OneSpan Inc.

Previous wording

This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the three- and six-month periods ended June 30, 2026 and 2025 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”).

Current wording

This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the three- and nine-month periods ended September 30, 2026 and 2025 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”).

Previous wording

We seek to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth. Both operating segments were profitable for the three and six months ended June 30, 2026, and Cybersecurity and Digital Agreements subscription revenue grew 2% and 25%, respectively, as compared to the three months ended June 30, 2025, respectively, and 5% and 18% as compared to the six months ended June 30, 2025, respectively.

Current wording

We seek to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth. Both operating segments were profitable for the three and nine months ended September 30, 2026, and Cybersecurity and Digital Agreements subscription revenue grew 17% and 14%, respectively, as compared to the three months ended September 30, 2025, respectively, and 9% and 17% as compared to the nine months ended September 30, 2025, respectively.

Previous wording

As discussed in greater detail below in "Results of Operations", the following factors had a significant impact on our financial results for the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025.

Current wording

As discussed in greater detail below in "Results of Operations", the following factors had a significant impact on our financial results for the three and nine months ended September 30, 2026 as compared to the three and nine months ended September 30, 2025.

Previous wording

Foreign exchange rate impact for the six months ended June 30, 2026. Changes in foreign exchange rates, in particular the weakening of the U.S. Dollar relative to the Euro, favorably impacted both total revenue and Cybersecurity revenue by approximately $3.3 million and $3.0 million, respectively, for thesix months ended June 30, 2026 as compared to the same period in 2025. The impact of changes in foreign exchange rates on the Digital Agreements segment for this period was approximately $0.3 millionas compared to the same period in 2025.

Current wording

Foreign exchange rate impact for the nine months ended September 30, 2026. Changes in foreign exchange rates, in particular the weakening of the U.S. Dollar relative to the Euro, favorably impacted total revenue, Cybersecurity revenue, and Digital Agreements revenue by $3.2 million, $2.9 million, and $0.3 million, respectively, for thenine months ended September 30, 2026 as compared to the same period in 2025.

Previous wording

Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended June 30, 2026 compared to the comparable prior year period resulted in an increase in operating expenses of $1.2 million.

Current wording

Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended September 30, 2026 compared to the comparable prior year period resulted in a decrease in operating expenses of $0.2 million. We estimate the change in currency rates during the nine months ended September 30, 2026 compared to the comparable prior year period resulted in an increase in operating expenses of $1.1 million.

Previous wording

The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended June 30, 2026 and 2025, operating expenses included $3.5 million and $3.5 million, respectively, of expenses related to stock-based and long-term incentive plans. During the six months ended June 30, 2026 and 2025, operating expenses included $5.3 million and $6.3 million, respectively, of expenses related to stock-based and long-term incentive plans.

Current wording

The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended September 30, 2026 and 2025, operating expenses included $5.5 million and $3.4 million, respectively, of expenses related to stock-based and long-term incentive plans. During the nine months ended September 30, 2026 and 2025, operating expenses included $10.8 million and $9.6 million, respectively, of expenses related to stock-based and long-term incentive plans.

Previous wording

•Restructuring and related charges. Restructuring and other related charges consists of employee costs incurred in connection with headcount reductions, which include severance, retention pay, and related benefits, real estate rationalization costs, which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs, which include write-offs of capitalized software assets no longer in use; write-offs of acquired technology and capitalized software; and vendor rationalization costs for contractually committed services that we are no longer utilizing. Prior to 2026, these costs were incurred in connection with restructuring plans previously approved by the Company's Board of Directors. There were no costs recorded for restructuring and related charges during the six months ended June 30, 2026.

Current wording

•Restructuring and related charges. Restructuring and other related charges consists of employee costs incurred in connection with headcount reductions, which include severance, retention pay, and related benefits, real estate rationalization costs, which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs, which include write-offs of capitalized software assets no longer in use; write-offs of acquired technology and capitalized software; and vendor rationalization costs for contractually committed services that we are no longer utilizing. Prior to 2026, these costs were incurred in connection with restructuring plans previously approved by the Company's Board of Directors. There were no costs recorded for restructuring and related charges during the nine months ended September 30, 2026.

