39 and $ 52.60

Aggregate proceeds $ 4.2 million $ 5.0 million $ 5.1 million $ 6.1 million $ 6.2 million $ 5.7 million

(14) Income Taxes

Loss before income taxes included in the consolidated statements of operations was as follows:

We have provided for current and deferred U.S.

federal, state, and foreign income taxes for all tax jurisdictions in which we operate.

Income (loss) before income taxes included in the consolidated statements of operations was as follows:

Year Ended December 31,

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Foreign 5,756 ( 14,038 ) ( 12,924 )

Loss before income taxes $ ( 149,778 ) $ ( 122,305 ) $ ( 135,913 )

Income (loss) before income taxes $ 41,455 $ ( 153,333 ) $ ( 122,305 )

Income tax expense included in the consolidated statements of operations was as follows:

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Foreign 779 ( 5,635 ) ( 1,452 )

Total deferred tax (benefit) expense ( 5,624 ) ( 1,440 ) 430

Income tax expense $ ( 518 ) $ 2,412 $ 10,421

Total deferred tax expense (benefit) 791 ( 5,624 ) ( 1,440 )

Total income tax expense (benefit) $ 15,929 $ ( 518 ) $ 2,412

The reconciliation of the federal statutory rate of 21% to the effective income tax rate for the years ended December 31, 2024, 2023 and 2022 was as follows:

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Year Ended December 31,

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Stock-based compensation 15.7 ( 7.0 ) ( 2.4 )

Federal research and development credit 0.9 1.4 1.4

Research and development credits ( 18.5 ) 0.9 1.4

Foreign rate differential 3.0 0.3 0.1

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Tax reserves 12.6 ( 0.1 ) ( 0.2 )

Prior year true-ups 5.2 ( 0.3 ) ( 0.1 )

Capital gain on sale — — ( 7.0 )

Provision to return ( 0.5 ) 5.2 ( 0.3 )

taxation of international operations 3.5 — —

Other 7.7 ( 0.8 ) ( 1.1 )

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Deferred tax liabilities:

Intangible assets $ — $ —

Operating lease ROU assets $ ( 10,329 ) $ ( 11,307 )

Convertible senior notes — —

Deferred contract acquisition and fulfillment costs ( 26,277 ) ( 24,251 )

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Net deferred tax liabilities $ ( 685 ) $ 112

Beginning January 1, 2022, the Tax Cuts and Jobs Act (the "Tax Act”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code (“IRC”) Section 174.

The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.

We have included the impact of this provision, which results in

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additional deferred tax assets of approximately $ 63.2 million and $ 37.1 million as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, we have evaluated the need for a valuation allowance on our deferred tax assets.

In making this determination, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The valuation allowance increased by $ 1.5 million for the year ended December 31, 2023.

Due to our history of generating losses, we continue to record a valuation allowance against our net deferred tax assets in the United States and U.K.

In addition to the United States, we have recognized valuation allowance against a net deferred tax asset in Israel.

Based on our assessment of future profitability in Ireland, we have released a portion of valuation allowance in respect of our deferred tax assets.

As of December 31, 2024, we had federal and state net operating loss (“NOL”) carryforwards in the United States of $ 265.6 million and $ 306.0 million, respectively.

Of these amounts, $ 332.7 million of federal and a portion of state NOLs can be carried forward indefinitely.

The remaining NOLs expire at various dates beginning in 2024.

We had foreign NOL carryforwards of $ 241.6 million that can be carried forward indefinitely.

Of these amounts, $ 251.5 million of federal and $ 47.8 million of state NOLs can be carried forward indefinitely.

We had foreign NOL carryforwards of $ 215.5 million that can be carried

forward indefinitely.

We also had federal, state and foreign research and development credit carryforwards of $ 9.3 million, $ 4.1 million and $ 0.3 million as of December 31, 2024, respectively.

These credit carryforwards expire at various dates beginning in 2024.

The remaining NOLs and credits expire at various dates beginning in 2025.

