This section should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying Notes included under Item 1. Financial Statements of this Form 10-Q and the Combined Financial Statements and accompanying Notes and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the three years ended December 31, 2025 included in the Information Statement. See the sections of this Form 10-Q titled “Note About Forward-looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements that could cause future results to differ materially from those reflected in this section. The financial information discussed below and included in this Form 10-Q may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been a standalone company during the periods presented or what our financial condition, results of operations and cash flows may be in the future.
OVERVIEW
Business Overview
Octave Intelligence plc ("Octave" or the "Company") provides a suite of software solutions that help organizations design, build, operate, and protect their physical assets, people, and critical infrastructure. These workflow environments often involve different teams, specialized tools, and large volumes of information that are difficult to integrate or interpret without context. When data is organized into separate systems or isolated workflows, decision making slows down, quality issues are harder to identify, and teams may miss early signs of risk or system failure.
The Company’s platform connects data, events, and workflows across these environments and applies context-aware intelligence to help customers understand what is happening, what may happen next, and how actions in one area affect conditions in another. By providing a clearer picture of current and emerging conditions, Octave’s software helps optimize the performance and reliability of the systems that teams depend on so they can act quicker and reduce risk. Octave refers to its suite of software solutions collectively as our platform, noting that different components of the software architecture are at various stages of technical integration and interoperability.
Overview of Platform Environments
Octave’s software platform supports collaboration, improves continuity, and helps organizations reduce risk and strengthen the reliability of their systems across the following four core workflow environments:
•Design: Supports 3D modeling, engineering analysis, simulation, and geospatial intelligence. This helps teams create information-rich digital representations that serve as the basis for downstream activities.
•Build: Connects engineering, procurement, fabrication, construction, and commissioning workflows. This helps teams coordinate materials, track progress, manage changes, and improve cost and schedule predictability.
•Operate: Unifies operational data, historical information, maintenance activities, quality systems, and worker tools. This enables real-time insight, predictive intelligence, operational technology cyber security, and improved asset and system performance.
•Protect: Supports public safety and physical security workflows. This includes incident response, emergency management, situational awareness, digital security, and regulatory compliance.
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Spin-off from Hexagon
On March 4, 2025, Hexagon AB ("Hexagon") announced that its board of directors had directed management to prepare for the spin-off of the Octave business into an independent, publicly-traded company through a tax-free, from both a U.S. federal income and Swedish tax perspective, pro rata distribution of all the outstanding share capital of Octave to Hexagon shareholders via a Lex-ASEA distribution. Prior to the Distribution (as defined below), the Company was wholly owned by Hexagon.
On April 24, 2026, the general meeting of shareholders of Hexagon approved the Distribution of the Octave business into a separate publicly-traded company named Octave Intelligence plc.
On May 22, 2026, the spin-off was consummated by means of a tax-free pro rata distribution (the “Distribution”) wherein each Hexagon shareholder of record on May 22, 2026 (the “Record Date”) received one (1) Octave Class A Ordinary Share for every ten (10) Hexagon Class A Shares and one (1) Octave Class B Ordinary Share for every ten (10) Hexagon Class B Shares held resulting in the distribution of 268,437,788 of the Company's ordinary shares to Hexagon shareholders. Octave Class A Ordinary Shares were delivered to holders of Hexagon Class A Shares. Octave Class B Ordinary Shares were delivered to holders of Hexagon Class B Shares other than Hexagon affiliates in the form of Swedish Depository Receipts (the “Octave SDRs”), and to Hexagon affiliates in book-entry form via Octave’s transfer agent. Following the Distribution, the Company commenced "regular way" trading as an independent public company whereby Octave Class B Ordinary Shares were listed under the ticker symbol "OCTV" on the Nasdaq Global Select Market and the Octave SDRs were listed under the ticker symbol "OCTV SDB" on Nasdaq Stockholm.
Immediately following the Distribution, there were 11,025,000 Octave Class A Ordinary Shares and 257,412,788 Octave Class B Ordinary Shares, for a total of 268,437,788 Octave ordinary shares, outstanding. Holders of Hexagon Class B Shares other than Hexagon affiliates on the Record Date received Octave Class B Shares via 210,003,594 Octave SDRs delivered through Euroclear Sweden while Hexagon affiliates received 47,409,194 Octave Class B Shares in book entry form via Octave’s transfer agent. As of August 7, 2026, 167,780,741 Octave SDRs were outstanding in respect of the Class B Shares and 89,632,047 Octave Class B Shares were held directly by Octave shareholders.
Relationship with Hexagon Prior to the Distribution
Prior to the Distribution, the Condensed Consolidated Financial Statements included in this Form 10-Q were derived from Hexagon’s historical accounting records and presented on a standalone basis as if the Octave operations had been conducted independently from Hexagon. The Condensed Consolidated Financial Statements were prepared in accordance with U.S. GAAP and Hexagon’s historical accounting policies, by aggregating financial information from the components of Octave’s and Hexagon’s accounting records directly attributable to Octave. The Condensed Consolidated Financial Statements include all revenues and costs directly attributable to the Octave business. Historically, Hexagon provided certain corporate functions to Octave and costs associated with these functions were allocated to Octave. These functions include, but are not limited to, corporate communications, executive management, legal, human resources, treasury, finance, accounting, information technology, and the related benefit costs associated with such functions, such as stock-based compensation. The costs of such services were allocated to Octave based on direct usage when identifiable, with the remainder allocated on a pro rata basis of revenue of Octave and Hexagon. Octave and Hexagon believe the basis on which these expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, Octave during the periods presented; however, they may not be indicative of the actual expense that would have been incurred had Octave been operating as a standalone company for the periods presented.
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In connection with the Distribution, we entered into certain agreements with Hexagon, including a Distribution Agreement, Tax Disaffiliation Agreement, Employee Matters Agreement, and Master Transition Services Agreement. Under the Master Transition Services Agreement, we generally expect to be able to utilize Hexagon’s services for a transitional period following the Distribution before we replace these services over time with services supplied either internally or by third parties. The expenses for the services may vary from the historical costs directly billed and allocated to us for the same services.
We expect to continue to incur certain stand-up costs in connection with our establishment as a standalone public entity following the Distribution through fiscal year 2027. Stand-up costs include expenses associated with the 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.
KEY DRIVERS
Impact of Foreign Currency Exchange on Results of Operations
Our operations are internationally diversified, and our results of operations have been, and we expect in the future will be, affected by changes in foreign currency exchange rates.
The proportion of total revenue and operating expenses (excluding goodwill and indefinite-life intangible asset impairment charges) denominated in a currency other than the U.S. dollar are as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Revenue 55 % 50 % 54 % 50 %
Operating expenses 39 % 40 % 38 % 40 %
Our most significant currencies outside of the U.S. Dollar are denominated in Euro, Canadian Dollar, Chinese Renminbi, Indian Rupee, British Pound and Australian Dollar. Other than the natural hedge attributable to matching revenue and expenses in the same currencies, we did not hedge foreign currency exposure in these historical periods.
We identify the effects of foreign currency on our operations and present constant currency information because we believe exchange rates are an important factor in understanding period-over-period comparisons and enhance the understanding of our results and evaluations of our performance. See the “Non-GAAP Financial Measures” section for additional information, including our definition and our use of constant currency.
Revenue
We generate revenue through subscriptions, perpetual licenses, professional services and other offerings. Our revenue base is well-diversified across account types, industries, and geographic regions. Excluding the impact of acquisitions, our primary sources of revenue growth come from increased subscriptions revenue, focused on SaaS solutions, within our long-standing client base, particularly through expanded usage of existing solutions, as well as adoption of new product offerings by those clients and subscriptions from new customers.
We anticipate subscriptions will continue to represent a significant majority of new arrangements, including customers migrating from existing perpetual license arrangements to subscriptions. Due to the ratable recognition of subscriptions revenue, growth in subscriptions revenue will lag behind the growth of subscription orders and will impact the comparative growth of our reported revenue on a quarter-over-quarter basis.
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Goodwill and Indefinite-Life Intangible Asset Impairment
Following the commencement of regular-way trading of our Class B Ordinary Shares, our observed market capitalization has remained below our carrying value. Management concluded the market capitalization, together with current capital market conditions, to be a triggering event requiring an interim goodwill impairment assessment as of June 30, 2026.
Based on the results of the quantitative goodwill impairment test, the carrying amount of our single reporting unit exceeded its estimated fair value. Accordingly, we recognized a non-cash goodwill impairment charge of $1,671 million during the three and six months ended June 30, 2026. The charge was recorded in Other operating expense (income), net in the Condensed Consolidated Statements of Operations.
In addition, following the Hexagon shareholders’ approval of the Distribution on April 24, 2026, we initiated the phase out of legacy brands and transition of the Octave business to a unified Octave brand. As such, we performed an assessment of the useful life estimates of all trademarks which have historically been carried as indefinite-life intangible assets in the Condensed Consolidated Balance Sheets. In completing this assessment, we concluded all trademark assets should no longer be carried as indefinite-life intangible assets, but rather determined each to have a finite useful life.
As such, we performed a quantitative impairment test which consisted of a comparison of the fair value of our trademarks with the carrying amount, and in all cases where the carrying amount exceeded its fair value, an impairment charge was recognized in an amount equal to the excess. Accordingly, during the three months ended June 30, 2026, we recognized a non-cash impairment charge of $463.7 million. The charge was recorded in Other operating expense (income), net in the Condensed Consolidated Statements of Operations.
These impairment charges materially affected our reported operating results for the three and six months ended June 30, 2026 and reduced the carrying amounts of goodwill and intangible assets on our balance sheet. The impairment charges did not result in any current cash expenditure and did not affect our cash flows from operating activities or compliance with the financial covenants under our Credit Agreement. These charges are not indicative of our current operating performance or cash generation.
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RESULTS OF OPERATIONS
The following table sets forth our results of operations for the periods presented:
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
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Revenue
The volume, mix, and duration of contract types starting or renewing in any given period may have a material impact on revenue in the period, and as a result can impact the comparability of reported revenue period-over-period.
Revenue by type is as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Revenue:
Subscription licenses $ 72,549 $ 73,647 $ 144,911 $ 147,814
SaaS 87,225 70,999 171,894 138,848
Maintenance subscription 123,039 122,688 245,188 239,504
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
Revenue by type, as a percentage of total revenue, is as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Revenue:
Subscription licenses 18 % 18 % 18 % 19 %
SaaS 22 % 17 % 22 % 17 %
Maintenance subscription 31 % 30 % 32 % 30 %
Subscriptions 71 % 65 % 72 % 66 %
Licenses 10 % 12 % 9 % 12 %
Services and other 19 % 23 % 19 % 22 %
Total revenue 100 % 100 % 100 % 100 %
Revenue by geographic region, based upon the location of the end customer, is as follows:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Americas: (1)
United States $ 151,159 $ 171,983 $ 297,051 $ 332,472
Other Americas 33,552 38,073 75,405 73,984
EMIA (2) 156,498 143,693 302,018 275,893
APAC (3) 57,205 59,592 110,441 113,796
Total revenue $ 398,414 $ 413,341 $ 784,915 $ 796,145
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(1)Americas includes the United States, Canada, and Latin America.
(2)EMIA includes Europe, Middle East, India, and Africa.
(3)APAC includes the Asia-Pacific region, excluding India.
Operations in Ireland, our country of domicile, are not material in all periods presented.
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For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Revenue decreased by $14.9 million or 4% in absolute terms, and by 1% on an organic constant currency basis. Divestitures of non-core businesses in the prior year contributed a negative impact on growth of 4% and currency contributed a positive impact of 1%. Revenue in EMIA grew 9%, driven by strong growth in subscriptions offset by a decline in license sales. Revenue in Americas declined 12%, driven by divestitures of non-core businesses in the prior year and lower license sales, reflecting the ongoing shift in customer demand towards SaaS. Revenue in APAC declined 4% driven by lower license sales.
Overall, subscriptions revenue growth was the primary driver for the overall portfolio, led by SaaS revenues which grew 23%, reflecting strong demand for SaaS offerings particularly across the Build and Operate product portfolios. Maintenance subscription and subscription licenses revenues were largely flat compared to the prior year. Licenses sales declined 23% due to the customer demand shift to SaaS and macro factors impacting certain energy markets and capital projects, and the timing of large orders in the Protect product portfolio. Services and other declined 19% due to the divestiture of non-core businesses in the prior year and fewer projects with customizations.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Revenue decreased by $11.2 million or 1% in absolute terms, and flat on an organic constant currency basis. Divestitures of non-core businesses in the prior year contributed to a negative impact on growth of 4% and currency contributed a positive impact of 2%. Revenue in EMIA grew 9% driven by strong growth in subscriptions offset by a decline in license sales. Revenue in Americas declined 8% driven by divestitures of non-core businesses in the prior year and lower license sales, reflecting the ongoing shift in customer demand towards SaaS. Revenue in APAC declined 3% driven by lower license sales.
Overall, subscriptions revenue growth was the primary driver for the overall portfolio, led by SaaS revenues which grew 24%, reflecting strong demand for SaaS offerings, particularly across the Build and Operate product portfolios. Maintenance subscriptions grew 2% and subscription licenses sales declined 2%, reflecting higher customer large project activity in the prior year. Licenses sales declined 21% due to the customer demand shift to SaaS, macro factors impacting energy markets and the timing of large orders in the Protect product portfolio. Services and other declined 16% due to the divestiture of non-core businesses in the prior year and fewer projects requiring customizations.
Cost of Revenue and Operating Expenses
Management continuously assesses our cost structure to ensure an optimal balance of personnel necessary to support customer activity, investment in innovation and the associated infrastructure necessary to support business operations and continuity, including investments in certain public company functions necessary to operate as a standalone business.
Cost of Revenue
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Total cost of revenue $ 92,763 $ 106,914 $ 181,586 $ 206,476
Gross profit percentage 77 % 74 % 77 % 74 %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Cost of revenue decreased by $14.2 million or 13%, primarily due to the reduction in services and other labor and associated delivery costs that supported the non-core businesses divested in the prior year. This decrease was partially offset by an increase in cloud platform costs associated with public cloud infrastructure providers and general labor costs. As a result, gross profit decreased by $0.8 million, despite gross profit margin increasing from 74% to 77%.
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For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Cost of revenue decreased by $24.9 million or 12%, primarily due to the reduction in services and other labor and associated delivery costs that supported the non-core businesses divested in the prior year. This decrease was partially offset by an increase in cloud platform costs associated with public cloud infrastructure providers and general labor costs. As a result, gross profit margin improved from 74% to 77%, and gross profit increased by $13.7 million or 2%.
Research and Development Expenses
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Research and development $ 54,578 $ 46,442 $ 102,064 $ 89,844
Percentage of total revenue 14 % 11 % 13 % 11 %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Research and development expenses increased by $8.1 million or 18%, primarily due to a $4.9 million decline in the capitalization of software development costs relative to overall expenditures as product release cycles shorten and labor costs declined. Overall research and development labor costs have declined as a result of cost saving actions taken in the second half of 2025, but have been reinvested in tools which further improve artificial intelligence offerings and accelerate development delivery and quality.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Research and development expenses increased by $12.2 million or 14%, primarily due to a $6.1 million decline in the capitalization of software development costs relative to overall expenditures as product release cycles shorten. Overall research and development labor costs have remained stable as cost savings actions taken in the second half of 2025 have offset wage inflation. Investments continue in tools which further improve artificial intelligence offerings and accelerate development delivery and quality.
Sales and Marketing Expenses
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Sales and marketing $ 99,973 $ 97,903 $ 196,493 $ 186,541
Percentage of total revenue 25 % 24 % 25 % 23 %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Sales and marketing expenses increased by $2.1 million or 2%, primarily due to higher salaries and wages from annual salary increases, an increase in outbound marketing costs and higher sales commissions expenses. This increase was partially offset by overall headcount reductions compared to the prior year as a result of cost savings actions taken in the second half of 2025.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Sales and marketing expenses increased by $10.0 million or 5%, primarily due to higher salaries and wages from annual salary increases, an increase in outbound marketing costs, additional hiring of sales and sales support personnel, and increased investments in sales enablement technology. This increase was partially offset by overall headcount reductions compared to the prior year as a result of cost savings actions taken in the second half of 2025.
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General and Administrative Expenses
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
General and administrative $ 39,469 $ 43,467 $ 82,061 $ 79,859
Percentage of total revenue 10 % 11 % 10 % 10 %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
General and administrative expenses decreased by $4.0 million or 9%, primarily due to lower allocations of general corporate expenses from Hexagon coinciding with the spin-off completion and a reduction in overall headcount costs compared to the prior year as a result of cost savings actions taken in the second half of 2025. This decrease was partially offset by increased investments in public company functions and information technology.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
General and administrative expenses increased by $2.2 million or 3%, primarily due to higher salaries and wages driven by annual salary increases, increased hiring to support public company functions, and investment in information technology. This increase was partially offset by savings achieved through cost savings actions undertaken in the second half of 2025.
Amortization of Intangible Assets
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Amortization of intangible assets $ 44,570 $ 38,284 $ 87,563 $ 75,637
Percentage of total revenue 11 % 9 % 11 % 10 %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Amortization of intangible assets increased by $6.3 million or 16%, primarily due to an increase in incremental new releases of developed product solutions for sale and the initial amortization of trademarks following management’s conclusion that all historical trademark assets have a finite useful life starting in the second quarter of 2026.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Amortization of intangible assets increased by $11.9 million or 16%, primarily due to an increase in incremental new releases of developed product solutions for sale and the initial amortization of trademarks following management’s conclusion that all historical trademark assets have a finite useful life starting in the second quarter of 2026.
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Other Operating Expense (Income), Net
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Other operating expense (income), net $ 2,136,986 $ (16,529) $ 2,141,439 $ (12,976)
Percentage of total revenue n/m (4) % n/m (2) %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Other operating expense (income), net increased by $2,153.5 million, primarily due to the current period impairment charges recognized on goodwill of $1,671.0 million and indefinite-life intangible assets of $463.7 million. Additionally, there was a decrease in contingent consideration fair value remeasurement gains recognized compared to the prior year period.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Other operating expense (income), net increased by $2,154.4 million, primarily due to the current period impairment charges recognized on goodwill of $1,671.0 million and indefinite-life intangible assets of $463.7 million. Additionally, there was a decrease in contingent consideration fair value remeasurement gains recognized compared to the prior year period.
Other Income (Expense), Net
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Other income (expense), net $ 3,754 $ (340) $ 4,102 $ 211
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
Other income (expense), net increased by $4.1 million, primarily due to currency translation gains recognized in the current period.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Other income (expense), net increased by $3.9 million, primarily due to currency translation gains recognized in the current period.
Interest Expense, net
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Interest expense, net $ (1,757) $ — $ (1,757) $ —
For the three and six months ended June 30, 2026 compared with the three and six months ended June 30, 2025
Interest expense, net increased to $1.8 million, primarily due to principal interest and amortization of debt issuance costs on the Term Loans and Revolving Credit Facility of $3.4 million. This increase was partially offset by $1.6 million of interest income earned on cash balances once Octave was no longer included in Hexagon's centralized treasury operations.
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Provision (Benefit) for Income Taxes
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Income (loss) before income taxes $ (2,067,928) $ 96,520 $ (2,003,946) $ 170,975
Provision (benefit) for income taxes $ (97,250) $ 21,352 $ (80,649) $ 36,321
Effective tax rate 5 % 22 % 4 % 21 %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025
For the three months ended June 30, 2026, the effective tax rate was lower as compared to the three months ended June 30, 2025, primarily due to the non-deductible nature of the Company’s goodwill impairment charge taken during the period as well as jurisdictional mix of earnings and effects of cross-border transactions in preparation for the Distribution.
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
For the six months ended June 30, 2026, the effective tax rate was lower as compared to the six months ended June 30, 2025, primarily due to the non-deductible nature of the Company’s goodwill impairment charge taken during the period as well as jurisdictional mix of earnings and effects of cross-border transactions in preparation for the Distribution.
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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 during 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.
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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 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.
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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 %
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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) % — %
For the three months ended June 30, 2026 compared with the three months ended June 30, 2025, organic constant currency decline was 1% with a currency impact of positive 1%, and for the six months ended June 30, 2026 compared with the six months ended June 30, 2025, organic constant currency change was flat with a currency impact of positive 2%.
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LIQUIDITY AND CAPITAL RESOURCES
Sources of Historical Liquidity
We have historically generated positive cash flow from operations; however, prior to the Distribution, Octave was dependent upon Hexagon for all working capital and financing requirements. Hexagon uses a centralized approach to cash management and financing of its operations. Accordingly, a substantial portion of Octave’s cash accounts were regularly cleared to Hexagon at Hexagon’s discretion, and Hexagon funds its operating and investing activities as needed. This arrangement is not reflective of the manner in which the Octave business would have been able to finance its operations had it been a standalone business separate from Hexagon during the periods presented. Prior to the Distribution, transfers of cash between Hexagon and Octave are included within Net transfers (to) from Hexagon in the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Equity.
Sources of Current Liquidity
On April 27, 2026, in connection with the Distribution, the Company entered into a senior unsecured credit agreement (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, establishing a $350.0 million U.S. dollar term loan facility (the “USD Term Loan”), a €150.0 million euro term loan facility (the “EUR Term Loan”, and together with the USD Term Loan, the “Term Loans”), and a $500.0 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). On May 22, 2026, the Company fully drew the Term Loans and borrowed under the Revolving Credit Facility. The proceeds from these borrowings were used to fund a cash payment of $625.0 million to Hexagon in connection with the Distribution.
Borrowings under the Credit Facilities bear interest at variable rates based on Term Secured Overnight Financing Rate for U.S. dollar-denominated loans and Euro Interbank Offered Rate for euro-denominated loans, in each case plus an applicable margin ranging from 125 to 175 basis points based on the Company's consolidated leverage ratio. Commitment fees on the undrawn Revolving Credit Facility balance accrue at 15 to 25 basis points per annum.
The Credit Agreement requires the Company to maintain a maximum consolidated leverage ratio (net debt to EBITDA as defined in the Credit Agreement) of 3.5 to 1.0 as of the end of each fiscal quarter. The Company may elect to increase the maximum permitted leverage ratio to 4.0 to 1.0 for the fiscal quarter during which a material acquisition occurs and for the three immediately following fiscal quarters, subject to a minimum two-quarter interval before any subsequent election. As of June 30, 2026, the Company was in compliance with all covenants under the Credit Agreement.
CASH FLOW ACTIVITY
Summarized cash flow information for the six months ended June 30, 2026 and 2025 is as follows:
Six Months Ended June 30,
2026 2025
Net cash provided by operating activities $ 240,878 $ 248,518
Net cash used in investing activities $ (92,254) $ (83,903)
Net cash provided by (used in) financing activities $ 4,460 $ (166,195)
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Operating Activities
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Net cash provided by operating activities decreased by $7.6 million, primarily due to lower net income after adjusting for non-cash items and increased current period payout of restructuring charges. This was partially offset by favorable changes in operating assets and liabilities.
Investing Activities
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Net cash used in investing activities increased by $8.4 million, primarily due to an investment of $15.0 million and the absence of proceeds from divestitures received during the prior-year period of $4.1 million. These increases were partially offset by lower capitalization of software development costs of $6.2 million and lower cash paid for acquisitions of $6.2 million.
Financing Activities
For the six months ended June 30, 2026 compared with the six months ended June 30, 2025
Net cash provided by (used in) financing activities increased by $170.7 million primarily due to proceeds from the Term Loans of $524.4 million, proceeds from the Revolving Credit Facility, net of repayments, of $102.6 million, proceeds from other short-term borrowings of $22.9 million, and a reduction in the net transfers to Hexagon of $150.1 million made during the period. These increases were substantially offset by the $625.0 million cash payment to Hexagon in connection with the Distribution.
Cash and Cash Requirements
As of June 30, 2026 and December 31, 2025, Cash and cash equivalents totaled $304.1 million and $156.1 million, respectively. Our ability to generate positive cash flows from operations is dependent on general economic conditions, and the competitive environment in our industry, and is subject to the business and other risk factors described in the section of this Form 10-Q titled “Risk Factors” and under the section titled “Risk Factors” in the Information Statement. If we are unable to generate sufficient cash flows from operations or otherwise comply with the terms of any external borrowings, we may be required to seek additional financing alternatives.
We believe that our existing cash and cash equivalents, cash expected to be generated from operations and available borrowing capacity under the revolving credit facility provided by our Credit Agreement will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
Cash and Cash Equivalents Held by non-U.S. Subsidiaries
As of June 30, 2026 and December 31, 2025, Cash and cash equivalents held by the Company’s non-U.S. subsidiaries were $220.0 million and $141.8 million, respectively.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
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CRITICAL ACCOUNTING ESTIMATES
The preparation of our Condensed Consolidated Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain.
Except for the Updates to Significant Accounting Policies discussed in Note 2, “Summary of Significant Accounting Policies,” there were no material changes in critical accounting estimates from those disclosed in the Information Statement section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
OTHER MATTERS
See Note 2, “Summary of Significant Accounting Policies,” of the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.
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