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Item 1. Financial Statements

2025-05-12 compared with 2024-11-07 · 196 added, 242 removed, 411 unchanged (52% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current assets:

1 unchanged sentence

Short-term investments 202,011 187,025

Accounts receivable, net of allowance for credit losses of $ 1,591 and $ 951 at September 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for credit losses of $ 2,942 and $ 1,833 at March 31, 2025 and December 31, 2024, respectively

140,541 168,242

10 unchanged sentences

Total assets $ 1,644,810 $ 1,652,034

Liabilities and Stockholders’ Deficit

Liabilities and Stockholders’ Equity

Current liabilities:

10 unchanged sentences

Total liabilities $ 1,592,088 $ 1,634,323

Stockholders’ deficit:

Stockholders’ equity:

Preferred stock, $ 0.01 par value per share;

100,000,000 shares authorized at September 30, 2024 and December 31, 2023;

0 shares issued and outstanding at September 30, 2024 and December 31, 2023

10,000,000 shares authorized at March 31, 2025 and December 31, 2024;

0 shares issued and outstanding at March 31, 2025 and December 31, 2024

Common stock, $ 0.01 par value per share;

100,000,000 shares authorized at September 30, 2024 and December 31, 2023;

63,747,524 and 62,283,630 shares issued at September 30, 2024 and December 31, 2023, respectively;

63,177,945 and 61,714,051 shares outstanding at September 30, 2024 and December 31, 2023, respectively

Treasury stock, at cost, 569,579 shares at September 30, 2024 and December 31, 2023

100,000,000 shares authorized at March 31, 2025 and December 31, 2024;

64,752,047 and 64,067,220 shares issued at March 31, 2025 and December 31, 2024, respectively;

64,181,792 and 63,496,965 shares outstanding at March 31, 2025 and December 31, 2024, respectively

Treasury stock, at cost, 570,255 shares at March 31, 2025 and December 31, 2024

( 4,765 ) ( 4,765 )

Additional paid-in-capital 1,042,355 1,011,080

Accumulated other comprehensive income 1,929 1,344

Accumulated other comprehensive income (loss) 419 ( 1,205 )

Accumulated deficit ( 985,929 ) ( 988,034 )

Total stockholders’ deficit ( 6,304 ) ( 118,179 )

Total liabilities and stockholders’ deficit $ 1,574,531 $ 1,505,348

Total stockholders’ equity 52,722 17,711

Total liabilities and stockholders’ equity $ 1,644,810 $ 1,652,034

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

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

2024 2023 2024 2023

Three Months Ended March 31,

Product subscriptions $ 203,935 $ 196,918

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General and administrative 23,586 19,928

Impairment of long-lived assets — 3,553 — 30,784

Restructuring — 19,996 — 19,996

Total operating expenses 150,874 134,391

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Other income (expense), net 1,802 ( 1,435 )

Income (loss) before income taxes 19,506 ( 74,529 ) 39,422 ( 165,763 )

Income before income taxes 4,805 10,331

Provision for income taxes 2,700 8,925

Net income (loss) $ 16,554 $ ( 76,611 ) $ 27,007 $ ( 169,308 )

Net income (loss) per share, basic $ 0.26 $ ( 1.25 ) $ 0.43 $ ( 2.80 )

Net income (loss) per share, diluted $ 0.22 $ ( 1.25 ) $ 0.36 $ ( 2.80 )

Net income $ 2,105 $ 1,406

Net income per share, basic $ 0.03 $ 0.02

Net income per share, diluted $ 0.03 $ 0.02

Weighted-average common shares outstanding, basic 63,835,945 61,907,808

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)

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

2024 2023 2024 2023

Net income (loss) $ 16,554 $ ( 76,611 ) $ 27,007 $ ( 169,308 )

Three Months Ended March 31,

Net income $ 2,105 $ 1,406

Other comprehensive income (loss):

Change in fair value of cash flow hedges 1,815 ( 629 )

