Octave Announces Second Quarter 2026 Financial Results
Rhea-AI Summary
Octave (Nasdaq: OCTV) reported Q2 2026 total revenue of $398 million, down 4% year over year, while recurring revenue rose 6% to $283 million. Annualized recurring revenue reached $1,143 million, up 7% from Q2 2025. Adjusted income from operations was $116 million with a 29% adjusted operating margin, and free cash flow was $93 million (23% margin).
GAAP results were heavily impacted by $2,135 million of non-cash impairment charges, driving a $1,971 million net loss and EPS of $(7.34). Octave completed its spin-off from Hexagon, listed its shares in New York and Stockholm, acquired video software provider VXG, and launched the Octave CoLabs AI collaboration program. The company issued Q3 and full-year 2026 guidance, including full-year revenue of $1,635–$1,665 million and ARR of $1,185–$1,205 million.
Positive
- Recurring revenue $283M, up 6% year-over-year
- ARR $1,143M, 7% year-over-year increase
- Adjusted operating income $116M, 29% margin in Q2 2026
- Free cash flow $93M, 23% margin in Q2 2026
- Operating cash flow $125M with 31% margin in Q2 2026
- 2026 guidance ARR $1,185–$1,205M, 6–8% organic growth
- 2026 adjusted operating margin guided to ~30%, FCF margin ~20%
- Spin-off completed and dual Nasdaq listings (New York, Stockholm)
- VXG acquisition to expand cloud video and physical security offerings
- Cash balance $304M at June 30, 2026
Negative
- Total revenue down 4% year-over-year to $398M in Q2 2026
- GAAP operating loss $2,070M, operating margin (520%) in Q2 2026
- Net loss $1,971M and EPS $(7.34) versus $0.28 prior year
- Impairment charges $2,135M on goodwill and trademarks in Q2 2026
- Goodwill impairment $1,671M after market cap fell below carrying value
- Trademark impairment $464M from brand phase-out and useful-life change
- Total debt $644M versus $304M cash at June 30, 2026
- Adjusted operating income down to $116M from $129M year-over-year
News Explained
The completed separation left a newly issued share structure alongside $304 million of cash and $644 million of debt at June 30.
The completed separation is reflected in the June 30 balance sheet through
The equity statement records a cash payment to Hexagon in connection with the Distribution, while the balance sheet reports
Under the supplied dilution definition, issuing additional shares increases the total share count and reduces an existing holder’s percentage ownership absent offsetting changes.
At
News Market Reaction – OCTV
In the Aug 12 session, OCTV declined 3.09%, reflecting a moderate negative market reaction. Argus tracked a trough of -11.3% from its starting point during tracking. Our momentum scanner triggered 20 alerts that day, indicating elevated trading interest and price volatility. Trading volume was exceptionally heavy at 67.0x the daily average, suggesting significant selling pressure.
Data tracked by StockTitan Argus on the day of publication.
Key Figures
Historical Context
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| Aug 06 | Industry award | Positive | -0.9% | Frost & Sullivan named Octave its 2026 Global Command and Control Company of the Year |
| Jul 15 | AI program launch | Positive | +2.4% | Launched customer innovation program using agentic AI workflows with Bechtel and Fluor |
| Jul 14 | Share conversions | Neutral | -1.9% | Executives converted Swedish depositary receipts into Class B ordinary shares |
| Jul 14 | Earnings scheduling | Neutral | -1.9% | Announced Q2 2026 results release and conference call scheduled for August 12 |
| Jul 09 | Partnership renewal | Positive | +1.8% | Renewed five-year Veolia agreement supporting more than 10,000 global users |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Positive announcements had mixed reactions, with two aligned gains and one divergence; two informational disclosures were followed by declines.
Key Terms
arr financial
saas technical
organic constant currency financial
goodwill impairment financial
non-gaap financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
- Total revenue of
$398 million , a decrease of4% on a quarterly as-reported year-over-year basis and a decrease of1% on an organic constant currency basis - Recurring revenue of
$283 million , an increase of6% on a quarterly as-reported year-over-year basis and organic constant currency basis - Annualized recurring revenue (“ARR”) of
$1,143 million , compared to$1,066 million in the prior year, an increase of7% year-over-year - Cash flow from operations of
$125 million and Free cash flow of$93 million
HUNTSVILLE, Alabama, August 12, 2026 -- Octave Intelligence plc (Nasdaq New York: OCTV and Nasdaq Stockholm: OCTV SDB), today announced financial results for the second quarter 2026, ended June 30, 2026.
