NETSCOUT SYSTEMS INC

Previous wording

We are an industry leader with over four decades of experience in providing enterprise network observability, carrier service assurance, AIOps, cybersecurity, and DDoS, protection solutions. Our unique visibility platform and solutions are powered by our pioneering DPI, technology at scale, which is used by many Fortune 500 companies to protect their digital business services against disruption. Service providers and enterprises, including local, state and federal government agencies, rely on our solutions to achieve the visibility and protection necessary to optimize network performance, ensure the delivery of high-quality, mission-critical applications and services, gain timely insight into the end-user experience, and protect their networks from attack. The majority of our solutions are designed to provide Smart Data, a high-fidelity, decision-grade data foundation derived from real-time network activity across legacy, hybrid, and cloud-native environments. This data is designed to enable a unified view of performance, availability, and security, support faster root-cause analysis and operational decision-making, and is increasingly used to inform broader observability platforms and automated and AI-driven workflows. With our offerings, customers can quickly, efficiently and effectively identify and resolve issues that result in downtime, service interruptions, poor service quality, or compromised data, thereby reducing mean time to resolution of issues and driving compelling returns on their investments in their networks and broader technology initiatives. Significant technology trends and catalysts for our business include the evolution of customers' digital transformation initiatives, such as migration to cloud environments and to the edges of their networks; the rapidly evolving cybersecurity threat landscape; advancements in artificial intelligence and business analytics that can enhance observability and are increasing the need for high-quality, real-time data to support automated and AI-driven operations; and the continued evolution and potential opportunities related to 5G technology across both the service provider and enterprise customer verticals.

Current wording

We are an industry leader with over four decades of experience in providing enterprise network observability, carrier service assurance, AI Ops, cybersecurity, and DDoS protection solutions. Our unique visibility platform and solutions are powered by our pioneering deep packet inspection, or DPI, technology at scale, which is used by many Fortune 500 companies to protect their digital business services against disruption. Service providers and enterprises, including local, state and federal government agencies, rely on our solutions to achieve the visibility and protection necessary to optimize network performance, ensure the delivery of high-quality, mission-critical applications and services, gain timely insight into the end-user experience, and protect their networks from attack. The majority of our solutions are designed to provide Smart Data, a high-fidelity, decision-grade data foundation derived from real-time network activity across legacy, hybrid, and cloud-native environments. This data is designed to enable a unified view of performance, availability, and security, support faster root-cause analysis and operational decision-making, and is increasingly used to inform broader observability platforms and automated and AI-driven workflows. With our offerings, customers can quickly, efficiently and effectively identify and resolve issues that result in downtime, service interruptions, poor service quality, or compromised data, thereby reducing mean time to resolution of issues and driving compelling returns on their investments in their networks and broader technology initiatives. Significant technology trends and catalysts for our business include the evolution of customers' digital transformation initiatives, such as migration to cloud environments and to the edges of their networks; the rapidly evolving cybersecurity threat landscape; advancements in AI and business analytics that can enhance observability and are increasing the need for high-quality, real-time data to support automated and AI-driven operations; and the continued evolution and potential opportunities related to 5G technology across both the service provider and enterprise customer verticals.

Previous wording

Our operating results are affected by a variety of factors, including customer demand, product and services mix, pricing, operating costs, competition, and our ability to successfully execute our growth and strategic initiatives. See Part I, Item 1A, “Risk Factors” in our Annual Report for additional information regarding factors that may affect our business and operating results.

Current wording

Our operating results are affected by a variety of factors, including customer demand, product and service mix, pricing, operating costs, competition, and our ability to successfully execute our growth and strategic initiatives. See Part I, Item 1A, “Risk Factors” in our Annual Report for additional information regarding factors that may affect our business and operating results.

Previous wording

On May 1, 2026, the Company acquired the assets and certain liabilities comprising DigiCert, Inc.'s DDoS protection business pursuant to an Asset Purchase Agreement (the "Acquisition"). The Digicert DDoS protection business acquisition enhances the Company’s cybersecurity offerings and enables the integration of certain infrastructure of the Company’s Arbor Cloud network, while expanding its DDoS protection capabilities. The DigiCert DDoS protection business acquisition is expected to contribute approximately $20 million in annualized revenue from the acquisition date, while providing the Company with greater control of the Arbor Cloud network and a clearer path to scaling cloud-based services over time.

Current wording

On May 1, 2026, the Company acquired the assets and certain liabilities comprising DigiCert, Inc.'s DDoS protection business pursuant to an Asset Purchase Agreement (the "Acquisition"). The DigiCert DDoS protection business acquisition enhances the Company’s cybersecurity offerings and enables the integration of certain infrastructure of the Company’s Arbor Cloud network, while expanding its DDoS protection capabilities. The DigiCert DDoS protection business acquisition is expected to contribute approximately $20 million in incremental annualized revenue from the acquisition date, while providing the Company with greater control of the Arbor Cloud network and a clearer path to scaling cloud-based services over time.

Previous wording

Though we continue to monitor the impacts of evolving global and macroeconomic conditions on our business, we believe our current cash reserves and access to capital through our revolving credit facility leave us well-positioned to manage our business in today's environment. We expect net cash provided by operations combined with cash, cash equivalents, marketable securities and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, and working capital requirements over at least the next twelve months. We continue to take actions to manage costs and increase productivity throughout our company, including managing discretionary spending and hiring activities, but are continuing to invest in areas that advance our business for the future. In addition to our cash equivalents, we had $600 million available under a revolving credit facility based on covenant levels at June 30, 2026.

Current wording

Though we continue to monitor the impacts of evolving global and macroeconomic conditions on our business, we expect net cash provided by operations combined with cash, cash equivalents, marketable securities and borrowing availability under our revolving credit facility to provide sufficient liquidity to fund current obligations, capital spending, and working capital requirements over at least the next twelve months. We continue to take actions to manage costs and increase productivity throughout our company, including managing discretionary spending and hiring activities, but are continuing to invest in areas that advance our business for the future. In addition to our cash equivalents, we had $600 million available under a revolving credit facility based on covenant levels at September 30, 2026.

Previous wording

Total revenue increased $23.7 million, or 13%, for the three months ended June 30, 2026, as compared to total revenue for the three months ended June 30, 2025, driven by increases in both product and service revenue. Growth was primarily driven by demand for service assurance offerings from enterprise customer channels. U.S. revenue increased 24% while international revenue decreased 1%.

Current wording

Total revenue increased $26.8 million, or 7%, for the six months ended September 30, 2026, as compared to total revenue for the six months ended September 30, 2025, driven by an increase in service revenue and to a lesser extent product revenue. Growth was primarily driven by demand for service assurance offerings from enterprise customer channels. U.S. revenue increased 7% while international revenue increased 6%.

Previous wording

Our gross profit percentage increased 2 percentage points to 79 % during the three months ended June 30, 2026, as compared with the three months ended June 30, 2025, primarily due to increased product revenue growth and a more favorable product mix associated with increased licensing of our software products.

Current wording

Our total gross profit percentage remained at 79% during the six months ended September 30, 2026, as compared with the six months ended September 30, 2025. Our total gross profit percentage benefited from product revenue growth and a more favorable product mix associated with increased licensing of our software products, offset primarily by increased service costs associated with our DigiCert DDoS protection business acquisition.

Previous wording

Net income for the three months ended June 30, 2026 was $21.8 million, as compared with a net loss for the three months ended June 30, 2025 of $3.7 million. The increase of $25.5 million in net income was primarily due to a $23.7 million increase in revenue, $3.7 million increase in tax benefit, $3.4 million increase in capitalized software, $1.1 million increase in interest income, partially offset by $11.8 million increase in employee-related expenses primarily due to an increase in variable incentive compensation.

Current wording

Net income for the six months ended September 30, 2026 was $56.2 million, as compared with net income for the six months ended September 30, 2025 of $22.1 million. The increase of $34.1 million in net income was primarily due to a $23.9 million increase in total gross profit, $6.3 million increase in capitalized software, $4.9 million increase in interest and other income, $3.2 million decrease in costs associated with trade shows and other events due to timing, $3.0 million decrease in income tax expenses, $2.8 million decrease in professional service costs, $1.2 million decrease in legal expenses, $1.0 million decrease in amortization of acquired intangibles, and $0.8 million decrease in restructuring charges, partially offset by $16.9 million increase in employee-related expenses primarily due to an increase in variable incentive compensation.

Previous wording

At June 30, 2026, we had cash, cash equivalents, marketable securities and investments (current and non-current) of $668.5 million. This represents a decrease of $36.7 million from $705.1 million at March 31, 2026. This decrease was primarily due to $55.0 million used in the acquisition of the DDoS Protection Business of DigiCert, $25.3 million used for tax withholdings on restricted stock units, $20.2 million in purchases of marketable securities, and $3.5 million used for capital expenditures, partially offset by $50.8 million of net cash provided by operations, and $23.8 million in proceeds from the maturity of marketable securities during the three months ended June 30, 2026.

Current wording

At September 30, 2026, we had cash, cash equivalents, marketable securities and investments (current and non-current) of $571.3 million. This represents a decrease of $133.9 million from $705.1 million at March 31, 2026. This decrease was primarily due to $77.0 million used for treasury stock repurchases, $60.3 million in purchases of marketable securities, $55.0 million used in the acquisition of the DDoS Protection Business of DigiCert, $27.7 million used for tax withholdings on restricted stock units, and $9.1 million used for fixed assets and capitalized software, partially offset by $35.6 million of net cash provided by operations, and $46.3 million in proceeds from the maturity of marketable securities during the six months ended September 30, 2026.

Previous wording

We supplement the United States GAAP financial measures we report in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP diluted net income per share, and adjusted EBITDA. Non-GAAP gross profit removes expenses related to the amortization of acquired intangible assets, share-based compensation expense, and acquisition-related depreciation expense from gross profit (GAAP). Non-GAAP income from operations includes the aforementioned adjustments related to non-GAAP gross profit and also removes executive transition costs, and restructuring charges from income (loss) from operations (GAAP). Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations, and also removes the income tax effects of such adjustments from net income (loss) (GAAP). Non-GAAP diluted net income per share is non-GAAP net income divided by total outstanding shares on a diluted basis. Adjusted EBITDA includes the aforementioned adjustments related to non-GAAP net income and also removes interest and other expense, income tax expense, and non-acquisition related depreciation from net income (GAAP). Beginning in the third quarter of fiscal year 2026, we have renamed non-GAAP EBITDA from operations to adjusted EBITDA. We now reconcile this metric to GAAP net income; however, the adjustments included, and the resulting amounts are unchanged from prior periods. This change is intended to align terminology with common market practice.

Current wording

To supplement the United States GAAP financial measures, we report in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per diluted share, and adjusted EBITDA. Non-GAAP gross profit removes expenses related to the amortization of acquired intangible assets and share-based compensation expense from gross profit (GAAP). Non-GAAP income from operations includes the aforementioned adjustments related to non-GAAP gross profit and also removes executive transition costs, and restructuring charges from income from operations (GAAP). Non-GAAP operating margin is non-GAAP income from operations expressed as a percentage of revenue. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations and also removes the income tax effects of such adjustments as well as any loss on extinguishment of debt from net income (GAAP). Non-GAAP net income per diluted share is non-GAAP net income divided by total outstanding shares on a diluted basis. Adjusted EBITDA includes the aforementioned adjustments related to non-GAAP net income and also removes interest and other expense, income tax expense, and depreciation and amortization from net income (GAAP). Beginning in the third quarter of fiscal year 2026, we have renamed non-GAAP EBITDA from operations to adjusted EBITDA. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures included in the attached tables within this Quarterly Report.

Previous wording

Management believes these non-GAAP financial measures will enhance the reader's overall understanding of our current financial performance and our prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how management plans and measures our business. We believe that providing these non-GAAP measures to investors provides them with a view of our operating results that may be more easily compared to peer companies and also enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions. Presenting the GAAP measures on their own may not be indicative of our core operating results. Furthermore, management believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations.

Current wording

These non-GAAP measures are not prepared in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (gross profit, income from operations, operating margin, net income, and net income per diluted share), and may have limitations because they do not reflect all of our results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from, or as a substitute for results prepared in accordance with GAAP. We believe these non-GAAP financial measures will enhance the reader’s overall understanding of our current financial performance and our prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. We believe that providing these non-GAAP measures affords investors a view of our operating results that may be more easily compared to peer companies and also enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions. Presenting the GAAP measures on their own, without the supplemental non-GAAP disclosures, might not be indicative of our core operating results. Furthermore, we believe that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations.

Previous wording

The following table reconciles gross profit, income (loss) from operations, net income (loss) and net income (loss) per share on a GAAP and non-GAAP basis for the three months ended June 30, 2026 and 2025, respectively (dollars in thousands, except for per share data):

Current wording

The following table reconciles gross profit, income (loss) from operations, net income (loss) and net income (loss) per share on a GAAP and non-GAAP basis for the three and six months ended September 30, 2026 and 2025, respectively (dollars in thousands, except for per share data):

Previous wording

The 3%, or $2.2 million, increase in total sales and marketing expenses for the three months ended June 30, 2026 compared to the same period last year was primarily due to an increase in employee-related variable incentive compensation.

Current wording

The 0%, or $0.1 million, decrease in total sales and marketing expenses for the three months ended September 30, 2026 compared to the same period last year was primarily due to a $3.0 million decrease in costs associated with trade shows and other events due to timing, partially offset by an increase of $0.9 million in personnel costs and an increase in employee-related variable incentive compensation.

Previous wording

Interest and Other Income, Net. Interest and other income, net includes interest earned on our cash, cash equivalents and marketable securities, interest expense and other non-operating gains or losses.

Current wording

Interest and Other Income (Expense), Net. Interest and other income, net includes interest earned on our cash, cash equivalents and marketable securities, interest expense and other non-operating gains or losses.

Previous wording

The 20 %, or $0.7 million, increase in interest and other income (expense), net, for the three months ended June 30, 2026 compared to the same period last year was primarily due to a $1.8 million decrease in foreign exchange expense and a $1.1 million increase in interest, offset by a $2.5 million decrease in the change in fair value of our prior equity investment in Napatech that was sold in August 2025.

Current wording

The $4.2 million, increase in interest and other income (expense), net, for the three months ended September 30, 2026 compared to the same period last year was primarily due to a $3.5 million decrease in the change in fair value of our prior equity investment in Napatech that was sold in August 2025.

Previous wording

The effective tax rates were (15.2)% and 30.1% for the three months ended June 30, 2026 and 2025, respectively. The effective tax rate for the three months ended June 30, 2026 differed from the effective tax rate for the three months ended June 30, 2025, primarily related to an increase in the forecasted benefit of the foreign derived intangible income deduction, a significant benefit related to stock compensation and a decrease in foreign withholding taxes.

Current wording

The effective tax rates were 15.5% and 17.7% for the three months ended September 30, 2026 and 2025, respectively. The effective tax rate for the three months ended September 30, 2026 differed from the effective tax rate for the three months ended September 30, 2025, primarily related to an increase in the forecasted benefit of the foreign derived intangible income deduction , partially offset by an increase in state tax expense.

Previous wording

Total revenue increased $23.7 million, or 13% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, driven by increases in both product and service revenue. Product revenue increased 18%, driven by increased enterprise demand for service assurance offerings, which included revenue related to U.S. Government agencies. Service revenue increased 9%, primarily due to the timing and composition of maintenance and contract renewals and to a lesser extent incremental revenue from the DigiCert DDoS protection business acquisition on May 1, 2026. U.S. revenue increased 24%, benefiting from increased enterprise and service provider demand while international revenue decreased 1%. By product line, service assurance revenue increased 20% due to an increase in revenue from enterprise and service provider customers that included the benefit in part from government-related orders, some of which were received earlier than anticipated. Cybersecurity revenue increased 1% due to incremental revenue from the DigiCert DDoS protection business acquisition partially offset by a decrease in product revenue from enterprise customers. From a customer-vertical perspective, enterprise revenue increased 19%, driven by an increase in both product and service revenue and service provider revenue increased 3%.

Current wording

Total revenue increased $26.8 million, or 7% for the six months ended September 30, 2026 compared to the six months ended September 30, 2025 driven by an increase in service revenue and to a lesser extent product revenue. Service revenue increased 8%, primarily due to the timing and composition of maintenance and contract renewals and continued expansion of cloud services. Product revenue increased by 5%, driven by improved enterprise demand for service assurance offerings, including increased orders from U.S. Government agencies. U.S. revenue grew 7%, benefiting from stronger enterprise demand, while international revenue increased 6%, benefiting from stronger service provider demand. By product line, service assurance revenue increased 8% driven by both product and service revenue and cybersecurity revenue increased 4%, as growth in cybersecurity service revenue more than offset lower cybersecurity product revenue. From a customer-vertical perspective, enterprise revenue increased 9%, driven by an increase in both product and service revenue, and service provider revenue increased 3%.

Previous wording

Product. The 19%, or $2.3 million, decrease in cost of product revenue for the three months ended June 30, 2026 compared to the same period last year was primarily due to a more favorable product mix associated with increased licensing of our software products.

Current wording

Product. The 12%, or 2.7 million, decrease in cost of product revenue for the six months ended September 30, 2026 compared to the same period last year was primarily due to a more favorable product mix associated with increased licensing of our software products. Our product gross profit percentage increased two percentage points during the six months ended September 30, 2026 as compared with the six months ended September 30, 2025.

Previous wording

Service. The 11%, or $3.3 million, increase in cost of service revenue for the three months ended June 30, 2026 compared to the same period last year was primarily driven by an increase in employee-related variable incentive compensation, and a $1.4 million increase in personnel costs driven by increased headcount from our DigiCert DDoS protection business acquisition. Our service gross profit percentage was consistent at 72% during the three months ended June 30, 2026 as compared with the three months ended June 30, 2025.

Current wording

Service. The 9%, or $5.7 million, increase in cost of service revenue for the six months ended September 30, 2026 compared to the same period last year was driven by a $3.3 million increase in personnel costs primarily from increased headcount from our DigiCert DDoS protection business acquisition and an increase in employee-related variable incentive compensation. Our service gross profit percentage was consistent at 73% during the six months ended September 30, 2026 as compared with the six months ended September 30, 2025.

Previous wording

The 6%, or $2.6 million, increase in research and development expenses for the three months ended June 30, 2026 compared to the same period last year was primarily due to an increase in employee-related variable incentive compensation and an increase of $1.4 million in personnel costs driven by increased headcount from our DigiCert DDoS protection business acquisition, partially offset by an increase in capitalized software development costs.

Current wording

Research and development. The 2%, or $1.3 million, increase in research and development expenses for the six months ended September 30, 2026 compared to the same period last year was primarily due to an increase of $3.4 million in personnel costs driven by increased headcount from our DigiCert DDoS protection business acquisition and an increase in employee-related variable incentive compensation, partially offset by a $5.8 million increase in capitalized software development costs.

Previous wording

The 8%, or $2.1 million, decrease in general and administrative expenses for the three months ended June 30, 2026 compared to the same period last year was primarily due to a $1.1 million decrease in stock based compensation driven by the retirement of our former Chief Financial Officer and Chief Operating Officer, a $1.0 million decrease associated with the elimination of the costs associated with the previous one-year senior advisor roles of our former Chief Financial Officer and Chief Operating Officer, a $0.5 million decrease in professional service costs, a $0.5 million decrease in legal expenses, and a $0.4 million increase in software capitalization, partially offset by an increase in employee-related variable incentive compensation.