Adjustment for net (gains)/losses realized on cash flow hedges and included in net income (loss), net of taxes ( 183 ) ( 49 ) ( 656 ) 531

Adjustment for net (gains)/ losses realized on cash flow hedges and included in net income, net of taxes ( 325 ) ( 381 )

Total change in unrealized gains (losses) on cash flow hedges 1,490 ( 1,010 )

Change in unrealized gains on investments 1,123 97 359 539

Change in unrealized gains (losses) on investments 134 ( 555 )

Total other comprehensive income (loss) 1,624 ( 1,565 )

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)

Three Months Ended September 30, 2024 and 2023

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Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

Three Months Ended March 31, 2025 and 2024

(in thousands)

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Shares Amount Shares Amount

Balance, June 30, 2024 62,702 $ 628 570 $ ( 4,765 ) $ 951,620 $ ( 851 ) $ ( 999,552 ) $ ( 52,920 )

Stock-based compensation expense — — — — 23,739 — — 23,739

Issuance of common stock under employee stock purchase plan 144 1 4,200 4,201

Vesting of restricted stock units 341 3 — — ( 3 ) — — —

Shares withheld for employee taxes ( 21 ) — — — ( 794 ) — — ( 794 )

Issuance of common stock upon exercise of stock options 11 — — — 136 — — 136

Other comprehensive loss — — — — — 2,780 — 2,780

Net income — — — — — — 16,554 16,554

Balance, September 30, 2024 63,177 $ 632 570 $ ( 4,765 ) $ 978,898 $ 1,929 $ ( 982,998 ) $ ( 6,304 )

Common stock Treasury stock Additional

paid-in-capital Accumulated

comprehensive

loss Accumulated

deficit Total

stockholders’

Shares Amount Shares Amount

Balance, June 30, 2023 60,940 $ 609 570 $ ( 4,765 ) $ 846,326 $ 250 $ ( 953,442 ) $ ( 111,022 )

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

Stock-based compensation expense — — — — 25,773 — — 25,773

2 unchanged sentences

Shares withheld for employee taxes ( 37 ) — — — ( 1,303 ) — — ( 1,303 )

Vesting of equity awards previously classified as liabilities 22 — — — 777 — — 777

Issuance of common stock upon exercise of stock options 157 1 — — 1,588 — — 1,589

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

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

Other comprehensive gain — — — — — 1,624 — 1,624

Net loss — — — — — — ( 76,611 ) ( 76,611 )

Balance, September 30, 2023 61,422 $ 614 570 $ ( 4,765 ) $ 873,381 $ ( 822 ) $ ( 1,030,053 ) $ ( 161,645 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)

Nine Months Ended September 30, 2024 and 2023

(in thousands)

Net income — — — — — — 2,105 2,105

Balance, March 31, 2025 64,182 $ 642 571 $ ( 4,765 ) $ 1,042,355 $ 419 $ ( 985,929 ) $ 52,722

Common stock Treasury stock Additional

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Shares withheld for employee taxes ( 29 ) — — — ( 1,764 ) — — ( 1,764 )

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

Issuance of common stock upon exercise of stock options 111 1 — — 1,267 — — 1,268

1 unchanged sentence

Net income — — — — — — 1,406 1,406

Balance, September 30, 2024 63,177 $ 632 570 $ ( 4,765 ) $ 978,898 $ 1,929 $ ( 982,998 ) $ ( 6,304 )

Common stock Treasury stock Additional

paid-in-capital Accumulated

comprehensive

loss Accumulated

deficit Total

stockholders’

Shares Amount Shares Amount

Balance, December 31, 2022 59,720 $ 597 487 $ ( 4,764 ) $ 746,249 $ ( 1,411 ) $ ( 860,745 ) $ ( 120,074 )

Stock-based compensation expense — — — — 84,513 — — 84,513

Issuance of common stock under employee stock purchase plan 330 4 — — 11,319 — — 11,323

