Q2 Holdings, Inc.

Previous wording

Founded over 20 years ago, Q2 began by providing digital banking solutions to domestic regional and community financial institutions, or RCFIs. We have rapidly grown since then through a combination of innovation, broad market acceptance of our solutions, strategic investments and acquisitions. Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, small to medium business, or SMBs and commercial segments. While we continue to generate a substantial majority of our revenue from our digital banking platform, we are actively leveraging our broader product portfolio and deep domain expertise to expand our market presence. This strategy includes seeking to further penetrate the digital banking market and drive significant growth across our diverse customer base in the broader financial services sector, while opening up new and meaningful expansion opportunities for our business.

Current wording

Founded over 21 years ago, Q2 began by providing digital banking solutions to domestic regional and community financial institutions, or RCFIs. We have rapidly grown since then through a combination of innovation, broad market acceptance of our solutions, strategic investments and acquisitions. Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, small to medium business, or SMBs and commercial segments. While we continue to generate a substantial majority of our revenue from our digital banking platform, we are actively leveraging our broader product portfolio and deep domain expertise to expand our market presence. This strategy includes seeking to further penetrate the digital banking market and drive significant growth across our diverse customer base in the broader financial services sector, while opening up new and meaningful expansion opportunities for our business.

Previous wording

The recent imposition by the United States of additional tariffs on a broad range of imports from multiple countries and uncertainty regarding the ultimate effectiveness, timing and extent of certain of such tariffs, along with the possibility of retaliatory tariffs being imposed by foreign countries, has introduced new uncertainty into the global trade environment. Although our operations do not involve the direct purchase of significant volumes of goods or raw materials from outside the United States, and we do not manufacture or inventory physical products, these trade measures may indirectly affect our business. For example, continued or escalating tariffs may contribute to inflationary pressures or impact the cost structures of our third-party service providers, cloud infrastructure partners or customers, which could affect demand for our solutions and services or increase our cost-of-service delivery over time.

Current wording

The imposition by the United States of additional tariffs on a broad range of imports from multiple countries and uncertainty regarding the ultimate effectiveness, timing and extent of certain of such tariffs, along with retaliatory tariffs, and the possibility of additional retaliatory tariffs, being imposed by foreign countries, has introduced uncertainty into the global trade environment. Although our operations do not involve the direct purchase of significant volumes of goods or raw materials from outside the United States, and we do not manufacture or inventory physical products, these trade measures may indirectly affect our business. For example, continued or escalating tariffs may contribute to inflationary pressures or impact the cost structures of our third-party service providers, cloud infrastructure partners or customers, which could affect demand for our solutions and services or increase our cost-of-service delivery over time.

Previous wording

Additionally, recent changes in the regulatory landscape for financial services and new regulatory developments, including, for example, the GENIUS Act signed into law on July 18, 2025, may impact our prospects' and customers' operations. Financial services providers and their solutions are subject to extensive and complex regulations and oversight by federal, state and other regulatory authorities. New regulations or changes to existing regulations may create uncertainty or additional cost for financial services providers as they adjust their operations and compliance efforts. Changes to regulations or new regulations may also encourage the adoption and prevalence of new financial products and services from non-depository institutions, such as cryptocurrencies or stablecoin, which may compete with their more traditional financial services.

Current wording

Additionally, recent changes in the regulatory landscape for financial services and new regulatory developments, including, for example, the GENIUS Act signed into law on July 18, 2025, may impact our prospects' and customers' operations. Financial services providers and their solutions are subject to extensive and complex regulations and oversight by federal, state and other regulatory authorities. New regulations or changes to existing regulations may create uncertainty or additional cost for financial services providers as they adjust their operations and compliance efforts. Changes to regulations or new regulations may also encourage the adoption and prevalence of new financial products and services from non-depository institutions, such as cryptocurrencies or stablecoin, which may compete with their more traditional financial services. Continued heightened geopolitical instability, including acts of war or military conflict, has created additional uncertainty in the marketplace. Heightened geopolitical tensions increase the risks associated with cybersecurity threats, supply chain disruptions, payment delays and failures to settle financial transactions. While we do not have significant operations in directly affected areas, we are unable to predict the impact of geopolitical factors on the global economy or on our financial condition or results of operations.

