VARONIS SYSTEMS INC

Previous wording

We sell substantially all of our products and services to channel partners, including distributors and resellers, which sell to end-user customers, which we refer to in this report as our customers. We believe that our sales model, which combines the leverage of a channel sales model with our highly trained and professional sales force, has and will continue to play a major role in our ability to grow and to successfully deliver our unique value proposition for enterprise data. While our products serve customers of all sizes, across industries and across geographies, the marketing focus and majority of our sales focus is on targeting larger organizations who can make sizable initial purchases with us and, over time, have a greater potential lifetime value. Our customers span leading firms in the financial services, public, healthcare, industrial, insurance, energy and utilities, technology, consumer and retail, education and construction and engineering sectors. We believe our existing customer base serves as a strong source of future incremental revenues given our broad platform of products, their growing volumes and complexity of enterprise data and related security concerns. We will continue our focus on targeting larger organizations who can make sizable purchases with us initially and over time. We are also focused on maintaining a high renewal rate by investing in the quality and reliability of our customer service and support teams to ensure our customers receive value from our products and providing software upgrades and enhancements when and if they are available. Our product offering currently contains coverage for most mission critical cloud and on-premises data stores and cloud infrastructure environments, and many critical SaaS applications. Our renewal rate continued to be over 90% for the nine months ended September 30, 2025. However, for the three months ended September 30, 2025, our term license subscription business underperformed relative to past periods, which resulted in weaker renewals in the final weeks of the quarter. In addition, as we have completed our SaaS transition, we are announcing the end of life for our term license subscription business as of December 31, 2026. We expect this to result in increased uncertainty with our remaining term license customers going forward.

Current wording

Our go-to-market model is channel-led and enterprise-focused. We sell through channel partners, including distributors and resellers, which sell to end-user customers, which we refer to in this report as our customers. We believe that our sales model, which combines the leverage of a channel sales model with our highly trained and professional sales force, has and will continue to play a major role in our ability to grow and to successfully deliver our unique value proposition for enterprise data. While our products serve customers of all sizes, across industries and across geographies, the marketing focus and majority of our sales focus is on targeting larger organizations who can make sizable initial purchases with us and, over time, have a greater potential lifetime value. Our customers span leading organizations across financial services, public, healthcare, industrial, insurance, energy and utilities, technology, construction and engineering, education and consumer and retail sectors. Our sales motion leads with a rapid risk assessment that surfaces immediate, high-priority exposure – typically within days of deployment – creating a clear and urgent case for expansion. Our SaaS renewal rate is over 90% for the three months ended March 31, 2026.

Previous wording

We believe there is a significant long-term growth opportunity in both domestic and international markets, which could include any organization that relies on data stored in SaaS applications, IaaS environments, NAS devices, file shares, databases and email servers. For the three and nine months ended September 30, 2025, approximately 73% and 71% of our revenues were derived from the United States, respectively, while approximately 19% and 21% of our revenues were derived from EMEA, respectively and approximately 8% from ROW. Additionally, despite the revenue recognition variations from the accounting treatment associated with the positive trend of our increase in SaaS sales and existing customer conversions to SaaS, total revenues still grew approximately 15% for the nine months ended September 30, 2025 compared with the nine months ended September 30, 2024. We continue to expect expansion in both domestic and international markets to be key components of our long-term growth strategy. Over the last few years, we have seen changes in customer buying patterns including, some budgetary tightening and additional scrutiny on enterprise spending as a result of a higher inflation and interest rate environment.

Current wording

We believe there is a significant long-term growth opportunity in both domestic and international markets. Any organization that stores data in SaaS applications, IaaS environments, databases, file shares, email systems, or AI platforms is a potential customer. As enterprises accelerate AI adoption, the need to govern, secure, and monitor the data those systems touch will only grow. We believe Varonis is uniquely positioned to meet that demand – not as a company adapting to the AI era, but as one built for it. For the three months ended March 31, 2026, approximately 71% of our revenues were derived from the United States, while approximately 21% of our revenues were derived from EMEA and approximately 8% from ROW. Additionally, despite the revenue recognition variations from the accounting treatment associated with existing customer conversions to SaaS, total revenues still grew approximately 27% for the three months ended March 31, 2026, compared with the three months ended March 31, 2025. We continue to expect expansion in both domestic and international markets to be key components of our long-term growth strategy. Over the last few years, we have seen changes in customer buying patterns including some budgetary tightening and additional scrutiny on enterprise spending as a result of a higher inflation and interest rate environment.