Vesting of restricted stock units 1,139 10 — — ( 10 ) — — —

Shares withheld for employee taxes ( 82 ) — — — ( 4,012 ) — — ( 4,012 )

Issuance of common stock upon exercise of stock options 208 2 — — 2,982 — — 2,984

Issuance of common stock in relation to an acquisition 107 1 — — ( 1 ) — — —

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

Reclassification of 2023 capped calls from equity to derivative asset — — — — 33,029 — — 33,029

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

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

Other comprehensive gain — — — — — 589 — 589

Net loss — — — — — — ( 169,308 ) ( 169,308 )

Balance, September 30, 2023 61,422 $ 614 570 $ ( 4,765 ) $ 873,381 $ ( 822 ) $ ( 1,030,053 ) $ ( 161,645 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Balance, March 31, 2024 62,296 $ 623 570 $ ( 4,765 ) $ 930,126 $ ( 221 ) $ ( 1,012,154 ) $ ( 86,391 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss) $ 27,007 $ ( 169,308 )

Net income $ 2,105 $ 1,406

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

2 unchanged sentences

Stock-based compensation expense 27,151 25,745

Impairment of long-lived assets — 30,784

Change in fair value of derivative assets — 15,511

Deferred income taxes — 1,840

Induced conversion expense — 53,889

Other ( 1,153 ) ( 203 )

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Cash flows from investing activities:

Business acquisitions, net of cash acquired ( 37,198 ) ( 34,841 )

Purchases of property and equipment ( 1,361 ) ( 620 )

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Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 7,200

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

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

Payments related to business acquisitions — ( 2,250 )

Proceeds from capped call settlement — 17,518

Taxes paid related to net share settlement of equity awards ( 1,303 ) ( 1,764 )

3 unchanged sentences

Effect of exchange rate changes on cash ,cash equivalents and restricted cash 1,334 ( 1,493 )

Net increase (decrease) in cash, cash equivalents and restricted cash 15,978 ( 24,589 )

Net decrease in cash, cash equivalents and restricted cash ( 43,390 ) ( 7,755 )

Cash, cash equivalents and restricted cash, beginning of period 342,101 214,130

2 unchanged sentences

Cash paid for interest on convertible senior notes $ 1,571 $ 2,698

Cash paid for income taxes, net of refunds $ 7,073 $ 4,087

Cash paid for income taxes, net of refund 992 2,352

Reconciliation of cash, cash equivalents and restricted cash:

3 unchanged sentences

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies

Description of Business

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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 16, 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 comparative financial information presented herein for such immaterial errors .

Basis of Presentation and Consolidation

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Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 26, 2024.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 28, 2025.

The condensed consolidated financial statements include our results of operations and those of our wholly-owned subsidiaries and reflect all adjustments (consisting solely of normal, recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented.

All intercompany transactions and balances have been eliminated in consolidation.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Use of Estimates

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Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies , to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Except for the inclusion of a description of contingent consideration within our Business Combinations policy, as noted below, there have been no changes to the significant accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2023.

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.

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.

Significant estimates in valuing certain intangible assets include, but are not limited to, cash flows that an asset is expected to generate in the future, technology migration curves, discount rates, and useful lives.

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

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.

Restricted Cash

As of September 30, 2024, we had $ 7.5 million of restricted cash recorded on our condensed consolidated balance sheet in prepaid expenses and other current assets and other assets in letters of credit outstanding as collateral for certain office space leases.

There have been no changes to the significant accounting policies during the three-month period ended March 31, 2025.

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Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Effective

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

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.

In November 2023, the FASB issued 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.

All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment.

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.

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.

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

The Company is currently evaluating the effect of adopting this ASU.

Revenue from Contracts with Customers

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All of our professional services are considered distinct performance obligations when sold stand alone or with other products.

The majority of our professional services contracts have terms of one year or less.

These contracts generally have terms of one year or less.

For the majority of these contracts, revenue is recognized over time based upon the proportion of work performed to date.

