Procore Technologies Inc.
07/31/2026 | Press release | Distributed by Public on 07/31/2026 15:21
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K dated February 24, 2026 (our "2025 Form 10-K"). You should review the disclosures under the section titled "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q and under Part I, Item 1A, "Risk Factors" in our 2025 Form 10-K for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.
Overview
Our mission is to connect everyone in construction on a global platform.
We are the leading global provider of construction management software, and are helping transform one of the oldest, largest, and least digitized industries in the world. We focus exclusively on connecting and empowering the construction industry's key stakeholders, such as owners, general contractors, and specialty contractors, to collaborate and access our capabilities from any location on any connected device. Our platform is modernizing and digitizing construction management by enabling timely access to critical project information, simplifying complex workflows, and facilitating seamless communication among relevant stakeholders, all of which we believe positions us to serve as a critical system of record and collaboration for the construction industry. We also continue to develop other products and services to address related challenges faced by the construction industry's key stakeholders. Our products, services, and platform help our customers increase productivity and efficiency, reduce rework and costly delays, improve safety and compliance, and enhance financial transparency and accountability.
In short, we build the software for the people that build the world.
Our customers range from small businesses managing a few million dollars of annual construction volume to global enterprises managing billions of dollars of annual construction volume. Our core customers are owners, general contractors, and specialty contractors operating across the residential and non-residential segments of the construction industry. We primarily sell subscriptions to access our products through our direct sales team, which is specialized by geography, followed by size and type of stakeholder.
Our products are offered on our cloud-based platform and are designed to be easy to configure and deploy. Our users can access our products on computers, smartphones, and tablets through any web browser or from our mobile application available for both the iOS and Android platforms.
We generate substantially all of our revenue from subscriptions to access our products. We primarily sell our products on a subscription basis for a fixed fee with pricing generally based on the number and mix of products a customer subscribes to and the fixed aggregate dollar volume of construction work contracted to run on our platform annually, which we refer to as annual construction volume. As our customers subscribe to additional products or increase the annual construction volume contracted to run on our platform, we generate more revenue. We do not provide refunds for unused construction volume. We generally do not charge customers based on consumption or on a per-project basis. Our business model is designed to encourage rapid, widespread adoption of our products by generally allowing for unlimited users. We typically do not charge a per-seat or per-user fee, meaning that customers can invite all project participants, including owners, general contractors, specialty contractors, architects, and engineers, to engage with our platform as part of a project team without incurring additional fees. We offer access to our products on a per-user basis to certain of our owner customers who have preferred to purchase access on a per-user basis. Customers are able to invite project participants to join our platform, including their employees and collaborators, who are other project participants that engage with our platform but do not pay us for such use. Multiple participants can be customers on the same project, which allows each of them to manage their own discrete workflows for the
project and retain access to project information for the duration of their subscription while allowing us to receive revenue from multiple customers on the same project independent of seat count.
Recent Developments
On July 27, 2026, we entered into an Agreement and Plan of Merger to acquire DroneDeploy (the "DroneDeploy Merger Agreement") for a purchase price of approximately $845.0 million in cash, subject to adjustment as provided in the DroneDeploy Merger Agreement (the "DroneDeploy Merger"). DroneDeploy is a software company that provides cloud-control software solutions for drones and other robots, which include automated flight safety checks, workflows, and real-time mapping and data processing. In addition to the purchase price, we have agreed to create a retention pool for the benefit of certain service providers of DroneDeploy consisting of equity awards, or cash where equity cannot be granted due to applicable law, to encourage such service providers to continue providing services to us following the closing of the DroneDeploy Merger. The completion of this transaction is anticipated to occur later this year and is subject to the satisfaction of certain closing conditions.
In connection with our entry into the DroneDeploy Merger Agreement, on July 27, 2026, we entered into a debt financing commitment letter (the "Commitment Letter") with Goldman Sachs Bank USA, pursuant to which it committed to provide us with debt financing in an aggregate principal amount of up to $700.0 million in the form of a 364-day senior secured bridge loan facility, subject to customary conditions. Subject to market conditions and other factors, we may fund a portion of the purchase price through one or more bank financing or capital markets transactions in lieu of all or a portion of the bridge facility.
Certain Factors Affecting Our Performance
Acquiring New Customers and Retaining and Expanding Existing Customers' Use of Our Platform
We believe that the market for our platform is large, and we are highly focused on our long-term growth. Our ability to generate revenue, continue to grow our business, and serve the broader needs of the construction industry depends on our ability to efficiently acquire new customers, retain existing customers and expand their use of our products, services, and platform, and maintain or increase the pricing of our products and services. We drive new customer acquisitions by investing across our sales and marketing engine to engage prospective customers, increase brand awareness, and drive adoption of our products, services, and platform. We drive retention of existing customers and expansion of their use of our products, services, and platform by focusing on our customers' success.
To support these efforts, beginning in 2024 and continuing through 2025, we evolved our GTM operating model by, among other things, transitioning to a general manager model, adding new product and technical specialists to our GTM teams and, increasing our sales headcount. We believe that the evolved GTM operating model will improve our long-term operating efficiency, best position us for sustainable long-term growth, and enhance our ability to capture our market opportunity. However, if we are not able to realize the benefits of this model, or otherwise fail to acquire new customers, retain existing customers, or expand existing customers' use of our products, services, and platform, our business, financial condition, results of operations, and prospects will be adversely affected, potentially materially.
Despite macroeconomic challenges, we have seen an increase in the number of customers that contributed more than $100,000 of annual recurring revenue ("ARR"), which increased from 2,517 as of June 30, 2025 to 2,871 as of June 30, 2026, reflecting a year-over-year growth rate of 14%. The number of customers that contributed more than $100,000 of ARR represented 68% and 64% of our total ARR as of June 30, 2026 and 2025, respectively. As of June 30, 2026, 59%, 26%, and 15% of our ARR was generated from general contractors, owners, and specialty contractors, respectively. All aforementioned customer counts, and the customer ARR mix exclude customers acquired from business combinations that do not have standard Procore annual contracts.
