What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-31 compared with 2024-11-01 · 166 added, 70 removed, 303 unchanged (44% of the section changed)

13 unchanged sentences

Through a connected portfolio of products with discrete value propositions that are built on the Atlassian platform and data model, the Atlassian System of Work helps customers of any size align work to goals, plan and track work, and unleash their organization's collective knowledge.

Our primary products include Jira for planning and project management, Confluence for content creation and sharing, Jira Service Management for team service, management and support applications, Loom for asynchronous video collaboration, and Rovo for unlocking organizational knowledge.

Our primary products include Jira for planning and project management, Confluence for content creation and sharing, and Jira Service Management for team service, management and support applications.

Together, our connected portfolio of products form integrated solutions and, when deployed in the cloud, provide customers all the benefits of analytics, automation, and AI, along with integrations with thousands of third-party apps as a solution that is deeply entrenched in how teams collaborate and how organizations run.

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To land new customers, we’ve engineered a low-friction flywheel with an emphasis on self-service, making it easy to try and get value first and foremost.

This allows us to operate at an unusual scale for an enterprise software company, with customers across virtually every industry sector in approximately 200 countries and territories as of September 30, 2024.

Our customers range from small organizations that have adopted one of our products for a small group of users, to over eighty percent of the Fortune 500, many of which use a combination of our products across thousands of users.

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Our business depends on demand for business software applications generally and for collaboration software solutions in particular.

We are subject to risks and exposures from the evolving macroeconomic environment, including the effects of rising inflation, and increases in interest rates, political instability, and geopolitical tensions.

We are subject to risks and exposures from the evolving macroeconomic environment, inflationary pressures, interest rate policy, political instability, and geopolitical tensions.

We monitor the direct and indirect impacts of these circumstances on our business and financial results.

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Customer Base

We have a history of successfully growing both our total customer base and the spend per customer through growth in users and adoption of new products.

We have a history of successfully growing both our total customer base and the spend per customer through growth in users, higher average price per user and adoption of new products.

We believe our ability to attract new customers is critical, and expanding within the existing customer base is the primary driver of our success as a business.

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Cloud ARR and Cloud MRR should be viewed independently of revenue and do not represent our revenue under U.S.

generally accepted accounting principles (“GAAP”), as they are operational metrics that can be affected by contract start and end dates and renewal rates.

While a single customer may have distinct departments, operating segments, or

subsidiaries with multiple active licenses or subscriptions of our products, if the product deployments share a unique domain name, we only include the customer once for purposes of calculating a customer.

As of September 30, 2024, we had more than 300,000 customers.

Including single user accounts and organizations who have only adopted our free or starter products, the active use of our products extends well beyond our total customer base.

With these customers using our software today, we are able to reach a vast number of users, gather insights to refine our offerings, and generate growing revenue by expanding within our total customer base.

generally accepted accounting principles (“GAAP”), as they are operational metrics that can be affected by contract start and

end dates and renewal rates.

While a single customer may have distinct departments, operating segments, or subsidiaries with multiple active licenses or subscriptions of our products, if the product deployments share a unique domain name, we only include the customer once for purposes of calculating a customer.

As of December 31, 2024, we had more than 300,000 customers.

If we include single user accounts and organizations who have only adopted our free or starter products, the active use of our products extends well beyond our total customer base.

Through the extensive use of our software, we are able to reach a vast number of users, gather insights to refine our offerings, and generate growing revenue by expanding within our total customer base.

Customers with greater than $10,000 in Cloud ARR represent the majority of our Cloud revenue.

The following table sets forth our number of customers with greater than $10,000 in Cloud ARR as of the dates presented:

September 30, 2023 December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024

December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024

Number of customers with greater than $10,000 in Cloud ARR 42,864* 44,336 45,842 46,844 49,449

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The following table presents a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2024 2023 2024 2023

Net cash provided by operating activities $ 351,905 $ 289,594 $ 432,397 $ 456,550

1 unchanged sentence

Free cash flow $ 342,569 $ 284,261 $ 416,910 $ 447,548

Free cash flow decreased by $88.9 million during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

The decrease in free cash flow was primarily attributable to a decrease in net cash provided by operating activities and an increase in capital expenditures.