Previous wording

Since inception, we have continued to scale our business and execute on strategic initiatives which we believe have positioned us for durable long-term growth. For the three and nine months ended September 30, 2025, we have continued to grow our revenues despite revenue recognition accounting treatment variations associated with the increase in SaaS sales and existing customer conversions to SaaS. For the three months ended September 30, 2025 and 2024, SaaS revenues were $125.8 million and $57.8 million, respectively. For the nine months ended September 30, 2025 and 2024, SaaS revenues were $320.3 million and $136.6 million, respectively. For the three months ended September 30, 2025 and 2024, our total revenues were $161.6 million and $148.1 million, respectively. For the nine months ended September 30, 2025 and 2024, our total revenues were $450.2 million and $392.4 million, respectively. For the three months ended September 30, 2025 and 2024, we have operating losses of $35.9 million and $23.6 million and net losses of $29.9 million and $18.3 million, respectively. For the nine months ended September 30, 2025 and 2024, we have operating losses of $116.3 million and $100.1 million and net losses of $101.5 million and $82.8 million, respectively.

Current wording

Since inception, we have continued to scale our business and execute on strategic initiatives which we believe have positioned us for durable long-term growth. During the three months ended March 31, 2026, we have continued to grow our revenues despite revenue recognition accounting treatment variations associated with existing customer conversions to SaaS. For the three months ended March 31, 2026 and 2025, SaaS revenues were $161.1 million and $88.6 million, respectively. For the three months ended March 31, 2026 and 2025, our total revenues were $173.1 million and $136.4 million, respectively. For the three months ended March 31, 2026 and 2025, we have operating losses of $44.5 million and $43.8 million and net losses of $36.9 million and $35.8 million, respectively.

Previous wording

Annual recurring revenues is a key performance indicator defined as the annualized value of active SaaS contracts, term-based subscription license contracts and maintenance contracts in effect at the end of that period. SaaS contracts, term-based subscription license contracts and maintenance contracts are annualized by dividing the total contract value by the number of days in the term and multiplying the result by 365.

Current wording

SaaS annual recurring revenues ("SaaS ARR") is a key performance indicator defined as the annualized value of active SaaS contracts in effect at the end of that period. SaaS contracts are annualized by dividing the total contract value by the number of days in the term and multiplying the result by 365. As we have announced the end-of-life of our self-hosted business as of December 31, 2026, we are disclosing SaaS ARR until the end-of-life of the self-hosted business is complete, at which point, ARR and SaaS ARR will be materially consistent.

Previous wording

As of September 30, 2025 and 2024, ARR was $718.6 million and $610.0 million, respectively, an increase of 18% period over period. The annualized value of contracts is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of these contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period. ARR is not a forecast of future revenues and can be impacted by contract start and end dates and renewal rates. We expect ARR to continue to increase in absolute dollars.

Current wording

As of March 31, 2026 and 2025, SaaS ARR was $683.2 million and $405.2 million, respectively, an increase of 69% period over period. The annualized value of contracts is a legal and contractual determination made by assessing the contractual terms with our customers. The annualized value of these contracts is not determined by reference to historical revenues, deferred revenues or any other GAAP financial measure over any period. SaaS ARR is not a forecast of future revenues and can be impacted by contract start and end dates and renewal rates. We expect SaaS ARR to continue to increase in absolute dollars.

Previous wording

Remaining performance obligations ("RPO") represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable amounts that will be invoiced in the future. Our RPO was $930.7 million as of September 30, 2025 and we expect RPO to increase in absolute dollars.

Current wording

Remaining performance obligations ("RPO") represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable amounts that will be invoiced in the future. Our RPO was $1,095.4 million as of March 31, 2026 and we expect RPO to increase in absolute dollars.

Previous wording

SaaS Revenues. SaaS revenues relate to the Varonis Data Security Platform delivered as a SaaS model. Over the last several years, the Company began to offer SaaS-delivered solutions and strategically enhanced its platform to safeguard customers' most mission-critical assets, including cloud environments, SaaS applications and on-premises data. Each of these products allow customers to use hosted software, and the related revenue from these products is recognized ratably over the associated contract period. Our SaaS solutions are the primary driver of our revenues and we expect SaaS revenues to continue to grow considerably. Conversions from a license sold on-premises to our SaaS offering during the original subscription period are accounted for on a prospective basis.