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Such amounts are recognized as revenue over the contractual period consistent with the above methodology.

For the three months ended September 30, 2024 and 2023, we recognized revenue of $ 184.6 million and $ 174.3 million, respectively, and for the nine months ended September 30, 2024 and 2023, we recognized $ 398.3 million and $ 366.5 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

For the three months ended March 31, 2025 and 2024, we recognized revenue of $ 185.6 million and $ 179.3 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current.

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Unbilled receivables include amounts related to our contractual right to consideration for both completed and partially completed performance obligations that have not been invoiced.

If the right to consideration is based on satisfaction of another performance obligation in the contract other than the passage of time, we record a contract asset.

As of September 30, 2024 and December 31, 2023, unbilled receivables of $ 3.6 million and $ 2.0 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of September 30, 2024 and December 31, 2023, we had no contract assets recorded on our condensed consolidated balance sheet.

If the right to

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consideration is based on satisfaction of another performance obligation in the contract other than the passage of time, we record a contract asset.

As of March 31, 2025 and December 31, 2024, unbilled receivables of $ 2.4 million and $ 2.5 million , respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of March 31, 2025 and December 31, 2024, we had no contract assets recorded on our unaudited condensed consolidated balance sheet.

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2024.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2025.

The estimated revenues do not include unexercised contract renewals.

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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 will be held by Rapid7 to satisfy certain post-closing purchase price adjustments.

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”).

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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 September 30, 2024 , the fair value of the contingent purchase consideration was $ 12.2 million of which $ 6.8 million was recorded within accrued expenses and other current liabilities and $ 5.4 million was recorded within other liabilities in our condensed consolidated balance sheet.

In the three and nine months ended September 30, 2024 , we recorded $ 0.2 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 three and nine months ended September 30, 2024 , we recognized stock-based compensation expense related to such shares in the amount of $ 0.7 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 March 31, 2025, the fair value of the contingent purchase consideration was $ 12.6 million of which $ 7.0 million was recorded within accrued expenses and other current liabilities and $ 5.6 million w as recorded within other liabilities in our unaudited condensed consolidated balance sheet.

In the three months ended March 31, 2025, we recorded approximately $ 0.2 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”), which 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 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 three months ended March 31, 2025, we recognized stock-based compensation expense related to such shares in the amount of $ 1.0 million .

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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):

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

In the three and nine months ended September 30, 2024, we recorded $ 0.1 million and $ 0.4 million, respectively, 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 three and nine months ended September 30, 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 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 $ 13.9 million, $ 20.7 million and $ 12.8 million, respectively.

The goodwill was allocated to our one reporting unit.

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

In the first quarter of 2024, we sold acquired intellectual property through a non-cash intercompany transaction, which for the three and nine months ended September 30, 2024 resulted in $ 4.6 million of current tax expense and $ 1.8 million o f deferred tax expense in Israel.

Our revenue and net loss attributable to the Noetic business for the three months ended March 31, 2025 were not material.

Our investments, which are all classified as available-for-sale, consisted of the following:

As of September 30, 2024

As of March 31, 2025

Losses Fair Value

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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

As of September 30, 2024, our available-for-sale investments had maturities ranging fro m 1 to 20 months.

As of December 31, 2023, our available-for-sale investments had maturities ranging from 1 to 18 months.

For all of our investments for which the amortized cost basis was greater than the fair value at September 30, 2024 and December 31, 2023, we have concluded that there is no plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated maturity.

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As of March 31, 2025 and December 31, 2024, our available-for-sale investments had maturities ranging from 1 to 17 months.

For all of our investments for which the amortized cost basis was greater than the fair value at March 31, 2025 and December 31, 2024, we have concluded that there is no plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated maturity.

In making the determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity.

