Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

All statements, trend analyses, and other information contained in the following discussion relative to markets for our products and trends in revenue, gross margins, and anticipated expense levels, as well as other statements including words such as "may," "expect," "forecast," "anticipate," "intend," "plan," "believe," "could," "seek," "project," "estimate," and other similar expressions constitute forward-looking statements. These forward-looking statements are subject to business and economic risks and uncertainties, including those discussed under the caption "Risk Factors" in Item 1A of this Form 10-K, and our actual results of operations may differ materially from those contained in the forward-looking statements.

This section of our Annual Report on Form 10-K discusses our financial condition, results of operations, and liquidity and capital resources for the fiscal years ended December 31, 2025 and 2024, and year-to-year comparisons between fiscal 2025 and fiscal 2024 in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). A discussion of our financial condition, results of operations, and liquidity and capital resources for the fiscal year ended December 31, 2024 and 2023 and year-to-year comparisons between fiscal 2024 and fiscal 2023 that is not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed on February 7, 2025.

Business Overview

We develop, sell, deploy, service and maintain software solutions designed to manage supply chains, inventory and omnichannel operations for retailers, wholesalers, manufacturers, logistics providers and other organizations. Our customers include many of the world's premier and most profitable brands.

Our business model is singularly focused on the development and implementation of complex commerce enablement software solutions that are designed to optimize supply chains, and retail store operations including POS effectiveness and efficiency for our customers.

We have five principal sources of revenue:

In 2025, we generated $1,081.4 million in total revenue, with a revenue mix of: cloud subscriptions 38%; software license 1%; maintenance 12%; services revenue 47%; and hardware 2%.

We have three geographic reportable segments: the Americas, EMEA, and APAC. Geographic revenue is based on the location of the sale. Our international revenue was approximately $373.5 million and $346.2 million for the years ended December 2025 and 2024, respectively, which represents approximately 35%, and 33% of our total revenue for the years ended December 2025 and 2024, respectively, respectively. International revenue includes all revenue derived from sales to customers outside the United States. At December 31, 2025, we employed approximately 4,370 employees worldwide. We have offices in Australia, Chile, China, France, Germany, India, Italy, Japan, the Netherlands, Singapore, Spain, and the United Kingdom, as well as representatives in Mexico and reseller partnerships in Latin America, Eastern Europe, the Middle East, South Africa, and Asia.

Future Expectations

While we remain cautious about the global economy, our results for the full year ended December 31, 2025 exceeded our expectations due to solid demand for our cloud solutions. Our solutions are mission critical, supporting complex global supply chains. We believe that favorable secular tailwinds, such as the digital transformation of businesses in manufacturing, wholesale and retail, coupled with our commitment to investing in organic innovation to deliver leading cloud supply chain, inventory and omnichannel commerce solutions is in synergistic alignment with current market demand. We believe this alignment is contributing to our strong financial results, higher demand and strong win rates for our solutions for the period. We remain committed to investing in our business to drive customer success and expand our total addressable market, which we believe will position us well to achieve long-term sustainable growth and earnings.

Going forward, we are investing in our cloud business, including enterprise investments in innovation, and strategic operating expenses to support growth objectives.

For 2026, our five strategic goals continue to be:

Cloud Subscription

Under our Manhattan Active® Solutions cloud subscription offering, customers pay a periodic fee for the right to use our software within a cloud environment that we provide and manage over a specified period of time. Adoption of our Manhattan Active® cloud solutions continues to increase nicely, with cloud revenue up 21% over 2024. Cloud revenue now represents about 96% of our total software revenue.

Customers on our legacy perpetual license program can convert their maintenance contracts to cloud subscription contracts.

Global Economic Trends and Industry Factors

Global macro-economic trends, technology spending, and supply chain management market growth are important barometers for our business. In 2025, we generated approximately 65% of our total revenue in the United States, 20% in EMEA, and the remaining balance in APAC, Canada, and Latin America. In addition, Gartner Inc. ("Gartner"), an information technology research and advisory company, estimates that over 80% of every supply chain software solutions dollar invested is spent in North America and Europe; consequently, the health of the U.S. and European economies have a meaningful impact on our financial results.

We sell technology-based solutions with total pricing, including software and services, in many cases exceeding $1.0 million. Our software is often a part of our customers' and prospects' much larger capital commitment associated with facilities expansion and business improvement. We believe that, given the mission critical nature of our software, combined with a challenging global macro environment, our current sales cycles for large cloud subscriptions in our target markets could be extended. While demand for our solutions is solid, the current business climate within the United States and geographic regions in which we operate may affect customers' and prospects' decisions regarding timing of strategic capital expenditures.

In January 2026, the International Monetary Fund (IMF) provided a World Economic Outlook (WEO) update. The WEO update noted, "Global growth is projected at 3.3 percent in 2026 and 3.2 percent in 2027: rates similar to the estimated 3.3 percent outturn in 2025. Global headline inflation is expected to decline from an estimated 4.1 percent in 2025 to 3.8 percent in 2026 and further to 3.4 percent in 2027. The inflation projections are also broadly unchanged from those in October and envisage inflation returning to target more gradually in the United States than in other large economies."

The WEO update projected advanced economies, which represent our primary revenue markets, would grow at about 2.4 and 2.0 percent in 2026 and 2027, while the emerging and developing economies would grow at about 4.2 percent in 2026 and 4.1 percent in 2027.

While we are encouraged by our results, we remain cautious regarding the pace of global economic growth. We believe global geopolitical and economic volatility likely will continue to shape customers' and prospects' enterprise software buying decisions.

Key Performance Metrics

We regularly review metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe cloud subscriptions revenue growth and remaining performance obligation (RPO) growth are the leading indicators of our business performance, primarily derived from cloud subscription fees that customers pay for our Unified Omnichannel Commerce and Digital Supply Chain solutions.

Cloud Subscriptions Revenue Growth

Our cloud revenue growth provides insight into our ability to maintain and grow our cloud customer base. Total cloud revenue increased from $337.2 million in 2024 to $408.1 million in 2025, representing a 21% year-over-year increase. Cloud revenue growth is being driven by strong demand for our cloud offerings.

Remaining Performance Obligations

Transaction price allocated to RPO represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that we expect to invoice and recognize as revenue in future periods. Over 98% of our RPO

represent cloud native subscriptions with a non-cancelable term greater than one year. Maintenance contracts typically are for one year and not included in RPO. RPO provides insight into our contracted backlog of future business. As of December 31, 2025, our RPO was approximately $2.2 billion, an increase of 25% over December 31, 2024 on strong demand.

Revenue

Cloud Subscriptions and Software License revenue: In the full year ended December 31, 2025, cloud subscriptions revenue was 96% of total cloud and software license revenue. In 2025, cloud subscriptions revenue totaled $408.1 million, or 38% of total revenue. The Americas, EMEA, and APAC segments recognized $313.0 million, $80.1 million and $15.0 million in cloud subscriptions revenue, respectively, in 2025. Cloud subscriptions revenue is recognized over the term of the agreement, typically five years or more. Cloud subscription revenue growth is influenced by the strength of general economic and business conditions and the competitive position of our software products. These revenues generally have long sales cycles. Approximately 56% of the total value of new non-cancelable cloud subscriptions (excluding renewals) signed during 2025 was with new customers and 44% was with existing customers. We define new customers as entities from which we either have never earned revenue or have not recognized revenue in the last five years.

In 2025, license revenue totaled $14.8 million, or 1% of total revenue. The Americas, EMEA, and APAC segments totaled $5.6 million, $8.4 million, and $0.8 million in license revenue, respectively, in 2025.

Our Unified Omnichannel Commerce and Digital Supply Chain solutions are focused on core omnichannel operation (e-commerce, retail store operations and POS), supply chain commerce operations (Warehouse Management, Transportation Management and Labor Management), and inventory optimization, which are intensely competitive markets characterized by rapid technological change. We are a market leader in the supply chain management and omnichannel software solutions market as defined by industry analysts such as ARC Advisory Group and Gartner. Our goal is to extend our position as a leading global supply chain solutions provider by growing our cloud subscriptions revenues faster than our competitors through investment in innovation.

Maintenance Revenue: Our maintenance revenue totaled $130.0 million, or 12% of total revenue. The Americas, EMEA and APAC segments recognized $102.4 million, $19.0 million, and $8.6 million, respectively, in maintenance revenue in 2025. For maintenance, we offer a comprehensive 24 hours per day, 365 days per year program that provides our customers with software upgrades, when and if available, which include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives.

Maintenance relates to our legacy perpetual license sales. We expect maintenance revenues to decline as we continue to develop our cloud offerings, and be offset by additional cloud revenue, including from customers converting their maintenance contracts to cloud subscriptions. The growth of maintenance revenues is influenced by: (1) new software license contracts; (2) annual renewal of support contracts; and (3) fluctuations in currency rates. Substantially all of our customers renew their annual support contracts or convert their maintenance contracts to cloud subscriptions. Maintenance revenue is generally paid in advance and recognized over the term of the agreement, typically twelve months. Maintenance renewal revenue is recognized over the renewal period once we have a contract upon payment from the customer.

Services Revenue:In 2025, our services revenue totaled $503.0 million, or 47% of total revenue. The Americas, EMEA, and APAC segments recognized $364.7 million, $107.5 million, and $30.8 million, respectively.

Our professional services organization provides our customers with expertise and assistance in planning and implementing our solutions. To ensure a successful product implementation, consultants assist customers with the initial implementation of a system or service, the conversion and transfer of the customer's historical data to the new system or service, and ongoing training, education, and system/service upgrades. We believe our professional services enable customers to implement our software rapidly, ensure the customer's success with our solutions, strengthen our customer relationships, and add to our industry-specific knowledge base for use in future implementations and product innovations.

Although our professional services are optional, the majority of our customers use at least some portion of these services for their planning, implementation, ongoing support, training, system upgrades or related needs. Professional services are typically rendered under time and materials-based contracts with services typically billed on an hourly basis. Professional services are sometimes rendered under fixed-fee based contracts with payments due on specific dates or milestones.

Services revenue growth is contingent upon cloud sales and customer upgrade cycles, which are influenced by the strength of general economic and business conditions and the competitive position of our software products. In addition, our professional services business has competitive exposure to offshore providers and other consulting companies.

Hardware Revenue:Our hardware revenue, which we recognize net of related costs, totaled $25.4 million in 2025 representing 2% of total revenue. As a convenience for our cloud and perpetual license customers, we resell a variety of hardware products developed and manufactured by third parties. These products include computer hardware, radio frequency terminal networks, RFID chip readers,

bar code printers and scanners, and other peripherals. We resell all third-party hardware products and related maintenance pursuant to agreements with manufacturers or through distributor-authorized reseller agreements pursuant to which we are entitled to purchase hardware products and services at discount prices. We purchase hardware from our vendors only after receiving an order from a customer. As a result, we do not maintain hardware inventory.

Product Development

We continue to invest significantly in research and development (R&D) to provide leading Unified Omnichannel Commerce and Digital Supply Chain solutions to enable global retailers, manufacturers, wholesalers, distributors and logistics providers to successfully manage accelerating and fluctuating demands as well as the increasing complexity and volatility of their local and global supply chains, retail store operations and POS. Our R&D expenses for the years ended December 2025 and 2024 were $145.1 million and $137.7 million, respectively.

We expect to continue to focus our R&D resources on the development and enhancement of our core supply chain, inventory optimization, omnichannel and POS software solutions. We offer what we believe to be the broadest solutions portfolio in the supply chain solutions marketplace, to address all aspects of inventory optimization, transportation management, distribution management, planning, and omnichannel operations including order management, store inventory & fulfillment, call center and POS.

We also plan to continue to enhance our existing solutions and to introduce new solutions to address evolving industry standards and market needs. We identify opportunities to further enhance our solutions and to develop and provide new solutions through our customer support organization, as well as through ongoing customer consulting engagements and implementations, interactions with our user groups, association with leading industry analysts and market research firms, and participation in industry standards and research committees. Our solutions address the needs of customers in various vertical markets, including retail, consumer goods, food and grocery logistics service providers, industrial and wholesale, high technology and electronics, life sciences, and government.

Cash Flow and Financial Condition

For 2025, we generated cash flow from operating activities of $389.5 million and have generated a cumulative total of $930.7 million for the three years ended December 31, 2025. Our cash at December 31, 2025 totaled $328.7 million, with no debt. We currently have no credit facilities. During the past three years, our primary uses of cash have been for funding investments in R&D in our Unified Omnichannel Commerce and Digital Supply Chain solutions to drive revenue and earnings growth. In addition for 2025, we repurchased $274.5 million of Manhattan Associates' outstanding common stock under the share repurchase program approved by our Board of Directors. In January 2026, our Board of Directors replenished the Company's share repurchase authority to an aggregate of $100.0 million of our common stock.

In 2026, we expect that our priorities for use of cash will continue to be investments in our Unified Omnichannel Commerce and Digital Supply Chain solutions. We also anticipate prioritizing capital allocation in our global teams to fund growth, and accretive share repurchases. We do not anticipate any borrowing requirements in 2026 for general corporate purposes.

Full Year 2025 Financial Summary

Results of Operations

In the following table, we present a selection of certain Statement of Income data for 2025 and 2024.

We have three reportable segments: the Americas, EMEA, and APAC. Revenue information is based on the location of sale. The revenues represented below are from external customers only. The geography-based expenses include costs of personnel, direct sales, marketing expenses, and general and administrative costs to support the business. There are certain corporate expenses included in the Americas segment that we do not charge to the other segments including research and development, stock compensation, certain marketing and general and administrative costs that support the global organization, and the amortization of acquired developed technology. Included in the Americas costs are all research and development costs, including the costs associated with our operations in India. During 2025 and 2024, we derived the majority of our revenues from sales to customers within our Americas segment. In the following table, we present a summary of revenue and operating profit by segment:

The consolidated results of our operations for the years ended December 2025 and 2024 are discussed below.

Revenue

Our revenue consists of fees generated from cloud subscriptions, software licensing, maintenance, professional services, and hardware sales.

Cloud Subscriptions Revenue

Cloud subscriptions revenue increased $70.9 million to $408.1 million in 2025 compared to 2024. Our customers have demonstrated a clear preference for cloud-based solutions, including existing customers that are migrating from on-premise to cloud-based offerings. Cloud subscriptions revenue increased $48.7 million, $17.3 million and $4.9 million for the Americas, EMEA, and APAC segments, respectively. Cloud subscriptions revenue recognized from first time cloud customers (defined as customers with no prior cloud subscriptions) during the year in which their initial cloud subscription began was approximately 8% and 2% of total cloud revenue in 2025 and 2024, respectively. Our contracts with first time cloud customers for multi-year subscriptions typically increase in scope and price over the term, and thus revenue recognized during the year when the contract is signed tends to be small relative to the total contract value. Revenue recognized in the initial year excludes revenue from additional solutions sold to the customer in future years and could be impacted by the timing of the start date of the subscription during the year.

Software License Revenue

Software license revenue decreased $0.3 million to $14.8 million in 2025 compared to 2024 on strong market preference for our cloud-native solutions. License revenue for the Americas and APAC segments decreased $6.6 million and $0.7 million, respectively, while license revenue for the EMEA segment increased $7.0 million in 2025 over 2024. The majority of our software license revenue relates to our warehouse management product group (approximately 80%) for the year ended December 31, 2025.

Maintenance Revenue

Maintenance revenue decreased by $8.3 million in 2025 compared to 2024. The Americas and APAC segments decreased $8.3 million and $0.6 million, respectively, compared to 2024, while the EMEA segment increased $0.6 million. Maintenance relates to our perpetual software licenses. The decrease in maintenance revenue for the Americas segment is primarily driven by customer demand for cloud-based solutions over perpetual software licenses.

Services Revenue

Services revenue decreased $22.5 million in 2025 compared to 2024. Service revenue for the Americas segment decreased $24.8 million, while services revenue for the EMEA and APAC segments increased $2.2 million and $0.1 million, respectively, compared to 2024. The decrease in services revenue for the Americas segment is primarily driven by customer budgetary constraints that shifted services work to future periods which negatively impacted our professional services revenue related to cloud subscriptions. The percentage of professional services revenue that relates to cloud subscriptions in 2025 and 2024 was approximately 75%, respectively. The remainder of our professional services revenue relates to implementations, ongoing support, and upgrades of licensed software. Professional services revenue recognized from first time cloud customers (defined as customers with no prior cloud subscriptions) during the year in which their initial cloud subscription began was approximately 7% of total services revenue in 2025 and 2024, respectively. As with our cloud subscriptions, customers often continue to purchase our professional services beyond their initial implementation to roll out additional locations, implement additional features and functionality, and implement additional products, as well as for general support. Professional services revenue recognized from first time cloud customers excludes those services we provided after the year in which the initial cloud subscription began. Further, the professional services revenue attributable to first time cloud customers could be affected by the timing of the start date of the subscription during the year.

Hardware Revenue

Hardware revenue, net decreased $0.8 million in 2025 compared to 2024. The majority of hardware sales are derived from our Americas segment. Sales of hardware are largely dependent upon customer-specific desires, which fluctuate.

Cost of Revenue

Cost of Cloud Subscriptions, Maintenance and Services

Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services related to perpetual software licenses; and professional and technical services as well as hosting fees. The $1.7 million increase in 2025 compared to 2024 was principally due to a $10.6 million increase in computer infrastructure cost, partially offset by a $5.5 million decrease in compensation and other personnel-related expenses, a $2.5 million decrease in performance-based compensation expense, and a $0.8 million decrease in travel expense.

Cost of Software License

Cost of software license consists of the costs associated with software reproduction; media, packaging and delivery; documentation, and other related costs; and royalties on third-party software sold with or as part of our products. In 2025, cost of license decreased $0.4 million, compared to 2024.

Operating Expenses

Research and Development

Our principal research and development (R&D) activities during 2025 and 2024 focused on the expansion and integration of new products and releases, including cloud solutions, while expanding the product footprint of our Unified Omnichannel Commerce and Digital Supply Chain solutions, including Inventory Optimization and point-of-sale.

For 2025 and 2024, we did not capitalize any R&D costs as the period between determining technological feasibility was established or that it is probable the software product would be used to perform the function intended were insignificant.

R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our research and development activities. Research and development expenses in 2025 increased by $7.4 million compared to 2024. This increase is principally due to a $7.4 million increase in compensation and other personnel-related expenses.

Sales and Marketing

Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing and alliance programs and related activities. Sales and marketing expenses increased by $5.2 million in 2025 compared to 2024, primarily due to a $2.6 million increase in compensation and other personnel-related expense, a $1.1 million increase in marketing and

campaign expenses, a $0.9 million increase in performance-based compensation expense, and a $0.3 million increase in travel expense.

General and Administrative

General and administrative expenses consist primarily of salaries and other personnel-related costs of executive, financial, human resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other administrative expenses. General and administrative expenses increased $4.0 million in 2025 due to a $3.0 million signing bonus, $0.8 million in recruiting fees, and $6.5 million of stock compensation expense related to the hiring of our new chief executive officer; a $5.4 million increase in compensation and other personnel-related expenses, a $1.5 million increase in professional expense, and a $0.8 million increase in office expense, partially offset by a $13.8 million decrease in expense related to an unusual health insurance claim as the final payment was much lower than the cost estimates previously provided by our health insurance provider.

Depreciation and Amortization

Depreciation and amortization of intangibles and software expense amounted to $6.3 million in 2025 and 2024, respectively. Amortization of intangibles was immaterial in 2025 and 2024. We have recorded acquisition-related intangible assets as part of the purchase accounting associated with various acquisitions.

Restructuring expense

In January 2025, the Company eliminated approximately 100 positions to align our services capacity with customer demand which has been impacted by short-term macro-economic uncertainty. The Company recorded restructuring expense of approximately $2.9 million for the year ended December 31, 2025 to the Americas segment. The expense primarily consists of employee severance and outplacement services. The expense is classified in "Restructuring expense" in the Company's Consolidated Statements of Income for the year ended December 31, 2025.

Operating Income

Operating income in 2025 increased $18.2 million to $279.8 million, compared to $261.6 million for 2024. Operating margins were 25.9% for 2025 versus 25.1% for 2024. Operating income and margin increased primarily due to increased cloud subscriptions. In 2025, operating income increased by $0.2 million, $15.6 million, and $2.4 million in the Americas, EMEA and APAC segment, respectively.

Other Income and Income Taxes

Other (Loss) Income, net

Other (loss) income, net primarily includes interest income, foreign currency gains and losses, and other non-operating expenses. Interest income was $4.4 million and $6.0 million for 2025 and 2024, respectively. The weighted-average interest rate earned on cash and investments was approximately 1% in 2025 and approximately 2% in 2024. We recorded net foreign currency gains of $1.7 million in 2025 and losses of $1.0 million in 2024. The foreign currency gains and losses mainly resulted from gains or losses on intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar relative to other foreign currencies, primarily the British Pound Sterling, Euro, and Indian Rupee.

Income Tax Provision

Our effective income tax rates were 23.1% and 18.2% in 2025 and 2024, respectively. Our effective income tax rate takes into account the source of taxable income, domestically by state and internationally by country, and available income tax credits.

The effective tax rate in 2025 increased from 2024 mainly due to a decrease of excess tax benefits on restricted stock vesting in 2025, an increase in executive compensation limitations, and an increase in tax contingency reserves.

The income tax provision for 2025 and 2024 included excess tax benefits of $6.1 million and $13.1 million on vesting of restricted stock.

Liquidity and Capital Resources

During 2025 and 2024, we funded our business through cash generated from operations. Our cash and cash equivalents as of December 31, 2025 included $226.6 million held in the U.S. and $102.1 million held by our foreign subsidiaries. We believe that our cash balances in the U.S. are sufficient to fund our U.S. operations. In the future, if we elect to repatriate the unremitted earnings of our foreign subsidiaries, we would no longer be subject to additional U.S. income taxes on such earnings due to the enactment of the Tax Cuts and Jobs Act in December 2017, but we could be subject to additional local withholding taxes.

Cash flow from operating activities totaled $389.5 million and $295.0 million in 2025 and 2024, respectively. Typical factors affecting our cash provided by operating activities include our level of revenue and earnings for the period, the timing and amount of employee bonus and income tax payments, and the timing of cash collections from our customers which is our primary source of operating cash flow. Cash flow from operating activities for 2025 increased $94.5 million compared to 2024 due to the timing of cash collections from our customers and decrease in cash taxes owed from the acceleration of the deduction for domestic research and development expenditures. Days sales outstanding was 73 and 74 for quarter ending December 2025 and 2024, respectively, reflecting solid cash collections.

Investing activities used cash of $15.5 million and $8.7 million in 2025 and 2024, respectively. Our investing activities for 2025 and 2024 consisted of capital spending to support company growth and short-term investing.

Financing activities used cash of $315.2 million and $286.4 million in 2025 and 2024, respectively. The principal use of cash for financing activities in 2025 and 2024 was to purchase our common stock, including shares withheld for taxes due upon vesting of restricted stock and excise tax payments. Repurchases of our common stock for 2025 and 2024 totaled $315.2 million and $286.4 million, respectively, including shares withheld for taxes of $39.0 million and $43.6 million, respectively. Excise tax payments totaled $1.6 million and $1.1 million in 2025 and 2024, respectively. In January 2026, our Board of Directors replenished the Company's share repurchase authority to an aggregate of $100.0 million of our common stock.

We believe that our existing cash will be sufficient to meet our working capital and capital expenditure needs at least for the next twelve months, although there can be no assurance that this will be the case. In 2026, we anticipate that our priorities for use of cash will be similar to prior years, with our first priority being continued investment in product development and in our business to extend our market leadership. We will also continue to weigh our share repurchase options against cash for acquisitions and investing in the business. At this time, we do not anticipate any borrowing requirements in 2026 for general corporate purposes.

Periodically, opportunities may arise to grow our business through the acquisition of complementary products and technologies. Any material acquisition could result in a decrease to our working capital depending on the amount, timing, and nature of the consideration to be paid. We expect to continue to evaluate acquisition opportunities that are complementary to our product footprint and technology direction.

Aggregate Contractual Obligations

Our principal commitments as of December 31, 2025 consist of multiple non-cancellable contracts for cloud infrastructure services and obligations under operating leases. As of December 31, 2025, our cloud infrastructure contractual obligations are approximately $202.7 million over the next 5 years. We also enter into non-cancellable subscriptions in the ordinary course of business for internal software to support our operations. Our contractual obligations, as of December 31, 2025, are approximately $37.0 million over the next 7 years. We expect to fulfill all of these commitments from our working capital.

Lease Commitments

We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various dates ranging from 2025 to 2036. Rent expense for these leases aggregated $10.1 million and $9.3 million during 2025 and 2024, respectively.

In the following table, we present a summary of our contractual commitments as of December 31, 2025 (in thousands):

Indemnities

Our customer contracts generally contain infringement indemnity provisions. Under those provisions, we generally agree, subject to certain exceptions, to indemnify, defend, and hold harmless the customer in connection with third party claims against the customer alleging that the customer's use of our services and products infringe third party intellectual property rights. Conditions to our obligations generally include that we are provided the right to control the defense of the claims and, in general, to control settlement negotiations. Those provisions generally provide also that, if the customer is prevented from using our services or products because of

a third party infringement claim, our sole obligation (in addition to the indemnification, defense, and hold harmless obligation referred to above) is to, at our expense, (i) procure for the customer the right to continue to use the services or products, (ii) replace or modify the services or products so that the customer's use does not infringe, or, if neither of these options is reasonably feasible, (iii) terminate that particular services or products and provide, as applicable, a refund of services fees paid for services not received or a refund of the unamortized portion of the license fees paid for the products (based on a five year amortization period). Our customer contracts sometimes also require us to indemnify, defend, and hold harmless the customer in connection with death, personal injury or property damage claims made by third parties with respect to actions of our personnel or contractors. The indemnity obligations contained in our customer contracts generally have no specified expiration date and no specified monetary limitation on liability, but they do not cover indirect or consequential damages, such as our customers' lost revenues or profits. We have not previously incurred costs to settle claims or pay awards under these indemnification obligations. We account for these indemnity obligations in accordance with the Financial Accounting Standards Board's guidance on accounting for contingencies and record a liability for these obligations when a loss is probable and reasonably estimable. We have not recorded any liabilities for these indemnification obligations as of December 31, 2025.

Warranties

In general, in our customer contracts for purchase of our cloud SaaS services or license of our on-premises software products, we warrant that our services or software will perform in accordance with our published services or product specifications. Additionally, we may include other warranties such as "no-malware" warranties and warranties that we will perform our SaaS services consistent with generally accepted industry standards or similar standards. In our SaaS services agreements, we also include service level agreements (SLAs) under which we agree to provide service credits to our customers if our services availability drops below certain defined levels. If necessary, we would reserve for the estimated cost of product and service warranties based on specific warranty claims and claims history. However, we have not incurred significant recurring expense under our services or product warranties. As a result, we believe the estimated fair value of our warranty obligations is nominal, and we have no liabilities recorded for them as of December 31, 2025.

Application of Critical Accounting Policies and Estimates

The SEC defines "critical accounting policies" as those that require application of management's 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 and may change in subsequent periods.

Our Consolidated Financial Statements are prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based on information available to us at the time that these estimates, judgments, and assumptions are made. To the extent there are material differences between those estimates, judgments, or assumptions and actual results, our financial statements will be affected. The accounting policy that reflect our more significant estimates, judgments, and assumptions is Revenue Recognition.

Revenue Recognition

We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We derive our revenue mainly from cloud subscriptions, customer support services, and software enhancements ("maintenance"), and professional services. We exclude sales and usage-based taxes from revenue.

Nature of Products and Services

Cloud subscriptions include software as a service ("SaaS") and hosting arrangements which provide customers with the right to use our software within a cloud environment that we provide and manage where the customer does not have the right to take possession of the software without significant penalty. SaaS and hosting revenues are recognized over the contract period as the service is provided.

Our services revenue consists of fees generated from implementation, training and application managed services, including reimbursements of out-of-pocket expenses in connection with our implementation services. Implementation services include system planning, design, configuration, testing, and other software implementation support, and are typically optional and distinct from our software. Following implementation, customers may purchase application managed services to support and maintain our software. Fees for our services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. In certain situations, we render professional services under agreements based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-based services contracts is recognized over time based on the proportion performed.

Our cloud contracts with customers can include the sales of SaaS and services. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price ("SSP"). We estimate SSP based on the prices charged to customers, or by using other observable inputs. The selling price of our cloud subscriptions are highly variable. Thus, we estimate SSP for our cloud subscriptions using the residual approach, determined based on total transaction price less the SSP of other goods and services promised in the contract.