Previous wording

We define a Registered User as an individual related to an account holder of an Installed Customer on our consumer digital banking platform who has registered to use one or more of our digital banking solutions and has current access to use those solutions as of the last day of the reporting period presented. Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base. We anticipate that over time the number of Registered Users will grow at a faster rate than our number of Installed Customers but may fluctuate from period to period. We add new Registered Users through both organic and inorganic growth from existing customers and from the addition of End Users from new Installed Customers. Our Installed Customers had approximately 24.7 million, 22.0 million and 21.1 million Registered Users as of December 31, 2024, 2023 and 2022, respectively. Registered Users as of June 30, 2025 were 26.2 million compared to 23.6 million as of June 30, 2024.

Current wording

We define a Registered User as an individual related to an account holder of an Installed Customer on our consumer digital banking platform who has registered to use one or more of our digital banking solutions and has current access to use those solutions as of the last day of the reporting period presented. Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base. We anticipate that over time the number of Registered Users will grow at a faster rate than our number of Installed Customers but may fluctuate from period to period. We add new Registered Users through both organic and inorganic growth from existing customers and from the addition of End Users from new Installed Customers. Our Installed Customers had approximately 24.7 million, 22.0 million and 21.1 million Registered Users as of December 31, 2024, 2023 and 2022, respectively. Registered Users as of September 30, 2025 were 27.0 million compared to 24.4 million as of September 30, 2024.

Previous wording

We believe Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential and our ability to maintain and expand our relationship with existing clients. We calculate Subscription ARR as the annualized value of all recurring subscription revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Subscription ARR also includes the contracted minimum subscription amounts associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced. Subscription revenues are defined within "Critical Accounting Policies and Significant Judgements and Estimates" in our Form 10-K. We calculate Total ARR as the annualized value of all recurring revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Integrated Services. Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature. Total ARR does not include revenue from professional services or other sources of revenue that are not deemed to be recurring in nature. Subscription and Total ARR are not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. Subscription and Total ARR should be viewed independently of revenue and deferred revenue as Subscription and Total ARR are operating metrics and are not intended to be combined with or replace these items. Our use of Subscription and Total ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures.

Current wording

We believe Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential and our ability to maintain and expand our relationship with existing clients. We calculate Subscription ARR as the annualized value of all recurring subscription revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Subscription ARR also includes the contracted minimum subscription amounts associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced. Subscription revenues are defined within "Critical Accounting Policies and Significant Judgments and Estimates" in our Form 10-K. We calculate Total ARR as the annualized value of all recurring revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Integrated Services. Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature. Total ARR does not include revenue from professional services or other sources of revenue that are not deemed to be recurring in nature. Subscription and Total ARR are not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. Subscription and Total ARR should be viewed independently of revenue and deferred revenue as Subscription and Total ARR are operating metrics and are not intended to be combined with or replace these items. Our use of Subscription and Total ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures.

Previous wording

Our Subscription ARR was $681.9 million, $593.9 million and $500.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. Subscription ARR as of June 30, 2025 was $716.0 million compared to $633.9 million as of June 30, 2024. Our Total ARR was $824.2 million, $734.8 million and $655.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. Total ARR as of June 30, 2025 was $860.6 million compared to $783.0 million as of June 30, 2024.

Current wording

Our Subscription ARR was $681.9 million, $593.9 million and $500.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. Subscription ARR as of September 30, 2025 was $745.4 million compared to $654.6 million as of September 30, 2024. Our Total ARR was $824.2 million, $734.8 million and $655.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. Total ARR as of September 30, 2025 was $888.4 million compared to $796.4 million as of September 30, 2024.

Previous wording

We provide non-GAAP operating income that excludes such items as deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets, lease and other restructuring charges and non-recurring legal settlements. There was no deferred revenue reduction from purchase accounting or transaction-related costs in either of the three and six months ended June 30, 2025 or 2024. We believe excluding these items is useful for the following reasons:

Current wording

We provide non-GAAP operating income that excludes such items as deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets, lease and other restructuring charges and non-recurring legal settlements. There was no deferred revenue reduction from purchase accounting or transaction-related costs in either of the three and nine months ended September 30, 2025 or 2024. We believe excluding these items is useful for the following reasons:

Previous wording

We define adjusted EBITDA as net income (loss) before stock-based compensation, transaction-related costs, depreciation, amortization, lease and other restructuring charges, non-recurring legal settlements, provision for income taxes and interest and other (income) expense, net. There were no transaction-related costs in either of the three and six months ended June 30, 2025 or 2024. We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results for the following reasons:

Current wording

We define adjusted EBITDA as net income (loss) before stock-based compensation, transaction-related costs, depreciation, amortization, lease and other restructuring charges, non-recurring legal settlements, provision for income taxes and interest and other (income) expense, net. There were no transaction-related costs in either of the three and nine months ended September 30, 2025 or 2024. We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results for the following reasons:

Previous wording

On July 4, 2025, H.R. 1, the "One Big Beautiful Bill Act," was signed into law. This legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes were not reflected in the income tax provision for the period ended June 30, 2025, as enactment occurred after the balance sheet date.

Current wording

On July 4, 2025, H.R. 1, the "One Big Beautiful Bill Act," was signed into law. This legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes were reflected in the income tax provision for the three months ended September 30, 2025.

Previous wording

(1)Includes amortization of acquired technology totaling $5.5 million for each of the three months ended June 30, 2025 and 2024, and $11.0 million for each of the six months ended June 30, 2025 and 2024.

Current wording

(1)Includes amortization of acquired technology of $5.5 million for each of the three months ended September 30, 2025 and 2024, and $16.5 million for each of the nine months ended September 30, 2025 and 2024.

Previous wording

(1)Includes amortization of acquired technology of 2.8% and 3.2% for the three months ended June 30, 2025 and 2024, respectively, and 2.9% and 3.3% for the six months ended June 30, 2025 and 2024, respectively.

Current wording

(1)Includes amortization of acquired technology of 2.7% and 3.1% for the three months ended September 30, 2025 and 2024, respectively, and 2.8% and 3.2% for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Revenues increased by $22.3 million, or 12.9%, from $172.9 million for the three months ended June 30, 2024 to $195.1 million for the three months ended June 30, 2025. This increase in revenue was primarily attributable to a $22.4 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in expansions with existing customers and a $0.2 million increase in services and other revenue, partially offset by a $0.3 million decrease in transactional revenue.

Current wording

Revenues increased by $26.7 million, or 15.2%, from $175.0 million for the three months ended September 30, 2024 to $201.7 million for the three months ended September 30, 2025. This increase in revenue was primarily attributable to a $24.6 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in expansions with existing customers, a $1.1 million increase in transactional revenue from usage of our solutions and a $1.0 million increase in services and other revenue.

Previous wording

Revenues increased by $46.5 million, or 13.7%, from $338.4 million for the six months ended June 30, 2024 to $384.9 million for the six months ended June 30, 2025. This increase in revenue was primarily attributable to a $46.3 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in expansions with existing customers and a $1.2 million increase in transactional revenue from usage of our solutions, partially offset by a $1.0 million decrease in services and other revenue from professional and discretionary services and Helix related pass-through revenue.

Current wording

Revenues increased by $73.2 million, or 14.3%, from $513.4 million for the nine months ended September 30, 2024 to $586.6 million for the nine months ended September 30, 2025. This increase in revenue was primarily attributable to a $70.9 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in expansions with existing customers and a $2.3 million increase in transactional revenue from usage of our solutions.

Previous wording

We believe that elevated interest rates have increased the importance for financial institutions to attract and retain depository relationships, which we believe has increased demand for our digital banking solutions. We have observed improved subscription bookings and associated revenue primarily from our digital banking solutions, which we believe is a result of banking conditions placing an importance on attracting and retaining deposits. For the three and six months ended June 30, 2025, our subscription revenue growth was 16% and 17%, respectively, as compared to the prior year period, and we expect subscription revenue will continue to increase as a percentage of total revenue. We continue to observe an overall trend of reduction in customer demand for certain discretionary aspects of our solutions, namely professional services, which we believe are related to customer spending patterns and budget cycles, and will likely continue until the general economic outlook improves.

Current wording

We believe that elevated and fluctuating interest rates have increased the importance for financial institutions to attract and retain depository relationships, which we believe has increased demand for our digital banking solutions. We have observed improved subscription bookings and associated revenue primarily from our digital banking solutions, which we believe is a result of banking conditions placing an importance on attracting and retaining deposits. For the three and nine months ended September 30, 2025, our subscription revenue growth was 18% and 17%, respectively, as compared to the prior year period, and we expect subscription revenue will continue to increase as a percentage of total revenue. We continue to see variability in customer demand for certain discretionary elements of our solutions, including professional services. We believe these fluctuations, and the overall trending decline, are influenced by customer spending patterns and budget cycles, and expect this trend to continue until the broader economic outlook improves.