Current wording

SaaS Revenues. SaaS revenues relate to the Varonis Data Security Platform delivered as a SaaS model. Over the last several years, we began to offer SaaS-delivered solutions and strategically enhanced our platform to safeguard customers' most mission-critical assets, including cloud environments, SaaS applications, on-premises data, email and AI systems. Each of these products allow customers to use hosted software, and the related revenue from these products is recognized ratably over the associated contract period. Our SaaS solutions are the primary driver of our revenues and we expect SaaS revenues to continue to grow considerably. Conversions from a license sold on-premises to our SaaS offering during the original subscription period are accounted for on a prospective basis.

Previous wording

Maintenance and Services Revenues. Maintenance and services revenues consist of revenues from maintenance agreements of past perpetual license sales and, to a lesser extent, professional services. Customers with maintenance agreements are entitled to receive support and unspecified upgrades and enhancements when and if they become available. We recognize the revenues associated with maintenance ratably over the associated contract period. We recognize the revenues associated with professional services as those services are delivered or once the service term has expired. Professional services have always been and we expect it to continue to be a small percentage of our total revenues.

Current wording

Maintenance and Services Revenues. Maintenance and services revenues consist of revenues from maintenance agreements of past perpetual license sales and, to a lesser extent, professional services. Customers with maintenance agreements are entitled to receive support and unspecified upgrades and enhancements when and if they become available. We recognize the revenues associated with maintenance ratably over the associated contract period.

Previous wording

Our renewal rate for each of the nine months ended September 30, 2025 and 2024 continued to be over 90%. We measure the renewal rate for our customers over a 12-month period, based on a dollar renewal rate for contracts expiring during that time period. The expected increase in SaaS revenues, combined with the timing of renewals and renewal rates, may result in significant variation in the revenues we recognize in a given period. In addition, for the three months ended September 30, 2025, our term license subscription business underperformed relative to past periods, resulting in weaker renewals in the final weeks of the quarter. We expect term license subscription revenues and perpetual license revenues, including the associated maintenance and support related to perpetual licenses, to continue to decline in the future.

Current wording

Our SaaS renewal rate for each of the three months ended March 31, 2026 and 2025 is over 90%. We measure the SaaS renewal rate for our customers over a 12-month period, based on a dollar renewal rate for SaaS contracts expiring during that time period. The expected increase in SaaS revenues, combined with the timing of conversions and renewals, as well as conversion and renewal rates, may result in significant variation in the revenues we recognize in a given period. We expect term license subscription revenues and perpetual license revenues, including the associated maintenance and support related to perpetual licenses, to continue to decline.

Previous wording

Cost of revenues consist primarily of salaries (including payroll tax expense related to stock-based compensation), employee benefits (including commissions and bonuses) and stock-based compensation for our customer support, customer success, MDDR and services employees; third-party hosting fees; amortization of certain acquired intangible assets; travel expenses; and allocated overhead costs for facilities, IT and depreciation. We recognize expenses related to these costs as they are incurred and expect that these costs will increase in absolute dollars as we continue to invest in our customer success, support and MDDR teams and support the underlying programs that play a critical role in maintaining our high renewal rate.

Current wording

Cost of revenues consist primarily of salaries (including payroll tax expense related to stock-based compensation), employee benefits (including commissions and bonuses) and stock-based compensation for our customer support, customer success, MDDR and services employees; third-party hosting fees; amortization of certain acquired intangible assets; travel expenses; and allocated overhead costs for facilities, IT and depreciation. We recognize expenses related to these costs as they are incurred and expect that these costs will increase in absolute dollars as we continue to invest in our customer success, support and MDDR teams and support the underlying programs that play a critical role in maintaining our high SaaS renewal rate.

Previous wording

Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. As the majority of our expenses are relatively fixed quarter over quarter and due to the seasonality of our business, the first quarter typically results in the lowest gross margin as our first quarter revenues have historically been the lowest for the year. Conversely, the fourth quarter typically results in the highest gross margin as our fourth quarter revenues have historically been the highest for the year. We expect this seasonality to continue to decrease due to differences in the revenue recognition accounting treatment as we seek to convert our remaining term license subscription customers to SaaS.

