What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-05 · 148 added, 92 removed, 365 unchanged (40% of the section changed)

12 unchanged sentences

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

• our ability to capitalize on customer demand for consolidated security platforms and vendor consolidation trends, including out ability to deliver an integrated, open security operations platform;

• our ability to capitalize on customer demand for consolidated security platforms and vendor consolidation trends, including our ability to deliver an integrated, open security operations platform;

• our ability to deliver, scale and operate managed services (including managed detection and response (“MDR”) and related offerings, including with respect to service quality, staffing, operating efficiency, and the integration of technology and expertise;

46 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 March 31, 2026, we had over 11,500 customers in 150 countries, including 35% 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, 2026 and 2025.

As of June 30, 2026, we had over 11,500 customers in 149 countries, including 34% 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, 2026 and 2025.

Recent Developments

Kenzo Security Acquisition

On March 26, 2026, we acquired Kenzo Security, Inc.

("Kenzo") an agentic AI security platform built to scale autonomous security investigations for a p urchase price with an aggregate fair value of $25.5 million.

The purchase consideration consisted of $24.2 million in cash paid at closing and $1.3 million of deferred cash payments related to certain indemnities outlined in the purchase agreement.

The acquisition further enhances our Command Platform, accelerating industry-leading MDR services from AI-assisted workflows to AI-driven, machine-speed security operations.

Restructuring Plan

In June 2026, we executed a limited restructuring activity designed to improve operational efficiencies and better align our workforce with current business needs.

The restructuring included a reduction of our workforce primarily within our sales and marketing departments and, to a lesser degree, within our general and administrative business support departments.

The restructuring activities are expected to be substantially completed by the end of the third quarter of 2026 with some payments continuing into the fourth quarter of 2026, subject to local law and consultation requirements.

For further information, refer to Note 15, Restructuring, in the Notes to our Consolidated Financial Statements.

On August 7, 2026, our board of directors approved a restructuring plan that is designed to simplify our operations, align resources and investments with our core platform, and create capacity to reinvest in capabilities and solutions that improve the customer experience and strengthen our competitive position (collectively, the “2026 Restructuring Plan”).

The 2026 Restructuring Plan includes reduction of the Company’s workforce by approximately 12%.

For further information, refer to Note 16, Subsequent events, in the Notes to our Consolidated Financial Statements.

The actions associated with the Restructuring Plan are expected to be completed by the end of fiscal 2026, subject to local law and consultation requirements.

Leadership Transition

Effective June 1, 2026, Wael Mohamed was appointed Chief Executive Officer, Corey Thomas was appointed Executive Chairman, and Marc Brown was appointed Lead Independent Director.

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 months ended March 31, 2026 and 2025, 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 each of the three and six months ended June 30, 2026 and 2025, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 97% of total revenue.

Components of Results of Operations

16 unchanged sentences

Cost of professional services consists of personnel and related costs for our professional services team, including salaries and other payroll related costs, bonuses, stock-based compensation, costs of contracted third-party vendors, travel and entertainment expenses and allocated overhead costs.

We expect our cost of revenue to increase on an absolute dollar basis as we continue to grow our revenue over time.

We expect our cost of revenue to fluctuate on an absolute dollar basis as we continue to grow our revenue over time.

Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the average sales price of our products and services, transaction volume growth, the mix of revenue between software licenses, cloud-based subscriptions, managed services and professional services and changes in cloud computing costs.

5 unchanged sentences

All overhead costs are allocated based on relative headcount.

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

In the near term, we are taking restructuring actions that are expected to reduce the absolute amount of our expenses while continuing to prioritize investments to drive growth.

Research and Development Expense

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

Restructuring Expense

Restructuring expense consists of charges related to a restructuring plan such as employee transition, notice period and severance payments and employee benefits and related facilitation costs.

For further information, refer to Note 15, Restructuring , in the Notes to our unaudited condensed consolidated financial statements.

Interest Income

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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, 2026 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 sustained future growth, supports the realization of such deferred tax assets.

We determined as of June 30, 2026 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 sustained future profitability, 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.

