BLACKBAUD INC

Previous wording

During the first quarter, we expanded the availability of AI‑enabled capabilities across our product portfolio and launched our first agentic AI solution, the Blackbaud fundraising development agent, into general availability. This solution is designed to assist fundraising teams by automating certain outreach and stewardship activities within existing workflows, using customer‑permissioned data and operating under defined governance and user controls.

Current wording

We delivered another quarter of solid execution against our operating plan, with continued focus on operational efficiency and product innovation. AI initiatives remain an important area of emphasis—both in the capabilities we are delivering to customers and in the way we operate the business. During the first half of 2026, we expanded the availability of AI-enabled capabilities across our product portfolio and launched our first agentic AI solution, the Blackbaud fundraising development agent, into general availability. This solution is designed to assist fundraising teams by automating certain outreach and stewardship activities within existing workflows, using customer-permissioned data and operating under defined governance and user controls.

Previous wording

The fundraising development agent is expected to be offered under a subscription pricing model. While commercialization remains in the early stages, we currently anticipate that annual subscription pricing would generally be in the tens of thousands of dollars, depending on customer size and use case. We expect this offering to be marketed both to existing customers as an incremental subscription and to prospective new customers as part of our broader product portfolio. We continue to evaluate customer adoption, operational impacts, and potential financial contributions as part of our ongoing planning and investment process.

Current wording

The fundraising development agent is currently being offered under a subscription pricing model. While commercialization remains in the early stages, annual subscription pricing is generally in the tens of thousands of dollars, depending on customer size and use case. We expect this offering to be marketed both to existing customers as an incremental subscription and to prospective new customers as part of our broader product portfolio. During the second quarter, we continued to expand customer deployments and evaluate adoption trends, operational impacts and potential financial contributions as part of our ongoing planning and investment process.

Previous wording

Adoption of AI‑enabled functionality continued across portions of our customer base during the quarter. A significant portion of our Raiser’s Edge NXT customers utilize machine‑learning‑enabled donor prospecting capabilities, which leverage historical and behavioral data to support fundraising activities. These capabilities are supported by proprietary Blackbaud data, licensed datasets, benchmarking data, and other philanthropic datasets, all subject to our cybersecurity and data governance framework.

Current wording

Adoption of AI-enabled functionality continued across portions of our customer base during the quarter. More than half of our Raiser's Edge NXT customers utilize machine-learning-enabled donor prospecting capabilities, which leverage historical and behavioral data to support fundraising activities. These capabilities are supported by proprietary Blackbaud data, licensed datasets, benchmarking data and other philanthropic datasets, all subject to our cybersecurity and data governance framework.

Previous wording

We also continued to apply AI internally to improve efficiency across engineering, marketing, customer success and the back office. During the quarter, our engineering teams increased their use of approved generative AI development tools to accelerate software development and issue remediation, contributing to productivity improvements and faster delivery of enhancements.

Current wording

We also continued to apply AI internally to improve efficiency across engineering, sales and marketing, customer success and the back office. During the quarter, our engineering teams increased their use of approved generative AI development tools to accelerate software development and issue remediation, contributing to productivity improvements and faster delivery of enhancements. We are also applying AI to support lead qualification, sales development, customer support and other operational processes.

Previous wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended March 31, 2026, we repurchased an aggregate of 1,601,057 shares for $82.1 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 4.5% of our outstanding common stock as of December 31, 2025. As of March 31, 2026, $878.5 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures below.

Current wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended June 30, 2026, we repurchased an aggregate of 797,795 shares for $28.0 million. During the six months ended June 30, 2026, we repurchased an aggregate of 2,398,852 shares for $110.1 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 6.2% of our outstanding common stock as of December 31, 2025. As of June 30, 2026, $850.4 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures below.