As of December 31, 2024, our ability to utilize NOLs remains limited under IRC Sections 382 and 383 due to an ownership change we experienced in January 2018.

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Subsequent ownership changes may further affect the limitation in future years.

Beginning January 1, 2022, the Tax Cuts and Jobs Act eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code Section 174.

The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.

We have included the impact of this provision, which results in additional deferred tax assets of approximately $ 91.0 million and $ 63.2 million as of December 31, 2024 and 2023, respectively.

During the fourth quarter of 2024, we completed an analysis of our U.S.

federal research and development tax credits.

As a result, we recorded additional credits of $ 4.2 million , which have a full valuation allowance and are subject to the potential limitations discussed above.

Valuation Allowances

As of December 31, 2024, we have evaluated the need for a valuation allowance on our deferred tax assets.

In making this determination, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company's valuation allowance decreased by $ 2.4 million for the year ended December 31, 2024, due primarily to a decrease in operating losses, as well as a decrease of $ 1.7 million related to release of our valuation allowance related to our net deferred tax assets in Israel, offset by an increase related in capitalized research and development.

The release of the valuation allowance in Israel was primarily the result of an internal restructuring, which changed the overall deferred tax position of the Israeli subsidiary.

Due to our history of generating losses, we continue to record a valuation allowance against our net deferred tax assets in the United States and U.K and against the net operating loss carryforwards of our Ireland subsidiary.

We may release additional valuation allowances in future periods if objective negative evidence of cumulative losses is no longer present and positive evidence, such as projection of future growth, supports the realization of such deferred tax assets.

Release of all or a portion of these valuation allowances would result in a decrease in the provision for income taxes in the period of the release.

Unrecognized Tax Benefits

We file income tax returns in all jurisdictions in which we operate.

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We are currently under tax examination in the state of Massachusetts for tax years 2023 through 2024 and in Israel for tax years 2018 through 2022.

The following is a reconciliation of the beginning and ending balances of unrecognized tax benefits (excluding interest and penalties), in thousands:

Balance, January 1, 2024 $ 5,041

Additions based on tax positions related to the current year 4,520

Additions for tax positions of prior years 315

Reductions for tax positions of prior years —

Settlements —

Balance, December 31, 2024 $ 9,876

We have established reserves to provide for additional income taxes that management believes will more likely than not be due in future years.

The reserves have been established based upon our assessment of the potential exposure.

Our reserve for unrecognized income tax benefits of $ 5.0 million remained unchanged from December 31, 2022.

We recorded $ 0.2 million of interest in 2023 related to uncertain tax positions.

During the next twelve months, the Company does not expect any change to its uncertain tax positions other than the accrual of interest in the normal course of business.

We plan to permanently reinvest the undistributed earnings of our foreign subsidiaries.

If we repatriate these earnings, we may be required to pay U.S.

state and local taxes, as well as foreign withholding taxes.

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(15) Net Loss Per Share

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the years ended December 31, 2023 and 2022 :

The change in our reserves during the year ended December 31, 2024 primarily relates to an intercompany sale of

intellectual property as part of a post-acquisition integration strategy related to our acquisition of Minerva Labs Ltd.

We recorded $ 0.4 million of interest in 2024 related to unrecognized tax benefits.

During the next twelve months, the Company does not expect any change to its unrecognized tax benefits other than the accrual of interest in the normal course of business.

We recognize interest and penalties related to unrecognized tax benefits in the income tax line of the statement of operations.

From time to time, we may receive income tax assessments from taxing authorities asserting additional tax liabilities owed by the Company.

During the quarter ended June 30, 2024, we received an initial assessment from the Israel Tax Authority (“ITA”) of approximately 324 million Israeli New Shekels (approximately $ 88 million, based upon exchange rates as of December 31, 2024 between the Israeli New Shekel and the US Dollar) related to fiscal year 2021.

Based on our interpretation of the regulations and available case law, we believe that the tax positions we have taken on our filed tax return in Israel are sustainable and we intend to defend our position through all available means.

