What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-07 · 141 added, 259 removed, 350 unchanged (53% of the section changed)

8 unchanged sentences

• our ability to continue to add new customers, maintain existing customers and sell new products and professional services to new and existing customers;

• uncertain impacts that changes in overall level of software spending and ongoing volatility in the global economy as well as effects of inflation and increased interest rates may have on our business, strategy, operating results, financial condition and cash flows;

• uncertain impacts that prolonged economic uncertainty may have on our business, strategy, operating results, financial condition and cash flows, as well as changes in overall level of software spending and volatility in the global economy;

• the effects of increased competition as well as innovations by new and existing competitors in our market;

• our ability to adapt to technological change and effectively enhance, innovate and scale our solutions;

• our ability to effectively manage or sustain our growth and to attain and sustain profitability;

• our ability to effectively restructure our business in alignment with our strategic priorities;

• our ability to adapt to technological change and effectively enhance, innovate and scale our solutions, including our Command Platform;

• our ability to effectively manage or sustain our growth and to sustain profitability;

• our ability to diversify our sources of revenue;

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• our ability to maintain, or strengthen awareness of, our brand;

• perceived or actual security, integrity, reliability, quality or compatibility problems with our solutions, including related to security breaches in our customers;

systems, unscheduled downtime or outages;

• perceived or actual security, integrity, reliability, quality or compatibility problems with our solutions, including problems related to systems, unscheduled downtime, outages or security breaches in our customers;

• statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance;

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• our ability to maintain, protect and enhance our intellectual property;

• the outcomes of our initiatives that use artificial intelligence (“AI”);

• costs associated with defending intellectual property infringement and other claims;

2 unchanged sentences

Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A.

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Furthermore, such forward-looking statements speak only as of the date of this report.

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and its subsidiaries unless the context indicates otherwise.

Rapid7 is a global cybersecurity software and services provider on a mission to offer customers greater clarity and control of their attack surface through our comprehensive and consolidated security offerings.

For more than twenty years, Rapid7 has partnered with customers across the globe representing a diverse range of industries and sizes to improve the efficacy and productivity of their security operations (“SecOps”).

In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the proliferation of cyberattacks leveraging artificial intelligence (“AI”), targeted automation, and a widening spectrum of attackers and techniques.

To fortify their security posture, organizations will require greater visibility, advanced capabilities leveraging increased expertise, and integrated data to effectively anticipate, identify, and respond to exposure-led threats.

Through our security operations platform, anchored on our cloud security, security information and event management (“SIEM”), advanced detection and response, and vulnerability management offerings, we believe that Rapid7 is poised to expand the capabilities of today's SecOps teams.

Rapid7 extends and expands the expertise of the Security Operations Center (“SOC") across information security, cloud operations, development, and IT teams, enabling them to better understand the attacker and leverage that information to take control of their fragmented attack surface.

Rapid7 is a global cybersecurity software and service provider on a mission to create a safer digital world by making cybersecurity simpler and more accessible.

For more than twenty years, Rapid7 has partnered with enterprises across the globe representing a diverse range of industries to improve the efficacy and productivity of their security operations (“SecOps”).

In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the widening spectrum of attackers and techniques, including the proliferation of cyberattacks leveraging artificial intelligence (“AI”) and targeted automation.

We empower security professionals to manage a modern attack surface through our trusted AI infused technology, leading-edge research, and broad, strategic expertise.

Rapid7’s comprehensive security solutions help our global customers unite exposure management with threat detection and response to reduce attack surfaces and eliminate threats with speed and precision.

Our Command Platform is anchored on our cloud security, security information and event management (“SIEM”), advanced detection and response, and vulnerability management offerings.

Rapid7 enables the Security Operations Center (“SOC”) to understand their fragmented attack surface with attacker perspective, allowing them to proactively secure their attack surface and better detect and respond to threats.

Enriched by years of managed services expertise, our integrated security operations platform enables SecOps teams to move away from a reactive approach, reduce their attack surface, and enhance response efficiency with a deep contextual understanding of their environment.

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As the threat landscape continues to grow in complexity, customers are demonstrating demand for integrated expertise to support them in effectively managing their security technologies.

The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what we view as the new extended SOC.

Our focus is to be the leading provider of integrated security solutions for the extended SOC by providing risk and threat management within the context of overall security.

The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what our customers require for the modern SOC.

Our focus is to be the leading provider of integrated security operations solutions by providing exposure and threat management that leverages our ability to give customers command of their attack surface.

We market and sell our products and professional services to organizations of all sizes globally, including mid-market businesses, enterprises, non-profits, educational institutions and government agencies.

Our customers span a wide variety of industries such as technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services.