1 unchanged sentence

The following table presents the consolidated statement of operations data (in thousands):

Three Months Ended March 31,

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

2026 2025 2026 2025

Product subscriptions $ 205,051 $ 208,097 $ 409,100 $ 412,032

9 unchanged sentences

General and administrative 17,385 21,166 35,597 44,752

Restructuring 1,675 — 1,675 —

Total operating expenses 142,319 147,640 287,819 298,514

Loss from operations (558) (101)

Income from operations 3,019 3,494 2,461 3,393

Interest income 5,539 5,514 11,151 11,272

2 unchanged sentences

Income before income taxes 5,863 10,338 7,693 15,143

Provision for income taxes 700 2,700

(Benefit) provision for income taxes (210) 2,000 490 4,700

Net income $ 6,073 $ 8,338 $ 7,203 $ 10,443

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

Three Months Ended March 31,

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

2026 2025 2026 2025

Stock-based compensation expense:

4 unchanged sentences

Total stock-based compensation expense $ 19,825 $ 27,581 $ 39,715 $ 54,732

Three Months Ended March 31,

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

2026 2025 2026 2025

Depreciation and amortization expense:

5 unchanged sentences

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,

2026 2025 2026 2025

Product subscriptions 97.2 % 97.2 % 97.3 % 97.1 %

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General and administrative 8.2 % 9.9 % 8.5 % 10.5 %

Restructuring 0.8 % — % 0.4 % — %

Total operating expenses 67.5 % 68.9 % 68.5 % 70.3 %

Loss from operations (0.3) % (0.1) %

Income from operations 1.4 % 1.5 % 0.6 % 0.8 %

Interest income 2.6 % 2.6 % 2.7 % 2.7 %

2 unchanged sentences

Income before income taxes 2.8 % 4.8 % 1.9 % 3.7 %

Provision for income taxes 0.3 % 1.3 %

(Benefit) provision for income taxes (0.1) % 0.9 % 0.1 % 1.1 %

Net income 2.9 % 3.9 % 1.8 % 2.6 %

Comparison of the Three Months Ended March 31, 2026 and 2025

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

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

Three Months Ended March 31, Change

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

2026 2025 $ % 2026 2025 $ %

2 unchanged sentences

Total revenue $ 210,883 $ 214,193 $ (3,310) (1.5) % $ 420,574 $ 424,446 $ (3,872) (0.9) %

The decrease in total revenue for the three months ended March 31, 2026 as compared to the same period in 2025 was driven by a decrease in professional services revenue from less consulting testing performed in the first quarter of 2026.

Revenue from product subscriptions was approximately flat.

Cost of Revenue

Three Months Ended March 31, Change

Total revenue decreased by $3.9 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025, primarily driven by a decrease in our non-core standalone products, partially offset by an increase in our managed detection and response revenue.

The decrease in professional services revenue was primarily driven by lower penetration-testing revenue.

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

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

2026 2025 $ % 2026 2025 $ %

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Total gross margin % 68.9 % 70.6 % 69.0 % 71.1 %

The increase in total cost of revenue for the three months ended March 31, 2026 as compared to the same period in 2025 was primarily driven by a $3.1 million increase in personnel costs related to supporting product delivery, a $0.9 million increase in cloud computing costs, a $0.6 million increase in amortization expense for capitalized internally-developed software, and a $0.5 million increase in facilities expenses.

The increase was partially offset by $0.1 million decrease in subscription expense.

The increase in total cost of revenue for the six months ended June 30, 2026 compared with the corresponding period in 2025 was primarily driven by an increase of personnel expenses of $4.5 million, inclusive of a $6.1 million increase in wages and wage-related expenses primarily driven by an increase in headcount, partially offset by a $1.5 million decrease in stock-based compensation expense, which was driven by stock awards granted at lower stock prices and fewer awards granted than in the same period in 2025;

a $1.1 million increase in cloud computing costs;

a $1.0 million increase in facilities related expenses;

and $0.8 million increase in amortization expense related to acquired developed technologies and capitalized internally-developed software.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the six-month period discussed 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

2026 2025 $ % 2026 2025 $ %

1 unchanged sentence

% of revenue 22.3 % 22.0 % 22.7 % 22.4 %

Research and development expenses increased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a $2.5 million increase in personnel cost driven by an increase in headcount to further product development and offset by a $0.6 million decrease in impairment expense of capitalized internally-developed software projects, $0.5 million decrease in professional expenses, and $0.5 million decrease in hosting expenses.

