HUBSPOT INC

Previous wording

AI is integrated throughout our agentic customer platform, including our Smart CRM, engagement Hubs, and the connected ecosystem. Our engagement Hubs that enable companies to attract, engage, and delight customers throughout the customer lifecycle include Marketing, Sales, Service, Operations, Content and Revenue. The Smart CRM is the foundational context layer that combines customer data with AI to power the entire customer platform with unified customer profiles and tools to manage and govern your team and business processes. Our customer platform features a central database of lead and customer interactions and integrated applications designed to help businesses build their presence online, attract prospects across channels, convert prospects into leads, close leads into customers, transact with those customers, and delight them so they become promoters of those businesses.

Current wording

AI is integrated throughout our agentic customer platform, including our Smart CRM, engagement Hubs, and the connected ecosystem. Our engagement Hubs that enable companies to attract, engage, and delight customers throughout the customer lifecycle include Marketing, Sales, Service, Operations, Content and Revenue. The Smart CRM is the foundational context layer that combines customer data with AI to power the entire customer platform with unified customer profiles and tools to manage and govern their teams and business processes. Our customer platform features a central database of lead and customer interactions and integrated applications designed to help businesses build their presence online, attract prospects across channels, convert prospects into leads, close leads into customers, transact with those customers, and delight them so they become promoters of those businesses. We recently launched YouSpot, a new AI-native personal CRM for individual professionals that unifies a user’s contacts, email, calendar, and notes and lets them search that information in plain language.

Previous wording

We focus on selling to mid-market business-to-business, or B2B, companies, which we define as companies that have between 2 and 2,000 employees. While our customer platform was built to grow with any company, we focus on selling to mid-market businesses because we believe we have significant competitive advantages attracting and serving this market segment. These mid-market businesses seek an integrated, easy-to-implement and easy-to-use solution to reach customers and compete with organizations that have larger marketing, sales, and customer service budgets. We efficiently reach these businesses at scale through our traditional and AI-enhanced engagement strategies, our Solutions Partners, and our “freemium” model. AI-enhanced engagement strategies leverage AI to personalize, automate, and optimize how businesses attract, engage, and retain customers across channels and throughout the customer lifecycle. A Solutions Partner is a service provider that helps businesses with strategy, execution, and implementation of go-to-market activities and technology solutions. Our freemium model attracts customers who begin using our customer platform through our free products and then upgrade to our paid products. As of June 30, 2026, we had 9,016 full-time employees and 306,446 Customers of varying sizes in more than 135 countries, representing many industries.

Current wording

We focus on selling to mid-market business-to-business, or B2B, companies, which we define as companies that have between 2 and 2,000 employees. While our customer platform was built to grow with any company, we focus on selling to mid-market businesses because we believe we have significant competitive advantages attracting and serving this market segment. These mid-market businesses seek an integrated, easy-to-implement and easy-to-use solution to reach customers and compete with organizations that have larger marketing, sales, and customer service budgets. We efficiently reach these businesses at scale through our traditional and AI-enhanced engagement strategies, our Solutions Partners, and our “freemium” model. AI-enhanced engagement strategies leverage AI to personalize, automate, and optimize how businesses attract, engage, and retain customers across channels and throughout the customer lifecycle. A Solutions Partner is a service provider that helps businesses with strategy, execution, and implementation of go-to-market activities and technology solutions. Our freemium model attracts customers who begin using our customer platform through our free products and then upgrade to our paid products. As of September 30, 2026, we had 311,704 Customers of varying sizes in more than 135 countries, representing many industries. Beginning in the third quarter of 2026, Customers included Customers of YouSpot with a YouSpot Pro paid subscription.

Previous wording

We derive most of our revenue from subscriptions to our cloud-based customer platform and related professional services, which consist of customer on-boarding, training and consulting services. Subscription revenue accounted for 98% of our total revenue for the six months ended June 30, 2026 and 2025. We sell multiple product plans at different base prices on a subscription basis, each of which includes our Smart CRM and integrated applications to meet the needs of the various customers we serve. We also generate revenue through customer usage of our consumption-based products. Customers pay additional fees if the number of contacts stored and tracked in the customer’s database exceeds specified thresholds. We also generate revenue based on the purchase of additional subscriptions, products and seats. Most of our Customers’ subscriptions are one year or less in duration.