Previous wording

Segment operating income (loss) consists of the revenue generated by a segment, less the direct costs of revenue, sales and marketing, research and development amortization and any impairment charges that are incurred directly by a segment. Unallocated corporate costs include general and administrative expense and other company-wide costs that are not attributable to a particular segment. Financial results by reportable operating segment are included below under Results of Operations. As of December 31, 2024, we adopted ASU 2023-07, Segment Reporting (Topic 280) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. See Note 3, Segment Information, for additional information.

Current wording

Segment operating income (loss) consists of the revenues generated by a segment, less the direct costs of revenue, sales and marketing, research and development expenses, general and administrative expenses, restructuring and other related charges, and amortization of intangible assets expense that are incurred directly by a segment. Sales and marketing and research and development expenses were determined to be significant segment expenses. Unallocated corporate costs include costs related to administrative functions that are performed in a centralized manner that are not directly attributable to a particular segment. Financial results by reportable operating segment are included below under Results of Operations.

Previous wording

During the three months ended June 30, 2026 and 2025, we generated approximately 76% and 78% of our revenues, respectively, and incurred approximately 57% and 54% of our operating expenses, respectively, outside of the U.S. During the six months ended June 30, 2026 and 2025, we generated approximately 78% and 81% of our revenues, respectively, and incurred approximately 57% and 56% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.

Current wording

During the three months ended September 30, 2026 and 2025, we generated approximately 78% and 75% of our revenues, respectively, and incurred approximately 51% and 53% of our operating expenses, respectively, outside of the U.S. During the nine months ended September 30, 2026 and 2025, we generated approximately 78% and 79% of our revenues, respectively, and incurred approximately 55% and 55% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.

Previous wording

While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the six months ended June 30, 2026 was denominated in U.S. Dollars. For the six months ended June 30, 2026, approximately 60% of our revenue was denominated in U.S. Dollars, 37% was denominated in Euros and 3% was denominated in other currencies. For the six months ended June 30, 2025, approximately 56% of our revenue was denominated in U.S. Dollars, 41% was denominated in Euros and 3% was denominated in other currencies.

Current wording

While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the nine months ended September 30, 2026 was denominated in U.S. Dollars. For the nine months ended September 30, 2026, approximately 60% of our revenue was denominated in U.S. Dollars, 37% was denominated in Euros and 3% was denominated in other currencies. For the nine months ended September 30, 2025, approximately 57% of our revenue was denominated in U.S. Dollars, 40% was denominated in Euros and 3% was denominated in other currencies.

Previous wording

Translation adjustments arising from differences in exchange rates generated a comprehensive loss of $0.4 million and $2.3 million during the three and six months ended June 30, 2026, respectively. For the three and six months ended June 30, 2025, translation adjustments arising from differences in exchange rates generated a comprehensive gain of $5.5 million and $8.2 million, respectively.

Current wording

Translation adjustments arising from differences in exchange rates generated a comprehensive loss of $0.3 million and $2.5 million during the three and nine months ended September 30, 2026, respectively. For the three and nine months ended September 30, 2025, translation adjustments arising from differences in exchange rates generated a comprehensive loss of $0.9 million and comprehensive income of $7.3 million, respectively.

Previous wording

Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other income (expense), net. Foreign exchange transaction losses aggregated $0.2 million and $0.7 million for the three and six months ended June 30, 2026, respectively. For the three and six months ended June 30, 2025, losses resulting from foreign currency transactions were $1.0 million and $1.1 million, respectively.

Current wording

Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other income (expense), net. Foreign exchange transaction losses aggregated $0.1 million and $0.8 million for the three and nine months ended September 30, 2026, respectively. For the three and nine months ended September 30, 2025, losses resulting from foreign currency transactions were $0.2 million and $1.3 million, respectively.

Previous wording

(1) Cybersecurity other segment items includes general and administrative expense and amortization of intangibles for the three months ended June 30, 2026, and general and administrative expense, write-off of assets, and amortization of intangibles for the six months ended June 30, 2026. Cybersecurity other segment items includes general and administrative expense and restructuring and other related charges for the three and six months ended June 30, 2025.

Current wording

(1) Cybersecurity other segment items includes general and administrative expense and amortization of intangibles for the three months ended September 30, 2026, and general and administrative expense, write-off of assets, and amortization of intangibles for the nine months ended September 30, 2026. Cybersecurity other segment items includes general and administrative expense and restructuring and other related charges for the three and nine months ended September 30, 2025.

