# Freshworks Inc.: Form 10-Q for the period ended Mar 31, 2026

- Company: [Freshworks Inc.](/companies/frsh.md) (CIK 1544522)
- Form: 10-Q
- Filed: 2026-05-05
- Accepted by EDGAR: May 5, 2026, 16:31 ET
- Period: 2026-03-31
- Accession: 0001544522-26-000090
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1544522/000154452226000090/frsh-20260331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1544522/000154452226000090/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2026-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2026-01-01 to 2026-03-31 | $228.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2026-01-01 to 2026-03-31 | $34.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2026-01-01 to 2026-03-31 | $193.9m | us-gaap:GrossProfit |
| Research and development | 3 months, 2026-01-01 to 2026-03-31 | $49.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2026-01-01 to 2026-03-31 | −$8.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2026-01-01 to 2026-03-31 | −$1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2026-01-01 to 2026-03-31 | −$4.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2026-01-01 to 2026-03-31 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2026-01-01 to 2026-03-31 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2026-01-01 to 2026-03-31 | 283,336,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2026-01-01 to 2026-03-31 | $62.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2026-01-01 to 2026-03-31 | $3.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2026-01-01 to 2026-03-31 | $48.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2026-03-31 | $548.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2026-03-31 | $1.01bn | us-gaap:AssetsCurrent |
| Total assets | at 2026-03-31 | $1.61bn | us-gaap:Assets |
| Current liabilities | at 2026-03-31 | $520.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2026-03-31 | $586.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2026-03-31 | $1.02bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 42,144 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2025 included in the Annual Report on Form 10-K. As described in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled “Risk Factors.”*

### Overview

We provide people-first AI service software that organizations use to deliver exceptional employee and customer experiences. Our employee experience (EX) products include Freshservice, Freshservice for Business Teams, Device42 and FireHydrant. Our customer experience (CX) products include our Freshdesk suite of products. Our AI offerings, which include Freddy AI Agent, Freddy AI Copilot and Freddy AI Insights, further enhance the employee and customer and employee experience and are designed to boost productivity.

In January 2026, the Company completed the acquisition of FireHydrant, Inc. (FireHydrant), a provider of AI-powered incident management software. The Company accounted for the transaction as a business combination and our consolidated financial statements and key business metrics include FireHydrant since the acquisition date.

We generate revenue primarily from the sale of subscriptions for accessing our cloud-based software products over the contract term. We generally enter into subscription agreements with our customers on monthly, annual, or multi-year terms and invoice customers in advance in either monthly or annual installments. We also sell software licenses with associated maintenance for Device42 and professional services that include product configuration, data migration, systems integration, and training.

Our customer base and operations have scaled over time. Our total revenue was $228.6 million and $196.3 million in the three months ended March 31, 2026 and 2025, respectively, representing year-over-year growth of 16%. We incurred operating losses of $8.1 million and $10.4 million for three months ended March 31, 2026 and 2025, respectively.

### Macroeconomic and Other Factors

Current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, and geopolitical developments have impacted and may continue to impact business spending and the overall economy, and in turn our business. These macroeconomic events could adversely affect demand for our products and services and we expect these pressures to persist for the foreseeable future. Additionally, foreign currency exchange rate fluctuations negatively impacted our revenue growth historically and volatility in the foreign currency market still exist. For the quarters ended March 31, 2026, December 31, 2025, and March 31, 2025, we had approximately 29%, 28% and 27%, respectively, of revenue exposure related to the euro and British pound. If adverse conditions arise, they could have a material adverse impact on our results and our ability to accurately predict our future results and earnings.

Given our business model is primarily subscription-based, the effects of the macroeconomic conditions may not be fully reflected in our revenue until future periods. The ultimate impact on our business and operations remains highly uncertain, and it is not possible for us to predict the duration and extent to which this will affect our business, future results of operations, and financial condition. See the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion of the challenges and risks we have encountered and could encounter related to these macroeconomic events.