Current wording

Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. As the majority of our expenses are relatively fixed quarter over quarter and due to the seasonality of our business, the first quarter typically results in the lowest gross margin as our first quarter revenues have historically been the lowest for the year. Conversely, the fourth quarter typically results in the highest gross margin as our fourth quarter revenues have historically been the highest for the year. We have seen the impact of these seasonal patterns, due to differences in revenue recognition accounting treatment, decline in 2025 and during the three months ended March 31, 2026 and we expect it to continue to decline, as we seek to sell more of our SaaS offering to customers and complete the end-of-life of our self-hosted business.

Previous wording

Financial income (expenses), net consists primarily of interest income, amortization of premiums and accretion of discounts related to our investment in available for sale marketable securities, foreign exchange gains or losses, amortization of debt issuance costs and interest expense. Interest income represents interest received on our cash, cash equivalents, marketable securities, and deposits. Foreign exchange gains or losses relate to our business activities in foreign countries with different operational reporting currencies. As a result of our business activities in foreign countries, we expect that foreign exchange gains or losses will continue to occur due to fluctuations in exchange rates in the countries where we do business. Amortization of debt issuance costs relate to the Notes we issued in May 2020 and September 2024. Interest expense consists of the contractual interest expenses associated with the Notes. The Notes we issued in May 2020 matured on August 15, 2025, as such, no further amortization of debt issuance costs or contractual interest expense will be incurred related to these Notes.

Current wording

Financial income (expenses), net consists primarily of interest income, amortization of premiums and accretion of discounts related to our investment in available for sale marketable securities, foreign exchange gains or losses, amortization of debt issuance costs and interest expense and the remeasurement of options to repurchase common stock. Interest income represents interest received on our cash, cash equivalents, marketable securities and deposits. Foreign exchange gains or losses relate to our business activities in foreign countries with different operational reporting currencies. As a result of our business activities in foreign countries, we expect that foreign exchange gains or losses will continue to occur due to fluctuations in exchange rates in the countries where we do business. Amortization of debt issuance costs relate to the Notes we issued in May 2020 and September 2024. Interest expense consists of the contractual interest expenses associated with the Notes. The Notes we issued in May 2020 matured on August 15, 2025, as such, no further amortization of debt issuance costs or contractual interest expense will be incurred related to these Notes. The remeasurement of options to repurchase common stock are associated with our October 2025 share repurchase program.

Previous wording

For the nine months ended September 30, 2025, our revenues increased 15% compared to the nine months ended September 30, 2024 despite increased SaaS sales and existing customer conversions to SaaS which cause variations due to accounting treatment differences in revenue recognition for sales within the respective periods. SaaS revenues increased 135% from $136.6 million for the nine months ended September 30, 2024 to $320.3 million for the nine months ended September 30, 2025, as we completed our transition to a SaaS delivery model. The increase in SaaS revenues was driven by (i) new customer acquisitions, which are happening due to the simplicity and automated outcomes of our SaaS platform and MDDR offering, as well as customer interest in Gen AI, (ii) existing customer conversions and upsells and (iii) our high renewal rates. Consequently, there was an expected decrease to term license subscriptions given the aforementioned transition and customer conversions, a trend we expect to continue in the near future. ARR was $718.6 million and $610.0 million as of September 30, 2025 and 2024, respectively, representing an increase of 18%. The anticipated decrease in maintenance and services revenueswas due to the conversion of existing customers to SaaS and churn, despite our renewal rate continuing to be over 90% for each of the nine months ended September 30, 2025 and 2024. We continue to expect less associated maintenance and services revenues in the future.

Current wording

For the three months ended March 31, 2026, our revenues increased 27% compared to the three months ended March 31, 2025 despite existing customer conversions to SaaS which cause variations due to accounting treatment differences in revenue recognition for sales within the respective periods. SaaS revenues increased 82% from $88.6 million for the three months ended March 31, 2025 to $161.1 million for the three months ended March 31, 2026, as we completed our transition to a SaaS delivery model. The increase in SaaS revenues was driven by (i) new customer acquisitions, which are happening due to the simplicity and automated outcomes of our SaaS platform and MDDR offering, as well as customer interest in Gen AI, (ii) existing customer conversions and upselling and (iii) our high renewal rates. Consequently, there was an expected decrease to term license subscriptions given the aforementioned transition and customer conversions, a trend we expect to continue in the near future. SaaS ARR was $683.2 million and $405.2 million as of March 31, 2026 and 2025, respectively, representing an increase of 69%. The anticipated decrease in maintenance and services revenues was due to the conversion of existing customers to SaaS and churn. We continue to expect less maintenance and services revenues in the future.

