Jamf Holding Corporation
08/07/2025 | Press release | Distributed by Public on 08/07/2025 14:26
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes in our Annual Report on Form 10-K for the year ended December 31, 2024. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below, elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2024, and in our subsequent Quarterly Reports on Form 10-Q, particularly in the sections entitled "Risk Factors" and "Forward-Looking Statements."
Overview
We are the standard in managing and securing Apple at work, and we are the only company in the world that provides a complete management and security solution for an Apple-first environment that is designed to be enterprise secure, consumer simple, and protective of personal privacy. We help IT and security teams confidently protect the devices, data, and applications used by their workforce, while providing employees with the powerful and intended Apple experience. With Jamf's solution, devices can be deployed to employees brand new in the shrink-wrapped box, set up automatically and personalized at first power-on and administered continuously throughout the lifecycle of the device.
Jamf was founded in 2002, around the same time that Apple was leading an industry transformation. Apple transformed the way people access and utilize technology through its focus on creating a superior consumer experience. With the release of revolutionary products like the Mac, iPod, iPhone, iPad, Apple Watch, and Apple TV, Apple built one of the world's most valuable brands and became ubiquitous in everyday life.
We have built our company through a primary focus on being the leading solution for Apple in the enterprise because we believe that due to Apple's broad range of devices, combined with the changing demographics of today's workforce and their strong preference for Apple, Apple will become the number one device ecosystem in the enterprise by the end of this decade. We believe that the enterprise management provider that is best at Apple will one day be the enterprise leader, and that Jamf is best positioned for that leadership. Through our long-standing relationship with Apple, we have accumulated significant Apple technical experience and expertise that give us the ability to fully and quickly leverage and extend the capabilities of Apple products, operating systems, and services, while protecting devices with our differentiated Apple-first security solutions. This expertise enables us to fully support new innovations and operating system releases the moment they are made available by Apple. This focus has allowed us to create a best-in-class user experience in the enterprise.
We sell our SaaS solutions via a subscription model, through a direct sales force, online, and indirectly via our channel and other strategic partners, including Apple. Our multi-dimensional go-to-market model and primarily cloud-deployed offering enable us to reach organizations around the world, large and small, with our software solutions.
On April 1, 2025, the Company completed its acquisition of Identity Automation. Identity Automation is a dynamic identity and access management platform for industries that are defined by frequent role adjustments, such as education and healthcare. With Identity Automation, Jamf is able to combine identity with device access in one unique solution, helping ensure secure devices and application access.We financed the acquisition with cash on hand. See Note 4 of our condensed consolidated financial statements for more information.
Key Factors Affecting Our Performance
New customer growth.Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and solutions, the features and pricing of our competitors' offerings, the effectiveness of our marketing efforts, the effectiveness of our channel partners in selling, marketing, and deploying our software solutions, the growth of the market for devices and services for SMBs, enterprises, and other organizations, and the continued demand for Apple products. Our growth requires continued adoption of our platform by new customers. We intend to continue to invest in building brand awareness as we further penetrate our addressable markets. We intend to expand our customer base by continuing to make significant and targeted investments in our direct sales and marketing to attract new customers and to drive broader awareness of our software solutions.
Existing customer retention and expansion.Our ability to increase revenue depends in large part on our ability to retain our existing customers and increase revenue from our existing customer base. Customer retention and expansion is dependent upon a number of factors, including their satisfaction with our software solutions and support, the features and pricing of our competitors' offerings, and our ability to effectively enhance our platform by developing new products and features and addressing additional use cases. Often our customers will begin with a small deployment and then later expand their usage more broadly within the organization as they realize the benefits of our platform. We believe that our "land and expand" business model allows us to efficiently increase revenue from our existing customer base. We intend to continue to invest in enhancing awareness of our software solutions, creating additional use cases, and developing more products, features, and functionality, which we believe are important factors to expand usage of our software solutions by our existing customer base. We believe our ability to retain and expand usage of our software solutions by our existing customer base is evidenced by our dollar-based net retention rate.
Product innovation and technology leadership.Our success is dependent on our ability to sustain product innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated platform, and we intend to further extend the adoption of our platform through additional innovation. While sales of subscriptions to our Jamf Pro product account for a substantial portion of our revenue, we intend to continue to invest in building additional products, features, and functionality that expand our capabilities and facilitate the extension of our platform to new use cases. Our future success is dependent on our ability to successfully develop, market, and sell additional products to both new and existing customers. For example, on April 1, 2025, we completed our acquisition of Identity Automation, a dynamic identity and access management platform for industries that are defined by frequent role adjustments, such as education and healthcare.
Investment in growth.Our ability to effectively invest for growth is dependent upon a number of factors, including our ability to offset anticipated increases in operating expenses with revenue growth, our ability to spend our research and development budget efficiently or effectively on compelling innovation and technologies, our ability to accurately predict costs, and our ability to maintain our corporate culture as our business evolves. We plan to continue strategically investing in our business so we can capitalize on our market opportunity. We intend to invest in our sales team to target expansion within our midmarket and enterprise customers and to attract new customers. We expect to continue to make strategically focused investments in marketing to drive brand awareness and enhance the effectiveness of our customer acquisition model. We also intend to continue to invest in our research and development team to develop new and improved products, features, and functionality. Although these investments may increase our operating expenses in certain periods and, as a result, adversely affect our operating results in the near term, we believe they will contribute to our long-term growth.
International expansion.Our international growth in any region depends on our ability to effectively implement our business processes and go-to-market strategy, our ability to adapt to market or cultural differences, the general competitive landscape, our ability to invest in our sales and marketing channels, the maturity and growth trajectory of devices and services by region, and our brand awareness and perception. In addition, global demand for our platform and the growth of our international operations is dependent upon the rate of market adoption of Apple products in international markets. We plan to continue making investments in our international sales and marketing channels to take advantage of this market opportunity while refining our go-to-market approach based on local market dynamics. While we believe global demand for our platform will increase as international adoption of Apple products and market awareness of Jamf grows, our ability to conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems (including with respect to data transfer and privacy), alternative dispute systems, commercial markets, and geopolitical and global market challenges.
Partner network development.Our success is dependent not only on our independent efforts to innovate, scale, and reach more customers directly but also on the success of our partners to continue to gain share in the enterprise. With a focus on the user and being the bridge between critical technologies - with Apple, Microsoft, AWS, Google, and Okta as examples - we believe we can help other market participants deliver more to enterprise users with the power of Jamf. We will continue to invest in the relationships with our existing, critical partners, nurture and develop new relationships, and do so globally. We will continue to invest in developing "plus one" solutions and workflows that help tie our software solutions together with those delivered by others.
Continued demand for Apple products and general and industry-specific economic and market conditions and reductions in IT spending. Our revenue, results of operations, and cash flows depend on the overall demand for Apple products and our products. The U.S. and other key international economies are impacted by high levels of inflation, elevated interest rates, supply chain disruptions, volatility in credit, equity, and foreign exchange markets, the Russia-Ukraine war, financial instability and instability in the global trade environment including resulting from recent U.S. tariff announcements, potential retaliatory measures by other countries, uncertainty surrounding trade relations, and overall economic uncertainty. These factors
could continue to pose the risk of reductions in IT spending by our existing and prospective customers or in requests to renegotiate existing contracts, defaults on payments due on existing contracts, or non-renewals. As result of macroeconomic uncertainty, some of our customers have continued to take a more moderate outlook when planning their future hiring and device growth needs.
Strategic reinvestment plan. On July 15, 2025, the Company announced its strategic reinvestment plan, which is intended to reduce operating costs, improve operating margins, allow for strategic reinvestment, and continue advancing the Company's ongoing commitment to profitable growth. The strategic reinvestment plan is expected to impact approximately 6.4% of the Company's full-time employees. The Company currently estimates that it will incur charges of approximately $11.0 million to $12.5 million in connection with the strategic reinvestment plan, consisting of cash expenditures for notice period and severance payments, employee benefits, and related costs. The Company expects that the majority of the charges will be incurred in the third quarter of 2025 and that the execution of the strategic reinvestment plan will be substantially complete by the end of the fourth quarter of 2025, subject to local law and consultation requirements. The Company may also incur charges and expenditures not currently contemplated due to unanticipated events that may occur in connection with the strategic reinvestment plan.
Key Business Metrics
In addition to our GAAP financial information, we review several operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Annual Recurring Revenue
ARR represents the annualized value of all subscription and support and maintenance contracts as of the end of the period. ARR mitigates fluctuations due to seasonality, contract term, and the sales mix of subscriptions for term-based licenses and SaaS. Beginning in the second quarter of 2025, ARR is calculated using the current period exchange rate. ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
Our ARR was $710.0 million and $621.7 million as of June 30, 2025 and 2024, respectively, which is an increase of 14% year-over-year. The growth in our ARR was primarily driven by the acquisition of Identity Automation, device expansion, cross-selling additional solutions to our installed customer base, and the addition of new customers.
Dollar-Based Net Retention Rate
To further illustrate the "land and expand" economics of our customer relationships, we examine the rate at which our customers increase their subscriptions for our software solutions. Our dollar-based net retention rate measures our ability to increase revenue across our existing customer base through expanded use of our software solutions, offset by customers whose subscription contracts with us are not renewed or renew at a lower amount.
We calculate dollar-based net retention rate as of a period end by starting with Prior Period ARR. We then calculate the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the dollar-based net retention rate. Our dollar-based net retention rate for the trailing twelve months ended June 30, 2025 does not include Identity Automation since they have not been a part of our business for the full trailing twelve months.
Our dollar-based net retention rates were 103% and 106% for the trailing twelve months ended June 30, 2025 and 2024, respectively.
Components of Results of Operations
Revenue
We recognize revenue under ASC 606 when or as performance obligations are satisfied. We derive revenue primarily from sales of SaaS subscriptions and support and maintenance contracts and, to a lesser extent, sales of on-premise term-based subscriptions and perpetual licenses and services.
Subscription. Subscription revenue consists of sales of SaaS subscriptions and on-premise term-based subscription licenses as well as support and maintenance contracts. We sell our software solutions primarily with a one-year contract term. We typically invoice SaaS subscription fees and support and maintenance fees annually in advance and recognize revenue ratably over the term of the applicable agreement, provided that all other revenue recognition criteria have been satisfied. The license portion of on-premise subscription revenue is recognized upfront, assuming all revenue recognition criteria are satisfied. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2024 for more information.
Services. Services revenue consists primarily of professional services provided to our customers to configure and optimize the use of our software solutions, as well as training services related to the operation of our software solutions. Our services are priced on a fixed fee basis and generally invoiced in advance of the service being delivered. Revenue is recognized as the services are performed.
License. License revenue consists of revenue from on-premise perpetual licenses of our Jamf Pro product sold primarily to existing customers. We recognize license revenue upfront, assuming all revenue recognition criteria are satisfied.
Cost of Revenue
Cost of subscription. Cost of subscription revenue consists primarily of employee compensation costs for employees associated with supporting our subscription and support and maintenance arrangements, our customer success function, and third-party hosting fees related to our cloud services. Employee compensation and related costs include cash compensation and benefits to employees and associated overhead costs.
Cost of services. Cost of services revenue consists primarily of employee compensation costs directly associated with delivery of professional services and training, costs of third-party integrators, and other associated overhead costs.
Amortization. Amortization expense consists of amortization of acquired intangible assets.
Gross Profit
Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including the mix of cloud-based subscription customers, the costs associated with supporting our cloud solution, the extent to which we expand our customer support team, and the extent to which we can increase the efficiency of our technology and infrastructure through technological improvements.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of employee compensation costs, sales commissions, costs of general marketing and promotional activities, travel-related expenses, restructuring and other cost optimization charges, and allocated overhead. Sales commissions as well as associated payroll taxes and retirement plan contributions (together, "contract costs") that are incremental to the acquisition of customer contracts are capitalized and amortized over the period of benefit, which is estimated to be generally five years.
Research and development. Research and development expenses consist primarily of personnel costs, restructuring and other cost optimization charges, and allocated overhead. We will continue to invest in innovation so that we can offer our customers new solutions and enhance our existing solutions. See "Business - Research and Development" in our Annual Report on Form 10-K for the year ended December 31, 2024 for more information.
General and administrative. General and administrative expenses consist primarily of employee compensation costs for corporate personnel, such as those in our executive, human resource, facilities, accounting and finance, legal and compliance, and IT departments. General and administrative expenses also include non-personnel costs such as legal, accounting, and other professional fees. In addition, general and administrative expenses include acquisition and integration-related expenses, which primarily consist of third-party expenses, such as legal and accounting fees, as well as expense recognized for deferred compensation related to the acquisition of dataJAR. General and administrative expenses also include system transformation costs, which are primarily associated with the implementation of sales software and software supporting our business including enterprise resource planning, as well as the implementation of other systems to upgrade processes, governance, and systems. General and administrative expenses also include restructuring and other cost optimization charges.
Amortization. Amortization expense consists of amortization of acquired intangible assets.
Interest (Expense) Income, Net
Interest (expense) income, net primarily consists of interest income earned on our cash and cash equivalents as well as interest charges and amortization of capitalized issuance costs related to our 2026 Notes and 2025 Term Loan.
Foreign Currency Transaction Gain
Foreign currency transaction gain includes gains and losses from transactions denominated in a currency other than the Company's functional currency, the U.S. dollar.
Other Expense, Net
Other expense, net consists of an impairment loss recorded on a strategic investment in the second quarter of 2025.
Income Tax Provision
Income tax provision consists primarily of income taxes related to U.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business.
Results of Operations
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | $ | 172,763 | $ | 149,428 | $ | 336,987 | $ | 297,781 | |||||||||||||||
| Services | 3,735 | 3,497 | 7,132 | 7,203 | |||||||||||||||||||
| License | 3 | 91 | 3 | 155 | |||||||||||||||||||
| Total revenue | 176,501 | 153,016 | 344,122 | 305,139 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
|
Cost of subscription(1)(2)(3)(4)(5)(6)(exclusive of amortization expense shown below)
|
34,825 | 28,141 | 65,527 | 56,151 | |||||||||||||||||||
|
Cost of services(1)(2)(3)(4)(5)(6)(exclusive of amortization expense shown below)
|
4,299 | 3,619 | 7,848 | 7,389 | |||||||||||||||||||
| Amortization expense | 4,671 | 3,244 | 7,522 | 6,556 | |||||||||||||||||||
| Total cost of revenue | 43,795 | 35,004 | 80,897 | 70,096 | |||||||||||||||||||
| Gross profit | 132,706 | 118,012 | 263,225 | 235,043 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
|
Sales and marketing(1)(2)(3)(4)(5)(6)
|
64,231 | 61,905 | 123,943 | 126,687 | |||||||||||||||||||
|
Research and development(1)(2)(3)(4)(5)(6)
|
39,204 | 34,753 | 74,661 | 69,015 | |||||||||||||||||||
|
General and administrative(1)(2)(3)(4)(5)(6)(7)
|
35,877 | 34,427 | 68,545 | 66,625 | |||||||||||||||||||
| Amortization expense | 8,374 | 6,895 | 15,212 | 13,793 | |||||||||||||||||||
| Total operating expenses | 147,686 | 137,980 | 282,361 | 276,120 | |||||||||||||||||||
| Loss from operations | (14,980) | (19,968) | (19,136) | (41,077) | |||||||||||||||||||
| Interest (expense) income, net | (1,621) | 1,641 | (293) | 3,681 | |||||||||||||||||||
| Foreign currency transaction gain | 193 | 431 | 3,374 | 19 | |||||||||||||||||||
|
Other expense, net
|
(850) | - | (850) | - | |||||||||||||||||||
| Loss before income tax provision | (17,258) | (17,896) | (16,905) | (37,377) | |||||||||||||||||||
| Income tax provision | (3,617) | (1,366) | (3,441) | (2,409) | |||||||||||||||||||
| Net loss | $ | (20,875) | $ | (19,262) | $ | (20,346) | $ | (39,786) | |||||||||||||||
(1)Includes stock-based compensation as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 3,462 | $ | 2,983 | $ | 6,523 | $ | 5,611 | |||||||||||||||
| Services | 407 | 451 | 797 | 863 | |||||||||||||||||||
| Sales and marketing | 8,386 | 8,285 | 15,560 | 14,674 | |||||||||||||||||||
| Research and development | 7,087 | 6,969 | 13,418 | 12,400 | |||||||||||||||||||
| General and administrative | 8,470 | 7,595 | 15,909 | 13,314 | |||||||||||||||||||
| $ | 27,812 | $ | 26,283 | $ | 52,207 | $ | 46,862 | ||||||||||||||||
(2)Includes payroll taxes related to stock-based compensation as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 44 | $ | 45 | $ | 241 | $ | 182 | |||||||||||||||
| Services | 5 | - | 57 | 24 | |||||||||||||||||||
| Sales and marketing | 100 | 57 | 827 | 617 | |||||||||||||||||||
| Research and development | 76 | 57 | 546 | 359 | |||||||||||||||||||
| General and administrative | 76 | 171 | 505 | 436 | |||||||||||||||||||
| $ | 301 | $ | 330 | $ | 2,176 | $ | 1,618 | ||||||||||||||||
(3)Includes depreciation expense as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 370 | $ | 307 | $ | 722 | $ | 605 | |||||||||||||||
| Services | 52 | 46 | 97 | 93 | |||||||||||||||||||
| Sales and marketing | 643 | 687 | 1,300 | 1,420 | |||||||||||||||||||
| Research and development | 466 | 449 | 931 | 893 | |||||||||||||||||||
| General and administrative | 250 | 251 | 536 | 509 | |||||||||||||||||||
| $ | 1,781 | $ | 1,740 | $ | 3,586 | $ | 3,520 | ||||||||||||||||
(4) Includes acquisition-related expense as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 61 | $ | - | $ | 61 | $ | - | |||||||||||||||
| Services | - | 88 | - | 167 | |||||||||||||||||||
| Sales and marketing | 77 | - | 77 | - | |||||||||||||||||||
| Research and development | 5 | 236 | 5 | 419 | |||||||||||||||||||
| General and administrative | 2,439 | 2,062 | 4,493 | 4,188 | |||||||||||||||||||
| $ | 2,582 | $ | 2,386 | $ | 4,636 | $ | 4,774 | ||||||||||||||||
(5) Includes system transformation costs as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 111 | $ | 72 | $ | 218 | $ | 104 | |||||||||||||||
|
Services
|
17 | - | 30 | - | |||||||||||||||||||
| Sales and marketing | 236 | 84 | 575 | 135 | |||||||||||||||||||
| Research and development | 141 | - | 282 | - | |||||||||||||||||||
| General and administrative | 2,694 | 2,188 | 5,323 | 3,974 | |||||||||||||||||||
| $ | 3,199 | $ | 2,344 | $ | 6,428 | $ | 4,213 | ||||||||||||||||
(6) Includes restructuring and other cost optimization charges as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 65 | $ | (3) | $ | 69 | $ | 7 | |||||||||||||||
|
Services
|
31 | - | 31 | - | |||||||||||||||||||
| Sales and marketing | 282 | 947 | 391 | 6,518 | |||||||||||||||||||
| Research and development | 759 | (26) | 935 | 708 | |||||||||||||||||||
| General and administrative | 396 | 168 | 663 | 957 | |||||||||||||||||||
| $ | 1,533 | $ | 1,086 | $ | 2,089 | $ | 8,190 | ||||||||||||||||
(7)General and administrative also includes the following:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Offering costs
|
$ | - | $ | 872 | $ | - | $ | 872 | |||||||||||||||
| Extraordinary legal settlements and non-recurring litigation costs | - | 64 | - | (133) | |||||||||||||||||||
The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of total revenue for the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (as a percentage of total revenue) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | 98 | % | 98 | % | 98 | % | 98 | % | |||||||||||||||
| Services | 2 | 2 | 2 | 2 | |||||||||||||||||||
| License | - | - | - | - | |||||||||||||||||||
| Total revenue | 100 | 100 | 100 | 100 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of subscription (exclusive of amortization expense shown below) | 20 | 18 | 19 | 18 | |||||||||||||||||||
| Cost of services (exclusive of amortization expense shown below) | 2 | 2 | 2 | 2 | |||||||||||||||||||
| Amortization expense | 3 | 3 | 3 | 3 | |||||||||||||||||||
| Total cost of revenue | 25 | 23 | 24 | 23 | |||||||||||||||||||
| Gross profit | 75 | 77 | 76 | 77 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 36 | 40 | 36 | 41 | |||||||||||||||||||
| Research and development | 22 | 23 | 22 | 23 | |||||||||||||||||||
| General and administrative | 20 | 22 | 20 | 22 | |||||||||||||||||||
| Amortization expense | 5 | 5 | 4 | 4 | |||||||||||||||||||
| Total operating expenses | 83 | 90 | 82 | 90 | |||||||||||||||||||
| Loss from operations | (8) | (13) | (6) | (13) | |||||||||||||||||||
|
Interest (expense) income, net
|
(1) | 1 | - | 1 | |||||||||||||||||||
|
Foreign currency transaction gain
|
- | - | 1 | - | |||||||||||||||||||
|
Other expense, net
|
(1) | - | - | - | |||||||||||||||||||
|
Loss before income tax provision
|
(10) | (12) | (5) | (12) | |||||||||||||||||||
|
Income tax provision
|
(2) | (1) | (1) | (1) | |||||||||||||||||||
|
Net loss
|
(12) | % | (13) | % | (6) | % | (13) | % | |||||||||||||||
Comparison of the Three and Six Months Ended June 30, 2025 and 2024
Revenue
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| SaaS subscription and support and maintenance | $ | 166,563 | $ | 146,101 | $ | 20,462 | 14 | % | $ | 322,191 | $ | 288,507 | $ | 33,684 | 12 | % | |||||||||||||||||||||||||||||||
| On-premise subscription | 6,200 | 3,327 | 2,873 | 86 | 14,796 | 9,274 | 5,522 | 60 | |||||||||||||||||||||||||||||||||||||||
| Subscription revenue | 172,763 | 149,428 | 23,335 | 16 | 336,987 | 297,781 | 39,206 | 13 | |||||||||||||||||||||||||||||||||||||||
| Professional services | 3,735 | 3,497 | 238 | 7 | 7,132 | 7,203 | (71) | (1) | |||||||||||||||||||||||||||||||||||||||
| Perpetual licenses | 3 | 91 | (88) | (97) | 3 | 155 | (152) | (98) | |||||||||||||||||||||||||||||||||||||||
| Non-subscription revenue | 3,738 | 3,588 | 150 | 4 | 7,135 | 7,358 | (223) | (3) | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 176,501 | $ | 153,016 | $ | 23,485 | 15 | % | $ | 344,122 | $ | 305,139 | $ | 38,983 | 13 | % | |||||||||||||||||||||||||||||||
For the three and six months ended June 30, 2025, total revenue increased as a result of higher subscription revenue. Subscription revenue accounted for 98% of total revenue for both the three and six months ended June 30, 2025 and 2024. The increase in subscription revenue was driven by the acquisition of Identity Automation, device expansion, cross-selling, and the addition of new customers.
Cost of Revenue and Gross Margin
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of subscription (exclusive of amortization expense shown below) | $ | 34,825 | $ | 28,141 | $ | 6,684 | 24 | % | $ | 65,527 | $ | 56,151 | $ | 9,376 | 17 | % | |||||||||||||||||||||||||||||||
| Cost of services (exclusive of amortization expense show below) | 4,299 | 3,619 | 680 | 19 | 7,848 | 7,389 | 459 | 6 | |||||||||||||||||||||||||||||||||||||||
| Amortization expense | 4,671 | 3,244 | 1,427 | 44 | 7,522 | 6,556 | 966 | 15 | |||||||||||||||||||||||||||||||||||||||
| Total cost of revenue | $ | 43,795 | $ | 35,004 | $ | 8,791 | 25 | % | $ | 80,897 | $ | 70,096 | $ | 10,801 | 15 | % | |||||||||||||||||||||||||||||||
| Gross margin | 75% | 77% | 76% | 77% | |||||||||||||||||||||||||||||||||||||||||||
Three months ended
For the three months ended June 30, 2025, cost of revenue increased primarily due to an increase in cost of subscription revenue and amortization expense. Cost of subscription revenue increased primarily due to a $3.4 million increase in employee compensation costs, a $1.0 million increase in computer hardware and software costs, a $0.7 million increase in third-party hosting costs, and a $0.5 million increase in stock-based compensation expense and related payroll taxes. Amortization expense increased primarily due to the increase in intangible assets from the Identity Automation acquisition.
Six months ended
For the six months ended June 30, 2025, cost of revenue increased due to an increase in cost of subscription revenue and amortization expense. Cost of subscription revenue increased primarily due to a $4.8 million increase in employee compensation costs, a $1.9 million increase in computer hardware and software costs, a $1.0 million increase in stock-based compensation expense and related payroll taxes, and a $0.5 million increase in outside services. Amortization expense increased primarily due to the increase in intangible assets from the Identity Automation acquisition.
Operating Expenses
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 64,231 | $ | 61,905 | $ | 2,326 | 4 | % | $ | 123,943 | $ | 126,687 | $ | (2,744) | (2) | % | |||||||||||||||||||||||||||||||
| Research and development | 39,204 | 34,753 | 4,451 | 13 | 74,661 | 69,015 | 5,646 | 8 | |||||||||||||||||||||||||||||||||||||||
| General and administrative | 35,877 | 34,427 | 1,450 | 4 | 68,545 | 66,625 | 1,920 | 3 | |||||||||||||||||||||||||||||||||||||||
| Amortization expense | 8,374 | 6,895 | 1,479 | 21 | 15,212 | 13,793 | 1,419 | 10 | |||||||||||||||||||||||||||||||||||||||
| Operating expenses | $ | 147,686 | $ | 137,980 | $ | 9,706 | 7 | % | $ | 282,361 | $ | 276,120 | $ | 6,241 | 2 | % | |||||||||||||||||||||||||||||||
Three months ended
For the three months ended June 30, 2025, sales and marketing expenses increased primarily due to a $2.1 million increase in employee compensation costs.
For the three months ended June 30, 2025, research and development expenses increased primarily due to a $1.9 million increase in employee compensation costs, a $0.8 million increase in restructuring and other cost optimization charges, a $0.5 million increase in outside services, and a $0.4 million increase in third-party hosting costs.
For the three months ended June 30, 2025, general and administrative expenses increased primarily due to a $1.7 million increase in employee compensation costs, a $0.8 million increase in stock-based compensation expense and related payroll taxes, and a $0.5 million increase in system transformation costs, partially offset by a $0.9 million decrease in offering costs.
For the three months ended June 30, 2025, amortization expense increased primarily due to the increase in intangible assets from the Identity Automation acquisition.
Six months ended
For the six months ended June 30, 2025, sales and marketing expenses decreased primarily due to a $6.1 million decrease in restructuring and other cost optimization charges, partially offset by a $1.1 million increase in stock-based compensation and related payroll taxes, a $0.8 million increase in travel-related expenses, a $0.4 million increase in employee compensation costs, and a $0.4 million increase in system transformation costs.
For the six months ended June 30, 2025, research and development expenses increased primarily due to a $1.7 million increase in employee compensation costs, a $1.2 million increase in stock-based compensation and related payroll taxes, a $0.8 million increase in third-party hosting costs, a $0.6 million increase in computer hardware and software costs, and a $0.5 million increase in outside services.
For the six months ended June 30, 2025, general and administrative expenses increased primarily due to a $2.7 million increase in stock-based compensation expense and related payroll taxes, a $1.3 million increase in system transformation costs, and a $1.2 million increase in employee compensation costs, partially offset by a $1.1 million decrease in outside services, a $0.9 million decrease in offering costs, and a $0.3 million decrease in restructuring and other cost optimization charges.
For the six months ended June 30, 2025, amortization expense increased primarily due to the increase in intangible assets from the Identity Automation acquisition.
Interest (Expense) Income, Net
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Interest (expense) income, net
|
$ | (1,621) | $ | 1,641 | $ | (3,262) | NM | $ | (293) | $ | 3,681 | $ | (3,974) | NM | |||||||||||||||||||||||||||||||||
NM Not Meaningful.
Three and six months ended
For the three and six months ended June 30, 2025, the change in interest (expense) income, net was primarily due to an increase in interest expense related to the 2025 Term Loan and a decrease in interest income due to lower earned interest rates.
Foreign Currency Transaction Gain
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Foreign currency transaction gain
|
$ | 193 | $ | 431 | $ | (238) | (55) | % | $ | 3,374 | $ | 19 | $ | 3,355 | NM | ||||||||||||||||||||||||||||||||
NM Not Meaningful.
Six months ended
For the six months ended June 30, 2025, the change in foreign currency transaction gain was primarily due to the impact of changes in foreign currency exchange rates, primarily the GBP and EUR.
Other Expense, Net
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Other expense, net
|
$ | (850) | $ | - | $ | (850) | NM | $ | (850) | $ | - | $ | (850) | NM | |||||||||||||||||||||||||||||||||
NM Not Meaningful.
Three and six months ended
Other expense, net for the three and six months ended June 30, 2025 consists of an impairment loss recorded on a strategic investment. See Note 2 of our condensed consolidated financial statements for additional information.
Income Tax Provision
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Income tax provision
|
$ | (3,617) | $ | (1,366) | $ | (2,251) | NM | $ | (3,441) | $ | (2,409) | $ | (1,032) | 43 | % | ||||||||||||||||||||||||||||||||
| Effective tax rate | (21.0) | % | (7.6) | % | (20.4) | % | (6.4) | % | |||||||||||||||||||||||||||||||||||||||
NM Not Meaningful.
Three and six months ended
The change in the effective tax rate for the three and six months ended June 30, 2025 compared to the prior year period was primarily due to the impact of the BEAT, which we were not subject to prior to the first quarter of 2025, partially offset by the impact of the Identity Automation acquisition. See Note 11 of our condensed consolidated financial statements for additional information.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance. We believe that non-GAAP financial measures, when taken collectively with GAAP financial measures, may be helpful to investors because they provide consistency and comparability with our past financial performance (for example, by eliminating items that fluctuate for reasons unrelated to operating performance or that represent non-recurring, one-time events), provide additional understanding of factors and trends affecting our business, and assist in comparisons with other companies, some of which use similar non-GAAP information to supplement their GAAP results.
Certain of these non-GAAP measures exclude amortization expense, stock-based compensation expense, foreign currency transaction gain, amortization of debt issuance costs, acquisition-related expense, payroll taxes related to stock-based compensation, system transformation costs, restructuring and other cost optimization charges, impairment charges, and extraordinary legal settlements and non-recurring litigation costs. Acquisition-related expense includes acquisition and integration-related expenses which primarily consist of third-party expenses, such as legal and accounting fees, as well as expense recognized for deferred compensation related to the acquisition of dataJAR. System transformation costs are primarily associated with the implementation of updated sales software and software supporting our business including enterprise resource planning, as well as the implementation of other systems to upgrade processes, governance, and systems. System transformation costs include costs that were expensed as incurred and the amortization of capitalized costs. The transformation included a comprehensive redesign of our systems, including the quoting, contracting, and invoicing processes, and the systems and tools we use.
Our non-GAAP financial measures are presented for supplemental informational purposes only, and should not be considered a substitute for financial measures presented in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude certain expenses that are required by GAAP to be recorded in our financial statements, including stock-based compensation expense and amortization of acquired intangible assets. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by our management about which expenses are excluded or included in determining these non-GAAP financial measures. Further, non-GAAP financial measures are not standardized. It may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. While the amortization expense of acquired intangible assets is excluded from certain non-GAAP measures, the revenue related to acquired intangible assets is reflected in such measures as those assets contribute to revenue generation. 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. In addition, investors are encouraged to review our condensed consolidated financial statements and the notes thereto in their entirety and not to rely on any single financial measure.
Non-GAAP Gross Profit and Non-GAAP Gross Profit Margin
We use non-GAAP gross profit and non-GAAP gross profit margin, and believe it is useful to our investors, to understand and evaluate our operating performance and trends and to prepare and approve our annual budget. We define non-GAAP gross profit as gross profit, adjusted for amortization expense, stock-based compensation expense, acquisition-related expense, payroll taxes related to stock-based compensation, system transformation costs, and restructuring and other cost optimization charges. We define non-GAAP gross profit margin as non-GAAP gross profit as a percentage of total revenue.
A reconciliation of non-GAAP gross profit to gross profit and non-GAAP gross profit margin to gross profit margin, the most directly comparable GAAP measures, are as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Gross profit | $ | 132,706 | $ | 118,012 | $ | 263,225 | $ | 235,043 | |||||||||||||||
| Amortization expense | 4,671 | 3,244 | 7,522 | 6,556 | |||||||||||||||||||
| Stock-based compensation | 3,869 | 3,434 | 7,320 | 6,474 | |||||||||||||||||||
| Acquisition-related expense | 61 | 88 | 61 | 167 | |||||||||||||||||||
| Payroll taxes related to stock-based compensation | 49 | 45 | 298 | 206 | |||||||||||||||||||
|
System transformation costs
|
128 | 72 | 248 | 104 | |||||||||||||||||||
|
Restructuring and other cost optimization charges
|
96 | (3) | 100 | 7 | |||||||||||||||||||
| Non-GAAP gross profit | $ | 141,580 | $ | 124,892 | $ | 278,774 | $ | 248,557 | |||||||||||||||
| Gross profit margin | 75% | 77% | 76% | 77% | |||||||||||||||||||
| Non-GAAP gross profit margin | 80% | 82% | 81% | 81% | |||||||||||||||||||
Non-GAAP Operating Income and Non-GAAP Operating Income Margin
We use non-GAAP operating income and non-GAAP operating income margin, and believe it is useful for our investors, to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operating plans. We define non-GAAP operating income as operating loss, adjusted for amortization expense, stock-based compensation expense, acquisition-related expense, offering costs, payroll taxes related to stock-based compensation, system transformation costs, restructuring and other cost optimization charges, and extraordinary
legal settlements and non-recurring litigation costs. We define non-GAAP operating income margin as non-GAAP operating income as a percentage of total revenue.
A reconciliation of non-GAAP operating income to operating loss and non-GAAP operating income margin to operating loss margin, the most directly comparable GAAP measures, are as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Operating loss | $ | (14,980) | $ | (19,968) | $ | (19,136) | $ | (41,077) | |||||||||||||||
| Amortization expense | 13,045 | 10,139 | 22,734 | 20,349 | |||||||||||||||||||
| Stock-based compensation | 27,812 | 26,283 | 52,207 | 46,862 | |||||||||||||||||||
| Acquisition-related expense | 2,582 | 2,386 | 4,636 | 4,774 | |||||||||||||||||||
|
Offering costs
|
- | 872 | - | 872 | |||||||||||||||||||
| Payroll taxes related to stock-based compensation | 301 | 330 | 2,176 | 1,618 | |||||||||||||||||||
| System transformation costs | 3,199 | 2,344 | 6,428 | 4,213 | |||||||||||||||||||
|
Restructuring and other cost optimization charges
|
1,533 | 1,086 | 2,089 | 8,190 | |||||||||||||||||||
| Extraordinary legal settlements and non-recurring litigation costs | - | 64 | - | (133) | |||||||||||||||||||
| Non-GAAP operating income | $ | 33,492 | $ | 23,536 | $ | 71,134 | $ | 45,668 | |||||||||||||||
| Operating loss margin | (8)% | (13)% | (6)% | (13)% | |||||||||||||||||||
| Non-GAAP operating income margin | 19% | 15% | 21% | 15% | |||||||||||||||||||
Non-GAAP Net Income
We use non-GAAP net income, and believe it is useful for our investors, to understand and evaluate our operating performance and trends. We define non-GAAP net income as net loss, adjusted for income tax provision, amortization expense, stock-based compensation expense, foreign currency transaction gain, amortization of debt issuance costs, acquisition-related expense, offering costs, payroll taxes related to stock-based compensation, system transformation costs, restructuring and other cost optimization charges, impairment charges, and extraordinary legal settlements and non-recurring litigation costs, and adjustment to income tax expense based on the non-GAAP measure of profitability using our blended U.S. statutory tax rate.
We define non-GAAP income before income taxes as loss before income taxes adjusted for amortization expense, stock-based compensation expense, foreign currency transaction gain, amortization of debt issuance costs, acquisition-related expense, offering costs, payroll taxes related to stock-based compensation, system transformation costs, restructuring and other cost optimization charges, impairment charges, and extraordinary legal settlements and non-recurring litigation costs.
We define non-GAAP provision for income taxes as the current and deferred income tax expense commensurate with the non-GAAP measure of profitability using our blended U.S. statutory tax rate.
A reconciliation of non-GAAP net income to net loss, the most directly comparable GAAP measure, is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Net loss
|
$ | (20,875) | $ | (19,262) | $ | (20,346) | $ | (39,786) | |||||||||||||||
|
Exclude: income tax provision
|
(3,617) | (1,366) | (3,441) | (2,409) | |||||||||||||||||||
|
Loss before income tax provision
|
(17,258) | (17,896) | (16,905) | (37,377) | |||||||||||||||||||
| Amortization expense | 13,045 | 10,139 | 22,734 | 20,349 | |||||||||||||||||||
| Stock-based compensation | 27,812 | 26,283 | 52,207 | 46,862 | |||||||||||||||||||
|
Foreign currency transaction gain
|
(193) | (431) | (3,374) | (19) | |||||||||||||||||||
| Amortization of debt issuance costs | 794 | 708 | 1,519 | 1,397 | |||||||||||||||||||
| Acquisition-related expense | 2,582 | 2,386 | 4,636 | 4,774 | |||||||||||||||||||
|
Offering costs
|
- | 872 | - | 872 | |||||||||||||||||||
| Payroll taxes related to stock-based compensation | 301 | 330 | 2,176 | 1,618 | |||||||||||||||||||
| System transformation costs | 3,199 | 2,344 | 6,428 | 4,213 | |||||||||||||||||||
|
Restructuring and other cost optimization charges
|
1,533 | 1,086 | 2,089 | 8,190 | |||||||||||||||||||
|
Impairment charges
|
850 | - | 850 | - | |||||||||||||||||||
|
Extraordinary legal settlements and non-recurring litigation costs
|
- | 64 | - | (133) | |||||||||||||||||||
| Non-GAAP income before income taxes | 32,665 | 25,885 | 72,360 | 50,746 | |||||||||||||||||||
|
Non-GAAP provision for income taxes (1)
|
(7,839) | (6,212) | (17,366) | (12,179) | |||||||||||||||||||
| Non-GAAP net income | $ | 24,826 | $ | 19,673 | $ | 54,994 | $ | 38,567 | |||||||||||||||
(1) In accordance with the SEC's Non-GAAP Financial Measures Compliance and Disclosure Interpretation, the Company's blended U.S. statutory rate of 24% is used as an estimate for the current and deferred income tax expense associated with our non-GAAP income before income taxes.
Adjusted EBITDA
We define adjusted EBITDA as net loss, adjusted for interest expense (income), net, provision for income taxes, depreciation expense, amortization expense, stock-based compensation expense, foreign currency transaction gain, acquisition-related expense, offering costs, payroll taxes related to stock-based compensation, system transformation costs, restructuring and other cost optimization charges, impairment charges, and extraordinary legal settlements and non-recurring litigation costs.
A reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP measure, is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Net loss
|
$ | (20,875) | $ | (19,262) | $ | (20,346) | $ | (39,786) | |||||||||||||||
|
Interest expense (income), net
|
1,621 | (1,641) | 293 | (3,681) | |||||||||||||||||||
|
Provision for income taxes
|
3,617 | 1,366 | 3,441 | 2,409 | |||||||||||||||||||
| Depreciation expense | 1,781 | 1,740 | 3,586 | 3,520 | |||||||||||||||||||
| Amortization expense | 13,045 | 10,139 | 22,734 | 20,349 | |||||||||||||||||||
| Stock-based compensation | 27,812 | 26,283 | 52,207 | 46,862 | |||||||||||||||||||
|
Foreign currency transaction gain
|
(193) | (431) | (3,374) | (19) | |||||||||||||||||||
| Acquisition-related expense | 2,582 | 2,386 | 4,636 | 4,774 | |||||||||||||||||||
|
Offering costs
|
- | 872 | - | 872 | |||||||||||||||||||
| Payroll taxes related to stock-based compensation | 301 | 330 | 2,176 | 1,618 | |||||||||||||||||||
| System transformation costs | 3,199 | 2,344 | 6,428 | 4,213 | |||||||||||||||||||
|
Restructuring and other cost optimization charges
|
1,533 | 1,086 | 2,089 | 8,190 | |||||||||||||||||||
|
Impairment charges
|
850 | - | 850 | - | |||||||||||||||||||
| Extraordinary legal settlements and non-recurring litigation costs | - | 64 | - | (133) | |||||||||||||||||||
| Adjusted EBITDA | $ | 35,273 | $ | 25,276 | $ | 74,720 | $ | 49,188 | |||||||||||||||
Liquidity and Capital Resources
General
As of June 30, 2025, our principal sources of liquidity were cash and cash equivalents totaling $481.5 million, which were held for general corporate purposes, which may include working capital, capital expenditures, and potential acquisitions and strategic transactions, as well as the available balance of the 2024 Revolving Credit Facility of $173.9 million. Our cash and cash equivalents are comprised of cash, money market deposit accounts, and money market funds with original maturities at the time of purchase of three months or less. Our cash and cash equivalents are held at a diversified portfolio of investment grade global banks and money market investments. We expect that our operating cash flows, in addition to our cash and cash equivalents, will enable us to make continued investments in supporting the growth of our business in the future.
A majority of our customers pay in advance for subscriptions and support and maintenance contracts, a portion of which is recorded as deferred revenue. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is later recognized as revenue in accordance with our revenue recognition policy. As of June 30, 2025, we had deferred revenue of $408.2 million, of which $350.9 million was recorded as a current liability and is expected to be recognized as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
On April 1, 2025, the Company acquired Identity Automation for total purchase consideration of $216.1 million, which included $176.1 million paid upon closing and deferred cash consideration of $40.0 million to be paid on October 1, 2025. The cash consideration paid upon closing was funded with the Company's cash on hand.
As of June 30, 2025, there were $1.1 million in outstanding letters of credit under the 2024 Credit Agreement and $370.8 million outstanding on our 2026 Notes, which mature on September 1, 2026. On May 21, 2025, the Company entered into Amendment No. 1 to the 2024 Credit Agreement, which provided for the 2025 Term Loan in an aggregate principal amount of $400.0 million. See Note 8 of our condensed consolidated financial statements for additional information. The Company anticipates using the proceeds of the 2025 Term Loan, in its discretion, to (i) pay the deferred cash consideration in connection with the acquisition of Identity Automation, (ii) repurchase a portion of the 2026 Notes in open market repurchases or through privately negotiated transactions, (iii) pay fees, costs, and expenses incurred with the foregoing and Amendment No. 1 to the 2024 Credit Agreement, and (iv) finance working capital and other general corporate purposes.
Future Liquidity and Capital Resource Requirements
We believe our cash and cash equivalents, the 2024 Revolving Credit Facility, and cash provided by sales of our software solutions and services will be sufficient to meet our working capital and capital expenditure needs and debt service requirements for at least the next 12 months, as well as other known long-term cash requirements. Our future capital requirements will depend on many factors including our growth rate, market conditions, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services offerings, and the continuing market acceptance of our products. In the future, we may use cash to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights.
As of June 30, 2025, our principal commitments consist of obligations under our 2026 Notes, the 2025 Term Loan, contractual agreements for hosting services and other support software, operating leases for office space, and the deferred consideration in connection with the acquisition of Identity Automation. See Note 8 of our condensed consolidated financial statements for additional information on the commitments related to the 2025 Term Loan. Additionally, in the second quarter of 2025, the Company entered into an amended contractual agreement with an unrelated party for hosting services, which includes a non-cancelable commitment of $147.3 million over the next three years. Any remaining commitments under the prior agreement were terminated upon the commencement date of the amended agreement. Other than as described above, there have been no other material changes to our commitments as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
In addition, as disclosed above, subject to the restrictions in our debt agreements, we may, at any time, and from time to time, repurchase 2026 Notes, or any other securities we may issue, in open market transactions, privately negotiated transactions, in exchange for property or other securities or otherwise. In addition, subject to the restrictions in our debt agreements and the terms of the 2026 Notes, we may redeem all or portions of such notes. Any repurchase or redemption decisions will be made after consideration of market conditions and liquidity needs and will be upon such terms and at such prices as we determine appropriate. However, there is no guarantee that a repurchase or redemption will take place.
Cash Flows
The following table presents a summary of our condensed consolidated cash flows from operating, investing, and financing activities:
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
|
Net cash provided by (used in) operating activities
|
$ | 41,784 | $ | (1,591) | |||||||
| Net cash used in investing activities | (182,448) | (5,538) | |||||||||
|
Net cash provided by (used in) financing activities
|
394,566 | (38,947) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (450) | (216) | |||||||||
|
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
253,452 | (46,292) | |||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 228,344 | 250,809 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 481,796 | $ | 204,517 | |||||||
| Cash paid for interest | $ | 2,781 | $ | 420 | |||||||
| Cash paid for purchases of equipment and leasehold improvements | 3,857 | 2,733 | |||||||||
Operating Activities
Our largest source of operating cash is cash collections from our subscription customers. Our primary use of cash from operating activities is employee-related expenditures, marketing expenses, and third-party hosting costs.
During the six months ended June 30, 2025, net cash provided by operating activities was $41.8 million compared to net cash used in operating activities of $1.6 million for the six months ended June 30, 2024. The change was primarily attributable to an increase in cash received from our customers, a $10.9 million decrease in cash paid for system transformation costs, and a $5.5 million decrease in cash paid for restructuring and other cost optimization charges, partially offset by a $2.6 million increase in cash paid for acquisition-related expenses and a $2.4 million increase in cash paid for interest.
Investing Activities
During the six months ended June 30, 2025, net cash used in investing activities was $182.4 million, an increase of $176.9 million compared to the six months ended June 30, 2024. The increase was primarily attributable to cash paid, net of cash acquired, of $175.6 million for the Identity Automation acquisition in the second quarter of 2025.
Financing Activities
During the six months ended June 30, 2025, net cash provided by financing activities was $394.6 million compared to net cash used in financing activities of $38.9 million for the six months ended June 30, 2024. The change was primarily attributable to proceeds from the 2025 Term Loan of $400.0 million in the second quarter of 2025 and $35.4 million paid for the repurchase and retirement of common stock in the prior year period.
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, channel partners, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement, misappropriation, or other violation claims made by third parties. See "Risk Factors - We have indemnity provisions under our contracts with our customers, partners, and other third parties, which could have a material adverse effect on our business" in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition, we have entered into indemnification agreements with our directors and certain officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands have been made upon us to provide indemnification under such agreements, and there are no claims that we are aware of that could have a material effect on our condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive income (loss), or condensed consolidated statements of cash flows.
Critical Accounting Estimates
Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates, impacting our reported results of operations and financial condition.
There have been no material changes to our critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. Refer to "Note 2 - Summary of significant accounting policies" to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more detailed information regarding these and other accounting policies.
Recent Accounting Pronouncements
For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see "Note 2 - Summary of significant accounting policies" to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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