Current wording

We derive most of our revenue from subscriptions to our cloud-based customer platform and related professional services, which consist of customer on-boarding, training and consulting services. Subscription revenue accounted for 98% of our total revenue for the nine months ended September 30, 2026 and 2025. We sell multiple product plans at different base prices on a subscription basis, each of which includes our Smart CRM and integrated applications to meet the needs of the various customers we serve. Customers pay additional fees if the number of contacts stored and tracked in the customer’s database exceeds specified thresholds. We also generate revenue through customer usage of our credits-based products and through the purchase of additional subscriptions, products and seats. Most of our Customers’ subscriptions are one year or less in duration.

Previous wording

Many of our customers purchase on-boarding, training, and consulting services, which are designed to help customers enhance their ability to attract, engage and delight their customers using our customer platform. Professional services and other revenue also include Payments, our end-to-end payment solution, as well as our Stripe payment processing integration, both built within Revenue Hub. Professional services and other revenue accounted for 2% of total revenue for the six months ended June 30, 2026 and 2025.

Current wording

Many of our customers purchase on-boarding, training, and consulting services, which are designed to help customers enhance their ability to attract, engage and delight their customers using our customer platform. Professional services and other revenue also include Payments, our end-to-end payment solution, as well as our Stripe payment processing integration, both built within Revenue Hub. Professional services and other revenue accounted for 2% of total revenue for the nine months ended September 30, 2026 and 2025.

Previous wording

We have focused on rapidly growing our business and plan to continue to make investments to help us address some of the challenges facing us to support this growth, such as demand for our customer platform by existing and new customers, significant competition from other customer platform providers and related applications and rapid technological changes in our industry.

Current wording

We have focused on rapidly growing our business and plan to continue to make investments to help us address some of the challenges facing us to support this growth, such as demand for our customer platform by existing and new customers, significant competition from other customer platform providers and related applications and rapid technological changes in our industry. See “Business Trends” below.

Previous wording

Subscription-based revenue is derived from customers using our customer platform for their marketing, sales, service, data, and content management needs. We sell multiple product plans at different base prices on a subscription basis, each of which includes our Smart CRM and integrated applications to meet the needs of the various customers we serve. All subscription fees that are billed in advance of service are recorded in deferred revenue. Subscription based revenue is recognized net of consideration paid to Solutions Partners when those Solutions Partners purchase the subscription to our customer platform. We also generate revenue through usage, including HubSpot Credits, which are consumed when customers use our AI agent products across our customer platform, and other consumption-based offerings. Usage fees that are billed in advance of consumption are recorded in deferred revenue.

Current wording

Subscription-based revenue is derived from customers using our customer platform for their marketing, sales, service, data, and content management needs. We sell multiple product plans at different base prices on a subscription basis, each of which includes our Smart CRM and integrated applications to meet the needs of the various customers we serve. All subscription fees that are billed in advance of service are recorded in deferred revenue. Subscription based revenue is recognized net of consideration paid to Solutions Partners when those Solutions Partners purchase the subscription to our customer platform. We also generate revenue through usage, including HubSpot Credits, which are consumed when customers use our AI agent products across our customer platform, and other credits-based offerings. Usage fees that are billed in advance of consumption are recorded in deferred revenue.

Previous wording

Research and development expenses consist primarily of personnel costs of our development team, including salaries, benefits, bonuses, stock-based compensation expense, professional and contractor fees and allocated overhead costs, which include facilities costs, depreciation of fixed assets, and costs related to information technology. We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our customer platform and amortize such costs as cost of subscription and cost of professional services and other revenue over the estimated life of the new product or incremental functionality, which is generally two years. We also capitalize certain development costs that are attributable to developing our internally developed software platforms and amortize such costs throughout the consolidated statement of operations over the estimated life of our internally developed software platforms, which is generally five years. We focus our research and development efforts on improving our products and developing new ones, delivering new functionality and enhancing the customer experience. We believe delivering new functionality for our customers is an integral part of our solution and provides our customers with access to a broad array of options and information critical to their marketing, sales, and customer service efforts. We expect to continue to make investments in and expand our offerings to enhance our customers’ experience and satisfaction and attract new customers. Over time, we expect research and development expenses to increase in absolute dollars as we continue to increase the functionality of our customer platform and decline as a percentage of total revenue, exclusive of stock-based compensation expense.

