What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-12 · 269 added, 228 removed, 263 unchanged (65% of the section changed)

29 unchanged sentences

These statements represent the beliefs and assumptions of our management based on information currently available to us.

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.

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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 I, Item 1A.

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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 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.

As of June 30, 2025, we had over 11,000 customers in 151 countries, including 40% 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 and six months ended June 30, 2025 or 2024.

Recent Developments

Credit Agreement

On June 25, 2025 (the "Closing Date"), we entered into a credit agreement (the "Credit Agreement"), by and among the Company, Rapid7 LLC, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, that provides for a $ 200.0 million revolving credit facility with a letter of credit sublimit of $20.0 million.

The Credit Agreement allows for incremental facilities up to the greater of $141 million or 75% of Consolidated EBITDA (as defined in the Credit Agreement).

Additional incremental facilities may be incurred, subject to certain conditions.

We incurred fees of $1.6 million in connection with entering into the Credit Agreement.

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

Under the terms of the Credit Agreement, we are required to pay a commitment fee on the unused portion of the credit facility.

The commitment fee rate is determined by the total net leverage ratio of the Company and its subsidiaries, ranging from 0.20% to 0.25% per annum on the unused portion of

the credit facility.

The commitment fee is expensed as incurred and included within interest expense on the consolidated statement of operations.

The Credit Agreement matures on the fifth-anniversary of the Closing Date or, if certain specified liquidity conditions are note satisfied, 91 days prior to the earliest maturity date of either the 2027 or the 2029 Notes.

The Credit Agreement also contains certain affirmative and negative covenants, including a requirement to maintain a minimum interest coverage ratio for the duration of the Credit Agreement and a maximum net leverage ratio.

The borrowings under the Credit Agreement bear interest at a variable annual rate based on either the Secured Overnight Financing Rate (SOFR) subject to a floor of zero or alternate base rate plus, in each case, a fixed margin, which varies depending on the Company’s net leverage ratio.

As of June 30, 2025, we did not have any outstanding borrowings under the Credit Agreement.

As of June 30, 2025, we had a total of $6.0 million in letters of credit outstanding as collateral for certain office space leases and corporate credit card programs which reduce the amount of borrowing availability under our Credit Agreement.

Federal Tax Legislation

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act ("OBBBA").

The OBBBA changes the current tax law related to both corporate income taxes and deferred tax assets and liabilities, which we currently accounts for under ASC 740, Income taxes ("ASC 740") .

The income tax effects of a change in tax law on current taxes related to current year ordinary income and changes to deferred taxes arising subsequent to the date of enactment are included in the annual effective tax rate, beginning in the period of enactment.

We are currently evaluating the impact of the OBBBA on its business, financial condition, and results of operations under ASC 740.

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.

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

Our Nexpose 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 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.

For the three and six months ended June 30, 2025 and 2024, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 97%, and 96%, respectively, of total revenue.

Immaterial Correction of an Error

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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.

We believe that both management and investors benefit from referring to these key metrics as supplemental information in assessing our performance and when planning, forecasting, and analyzing future periods.

These key metrics also facilitate management's internal comparisons to our historical performance as well as comparisons to certain competitors' operating results.

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 March 31,

(dollars in thousands)

Total revenue $ 210,253 $ 205,101

Year-over-year growth 2.5 % 12.0 %

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

Non-GAAP operating margin 15.4 % 19.6 %

Free cash flow $ 24,677 $ 27,534

As of March 31,

(dollars in thousands)

Annualized recurring revenue (“ARR”) $ 837,220 $ 807,196

Year-over-year growth 3.7 % 10.9 %

Number of customers 11,685 11,462

Year-over-year growth 1.9 % 3.9 %

ARR per customer $ 71.6 $ 70.4

Year-over-year growth 1.7 % 6.8 %

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Total Revenue and Growth .

We are focused on driving continued revenue growth through increased sales of our products and professional services to new and existing customers.

We monitor total revenue and believe it is useful to investors as a measure of the overall success of our business.