Research and development expenses slightly increased for the six months ended June 30, 2026 as compared to the same period in 2025, primarily driven by a $3.3 million increase in personnel costs, including a $6.2 million increase in wages and wage-related expenses, partially offset by a $3.0 million decrease in stock-based compensation expense which was driven by stock awards granted at lower stock prices and fewer awards granted than in the same period in 2025;

a $1.0 million decrease related to professional fees as we used less third-party services;

a $0.9 million decrease in hosting and cloud computing expenses;

a $0.6 million decrease in impairment of internally-developed software expense;

and a $0.8 decrease in expenses driven by a gain from hedging activities related to international research and development wages and wage-related costs.

These expenses were offset by a $0.2 million increase to engineering costs as we continue to develop new and enhance existing products.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the six-month period discussed as there were no material drivers for the reduction of expense in comparative three-month period as opposed to the slight increase in expense in comparative six-month periods.

Sales and Marketing Expense

Three Months Ended March 31, Change

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

2026 2025 $ % 2026 2025 $ %

1 unchanged sentence

% of revenue 36.1 % 37.0 % 36.9 % 37.4 %

Sales and marketing expenses decreased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a $2.6 million decrease in personnel costs, primarily consisting of a $2.2 million decrease in SBC expense $1.3 million decrease in commissions, and offset by a $0.9 million increase to salaries and bonus costs.

The decrease was also driven by a $0.6 million decrease in amortization of acquired intangibles.

The decrease was partially offset by a $0.9 million increase in full time and contract labor costs.

The decrease was partially offset by a $1.7 million increase to our sales related events and a $1.3 million increase to professional fees for consulting.

Sales and marketing expenses decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by a $6.7 million decrease in personnel related expenses, which was substantially driven by the $0.7

million restructuring charges which reduced personnel related expenses for the quarter and a $5.2 million decrease in stock-based compensation which was driven by stock awards granted at lower stock prices and fewer awards granted than in the same period in 2025.

Sales and marketing expense was further reduced by a $1.2 million decrease in amortization expense as the customer relationships intangible asset was completely amortized as of April 2026.

The decrease was offset by a $2.4 million increase in professional fees for consulting, a $1.7 million increase expenses from sales related events, and a $0.8 million increase in marketing expenses.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the six-month period discussed above except for the impact of the $0.7 million restructuring charges which reduced personnel related expenses for the three months ended June 30, 2026 as compared to the same period in 2025.

General and Administrative Expense

Three Months Ended March 31, Change

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

2026 2025 $ % 2026 2025 $ %

1 unchanged sentence

% of revenue 8.2 % 9.9 % 8.5 % 10.5 %

General and administrative expenses decreased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a decrease of $3.2 million personnel costs, which included a $2.6 million decrease in stock-based compensation expense due to fewer awards granted and more recent grants valued at a lower grant price.

Additionally, professional fees decreased by $1.7 million, primarily related to certain consulting services, and a $1.2 million decrease in bad debt expense.

The decrease was partially offset by an increase in hosting expenses of $0.6 million associated with enterprise software and cloud computing costs and $0.5 million of acquisition-related expenses associated with our acquisition of Kenzo.

General and administrative expenses decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by a $5.8 million decrease in personnel costs, which included a $5.3 million decrease in stock-based compensation expense due to more recent grants valued at a lower grant price and fewer awards granted.

Additionally, professional fees decreased by $2.7 million, primarily related to legal and accounting services, and a $0.9 million decrease in bad debt expense.

The decrease was partially offset by an increase in hosting expenses of $0.8 million associated with enterprise software and cloud computing costs.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the six-month period discussed above, except for bad debt expense which increased by $0.3 million for the three months ended June 30, 2026 as compared to the same period in 2025.

Restructuring Expense

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

2026 2025 $ % 2026 2025 $ %

Restructuring $ 1,675 $ — $ 1,675 100.0 % $ 1,675 $ — $ 1,675 100.0 %

% of revenue 0.8 % — % 0.4 % — %

Restructuring expenses increased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by a restructuring primarily from our reduction in force as we realign our workforce to focus on our core platform and create capacity to reinvest in capabilities and solutions that improve the customer experience and strengthen our competitive position.s whereas, there were no restructuring expenses in 2025

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

Interest Income

Three Months Ended March 31, Change

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

2026 2025 $ % 2026 2025 $ %

1 unchanged sentence

% of revenue 2.6 % 2.6 % 2.7 % 2.7 %

Interest income slightly decreased for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to lower cash and investment balances this year compared to prior year.