Previous wording

Cost of revenues increased by $4.5 million, or 5.3%, from $86.1 million for the three months ended June 30, 2024 to $90.6 million for the three months ended June 30, 2025. This increase was primarily attributable to a $2.6 million net increase in third-party public cloud service provider costs, co-location facility costs and software costs resulting from the increased infrastructure necessary to support growing customer activity and migration to third-party public cloud service providers, a $1.7 million increase from the amortization of capitalized software development and capitalized implementation services, a $0.6 million increase in overhead costs and other discretionary expenses and a $0.4 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs, partially offset by a $0.7 million decrease as a result of higher capitalized implementation costs. Increases in personnel costs were largely offset by decreases in stock-based compensation expense.

Current wording

Cost of revenues increased by $6.9 million, or 8.0%, from $86.0 million for the three months ended September 30, 2024 to $92.9 million for the three months ended September 30, 2025. This increase was primarily attributable to a $5.0 million net increase in third-party public cloud service provider costs, co-location facility costs and software costs resulting from the increased infrastructure necessary to support growing customer activity and migration to third-party public cloud service providers, a $1.7 million increase from the amortization of capitalized software development and capitalized implementation services, a $0.8 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs and a $0.4 million increase in overhead costs and other discretionary expenses, partially offset by a $0.7 million net decrease in personnel costs, driven by decreases in stock-based compensation expense and a $0.3 million decrease as a result of higher capitalized implementation costs.

Previous wording

Cost of revenues increased by $10.0 million, or 5.9%, from $169.3 million for the six months ended June 30, 2024 to $179.3 million for the six months ended June 30, 2025. This increase was primarily attributable to a $4.5 million net increase in third-party public cloud service provider costs, co-location facility costs and software costs resulting from the increased infrastructure necessary to support growing customer activity and migration to third-party public cloud service providers, a $3.5 million net increase in personnel costs, including an increase in the number of personnel who provide implementation and customer support services and maintain our data centers and other technical infrastructure, a $3.2 million increase from the amortization of capitalized software development and capitalized implementation services, a $0.9 million increase in overhead costs and other discretionary expenses and a $0.2 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs, partially offset by a $1.9 million decrease as a result of higher capitalized implementation costs and a $0.5 million decrease in decrease in pass-through fees.

Current wording

Cost of revenues increased by $16.9 million, or 6.6%, from $255.3 million for the nine months ended September 30, 2024 to $272.2 million for the nine months ended September 30, 2025. This increase was primarily attributable to a $9.5 million net increase in third-party public cloud service provider costs, co-location facility costs and software costs resulting from the increased infrastructure necessary to support growing customer activity and migration to third-party public cloud service providers, a $4.9 million increase from the amortization of capitalized software development and capitalized implementation services, a $2.9 million net increase in personnel costs, a $1.3 million increase in overhead costs and other discretionary expenses and a $0.8 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs, partially offset by a $2.2 million decrease as a result of higher capitalized implementation costs and a $0.3 million decrease in pass-through fees.

Previous wording

We intend to continue to invest in our implementation and customer support teams and third-party partners for intellectual property and transactional processing in our solutions and technology infrastructure to standardize our business processes and drive future efficiency in our implementations, serve our customers and support our growth as we continue the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers. As we continue to make these investments over the long term, we expect they will increase cost of revenues in absolute dollars as we grow our business, and we expect such expenses to decline as a percentage of revenue, based on cost efficiencies realized in the business, the level and timing of implementation support activities, timing of capitalized software development costs, debit card related pass-through fees and other related costs.

Current wording

We intend to continue to invest in our implementation and customer support teams and third-party partners for intellectual property and transactional processing in our solutions and technology infrastructure to standardize our business processes and drive future efficiency in our implementations, serve our customers and support our growth as we finalize the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers. As we continue to make these investments over the long term, we expect they will increase cost of revenues in absolute dollars as we grow our business, and we expect such expenses to decline as a percentage of revenue, based on cost efficiencies realized in the business, the level and timing of implementation support activities, timing of capitalized software development costs, debit card related pass-through fees and other related costs.

Previous wording

Sales and marketing expenses decreased by $0.7 million, or 2.5%, from $27.7 million for the three months ended June 30, 2024 to $27.0 million for the three months ended June 30, 2025. This decrease was primarily attributable to a $0.5 million decrease in costs related to our annual in-person client conference and other discretionary expenses and a $0.2 million decrease in personnel costs, primarily from decreases in stock-based compensation.

Current wording

Sales and marketing expenses increased by $0.8 million, or 3.3%, from $25.6 million for the three months ended September 30, 2024 to $26.4 million for the three months ended September 30, 2025. This increase was primarily attributable to a $1.0 million increase in costs related to marketing events and other discretionary expenses partially offset by a $0.3 million decrease in personnel costs, primarily from decreases in stock-based compensation.

Previous wording

Research and development expenses increased by $4.1 million, or 5.9%, from $70.6 million for the six months ended June 30, 2024 to $74.8 million for the six months ended June 30, 2025. This increase was primarily attributable to a $2.0 million increase from lower capitalization of software development and implementation services costs from the strategic realignment and expansion of our global innovation capabilities, a $1.2 million increase in travel-related and other discretionary expenses and a $0.8 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions.

Current wording

Research and development expenses increased by $2.0 million, or 5.5%, from $36.9 million for the three months ended September 30, 2024 to $38.9 million for the three months ended September 30, 2025. This increase was primarily attributable to a $0.6 million increase in travel-related and other discretionary expenses, a $0.4 million increase from lower capitalization of software development and implementation services costs, a $0.4 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions and a $0.4 million increase due to an impairment loss related to capitalized software development costs from certain software assets that are no longer expected to be recoverable.

Previous wording

Research and development expenses increased by $1.2 million, or 3.2%, from $35.8 million for the three months ended June 30, 2024 to $36.9 million for the three months ended June 30, 2025. This increase was primarily attributable to a $0.7 million increase in travel-related and other discretionary expenses and a $0.6 million increase from lower capitalization of software development and implementation services costs from the strategic realignment and expansion of our global innovation capabilities, partially offset by a $0.3 million decrease in personnel costs, primarily due to a decrease in stock-based compensation expenses.

Current wording

Research and development expenses increased by $6.2 million, or 5.7%, from $107.5 million for the nine months ended September 30, 2024 to $113.7 million for the nine months ended September 30, 2025. This increase was primarily attributable to a $2.3 million increase from lower capitalization of software development and implementation services costs, a $2.2 million increase in travel-related and other discretionary expenses, a $1.2 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions and a $0.4 million increase due to an impairment loss related to capitalized software development costs from certain software assets that are no longer expected to be recoverable.

Previous wording

General and administrative expenses decreased by $0.2 million, or 0.8%, from $31.3 million for the three months ended June 30, 2024 to $31.0 million for the three months ended June 30, 2025. The decrease in general and administrative expenses was primarily attributable to decreases in professional services.

Current wording

General and administrative expenses increased by $0.2 million, or 0.7%, from $31.5 million for the three months ended September 30, 2024 to $31.7 million for the three months ended September 30, 2025. The increase in general and administrative expenses was primarily attributable to an increase in other discretionary expenses.

Previous wording

General and administrative expenses increased by $1.9 million, or 3.1%, from $61.5 million for the six months ended June 30, 2024 to $63.4 million for the six months ended June 30, 2025. The increase in general and administrative expenses was primarily attributable to a $1.8 million non-recurring legal settlement charge related to certain litigation as discussed in Note 8 - Commitments and Contingencies and a $0.3 million increase in personnel costs, including stock-based compensation, to support the growth of our business, partially offset by a $0.2 million net decrease in professional services, software and other discretionary expenses.

Current wording

General and administrative expenses increased by $2.1 million, or 2.3%, from $93.0 million for the nine months ended September 30, 2024 to $95.1 million for the nine months ended September 30, 2025. The increase in general and administrative expenses was primarily attributable to a $1.8 million non-recurring legal settlement charge related to certain litigation as discussed in Note 8 - Commitments and Contingencies and a $0.3 million net increase in software and other discretionary expenses.

Previous wording

Amortization of acquired intangibles decreased by $4.8 million, or 100.0%, from $4.8 million for the three months ended June 30, 2024 to zero for the three months ended June 30, 2025 and decreased by $9.5 million, or 99.0%, from $9.6 million for the six months ended June 30, 2024 to $0.1 million for the six months ended June 30, 2025. The decrease in amortization in both periods is related to acquired intangible assets that have been fully amortized.

Current wording

Amortization of acquired intangibles decreased by $4.8 million, or 100.0%, from $4.8 million for the three months ended September 30, 2024 to zero for the three months ended September 30, 2025 and decreased by $14.3 million, or 99.4%, from $14.4 million for the nine months ended September 30, 2024 to $0.1 million for the nine months ended September 30, 2025. The decrease in amortization in both periods is related to acquired intangible assets that have been fully amortized.

Previous wording

Lease and other restructuring charges decreased by $1.2 million, or 127.0%, from $1.0 million for the three months ended June 30, 2024 to a credit of $0.3 million for the three months ended June 30, 2025. The decrease in lease and other restructuring charges was primarily attributable to a $0.9 million decrease related to updated assessments and ongoing expenses of previously vacated facilities, including a $0.7 million reversal of a previously accrued lease restructuring liability which was recorded in the second quarter ended June 30, 2025. The reversal was made in conjunction with the Company's decision during the second quarter to reoccupy a part of a facility lease which it previously vacated for sublease. Additionally, there was a $0.3 million decrease in the current period as compared to the prior year period as a result of severance charges associated with restructuring or eliminating certain positions that were recognized in the previous period.

Current wording

Lease and other restructuring charges decreased by $2.3 million, or 74.3%, from $3.1 million for the three months ended September 30, 2024 to $0.8 million for the three months ended September 30, 2025. The decrease in lease and other restructuring charges was primarily from a $1.2 million decrease related to updated assessments and ongoing expenses of previously vacated facilities, including a $0.7 million reversal of a previously accrued lease restructuring liability which was recorded in the third quarter ended September 30, 2025. The reversal was made in conjunction with the Company's decision to reoccupy a part of a facility lease which it previously vacated for sublease. Additionally, there was a $1.1 million decrease in the current period as compared to the prior year period as a result of severance charges associated with restructuring or eliminating certain positions that were recognized in the previous period.

Previous wording

Lease and other restructuring charges decreased by $0.3 million or 16.6%, from $2.1 million for the six months ended June 30, 2024 to $1.7 million for the six months ended June 30, 2025. The decrease in lease and other restructuring charges was primarily attributable to a $1.3 million decrease related to updated assessments and ongoing expenses of previously vacated facilities, including a $0.7 million reversal of a previously accrued lease restructuring liability recorded in the second quarter ended June 30, 2025, partially offset by a $0.9 million increase in severance charges associated with restructuring or eliminating certain positions in connection with initiatives intended to align our resources to the portions of our business that we believe will drive the most long-term value.

Current wording

Lease and other restructuring charges decreased by $2.7 million or 51.2%, from $5.2 million for the nine months ended September 30, 2024 to $2.5 million for the nine months ended September 30, 2025. The net decrease in lease and other restructuring charges was primarily from a decrease related to updated assessments and ongoing expenses of previously vacated facilities, including a $1.4 million reversal of a previously accrued lease restructuring liability which was recorded in the year-ended September 30, 2025. The reversal was made in conjunction with the Company's decision during the year to reoccupy a part of a facility lease which it previously vacated for sublease.

Previous wording

Total other income, net increased by $2.1 million, or 44.9%, from $4.6 million for the six months ended June 30, 2024 to $6.7 million for the six months ended June 30, 2025. The increase was primarily driven by interest income earned from increased balances in our cash, cash equivalents and investments during the current period, partially offset by expenses associated with the Company's Revolving Credit Agreement.

Current wording

Total other income, net increased by $0.9 million, or 28.8%, from $3.3 million for the three months ended September 30, 2024 to $4.2 million for the three months ended September 30, 2025. The increase was primarily driven by interest income earned from increased balances in our cash, cash equivalents and investments during the current period.

Previous wording

Total other income, net increased by $0.9 million, or 33.9%, from $2.7 million for the three months ended June 30, 2024 to $3.7 million for the three months ended June 30, 2025. The increase was primarily driven by interest income earned from increased balances in our cash, cash equivalents and investments during the current period, partially offset by expenses associated with the Company's Revolving Credit Agreement.