Current wording

General and administrative. The 7%, or $3.7 million, decrease in general and administrative expenses for the six months ended September 30, 2026 compared to the same period last year was primarily due to a $0.8 million decrease in stock based compensation driven by the retirement of our former Chief Financial Officer and Chief Operating Officer, a $1.0 million decrease associated with the elimination of the costs associated with the previous one-year senior advisor roles of our former Chief Financial Officer and Chief Operating Officer, a $1.2 million decrease in legal expenses, a $1.1 million decrease in professional service costs, a $0.7 million decrease in audit fees, partially offset by a $1.6 million increase in software license costs and an increase in employee-related variable incentive compensation.

Previous wording

We produce our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers. We configure our products to customer specifications and generally deliver products shortly after receipt of the purchase order. Service engagements are also included in certain orders. Customers generally may reschedule or cancel unfulfilled orders with little or no penalty. Our total backlog at any particular time is not necessarily indicative of future sales levels. Within total backlog, fulfillable backlog includes what we consider to represent orders that are generally available to be delivered to customers as of the end of the reporting period. Delivery of our fulfillable backlog typically occurs early in the subsequent quarter. However, delivery may be delayed or accelerated due to various other reasons, including but not limited to, changes in timing of customer projects and product delivery schedules, which may not be within our control. Our total combined product backlog at June 30, 2026 was $32.9 million compared to $50.8 million at March 31, 2026. Combined product backlog included fulfillable backlog of $27.9 million and $45.8 million at June 30, 2026 and March 31, 2026, respectively.

Current wording

We produce our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers. We configure our products to customer specifications and generally deliver products shortly after receipt of the purchase order. Service engagements are also included in certain orders. Customers generally may reschedule or cancel unfulfilled orders with little or no penalty. Our total backlog at any particular time is not necessarily indicative of future sales levels. Within total backlog, fulfillable backlog includes what we consider to represent orders that are generally available to be delivered to customers as of the end of the reporting period. Delivery of our fulfillable backlog typically occurs early in the subsequent quarter. However, delivery may be delayed or accelerated due to various other reasons, including but not limited to, changes in timing of customer projects and product delivery schedules, which may not be within our control. Our total combined product backlog at September 30, 2026 was $20.9 million compared to $50.8 million at March 31, 2026. Combined product backlog included fulfillable backlog of $15.4 million and $45.8 million at September 30, 2026 and March 31, 2026, respectively.

Previous wording

Cash and short-term investments held outside of the United States was approximately $250.8 million.

Current wording

Cash and short-term investments held outside of the United States were approximately $199.6 million.

Previous wording

Net cash provided by operating activities of $50.8 million for three months ended June 30, 2026, was primarily attributable to a $25.5 million increase in net income, as adjusted for share-based compensation expense, depreciation and amortization, deferred income taxes, operating lease right-of-use asset, and a $1.5 million working capital outflow. The working capital outflow was primarily driven by a $31.7 million decrease in accrued compensation, a $31.6 million decrease in deferred revenue, a $7.6 million increase in inventories and deferred costs, a $6.5 million increase in prepaid expenses and other assets, and a $2.5 million decrease in operating lease liabilities, partially offset by a $79.0 million decrease in accounts receivable and unbilled costs, primarily impacted by the timing of customer fulfillment.

Current wording

Net cash provided by operating activities of $35.6 million for the six months ended September 30, 2026, was primarily attributable to net income, as adjusted for share-based compensation expense, depreciation and amortization, deferred income taxes, operating lease right-of-use asset, accretion of discounts on marketable securities, and unrealized foreign exchange losses, partially offset by a $77.6 million net working capital outflow. The working capital outflow was primarily driven by a $43.2 million decrease in deferred revenue, a $20.2 million decrease in accrued compensation and other expenses, a $13.6 million increase in inventories and deferred costs, a $6.4 million decrease in accounts payable, a $9.5 million increase in prepaid expenses and other asset, a $5.4 million decrease in operating lease liabilities, offset by a $21.7 million decrease in accounts receivable and unbilled costs. Inventories and deferred costs increased primarily due to strategic purchases of components and raw materials intended to mitigate potential supply-chain constraints and cost increases and to support anticipated customer demand.