As of September 30, 2024, we had over 11,000 customers in 146 countries, including 45% of the Fortune 100.

Our revenue was not concentrated with any individual customer and no customer represented more than 2% of our revenue for three and nine months ended September 30, 2024 or 2023.

Recent Developments

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 $51.0 million.

The purchase consideration consisted of $38.6 million in cash paid at closing, $12.1 million of contingent consideration and $0.4 million of deferred cash payments.

The deferred cash payments will be held by Rapid7 to satisfy certain post-closing purchase price adjustments.

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 September 30, 2024 , the fair value of the contingent purchase consideration was $12.2 million.

In connection with the acquisition, we will 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.

As of March 31, 2025, we had over 11,000 customers in 151 countries, including 39% of the Fortune 100.

Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for the three months ended March 31, 2025 or 2024.

Our Business Model

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When licensed on-premise software is purchased, maintenance and support and content subscriptions, as applicable, are bundled with the license for the term period.

Our Nexpose and Metasploit products are offered through term software licenses with an option for one or multi-year terms.

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and Metasploit products are offered through term software licenses with an option for one or multi-year terms.

Our maintenance and support provides our customers with telephone and web-based support and ongoing bug fixes and repairs during the term of the maintenance and support agreement, and our customers who purchase our Nexpose and Metasploit products also purchase content subscriptions, which provide them with real-time access to the latest vulnerabilities and exploits.

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Our Managed Threat Complete Offering is offered on a managed service basis, generally pursuant to one or multi-year agreements.

For the three months ended September 30, 2024 and 2023, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, and 95%, respectively, of total revenue.

For the nine months ended September 30, 2024 and 2023, recurring revenue was 96% and 95%, respectively, of total revenue.

For the three months ended March 31, 2025 and 2024, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, and 96%, respectively, of total revenue.

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.

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

99, Materiality , and SAB No.

108, C onsidering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , we evaluated the errors and determined the related impacts were not material to our unaudited 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 .

Refer to Note 16, Immaterial Correction of an Error , in the notes to our unaudited condensed consolidated financial statements for further information.

We monitor the following key metrics to help us measure and evaluate the effectiveness of our operations and as a means to evaluate period-to-period comparisons.

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We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and also because they are used by institutional investors and the analyst community to help evaluate the health of our business:

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

2024 2023 2024 2023

Three Months Ended March 31,

(dollars in thousands)

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Free cash flow $ 24,677 $ 27,534

As of September 30,

As of March 31,

(dollars in thousands)

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Year-over-year growth 1.7 % 6.8 %

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Total Revenue and Growth .

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Annualized Recurring Revenue and Growth.

Annualized Recurring Revenue (“ARR”) is defined as the annual value of all recurring revenue related to contracts in place at the end of the quarter.

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

ARR should be viewed independently of revenue and deferred revenue, as ARR is an operating metric and is not intended to be combined with or replace these items.

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While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

We define non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, impairment of long-lived assets, change in the fair value of derivative assets, restructuring expense, induced conversion expense and discrete tax items.

We define non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, litigation-related expenses, impairment of long-lived assets, change in the fair value of derivative assets, restructuring expense and discrete tax items.

Non-GAAP net income per basic and diluted share is calculated as non-GAAP net income divided by the weighted average shares used to compute net income per share, with the number of weighted average shares decreased, when applicable, to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.

We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors:

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• Stock-based compensation expense.

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We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.

• Acquisition-related expenses.

We exclude acquisition-related expenses that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results.

• Amortization of debt issuance costs.

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• Induced conversion expense.

In conjunction with the third quarter of 2023 partial repurchase of our 2025 Notes, we incurred a non-cash induced conversion expense of $53.9 million.

In conjunction with the third quarter of 2023 partial repurchase of our 2.25% convertible senior notes due 2025, we incurred a non-cash induced conversion expense of $53.9 million.

We exclude induced conversion expense because this amount is not indicative of the performance of or trends in our business, and neither is comparable to the prior period nor predictive of future results.

• Litigation-related expenses.

We exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred in litigation and litigation-related matters of non-ordinary course lawsuits and other disputes to be indicative of our core operating performance.

We do not adjust for ordinary course legal expenses, including legal costs and settlement fees resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

• Acquisition-related expenses.

We exclude acquisition-related expenses that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results.

• Change in fair value of derivative assets.

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• Restructuring expense.

We exclude non-ordinary course restructuring expenses related to the restructuring plan we announced in August 2023, which was concluded in the first quarter of 2024 (the "Restructuring Plan") because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods.

information see Note 15, Restructuring , in the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

We exclude non-ordinary course restructuring expenses related to the Restructuring Plan because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods.

• Discrete tax items.