Non-GAAP Income from Operations and Non-GAAP Operating Margin .

We monitor non-GAAP income from operations and non-GAAP operating margin, non-GAAP financial measures, to analyze our financial results.

We believe non-GAAP income from operations and non-GAAP operating margin are useful to investors, as supplements to U.S.

GAAP measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance and allowing for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

See "Non-GAAP Financial Results" below for further information on non-GAAP income from operations and a reconciliation of non-GAAP income from operations to the comparable GAAP financial measure.

Free Cash Flow .

Free cash flow is a non-GAAP measure that we define as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.

We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures.

See "Non-GAAP Financial Results" below for a reconciliation of non-GAAP free cash flow to the comparable GAAP financial measure.

Annualized Recurring Revenue and Growth.

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.

ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates and does not include revenue reported as professional services revenue in our consolidated statement of operations.

We use ARR and believe it is useful to investors as a measure of the overall success of our business.

Number of Customers .

We believe that the size of our customer base is an indicator of our global market penetration and that our net customer additions are an indicator of the growth of our business.

We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding only InsightOps and Logentries customers with a contract value less than $2,400 per year.

ARR per Customer .

ARR per customer is defined as ARR divided by the number of customers at the end of the period.

Non-GAAP Financial Results

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and free cash flow.

The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons, and use certain non-GAAP financial measures as performance measures under our executive bonus plan.

We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

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, 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.

We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense.

We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

• Amortization of acquired intangible assets.

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.

• Amortization of debt issuance costs.

The expense for the amortization of debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods.

• Induced conversion expense.

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.

The change in fair value of derivative assets related to our capped calls settlement is a non-cash item and we believe the exclusion of this other income (expense) provides a more useful comparison of our operational performance in different periods.

• 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 and we believe the exclusion of the impairment charges provides a more useful comparison of our operational performance in different periods.

• Restructuring expense.

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.

We exclude certain discrete tax items such as income tax expenses or benefits that are not related to ongoing business operations in the current year and adjustments to uncertain tax position reserves as these charges are not indicative of our ongoing operating results, and they are not considered when we are forecasting our future results.

• Anti-dilutive impact of capped call transaction.

Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes.

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 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

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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 months ended March 31, 2025 and 2024 :

Three Months Ended March 31,

(in thousands)

GAAP total gross profit $ 150,773 $ 144,107

Stock-based compensation expense 2,264 2,671

Amortization of acquired intangible assets 4,423 4,317

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

Three Months Ended March 31,

(in thousands)

GAAP gross profit – product subscriptions $ 149,567 $ 142,184

Stock-based compensation expense 1,731 2,298

Amortization of acquired intangible assets 4,423 4,317

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

Three Months Ended March 31,

(in thousands)

GAAP gross profit – professional services $ 1,206 $ 1,923

Stock-based compensation expense 533 373

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

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

Stock-based compensation expense 27,151 25,745

Amortization of acquired intangible assets 5,120 5,014

Acquisition-related expenses (1)

Restructuring expense (2)

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

(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 $ 2,105 $ 1,406

Stock-based compensation expense 27,151 25,745

Amortization of acquired intangible assets 5,120 5,014

Acquisition-related expenses 183 —

Amortization of debt issuance costs 1,019 1,053

Restructuring expense — (190)

Discrete tax items — 6,360

Non-GAAP net income $ 35,578 $ 39,388

Interest expense of convertible senior notes (1) 1,571 1,571

Numerator for non-GAAP earnings per share calculation $ 37,149 $ 40,959

Weighted average shares used in GAAP earnings per share calculation, basic 63,835,945 61,907,898

Dilutive effect of convertible senior notes (1) 11,183,611 11,183,611

Dilutive effect of employee equity incentive plans (2) 388,471 930,195

Weighted average shares used in non-GAAP earnings per share calculation, diluted 75,408,027 74,021,704

Non-GAAP net income per share:

Basic $ 0.56 $ 0.64

Diluted $ 0.49 $ 0.55

(1) We use the if-converted method to compute diluted earnings per share with respect to our Notes.

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 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.

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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 $ 2,105 $ 1,406

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

Interest expense 2,654 2,670

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

Provision for income taxes 2,700 8,925

Depreciation expense 2,791 2,908

Amortization of intangible assets 8,874 8,440

Stock-based compensation expense 27,151 25,745

Acquisition-related expenses 183 —

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 months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(in thousands)

Net cash provided by operating activities $ 29,757 $ 31,070

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

Capitalized internal-use software costs (3,719) (2,916)

Free cash flow $ 24,677 $ 27,534

Components of Results of Operations

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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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Research and development expense consists of personnel costs for our research and development team, including salaries and other payroll related costs, bonuses and stock-based compensation.

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.

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.

Sales and Marketing Expense

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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.

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

We determined as of June 30, 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.

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Results of Operations

Three Months Ended March 31,

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

2025 2024 2025 2024

(in thousands)

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Total operating expenses 147,640 141,776 298,514 276,167

Income (loss) from operations (101) 9,716

Income from operations

3,494 5,223 3,393 14,939

Interest income 5,514 5,221 11,272 9,941

Interest expense (2,627) (2,673) (5,281) (5,343)

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

Other income (loss), net

3,957 (695) 5,759 (2,130)

Income before income taxes 10,338 7,076 15,143 17,407

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

Three Months Ended March 31,

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

2025 2024 2025 2024

(in thousands)

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Total stock-based compensation expense $ 27,581 $ 29,066 $ 54,732 $ 54,811

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Three Months Ended March 31,

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

2025 2024 2025 2024

(in thousands)

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

Three Months Ended March 31,

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

2025 2024 2025 2024

Consolidated Statement of Operations Data:

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Total operating expenses 68.9 68.2 70.3 66.8

Income (loss) from operations (0.1) 5.2

Income from operations

1.6 2.5 0.8 3.7

Interest income 2.6 2.5 2.7 2.4

Interest expense (1.2) (1.3) (1.2) (1.3)

Other income (expense), net 0.9 (0.7)

Other income (loss), net

1.8 (0.3) 1.4 (0.5)

Income before income taxes 4.8 3.4 3.7 4.3

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Net income 3.9 % 3.1 % 2.6 % 2.0 %

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

Three Months Ended March 31, Change

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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Total revenue 214,193 $ 207,991 $ 6,202 3.0 % $ 424,446 $ 413,092 $ 11,354 2.7 %

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.

Total revenue increased by $6.2 million in the three months ended June 30, 2025 compared to the same period in 2024, due to a $9.1 million increase in revenue from existing customers, partially offset by a $2.9 million decrease in revenue from new customers.

Total revenue increased by $11.4 million in the six months ended June 30, 2025 compared to the same period in 2024, due to an $17.2 million increase in revenue from existing customers, partially offset by a $5.8 million decrease in revenue from new customers.

The 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.

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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.

The increase in total revenue in the three months ended June 30, 2025 compared to the same period in 2024 was comprised of $1.2 million generated from sales in North America and $4.9 million generated from sales from the rest of the world.

The increase in total revenue in the six months ended June 30, 2025 compared to the same period in 2024 was comprised of $1.9 million generated from sales in North America and $9.4 million generated from sales from the rest of the world.

Cost of Revenue

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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Total gross margin % 70.6 % 70.7 % 71.1 % 70.5 %

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.

Total cost of revenue increased by $2.1 million in the three months ended June 30, 2025 compared to the same period in 2024, due to a $1.6 million increase in cloud computing costs, a $0.6 increase in amortization expense for capitalized internally-developed software, a $0.4 million increase in royalties and subscriptions and a $0.6 million increase in other expenses.

These increases were partially offset by a $1.1 million decrease in personnel costs, inclusive of a $3.8 million decrease due to a shift in the nature of certain roles and responsibilities between product delivery and sales support functions which were partially offset by a $2.7 million increase due to an increase in headcount excluding the aforementioned shift in roles.

Total cost of revenue increased by $0.6 million in the six months ended June 30, 2025 compared to the same period in 2024, due to a $3.1 million increase in cloud computing costs, a $0.9 million increase in amortization expense for capitalized internally-developed software, a $0.9 million increase in royalties and subscriptions and a $0.8 million increase in other expenses.

These increases were partially offset by a $3.2 million decrease in personnel costs, inclusive of a $6.0 million decrease due to a shift in the nature of certain roles and responsibilities between product delivery and sales support functions which were partially offset by a $2.8 million increase due to an increase in headcount excluding the aforementioned shift in roles, a $1.0 million decrease on third-party professional services consulting spend primarily driven by a related decrease in professional services revenue, and a $0.9 million decrease in allocated overhead costs.

Total gross margin percentage increased for the three and six months ended June 30, 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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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% of revenue 22.0 % 19.4 % 22.4 % 19.8 %

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.

Research and development expense increased by $6.8 million in the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $4.7 million increase in personnel costs, inclusive of a $1.3 million increase in stock-based compensation expense resulting from an increase in headcount, a $1.3 million increase in third-party cloud infrastructure costs related to new product development and a $0.8 million increase in other expenses.

Research and development expense increased by $13.3 million in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $9.0 million increase in personnel costs, inclusive of a $3.7 million increase in stock-based compensation expense resulting from an increase in headcount, a $2.2 million increase in third-party cloud infrastructure costs related to new product development, a $0.8 million increase in allocated overhead costs and a $1.3 million increase in other expenses.

Sales and Marketing Expense

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

2 unchanged sentences

% of revenue 37.0 % 37.6 % 37.4 % 36.6 %

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.

Sales and marketing expense increased by $1.1 million in the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $0.7 million increase in personnel costs, inclusive of a $3.8 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 $3.1 million decrease due to decreased headcount excluding the aforementioned shift in roles, a $0.7 million increase in allocated overhead expenses and a $0.4 million increase in commissions expense.

These increases were partially offset by a $0.7 million decrease in other expenses.

Sales and marketing expense increased by $7.4 million in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $2.1 million increase in personnel costs, inclusive of a $6.0 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 $3.9 million decrease due to decreased headcount excluding the aforementioned shift in roles, a $2.7 million increase in commissions expense, a $1.1 million increase in office related expenses driven by higher costs related to corporate events and related activities, a $0.7 million increase in marketing and advertising expense and a $0.7 million increase in other expenses.

General and Administrative Expense

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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% of revenue 9.9 % 11.2 % 10.5 % 10.4 %

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.

General and administrative expense decreased by $2.0 million in the three months ended June 30, 2025 compared to the same period in 2024, primarily due to a $1.3 million decrease in charitable contributions and taxes, a $0.8 million decrease in personnel costs and a $0.5 million decrease in operating expenses largely related to bad debt expense.

These decreases were partially offset by a $0.5 million increase in professional fees.

General and administrative expense increased by $1.6 million in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to a $2.3 million increase in professional fees related to accounting, legal and corporate advisory services and a $0.7 million increase in operating expenses largely related to bad debt expense.

These increases were partially offset by a $1.0 million decrease related to charitable contributions and taxes and a $0.7 million decrease in personnel cost.

Interest Income

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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% of revenue 2.6 % 2.5 % 2.7 % 2.4 %

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 income increased by $0.3 million in the three months ended June 30, 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 income increased by $1.3 million in the six months ended June 30, 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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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% of revenue (1.2) % (1.3) % (1.2) % (1.3) %

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

Interest expense remained consistent in the three and six months ended June 30, 2025 compared to the same period in 2024.

Other Income (Expense), Net

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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% of revenue 1.8 % (0.3) % 1.4 % (0.5) %

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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Other income (expense), net increased by $7.9 million in the six months ended June 30, 2025 compared to the same period in 2024, due to favorable market conditions resulting in an increase in unrealized gains primarily related to the British Pound Sterling and recognition of realized gains during the period.

Provision for Income Taxes

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

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

Provision for income taxes $ 2,000 $ 538 $ 1,462 271.7 % $ 4,700 $ 9,463 $ (4,763) (50.3) %

% of revenue 0.9 % 0.3 % 1.1 % 2.3 %

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.

Provision for income taxes increased by $1.5 million in the three months ended June 30, 2025 compared to the same period in 2024 primarily due to increased pre-tax earnings in the current period, resulting in an increase in domestic and international taxes.

Provision for income taxes decreased by $4.8 million in the six months ended June 30, 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.

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.

These key metrics also facilitate management's internal comparisons to our historical performance as well as comparisons to certain competitors' operating results.

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

2025 2024 2025 2024

(dollars in thousands)

Total revenue $ 214,193 $ 207,991 $ 424,446 $ 413,092

Year-over-year growth 3.0 % 9.2 % 2.7 % 10.6 %

Non-GAAP income from operations $ 36,348 $ 39,276 $ 68,701 $ 79,561

Non-GAAP operating margin 17.0 % 18.9 % 16.2 % 19.3 %

Free cash flow $ 42,280 $ 29,205 $ 66,957 $ 56,739

As of June 30,

(dollars in thousands)

Annualized recurring revenue (“ARR”) $ 840,610 $ 815,630

Year-over-year growth 3.1 % 8.6 %

Number of customers 11,643 11,484

Year-over-year growth 1.4 % 1.7 %

ARR per customer $ 72.2 $ 71.0

Year-over-year growth 1.7 % 6.8 %

Total Revenue and Growth .

We are focused on driving continued revenue growth through increased sales of our products and professional services to new and existing customers.

We monitor total revenue and believe it is useful to investors as a measure of the overall success of our business.

Non-GAAP Income from Operations and Non-GAAP Operating Margin .

We monitor non-GAAP income from operations and non-GAAP operating margin, non-GAAP financial measures, to analyze our financial results.

We believe non-GAAP income from operations and non-GAAP operating margin are useful to investors, as supplements to U.S.

See "Non-GAAP Financial Results" below for further information on non-GAAP income from operations and a reconciliation of non-GAAP income from operations to the comparable GAAP financial measure.

Free Cash Flow .

Free cash flow is a non-GAAP measure that we define as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.

See "Non-GAAP Financial Results" below for a reconciliation of non-GAAP free cash flow to the comparable GAAP financial measure.

Annualized Recurring Revenue and Growth.

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.

We use ARR and believe it is useful to investors as a measure of the overall success of our business.

Number of Customers .

We believe that the size of our customer base is an indicator of our global market penetration and that our net customer additions are an indicator of the growth of our business.

ARR per Customer .

ARR per customer is defined as ARR divided by the number of customers at the end of the period.

Non-GAAP Financial Results

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we may provide investors with certain non-GAAP financial measures from time to time, including non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and free cash flow.

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, non-ordinary course litigation-related expenses, impairment of long-lived assets, change in the fair value of derivative assets, restructuring expense and discrete tax items.

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

• Stock-based compensation expense.

We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense.

We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

• Amortization of acquired intangible assets.

• Amortization of debt issuance costs.

• Induced conversion expense.

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.

• Non-ordinary course litigation-related expenses.

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.

• 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 and we believe the exclusion of the impairment charges provides a more useful comparison of our operational performance in different periods.

• Restructuring expense.

• Discrete tax items.

• Anti-dilutive impact of capped call transaction.

Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes.

We include all non-GAAP financial measures in the current year or any comparative year that will be included in the non-GAAP reconciliation during the current fiscal year annual Form 10-K.

As such, not all non-GAAP financial measures listed above may be included in the current reporting period non-GAAP financial metrics presented with this Form 10-Q.

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and six months ended June 30, 2025 and 2024 :

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

2025 2024 2025 2024

(in thousands)

GAAP total gross profit $ 151,134 $ 146,999 $ 301,907 $ 291,106

Stock-based compensation expense 2,580 3,270 4,844 5,941

Amortization of acquired intangible assets 4,423 4,012 8,846 8,329

Non-GAAP total gross profit $ 158,137 $ 154,281 $ 315,597 $ 305,376

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

2025 2024 2025 2024

(in thousands)

GAAP gross profit – product subscriptions $ 150,861 $ 144,960 $ 300,428 $ 287,144

Stock-based compensation expense 2,054 2,802 3,785 5,100

Amortization of acquired intangible assets 4,423 4,012 8,846 8,329

Non-GAAP gross profit – product subscriptions $ 157,338 $ 151,774 $ 313,059 $ 300,573

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

2025 2024 2025 2024

(in thousands)

GAAP gross profit – professional services $ 273 $ 2,039 $ 1,479 $ 3,962

Stock-based compensation expense 526 468 1,059 841

Non-GAAP gross profit – professional services $ 799 $ 2,507 $ 2,538 $ 4,803

The following table reconciles GAAP income from operations to non-GAAP income from operations for the three and six months ended June 30, 2025 and 2024:

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

2025 2024 2025 2024

(in thousands)

GAAP income from operations

$ 3,494 $ 5,223 $ 3,393 $ 14,939

Stock-based compensation expense 27,581 29,066 54,732 54,811

Amortization of acquired intangible assets 5,090 4,709 10,210 9,723

Acquisition-related expenses (1)

183 278 366 278

Restructuring expense (2)

Non-GAAP income from operations $ 36,348 $ 39,276 $ 68,701 $ 79,561

(1) For the three and six months ended June 30, 2025, acquisition-related expenses included $0.2 million and $0.4 million, respectively of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

(2 For the three and six months ended June 30, 2024, restructuring expense was recorded within general and administrative expense in our consolidated statement of operations.

The following table reconciles GAAP net income to non-GAAP net income for the three and six months ended June 30, 2025 and 2024:

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

2025 2024 2025 2024

(in thousands, except share and per share data)

GAAP net income $ 8,338 $ 6,538 $ 10,443 $ 7,944

Stock-based compensation expense 27,581 29,066 54,732 54,811

Amortization of acquired intangible assets 5,090 4,709 10,210 9,723

Acquisition-related expenses 183 278 366 278

Amortization of debt issuance costs 999 1,055 2,018 2,108

Restructuring expense — — — (190)

Discrete tax items — — — 6,360

Non-GAAP net income $ 42,191 $ 41,646 $ 77,769 $ 81,034

Interest expense of convertible senior notes (1) 1,399 1,571 2,625 3,142

Numerator for non-GAAP earnings per share calculation $ 43,590 $ 43,217 $ 80,394 $ 84,176

Weighted average shares used in GAAP earnings per share calculation, basic 64,441,000 62,496,289 64,140,087 62,201,182

Dilutive effect of convertible senior notes (1) 10,686,653 11,183,611 10,429,891 11,183,611

Dilutive effect of employee equity incentive plans (2) 255,992 570,460 322,231 750,328

Weighted average shares used in non-GAAP earnings per share calculation, diluted 75,383,645 74,250,360 74,892,209 74,135,121

Non-GAAP net income per share:

Basic $ 0.65 $ 0.67 $ 1.21 $ 1.30

Diluted $ 0.58 $ 0.58 $ 1.07 $ 1.14

(1) We use the if-converted method to compute diluted earnings per share with respect to our Notes.

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 six months ended June 30, 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 to adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

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

2025 2024 2025 2024

(in thousands)

GAAP net income $ 8,338 $ 6,538 $ 10,443 $ 7,944

Interest income (5,514) (5,221) (11,272) (9,941)

Interest expense 2,627 2,673 5,281 5,343

Other (income) expense, net (3,957) 695 (5,759) 2,130

Provision for income taxes 2,000 538 4,700 9,463

Depreciation expense 2,349 2,775 5,140 5,683

Amortization of intangible assets 9,041 8,096 17,915 16,536

Stock-based compensation expense 27,581 29,066 54,732 54,811

Acquisition-related expenses 183 278 366 278

Restructuring expense

Adjusted EBITDA $ 42,648 $ 45,438 $ 81,546 $ 92,057

The following table reconciles net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2025 and 2024:

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

2025 2024 2025 2024

(in thousands)

Net cash provided by operating activities $ 47,542 $ 32,858 $ 77,299 $ 63,928

Purchases of property and equipment (948) (280) (2,309) (900)

Capitalized internal-use software costs (4,314) (3,373) (8,033) (6,289)

Free cash flow $ 42,280 $ 29,205 $ 66,957 $ 56,739

Liquidity and Capital Resources

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.

As of June 30, 2025, we had $261.3 million in cash and cash equivalents, $338.4 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, cash flow provided by operating activities and our Credit Agreement.

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 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.

On June 25, 2025 we entered into a credit agreement (the "Credit Agreement") that establishes a senior secured revolving credit facility and provides for borrowings in an aggregate principal amount of up to $200 million (the “Revolving Facility”, the loans thereunder, the “Revolving Loans” and the commitments thereunder, the “Revolving Commitments”).The Credit Agreement allows for incremental facilities up to the greater of $141 million or 75% of Consolidated EBITDA (as defined in the Credit Agreement).

Additional incremental facilities may be incurred, subject to certain conditions.

The proceeds of the Revolving Facility can be used to finance working capital needs, capital expenditures, permitted acquisitions and other general corporate purposes.

Refer to Note 10, Debt , for additional information related to the credit agreement.

We believe that our existing cash and cash equivalents, our investments, our cash generated by operating activities and our available borrowings under our Credit Agreement 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, potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes.

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See Note 14, 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.

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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,

The following table shows a summary of our cash flows for the six months ended June 30, 2025 and 2024:

Six Months Ended June 30,

(in thousands)

2 unchanged sentences

Net cash used in investing activities (120,530) (34,795)

Net cash provided by financing activities 4,732 4,362

Net cash (used in) provided by financing activities

(42,390) 3,361

Effects of exchange rates on cash, cash equivalents and restricted cash 4,847 (2,076)

3 unchanged sentences

Operating Activities

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.

Operating activities provided $77.3 million of cash and cash equivalents for the six months ended June 30, 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 $10.4 million and a decrease in our net operating assets and liabilities of $8.3 million, offset by non-cash charges of $75.1 million related primarily to depreciation and amortization, stock-based compensation expense, amortization of debt issuance costs and other non-cash charges.

1 unchanged sentence

These factors were offset by a $17.5 million decrease in accounts receivable and a $9.8 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.

Operating activities provided $63.9 million of cash and cash equivalents in the six months ended June 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 $10.5 million and a decrease in our net operating assets and liabilities of $23.6 million, offset by non-cash charges of $77.1 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges.

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Investing Activities

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.

Investing activities used $120.5 million of cash for the six months ended June 30, 2025, consisting of $111.5 million in purchases of investments, net of sales/maturities, $8.0 million for capitalization of internal-use software costs, and $2.3 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 $34.8 million of cash in the six months ended June 30, 2024, consisting of $28.0 million in purchases of investments, net of sales/maturities, $6.3 million for capitalization of internal-use software costs, and $0.9 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by proceeds of $0.4 million from other investing activities.

Financing Activities

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.

Financing activities used $42.4 million for the six months ended June 30, 2025, which consisted primarily of $46.0 million in conversion of convertible senior notes, $1.9 million in withholding taxes paid for the net share settlement of equity awards, and $1.3 million in debt issuance costs, partially offset by $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.

Financing activities provided $3.4 million of cash in the six months ended June 30, 2024, which consisted primarily of $5.0 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc.

2015 Employee Stock Purchase Plan (“ESPP”) and $1.4 million in proceeds from the exercise of stock options, partially offset by $3.1 million in withholding taxes paid for the net share settlement of equity awards.

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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 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.

As of June 30, 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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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