As such, we have not recorded any impact of the ITA assessment in our consolidated financial statements for the year ended December 31, 2024.

We are continuing to monitor developments related to this matter and its impact on our existing income tax reserves for all open years.

If we are unsuccessful in sustaining our tax position in this matter, our financial condition and results of operations would be adversely affected.

Other Tax Matters

As of December 31, 2024, we have accumulated earnings generated by foreign subsidiaries.

We have not recognized a deferred tax liability for the majority of these unremitted earnings as our intention is to indefinitely reinvest these accumulated earnings in our foreign subsidiaries.

During the fourth quarter of 2024, we made the determination that the unremitted foreign earnings associated with our Israel legal entity are no longer indefinitely reinvested.

We recorded a liability of $ 0.1 million related to the taxes expected to be imposed upon the repatriation of these unremitted foreign earnings that are not considered indefinitely reinvested.

The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules (“Pillar Two”) for the global 15% minimum tax have been adopted in a number of jurisdictions in which we operate.

We are continuing to evaluate the potential impact on future periods of the Pillar Two framework, pending legislative adoption by additional individual countries.

(15) Net Income (Loss) per Share

The following table summarizes the computation of basic and diluted net income (loss) per share of our common stock for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

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(in thousands, except share and per share data)

Net loss $ ( 149,260 ) $ ( 124,717 ) $ ( 146,334 )

Weighted-average common shares outstanding, basic and diluted 60,756,087 58,552,065 55,270,998

Net loss per share, basic and diluted $ ( 2.46 ) $ ( 2.13 ) $ ( 2.65 )

Net income (loss) used to calculate net income (loss), basic $ 25,526 $ ( 152,815 ) $ ( 124,717 )

Weighted-average common shares outstanding, basic 62,607,583 60,756,087 58,552,065

Weighted average effect of dilutive shares:

Dilutive effect of equity incentive plans 576,068 — —

Weighted-average common shares outstanding, diluted 63,183,651 60,756,087 58,552,065

Net income (loss) per share, basic $ 0.41 $ ( 2.52 ) $ ( 2.13 )

Net income (loss) per share, diluted $ 0.40 $ ( 2.52 ) $ ( 2.13 )

We intend to settle any conversion of our 2025 Notes, 2027 Notes and 2029 Notes in cash, shares, or a combination thereof.

The dilutive impact of the Notes for our calculation of diluted net income (loss) per share is considered using the if-converted method.

For the years ended December 31, 2023 and 2022, the shares underlying the Notes were not considered in the calculation of diluted net loss per share as the effect would have been anti-dilutive.

In connection with the issuance of the 2023 Notes, the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into 2023 Capped Calls, 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls, which were not included for the purpose of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

As further described in Note 11, Debt , the 2023 Capped Calls were not redeemed with the redemption of the 2023 Notes.

The 2025 Capped Calls were not redeemed with the partial repurchase of the 2025 Notes and remain outstanding.

For the years ended December 31, 2024, 2023 and 2022, the shares underlying the Notes were not considered in the calculation of diluted net income (loss) per share as the effect would have been anti-dilutive.

In connection with the issuance of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into the 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls, which were not included for the purpose of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

As of December 31, 2024, the 2025 Notes were convertible at the option of the holder, however the 2027 Notes and the 2029 Notes were not convertible at the option of the holder.

As of December 31, 2023, and 2022 the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder.

We had not received any conversion notices through the issuance date of our unaudited consolidated financial statements.

We had not received any conversion notices through the issuance date of our consolidated financial statements.

For disclosure purposes, we have calculated the potentially dilutive effect of the conversion spread, which is included in the table below.

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(a) Purchase Obligations

As of December 31, 2023, we have non-cancellable firm purchase commitments relating to cloud infrastructure services, including with Amazon Web Services (“AWS”), and software subscriptions.

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As of December 31, 2024, we have non-cancellable firm purchase commitments primarily relating to cloud infrastructure services and software subscriptions.