Current wording

Research and development expenses consist primarily of personnel costs of our development team, including salaries, benefits, bonuses, stock-based compensation expense, professional and contractor fees and allocated overhead costs, which include facilities costs, depreciation of fixed assets, and costs related to information technology. We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our customer platform and amortize such costs as cost of subscription and cost of professional services and other revenue over the estimated life of the new product or incremental functionality, which is generally two years. We also capitalize certain development costs that are attributable to developing our internally developed software platforms and amortize such costs throughout the consolidated statement of operations over the estimated life of our internally developed software platforms, which is generally five years. We focus our research and development efforts on improving our products and developing new ones, delivering new functionality and enhancing the customer experience. We believe delivering new functionality for our customers is an integral part of our solution and provides our customers with access to a broad array of options and information critical to their marketing, sales, and customer service efforts. We expect to continue to make investments in and expand our offerings to enhance our customers’ experience and satisfaction and attract new customers. Over time, we expect research and development expenses to increase in absolute dollars as we continue to increase the functionality of our customer platform and decline as a percentage of total revenue.

Previous wording

We plan to continue to invest in sales and marketing to grow our customer base and increase sales to existing customers. This growth will include adding sales personnel and expanding our marketing activities to continue to generate leads and build brand awareness. We expect sales and marketing expenses to increase in absolute dollars as we continue to develop our sales and marketing teams. Over time, we expect sales and marketing expenses will decline as a percentage of total revenue, exclusive of stock-based compensation.

Current wording

We plan to continue to invest in sales and marketing to grow our customer base and increase sales to existing customers. This growth will include adding sales personnel and expanding our marketing activities to continue to generate leads and build brand awareness. We expect sales and marketing expenses to increase in absolute dollars as we continue to develop our sales and marketing teams. Over time, we expect sales and marketing expenses will decline as a percentage of total revenue.

Previous wording

General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, employee-related information technology, administrative personnel, including salaries, benefits, bonuses, stock-based compensation expense, professional fees for external legal, accounting and other consulting services, and allocated overhead costs, which include facilities costs, depreciation of fixed assets, and costs related to information technology. We expect that general and administrative expenses will increase on an absolute dollar basis as we incur the costs of compliance associated with being a publicly traded company, and remain relatively consistent as a percentage of total revenue, exclusive of stock-based compensation expense, as we focus on processes, systems and controls to enable our internal support functions to scale with the growth of our business.

Current wording

General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, employee-related information technology, administrative personnel, including salaries, benefits, bonuses, stock-based compensation expense, professional fees for external legal, accounting and other consulting services, and allocated overhead costs, which include facilities costs, depreciation of fixed assets, and costs related to information technology. We expect that general and administrative expenses will increase on an absolute dollar basis as we incur the costs of compliance associated with being a publicly traded company, and remain relatively consistent as a percentage of total revenue, as we focus on processes, systems and controls to enable our internal support functions to scale with the growth of our business.

Previous wording

Restructuring expenses primarily consist of variable lease costs related to properties vacated under our restructuring plan. On January 25, 2023, our board of directors authorized a restructuring plan (the “Restructuring Plan”) that was designed to reduce operating costs and enable investment in key opportunities for long-term growth while driving continued profitability. The Restructuring Plan included a reduction of our workforce by approximately 7% and a global lease consolidation to create higher density across our workspaces. Future variable facilities related costs for vacated properties will continue to be recorded to restructuring charges.

Current wording

Restructuring expenses primarily consist of variable lease costs related to properties vacated under our 2023 Restructuring Plan (as defined herein). On January 25, 2023, our Board of Directors authorized a restructuring plan (the “2023 Restructuring Plan”) that was designed to reduce operating costs and enable investment in key opportunities for long-term growth while driving continued profitability. The 2023 Restructuring Plan included a reduction of our workforce by approximately 7% and a global lease consolidation to create higher density across our workspaces. Future variable facilities related costs for vacated properties will continue to be recorded to restructuring charges.

Previous wording

Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments. Interest expense primarily consists of amortization of issuance costs and contractual interest expense related to our 2025 Notes and Revolving Credit Facility. Other (expense) income, net primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities and any gains, losses on, or impairments of our strategic investments.

