What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-01-27 compared with 2020-01-27 · 504 added, 393 removed, 1007 unchanged (47% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Progress Software Corporation and subsidiaries (the "Company") as of November 30, 2019 and 2018 , and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended November 30, 2019 , and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Progress Software Corporation and subsidiaries (the "Company") as of November 30, 2020 and 2019, the related consolidated statements of operation, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended November 30, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of November 30, 2019 , based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 27, 2020 , expressed an unqualified opinion on the Company's internal controls over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company adopted Accounting Standards Codification Update No.

2014-09, Revenue from Contracts with Customers” (ASC 606), using the full retrospective adoption method on December 1, 2018.

The adoption of ASC 606 is also communicated as part of the revenue recognition critical audit matter below.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of November 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 27, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition-Refer to Note 1 to the financial statements (see also change in accounting principle explanatory paragraph above)

Revenue recognition - Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company derives revenue from multiple sources, including software licenses, maintenance and services.

Effective December 1, 2018, the Company adopted ASC 606 , using the full retrospective method, which required the Company to retroactively adjust comparative prior periods to conform with the current presentation.

Frequently, the customer arrangements provide software licenses combined with maintenance and therefore include multiple performance obligations under ASC 606.

Frequently, the customer arrangements provide software licenses combined with maintenance and therefore including multiple performance obligations under ASC 606, Revenue from Contracts with Customer.

The identification of performance obligations of the arrangement, particularly for more complex customer arrangements, requires a detailed analysis of the contractual terms and application of more complex accounting guidance.

In addition, the allocation of the transaction price to each performance obligation within an arrangement (license, maintenance, and services) and the timing of revenue recognition requires the application of management judgment.

In addition, the allocation of the transaction price to each performance obligations within an arrangement (license, maintenance and services) and the timing of revenue recognition, requires the application of management judgment.

Revenue arrangements with higher contract values frequently require more complex management judgments.

Given the accounting complexity and the management judgment necessary to (1) identify performance obligations in the arrangement, (2) determine the timing and allocation of revenue for multiple performance obligations, and (3) retroactively adjust comparative prior periods to conform to current presentation under ASC 606, auditing revenue recognition for arrangements with multiple performance obligations and testing of ASC 606 adoption impact on adjusted comparable prior periods’ financial statements requires a high degree of auditor judgment and an increased extent of effort.

Given the accounting complexity and the management judgment necessary to identify performance obligations in the arrangement and determine the timing and allocation of revenue in arrangements with multiple performance obligations,

auditing revenue recognition for such arrangements required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the recognition of revenue from multiple-performance-obligation arrangements included the following, among others:

We tested the effectiveness of controls over revenue recognition, including those over the identification of performance obligations included in the transaction, the allocation of transaction price to these performance obligations, the timing of revenue recognition, and the adoption of ASC 606 using the full retrospective method.

• We tested the effectiveness of controls over revenue recognition, including those over the identification of performance obligations included in the transaction, the allocation of transaction price to these performance obligations, the timing of revenue recognition.

• We evaluated the Company’s accounting policies in the context of the applicable accounting standards.

We evaluated the appropriateness and consistency of the methods and assumptions used by management to determine the stand-alone selling price of delivered and undelivered performance obligations of the arrangement.

• We evaluated the appropriateness and consistency of the methods and assumptions used by management to determine the standalone selling price of delivered and undelivered performance obligations of the arrangement.

• We selected a sample of revenue arrangements, including those arrangements that we considered individually significant, and performed the following:

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– We tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated.

We evaluated whether the Company appropriately determined all performance obligations in the arrangement and whether the methodology to allocate the transaction price to the individual performance obligations was appropriately applied based on their stand-alone selling prices.

– We evaluated whether the Company appropriately determined all performance obligations in the arrangement and whether the methodology to allocate the transaction price to the individual performance obligation was appropriately applied based on their stand-alone selling prices.

– We compared the transaction price to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

We tested the allocation of the transaction price to each distinct performance obligation by comparing the relative stand-alone selling price to the selling price of similar goods or services.

– We tested the allocation of the transaction price to each distinct performance obligation by comparing the relative standalone selling prices to the selling prices of similar goods or services.

– We evaluated whether the value allocated to each performance obligation was appropriately recognized in the correct accounting period.

– We obtained evidence of delivery of the performance obligations of the arrangement to the customer.

We tested if the cumulative effect adjustment made under the full retrospective adoption method was in accordance with ASC 606, including testing the mathematical accuracy, and assessed the completeness of the financial statement disclosures.

We also performed procedures to address the completeness and accuracy of the underlying data used in the calculations and the Company’s disclosures.

Ipswitch Inc.

Acquisition-Refer to Note 7 to the financial statements

Chef Acquisition - Refer to Note 7 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Ipswitch Inc.

for cash consideration of approximately $225 million on April 30, 2019 and accounted for the transaction under the acquisition method of accounting for business combinations.

The Company completed the acquisition of Chef Software, Inc.

(“Chef”) for cash consideration of approximately $220 million on October 5, 2020.

The Company accounted for the acquisition of Chef under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values.

The method for determining fair value varied depending on the type of asset or liability and involved management making significant estimates related to assumptions such as the discount rates, customer attrition, and revenue growth projections.

We identified the valuation of the intangible assets of Ipswitch Inc.

as a critical audit matter because of the significant estimates management makes to determine their fair value.

We identified the valuation of the intangible assets of Chef as a critical audit matter because of the significant estimates management makes to determine their fair value.

This requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions related to the discount rates, customer attrition, and revenue growth projections.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of assets acquired and liabilities assumed for Ipswitch Inc.

included the following, among others:

Our audit procedures related to the fair value of assets acquired and liabilities assumed for Chef included the following, among others:

• We tested the effectiveness of controls over the valuation of intangible assets, including management’s controls over forecasts of revenue growth projections, customer attrition rate, and selection of the discount rate.

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– Testing the source information underlying the determination of the valuation assumptions and testing the mathematical accuracy of the calculation.

Developing a range of independent estimates for certain assumptions and comparing those to the assumptions selected by management.

Evaluating whether the fair value models being used are appropriate considering the Company’s circumstances and valuation premise identified.

– Developing a range of independent estimates and comparing those to the assumptions selected by management.

– Evaluating whether the fair value models being used is appropriate considering the Company’s circumstances and valuation premise identified.

• We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

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Consolidated Balance Sheets

(In thousands, except share data)

As Adjusted (1)

(In thousands, except share data) November 30,

2020 November 30,

Current assets:

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Accounts receivable (less allowances of $ 1,315 in 2020 and $ 825 in 2019)

84,040 72,820

Unbilled receivables and contract assets 24,917 10,880

Other current assets 23,983 27,280

Assets held for sale

Total current assets 238,935 284,665

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Intangible assets, net 212,747 99,392

Goodwill 491,726 432,824

Right-of-use lease assets 30,635 —

Deferred tax assets 14,490 18,601

Other assets 6,299 3,532

Total assets $ 1,041,782 $ 881,271

Liabilities and shareholders’ equity

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Dividends payable to shareholders 7,904 7,498

Short-term operating lease liabilities 7,015 —

Income taxes payable 1,899 1,444

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Long-term debt, net 364,260 284,002

Long-term operating lease liabilities 26,966 —

Long-term deferred revenue 26,908 19,752

Deferred tax liabilities

Other noncurrent liabilities 15,092 6,350

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Total liabilities and shareholders’ equity $ 1,041,782 $ 881,271

(1) The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method.

Nature of Business and Summary of Significant Accounting Policies for further information.

See notes to consolidated financial statements.

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Fiscal Year Ended

(In thousands, except per share data)

As Adjusted (1)

(In thousands, except per share data) November 30,

2020 November 30,

2019 November 30,

As Adjusted (1)

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Total costs of revenue 62,114 75,241 66,973

Gross profit 380,036 338,057 312,008

Operating expenses:

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Provision for income taxes 16,913 2,095 11,126

Net income $ 79,722 $ 26,400 $ 49,670

Earnings per share:

Basic $ 1.78 $ 0.59 $ 1.09

Diluted $ 1.76 $ 0.58 $ 1.08

Weighted average shares outstanding:

Basic 44,886 44,791 45,561

Diluted 45,321 45,340 46,135

Cash dividends declared per common share $ 0.670 $ 0.630 $ 0.575

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Fiscal Year Ended

(In thousands)

As Adjusted (1)

(In thousands) November 30,

2020 November 30,

2019 November 30,

As Adjusted (1)

Net income $ 79,722 $ 26,400 $ 49,670

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 777 ( 420 ) ( 9,796 )

Unrealized loss on hedging activity, net of tax benefit of $503 in 2019 and $0 in 2018 and 2017

Unrealized gain (loss) on investments, net of tax provision (benefit) of $60 in 2019, $57 in 2018, and ($60) in 2017

Total other comprehensive (loss) income, net of tax

Unrealized loss on hedging activity, net of tax benefit of $ 1,176 in 2020 and $ 503 in 2019, respectively

( 3,625 ) ( 1,551 ) —

Unrealized gain on investments, net of tax provision of $ 32 , $ 60 and $ 57 in 2020, 2019 and 2018, respectively

Total other comprehensive (loss), net of tax ( 2,804 ) ( 1,798 ) ( 9,770 )

Comprehensive income $ 76,918 $ 24,602 $ 39,900

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Consolidated Statements of Shareholders’ Equity

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Shareholders' Equity

(in thousands)

Number of Shares

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity

(in thousands) Number of Shares Amount

Balance, December 1, 2017, as adjusted (1)

47,281 $ 473 $ 249,363 $ 172,951 $ ( 18,406 ) $ 404,381

Issuance of stock under employee stock purchase plan 225 2 5,456 — — 5,458

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Withholding tax payments related to net issuance of restricted stock units ( 108 ) ( 1 ) ( 3,998 ) — — ( 3,999 )

Tax benefit arising from employee stock purchase plan, stock options and restricted share activity

Stock-based compensation — — 20,569 — — 20,569

Adjustment due to adoption of ASU 2016-09 (Note 1) — — 641 ( 641 ) — —

Dividends declared — — — ( 26,169 ) — ( 26,169 )