### Key Business Metrics

We monitor and review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions. Key business metrics and our financial performance are impacted by various factors discussed below, including fluctuations in value of foreign currencies relative to the U.S. dollar. We also review customer data used for calculating these key business metrics on an ongoing basis and make necessary modifications resulting from such review. We believe these key business metrics provide meaningful supplemental information for management and investors in assessing our operating performance.

|  | As of March 31, 2026 | 2025 | % Growth |
| --- | ---: | ---: | ---: |
| Number of customers contributing more than $5,000 in ARR | 25,088 | 23,275 | 8% |
| ARR from customers contributing more than $5,000 in ARR as a percentage of total ARR | 92% | 90% |  |
| Net dollar retention rate | 106% | 105% |  |

#### Number of Customers Contributing More Than $5,000 in ARR

We define our total customers contributing more than $5,000 in annual recurring revenue (ARR) as of a particular date as the number of business entities or individuals, represented by a unique domain or a unique email address, with one or more paid subscriptions to one or more of our products that contributed more than $5,000 in ARR. We believe that the number of customers that contribute more than $5,000 in ARR is an indicator of our success in attracting, retaining, and expanding with larger businesses.

#### Net Dollar Retention Rate

Our net dollar retention rate measures our ability to increase revenue across our existing customer base through expansion of users and products associated with a customer as offset by our churn and contraction in the number of users and products associated with a customer. To calculate net dollar retention rate as of a particular date, we first determine “Entering ARR,” which is ARR from the population of our customers as of 12 months prior to the end of the reporting period. We then calculate the “Ending ARR” which is ARR from the same set of customers as of the end of the reporting period. We then divide the Ending ARR by the Entering ARR to arrive at our net dollar retention rate. Ending ARR includes upsells, cross-sells, renewals, and expansion as a result of acquisitions during the measurement period and is net of any contraction or attrition over this period.

We define ARR as the sum total of subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of subscription and maintenance contracts and upon delivery for software licenses. For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR. While monthly subscribers as a group have historically maintained or increased their subscriptions over time, there is no guarantee that any particular customer on a monthly subscription will renew its subscription in any given month, and therefore the calculation of ARR for these monthly subscriptions may not accurately reflect revenue to be received over a 12-month period from such customers, and net dollar retention rate may reflect a higher rate than the actual rate if customers on monthly subscriptions choose not to renew during the course of the 12 months. Monthly subscriptions represented 12% and 14% of ARR as of March 31, 2026 and 2025, respectively. The net dollar retention rate for customers on monthly contracts has generally been lower than our overall net dollar retention rate. In addition, as part of our regular review of customer data that includes reviewing customers purchasing our products via resellers so we can properly attribute them as end customers, we may make adjustments that could impact the calculation of net dollar retention rate.

Our net dollar retention rate increased to 106% as of March 31, 2026, compared to 105% as of March 31, 2025, remained relatively flat. We expect our net dollar retention rate may fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

### Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), we believe the following non-GAAP financial measures are useful in evaluating our operating performance: non-GAAP income from operations, non-GAAP net income, and free cash flow. We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe these non-GAAP financial measures may be helpful to investors because they provide consistency and comparability with past financial performance.

Non-GAAP financial measures have limitations in their usefulness to investors and should not be considered in isolation or as substitutes for financial information presented under GAAP. Non-GAAP financial measures have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only.

We exclude the following items from one or more of our non-GAAP financial measures:

- *Stock-based compensation expense.* We exclude stock-based compensation, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this expense provides meaningful supplemental information regarding operational performance. In particular, stock-based compensation expense is not comparable across companies given the variety of valuation methodologies and assumptions.
- *Employer payroll taxes on employee stock transactions.* We exclude the amount of employer payroll taxes on equity awards from certain of our non-GAAP financial measures because they are dependent on our stock price at the time of vesting or exercise and other factors that are beyond our control and do not believe these expenses have a direct correlation to the operation of the business.
- *Amortization of acquired intangibles.* We exclude amortization of acquired intangibles, which is a non-cash expense, from certain of our non-GAAP financial measures. Our expenses for amortization of acquired intangibles are inconsistent in amount and frequency because they are significantly affected by the timing, size of acquisitions, and the allocation of purchase price. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operating performance of our business.
- *Restructuring charges.* We exclude restructuring charges, which primarily consist of employee severance and other employee termination benefits associated with the restructuring plan, from our non-GAAP financial measures because we do not believe these expenses have a direct correlation to the operating performance of our business.
- *Acquisition expenses*. We exclude acquisition expenses, which primarily consist of legal fees and due diligence costs, from our non-GAAP financial measures because we do not believe these expenses have a direct correlation to the operating performance of our business.
- *Income tax effect and adjustments*. Starting 2026, we utilize a long-term projected non-GAAP tax rate to compute our non-GAAP income tax provision in order to provide better consistency across interim reporting periods. Our non-GAAP tax rate reflects our estimated long-term effective tax rate based on our anticipated geographic earnings mix and statutory tax regimes. For fiscal year 2026, we determined the projected non-GAAP tax rate to be 24%. The difference between our GAAP income tax provision and our non-GAAP income tax provision is presented as non-GAAP income tax reconciling adjustments. We have not provided a reconciliation of our projected non-GAAP tax rate for fiscal year 2026 to GAAP due to the uncertainty and potential variability of the items we exclude from our GAAP financial measures to

calculate our non-GAAP financial measures and the resulting income tax effects of such items. Accordingly, a reconciliation is not available without unreasonable effort and we are unable to address the probable significance of the unavailable information, although it is important to note that these items could be material to our results computed in accordance with GAAP. Prior to 2026, we excluded the income tax effect of the above adjustments, income tax effect associated with acquisitions and tax charges or benefits that are a result of a change in valuation allowance on deferred tax assets and its related impacts, from our non-GAAP financial measures. We excluded these costs because we do not believe these expenses have a direct correlation to the operating performance of our business.

### Non-GAAP Income From Operations and Non-GAAP Net Income

We define non-GAAP income from operations as GAAP loss from operations, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangibles, restructuring charges and acquisition expenses.

We define non-GAAP net income as GAAP net loss, excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, restructuring charges, amortization of acquired intangibles, acquisition expenses and income tax adjustments.

The following tables present a reconciliation of our GAAP loss from operations to our non-GAAP income from operations and our GAAP net loss to our non-GAAP net income for each of the periods presented (in thousands):

#### Non-GAAP Income from Operations

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Loss from operations | $(8,060) | $(10,416) |
| Non-GAAP adjustments: |  |  |
| Stock-based compensation expense | 43,921 | 51,664 |
| Employer payroll taxes on employee stock transactions | 757 | 1,199 |
| Amortization of acquired intangibles | 4,183 | 3,514 |
| Restructuring charges | — | 405 |
| Acquisition expenses | 155 | — |
| Non-GAAP income from operations | $40,956 | $46,366 |

#### Non-GAAP Net Income

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Net loss | $(4,810) | $(1,304) |
| Non-GAAP adjustments: |  |  |
| Stock-based compensation expense | 43,921 | 51,664 |
| Employer payroll taxes on employee stock transactions | 757 | 1,199 |
| Amortization of acquired intangibles | 4,183 | 3,514 |
| Restructuring charges | — | 405 |
| Acquisition expenses | 155 | — |
| Income tax adjustments | (11,996) | 410 |
| Non-GAAP net income | $32,210 | $55,888 |

30

### Free Cash Flow

We define free cash flow as net cash provided by operating activities, less purchases of property and equipment, and capitalized internal-use software costs. We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash from our core operations after purchases of property and equipment and excluding the impact of non-recurring strategic and restructuring activities. Free cash flow is a measure to determine, among other things, cash available for strategic initiatives, including further investments in our business and potential acquisitions of businesses.

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable measure calculated in accordance with GAAP for each of the periods presented (in thousands):

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $62,389 | $57,973 |
| Less: |  |  |
| Purchases of property and equipment | (3,901) | (1,296) |
| Capitalized internal-use software | (3,379) | (2,772) |
| Free cash flow, including acquisition expenses and restructuring costs(1) | $55,828 | $53,905 |
| Net cash provided by (used in) investing activities | $(82,258) | $46,231 |
| Net cash used in financing activities | $(55,529) | $(130,273) |

(1) Free cash flow includes $0.7 million of acquisition expenses paid during the three months ended March 31, 2026 and $1.5 million of restructuring costs paid during the three months ended March 31, 2025.