Current wording

Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments. Interest expense primarily consists of amortization of issuance costs and contractual interest expense related to our 2025 Notes and Revolving Credit Facility. Other income (expense), net primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities and any gains, losses on, or impairments of our strategic investments.

Previous wording

Results of Operations for the Three and Six Months Ended June 30, 2026 and 2025

Current wording

Results of Operations for the Three and Nine Months Ended September 30, 2026 and 2025

Previous wording

Subscription revenue increased during the six months ended June 30, 2026 compared to the same period in 2025 primarily due to the increase in Customers, which grew from 267,982 as of June 30, 2025 to 306,446 as of June 30, 2026. In addition, Average Subscription Revenue per Customer increased from $11,183 for the six months ended June 30, 2025 to $11,799 for the six months ended June 30, 2026. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products. The increase in Average Subscription Revenue per Customer was primarily driven by continued adoption of our Professional and Enterprise products and the impact of foreign currency translation primarily attributable to the decrease in the value of the U.S. Dollar relative to the Euro and British Pound Sterling, partially offset by continued purchases of our lower-priced Starter products.

Current wording

Subscription revenue increased during the three months ended September 30, 2026 compared to the same period in 2025 primarily due to the increase in Customers, which grew from 278,880 as of September 30, 2025 to 311,704 as of September 30, 2026. In addition, Average Subscription Revenue per Customer increased from $11,578 for the three months ended September 30, 2025 to $12,038 for the three months ended September 30, 2026. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products. The increase in Average Subscription Revenue per Customer was primarily driven by continued adoption of our Professional and Enterprise products, partially offset by continued purchases of our lower-priced Starter products.

Previous wording

Subscription revenue increased during the three months ended June 30, 2026 compared to the same period in 2025 primarily due to the increase in Customers, which grew from 267,982 as of June 30, 2025 to 306,446 as of June 30, 2026. In addition, Average Subscription Revenue per Customer increased from $11,310 for the three months ended June 30, 2025 to $11,800 for the three months ended June 30, 2026. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products. The increase in Average Subscription Revenue per Customer was primarily driven by continued adoption of our Professional and Enterprise products and the impact of foreign currency translation primarily attributable to the decrease in the value of the U.S. Dollar relative to the Euro and British Pound Sterling, partially offset by continued purchases of our lower-priced Starter products.

Current wording

Subscription revenue increased during the nine months ended September 30, 2026 compared to the same period in 2025 primarily due to the increase in Customers, which grew from 278,880 as of September 30, 2025 to 311,704 as of September 30, 2026. In addition, Average Subscription Revenue per Customer increased from $11,307 for the nine months ended September 30, 2025 to $11,928 for the nine months ended September 30, 2026. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products. The increase in Average Subscription Revenue per Customer was primarily driven by continued adoption of our Professional and Enterprise products and the impact of foreign currency translation primarily attributable to the decrease in the value of the U.S. Dollar relative to the Euro and British Pound Sterling, partially offset by continued purchases of our lower-priced Starter products.

Previous wording

Professional services and other revenue increased during the three months ended June 30, 2026 compared to the same period in 2025 primarily driven by Payments.

Current wording

Professional services and other revenue increased during the nine months ended September 30, 2026 compared to the same period in 2025 primarily driven by fees earned from Payments, partially offset by lower revenue from technical consulting services.

Previous wording

Total cost of revenue for the three and six months ended June 30, 2026 increased compared to the same period in 2025 primarily due to an increase in subscription and hosting costs, amortization of capitalized software development costs, amortization of acquired technology, employee-related costs and allocated overhead expenses. Gross margins remained relatively consistent year-over-year.

Current wording

Total cost of revenue for the three and nine months ended September 30, 2026 increased compared to the same period in 2025 primarily due to an increase in subscription and hosting costs, amortization of capitalized software development costs, amortization of acquired technology, and allocated overhead expenses. Gross margins remained relatively consistent year-over-year.