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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 and liabilities measured and recorded at fair value on a recurring basis using the above input categories:

As of September 30, 2024

As of March 31, 2025

Level 1 Level 2 Level 3 Total

1 unchanged sentence

government agencies $ 301,147 $ — $ — $ 301,147

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets and other assets) — 1,559 — 1,559

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 611 — 611

Total assets $ 301,147 $ 611 $ — $ 301,758

Contingent consideration (other current liabilities and other long-term liabilities) — — 12,605 12,605

Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other long-term liabilities) — 66 — 66

Foreign currency forward contracts designated as cash flow hedges (other current and long-term liabilities) — 440 — 440

Total liabilities $ — $ 440 $ 12,605 $ 13,045

3 unchanged sentences

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) — 96 — 96

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

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 liabilities) — 1,415 — 1,415

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

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

As of September 30, 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 10, Debt , was $ 45.1 million, $ 547.1 million and $ 281.9 million, respectively, based upon quoted market prices.

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

As of March 31, 2025, 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 10, Debt , was $ 45.8 million, $ 548.6 million and $ 257.1 million, respectively, based upon quoted market prices.

We consider the fair value of the Notes (as defined in Note 10, Debt ) to be a Level 2 measurement due to limited trading activity of the Notes.

As of September 30, 2024, the fair value of our contingent consideration, as further described in Note 3, Business Combinations, was $ 12.2 million and is classified as a Level 3 measurement based on inputs not observable in the market.

As of March 31, 2025, the fair value of our contingent consideration, as further described in Note 3, Business Combinations, was $ 12.6 million and is classified as a Level 3 measurement based on inputs not observable in the market.

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Property and Equipment

Property and equipment are recorded at cost and consist of the following:

September 30, December 31,

March 31, December 31,

(in thousands)

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Property and equipment, net $ 31,659 $ 32,245

Depreciation expense was $ 2.7 million and $ 3.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 8.4 million and $ 10.9 million for the nine months ended September 30, 2024 and 2023, respectively.

We recorded depreciation expense of $ 2.8 million and $ 2.9 million for the three months ended March 31, 2025 and 2024, respectively.

Goodwill and Intangibles

Goodwill was $ 575.2 million and $ 536.4 million as of September 30, 2024 and December 31, 2023, respectively.

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

(in thousands)

Balance, December 31, 2023 $ 536,351

Noetic acquisition 38,814

Balance, September 30, 2024 $ 575,165

Goodwill was $ 575.3 million as of March 31, 2025 and December 31, 2024.

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

Average Estimated Useful Life (years) As of September 30, 2024 As of December 31, 2023

Average Estimated Useful Life (years) As of March 31, 2025 As of December 31, 2024

Gross Carrying

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Total intangible assets $ 233,271 $ ( 153,508 ) $ 79,763 $ 230,352 $ ( 144,633 ) $ 85,719

Amortization expense was $ 8.5 million and $ 8.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 25.1 million and $ 23.6 million for the nine months ended September 30, 2024 and 2023, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of September 30, 2024 was as follows (in thousands):

2024 (for the remaining three months) $ 8,429

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

Amortization expense was $ 8.9 million and $ 8.4 million for the three months ended March 31, 2025 and 2024, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of March 31, 2025 was as follows (in thousands):

2025 (for the remaining nine months) $ 24,437

2030 and thereafter 4,409

Total $ 70,635

The table above excludes the impact of $ 10.2 million of capitalized internal-use software costs for projects that have not been completed as of September 30, 2024, and therefore, all the costs associated with these projects have not been incurred.

The table above excludes the impact of $ 9.1 million of capitalized internal-use software costs for projects that have not been completed as of March 31, 2025, and therefore, all the costs associated with these projects have not been incurred.

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Deferred Contract Acquisitions and Fulfillment Costs

Deferred contract acquisition and fulfillment costs, which primarily consist of capitalized sales commissions, for the nine months ended September 30, 2024 and 2023 was as follows:

Nine Months Ended September 30,

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs, which primarily consist of capitalized sales commissions, for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

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To mitigate our exposure to foreign currency fluctuations resulting from certain expenses denominated in certain foreign currencies, we enter into forward contracts that are designated as cash flow hedging instruments.