In addition, our gross retention rate ("GRR") was 95% as of both June 30, 2026 and June 30, 2025. Our GRR reflects only customer losses and does not reflect customer expansion or contraction. We believe our high GRR demonstrates that we serve a vital role in our customers' operations, as the vast majority of our customers continue to use our products and platform and to renew their subscriptions. We believe that GRR is a key metric to understand our ability to retain our customer base, to evaluate whether our products and platform are addressing our customers' needs throughout the year.
To calculate GRR at the end of a particular period, we first calculate our ARR from the cohort of active customers at the end of the period 12 months prior to the end of the period selected. We define ARR at the end of a particular period as the annualized dollar value of our subscriptions from customers as of such period end date. For multi-year subscriptions, ARR at the end of a particular period is measured by using the stated contractual subscription fees as of the period end date on which ARR is measured. For example, if ARR is measured during the first year of a multi-year contract, the first-year subscription fees are used to calculate ARR. ARR at the end of a particular period includes the annualized dollar value of subscriptions for which the term has not ended, and subscriptions for which we are negotiating a subscription renewal. ARR should be viewed independently of revenue determined in accordance with accounting principles generally accepted in the U.S. ("GAAP" or "U.S. GAAP") and does not represent our U.S. GAAP revenue on an annualized basis. ARR is not intended to be a replacement or forecast of revenue. We then calculate the value of ARR from any customers whose subscriptions terminated and were not renewed during the 12 months preceding the end of the period selected, which we refer to as cancellations. We then divide (a) the total prior period ARR minus cancellations by (b) the total prior period ARR to calculate GRR.
Remaining Performance Obligations
Our subscriptions typically have a term of one to three years. The transaction price allocated to remaining performance obligations ("RPO") under our subscriptions represents the contracted transaction price that has not yet been recognized as revenue, which includes deferred revenue and amounts under non-cancelable subscriptions that will be invoiced and recognized as revenue in future periods. Our current RPO ("cRPO") represents future revenue under existing contracts that is expected to be recognized as revenue in the next 12 months.
The following table presents our cRPO and non-current RPO at the end of each period:
| June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Remaining performance obligations | |||||||||||||||||||||||
| Current | $ | 1,072,490 | $ | 879,489 | $ | 193,001 | 22 | % | |||||||||||||||
| Non-current | 597,425 | 464,268 | 133,157 | 29 | % | ||||||||||||||||||
| Total remaining performance obligations | $ | 1,669,915 | $ | 1,343,757 | $ | 326,158 | 24 | % | |||||||||||||||
We believe that cRPO is a key metric to track our ability to win fixed revenue commitments from new customers and to expand and retain existing customers. However, as our average contract duration continues to lengthen due to increased purchases of multi-year subscriptions, our cRPO growth rate may not directly correlate with our actual or expected revenue growth in current or future periods. As of June 30, 2026, cRPO increased by $193.0 million, or 22%, year-over-year. Approximately 42% of the increase was attributable to existing customers and 58% was attributable to new customers acquired during the twelve months ended June 30, 2026. We expect RPO to change from period to period primarily due to the size, timing, and duration of new customer contracts and customer renewals.
Continued Technology Innovation and Strategic Expansion of Our Products and Services
We plan to continue to invest in technology innovation and product development, including Procore AI, which includes tools and products that are purpose-built for the construction industry, to enhance the capabilities of our platform. Additional capabilities will also enable customers and collaborators to manage new workflows on our platform and allow us to attract a broader set of stakeholders. We have introduced and continue to develop new products and services organically and through our acquisitions.
We intend to continue to invest in building additional products, services, offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform. For example, in January 2026, we acquired Toric Labs, Inc. (d/b/a Datagrid), a leader in agentic AI solutions for the construction industry, to accelerate our AI strategy, and in January 2025, we acquired Novorender AS, a leader in advanced building information modeling rendering technology, to enhance our capabilities for large-scale construction projects. In
addition, in July 2026, we entered into the DroneDeploy Merger Agreement to acquire DroneDeploy, a leader in reality capture and robotic automation. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. While the impact of these developments are not yet material to our business, our future success is dependent on our ability to successfully develop or acquire, market, and sell existing and new products and services to both new and existing customers.
International Growth
We see international expansion as a major, and largely greenfield, opportunity for growth as we look to capture a larger part of the worldwide construction market. We have an international sales and marketing presence with offices in Sydney, Australia; Toronto, Canada; London, England; Dublin, Ireland; and Dubai, United Arab Emirates ("UAE"). As a result of our international efforts, we support multiple languages and currencies. Non-U.S. revenue as a percentage of our total revenue was 15% for both the six months ended June 30, 2026 and 2025. We determine the percentage of non-U.S. revenue based on the billing location of each customer. Fluctuations in foreign currencies may positively or negatively impact the amount of revenue that we report for our foreign subsidiaries upon the translation of these amounts into U.S. Dollars.
Furthermore, we believe global demand for our products, services, and platform will continue to increase as we expand our international sales and marketing efforts, and the awareness of our products, services, and platform grows. However, our ability to conduct our business operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, currencies, cultures, customs, and commercial markets, as well as differing legal, tax, regulatory, and alternative dispute systems. We have made, and plan to continue to make, significant investments in international markets. While these investments may adversely affect our operating results in the near term, we believe they will contribute to our long-term growth.
Macroeconomic Factors
Macroeconomic factors and geopolitical events that impact the construction industry, such as elevated inflation and responses by governments to address it, changing interest rates, volatility in capital markets, bank failures, fluctuations in foreign exchange rates, global pandemics, trade wars or shifting tariffs, evolving and potentially conflicting regulatory requirements, and wars and other conflicts may impact our customers' spending as well as our operating expenses and cash flows. However, as such factors evolve, we continue to monitor the ways in which they may directly or indirectly impact our business, results of operations, and financial condition. See the section titled "Risk Factors" in Part I, Item 1A, of our 2025 Form 10-K for further discussion.
Components of Results of Operations
Revenue
We generate substantially all of our revenue from subscriptions to access our products and related support. Subscriptions are sold for a fixed fee and revenue is recognized ratably over the term of the subscription. Our subscriptions generally have annual or multi-year terms, are typically subject to renewal at the end of the subscription term, and are non-cancelable. To the extent we invoice our customers in advance of revenue recognition, we record deferred revenue. Consequently, a portion of the revenue that we report each period is attributable to the recognition of revenue previously deferred related to subscriptions that we entered into during previous periods.
Cost of Revenue
Cost of revenue primarily consists of personnel-related compensation expenses for our customer support team, including salaries, benefits, stock-based compensation, payroll taxes, commissions, and bonuses. Additionally, cost of revenue includes non-personnel-related expenses, such as third-party hosting costs, amortization of capitalized software development costs related to our platform, amortization of acquired technology intangible assets, software license fees, and allocated overhead. We expect our cost of revenue to increase on an absolute dollar basis as our revenue and acquisition activities increase. We intend to continue to invest additional resources in platform hosting, customer support, and software development as we grow our business, support our GTM operating model, and ensure that our customers are realizing the full benefit of our products. The level and timing of investment in these areas could affect our cost of revenue in the future.
Costs related to the development of internal-use software for new products and major platform enhancements are capitalized until the software is substantially complete and ready for its intended use. Capitalized software development costs are amortized on a straight-line basis over the developed software's estimated useful life of two years and the amortization is recorded in cost of revenue.
Operating Expenses
Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. For each of these categories of expense, personnel-related compensation expenses are the most significant component, which include salaries, stock-based compensation, commissions, benefits, bonuses, and payroll taxes.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations. Additionally, sales and marketing expenses include non-personnel-related expenses, such as advertising costs, marketing events, travel, trade shows, and other marketing activities; contractor costs to supplement our staff levels; consulting services; amortization of acquired customer relationship intangible assets; and allocated overhead. We expense advertising and other promotional expenditures as incurred. We expect sales and marketing expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue, as our business continues to grow, as we support our GTM operating model, and as we increase our investment in sales and marketing to drive customer growth.
Research and Development
Research and development expenses primarily consist of personnel-related compensation expenses for our engineering, product, and design teams, net of capitalized software development costs. Additionally, research and development expenses include non-personnel-related expenses, such as contractor costs to supplement our staff levels; computer software expenses; consulting services; amortization of certain acquired intangible assets used in research and development activities; and allocated overhead. We expect research and development expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue for the foreseeable future as we continue to build, enhance, maintain, and scale our products, services, and platform.
General and Administrative
General and administrative expenses primarily consist of personnel-related compensation expenses for our finance, human resources, information technology, legal, executive, and other administrative functions. Additionally, general and administrative expenses include non-personnel-related expenses, such as professional fees for legal, audit, tax, and other external consulting services; computer software expenses; costs associated with operating as a public company, including insurance costs, professional services, investor relations, and other compliance costs; property and use taxes; licenses; travel and entertainment costs; acquisition-related transaction expenses; and allocated overhead. We expect general and administrative expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue as our business continues to grow, including in relation to our international expansion.
Interest Income
Interest income consists primarily of interest income earned on our marketable securities, money market funds, and cash savings accounts.
Interest Expense
Interest expense consists primarily of costs associated with our finance leases.
Accretion Income, Net
Accretion income, net consists of accretion of discounts, net of amortization of premiums, related to our available-for-sale marketable debt securities.
Other Income , Net
Other income, net primarily consists of gains or losses on foreign currency transactions, unrealized gains or losses on equity securities, and miscellaneous other income and expenses.
(Benefit from) Provision for Income Taxes
(Benefit from) provision for income taxes consists primarily of income taxes of U.S. state franchise taxes and certain foreign jurisdictions in which we conduct business, net of the release of valuation allowance as a result of deferred tax liabilities from acquisitions that are an available source of income to realize our deferred tax assets. As we expand our international operations, we expect to incur increased foreign tax expenses. We have a full valuation allowance for net U.S. deferred tax assets. The U.S. valuation allowance primarily includes net operating loss carryforwards and tax credits related primarily to research and development for our operations in the U.S. We expect to maintain this full valuation allowance for our net U.S. deferred tax assets for the foreseeable future.
Results of Operations
The following tables set forth our condensed consolidated statements of operations data and such data as a percentage of revenue for each of the periods indicated. Certain percentages below may not sum due to rounding.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | $ | 375,207 | $ | 323,919 | $ | 734,490 | $ | 634,551 | |||||||||||||||
|
Cost of revenue(1)(2)(3)
|
75,411 | 67,732 | 146,904 | 132,658 | |||||||||||||||||||
| Gross profit | 299,796 | 256,187 | 587,586 | 501,893 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
|
Sales and marketing(1)(2)(3)(4)
|
145,785 | 141,897 | 294,966 | 280,581 | |||||||||||||||||||
|
Research and development(1)(2)(3)(4)
|
93,349 | 88,902 | 178,914 | 176,511 | |||||||||||||||||||
|
General and administrative(1)(3)(4)
|
56,335 | 55,655 | 125,050 | 111,313 | |||||||||||||||||||
| Total operating expenses | 295,469 | 286,454 | 598,930 | 568,405 | |||||||||||||||||||
| Income (loss) from operations | 4,327 | (30,267) | (11,344) | (66,512) | |||||||||||||||||||
| Interest income | 4,422 | 5,015 | 8,944 | 11,012 | |||||||||||||||||||
| Interest expense | (179) | (298) | (447) | (583) | |||||||||||||||||||
| Accretion income, net | 714 | 2,027 | 1,711 | 4,474 | |||||||||||||||||||
| Other income, net | 5,879 | 2,023 | 5,323 | 2,414 | |||||||||||||||||||
| Income (loss) before (benefit from) provision for income taxes | 15,163 | (21,500) | 4,187 | (49,195) | |||||||||||||||||||
| (Benefit from) provision for income taxes | (1,759) | (411) | (3,639) | 4,883 | |||||||||||||||||||
| Net income (loss) | $ | 16,922 | $ | (21,089) | $ | 7,826 | $ | (54,078) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
|
Cost of revenue(1)(2)(3)
|
20 | % | 21 | % | 20 | % | 21 | % | |||||||||||||||
| Gross profit | 80 | % | 79 | % | 80 | % | 79 | % | |||||||||||||||
| Operating expenses | |||||||||||||||||||||||
|
Sales and marketing(1)(2)(3)(4)
|
39 | % | 44 | % | 40 | % | 44 | % | |||||||||||||||
|
Research and development(1)(2)(3)(4)
|
25 | % | 27 | % | 24 | % | 28 | % | |||||||||||||||
|
General and administrative(1)(3)(4)
|
15 | % | 17 | % | 17 | % | 18 | % | |||||||||||||||
| Total operating expenses | 79 | % | 88 | % | 82 | % | 90 | % | |||||||||||||||
| Income (loss) from operations | 1 | % | (9 | %) | (2 | %) | (10 | %) | |||||||||||||||
| Interest income | 1 | % | 2 | % | 1 | % | 2 | % | |||||||||||||||
| Interest expense | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||||||||
| Accretion income, net | 0 | % | 1 | % | 0 | % | 1 | % | |||||||||||||||
| Other income, net | 2 | % | 1 | % | 1 | % | 0 | % | |||||||||||||||
| Income (loss) before (benefit from) provision for income taxes | 4 | % | (7 | %) | 1 | % | (8 | %) | |||||||||||||||
| (Benefit from) provision for income taxes | (0%) | (0%) | (0%) | 1 | % | ||||||||||||||||||
| Net income (loss) | 5 | % | (7 | %) | 1 | % | (9 | %) | |||||||||||||||
(1)Includes stock-based compensation expense and amortization of capitalized stock-based compensation as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 6,196 | $ | 5,868 | $ | 12,138 | $ | 11,136 | |||||||||||||||
| Sales and marketing | 18,160 | 17,589 | 38,748 | 32,539 | |||||||||||||||||||
| Research and development | 21,994 | 21,237 | 40,549 | 39,661 | |||||||||||||||||||
| General and administrative | 14,212 | 13,718 | 29,614 | 26,100 | |||||||||||||||||||
| Total stock-based compensation expense* | $ | 60,562 | $ | 58,412 | $ | 121,049 | $ | 109,436 | |||||||||||||||
*Includes amortization of capitalized stock-based compensation of $3.8 million and $2.8 million, respectively, for the three months ended June 30, 2026 and 2025; and $7.3 million and $5.6 million, respectively, for the six months ended June 30, 2026 and 2025; which was initially capitalized as capitalized software and cloud-computing arrangement implementation costs.
(2)Includes amortization of acquired intangible assets as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 8,311 | $ | 8,015 | $ | 16,019 | $ | 15,617 | |||||||||||||||
| Sales and marketing | 905 | 3,346 | 2,026 | 6,651 | |||||||||||||||||||
| Research and development | 221 | 658 | 883 | 1,290 | |||||||||||||||||||
| Total amortization of acquired intangible assets | $ | 9,437 | $ | 12,019 | $ | 18,928 | $ | 23,558 | |||||||||||||||
(3)Includes employer payroll tax on employee stock transactions as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 129 | $ | 200 | $ | 303 | $ | 461 | |||||||||||||||
| Sales and marketing | 572 | 748 | 1,324 | 1,879 | |||||||||||||||||||
| Research and development | 687 | 1,103 | 1,737 | 2,829 | |||||||||||||||||||
| General and administrative | 315 | 462 | 817 | 1,345 | |||||||||||||||||||
| Total employer payroll tax on employee stock transactions | $ | 1,703 | $ | 2,513 | $ | 4,181 | $ | 6,514 | |||||||||||||||
(4)Includes acquisition-related expenses as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Sales and marketing | $ | 166 | $ | 138 | $ | 320 | $ | 794 | |||||||||||||||
| Research and development | 3,001 | 695 | 5,587 | 1,744 | |||||||||||||||||||
| General and administrative | 1,298 | 166 | 2,543 | 541 | |||||||||||||||||||
| Total acquisition-related expenses | $ | 4,465 | $ | 999 | $ | 8,450 | $ | 3,079 | |||||||||||||||
Comparison of the Three Months Ended June 30, 2026 and 2025
Revenue
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 375,207 | $ | 323,919 | $ | 51,288 | 16 | % | |||||||||||||||
During the three months ended June 30, 2026, our revenue increased by $51.3 million, or 16%, compared to the three months ended June 30, 2025, of which approximately 88% was attributable to revenue from existing customers and approximately 12% was attributable to revenue from new customers acquired during the three months ended June 30, 2026. The increase in revenue from existing customers includes the net benefit of a full quarter of subscription revenue in the second quarter of 2026 from customers that were newly acquired or expanded their subscriptions between the second quarter of 2025 and the first quarter of 2026 and continued or expanded their subscriptions, as applicable, in the second quarter of 2026.
Cost of Revenue, Gross Profit, and Gross Margin
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 75,411 | $ | 67,732 | $ | 7,679 | 11 | % | |||||||||||||||
| Gross profit | 299,796 | 256,187 | 43,609 | 17 | % | ||||||||||||||||||
| Gross margin | 80 | % | 79 | % | |||||||||||||||||||
The increase in cost of revenue during the three months ended June 30, 2026 was primarily attributable to an increase of $4.4 million in amortization of capitalized software development costs. The increase in cost of revenue was also attributable to a $2.6 million increase in third-party cloud hosting and related services as we grow our customer base. We increased our cost of revenue headcount by 2% since June 30, 2025.
Operating Expenses
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Sales and marketing | $ | 145,785 | $ | 141,897 | $ | 3,888 | 3 | % | |||||||||||||||
The increase in sales and marketing expenses during the three months ended June 30, 2026 was primarily attributable to an increase of $5.5 million in personnel-related expenses, including increases of $5.1 million in salaries and wages and $0.6 million in stock-based compensation expense. The increases in sales and marketing expenses were partially offset by a $2.4 million decrease in amortization of customer relationship intangible assets due to certain customer relationship intangible assets becoming fully amortized in Q4 2025. We decreased our sales and marketing headcount by 4% since June 30, 2025.
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Research and development | $ | 93,349 | $ | 88,902 | $ | 4,447 | 5 | % | |||||||||||||||
The increase in research and development expenses during the three months ended June 30, 2026 was primarily attributable to an increase of $2.3 million in acquisition-related expenses. The increase in research and development expenses was also attributable to a $2.1 million increase in computer software expenses. We increased our research and development headcount by 6% since June 30, 2025.
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| General and administrative | $ | 56,335 | $ | 55,655 | $ | 680 | 1 | % | |||||||||||||||
The increase in general and administrative expenses during the three months ended June 30, 2026 was primarily attributable to an increase of $5.5 million in professional fees, including a $3.4 million increase in legal fees, which were predominantly related to an ongoing lawsuit with Oracle. The increase in general and administrative expenses was also attributable to a $1.1 million increase in acquisition-related expenses. The increases in general and administrative expenses were partially offset by a $5.0 million decrease in rent expense, primarily related to a non-cash gain that was recognized in relation to modifications of leases in the second quarter of 2026. Our general and administrative headcount has remained relatively consistent since June 30, 2025.
Interest Income, Interest Expense, Accretion Income, Net, Other Income, Net, and (Benefit from) Provision for Income Taxes
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest income | $ | 4,422 | $ | 5,015 | $ | (593) | (12 | %) | |||||||||||||||
| Interest expense | 179 | 298 | (119) | (40 | %) | ||||||||||||||||||
| Accretion income, net | 714 | 2,027 | (1,313) | (65 | %) | ||||||||||||||||||
| Other income, net | 5,879 | 2,023 | 3,856 | * | |||||||||||||||||||
| (Benefit from) provision for income taxes | (1,759) | (411) | (1,348) | * | |||||||||||||||||||
* Percentage not meaningful
During the three months ended June 30, 2026, accretion income, net decreased by $1.3 million due to a decrease in the balance of our marketable securities portfolio year over year.
During the three months ended June 30, 2026, other income, net increased by $3.9 million primarily due to unrealized gains on strategic investments.
During the three months ended June 30, 2026, benefit from income taxes increased by $1.3 million due to the Company's shift from pre-tax loss in 2025 to pre-tax income in 2026
Comparison of the Six Months Ended June 30, 2026 and 2025
Revenue
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 734,490 | $ | 634,551 | $ | 99,939 | 16 | % | |||||||||||||||
During the six months ended June 30, 2026, our revenue increased by $99.9 million, or 16%, compared to the six months ended June 30, 2025, of which approximately 84% was attributable to revenue from existing customers and approximately 16% was attributable to revenue from new customers acquired during the six months ended June 30, 2026. The increase in revenue from existing customers includes the net benefit of a full six months of subscription revenue in the first half of 2026 from customers that were newly acquired or expanded their subscriptions in 2025 and continued or expanded their subscriptions, as applicable, in the first half of 2026.
Cost of Revenue, Gross Profit, and Gross Margin
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 146,904 | $ | 132,658 | $ | 14,246 | 11 | % | |||||||||||||||
| Gross profit | 587,586 | 501,893 | 85,693 | 17 | % | ||||||||||||||||||
| Gross margin | 80 | % | 79 | % | |||||||||||||||||||
The increase in cost of revenue during the six months ended June 30, 2026 was primarily attributable to an increase of $8.3 million in amortization of capitalized software development costs. The increase in cost of revenue was also attributable to a $3.6 million increase in third-party cloud hosting and related services as we grow our customer base, and a $1.1 million increase in personnel-related expenses for salaries and wages. We increased our cost of revenue headcount by 2% since June 30, 2025.
Operating Expenses
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Sales and marketing | $ | 294,966 | $ | 280,581 | $ | 14,385 | 5 | % | |||||||||||||||
The increase in sales and marketing expenses during the six months ended June 30, 2026 was primarily attributable to an increase of $18.2 million in personnel-related expenses, including increases of $12.5 million in salaries and wages and $6.2 million in stock-based compensation expense. The increase in sales and marketing expenses was also attributable to a $2.9 million increase in travel-related costs, and a $1.2 million increase in computer software expenses. The increases in sales and marketing expenses were partially offset by a $4.6 million decrease in amortization of customer relationship intangible assets due to certain customer relationship intangible assets becoming fully amortized in Q4 2025, and a $2.4 million decrease in professional fees for temporary contractor labor. We decreased our sales and marketing headcount by 4% since June 30, 2025.
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Research and development | $ | 178,914 | $ | 176,511 | $ | 2,403 | 1 | % | |||||||||||||||
The increase in research and development expenses during the six months ended June 30, 2026 was primarily attributable to an increase of $3.9 million in acquisition-related expenses. The increase in research and development expenses was also attributable to a $2.4 million increase in computer software expenses. The increases in research and development expenses were partially offset by a $4.0 million decrease in personnel-related expenses for salaries and wages. We increased our research and development headcount by 6% since June 30, 2025.
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| General and administrative | $ | 125,050 | $ | 111,313 | $ | 13,737 | 12 | % | |||||||||||||||
The increase in general and administrative expenses during the six months ended June 30, 2026 was primarily due to an increase of $15.9 million in professional fees, including an increase of $11.3 million in legal fees, which were predominantly related to an ongoing lawsuit with Oracle America, Inc. and certain of its affiliates ("Oracle"). The increase in general and administrative expenses was also attributable to a $2.0 million increase in acquisition-related expenses. The increases in general and administrative expenses were partially offset by a decrease of $3.2 million in rent expense, primarily related to modifications of leases in the second quarter of 2026; and a $0.9 million decrease in personnel-related expenses, including a decrease of $3.9 million in salaries and wages, partially offset by an increase of $3.5 million in stock-based compensation expense. Our general and administrative headcount has remained relatively consistent since June 30, 2025.
Interest Income, Interest Expense, Accretion Income, Net, Other Income, Net, and (Benefit from) Provision for Income Taxes
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Interest income | $ | 8,944 | $ | 11,012 | $ | (2,068) | (19 | %) | |||||||||||||||
| Interest expense | 447 | 583 | (136) | (23 | %) | ||||||||||||||||||
| Accretion income, net | 1,711 | 4,474 | (2,763) | (62 | %) | ||||||||||||||||||
| Other income, net | 5,323 | 2,414 | 2,909 | * | |||||||||||||||||||
| (Benefit from) provision for income taxes | (3,639) | 4,883 | (8,522) | * | |||||||||||||||||||
* Percentage not meaningful
During the six months ended June 30, 2026, accretion income, net decreased by $2.8 million due to a decrease in the balance of our marketable securities portfolio year over year.
During the six months ended June 30, 2026, other income, net increased by $2.9 million primarily due to unrealized gains on strategic investments.
(Benefit from) income taxes for the six months ended June 30, 2026, differs from provision for income taxes for the six months ended June 30, 2025, primarily due to the release of a portion of our valuation allowance as a result of acquired deferred tax liabilities from the Datagrid acquisition that are an available
source of income to realize our deferred tax assets. Further, in the prior year, the Company recognized a one-time tax expense related to foreign tax on the realignment of intellectual property attributable to the Novorender acquisition.
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. GAAP, we believe certain non-GAAP measures, as described below, are useful in evaluating our operating performance. We use this non-GAAP financial information, collectively, to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, is helpful to investors because it provides consistency and comparability with past financial performance, and may assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.
The non-GAAP financial information is presented for supplemental informational purposes only. Non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP, non-GAAP financial measures may be different from similarly-titled non-GAAP measures used by other companies since other companies may calculate such non-GAAP financial measures differently, and non-GAAP financial measures exclude expenses that may have a material impact on our reported financial results. Unlike stock-based compensation expense, employer payroll tax related to employee stock transactions is a cash expense that we will continue to incur in the future. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Investors should not rely on any single financial measure to evaluate our business.
Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Income from Operations, and Non-GAAP Operating Margin
We define these non-GAAP financial measures as the respective GAAP measures, excluding stock-based compensation expense, amortization of acquired intangible assets, employer payroll tax related to employee stock transactions, and acquisition-related expenses. Non-GAAP gross margin is the ratio calculated by dividing non-GAAP gross profit by total revenue. Non-GAAP operating margin is the ratio calculated by dividing non-GAAP income from operations by total revenue.
Stock-based compensation expense includes the net effects of capitalization and amortization of stock-based compensation expense related to capitalized software and cloud-computing arrangement implementation costs. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of the compensation provided to our employees. Because of varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company's non-cash expenses, we believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for meaningful comparisons between our operating results from period to period. The expense related to amortization of acquired intangible assets is a non-cash expense and dependent upon estimates and assumptions, which can vary significantly and are unique to each asset acquired; therefore, we believe that non-GAAP measures that adjust for the amortization of acquired intangible assets provide investors a consistent basis for comparison across accounting periods. The amount of employer payroll tax-related items on employee stock transactions is dependent on restricted stock unit ("RSU") settlements, option exercises, related stock price, and other factors that are beyond our control and that do not correlate to the operation of our business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution than the accounting charges associated with such grants). Since the amount of employer payroll tax-related items on employee stock transactions is highly variable due to factors outside our control, and unrelated to our core operations, operating results, revenue-generating activities, business strategy, industry, or regulatory environment, management does not consider employer payroll tax on employee stock transactions in the evaluation of the business or in making operating plans. Accordingly, we believe this adjustment in arriving at
our non-GAAP measures provides investors with a better understanding of the performance of our core business in a manner that is consistent with management's view of the business. Acquisition-related expenses include external and incremental transaction costs, such as legal and due diligence costs, and retention or other compensation payments. These expenses are unpredictable and generally would not have otherwise been incurred in the periods presented as part of our continuing operations. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related expenses, may not be indicative of such future costs. We believe excluding acquisition-related expenses facilitates the comparison of our financial results to our historical operating results and to other companies in our industry. Overall, we believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results period-over-period and to those of peer companies.
The following tables present reconciliations of our GAAP financial measures to our non-GAAP financial measures for the periods presented:
Reconciliation of gross profit and gross margin to non-GAAP gross profit and non-GAAP gross margin:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 375,207 | $ | 323,919 | $ | 734,490 | $ | 634,551 | |||||||||||||||
| Gross profit | 299,796 | 256,187 | 587,586 | 501,893 | |||||||||||||||||||
| Stock-based compensation expense | 6,196 | 5,868 | 12,138 | 11,136 | |||||||||||||||||||
| Amortization of acquired technology intangible assets | 8,311 | 8,015 | 16,019 | 15,617 | |||||||||||||||||||
| Employer payroll tax on employee stock transactions | 129 | 200 | 303 | 461 | |||||||||||||||||||
| Non-GAAP gross profit | $ | 314,432 | $ | 270,270 | $ | 616,046 | $ | 529,107 | |||||||||||||||
| Gross margin | 80 | % | 79 | % | 80 | % | 79 | % | |||||||||||||||
| Non-GAAP gross margin | 84 | % | 83 | % | 84 | % | 83 | % | |||||||||||||||
Reconciliation of operating expenses to non-GAAP operating expenses:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 375,207 | $ | 323,919 | $ | 734,490 | $ | 634,551 | |||||||||||||||
| GAAP sales and marketing | 145,785 | 141,897 | 294,966 | 280,581 | |||||||||||||||||||
| Stock-based compensation expense | (18,160) | (17,589) | (38,748) | (32,539) | |||||||||||||||||||
| Amortization of acquired intangible assets | (905) | (3,346) | (2,026) | (6,651) | |||||||||||||||||||
| Employer payroll tax on employee stock transactions | (572) | (748) | (1,324) | (1,879) | |||||||||||||||||||
| Acquisition-related expenses | (166) | (138) | (320) | (794) | |||||||||||||||||||
| Non-GAAP sales and marketing | $ | 125,982 | $ | 120,076 | $ | 252,548 | $ | 238,718 | |||||||||||||||
| GAAP sales and marketing as a percentage of revenue | 39 | % | 44 | % | 40 | % | 44 | % | |||||||||||||||
| Non-GAAP sales and marketing as a percentage of revenue | 34 | % | 37 | % | 34 | % | 38 | % | |||||||||||||||
| GAAP research and development | $ | 93,349 | $ | 88,902 | $ | 178,914 | $ | 176,511 | |||||||||||||||
| Stock-based compensation expense | (21,994) | (21,237) | (40,549) | (39,661) | |||||||||||||||||||
| Amortization of acquired intangible assets | (221) | (658) | (883) | (1,290) | |||||||||||||||||||
| Employer payroll tax on employee stock transactions | (687) | (1,103) | (1,737) | (2,829) | |||||||||||||||||||
| Acquisition-related expenses | (3,001) | (695) | (5,587) | (1,744) | |||||||||||||||||||
| Non-GAAP research and development | $ | 67,446 | $ | 65,209 | $ | 130,158 | $ | 130,987 | |||||||||||||||
| GAAP research and development as a percentage of revenue | 25 | % | 27 | % | 24 | % | 28 | % | |||||||||||||||
| Non-GAAP research and development as a percentage of revenue | 18 | % | 20 | % | 18 | % | 21 | % | |||||||||||||||
| GAAP general and administrative | $ | 56,335 | $ | 55,655 | $ | 125,050 | $ | 111,313 | |||||||||||||||
| Stock-based compensation expense | (14,212) | (13,718) | (29,614) | (26,100) | |||||||||||||||||||
| Employer payroll tax on employee stock transactions | (315) | (462) | (817) | (1,345) | |||||||||||||||||||
| Acquisition-related expenses | (1,298) | (166) | (2,543) | (541) | |||||||||||||||||||
| Non-GAAP general and administrative | $ | 40,510 | $ | 41,309 | $ | 92,076 | $ | 83,327 | |||||||||||||||
| GAAP general and administrative as a percentage of revenue | 15 | % | 17 | % | 17 | % | 18 | % | |||||||||||||||
| Non-GAAP general and administrative as a percentage of revenue | 11 | % | 13 | % | 13 | % | 13 | % | |||||||||||||||
Reconciliation of loss from operations and operating margin to non-GAAP income from operations and non-GAAP operating margin:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 375,207 | $ | 323,919 | $ | 734,490 | $ | 634,551 | |||||||||||||||
| Income (loss) from operations | 4,327 | (30,267) | (11,344) | (66,512) | |||||||||||||||||||
| Stock-based compensation expense | 60,562 | 58,412 | 121,049 | 109,436 | |||||||||||||||||||
| Amortization of acquired intangible assets | 9,437 | 12,019 | 18,928 | 23,558 | |||||||||||||||||||
| Employer payroll tax on employee stock transactions | 1,703 | 2,513 | 4,181 | 6,514 | |||||||||||||||||||
| Acquisition-related expenses | 4,465 | 999 | 8,450 | 3,079 | |||||||||||||||||||
| Non-GAAP income from operations | $ | 80,494 | $ | 43,676 | $ | 141,264 | $ | 76,075 | |||||||||||||||
| Operating margin | 1 | % | (9 | %) | (2 | %) | (10 | %) | |||||||||||||||
| Non-GAAP operating margin | 21 | % | 13 | % | 19 | % | 12 | % | |||||||||||||||
Liquidity and Capital Resources
As of June 30, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $655.9 million, which were held in money market funds, U.S. treasury securities, corporate notes and obligations, checking accounts, and savings accounts. Our investments in marketable securities are exposed to interest rate risk; however, due to the short-term nature of our investments, we do not anticipate being exposed to material risks due to changes in interest rates.
As of June 30, 2026, we had outstanding letters of credit, on an unsecured basis, totaling approximately $7.6 million to secure various leased office facilities in the U.S. and Australia.
Our cash sources primarily consist of cash generated from sales to our customers, maturities of our marketable securities, proceeds from employees through stock option exercises and our employee stock purchase plan ("ESPP"), and interest income on our marketable securities, money market funds, and savings account balances.
Our cash requirements are primarily for operating expenses, which include personnel-related costs, purchase obligations primarily for hosting and software licenses and other services, lease obligations, and capital expenditures for our employees and offices. We also fund investments which help drive our strategic business growth through acquisitions and investments in equity securities and limited partnership funds. In February 2025, we began using cash to fund withholding taxes due upon the vesting of employee RSUs by net share settlement, rather than our previous approach of selling shares of our common stock issued to employees to cover applicable withholding taxes. We also use working capital to fund repurchases under our stock repurchase program.
On July 27, 2026, we entered into the DroneDeploy Merger Agreement to acquire DroneDeploy for approximately $845.0 million in cash, subject to adjustment as provided in the DroneDeploy Merger Agreement. In connection with our entry into the DroneDeploy Merger Agreement, we entered into the Commitment Letter with Goldman Sachs Bank USA, pursuant to which it committed to provide us with debt financing in an aggregate principal amount of up to $700.0 million in the form of a 364-day senior secured bridge facility, subject to customary conditions. Subject to market conditions and other factors, we may fund a portion of the purchase price through one or more bank financing or capital markets transactions in lieu of all or a portion of the bridge facility.
During the six months ended June 30, 2026, we had a $29.7 million decrease in contractual commitments beyond those disclosed in our 2025 Form 10-K, related to the Carpinteria lease modifications. The Company modified its office leases in Carpinteria, California to extend the term of its primary core lease space and decline renewal extensions for its remaining office suites. In the next 12 months, we have operating lease obligations of $1.7 million related to leases that commenced during the six months ended June 30, 2026. Beyond the next 12 months, we have additional net contractual commitments for operating lease obligations of $23.7 million related to leases that commenced during the six months ended June 30, 2026. There have been no other material changes to our contractual obligations from those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K. We believe our existing cash, cash equivalents, and marketable securities will be sufficient to meet our needs for at least the next 12 months. While we have generated positive cash flows from operations in recent years, we have a limited history of generating profit from operations, as reflected in our accumulated deficit of $1.3 billion as of June 30, 2026. We may not maintain profitability in future periods and may require additional capital resources to execute strategic initiatives to grow our business.
This assessment is a forward-looking statement and involves risks and uncertainties. Our additional future capital requirements will depend on many factors, including our revenue growth rate, new customer acquisition and subscription renewal activity, timing of billing activities, our ability to integrate the companies or technologies we acquire and realize strategic and financial benefits from our investments and acquisitions, other strategic transactions or investments we may enter into, the volume and timing of any stock repurchases under our stock repurchase program, the timing and extent of spending to support further sales and marketing and research and development efforts, general and administrative expenses to support our growth (including international expansion), and inflation. 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 to fund these activities. If we are unable to raise additional
capital when desired, or on acceptable terms, our business, results of operations, and financial condition could be materially adversely affected.
As of June 30, 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.
The following table summarizes our cash flows for the periods presented:
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by operating activities | $ | 164,629 | $ | 96,856 | |||||||
| Net cash used in investing activities | (33,108) | (80,462) | |||||||||
| Net cash used in financing activities | (92,014) | (131,804) | |||||||||
Operating Activities
Our largest source of cash from operating activities is collections from the sales of subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, marketing expenses, hosting and software license expenses, and overhead.
Net cash provided by operating activities was $164.6 million during the six months ended June 30, 2026 which resulted from net income of $7.8 million, adjusted for non-cash charges of $163.9 million and a net cash outflow of $7.1 million from changes in operating expenses and liabilities. The $7.1 million of net cash outflows as a result of changes in our operating assets and liabilities primarily reflected the following:
•a $21.8 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors;
•a $15.7 million decrease in deferred revenue primarily due to timing of billings and seasonality;
•a $15.7 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period;
•a $6.6 million increase in prepaid expenses and other current assets primarily due to timing of cash payments to our vendors; and
•a $2.3 million decrease in operating lease liabilities related to lease payments.
These changes in our operating assets and liabilities were partially offset by the following:
•a $46.8 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and
•a $8.2 million increase in accounts payable primarily due to timing of cash payments to our vendors.
Net cash provided by operating activities was $96.9 million during the six months ended June 30, 2025, which resulted from a net loss of $54.1 million, adjusted for non-cash charges of $157.8 million and net cash inflows of $6.8 million from changes in operating assets and liabilities. The $6.8 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:
•a $28.3 million decrease in deferred revenue primarily due to the growth of our business and timing of billings;
•a $20.2 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period;
•a $13.0 million decrease in accounts payable primarily due to timing of cash payments to our vendors;
•a $9.2 million increase in prepaid expenses and other current assets primarily due to timing of cash payments to our vendors; and
•a $2.3 million decrease in operating lease liabilities related to lease payments.
These changes in our operating assets and liabilities were partially offset by the following:
•a $54.6 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and
•a $11.6 million increase in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors.
Investing Activities
Net cash used in investing activities of $33.1 million during the six months ended June 30, 2026 consisted of cash outflows for business combinations of $158.9 million, capitalized software development costs of $34.1 million, purchases of property and equipment of $9.9 million, and purchases of strategic investments of $0.4 million; partially offset by $106.7 million in sales of marketable securities, $63.1 million in maturities of marketable securities, and $0.4 million in sales of strategic investments.
Net cash used in investing activities of $80.5 million during the six months ended June 30, 2025 consisted of cash outflows for purchases of marketable securities of $218.6 million, business combinations of $41.5 million, capitalized software development costs of $32.6 million, purchases of property and equipment of $7.0 million, and asset acquisitions of $3.5 million, and purchases of strategic investments of $0.9 million. Such outflows were partially offset by $223.7 million in maturities of marketable securities.
Financing Activities
Net cash used in financing activities of $92.0 million during the six months ended June 30, 2026 consisted of repurchases of our common stock of $100.0 million, payments of tax withholding for net share settlement of $30.5 million, payments on our finance lease obligations of $0.7 million, and payments of deferred asset acquisition consideration of $0.3 million; partially offset by a $22.1 million increase in funds held for customers, proceeds from employee purchases under the ESPP of $13.0 million and proceeds from stock option exercises of $4.4 million.
Net cash used in financing activities of $131.8 million during the six months ended June 30, 2025 consisted of repurchases of our common stock of $103.2 million, payments of tax withholding for net share settlement of $49.9 million, and payments on our finance lease obligations of $0.8 million; partially offset by proceeds from employee purchases under the ESPP of $14.4 million and proceeds from stock option exercises of $7.6 million.
Capital Allocation Strategy
We have a balanced approach to capital allocation based on the following priorities: driving organic and efficient revenue growth; investing in accretive mergers and acquisitions; and returning capital to stockholders through regular evaluation of stock repurchases, as appropriate.
Stock Repurchase Program
On November 3, 2025, our board of directors (our "Board") authorized a stock repurchase program to repurchase up to $300.0 million of our outstanding common stock. We intend to opportunistically repurchase shares of our common stock from time to time through the open market or other transactions in accordance with applicable securities laws, in each case, subject to market conditions, applicable legal requirements, and other relevant factors. The timing of stock repurchases and the actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities, and will be subject to the discretion of our management within its authorization. The stock repurchase program will be funded using our working capital. The stock repurchase program does not obligate
us to acquire any particular number of shares of our common stock, or any shares at all. The stock repurchase program expires on November 3, 2026, and may be suspended or discontinued at any time at our discretion and without notice. During the six months ended June 30, 2026, we repurchased and retired a total of 1,765,560 shares of our common stock at a weighted average per share price of $56.66 for an aggregate amount of $100.0 million, which includes the transaction costs associated with the repurchases but excludes the 1% excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those accounting policies and estimates that are both the most important to the portrayal of our net assets and results of operations and require the most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.
Our significant accounting policies are described in Note 2 of our condensed consolidated financial statements. Our critical accounting policies and more significant judgments and estimates used in the preparation of our financial statements are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Form 10-K. There have been no significant changes to these policies for the six months ended June 30, 2026.
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