Previous wording

Net cash used in investing activities increased by $40.6 million to $57.9 million during the three months ended June 30, 2026, compared with $17.3 million of net cash used in investing activities during the three months ended June 30, 2025. The increase in net cash used in investing activities was due to $55.0 million used in the Digicert DDoS protection business acquisition, $1.6 million increase in purchase of fixed assets, and $2.9 million used for capitalized software development costs. Partially offsetting the increase was a $10.1 million increase in proceeds from the maturity of marketable securities, and a $8.9 million decrease in purchase of marketable securities and investments.

Current wording

Net cash used in investing activities increased by $65.6 million to $78.2 million during the six months ended September 30, 2026, compared with $12.6 million of net cash used in investing activities during the six months ended September 30, 2025. The increase in net cash used in investing activities was due to $55.0 million used in the DigiCert DDoS protection business acquisition, a $9.7 million increase in purchase of marketable securities and investments, and $5.0 million increase in capitalized software development costs. Partially offsetting the increase was a $15.9 million increase in proceeds from the maturity of marketable securities.

Previous wording

Net cash used in financing activities decreased by $3.4 million to $25.3 million during the three months ended June 30, 2026, compared with $28.8 million of cash used in financing activities during the three months ended June 30, 2025.

Current wording

Net cash used in financing activities increased by $57.9 million to $104.6 million during the six months ended September 30, 2026, compared with $46.8 million of cash used in financing activities during the six months ended September 30, 2025.

Previous wording

During the three months ended June 30, 2026, we did not repurchase shares under the 2022 Share Repurchase Program. During the three months ended June 30, 2025, we repurchased a total of 0.8 million shares for $15.0 million in the open market under the 2022 Share Repurchase Program.

Current wording

During the six months ended September 30, 2026, we repurchased a total of 2.0 million shares for $77.0 million in the open market under the 2022 Share Repurchase Program. During the six months ended September 30, 2025, we repurchased a total of approximately 1.5 million shares for $31.6 million in the open market under the 2022 Share Repurchase Program.

Previous wording

In connection with the delivery of our common stock upon vesting of restricted stock units, we withheld approximately 0.6 million shares and 0.6 million shares at a cost of $25.3 million and $13.8 million during the three months ended June 30, 2026 and 2025, respectively, in each case related to minimum statutory tax withholding requirements on these restricted stock units. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the number of shares that are available for repurchase under that program.

Current wording

In connection with the delivery of our common stock upon vesting of restricted stock units, we withheld approximately 0.7 million shares and 0.7 million shares at a cost of $27.7 million and $15.2 million during the six months ended September 30, 2026 and 2025, respectively, in each case related to minimum statutory tax withholding requirements on these restricted stock units. These withholding transactions do not fall under the repurchase program described above, and therefore do not reduce the number of shares that are available for repurchase under that program.

Previous wording

We have contractual obligations for operating leases, unconditional purchase obligations, pension benefits plans and certain other long-term liabilities. We expect net cash provided by operating activities combined with cash, cash equivalents, marketable securities and borrowing availability under our revolving credit facility will provide sufficient liquidity to fund current obligations, capital spending, and working capital requirements over at least the next twelve months and the foreseeable future. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and our revolving credit facility. However, macroeconomic conditions, including high inflation and interest rates, and international trade relations (including trade protections measures, such as tariffs and other trade barriers), could increase our anticipated funding requirements or make it more difficult for us to access capital.

Current wording

We have contractual obligations for operating leases, unconditional purchase obligations, pension benefit plans and certain other long-term liabilities. We expect net cash provided by operating activities combined with cash, cash equivalents, marketable securities and borrowing availability under our revolving credit facility will provide sufficient liquidity to fund current obligations, capital spending, and working capital requirements over at least the next twelve months and the foreseeable future. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and our revolving credit facility. However, macroeconomic conditions, including high inflation and interest rates, and international trade relations (including trade protection measures, such as tariffs and other trade barriers), could increase our anticipated funding requirements or make it more difficult for us to access capital.