Current wording

Total other income, net increased by $3.0 million, or 38.3%, from $7.9 million for the nine months ended September 30, 2024 to $10.9 million for the nine months ended September 30, 2025. The increase was primarily driven by interest income earned from increased balances in our cash, cash equivalents and investments during the current period, partially offset by expenses associated with the Company's Revolving Credit Agreement.

Previous wording

Total provision for income taxes decreased by $1.4 million, or 39.1%, from $3.6 million for the six months ended June 30, 2024 to $2.2 million for the six months ended June 30, 2025. The decrease was primarily driven by a $0.8 million decrease in foreign taxes, a $0.4 million decrease in federal income taxes and a $0.2 million decrease in state income taxes.

Current wording

Total provision for income taxes decreased by $2.1 million, or 92.9%, from $2.3 million for the three months ended September 30, 2024 to $0.2 million for the three months ended September 30, 2025. The decrease was primarily driven by a $1.0 million decrease in state income taxes, a $0.7 million decrease in foreign income taxes and a $0.4 million decrease in federal income taxes.

Previous wording

Total provision for income taxes decreased by $0.4 million, or 17.0%, from $2.1 million for the three months ended June 30, 2024 to $1.7 million for the three months ended June 30, 2025. The decrease was primarily driven by a $0.6 million decrease in foreign taxes, partially offset by a $0.2 million increase in state income taxes.

Current wording

Total provision for income taxes decreased by $3.5 million, or 59.7%, from $5.9 million for the nine months ended September 30, 2024 to $2.4 million for the nine months ended September 30, 2025. The decrease was primarily driven by a $1.5 million decrease in foreign income taxes, a $1.2 million decrease in state income taxes and a $0.8 million decrease in federal income taxes.

Previous wording

As of June 30, 2025, our principal sources of liquidity were cash, cash equivalents and investments of $532.1 million. Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, including our ability to access capital markets and available borrowings under our $125.0 million Revolving Credit Agreement, are adequate to meet our cash requirements for the next twelve months, including the repayment of our 2025 Notes and 2026 Notes upon maturity. We also believe that our longer-term working capital, planned capital expenditures, and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities. However, if we determine a need for additional short-term or long-term liquidity, there is no assurance that such financing, if pursued, would be adequate or available on terms acceptable to us.

Current wording

As of September 30, 2025, our principal sources of liquidity were cash, cash equivalents and investments of $568.7 million. Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, including our ability to access capital markets and available borrowings under our $125.0 million Revolving Credit Agreement, are adequate to meet our cash requirements for the next twelve months, including the repayment of our 2025 Notes and 2026 Notes upon maturity. We also believe that our longer-term working capital, planned capital expenditures, and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities. However, if we determine a need for additional short-term or long-term liquidity, there is no assurance that such financing, if pursued, would be adequate or available on terms acceptable to us.

Previous wording

For the six months ended June 30, 2025, our net cash and cash equivalents provided by operating activities was $92.2 million, which consisted of net income of $16.5 million and non-cash adjustments of $84.4 million, partially offset by cash outflows from changes in operating assets and liabilities of $8.8 million. The primary drivers of cash outflows in operating assets and liabilities were a $18.2 million cash outflow resulting from an increase in accounts receivable, primarily due to the timing of annual billings, a $16.0 million cash outflow resulting from a net increase in deferred solution costs primarily from annual commission payments and deferred implementation costs and a $12.8 million cash outflow resulting from a decrease in accounts payable and accrued liabilities due to timing of payments and payment of annual bonuses during the first quarter. Cash outflows were partially offset by a $39.7 million cash inflow resulting from an increase in deferred revenue due to the increase in billings for services to be provided in future periods and deposits received from customers in advance of service delivery. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs and amortization of debt issuance costs, partially offset by a decrease in deferred income taxes.