"Our second quarter results reflect the continued momentum we are building as a newly independent company, with ARR of
"We are moving faster and investing with focus, delivering strong free cash flow in the quarter while executing on our go-to-market priorities and deepening the platform and agentic capabilities that make our customers' operating context more valuable to them. The deliberate shift in our business model means recurring revenue growth and ARR are the better indicators of underlying performance than reported total revenue. We remain confident in the path and the medium-term financial objectives we shared at our March investor day"
Second Quarter 2026 Financial Highlights and Key Business Metrics:
| USD millions, except EPS and percentages | Q2 2026 | Q2 2025 | ||
| Total revenue | ||||
| Annualized recurring revenue (ARR) | ||||
| Income (loss) from operations | ||||
| Operating margin | (520)% | |||
| Adjusted income from operations | ||||
| Adjusted operating margin | ||||
| Net income (loss) | ||||
| Adjusted net income | ||||
| Earnings per share | ||||
| Adjusted earnings per share | ||||
| Cash flow from operations | ||||
| Cash flow from operations margin | ||||
| Free cash flow | ||||
| Free cash flow margin | ||||
Recent Business Highlights
- In July, Octave launched Octave CoLabs, a collaborative innovation program that pairs Octave's product and technical leadership with customer teams to build agentic AI workflows on customers' own operational data. Initial participants include Bechtel and Fluor.
- In May, Octave completed its separation from Hexagon AB and its Class B ordinary shares commenced trading on the Nasdaq Global Select Market in New York under the ticker symbol "OCTV," and its Swedish Depositary Receipts commenced trading on the Nasdaq Stockholm under the ticker symbol “OCTV SDB”. This marked the culmination of a multi-year process to establish Octave as an independent, pure-play enterprise software company serving asset-intensive industries and the public sector.
- In May, Octave announced it acquired VXG Inc., a provider of enterprise-grade, cloud-native video management software, to strengthen its physical security portfolio and build upon AI-enhanced cloud capabilities in its Protect workflow environment, expanding its software offerings for protecting people, places, and assets.
Balance Sheet
At June 30, 2026, total cash and cash equivalents was
Second quarter financial results include non-cash impairment charges totaling
These charges did not result in any current cash expenditure and did not affect the Company's cash flows or compliance with the financial covenants under the Company's Credit Agreement, nor are they indicative of any changes to the operating outlook for the business.
Consistent with the Company's definitions of its non-GAAP measures, impairment charges are excluded from Adjusted income from operations, Adjusted operating margin, Adjusted net income and Adjusted earnings per share.
Third Quarter and Full Year 2026 Guidance
Octave provided initial third quarter and full year 2026 financial guidance and expectations for certain key business metrics as set out below.
| Q3 2026 | Full Year 2026 | |||
| Total revenue | ||||
| Annualized recurring revenue (ARR) | N/A | |||
| Total revenue growth y/y (organic, constant currency) | 2 - | 0 - | ||
| ARR growth y/y (organic, constant currency) | N/A | 6 - | ||
| Recurring revenue | ||||
| Recurring revenue growth y/y (organic, constant currency) | 3 - | 5 - | ||
| Adjusted Operating Margin | ~ | ~ | ||
| Free Cash Flow Margin | N/A | ~ | ||
See the section entitled "Explanation of Non-GAAP Financial Measures" and the reconciliation of GAAP measures to non-GAAP measures at the end of this release.
Conference Call Information
Octave will host a conference call today, August 12, 2026, to discuss its results at 8:00 a.m. Eastern time. The call will be available live via webcast on Octave’s website at https://investors.octave.com. A webcast replay of the event will also be available at https://investors.octave.com
Date: August 12, 2026
Time: 8:00 a.m. ET; 14:00 CEST
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact, including, without limitation, statements regarding our financial guidance, expected revenue, annual recurring revenue, recurring revenue, Adjusted operating margin, Adjusted net income per share, weighted average shares outstanding, Free Cash Flow margin, future financial position, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements. Use of words such as “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “anticipates,” “continues,” “forecasts,” “target,” “outlook,” “objective,” “goal” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance.