Previous wording

Revenue increased by $11.2 million, during the three months ended March 31, 2026, when compared to the same period in 2025, driven largely by the following:

Current wording

Revenue increased by $8.6 million and $19.8 million, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Previous wording

Income from operations increased by $31.7 million, during the three months ended March 31, 2026, when compared to the same period in 2025, driven largely by the following:

Current wording

Income from operations increased by $4.7 million and $36.4 million, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Previous wording

Our recurring subscription contracts are typically for a term of three years at contract inception with standard three-year renewals thereafter. A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers. Management uses gross dollar retention in analyzing our success at delighting our customers with innovative and cloud solutions. Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a measurement period of twelve months. For the twelve months ended March 31, 2026, our gross dollar retention was approximately 92%. This gross dollar retention rate is relatively unchanged from our rate for the twelve months ended December 31, 2025. Changes in the amount of contractual annual recurring revenue up for renewal in a given period may impact absolute churn dollars even when customer renewal rates remain relatively consistent from year-to-year. We are continually investing in innovation, which we believe will support gross dollar retention over the long-term.

Current wording

Our recurring subscription contracts are typically for a term of three years at contract inception with standard three-year renewals thereafter. In recent periods, we have experienced an increase in longer‑term customer contracts. We now have approximately 90% of our contractual recurring revenue on 3-year or longer contracts and approximately 25% on 4-year or longer contracts. A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers.

Previous wording

At March 31, 2026, our cash and cash equivalents were $34.1 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.1 billion and our net leverage ratiowas 2.67 to 1.00.

Current wording

At June 30, 2026, our cash and cash equivalents were $34.4 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.1 billion and our net leverage ratiowas 2.58 to 1.00.

Previous wording

During the three months ended March 31, 2026, we generated $51.5 million in cash from operations, had a net increase in borrowings of $64.9 million, returned $82.1 million to stockholders by way of share repurchases, and had aggregate cash outlays of $14.5 million for purchases of property and equipment and capitalized software development costs.

Current wording

During the six months ended June 30, 2026, we generated $142.5 million in cash from operations, had a net increase in borrowings of $28.6 million, returned $110.1 million to stockholders by way of share repurchases, and had aggregate cash outlays of $30.2 million for purchases of property and equipment and capitalized software development costs.

Previous wording

Comparison of the three months ended March 31, 2026 and 2025

Current wording

Comparison of the three and six months ended June 30, 2026 and 2025

Previous wording

Revenue increased by $11.2 million, or 4.2%, during the three months ended March 31, 2026, when compared to the same period in 2025. For a discussion of our changes in revenue, see "Revenue" above starting on page 21 in this report.

Current wording

Revenue increased by $8.6 million, or 3.0%, and $19.8 million, or 3.6%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025. For a discussion of our changes in revenue, see "Revenue" above starting on page 22 in this report.

Previous wording

Cost of revenue decreased by $0.2 million, or 0.2%, during the three months ended March 31, 2026, when compared to the same period in 2025, driven primarily by the following:

Current wording

Cost of revenue decreased by $1.2 million, or 1.1%, and $1.4 million, or 0.6%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven primarily by the following:

Previous wording

Gross margin increased by 180 basis points for the three months ended March 31, 2026, when compared to the same period in 2025, due to the increase in revenue combined with the decrease in cost of revenue.

Current wording

Gross margin increased by 160 basis points and 170 basis points for the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, due to the increase in revenue combined with the decrease in cost of revenue.

Previous wording

We continue to make investments intended to delight our customers with innovative and secure cloud solutions, including AI technology. Research and development expenses increased by $3.4 million, or 10.0%, during the three months ended March 31, 2026, when compared to the same period in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Current wording

We continue to make investments intended to delight our customers with innovative and secure cloud solutions, including AI technology. Research and development expenses increased by $1.3 million, or 3.8%, and $4.6 million, or 6.9%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Previous wording

Not included in research and development expense for the three months ended March 31, 2026 and 2025 were $12.2 million and $12.4 million, respectively, of qualifying costs associated with software development activities that are required to be capitalized under GAAP, such as those for our cloud solutions. Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to costof revenue over the related assets' estimated useful life, which generally range from two to seven years. We expect that the amount of software development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.

Current wording

Not included in research and development expense for the three months ended June 30, 2026 and 2025 were $13.0 million and $14.4 million, respectively, and for the six months ended June 30, 2026 and 2025 were $25.2 million and $26.8 million, respectively, of qualifying costs associated with software development activities that were capitalized, such as those for our cloud solutions. Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to costof revenue over the related assets' estimated useful life, which generally range from two to seven years. We expect that the amount of software development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.

Previous wording

General and administrative expense decreased by $26.4 million, or 46.6%, during the three months ended March 31, 2026, when compared to the same period in 2025. The decreases in dollars and as a percentage of revenue were primarily driven by the following:

Current wording

General and administrative expense decreased by $24.8 million, or 27.7%, during the six months ended June 30, 2026, when compared to the same period in 2025. The decreases in dollars and as a percentage of revenue were primarily driven by the following:

Previous wording

The decrease in interest expense in dollars and as a percentage of total revenue during the three months ended March 31, 2026, when compared to the same period in 2025, was primarily due to a decrease in portfolio effective interest rate on relatively flat average daily borrowing. We currently expect interest expense for the full year 2026 to be approximately $62 million to $66 million. Our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment. See Note 7 to our unaudited, condensed consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 3. Quantitative and Qualitative Disclosures about Market Risk: Interest Rate Risk (below) for more information about our variable interest rate exposure and related risk.

Current wording

The decreases in interest expense in dollars and as a percentage of total revenue during the three and six months ended June 30, 2026, when compared to the same periods in 2025, were primarily due to a decrease in portfolio effective interest rate on relatively flat average daily borrowing. We currently expect interest expense for the full year 2026 to be approximately $62 million to $66 million. Our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment. See Note 7 to our unaudited, condensed consolidated financial

Previous wording

Other income, net in dollars and as a percentage of total revenue during the three months ended March 31, 2026, was relatively consistent with the same period in 2025. See Note 5 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Current wording

The increases in other income, net in dollars and as a percentage of total revenue during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, were primarily due to decreases in current year losses in currency revaluation compared to prior year losses. See Note 5 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Previous wording

To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with three-year renewals thereafter, billed annually in advance and non-cancelable. In recent periods, we have experienced an increase in longer‑term customer contracts, with more than 20% of new and renewing contracts having initial terms of four years or longer. We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of each one-year period.

Current wording

To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with three-year renewals thereafter, billed annually in advance and non-cancelable. We now have approximately 90% of our contractual recurring revenue on 3-year or longer contracts and approximately 25% on 4-year or longer contracts. We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of each one-year period.

Previous wording

The decrease in deferred revenue during the three months ended March 31, 2026 was primarily due toa seasonal decrease in customer contract billings. Historically, due to the timing of customer budget cycles, we have an increase in billings and customer contract renewals at or near the beginning of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter.

Current wording

The increase in deferred revenue during the six months ended June 30, 2026 was primarily due toa seasonal increase in customer contract billings. Historically, due to the timing of customer budget cycles, we have an increase in billings and customer contract renewals at or near the beginning of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter.

Previous wording

The increase in our effective income tax rate for the three months ended March 31, 2026 when compared to the same period in 2025 was primarily due to an increase in pre-tax book income.

Current wording

The decreases in our effective income tax rate for the three and six months ended June 30, 2026 when compared to the same periods in 2025 were primarily due to a decrease in our valuation allowance and increased deductions from OBBBA implementation, partially offset by discrete tax expense recognized in 2026. See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information. We currently expect a material impact from future phases in fiscal years 2026 and 2027, but not beyond, before considering any impacts of any potential future valuation allowance release (described further in Note 9).

Previous wording

(3)Includes charges of $24.3 million incurred during the three months ended March 31, 2025 related to the release from our lease for office space in Washington, DC.

Current wording

(3)Includes charges of $24.3 million incurred during the six months ended June 30, 2025 related to the release from our lease for office space in Washington, DC.

Previous wording

At March 31, 2026, our total cash and cash equivalents balance included approximately $14.0 million of cash that was held by operations outside the U.S. While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate the funds. We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.

Current wording

At June 30, 2026, our total cash and cash equivalents balance included approximately $14.9 million of cash that was held by operations outside the U.S. While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate the funds. We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.

Previous wording

Net cash provided by operating activities increased by $50.1 million during the three months ended March 31, 2026, when compared to the same period in 2025, primarily due to a $37.4 million increase in net income adjusted for non-cash expenses and a $12.7 million increase in cash flow from operations associated with working capital.

Current wording

Net cash provided by operating activities increased by $74.2 million during the six months ended June 30, 2026, when compared to the same period in 2025, primarily due to a $47.5 million increase in net income adjusted for non-cash expenses and a $26.6 million increase in cash flow from operations associated with working capital.

Previous wording

The increase in cash flow from operations associated with working capital during the three months ended March 31, 2026, when compared to the same period in 2025, was primarily due to fluctuations in the timing of vendor payments.

Current wording

The increase in cash flow from operations associated with working capital during the six months ended June 30, 2026, when compared to the same period in 2025, was primarily due to:

Previous wording

Net cash used in investing activities of $14.5 million decreased by $11.4 million during the three months ended March 31, 2026, when compared to the same period in 2025.

Current wording

Net cash used in investing activities of $38.9 million decreased by $2.4 million during the six months ended June 30, 2026, when compared to the same period in 2025.

Previous wording

During the three months ended March 31, 2025, we used net cash of $12.2 million for the disposition of a business.

Current wording

During the six months ended June 30, 2025, we used net cash of $12.2 million for the disposition of a business.

Previous wording

During the three months ended March 31, 2026, we had a net increase in borrowings of $64.9 million, primarily due to our stock repurchase program and to satisfy tax obligations of employees upon settlement of equity awards (see discussion below).

Current wording

During the six months ended June 30, 2026, we had a net increase in borrowings of $28.6 million, primarily due to our stock repurchase program and to satisfy tax obligations of employees upon settlement of equity awards (see discussion below).

Previous wording

We paid $25.1 million to satisfy tax obligations of employees upon settlement of equity awards during the three months ended March 31, 2026 compared to $37.9 million during the same period in 2025. The amount of taxes paid by us on behalf of employees related to the settlement of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement. Most of our equity awards currently vest in our first quarter.

Current wording

We paid $25.3 million to satisfy tax obligations of employees upon settlement of equity awards during the six months ended June 30, 2026 compared to $38.7 million during the same period in 2025. The amount of taxes paid by us on behalf of employees related to the settlement of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement. Most of our equity awards currently vest in our first quarter.

Previous wording

During the three months ended March 31, 2026, cash flow from financing activities associated with changes in restricted cash due to customers decreased $294.1 million, compared to a decrease of $320.2 million during the same period in 2025. This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next. This restricted cash due to customers is not available to us for operational purposes.

Current wording

During the six months ended June 30, 2026, cash flow from financing activities associated with changes in restricted cash due to customers increased $132.6 million, compared to an increase of $128.6 million during the same period in 2025. This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next. This restricted cash due to customers is not available to us for operational purposes.

Previous wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended March 31, 2026, we repurchased an aggregate of 1,601,057 shares for $82.1 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 4.5% of our outstanding common stock as of December 31, 2025. As of March 31, 2026, $878.5 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, U.S. excise taxes and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures above.

Current wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended June 30, 2026, we repurchased an aggregate of 797,795 shares for $28.0 million. During the six months ended June 30, 2026, we repurchased an aggregate of 2,398,852 shares for $110.1 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 6.2% of our outstanding common stock as of December 31, 2025. As of June 30, 2026, $850.4 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, U.S. excise taxes and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures above.

Previous wording

Historically, we have drawn on our credit facility from time to time to help us meet financial needs, primarily due to the seasonality of our cash flows from operations and financing for business acquisitions. At March 31, 2026, our available borrowing capacity under the 2024 Credit Facilities was $343.2 million. The 2024 Credit Facilities mature in April 2029.

Current wording

Historically, we have drawn on our credit facility from time to time to help us meet financial needs, primarily due to the seasonality of our cash flows from operations and financing for business acquisitions. At June 30, 2026, our available borrowing capacity under the 2024 Credit Facilities was $374.0 million. The 2024 Credit Facilities mature in April 2029.

Previous wording

At March 31, 2026, the carrying amount of our debt under the 2024 Credit Facilities was $1.1 billion. Our average daily borrowings during the three months ended March 31, 2026 were $1.1 billion.

Current wording

At June 30, 2026, the carrying amount of our debt under the 2024 Credit Facilities was $1.1 billion. Our average daily borrowings during the three and six months ended June 30, 2026 were $1.1 billion and $1.1 billion, respectively.

Previous wording

In addition to principal payments, as of March 31, 2026, we expect to pay interest expense over the life of our debt obligations of approximately $213.5 million. These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of March 31, 2026, which includes the effect of interest rate swap agreements. The actual interest expense recognized in our unaudited, condensed consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.

Current wording

In addition to principal payments, as of June 30, 2026, we expect to pay interest expense over the life of our debt obligations of approximately $194.7 million. These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of June 30, 2026, which includes the effect of interest rate swap agreements. The actual interest expense recognized in our unaudited, condensed consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.

Previous wording

As of March 31, 2026, we had remaining operating lease payments of $9.3 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture. Given our remote-first workforce strategy and real estate footprint optimization efforts, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See Note 8 to our unaud ited, condensed consolidated financial statements in this report for more information.

Current wording

As of June 30, 2026, we had remaining operating lease payments of $8.6 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture. Given our remote-first workforce strategy and real estate footprint optimization efforts, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See Note 8 to our unaud ited, condensed consolidated financial statements in this report for more information.

Previous wording

As of March 31, 2026, we had remaining purchase obligations of $142.3 million. These purchase obligations are for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. Our purchase obligations are not recorded as liabilities on our unaudited, condensed consolidated balance sheets as of March 31, 2026, as we had not received the related services. See Note 8 to our unaudited, condensed consolidated financial statements in this report for more information.

Current wording

As of June 30, 2026, we had remaining purchase obligations of $84.5 million. These purchase obligations are for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. Our purchase obligations are not recorded as liabilities on our unaudited, condensed consolidated balance sheets as of June 30, 2026, as we had not received the related services. See Note 8 to our unaudited, condensed consolidated financial statements in this report for more information.

Previous wording

Approximately 17% of our total revenue for the three months ended March 31, 2026 was generated from operations outside the U.S. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $5.3 million as of March 31, 2026 and a loss of $3.8 million as of December 31, 2025. We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our investments denominated in British Pounds into U.S. dollars.

Current wording

Approximately 18% of our total revenue for the six months ended June 30, 2026 was generated from operations outside the U.S. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $5.4 million as of June 30, 2026 and a loss of $3.8 million as of December 31, 2025. We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our investments denominated in British Pounds into U.S. dollars.

Previous wording

The vast majority of our contracts are entered into by our U.S. or U.K. entities. The contracts entered into by the U.S. entity are almost always denominated in U.S. dollars or Canadian dollars, and contracts entered into by our U.K., Australian and Irish subsidiaries are generally denominated in British Pounds, Australian dollars and Euros, respectively. Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies. During the three months ended March 31, 2026, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S. currencies. Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S. dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position. For the three months ended March 31, 2026, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $2.2 million and $1.1 million, respectively. We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian dollar against changes in the exchange rate with the U.S. dollar. We will continue monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates. These impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in accordance with GAAP.

Current wording

The vast majority of our contracts are entered into by our U.S. or U.K. entities. The contracts entered into by the U.S. entity are almost always denominated in U.S. dollars or Canadian dollars, and contracts entered into by our U.K., Australian and Irish subsidiaries are generally denominated in British Pounds, Australian dollars and Euros, respectively. Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies. During the six months ended June 30, 2026, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S. currencies. Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S. dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position. For the six months ended June 30, 2026, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $2.9 million and $2.5 million, respectively. We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian dollar against changes in the exchange rate with the U.S. dollar. We will continue monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates. These impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in accordance with GAAP.

Previous wording

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2026 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2026 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.