Current wording

For the nine months ended September 30, 2025, our net cash and cash equivalents provided by operating activities was $137.8 million, which consisted of net income of $31.6 million and non-cash adjustments of $130.1 million, partially offset by cash outflows from changes in operating assets and liabilities of $23.9 million. The primary drivers of cash outflows in operating assets and liabilities were a $28.0 million cash outflow resulting from an increase in accounts receivable, primarily due to the timing of annual billings, a $26.1 million cash outflow resulting from a gross increase in deferred solution costs primarily from annual commission payments and deferred implementation costs from both new customers and existing customer expansions. Cash outflows were partially offset by a $33.9 million cash inflow resulting from an increase in deferred revenue due to the timing of annual billings and deposits received from customers prior to the recognition of revenue from those related payments. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs and amortization of debt issuance costs, partially offset by amortization of premiums and discounts on investments and deferred income taxes.

Previous wording

For the six months ended June 30, 2024, our net cash and cash equivalents provided by operating activities was $49.5 million, which consisted of a net loss of $26.9 million and non-cash adjustments of $95.4 million, partially offset by cash outflows from changes in operating assets and liabilities of $19.0 million. The primary drivers of cash outflows in operating assets and liabilities were a $17.6 million increase in deferred solution costs primarily from annual commission payments, and deferred implementation costs from both new customers and existing customer expansions, a $16.4 million increase in accounts receivable primarily due to the timing of annual billings at the end of the current quarter and a $6.9 million decrease in accounts payable and accrued liabilities due to timing of payments and payment of annual bonuses during the first quarter. Cash outflows were partially offset by cash inflows resulting from a $22.6 million increase in deferred revenue due to the timing of annual billings and deposits received from customers prior to the recognition of revenue from those related payment. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs and lease impairments, partially offset by amortization of premiums and discounts on investments.

Current wording

For the nine months ended September 30, 2024, our net cash and cash equivalents provided by operating activities was $92.7 million, which consisted of a net loss of $38.7 million and non-cash adjustments of $146.1 million, partially offset by cash outflows from changes in operating assets and liabilities of $14.7 million. The primary drivers of cash outflows in operating assets and liabilities were a $21.9 million increase in deferred solution costs primarily from annual commission payments and deferred implementation costs from both new customers and existing customer expansions, a $14.8 million increase in accounts receivable primarily due to the timing of annual billings and a $6.6 million decrease in other long-term liabilities. Cash outflows were partially offset by cash inflows resulting from a $30.5 million increase in deferred revenue due to the timing of annual billings and deposits received from customers prior to the recognition of revenue from those related payments. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs, deferred income taxes and lease restructurings and impairments, partially offset by amortization of premiums and discounts on investments.

Previous wording

For the six months ended June 30, 2025, our net cash used in investing activities was $41.6 million, consisting of $66.2 million for purchases of investments, $10.5 million for capitalized software development costs and $2.1 million for the purchase of property and equipment, partially offset by $37.2 million received from the maturities of investments.

Current wording

For the nine months ended September 30, 2025, our net cash used in investing activities was $28.3 million, consisting of $91.5 million for purchases of investments, $16.2 million for capitalized software development costs and $4.8 million for the purchase of property and equipment, partially offset by $84.2 million received from the maturities of investments.

Previous wording

For the six months ended June 30, 2024, our net cash provided by investing activities was $12.1 million, consisting of $60.3 million received from the maturities of investments, partially offset by $33.5 million for purchases of investments, $11.8 million for capitalized software development costs and $2.9 million for the purchase of property and equipment.

Current wording

For the nine months ended September 30, 2024, our net cash used in investing activities was $14.6 million, consisting of $67.3 million for purchases of investments, $17.6 million for capitalized software development costs and $5.3 million for the purchase of property and equipment, partially offset by $75.6 million received from the maturities of investments.

Previous wording

For the six months ended June 30, 2025, our net cash provided by financing activities was $4.2 million, attributable to cash received from exercises of stock options and contributions to our ESPP to purchase our common stock.

Current wording

For the nine months ended September 30, 2025, our net cash provided by financing activities was $4.2 million, attributable to cash received from exercises of stock options and contributions to our ESPP to purchase our common stock.

Previous wording

For the six months ended June 30, 2024, our net cash provided by financing activities was $11.4 million due to cash received from exercises of stock options and contributions to our ESPP to purchase our common stock.

Current wording

For the nine months ended September 30, 2024, our net cash provided by financing activities was $10.5 million, primarily consisting of $11.4 million due to cash received from exercises of stock options and contributions to our ESPP to purchase our common stock, partially offset by $0.9 million for payment of debt issuance costs related to the Revolving Credit Agreement.