These forward contracts have contractual maturities of twenty months or less, and as of September 30, 2024 and December 31, 2023, outstanding forward contracts had a total notional value of $ 52.4 million and $ 49.5 million, respectively.

These forward contracts have contractual maturities of eighteen months or less, and as of March 31, 2025 and December 31, 2024, outstanding forward contracts had a total notional value of $ 61.0 million and $ 50.4 million, respectively.

The notional value represents the gross amount of foreign currency that will be bought or sold upon maturity of the forward contract.

During the three and nine months ended September 30, 2024, all cash flow hedges were considered effective.

During the three months ended March 31, 2025 and 2024, all cash flow hedges were considered effective.

Refer to Note 5, Fair Value Measurements , for the fair values of our outstanding derivative instruments.

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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.

Trust Company, Bank National Association, as

trustee (the “Indentures”).

Trust Company, Bank National Association, as trustee (the “Indentures”).

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.

For additional details on the terms of our Notes, see Note 11, Debt , to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

As of September 30, 2024, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holders.

As of March 31, 2025, 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.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the Indentures.

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If we undergo a fundamental change (as set forth in the Indentures) at any time prior to the maturity date, holders of the Notes will have the right, at their option, to require us to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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.

Subsequent to the balance sheet date, on May 1, 2025, the Company paid $ 46.5 million to redeem the outstanding portion of the 2025 Notes, including the outstanding principal amount and accrued interest through the maturity date of the 2025 Notes.

Accounting for the Notes

In accounting for the issuance of the Notes, the principal less debt issuance costs are recorded as debt on our condensed consolidated balance sheet.

In accounting for the issuance of the Notes, the principal less debt issuance costs are recorded as debt on our unaudited condensed consolidated balance sheet.

The debt issuance costs are amortized to interest expense using the effective interest method over the contractual term of the Notes.

The net carrying amount of the Notes as of September 30, 2024 and December 31, 2023 was as follows (in thousands):

The net carrying amount of the Notes as of March 31, 2025 and December 31, 2024 was as follows (in thousands):

2025 Notes 2027 Notes 2029 Notes

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Amortization of debt issuance costs — 72 72 — 615 615 — 332 332

Balance at September 30, 2024 $ 45,992 $ ( 176 ) $ 45,816 $ 600,000 $ ( 6,200 ) $ 593,800 $ 300,000 $ ( 6,438 ) $ 293,562

Balance at March 31, 2025 $ 45,992 $ ( 25 ) $ 45,967 $ 600,000 $ ( 4,949 ) $ 595,051 $ 300,000 $ ( 5,748 ) $ 294,252

Interest expense related to the Notes was as follows (in thousands):

Three Months Ended September 30,

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

Contractual interest expense $ 258 $ 375 $ 938 $ 1,571 $ 948 $ 375 $ 229 $ 1,552

Amortization of debt issuance costs 79 634 455 1,168 289 631 73 $ 993

Total interest expense $ 337 $ 1,009 $ 1,393 $ 2,739 $ 1,237 $ 1,006 $ 302 $ 2,545

Nine Months Ended September 30,

Three Months Ended March 31,

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

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In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions.

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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:

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

Subsequent to the balance sheet date, the 2025 Capped Calls expired in full on April 29, 2025.

The Company did not elect to exercise any portion of the 2025 Capped Calls prior to expiration.

For additional details on the terms of our Capped Calls, see Note 11, Debt, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

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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 (as amended, in December 2021) that 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 condensed consolidated balance sheet and are 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 condensed consolidated statement of operations.

The Credit Agreement contains 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 September 30, 2024, we did not have any outstanding borrowings under the Credit Agreement.