Previous wording

(2) Cybersecurity operating income includes $1.0 million and $1.7 million of total amortization and depreciation expense for the three and six months ended June 30, 2026, respectively. Cybersecurity operating income includes $0.2 million and $0.4 million of total amortization and depreciation expense for the three and six months ended June 30, 2025, respectively.

Current wording

(2) Cybersecurity operating income includes $1.1 million and $2.8 million of total amortization and depreciation expense for the three and nine months ended September 30, 2026, respectively. Cybersecurity operating income includes

Previous wording

Cybersecurity operating income does not include any restructuring and other related charges for the three and six months ended June 30, 2026. Cybersecurity operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended June 30, 2025, respectively.

Current wording

Cybersecurity operating income does not include any restructuring and other related charges for the three and nine months ended September 30, 2026. Cybersecurity operating income includes less than $0.1 million and $0.3 million of restructuring and other related charges for the three and nine months ended September 30, 2025, respectively.

Previous wording

(3) Digital Agreements other segment items includes general and administrative expense and amortization of intangibles for the three and six months ended June 30, 2026. Digital Agreements other segment items includes general and administrative expense and restructuring and other related charges for thethree and six months ended June 30, 2025.

Current wording

(3) Digital Agreements other segment items includes general and administrative expense and amortization of intangibles for the three and nine months ended September 30, 2026. Digital Agreements other segment items includes general and administrative expense and restructuring and other related charges for the three and nine months ended September 30, 2025.

Previous wording

(4) Digital Agreements operating income includes $2.2 million and $4.3 million of total amortization and depreciation expense for the three and six months ended June 30, 2026, respectively. Digital Agreements operating income includes $1.8 million and $3.5 million of total amortization and depreciation expense for the three and six months ended June 30, 2025, respectively.

Current wording

(4) Digital Agreements operating income includes $2.1 million and $6.4 million of total amortization and depreciation expense for the three and nine months ended September 30, 2026, respectively. Digital Agreements operating income includes $1.9 million and $5.5 million of total amortization and depreciation expense for the three and nine months ended September 30, 2025, respectively.

Previous wording

Digital Agreements operating income does not include any restructuring and other related charges for the three and six months ended June 30, 2026.

Current wording

Digital Agreements operating income does not include any restructuring and other related charges for the three and nine months ended September 30, 2026.

Previous wording

Digital Agreements operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended June 30, 2025, respectively.

Current wording

Digital Agreements operating income includes less than $0.1 million and $0.2 million of restructuring and other related charges for the three and nine months ended September 30, 2025, respectively.

Previous wording

Revenue by products and services allocated to the segments for the three and six months ended June 30, 2026, and 2025 is as follows:

Current wording

Revenue by products and services allocated to the segments for the three and nine months ended September 30, 2026 and 2025 is as follows:

Previous wording

(1) Cybersecurity and Digital Agreements Subscription revenue during the three months ended June 30, 2025 includes $5.9 million and less than $0.1 million, respectively, of term maintenance that has been reclassified from maintenance and services to align with the revised presentation of revenue. Cybersecurity and Digital Agreements Subscription revenue during the six months ended June 30, 2025 includes $11.0 million and less than $0.1 million, respectively, of term maintenance that has been reclassified from maintenance and services to align with the revised presentation of revenue. See Note 4, Revenue from Contracts with Customers, for additional information.

Current wording

(1) Cybersecurity and Digital Agreements subscription revenue during the three months ended September 30, 2025 includes $6.6 million and less than $0.1 million, respectively, of term maintenance that has been reclassified from maintenance and services to align with the revised presentation of revenue. Cybersecurity and Digital Agreements subscription revenue during the nine months ended September 30, 2025 includes $17.6 million and less than $0.1 million, respectively, of term maintenance that has been reclassified from maintenance and services to align with the revised presentation of revenue. See Note 4, Revenue from Contracts with Customers, for additional information.

Previous wording

Total revenue increased by $0.6 million, or 1%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Changes in foreign exchange rates as compared to the same period in 2025 favorably impacted revenue by approximately $0.6 million. Total revenue increased by $3.2 million, or 3%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Changes in foreign exchange rates as compared to the same period in 2025 favorably impacted revenue by approximately $3.3 million.

Current wording

Total revenue increased by $6.8 million, or 12%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Changes in foreign exchange rates as compared to the same period in 2025 negatively impacted revenue by approximately $0.2 million. Total revenue increased by $10.0 million, or 6%, during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Changes in foreign exchange rates as compared to the same period in 2025 favorably impacted revenue by approximately $3.2 million.

Previous wording

•Cybersecurity revenue decreased $3.3 million, or approximately 7%, during the three months ended June 30, 2026, compared to the three months ended June 30, 2025. For the six months ended June 30, 2026, Cybersecurity revenue decreased $2.5 million, or approximately 3%, compared to the six months ended June 30, 2025. The decrease in Cybersecurity revenue for both periods was primarily due to lower hardware revenue, partially offset by an increase in software revenue. The decrease in hardware revenue was due to lower volume of hardware devices sold, partially offset by favorable customer mix. The increase in software revenue was due to an increase in subscription revenue primarily due to the two recent acquisitions and existing customer expansions, partially offset by lower multi-year term license revenue, the timing of customer renewals, and lower perpetual maintenance revenue due to contract transitions to term-based arrangements. Changes in foreign exchange rates for the three months ended June 30, 2026 compared to the same period in 2025 favorably impacted Cybersecurity revenue by $0.5 million. Changes in foreign exchange rates for the six months ended June 30, 2026 compared to the same period in 2025 favorably impacted Cybersecurity revenue by $3.1 million.

Current wording

•Cybersecurity revenue increased $4.6 million, or approximately 11%, during the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The increase in Cybersecurity revenue for the three month period was driven by increases in subscription and hardware revenue, partially offset by a decrease in perpetual maintenance revenue due to contract transitions to term-based arrangements. The increase in subscription revenue was driven by customer expansion contracts, including an increase in multi-year term license revenue, new logo and new product revenue, revenue from Build38, and an increase in past-due renewal catch-up revenue. The increase in hardware revenue was driven by timing of shipments and a more favorable mix of higher priced hardware devices sold, partially offset by lower volumes. For the nine months ended September 30, 2026, Cybersecurity revenue increased $2.1 million, or approximately 2%, compared to the nine months ended September 30, 2025. The increase in Cybersecurity revenue for the nine month period was driven by an increase in subscription revenue, partially offset by decreases in hardware and perpetual maintenance revenue. The increase in subscription revenue was primarily driven by recent acquisitions, customer expansion contracts, new logos and new product revenue. The decrease in hardware revenue was due to a lower volume of hardware devices sold, partially offset by a more favorable mix of higher priced devices sold. The decrease in perpetual maintenance revenue was due to contract transitions to term-based arrangements. Changes in foreign exchange rates for the three months ended September 30, 2026 compared to the same period in 2025 negatively impacted Cybersecurity revenue by $0.2 million. Changes in foreign exchange rates for the nine months ended September 30, 2026 compared to the same period in 2025 favorably impacted Cybersecurity revenue by $2.9 million.

Previous wording

•Digital Agreements revenue increased $3.9 million, or 25%, during the three months ended June 30, 2026, compared to the three months ended June 30, 2025. For the six months ended June 30, 2026, Digital Agreements revenue increased $5.7 million, or 18%, during the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase for both periods was primarily attributable to an increase in subscription revenue from existing customer expansions and overage usage fees. Changes in foreign exchange rates for the three months ended June 30, 2026, compared to the same period in 2025, favorably impacted Digital Agreements revenue by $0.1 million. Changes in foreign exchange rates for the six months ended June 30, 2026, compared to the same period in 2025, favorably impacted Digital Agreements revenue by $0.3 million.

Current wording

•Digital Agreements revenue increased $2.3 million, or 14%, during the three months ended September 30, 2026, compared to the three months ended September 30, 2025. For the nine months ended September 30, 2026, Digital Agreements revenue increased $7.9 million, or 17%, compared to the nine months ended September 30, 2025. The increase in revenue for both periods was primarily driven by an increase in overage usage fees, subscription revenue from existing customer expansions, and new logos. Changes in foreign exchange rates for the three months ended September 30, 2026, compared to the same period in 2025, favorably impacted Digital Agreements revenue by less than $0.1 million. Changes in foreign exchange rates for the nine months ended September 30, 2026, compared to the same period in 2025, favorably impacted Digital Agreements revenue by $0.3 million.

