Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates during the first quarter of 2025. For a complete discussion of our critical accounting policies and estimates, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2024 Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

For a summary of recent accounting pronouncements applicable to our Condensed Consolidated Financial Statements, refer to Note 1 “Overview and Accounting Policies” of this report.

EXECUTIVE LEVEL OVERVIEW

We are a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Our comprehensive work process solutions are used across a range of industries, including architecture, building construction, civil engineering, geospatial, survey and mapping, natural resources, utilities, transportation, and government. Our representative customers include construction owners, contractors, engineering and construction firms, surveying companies, energy and utility companies, trucking companies, and state, federal, and municipal governments.

Our growth strategy is centered on multiple elements:

  • Execute on our Connect & Scale strategy;

  • Deliver customer outcomes that can enable productivity, quality, safety, transparency, and environmental sustainability;

  • Focus on software and services;

  • Address attractive markets with significant growth and profitability potential;

  • Capitalize on domain knowledge and technological innovation that benefit a diverse customer base;

  • Drive geographic expansion with a localization strategy;

  • Optimize go-to-market strategies to best access our markets; and

  • Pursue strategic and targeted acquisitions, divestitures, joint ventures, and investments.

Our focus on these growth drivers has led over time to growth in revenue and profitability and an increasingly diversified business model. We continue to experience a shift toward a more significant mix of recurring revenue as demonstrated by our success in driving annualized recurring revenue (“ARR”) of $2,176.5 million, which represents growth of 7% year-over-year at the end of the first quarter of 2025. Excluding the impact of foreign currency, acquisitions, and divestitures, organic ARR growth was 15%. This shift toward recurring revenue has positively impacted our revenue mix, growth, and profitability over time and is leading to improved visibility in our businesses. Our software, services, and recurring revenue represented 78% and 73% of total revenue for the first quarter of 2025 and 2024. Additionally, we continue to maintain focus on increasing our mix of recurring revenue, which is accelerated by the Ag divestiture that closed in the second quarter of 2024 and the Mobility divestiture that closed in the first quarter of 2025.

As our solutions have expanded, our go-to-market model has also evolved with a balanced mix between direct, distribution, and OEM customers as well as enterprise-level customer relationships.

Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, we refer to organic revenue growth, which is a non-GAAP measure. For a full definition of ARR, organic ARR, and organic revenue growth as used in this discussion and analysis, refer to the “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” below in this Item 2.

Impact of Recent Events on Our Business

Acquisitions and Divestitures

We acquire businesses that align with our long-term growth strategies, including our strategic product roadmap and, conversely, we divest certain businesses that no longer fit those strategies. This is demonstrated by the 12 acquisitions and 23 divestitures that we have completed since 2020, including the Ag divestiture in the second quarter of 2024 and the Mobility divestiture in the first quarter of 2025.

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Mobility Divestiture

On February 8, 2025, we completed the sale of our Mobility business to Platform Science in exchange for equity ownership interests with a fair value of $253.9 million. The fair value was based on unobservable inputs, including discounted cash flow projections, market comparables, and an option pricing model. Following the closing of the transaction, we own, or have rights to acquire, 32.5% of Platform Science’s expanded business comprised of (i) shares of preferred stock, with certain liquidation preferences, that represent 28.5% ownership, and (ii) common stock warrants allowing us the rights to acquire 4% of additional ownership.

Upon closing of the transaction, we deconsolidated $277.3 million of net assets including $145.3 million of goodwill, and we recorded our equity investment at its fair value under the measurement alternative election, which represents a non-cash investing activity. As a result, we recognized a cumulative, pre-tax loss of $30.6 million from the held for sale date in the third quarter of 2024 to the closing date. Mobility was reported as a part of our T&L segment.

The combined business aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems.

Ag Divestiture

On April 1, 2024, we completed the sale and contribution of our Ag business to AGCO in exchange for $1.9 billion of cash proceeds and an equity ownership interest in PTx Trimble, a joint venture (the “JV”) that was formed by Trimble and AGCO, with a fair value of $275.6 million. The fair value was based on a combination of the equity value, primarily the transaction price, and an option pricing model for a put and call option. Following the closing of the transaction, we own 15% of the JV.

Upon closing of the transaction, we deconsolidated $457.3 million of net assets, including $357.4 million of goodwill, and we recorded our equity investment at its fair value under the equity method of accounting, which represents a non-cash investing activity. As a result, we recognized a pre-tax gain of $1.7 billion in the second quarter of 2024, which includes the gain for our retained 15% ownership interest in the JV. The sale and contribution of the Ag business excluded certain GNSS and guidance technologies. Ag was reported as a part of our Field Systems segment.

The formation of the JV is expected to better serve farmers with factory fit and aftermarket applications in the mixed fleet precision agriculture market to help farmers drive productivity, efficiency, and sustainability.

Macroeconomic Conditions

Macroeconomic conditions continue to present significant challenges globally, driven by geopolitical tensions, tariff and trade policies, exchange rate and interest rate volatility, and persistent inflationary pressures. The heightened trade tensions and related imposition of tariffs between the United States and its trading partners, the extent and duration of these tariffs, and their impact on global economic conditions remain uncertain and depend on various factors, including international negotiations, policy responses, potential exemptions, and shifts in global supply and demand. These evolving dynamics may have a negative impact on our business operations; however, our shift away from hardware-centric business towards a more significant mix of recurring revenue is expected to decrease such impacts. We are closely monitoring global trade developments and considering ways to mitigate potential impacts on our business.

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RESULTS OF OPERATIONS

Overview

The following table shows revenue by category, gross margin and gross margin as a percentage of revenue, operating income and operating income as a percentage of revenue, diluted earnings per share, and annualized recurring revenue compared for the periods indicated:

First Quarter of
20252024Dollar Change% Change
(In millions, except per share amounts)
Revenue:
Product$271.6$367.1$(95.5)(26)%
Subscription and services569.0586.2(17.2)(3)%
Total revenue$840.6$953.3$(112.7)(12)%
Gross margin$560.8$593.6$(32.8)(6)%
Gross margin as a % of revenue66.7%62.3%
Operating income$97.5$109.2$(11.7)(11)%
Operating income as a % of revenue11.6%11.5%
Diluted earnings per share$0.27$0.23$0.0417%
Non-GAAP operating income (1)$198.2$234.4$(36.2)(15)%
Non-GAAP operating income as a % of revenue (1)23.6%24.6%
Non-GAAP diluted earnings per share (1)$0.61$0.64$(0.03)(5)%
Annualized Recurring Revenue (“ARR”) (1)$2,176.5$2,028.6$147.97%

(1) Refer to “Supplemental Disclosure of Non-GAAP Financial Measures and Annualized Recurring Revenue” of this report for definitions.

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First Quarter of 2025 as Compared to 2024

Revenue

Change versus the corresponding period in 2024First Quarter of 2025
% Change
ProductSubscription and ServicesTotal Revenue
Change in Revenue(26)%(3)%(12)%
Acquisitions3%1%1%
Divestitures(27)%(7)%(14)%
Foreign currency exchange(1)%(1)%(1)%
Organic growth(1)%4%2%

Note that the first quarter of 2025 began on January 4, 2025 compared to the first quarter of 2024, which began on December 30, 2023. This significantly impacted overall Company and AECO year-over-year comparisons due to the timing of revenue recognition for January 1 annual software term license renewals (“software renewals”). At an overall company level, the estimated impact of the software renewals was $49.6 million or a 5% negative impact on revenue growth. For AECO, the estimated impact was $49.0 million or a 14% negative impact on AECO segment revenue growth.

Organic total revenue increased for the first quarter due to strong subscription growth across all segments, partially offset by prior year software renewals.

Organic product revenue was flat for the first quarter primarily due to relatively strong end-user demand for Civil Construction solutions, offset by a decline in Surveying due to an unusually large order in the prior year.

Organic subscription and services revenue increased for the first quarter primarily due to subscription growth across all segments, with the biggest impact in AECO, partially offset by prior year software renewals.

Gross Margin

Gross margin decreased for the first quarter primarily due to the margin associated with the divestitures and prior year software renewals, partially offset by the growth of higher margin subscription sales.

Gross margin as a percentage of revenue increased for the first quarter due to growth of higher margin subscription sales and the divestiture of lower margin businesses, partially offset by the impact of prior year software renewals.

Operating Income

Operating income decreased for the first quarter primarily due to the impact of divestitures and prior year software renewals, partially offset by organic growth.

Operating income as a percentage of revenue was relatively flat.

Research and Development, Sales and Marketing, and General and Administrative Expense

The following table shows research and development (“R&D”), sales and marketing (“S&M”), and general and administrative (“G&A”) expense, along with these expenses as a percentage of revenue for the periods indicated:

First Quarter of
20252024Dollar Change% Change
(In millions)
Research and development$158.5$170.2$(11.7)(7)%
Percentage of revenue18.9%17.9%
Sales and marketing$153.2$146.8$6.44%
Percentage of revenue18.2%15.4%
General and administrative$121.5$134.1$(12.6)(9)%
Percentage of revenue14.5%14.1%
Total$433.2$451.1$(17.9)(4)%

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R&D expense decreased for the first quarter primarily due to the impact of the divestitures, partially offset by higher compensation expense. We believe that the development and introduction of new solutions are critical to our future success, and we expect to continue the active development of new products.

S&M expense increased for the first quarter primarily due to higher compensation expense, including commissions, as well as higher marketing and consulting costs related to AECO revenue growth, partially offset by the impact of the divestitures.

G&A expense decreased for the first quarter primarily due to the divestitures, partially offset by higher investment costs associated with our Connect & Scale strategy and higher incentive compensation.

Amortization of Purchased Intangible Assets

First Quarter of
20252024Dollar Change% Change
(In millions)
Cost of sales$16.4$27.8$(11.4)(41)%
Operating expenses25.626.7(1.1)(4)%
Total amortization expense of purchased intangibles$42.0$54.5$(12.5)(23)%
Total amortization expense of purchased intangibles as a percentage of revenue5%6%

Total amortization expense of purchased intangibles decreased for the first quarter primarily due to the expiration of prior years’ acquisition amortization.

Non-Operating (Expense) Income, Net

The components of non-operating (expense) income, net, were as follows:

First Quarter of
20252024Dollar Change% Change
(In millions)
Interest expense, net$(15.6)$(45.2)$29.6(65)%
Income from equity method investments, net1.05.6(4.6)(82)%
Other income, net3.53.40.13%
Total non-operating expense, net$(11.1)$(36.2)$25.1(69)%

Non-operating expense, net decreased for the first quarter primarily due to lower interest expense after the debt repayment made in 2024.

Income Tax Provision

For the first quarter of 2025, our effective income tax rate was 22.8%, as compared to 21.6% in the corresponding period in 2024. The increase was primarily due to lower U.S. federal R&D credit, partially offset by higher stock-based compensation deductions.

Results by Segment

We report our financial performance, including revenue and operating income, based on three reportable segments: AECO, Field Systems, and T&L.

Our CODM views and evaluates operations based on the results of our reportable operating segments under our management reporting system. For additional discussion of our segments, refer to Note 7 “Reporting Segment and Geographic Information” of this report.

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The following table is a summary of revenue and operating income by segment compared for the periods indicated:

First Quarter of
20252024Dollar Change% Change
(In millions)
AECO
Segment revenue$335.4$339.1$(3.7)(1)%
Segment revenue as a % of total revenue40%36%
Segment operating income$91.6$126.7(35.1)(28)%
Segment operating income as a % of segment revenue27.3%37.4%
Field Systems
Segment revenue$359.2$419.2(60.0)(14)%
Segment revenue as a % of total revenue43%44%
Segment operating income$106.6$98.38.38%
Segment operating income as a % of segment revenue29.7%23.4%
T&L
Segment revenue$146.0$195.0(49.0)(25)%
Segment revenue as a % of total revenue17%20%
Segment operating income$26.1$36.3(10.2)(28)%
Segment operating income as a % of segment revenue17.9%18.6%

The following table is a reconciliation of our consolidated segment operating income to consolidated income before taxes:

First Quarter of
20252024
(In millions)
Total segment operating income$224.3$261.3
Unallocated general corporate expenses(26.1)(26.9)
Amortization of purchased intangible assets(42.0)(54.5)
Acquisition / divestiture items(8.9)(23.9)
Stock-based compensation / deferred compensation(37.5)(38.8)
Restructuring and other costs(12.3)(8.0)
Consolidated operating income97.5109.2
Total non-operating expense, net(11.1)(36.2)
Consolidated income before taxes$86.4$73.0

AECO

First Quarter of 2025
Change versus the corresponding period in 2024% Change
Change in Revenue - AECO(1)%
Acquisitions—%
Divestitures—%
Foreign currency exchange(1)%
Organic growth—%

Organic revenue was flat for the first quarter due to increased subscription revenue, which benefited from cumulative growth along with an expansion of customers across many products, with the largest impacts resulting from Viewpoint, Architecture & Design, and MEP products. The increases were largely offset by the impact of prior year software renewals, primarily for Structures products.

Operating income and operating income as a percentage of revenue decreased for the first quarter primarily due to the impact of prior year software renewals, partially offset by increased subscription revenue and associated gross margin expansion.

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Field Systems

First Quarter of 2025
Change versus the corresponding period in 2024% Change
Change in Revenue - Field Systems(14)%
Acquisitions2%
Divestitures(21)%
Foreign currency exchange—%
Organic growth5%

Organic revenue increased for the first quarter primarily due to relatively strong end-user demand for Civil Construction solutions, offset by a decline in Surveying due to an unusually large order in the prior year. Surveying end-user demand was relatively strong; however, dealers tightly managed and drew down on their pre-existing inventories.

Operating income and operating income as a percentage of revenue increased for the first quarter due to organic revenue growth and gross margin expansion, including a higher mix of software and subscription revenue, partially offset by the loss of lower margin divestiture income.

T&L

First Quarter of 2025
Change versus the corresponding period in 2024% Change
Change in Revenue - T&L(25)%
Acquisitions2%
Divestitures(26)%
Foreign currency exchange(2)%
Organic growth1%

Organic revenue increased for the first quarter primarily driven by Transporeon and MAPS subscription revenue growth.

Operating income and operating income as a percentage of revenue decreased for the first quarter primarily due to the loss of divestiture income.

LIQUIDITY AND CAPITAL RESOURCES

As of
First Quarter ofYear End
20252024Dollar Change% Change
(In millions, except percentages)
Cash and cash equivalents (1)$290.0$747.8$(457.8)(61)%
As a percentage of total assets3.3%7.9%
Principal balance of outstanding debt$1,400.0$1,400.0$——%
First Quarter of
20252024Dollar Change% Change
(In millions)
Net cash provided by operating activities$155.6$233.8$(78.2)(33)%
Net cash used in investing activities(14.5)(3.5)(11.0)314%
Net cash used in financing activities(611.1)(202.2)(408.9)202%
Effect of exchange rate changes on cash and cash equivalents12.2(5.4)17.6(326)%
Net (decrease) increase in cash and cash equivalents$(457.8)$22.7

(1) Includes $9.0 million of cash and cash equivalents classified as held for sale as of year end 2024.

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Operating Activities

The decrease in cash provided by operating activities was primarily driven by higher tax and incentive bonus payments, partially offset by reductions in net working capital requirements associated with a greater mix of software and subscription revenue.

Investing Activities

The increase in cash used in investing activities was primarily related to the Mobility divestiture that closed in the current year.

Financing Activities

The increase in cash used in financing activities was primarily driven by $627.4 million in repurchases of common stock in the current year, as compared to $175.0 million of repurchases in the prior year.

Cash and Cash Equivalents

We believe that our cash and cash equivalents and available borrowing capacity under our existing lines of credit, along with cash provided by operations, will be sufficient in the foreseeable future to meet our anticipated operating cash needs, including expenditures related to our Connect & Scale strategy, debt service, acquisitions, and any stock repurchases under the stock repurchase program.

Our 2022 credit facility allows us to borrow up to $1.25 billion, with an option to increase the borrowings for up to $1.75 billion with lender approval. As of April 4, 2025, there was no outstanding debt under the 2022 credit facility.

In the second quarter of 2024, we completed the Ag divestiture and received $1.9 billion of cash proceeds, subject to working capital adjustments. Approximately half of the proceeds were used in 2024 to pay down debt and make a tax payment of $122.0 million related to the transaction. In the first quarter of 2025, we used $627.4 million of proceeds to repurchase stock. We expect to use the remaining proceeds to pay for $253.0 million of taxes becoming due in the second quarter of 2025.

Our cash requirements have not otherwise materially changed since the 2024 Form 10-K.

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SUPPLEMENTAL DISCLOSURE OF NON-GAAP FINANCIAL MEASURES AND ANNUALIZED RECURRING REVENUE

To supplement our consolidated financial information, we included non-GAAP financial measures, which are not meant to be considered in isolation or as a substitute for comparable GAAP. We believe non-GAAP financial measures provide useful information to investors and others in understanding our “core operating performance”, which excludes (i) the effect of non-cash items and certain variable charges not expected to recur; and (ii) transactions that are not meaningful in comparison to our past operating performance or not reflective of ongoing financial results. Lastly, we believe that our core operating performance offers a supplemental measure for period-to-period comparisons and can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors.

Organic revenue growth is a non-GAAP measure that refers to revenue excluding the impacts of (i) foreign currency translation and (ii) acquisitions and divestitures that closed in the prior 12 months. We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that are not indicative of ongoing performance or impact comparability with the prior year. We provide reconciliation tables showing the change in revenue growth to organic revenue growth in the “Results of Operations” section found earlier in this Item 2.

In addition to providing non-GAAP financial measures, we disclose ARR to give the investors supplementary indicators of the value of our current recurring revenue contracts. ARR represents the estimated annualized value of recurring revenue. ARR is calculated by taking our subscription and maintenance and support for the current quarter and adding the portion of the contract value of all our term licenses attributable to the current quarter, then dividing that sum by the number of days in the quarter and then multiplying that quotient by 365. Organic ARR refers to annualized recurring revenue excluding the impacts of (i) foreign currency translation, and (ii) acquisitions and divestitures that closed in the prior 12 months. ARR and organic ARR should be viewed independently of revenue and deferred revenue as they are performance measures and are not intended to be combined with or to replace either of those items.

The non-GAAP financial measures, definitions, and explanations to the adjustments to comparable GAAP measures are included below:

First Quarter of
20252024
Dollar% ofDollar% of
(In millions, except per share amounts)AmountRevenueAmountRevenue
REVENUE:
GAAP revenue:$840.6$953.3
GROSS MARGIN:
GAAP gross margin:$560.866.7%$593.662.3%
Amortization of purchased intangible assets(A)16.427.8
Stock-based compensation / deferred compensation(C)4.34.3
Restructuring and other costs(D)0.21.4
Non-GAAP gross margin:$581.769.2%$627.165.8%
OPERATING EXPENSES:
GAAP operating expenses:$463.355.1%$484.450.8%
Amortization of purchased intangible assets(A)(25.6)(26.7)
Acquisition / divestiture items(B)(8.9)(23.9)
Stock-based compensation / deferred compensation(C)(33.2)(34.5)
Restructuring and other costs(D)(12.1)(6.6)
Non-GAAP operating expenses:$383.545.6%$392.741.2%
OPERATING INCOME:
GAAP operating income:$97.511.6%$109.211.5%
Amortization of purchased intangible assets(A)42.054.5
Acquisition / divestiture items(B)8.923.9
Stock-based compensation / deferred compensation(C)37.538.8
Restructuring and other costs(D)12.38.0
Non-GAAP operating income:$198.223.6%$234.424.6%

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First Quarter of
20252024
NON-OPERATING (EXPENSE) INCOME, NET:
GAAP non-operating expense, net:$(11.1)$(36.2)
Acquisition / divestiture items(B)(5.3)(3.4)
Deferred compensation(C)0.9(2.4)
Restructuring and other costs(D)0.1—
Non-GAAP non-operating expense, net:$(15.4)$(42.0)
Tax Rate %Tax Rate %
(G)(G)
INCOME TAX PROVISION:
GAAP income tax provision:$19.722.8%$15.821.6%
Non-GAAP items tax effected(E)22.025.8
Difference in GAAP and Non-GAAP tax rate(F)(10.3)(8.3)
Non-GAAP income tax provision:$31.417.2%$33.317.3%
NET INCOME:
GAAP net income:$66.7$57.2
Amortization of purchased intangible assets(A)42.054.5
Acquisition / divestiture items(B)3.620.5
Stock-based compensation(C)38.436.4
Restructuring and other costs(D)12.48.0
Non-GAAP tax adjustments(E) - (F)(11.7)(17.5)
Non-GAAP net income:$151.4$159.1
DILUTED NET INCOME PER SHARE:
GAAP diluted net income per share:$0.27$0.23
Amortization of purchased intangible assets(A)0.170.22
Acquisition / divestiture items(B)0.010.08
Stock-based compensation(C)0.160.15
Restructuring and other costs(D)0.050.03
Non-GAAP tax adjustments(E) - (F)(0.05)(0.07)
Non-GAAP diluted net income per share:$0.61$0.64
ADJUSTED EBITDA:
GAAP operating income:$97.511.6%$109.211.5%
Amortization of purchased intangible assets(A)42.054.5
Acquisition / divestiture items(B)8.923.9
Stock-based compensation(C)37.538.8
Restructuring and other costs(D)12.38.0
Non-GAAP operating income:198.223.6%234.424.6%
Depreciation expense and cloud computing amortization12.010.9
Income from equity method investments, net1.95.6
Adjusted EBITDA$212.125.2%$250.926.3%

Non-GAAP Definitions

Non-GAAP gross margin

We define Non-GAAP gross margin as GAAP gross margin, excluding the effects of amortization of purchased intangible assets, stock-based compensation, deferred compensation, and restructuring and other costs. We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions, and manufacturing costs influence our business.

Non-GAAP operating expenses

We define Non-GAAP operating expenses as GAAP operating expenses, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs. We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue.

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Non-GAAP operating income

We define Non-GAAP operating income as GAAP operating income, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and restructuring and other costs. We believe our investors benefit by understanding our non-GAAP operating income trends, which are driven by revenue, gross margin, and spending.

Non-GAAP non-operating expense, net

We define Non-GAAP non-operating expense, net as GAAP non-operating income (expense), net, excluding acquisition/divestiture items, deferred compensation, and restructuring and other costs. We believe this measure helps investors evaluate our non-operating expense trends.

Non-GAAP income tax provision

We define Non-GAAP income tax provision as GAAP income tax provision, excluding charges and benefits such as net deferred tax impacts resulting from the non-U.S. intercompany transfer of intellectual property, deferred tax impacts from global intangible low-taxed income, and significant reserve releases upon the statute of limitations expirations. We believe this measure helps investors because it provides for consistent treatment of excluded items in our non-GAAP presentation and a difference in the GAAP and non-GAAP tax rates.

Non-GAAP net income

We define Non-GAAP net income as GAAP net income, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments. This measure provides a supplemental view of net income trends, which are driven by non-GAAP income before taxes and our non-GAAP tax rate.

Non-GAAP diluted net income per share

We define Non-GAAP diluted net income per share as GAAP diluted net income per share, excluding the effects of amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, restructuring and other costs, and non-GAAP tax adjustments. We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the Company.

Adjusted EBITDA

We define Adjusted EBITDA as non-GAAP operating income plus depreciation expense, cloud computing amortization, and income from equity method investments, net, excluding our proportionate share of items such as goodwill impairment, amortization of purchased intangibles, stock-based compensation, and restructuring costs. Other companies may define Adjusted EBITDA differently. Adjusted EBITDA is a performance measure that we believe offers a useful view of the overall operations of our business because it facilitates operating performance comparisons by removing potential differences caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, depreciation, amortization of purchased intangibles and cloud computing costs, and income from equity method investments, net.

Explanations of Non-GAAP adjustments

(A).Amortization of purchased intangible assets**.** Non-GAAP gross margin and operating expenses exclude the amortization of purchased intangible assets, which primarily represents technology and/or customer relationships already developed.

(B).Acquisition / divestiture items**.** Non-GAAP gross margin and operating expenses exclude costs consisting of external and incremental costs resulting directly from acquisitions, divestitures, and strategic investment activities such as legal, due diligence, integration, and other closing costs, including the acceleration of acquisition stock awards and adjustments to the fair value of earn-out liabilities. Non-GAAP non-operating expense, net, excludes one-time acquisition/divestiture charges, including foreign currency exchange rate gains/losses related to an acquisition, divestiture gains/losses, and strategic investment gains/losses. These are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance.

(C).Stock-based compensation / deferred compensation**.** Non-GAAP gross margin and operating expenses exclude stock-based compensation and income or expense associated with movement in our non-qualified deferred compensation plan liabilities. Changes in non-qualified deferred compensation plan assets, included in non-operating expense, net, offset the income or expense in the plan liabilities.

(D).Restructuring and other costs. Non-GAAP gross margin and operating expenses exclude restructuring and other costs comprised of termination benefits related to reductions in employee headcount and closure or exit of facilities and incremental expenses resulting from the 2023 re-audit. Non-GAAP non-operating expense net, excludes our

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proportionate share of items recorded in income from equity method investment items, such as goodwill impairment, amortization of purchased intangibles, stock-based compensation, and restructuring costs.

(E).Non-GAAP items tax effected**.** This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) through (D) on non-GAAP net income.

(F).Difference in GAAP and non-GAAP tax rate**.** This amount represents the difference between the GAAP and non-GAAP tax rates applied to the non-GAAP operating income plus the non-GAAP non-operating expense, net. The non-GAAP tax rate excludes charges and benefits such as (i) deferred tax impacts from tax amortization relating to a non-U.S. intercompany transfer of intellectual property, (ii) deferred tax impacts from global intangible low-taxed income, and (iii) significant reserve releases upon statute of limitations expirations.

(G).Tax rate percentages**.** These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes.

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