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Although we cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, we do reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income (loss) per diluted share, when applicable, to provide investors with useful information in evaluating our financial performance on a per share basis.

We define adjusted EBITDA as net income (loss) before (1) interest income, (2) interest expense, (3) other (income) expense, net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, (8) acquisition-related expenses, (9) impairment of long-lived assets and (10) restructuring expense.

We define adjusted EBITDA as net income before (1) interest income, (2) interest expense, (3) other (income) expense, net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, (8) acquisition-related expenses, and (9) restructuring expense.

We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items.

In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results.

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Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and nine months ended September 30, 2024, and 2023:

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

2024 2023 2024 2023

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three months ended March 31, 2025 and 2024 :

Three Months Ended March 31,

(in thousands)

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Non-GAAP total gross profit $ 157,460 $ 151,095

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

2024 2023 2024 2023

Three Months Ended March 31,

(in thousands)

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Non-GAAP gross profit – product subscriptions $ 155,721 $ 148,799

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

2024 2023 2024 2023

Three Months Ended March 31,

(in thousands)

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Non-GAAP gross profit – professional services $ 1,739 $ 2,296

The following table reconciles GAAP income (loss) from operations to non-GAAP income from operations for the three and nine months ended September 30, 2024, and 2023:

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

2024 2023 2024 2023

The following table reconciles GAAP income from operations to non-GAAP income from operations for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

GAAP income (loss) from operations $ 13,961 $ (16,041) $ 31,409 $ (91,665)

GAAP (loss) income from operations $ (101) $ 9,716

Stock-based compensation expense 27,151 25,745

1 unchanged sentence

Acquisition-related expenses (1)

290 — 568 363

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

Restructuring expense (2)

— 19,996 (190) 19,996

Non-GAAP income from operations $ 32,353 $ 40,285

(1) For the three and nine months ended September 30, 2024, acquisition-related expenses included $0.2 million of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

(2) For the nine months ended September 30, 2024, restructuring expense was recorded within general and administrative expense in our condensed consolidated statement of operations.

The following table reconciles GAAP net income (loss) to non-GAAP net income for the three and nine months ended September 30, 2024, and 2023:

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

2024 2023 2024 2023

(1) For the three months ended March 31, 2025, acquisition-related expenses included $0.2 million of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

(2 For the three months ended March 31, 2024, restructuring expense was recorded within general and administrative expense in our consolidated statement of operations.

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The following table reconciles GAAP net income to non-GAAP net income for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands, except share and per share data)

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

GAAP net income $ 2,105 $ 1,406

Stock-based compensation expense 27,151 25,745

2 unchanged sentences

Amortization of debt issuance costs 1,019 1,053

Induced conversion expense — 53,889 — 53,889

Change in fair value of derivative assets — 2,851 — 15,511

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

Restructuring expense — (190)

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There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive.

On an if-converted basis, for the three and nine months ended September 30, 2024 and 2023, the 2025 Notes, the 2027 Notes and the 2029 Notes were dilutive.

On an if converted basis, for the three months ended March 31, 2025 and 2024, the 2029 Notes, 2027 Notes and 2025 Notes were dilutive.

(2) We use the treasury method to compute the dilutive effect of employee equity incentive plan awards.

The following table reconciles GAAP net income (loss) to adjusted EBITDA for the three and nine months ended September 30, 2024, and 2023:

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

2024 2023 2024 2023

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The following table reconciles GAAP net income to adjusted EBITDA for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

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

GAAP net income $ 2,105 $ 1,406

Interest income (5,758) (4,720)

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Acquisition-related expenses 183 —

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

Restructuring expense — (190)

Adjusted EBITDA $ 38,898 $ 46,619

The following table reconciles net cash provided by operating activities to free cash flow for the three and nine months ended September 30, 2024, and 2023:

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

2024 2023 2024 2023

The following table reconciles net cash provided by operating activities to free cash flow for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

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All overhead costs are allocated based on relative headcount.

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Cost of Product Subscriptions

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All overhead costs are allocated based on relative headcount.

In the near term, we expect our operating expenses to increase as a percentage of revenue as we prioritize investments to drive growth.

Research and Development Expense

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Additional expenses include third-party infrastructure costs, travel and entertainment, consulting and professional fees for third-party development resources as well as allocated overhead costs.

We expect research and development expense to decrease as a percentage of total revenue in the near term.

Sales and Marketing Expense

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Additional expenses include marketing activities and promotional events, travel and entertainment, training costs, amortization of certain intangible assets and allocated overhead costs.

We expect sales and marketing expense to decrease as a percentage of total revenue in the near term.

General and Administrative Expense

1 unchanged sentence

Additional expenses include travel and entertainment, professional fees, litigation-related expenses, insurance, acquisition-related expenses, amortization of certain intangible assets and allocated overhead costs.