The following table presents details of the future non-cancellable purchase commitments under these agreements as of December 31, 2024 (in thousands):

2025 $ 60,125

2028 and thereafter —

Total $ 100,062

In January 2025, we amended our contract with a cloud services provider which increased our total purchase obligation by $ 93.8 million in 2025, and $ 125.0 million in each of 2026, 2027, 2028 and 2029, respectively, for a total additional $ 593.8 million incremental to the amounts that are included in the table above.

In addition, the amended contract includes an additional $ 35.0 million obligation over the five-year period.

We provide limited product warranties.

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We agree to standard indemnification provisions in the ordinary course of business.

Pursuant to these provisions, we agree to indemnify, hold harmless and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our customers, in connection with any United States patent, copyright or other intellectual property infringement claim by any third party arising from the use of our products or services in accordance with the agreement or arising from our gross negligence, willful misconduct or violation of the law (provided that there is not gross or willful misconduct on the part of the other party) with respect to our products or services.

other party) with respect to our products or services.

The term of these indemnification provisions is generally perpetual from the time of execution of the agreement.

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As permitted under Delaware law, we have entered into indemnification agreements with our officers and directors, indemnifying them for certain events or occurrences while they serve as officers or directors of the company.

(e) Income Taxes

From time to time, we may receive income tax assessments from taxing authorities asserting additional tax liabilities owed by the Company.

As such, we have not recorded any impact of the ITA assessment in our consolidated financial statements for the year ended December 31, 2024.

We are continuing to monitor developments related to this matter and its impact on our existing income tax reserves for all open years.

If we are unsuccessful in sustaining our tax position in this matter, our financial condition and results of operations would be adversely affected.

(17) Employee Benefit Plan

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(18) Segment Information and Information about Geographic Areas

We operate in one segment.

Our chief operating decision maker is our Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.

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We operate in a single reportable segment, providing product subscriptions and professional services to our customers.

The segment’s accounting policies are consistent with those described in Note 2, Summary of Significant Accounting Policies .

Our chief operating decision maker (“CODM”) is our Chief Executive Officer.

One of the measures of profit or loss that is used by our CODM to assess performance and allocate resources is consolidated net income, as reported in the consolidated statements of operations.

Consolidated net income is used by our CODM in monitoring actual versus budgeted results as well as in benchmarking against our competitors, which are used in assessing performance of the segment.

The following table includes segment revenue, segment profit or loss, significant segment expenses regularly provided to the CODM and other segment expenses for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

2024 2023 2022

(in thousands)

Total revenue $ 844,007 $ 777,707 $ 685,083

Adjusted total cost of revenue 1

221,664 202,655 185,489

Adjusted research and development 1

135,560 138,754 140,030

Adjusted sales and marketing 1

267,483 280,703 273,482

Adjusted general and administrative 1

55,792 53,374 55,696

Other segment expenses 2

137,982 255,036 155,103

Net income (loss) $ 25,526 $ ( 152,815 ) $ ( 124,717 )

1 Adjusted total cost of revenue excludes the impact of stock-based compensation expense and amortization of acquired intangible assets.

Adjusted research and development excludes the impact of stock-based compensation expense.

Adjusted sales and marketing excludes the impact of stock-based compensation and amortization of acquired intangible assets.

Adjusted general and administrative excludes the impact of stock-based compensation, amortization of acquired intangible assets, acquisition-related expenses and litigation-related expenses.

2 Other segment expenses include stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, litigation-related expenses, impairment of long-lived assets, restructuring expense, interest income, interest expense, other income (expense) and provision for (benefit from) income taxes.

See the consolidated financial statements for other financial information regarding our operating segment.

