What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-08 · 99 added, 122 removed, 410 unchanged (35% of the section changed)

53 unchanged sentences

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 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.

As of September 30, 2025, we had over 11,000 customers in 150 countries, including 36% 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 nine months ended September 30, 2025 or 2024.

Recent Developments

5 unchanged sentences

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.

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.

2 unchanged sentences

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.

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

As of September 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 OBBBA changed the current tax law related to both corporate income taxes and deferred tax assets and liabilities, which we currently account 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.

We concluded the OBBBA did not have a material impact on our provision for income tax.

As a result of the application of OBBBA, we recorded a benefit to the tax provision for the three months ended September 30, 2025.

Our Business Model

11 unchanged sentences

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

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.

For the three and nine months ended September 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 96%, and 97% of total revenue in 2025, and 96% and 96%, respectively, in 2024.

Immaterial Correction of an Error

2 unchanged sentences

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.

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 .

22 unchanged sentences

Operating Expenses

Operating expenses consist of research and development, sales and marketing, general and administrative expenses, and restructuring.

Operating expenses consist of research and development, sales and marketing, general and administrative expenses, and restructuring costs.

Operating expenses include overhead costs for depreciation, facilities, IT, information security and recruiting.

4 unchanged sentences

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

11 unchanged sentences

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.

Provision for Income Taxes

(Benefit) Provision for Income Taxes

Provision for income taxes consists of domestic and foreign taxes on income and withholding taxes.

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 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.

We determined as of September 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 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 June 30, Six Months Ended June 30,

All numbers presented below are in thousands except for percentages.

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

2025 2024 2025 2024

14 unchanged sentences

Income from operations 5,903 12,817 9,296 27,756

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

Interest income 6,167 5,571 17,439 15,512

Interest expense (2,585) (2,837) (7,866) (8,180)

Other income (loss), net

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

Other (expense) income, net (173) 2,811 5,586 681

Income before income taxes 9,312 18,362 24,455 35,769

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

(Benefit) provision for income taxes (497) 2,952 4,203 12,415

Net income $ 9,809 $ 15,410 $ 20,252 $ 23,354

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

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

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

2025 2024 2025 2024

6 unchanged sentences

Total stock-based compensation expense $ 26,327 $ 25,738 $ 81,059 $ 80,549

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

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

2025 2024 2025 2024

7 unchanged sentences

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

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

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

2025 2024 2025 2024

(in thousands)

Consolidated Statement of Operations Data:

12 unchanged sentences

Income from operations 3 % 6 % 1 % 4 %

1.6 2.5 0.8 3.7

Interest income 3 % 3 % 3 % 2 %

1 unchanged sentence

Other income (loss), net — % 1 % 1 % — %

1.8 (0.3) 1.4 (0.5)

Income before income taxes 4 % 9 % 4 % 6 %

1 unchanged sentence

Net income 5 % 7 % 3 % 4 %

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

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

All numbers presented below are in thousands, except for percentages.

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Product subscriptions $ 210,146 $ 205,593 $ 4,553 2.2 % $ 622,178 $ 602,578 $ 19,600 3.3 %

1 unchanged sentence

Total revenue $ 217,960 $ 214,654 $ 3,306 1.5 % $ 642,406 $ 627,746 $ 14,660 2.3 %

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.

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.

The increase in total revenue for the nine months ended September 30, 2025 as compared to the same period in 2024 of $14.7 million was primarily driven by renewals, upselling activities, and cross-selling initiatives conducted with the existing customer base of $19.6 million.

This increase in revenue was partially offset by a $8.5 million decline in revenues generated from new customers as compared to the revenue derived from new customers in the corresponding periods of the prior year.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

Cost of Revenue

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

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Cost of revenue:

6 unchanged sentences

Total gross margin % 70.2 % 70.6 % 70.8 % 70.5 %

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.

The increase in total cost of revenue for the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily driven by an increase in cloud computing costs of $4.5 million, amortization expense for capitalized internally-developed software of $1.9 million, and software subscriptions and royalties of $0.9 million.

The increase was partially offset by a decrease in personnel costs of $4.7 million, including a $7.7 million decrease due to a shift in the nature of certain roles and responsibilities between product delivery and sales support functions offset by a $3.0 million increase in personnel costs as we invest in the business to accelerate future growth .

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

Operating Expenses

Research and Development Expense

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

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Research and development $ 46,914 $ 44,976 $ 1,938 4.3 % $ 142,029 $ 126,792 $ 15,237 12.0 %

% of revenue 21.5 % 21.0 % 22.1 % 20.2 %

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.

Research and development expenses increased for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily driven by an increase in personnel cost of $11.9 million, inclusive of stock-based compensation, as well as third-party cloud infrastructure costs of $3.4 million related to the continuous development of new products and enhancements of existing products.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

Sales and Marketing Expense

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

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Sales and marketing $ 79,296 $ 74,821 $ 4,475 6.0 % $ 237,943 $ 226,042 $ 11,901 5.3 %

% of revenue 36.4 % 34.9 % 37.0 % 36.0 %

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.

Sales and marketing expenses increased for the nine months ended September 30, 2025 as compared to the same periods in 2024, primarily driven by an $8.9 million increase in personnel costs.

This increase was driven by $9.3 million of headcount related changes associated with a shift in the nature of certain roles and responsibilities between product delivery and sales support functions, as well as a net increase in overall headcount.

These increases were partially offset by a $0.4 million decrease in personnel cost attributable to lower spending on contract labor.

Also contributing to the overall increase in sales and marketing expenses were higher marketing and advertising costs of $1.8 million and an additional $0.9 million of increased costs related to corporate events and related activities .

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

General and Administrative Expense

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

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

General and administrative $ 20,863 $ 18,883 $ 1,980 10.5 % $ 65,615 $ 62,013 $ 3,602 5.8 %

% of revenue 9.6 % 8.8 % 10.2 % 9.9 %

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.

General and administrative expenses increased for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily driven by an increase in personnel expenses of $1.9 million as we continue to invest in our growth, increased professional fees of $2.4 million related to accounting, legal and corporate advisory services, and increased software-related expenses of $0.8 million partially offset by decreased infrastructure expenses of $2.0 million.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

Interest Income

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

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Interest income $ 6,167 $ 5,571 $ 596 10.7 % $ 17,439 $ 15,512 $ 1,927 12.4 %

% of revenue 2.8 % 2.6 % 2.7 % 2.5 %

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 income increased in the three and nine months ended September 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.

Interest Expense

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

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Interest expense $ (2,585) $ (2,837) $ 252 (8.9) % $ (7,866) $ (8,180) $ 314 (3.8) %

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

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 June 30, Change Six Months Ended June 30, Change

Interest expense remained consistent in the three and nine months ended September 30, 2025 as compared to the same periods in 2024.

Other (Expense) Income, Net

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

Other income (expense), net $ 3,957 $ (695) $ 4,652 (669.4) % $ 5,759 $ (2,130) $ 7,889 (370.4) %

Other (expense) income, net $ (173) $ 2,811 $ (2,984) (106.2) % $ 5,586 $ 681 $ 4,905 720.3 %

% of revenue (0.1) % 1.3 % 0.9 % 0.1 %

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 June 30, Change Six Months Ended June 30, Change

Other (expense) income, net increased for the nine months ended September 30, 2025 compared to the same period primarily driven by favorable foreign exchange currency rates resulting in an increase in realized and unrealized gains primarily related to the British Pound Sterling.

Other (expense) income, net decreased for the three months ended September 30, 2025 compared to the same period due to unfavorable foreign exchange currency rates resulting in an increase in realized and unrealized losses primarily related to the British Pound Sterling.

(Benefit) provision for income taxes

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

2025 2024 $ % 2025 2024 $ %

(dollars in thousands)

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

(Benefit) provision for income taxes $ (497) $ 2,952 $ (3,449) (116.8) % $ 4,203 $ 12,415 $ (8,212) (66.1) %

% of revenue (0.2) % 1.4 % 0.7 % 2.0 %

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.

The tax provision for the nine months ended September 30, 2025 decreased primarily as a result of a 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.

and the impact of OBBBA, partially offset by an increase in domestic and international taxes in the current period.

(Benefit) provision for income taxes for the three months ended September 30, 2025 changed from an income tax provision to income tax benefit due to the impact of OBBBA on our tax provision.

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.

2 unchanged sentences

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 June 30, Six Months Ended June 30,

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

(in thousands, except percentages)

2025 2024 2025 2024

(dollars in thousands)

Total revenue $ 217,960 $ 214,654 $ 642,406 $ 627,746

3 unchanged sentences

Free cash flow $ 30,111 $ 38,502 $ 97,820 $ 95,241

As of June 30,

(dollars in thousands)

As of September 30,

(in thousands, except percentages)

Annualized recurring revenue (“ARR”) $ 837,730 $ 823,104

56 unchanged sentences

• 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.

We exclude non-ordinary course restructuring expenses related to the Restructuring Plan as defined in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 28, 2025 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.

10 unchanged sentences

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 six months ended June 30, 2025 and 2024 :

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

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and nine months ended September 30, 2025 and 2024 (in thousands) :

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

2025 2024 2025 2024

(in thousands)

GAAP total gross profit $ 152,976 $ 151,497 $ 454,883 $ 442,603

2 unchanged sentences

Non-GAAP total gross profit $ 159,857 $ 159,048 $ 475,454 $ 464,424

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

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

2025 2024 2025 2024

(in thousands)

GAAP gross profit – product subscriptions $ 151,883 $ 148,819 $ 452,311 $ 435,963

2 unchanged sentences

Non-GAAP gross profit – product subscriptions $ 158,238 $ 155,914 $ 471,297 $ 456,487

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

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

2025 2024 2025 2024

(in thousands)

GAAP gross profit – professional services $ 1,093 $ 2,678 $ 2,572 $ 6,640

1 unchanged sentence

Non-GAAP gross profit – professional services $ 1,619 $ 3,134 $ 4,157 $ 7,937

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,

The following table reconciles GAAP income from operations to non-GAAP income from operations for the three and nine months ended September 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

(in thousands)

GAAP income from operations $ 5,903 $ 12,817 $ 9,296 $ 27,756

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

Stock-based compensation expense 26,327 25,738 81,059 80,549

4 unchanged sentences

Non-GAAP income from operations $ 36,906 $ 43,952 $ 105,607 $ 123,513

(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,

(1) Acquisition-related expenses included expenses included $0.1 million and $0.5 million for the three and nine months ended September 30, 2025, respectively, and $0.3 million and 0.6 million for the three and nine months ended September 30, 2024, respectively 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 consolidated statement of operations.

The following table reconciles GAAP net income to non-GAAP net income for the three and nine months ended September 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

(in thousands, except share and per share data)

GAAP net income $ 9,809 $ 15,410 $ 20,252 $ 23,354

17 unchanged sentences

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.

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

The following table reconciles GAAP net income to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

(in thousands)

GAAP net income $ 9,809 $ 15,410 $ 20,252 $ 23,354

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Interest expense 2,585 2,837 7,866 8,180

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

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

Other expense (income), net 173 (2,811) (5,586) (681)

(Benefit) provision for income taxes (497) 2,952 4,203 12,415

Depreciation expense 2,339 2,718 7,478 8,401

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Adjusted EBITDA $ 43,514 $ 50,083 $ 125,059 $ 142,140

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,

The following table reconciles net cash provided by operating activities to free cash flow for the three and nine months ended September 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

(in thousands)

Net cash provided by operating activities $ 38,199 $ 43,969 $ 116,250 $ 107,897

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Liquidity and Capital Resources

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.

As of September 30, 2025, we had $130.6 million in cash and cash equivalents, $503.9 million in investments that have maturities ranging from one to nineteen months and an accumulated deficit of $967.8 million.

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

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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.

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.

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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 six months ended June 30, 2025 and 2024:

Six Months Ended June 30,

(in thousands)

The following table shows a summary of our cash flows for the nine months ended September 30, 2025 and 2024 (in thousands):

Nine Months Ended September 30,

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

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Net cash (used in) provided by financing activities (40,828) 6,799

(42,390) 3,361

Effects of exchange rates on cash, cash equivalents and restricted cash 5,272 770

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Operating Activities

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.

Operating activities provided $116.3 million of cash and cash equivalents for the nine months ended September 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 $20.3 million and an increase of our net operating assets and liabilities of $16.4 million, offset by non-cash charges of $112.4 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 $11.6 million decrease in accrued expenses, a $36.9 million decrease in deferred revenue, a $1.3 million increase in prepaid expenses, a $2.8 million decrease in other liabilities and a $3.8 million decrease in accounts payable, which each had a negative impact on operating cash flow.

These factors were offset by a $25.9 million decrease in accounts receivable and a $14.1 million decrease in deferred contract acquisition and fulfillment costs, which each had a positive impact on operating cash flow.

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.

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 $23.4 million and non-cash charges of $119.2 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.

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.

Investing Activities

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.

Investing activities used $292.2 million of cash for the nine months ended September 30, 2025, consisting of $503.0 million in purchases of investments, net of sales/maturities, $12.0 million for capitalization of internal-use software costs, and $6.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $227.5 million in proceeds from other investments.

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.

Financing Activities

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.

Financing activities used $40.8 million for the nine months ended September 30, 2025, which consisted primarily of $46.0 million in conversion of convertible senior notes, $2.4 million in withholding taxes paid for the net share settlement of equity awards, and $1.7 million in debt issuance costs, partially offset by $7.7 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.

Financing activities provided $6.8 million of cash in the nine months ended September 30, 2024, 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.

Contractual Obligations and Commitments

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.

As of September 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 13, Commitments and Contingencies , in the notes to our unaudited condensed consolidated financial statements.

Off-Balance Sheet Arrangements

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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