Treasury stock repurchases and retirements ( 2,879 ) ( 29 ) ( 9,285 ) ( 110,686 ) — ( 120,000 )

Net income — — — 49,670 — 49,670

Other comprehensive income — — — — ( 9,770 ) ( 9,770 )

Balance, November 30, 2018, as adjusted (1)

45,115 $ 451 $ 266,602 $ 85,125 $ ( 28,176 ) $ 324,002

Issuance of stock under employee stock purchase plan 189 2 5,505 — — 5,507

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Stock-based compensation — — 23,311 — — 23,311

Issuance of shares related to non-compete agreement (Note 7) 44 — 2,000 — — 2,000

Adjustment due to adoption of ASU 2016-16 (Note 1) — — — 4,781 — 4,781

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Treasury stock repurchases and retirements ( 688 ) ( 7 ) ( 1,257 ) ( 23,736 ) — ( 25,000 )

Net income — — — 26,400 — 26,400

Other comprehensive loss — — — — ( 1,798 ) ( 1,798 )

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Stock-based compensation — — 23,482 — — 23,482

Issuance of shares related to non-compete agreement (Note 7)

Adjustment due to adoption of ASU 2016-16 (Note 1)

Dividends declared — — — ( 30,305 ) — ( 30,305 )

Treasury stock repurchases and retirements ( 1,446 ) ( 14 ) ( 18,813 ) ( 41,173 ) — ( 60,000 )

Net income — — — 79,722 — 79,722

Other comprehensive loss — — — — ( 2,804 ) ( 2,804 )

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Fiscal Year Ended

(In thousands)

As Adjusted (1)

(In thousands) November 30,

2020 November 30,

2019 November 30,

As Adjusted (1)

Cash flows from operating activities:

Net income $ 79,722 $ 26,400 $ 49,670

Adjustments to reconcile net income to net cash provided by operating activities:

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Stock-based compensation 23,482 23,311 20,569

Non-cash lease expense 8,609 — —

Loss on disposal of property and equipment 1,025 376 390

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Deferred income taxes ( 2,622 ) ( 14,869 ) ( 2,328 )

Excess tax benefit from stock plans

Allowances for bad debt and sales credits 164 546 262

Gain on sale of intangible assets ( 889 ) — —

Changes in operating assets and liabilities:

Accounts receivable and unbilled receivables 10,682 ( 24,655 ) 18,708

Other assets 1,561 ( 1,902 ) ( 10,332 )

Accounts payable and accrued liabilities ( 4,974 ) 9,116 ( 11,842 )

Lease liabilities ( 8,101 ) — —

Income taxes payable 3 ( 454 ) ( 2,890 )

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Payments for acquisitions, net of cash acquired ( 213,057 ) ( 225,298 ) —

Proceeds from sale of property, plant and equipment, net

Proceeds from sale of long-lived assets, net 889 6,146

Net cash flows (used in) from investing activities ( 207,293 ) ( 208,380 ) 7,593

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Proceeds from the issuance of debt 98,500 184,985 —

Excess tax benefit from stock plans

Payment of principal on long-term debt ( 11,288 ) ( 5,309 ) ( 6,188 )

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Effect of exchange rate changes on cash 3,097 ( 1,263 ) ( 10,512 )

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents ( 56,269 ) 49,133 ( 28,338 )

Cash and cash equivalents, beginning of year 154,259 105,126 133,464

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Cash paid for income taxes, net of refunds of $ 724 in 2020, $ 1,385 in 2019 and $ 909 in 2018

$ 16,107 $ 16,340 $ 25,451

Cash paid for interest $ 9,175 $ 8,666 $ 4,220

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Nature of Business and Summary of Significant Accounting Policies

Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") offers the leading platform for developing and deploying strategic business applications.

We enable customers and partners to deliver modern, high-impact digital experiences with a fraction of the effort, time and cost.

Progress offers powerful tools for easily building adaptive user experiences across any type of device or touchpoint, the flexibility of a cloud-native app dev platform to deliver modern apps, leading data connectivity technology, web content management, business rules, secure file transfer, network monitoring, plus award-winning machine learning that enables cognitive capabilities to be a part of any application.

Over 1,700 independent software vendors ("ISVs"), 100,000 enterprise customers, and 2 million developers rely on Progress to power their applications.

Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") provides the best products to develop, deploy and manage high-impact business applications.

Our comprehensive product stack is designed to make technology teams more productive and we have a deep commitment to the developer community, both open source and commercial alike.

With Progress, organizations can accelerate the creation and delivery of strategic business applications, automate the process by which apps are configured, deployed and scaled, and make critical data and content more accessible and secure—leading to competitive differentiation and business success.

Over 1,700 independent software vendors ("ISVs"), 100,000 enterprise customers, and three million developers rely on Progress to power their applications.

Our products are generally sold as perpetual licenses, but certain products also use term licensing models and our cloud-based offerings use a subscription-based model.

More than half of our worldwide license revenue is realized through relationships with indirect channel partners, principally application partners, original equipment manufacturers ("OEMs"), distributors and value-added resellers.

Application partners are ISVs that develop and market applications using our technology and resell our products in conjunction with sales of their own products that incorporate our technology.

More than half of our worldwide license revenue is realized through relationships with indirect channel partners, principally ISVs, original equipment manufacturers ("OEMs"), distributors and value-added resellers.

ISVs develop and market applications using our technology and resell our products in conjunction with sales of their own products that incorporate our technology.

OEMs are companies that embed our products into their own software products or devices.

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fair values of investments in marketable securities;

assets held for sale;

intangible assets and goodwill valuations;

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A summary of activity in the allowance for doubtful accounts is as follows (in thousands):

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

As Adjusted (1)

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A summary of activity in the allowance for sales credit memos is as follows (in thousands):

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

As Adjusted (1)

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We entered into an interest rate swap contract in July 2019 to manage the variability of cash flows associated with approximately one-half of our variable rate debt.

We have designated the interes t rate swap as a cash flow hedge and assess the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative.

We have designated the interes t rate swap as a cash flow hedge and we assessed the hedge's effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative.

To the extent that the interest rate swap is highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative are included as a component of other comprehensive loss on our consolidated balance sheets.

Although we have determined at the onset of the hedge that the interest rate swap will be a highly effective hedge throughout the term of the contract, any portion of the fair value swap subsequently determined to be ineffective will be recognized in earnings.

Although we determined at the onset of the hedge that the interest rate swap will be a highly effective hedge throughout the term of the contract, any portion of the fair value swap subsequently determined to be ineffective will be recognized in earnings.

Forward Contracts

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We enter into certain derivative instruments that do not qualify for hedge accounting and are not designated as hedges.

Although these derivatives do not qualify for hedge accounting, we believe that such instruments are closely correlated with the underlying exposure, thus managing the associated risk.

Although these derivatives do not qualify for hedge accounting, we believe that such instruments are closely correlated with the

underlying exposure, thus managing the associated risk.

The gains or losses from changes in the fair value of such derivative instruments that are not accounted for as hedges are recognized in earnings in foreign currency loss, net in the consolidated statements of operations.

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During the fiscal years ended November 30, 2020, 2019, and 2018, there were no internal use software development costs capitalized.

We did no t incur any amortization expense related to internal use software development costs during the fiscal year ended November 30, 2019 as these costs were fully amortized as of November 30, 2018 .

Amortization expense related to internal use software totaled $ 0.2 million and $ 0.6 million during the fiscal years ended November 30, 2018 and 2017 , respectively.

We did no t incur any amortization expense related to internal use software development costs during the fiscal years ended November 30, 2020 and 2019 as these costs were fully amortized as of November 30, 2018.

Amortization expense related to internal use software totaled $ 0.2 million during the fiscal year ended November 30, 2018.

Goodwill, Intangible Assets and Long-Lived Assets

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During the fourth quarter of fiscal year 2019, we incurred an additional asset impairment charge of $ 1.4 million related to the abandonment of certain long-lived assets associated with this sale of corporate land and buildings.

The fair value of the assets held for sale was measured using third-party valuation models, which included a discounted cash flow analysis (Note 4).

The fair value of the assets held for sale was measured using third-party valuation models, which included a discounted cash flow analysis.

Comprehensive (Loss) Income

The components of comprehensive loss include, in addition to net income, unrealized gains and losses on investments and foreign currency translation adjustments.

The components of comprehensive loss include, in addition to net income, foreign currency translation adjustments and unrealized gains and losses on investments and hedging activity.

Accumulated other comprehensive loss by components, net of tax (in thousands):

Foreign Currency Translation Adjustment

Unrealized (Losses) Gains on Investments

Unrealized Loss on Hedging Activity

Foreign Currency Translation Adjustment Unrealized (Losses) Gains on Investments Unrealized Losses on Hedging Activity Total

Balance, December 1, 2018 $ ( 27,973 ) $ ( 203 ) $ — $ ( 28,176 )

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Balance, November 30, 2020 $ ( 27,616 ) $ 14 $ ( 5,176 ) $ ( 32,778 )

The tax effect on accumulated unrealized losses on investments was minimal as of November 30, 2019 , November 30, 2018 , and November 30, 2017 .

The tax effect on accumulated unrealized losses on hedging activity and unrealized (losses) gains on investments was $ 1.6 million, $ 0.4 million and minimal as of November 30, 2020, November 30, 2019, and November 30, 2018, respectively.

Revenue Recognition

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Our licenses are sold as perpetual or term licenses, and the arrangements typically contain various combinations of maintenance and services, which are generally accounted for as separate performance obligations.

residual approach to allocate the transaction price to our software license performance obligations because, due to the pricing of our licenses being highly variable, they do not have an observable stand-alone selling price ("SSP").

We use the residual approach to allocate the transaction price to our software license performance obligations because, due to the pricing of our licenses being highly variable, they do not have an observable stand-alone selling price ("SSP").

As required, we evaluate the residual approach estimate compared to all available observable data in order to conclude the estimate is representative of its SSP.

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Determining whether products and services are distinct performance obligations and the determination of the SSP may require significant judgment.

Contract Balances

Unbilled Receivables and Contract Assets

The timing of revenue recognition may differ from the timing of customer invoicing.

