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 2026. 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 2025 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

Trimble is a leading technology solutions and platform provider, enabling office professionals and field workers to connect their workflows and industry lifecycles, driving a more productive, efficient, and sustainable future. With a focus on the industries that build, maintain, and move the world, the comprehensive depth and breadth of our solutions are transforming the way the world works, making it easier for Trimble customers to focus on what matters—getting the job done right.

Trimble offers a diverse range of coherent capabilities that connect applications, data, workflows, and mobile technologies to more efficiently orchestrate work, often in mixed stakeholder, mixed user, and mixed fleet environments. We deploy AI, Generative AI, Machine Learning, Computer Vision, and similar technologies into our solutions across our business segments to deliver customer value through process automation and operational insights.

Our representative customers include asset owners; general and specialty contractors; architects, engineers and designers; surveyors; energy and utility companies; transportation shippers and carriers, as well as state, federal, and municipal governments.

Our growth strategy is centered on multiple elements:

• Continue to execute on our Connect & Scale strategy, incorporating AI capabilities;

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

• Focus on platforms, software, services, and data;

• 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 to sustained growth in revenue and profitability, evolving into a more streamlined and resilient 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 $2.4 billion, which represents growth of 12% year-over-year at the end of the first quarter of 2026. Excluding the impact of foreign currency, acquisitions, and divestitures, organic ARR growth was 12%. 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% of total revenue for the first quarter of both 2026 and 2025. Additionally, we continue to maintain focus on increasing our mix of higher margin recurring revenue, which was accelerated by recent divestitures.

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 “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 13 acquisitions and 25 divestitures that we have completed since 2020.

Table of Contents

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.

Macroeconomic Conditions

Macroeconomic conditions continue to present significant challenges globally, driven by geopolitical tensions, such as the conflict in the Middle East, tariff and trade policies, exchange rate and interest rate volatility, and persistent inflationary pressures.

The recent conflict in the Middle East may result in increased inflationary pressure and economic uncertainty. Additionally, the heightened trade tensions and related uncertainty of tariffs, potential refunds of certain tariffs, and imposed export control restrictions between the United States and its trading partners create additional volatility. The extent and duration of the Middle East conflict and 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.

If there was a deterioration in the global economy, the economies of the countries or regions where our customers are located or do business, or the industries that we or our customers serve, the demand for our products and services may decrease. We are closely monitoring global developments.

Table of Contents

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
			2026						2025						Dollar Change						% Change
(In millions, except per share amounts)
Revenue:
Product			$	311.2					$	271.6					$	39.6					15%
Subscription and services			628.7						569.0						59.7						10%
Total revenue			$	939.9					$	840.6					$	99.3					12%
Gross margin			$	646.3					$	560.8					$	85.5					15%
Gross margin as a % of revenue			68.8		%				66.7		%
Operating income			$	144.0					$	97.5					$	46.5					48%
Operating income as a % of revenue			15.3		%				11.6		%
Diluted earnings per share			$	0.42					$	0.27					$	0.15					56%
Non-GAAP operating income (1)			$	243.2					$	198.2					$	45.0					23%
Non-GAAP operating income as a % of revenue (1)			25.9		%				23.6		%
Non-GAAP diluted earnings per share (1)			$	0.79					$	0.61					$	0.18					30%
Annualized Recurring Revenue (1)			$	2,434.6					$	2,176.5					$	258.1					12%

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

Table of Contents

First Quarter of 2026 as Compared to 2025

Revenue

Change versus the corresponding period in 2025						First Quarter of 2026
			% Change
						Product						Subscription and Services						Total Revenue
Change in Revenue						15		%				10		%				12		%
Divestitures						(2)		%				(3)		%				(3)		%
Foreign currency exchange						3		%				2		%				3		%
Organic growth						14		%				11		%				12		%

Total organic revenue increased for the first quarter from both strong product demand and subscription and services growth.

Organic product revenue increased for the first quarter primarily due to strong end-user demand for civil construction solutions and revenue growth in surveying products.

Organic subscription and services revenue increased for the first quarter due to subscription growth across all segments, most notably, in AECO.

Gross Margin

Gross margin and gross margin as a percentage of revenue increased for the first quarter due to the improved mix of higher margin subscription and software term license sales, as well as the divestiture of lower margin businesses.

Operating Income

Operating income and operating income as a percentage of revenue increased for the first quarter primarily due to organic revenue and gross margin expansion, and to a lesser extent, lower acquisition and divestiture transaction expenses. In addition to organic revenue and gross margin expansion, operating income as a percentage of revenue was favorably impacted by the loss of lower margin divestiture income.

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
			2026						2025						Dollar Change						% Change
(In millions)
Research and development			$	169.5					$	158.5					$	11.0					7%
Percentage of revenue			18.0		%				18.9		%
Sales and marketing			$	176.1					$	153.2					$	22.9					15%
Percentage of revenue			18.7		%				18.2		%
General and administrative			$	126.7					$	121.5					$	5.2					4%
Percentage of revenue			13.5		%				14.5		%
Total			$	472.3					$	433.2					$	39.1					9%

R&D expense increased for the first quarter primarily due to foreign exchange rate fluctuation, increased compensation expenses, software costs, and professional service costs, partially offset by the impact of divestitures. We believe that developing and introducing new solutions, including AI, 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 marketing and consulting expenses related to revenue growth, as well as higher compensation expenses including commissions, partially offset by the impact of the divestitures.

G&A expense increased for the first quarter primarily due to higher compensation expenses including incentives, partially offset by lower professional services and transaction expenses.

Table of Contents

Amortization of Purchased Intangible Assets

The following table shows amortization of purchased intangible assets for the periods indicated:

			First Quarter of
			2026						2025						Dollar Change						% Change
(In millions)
Cost of sales			$	16.1					$	16.4					$	(0.3)					(2)%
Operating expenses			27.1						25.6						1.5						6%
Total amortization expense of purchased intangibles			$	43.2					$	42.0					$	1.2					3%
Total amortization expense of purchased intangibles as a percentage of revenue			5		%				5		%

Total amortization expense of purchased intangibles slightly increased for the first quarter primarily due to foreign currency exchange impacts, partially offset by the expiration of prior years’ acquisition amortization.

Non-Operating (Expense) Income, Net

The following table shows non-operating (expense) income, net for the periods indicated:

			First Quarter of
			2026						2025						Dollar Change						% Change
(In millions)
Interest expense, net			$	(19.5)					$	(15.6)					$	(3.9)					25%
Income from equity method investments, net			0.8						1.0						(0.2)						(20)%
Other income, net			6.0						3.5						2.5						71%
Total non-operating expense, net			$	(12.7)					$	(11.1)					$	(1.6)					14%

Non-operating expense, net increased for the first quarter primarily due to lower interest income from lower average cash balances, partially offset by lower foreign currency exchange losses reported in other income,net.

Income Tax Provision

For the first quarter of 2026, our effective income tax rate was 24.7%, as compared to 22.8% in the corresponding period in 2025. The increase was primarily due to lower deferred tax benefits from net CFC tested income, partially offset by lower related cash taxes.

We accounted for the tax implications of the enacted OBBBA and the impact to our 2026 tax rate is immaterial. We believe that OBBBA will not have a material impact on our future effective income tax rate.

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. These results are not necessarily in conformance with U.S. GAAP. For additional discussion of our segments, refer to Note 7, Segment and Geographic Information of this report.

Table of Contents

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

			First Quarter of
			2026						2025						Dollar Change						% Change
(In millions)
AECO
Segment revenue			$	391.1					$	335.4					$	55.7					17%
Segment revenue as a % of total revenue			42		%				40		%
Segment operating income			$	123.1					$	91.6					31.5						34%
Segment operating income as a % of segment revenue			31.5		%				27.3		%
Field Systems
Segment revenue			$	409.2					$	359.2					50.0						14%
Segment revenue as a % of total revenue			43		%				43		%
Segment operating income			$	118.0					$	106.6					11.4						11%
Segment operating income as a % of segment revenue			28.8		%				29.7		%
T&L
Segment revenue			$	139.6					$	146.0					(6.4)						(4)%
Segment revenue as a % of total revenue			15		%				17		%
Segment operating income			$	33.8					$	26.1					7.7						30%
Segment operating income as a % of segment revenue			24.2		%				17.9		%

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

			First Quarter of
			2026						2025
(In millions)
Total segment operating income			$	274.9					$	224.3
Unallocated general corporate expenses			(31.7)						(26.1)
Amortization of purchased intangible assets			(43.2)						(42.0)
Acquisition / divestiture items			(5.9)						(8.9)
Stock-based compensation / deferred compensation			(43.7)						(37.5)
Restructuring and other costs			(6.4)						(12.3)
Consolidated operating income			144.0						97.5
Total non-operating expense, net			(12.7)						(11.1)
Consolidated income before taxes			$	131.3					$	86.4

AECO

						First Quarter of 2026
Change versus the corresponding period in 2025						% Change
Change in Revenue - AECO						17		%
Foreign currency exchange						3		%
Organic growth						14		%

Organic revenue increased for the first quarter due to strong demand for subscription offerings and, to a lesser extent, software term licenses. Revenue benefited from cumulative growth along with an expansion of customers across many products, with the largest impacts resulting from Construction Management Systems, Structures, and Architecture & Design.

Operating income and operating income as a percentage of revenue increased for the first quarter primarily due to organic revenue and gross margin expansion.

Table of Contents

Field Systems

												First Quarter of 2026
Change versus the corresponding period in 2025												% Change
Change in Revenue - Field Systems												14		%
Foreign currency exchange												2		%
Organic growth												12		%

Organic revenue increased for the first quarter primarily due to strong end-user demand for Civil Construction and Surveying solutions.

Operating income increased for the first quarter primarily due to organic revenue growth. Operating income as a percentage of revenue slightly decreased primarily due to higher operating expenses in marketing and compensation to support long-term growth initiatives.

T&L

												First Quarter of 2026
Change versus the corresponding period in 2025												% Change
Change in Revenue - T&L												(4)		%
Divestitures												(15)		%
Foreign currency exchange												5		%
Organic growth												6		%

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

Operating income and operating income as a percentage of revenue increased for the first quarter primarily due to organic recurring revenue and gross margin expansion.

LIQUIDITY AND CAPITAL RESOURCES

			As of
			First Quarter of						Year End
			2026						2025						Dollar Change						% Change
(In millions, except percentages)
Cash and cash equivalents			$	234.1					$	253.4					$	(19.3)					(8)		%
As a percentage of total assets			2.6		%				2.7		%
Principal balance of outstanding debt			$	1,420.3					$	1,400.0					$	20.3					1		%
			First Quarter of
			2026						2025						Dollar Change						% Change
(In millions)
Net cash provided by operating activities			$	274.7					$	155.6					$	119.1					77		%
Net cash used in investing activities			(5.1)						(14.5)						9.4						(65)		%
Net cash used in financing activities			(285.9)						(611.1)						325.2						(53)		%
Effect of exchange rate changes on cash and cash equivalents			(3.0)						12.2						(15.2)						(125)		%
Net decrease in cash and cash equivalents			$	(19.3)					$	(457.8)

Operating Activities

The increase in cash provided by operating activities was primarily driven by higher operating income, lower cash taxes paid, and lower incentive bonus payments.

Table of Contents

Investing Activities

The decrease in cash used in investing activities was primarily due to higher cash divested in the prior year as part of the Mobility divestiture.

Financing Activities

The decrease in cash used in financing activities was primarily driven by $304.6 million in lower cash paid for repurchases of common stock compared to 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 additional software and technology expenditures related to our Connect & Scale strategy, debt service, acquisitions, and any stock repurchases under the stock repurchase program.

In December 2025, we entered into the 2025 Credit Facility, which replaced the 2022 Credit Facility. The 2025 Credit Facility contains an option to increase the borrowing from $1.25 billion up to $1.75 billion with lender approval. As of April 3, 2026, $10.0 million was outstanding under the 2025 Credit Facility.

Subsequent to the end of the first quarter of 2026, we borrowed $250 million from our credit facilities to finance an acquisition. See Note 14, Subsequent Events for further details.

The enacted OBBBA permanently repealed the domestic R&D capitalization requirement. As a result, we expect cash tax reductions of approximately $53 million in 2026.

Our cash requirements have not otherwise materially changed since the 2025 Form 10-K.

Table of Contents

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 measures. 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 certain 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 revenue 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
						2026									2025
						Dollar			% of						Dollar			% of
(In millions, except per share amounts)						Amount			Revenue						Amount			Revenue
REVENUE:
GAAP revenue:						$	939.9								$	840.6
GROSS MARGIN:
GAAP gross margin:						$	646.3		68.8		%				$	560.8		66.7		%
Amortization of purchased intangible assets			(A)			16.1									16.4
Stock-based compensation / deferred compensation			(C)			4.2									4.3
Restructuring and other costs			(D)			0.3									0.2
Non-GAAP gross margin:						$	666.9		71.0		%				$	581.7		69.2		%
OPERATING EXPENSES:
GAAP operating expenses:						$	502.3		53.4		%				$	463.3		55.1		%
Amortization of purchased intangible assets			(A)			(27.1)									(25.6)
Acquisition / divestiture items			(B)			(5.9)									(8.9)
Stock-based compensation / deferred compensation			(C)			(39.5)									(33.2)
Restructuring and other costs			(D)			(6.1)									(12.1)
Non-GAAP operating expenses:						$	423.7		45.1		%				$	383.5		45.6		%
OPERATING INCOME:
GAAP operating income:						$	144.0		15.3		%				$	97.5		11.6		%
Amortization of purchased intangible assets			(A)			43.2									42.0
Acquisition / divestiture items			(B)			5.9									8.9
Stock-based compensation / deferred compensation			(C)			43.7									37.5
Restructuring and other costs			(D)			6.4									12.3
Non-GAAP operating income:						$	243.2		25.9		%				$	198.2		23.6		%

Table of Contents

						First Quarter of
						2026									2025
NON-OPERATING EXPENSE, NET:
GAAP non-operating expense, net:						$	(12.7)								$	(11.1)
Acquisition / divestiture items			(B)			(4.1)									(5.3)
Deferred compensation			(C)			(2.0)									0.9
Restructuring and other costs			(D)			1.9									0.1
Non-GAAP non-operating expense, net:						$	(16.9)								$	(15.4)
									Tax Rate %									Tax Rate %
									(F)									(F)
INCOME TAX PROVISION:
GAAP income tax provision:						$	32.4		24.7		%				$	19.7		22.8		%
Non-GAAP items tax effected			(E)			7.0									11.7
Non-GAAP income tax provision:						$	39.4		17.4		%				$	31.4		17.2		%
NET INCOME:
GAAP net income:						$	98.9								$	66.7
Amortization of purchased intangible assets			(A)			43.2									42.0
Acquisition / divestiture items			(B)			1.8									3.6
Stock-based compensation			(C)			41.7									38.4
Restructuring and other costs			(D)			8.3									12.4
Non-GAAP tax adjustments			(E)			(7.0)									(11.7)
Non-GAAP net income:						$	186.9								$	151.4
DILUTED NET INCOME PER SHARE:
GAAP diluted net income per share:						$	0.42								$	0.27
Amortization of purchased intangible assets			(A)			0.18									0.17
Acquisition / divestiture items			(B)			0.01									0.01
Stock-based compensation			(C)			0.18									0.16
Restructuring and other costs			(D)			0.03									0.05
Non-GAAP tax adjustments			(E)			(0.03)									(0.05)
Non-GAAP diluted net income per share:						$	0.79								$	0.61
ADJUSTED EBITDA:
GAAP operating income:						$	144.0		15.3		%				$	97.5		11.6		%
Amortization of purchased intangible assets			(A)			43.2									42.0
Acquisition / divestiture items			(B)			5.9									8.9
Stock-based compensation / deferred compensation			(C)			43.7									37.5
Restructuring and other costs			(D)			6.4									12.3
Non-GAAP operating income:						243.2			25.9		%				198.2			23.6		%
Depreciation expense and cloud computing amortization						11.8									12.0
Income from equity method investments, net						2.7									1.9
Adjusted EBITDA						$	257.7		27.4		%				$	212.1		25.2		%

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.

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

Table of Contents

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 (expense) income, 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 the GAAP income tax provision adjusted for the tax effects of the non-GAAP pre-tax adjustments (A) through (D), excluding certain tax charges and benefits such as net deferred tax impacts resulting from tax amortization related to a non-U.S. intercompany transfer of intellectual property and certain acquisitions, deferred tax impacts from net CFC tested income, significant reserve releases upon the expiration of statute of limitations and audit closures, and tax law changes. We believe this measure helps investors because it provides for consistent treatment of excluded items in our non-GAAP presentation.

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 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 costs composed of termination benefits related to reductions in employee headcount, closure or exit of facilities, and cancellation of certain contracts, and other costs composed of one-time incremental expenses resulting from the re-audit and related remediation of control deficiencies. Non-GAAP non-operating expense net, excludes our proportionate share of items recorded in

Table of Contents

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 represents the income tax effect of non-GAAP pre-tax adjustments, excluding certain tax charges and benefits, which reconcile the GAAP income tax provision to the non-GAAP income tax provision.

(F).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.