Net revenues by geographic area presented based upon the location of the customer are as follows:

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(in thousands)

United States $ 579,025 $ 515,894 $ 414,856

Other 198,682 169,189 120,548

North America $ 643,405 $ 607,448 $ 541,812

Rest of world 200,602 170,259 143,271

Total $ 844,007 $ 777,707 $ 685,083

Property and equipment, net by geographic area is presented in the table below:

Property and equipment, net by geographic area was as follows:

As of December 31, 2024 As of December 31, 2023

(in thousands)

United States $ 27,609 $ 41,570

Other 12,033 16,321

North America $ 22,613 $ 27,609

Rest of world 9,632 12,033

Total $ 32,245 $ 39,642

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In addition, we incurred $ 1.3 million of stock-based compensation expense related to acceleration of share-based awards.

As of December 31, 2023, the restructuring liability accrued but not paid totaled $ 3.8 million, which is included within accrued expenses in the condensed consolidated balance sheets.

The execution of the Restructuring Plan was substantially complete as of December 31, 2023 and we expect the remaining restructuring liability to be paid by the end of the first quarter of 2024.

Potential position eliminations in each country are subject to local law and consultation requirements, which may extend this process beyond the fourth quarter of 2023 in certain countries.

The charges that we expect to incur are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual expenses may differ materially from the estimates disclosed above.

In 2023, we permanently closed certain idle office spaces in Plano, Texas, Los Angeles, California and Toronto, Canada, which resulted in an impairment loss of $ 3.6 million.

In 2023, we permanently closed certain idle office spaces in Plano, Texas;

Los Angeles, California;

and Toronto, Canada, which resulted in an impairment loss of $ 3.6 million.

Refer to Note 12, Leases , for further details on the impairment of long-lived assets.

The following table presents the activity of the restructuring liability for the year ended December 31, 2023:

Restructuring Liability

As of December 31, 2023, the restructuring liability accrued but not paid totaled $ 3.8 million, which was included within accrued expenses in the condensed consolidated balance sheets.

During the first quarter of 2024, the execution of the Restructuring Plan was completed and we recorded $( 0.2 ) million of restructuring charges within general and administrative expense in the consolidated statements of operations.

Additionally, during the second quarter of 2024, the remaining payments were made, resulting in no remaining restructuring liability as of December 31, 2024.

(20) Immaterial Correction of an Error

During the fourth quarter of 2024, we identified an immaterial error related to stock-based compensation expense associated with certain RSUs and PSUs granted during fiscal years 2023 and 2024 attributable to an improper valuation of the underlying awards, resulting in an understatement of stock-based compensation expense in 2023 and 2024.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality , and SAB No.

108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , the Company evaluated the errors and determined that the related impact was not material to results of operations or financial position for any historical annual or interim period.

As a result, we are correcting the errors by adjusting prior period financial statements as of and for each of the quarterly and year-to-date periods shown below.

Additionally, Note 13, Stock-Based Compensation, Note 14, Income Taxes and Note 15, Net Income (Loss) per Share, have been adjusted to reflect the correction of the immaterial errors.

The following table sets forth the effect of the immaterial error correction to certain line items of our consolidated statement of operations, consolidated balance sheet and consolidated statement of cash flows as of and for the year ended December 31, 2023:

Year Ended December 31, 2023

As Reported Adjustment Revised

(in thousands, except per share amounts)

Consolidated Statement of Operations:

Cost of revenue - product subscriptions $ 202,904 $ 236 $ 203,140

Cost of revenue - professional services $ 28,837 $ 69 $ 28,906

Research and development expense $ 176,776 $ 1,161 $ 177,937

Sales and marketing expense $ 312,636 $ 1,025 $ 313,661

General and administrative expense $ 84,276 $ 1,064 $ 85,340

Net income (loss) $ ( 149,260 ) $ ( 3,555 ) $ ( 152,815 )

Net income (loss) per share, basic $ ( 2.46 ) $ ( 0.06 ) $ ( 2.52 )

Net income (loss) per share, diluted $ ( 2.46 ) $ ( 0.06 ) $ ( 2.52 )

Consolidated Statement of Cash Flows:

Net income (loss) $ ( 149,260 ) $ ( 3,555 ) $ ( 152,815 )

Stock-based compensation expense $ 108,081 $ 3,555 $ 111,636

Net cash provided by operating activities $ 104,278 $ — $ 104,278

As of December 31, 2023

As Reported Adjustment Revised

(in thousands)

