COMMVAULT SYSTEMS INC

1. Basis of Presentation

Commvault Systems, Inc. and its subsidiaries ("Commvault," "we," "us," "our," or the "Company") is a provider of cyber resiliency solutions designed to help the enterprise protect, secure, and recover their data, applications, and identity systems in a world of increasing cyber threats and attacks. Commvault’s offerings provide cyber resilience, including data protection, cyber recovery, data security, and governance, aiming to enable customers' continuous business. Our offerings are delivered through self-managed software, software-as-a-service ("SaaS"), integrated appliances, or managed by partners. Customers use our Commvault Cloud platform to help protect themselves from threats like ransomware and recover their data efficiently.

The consolidated financial statements of Commvault as of September 30, 2026 and for the three and six months ended September 30, 2026 and 2025 are unaudited, and in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements and should be read in conjunction with the financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire fiscal year.

The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make judgments and estimates that affect the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The amounts of assets and liabilities reported in our consolidated balance sheets and the amounts of revenues and expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, income taxes and related reserves, deferred commissions, goodwill, and purchased intangible assets. Actual results could differ from those estimates.

Reclassification of Prior Year Balances

Certain prior year amounts have been reclassified for consistency with the current year presentation. Beginning in fiscal 2027, Customer support revenue has been further disaggregated between support associated with term-based software license arrangements ("Term-based support") and support associated with perpetual software license arrangements ("Perpetual support"). In addition, Term-based support revenue is now presented within Subscription revenue, together with Term-based license and SaaS revenues. These reclassifications have no impact on the amount of total revenues, net income, or the underlying revenue recognition for these arrangements.

In addition, amortization of debt issuance costs, which was previously included within depreciation and amortization on the Consolidated Statements of Cash Flows, is now presented separately, and the noncash change in fair value of equity securities, which was previously presented separately, is now included within other as an adjustment to reconcile net income to net cash provided by operating activities. These reclassifications have no impact on the amount of cash flows from operating activities.

2. Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 that have had a material effect on our consolidated financial statements.

Recently Adopted and Recently Issued Accounting Standards

There were no recently adopted accounting standards that had a material effect on our consolidated financial statements and accompanying disclosures. The table below outlines recently issued accounting standards not yet adopted that could have an impact on the consolidated financial statements upon adoption.

Concentration of Credit Risk

We grant credit to customers in a wide variety of industries worldwide and generally do not require collateral. Credit losses relating to these customers have historically been minimal.

We rely significantly on our value-added resellers, systems integrators, and corporate resellers, which we collectively refer to as resellers, for the marketing and distribution of our products and services. Further, we have non-exclusive distribution agreements with certain partners who enable a more efficient and effective distribution channel for our solutions by managing our resellers and leveraging their own industry experience.

Partner A accounted for approximately 30% and 31% of our total revenues for the three months ended September 30, 2026 and 2025, respectively, and 31% and 32% of our total revenues for the six months ended September 30, 2026 and 2025, respectively. In addition, Partner A represented approximately 19% and 29% of our total accounts receivable as of September 30, 2026 and March 31, 2026, respectively.

Partner B accounted for approximately 12% of our total revenues for both the three and six months ended September 30, 2026 and 2025. In addition, Partner B represented approximately 12% of our total accounts receivable as of September 30, 2026. Total accounts receivable as of March 31, 2026 for Partner B were less than 10%.

3. Revenue

We generate revenues through subscription arrangements, which include term-based software licenses, term-based support, and SaaS, as well as perpetual software licenses, perpetual support, and other services.

Term-based License

Term-based license includes revenue from the license portion of time-based subscription arrangements which are deployed on-premise. The revenue from these licenses is typically recognized when the software is delivered or made available for download.

Term-based Support

Term-based support includes revenues associated with support contracts tied to our term-based software products. Term-based support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support, and other premium support offerings, including enterprise support. We sell our term-based support contracts as a percentage of net software purchases. Term-based support revenue is recognized ratably over the contract term, which is typicallyone tothree years.

Software-as-a-service ("SaaS")

SaaS includes revenue from time-based subscription arrangements which are delivered through hosted cloud solutions. SaaS revenue is recognized ratably over the contract term, typicallyone tothree years, beginning on the date that the service is made available to the customer. Revenue from usage- or consumption-based arrangements is generally recognized as the services are consumed.

Perpetual License

Perpetual license includes revenue from the sale of perpetual software licenses. Perpetual software license revenue is typically recognized when the software is delivered or made available for download.