The decrease in net cash provided by operating activities was primarily attributable to an increase in cash paid to employees, including higher annual employee bonus payments, cash paid to suppliers, and cash used to pay income taxes, partially offset by an increase in cash received from customers.

Free cash flow increased by $58.3 million during the three months ended December 31, 2024 as compared to the three months ended December 31, 2023.

The increase in free cash flow was primarily attributable to an increase in net cash provided by operating activities.

The increase in net cash provided by operating activities was primarily attributable to an increase in cash received from customers, partially offset by an increase in cash paid to employees.

Free cash flow decreased by $30.6 million during the six months ended December 31, 2024 as compared to the six months ended December 31, 2023.

The decrease in free cash flow was primarily attributable to a decrease in net cash provided by operating activities.

The decrease in net cash provided by operating activities was primarily attributable to an increase in cash paid to employees and vendors, partially offset by an increase in cash received from customers.

For more information about net cash provided by operating activities, please see “Liquidity and Capital Resources.”

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General and administrative expenses consist primarily of compensation expenses for our employees, including stock-based compensation, for finance, legal, human resources and information technology personnel, facilities and related overhead costs, consulting and contractor costs, certain IT program expenses, and other corporate expenses.

Provision for income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business.

Provision for (benefit from) income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business.

Critical Accounting Estimates

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Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

There have been no significant changes to our critical accounting policies and estimates during the three months ended September 30, 2024, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Results of Operations included in our Annual Report on Form 10-K for fiscal year 2024.

There have been no significant changes to our critical accounting policies and estimates during the three and six months ended December 31, 2024, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Results of Operations included in our Annual Report on Form 10-K for fiscal year 2024.

New Accounting Pronouncements Pending Adoption

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The following table sets forth our results of operations for the periods indicated (in thousands, except for percentages of total revenues):

Three Months Ended September 30,

2024 % of Total Revenues 2023 % of Total Revenues

Three Months Ended December 31, Six Months Ended December 31,

2024 % of Total Revenues 2023 % of Total Revenues 2024 % of Total Revenues 2023 % of Total Revenues

Subscription $ 1,213,248 94 % $ 932,181 88 % $ 2,345,196 95 % $ 1,784,163 88 %

12 unchanged sentences

Interest expense (7,291) (1) (9,001) (1) (14,609) (1) (17,977) (1)

Loss before provision for income taxes (30,164) (3) (10,954) (1)

Provision for income taxes (93,605) (7) (20,929) (2)

Loss before income taxes (47,183) (4) (40,109) (4) (77,347) (4) (51,063) (3)

Provision for (benefit from) income taxes (8,975) (1) 44,360 4 84,630 3 65,289 3

Net loss $ (38,208) (3) % $ (84,469) (8) % $ (161,977) (7) % $ (116,352) (6) %

Three Months Ended September 30, 2024 and 2023

Three Months Ended September 30,

Three Months Ended December 31, 2024 and 2023

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

2 unchanged sentences

Total revenues $ 1,286,463 $ 1,060,110 $ 226,353 21 %

Total revenues increased $210.0 million, or 21%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Total revenues increased $226.4 million, or 21%, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Growth in total revenues was primarily attributable to increased demand for our products from existing customers.

Of total revenues recognized in the three months ended September 30, 2024, over 90% were attributable to sales to customer accounts existing on or before June 30, 2024.

Subscription revenues increased $280.0 million, or 33%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Of total revenues recognized in the three months ended December 31, 2024, over 90% were attributable to sales to customer accounts existing on or before September 30, 2024.

Subscription revenues increased $281.1 million, or 30%, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

The increase in subscription revenues was primarily attributable to paid seat expansion from our existing customers, price increases, and migrations.

Other revenues decreased $54.7 million, or 43%, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

The decrease in other revenues was primarily attributable to a decrease of $66.2 million in maintenance revenue due to the end of support for our Server offerings.

Total revenues by deployment options were as follows:

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Cloud $ 846,962 $ 653,210 $ 193,752 30 %

Data Center 362,281 274,758 87,523 32

Server — 69,173 (69,173) (100)

Marketplace and other 77,220 62,969 14,251 23

Total revenues $ 1,286,463 $ 1,060,110 $ 226,353 21 %

Total revenues by geography were as follows:

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Americas $ 619,165 $ 514,434 $ 104,731 20 %

EMEA 525,482 425,292 100,190 24

Asia Pacific 141,816 120,384 21,432 18

Total revenues $ 1,286,463 $ 1,060,110 $ 226,353 21 %

Cost of Revenues

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Cost of revenues $ 223,127 $ 194,536 $ 28,591 15 %

Gross margin 83 % 82 %

Cost of revenues increased $28.6 million, or 15%, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

The overall increase was primarily attributable to an increase of $11.1 million in hosting fees paid to third-party providers, an increase of $7.4 million in compensation expense for employees (which includes an increase of $3.8 million in stock-based compensation), an increase of $4.0 million in software subscription costs and an increase of $3.1 million in amortization from acquired intangible assets.

Operating Expenses

Research and Development

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Research and development $ 680,213 $ 536,779 $ 143,434 27 %

Research and development expenses increased $143.4 million, or 27%, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

The overall increase was primarily attributable to an increase of $133.2 million in compensation expenses for employees (which includes an increase of $72.5 million in stock-based compensation ).

Marketing and Sales

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Marketing and sales $ 271,894 220,513 $ 51,381 23 %

Marketing and sales expenses increased $51.4 million , or 23%, for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 .

The overall increase was primarily attributable to an increase of $33.0 million in compensation expenses for employees (which includes an increase of $5.1 million in stock-based compensation) , and an increase of $12.5 million in advertising and marketing event expenses.

General and Administrative

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

General and administrative $ 168,708 157,344 $ 11,364 7 %

General and administrative expenses increased $11.4 million, or 7%, in the three months ended December 31, 2024 compared to the three months ended December 31, 2023 .

The overall increase was primarily attributable to an increase of $13.6 million in compensation expense for employees (which includes an increase of $7.5 million in stock-based compensation).

Other Expense, net

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Other expense, net $ (7,999) $ (4,639) $ (3,360) 72 %

Other expense, net increased $3.4 million, or 72%, in the three months ended December 31, 2024, compared to the three months ended December 31, 2023.

The increase in other expense was primarily attributable to an increase of $2.0 million in contributions to the Atlassian Foundation, and an increase of $1.2 million in net loss related to strategic investments.

Interest Income

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Interest income 25,586 22,593 $ 2,993 13 %

Interest income increased $3.0 million, or 13% in the three months ended December 31, 2024 compared to the three months ended December 31, 2023 .

The increase was primarily attributable to an increase in investment income as a result of increased investment balances.

Interest Expense

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Interest expense $ (7,291) $ (9,001) $ 1,710 (19) %

Interest expense decreased $1.7 million, or 19% in the three months ended December 31, 2024 compared to the three months ended December 31, 2023 .

The decrease was primarily attributable to a decrease in interest expense on our outstanding debt as a result of the issuance of the Notes (as defined below) and repayment of the Term Loan (as defined below) in the fourth quarter of fiscal year 2024.

Provision for (Benefit from) Income Taxes

Three Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Provision for (benefit from) income taxes $ (8,975) $ 44,360 $ (53,335) (120) %

Effective tax rate * *

* Not meaningful

Provision for income taxes decreased $53.3 million for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023.

The decrease was primarily attributable to the change in the mix of earnings and losses in foreign jurisdictions.

See Note 14, “ Income Taxes ,” of the notes to our condensed consolidated financial statements for additional information.

Our future effective annual tax rate may be materially impacted by the expense or benefit from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, level of profit before tax, accounting for uncertain tax positions, business combinations, changes in our valuation allowances to the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.

A significant amount of our earnings is generated by our Australian subsidiaries.

Our future effective tax rates may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory tax rates.

Changes in our global operations could result in changes to our effective tax rates, future cash flows, and overall profitability of our operations.

We recognize the tax benefit of an uncertain tax position only if we conclude it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits.

The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority.

We believe we have provided adequate reserves for income tax uncertainties in all open tax years.

Based on the information currently available, we do not anticipate a material change in unrecognized tax benefits in the next 12 months.

The Organization for Economic Co-operation and Development introduced a framework for a global minimum corporate income tax of 15% known as the Global Anti-Base Erosion rules.

This legislation has been enacted in certain jurisdictions where we operate and is effective for our fiscal year 2025.

As of December 31, 2024, the global minimum tax does not have a significant impact on our financial statements.

As additional jurisdictions enact legislation, transitional rules lapse, and other provisions of the global minimum tax legislation become effective, our effective tax rate and cash tax payments may increase in future years.

Six Months Ended December 31, 2024 and 2023

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Subscription $ 2,345,196 $ 1,784,163 $ 561,033 31 %

Other 129,048 253,722 (124,674) (49)

Total revenues $ 2,474,244 $ 2,037,885 $ 436,359 21 %

Total revenues increased $436.4 million, or 21%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

Growth in total revenues was primarily attributable to increased demand for our products from existing customers.

Of total revenues recognized in the six months ended December 31, 2024, over 90% was attributable to sales to customer accounts existing on or before June 30, 2024.

Subscription revenues increased $561.0 million, or 31%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

The increase in subscription revenues was primarily attributable to paid seat expansion from our existing customers, migrations, and price increases.

Other revenues decreased $70.0 million, or 56%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Other revenues decreased $124.7 million, or 49%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

The decrease in other revenues was primarily attributable to a decrease of $141.7 million in maintenance revenue due to the end of support for our Server offerings.

Total revenues by deployment options were as follows:

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

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Total revenues by geography were as follows:

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

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Cost of Revenues

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

1 unchanged sentence

Gross margin 82 % 82 %

Cost of revenues increased $39.6 million, or 22%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Cost of revenues increased $68.2 million, or 18%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

The overall increase was primarily attributable to an increase of $33.6 million in hosting fees paid to third-party providers, an increase of $13.5 million in compensation expense for employees (which includes an increase of $5.2 million in stock-based compensation), and an increase of $7.4 million in amortization from acquired intangible assets.

1 unchanged sentence

Research and Development

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Research and development $ 1,283,314 $ 1,018,517 $ 264,797 26 %

Research and development expenses increased $121.4 million, or 25%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Research and development expenses increased $264.8 million, or 26%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

The overall increase was primarily attributable to an increase of $239.0 million in compensation expenses for employees (which includes an increase of $115.5 million in stock-based compensation ).

Marketing and Sales

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Marketing and sales $ 524,287 $ 414,080 $ 110,207 27 %

Marketing and sales expenses increased $58.8 million , or 30%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 .

Marketing and sales expenses increased $110.2 million, or 27%, for the six months ended December 31, 2024 , compared to the six months ended December 31, 2023 .

The overall increase was primarily attributable to an increase of $67.9 million in compensation expenses for employees (which includes an increase of $8.8 million in stock-based compensation), and an increase of $30.4 million in advertising and marketing event expenses.

General and Administrative

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

General and administrative $ 315,349 $ 300,654 $ 14,695 5 %

General and administrative expenses increased $3.3 million, or 2% in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 .

The overall increase was primarily attributable to an increase of $3.1 million in compensation expense for employees (which includes an increase of $2.5 million in stock-based compensation).

General and administrative expenses increased $14.7 million, or 5%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023 .

The overall increase was primarily attributable to an increase of $16.7 million in compensation expenses for employees (which includes an increase of $10.0 million in stock-based compensation).

Other Expense, net

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Other expense, net $ (27,431) $ (12,974) $ (14,457) 111 %

Other expense, net increased $11.1 million, or 133%, in the three months ended September 30, 2024 , compared to the three months ended September 30, 2023 .

The increase in other expense was primarily attributable to an increase of $8.5 million r elated to our share of loss from an equity method investment, and an increase of $1.9 million in contributions to the Atlassian Foundation.

Other expense, net increased $14.5 million, or 111% in the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

The increase was primarily attributable to an increase of $8.5 million in expense related to our share of loss from an equity method investment and an increase of $3.8 million in contributions to the Atlassian Foundation.

Interest Income

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Interest Income $ 54,150 $ 47,819 $ 6,331 13 %

Interest income increased $3.3 million, or 13% in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 .

Interest income increased $6.3 million , or 13% in the six months ended December 31, 2024 compared to the six months ended December 31, 2023 .

The increase was primarily attributable to an increase in investment income as a result of increased investment balances.

Interest Expense

Three Months Ended September 30,

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Interest expense $ (14,609) $ (17,977) $ 3,368 (19) %

Interest expense decreased $1.7 million, or 18% in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 .

Interest expense decreased $3.4 million, or 19%, in the six months ended December 31, 2024 compared to the six months ended December 31, 2023 .

The decrease was primarily attributable to a decrease in interest expense on our outstanding debt as a result of the issuance of the Notes (as defined below), and repayment of the Term Loan (as defined below) in the fourth quarter of fiscal year 2024.

Provision for Income Taxes

Three Months Ended September 30,

Provision for (Benefit from) Income Taxes

Six Months Ended December 31,

(in thousands, except percentage data) 2024 2023 $ Change % Change

Provision for income taxes $ (93,605) $ (20,929) $ (72,676) 347 %

Provision for (benefit from) income taxes $ 84,630 $ 65,289 $ 19,341 30 %

Effective tax rate * *

* Not meaningful

Provision for income taxes increased $72.7 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

Provision for income taxes increased $19.3 million for the six months ended December 31, 2024, as compared to the six months ended December 31, 2023.

The increase was primarily attributable to the change in the mix of earnings and losses in foreign jurisdictions.

See Note 14, “ Income Taxes ,” of the notes to our condensed consolidated financial statements for additional information.

the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.

A significant amount of our earnings is generated by our Australian subsidiaries.

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This legislation has been enacted in certain jurisdictions where we operate and is effective for our fiscal year 2025.

As of September 30, 2024, the global minimum tax does not have a significant impact on our financial statements.

As of December 31, 2024, the global minimum tax does not have a significant impact on our financial statements.

Liquidity and Capital Resources

As of September 30, 2024, we had cash and cash equivalents totaling $2.1 billion, marketable securities totaling $161.4 million and accounts receivables totaling $484.1 million.

As of December 31, 2024, we had cash and cash equivalents totaling $2.2 billion, marketable securities totaling $251.6 million and accounts receivables totaling $695.7 million.

Since our inception, we have primarily financed our operations through cash flows generated by operations and corporate debt.

Our cash flows from operating activities, investing activities, and financing activities for the periods presented were as follows (in thousands):

Three Months Ended September 30,

Six Months Ended December 31,

Net cash provided by operating activities $ 432,397 $ 456,550

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Our primary uses of cash from operating activities are general business expenses including employment expenses, cloud platform and other infrastructure services, income taxes, professional services fees, marketing expenses, software expenses, and facility expenses.

Net cash provided by operating activities decreased by $86.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

The net decrease was primarily attributable to an increase in cash paid to employees, including higher annual employee bonus payments, cash paid to suppliers, and cash used to pay income taxes, partially offset by an increase in cash received from customers.

Net cash used in investing activities decreased by $38.2 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

The net decrease was primarily attributable to a decrease in net outflows of $71.8 million related to marketable securities activity, partially offset by an increase in net outflows of $26.1 million related to strategic investment activity and an increase in cash outflows for acquisitions, net of cash acquired, of approximately $5.0 million.

Net cash used in financing activities increased by $120.9 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Net cash provided by operating activities decreased by $24.2 million for the six months ended December 31, 2024, compared to the six months ended December 31, 2023.

The net decrease was primarily attributable to an increase in cash paid to employees and vendors, partially offset by an increase in cash received from customers.

Net cash used in investing activities decreased by $788.9 million during the six months ended December 31, 2024, compared to the six months ended December 31, 2023.

The net decrease was primarily attributable to a decrease in cash consideration paid for acquisitions, net of cash acquired of approximately $839.8 million, partially offset by an increase in net outflows of $37.1 million related to strategic investment activity.

Net cash used in financing activities increased by $75.8 million for the six months ended December 31, 2024, compared to the six months ended December 31, 2023.

The net increase was primarily attributable to an increase in repurchases of Class A Common Stock of $85.2 million.

Material Cash Requirements

As of September 30, 2024 , we had $500.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “2029 Notes”) and $500.0 million aggregate principal amount of 5.500% senior notes due 2034 (the “2034 Notes,” and together with the 2029 Notes, the “Notes”).

As of December 31, 2024 , we had $500.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “2029 Notes”) and $500.0 million aggregate principal amount of 5.500% senior notes due 2034 (the “2034 Notes,” and together with the 2029 Notes, the “Notes”).

The 2029 Notes and the 2034 Notes will mature on May 15, 2029 and May 15, 2034, respectively.

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The Share Repurchase Programs do not have a fixed expiration date, may be suspended or discontinued at any time, and do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

During the three months ended September 30, 2024, we repurchased and subsequently retired approximately 1.1 million shares of our Class A Common Stock for approximately $183.9 million at an average price per share of $162.57.

During the three and six months ended December 31, 2024, we repurchased and subsequently retired approximately 0.4 million and 1.5 million shares of our Class A Common Stock for approximately $68.4 million and $252.3 million at an average price per share of $185.95 and $168.30, respectively.

All repurchases were made in open market transactions.

As of September 30, 2024, we were authorized to purchase a remaining $267.9 million and $1.5 billion of our Class A Common Stock under the 2023 Share Repurchase Program and 2024 Share Repurchase Program, respectively.

As of December 31, 2024, we were authorized to purchase a remaining $199.6 million and $1.5 billion of its Class A Common Stock under the 2023 Share Repurchase Program and 2024 Share Repurchase Program, respectively.

Contractual Obligations

Our principal commitments consist of contractual commitments for our cloud services platform and other infrastructure services, and obligations under leases for office space including obligations for leases that have not yet commenced.

There were no material changes outside the ordinary course of business to our contractual obligations disclosed in our Annual Report on Form 10-K for fiscal year 2024.

Refer to Note 10, “ Commitments and Contingencies,” to our condensed consolidated financial statements for additional information.

Other Future Obligations

1 unchanged sentence

Our other future cash requirements will depend on many factors including our growth rate, the timing and extent of spend on research and development efforts, employee headcount, marketing and sales activities, payments to tax authorities, acquisitions of additional businesses and technologies, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our products.

As of September 30, 2024, we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

As of December 31, 2024, we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Non-GAAP Financial Measures

In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions.

The key measures we consider are non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted

share and free cash flow (collectively, the “Non-GAAP Financial Measures”).

The key measures we consider are non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow (collectively, the “Non-GAAP Financial Measures”).

These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations.

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We compensate for such limitations by reconciling these Non-GAAP Financial Measures to the most comparable GAAP financial measures.

The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for the three months ended September 30, 2024 and 2023 (in thousands, except percentage and per share data):

Three Months Ended September 30,

The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for the three and six months ended December 31, 2024 and 2023 (in thousands, except percentage and per share data):

Three Months Ended December 31, Six Months Ended December 31,

2024 2023 2024 2023

GAAP gross profit $ 1,063,336 $ 865,574 $ 2,033,493 $ 1,665,320

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Additionally, we considered our current operating structure and other factors such as our existing tax positions in various jurisdictions and key legislation in major jurisdictions where we operate.

For fiscal year 2025, we determined the projected non-GAAP tax rate to be 26%.

For fiscal year 2025 and 2024, we determined the projected non-GAAP tax rate to be 26% and 27%, respectively.

This fixed long-term projected non-GAAP tax rate eliminates the effects of non-recurring and period specific items which can vary in size and frequency.

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The rate could be subject to change for a variety of reasons, for example, significant changes in the geographic earnings mix or fundamental tax law changes in major jurisdictions where we operate.

(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three months ended September 30, 2024 and September 30, 2023 because the effect would have been anti-dilutive.

(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three and six months ended December 31, 2024 and 2023 because the effect would have been anti-dilutive.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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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