When revenue is recognized prior to invoicing and the right to the amount due from customers is conditioned only on the passage of time, we record an unbilled receivable on our consolidated balance sheets.

Our multi-year term license arrangements, which are typically billed annually, result in revenue recognition in advance of invoicing and the recognition of unbilled receivables.

As of November 30, 2019 , invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

Contract assets, which arise when revenue is recognized prior to invoicing and the right to the amount due from customers is conditioned on something other than the passage of time, such as the completion of a related performance obligation, were $ 4.0 million as of November 30, 2019 and insignificant as of November 30, 2018.

These amounts are included in unbilled receivables or long-term unbilled receivables on our consolidated balance sheets.

Deferred Revenue

Deferred revenue is recorded when revenue is recognized subsequent to customer invoicing.

Our deferred revenue balance is primarily made up of deferred maintenance from our OpenEdge and Application Development and Deployment segments.

As of November 30, 2019 , the changes in deferred revenue were as follows (in thousands):

Balance, December 1, 2018 As Adjusted (1)

Billings and other

Revenue recognized

Balance, November 30, 2019

(1) The Company adopted ASC 606 effective December 1, 2018 using the full retrospective method.

Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

As of November 30, 2019 , transaction price allocated to remaining performance obligations was $ 186 million .

We expect to recognize approximately 90 % of the revenue within the next year and the remainder thereafter.

Deferred Contract Costs

Deferred contract costs, which include certain sales incentive programs, are incremental and recoverable costs of obtaining a contract with a customer.

Incremental costs of obtaining a contract with a customer are recognized as an asset if the expected benefit of those costs is longer than one year.

We have applied the practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.

These costs include a large majority of our sales incentive programs as we have determined that annual compensation is commensurate with annual sales activities.

Certain of our sales incentive programs do meet the requirements to be capitalized.

Depending upon the sales incentive program and the related revenue arrangement, such capitalized costs are amortized over the longer of (i) the product life, which is generally three to five years ;

or (ii) the term of the related revenue contract.

We determined that a three to five year product life represents the period of benefit that we receive from these incremental costs based on both qualitative and quantitative factors, which include customer contracts, industry norms, and product upgrades.

Total deferred contract costs were $ 1.7 million as of November 30, 2019 and minimal as of November 30, 2018 and are included in other current assets and other assets on our consolidated balance sheets.

Amortization of deferred contract costs is included in sales and marketing expense on our consolidated statement of operations and was minimal in all periods presented.

Advertising Costs

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Stock-Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards, less the present value of expected dividends, measured at the grant date and recognized over the relevant service period.

Stock-based compensation expense reflects the fair value of stock-based awards, less the present value of expected dividends when applicable, measured at the grant date and recognized over the relevant service period.

We estimate the fair value of each stock-based award on the measurement date using either the current market price of the stock, the Black-Scholes option valuation model, or the Monte Carlo Simulation valuation model.

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In September 2017, Praesidium Investment Management, then one of our largest stockholders, publicly announced its disagreement with our strategy in a Schedule 13D filed with the Securities and Exchange Commission (the “SEC”) and stated that it was seeking changes in the composition of our Board of Directors.

In fiscal years 2017 and 2018, we incurred professional and other fees relating to Praesidium’s actions.

We did not incur any fees related to Praesidium's actions during fiscal year 2019.

In fiscal year 2018, we incurred professional and other fees relating to Praesidium’s actions.

We did not incur any fees related to Praesidium's actions during fiscal year 2020 or 2019.

Acquisition-Related Costs

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Recently Adopted Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12").

ASU 2017-12 intends to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.

The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

We adopted this standard at the beginning of the first quarter of fiscal year 2020.

However, because our existing accounting aligned with the guidance of ASU 2017-12 there was no impact to our financial statements from adoption.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) ("ASC 842").

ASC 842 supersedes the requirements in Topic 840, Leases , and requires lessees to recognize right-of-use ("ROU") assets and liabilities for leases with lease terms of more than twelve months.

ASC 842 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018.

We adopted ASC 842 effective December 1, 2019 using the modified retrospective transition method of applying the new standard at the adoption date.

Results for reporting periods beginning on or after December 1, 2019 are presented under the new guidance, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance.

Disclosures required under the new standard will not be provided for dates and periods before December 1, 2019.

The new standard provided a number of optional practical expedients in transition.

We elected the transition package of practical expedients available in the standard, which allowed the carry forward of historical assessments of whether a contract contains a lease, lease classification and initial direct costs.

We also elected the practical expedient provided in ASC 842 to not separate lease components from non-lease components for each material underlying asset class:

office leases, vehicle leases and equipment leases.

For each lease, the non-lease components and related lease components are accounted for as a single lease component.

Items or activities that do not transfer goods or services to the lessee, such as administrative tasks to set up the contract and reimbursement or payment of lessor costs, are not components of the contract and therefore no contract consideration is allocated to such items or activities.

We did not elect the hindsight practical expedient to determine the lease term for existing leases.

The adoption of the new standard also resulted in significant additional disclosures regarding our leasing activities.

Refer to Note 9 for further details.

In October 2016, the FASB issued Accounting Standards Update No.

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Upon adoption, we recorded a cumulative $ 31 million increase to our 2017 beginning retained earnings balance, a $ 15 million decrease to deferred revenue, a $ 28 million increase to unbilled receivables, and a $ 12 million increase to deferred tax liabilities.

The revenue recognition related to accounting for the following transactions is most impacted by our adoption of this standard:

The revenue recognition related to accounting for the following transactions was most impacted by our adoption of this standard:

• Revenue from term licenses with extended payment terms over the term of the agreement within our Data Connectivity and Integration segment - Under the applicable revenue recognition guidance for fiscal years 2018 and prior, these transactions were recognized when the amounts were billed to the customer.

In accordance with ASC 606, revenue from term license performance obligations is recognized upon delivery and revenue from maintenance performance obligations is expected to be recognized over the contract term.

To the extent that we enter into these transactions, revenue from term licenses with extended payment terms will be recognized prior to the customer being billed and we will recognize an unbilled receivable on the balance sheet.

To the extent that we have entered into these transactions after adoption of ASC 606, revenue from term licenses with extended payment terms is being recognized prior to the customer being billed and we recognize an unbilled receivable on the balance sheet.

Accordingly, the recognition of license revenue is accelerated under ASC 606 as we historically did not recognize revenue until the amounts had been billed to the customer.

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Under ASC 606, the requirement to have VSOE for undelivered elements that existed under prior guidance is eliminated.

Accordingly, the Company will recognize a portion of the sales price as revenue upon delivery of the license instead of recognizing the entire sales price ratably over the maintenance period.

The impact of the adoption of this standard on our previously reported consolidated balance sheet and consolidated statements of operations is as follows:

Accordingly, the Company is recognizing a portion of the sales price as revenue upon delivery of the license instead of recognizing the entire sales price ratably over the maintenance period.

The impact of the adoption of this standard on our previously reported consolidated balance sheet and consolidated statements of operations was as follows:

Consolidated Balance Sheet

November 30, 2018

(in thousands)

(in thousands) As Reported Adjustments As Adjusted

Accounts receivable, net $ 58,450 $ 1,265 $ 59,715

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Other assets (1)

580,237 — 580,237

Total assets $ 640,609 $ 3,541 $ 644,150

Liabilities and shareholders’ equity

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Other liabilities (2)

178,409 — 178,409

Retained earnings 71,242 13,883 85,125

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Other equity (3)

267,053 — 267,053

Total liabilities and shareholders’ equity $ 640,609 $ 3,541 $ 644,150

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November 30, 2018

November 30, 2017

(In thousands, except per share data)

(In thousands, except per share data) As Reported Adjustments As Adjusted

Software licenses $ 122,137 $ ( 22,337 ) $ 99,800

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Costs of revenue 66,973 — 66,973

Gross Profit 330,192 ( 18,184 ) 312,008

Operating expenses 244,194 — 244,194

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Provision for income taxes 15,489 ( 4,363 ) 11,126

Net income $ 63,491 $ ( 13,821 ) $ 49,670

Earnings (loss) per share:

Basic $ 1.39 $ ( 0.30 ) $ 1.09

Diluted $ 1.38 $ ( 0.30 ) $ 1.08

Weighted average shares outstanding:

Basic 45,561 — 45,561

Diluted 46,135 — 46,135

The adoption of ASC 606 had no impact on total cash from or used in operating, financing, or investing activities on our consolidated cash flow statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued Accounting Standards Update No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15").

ASU 2018-15 amends current guidance to align the accounting for costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs associated with developing or obtaining internal-use software.

Capitalized implementation costs must be expensed over the term of the hosting arrangement and presented in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement.

The guidance in ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted.

We are currently accounting for costs incurred in a cloud computing arrangement in accordance with the guidance provided in ASU 2018-15.

In August 2017, the FASB issued Accounting Standards Update No.

2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12").

The guidance in ASU 2017-12 is required for annual reporting periods beginning after December 15, 2018.

We are currently accounting for our cash flow hedges in accordance with the guidance provided in ASU 2017-12.

In January 2017, the FASB issued Accounting Standards Update No.

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The guidance in ASU 2017-04 is required for annual reporting periods beginning after December 15, 2019, with early adoption permitted.

We do not expect the implementation of this update to have a material effect upon adoption on our consolidated financial position and results of operations.

In February 2016, the FASB issued Accounting Standards Update No.

2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires lessees to record most leases on their balance sheets, recognizing a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term.

The guidance in ASU 2016-02 is required for annual reporting periods beginning after December 15, 2018.

We are required to adopt this standard effective December 1, 2019 and plan to apply the modified retrospective transition method.

The comparative historical information will not be restated and will continue to be reported under the accounting standards in effect for those periods.

The new standard provides for optional practical expedients in transition.

We expect to elect the package of transition practical expedients available in the standard, which permits us not to reassess our prior conclusions about lease identification, classification, and initial direct costs under the new standard.

Furthermore, we expect to elect the practical expedients to combine lease and non-lease components and to not recognize right-of-use assets and lease liabilities for short-term leases.

