“In 2026, we expect a lower ARR contribution margin and lower free cash flow due to the impact of the end-of-life announcement.”

In context

“income statement, I'll be discussing non-GAAP results going forward. Gross profit for the fourth quarter was $138.7 million, representing a gross margin of 80%, compared to 84.4% in 2024. Our gross margin continues to be healthy and in line with our long-term target set at our Investor Day. Operating expenses in the fourth quarter totaled $134.1 million. As a result, fourth-quarter operating income was $4.6 million or an operating margin of 2.6%. This compares to an operating income of $15.3 million for an operating margin of 9.7% in the same period last year. Fourth-quarter ARR contribution margin was 15.9%, down from 16.6% last year. If our non-SaaS business would have renewed at historical levels this year, our contribution margin would have shown a significant improvement versus 2024. In 2026, we expect a lower ARR contribution margin and lower free cash flow due to the impact of the end-of-life announcement. While this announcement negatively impacts 2026 ARR contribution margin and free cash flow by $30 to $50 million based on our guidance, we believe it will allow us to show a healthier financial profile beginning in 2027 due to the removal of our lower renewal self-hosted customer base. During the quarter, we had financial income of approximately $9.6 million, driven primarily by interest income on our cash, deposits, and investments in marketable securities. Net income for 2025 was $11.1 million or net income of 8¢ per diluted share, compared to net income of $23.9 million or net income of 18¢ per diluted share for 2024. This is based on 133.3 million diluted shares outstanding and 135.1 million diluted shares outstanding for Q4 2025 and Q4 2024, respectively. As of December 31, 2025, we”