Perpetual Support

Perpetual support includes revenues associated with support contracts tied to our perpetual software products. Perpetual support includes software updates on a when-and-if-available basis, telephone support, and integrated web-based support. We sell our perpetual support contracts as a percentage of net software purchases. Perpetual support revenue is recognized ratably over the contract term, which is typicallyone year.

Other Services

Other services consist primarily of revenue related to professional service offerings, including consultation, assessment and design, installation services, and customer education. Revenues related to other services can vary period over period based on the timing services are delivered and are typically recognized as the services are performed.

We do not customize our software licenses (both term-based and perpetual) and installation services are not required. Software licenses are delivered before related services are provided and are functional without professional services, updates, or technical support. We have concluded that our software licenses (both term-based and perpetual) are functional intellectual property that is distinct, as the user can benefit from the software on its own. Revenues for both term-based and perpetual licenses are typically recognized when the software is delivered or made available for download as this is the point the user of the software can direct the use of and obtain substantially all the remaining benefits from the functional intellectual property. We do not recognize software revenue related to the renewal of term-based software licenses earlier than the beginning of the new subscription period.

We also offer software that integrates with appliances and addresses a wide range of business needs and use cases, ranging from support for remote or branch offices with limited IT staff up to large corporate data centers. These appliances are almost exclusively sold through a software-only model in which we sell software to a third party, which assembles an integrated appliance that is sold to end user customers. As a result, the revenues and costs associated with hardware are usually not included in our consolidated financial statements.

Our typical performance obligations include the following:

Judgments Related to Revenue Recognition

Most of our contracts with customers contain multiple performance obligations. For these contracts, we evaluate and account for individual performance obligations separately if they are determined to be distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software licenses (both term-based and perpetual) are typically estimated using the residual approach. Standalone selling prices for SaaS, customer support contracts (both term-based and perpetual), and other services are typically estimated based on observable transactions when these services are sold on a standalone basis. We recognize revenue net of sales tax.

Disaggregation of Revenues

We disaggregate revenues from contracts with customers by geographical region. Our Americas region includes the United States, Canada, and Latin America. Our International region primarily includes Europe, the Middle East, Africa, Australia, India, and Southeast Asia.

Remaining Performance Obligations

Remaining performance obligations represent expected future revenue from existing contracts where performance obligations are unsatisfied or partially unsatisfied at the end of the reporting period. Remaining performance obligations include unfulfilled contracts at the end of a given period and can include subscription arrangements (term-based licenses, term-based support, and SaaS), perpetual support, and other services. As of September 30, 2026, our remaining performance obligations (inclusive of deferred revenue) were $1,074,729, of which approximately 58% is expected to be recognized as revenue over the next twelve months and the remainder recognized thereafter.

Remaining performance obligations, excluding deferred revenue, related to subscription arrangements and other services were $278,069 and $31,262, respectively. Remaining performance obligations related to perpetual support were not material. Of these balances, we expect approximately 43% of subscription arrangements and 100% of other services to be recognized as revenue over the next twelve months and the remainder recognized thereafter. We expect approximately 13% of subscription arrangements remaining performance obligations to be recognized as revenue in the third quarter of fiscal 2027. These balances represent transactions consisting primarily of early renewals, unbilled and undelivered support and other services, and orders received prior to the last day of the quarter that were not delivered or provisioned to customers.

Remaining performance obligations will fluctuate period to period. We do not believe the amount of remaining performance obligations is indicative of future sales or revenue or that the mix at the end of any given period correlates with actual sales performance.

Information About Contract Balances

Amounts collected in advance of services being provided are accounted for as deferred revenue. Nearly all of our deferred revenue balance is related to SaaS, customer support, and other services.

In some arrangements we allow customers to pay for term-based licenses over the term of the software license. When a term-based license arrangement contains payment terms that extend beyond one year, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the license and is recognized as interest income over the extended payment period. The total license fee net of the significant financing component is recognized as revenue at the point in time when the software is transferred to the customer. Interest income from significant financing components was not material for the three and six months ended September 30, 2026 and 2025.

Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables which are anticipated to be invoiced in the next twelve months are included in accounts receivable on the Consolidated Balance Sheets. Long-term unbilled receivables are included in other assets on the Consolidated Balance Sheets. The opening and closing balances of our accounts receivable, unbilled receivables, and deferred revenues are as follows:

The changes in accounts receivable and unbilled receivables are primarily driven by the timing of our billings and cash collections, as well as a higher volume of term-based license arrangements with payments due over the license term. The decrease in deferred revenue is primarily the result of decreases in perpetual support renewal and other services contracts.