Balance at December 31, 2022 $ —

Charges 22,227

Payments ( 18,463 )

Balance at December 31, 2023 $ 3,764

Consolidated Balance Sheet:

Additional paid-in capital $ 894,630 $ 3,555 $ 898,185

Accumulated deficit $ ( 1,010,005 ) $ ( 3,555 ) $ ( 1,013,560 )

Total stockholders' deficit $ ( 118,179 ) $ — $ ( 118,179 )

The following tables set forth the effect of the immaterial error corrections to (i) certain line items of our unaudited condensed consolidated statements of operations for the interim periods ended March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023, as well as (ii) certain line items of our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the interim periods ended March 31, 2024, June 30, 2024 and September 30, 2024.

Prospectively, we will effect an immaterial error correction of these unaudited condensed consolidated financial statements for the 2024 interim periods as those statements are reproduced on a comparative basis in our Quarterly Reports on Form 10-Q throughout fiscal year 2025:

Three Months Ended March 31, 2023 Three Months Ended June 30, 2023

As Reported Adjustment Revised As Reported Adjustment Revised

(unaudited, in thousands, except per share amounts) (unaudited, in thousands, except per share amounts)

Consolidated Statement of Operations:

Cost of revenue - product subscriptions $ 48,188 $ 36 $ 48,224 $ 51,148 $ 78 $ 51,226

Cost of revenue - professional services $ 7,811 $ 10 $ 7,821 $ 7,016 $ 22 $ 7,038

Research and development expense $ 46,346 $ 148 $ 46,494 $ 50,762 $ 402 $ 51,164

Sales and marketing expense $ 80,587 $ 166 $ 80,753 $ 83,036 $ 332 $ 83,368

General and administrative expense $ 24,207 $ 269 $ 24,476 $ 22,888 $ 562 $ 23,450

Net income (loss) $ ( 25,915 ) $ ( 629 ) $ ( 26,544 ) $ ( 66,782 ) $ ( 1,396 ) $ ( 68,178 )

Net income (loss) per share, basic $ ( 0.43 ) $ ( 0.01 ) $ ( 0.44 ) $ ( 1.10 ) $ ( 0.03 ) $ ( 1.13 )

Net income (loss) per share, diluted $ ( 0.43 ) $ ( 0.01 ) $ ( 0.44 ) $ ( 1.10 ) $ ( 0.03 ) $ ( 1.13 )

Three Months Ended September 30, 2023 Three Months Ended December 31, 2023

As Reported Adjustment Revised As Reported Adjustment Revised

(unaudited, in thousands, except per share amounts) (unaudited, in thousands, except per share amounts)

Consolidated Statement of Operations:

Cost of revenue - product subscriptions $ 51,261 $ 60 $ 51,321 $ 52,307 $ 62 $ 52,369

Cost of revenue - professional services $ 6,569 $ 21 $ 6,590 $ 7,441 $ 16 $ 7,457

Research and development expense $ 39,940 $ 309 $ 40,249 $ 39,729 $ 302 $ 40,031

Sales and marketing expense $ 75,699 $ 284 $ 75,983 $ 73,314 $ 243 $ 73,557

General and administrative expense $ 17,866 $ ( 76 ) $ 17,790 $ 19,314 $ 309 $ 19,623

Net income (loss) $ ( 76,611 ) $ ( 598 ) $ ( 77,209 ) $ 20,048 $ ( 932 ) $ 19,116

Net income (loss) per share, basic $ ( 1.25 ) $ ( 0.01 ) $ ( 1.26 ) $ 0.33 $ ( 0.02 ) $ 0.31

Net income (loss) per share, diluted $ ( 1.25 ) $ ( 0.01 ) $ ( 1.26 ) $ 0.27 $ ( 0.01 ) $ 0.26

Three Months Ended March 31, 2024

As Reported Adjustment Revised

(unaudited, in thousands, except per share amounts)