### Components of Our Results of Operations

### Revenue

Substantially all of our revenue is derived from subscriptions, which is comprised of fees paid by customers for accessing our cloud-based software products during the term of the subscription. Subscription revenue is recognized ratably over the contract term beginning on the commencement date of each subscription, which is the date that the cloud-based software is made available to customers.

Software license revenue is generally sold as bundled arrangements that include the rights to a software license and maintenance and cloud-based software in some cases. Software license revenue is recognized upon making the software available to the customer and maintenance revenue is recognized as support and updates are provided, which is generally ratably over the contract term.

Professional services revenue comprises less than 5% of total revenue and includes fees charged for product configuration, data migration, systems integration, and training. Professional services revenue is recognized as services are performed.

We generally enter into subscription and software license agreements with our customers on monthly, annual, or multi-year terms and invoice customers in advance in either monthly or annual installments. Our payment terms generally require the customers to pay the invoiced amount in advance or within 30 days from the invoice date. Our maintenance and professional services are generally billed in advance along with the related subscription and software license arrangements.

### Cost of Revenue

Cost of revenue consists primarily of personnel-related expenses (including salaries, related benefits, and stock-based compensation expense) for employees associated with our cloud-based infrastructure, payment gateway fees, voice, product support, and professional services organizations, as well as costs for hosting capabilities. Cost of revenue also includes third-party license fees, amortization of acquired technology intangibles, amortization of capitalized internal-use software, and allocation of general overhead costs such as facilities and information technology.

We expect our cost of revenue to continue to increase in dollar amount as we invest additional resources in our cloud-based infrastructure and customer support and professional services organizations. However, our gross profit and gross margin may fluctuate from period to period due to the timing and extent of our investments in third-party hosting capacity, expansion of our cloud-based infrastructure, customer support, and professional services organizations, as well as the amortization of costs associated with capitalized internal-use software.

### Overhead Allocation

We allocate shared costs, such as facilities costs (including rent, utilities, and depreciation on capital expenditures related to facilities shared by multiple departments), information technology costs, and certain administrative personnel costs to all departments based on headcount and location. Allocated shared costs are reflected in each of the expense categories described below, in addition to cost of revenue as described above.

### Operating Expenses

*Research and Development.* Research and development expense consists primarily of personnel-related costs, including salaries, related benefits, and stock-based compensation expense for engineering and product development employees and certain executives, software license fees, rental of office premises, third-party hosting fees, third-party product development services and consulting expenses, and depreciation expense for equipment used in research and development activities. We capitalize a portion of our research and development expenses that meet the criteria for capitalization of internal-use software. All other research and development costs are expensed as incurred.

We believe that continued investment in our products is important for our growth, and as such, we expect that our research and development expenses will continue to increase in dollar amount for the foreseeable future, but such expenses as a percentage of revenue may fluctuate from period to period depending upon the timing and amount of these expenses.

*Sales and Marketing.* Sales and marketing expense consists primarily of personnel-related costs, including salaries, related benefits, and stock-based compensation expense for our sales personnel and certain executives, sales commissions for our sales force and reseller commissions for our channel sales partners, as well as costs associated with marketing activities, travel and entertainment costs, amortization of acquired technology intangibles, software license fees, and rental of office premises. Sales and reseller commissions that are considered incremental costs incurred to obtain contracts with customers, are deferred and amortized over the benefit period of three years. Marketing activities include online lead generation, advertising, and promotional events.

We expect to continue to make significant investments as we expand our customer acquisition, retention efforts and marketing events and associated business travel. As a result, we expect that our sales and marketing expenses will continue to increase in dollar amount for the foreseeable future, however, we expect it to decline as a percentage of revenue over the longer term. This percentage may fluctuate from period to period depending upon the timing and amount of these expenses.

*General and Administrative.* General and administrative expense consists primarily of personnel-related costs, including salaries, related benefits, and stock-based compensation expense for certain executives and other general and administrative personnel, third-party professional services fees, costs of director and officer insurance, and costs associated with acquisitions of businesses, software license fees, and rental of office premises.

We expect to increase personnel-related and professional service expenses associated with ongoing compliance and reporting obligations and costs to broaden our IT related infrastructure. Our general and administrative expenses are expected to continue to increase in dollar amount for the foreseeable future, however, we expect it to decline as a percentage of revenue over the longer term. This percentage may fluctuate from period to period depending upon the timing and amount of our general and administrative expenses.

### Interest and Other Income (Expense), Net

Interest and other income (expense), net primarily consists of interest income from our investment portfolios, amortization of premium or discount on marketable securities, and foreign currency gains and losses.

### Provision for (Benefit from) Income Taxes

We are subject to income taxes in U.S. states and in foreign jurisdictions. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions as well as non-deductible expenses, such as stock-based compensation, and changes in our valuation allowance.

### Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the periods presented (in thousands):

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Revenue | $228,633 | $196,273 |
| Cost of revenue(1) | 34,688 | 29,878 |
| Gross profit | 193,945 | 166,395 |
| Operating expenses: |  |  |
| Research and development(1) | 49,261 | 40,001 |
| Sales and marketing(1) | 112,317 | 89,158 |
| General and administrative(1) | 40,427 | 47,247 |
| Restructuring charges | — | 405 |
| Total operating expenses | 202,005 | 176,811 |
| Loss from operations | (8,060) | (10,416) |
| Interest and other income, net | 1,426 | 12,969 |
| Income (loss) before income taxes | (6,634) | 2,553 |
| Provision for (benefit from) income taxes | (1,824) | 3,857 |
| Net loss | $(4,810) | $(1,304) |

(1) Includes stock-based compensation expense as follows:

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Cost of revenue | $1,618 | $1,518 |
| Research and development(1) | 12,301 | 9,213 |
| Sales and marketing | 13,000 | 13,409 |
| General and administrative(2) | 17,002 | 27,524 |
| Total stock-based compensation expense | $43,921 | $51,664 |

(1) Stock-based compensation expense recorded to research and development in the condensed consolidated statements of operations excludes amounts that were capitalized for internal-use software.

(2) General and administrative expense includes stock-based compensation associated with RSUs and PRSUs primarily granted to the Executive Chairman of $11.3 million for the three months ended March 31, 2025.

The following table sets forth our condensed consolidated statements of operations data for the periods presented, as a percentage of revenue:

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Revenue | 100% | 100% |
| Cost of revenue | 15 | 15 |
| Gross profit | 85 | 85 |
| Operating expense: |  |  |
| Research and development | 22 | 20 |
| Sales and marketing | 49 | 45 |
| General administrative | 18 | 25 |
| Restructuring charges | — | — |
| Total operating expenses | 89 | 90 |
| Loss from operations | (4) | (5) |
| Interest and other income, net | 1 | 6 |
| Income (loss) before income taxes | (3) | 1 |
| Provision for (benefit from) income taxes | (1) | 2 |
| Net loss | (2)% | (1)% |

### Comparison of the Three Months Ended March 31, 2026 and 2025

### Revenue

*(dollars in thousands)*

|  | Three Months Ended March 31, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Subscription services, software licenses and maintenance | $226,513 | $194,193 | $32,320 | 17% |
| Professional services | 2,120 | 2,080 | 40 | 2% |
| Total revenue | $228,633 | $196,273 | $32,360 | 16% |

Revenue increased by $32.4 million, or 16%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Of the total increase in revenue, approximately $14.2 million was attributable to revenue from existing customers as of March 31, 2025, net of contraction and churn, and approximately $18.2 million was attributable to revenue from new customers acquired during the three months ended March 31, 2026, net of contraction and churn.

### Cost of Revenue and Gross Margin

*(dollars in thousands)*

|  | Three Months Ended March 31, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue | $34,688 | $29,878 | $4,810 | 16% |
| Gross Margin | 85% | 85% |  |  |

Cost of revenue increased by $4.8 million, or 16%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily driven by a $2.5 million increase in third-party hosting costs and cloud software fees, which was driven by the increased capacity and volume required to support new customers. Additionally, the increase was driven by $0.9 million in amortization of internally capitalized software and $0.7 million in personnel-related costs, primarily due to annual compensation adjustment. Our gross margin remained flat at 85% for the three months ended March 31, 2026 and 2025.

### Operating Expenses

*(dollars in thousands)*

|  | Three Months Ended March 31, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $49,261 | $40,001 | $9,260 | 23% |
| Sales and marketing | 112,317 | 89,158 | 23,159 | 26% |
| General and administrative | 40,427 | 47,247 | (6,820) | (14)% |
| Restructuring charges | — | 405 | (405) | (100)% |
| Total operating expenses | $202,005 | $176,811 | $25,194 | 14% |

The $25.2 million or 14%, increase in our operating expenses for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, was primarily driven by higher personnel related costs due to annual compensation adjustments and marketing sponsorship costs, partially offset by lower stock-based compensation expense from the departure of our former Executive Chairman in December 2025.

#### Research and Development

Research and development expense increased by $9.3 million, or 23%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily driven by increases of $3.6 million in personnel-related costs primarily due to annual compensation adjustments, $3.1 million in stock-based compensation, $1.0 million in professional service fees, $1.0 million in software licensing fees and web hosting costs for product development.

#### Sales and Marketing

Sales and marketing expense increased by $23.2 million, or 26%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily due to increases in personnel-related costs of $12.7 million primarily from higher headcount and annual compensation adjustment, $6.7 million in marketing sponsorship costs, $1.4 million in reseller commissions and $1.1 million in software license fees.

#### General and Administrative

General and administrative expense decreased by $6.8 million, or 14%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was primarily driven by a decrease of $10.5 million in stock-based compensation expense primarily due to the departure of our former Executive Chairman in December 2025; partially offset by increases of $2.7 million in personnel-related costs primarily due to annual compensation adjustments.

### Interest and Other Income (Expense), Net

*(dollars in thousands)*

|  | Three Months Ended March 31, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $7,022 | $11,294 | $(4,272) | (38)% |
| Other income (expense), net | (5,596) | 1,675 | (7,271) | \* |
| Interest and other income, net | $1,426 | $12,969 | $(11,543) | (89)% |

#### \* not meaningful

Interest income decreased by $4.3 million, or 38%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to reduction in average balances held in our marketable securities portfolios used for share repurchases and decrease in interest rates.

Other income (expense), net changed by $7.3 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to a $7.1 million foreign exchange loss during the period, mostly from unfavorable changes in foreign exchange rates in Indian rupee against the U.S. dollar.

### Provision for (Benefit from) Income Taxes

*(dollars in thousands)*

|  | Three Months Ended March 31, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | --- |
| Provision for (benefit from) income taxes | $(1,824) | $3,857 | $(5,681) | \* |

#### \* not meaningful

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. For the three months ended March 31, 2026 and 2025, we recorded a provision for (benefit from) income taxes of $(1.8) million and $3.9 million on income (loss) before taxes of $(6.6) million and $2.6 million, respectively. The decrease in the provision for income taxes for the three months ended March 31, 2026, was largely driven by a pre-tax loss in the current quarter compared to pre-tax income in the corresponding quarter of 2025. In addition, following the release of the valuation allowance on U.S. federal and state deferred tax assets in the fourth quarter of 2025, we are able to recognize tax benefits associated with pre-tax losses incurred in 2026.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing significant changes to the U.S. tax code, including the immediate expensing of U.S. research and development costs, the immediate expensing of certain capital expenditures, and other tax code changes effective beginning in 2026, which were not material to our tax expense.

### Liquidity and Capital Resources

As of March 31, 2026, our principal sources of liquidity were cash and cash equivalents of $548.2 million and marketable securities of $231.1 million, which were primarily held for working capital resources.

As of March 31, 2026, we had an accumulated deficit of $3.6 billion. Our operating activities resulted in cash inflows of $62.4 million for the three months ended March 31, 2026. In May 2026, we committed to a restructuring plan that is expected to incur charges in the second quarter of 2026, consisting primarily of cash expenditures for separation-related payments, employee benefits and related costs. See Note 14—Subsequent Events.

Our material cash requirements from known contractual obligations consist primarily of our obligations under operating leases for office space and contractual obligations for third-party cloud infrastructure See Note 7 — Leases and Note 8 — Commitments and Contingencies for additional discussion of our principal contractual commitments.

In February 2026, our board of directors approved the share repurchase program, which authorized the repurchase of up to $400 million of our outstanding Class A common stock. For the three months ended March 31, 2026, we repurchased a total of 5.7 million shares of Class A common stock under this program in open market transactions for an aggregate purchase price of $45.4 million. As of March 31, 2026, $354.6 million remained available for future share repurchases under the current program.

As of March 31, 2026, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. We believe we will meet longer term expected future cash requirements and obligations through a combination of our existing cash available balances, cash flow from operations, and issuances of equity securities or debt offerings, as needed. Our future capital requirements will depend on many factors, including the rate of our revenue growth, the timing and extent of spending on research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and other business initiatives and the continuing market adoption of our products. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing in connection with such activities. If we raise additional funds through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our equity securities and could contain covenants that restrict our operational flexibility. Any additional equity or convertible debt financing may be dilutive to stockholders. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.

The following table summarizes our cash flows for the periods presented (in thousands):

|  | Three Months Ended March 31, 2026 | 2025 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $62,389 | $57,973 |
| Net cash used in investing activities | (82,258) | 46,231 |
| Net cash used in financing activities | (55,529) | (130,273) |

### Cash Flows from Operating Activities

Net cash provided by operating activities of $62.4 million for the three months ended March 31, 2026 reflects our net loss of $4.8 million, adjusted for non-cash items such as stock-based compensation of $43.9 million, amortization of deferred contract acquisition costs of $8.6 million, depreciation and amortization of $7.9 million, non-cash lease expense of $2.9 million and $7.8 million of other items, primarily related to foreign currency gains and losses; offset by $5.9 million change in deferred tax provision and $0.9 million from discount amortization of marketable securities. Additionally, net cash inflows from changes in operating assets and liabilities were $2.9 million. The net cash inflows from changes in operating assets and liabilities were primarily due to a decrease of $24.9 million in accounts receivable and increases of $6.9 million in accounts payable and $1.0 million in deferred revenue; offset by increases of $12.6 million in prepaid expenses and other assets, $10.2 million in deferred contract acquisition costs, and decreases of $3.7 million in operating lease liabilities and $3.4 million in accrued expenses and other liabilities.

Net cash provided by operating activities of $58.0 million for the three months ended March 31, 2025 reflects our net loss of $1.3 million, adjusted for non-cash items such as stock-based compensation of $51.7 million, amortization of deferred contract acquisition costs of $7.6 million, depreciation and amortization of $6.4 million and non-cash lease expense of $2.3 million; offset by $1.9 million from discount amortization of marketable securities and $0.5 million from changes in deferred income taxes. Additionally, net cash outflows from changes in operating assets and liabilities were $6.3 million. The net cash outflows from changes in operating assets and liabilities were due to an increase of $15.3 million in prepaid expenses and other assets, an increase of $8.7 million in deferred contract acquisition costs; offset by a decrease of $10.6 million in accounts receivable and an increase of $7.0 million in deferred revenue.

### Cash Flows from Investing Activities

Net cash used in investing activities of $82.3 million for the three months ended March 31, 2026 consisted of $56.9 million paid for business combinations, net of cash acquired, $18.1 million in purchases of marketable securities, net of maturities, $3.9 million in purchases of property and equipment, which primarily include construction and improvements at our major offices, and $3.4 million in capitalized internal-use software.

Net cash provided by investing activities of $46.2 million for the three months ended March 31, 2025 consisted of $50.3 million in maturities and redemptions of marketable securities, net of purchases; offset by $2.8 million in capitalized internal-use software and $1.3 million in purchases of property and equipment.

### Cash Flows from Financing Activities

Net cash used in financing activities of $55.5 million for the three months ended March 31, 2026 consisted of $48.4 million cash paid to repurchase shares of our common stock and $7.2 million in payment of withholding taxes on net share settlement of equity awards.

Net cash used in financing activities of $130.3 million for the three months ended March 31, 2025 consisted of $113.6 million cash paid to repurchase shares of our common stock and $16.7 million in payment of withholding taxes on net share settlement of equity awards.

### Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires our management to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenue, costs and expenses, and related disclosures during the applicable periods. We base our estimates, assumptions and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change the results from those reported. We evaluate our estimates, assumptions, and judgments on an ongoing basis.

There have been no changes to our critical accounting policies and estimates during the three months ended March 31, 2026 as compared to those disclosed in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K filed with the SEC on February 26, 2026.

### Recent Accounting Pronouncements

See Note 1—Basis of Presentation and Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

## Market risk

As filed, 4,196 characters.

We are exposed to certain market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates.

### Foreign Currency Exchange Risk

The functional currency of our foreign subsidiaries is the U.S. dollar. The majority of our sales are derived in U.S. dollars. Our operating expenses incurred by our foreign subsidiaries are denominated in their respective local currencies, and remeasured at the exchange rates in effect on the transaction date. Additionally, fluctuations in foreign exchange rates may result in the recognition of transaction gains and losses in our condensed consolidated statements of operations. Our condensed consolidated results of operations and cash flows are, therefore, subject to foreign exchange rate fluctuations, particularly changes in the Indian rupee, British pound and euro, and may be adversely affected in the future due to changes in foreign exchange rates. Based on a sensitivity analysis we have performed as of March 31, 2026, a hypothetical 10% foreign currency exchange rate change applied to total monetary assets and liabilities denominated in currencies other than the U.S. dollar would result in a gain or loss of approximately $13.9 million.

To reduce the risk that our earnings and cash flows will be adversely affected by changes in exchange rates, we entered into foreign exchange forward contracts to hedge a portion of our forecasted foreign currency expenses denominated in Indian rupee. Gains or losses on these contracts are generally recognized in income at the time the related transactions being hedged are recognized. As of March 31, 2026, the total notional amount of outstanding designated foreign currency forward contracts was $84.0 million. The fair value of derivative assets and liabilities as of March 31, 2026, and all related unrealized and realized gains and losses during the three months ended March 31, 2026 and 2025 were not material.

We do not use foreign exchange contracts for speculative trading purposes and we may enter into other hedging transactions in the future if our exposure to foreign currency becomes more significant. We monitor our exposures in other currencies and assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis.

### Interest Rate Risk

Our cash, cash equivalents, and marketable securities primarily consist of deposits held at financial institutions, highly liquid money market funds, and investments in U.S. treasury securities, U.S. government agency securities, corporate bonds and commercial paper. We had cash and cash equivalents of $548.2 million and marketable securities of $231.1 million as of March 31, 2026. We do not enter into investments for trading and speculative purposes. The carrying amount of our cash equivalents reasonably approximate fair value, due to the maturities of three months or less of these instruments. Our investments are subject to market risk due to changes in interest rates, which may affect our interest income and the fair value of our investments. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our marketable securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.

Based on an interest rate sensitivity analysis we have performed as of March 31, 2026, a hypothetical 100 basis points favorable or adverse movement in interest rates would not have a material effect in the combined market value of our cash and cash equivalents and marketable securities.

## Controls and procedures

As filed, 1,874 characters.

### Evaluation of Disclosure Controls and Procedures

Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 1,162 characters.

You should carefully consider the risks and uncertainties described under the section “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on February 26, 2026 as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before making an investment decision. These identified risks and uncertainties may have a material adverse effect on our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also become important factors that affect our business. There have been no material changes from the risks and uncertainties previously disclosed under the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Filed May 5, 2026.
Source: SEC EDGAR, the filing index for accession 0001544522-26-000090. Last ingested by Listed: Nov 4, 2026, 16:42 ET. No prices; not investment advice.