The amount of revenue recognized in the period that was included in the opening deferred revenue balance was $145,326 and $315,486 for the three and six months ended September 30, 2026, respectively. The majority of this revenue consists of SaaS and customer support. The amount of revenue recognized from performance obligations satisfied in prior periods was not significant.

4. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, we use the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Inputs other than Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3 — Unobservable inputs that are supported by little or no market activity and that require the reporting entity to develop its own assumptions.

The carrying amounts of our cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to the short-term maturity of these instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the composition of our financial assets measured at fair value as of September 30, 2026 and March 31, 2026:

Assets and Liabilities Not Carried at Fair Value

Fair Value of the Convertible Senior Notes

The 0% convertible senior notes due 2030 (the "Notes") are carried at amortized cost. As of September 30, 2026, the estimated fair value of the Notes was $842,841. The fair value was determined based on the quoted mid-market trading price per $1,000 of face value of the Notes as of the last trading day of the period. The Company considers the fair value of the Notes to be a Level 2 measurement because the valuation is based on observable market data, including broker quoted prices; however, the Notes are not actively traded. Refer to Note 12 of the Notes to Consolidated Financial Statements for further details.

Private Equity Fund Investments

We held equity interests in private equity funds of $10,204 as of September 30, 2026, which are accounted for under the net asset value ("NAV") practical expedient as permitted under Accounting Standards Codification ("ASC") 820, Fair Value Measurement. Investments measured using the NAV practical expedient are not classified within the fair value hierarchy. The net asset values of these investments are determined using quarterly capital statements from the funds, which are based on our contributions to the funds, allocation of profit and loss and changes in fair value of the underlying fund investments. Changes in fair value as reported on the capital statements are recorded through the Consolidated Statements of Operations as non-operating income or expense. These private equity funds focus on making investments in key technology sectors, principally by investing in companies at expansion capital and growth equity stages. We had total unfunded commitments in private equity funds of $475 as of September 30, 2026.

Strategic Investments

As of September 30, 2026, we held an equity interest in a private company with a carrying value of $13,347, consisting of multiple classes of shares subject to different accounting treatment. Of the total investment, a carrying value of $11,126 is accounted for under the measurement alternative in accordance with ASC 321, Investments—Equity Securities, and is carried at cost, less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. There were no observable price changes during the three and six months ended September 30, 2026.

The remainder of the investment, with a carrying value of $2,221, is accounted for under the equity method in accordance with ASC 323 Investments—Equity Method and Joint Ventures. The carrying amount is adjusted each reporting period to reflect our proportionate share of the investee's earnings or losses, distributions received, and any impairment losses. Our share of the investee's earnings or losses is recorded through the Consolidated Statements of Operations as non-operating income or expense.

We evaluate strategic investments for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If an impairment is identified and the decline in value is determined to be other than temporary, an impairment loss is recognized in earnings. No impairments have been identified during the periods presented.

5. Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the vesting of restricted stock units ("RSUs"), performance stock units ("PSUs"), common shares to be purchased under the Employee Stock Purchase Plan ("ESPP"), and, if dilutive, the conversion spread on the Notes. The dilutive effect of RSUs, PSUs, and ESPP purchases is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of the Notes is calculated using the if-converted method. See Note 12 of the Notes to Consolidated Financial Statements for further details of the Notes.

The following table sets forth the reconciliation of basic and diluted net income per common share:

Diluted weighted average shares outstanding excludes RSUs, PSUs, and common shares to be purchased under the ESPP totaling 288 and 71 for the three months ended September 30, 2026 and 2025, respectively, and 311 and 64 for the six months ended September 30, 2026 and 2025, respectively, because the effect of including them would have been anti-dilutive. In addition, the Notes were excluded from diluted net income per share as their inclusion would have been anti-dilutive.

6. Commitments and Contingencies

The Company and certain current and former officers are named as defendants in actions filed by shareholders in May 2026 and July 2026 in the United States District Court for the District of New Jersey. The actions allege violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 10b-5. The actions seek declarations of the actions as class actions, unspecified monetary relief, and costs and fees.

In May 2026 and August 2026, shareholder derivative actions were filed in the same court against certain officers and directors of the Company. The complaints allege claims of breach of fiduciary duty and violations of Section 14(a) of the Exchange Act on behalf of the Company, and seek equitable relief, unspecified monetary damages payable to the Company, and costs and fees. In August 2026, the court consolidated the derivative actions and stayed them pending developments in the securities actions.