Forward-looking statements are based on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives and financial needs, and on a number of assumptions. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, among other things, customer demand for our software solutions, subscription license activity, SaaS adoption, pricing and packaging initiatives, macroeconomic conditions, our ability to identify, consummate and successfully integrate strategic acquisitions, our ability to successfully operate as an independent public company following the spin-off from Hexagon, the timing and costs associated with separation-related activities, our ability to generate sufficient cash flows and comply with the terms of our indebtedness, our ability to execute our growth strategies, and other risks and uncertainties included under the section titled “Risk Factors” in the Information Statement attached as Exhibit 99.1 to Octave’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 12, 2026 available on our investor relations website at investors.octave.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, and those discussed in other documents we file with the SEC. All information provided in this press release and in the attachments is as of August 12, 2026. You should not rely upon forward‑looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward‑looking statements will be achieved or occur, including any expected or targeted financial or operating results. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward‑looking statements. Except as required by law, we undertake no obligation to update publicly any forward‑looking statements for any reason after the date of this press release to conform these statements to actual results or to changes in our expectations.
Investor Relations Contact
Elizabeth Chwalk, VP, Investor Relations, elizabeth.chwalk@octave.com
investors@octave.com
This information is information that Octave Intelligence plc is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 13:00 CEST on 12 August 2026.
Media: media@octave.com
###
| OCTAVE INTELLIGENCE PLC Condensed Consolidated Balance Sheets (Unaudited) In thousands (except per share amounts) | |||||||
| As of | |||||||
| June 30, 2026 | December 31, 2025 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 304,147 | $ | 156,069 | |||
| Accounts receivable, net | 375,640 | 400,686 | |||||
| Prepaids and other current assets | 98,300 | 100,008 | |||||
| Total current assets | 778,087 | 656,763 | |||||
| Property and equipment, net | 23,417 | 54,642 | |||||
| Property and equipment held for sale | 30,888 | — | |||||
| Operating lease right-of-use assets | 52,037 | 50,605 | |||||
| Goodwill | 4,554,993 | 6,221,366 | |||||
| Intangible assets, net | 1,161,836 | 1,649,408 | |||||
| Deferred income taxes | 31,441 | 29,903 | |||||
| Other noncurrent assets | 57,051 | 33,564 | |||||
| Total assets | $ | 6,689,750 | $ | 8,696,251 | |||
| LIABILITIES | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 54,834 | $ | 48,765 | |||
| Accrued compensation | 90,328 | 113,532 | |||||
| Deferred revenue | 436,983 | 380,612 | |||||
| Operating lease liabilities | 13,991 | 15,683 | |||||
| Other current liabilities | 160,153 | 94,282 | |||||
| Total current liabilities | 756,289 | 652,874 | |||||
| Long-term debt | 621,284 | — | |||||
| Operating lease liabilities - noncurrent | 39,604 | 36,770 | |||||
| Deferred income taxes | 152,584 | 269,152 | |||||
| Other noncurrent liabilities | 40,039 | 59,820 | |||||
| Total liabilities | 1,609,800 | 1,018,616 | |||||
| EQUITY | |||||||
| Preferred shares, | — | — | |||||
| Class A Ordinary Shares, | 110 | — | |||||
| Class B Ordinary Shares, | 2,574 | — | |||||
| Additional paid-in-capital | 6,783,958 | — | |||||
| Net investment by Hexagon | — | 7,749,558 | |||||
| Retained earnings | (1,629,928 | ) | — | ||||
| Accumulated other comprehensive loss | (76,764 | ) | (71,923 | ) | |||
| Total equity | 5,079,950 | 7,677,635 | |||||
| Total liabilities and equity | $ | 6,689,750 | $ | 8,696,251 | |||
| OCTAVE INTELLIGENCE PLC Condensed Consolidated Statements of Operations (Unaudited) In thousands (except per share amounts) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Revenue: | |||||||||||||||
| Subscriptions | $ | 282,813 | $ | 267,334 | $ | 561,993 | $ | 526,166 | |||||||