Consolidated Statement of Operations:

Cost of revenue - product subscriptions $ 54,655 $ 79 $ 54,734

Cost of revenue - professional services $ 6,248 $ 12 $ 6,260

Research and development expense $ 40,990 $ 378 $ 41,368

Sales and marketing expense $ 72,805 $ 290 $ 73,095

General and administrative expense $ 19,835 $ 93 $ 19,928

Net income (loss) $ 2,258 $ ( 852 ) $ 1,406

Net income (loss) per share, basic $ 0.04 $ ( 0.02 ) $ 0.02

Net income (loss) per share, diluted $ 0.03 $ ( 0.01 ) $ 0.02

Consolidated Statement of Cash Flows:

Net income $ 2,258 $ ( 852 ) $ 1,406

Stock-based compensation expense $ 24,893 $ 852 $ 25,745

Net cash provided by operating activities $ 31,070 $ — $ 31,070

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

As Reported Adjustment Revised As Reported Adjustment Revised

(unaudited, in thousands, except per share amounts) (unaudited, in thousands, except per share amounts)

Consolidated Statement of Operations:

Cost of revenue - product subscriptions $ 54,982 $ 125 $ 55,107 $ 109,637 $ 204 $ 109,841

Cost of revenue - professional services $ 5,866 $ 19 $ 5,885 $ 12,114 $ 31 $ 12,145

Research and development expense $ 40,056 $ 392 $ 40,448 $ 81,046 $ 770 $ 81,816

Sales and marketing expense $ 77,795 $ 331 $ 78,126 $ 150,600 $ 621 $ 151,221

General and administrative expense $ 22,412 $ 790 $ 23,202 $ 42,247 $ 883 $ 43,130

Net income (loss) $ 8,195 $ ( 1,657 ) $ 6,538 $ 10,453 $ ( 2,509 ) $ 7,944

Net income (loss) per share, basic $ 0.13 $ ( 0.03 ) $ 0.10 $ 0.13 $ ( 0.05 ) $ 0.08

Net income (loss) per share, diluted $ 0.11 $ ( 0.02 ) $ 0.09 $ 0.11 $ ( 0.03 ) $ 0.08

Consolidated Statement of Cash Flows:

Net income (loss) $ 10,453 $ ( 2,509 ) $ 7,944

Stock-based compensation expense $ 52,302 $ 2,509 $ 54,811

Net cash provided by operating activities $ 63,928 $ — $ 63,928

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

As Reported Adjustment Revised As Reported Adjustment Revised

(unaudited, in thousands, except per share amounts) (unaudited, in thousands, except per share amounts)

Consolidated Statement of Operations:

Cost of revenue - product subscriptions $ 56,653 $ 121 $ 56,774 $ 166,290 $ 325 $ 166,615

Cost of revenue - professional services $ 6,364 $ 19 $ 6,383 $ 18,478 $ 50 $ 18,528

Research and development expense $ 44,565 $ 411 $ 44,976 $ 125,611 $ 1,181 $ 126,792

Sales and marketing expense $ 74,521 $ 300 $ 74,821 $ 225,121 $ 921 $ 226,042

General and administrative expense $ 18,590 $ 293 $ 18,883 $ 60,837 $ 1,176 $ 62,013

Net income (loss) $ 16,554 $ ( 1,144 ) $ 15,410 $ 27,007 $ ( 3,653 ) $ 23,354

Net income (loss) per share, basic $ 0.26 $ ( 0.02 ) $ 0.24 $ 0.43 $ ( 0.07 ) $ 0.36

Net income (loss) per share, diluted $ 0.22 $ ( 0.01 ) $ 0.21 $ 0.36 $ ( 0.04 ) $ 0.32

Consolidated Statement of Cash Flows:

Net income (loss) $ 27,007 $ ( 3,653 ) $ 23,354

Stock-based compensation expense $ 76,896 $ 3,653 $ 80,549

Net cash provided by operating activities $ 107,897 $ — $ 107,897

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Ta ble of Contents

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