Previous wording

The increase in subscription cost of revenue for the three and six months ended June 30, 2026 compared to the same period in 2025 was primarily due to the following:

Current wording

The increase in subscription cost of revenue for the three and nine months ended September 30, 2026 compared to the same period in 2025 was primarily due to the following:

Previous wording

Subscription and hosting costs increased primarily due to growth in our Customer base from 267,982 as of June 30, 2025 to 306,446 as of June 30, 2026. We also incurred higher subscription and hosting costs as we continued to support increased usage of our customer platform and continued investments in AI-enabled tools to expand AI functionality. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and enhance functionality. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business.

Current wording

Subscription and hosting costs increased primarily due to growth in our Customer base from 278,880 as of September 30, 2025 to 311,704 as of September 30, 2026. We also incurred higher subscription and hosting costs to support increased usage of our customer platform, including growth in usage of AI features, and continued investments to expand AI functionality. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and enhance functionality. Amortization of acquired technology increased due to the amortization of acquired technology associated with our business acquisitions in 2026. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business.

Previous wording

Subscription and hosting costs increased primarily due to growth in our Customer base from 267,982 as of June 30, 2025 to 306,446 as of June 30, 2026. We also incurred higher subscription and hosting costs as we continued to support increased usage of our customer platform and continued investments AI-enabled tools to expand AI functionality. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and enhance functionality. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business.

Current wording

Subscription and hosting costs increased primarily due to growth in our Customer base from 278,880 as of September 30, 2025 to 311,704 as of September 30, 2026. We also incurred higher subscription and hosting costs to support increased usage of our customer platform, including growth in usage of AI features, and continued investments to expand AI functionality. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and enhance functionality. Amortization of acquired technology increased due to the amortization of acquired technology associated with our business acquisitions in 2026. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business.

Previous wording

The changes in professional services and other cost of revenue for three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Current wording

The changes in professional services and other cost of revenue for three and nine months ended September 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Previous wording

The changes in research and development expense for the three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Current wording

The changes in research and development expense for the three and nine months ended September 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Previous wording

Software and services expense increased due to an increase in the use of AI tools. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Current wording

Software and services expense increased due to an increase in the use of AI tools. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Previous wording

Software and services expense increased due to an increase in the use of AI tools. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Current wording

Software and services expense increased due to an increase in the use of AI tools. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Previous wording

The increase in sales and marketing expense for the three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Current wording

The changes in sales and marketing expense for the three and nine months ended September 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Previous wording

Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Solutions Partner commissions increased due to increased revenue generated through our Solutions Partners. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Software and services cost increased due to an increase in the use of third party software and AI-enabled tools to improve productivity. Professional fees increased due to an increase in the use of third party services and contractors for our marketing efforts. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure to support our business growth and increased proportional allocation of shared company expenses associated with headcount in sales and marketing.

Current wording

Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Solutions Partner commissions increased due to increased revenue generated through our Solutions Partners. Software and services cost increased due to an increase in the use of third party software and AI-enabled tools to improve productivity. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure to support our business growth and increased proportional allocation of shared company expenses associated with headcount in sales and marketing. Professional fees increased due to an increase in the use of third party services and contractors for our marketing efforts.

Previous wording

Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Solutions Partner commissions increased due to increased revenue generated through our Solutions Partners, partially offset by a decrease due to the change in the duration and eligibility of commissions for certain Solutions Partners to better align with the value delivered to customers in the first quarter of 2025. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Software and services cost increased due to an increase in the use of third party software and AI-enabled tools to improve productivity. Professional fees increased due to an increase in the use of third party services and contractors for our marketing efforts. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure to support our business growth and increased proportional allocation of shared company expenses associated with headcount in sales and marketing.

Current wording

Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Solutions Partner commissions increased due to increased revenue generated through our Solutions Partners, partially offset by a decrease due to the change in the duration and eligibility of commissions for certain Solutions Partners to better align with the value delivered to customers in the first quarter of 2025. Software and services cost increased due to an increase in the use of third party software and AI-enabled tools to improve productivity. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure to support our business growth and increased proportional allocation of shared company expenses associated with headcount in sales and marketing. Professional fees increased due to an increase in the use of third party services and contractors for our marketing efforts.