Based on the preliminary nature of these proceedings, the outcomes remain uncertain and the Company is unable to reasonably estimate the potential impact, if any, on its results of operations, financial condition, or cash flows. The Company has not recorded an accrual related to these proceedings as of September 30, 2026.

Strategic Pricing and Packaging Initiative

During the first quarter of fiscal 2027, we recognized expense of $6,500 under a performance-based arrangement related to a strategic pricing and packaging initiative. The arrangement included provisions for additional contingent fees payable upon the achievement of specified performance outcomes. During the second quarter of fiscal 2027, the arrangement was completed and the contingency was resolved with no additional amounts becoming payable.

7. Capitalization

On April 15, 2026, our board of directors (the "Board") approved recommitting our existing share repurchase program, making $250,000 available for future repurchases. The share repurchase program has no expiration date. For the three and six months ended September 30, 2026, we repurchased $109,160 and $119,291 of our common stock, respectively. We repurchased 808 shares for the three months ended September 30, 2026 and 906 shares during the six months ended September 30, 2026. As of September 30, 2026, $130,709 remained available under the share repurchase program.

8. Stock Plans

We maintain the 2016 Omnibus Incentive Plan (the "2016 Plan") and the 2026 Equity Plan (the "2026 Plan"), each of which authorizes the grant of various equity-based and cash-based awards. In August 2026, we adopted the 2026 Plan, which replaced the 2016 Plan. No further awards will be granted under the 2016 Plan, and awards previously granted thereunder will remain outstanding in accordance with their terms. During the periods presented, awards granted under both the 2016 Plan and 2026 Plan consisted of RSUs and PSUs. We also maintain the ESPP, under which eligible employees may purchase shares of our common stock through payroll deductions at a discount to market value, subject to statutory and plan limits.

Restricted Stock Units

RSUs generally vest over service periods of up tothree years. The fair value of RSUs is measured based on the market price of our common stock on the date of grant and compensation expense is recognized on a straight-line basis over the requisite service period.

Performance Stock Units

PSUs generally vest over service periods of up tothree years and are subject to the achievement of specified performance or market-based conditions. Performance-based PSUs are earned based on the achievement of predetermined performance objectives, while market-based PSUs are earned based on our total shareholder return relative to a designated market index over the performance period. Depending on actual performance, the number of shares ultimately earned may range from 0% to 300% of target for both performance or market-based PSUs.

The fair value of performance-based PSUs is measured based on the market price of our common stock on the date of grant. The fair value of market-based PSUs is measured using a Monte Carlo simulation model, which incorporates assumptions as to the expected life of awards, a risk-free interest rate, stock price volatility, and dividend yield.

Compensation expense for PSUs is recognized using the accelerated method over the requisite service period. For performance-based PSUs, compensation expense reflects management's estimate of the number of awards expected to vest and is adjusted as necessary until achievement of the performance conditions is determined. Compensation expense for market-based PSUs is recognized based on the grant-date fair value of the target award and is not adjusted for estimated or actual achievement of the market conditions.

Employee Stock Purchase Plan

Under the ESPP, substantially all employees may purchase our common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the stock as of the beginning or the end ofsix-month offering periods. An employee’s payroll deductions under the ESPP are limited to 10% of the employee’s salary and employees may not purchase more than $25 of stock during any calendar year. The fair value of ESPP awards, including discount and look-back features, is measured using the Black-Scholes option pricing model, which also incorporates assumptions including expected term, risk-free interest rate, stock price volatility, and dividend yield. Compensation expense for the ESPP is recognized on a straight-line basis over the applicable offering period.

Stock-based Compensation Expense

The following table presents the stock-based compensation expense recognized in our Consolidated Statements of Operations for the three and six months ended September 30, 2026 and 2025. Stock-based compensation is attributable to RSUs, PSUs, and the ESPP.

As of September 30, 2026, there was $193,274 of unrecognized stock-based compensation expense that is expected to be recognized over a weighted-average period of 2.14 years. We account for forfeitures as they occur. To the extent that awards are forfeited, stock-based compensation will be different from our current estimate.

The following table presents RSU and PSU activity for the six months ended September 30, 2026.