Previous wording

The increase in cost of revenues was primarily related to a $5.5 million increase in third-party hosting costs associated with our transition to a SaaS delivery model. The increase was also due to a $4.7 million increase in salaries, benefits and stock-based compensation expense due to increased headcount for customer success personnel to assist with the completion of our SaaS transition, including our MDDR offering, to ensure high customer satisfaction and to maintain our strong renewal rates.

Current wording

The increase in cost of revenues was primarily related to a $6.1 million increase in third-party hosting costs associated with our transition to a SaaS delivery model. The increase is also due to a $3.7 million increase in salaries, benefits and stock-based compensation expense due to increased headcount for customer success personnel to assist with the completion of our SaaS transition, including our MDDR offering, to ensure high customer satisfaction and to maintain our strong SaaS renewal rate and an increase of $2.5 million in facilities and allocated overhead costs.

Previous wording

The increase in research and development expenses was primarily related to a $25.3 million increase in salaries and benefits and stock-based compensation expense primarily due to increased headcount and conditional consideration related to the business acquisitions, an increase of $3.5 million in facilities and allocated overhead costs, a $3.2 million increase in third-party hosting costs associated with our transition to a SaaS delivery model and a $1.1 million increase in acquisition-related costs associated with the business acquisitions, partially offset by a $6.7 million decrease in acquired in-process research and development costs associated with a prior period asset acquisition.

Current wording

The increase in research and development expenses was primarily related to a $12.7 million increase in salaries, benefits and stock-based compensation expense primarily due to increased headcount and conditional consideration related to the business acquisitions, an increase of $2.5 million in facilities and allocated overhead costs and a $0.4 million increase in third-party hosting costs associated with our transition to a SaaS delivery model.

Previous wording

The increase in sales and marketing expenses was primarily related to a $1.1 million increase in general sales and marketing expenses, including increased travel, marketing events and third-party hosting costs associated with our transition to a SaaS delivery model, a $0.8 million increase in salaries, benefits and stock-based compensation expense and an increase of $0.6 million in facilities and allocated overhead costs.

Current wording

The increase in sales and marketing expenses was primarily related to an increase of $3.9 million in general sales and marketing expenses, including increased travel, marketing events and third-party hosting costs associated with our transition to a SaaS delivery model, an increase of $1.9 million in salaries, benefits and stock-based compensation expense and a $1.8 million increase in facilities and allocated overhead costs.

Previous wording

The increase in general and administrative expenses was primarily related to an increase of a $1.4 million in acquisition-related costs associated with business acquisitions, a $0.7 million increase in consulting and services fees and a $0.3 million increase in salaries, benefits and stock-based compensation expense primarily due to increased headcount to support the overall growth of our business.

Current wording

The increase in general and administrative expenses was primarily related to an increase of $0.5 million in acquisition-related costs associated with the business acquisitions, a $0.5 million increase in facilities and allocated overhead costs, a $0.3 million increase in consulting and services fees and a $0.2 million increase in salaries, benefits and stock-based compensation expense primarily due to increased headcount to support the overall growth of our business.

Previous wording

The decrease in financial income, net was primarily due to foreign currency losses, amortization of premiums on marketable securities and higher interest and issuance cost amortization expense related to the 2029 convertible note, partially offset by higher interest income.

Current wording

The decrease in financial income, net was primarily due to lower interest income, foreign currency loss, remeasurement of options to repurchase common stock and amortization of premiums on marketable securities, partially offset by less interest and issuance cost amortization expense related to the maturity of the 2025 convertible note.

Previous wording

Income taxes for the three months ended September 30, 2025 were comprised of foreign and U.S. income taxes.

Current wording

Benefit (provision) for income taxes for the three months ended March 31, 2026, including the change in income taxes, were comprised of foreign and U.S. income taxes. Additionally, we recognized $9,134 of a deferred tax liability which relates to the fair value of intangibles, other than goodwill and the fair value adjustments for the tangible assets acquired over their historical cost basis for the AllTrue.ai acquisition. We will file a consolidated tax return in the U.S. to utilize the benefit of our loss carryforwards against future taxable profit and consequently decreased our valuation allowance in an amount equal to the deferred tax liability recognized in the business combination.

Previous wording

As of September 30, 2025, our cash and cash equivalents, short-term marketable securities and short-term deposits of $707.9 million were held for working capital purposes. We believe that our existing cash and cash equivalents, short-term marketable securities, short-term deposits and cash flow from operations will be sufficient to fund our operations and capital expenditures for at least the next 12 months. Additionally, as of September 30, 2025, we held $395.7 million in long-term marketable securities. Our future capital requirements will depend on many factors, including our rate of revenue growth, timing of renewals and renewal rates, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts and expansion into new geographic locations, the timing of introductions of new software products and enhancements to existing software products, the continuing market acceptance of our software offerings and our use of cash to pay for acquisitions or share repurchases, if any.

Current wording

As of March 31, 2026, our cash and cash equivalents, short-term marketable securities and short-term deposits of $785.9 million were held for working capital purposes. We believe that our existing cash and cash equivalents, short-term marketable securities, short-term deposits and cash flow from operations will be sufficient to fund our operations and capital expenditures for at least the next 12 months. Additionally, as of March 31, 2026, we held $113.6 million in long-term marketable securities. Our future capital requirements will depend on many factors, including our rate of revenue growth, timing of renewals and renewal rates, the amount and timing of conversions, the expansion of our sales and marketing activities, the timing and extent of spending to support product development efforts and expansion into new geographic locations, the timing of introductions of new software products and enhancements to existing software products, the continuing market acceptance of our software offerings and our use of cash to pay for acquisitions or share repurchases, if any.

Previous wording

Our operating activities are driven by sales of our products less costs and expenses, primarily payroll and related expenses, and adjusted for certain non-cash items, mainly depreciation and amortization, stock-based compensation, amortization of deferred commissions, non-cash operating lease costs, amortization of debt issuance costs, amortization of premium and accretion of discount on marketable securities and changes in operating assets and liabilities. Changes in operating assets and liabilities are driven mainly by collection of accounts receivable from the sales of our software products and deferred revenue, which primarily consists of billed fees for our subscriptions, prior to satisfying the criteria for revenue recognition, which are subsequently recognized as revenue in accordance with our revenue recognition policy.

Current wording

Our operating activities are driven by sales of our products less costs and expenses, primarily payroll and related expenses, and adjusted for certain non-cash and non-operating cash flow items, mainly depreciation and amortization, stock-based compensation, amortization of deferred commissions, non-cash operating lease costs, amortization of debt issuance costs, amortization of premium and accretion of discount on marketable securities, deferred income taxes, net and remeasurement of options to repurchase common stock, and changes in operating assets and liabilities. Changes in operating assets and liabilities are driven mainly by collection of accounts receivable from the sales of our software products and deferred revenue, which primarily consists of billed fees for our subscriptions, prior to satisfying the criteria for revenue recognition, which are subsequently recognized as revenue in accordance with our revenue recognition policy.

Previous wording

For the nine months ended September 30, 2025, net cash provided by operating activities were $122.7 million. We have observed two seasonal patterns that impact our net cash provided by operating activities. First, a majority of our sales are made during the last three weeks of the quarter. Second, the highest dollar amount of sales of our products and services occurs in the fourth quarter. Consequently, we end the fourth quarter with our highest accounts receivable balance of any quarter which in turn generates the greatest amount of collections in the following quarter. In addition, there is negative sequential sales in the first quarter, which results in a relatively lower amount collected during the second quarter. These seasonal trends also impact our operating loss because the majority of our expenses are relatively fixed in the short-term. For the nine months ended September 30, 2025, cash inflows were $54.2 million from our net loss excluding non-cash charges. Additional sources of cash inflows were from changes in our working capital, including a $46.5 million decrease in accounts receivable. Our days sales outstanding (“DSO”) for the three and nine months ended September 30, 2025 were 72 and 76, respectively. Other sources of cash inflows were from a $50.1 million increase in deferred revenues, a $23.4 million increase in accrued expenses and other short-term liabilities, a $1.6 million increase in other long-term liabilities and a $0.8 million increase in trade payables. This was partially offset by a $53.5 million increase in prepaid expenses and other short-term assets (including deferred commissions) and a $0.3 million increase in other long-term assets.

Current wording

For the three months ended March 31, 2026, net cash provided by operating activities was $55.0 million. We have historically observed two seasonal patterns that impact our net cash provided by operating activities, which we continue to expect under a SaaS delivery model. First, a majority of our sales are made during the last three weeks of the quarter. Second, the highest dollar amount of sales of our products and services occurs in the fourth quarter. Consequently, we end the fourth quarter with our highest accounts receivable balance of any quarter which in turn generates the greatest amount of collections in the following quarter. In addition, there is negative sequential sales in the first quarter, which results in a relatively lower amount collected during the second quarter. These seasonal trends also impact our operating loss because the majority of our expenses are relatively fixed in the short-term. For the three months ended March 31, 2026, cash inflows were $14.0 million from our net loss excluding non-cash and non-operating cash flow charges. Additional sources of cash inflows were from changes in our working capital, including a $86.2 million decrease in accounts receivable. Our days sales outstanding (“DSO”) for the three months ended March 31, 2026 was 83. Other sources of cash inflows was from a $5.0 million increase in trade payables and a $0.2 million increase in other long-term liabilities. This was partially offset by a $22.3 million increase in prepaid expenses and other short-term assets (including deferred commissions), a $14.1 million decrease in accrued expenses and other short-term liabilities, a $11.3 million increase in other long-term assets and a $2.8 million decrease in deferred revenues.

Previous wording

For the nine months ended September 30, 2024, net cash provided by operating activities were $90.9 million. For the nine months ended September 30, 2024, cash inflows were $62.9 million from our net loss excluding non-cash and acquired in-process research and development charges. Additional sources of cash inflows were from changes in our working capital, including a $49.9 million decrease in accounts receivable. Our DSO for the three and nine months ended September 30, 2024 were 69 and 73, respectively. Other sources of cash inflows were from a $37.2 million increase in deferred revenues, a $0.8 million increase in trade payables and a $0.3 million increase in other long-term liabilities. This was partially offset by a $54.2 million increase in prepaid expenses and other short-term assets (including deferred commissions), a $5.9 million decrease in accrued expenses and other liabilities and a $0.1 million increase in other long-term assets.

Current wording

For the three months ended March 31, 2025, net cash provided by our operating activities was $68.0 million. For the three months ended March 31, 2025, cash inflows were $13.7 million from our net loss excluding non-cash charges. Additional sources of cash inflows were from changes in our working capital, including a $65.1 million decrease in accounts receivable. Our DSO for the three months ended March 31, 2025 was 79. Other sources of cash inflows were from a $6.0 million increase in deferred revenues, a $2.0 million increase in trade payables and a $0.5 million increase in other long-term liabilities. This was partially offset by a $16.7 million decrease in accrued expenses and other short-term liabilities and a $2.5 million increase in prepaid expenses and other short-term assets (including deferred commissions).

Previous wording

Our investing activities consist primarily of acquisitions, capital expenditures to purchase property and equipment, including leasehold improvements, capitalized internal-use software, purchase and sale of deposits and changes in our marketable securities. In the future, we expect to continue to incur capital expenditures to support our expanding operations.

Current wording

Our investing activities consist primarily of acquisitions, capital expenditures to purchase property and equipment, including leasehold improvements, capitalized internal-use software, purchase and sale of deposits and marketable securities. In the future, we expect to continue to incur capital expenditures to support our expanding operations.

Previous wording

For the nine months ended September 30, 2025, net cash used in investing activities of $36.8 million was primarily attributable to $123.5 million of cash paid for acquisitions, $8.7 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space and $2.5 million for capitalized internal-use software expenditures, partially offset by net proceeds of $94.6 million in marketable securities and net proceeds of $3.3 million in deposits.

Current wording

For the three months ended March 31, 2026, net cash provided by investing activities of $63.3 million was attributable to net proceeds of $184.1 million in marketable securities, partially offset by $113.6 million of cash paid for acquisitions, net of cash acquired and escrow refunds, $5.0 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space, net investments of $1.1 million in deposits and $1.0 million for capitalized internal-use software expenditures.

Previous wording

For the nine months ended September 30, 2024, net cash used in investing activities of $412.8 million was primarily attributable to net investments of $419.7 million in marketable securities, $6.7 million for in-process research and development and $2.3 million in capital expenditures to support our growth during the period including hardware, software, office equipment and leasehold improvements. This was partially offset by net proceeds of $15.8 million in deposits.

Current wording

For the three months ended March 31, 2025, net cash used in investing activities of $25.0 million was primarily attributable to $18.6 million of cash paid for an acquisition, net of cash acquired, $2.3 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space, net investments of $2.1 million in deposits, net investments of $1.7 million in marketable securities and $0.3 million for capitalized internal-use software expenditures.

Previous wording

For the nine months ended September 30, 2024, net cash provided by financing activities of $373.4 million was attributable to $450.1 million of net proceeds from the issuance of convertible senior notes and $16.1 million of proceeds from employee stock plans, partially offset by $55.5 million related to purchases of capped calls associated with the issued convertible senior notes and $37.3 million in taxes paid related to net share settlement of equity awards.

Current wording

For the three months ended March 31, 2026, net cash used in financing activities of $141.5 million was attributable to $135.0 million in repurchases of common stock and $17.4 million in taxes paid related to net share settlement of equity awards, partially offset by $8.0 million of proceeds from employee stock plans and $2.9 million in proceeds from options to repurchase common stock.

Previous wording

For the nine months ended September 30, 2025, net cash used in financing activities of $114.2 million was attributable to $100.0 in repurchases of common stock, $28.4 million in taxes paid related to net share settlement of equity awards and $0.1 million in repayment of 2025 convertible senior note principal, partially offset by $14.3 million of proceeds from employee stock plans.

Current wording

For the three months ended March 31, 2025, net cash used in financing activities of $75.5 million was attributable to $61.3 million in repurchases of common stock, $21.4 million in taxes paid related to net share settlement of equity awards partially offset by $7.2 million of proceeds from employee stock plans.

Previous wording

For further information regarding the Notes and Capped Call Transactions, refer to Note 6 of our condensed consolidated financial statements.

Current wording

For further information regarding the Notes and Capped Call Transactions, refer to Note 6, "Convertible Senior Notes and Capped Call Transactions," of our condensed consolidated financial statements.

Previous wording

In October 2025, our board of directors authorized a share repurchase program of up to $150.0 million of the Company’s common stock (the “October 2025 Share Repurchase Program”). Under the October 2025 Share Repurchase Program, we are authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The October 2025 Share Repurchase Program will expire in 12 months. The number of shares to be purchased and the timing of purchases will be based on our trading windows, available liquidity, and general business and market conditions.

Current wording

In October 2025, our board of directors authorized a share repurchase program of up to $150.0 million of the Company’s common stock (the “October 2025 Share Repurchase Program”). Under the October 2025 Share Repurchase Program, we were authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. As of March 31, 2026, we completed our October 2025 Share Repurchase Program.

Previous wording

In February 2025, our board of directors authorized a share repurchase program of up to $100.0 million of the Company’s common stock (the “February 2025 Share Repurchase Program”). Under the February 2025 Share Repurchase Program, we are authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The February 2025 Share Repurchase Program was completed in April 2025.

Current wording

In February 2025, our board of directors authorized a share repurchase program of up to $100.0 million of the Company’s common stock (the “February 2025 Share Repurchase Program”). Under the February 2025 Share Repurchase Program, we were authorized to repurchase shares through open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The February 2025 Share Repurchase Program was completed in April 2025.

Previous wording

We have obligations related to unrecognized tax benefit liabilities totaling $45.9 million and others related to severance pay, which have been excluded from the table above as we do not believe it is practicable to make reliable estimates of the periods in which payments for these obligations will be made. We also have a contractual minimum purchase commitment with a service provider through August 31, 2027 totaling $10.5 million due in the next 12 months and $10.5 million due thereafter, and an additional contractual minimum purchase commitment with another service provider through May 31, 2031 totaling $34.9 million due in the next 12 months and $377.6 million due thereafter, with no specified annual commitments. We expect to fund these obligations with cash flows from operations and cash on our balance sheet.

Current wording

We have obligations related to unrecognized tax benefit liabilities totaling $55.4 million and others related to severance pay, which have been excluded from the table above as we do not believe it is practicable to make reliable estimates of the periods in which payments for these obligations will be made. We also have contractual minimum purchase commitments with service providers through August 31, 2027, October 31, 2028 and May 31, 2031. These commitments total $1.9 million, $2.5 million and $11.5 million due within the next 12 months, respectively and $10.5 million, $3.2 million and $377.6 million (with no specified annual commitments), respectively, due thereafter. We expect to fund these obligations with cash flows from operations and cash on our balance sheet.