Previous wording

The changes in general and administrative expense for the three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Current wording

The changes in general and administrative expense for the three and nine months ended September 30, 2026 compared to the same periods in 2025 were primarily due to the following:

Previous wording

Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Professional fees increased primarily due to increase in the use of third-party services and contractors. Allocated overhead expenses increased primarily due to the increased proportional allocation of shared company expenses associated with headcount in general and administrative. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Current wording

Software and services cost increased due to an increase in the use of third party software and AI-enabled tools. Professional fees increased primarily due to increase in the use of third-party services and contractors. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Previous wording

Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Professional fees increased primarily due to increase in the use of third-party services and contractors. Allocated overhead expenses increased primarily due to the increased proportional allocation of shared company expenses associated with headcount in general and administrative. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Current wording

Software and services cost increased due to an increase in the use of third party software and AI-enabled tools. Professional fees increased primarily due to increase in the use of third-party services and contractors. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Employee-related costs decreased primarily due to lower expense associated with our share-based payment awards.

Previous wording

Restructuring charges in the three and six months ended June 30, 2026 and 2025 consisted of variable facilities-related costs on unused space.

Current wording

Restructuring charges in the three and nine months ended September 30, 2026 and 2025 consisted of variable facilities-related costs on unused space under the 2023 Restructuring Plan.

Previous wording

The decrease during the three and six months ended June 30, 2026 is primarily due to lower average investment balances, driven by the use of cash to settle our 2025 Notes and fund our Share Repurchase Programs, and lower yields.

Current wording

The decrease during the three and nine months ended September 30, 2026 is primarily due to lower average investment balances, driven by the use of cash to settle our 2025 Notes and fund our Share Repurchase Programs, and lower yields.

Previous wording

The change in other (expense) income during the three and six months ended June 30, 2026 is primarily due to the following:

Current wording

The change in other income (expense) during the three and nine months ended September 30, 2026 is primarily due to the following:

Previous wording

The increase in the impairment of strategic investments is due to an impairment of $2.4 million in the second quarter of 2026 compared to no impairment in the same period in 2025. The decrease in gain on strategic investments is due to gains of $0.1 million from observable price changes in the value of certain strategic investments in the second quarter of 2026 compared to $1.8 million in the same period in 2025. The change in foreign currency gains and losses is primarily attributable to the value of the U.S. Dollar relative to the Euro and British Pound Sterling.

Current wording

The increase in gain on strategic investments is due to gains of $10.6 million from observable price changes in the value of certain strategic investments in the third quarter of 2026 compared to $0.1 million in the same period in 2025. The decrease in the impairment of strategic investments is due to an impairment of $0.4 million in the third quarter of 2026 compared to $2.1 million in the same period in 2025. The change in foreign currency gains and losses is primarily attributable to the value of the U.S. Dollar relative to the Euro and British Pound Sterling.

Previous wording

The increase in the impairment of strategic investments is due to an impairment of $3.0 million in 2026 compared to $1.6 million in the same period in 2025. The decrease in gain on strategic investments is due to gains of $0.6 million from observable price changes in the value of certain strategic investments in 2026 compared to $1.9 million in the same period in 2025. The change in foreign currency gains and losses is primarily attributable to the value of the U.S. Dollar relative to the Euro and British Pound Sterling.

Current wording

The increase in gain on strategic investments is due to gains of $11.2 million from observable price changes in the value of certain strategic investments in 2026 compared to $2.0 million in the same period in 2025. The decrease in the impairment of strategic investments is due to an impairment of $3.4 million in 2026 compared to $3.7 million in the same period in 2025. The change in foreign currency gains and losses is primarily attributable to the value of the U.S. Dollar relative to the Euro and British Pound Sterling.

Previous wording

The increase in the income tax expense is primarily from an increased U.S. tax expense as a result of the pattern in which pre-tax income is realized throughout 2026 as compared to 2025, as well as an increase in customer withholding taxes.

Current wording

The increase in income tax expense is primarily from an increase in customer withholding taxes.

Previous wording

We will continue to maintain a full valuation allowance on our U.S federal and state deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. However, given our anticipated future earnings, management believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to reach a conclusion that all or a portion of the valuation allowance may no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.

Current wording

We will continue to maintain a full valuation allowance on our U.S federal and state deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance. However, given our current and anticipated future earnings, management believes that there is a reasonable possibility that within the foreseeable future, sufficient positive evidence may become available to reach a conclusion that a significant portion of the valuation allowance may no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. The timing and amount of the valuation allowance release could vary based on the level of profitability that we are actually able to achieve.