The weighted-average fair value of shares granted was $147.82 and $181.16 per unit during the three months ended September 30, 2026 and 2025, respectively, and $122.01 and $184.61 per unit during the six months ended September 30, 2026 and 2025, respectively. The fair value of awards includes awards with performance and market conditions.

Employee purchases under the ESPP were as follows:88 shares in exchange for $6,585 of proceeds in the six months ended September 30, 2026, and 45 shares in exchange for $6,974 of proceeds in the six months ended September 30, 2025.

9. Income Taxes

Our effective tax rate ("ETR") was 24.9% and 2.5% for the three months ended September 30, 2026 and 2025, respectively, and 29.2% and 8.9% for the six months ended September 30, 2026 and 2025, respectively. The increase in ETR as of September 30, 2026 compared to the prior year was primarily due to changes in the mix of our earnings and tax expenses between the U.S. and foreign countries, as well as changes in the tax impact of stock-based compensation.

10. Segment Information

We operate as a single reportable segment as we report financial information, including net income determined in accordance with GAAP, among other measures, on a consolidated basis to our Chief Executive Officer, who serves as the Chief Operating Decision Maker ("CODM"). The CODM uses consolidated net income to make operating decisions, allocate resources, and evaluate financial performance, primarily by monitoring actual results compared to forecasted results, as well as by reviewing year-over-year results and trending historical performance. The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of actual versus forecasted results are used in assessing the performance of the segment.

The CODM reviews significant segment expenses for our single reportable segment. Significant segment expenses include cost of revenues, sales and marketing expenses, research and development expenses, general and administrative expenses, depreciation and amortization, restructuring, and other operating expenses, all of which are presented in our Consolidated Statements of Operations. Other segment items include interest income, interest expense, other income, net, and income tax expense, which are also presented in our Consolidated Statements of Operations.

Revenues by geography are based upon the billing address of the customer. All transfers between geographic regions have been eliminated from consolidated revenues. The following table sets forth revenue by geographic area:

No individual country other than the United States accounted for 10% or more of revenues for the three and six months ended September 30, 2026 and 2025. Revenue included in the "Other" caption above primarily relates to our operations in Europe, Australia, Canada, and Asia.

11. Restructuring

We initiated a restructuring plan in the first quarter of fiscal 2026 ("Plan A") which was completed in the fourth quarter of fiscal 2026. It was intended to optimize our Business Technology organization. The objective of this plan was to realign the workforce, invest in emerging capabilities, modernize the technology landscape, and streamline operations to operate with greater agility and customer focus. There wereno charges incurred for the three and six months ended September 30, 2026 related to Plan A. For the three and six months ended September 30, 2025, restructuring charges related to this plan were composed of the following:

We initiated a restructuring plan in the third quarter of fiscal 2026 ("Plan B") intended to optimize our cost structure, improve organizational agility, and better align resources with strategic priorities. These restructuring activities encompass workforce reductions, office lease closures, and exit of operations in certain jurisdictions. The majority of these costs have been incurred and the remaining activities are anticipated to be completed in fiscal 2027. For the three and six months ended September 30, 2026, restructuring charges related to Plan B were composed of the following:

Restructuring Accrual

The accrual activity related to our restructuring plans for the six months ended September 30, 2026 was as follows:

12. Debt

Convertible Senior Notes

On September 5, 2025, we issued $900,000 aggregate principal amount of the Notes, including the exercise in full by the initial purchasers of the Notes of their option to purchase an additional $115,000 aggregate principal amount of the Notes. The Notes were issued pursuant to an Indenture, dated September 5, 2025 (the "Indenture"), between Commvault and U.S. Bank Trust Company, National Association, as trustee. The Notes are senior, unsecured obligations and do not bear regular interest; however, special interest and additional interest, if any, may accrue on the Notes at a combined rate per annum not exceeding 0.50% upon the occurrence of certain events as described in the Indenture. The Notes mature on September 15, 2030, unless earlier converted, redeemed, or repurchased. The total net proceeds from the offering, after deducting debt issuance costs, were $878,447.

Noteholders will have the right to convert their Notes before March 15, 2030 only under the following circumstances: (1) during any fiscal quarter (and only during such fiscal quarter) commencing after the fiscal quarter ending on December 31, 2025, if the Last Reported Sale Price (as defined in the Indenture) per share of our common stock exceeds 130% of the conversion price (as described below) for each of at least 20 Trading Days (as defined in the Indenture) (whether or not consecutive) during a period of 30 consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding fiscal quarter; (2) during thefive consecutive business days immediately after anyten consecutive Trading Day period (the "Measurement Period") in which the Trading Price (as defined in the Indenture) per $1,000 principal amount of Notes for each Trading Day of the Measurement Period was less than 98% of the product of the Last Reported Sale Price per share of the common stock on such Trading Day and the conversion rate (as described below) on each Trading Day; (3) upon the occurrence of specified corporate events or distributions on the common stock as set forth in the Indenture; or (4) if the Company calls such Notes for redemption.