Previous wording

For the three months ended June 30, 2026, revenue generated in the Americas was $3.9 million, or 16%, higher than the three months ended June 30, 2025. For the six months ended June 30, 2026, revenue generated in the Americas was $7.9 million, or 18%, higher than the same period in 2025. The increase in revenue for both periods was largely due to an increase in Digital Agreements revenue, and to a lesser extent, Cybersecurity software revenue.

Current wording

For the three months ended September 30, 2026, revenue generated in the Americas was $1.4 million, or 5%, higher than the three months ended September 30, 2025. For the nine months ended September 30, 2026, revenue generated in the Americas was $9.3 million, or 13%, higher than the same period in 2025. The increase in revenue for both periods was primarily due to increases in Digital Agreements and Cybersecurity software revenue, partially offset by a decrease in Cybersecurity hardware revenue.

Previous wording

For the three months ended June 30, 2026, revenue generated in EMEA was $2.5 million, or 10%, lower than the same period in 2025. For the six months ended June 30, 2026, revenue generated in EMEA was $4.9 million, or 9%, lower than the same period in 2025. The decrease for both periods was primarily due to a decrease in Cybersecurity hardware and software revenues, partially offset by an increase in Digital Agreements revenue.

Current wording

For the three months ended September 30, 2026, revenue generated in EMEA was $2.4 million, or 11%, higher than the same period in 2025. The increase was primarily driven by increases in Cybersecurity software and Digital Agreements revenue, partially offset by a decrease in Cybersecurity hardware revenue. For the nine months ended September 30, 2026, revenue generated in EMEA was $2.6 million, or 3%, lower than the same period in 2025. The decrease was primarily due to a decrease in Cybersecurity hardware revenue and to a lesser extent, Cybersecurity software revenues, partially offset by an increase in Digital Agreements revenue.

Previous wording

For the three months ended June 30, 2026, revenue generated in APAC was $0.8 million, or 6%, lower than the three months ended June 30, 2025, primarily due to lower Cybersecurity hardware revenue, offset partially by Cybersecurity software revenue. For the six months ended June 30, 2026, revenue generated in APAC was $0.2 million, or 1%, higher than the same period in 2025 due to an increase in Cybersecurity software revenue, offset partially by a decrease in Cybersecurity hardware revenue.

Current wording

For the three months ended September 30, 2026, revenue generated in APAC was $3.0 million, or 32%, higher than the three months ended September 30, 2025. The increase was primarily driven by an increase in Cybersecurity hardware revenue, and to a lesser extent, Cybersecurity software revenue. For the nine months ended September 30, 2026, revenue generated in APAC was $3.3 million, or 10%, higher than the same period in 2025. The increase was primarily driven by increases in both Cybersecurity hardware and software revenues.

Previous wording

The following table presents cost of goods sold for our products and services for the three and six months ended June 30, 2026 and 2025:

Current wording

The following table presents cost of goods sold for our products and services for the three and nine months ended September 30, 2026 and 2025:

Previous wording

The cost of product and license revenue decreased by $1.7 million, or 20%, and $1.6 million, or 10% during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025. The decrease in the cost of product and license revenue for both the three and six months ended June 30, 2026 was driven primarily by lower hardware revenues and more favorable customer mix.

Current wording

The cost of product and license revenue decreased by $0.9 million, or 13%, and $2.5 million, or 11%, during the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025. The decrease in the cost of product and license revenue for the three months ended September 30, 2026 was primarily driven by lower hardware cost of sales due to a more favorable mix of hardware products shipped, and to a lesser extent, lower software license costs due to a higher mix of multi-year term license revenue. The decrease for the nine months ended September 30, 2026 was primarily driven by lower hardware cost of sales due to lower volume and a more favorable mix of hardware products shipped.

Previous wording

The cost of services and other revenue increased by $1.8 million, or 23%, and $2.9 million, or 19% during the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The increase in both periods is largely attributed to additional hosting server costs and third-party license costs driven by increased cloud subscription revenue from existing customers and, to a lesser extent, new customers, as well as amortization of intangible assets related to our acquisitions.

Current wording

The cost of services and other revenue increased by $1.0 million, or 13%, and $3.9 million, or 17% during the three and nine months ended September 30, 2026, compared to the three and nine months ended September 30, 2025. The increase in both periods is largely attributed to higher third-party license costs as well as amortization of intangible assets related to our acquisitions, and depreciation of internally developed assets related to the enhancement of our platform.

Previous wording

Gross profit increased by $0.5 million, or 1%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Gross margin was 74% for the three months ended June 30, 2026, as compared to 73% for the three months ended June 30, 2025. Gross profit increased by $1.9 million, or 2%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Gross margin was 74% for both the six months ended June 30, 2026 and 2025.

Current wording

Gross profit increased by $6.7 million, or 16%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Gross margin was 76% for the three months ended September 30, 2026, as compared to 74% for the three months ended September 30, 2025.

Previous wording

The majority of our inventory purchases are denominated in U.S. Dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had an unfavorable impact on overall cost of goods sold of $0.1 million for three months ended June 30, 2026 and $0.6 million for the six months ended June 30, 2026. Had currency rates during the three months ended June 30, 2026 been equal to rates in the comparable period of 2025, the gross margin would have been 1 percentage point higher, driven by the favorable currency rate impact to revenue. Had currency rates during the six months ended June 30, 2026 been equal to rates in the comparable period of 2025, the gross margin would have 3 percentage points higher.

Current wording

The majority of our inventory purchases are denominated in U.S. Dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had a favorable impact on overall cost of goods sold of $0.3 million for the three months ended September 30, 2026 and an unfavorable $0.6 million for the nine months ended September 30, 2026. Had currency rates during the three months ended September 30, 2026 been equal to rates in the comparable period of 2025, the gross margin would have been less than 1 percentage point higher, driven by the favorable currency rate impact to revenue. Had currency rates during the nine months ended September 30, 2026 been equal to rates in the comparable period of 2025, the gross margin would have been 2 percentage points lower.

Previous wording

•Cybersecurity gross profit decreased by $2.9 million, or 9%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Cybersecurity gross margin was 73% during the three months ended June 30, 2026, compared to 74% for the three months ended June 30, 2025. For the six months ended June 30, 2026, Cybersecurity gross profit decreased $3.1 million, or 5%, compared to the same period in 2025. Cybersecurity gross margin for the six months ended June 30, 2026 was 74%, compared to 75% for the six months ended June 30, 2025. The decrease in gross profit for both periods is primarily due to lower hardware revenues and higher third-party costs and cloud infrastructure costs, partially offset by improved hardware customer mix.

Current wording

•Cybersecurity gross profit increased by $4.6 million, or 15%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Cybersecurity gross margin was 77% during the three months ended September 30, 2026, compared to 74% for the three months ended September 30, 2025. For the nine months ended September 30, 2026, Cybersecurity gross profit increased $1.5 million, or 2%, compared to the same period in 2025. Cybersecurity gross margin for the nine months ended September 30, 2026 was 75%, compared to 75% for the nine months ended September 30, 2025. The increase in Cybersecurity gross profit for both periods was primarily driven by increased revenue, discussed above, and favorable hardware mix, partially offset by incremental amortization of capitalized software costs related to the acquisition of Build38.

Previous wording

•Digital Agreements gross profit increased $3.4 million, or 31%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Digital Agreements gross margin for the three months ended June 30, 2026 was 75%, compared to 71% for the three months ended June 30, 2025. For the six months ended June 30, 2026, Digital Agreements gross profit increased $5.0 million, or 23%, compared to the same period in June 30, 2025. Digital Agreements gross margin for the six months ended June 30, 2026 was 74%, compared to 71% for the six months ended June 30, 2025. The increase in gross profit and gross margin for both periods was driven by higher subscription revenue from existing customer expansions and overage fees, as well as lower cloud infrastructure costs.

Current wording

•Digital Agreements gross profit increased $2.1 million, or 18%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Digital Agreements gross margin for the three months ended September 30, 2026 was 74%, compared to 72% for the three months ended September 30, 2025. For the nine months ended September 30, 2026, Digital Agreements gross profit increased $7.2 million, or 21%, compared to the same period ended September 30, 2025. Digital Agreements gross margin for the nine months ended September 30, 2026 was 74%, compared to 71% for the nine months ended September 30, 2025. The increase in gross profit for both periods was primarily driven by increased revenue, discussed above, and to a lesser extent, lower cloud infrastructure costs.

Previous wording

Operating expenses increased by $2.3 million, or 7%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. For the three months ended June 30, 2026, changes in foreign exchange rates increased operating expenses by approximately $0.2 million as compared to the same period in 2025. Operating expenses increased by $6.1 million, or 10%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. For the six months ended June 30, 2026, changes in foreign exchange rates increased operating expenses by approximately $1.2 million as compared to the same period in 2025.

Current wording

Operating expenses increased by $5.7 million, or 17%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. For the three months ended September 30, 2026, changes in foreign exchange rates decreased operating expenses by approximately $0.2 million as compared to the same period in 2025. Operating expenses increased by $11.8 million, or 12%, during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. For the nine months ended September 30, 2026, changes in foreign exchange rates increased operating expenses by approximately $1.1 million as compared to the same period in 2025.

Previous wording

The following table presents the breakout of operating expenses by category for the three and six months ended June 30, 2026 and 2025:

Current wording

The following table presents the breakout of operating expenses by category for the three and nine months ended September 30, 2026 and 2025:

Previous wording

Sales and marketing expenses for the three months ended June 30, 2026 increased by $1.6 million, or 14%, compared to the three months ended June 30, 2025. Sales and marketing expenses for the six months ended June 30, 2026 increased by $2.8 million, or 12%, compared to the six months ended June 30, 2025. The increase in expense for both periods was driven primarily by higher employee compensation costs, which included higher headcount from organic hires and from the two recent acquisitions, increases in salaries, benefits, bonus, and commissions.

Current wording

Sales and marketing expenses for the three months ended September 30, 2026 increased by $2.6 million, or 23%, compared to the three months ended September 30, 2025. Sales and marketing expenses for the nine months ended September 30, 2026 increased by $5.4 million, or 16%, compared to the nine months ended September 30, 2025. The increase in expense for both periods was driven primarily by higher employee compensation costs, which included higher headcount from organic hires and from the two recent acquisitions, as well as increases in salaries, benefits, bonus and share-based compensation, and commissions.

Previous wording

Average full-time sales, marketing, support, and operating employee headcount for the three and six months ended June 30, 2026 was 176 and 173, respectively, compared to 163 and 160 for the three and six months ended June 30, 2025, respectively. Average headcount was 8% higher for both the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025.

Current wording

Average full-time sales, marketing, support, and operating employee headcount for the three and nine months ended September 30, 2026 was 176 and 174, respectively, compared to 169 and 165 for the three and nine months ended September 30, 2025, respectively. Average headcount was 4% and 5% higher for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025.

Previous wording

Research and development expenses for the three months ended June 30, 2026 increased by $0.5 million, or 5%, compared to the three months ended June 30, 2025, which was largely driven by higher employee compensation costs from the two recent acquisitions, offset partially by higher internal software capitalization costs. Research and development expenses for the six months ended June 30, 2026 increased by $1.6 million, or 9%, compared to the six months ended June 30, 2025. The increase for the period was primarily driven by higher employee compensation costs, largely due to higher headcount from the two recent acquisitions, and higher contractor costs, offset partially by higher internal software capitalization costs.

Current wording

Research and development expenses for the three months ended September 30, 2026 increased by $1.1 million, or 13%, compared to the three months ended September 30, 2025, which was largely driven by higher employee compensation costs from the most recent acquisition, offset partially by higher internal software capitalization costs. Research and development expenses for the nine months ended September 30, 2026 increased by $2.7 million, or 10%, compared to the nine months ended September 30, 2025. The increase for the period was primarily driven by higher employee compensation costs, largely due to higher headcount from the two recent acquisitions, and higher consulting costs, offset partially by higher internal software capitalization costs.

Previous wording

Average full-time research and development employee headcount for the three and six months ended June 30, 2026 was 254 and 250, respectively, compared to 228 and 225 for the three and six months ended June 30, 2025, respectively. Average headcount was 11% higher for both the three and six months ended June 30, 2026 compared to the same periods in 2025.

Current wording

Average full-time research and development employee headcount for the three and nine months ended September 30, 2026 was 265 and 255, respectively, compared to 238 and 229 for the three and nine months ended September 30, 2025, respectively. Average headcount was 11% higher for both the three and nine months ended September 30, 2026 compared to the same periods in 2025.