VARONIS SYSTEMS INC

Previous 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 six months ended June 30, 2026.

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 nine months ended September 30, 2026.

Previous 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 and six months ended June 30, 2026, approximately 72% of our revenues were derived from the United States, while approximately 20% 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 22% for the six months ended June 30, 2026, compared with the six months ended June 30, 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.

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 and nine months ended September 30, 2026, approximately 72% of our revenues were derived from the United States, while approximately 20% 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 21% for the nine months ended September 30, 2026, compared with the nine months ended September 30, 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. During the three and six months ended June 30, 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 June 30, 2026 and 2025, SaaS revenues were $171.7 million and $105.9 million, respectively. For the six months ended June 30, 2026 and 2025, SaaS revenues were $332.8 million and $194.5 million, respectively. For the three months ended June 30, 2026 and 2025, our total revenues were $180.0 million and $152.2 million, respectively. For the six months ended June 30, 2026 and 2025, our total revenues were $353.1 million and $288.6 million, respectively. For the three months ended June 30, 2026 and 2025, we have operating losses of $40.6 million and $36.6 million and net losses of $46.8 million and $35.8 million, respectively. For the six months ended June 30, 2026 and 2025, we have operating losses of $85.1 million and $80.3 million and net losses of $83.7 million and $71.6 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 and nine months ended September 30, 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 September 30, 2026 and 2025, SaaS revenues were $185.1 million and $125.8 million, respectively. For the nine months ended September 30, 2026 and 2025, SaaS revenues were $517.9 million and $320.3 million, respectively. For the three months ended September 30, 2026 and 2025, our total revenues were $189.5 million and $161.6 million, respectively. For the nine months ended September 30, 2026 and 2025, our total revenues were $542.6 million and $450.2 million, respectively. For the three months ended September 30, 2026 and 2025, we have operating losses of $47.7 million and $35.9 million and net losses of $41.6 million and $29.9 million, respectively. For the nine months ended September 30, 2026 and 2025, we have operating losses of $132.8 million and $116.3 million and net losses of $125.3 million and $101.5 million, respectively.

Previous wording

As of June 30, 2026 and 2025, SaaS ARR was $726.0 million and $478.3 million, respectively, an increase of 52% 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.

Current wording

As of September 30, 2026 and 2025, SaaS ARR was $774.6 million and $546.1 million, respectively, an increase of 42% 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

As we have completed our SaaS transition and announced the end-of-life of our self-hosted business by the end of 2026, the historical renewal rate disclosure has been replaced by the SaaS renewal rate which is over 90% for the six months ended June 30, 2026. In addition, throughout 2026, we will also be disclosing SaaS ARR excluding conversions which excludes SaaS ARR associated with self-hosted customers converting to SaaS over the trailing twelve months. As of June 30, 2026, SaaS ARR excluding conversions was $598.1 million, an increase of 25% compared to June 30, 2025 SaaS ARR. We expect SaaS ARR excluding conversions to increase in absolute dollars. These additional performance metrics align with our new business model and how management views the business.

Current wording

As we have completed our SaaS transition and announced the end-of-life of our self-hosted business by the end of 2026, the historical renewal rate disclosure has been replaced by the SaaS renewal rate which is over 90% for the nine months ended September 30, 2026. In addition, throughout 2026, we will also be disclosing SaaS ARR excluding conversions which excludes SaaS ARR associated with self-hosted customers converting to SaaS over the trailing twelve months. As of September 30, 2026, SaaS ARR excluding conversions was $674.6 million, an increase of 24% compared to September 30, 2025 SaaS ARR. We expect SaaS ARR excluding conversions to increase in absolute dollars. These additional performance metrics align with our new business model and how management views the business.

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 $1,084.5 million as of June 30, 2026 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 $1,127.6 million as of September 30, 2026 and we expect RPO to increase in absolute dollars.

Previous wording

Our SaaS renewal rate for each of the six months ended June 30, 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.

Current wording

Our SaaS renewal rate for each of the nine months ended September 30, 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

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 six months ended June 30, 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.

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 nine months ended September 30, 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

For the three months ended June 30, 2026, our revenues increased 18% compared to the three months ended June 30, 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 62% from $105.9 million for the three months ended June 30, 2025 to $171.7 million for the three months ended June 30, 2026, as we completed our transition to a SaaS delivery model. The increase in SaaS revenues is happening due to the simplicity and automated outcomes of our SaaS platform and MDDR offering, as well as customer interest in securing AI and also driven by (i) our high renewal rates, (ii) existing customer conversions and upselling and (iii) new customer acquisitions. Consequently, there was an expected decrease to term license subscriptions given the aforementioned transition and customer conversions. SaaS ARR was $726.0 million and $478.3 million as of June 30, 2026 and 2025, respectively, representing an increase of 52%. 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.

Current wording

For the three months ended September 30, 2026, our revenues increased 17% compared to the three months ended September 30, 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 47% from $125.8 million for the three months ended September 30, 2025 to $185.1 million for the three months ended September 30, 2026. The increase in SaaS revenues is happening due to the simplicity and automated outcomes of our SaaS platform and MDDR offering, as well as customer interest in securing AI and also driven by (i) our high renewal rates, (ii) existing customer conversions and upselling and (iii) new customer acquisitions. Consequently, there was an expected decrease to term license subscriptions given the aforementioned transition and customer conversions. SaaS ARR was $774.6 million and $546.1 million as of September 30, 2026 and 2025, respectively, representing an increase of 42%. 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 $6.4 million increase in third-party hosting costs associated with our transition to a SaaS delivery model, a $3.0 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, a $2.5 million increase in developed technology intangible asset amortization due to the business acquisitions and a $1.2 million increase in facilities and allocated overhead costs.

Current wording

The increase in cost of revenues was primarily related to a $6.3 million increase in third-party hosting costs associated with the growth in our SaaS delivery model, a $2.3 million increase in salaries, benefits and stock-based compensation expense due to increased headcount for customer success personnel to assist with the growth of our SaaS delivery model, including our MDDR offering, to ensure high customer satisfaction and to maintain our strong SaaS renewal rate, a $2.3 million increase in developed technology intangible asset amortization due to the business acquisitions and a $0.7 million increase in facilities and allocated overhead costs.

Previous wording

The increase in research and development expenses was primarily related to a $27.4 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 $4.1 million in facilities and allocated overhead costs and a $1.2 million increase in third-party hosting costs associated with our transition to a SaaS delivery model.

Current wording

The increase in research and development expenses was primarily related to a $14.2 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 $1.2 million in facilities and allocated overhead costs and a $0.4 million increase in third-party hosting costs associated with our SaaS delivery model.

Previous wording

The increase in sales and marketing expenses was primarily related to an increase of $2.1 million in salaries, benefits and stock-based compensation expense and a $0.9 million increase in facilities and allocated overhead costs, partially offset by a decrease of $0.6 million in general sales and marketing expenses, including travel, marketing events and third-party hosting costs.

Current wording

The increase in sales and marketing expenses was primarily related to an increase of $5.2 million in salaries, benefits and stock-based compensation expense and a $1.8 million increase in facilities and allocated overhead costs.

Previous wording

The decrease in general and administrative expenses was primarily related to a $1.6 million decrease in salaries, benefits and stock-based compensation expense, partially offset by a $0.6 million increase in consulting and services fees and a $0.3 million increase in facilities and allocated overhead costs.

Current wording

The increase in general and administrative expenses was primarily related to a $5.2 million increase in salaries, benefits and stock-based compensation expense, a $0.5 million increase in consulting and services fees and a $0.3 million increase in facilities and allocated overhead cost, partially offset by a $1.4 million decrease in acquisition-related costs associated with the business acquisitions.

Previous wording

The decrease in financial income (expense), net was primarily due to lower interest income, foreign currency loss 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.

Current wording

The increase in financial income, net was primarily due to foreign currency gains, less interest and issuance cost amortization expense related to the maturity of the 2025 convertible note and less amortization of premiums on marketable securities, partially offset by lower interest income.

Previous wording

Provision for income taxes for the three months ended June 30, 2026, including the change in income taxes, were comprised of foreign and U.S. income taxes. Additionally, we recognized $0.5 million of a deferred tax liability which relates to measurement period adjustments of 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.

Current wording

Provision for income taxes for the three months ended September 30, 2026, including the change in income taxes, were comprised of foreign and U.S. income taxes.

Previous wording

The following tables are a summary of our condensed consolidated statements of operations for the six months ended June 30, 2026 and 2025 in dollars and as a percentage of our total revenues.

Current wording

The following tables are a summary of our condensed consolidated statements of operations for the nine months ended September 30, 2026 and 2025 in dollars and as a percentage of our total revenues.

Previous wording

MDDR offering, as well as customer interest in securing AI and also driven by (i) our high renewal rates, (ii) existing customer conversions and upselling and (iii) new customer acquisitions. Consequently, there was an expected decrease to term license subscriptions given the aforementioned transition and customer conversions. SaaS ARR was $726.0 million and $478.3 million as of June 30, 2026 and 2025, respectively, representing an increase of 52%. The anticipated decrease in maintenance and services revenueswas due to the conversion of existing customers to SaaS and churn. We continue to expect less associated maintenance and services revenues in the future.

Current wording

For the nine months ended September 30, 2026, our revenues increased 21% compared to the nine months ended September 30, 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 62% from $320.3 million for the nine months ended September 30, 2025 to $517.9 million for the nine months ended September 30, 2026. The increase in SaaS revenues is happening due to the simplicity and automated outcomes of our SaaS platform and MDDR offering, as well as customer interest in securing AI and also driven by (i) our high renewal rates, (ii) existing customer conversions and upselling and (iii) new customer acquisitions. Consequently, there was an expected decrease to term license subscriptions given the aforementioned transition and customer conversions. SaaS ARR was $774.6 million and $546.1 million as of September 30, 2026 and 2025, respectively, representing an increase of 42%. The anticipated decrease in maintenance and services revenueswas due to the conversion of existing customers to SaaS and churn. We continue to expect less associated maintenance and services revenues in the future.

Previous wording

The increase in cost of revenues was primarily related to an increase of $12.5 million in third-party hosting costs associated with our transition to a SaaS delivery model, a $6.7 million increase in salaries and 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 rates, a $4.2 million increase in developed technology intangible asset amortization due to the business acquisitions and an increase of $2.0 million in facilities and allocated overhead costs.

Current wording

The increase in cost of revenues was primarily related to an increase of $18.8 million in third-party hosting costs associated with the growth in our SaaS delivery model, a $9.0 million increase in salaries and benefits and stock-based compensation expense due to increased headcount for customer success personnel to assist with the growth of our SaaS delivery model, including our MDDR offering, to ensure high customer satisfaction and to maintain our strong SaaS renewal rates, a $6.5 million increase in developed technology intangible asset amortization due to the business acquisitions and an increase of $2.7 million in facilities and allocated overhead costs.

Previous wording

The increase in research and development expenses was primarily related to a $14.7 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 $1.6 million in facilities and allocated overhead costs and a $0.8 million increase in third-party hosting costs associated with our transition to a SaaS delivery model.

Current wording

The increase in research and development expenses was primarily related to a $41.6 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 $5.3 million in facilities and allocated overhead costs and a $1.6 million increase in third-party hosting costs associated with our SaaS delivery model.

Previous wording

The increase in sales and marketing expenses was primarily related to an increase of $4.0 million in salaries, benefits and stock-based compensation expense, an increase of $3.3 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 and a $2.7 million increase in facilities and allocated overhead costs.

Current wording

The increase in sales and marketing expenses was primarily related to an increase of $9.2 million in salaries, benefits and stock-based compensation expense, an increase of $4.5 million in facilities and allocated overhead costs and a $3.3 million increase in general sales and marketing expenses, including increased travel, marketing events and third-party hosting costs associated with the growth in our SaaS delivery model.

Previous wording

The increase in general and administrative expenses was primarily related to a $0.9 million increase in consulting and services fees, a $0.8 million increase in facilities and allocated overhead costs and a $0.5 million increase in acquisition-related costs associated with the business acquisitions, partially offset by a decrease of $1.4 million in salaries and benefits and stock-based compensation expense.

Current wording

The increase in general and administrative expenses was primarily related to a $3.8 million increase in salaries, benefits and stock-based compensation expense, a $1.4 million increase in consulting and services fees and a $1.1 million increase in facilities and allocated overhead costs, partially offset by a $0.9 million decrease in acquisition-related costs associated with the business acquisitions.

Previous wording

The decrease in financial income (expense), 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.

Current wording

The decrease in financial income, net was primarily due to lower interest income, remeasurement of options to repurchase common stock, foreign currency loss 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

Provision for income taxes for the six months ended June 30, 2026, including the change in income taxes, were comprised of foreign and U.S. income taxes. Additionally, we recognized $9.7 million 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.

Current wording

Provision for income taxes for the nine months ended September 30, 2026, including the change in income taxes, were comprised of foreign and U.S. income taxes. Additionally, we recognized $9.7 million 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 June 30, 2026, our cash and cash equivalents, short-term marketable securities and short-term deposits of $698.3 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 June 30, 2026, we held $213.3 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.

Current wording

As of September 30, 2026, our cash and cash equivalents, short-term marketable securities and short-term deposits of $631.4 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, 2026, we held $306.3 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

For the six months ended June 30, 2026, net cash provided by operating activities was $80.1 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 six months ended June 30, 2026, cash inflows were $27.2 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 $91.9 million decrease in accounts receivable. Our days sales outstanding (“DSO”) for the three and six months ended June 30, 2026 was 78 and 80, respectively. Other sources of cash inflows was from a $13.6 million increase in accrued expenses and other short-term liabilities, a $6.6 million increase in trade payables and a $1.7 million increase in other long-term liabilities. This was partially offset by a $45.4 million increase in prepaid expenses and other short-term assets (including deferred commissions), a $8.8 million increase in other long-term assets and a $6.7 million decrease in deferred revenues.

Current wording

For the nine months ended September 30, 2026, net cash provided by operating activities was $108.3 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 nine months ended September 30, 2026, cash inflows were $54.2 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 $75.8 million decrease in accounts receivable. Our days sales outstanding (“DSO”) for the three and nine months ended September 30, 2026 was 80. Other sources of cash inflows was from a $32.4 million increase in accrued expenses and other short-term liabilities, a $4.4 million increase in other long-term liabilities and a $2.9 million increase in trade payables. This was partially offset by a $51.1 million increase in prepaid expenses and other short-term assets (including deferred commissions), a $7.0 million increase in other long-term assets and a $3.2 million decrease in deferred revenues.

Previous wording

For the six months ended June 30, 2025, net cash provided by operating activities was $89.3 million. For the six months ended June 30, 2025, cash inflows were $31.8 million from our net loss excluding non-cash charges. Additional sources of cash inflows were from changes in our working capital, including a $39.0 million decrease in accounts receivable. Our DSO for the three and six months ended June 30, 2025 were 76 and 78, respectively. Other sources of cash inflows were from a $34.1 million increase in deferred revenues, a $16.0 million increase in accrued expenses and other short-term liabilities, a $2.8 million increase in trade payables and a $1.0 million increase in other long-term liabilities. This was partially offset by a $34.2 million increase in prepaid expenses and other short-term assets (including deferred commissions) and a $1.1 million increase in other long-term assets.

Current wording

For the nine months ended September 30, 2025, net cash provided by operating activities was $122.7 million. 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 DSO for the three and nine months ended September 30, 2025 was 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.

Previous wording

For the six months ended June 30, 2026, net cash provided by investing activities of $99.5 million was attributable to net proceeds of $224.6 million in marketable securities, partially offset by $113.6 million of cash paid for acquisitions, net of cash acquired and escrow refunds, $9.4 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space, $1.7 million for capitalized internal-use software expenditures and net investments of $0.4 million in deposits.

Current wording

For the nine months ended September 30, 2026, net cash provided by investing activities of $104.6 million was attributable to net proceeds of $231.8 million in marketable securities, partially offset by $113.6 million of cash paid for acquisitions, net of cash acquired and escrow refunds, $10.9 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space and $2.6 million for capitalized internal-use software expenditures.

Previous wording

For the six months ended June 30, 2025, net cash provided by investing activities of $44.9 million was primarily attributable to net proceeds of $68.3 million in marketable securities and net proceeds of $3.4 million in deposits. This was partially offset by $18.6 million of cash paid for an acquisition, $5.7 million in capital expenditures to support our growth including hardware, software, office equipment and leasehold improvements mainly in connection with existing office space, $1.0 million for capitalized internal-use software expenditures and $1.5 million for other investing activities

Current 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.

Previous wording

For the six months ended June 30, 2026, net cash used in financing activities of $148.5 million was attributable to $135.0 million in repurchases of common stock, $20.8 million in taxes paid related to net share settlement of equity awards and $3.5 million for a deferred acquisition payment, partially offset by $8.0 million of proceeds from employee stock plans and $2.9 million in proceeds from options to repurchase common stock.

Current wording

For the nine months ended September 30, 2026, net cash used in financing activities of $144.5 million was attributable to $135.0 million in repurchases of common stock, $22.8 million in taxes paid related to net share settlement of equity awards and $3.5 million for a deferred acquisition payment, partially offset by $14.0 million of proceeds from employee stock plans and $2.9 million in proceeds from options to repurchase common stock.

Previous wording

For the six months ended June 30, 2025, net cash used in financing activities of $120.6 million was attributable to $100.0 million in repurchases of common stock, $27.8 million in taxes paid related to net share settlement of equity awards, partially offset by $7.2 million of proceeds from employee stock plans.

Current wording

For the nine months ended September 30, 2025, net cash used in financing activities of $114.2 million was attributable to $100.0 million 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.

Previous wording

We have obligations related to unrecognized tax benefit liabilities totaling $63.9 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 contractual minimum purchase commitments with service providers through August 31, 2027, October 31, 2028 and May 31, 2031, which includes $2.5 million related to the October 31, 2028 commitment due within the next 12 months and $10.5 million, $2.6 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 condensed consolidated balance sheets.

Current wording

We have obligations related to unrecognized tax benefit liabilities totaling $65.3 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 of $390.8 million through 2031, which includes $12.1 million due within the next 12 months and the remainder due thereafter, primarily under arrangements with no specified annual commitments. We expect to fund these obligations with cash flows from operations and cash on our condensed consolidated balance sheets.