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Stock-Based Compensation

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 condensed consolidated statements of operations as follows:

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

2024 2023 2024 2023

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 unaudited condensed consolidated statements of operations as follows:

Three Months Ended March 31,

(in thousands)

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Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2025 and 2024 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 three months ended September 30, 2024 and 2023, we recognized stock-based compensation expense related to such bonuses in the amount of $ 0.2 million and $ 50 thousand, respectively, and during the nine months ended September 30, 2024 and 2023, we recognized stock-based compensation expense in the amount of $ 0.5 million a nd $ 1.1 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of September 30, 2024 and 2023.

During the three months ended March 31, 2025 and 2024, we recognized stock-based compensation expense related to such bonuses in the amount of $ 0.3 million and $ 0.1 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of March 31, 2025 and 2024.

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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(b) Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the nine months ended September 30, 2024 was as follows:

RSUs and PSUs activity during the three months ended March 31, 2025 was as follows:

Shares Weighted-

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Forfeited ( 260,257 ) $ 56.20

Unvested balance as of September 30, 2024 3,105,684 $ 56.24

As of September 30, 2024, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 152.0 million.

Unvested balance as of March 31, 2025 4,278,876 $ 46.29

As of March 31, 2025, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 113.4 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 1.21 years.

In January 2024, our Com pensation 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.

In January 2025, our Compensation Committee awarded 181,067 PSUs that required the achievement of net annualized recurring revenue (“Net ARR”) and Adjusted EBITDA targets for the 2025 fiscal-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.

In the three and nine months ended September 30, 2024, we recorded $ 0.4 million and $ 2.2 million, respectively, of stock-based compensation expense related to these PSUs based on estimated achievement 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 achievement of the milestones are not met, no PSUs will be earned.

In the three and nine months ended September 30, 2024, we recorded $ 0.3 million of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

In the three months ended March 31, 2025, we recorded $ 0.5 million of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

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Stock option activity during the nine months ended September 30, 2024 was as follows:

The following tables summarizes information about stock option activity during the reporting periods:

Shares Weighted

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Forfeited/cancelled —

Outstanding as of September 30, 2024 584,078 $ 12.40 1.45 $ 16,056

Vested and exercisable as of September 30, 2024 584,078 $ 12.40 1.45 $ 16,056

Outstanding as of March 31, 2025 425,321 $ 13.23 1.3 $ 5,649

Vested and exercisable as of March 31, 2025 425,321 $ 13.23 1.3 $ 5,649

(d) Employee Stock Purchase Plan

Under the Rapid7, Inc.

2015 Employee Stock Purchase Plan (“ESPP”), employees may set aside up to 15 % of their gross earnings, on an after-tax basis, to purchase our common stock at a discounted price, which is calculated at 85 % of the lesser of:

2015 Employee Stock Purchase Plan ("ESPP"), employees may set aside up to 15 % of their gross earnings, on an after-tax basis, to purchase our common shares at a discounted price, which is calculated at 85 % of the lesser of:

(i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date.

On March 15, 2024, we issued 147,445 shares of common stock to employees, with a purchase price of either $ 33.78 or $ 39.78 per share, for aggregate proceeds of $ 5.0 million.

On September 13, 2024, we issued 144,445 shares of common stock to employees, with a purchase price of $ 29.08 per share, for aggregate proceeds of $ 4.2 million.

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 three months September 30, 2024 and 2023:

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

2024 2023 2024 2023

On March 14, 2025, we issued 186,793 sha res of common stock to employees, with a purchase price of $ 23.79 per share, for aggregate proceeds of $ 4.4 million.

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We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year.

Our effective tax rates for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended March 31,

(in thousands, except share and per share data)

Net income (loss) $ 16,554 $ ( 76,611 ) $ 27,007 $ ( 169,308 )

Effective Tax Rate 56.2 % 86.4 %

The primary reconciling items between the Federal statutory tax rate of 21% and our overall effective rate for the three months ended March 31, 2025 were due to foreign taxes on our international operations, state income taxes, and the impact of valuation allowance on deferred tax assets.