On a preliminary basis, we expect to recognize right-of-use assets of approximately $ 26 million to $ 30 million and lease liabilities of approximately $ 28 million to $ 32 million as of December 1, 2019.

The most significant impact is from right-of-use assets and lease liabilities related to our office space operating leases.

The adoption is not expected to impact our consolidated net earnings or cash flows.

Upon adoption, we do not expect this update to have a material effect on our consolidated financial position and results of operations.

In June 2016, the FASB issued Accounting Standards Update No.

2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13").

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.

Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, contract assets, held-to-maturity debt securities, loans, and other instruments.

ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019.

Early adoption is permitted.

We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements.

Cash, Cash Equivalents and Investments

A summary of our cash, cash equivalents and available-for-sale investments at November 30, 2020 is as follows (in thousands):

Amortized Cost Basis

Amortized Cost Basis Unrealized

Gains Unrealized

Losses Fair Value

Cash $ 79,026 $ — $ — $ 79,026

Money market funds 18,964 — — 18,964

State and municipal bond obligations

treasury bonds 4,993 58 — 5,051

Corporate bonds 2,913 41 — 2,954

Total $ 105,896 $ 99 $ — $ 105,995

A summary of our cash, cash equivalents and available-for-sale investments at November 30, 2019 is as follows (in thousands):

Amortized Cost Basis

Amortized Cost Basis Unrealized

Gains Unrealized

Losses Fair Value

Cash $ 144,346 $ — $ — $ 144,346

Money market funds 9,913 — — 9,913

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Corporate bonds 5,146 12 — 5,158

Total $ 173,662 $ 23 $ — $ 173,685

Such amounts are classified on our consolidated balance sheets as follows (in thousands):

November 30, 2019

November 30, 2018

Cash and Equivalents

November 30, 2020 November 30, 2019

Cash and Equivalents Short-Term

Investments Cash and Equivalents Short-Term

Cash $ 79,026 $ — $ 144,346 $ —

Money market funds 18,964 — 9,913 —

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Corporate bonds — 2,954 — 5,158

Total $ 97,990 $ 8,005 $ 154,259 $ 19,426

The fair value of debt securities by contractual maturity is as follows (in thousands):

2020 November 30,

Due in one year or less $ 5,998 $ 14,004

Due after one year (1)

Includes state and municipal bond obligations, U.S.

Total $ 8,005 $ 19,426

(1) Includes U.S.

treasury bonds and corporate bonds, which are securities representing investments available for current operations and are classified as current on the consolidated balance sheets.

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Under this interest rate swap contract, we receive a floating rate based on the greater of 1-month LIBOR or 0.00 % and pay a fixed rate of 1.855 % on the outstanding notional amount.

We have designated the interes t rate swap as a cash flow hedge and assess the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative.

We have designated the interes t rate swap as a cash flow hedge and assessed the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative.

As of November 30, 2019 , the fair value of the hedge was a loss of $ 2.1 million and included in other noncurrent liabilities on our consolidated balance sheets.

As of November 30, 2020 and November 30, 2019 , the fair value of the hedge was a loss of $ 6.9 million and $ 2.1 million, respectively, and was included in other noncurrent liabilities on our consolidated balance sheets.

The following table presents our interest rate swap contract where the notional amount reflects the quarterly amortization of the interest rate swap, which is equal to approximately one-half of the corresponding reduction in the balance of our term loan as we make our scheduled principal payments.

The fair value of the derivative represents the discounted value of the expected future discounted cash flows for the interest rate swap, based on the amortization schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in thousands):

November 30, 2019

November 30, 2018

Notional Value

November 30, 2020 November 30, 2019

Notional Value Fair Value Notional Value Fair Value

Interest rate swap contracts designated as cash flow hedges $ 142,500 $ ( 6,855 ) $ 148,125 $ ( 2,054 )

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All forward contracts are recorded at fair value on the consolidated balance sheets at the end of each reporting period and expire between 30 days and two years from the date the contract was entered.

At November 30, 2020, $ 1.4 million was recorded in other assets on the consolidated balance sheets.

At November 30, 2019, $ 0.1 million was recorded in other noncurrent liabilities on the consolidated balance sheets.

At November 30, 2018 , $ 0.3 million and $ 0.1 million was recorded in other noncurrent liabilities and other current assets, respectively, on the consolidated balance sheets.

In fiscal year 2019 , realized and unrealized losses of $ 1.1 million from our forward contracts were recognized in foreign currency loss, net on the consolidated statement of operations.

In fiscal years 2018 and 2017 , realized and unrealized losses of $ 6.9 million and realized and unrealized gains of $ 9.4 million , respectively, from our forward contracts were recognized in foreign currency loss, net on the consolidated statements of operations.

These losses and gains were substantially offset by realized and unrealized gains and losses on the offsetting positions.

In fiscal year 2020, realized and unrealized gains of $ 1.7 million from our forward contracts were recognized in foreign currency loss, net on the consolidated statement of operations.

In fiscal years 2019 and 2018, realized and unrealized losses of $ 1.1 million and $ 6.9 million, respectively, from our forward contracts were recognized in foreign currency loss, net on the consolidated statements of operations.

These gains and losses were substantially offset by realized and unrealized losses and gains on the offsetting positions.

The table below details outstanding foreign currency forward contracts where the notional amount is determined using contract exchange rates (in thousands):

November 30, 2019

November 30, 2018

Notional Value

November 30, 2020 November 30, 2019

Notional Value Fair Value Notional Value Fair Value

Forward contracts to sell U.S.

dollars $ 69,031 $ 1,445 $ 66,951 $ ( 85 )

Forward contracts to purchase U.S.

dollars 440 ( 3 ) 1,457 5

Total $ 69,471 $ 1,442 $ 68,408 $ ( 80 )

Fair Value Measurements

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Fair Value Measurements Using

Value Level 1 Level 2 Level 3

Money market funds $ 18,964 $ 18,964 $ — $ —

State and municipal bond obligations

treasury bonds 5,051 — 5,051 —

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Fair Value Measurements Using

Value Level 1 Level 2 Level 3

Money market funds $ 9,913 $ 9,913 $ — $ —

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Foreign exchange derivatives ( 80 ) — ( 80 ) —

Interest rate swap $ ( 2,054 ) $ — $ ( 2,054 ) $ —

When developing fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs.

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Nonrecurring Fair Value Measurements

During fiscal years 2019 and 2018, certain assets were measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3).

During fiscal year 2019, certain assets were measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3).

During the fourth quarter of fiscal year 2019, based on the fair value measurement, we recorded a $ 22.7 million asset impairment charge, which was attributable to the intangible assets primarily associated with the technologies and trade names obtained in the acquisitions of DataRPM and Kinvey during the second and third quarters of fiscal year 2017, respectively (Note 6).

During the fourth quarter of fiscal year 2018, based on the fair value measurement, we recorded a $ 5.1 million asset impairment charge as of November 30, 2018 related to certain corporate land and building assets previously reported as property and equipment, net that we reclassified to assets held for sale on our consolidated balance sheets.

On April 3, 2019, we

sold these assets for approximately $ 5.8 million in net cash proceeds and recognized a net gain on the sale of approximately $ 0.1 million , which is included in interest income and other, net on our consolidated statements of operations.

The following table presents nonrecurring fair value measurements as of November 30, 2019 (in thousands):

Total Fair Value

Total Fair Value Total Losses

Intangible assets $ — $ 22,688

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The expected cash flows include maintenance fees to be collected from existing customers using the products, offset by compensation related costs and hosting fees to be incurred over the remaining estimated useful lives.

The following table presents nonrecurring fair value measurements as of November 30, 2018 (in thousands):

Total Fair Value

Assets held for sale

The fair value measurement of the assets held for sale was measured using third-party valuation models and was determined using an income-based valuation methodology, which includes discounted expected cash flows.

As the discounted cash flows represent unobservable inputs, the fair value was classified as a Level 3 measurement within the fair value hierarchy.

The expected cash flows include proceeds from the sale, offset by the costs incurred to sell the assets.

Property and Equipment

Property and equipment consists of the following (in thousands):

November 30, 2019

November 30, 2018

November 30, 2020 November 30, 2019

Computer equipment and software $ 50,103 $ 47,699

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Depreciation and amortization expense related to property and equipment was $ 6.1 million, $ 7.6 million, and $ 6.9 million for the years ended November 30, 2020, 2019, and 2018, respectively.

In the fourth quarter of fiscal year 2018, we reclassified certain corporate land and building assets previously reported as property and equipment to assets held for sale on our consolidated balance sheet.

Based on the fair value measurement, we recorded a $ 5.1 million asset impairment charge as of November 30, 2018.

On April 3, 2019, we sold these assets for approximately $ 5.8 million in net cash proceeds and recognized a net gain on the sale of approximately $ 0.1 million .

This asset impairment charge is included in impairment of intangible and long-lived assets on our consolidated statements of operations.

Intangible Assets and Goodwill

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Intangible assets are comprised of the following significant classes (in thousands):

November 30, 2019

November 30, 2018

November 30, 2020 November 30, 2019

Amount Accumulated

Amortization Net Book

Amount Accumulated

Amortization Net Book

Purchased technology $ 173,486 $ ( 113,863 ) $ 59,623 $ 135,186 $ ( 105,967 ) $ 29,219

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Non-compete agreement 2,000 ( 1,057 ) 943 2,000 ( 391 ) 1,609

Total $ 437,268 $ ( 224,521 ) $ 212,747 $ 295,968 $ ( 196,576 ) $ 99,392

We amortize intangible assets assuming no expected residual value.

Amortization expense related to these intangible assets was $ 27.9 million, $ 48.1 million and $ 36.0 million in fiscal years 2020, 2019 and 2018, respectively.

The additions to intangible assets during fiscal years 2020 and 2019 are related to the acquisition of Chef in October 2020 and Ipswitch in April 2019, respectively (Note 7).

During the fourth quarter of fiscal year 2019, we evaluated the ongoing value of the intangible assets associated with the technology obtained in connection with the acquisitions of DataRPM and Kinvey.

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Future amortization expense for intangible assets as of November 30, 2020 is as follows (in thousands):

2021 $ 44,890

Thereafter 25,484

Total $ 212,747

Changes in the carrying amount of goodwill for fiscal years 2020 and 2019 are as follows (in thousands):

November 30, 2019

November 30, 2018

November 30, 2020 November 30, 2019

Balance, beginning of year $ 432,824 $ 314,992

Measurement Period Adjustments (1)

Additions (2)

59,858 117,871

Translation Adjustments ( 118 ) ( 39 )

Balance, end of year $ 491,726 $ 432,824

The addition to goodwill during fiscal year 2019 is related to the acquisition of Ipswitch in April 2019 (Note 7).

(1) Represents final measurement period adjustments related to our Ipswitch acquisition (Note 7).

(2) The additions to goodwill during fiscal years 2020 and 2019 are related to the acquisition of Chef in October 2020 and Ipswitch in April 2019, respectively (Note 7).

Changes in the carrying amount of goodwill by reportable segment for fiscal year 2020 are as follows (in thousands):

November 30, 2018

Translation adjustments

November 30, 2019

November 30, 2019 Measurement Period Adjustments Additions Translation Adjustments November 30, 2020

OpenEdge $ 366,819 $ ( 838 ) $ — $ ( 118 ) $ 365,863

Data Connectivity and Integration 19,040 — — — 19,040

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Our reporting units each had fair values which significantly exceeded their carrying values as of the annual impairment date.

We did not recognize any goodwill impairment charges during fiscal years 2019, 2018 or 2017.

We did no t recognize any goodwill impairment charges during fiscal years 2020, 2019 or 2018.

Business Combinations

Chef Acquisition

On October 5, 2020, we completed the acquisition of Chef Software Inc.

(“Chef”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 4, 2020.

The acquisition was completed for a base purchase price of $ 220.0 million, subject to certain customary adjustments as further described in the Merger Agreement (the “Aggregate Consideration”), which was paid in cash.

Pursuant to the Merger Agreement, $ 12.0 million of the Aggregate Consideration was deposited into an escrow account to secure certain indemnification and other potential obligations of the former Chef equity holders.

Chef is a global leader in DevOps and DevSecOps, providing complete infrastructure automation to build, deploy, manage and secure applications in modern multi-cloud and hybrid environments, as well as on-premises.

Chef has enhanced our position as a trusted provider of the best products to develop, deploy and manage high-impact business applications by providing industry-

leading compliance and application automation products for multi-cloud and on-prem infrastructure.

The acquisition bolstered our core offerings, enabling customers to respond faster to business demands and improve efficiency.

We funded the acquisition through a combination of existing cash resources and by drawing down $ 98.5 million from our existing revolving credit facility (Note 8).

The Aggregate Consideration has been allocated to Chef’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values.

The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period (up to one year from the acquisition date).

The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.

The allocation of the purchase price is as follows (in thousands):

Initial Purchase Price Allocation Life

Net working capital $ 52,330

Property, plant and equipment 498

Purchased technology 38,300 5 years

Trade name 5,700 5 years

Customer relationships 97,300 7 years

Other assets 122

Other noncurrent liabilities ( 841 )

Lease liabilities, net ( 1,810 )

Deferred taxes ( 7,817 )

Deferred revenue ( 12,525 )

Goodwill 59,858

Net assets acquired $ 231,115

The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value.

The cash flows are based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital.

The valuation assumptions take into consideration our estimates of customer attrition, technology obsolescence, and revenue growth projections.

Based on the preliminary valuation, the acquired intangible assets are comprised of customer relationships of approximately $ 97.3 million, existing technology of approximately $ 38.3 million, and trade names of approximately $ 5.7 million.

Tangible assets acquired and assumed liabilities were recorded at fair value.

The valuation of the assumed deferred revenue was based on our contractual commitment to provide post-contract customer support to Chef customers and future contractual performance obligations under existing hosting arrangements.

The fair value of this assumed liability was based on the estimated cost plus a reasonable margin to fulfill these service obligations.

A significant portion of the deferred revenue is expected to be recognized in the 12 months following the acquisition.

We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill.

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 59.9 million of goodwill, which is not deductible for tax purposes.

Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) and certain acquisition restructuring and related charges are not included as a component of consideration transferred but are required to be expensed as incurred.

During the fiscal year ended November 30, 2020, we incurred approximately $ 2.2 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

The operations of Chef are included in our operating results as part of the Application Development and Deployment business segment from the date of acquisition.

The amount of revenue of Chef included in our consolidated statement of operations during the fiscal year ended November 30, 2020 was approximately $ 3.8 million.

We determined that disclosing the amount of Chef related earnings included in the consolidated statements of operations is impracticable, as certain operations of Chef were integrated into the operations of the Company from the date of acquisition.

Pro Forma Information

The following pro forma financial information presents the combined results of operations of Progress and Chef as if the acquisition had occurred on December 1, 2018, after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Chef acquisition and factually supportable.

These pro forma adjustments include (i) a decrease in revenue from Chef due to the beginning balance of deferred revenue being adjusted to reflect the fair value of the acquired balance, (ii) a net increase in amortization expense to record amortization expense for the $ 141.3 million of acquired identifiable intangible assets, (iii) an increase in interest expense to record interest for the period presented as a result of drawing down our revolving credit facility in connection with the acquisition, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

(approximately 24.5 %).

The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on December 1, 2018.

These results are prepared in accordance with ASC 606.

(In thousands, except per share data) Pro Forma

Fiscal Year Ended November 30, 2020 Pro Forma

Fiscal Year Ended November 30, 2019

Revenue $ 497,700 $ 459,665

Net income (loss) $ 61,952 $ ( 18,852 )

Net income (loss) per basic share $ 1.38 $ ( 0.42 )

Net income (loss) per diluted share $ 1.37 $ ( 0.42 )

Ipswitch Acquisition

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(“Ipswitch”) from Roger Greene (the “Seller”) pursuant to the Stock Purchase Agreement, dated as of March 28, 2019, by and among Progress, Ipswitch and the Seller.

The acquisition was completed for an aggregate purchase price of $ 225.0 million , subject to certain customary adjustments as further described in the Stock Purchase Agreement (the “Consideration”), which was paid in cash.

Pursuant to the Stock Purchase Agreement, $ 22.5 million of the Consideration was deposited into an escrow account to secure certain indemnification and other potential obligations of the Seller to Progress.

The acquisition was completed for an aggregate purchase price of $ 225.0 million, subject to certain customary adjustments as further described in the Stock Purchase Agreement, which was paid in cash.

Pursuant to the Stock Purchase Agreement, $ 22.5 million of the purchase price was deposited into an escrow account to secure certain indemnification and other potential obligations of the Seller to Progress.

This escrow was released in full in May 2020 upon expiration of the twelve-month escrow period.

The Seller also received an award of approximately $ 2.0 million in Progress restricted stock as consideration for the Seller entering into a non-competition agreement for three years as set forth in the Stock Purchase Agreement.

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Through this acquisition, we bolstered our core offerings to small and medium-sized businesses and enterprises, enabling those businesses to respond faster to business demands and to improve productivity.

We funded the acquisition through a combination of existing cash resources and a $ 185.0 million term loan, which is part of a new $ 401.0 million term loan and revolving credit facility (Note 8).

The consideration has been allocated to Ipswitch’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values.

We funded the acquisition through a combination of existing cash resources and a $ 185.0 million term loan, which is part of our $ 401.0 million term loan and revolving line of credit (Note 8).

The purchase price has been allocated to Ipswitch’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values.

The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.

We recorded measurement period adjustments based on our ongoing valuation and purchase price allocation procedures.

The allocation of the purchase price is as follows (in thousands):

Initial Purchase Price Allocation

Measurement Period Adjustments

Adjusted Purchase Price Allocation

We recorded measurement period adjustments in accordance with FASB’s guidance regarding business combinations in the fourth quarter of fiscal year 2019 and the second quarter of fiscal year 2020 based on our valuation and purchase price allocation procedures.

The measurement period adjustments, which were completed during the second quarter of fiscal year 2020, resulted in a decrease to goodwill of $ 0.6 million, primarily due to a decrease to the sales tax reserve, partially offset by increased accrued expenses.

The following table discloses the net assets acquired in the business combination (in thousands) :

Initial Purchase Price Allocation Measurement Period Adjustments Final Purchase Price Allocation Life

Net working capital $ 6,068 $ 651 $ 6,719

Property, plant and equipment 4,661 4,661

Purchased technology

Customer relationships

Purchased technology 33,100 33,100 5 years

Trade name 9,600 9,600 5 years

Customer relationships 66,600 66,600 5 years

Other assets 314 ( 4 ) 310

Deferred revenue ( 12,696 ) ( 29 ) ( 12,725 )

Goodwill 117,651 ( 618 ) 117,033

Net assets acquired $ 225,298 $ — $ 225,298

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The valuation assumptions take into consideration the Company's estimates of customer attrition, technology obsolescence, and revenue growth projections.

Based on the preliminary valuation, the acquired intangible assets are comprised of customer relationships of approximately $ 66.6 million , existing technology of approximately $ 33.1 million , and trade names of approximately $ 9.6 million .

Based on the valuation, the acquired intangible assets are comprised of customer relationships of approximately $ 66.6 million, existing technology of approximately $ 33.1 million, and trade names of approximately $ 9.6 million.

Tangible assets acquired and assumed liabilities were recorded at fair value.

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The fair value of this assumed liability was based on the estimated cost plus a reasonable margin to fulfill these service obligations.

A significant portion of the deferred revenue is expected to be recognized in the 12 months following the acquisition.

A significant portion of the deferred revenue was recognized in the 12 months following the acquisition.

We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill.

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 117.9 million of goodwill, which is deductible for tax purposes.

An election was made under Section 338(h)(10) of the Internal Revenue Code for Ipswitch to treat it as selling all of its assets on the acquisition date and then liquidating.

We believe that the investment value of the future enhancement of our product offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 117.0 million of goodwill, which is deductible for tax purposes.

An election was made under Section 338(h)(10) of the Internal Revenue Code for Ipswitch to treat the transaction as a sale of all its assets on the acquisition date and subsequent liquidation.

As a result, the identifiable intangible assets and goodwill are deductible for tax purposes.