Interest income slightly decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by lower investment balances partially offset by interest income generated from higher cash and cash equivalent balances compared to the prior year.

Interest income was relatively flat for the three months ended June 30, 2026 compared to the same period in 2025, primarily driven by higher cash and cash equivalent balances partially offset by the lower investment balance in the three-month period ended June 30, 2026 as compared to the cash and cash equivalent balances in the comparative period.

Interest Expense

Three Months Ended March 31, Change

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

2026 2025 $ % 2026 2025 $ %

1 unchanged sentence

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

Interest expense slightly decreased in the three months ended March 31, 2026 compared to the same period in 2025.

Interest expense decreased by $0.3 million for the six months ended June 30, 2026 compared with the corresponding period in 2025 primarily because the prior-year period included interest on the 2025 Notes prior to their maturity in May 2025.

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

Other (Expense) Income, Net

Three Months Ended March 31, Change

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

2026 2025 $ % 2026 2025 $ %

1 unchanged sentence

% of revenue (0.1) % 1.8 % (0.2) % 1.4 %

Other (expense) income, net decreased for the three months ended March 31, 2026 compared to the same period in 2025 primarily due to unrealized losses on foreign currency transactions resulting in an increase in unrealized losses as compared to unrealized gains in comparative periods primarily related to the British Pound Sterling and Euro.

Provision for income taxes

Three Months Ended March 31, Change

Other (expense) income, net decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025 primarily due to realized and unrealized losses on foreign currency transactions primarily related to transactions in the British Pound Sterling, the Euro, and the Israeli Shekel during the six months ended June 30, 2026 as compared to unrealized gains in the same period in 2025.

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

(Benefit) provision for income taxes

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

2026 2025 $ % 2026 2025 $ %

Provision for income taxes $ 700 $ 2,700 $ (2,000) (74.1) %

(Benefit) provision for income taxes $ (210) $ 2,000 $ (2,210) (110.5) % $ 490 $ 4,700 $ (4,210) (89.6) %

% of revenue (0.1) % 0.9 % 0.1 % 1.1 %

Provision for income taxes decreased for the three months ended March 31, 2026 compared to the same period in 2025.

The decrease was primarily driven by a one-time discrete tax benefit in the first quarter of 2026 for $0.6 million related to the acquisition of Kenzo and an increase to tax expense in the first quarter of 2025 for $1.1 million related to an unfavorable international return-to-provision expense of $1.1 million.

Provision for income taxes decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025.

The decrease was primarily driven by a $3.2 million net favorable change in foreign provisions primarily from foreign return to provision adjustments, $0.6 million discrete tax benefit from the Kenzo acquisition, and a lower domestic tax expense due to OBBBA.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the six-month period discussed above except for the impact from the $0.6 million discrete tax benefit which was recorded in the first quarter of 2026.

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

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

Three Months Ended March 31,

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

2026 2025 2026 2025

Total revenue $ 210,883 $ 214,193 $ 420,574 $ 424,446

Year-over-year growth (1.5) % 3.0 % (0.9) % 2.7 %

Income from operations $ 3,019 $ 3,494 $ 2,461 $ 3,393

Non-GAAP income from operations $ 28,885 $ 36,348 $ 53,317 $ 68,701

Operating margin 1.4 % 1.6 % 0.6 % 0.8 %

Non-GAAP operating margin 13.7 % 17.0 % 12.7 % 16.2 %

Net cash provided by operating activities $ 36,988 $ 47,542 $ 76,805 $ 77,299

Free cash flow $ 31,925 $ 42,280 $ 65,342 $ 66,957

As of March 31,

As of June 30,

Annualized recurring revenue (“ARR”) $ 824,020 $ 840,610

14 unchanged sentences

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.

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.

20 unchanged sentences

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

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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.

• Restructuring expense.

We exclude non-ordinary course restructuring expenses related to the restructuring activities 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.

5 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 months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and six months ended June 30, 2026 and 2025 (in thousands):

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

2026 2025 2026 2025

GAAP total gross profit $ 145,338 $ 151,134 $ 290,280 $ 301,907

2 unchanged sentences

Non-GAAP total gross profit $ 151,169 $ 158,137 $ 302,250 $ 315,597

Three Months Ended March 31,

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

2026 2025 2026 2025

GAAP gross profit – product subscriptions $ 145,126 $ 150,861 $ 290,021 $ 300,428

2 unchanged sentences

Non-GAAP gross profit – product subscriptions $ 150,653 $ 157,338 $ 301,340 $ 313,059

Three Months Ended March 31,

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

2026 2025 2026 2025

GAAP gross profit – professional services $ 212 $ 273 $ 259 $ 1,479

1 unchanged sentence

Non-GAAP gross profit – professional services $ 516 $ 799 $ 910 $ 2,538

The following table reconciles GAAP loss from operations to non-GAAP income from operations for the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

GAAP loss from operations $ (558) $ (101)

The following table reconciles GAAP income from operations to non-GAAP income from operations for the three and six months ended June 30, 2026 and 2025 (in thousands):

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

2026 2025 2026 2025

GAAP income from operations $ 3,019 $ 3,494 $ 2,461 $ 3,393

Stock-based compensation expense 19,825 27,581 39,715 54,732

1 unchanged sentence

Acquisition-related expenses (1)

98 183 704 366

Restructuring expenses 1,675 — 1,675 —

Non-GAAP income from operations $ 28,885 $ 36,348 $ 53,317 $ 68,701

(1) For the three months ended March 31, 2026 and 2025, acquisition-related expenses included $0.1 million and $0.2 million, respectively, of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

The following table reconciles GAAP net income to non-GAAP net income for the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

(1) For the three and six months ended June 30, 2026 and 2025, acquisition-related expenses included $0.1 million and $0.2 million and $0.7 million and $0.4 million, respectively, of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

The following table reconciles GAAP net income to non-GAAP net income for the three and six months ended June 30, 2026 and 2025 (in thousands):

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

2026 2025 2026 2025

GAAP net income $ 6,073 $ 8,338 $ 7,203 $ 10,443

3 unchanged sentences

Amortization of debt issuance costs 1,077 999 2,122 2,018

Restructuring expense 1,675 — 1,675 —

Discrete tax items — — (600) —

1 unchanged sentence

Interest expense of convertible senior notes (1)

1,312 1,399 2,625 2,625

Numerator for non-GAAP earnings per share calculation $ 34,328 $ 43,590 $ 62,206 $ 80,394

10 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 months ended March 31, 2026, the 2029 Notes and 2027 Notes were dilutive, for the three months ended March 31, 2025 the 2029 Notes, 2027 Notes and 2025 Notes were dilutive.

On an if converted basis, for the three and six months ended June 30, 2026, the 2029 Notes and 2027 Notes were dilutive, for the six months ended June 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 months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

The following table reconciles GAAP net income to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 (in thousands):

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

2026 2025 2026 2025

GAAP net income $ 6,073 $ 8,338 $ 7,203 $ 10,443

7 unchanged sentences

Acquisition-related expenses 98 183 704 366

Restructuring expense 1,675 — 1,675 —

Adjusted EBITDA $ 35,848 $ 42,648 $ 66,996 $ 81,546

The following table reconciles net cash provided by operating activities to free cash flow for the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

The following table reconciles net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2026 and 2025 (in thousands):

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

2026 2025 2026 2025

Net cash provided by operating activities $ 36,988 $ 47,542 $ 76,805 $ 77,299

3 unchanged sentences

Liquidity and Capital Resources

As of March 31, 2026, we had $343.3 million in cash and cash equivalents, $327.0 million in investments that have maturities ranging from one to eleven months and an accumulated deficit of $963.5 million.

As of June 30, 2026, we had $425.6 million in cash and cash equivalents, $277.0 million in investments that have maturities ranging from one to eight months and an accumulated deficit of $957.5 million.

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.

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).

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.

As of March 31, 2026, we were in compliance with all applicable covenants and had sufficient capacity under the affirmative covenants.

As of June 30, 2026, we were in compliance with all applicable covenants and had sufficient capacity under the affirmative covenants.

Refer to Note 9, 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.

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, any election we make to redeem our convertible senior notes, and the repayment of the $600 million 2027 Notes .

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

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

For more information regarding this commitment, see Note 15, Commitments and Contingencies , in the Notes to our consolidated financial statements on Form 10-K for the year ended

December 31, 2025, filed with the SEC on February, 19, 2026 .

As a result of the repayment of the 2027 Notes, we expect a reduction to cash received from interest income.

For more information regarding this commitment, see Note 15, Commitments and Contingencies , in the Notes to our consolidated financial statements

on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 19, 2026 .

In preparation for the repayment of the 2027 Notes, due on March 15, 2027, we implemented the following measures:

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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 three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

The following table shows a summary of our cash flows for the six months ended June 30, 2026 and 2025 (in thousands):

Six Months Ended June 30,

Cash, cash equivalents and restricted cash at beginning of period $ 246,664 $ 342,101

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Operating Activities

Operating activities provided $39.8 million of cash and cash equivalents for the three months ended March 31, 2026, which reflects the cash generating ability of our operations.

Operating activities provided $76.8 million of cash and cash equivalents for the six months ended June 30, 2026, which reflects our ability to generate cash from our operations.

Cash provided by operating activities was primarily driven by a net income of $7.2 million in addition to significant beneficial adjustments to reconcile net income to net cash provided from operating activities including $39.7 million in stock-based compensation, $22.4 million of depreciation from our fixed assets, and amortization, primarily from our internally-developed software and acquired intangibles.

Additionally, working capital contributed an additional $6.3 million of cash to operating activities primarily driven by significant accounts receivable collections of $31.4 million, partially offset by decreases in accrued expenses of $14.8 million and $11.1 million of deferred revenue.

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.

Additionally, working capital contributed an additional $7.2 million of cash to operating activities primarily driven by increase to operating cash flow from accounts receivable of $25.2 million, partially offset by decreases in deferred revenue of $19.6 million and accrued expenses of $8.3 million.

Operating activities provided $77.3 million of cash and cash equivalents for the six months ended June 30, 2025, which demonstrates our ability to generate cash from our operations 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.

The change in our net operating assets and liabilities was primarily due to a $13.2 million decrease in accrued expenses, a $12.3 million decrease in deferred revenue, a $5.8 million increase in prepaid expenses, a $1.2 million decrease in other liabilities and a $3.0 million decrease in accounts payable, which each had a negative impact on operating cash flow.

These factors were

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

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.

Investing Activities

Investing activities provided $55.3 million of cash for the three months ended March 31, 2026, primarily driven by $85.0 million of investment maturities, which was partially offset by $23.3 million in cash paid, net of cash acquired, in the acquisition of Kenzo to further strength our AI SOC capabilities and $4.3 million in capitalized internal-use software costs as we continue to invest and develop our product offering.

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 provided $100.1 million of cash for the six months ended June 30, 2026, primarily driven by $135.0 million of investment maturities, which was partially offset by $23.3 million in cash paid, net of cash acquired, in the acquisition of Kenzo to further strengthen our AI SOC capabilities and $8.2 million in capitalized internal-use software costs as we continue to invest and develop our product offering.

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.

Financing Activities

Financing activities provided $2.6 million for the three months ended March 31, 2026, which consisted primarily of $2.9 million in proceeds from our employee stock purchase plan and was partially offset by $0.3 million in withholding taxes paid for the net share settlement of equity awards.

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

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

Financing activities provided $2.6 million for the six months ended June 30, 2026, which consisted primarily of $2.9 million in proceeds from our employee stock purchase plan and was partially offset by $0.3 million in withholding taxes paid for the net share settlement of equity awards.

Financing activities used $42.4 million of cash 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.

Contractual Obligations and Commitments

As of March 31, 2026, there were no material changes from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February, 19, 2026 (the “Annual Report”).

As of June 30, 2026, there were no material changes from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 19, 2026 (the “Annual Report”).

Off-Balance Sheet Arrangements

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Our actual results may differ from these estimates.

Other than the new market-based PSU estimate discussed in Note 2, Summary of Significant Accounting Policies , there have been no material changes in our critical accounting policies from those disclosed in our Annual Report.

Other than the new market-based PSU estimate discussed in Note 10, Stock-Based Compensation , there have been no material changes in our critical accounting estimates from those disclosed in our Annual Report.

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