The primary reconciling items between the Federal statutory tax rate of 21% and our overall effective rate for the three months ended March 31, 2024 were due to foreign taxes on our international operations, state income taxes, the impact of valuation allowance on deferred tax assets, and certain discrete items.

Net Income per Share

The following table summarizes the computation of basic and diluted net income per share of our common stock for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands, except share and per share data)

Net income used to calculate net income, basic $ 2,105 $ 1,406

Weighted-average common shares outstanding, basic 63,835,945 61,907,808

Weighted-average effect of dilutive shares:

Dilutive effect of equity incentive plans 388,471 $ 930,195

Dilutive effect of convertible senior notes — $ 11,183,611

Weighted-average common shares outstanding, diluted 64,224,415 $ 74,021,704

Net income (loss) per share, basic $ 0.26 $ ( 1.25 ) $ 0.43 $ ( 2.80 )

Net income (loss) per share, diluted $ 0.22 $ ( 1.25 ) $ 0.36 ( 2.80 )

Net income per share, basic $ 0.03 $ 0.02

Net income per share, diluted $ 0.03 $ 0.02

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 three and nine months ended September 30, 2024 and 2023, 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.

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

For the three months ended March 31, 2025 and 2024, the shares underlying the Notes were not considered in the calculation of diluted net income 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 September 30, 2024 and 2023, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder.

As of March 31, 2025, 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 March 31, 2024, 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 condensed consolidated financial statements.

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The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been anti-dilutive:

Nine Months Ended September 30,

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Three Months Ended March 31,

Options to purchase common stock — 604,786

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Commitments and Contingencies

(a) Purchase Obligations

In January 2025, we amended our contract with a cloud services provider which increased our total purchase obligation to $ 660 million, including a minimum purchase commitment of $ 125.0 million in 2025, 2026, 2027, 2028 and 2029, and an additional $ 35.0 million obligation over the five-year period.

We provide limited product warranties.

Historically, any payments made under these provisions have been immaterial.

(b) Litigation and Claims

From time to time, we may be a party to litigation or subject to claims incident to the ordinary course of business.

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Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

(d) Indemnification Obligations

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

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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 $ 87 million, based upon the exchange rate between the Israeli New Shekel and the US Dollar as of September 30, 2024) related to fiscal year 2021.

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 current exchange rates 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 condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024.

We are continuing to monitor developments related to

this matter and its impact on our existing income tax reserves for all open years.

As such, we have not recorded any impact of the ITA assessment in our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2025.

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.

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.

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

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

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 1, Summary of Significant Accounting Policies .

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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 and other segment expenses for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

Total revenue $ 210,253 $ 205,101

Adjusted total cost of revenue 1

52,793 53,989

Adjusted research and development 1

37,502 33,440

Adjusted sales and marketing 1

71,507 65,305

Adjusted general and administrative 1

16,098 12,082

Other segment expenses 2

30,248 38,879

Net income $ 2,105 $ 1,406

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 and acquisition-related expenses.

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

See the unaudited condensed 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:

Three Months Ended March 31,

(in thousands)

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

As of September 30, 2024 As of December 31, 2023

As of March 31, 2025 As of December 31, 2024

(in thousands)

2 unchanged sentences

Total $ 31,659 $ 32,245

Restructuring

On August 7, 2023, our board of directors approved a restructuring plan that was designed to improve operational efficiencies, reduce operating costs and better align the Company’s workforce with current business needs, top strategic priorities and key growth opportunities (collectively, the “Restructuring Plan”).

The Restructuring Plan included a reduction of the Company’s workforce by approximately 16 %.

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 condensed consolidated statements of operations.

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

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 have corrected the errors by adjusting prior period financial statements as of and for the three months ended March 31, 2024.

Refer to the consolidated financial statements included in our Annual Report on Form

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10-K for the year ended December 31, 2024 for detailed tables showing the effect of the immaterial error corrections to certain line items of our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the interim period ended March 31, 2024.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements