Guidewire Software : Quarterly Report for Quarter Ending April 30, 2026 (Form 10-Q)

About this update from Guidewire Software, Inc.

Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the Risk Factors included in Item 1A of Part II of this Quarterly Report on Form 10-Q. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references in this report to particular years or quarters refer to our fiscal years ended in July and the associated quarters of those fiscal years. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law. Overview Guidewire is the platform that property and casualty ("P&C") insurers rely on to engage with customers, innovate, and operate more efficiently. Our platform combines core systems of record with digital, analytics, and artificial intelligence ("AI") capabilities. We serve insurers of all sizes, ranging from global carriers to regional and local providers, helping them navigate a rapidly changing insurance landscape. Our foundational core products, InsuranceSuite and InsuranceNow, are delivered primarily as cloud-based subscription services. Historically, InsuranceSuite has also been available for self-managed installations. These products serve as transactional systems of record, fully supporting insurance operations, including product definition, policy administration, claims management and billing. In addition, we provide digital engagement products that enable seamless sales, omnichannel service, and enhanced claims experiences for policyholders, agents, vendors, and field personnel. Our analytics products allow insurers to manage and use data more effectively, gain business insights, improve operational efficiency, and underwrite emerging risks. To support insurers worldwide, we localize our products to address diverse regulatory, language, and currency requirements. InsuranceSuite is a highly configurable and scalable product, delivered as a service, and primarily comprised of five core applications (PolicyCenter, ClaimCenter, BillingCenter, and the recently announced PricingCenter and UnderwritingCenter) that can be subscribed to separately or together. These applications are built on and optimized for our Guidewire Cloud Platform ("GWCP") architecture and leverage our in-house cloud operations team. InsuranceSuite is designed to support multiple releases each year to accelerate delivery of new capabilities and ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts. Additionally, InsuranceSuite embeds digital and analytics capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite. InsuranceNow is a complete, cloud-based application that offers policy administration, claims management, and billing functionality, plus pre-integrated document production, analytics, and other capabilities, that increases agility without adding complexity. Like InsuranceSuite, InsuranceNow is hosted on GWCP and managed by our internal cloud operations team. InsuranceNow is currently only available in the United States and Canada, and is generally suited to mid-market carriers and managing general agents whose needs are often not as complex as a typical InsuranceSuite customer. We reach customers directly through our global sales team and in partnership with third-party global system integrators ("SI's"). Because our platform is central to insurers' operations, customer evaluation cycles are often extensive, particularly when multiple products are involved or when insurers are moving to GWCP for the first time. Sales processes typically include detailed due diligence and customer reference checks. Our growth depends on continuously enhancing existing products, introducing new capabilities, ensuring efficient cloud operations, expanding local content, and providing access to innovation through the Guidewire Marketplace. We sell our products primarily through subscription services for our platform and cloud-delivered products. We generally price our subscription services for the core products based on the amount of Direct Written Premium ("DWP") managed on our platform, with certain cloud-delivered products priced based on usage or other metrics. Initial subscription agreements are generally five years in duration, with annual renewals thereafter. In some instances, we have customers that sign contracts with an initial term of seven years or longer. Subscription revenue is recognized ratably over the contract term. We also offer term licenses, primarily for existing on-premise customers, as well as support and professional services. Support is typically priced as a percentage of license fees and recognized ratably, while most professional services are billed monthly on a time-and-materials basis. However, certain services engagements are based on a fixed fee and revenue is recognized on a percentage of completion basis. Over the past few years, we have primarily been entering into cloud-based subscription arrangements with our new and existing customers, and we anticipate that subscription arrangements will continue to be a significant majority of annual new sales going forward. We may decide to change certain contract terms in new arrangements to remain competitive or otherwise meet market demands which may impact the way we recognize revenue and/or Annual Recurring Revenue ("ARR"). To extend our technology leadership in the global market and to drive operating efficiency, we continue to invest in product development and cloud operations to enhance and improve our current products, introduce new products, and advance our ability to securely and cost-effectively deliver our services in the cloud. Continued investment is critical as we seek to assist our customers in achieving their technology goals, maintain our competitive advantage, grow our revenue, expand internationally, and meet evolving customer demands. In certain cases, we may also acquire skills and technologies to manage our cloud infrastructure and accelerate our time to market for new products, solutions, and upgrades. Our track record of success with customers and their implementations is central to maintaining our strong competitive position. We rely on our global services team and SI partners to ensure that teams with the right combination of product, business, and language skills are used in the most efficient way to meet our customers' implementation and migration needs. We have extensive relationships with SI, consulting, technology, and other industry partners. Our network of partners has expanded as interest in and adoption of our platform has grown. We encourage our partners to co-market, pursue joint sales initiatives, and drive broader adoption of our technology, helping us grow our business more efficiently and enabling us to focus our resources on continued innovation and further enhancement of our solutions. We work closely with our network of SI partners to facilitate new sales and implementations of our products. Our partnership with leading SI partners allows us to increase efficiency and scale while reducing customer implementation and migration costs. We continue to invest time and resources to increase the number of qualified consultants employed by our SI partners, develop relationships with new partners in existing and new markets, and ensure that all SI partners are qualified to assist with implementing our products. We believe this model will continue to serve us well, and we intend to continue to expand our network of partners and the number of certified consultants with whom we work so we can leverage our SI partners more effectively, especially for future subscription migrations and implementations. We face a number of risks in the execution of our strategy, including, but not limited to, risks related to fluctuations in our results due to factors largely outside of our control, reliance on sales to a relatively small number of large customers and the related substantial negotiating leverage of these customers, lengthy and variable sales and implementation cycles, competing effectively in the global market, growing our business and managing our expanding operations, development and use of AI in an evolving regulatory environment, making long-term pricing commitments based on cost estimates that may change, expanding market adoption of our cloud-based offerings, maintaining customer satisfaction and renewals, cost-effectively and securely managing the infrastructure of our cloud-based customers, and the impact of these and other factors, including the impact of AI on the insurance and software industries, on our stock price and its volatility. In response to these and other risks we might face, we continue to invest in many areas of our business, including product development, cloud operations, cybersecurity, introduction of new products and/or new features, implementation and migration services, and sales and marketing. Seasonality We have experienced seasonal variations in our license revenue and, to a lesser extent, in our subscription revenue as a result of increased customer orders in our fourth fiscal quarter, which is the quarter ending July 31. We generally see significantly increased orders in our fourth fiscal quarter due to efforts by our sales team to achieve annual incentives. Because we recognize revenue upfront for term licenses compared to over time for subscription services, an increase in term licenses due to renewals or expansion orders, or non-renewals may impact our quarterly results. Subscription sales now represent the significant majority of total sales and, as a result when compared to term license sales, the revenue we recognize in the initial fiscal year of an order is lower, deferred revenue is higher, and our total reported revenue growth may be adversely affected in the near term due to the ratable nature of these arrangements. Over time, this ratable revenue dynamic will dampen the impact of seasonality on our revenue. Our services revenue is also subject to seasonal fluctuations, though to a lesser degree than our license revenue. Our services revenue is impacted by the number of billable days in a given fiscal quarter. Our second fiscal quarter, which is the quarter ending January 31, usually has fewer billable days due to the impact of calendar year end holidays in Europe and the United States. Our fourth fiscal quarter usually has fewer billable days due to the impact of vacations taken by our services professionals. Because we pay our services professionals the same amount throughout the year, our gross margins on our services revenue are usually lower in these quarters. This seasonal pattern, however, may be absent in any given year. Global Events Global events have adversely affected and may continue to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflationary pressures, and increased market volatility. For instance, the ongoing war between Russia and Ukraine, conflicts in the Middle East, escalating tensions in the South China Sea, currency exchange fluctuations, changes in interest rates, changes in trade policies and practices (including the imposition of tariffs), previous bank failures in the United States and Switzerland, and supply chain issues have contributed to global economic and market volatility in recent years. We are unable to accurately predict the full impact that these global events will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties. Our business and financial results have been and may in the future be impacted due to these disruptions, which may affect our ARR and revenue growth rates, sales cycles, services revenue and margins, operating cash flow and expenses, employee attrition, hiring and onboarding necessary personnel, allowance for collectibility of accounts receivable and unbilled receivables, and the change in fair value of strategic investments. Additionally, inflation levels and political uncertainty are impacting the global economy and have magnified the impact of these disruptions. Our customers may be unable to pay or may request amended payment terms for their outstanding invoices due to the economic impacts from these disruptions, and we may need to increase our accounts receivable allowances. A decrease in orders in a given period could negatively affect our revenue and ARR in future periods, particularly if experienced on a sustained basis, because a substantial proportion of our new software subscription services orders is recognized as revenue over time. Also, the global economic impact of these disruptions could affect our customers' DWP, which could ultimately impact our revenue as we generally price our products based on the amount of DWP that will be managed by our products. As a result of these developments and the related economic impact to our business, we may be required to record impairment related to our operating lease assets, investments, long-lived assets, intangible assets, or goodwill. We will continue to monitor and evaluate the nature and extent of these global events on our business. Key Business Metrics We use certain key metrics and financial measures not prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") to evaluate and manage our business, including ARR and Free Cash Flow. For a further discussion of how we use key metrics and certain non-GAAP financial measures, see "Non-GAAP Financial Measures" in this Quarterly Report on Form 10-Q. Annual Recurring Revenue ("ARR") We use ARR to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, support contracts, and hosting agreements based on customer contractual terms and invoicing activities for the current reporting period, which may not be the same as the timing and amount of revenue recognized. ARR reflects all fee changes due to contract renewals, non-renewals, expansion, cancellations, attrition, or renegotiations at a higher or lower fee arrangement that are effective as of the ARR reporting date. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded from our ARR calculations. In some arrangements with multiple performance obligations, a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes, but does not get allocated for purposes of calculating ARR. This revenue allocation generally only impacts the initial term of the contract. This means that if we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value would be recognized as services revenue, but our reported ARR amount would not be impacted. During the nine months ended April 30, 2026, the recurring license and support or subscription contract value recognized as services revenue was $5.9 million. If a customer contract contains invoicing amounts that increase over the contract term, then ARR reflects the annualized invoicing amount outlined in the contract for the current reporting period. For example, given a contract with annual invoicing of $1.0 million at the beginning of year one, $2.0 million at the beginning of year two, and $3.0 million at the beginning of year three, and the reporting period is subsequent to year two invoicing and prior to year three invoicing, the reported ARR for that contract would be $2.0 million. As of April 30, 2026, ARR was $1,147 million, compared to $1,041 million as of July 31, 2025. We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates. Free Cash Flow We monitor our free cash flow, as a key measure of our overall business performance, which enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, and stock-based compensation expenses. Additionally, free cash flow takes into account the impact of changes in deferred revenue, which reflects the receipt of cash payments for products before they are recognized as revenue, and unbilled accounts receivable, which reflects revenue that has been recognized that has yet to be invoiced to our customers. Our net cash provided by (used in) operating activities is significantly impacted by the timing of invoicing and collections of accounts receivable, the timing and amount of annual bonus payments, as well as payroll, commissions, payroll taxes, and other tax payments. Our capital expenditures consist of purchases of property and equipment, primarily computer hardware, software, and leasehold improvements, and capitalized software development costs. For a further discussion of our operating cash flows, see "Liquidity and Capital Resources - Cash Flows." Nine Months Ended April 30, 2026 2025 (in thousands) Net cash provided by (used in) operating activities $ 105,830 $ 56,036 Purchases of property and equipment (9,934) (2,336) Capitalized software development costs (13,939) (10,972) Free cash flow $ 81,957 $ 42,728 Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in accordance with GAAP. Accounting policies, methods, and estimates are an integral part of the preparation of condensed consolidated financial statements in accordance with GAAP and, in part, are based upon management's current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the condensed consolidated financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. While there are a number of significant accounting policies, methods, and estimates affecting our condensed consolidated financial statements, which are described in Note 1 "The Company and Summary of Significant Accounting Policies and Estimates" to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025, our revenue recognition policies are critical to the periods presented. There have been no material changes to our critical accounting policies as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025. Recent Accounting Pronouncements See Note 1 "The Company and Summary of Significant Accounting Policies and Estimates" to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements adopted, including the dates of adoption, and recent accounting pronouncements not yet adopted. Results of Operations The following table sets forth our results of operations for the periods presented. The data has been derived from the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly present the financial position and results of operations for the interim periods presented. The results of operations for any period should not be considered indicative of results for any future period. Certain figures included in this document have been subjected to rounding adjustments. Accordingly, figures shown in the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. This information should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2025. Three Months Ended April 30, 2026 As a % of total revenue 2025 As a % of total revenue (in thousands, except percentages) Revenue: Subscription and support $ 244,738 66 % $ 181,823 62 % License 55,996 15 57,233 19 Services 71,807 19 54,452 19 Total revenue 372,541 100 293,508 100 Cost of revenue: Subscription and support 67,882 18 57,411 20 License 374 - 892 - Services 67,639 18 52,507 18 Total cost of revenue 135,896 36 110,810 38 Gross profit: Subscription and support 176,856 47 124,412 42 License 55,622 15 56,341 19 Services 4,167 1 1,945 1 Total gross profit 236,645 64 182,698 62 Operating expenses: Research and development 87,868 24 72,915 25 Sales and marketing 68,201 18 57,768 20 General and administrative 49,939 13 47,547 16 Total operating expenses 206,008 55 178,230 61 Income (loss) from operations 30,637 8 4,468 1 Interest income 11,295 3 13,794 5 Interest expense (3,318) (1) (3,668) (1) Other income (expense), net (18,854) (5) 34,074 12 Income (loss) before provision for (benefit from) income taxes 19,760 5 48,668 17 Provision for (benefit from) income taxes 3,289 1 2,677 1 Net income (loss) $ 16,471 4 % $ 45,991 16 % Nine Months Ended April 30, 2026 As a % of total revenue 2025 As a % of total revenue (in thousands, except percentages) Revenue: Subscription and support $ 704,150 66 % $ 529,403 63 % License 157,491 15 158,297 18 Services 202,634 19 158,189 19 Total revenue 1,064,276 100 845,889 100 Cost of revenue: Subscription and support 195,737 18 170,531 20 License 1,460 - 2,715 - Services 189,390 18 152,401 18 Total cost of revenue 386,587 36 325,647 38 Gross profit: Subscription and support 508,413 48 358,872 43 License 156,031 15 155,582 18 Services 13,244 1 5,788 1 Total gross profit 677,689 64 520,242 62 Operating expenses: Research and development 249,510 23 212,063 25 Sales and marketing 193,934 18 164,698 19 General and administrative 146,689 14 132,010 16 Total operating expenses 590,133 55 508,771 60 Income (loss) from operations 87,556 8 11,471 2 Interest income 38,432 4 43,122 5 Interest expense (9,965) (1) (9,913) (1) Other income (expense), net 2,791 - (36,270) (4) Income (loss) before provision for (benefit from) income taxes 118,814 11 8,410 2 Provision for (benefit from) income taxes 10,926 1 (9,443) (1) Net income (loss) $ 107,888 10 % $ 17,853 3 % Revenue We derive our revenue primarily from delivering cloud-based services, licensing our software applications, providing support, and delivering professional services. Subscription and Support The majority of our revenue consists of fees for our subscription services, which are generally priced based on the amount of DWP that is managed by our subscription services. Subscription revenue is recognized ratably over the term of the arrangement, beginning at the point in time our provisioning process has been completed and access has been made available to the customer. The initial term of such arrangements is generally five years, though in some instances customers have entered into contracts with an initial term of seven years or longer. Subscription agreements contain optional annual renewals commencing upon the expiration of the initial contract term. A majority of our subscription customers are billed annually in advance. In some arrangements with multiple performance obligations, a portion of recurring subscription contract value may be allocated to license revenue or services revenue for revenue recognition purposes. For example, in arrangements with multiple performance obligations that include services at discounted rates, a portion of the total contract value related to subscription services will be allocated and recognized as services revenue. Additionally, agreements to migrate an existing term license customer to subscription services contain multiple performance obligations, including a provision to continue using the term license during the subscription service implementation period. Under these migration agreements, a portion of the total contract value related to subscription services could be allocated and recognized as term license and support revenue in the period renewed or delivered. Our support revenue is generally recognized ratably over the committed support term of the licensed software. Our support fees are typically priced as a fixed percentage of the associated term license fees. We generally invoice support annually in advance. Support related to subscription arrangements is included in subscription revenue, as support is not quoted or priced separately from the subscription services. License The majority of our license revenue consists of term license fees. Our term license revenue is primarily generated through license fees that are billed annually in advance during the term of the contract, including any renewals. Our term license fees are generally priced based on the amount of DWP that will be managed by our licensed software. Our term licenses are sold under an initial term with optional annual renewals after the initial term. Term license revenue for the committed term of the customer agreement is generally fully recognized upon delivery of the software or at the beginning of the renewal term. We do enter into license arrangements that have an initial term of two or more years and renewal terms of more than one year which results in significantly higher revenue in the initial year of the committed term than arrangements for our subscription services. Services Our services revenue is primarily derived from implementation and migration services performed for our customers, reimbursable travel expenses, and training fees. A majority of our services engagements are billed and revenue is recognized on a time and materials basis upon providing our services, while certain services engagements are based on a fixed fee and revenue is recognized on a percentage of completion basis. Three Months Ended April 30, 2026 2025 Change Amount As a % of total revenue Amount As a % of total revenue ($) (%) (in thousands, except percentages) Revenue: Subscription and support: Subscription $ 232,129 62 % $ 166,464 57 % $ 65,665 39 % Support 12,609 3 15,359 5 (2,750) (18) % License 55,996 15 57,233 19 (1,237) (2) % Services 71,807 19 54,452 19 17,354 32 % Total revenue $ 372,541 100 % $ 293,508 100 % $ 79,032 27 % Nine Months Ended April 30, 2026 2025 Change Amount As a % of total revenue Amount As a % of total revenue ($) (%) (in thousands, except percentages) Revenue: Subscription and support: Subscription $ 662,312 62 % $ 480,981 57 % $ 181,331 38 % Support 41,838 4 48,422 6 (6,584) (14) % License 157,491 15 158,297 18 (806) (1) % Services 202,634 19 158,189 19 44,445 28 % Total revenue $ 1,064,276 100 % $ 845,889 100 % $ 218,386 26 % Subscription and Support We anticipate subscriptions will continue to represent a significant majority of new arrangements, including customers migrating from existing term license arrangements to subscription services, in future periods. Due to the ratable recognition of subscription revenue, growth in subscription revenue will lag behind the growth of subscription orders and will impact the comparative growth of our reported revenue on a year-over-year basis. If we complete a higher percentage of subscription arrangements towards the end of a given period, our short-term growth rates will be negatively impacted. Due to the seasonal nature of our business, the impact of new subscription orders in our fourth fiscal quarter, our historically largest quarter for new orders, is not fully reflected in revenue until the following fiscal year. Subscription revenue increased by $65.7 million and $181.3 million during the three and nine months ended April 30, 2026, respectively, compared to the same periods a year ago, primarily due to the impact of cloud transition agreements entered into and provisioned since April 30, 2025, new subscription agreements, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term. Support revenue decreased by $2.8 million and $6.6 million during the three and nine months ended April 30, 2026, respectively, compared to the same periods a year ago, primarily due to customers migrating from on-premise term licenses to subscription services. Support related to subscription arrangements is included in subscription revenue, as support is not quoted or priced separately from the subscription services. As customers enter into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognized will be impacted by allocations of the total contract value between the license, subscription, and support performance obligations. As a result, we expect that the small percentage of term licenses as a percentage of total new sales and customers migrating from term licenses to subscription services will result in lower support revenue in the future. License Revenue related to new term licenses and multi-year term license renewals is generally recognized upfront and, as a result, no additional license revenue is recognized until after the committed term expires. As a customer enters into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognition will be impacted by allocations of total contract value between license, subscription, and support performance obligations. License revenue growth has and will be negatively impacted as subscription sales are a significant majority of total new sales and as customers migrate from term licenses to subscription services instead of renewing their term licenses. Term license revenue decreased by $1.2 million and $0.8 million during the three and nine months ended April 30, 2026, respectively, compared to the same periods a year ago, primarily due to agreements that migrated from a term license to a subscription service. Ongoing revenue related to migration agreements is recorded as subscription revenue. Services Services revenue increased by $17.4 million and $44.4 million during the three and nine months ended April 30, 2026, respectively, compared to the same periods a year ago, due to higher utilization of services employees and new subscription implementation and migration projects. As we successfully leverage our SI partners to lead more implementations and migrations, we expect our services revenue could fluctuate between periods. Additionally, services revenue overall may continue to be impacted by contracts with lower average services billing rates and investments in customer implementations, including fixed fee or capped arrangements, to accelerate customer transition to the cloud. In these arrangements when a project extends longer than originally anticipated, the average billing rate we recognize may decrease, which can result in revenue adjustments and lower gross profit. As we continue to expand into new markets and develop new products, we have, and may continue to, enter into contracts with lower average billing rates, make investments in customer implementation and migration engagements, and enter into fixed price contracts. Cost of Revenue and Gross Profit Our cost of subscription and support revenue primarily consists of personnel costs for our cloud operations and technical support teams, cloud infrastructure costs, development of online training curriculum, amortization of intangible assets, and royalty fees paid to third parties. Our cost of license revenue primarily consists of royalty fees paid to third parties and amortization of intangible assets. Our cost of services revenue primarily consists of personnel costs for our professional service employees, third-party subcontractors or consultants, and travel costs. In instances where we have primary responsibility for the delivery of services, subcontractor fees are expensed as cost of services revenue. In each case, personnel costs include salaries, bonuses, benefits, and stock-based compensation. We allocate overhead such as information technology infrastructure and software expenses, information security infrastructure and software expenses, and facilities expenses to all functional departments based on headcount. As such, these general overhead expenses are reflected in cost of revenue and each functional operating expense. Cost of Revenue: Three Months Ended April 30, 2026 2025 Change Amount Amount ($) (%) (in thousands, except percentages) Cost of revenue: Subscription and support $ 67,882 $ 57,411 $ 10,472 18 % License 374 892 (518) (58) % Services 67,639 52,507 15,132 29 % Total cost of revenue $ 135,896 $ 110,810 $ 25,086 23 % Includes stock-based compensation of: Cost of subscription and support revenue $ 3,391 $ 3,598 $ (207) Cost of license revenue - 32 (32) Cost of services revenue 6,108 5,055 1,053 Total $ 9,498 $ 8,685 $ 813 Nine Months Ended April 30, 2026 2025 Change Amount Amount ($) (%) (in thousands, except percentages) Cost of revenue: Subscription and support $ 195,737 $ 170,531 $ 25,206 15 % License 1,460 2,715 (1,255) (46) % Services 189,390 152,401 36,989 24 % Total cost of revenue $ 386,587 $ 325,647 $ 60,940 19 % Includes stock-based compensation of: Cost of subscription and support revenue $ 10,437 $ 10,511 $ (74) Cost of license revenue - 104 (104) Cost of services revenue 18,203 15,218 2,985 Total $ 28,640 $ 25,833 $ 2,807 Cost of subscription and support revenue during the three months ended April 30, 2026 increased by $10.5 million compared to the same period a year ago, primarily due to increases in cloud infrastructure expenses of $6.1 million driven by increased transaction volume on our cloud services, personnel costs of $2.5 million due to higher headcount, amortization of intangible assets of $0.7 million, and royalties of $0.5 million. Cost of subscription and support revenue during the nine months ended April 30, 2026 increased by $25.2 million compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $12.1 million from increased transaction volume on our cloud services, personnel costs of $8.3 million due to higher headcount, amortization of intangible assets of $1.6 million, and royalties of $1.2 million. We expect the cost of subscription and support revenue to increase in absolute dollars due to a greater number of customers utilizing our cloud services, continued adoption of cloud-based and AI-related product features, growth in cloud customer transaction volume, and the impact of inflation and other macroeconomic events. Cost of license revenue decreased by $0.5 million and $1.3 million during the three and nine months ended April 30, 2026, respectively, compared to the same periods a year ago, primarily due to decreases in personnel costs of $0.3 million and $1.0 million, respectively, and to a lesser extent, decreases in royalties. Personnel costs associated with the development of online training curriculum are primarily focused on our cloud services, thus contributing to the decrease in cost of license revenue. We continue to anticipate lower cost of license revenue over time as our term license customers transition to cloud subscription agreements. The $15.1 million increase in cost of services revenue during the three months ended April 30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $8.2 million due to higher headcount, subcontractor expenses of $3.8 million due to implementations involving our SI partners, and travel expenses of $2.2 million. The $37.0 million increase in cost of services revenue during the nine months ended April 30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $23.5 million due to higher headcount, subcontractor expenses of $7.8 million due to implementations involving our SI partners, and travel expenses of $3.2 million. We had 663 cloud operations and technical support employees and 972 professional services employees at April 30, 2026, compared to 591 cloud operations and technical support employees and 836 professional services employees at April 30, 2025. Gross Profit: Three Months Ended April 30, 2026 2025 Change Amount Margin % Amount Margin % ($) (%) (in thousands, except percentages) Gross profit: Subscription and support $ 176,856 72 % $ 124,412 68 % $ 52,444 42 % License 55,622 99 56,341 98 (719) (1) % Services 4,167 6 1,945 4 2,222 114 % Total gross profit $ 236,645 64 % $ 182,698 62 % $ 53,947 30 % Our gross profit increased $53.9 million during the three months ended April 30, 2026, compared to the same period a year ago. Gross profit was primarily impacted by the increase in subscription and support gross profit due to the increase in subscription revenue from cloud migration and new and renewed subscription orders at a rate higher than subscription and support costs. Services contributed to the increased gross profit due to higher utilization of services employees and higher revenues from new subscription implementation and migration projects. These increases were partially offset by a decrease in license gross profit due to lower license revenue as customers migrate to subscription services. Our gross margin increased to 64% during the three months ended April 30, 2026 from 62% during the same period a year ago. Gross margin increased primarily due to the growth in subscription and support revenue which continues to outpace increases in cloud infrastructure and personnel costs. Nine Months Ended April 30, 2026 2025 Change Amount Margin % Amount Margin % ($) (%) (in thousands, except percentages) Gross profit: Subscription and support $ 508,413 72 % $ 358,872 68 % $ 149,541 42 % License 156,031 99 155,582 98 449 - % Services 13,244 7 5,788 4 7,456 129 % Total gross profit $ 677,689 64 % $ 520,242 62 % $ 157,447 30 % Our gross profit increased $157.4 million during the nine months ended April 30, 2026, compared to the same period a year ago. Gross profit was primarily impacted by the increase in subscription and support gross profit due to the increase in subscription revenue at a rate higher than subscription and support costs. Services contributed to the increased gross profit due to higher utilization of services employees and higher revenues from new subscription implementation and migration projects. Our gross margin increased to 64% during the nine months ended April 30, 2026 from 62% during the same period a year ago. Gross margin increased primarily due to the growth in subscription and support revenue which continues to outpace increases in cloud infrastructure and personnel costs. We expect subscription and support gross margin to continue to improve, though at a slower rate than in recent years, as we increase the number of cloud customers and scale our cloud platform. We expect services gross margin will continue to improve as we gain additional efficiencies, but could fluctuate between periods based on the use of subcontractors to supplement our internal services team and the impact of any arrangements entered into to encourage customers to migrate from licenses to subscription services. We expect license gross profit to decline over time due to customers migrating from licenses to subscription services but can fluctuate quarter to quarter depending on the timing of renewals and license revenue allocation from migration orders. Overall, we expect gross margins to continue to improve over time as improvements in subscription and support gross margin and services gross margin will more than offset the negative impact of revenue shifts away from high margin license revenue. Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest components of our operating expenses are personnel costs for our employees and, to a lesser extent, professional services. In each case, personnel costs include salaries, bonuses, commissions, benefits, and stock-based compensation. We allocate overhead such as information technology infrastructure and software expenses, information security infrastructure and software expenses, and facilities expenses to all functional departments based on headcount. As such, these general overhead expenses are reflected in cost of revenue and each functional operating expense. Three Months Ended April 30, 2026 2025 Change Amount As a % of total revenue Amount As a % of total revenue ($) (%) (in thousands, except percentages) Operating expenses: Research and development $ 87,868 24% $ 72,915 25% $ 14,953 21 % Sales and marketing 68,201 18 57,768 20 10,433 18 % General and administrative 49,939 13 47,547 16 2,392 5 % Total operating expenses $ 206,008 55% $ 178,230 61% $ 27,778 16 % Includes stock-based compensation of: Research and development $ 12,061 $ 10,267 $ 1,794 Sales and marketing 11,598 10,832 766 General and administrative 11,784 10,573 1,211 Total $ 35,443 $ 31,672 $ 3,771 Nine Months Ended April 30, 2026 2025 Change Amount As a % of total revenue Amount As a % of total revenue ($) (%) (in thousands, except percentages) Operating expenses: Research and development $ 249,510 23 % $ 212,063 25 % $ 37,447 18 % Sales and marketing 193,934 18 164,698 19 29,236 18 % General and administrative 146,689 14 132,010 16 14,680 11 % Total operating expenses $ 590,133 55 % $ 508,771 60 % $ 81,362 16 % Includes stock-based compensation of: Research and development $ 36,277 $ 30,560 $ 5,717 Sales and marketing 35,014 31,400 3,614 General and administrative 35,085 31,572 3,513 Total $ 106,376 $ 93,532 $ 12,844 Research and Development Our research and development expenses primarily consist of personnel costs for our technical staff, web hosting costs, and software subscription costs. The $15.0 million increase in research and development expenses during the three months ended April 30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $11.0 million associated with higher headcount, and web hosting and software subscription costs of $2.8 million driven by increased product development efforts. The $37.4 million increase in research and development expenses during the nine months ended April 30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $28.4 million associated with higher headcount, and web hosting and software subscription costs of $5.7 million. Our research and development headcount was 1,369 at April 30, 2026, compared with 1,204 at April 30, 2025. We expect our research and development expenses to increase in absolute dollars due to inflation and investments to enhance and develop our products and services, but decrease as a percentage of revenue as we focus on hiring in lower cost regions. We continue to dedicate internal resources to develop, improve, and expand the functionality, efficiency, and security of our solutions in the cloud. Our research and development expenses may also increase as we dedicate more resources to our software development efforts, utilize AI tools to accelerate development efforts, and invest in AI-driven solutions for our customers, as well as if we pursue additional acquisitions. Sales and Marketing Our sales and marketing expenses primarily consist of personnel costs for our sales and marketing employees. Included in our personnel costs are commissions, which are considered contract acquisition costs and are capitalized when earned and expensed over the anticipated period of time that goods and services are expected to be provided to a customer, which we estimate to be approximately five years. Sales and marketing expenses also include travel expenses, professional services for marketing activities, and amortization of certain acquired intangibles. The $10.4 million increase in sales and marketing expenses during the three months ended April 30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $7.8 million associated with higher headcount, which includes the impact of contract acquisition costs, and marketing and advertising expenses of $1.9 million due to customer events and increased lead generation activity. The $29.2 million increase in sales and marketing expenses during the nine months ended April 30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $20.4 million associated with higher headcount, which includes the impact of contract acquisition costs, marketing and advertising expenses of $4.3 million, and travel expenses of $4.3 million, partially offset by a decrease in web hosting costs of $1.1 million. Our sales and marketing headcount was 554 at April 30, 2026, compared with 497 at April 30, 2025. We expect our sales and marketing expenses to increase in absolute dollars as we support new product initiatives and ongoing subscription and cloud growth, but to grow more slowly than revenue over time. As a result, we expect sales and marketing expense as a percentage of revenue to decline as we realize efficiencies and leverage prior investments in customer success. General and Administrative Our general and administrative expenses include executive, finance, human resources, information technology, information security, legal, and corporate development and strategy functions, and primarily consist of personnel costs and, to a lesser extent, professional services, software costs, and cloud hosting costs. The $2.4 million increase in general and administrative expenses during the three months ended April 30, 2026, compared to the same period a year ago, was due to increases in personnel costs of $2.6 million, driven by the impact of annual salary increases and an increase in the annual bonus accrual and stock-based compensation, which was partially offset by the net impact of fluctuations in bad debt expenses, web hosting, software subscription and professional services costs. The $14.7 million increase in general and administrative expenses during the nine months ended April 30, 2026, compared to the same period a year ago, was due to increases in personnel costs of $9.9 million driven by the impact of annual salary increases and an increase in the annual bonus accrual and stock-based compensation, professional services of $1.8 million, bad debt expenses of $1.5 million, and facilities costs of $1.2 million. Our general and administrative headcount was 491 at April 30, 2026, compared with 468 at April 30, 2025. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments. We expect that our general and administrative expenses will increase in absolute dollars due to inflation and investments required to support our strategic initiatives, grow our business, and meet our product and information security, compliance and reporting obligations, but decrease as a percentage of revenue as overall hiring and investments slow. Other Income (Expense) Three Months Ended April 30, 2026 2025 Change Amount Amount ($) (%) (in thousands, except percentages) Interest income $ 11,295 $ 13,794 $ (2,499) (18) % Interest expense $ (3,318) $ (3,668) $ 350 (10) % Other income (expense), net $ (18,854) $ 34,074 $ (52,928) (155) % Nine Months Ended April 30, 2026 2025 Change Amount Amount ($) (%) (in thousands, except percentages) Interest income $ 38,432 $ 43,122 $ (4,690) (11) % Interest expense $ (9,965) $ (9,913) $ (52) 1 % Other income (expense), net $ 2,791 $ (36,270) $ 39,061 (108) % Interest Income Interest income represents interest earned on our cash, cash equivalents, and investments. Interest income decreased $2.5 million and $4.7 million during the three and nine months ended April 30, 2026, respectively, compared to the same periods a year ago, primarily due to lower interest rates and lower available funds to invest due to purchases under our stock repurchase program. Interest Expense Interest expense includes both stated interest and the amortization of debt issuance costs associated with the outstanding amount due on the aggregate principal amount of our 1.25% Convertible Senior Notes due 2025 ("2025 Convertible Senior Notes") and the aggregate principal amount of our 1.25% Convertible Senior Notes due 2029 (the "2029 Convertible Senior Notes", together with the 2025 Convertible Senior Notes, the "Convertible Senior Notes"). The amortization of debt issuance costs is recognized on an effective interest basis. Our 2025 Convertible Senior Notes were partially retired in October and December 2024, and were fully settled on their maturity date of March 15, 2025. Interest expense also includes commitment fees on our undrawn 2025 Credit Facility and amortization of issuance costs associated with our revolving credit agreement recognized on a straight-line basis. Interest expense for the three months ended April 30, 2026 consists of stated interest of $2.2 million, non-cash interest expense of $1.0 million related to amortization of debt issuance costs, and $0.2 million of commitment fees on our undrawn 2025 Credit Facility. Interest expense for the three months ended April 30, 2025 consists of stated interest of $2.4 million, non-cash interest expense of $1.1 million related to the amortization of debt issuance costs, and $0.2 million of commitment fees on our undrawn 2025 Credit Facility. Interest expense for the nine months ended April 30, 2026 consists of stated interest of $6.5 million, non-cash interest expense of $2.9 million related to amortization of debt issuance costs, and $0.5 million of commitment fees on our undrawn 2025 Credit Facility. Interest expense for the nine months ended April 30, 2025 consists of stated interest of $6.8 million, non-cash interest expense of $2.8 million related to the amortization of debt issuance costs, and $0.3 million of commitment fees on our undrawn 2025 Credit Facility. Other Income (Expense), Net Other income (expense), net includes foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded. Our monetary assets and liabilities denominated in currencies other than the functional currency of the entity in which they are recorded consist primarily of trade accounts receivable, unbilled accounts receivable, trade accounts payable, and intercompany receivables and payables. We have significant transactions in the following currencies: Australian Dollar, British Pound, Canadian Dollar, Euro, Indian Rupee, and Polish Zloty. Other income (expense) also includes changes in the fair value of our strategic investments and expenses related to the retirement of a portion of our 2025 Convertible Senior Notes. Other income (expense), net during the three months ended April 30, 2026 was expense of $18.9 million, compared to income of $34.1 million during the same period a year ago. This change was primarily driven by a foreign currency loss of $20.1 million during the three months ended April 30, 2026, compared to a gain of $34.2 million during the same period a year ago due to fluctuations in foreign currency exchange rates. Other income (expense), net during the nine months ended April 30, 2026 was income of $2.8 million, compared to expense of $36.3 million during the same period a year ago due to $53.6 million of expense related to the retirement of a portion of our 2025 Convertible Senior Notes during the nine months ended April 30, 2025. Additionally, during the nine months ended April 30, 2026, we recorded a foreign currency gain of $1.5 million, compared to $14.0 million during the same period a year ago due to fluctuations in foreign currency exchange rates. Income Taxes We are subject to taxes in the United States as well as other tax jurisdictions and countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may also be subject to U.S. income tax. Three Months Ended April 30, 2026 2025 Change Amount Amount ($) (%) (in thousands, except percentages) Provision for (benefit from) income taxes $ 3,289 $ 2,677 $ 612 23 % Effective tax rate 17 % 6 % Nine Months Ended April 30, 2026 2025 Change Amount Amount ($) (%) (in thousands, except percentages) Provision for (benefit from) income taxes $ 10,926 $ (9,443) $ 20,369 (216) % Effective tax rate 9 % (112) % We recognized an income tax expense of $3.3 million and $2.7 million for the three months ended April 30, 2026 and 2025, respectively, and an income tax expense of $10.9 million and an income tax benefit of $9.4 million for the nine months ended April 30, 2026 and 2025, respectively. The change in income taxes recorded for the three months ended April 30, 2026, compared to the same period a year ago, was primarily due to an increase in non-deductible executive compensation, a decrease in the Foreign-Derived Intangible Income ("FDII") deduction, a decrease in research and development credits due to U.S. tax law changes under H.R. 1 enacted on July 4, 2025, and a decrease in the deductions for stock-based compensation, offset by a decrease in income before taxes. The change in income taxes recorded for the nine months ended April 30, 2026, compared to the same period a year ago, was primarily due to an increase in income before taxes, an increase in non-deductible executive compensation, a decrease in the FDII deduction, and a decrease in research and development credits due to U.S. tax law changes under H.R. 1 enacted on July 4, 2025, offset by an increase in the deductions for stock-based compensation. In the United States, on July 4, 2025, H.R. 1 was signed into law. Among other provisions, the legislation reinstated immediate expensing for domestic research and experimental expenditures, extended 100% bonus depreciation for qualified property placed in service beginning January 20, 2025, and made certain other provisions of the Tax Cuts and Jobs Act permanent. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2026 and others effective from fiscal year 2027. We recognized the fiscal year 2026 tax effects of the legislation in our income tax provision for the three and nine months ended April 30, 2026. The effective tax rate of 17% and 9% for the three and nine months ended April 30, 2026, respectively, differs from the statutory U.S. Federal income tax rate of 21% primarily due to tax deductions for stock-based compensation, the FDII deduction, and research and development credits, partially offset by state taxes and certain non-deductible expenses, including the limitation on executive compensation. Non-GAAP Financial Measures In addition to the key business metrics presented above, we believe that the following non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Management uses these non-GAAP measures to compare our performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation, and for budgeting and planning purposes. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other software companies because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, many of which present similar non-GAAP financial measures to investors. However, our management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. We urge investors to review the reconciliation of non-GAAP financial measures to the comparable GAAP financial measures included herein and not to rely on any single financial measure to evaluate our business. The following table reconciles the specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below (in thousands, except share and per share data): Three Months Ended Nine Months Ended April 30, April 30, 2026 2025 2026 2025 Gross profit reconciliation: GAAP gross profit $ 236,645 $ 182,698 $ 677,689 $ 520,242 Non-GAAP adjustments: Stock-based compensation 9,498 8,685 28,639 25,833 Amortization of intangibles 1,180 485 3,045 1,455 Non-GAAP gross profit $ 247,324 $ 191,868 $ 709,373 $ 547,530 Income (loss) from operations reconciliation: GAAP income (loss) from operations $ 30,637 $ 4,468 $ 87,556 $ 11,471 Non-GAAP adjustments: Stock-based compensation 44,941 40,357 135,015 119,365 Amortization of intangibles 1,765 1,234 4,968 3,879 Acquisition consideration holdback 440 - 1,064 - Non-GAAP income (loss) from operations $ 77,784 $ 46,059 $ 228,604 $ 134,715 Net income (loss) reconciliation: GAAP net income (loss) $ 16,471 $ 45,991 $ 107,888 $ 17,853 Non-GAAP adjustments: Stock-based compensation 44,941 40,357 135,015 119,365 Amortization of intangibles 1,765 1,234 4,968 3,879 Acquisition consideration holdback 440 - 1,064 - Amortization of debt issuance costs 984 1,058 2,947 2,782 Changes in fair value of strategic investments (599) 103 (554) 341 (Gains) losses on sale of strategic investments (632) - (632) (3,671) Retirement of debt - - - 53,565 Unrealized foreign exchange rate (gains) losses (1) 20,141 (34,176) (1,513) (13,967) Tax impact of non-GAAP adjustments (13,864) (7,157) (39,295) (35,330) Non-GAAP net income (loss) $ 69,648 $ 47,409 $ 209,888 $ 144,817 Tax provision (benefit) reconciliation: GAAP tax provision (benefit) $ 3,289 $ 2,677 $ 10,926 $ (9,443) Non-GAAP adjustments: Stock-based compensation 8,881 6,933 26,154 18,110 Amortization of intangibles 349 212 963 586 Acquisition consideration holdback 87 - 206 - Amortization of debt issuance costs 194 182 571 426 Changes in fair value of strategic investments (118) 18 (110) 51 (Gains) losses on sale of strategic investments - - - (520) Retirement of debt - - - 7,585 Unrealized foreign exchange rate (gains) losses (1) 3,980 (5,871) (152) (3,011) Tax impact of non-GAAP adjustments 490 5,684 11,664 12,103 Non-GAAP tax provision (benefit) $ 17,153 $ 9,834 $ 50,222 $ 25,887 Three Months Ended Nine Months Ended April 30, April 30, 2026 2025 2026 2025 Net income (loss) per share reconciliation: GAAP net income (loss) per share - diluted $ 0.19 $ 0.54 $ 1.26 $ 0.21 Non-GAAP adjustments: Stock-based compensation 0.53 0.47 1.57 1.39 Amortization of intangibles 0.02 0.01 0.06 0.05 Acquisition consideration holdback - - - - Amortization of debt issuance costs 0.01 0.01 0.03 0.03 Changes in fair value of strategic investments (0.01) - (0.01) - (Gains) losses on sale of strategic investments (0.01) - (0.01) (0.04) Retirement of debt - - - 0.63 Unrealized foreign exchange rate (gains) losses (1) 0.24 (0.40) (0.02) (0.16) Tax impact of non-GAAP adjustments (0.16) (0.08) (0.46) (0.41) Non-GAAP net income (loss) per share - diluted $ 0.82 $ 0.55 $ 2.44 $ 1.70 Shares used in computing non-GAAP net income (loss) per share amounts: GAAP and pro forma weighted average shares - diluted 85,065,999 85,880,643 85,945,646 85,654,903 (1) During the three months ended April 30, 2026, we began excluding unrealized foreign currency exchange rate (gains) losses as a non-GAAP adjustment to other income (expense), net. Accordingly, we have recast previously reported amounts in our non-GAAP schedules. Liquidity and Capital Resources Our principal sources of liquidity are as follows (in thousands): April 30, 2026 July 31, 2025 Cash, cash equivalents, and investments $ 1,146,800 $ 1,483,197 Working capital $ 718,235 $ 962,613 Cash, Cash Equivalents, and Investments Our cash and cash equivalents are comprised of cash and liquid investments with remaining maturities of 90 days or less from the date of purchase, primarily commercial paper and money market funds. Our investments primarily consist of corporate debt securities, U.S. government and agency debt securities, commercial paper, asset-backed securities, and non-U.S. government securities, which include state, municipal, and foreign government securities. As of April 30, 2026, approximately $92.3 million of our cash and cash equivalents were domiciled in foreign jurisdictions. We may repatriate foreign earnings to the United States in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation. Revolving Credit Facility In December 2024, we entered into a revolving credit agreement (the "Credit Agreement"), which provides for a senior secured revolving credit facility in an aggregate principal amount of $300.0 million (the "2025 Credit Facility"). At our discretion, it allows flexibility for an uncommitted upsize of the aggregate principal amount of the 2025 Credit Facility or the establishment of incremental term loan facilities, in each case, as further set forth in the Credit Agreement. As of April 30, 2026, there were no outstanding borrowings of revolving loans under the 2025 Credit Facility and we were in compliance with related covenants. As of April 30, 2026, there was an outstanding standby letter of credit issued under the 2025 Credit Facility in an immaterial amount. Share Repurchase Program In September 2022, our board of directors authorized and approved a share repurchase program of up to $400.0 million of our outstanding common stock. We began repurchasing shares under this program during the first quarter of fiscal year 2023 and completed the program in December 2025. In January 2026, our board of directors authorized and approved a new share repurchase program of up to $500.0 million of our outsta nding common stock. Share repurchases under this program may be made from time to time, in the open market, in privately negotiated transactions and otherwise, at the discretion of our management and in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act, and other applicable legal requirements. Such repurchases may also be made in compliance with Rule 10b5-1 trading plans entered into by the Company. During the three and nine months ended April 30, 2026, we repurchased 1,696,180 and 2,437,175 shares of common stock, respectively, at an average price of $147.07 and $163.16, respectively. During the three and nine months ended April 30, 2025, we did not repurchase any shares of common stock. As of April 30, 2026, we had $240.5 million available to repurchase shares under the new share repurchase program. If we execute fully on the share repurchase program in the fiscal year, we may be subject to excise taxes on the share repurchase in accordance with the Inflation Reduction Act of 2022. Cash Flows Our cash flows from operations are significantly impacted by the timing of invoicing and collections of accounts receivable, annual bonus payments, as well as payments of payroll, commissions, payroll taxes, and other taxes. We expect that we will generate positive cash flows from operations on an annual basis in the future, although this may fluctuate significantly on a quarterly basis. In particular, we typically use more cash during our first fiscal quarter, which is the quarter ending October 31, as we generally pay cash bonuses to our employees for the prior fiscal year and seasonally higher sales commissions from increased customer orders booked in our fourth fiscal quarter of the prior year. Additionally, our capital expenditures may fluctuate depending on future office build outs and software development activities subject to capitalization. We believe that our existing cash and cash equivalents and other sources of liquidity will be sufficient to fund our operations for at least the next 12 months. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development and cloud operations efforts, investments in cloud infrastructure, cybersecurity, and operating costs, and expansion into other markets. We may also invest in or acquire complementary businesses, applications or technologies, or may execute on a board-authorized share repurchase program, which may require the use of significant cash resources and/or additional financing. The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q (in thousands): Nine Months Ended April 30, 2026 2025 Net cash provided by (used in) operating activities $ 105,830 $ 56,036 Net cash provided by (used in) investing activities $ (133,412) $ (178,576) Net cash provided by (used in) financing activities $ (378,544) $ 81,565 Cash Flows from Operating Activities Net cash provided by operating activities was $105.8 million for the nine months ended April 30, 2026 compared to net cash provided of $56.0 million during the nine months ended April 30, 2025. This $49.8 million increase in cash provided by operating activities was attributable to a $82.2 million increase in net income, after excluding the impact of non-cash charges such as deferred taxes, stock-based compensation expense, depreciation and amortization expense, and other non-cash items, offset by a $32.4 million increase in cash used by working capital activities. Cash Flows from Investing Activities Net cash used in investing activities was $133.4 million for the nine months ended April 30, 2026 compared to net cash used in investing activities of $178.6 million during the nine months ended April 30, 2025. The $45.2 million decrease in cash used was primarily due to higher proceeds from the sales and maturities of available-for-sale securities, relative to purchases, compared to the same period a year ago of $80.2 million, partially offset by a net $17.7 million impact from strategic investment activity, an increase of $6.7 million in net cash paid as purchase consideration for business acquisitions, an increase in purchases of property and equipment primarily due to new office build outs of $7.6 million, and an increase in capitalized software development costs of $3.0 million. Cash Flows from Financing Activities Net cash used in financing activities for the nine months ended April 30, 2026 was $378.5 million compared to $81.6 million provided by financing activities for the nine months ended April 30, 2025. This $460.1 million increase in cash used was primarily due to $392.4 million in cash paid for shares repurchased under the authorized and approved share repurchase programs, and $2.6 million from lower proceeds from stock option exercises, offset by $13.4 million of proceeds received from the issuance of common stock under the employee stock purchase plan. Additionally, during the nine months ended April 30, 2025, $80.5 million in net cash was received related to the issuance of the 2029 Convertible Senior Notes and related capped calls, in addition to the retirement and maturity of the 2025 Convertible Senior Notes, and $2.1 million was used to establish our revolving credit facility which did not recur in the current year. Commitments and Contractual Obligations There have been no material changes in our contractual obligations and commitments other than in the ordinary course of business since our fiscal year ended July 31, 2025. See our Annual Report on Form 10-K for the fiscal year ended July 31, 2025 for additional information regarding our contractual obligations. Off-Balance Sheet Arrangements Through April 30, 2026, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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