On or after March 15, 2030, until the close of business on the second Scheduled Trading Day (as defined in the Indenture) immediately before the maturity date, the Notes will be convertible at the option of the noteholders at any time, in multiples of $1,000 principal amount. The conversion rate for the Notes will initially be 4.2215 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $236.88 per share of common stock. The conversion rate is subject to adjustment upon certain events. Upon conversion, consideration due will consist of cash, up to the principal amount of the Notes to be converted, and, for any conversion value in excess of principal, cash or shares of our common stock, at our election.

We may not redeem the Notes at our option at any time before September 22, 2028. We will have the option to redeem the Notes, in whole or in part, on or after September 22, 2028 and before the 41 st Scheduled Trading Day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date, but only if (i) the Notes are Freely Tradable (as defined in the Indenture); and (ii) the Last Reported Sale Price per share of our common stock exceeds 130% of the conversion price on (1) each of at least 20 Trading Days, whether or not consecutive, during the 30 consecutive Trading Days ending on, and including, the Trading Day immediately before the date we send the related redemption notice; and (2) the Trading Day immediately before the date we send such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change (as defined in the Indenture) with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption. Pursuant to the partial redemption limitation, we may not elect to redeem less than all of the outstanding Notes unless at least $100,000 aggregate principal amount of Notes are outstanding and not subject to redemption as of the time we send the related redemption notice.

The net carrying amount of the Notes was as follows:

Amortization of debt issuance costs incurred related to the Notes for the three and six months ended September 30, 2026 was $1,063 and $2,126, respectively. Amortization of debt issuance costs incurred related to the Notes for the three and six months ended September 30, 2025 was $306. The debt issuance costs are being amortized into interest expense on the Consolidated Statements of Operations over the term of the Notes at an effective interest rate of 0.48%.

Capped Calls

In connection with the pricing of the Notes and the exercise in full by the initial purchasers of their option to purchase additional Notes, we entered into capped call transactions (the "Capped Calls") with certain affiliates of certain initial purchasers of the Notes and other financial institutions.

The Capped Calls each have an initial strike price of $236.88 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $357.56 per share, subject to certain adjustments. The Capped Calls are generally expected to reduce potential dilution to our common stock upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

For accounting purposes, the Capped Calls are treated as separate transactions from, and not part of, the terms of the Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The Capped Calls will not be remeasured as long as they continue to meet the conditions for equity classification.

Revolving Credit Facility

We maintain a $300,000 senior secured revolving credit facility that expires in April 2030 (the "Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The Credit Facility is available for share repurchases, general corporate purposes, and letters of credit. The Credit Facility contains financial maintenance covenants, including a leverage ratio and interest coverage ratio. The Credit Facility also contains certain customary events of default which would permit the lenders to, among other things, declare all loans then outstanding to be immediately due and payable if such default is not cured within applicable grace periods. The Credit Facility also limits our ability to incur certain additional indebtedness, create or permit liens on assets, make acquisitions or investments, make loans or advances, sell or transfer assets, pay dividends or distributions, and engage in certain transactions with affiliates. Outstanding borrowings under the Credit Facility accrue interest at a per annum rate determined by the Company’s election of either the Secured Overnight Financing Rate plus a margin ranging from 1.50% to 2.00%, or a base rate, which is generally the greater of a prime rate plus a margin ranging from 0.50% to 1.00%. The applicable margin in each case is contingent upon the Company’s leverage ratio. Additionally, the unused balance on the Credit Facility is subject to an unused commitment fee ranging from 0.25% to 0.35% per annum based on the Company's leverage ratio. As of September 30, 2026, there wereno borrowings under the Credit Facility and we were in compliance with all covenants.

We have deferred the expense related to debt issuance costs associated with the Credit Facility, which are classified as other assets, and will amortize the costs into interest expense over the term of the Credit Facility. Unamortized amounts as of September 30, 2026 were $1,448. The amortization of debt issuance costs and interest expense related to the Credit Facility incurred for the three and six months ended September 30, 2026 and 2025 was as follows: