Octave Intelligence plc

Previous wording

This section should be read in conjunction with the Condensed Combined Financial Statements and accompanying Notes included under Item 1. Financial Statements of this Form 10-Q and the Combined Financial Statements and accompanying Notes and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the three years ended December 31, 2025 included in the Information Statement. See the sections of this Form 10-Q titled “Note About Forward-looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements that could cause future results to differ materially from those reflected in this section. The financial information discussed below and included in this Form 10-Q may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been a standalone company during the periods presented or what our financial condition, results of operations and cash flows may be in the future.

Current wording

This section should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying Notes included under Item 1. Financial Statements of this Form 10-Q and the Combined Financial Statements and accompanying Notes and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the three years ended December 31, 2025 included in the Information Statement. See the sections of this Form 10-Q titled “Note About Forward-looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements that could cause future results to differ materially from those reflected in this section. The financial information discussed below and included in this Form 10-Q may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been a standalone company during the periods presented or what our financial condition, results of operations and cash flows may be in the future.

Previous wording

Octave provides a suite of software solutions that help organizations design, build, operate, and protect their physical assets, people, and critical infrastructure. These workflow environments often involve different teams, specialized tools, and large volumes of information that are difficult to integrate or interpret without context. When data is organized into separate systems or isolated workflows, decision making slows down, quality issues are harder to identify, and teams may miss early signs of risk or system failure.

Current wording

Octave Intelligence plc ("Octave" or the "Company") provides a suite of software solutions that help organizations design, build, operate, and protect their physical assets, people, and critical infrastructure. These workflow environments often involve different teams, specialized tools, and large volumes of information that are difficult to integrate or interpret without context. When data is organized into separate systems or isolated workflows, decision making slows down, quality issues are harder to identify, and teams may miss early signs of risk or system failure.

Previous wording

Our platform connects data, events, and workflows across these environments and applies context-aware intelligence to help customers understand what is happening, what may happen next, and how actions in one area affect conditions in another. By providing a clearer picture of current and emerging conditions, our software helps optimize the performance and reliability of the systems that teams depend on so they can act quicker and reduce risk. We refer to our suite of software solutions collectively as our platform, noting that different components of the software architecture are at various stages of technical integration and interoperability.

Current wording

The Company’s platform connects data, events, and workflows across these environments and applies context-aware intelligence to help customers understand what is happening, what may happen next, and how actions in one area affect conditions in another. By providing a clearer picture of current and emerging conditions, Octave’s software helps optimize the performance and reliability of the systems that teams depend on so they can act quicker and reduce risk. Octave refers to its suite of software solutions collectively as our platform, noting that different components of the software architecture are at various stages of technical integration and interoperability.

Previous wording

On March 4, 2025, Hexagon announced that its board of directors had directed management to prepare for the spin-off of the Octave business into an independent, publicly-traded company through a tax-free, from both a U.S federal income and Swedish tax perspective, pro rata distribution of all the outstanding share capital of Octave to Hexagon shareholders via a Lex-ASEA distribution.

Current wording

On March 4, 2025, Hexagon AB ("Hexagon") announced that its board of directors had directed management to prepare for the spin-off of the Octave business into an independent, publicly-traded company through a tax-free, from both a U.S. federal income and Swedish tax perspective, pro rata distribution of all the outstanding share capital of Octave to Hexagon shareholders via a Lex-ASEA distribution. Prior to the Distribution (as defined below), the Company was wholly owned by Hexagon.

Previous wording

On May 22, 2026, the spin-off was consummated by means of a tax-free pro rata distribution (the “Distribution”) wherein each Hexagon shareholder of record on May 22, 2026 (the “Record Date”) received one (1) Octave Class A Ordinary Share for every ten (10) Hexagon Class A Shares and one (1) Octave Class B Ordinary Share for every ten (10) Hexagon Class B Shares held. Octave Class A Ordinary Shares were delivered to holders of Hexagon Class A Shares, Octave Class B Ordinary Shares were delivered to holders of Hexagon Class B Shares, other than affiliates of Hexagon, in the form of Swedish Depository Receipts (the “Octave SDRs”), and Octave Class B Ordinary Shares were delivered to holders of Hexagon Class B Shares that are Hexagon affiliates in book-entry form via Octave’s transfer agent. Following the Distribution, Hexagon does not beneficially own any Octave ordinary shares.

Current wording

On May 22, 2026, the spin-off was consummated by means of a tax-free pro rata distribution (the “Distribution”) wherein each Hexagon shareholder of record on May 22, 2026 (the “Record Date”) received one (1) Octave Class A Ordinary Share for every ten (10) Hexagon Class A Shares and one (1) Octave Class B Ordinary Share for every ten (10) Hexagon Class B Shares held resulting in the distribution of 268,437,788 of the Company's ordinary shares to Hexagon shareholders. Octave Class A Ordinary Shares were delivered to holders of Hexagon Class A Shares. Octave Class B Ordinary Shares were delivered to holders of Hexagon Class B Shares other than Hexagon affiliates in the form of Swedish Depository Receipts (the “Octave SDRs”), and to Hexagon affiliates in book-entry form via Octave’s transfer agent. Following the Distribution, the Company commenced "regular way" trading as an independent public company whereby Octave Class B Ordinary Shares were listed under the ticker symbol "OCTV" on the Nasdaq Global Select Market and the Octave SDRs were listed under the ticker symbol "OCTV SDB" on Nasdaq Stockholm.

Previous wording

Immediately following the Distribution, there were 11,025,000 Octave Class A Ordinary Shares and 257,412,788 Octave Class B Ordinary Shares, for a total of 268,437,788 Octave ordinary shares, outstanding. Non-affiliate Hexagon shareholders on the Record Date received Octave Class B Shares via 210,003,594 Octave SDRs delivered through Euroclear Sweden that are listed on Nasdaq Stockholm under the ticker symbol “OCTV SDB,” while affiliates of Hexagon received 47,409,194 Octave Class B Shares in book entry form via Octave’s transfer agent. Of the initial 210,003,594 Octave SDRs delivered in respect of the initial distribution, 5,713,266 Octave SDRs were converted at the request of the holders thereof into Octave Class B Shares delivered on May 28, 2026. From time to time, holders of Octave SDRs may convert such interests into Octave Class B Shares pursuant to the procedures established in the General Terms and Conditions for the Octave SDRs, as previously disclosed. The Octave Class B Shares are listed under the ticker symbol “OCTV” on the Nasdaq Global Select Market in New York.

Current wording

Immediately following the Distribution, there were 11,025,000 Octave Class A Ordinary Shares and 257,412,788 Octave Class B Ordinary Shares, for a total of 268,437,788 Octave ordinary shares, outstanding. Holders of Hexagon Class B Shares other than Hexagon affiliates on the Record Date received Octave Class B Shares via 210,003,594 Octave SDRs delivered through Euroclear Sweden while Hexagon affiliates received 47,409,194 Octave Class B Shares in book entry form via Octave’s transfer agent. As of August 7, 2026, 167,780,741 Octave SDRs were outstanding in respect of the Class B Shares and 89,632,047 Octave Class B Shares were held directly by Octave shareholders.

Previous wording

The Condensed Combined Financial Statements included herein are derived from Hexagon’s historical accounting records and presented on a standalone basis as if the Octave operations had been conducted independently from Hexagon. The Condensed Combined Financial Statements are prepared in accordance with U.S. GAAP and Hexagon’s historical accounting policies, by aggregating financial information from the components of Octave’s and Hexagon’s accounting records directly attributable to Octave. The Condensed Combined Financial Statements include all revenues and costs directly attributable to the Octave business. Historically, Hexagon provided certain corporate functions to Octave and costs associated with these functions were allocated to Octave. These functions include, but are not limited to, corporate communications, executive management, legal, human resources, treasury, finance, accounting, information technology, and the related benefit costs associated with such functions, such as stock-based compensation. The costs of such services were allocated to Octave based on direct usage when identifiable, with the remainder allocated on a pro rata basis of revenue of Octave and Hexagon. Octave and Hexagon believe the basis on which these expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, Octave during the periods presented; however, they may not be indicative of the actual expense that would have been incurred had Octave been operating as a standalone company for the periods presented.

Current wording

Prior to the Distribution, the Condensed Consolidated Financial Statements included in this Form 10-Q were derived from Hexagon’s historical accounting records and presented on a standalone basis as if the Octave operations had been conducted independently from Hexagon. The Condensed Consolidated Financial Statements were prepared in accordance with U.S. GAAP and Hexagon’s historical accounting policies, by aggregating financial information from the components of Octave’s and Hexagon’s accounting records directly attributable to Octave. The Condensed Consolidated Financial Statements include all revenues and costs directly attributable to the Octave business. Historically, Hexagon provided certain corporate functions to Octave and costs associated with these functions were allocated to Octave. These functions include, but are not limited to, corporate communications, executive management, legal, human resources, treasury, finance, accounting, information technology, and the related benefit costs associated with such functions, such as stock-based compensation. The costs of such services were allocated to Octave based on direct usage when identifiable, with the remainder allocated on a pro rata basis of revenue of Octave and Hexagon. Octave and Hexagon believe the basis on which these expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, Octave during the periods presented; however, they may not be indicative of the actual expense that would have been incurred had Octave been operating as a standalone company for the periods presented.

Previous wording

Our operations are internationally diversified, and our results of operations have been, and we expect in the future will be, affected by changes in foreign currency exchange rates. For the three months ended March 31, 2026, and 2025, approximately 54% and 49%, respectively, of our total revenues and 36% and 41%, respectively, of our total operating expenses were denominated in a currency other than the U.S. dollar. Our most significant currencies outside of the U.S. dollar are denominated in euro, Canadian dollar, Chinese renminbi, Indian rupee, British pound and Australian dollar. Other than the natural hedge attributable to matching revenue and expenses in the same currencies, we did not hedge foreign currency exposure in these historical periods.

Current wording

Our most significant currencies outside of the U.S. Dollar are denominated in Euro, Canadian Dollar, Chinese Renminbi, Indian Rupee, British Pound and Australian Dollar. Other than the natural hedge attributable to matching revenue and expenses in the same currencies, we did not hedge foreign currency exposure in these historical periods.

Previous wording

We identify the effects of foreign currency on our operations and present constant currency information because we believe exchange rates are an important factor in understanding period-over-period comparisons and enhance the understanding of our results and evaluations of our performance. Refer to the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

Current wording

We identify the effects of foreign currency on our operations and present constant currency information because we believe exchange rates are an important factor in understanding period-over-period comparisons and enhance the understanding of our results and evaluations of our performance. See the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.

Previous wording

We generate revenue through subscriptions, perpetual licenses, professional services and other offerings. Our revenue base is well-diversified across account types, industries, and geographic regions. Excluding the impact of acquisitions, our primary sources of revenue growth come from increased subscriptions revenue within our long-standing client base, particularly through expanded usage of existing solutions, as well as adoption of new product offerings by those clients and subscriptions from new customers.

Current wording

We generate revenue through subscriptions, perpetual licenses, professional services and other offerings. Our revenue base is well-diversified across account types, industries, and geographic regions. Excluding the impact of acquisitions, our primary sources of revenue growth come from increased subscriptions revenue, focused on SaaS solutions, within our long-standing client base, particularly through expanded usage of existing solutions, as well as adoption of new product offerings by those clients and subscriptions from new customers.

Previous wording

We anticipate subscriptions will continue to represent a significant majority of new arrangements, including customers migrating from existing license arrangements to subscription services, in future periods. Due to the ratable recognition of subscriptions revenue, growth in subscriptions revenue will lag behind the growth of subscription orders and will impact the comparative growth of our reported revenue on a quarter-over-quarter basis.

Current wording

We anticipate subscriptions will continue to represent a significant majority of new arrangements, including customers migrating from existing perpetual license arrangements to subscriptions. Due to the ratable recognition of subscriptions revenue, growth in subscriptions revenue will lag behind the growth of subscription orders and will impact the comparative growth of our reported revenue on a quarter-over-quarter basis.

Previous wording

Management continuously assesses our cost structure to ensure an optimal balance of personnel necessary to support revenue levels, investment in innovation and the associated infrastructure necessary to support business operations and continuity, including investments in certain public company functions necessary to operate as a standalone business.

Current wording

Management continuously assesses our cost structure to ensure an optimal balance of personnel necessary to support customer activity, investment in innovation and the associated infrastructure necessary to support business operations and continuity, including investments in certain public company functions necessary to operate as a standalone business.

Previous wording

Cost of revenue decreased by $10.7 million or 11%, primarily due to the reduction in services and other labor and associated delivery costs that supported the divestiture of non-core businesses. This was partially offset by an increase in cloud platform costs associated with public cloud infrastructure providers and general labor costs. As a result, gross profit margin improved from 74% to 77%, and when coupled with the growth in revenue, gross profit increased by $14.4 million or 5%.

Current wording

Cost of revenue decreased by $24.9 million or 12%, primarily due to the reduction in services and other labor and associated delivery costs that supported the non-core businesses divested in the prior year. This decrease was partially offset by an increase in cloud platform costs associated with public cloud infrastructure providers and general labor costs. As a result, gross profit margin improved from 74% to 77%, and gross profit increased by $13.7 million or 2%.

Previous wording

Sales and marketing expenses increased by $7.9 million or 9%, primarily due to higher salaries and wages driven by increased marketing costs, wage inflation, additional hiring of sales and sales support personnel, and increased investments in sales enablement technology.

Current wording

Sales and marketing expenses increased by $10.0 million or 5%, primarily due to higher salaries and wages from annual salary increases, an increase in outbound marketing costs, additional hiring of sales and sales support personnel, and increased investments in sales enablement technology. This increase was partially offset by overall headcount reductions compared to the prior year as a result of cost savings actions taken in the second half of 2025.

Previous wording

General and administrative expenses increased by $6.2 million or 17%, primarily due to higher salaries and wages driven by wage inflation, increased hiring to support public company functions, an increase in the allowance for doubtful accounts, and a general increase in information technology costs.

Current wording

General and administrative expenses increased by $2.2 million or 3%, primarily due to higher salaries and wages driven by annual salary increases, increased hiring to support public company functions, and investment in information technology. This increase was partially offset by savings achieved through cost savings actions undertaken in the second half of 2025.

Previous wording

Amortization of intangible assets increased by $5.6 million or 15%, primarily due to incremental new releases of developed product solutions for sale.

Current wording

Amortization of intangible assets increased by $6.3 million or 16%, primarily due to an increase in incremental new releases of developed product solutions for sale and the initial amortization of trademarks following management’s conclusion that all historical trademark assets have a finite useful life starting in the second quarter of 2026.

Previous wording

For the three months ended March 31, 2026, the effective tax rate was higher as compared to the three months ended March 31, 2025, primarily due to the jurisdictional mix of earnings and effects of cross-border transactions in preparation for the Distribution.

Current wording

For the three months ended June 30, 2026, the effective tax rate was lower as compared to the three months ended June 30, 2025, primarily due to the non-deductible nature of the Company’s goodwill impairment charge taken during the period as well as jurisdictional mix of earnings and effects of cross-border transactions in preparation for the Distribution.

Previous wording

Adjusted Income from Operations—Income from Operations

Current wording

Adjusted Income from Operations—Income (Loss) from Operations

Previous wording

Adjusted income from operations is defined as Income from operations adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; and select other non-recurring items.

Current wording

Adjusted income from operations is defined as Income (loss) from operations adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; and select other non-recurring items.

Previous wording

Adjusted Net Income—Net Income

Current wording

Adjusted Net Income—Net Income (Loss)

Previous wording

Adjusted net income is defined as Net income adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; select other non-recurring items; and a corresponding adjustment to income tax expense for the impact of these adjustments.

Current wording

Adjusted net income is defined as Net income (loss) adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; select other non-recurring items; and a corresponding adjustment to income tax expense for the impact of these adjustments.

Previous wording

Stand-up costs include expenses associated with the spin-off and stand up of functions required to operate as a standalone public entity, these costs primarily relate to system implementation expenses, legal and consulting costs, development of our brand and other matters. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.

Current wording

Stand-up costs include expenses associated with the stand-up of functions required to operate as a standalone public entity, these costs primarily relate to system implementation expenses, legal and consulting costs, development of our brand and other matters. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.

Previous wording

Constant currency is a non-GAAP financial measure that presents our revenue excluding the estimated effects of foreign currency exchange rate fluctuations. A significant amount of our operations is conducted in foreign currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. We use constant currency to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period-over-period to evaluate its underlying performance.

Current wording

Constant currency is a non-GAAP financial measure that presents our revenue excluding the estimated effects of foreign currency exchange rate fluctuations. A significant amount of our operations is conducted in foreign currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. We use constant currency to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period-over-period to evaluate our underlying performance.

Previous wording

Reconciliation of revenue to revenue in constant currency for the three months ended March 31, 2026:

Current wording

Reconciliation of revenue to revenue in constant currency for the three and six months ended June 30, 2026:

Previous wording

We have historically generated positive cash flow from operations; however, as part of Hexagon, Octave has been dependent upon Hexagon for all of its working capital and financing requirements. Hexagon uses a centralized approach to cash management and financing of its operations. Accordingly, a substantial portion of Octave’s cash accounts are regularly cleared to Hexagon at Hexagon’s discretion, and Hexagon funds its operating and investing activities as needed. This arrangement is not reflective of the manner in which the Octave business would have been able to finance its operations had it been a standalone business separate from Hexagon during the periods presented. Transfers of cash between Hexagon and Octave are included within Net transfers (to) from Parent in the Condensed Combined Statements of Cash Flows and the Condensed Combined Statements of Equity.

Current wording

We have historically generated positive cash flow from operations; however, prior to the Distribution, Octave was dependent upon Hexagon for all working capital and financing requirements. Hexagon uses a centralized approach to cash management and financing of its operations. Accordingly, a substantial portion of Octave’s cash accounts were regularly cleared to Hexagon at Hexagon’s discretion, and Hexagon funds its operating and investing activities as needed. This arrangement is not reflective of the manner in which the Octave business would have been able to finance its operations had it been a standalone business separate from Hexagon during the periods presented. Prior to the Distribution, transfers of cash between Hexagon and Octave are included within Net transfers (to) from Hexagon in the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Equity.

Previous wording

Borrowings under the Credit Facilities bear interest, at the Company’s option, at variable rates based on Term Secured Overnight Financing Rate (“SOFR”) or an alternative base rate for loans denominated in U.S. dollars, Euro Interbank Offered Rate (“EURIBOR”) for loans denominated in euro or Daily Simple Sterling Overnight Index Average (“SONIA”) for Revolving Credit Facility loans denominated in pounds sterling, in each case plus an applicable margin.

Current wording

Borrowings under the Credit Facilities bear interest at variable rates based on Term Secured Overnight Financing Rate for U.S. dollar-denominated loans and Euro Interbank Offered Rate for euro-denominated loans, in each case plus an applicable margin ranging from 125 to 175 basis points based on the Company's consolidated leverage ratio. Commitment fees on the undrawn Revolving Credit Facility balance accrue at 15 to 25 basis points per annum.

Previous wording

Summarized cash flow information for the three months ended March 31, 2026 and 2025 is as follows:

Current wording

Summarized cash flow information for the six months ended June 30, 2026 and 2025 is as follows:

Previous wording

As of March 31, 2026 and December 31, 2025, our cash and cash equivalents totaled $175.5 million and $156.1 million, respectively. Our ability to generate positive cash flows from operations is dependent on general economic conditions, and the competitive environment in our industry, and is subject to the business and other risk factors described in the section of this Form 10-Q titled “Risk Factors” and under the section titled “Risk Factors” in the Information Statement. If we are unable to generate sufficient cash flows from operations or otherwise comply with the terms of any external borrowings, we may be required to seek additional financing alternatives.

Current wording

As of June 30, 2026 and December 31, 2025, Cash and cash equivalents totaled $304.1 million and $156.1 million, respectively. Our ability to generate positive cash flows from operations is dependent on general economic conditions, and the competitive environment in our industry, and is subject to the business and other risk factors described in the section of this Form 10-Q titled “Risk Factors” and under the section titled “Risk Factors” in the Information Statement. If we are unable to generate sufficient cash flows from operations or otherwise comply with the terms of any external borrowings, we may be required to seek additional financing alternatives.

Previous wording

Cash and cash equivalents held by the Company’s non-U.S. subsidiaries as of March 31, 2026 and December 31, 2025 were $155.1 million and $141.8 million, respectively.

Current wording

As of June 30, 2026 and December 31, 2025, Cash and cash equivalents held by the Company’s non-U.S. subsidiaries were $220.0 million and $141.8 million, respectively.

Previous wording

There were no material changes in critical accounting estimates from those disclosed in the Information Statement section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Current wording

Except for the Updates to Significant Accounting Policies discussed in Note 2, “Summary of Significant Accounting Policies,” there were no material changes in critical accounting estimates from those disclosed in the Information Statement section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Previous wording

See Note 2, “Summary of Significant Accounting Policies,” of the Condensed Combined Financial Statements for a discussion of recent accounting pronouncements.

Current wording

See Note 2, “Summary of Significant Accounting Policies,” of the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.