Previous wording

The following table shows cash and cash equivalents, working capital, net cash and cash equivalents provided by operating activities, net cash and cash equivalents provided by investing activities, and net cash and cash equivalents used in financing activities for the six months ended June 30, 2026 and 2025.

Current wording

The following table shows cash and cash equivalents, working capital, net cash and cash equivalents provided by operating activities, net cash and cash equivalents provided by investing activities, and net cash and cash equivalents used in financing activities for the nine months ended September 30, 2026 and 2025.

Previous wording

Our cash and cash equivalents at June 30, 2026 were held for working capital purposes. At June 30, 2026, $357.5 million of our cash and cash equivalents was held in accounts outside the United States. We do not assert indefinite reinvestment of our foreign earnings because these earnings have been subject to United States Federal tax. While we have concluded that any incremental tax incurred upon ultimate distribution of these earnings to be immaterial, our current plans do not demonstrate a need to repatriate undistributed earnings to fund our U.S. operations.

Current wording

Our cash and cash equivalents at September 30, 2026 were held for working capital purposes. At September 30, 2026, $349.6 million of our cash and cash equivalents was held in accounts outside the United States. We do not assert indefinite reinvestment of our foreign earnings because these earnings have been subject to United States federal tax. While we have concluded that any incremental tax incurred upon ultimate distribution of these earnings to be immaterial, our current plans do not demonstrate a need to repatriate undistributed earnings to fund our U.S. operations.

Previous wording

Cash from operations could be affected by various risks and uncertainties detailed in the section titled “Risk Factors” included under Part II, Item 1A. However, based on our current business plan and revenue prospects, we believe that our existing cash, cash equivalents and investment balances, and our anticipated cash flows from operations will be sufficient to meet our working capital and operating resource expenditure requirements for the next twelve months.

Current wording

Cash from operations could be affected by various risks and uncertainties detailed in the section titled “Risk Factors” included under Part II, Item 1A. However, based on our current business plan and revenue prospects, we believe that our existing cash, cash equivalents and investment balances, and our anticipated cash flows from operations will be sufficient to meet our working capital and operating resource expenditure requirements for the next twelve months. We expect to make cash payments of approximately $65 million to $75 million in connection with the 2026 Restructuring Plan, substantially all of which we expect to pay by June 30, 2027.

Previous wording

Net cash and cash equivalents provided by operating activities during the six months ended June 30, 2026 primarily reflected our net income of $75.9 million, $84.6 million of depreciation and amortization, $244.2 million in stock-based compensation, $2.6 million of unrealized currency translation, impairments of strategic investments of $3.0 million, and $0.2 million of amortization of debt discount and issuance costs, offset by non-cash expenses that included $10.3 million accretion of bond discounts, gains on strategic investments of $0.6 million, and $1.8 million of benefit from deferred income taxes. Working capital sources of cash and cash equivalents primarily included a $33.9 million decrease in accounts receivable related to increased collection, $59.5 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, $3.5 million increase in accounts payable related to timing of bill payments, $32.7 million increase in accrued expenses and other liabilities, and $13.9 million decrease in right-of-use asset. These sources of cash and cash equivalents were offset by $57.8 million increase in prepaid expenses and other assets, $38.1 million increase in deferred commissions, and $23.9 million decrease in operating lease liabilities.

Current wording

Net cash and cash equivalents provided by operating activities during the nine months ended September 30, 2026 primarily reflected our net income of $158.9 million, $130.8 million of depreciation and amortization, $371.3 million in stock-based compensation, $2.2 million of unrealized currency translation, impairments of strategic investments of $3.4 million, and $0.4 million of amortization of debt discount and issuance costs, offset by non-cash expenses that included $10.7 million accretion of bond discounts, gains on strategic investments of $11.2 million, and $0.1 million of benefit from deferred income taxes. Working capital sources of cash and cash equivalents primarily included a $47.0 million decrease in accounts receivable related to increased collection, $36.2 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, $18.0 million increase in accounts payable related to timing of bill payments, $40.3 million increase in accrued expenses and other liabilities, and $20.5 million decrease in right-of-use asset. These sources of cash and cash equivalents were offset by $61.6 million increase in prepaid expenses and other assets, $49.3 million increase in deferred commissions, and $36.6 million decrease in operating lease liabilities.