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We will recognize intangible asset amortization expense over the term of the agreement, which is 3 years.

We recorded $ 0.4 million of amortization expense related to this restricted stock award for the fiscal year ended November 30, 2019 in operating expenses on our consolidated statement of operations.

We recorded $ 0.7 million of amortization expense related to this restricted stock award for the fiscal year ended November 30, 2020 in operating expenses on our condensed consolidated statement of operations.

During the fiscal year ended November 30, 2019 , we incurred approximately $ 1.7 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

The operations of Ipswitch are included in our operating results as part of the OpenEdge segment from the date of acquisition.

The amount of revenue of Ipswitch included in our consolidated statement of operations during the fiscal years ended November 30, 2019 was approximately $ 28.2 million .

We determined that disclosing the amount of Ipswitch related earnings

included in the consolidated statements of operations is impracticable, as certain operations of Ipswitch were integrated into the operations of the Company from the date of acquisition.

During the fiscal year ended November 30, 2020, we incurred approximately $ 0.4 million of acquisition-related costs, which are included in acquisition-related expenses on our condensed consolidated statement of operations.

The operations of Ipswitch are included in our operating results as part of the OpenEdge business segment from the date of acquisition.

The amount of revenue of Ipswitch included in our consolidated statement of operations during the fiscal year ended November 30, 2020 was approximately $ 67.5 million.

The amount of revenue of Ipswitch included in our consolidated statement of operations during the fiscal year ended November 30, 2019 was approximately $ 28.2 million.

We determined that disclosing the amount of Ipswitch related earnings included in the consolidated statements of operations is impracticable, as certain operations of Ipswitch were integrated into the operations of the Company from the date of acquisition.

Pro Forma Information

The following pro forma financial information presents the combined results of operations of Progress and Ipswitch as if the acquisition had occurred on December 1, 2017 after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Ipswitch acquisition and factually supportable.

The pro forma adjustments reflected below include only those adjustments that are directly attributable to the Ipswitch acquisition and factually supportable.

These pro forma adjustments include (i) a decrease in revenue from Ipswitch due to the beginning balance of deferred revenue being adjusted to reflect the fair value of the acquired balance, (ii) a net increase in amortization expense to record amortization expense for the $ 111.3 million of acquired identifiable intangible assets and to eliminate historical amortization of Ipswitch intangible assets, (iii) an increase in interest expense to record interest for the period presented as a result of the new credit facility entered into by Progress in connection with the acquisition, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

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These results are prepared in accordance with ASC 606.

(In thousands, except per share data)

Fiscal Year Ended November 30, 2019

(In thousands, except per share data) Pro Forma

Fiscal Year Ended November 30, 2019

Revenue $ 442,286

Net income $ 19,641

Net income per basic share $ 0.44

Net income per diluted share $ 0.43

Kinvey Acquisition

On June 1, 2017, we acquired by merger 100 % of the outstanding securities of Kinvey for an aggregate sum of $ 49.2 million , which included approximately $ 0.3 million held-back from the founder of Kinvey as an incentive to remain with the Company for at least two years following the acquisition.

The $ 0.3 million held-back was recorded to expense over the service period, which ended prior to the expiration of the two years .

Kinvey allows developers to set up, use, and operate a serverless cloud backend for any native, hybrid, web, or IoT app built using any development tools.

The acquisition was accounted for as a business combination, and accordingly, the results of operations of Kinvey are included in our operating results as part of the OpenEdge business segment from the date of acquisition.

We paid the purchase price in cash from available funds.

The total consideration, less the $ 0.3 million held-back discussed above, which is considered to be a compensation arrangement, was allocated to Kinvey's tangible assets, identifiable intangible assets and assumed liabilities based on their estimated fair values.

The excess of the total consideration, less the amount held-back from the founder, over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.

The allocation of the purchase price was completed in the fourth quarter of fiscal year 2017 upon the finalization of our valuation of identifiable intangible assets and deferred taxes.

The allocation of the purchase price is as follows (in thousands):

Net working capital

Property, plant and equipment

Purchased technology

Customer relationships

Net deferred tax assets

Net assets acquired

The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value.

The cash flows are based on estimates used to price the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital.

Deferred taxes include deferred tax liabilities resulting from the tax effects of fair value adjustments related to identifiable intangible assets, which are more than offset by the value of deferred tax assets acquired from Kinvey.

Tangible assets acquired and assumed liabilities were recorded at fair value.

We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill.

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 24.4 million of goodwill, which is not deductible for tax purposes.

Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) are not included as a component of consideration paid, but are required to be expensed as incurred.

During the fiscal year ended November 30, 2019 , we did no t incur any acquisition-related transaction costs.

During the fiscal years ended November 30, 2018 and 2017, we incurred approximately $ 0.3 million and $ 1.1 million , respectively, of acquisition-related costs, which are included in acquisition-related expenses in our consolidated statement of operations.

As a result of our decision to reduce our current and ongoing spending levels within our cognitive application product lines, which consist primarily of our DataRPM and Kinvey products, we determined that the intangible assets were fully impaired and incurred an impairment charge of $ 22.7 million .

We have not disclosed the amount of revenues and earnings of Kinvey since acquisition, nor pro forma financial information, as those amounts are not significant to our consolidated financial statements.

DataRPM Acquisition

On March 1, 2017, we acquired by merger 100 % of the outstanding securities of DataRPM for an aggregate sum of $ 30.0 million .

Approximately $ 1.7 million of the purchase price was paid to DataRPM’s founders in the form of restricted stock units, subject to a two -year vesting schedule and continued employment.

DataRPM is a developer of solutions within the cognitive predictive maintenance for the industrial IoT ("IIoT") market.

The acquisition was accounted for as a business combination, and accordingly, the results of operations of DataRPM are included in our operating results as part of the OpenEdge business segment from the date of acquisition.

We paid the purchase price in cash from available funds.

The total consideration, less the fair value of the granted restricted stock units discussed above, which are considered compensation arrangements, was allocated to DataRPM’s tangible assets, identifiable intangible assets and assumed liabilities based on their estimated fair values.

The excess of the total consideration, less the fair value of the restricted stock units, over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.

The allocation of the purchase price was completed in the fourth quarter of fiscal year 2017 upon the finalization of our valuation of identifiable intangible assets and deferred taxes.

The allocation of the purchase price is as follows (in thousands):

Net working capital

Property, plant and equipment

Purchased technology

Customer relationships

Deferred taxes

Net assets acquired

The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value.

Deferred taxes include deferred tax liabilities resulting from the tax effects of fair value adjustments related to identifiable intangible assets, partially offset by the fair value of deferred tax assets acquired from DataRPM.

Tangible assets acquired and assumed liabilities were recorded at fair value.

We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill.

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 12.6 million of goodwill, which is not deductible for tax purposes.

As discussed above, approximately $ 1.7 million of the total consideration was paid to DataRPM’s founders in restricted stock units, subject to a vesting schedule and continued employment.

We concluded that the restricted stock units are compensation arrangements and we are recognizing stock-based compensation expense in accordance with the vesting schedule over the service period of the awards, which is 2 years .

During the fiscal years ended November 30, 2019 , 2018 and 2017, we incurred stock-based compensation expense related to these restricted stock units of $ 0.1 million , $ 0.1 million and $ 0.4 million , respectively.

The expense was lower in fiscal years 2019 and 2018 due to the forfeiture of the restricted stock units held by one of the founders as a result of his termination of employment.

These amounts are included in operating expenses in our consolidated statement of operations.

Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) are not included as a component of consideration transferred, but are required to be expensed as incurred.

During the fiscal years ended November 30, 2019 and 2018, we did no t incur any acquisition-related costs.

During the fiscal year ended November 30, 2017 , we incurred approximately $ 0.4 million of acquisition-related costs, which are included in acquisition-related expenses in our consolidated statement of operations.

We have not disclosed the amount of revenues and earnings of DataRPM since acquisition, nor pro forma financial information, as those amounts are not significant to our consolidated financial statements.

Term Loan and Line of Credit

On April 30, 2019, we entered into an amended and restated credit agreement (the "Credit Agreement") with certain lenders (the "Lenders"), which provides for a $ 301.0 million secured term loan and a $ 100.0 million secured revolving credit facility.

The revolving credit facility may be made available in U.S.

On April 30, 2019, we entered into an amended and restated credit agreement (the "Credit Agreement"), which provides for a $ 301.0 million secured term loan and a $ 100.0 million secured revolving line of credit.

The revolving line of credit may be made available in U.S.

Dollars and certain other currencies and may be increased by up to an additional $ 125.0 million if the existing or additional lenders are willing to make such increased commitments.

revolving credit facility has sublimits for swing line loans up to $ 25.0 million and for the issuance of standby letters of credit in a face amount up to $ 25.0 million .

The revolving line of credit has sublimits for swing line loans up to $ 25.0 million and for the issuance of standby letters of credit in a face amount up to $ 25.0 million.

The Credit Agreement modified our prior credit facility by extending the maturity date to April 30, 2024 and extending the principal repayments of the term loan.

We borrowed an additional $ 185.0 million under the term loan as part of this modification.

The new term loan was used to partially fund our acquisition of Ipswitch (Note 7) and we expect to use the revolving credit facility for general corporate purposes, which may include acquisitions of other businesses, and may also use it for working capital.

The Credit Agreement replaces our previous credit agreement dated November 20, 2017, which was set to mature on November 20, 2022.

Loans under the previous credit agreement could be prepaid before maturity in whole or in part at our option without penalty or premium.

At the time we entered into the Credit Agreement, there were no revolving loans and $ 1.3 million letters of credit outstanding, which were incorporated into the new credit facility.

Interest rates for the term loan and revolving credit facility are based upon our leverage ratio and determined based on an index selected at our option.

We borrowed an additional $ 185.0 million under the term loan as part of this modified credit facility.

The new term loan was used to partially fund our acquisition of Ipswitch in April 2019.

During October 2020, we partially funded our acquisition of Chef by drawing down $ 98.5 million under the revolving line of credit (Note 7).

Interest rates for the term loan and revolving line of credit are based upon our leverage ratio and determined based on an index selected at our option.

The rates range from 1.50 % to 2.00 % above the Eurocurrency rate for Eurocurrency-based borrowings or from 0.50 % to 1.00 % above the defined base rate for base rate borrowings.

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The credit facility matures on April 30, 2024, when all amounts outstanding will be due and payable in full.

The revolving credit facility does not require amortization of principal.

The revolving line of credit does not require amortization of principal.

The outstanding balance of the term loan as of November 30, 2020 was $ 286.0 million, with $ 18.8 million due in the next 12 months.

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The term loan may be prepaid before maturity in whole or in part at our option without penalty or premium.

As of November 30, 2019 , the carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds.

As of November 30, 2020, the carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable

market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds.

Costs incurred to obtain our long-term debt of $ 1.6 million, along with $ 1.2 million of unamortized debt issuance costs related to the previous credit agreement, are recorded as debt issuance costs as a direct deduction from the carrying value of the debt liability on our consolidated balance sheets as of November 30, 2020.

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We may prepay the loans or terminate or reduce the commitments in whole or in part at any time, without premium or penalty, subject to certain conditions and reimbursement of certain costs in the case of Eurocurrency rate loans.

As of November 30, 2019 , there were no amounts outstanding under the revolving line and $ 1.8 million of letters of credit.

As of November 30, 2020, there was $ 98.5 million outstanding under the revolving line and $ 2.1 million of letters of credit.

We are the sole borrower under the credit facility.

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The Credit Agreement generally prohibits, with certain exceptions, any other liens on our assets, subject to certain exceptions as described in the Credit Agreement.

dispose of assets, pay dividends or make distributions, repurchase stock, change the nature of the business, enter into certain transactions with affiliates and enter into burdensome agreements, in each case subject to customary exceptions for a credit facility of this size and type.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, grant liens, make investments, make acquisitions, incur indebtedness, merge or consolidate, dispose of assets, pay dividends or make distributions, repurchase stock, change the nature of the business, enter into certain transactions with affiliates and enter into burdensome agreements, in each case subject to customary exceptions for a credit facility of this size and type.

We are also required to maintain compliance with a consolidated fixed charge coverage ratio, a consolidated total leverage ratio and a consolidated senior secured leverage ratio.

We are in compliance with these financial covenants as of November 30, 2020.

As of November 30, 2019 , aggregate principal payments of long-term debt for the next five years are (in thousands):

Commitments and Contingencies

Leasing Arrangements

We lease certain facilities and equipment under non-cancelable operating lease arrangements.

Future minimum rental payments under these leases are as follows at November 30, 2019 (in thousands):

As of November 30, 2020, aggregate future maturities of long-term debt were as follows (in thousands):

2021 $ 18,812

Total $ 384,450

In February 2016, the FASB issued ASC 842 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The Company adopted ASC 842 on December 1, 2019 using the modified retrospective method and as a result did not adjust comparative periods or modify disclosures in those comparative periods.

The new guidance provides a number of optional practical expedients in transition.

The Company elected the package of practical expedients, which does not require the reassessment of prior conclusions about lease identification, lease classification and initial direct costs.

Further, the Company elected the practical expedients to combine lease and non-lease components.

Contracts may be comprised of lease components, non-lease components, and elements that are not components.

Each lease component represents a lessee’s right to use an underlying asset in the contract if the lessee can benefit from the right-of-use of the asset either on its own or together with other readily available resources and if the right-of-use is neither highly dependent or highly interrelated with other rights-of-use.

Non-lease components include items such as common area maintenance and utilities provided by the lessor.

We also elected the practical expedient to not recognize right-of-use assets and lease liabilities for short-term leases.

Leases with an initial term of 12 months or less are classified as short-term leases.

Consideration in the contract is comprised of any fixed payments and variable payments that depend on an index or rate.

Payments in the Company's operating lease arrangements primarily consist of base office rent.

In accordance with ASC 842, variable payments in an agreement that are not dependent on an index or rate are excluded from the calculation of ROU assets and lease liabilities.

The Company makes variable payments on certain of its leases related to taxes, insurance, common area maintenance, and utilities, among other things.

The adoption of ASC 842 on December 1, 2019 resulted in the recognition of operating lease ROU assets of approximately $ 28.9 million and operating lease liabilities of approximately $ 29.9 million.

The difference between the value of the ROU assets and lease liabilities is due to the reclassification of existing deferred rent, prepaid rent, and unamortized lease incentives as of December 1, 2019.

Operating leases are included in ROU assets and lease liabilities on the Company’s balance sheets.

ROU assets and lease liabilities are to be presented separately for operating and finance leases.

However, the Company currently has no material finance leases.

The adoption of ASC 842 did not have a material impact on the Company’s condensed consolidated statement of operations, consolidated statement of stockholders' equity, consolidated statement of comprehensive income (loss) or consolidated statement of cash flows.

The adoption of ASC 842 had no impact on liquidity or the Company’s debt-covenant compliance under its current debt agreements.

The Company determines if an arrangement is a lease at inception.

ROU assets represent the Company’s right to use an underlying asset for the duration of the lease term.

Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term.

ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received.

Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement.

Operating leases liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term.

The interest rate implicit in the lease contracts is not readily determinable.

As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.

The Company has operating leases for administrative, product development, and sales and marketing facilities, vehicles, and equipment under various non-cancelable lease agreements.

The Company’s leases have remaining lease terms ranging from 1 year to 10 years.

The Company’s lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options.

The Company considers several economic factors when making the determination as to whether the Company will exercise options to extend or terminate the lease, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of operating lease cost for the year ended November 30, 2020 was as follows (in thousands):

Fiscal Year Ended

November 30, 2020

Lease costs under long-term operating leases $ 7,605

Lease costs under short-term operating leases 426

Variable lease cost under short-term and long-term operating leases (1)

Operating lease right-of-use asset impairment 1,189

Total operating lease cost $ 9,545

(1) Lease costs that are not fixed at lease commencement.

The table below presents supplemental cash flow information related to leases during the year ended November 30, 2020 (in thousands):

Fiscal Year Ended

November 30, 2020

Cash paid for leases $ 8,101

Right-of-use assets recognized for new leases and amendments (non-cash) $ 8,532

Weighted average remaining lease term in years and weighted average discount rate are as follows:

November 30, 2020

Weighted average remaining lease term in years 5.02

Weighted average discount rate 2.3 %

Future payments under non-cancellable leases at November 30, 2020 are as follows (in thousands):

Thereafter 7,350

Total lease payments 36,026

Less imputed interest (1)

Present value of lease liabilities $ 33,981

(1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated as a result of a lease reassessment event.

Our operating lease arrangements are subject to customary renewal and base rental fee escalation clauses.

Total rent expense, net of sublease income which is insignificant, under operating lease arrangements was approximately $ 9.6 million, $ 8.9 million and $ 6.8 million in fiscal years 2020, 2019 and 2018, respectively.

Commitments and Contingencies

Guarantees and Indemnification Obligations

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Common Stock Repurchases

In January 2020, our Board of Directors increased the total share repurchase authorization from $ 75.0 million to $ 250.0 million.

In fiscal years 2020 and 2019, we repurchased and retired 1.4 million shares of our common stock for $ 60.0 million and 0.7 million shares of our common stock for $ 25.0 million, respectively, under this current authorization.

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As of November 30, 2020, there was $ 190.0 million remaining under the current authorization.

In January 2020, our Board of Directors increased the total share repurchase authorization from $ 75.0 million to $ 250.0 million .

On September 27, 2016, our Board of Directors approved the initiation of a quarterly cash dividend of $ 0.125 per share of common stock to Progress stockholders.

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In September 2018, the quarterly cash dividend was increased by 11 % to $ 0.155 per share of common stock.

On September 24, 2019, our Board of Directors approved an additional 6 % increase to our quarterly cash dividend from $ 0.155 to $ 0.165 per share of common stock and declared a quarterly dividend of $ 0.165 per share of common stock.

In September 2019, our Board of Directors approved an additional 6 % increase to our quarterly cash dividend from $ 0.155 to $ 0.165 per share of common stock.

On September 22, 2020, our Board of Directors approved an additional increase of 6 % to our quarterly cash dividend from $ 0.165 to $ 0.175 and declared a quarterly dividend of $ 0.175 per share of common stock.

We have declared aggregate per share quarterly cash dividends totaling $ 0.670 , $ 0.630 and $ 0.575 for the years ended November 30, 2020, November 30, 2019 and November 30, 2018, respectively.

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The 2004 Plan is reserved for persons to whom we may issue securities as an inducement to become employed by us pursuant to the rules and regulations of the NASDAQ Stock Market.

Awards under the 2004 Plan may include nonqualified stock

options, grants of conditioned or restricted stock, unrestricted grants of stock, grants of stock contingent upon the attainment of performance goals and stock appreciation rights.

Awards under the 2004 Plan may include nonqualified stock options, grants of conditioned or restricted stock, unrestricted grants of stock, grants of stock contingent upon the attainment of performance goals and stock appreciation rights.

A total of 1,500,000 shares are issuable under the 2004 Plan, of which 462,859 shares were available for grant as of November 30, 2020.

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A summary of stock option activity under all the plans is as follows:

Weighted Average

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value (1)

(in thousands)

Exercise Price

(in thousands)

Shares Weighted Average Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1)

(in thousands) Exercise Price (in years) (in thousands)

Options outstanding, December 1, 2019 1,423 $ 37.26

Granted 611 43.34

Exercised ( 137 ) 31.84

Canceled ( 224 ) 42.08

Options outstanding, November 30, 2020 1,673 $ 39.28 4.9 $ 7,125

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A summary of restricted stock units' activity is as follows (in thousands, except per share data):

Number of Shares

Weighted Average Fair Value

Number of Shares Weighted Average Fair Value

Restricted stock units outstanding, December 1, 2019 829 $ 38.15

Granted 538 43.80

Issued ( 416 ) 36.20

Canceled ( 155 ) 39.96

Restricted stock units outstanding, November 30, 2020 796 $ 42.65

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Performance-based restricted stock units are subject to multi-year performance criteria aligned with our business plan and are earned only to the extent the performance criteria are achieved.