| Licenses | 39,104 | 50,983 | 74,229 | 93,622 | |||||||||||
| Subscriptions and licenses | 321,917 | 318,317 | 636,222 | 619,788 | |||||||||||
| Services and other | 76,497 | 95,024 | 148,693 | 176,357 | |||||||||||
| Total revenue | 398,414 | 413,341 | 784,915 | 796,145 | |||||||||||
| Cost of revenue: | |||||||||||||||
| Cost of subscriptions and licenses | 39,980 | 41,724 | 83,766 | 81,208 | |||||||||||
| Cost of services and other | 52,783 | 65,190 | 97,820 | 125,268 | |||||||||||
| Total cost of revenue | 92,763 | 106,914 | 181,586 | 206,476 | |||||||||||
| Gross profit | 305,651 | 306,427 | 603,329 | 589,669 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | 54,578 | 46,442 | 102,064 | 89,844 | |||||||||||
| Sales and marketing | 99,973 | 97,903 | 196,493 | 186,541 | |||||||||||
| General and administrative | 39,469 | 43,467 | 82,061 | 79,859 | |||||||||||
| Amortization of intangible assets | 44,570 | 38,284 | 87,563 | 75,637 | |||||||||||
| Other operating expense (income), net | 2,136,986 | (16,529 | ) | 2,141,439 | (12,976 | ) | |||||||||
| Total operating expenses | 2,375,576 | 209,567 | 2,609,620 | 418,905 | |||||||||||
| Income (loss) from operations | (2,069,925 | ) | 96,860 | (2,006,291 | ) | 170,764 | |||||||||
| Other income (expense), net | 3,754 | (340 | ) | 4,102 | 211 | ||||||||||
| Interest expense, net | (1,757 | ) | — | (1,757 | ) | — | |||||||||
| Income (loss) before income tax | (2,067,928 | ) | 96,520 | (2,003,946 | ) | 170,975 | |||||||||
| Provision (benefit) for income taxes | (97,250 | ) | 21,352 | (80,649 | ) | 36,321 | |||||||||
| Net income (loss) | $ | (1,970,678 | ) | $ | 75,168 | $ | (1,923,297 | ) | $ | 134,654 | |||||
| Earnings per share - basic and diluted | $ | (7.34 | ) | $ | 0.28 | $ | (7.16 | ) | $ | 0.50 | |||||
| Weighted average ordinary shares outstanding - basic and diluted | 268,438 | 268,438 | 268,438 | 268,438 | |||||||||||
| OCTAVE INTELLIGENCE PLC Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) In thousands | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Net income (loss) | $ | (1,970,678 | ) | $ | 75,168 | $ | (1,923,297 | ) | $ | 134,654 | |||||
| Other comprehensive income (loss), net of taxes: | |||||||||||||||
| Foreign currency translation adjustments | 2,797 | 30,335 | (4,841 | ) | 46,516 | ||||||||||
| Total other comprehensive income (loss), net of taxes | 2,797 | 30,335 | (4,841 | ) | 46,516 | ||||||||||
| Comprehensive income (loss) | $ | (1,967,881 | ) | $ | 105,503 | $ | (1,928,138 | ) | $ | 181,170 | |||||
| OCTAVE INTELLIGENCE PLC Condensed Consolidated Statements of Equity (Unaudited) In thousands | |||||||||||||||||||||||||||
| Class A Ordinary Shares | Class B Ordinary Shares | Additional paid-in-capital | Net investment by Hexagon | Retained earnings | Accumulated other comprehensive income (loss) | Total equity | |||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
| Balance as of December 31, 2024 | — | $ | — | — | $ | — | $ | — | $ | 7,795,874 | $ | — | $ | (122,187 | ) | $ | 7,673,687 | ||||||||||
| Net income | — | — | — | — | — | 59,486 | — | — | 59,486 | ||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | — | 16,181 | 16,181 | ||||||||||||||||||
| Net transfers to Hexagon | — | — | — | — | — | (71,575 | ) | — | — | (71,575 | ) | ||||||||||||||||
| Balance as of March 31, 2025 | — | $ | — | — | $ | — | $ | — | $ | 7,783,785 | $ | — | $ | (106,006 | ) | $ | 7,677,779 | ||||||||||
| Net income | — | — | — | — | — | 75,168 | — | — | 75,168 | ||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | — | 30,335 | 30,335 | ||||||||||||||||||
| Net transfers to Hexagon | — | — | — | — | — | (87,819 | ) | — | — | (87,819 | ) | ||||||||||||||||
| Balance as of June 30, 2025 | — | $ | — | — | $ | — | $ | — | $ | 7,771,134 | $ | — | $ | (75,671 | ) | $ | 7,695,463 | ||||||||||
| Class A ordinary shares | Class B ordinary shares | Additional paid-in-capital | Net investment by Hexagon | Retained earnings | Accumulated other comprehensive income (loss) | Total equity | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance as of December 31, 2025 | — | $ | — | — | $ | — | $ | — | $ | 7,749,558 | $ | — | $ | (71,923 | ) | $ | 7,677,635 | |||||||||||
| Net income | — | — | — | — | — | 47,381 | — | — | 47,381 | |||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | — | (7,638 | ) | (7,638 | ) | |||||||||||||||||
| Net transfers to Hexagon | — | — | — | — | — | (56,753 | ) | — | — | (56,753 | ) | |||||||||||||||||
| Balance as of March 31, 2026 | — | $ | — | — | $ | — | $ | — | $ | 7,740,186 | $ | — | $ | (79,561 | ) | $ | 7,660,625 | |||||||||||
| Net loss | — | — | — | — | — | (340,750 | ) | (1,629,928 | ) | — | (1,970,678 | ) | ||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | — | 2,797 | 2,797 | |||||||||||||||||||
| Net transfers from Hexagon | — | — | — | — | — | 10,821 | — | — | 10,821 | |||||||||||||||||||
| Cash payment to Hexagon in connection with the Distribution | — | — | — | — | — | (625,000 | ) | — | — | (625,000 | ) | |||||||||||||||||
| Issuance of Ordinary Shares in connection with the Distribution | 11,025 | 110 | 257,413 | 2,574 | 6,782,573 | (6,785,257 | ) | — | — | — | ||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,385 | — | — | — | 1,385 | |||||||||||||||||||
| Balance as of June 30, 2026 | 11,025 | $ | 110 | 257,413 | $ | 2,574 | $ | 6,783,958 | $ | — | $ | (1,629,928 | ) | $ | (76,764 | ) | $ | 5,079,950 | ||||||||||
| OCTAVE INTELLIGENCE PLC Condensed Consolidated Statements of Cash Flows (Unaudited) In thousands | |||||||
| Six Months Ended June 30, | |||||||
| 2026 | 2025 | ||||||
| Cash flows from operating activities: | |||||||
| Net income (loss) | $ | (1,923,297 | ) | $ | 134,654 | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 93,416 | 81,648 | |||||
| Stock-based compensation expense | 6,703 | 6,802 | |||||
| Deferred income taxes | (97,472 | ) | 12,183 | ||||
| Impairment charges | 2,134,660 | — | |||||
| Remeasurement of contingent consideration reserves | (2,622 | ) | (12,544 | ) | |||
| Restructuring charges | (10,103 | ) | (975 | ) | |||
| Other | (112 | ) | 1,546 | ||||
| Changes in assets and liabilities, net of effect from acquisitions: | |||||||
| Accounts receivable | 22,678 | 17,979 | |||||
| Prepaids and other current assets | 2,382 | (5,979 | ) | ||||
| Accounts payable | 4,080 | (396 | ) | ||||
| Accrued compensation | (23,204 | ) | (14,969 | ) | |||
| Deferred revenue | 31,492 | 29,972 | |||||
| Other assets and liabilities | 2,277 | (1,403 | ) | ||||
| Net cash provided by operating activities | 240,878 | 248,518 | |||||
| Cash flows from investing activities: | |||||||
| Purchases of property and equipment | (5,095 | ) | (3,540 | ) | |||
| Capitalization of software development costs | (60,271 | ) | (66,443 | ) | |||
| Acquisitions, net of cash acquired | (11,115 | ) | (16,751 | ) | |||
| Purchases of investments | (15,000 | ) | — | ||||
| Proceeds from divestitures | — | 4,136 | |||||
| Other | (773 | ) | (1,305 | ) | |||
| Net cash used in investing activities | (92,254 | ) | (83,903 | ) | |||
| Cash flows from financing activities: | |||||||
| Proceeds from issuance of term loans | 524,420 | — | |||||
| Proceeds from revolving credit facility | 149,070 | — | |||||
| Repayment of revolving credit facility | (46,500 | ) | — | ||||
| Debt issuance costs | (3,779 | ) | — | ||||
| Net transfers to Hexagon | (16,048 | ) | (166,195 | ) | |||
| Cash payment to Hexagon in connection with the Distribution | (625,000 | ) | — | ||||
| Payment of contingent consideration | (606 | ) | — | ||||
| Proceeds from other short-term borrowings | 22,903 | — | |||||
| Net cash provided by (used in) financing activities | 4,460 | (166,195 | ) | ||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (5,006 | ) | 6,015 | ||||
| Net increase in cash and cash equivalents | 148,078 | 4,435 | |||||
| Cash and cash equivalents at beginning of period | 156,069 | 97,214 | |||||
| Cash and cash equivalents at end of period | $304,147 | $101,649 | |||||
DEFINITIONS OF KEY BUSINESS METRICS
We believe the presentation of key business metrics provides incremental useful information to investors regarding our results of operations. To the extent material, we disclose below the additional purposes, if any, for which our management uses these key business metrics. Our key business metrics may vary significantly from period-to-period for reasons unrelated to our operating performance and may differ from similarly titled measures presented by other companies. These metrics are based on management calculations derived from available operational data.
Recurring revenues includes monthly subscription licenses, SaaS-based subscriptions and maintenance subscriptions.
Annualized Recurring Revenue (“ARR”) is a key business metric we use to evaluate the scale and growth of our business as well as to assist in the evaluation of underlying trends in our business. ARR represents the annualized value of recurring revenue from our subscription licenses, SaaS-based subscriptions and maintenance subscriptions. It excludes revenue from perpetual software licenses, non-recurring services and other revenues. The company calculates ARR as the sum of: (i) the annualized value of monthly recurring revenue recognized from SaaS-based subscriptions and maintenance subscriptions in the last month of the most recently completed quarter, plus (ii) the annualized value of recurring revenue recognized from subscription licenses in the most recently completed quarter.
EXPLANATION OF NON-GAAP FINANCIAL MEASURES
Below are definitions and reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. Management believes these non-GAAP financial measures provide investors with a more meaningful measure of company performance period-to-period, align the measures to how management evaluates performance internally, and make it easier for investors to compare our performance to peers. These measures should be considered in addition to, and not as replacements for, the most directly comparable U.S. GAAP measure. The non-GAAP financial measures we use are as follows:
Adjusted Income from Operations—Income (Loss) from Operations
Adjusted income from operations is defined as Income (loss) from operations adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; and select other non-recurring items.
Adjusted Operating Margin—Operating Margin
Adjusted operating margin is defined as Operating margin adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; and select other non-recurring items.
Adjusted Net Income—Net Income (Loss)
Adjusted net income is defined as Net income (loss) adjusted for amortization of acquired intangibles; amortization of developed technologies; stock-based compensation expense; impairment charges; acquisition costs and charges; restructuring charges; stand-up costs; select other non-recurring items; and a corresponding adjustment to income tax expense for the impact of these adjustments.
Adjusted Earnings per share—Earnings per share
Adjusted earnings per share is defined as Adjusted net income divided by the weighted-average number of ordinary shares outstanding for the period, presented on a diluted basis.
Free Cash Flow—Cash Flow from Operations
Free cash flow is defined as cash flow from operations net of capital expenditures, including purchases of property and equipment and capitalization of software development costs. These expenditures consist primarily of facility improvements, office equipment, computer equipment, and software development costs. We believe that free cash flow, in conjunction with cash from operations, is a useful measure of liquidity since capital expenditures are a necessary component of ongoing operations. Free cash flow is not a measure of cash available for discretionary expenditures.
Free Cash Flow Margin—Cash Flow from Operations Margin
Free cash flow margin is defined as free cash flow divided by revenue. We believe that free cash flow margin, in conjunction with cash from operations and free cash flow, is a useful measure of liquidity since capital expenditures are a necessary component of ongoing operations. Free cash flow is not a measure of cash available for discretionary expenditures.
Description of Adjustments
Amortization of acquired intangibles and amortization of developed technologies are non-cash expenses that are impacted by the timing and magnitude of our acquisitions and additions to developed technologies. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Stock-based compensation expense is a non-cash expense relating to equity-based awards issued to executive officers, employees and outside directors, consisting of performance share awards. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Impairment charges are non-cash expenses related to long-lived assets for which it was determined the carrying value of such assets was partially or fully unrecoverable. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Acquisition costs and charges are direct costs of potential and completed acquisitions and expenses related to acquisition integration activities, including transaction fees, due diligence costs, severance and professional fees. Subsequent adjustments to our initial estimated amount of contingent consideration associated with specific acquisitions are also included within acquisition costs and charges. The occurrence and amount of these costs and charges varies depending on the timing and size of acquisitions and subsequent adjustments to our initial estimated amount of contingent consideration. We believe the assessment of our operations excluding these costs and charges is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Restructuring charges include excess facility restructuring costs; impairment and accretion expenses related to the lease assets of exited facilities; sublease income from previously impaired facilities; severance charges resulting from employee reduction actions; and third-party professional consulting fees related to modifications of our business strategy. These charges vary in size based on restructuring plans and duration. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Stand-up costs include expenses associated with the spin-off and stand up of functions required to operate as a standalone public entity, these costs primarily relate to system implementation expenses, legal and consulting costs, development of our brand and other matters. We believe the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Other non-recurring items include selected costs and charges that do not naturally conform to one of the adjustments above, including certain litigation matters net of expected insurance recoveries. We believe the assessment of our operations excluding these costs and charges is relevant to our assessment of internal operations and comparisons to the performance of other companies in our industry.
Income tax adjustments include the tax impact of the items excluded from Adjusted net income.
We use these non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results and cash flows without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP financial measures, when used in conjunction with the most comparable U.S. GAAP measure, help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals (communicated internally and externally) for managing our business and evaluating our performance. We believe that providing non-GAAP financial measures also affords investors a view of our operating results and cash flows that may be more easily compared to the results of other companies in our industry that use similar financial measures to supplement their U.S. GAAP results.
The items excluded from the non-GAAP financial measures often have a material impact on our financial results, certain of those items are non-recurring, and other such items often recur. Accordingly, the non-GAAP financial measures included herein should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with U.S. GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable U.S. GAAP measure on our financial statements.
Guidance for adjusted financial measures excludes amortization of acquired intangibles, amortization of developed technologies, stock-based compensation expense, impairment charges, acquisition costs and charges, restructuring charges, stand-up costs, other non-recurring items and related tax impacts.
Octave has not provided forecasts of the most directly comparable U.S. GAAP measures because certain items required to calculate those U.S. GAAP measures are outside of the company's control or cannot be reasonably predicted without unreasonable effort. With respect to Adjusted operating margin and Adjusted earnings per share, these items include the adjustment items described above. With respect to Free cash flow margin, the Company is unable to reasonably predict future operating cash flows, capital expenditures and capitalized software development costs without unreasonable effort. Accordingly, reconciliations of the forecasts of Adjusted operating margin, Adjusted earnings per share, Free cash flow margin, and organic constant currency growth to the most directly comparable U.S. GAAP measures have not been provided. The excluded items are uncertain, depend on various factors, and could have a material impact on the corresponding measures calculated in accordance with U.S. GAAP.
| NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
| Income (loss) from operations | $ | (2,069,925 | ) | $ | 96,860 | $ | (2,006,291 | ) | $ | 170,764 | |||||||||
| Amortization of acquired intangibles | 18,764 | 18,445 | 36,787 | 36,888 | |||||||||||||||
| Amortization of developed technologies | 26,101 | 20,124 | 51,357 | 39,319 | |||||||||||||||
| Stock-based compensation expense | 3,221 | 3,273 | 6,703 | 6,802 | |||||||||||||||
| Impairment charges | 2,134,660 | — | 2,134,660 | — | |||||||||||||||
| Acquisition costs and charges | 150 | (11,006 | ) | (2,472 | ) | (12,544 | ) | ||||||||||||
| Restructuring charges | 1,625 | 657 | 5,352 | 4,040 | |||||||||||||||
| Stand-up costs | 1,436 | 356 | 2,504 | 356 | |||||||||||||||
| Other non-recurring items | — | — | 3,000 | — | |||||||||||||||
| Adjusted income from operations | $ | 116,032 | $ | 128,709 | $ | 231,600 | $ | 245,625 | |||||||||||
| Operating margin | (520 | ) | % | 23 | % | (256 | ) | % | 21 | % | |||||||||
| Amortization of acquired intangibles | 5 | 4 | 5 | 5 | |||||||||||||||
| Amortization of developed technologies | 7 | 5 | 7 | 5 | |||||||||||||||
| Stock-based compensation expense | 1 | 1 | 1 | 1 | |||||||||||||||
| Impairment charges | 536 | — | 272 | — | |||||||||||||||
| Acquisition costs and charges | — | (3 | ) | — | (2 | ) | |||||||||||||
| Restructuring charges | — | — | 1 | 1 | |||||||||||||||
| Stand-up costs | — | — | — | — | |||||||||||||||
| Other non-recurring items | — | — | — | — | |||||||||||||||
| Adjusted operating margin | 29 | % | 31 | % | 30 | % | 31 | % | |||||||||||
| Net income (loss) | $ | (1,970,678 | ) | $ | 75,168 | $ | (1,923,297 | ) | $ | 134,654 | |||||||||
| Amortization of acquired intangibles | 18,764 | 18,445 | 36,787 | 36,888 | |||||||||||||||
| Amortization of developed technologies | 26,101 | 20,124 | 51,357 | 39,319 | |||||||||||||||
| Stock-based compensation expense | 3,221 | 3,273 | 6,703 | 6,802 | |||||||||||||||
| Impairment charges | 2,134,660 | — | 2,134,660 | — | |||||||||||||||
| Acquisition costs and charges | 150 | (11,006 | ) | (2,472 | ) | (12,544 | ) | ||||||||||||
| Restructuring charges | 1,625 | 657 | 5,352 | 4,040 | |||||||||||||||
| Stand-up costs | 1,436 | 356 | 2,504 | 356 | |||||||||||||||
| Other non-recurring items | — | 335 | 3,000 | 335 | |||||||||||||||
| Tax impacts | (119,867 | ) | (9,054 | ) | (130,162 | ) | (17,973 | ) | |||||||||||
| Adjusted net income | $ | 95,412 | $ | 98,298 | $ | 184,432 | $ | 191,877 | |||||||||||
| Earnings per share | $ | (7.34 | ) | $ | 0.28 | $ | (7.16 | ) | $ | 0.50 | |||||||||
| Adjustments | 7.70 | 0.08 | 7.85 | 0.21 | |||||||||||||||
| Adjusted earnings per share | $ | 0.36 | $ | 0.36 | $ | 0.69 | $ | 0.71 | |||||||||||
| Cash flow from operations | $ | 125,433 | $ | 123,009 | $ | 240,878 | $ | 248,518 | |||||||||||
| Purchases of property and equipment | (2,724 | ) | (2,031 | ) | (5,095 | ) | (3,540 | ) | |||||||||||
| Capitalization of software development costs | (29,211 | ) | (34,092 | ) | (60,271 | ) | (66,443 | ) | |||||||||||
| Free cash flow | $ | 93,498 | $ | 86,886 | $ | 175,512 | $ | 178,535 | |||||||||||
| Operating cash flow margin | 31 | % | 30 | % | 31 | % | 31 | % | |||||||||||
| Purchases of property and equipment | (1 | ) | — | (1 | ) | — | |||||||||||||
| Capitalization of software development costs | (7 | ) | (8 | ) | (8 | ) | % | (8 | ) | % | |||||||||
| Free cash flow margin | 23 | % | 21 | % | 22 | % | 22 | % | |||||||||||
Constant Currency
Constant currency is a non-GAAP financial measure that presents our revenue excluding the estimated effects of foreign currency exchange rate fluctuations. A significant amount of our operations is conducted in foreign currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. We use constant currency to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period-over-period to evaluate our underlying performance.
In reporting period-over-period results, we calculate the effects of foreign currency fluctuations and constant currency information by translating current and prior period results on a functional currency basis to our reporting currency using the prior period average foreign currency exchange rates from which the transaction occurred.
Reconciliation of revenue to revenue in constant currency for the three and six months ended June 30, 2026:
| Three months ended June 30, 2026 | Six months ended June 30, 2026 | ||||||||||||||||||||||||||||||||||
| Actual | Impact of Foreign Exchanges at 2025 Rates | Constant Currency | % as Reported | Organic % CC growth | Actual | Impact of Foreign Exchanges at 2025 Rates | Constant Currency | % as Reported | Organic % CC growth | ||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Subscriptions | $ | 282,813 | $ | 2,375 | $ | 280,438 | 6 | % | 6 | % | $ | 561,993 | $ | 11,779 | $ | 550,214 | 7 | % | 6 | % | |||||||||||||||
| Licenses | 39,104 | 398 | 38,706 | (23 | )% | (23 | )% | 74,229 | 2,439 | 71,790 | (21 | )% | (23 | )% | |||||||||||||||||||||
| Subscriptions and licenses | 321,917 | 2,773 | 319,144 | 1 | % | 2 | % | 636,222 | 14,218 | 622,004 | 3 | % | 2 | % | |||||||||||||||||||||
| Services and other | 76,497 | 1,368 | 75,129 | (19 | )% | (10 | )% | 148,693 | 4,386 | 144,307 | (16 | )% | (6 | )% | |||||||||||||||||||||
| Total revenue | $ | 398,414 | $ | 4,141 | $ | 394,273 | (4 | )% | (1 | )% | $ | 784,915 | $ | 18,604 | $ | 766,311 | (1 | )% | — % | ||||||||||||||||
Organic Constant Currency Growth—Revenue Growth
Organic constant currency growth presents period-over-period revenue growth excluding both the estimated effects of foreign currency exchange rate fluctuations (as described under Constant Currency above) and the impact of revenue attributable to businesses acquired or divested during the current or comparative period. We believe organic constant currency growth is useful to investors because it presents revenue growth from our existing operations on a comparable basis period-over-period.