We expect general and administrative expense to decrease as a percentage of total revenue in the near term.

Impairment of Long-Lived Assets

Impairment of long-lived assets consists of impairment charges allocated to the carrying amount of certain operating right-of-use assets and the associated leasehold improvements when the carrying amounts exceed their respective fair values.

Interest Income

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Interest expense consists primarily of contractual interest expense, amortization of debt issuance costs related to our convertible senior notes and revolving credit facility and induced conversion expense.

We expect interest expense in the near term to represent contractual interest expense and amortization of debt issuance costs related to our convertible senior notes and revolving credit facility.

We expect interest expense in the near term to represent contractual interest expense and amortization of debt issuance costs related to our convertible senior notes.

Other Income (Expense), Net

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Other income (expense), net consists primarily of the change in fair value of derivative assets and unrealized and realized gains and losses related to changes in foreign currency exchange rates.

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We maintain a substantially full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits.

Based on our history of losses, we expect to maintain this substantially full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized.

We determined as of March 31, 2025 that it was more likely than not that these deferred tax assets will not be realized.

However, we may release some of these 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.

Results of Operations

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

2024 2023 2024 2023

Three Months Ended March 31,

(in thousands)

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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

2 unchanged sentences

Interest expense (2,654) (2,670)

Other expense, net 2,811 (4,518) 681 (18,093)

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

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

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 $ 2,105 $ 1,406

(1) Cost of revenue and operating expenses include stock-based compensation expense and depreciation and amortization expense as follows:

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

2024 2023 2024 2023

Three Months Ended March 31,

(in thousands)

5 unchanged sentences

Total stock-based compensation expense $ 27,151 $ 25,745

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

2024 2023 2024 2023

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Three Months Ended March 31,

(in thousands)

5 unchanged sentences

Total depreciation and amortization expense $ 11,665 $ 11,348

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue:

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

2024 2023 2024 2023

Condensed Consolidated Statement of Operations Data:

The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue:

Three Months Ended March 31,

Consolidated Statement of Operations Data:

Product subscriptions 97.0 % 96.0 %

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General and administrative 11.2 9.7

Impairment of long-lived assets — 1.8 % — 5.4

Restructuring — 10.1 % — 3.5

Total operating expenses 71.8 65.1

3 unchanged sentences

Other income (expense), net 0.9 (0.7)

Income (loss) before income taxes 9.1 (37.5) 6.3 (29.0)

Provision for income taxes 1.4 1.0 2.0 0.6

Net income (loss) 7.7 % (38.5) % 4.3 % (29.6) %

Comparison of the Three Months Ended September 30, 2024 and 2023

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Product subscriptions $ 205,593 $ 189,876 $ 15,717 8.3 %

Professional services 9,061 8,967 94 1.0 %

Total revenue $ 214,654 $ 198,843 $ 15,811 8.0 %

Total revenue increased by $15.8 million in the three months ended September 30, 2024 compared to the same period in 2023 and consisted of a $2.4 million increase in revenue from new customers and a $13.4 million increase in revenue from existing customers.

The $13.4 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base.

Revenue from new customers represents the revenue recognized from the customer's initial purchase.

The increase in total revenue in the three months ended September 30, 2024 compared to the same period in 2023 was comprised of $8.5 million generated from sales in North America and $7.3 million generated from sales from the rest of the world.

Cost of Revenue

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Cost of revenue:

Product subscriptions $ 56,653 $ 51,261 $ 5,392 10.5 %

Professional services 6,364 6,569 (205) (3.1) %

Total cost of revenue $ 63,017 $ 57,830 $ 5,187 9.0 %

Gross margin %:

Product subscriptions 72.4 % 73.0 %

Professional services 29.8 % 26.7 %

Total gross margin % 70.6 % 70.9 %

Total cost of revenue increased by $5.2 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $4.7 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, a $0.6 million increase in amortization expense for capitalized internally-developed software and a $0.8 million increase in other expenses.

Total gross margin percentage decreased for the three months ended September 30, 2024 compared to the same period in 2023.

The decrease in product subscriptions gross margin for the three months ended September 30, 2024 was primarily due to an increase in cloud computing costs.

The increase in professional services gross margin for the three months ended September 30, 2024 was primarily due to a decrease in personnel costs.

Operating Expenses

Research and Development Expense

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Research and development $ 44,565 $ 39,940 $ 4,625 11.6 %

% of revenue 20.8 % 20.1 %

Research and development expense increased by $4.6 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $2.8 million increase in personnel costs, inclusive of a $1.2 million increase in stock-based compensation expense, resulting from an increase in headcount including the employees acquired in the acquisition of Noetic in July 2024, and a $1.8 million increase in other expenses.

Sales and Marketing Expense

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Sales and marketing $ 74,521 $ 75,699 $ (1,178) (1.6) %

% of revenue 34.7 % 38.2 %

Sales and marketing expense decreased by $1.2 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $3.3 million decrease in personnel costs, inclusive of a $0.3 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $0.2 million decrease in other expenses.

These decreases were partially offset by a $2.3 million increase in commission expense.

General and Administrative Expense

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

General and administrative $ 18,590 $ 17,866 $ 724 4.1 %

% of revenue 8.6 % 9.0 %

General and administrative expense increased by $0.7 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $0.7 million increase in professional fees.

Impairment of Long-Lived Assets

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Impairment of long-lived assets $ — $ 3,553 $ (3,553) (100.0) %

% of revenue — % 1.8 %

Impairment of long-lived assets expense of $3.6 million in the three months ended September 30, 2023 related to an impairment charge recorded after a triggering event related to a change in usage of certain idle office spaces located in Plano Texas, Los Angeles, California and Toronto, Canada indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.

Restructuring

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Restructuring $ — $ 19,996 $ (19,996) (100.0) %

% of revenue — % 10.1 %

Restructuring expense of $20.0 million in the three months ended September 30, 2023 was recorded as a result of restructuring charges consisting of employee transition, notice period and severance payments and employee benefits and related facilitation costs related to our Restructuring Plan.

Refer to Note 15, Restructuring , in the Notes to our condensed consolidated financial statements for further details on our Restructuring Plan.

Interest Income

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Interest income $ 5,571 $ 2,545 $ 3,026 118.9 %

% of revenue 2.6 % 1.3 %

Interest income increased by $3.0 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments.

Interest Expense

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Interest expense $ (2,837) $ (56,515) $ 53,678 (95.0) %

% of revenue (1.3) % (28.4) %

Interest expense decreased in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to $53.9 million of induced conversion expense incurred in the third quarter of 2023 in conjunction with the partial repurchase of the 2025 Notes.

Other Income (Expense), Net

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Other income (expense), net $ 2,811 $ (4,518) $ 7,329 (162.2) %

% of revenue 1.3 % (2.3) %

Other income (expense), net increased by $7.3 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to increases in realized and unrealized foreign currency gains, primarily related to the Euro and British Pound Sterling, partially offset by $2.9 million of expense for the change in fair value on derivative assets related to our 2023 capped calls settlement in the prior period.

Provision for Income Taxes

Three Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Income before income taxes 2.2 5.5

Provision for income taxes 1.3 4.4

% of revenue 1.4 % 1.0 %

Provision for income taxes increased by $0.9 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to an increase in taxes associated with our international operations.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Nine Months Ended September 30, Change

Net income 0.9 % 1.1 %

Comparison of the Three Months Ended March 31, 2025 and 2024

Three Months Ended March 31, Change

2025 2024 $ %

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Total revenue $ 210,253 $ 205,101 $ 5,152 2.5 %

Total revenue increased by $55.3 million in the nine months ended September 30, 2024 compared to the same period in 2023 and consisted of a $5.9 million increase in revenue from new customers and a $49.4 million increase in revenue from existing customers.

Total revenue increased by $5.2 million in the three months ended March 31, 2025 compared to the same period in 2024, due to an $8.1 million increase in revenue from existing customers, partially offset by a $2.9 million decrease in revenue from new customers.

The $8.1 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base.

Revenue from new customers represents the revenue recognized from the customer's initial purchase.

The increase in total revenue in the nine months ended September 30, 2024 compared to the same period in 2023 was comprised of $31.6 million generated from sales in North America and $23.7 million generated from sales from the rest of the world.

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The increase in total revenue in the three months ended March 31, 2025 compared to the same period in 2024 was comprised of $0.6 million generated from sales in North America and $4.6 million generated from sales from the rest of the world.

Cost of Revenue

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

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Total gross margin % 71.7 % 70.3 %

Total cost of revenue increased by $12.8 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $15.8 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, a $3.0 million increase in amortization expense for capitalized internally-developed software and a $0.4 million increase in other expenses.

These increases were partially offset by a $6.4 million decrease in personnel costs resulting from a decrease in headcount primarily due to our Restructuring Plan.

Total gross margin percentage increased in the nine months ended September 30, 2024 compared to the same period in 2023.

The gross margin percentage for product subscriptions was consistent in the nine months ended September 30, 2024 compared to the same period in 2023.

The increase in professional services gross margin in the nine months ended September 30, 2024 was primarily due to a decrease in personnel costs.

Total cost of revenue decreased by $1.5 million in the three months ended March 31, 2025 compared to the same period in 2024, due to a $2.1 million decrease in personnel costs, inclusive of a $2.5 million decrease due to a shift in the nature of certain roles and responsibilities between product delivery and sales support functions partially offset by a $0.4 million increase due to headcount, a $1.3 million decrease on third-party professional services consulting spend primarily driven by related decrease in professional services revenue, and a $0.9 million decrease in allocated overhead costs.

These decreases were partially offset by a $1.6 million increase in cloud computing costs, a $0.3 million increase in amortization expense for capitalized internally-developed software, a $0.5 million increase in royalties and subscriptions and a $0.4 million increase in other expenses.

Total gross margin percentage increased for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to an increase in products gross margin due to the decrease in personnel costs described above.

Operating Expenses

Research and Development Expense

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

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% of revenue 22.8 % 20.0 %

Research and development expense decreased by $11.4 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $10.8 million decrease in personnel costs, inclusive of a $4.9 million decrease in stock-based compensation expense, resulting from an overall decrease in headcount, primarily due to our Restructuring Plan, and a $3.0 million decrease due to a write-off of a capitalized internal-use software project in the prior period.

These decreases were partially offset by a $2.4 million increase in other expenses.

Research and development expense increased by $6.5 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to a $4.3 million increase in personnel costs, inclusive of a $2.5 million increase in stock-based compensation expense resulting from an increase in headcount, a $0.9 million increase in third-party cloud infrastructure costs related to new product development, a $0.6 million increase in impairment of internally developed software and a $0.7 million increase in other expenses.

Sales and Marketing Expense

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

2 unchanged sentences

% of revenue 37.8 % 35.4 %

Sales and marketing expense decreased by $14.2 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $15.7 million decrease in personnel costs, inclusive of a $1.9 million decrease in stock-based compensation expense, resulting from an overall decrease in headcount primarily due to our Restructuring Plan, a $1.7 million decrease in marketing and advertising expenses and a $3.6 million decrease in other expenses.

These decreases were partially offset by a $6.8 million increase in commission expense.

Sales and marketing expense increased by $6.3 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to a $1.6 million increase in personnel costs, inclusive of a $2.5 million increase driven by a shift in the nature of certain roles and responsibilities between product delivery and sales support functions partially offset by a $0.9

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million decrease due to decreased headcount, a $2.3 million increase in commissions expense, a $1.2 million increase in office related expenses driven by higher costs related to corporate events and related activities, a $0.8 million increase in marketing and advertising expense and a $0.5 million increase in other expenses.

General and Administrative Expense

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

2 unchanged sentences

% of revenue 11.2 % 9.7 %

General and administrative expense decreased by $4.1 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $3.5 million decrease in personnel costs, inclusive of a $1.4 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, a $1.6 million decrease in professional fees and a $0.4 million decrease in other expenses.

Impairment of Long-Lived Assets

Nine Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Impairment of long-lived assets $ — $ 30,784 $ (30,784) 100.0 %

% of revenue — % 5.4 %

Impairment of long-lived assets expense of $30.8 million in the nine months ended September 30, 2023 was recorded after a triggering event 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 indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.

Restructuring

Nine Months Ended September 30, Change

2024 2023 $ %

(dollars in thousands)

Restructuring $ — $ 19,996 $ (19,996) 100.0 %

% of revenue — % 3.5 %

Restructuring expense of $20.0 million in the nine months ended September 30, 2023 was recorded as a result of restructuring charges consisting of employee transition, notice period and severance payments and employee benefits and related facilitation costs related to our Restructuring Plan.

Refer to Note 15, Restructuring , in the Notes to our condensed consolidated financial statements for further details on our Restructuring Plan.

General and administrative expense increased by $3.7 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to a $1.9 million increase in professional fees related to legal and corporate advisory services, a $1.3 million increase in operating expenses largely related to bad debt expense, a $0.3 million increase in expense related to office supplies and a $0.2 million increase in accretion expense related to acquisition-related contingent consideration.

Interest Income

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

2 unchanged sentences

% of revenue 2.7 % 2.3 %

Interest income increased by $9.5 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments.

Interest income increased by $1.0 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments as well as favorable market conditions.

Interest Expense

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

2 unchanged sentences

% of revenue (1.3) % (1.3) %

Interest expense decreased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to $53.9 million of induced conversion expense incurred in the third quarter of 2023 in conjunction with the partial repurchase of the 2025 Notes.

Interest expense remained consistent in the three months ended March 31, 2025 compared to the same period in 2024.

Other Income (Expense), Net

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

2 unchanged sentences

% of revenue 0.9 % (0.7) %

Other income (expense), net increased by $18.8 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $15.5 million expense for the change in fair value on derivative assets related to our 2023 capped calls settlement in the prior period as well as increases in realized and unrealized foreign currency gains, primarily related to the Euro and British Pound Sterling.

Other income, net increased by $3.2 million in the three months ended March 31, 2025 compared to the same period in 2024, due to favorable market conditions resulting in an increase to unrealized gains of $4.0 million primarily related to the British Pound Sterling partially offset by a change in realized loss of $0.8 million.

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Provision for Income Taxes

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

(dollars in thousands)

Provision for income taxes $ 12,415 $ 3,545 $ 8,870 250.2 %

Provision for income taxes $ 2,700 $ 8,925 $ (6,225) NM

% of revenue 1.3 % 4.4 %

Provision for income taxes increased by $8.9 million in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to $6.4 million of tax expense recorded for an intercompany sale of intellectual property as part of post-acquisition strategy related to the acquisition of Minerva Lab Ltd.

and a $2.5 million increase in domestic and international taxes.

Provision for income taxes decreased by $6.2 million in the three months ended March 31, 2025 compared to the same period in 2024 primarily due to $6.4 million of tax expense recorded in the prior period for an intercompany sale of intellectual property as part of post-acquisition strategy related to the acquisition of Minerva Lab Ltd., partially offset by an increase in domestic and international taxes in the current period.

Liquidity and Capital Resources

As of September 30, 2024, we had $222.6 million in cash and cash equivalents, $281.5 million in investments that have maturities ranging from one to twenty months and an accumulated deficit of $1.0 billion.

Since our inception, we have generated significant losses and we may generate losses for the foreseeable future.

Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our Credit and Security Agreement (the “Credit Agreement”).

As of March 31, 2025, we had $291.5 million in cash and cash equivalents, $301.1 million in investments that have maturities ranging from one to eighteen months and an accumulated deficit of $1.0 billion.

Our principal sources of liquidity are cash and cash equivalents, investments and cash flow provided by operating activities.

To date, we have financed our operations primarily through private and public equity financings, issuance of convertible senior notes and through cash generated by operating activities.

We believe that our existing cash and cash equivalents, our investments, our available borrowings under our Credit Agreement and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months.

Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services (including with Amazon Web Services (“AWS”)), potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes.

We believe that our existing cash and cash equivalents, our investments and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months.

Additionally, as noted in Note 10, Debt , in the Notes to our unaudited condensed consolidated financial statements, our credit facility matured on December 22, 2024.

As of the date of filing this Form 10-Q, we intend to execute a credit facility which will enhance our liquidity and capital resources.

As of March 31, 2025, we had $7.2 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.

Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services, potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes.

Further, in January 2025, we entered into a cloud-services agreement with a cloud services provider that contains minimum spend commitments.

The agreement provides for an annual commitment of $125.0 million per year over the next five years, with an additional $35.0 million obligation over the five-year period of the agreement, for an aggregate total commitment of $660.0 million.

See Note 13, Commitments and Contingencies, in the Notes to our unaudited condensed consolidated financial statements for more information regarding this commitment.

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.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, particularly internationally, the introduction of new and enhanced products and service offerings, the cost of any future acquisitions of technology or businesses and any election we make to redeem our convertible senior notes.

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If we are unable to raise additional capital on terms satisfactory to us when we require it, our business, operating results and financial condition could be adversely affected.

The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

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The following table shows a summary of our cash flows for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

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Operating Activities

Operating activities provided $107.9 million of cash and cash equivalents in the nine months ended September 30, 2024, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.

Cash provided by operating activities reflected our net income of $27.0 million and non-cash charges of $111.0 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges, partially offset by a decrease in our net operating assets and liabilities of $30.1 million.

Operating activities provided $29.8 million of cash and cash equivalents for the three months ended March 31, 2025, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.

Cash provided by operating activities reflected our net income of $2.1 million and a decrease in our net operating assets and liabilities of $11.0 million, offset by non-cash charges of $38.7 million related primarily to depreciation and amortization, stock-based compensation expense, amortization of debt issuance costs and other non-cash charges.

The change in our net operating assets and liabilities was primarily due to a $20.3 million decrease in accrued expenses, a $12.9 million decrease in deferred revenue, a $2.0 million increase in prepaid expenses, a $2.2 million decrease in other liabilities and a $6.6 million decrease in accounts payable, which each had a negative impact on operating cash flow.

These factors were offset by a $27.7 million decrease in accounts receivable and a $5.3 million decrease in deferred contract acquisition and fulfillment costs, which each had a positive impact on operating cash flow.

Operating activities provided $31.1 million of cash and cash equivalents for the three months ended March 31, 2024, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.

Cash provided by operating activities reflected our net income of $1.4 million and a decrease in our net operating assets and liabilities of $10.1 million, offset by non-cash charges of $39.8 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges.

The change in our net operating assets and liabilities was primarily due to a decrease in deferred revenue and the timing of payments of operating expenses, including payout of annual bonuses and year-end commissions and other compensation costs and accounts payable, partially offset by a decrease in accounts receivable due to an increase in cash collections from our customers.

Operating activities provided $40.8 million of cash and cash equivalents in the nine months ended September 30, 2023, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.

Cash provided by operating activities reflected our net loss of $169.3 million and non-cash charges of $228.2 million related primarily to depreciation and amortization, stock-based compensation expense, impairment of long-lived assets, change in fair value of derivative assets, amortization of debt issuance costs and other non-cash charges, partially offset by a decrease in our net operating assets and liabilities of $18.1 million.

The change in our net operating assets and liabilities was primarily due to a $18.0 million decrease in accrued expenses, primarily as a result of the payout of annual bonuses and year-end commissions, a $6.4 million decrease in deferred revenue, a $1.2 million decrease in accounts payable, a $0.9 million decrease in other liabilities and a $9.5 million increase in deferred contract acquisition and fulfillment costs, which each had a negative impact on operating cash flow.

These factors were offset by a $12.4 million decrease in accounts receivable due to an increase in collections, and a $5.5 million decrease in prepaid expenses, which each had a positive impact on operating cash flow.

Investing Activities

Investing activities used $99.5 million of cash in the nine months ended September 30, 2024, consisting of $49.9 million in purchases of investments, net of sales/maturities, $37.2 million of cash paid for the acquisition of Noetic, $10.4 million for capitalization of internal-use software costs, and $2.2 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by proceeds of $0.4 million for other investing activities.

Investing activities used $145.2 million of cash in the nine months ended September 30, 2023, consisting of $93.4 million in purchases of investments, net of sales and maturities, $34.8 million of cash paid for the acquisition of Minerva, $13.0 million for capitalization of internal-use software costs and $4.0 million in capital expenditures to purchase computer equipment and leasehold improvements.

Investing activities used $79.2 million of cash for the three months ended March 31, 2025, consisting of $75.5 million in purchases of investments, net of sales/maturities, $3.7 million for capitalization of internal-use software costs, and $1.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $1.3 million in proceeds from other investments.

Investing activities used $41.7 million of cash for the three months ended March 31, 2024, consisting of $38.2 million in purchases of investments, net of sales/maturities, $2.9 million for capitalization of internal-use software costs and $0.6 million in capital expenditures to purchase computer equipment and leasehold improvements.

Financing Activities

Financing activities provided $6.8 million of cash in the nine months ended September 30, 2024, which consisted primarily of $9.2 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc.

Financing activities provided $4.7 million for the three months ended March 31, 2025, which consisted primarily of $4.4 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc.

2015 Employee Stock Purchase Plan (“ESPP”) and $1.6 million in proceeds from the exercise of stock options, partially offset by $1.3 million in withholding taxes paid for the net share settlement of equity awards.

Financing activities provided $81.8 million of cash in the nine months ended September 30, 2023, which consisted primarily of $292.8 million in proceeds from the issuance of the 2029 Notes, net of issuance costs paid of $7.2 million, $17.5 million in proceeds from the settlement of the 2023 Capped Calls, $11.3 million in proceeds from the issuance of common stock purchased by employees under the ESPP and $3.0 million in proceeds from the exercise of stock options, partially offset by $200.0 million for the repurchase and conversion of the 2025 Notes, $36.6 million for the purchase of the 2029 Capped Calls, $4.0 million in withholding taxes paid for the net share settlement of equity awards and $2.2 million in payments related to the acquisition of IntSights.

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Financing activities provided $4.4 million of cash for the three months ended March 31, 2024, which consisted primarily of $5.0 million in proceeds from the issuance of common stock purchased by employees under the ESPP and $1.1 million in proceeds from the exercise of stock options, partially offset by $1.7 million in withholding taxes paid for the net share settlement of equity awards.

Contractual Obligations and Commitments

As of September 30, 2024, there were no additional material changes from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024 (the “Annual Report”).

As of March 31, 2025, there were no additional material changes from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025 (the “Annual Report”) other than the cloud services agreement discussed in Note 14, Commitments and Contingencies , in the notes to our unaudited condensed consolidated financial statements.

Off-Balance Sheet Arrangements

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Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosures.

Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosures.

We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances.

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Our actual results may differ from these estimates.

There have been no material changes to our critical accounting estimates from those disclosed in our Annual Report.

There have been no material changes in our critical accounting policies from those disclosed in our Annual Report.

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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 2. Management’s Discussion and Analysis