The fair value of outright stock awards, restricted stock units and DSUs is equal to the closing price of our common stock on the date of grant, less the present value of expected dividends, as the recipient is not entitled to dividends during the requisite service period.

During fiscal year 2017, we granted performance-based restricted stock units that include a three -year market condition under a Long-Term Incentive Plan (“LTIP”) where the performance measurement period is three years.

Vesting of the LTIP awards is based on our level of attainment of specified total stockholder return ("TSR") targets relative to the percentage appreciation of a specified index of companies for the respective three -year periods and is also subject to the continued employment of the grantees.

In order to estimate the fair value of such awards, we used a Monte Carlo Simulation valuation model.

During the first quarter of fiscal years 2018 and 2019, we granted performance-based restricted stock units that include two performance metrics under the LTIP where the performance measurement period is three years.

Vesting of the 2018 and 2019 LTIP awards is as follows:

(i) 50 % is based on the three -year market condition as described above (TSR), and (ii) 50 % is based on achievement of a three -year cumulative performance condition (operating income).

In order to estimate the fair value of such awards, we used a Monte Carlo Simulation valuation model for the market condition portion of the award and used the

closing price of our common stock on the date of grant, less the present value of expected dividends, for the portion related to the performance condition.

Beginning in fiscal year 2020, restricted stock units have forfeitable dividend equivalent rights equal to the dividend paid on our common stock.

During the first quarter of fiscal years 2018, 2019 and 2020, we granted performance-based restricted stock units that include two performance metrics under a Long-Term Incentive Plan (“LTIP”) where the performance measurement period is three years .

Vesting of these LTIP awards is as follows:

(i) 50 % is based on our level of attainment of specified total stockholder return ("TSR") targets relative to the percentage appreciation of a specified index of companies for the respective three-year periods, and (ii) 50 % is based on achievement of a three-year cumulative performance condition (operating income).

The vesting of LTIP awards is also subject to continued employment of the grantees.

In order to estimate the fair value of such awards, we used a Monte Carlo Simulation valuation model for the market condition portion of the award and used the closing

price of our common stock on the date of grant, less the present value of expected dividends when applicable, for the portion related to the performance condition.

The 1991 Employee Stock Purchase Plan ("ESPP") permits eligible employees to purchase up to an aggregate of 9,450,000 shares of our common stock through accumulated payroll deductions.

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Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

Stock options:

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Total unrecognized stock-based compensation expense, net of expected forfeitures, related to unvested stock options and unvested restricted stock awards amounted to $ 33.3 million at November 30, 2020.

These costs are expected to be recognized over a weighted average period of 2 years.

These costs are expected to be recognized over a weighted average period of two years .

The following additional activity occurred under our plans (in thousands):

Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

Total intrinsic value of stock options on date exercised $ 1,340 $ 1,388 $ 3,692

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Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

Cost of maintenance and services $ 1,336 $ 1,134 $ 616

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Separation Arrangements

During fiscal year 2017, we entered into separation agreements with three executives, which entitled them to accelerated vesting of certain stock-based awards.

Due to the separation and accelerated vesting, we recognized additional stock-based compensation expense of $ 1.5 million , of which $ 0.8 million was recorded as sales and marketing expense and $ 0.7 million was recorded as general and administrative expense, in the consolidated statement of operations.

During fiscal year 2020, we entered into a separation agreement with one executive, which entitled them to accelerated vesting of certain stock-based awards.

Due to the separation and accelerated vesting, we recognized additional stock-based compensation expense of $ 0.3 million, which was recorded as general and administrative expense in the consolidated statement of operations.

Retirement Plan

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Company contributions to the plan are at the discretion of the Board of Directors and totaled approximately $ 3.6 million, $ 2.3 million and $ 3.1 million for fiscal years 2020, 2019 and 2018, respectively.

Revenue Recognition

Contract Balances

Unbilled Receivables and Contract Assets

The timing of revenue recognition may differ from the timing of customer invoicing.

Our multi-year term license arrangements, which are typically billed annually, result in revenue recognition in advance of invoicing and the recognition of unbilled receivables.

As of November 30, 2020, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

Total $ 10,776

Contract assets, which arise when products or services have begun to be transferred to the customer and our right to the amounts due from customers is conditioned on something other than the passage of time, such as the completion of a related performance obligation, were $ 11.3 million and $ 1.5 million as of November 30, 2020 and November 30, 2019, respectively.

These amounts are included in unbilled receivables and contract assets or long-term unbilled receivables and contract assets on our consolidated balance sheets.

Deferred Revenue

Deferred revenue is recorded when revenue is recognized subsequent to customer invoicing.

Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is included in long-term liabilities on the consolidated balance sheets.

Our deferred revenue balance is primarily made up of deferred maintenance from our OpenEdge and Application Development and Deployment segments.

As of November 30, 2020, the changes in deferred revenue were as follows (in thousands):

Balance, December 1, 2019 $ 177,246

Billings and other 458,199

Revenue recognized ( 442,150 )

Balance, November 30, 2020 $ 193,295

As of November 30, 2020, transaction price allocated to remaining performance obligations was $ 212.2 million.

We expect to recognize approximately 83 % of the revenue within the next year and the remainder thereafter.

Deferred Contract Costs

Deferred contract costs, which include certain sales incentive programs, are incremental and recoverable costs of obtaining a contract with a customer.

Incremental costs of obtaining a contract with a customer are recognized as an asset if the expected benefit of those costs is longer than one year.

We have applied the practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.

These costs include a large majority of our sales incentive programs as we have determined that annual compensation is commensurate with annual sales activities.

Certain of our sales incentive programs do meet the requirements to be capitalized.

Depending upon the sales incentive program and the related revenue arrangement, such capitalized costs are amortized over the longer of (i) the product life, which is generally three to five years ;

or (ii) the term of the related revenue contract.

Total deferred contract costs were $ 2.5 million, $ 1.7 million and minimal as of November 30, 2020, November 30, 2019 and November 30, 2018, respectively, and are included in other current assets and other assets on our consolidated balance sheets.

Amortization of deferred contract costs is included in sales and marketing expense on our consolidated statement of operations and was minimal in all periods presented.

Restructuring

The following table provides a summary of activity for all of the restructuring actions, which are detailed further below (in thousands):

Excess Facilities and Other Costs

Employee Severance and Related Benefits

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

Balance, November 30, 2017 $ 570 $ 3,556 $ 4,126

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Cash disbursements ( 1,309 ) ( 4,802 ) ( 6,111 )

Asset impairment

Translation adjustments and other 35 10 45

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Cash disbursements ( 1,569 ) ( 2,554 ) ( 4,123 )

Asset impairment ( 20 ) — ( 20 )

Translation adjustments and other 2 5 7

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2020 Restructurings

During the fourth quarter of fiscal year 2020, we restructured our operations in connection with the acquisition of Chef (Note 7).

This restructuring resulted in a reduction in redundant positions, primarily within administrative functions of Chef.

For the fiscal year ended November 30, 2020, we incurred expenses of $ 3.9 million relating to this restructuring.

The expenses are recorded as restructuring expenses in the consolidated statements of operations.

A summary of activity for this restructuring action is as follows (in thousands):

Facilities and

Other Costs Employee Severance and Related Benefits Total

Balance, December 1, 2019 $ — $ — $ —

Costs incurred — 3,947 3,947

Cash disbursements — ( 429 ) ( 429 )

Translation adjustments and other — 5 5

Balance, November 30, 2020 $ — $ 3,523 $ 3,523

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2021.

Accordingly, the balance of the restructuring reserve of $ 3.5 million is included in other accrued liabilities on the consolidated balance sheet at November 30, 2020.

We expect to incur additional expenses as part of this action related to employee costs and facility closures as we consolidate offices in various locations during fiscal year 2021, but we do not expect these costs to be material.

2019 Restructurings

During the fourth quarter of fiscal year 2019, we announced the reduction of our current and ongoing spending level within our cognitive application product lines, which consist primarily of our DataRPM and Kinvey products.

7 unchanged sentences

Facilities and

Employee Severance and Related Benefits

Other Costs Employee Severance and Related Benefits Total

Balance, December 1, 2018 $ — $ — $ —

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Balance, November 30, 2019 $ — $ 1,460 $ 1,460

Costs incurred — 108 108

Cash disbursements — ( 1,546 ) ( 1,546 )

Balance, November 30, 2020 $ — $ 22 $ 22

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2021.

Accordingly, the balance of the restructuring reserve of $ 1.5 million is included in other accrued liabilities on the consolidated balance sheet at November 30, 2019 .

Accordingly, the balance of the restructuring reserve, which is not material, is included in other accrued liabilities on the consolidated balance sheet at November 30, 2020.

We do not expect to incur additional material costs with respect to this restructuring.

1 unchanged sentence

This restructuring resulted in a reduction in redundant positions, primarily within administrative functions of Ipswitch.

We expect to incur additional expenses as part of this action related to employee costs and facility closures as we consolidate offices in various locations during fiscal year 2020, but we do not expect these costs to be material.

For the fiscal year ended November 30, 2019 , we incurred expenses of $ 3.1 million relating to this restructuring.

For the fiscal years ended November 30, 2020 and 2019, we incurred expenses of $ 1.5 million and $ 3.1 million, respectively, relating to this restructuring.

The expenses are recorded as restructuring expenses in the consolidated statements of operations.

1 unchanged sentence

Facilities and

Employee Severance and Related Benefits

Other Costs Employee Severance and Related Benefits Total

Balance, December 1, 2018 $ — $ — $ —

3 unchanged sentences

Balance, November 30, 2019 $ 5 $ 547 $ 552

Costs incurred 1,447 39 1,486

Cash disbursements ( 1,020 ) ( 579 ) ( 1,599 )

Asset impairment ( 20 ) — ( 20 )

Translation adjustments and other 5 — 5

Balance, November 30, 2020 $ 417 $ 7 $ 424

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2021.

Accordingly, the balance of the restructuring reserve of $ 0.4 million is included in other accrued liabilities on the consolidated balance sheet at November 30, 2020.

We expect to incur additional expenses as part of this action related to facility closures as we consolidate offices in various locations during fiscal year 2021, but we do not expect these costs to be material.

2017 Restructuring

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Restructuring expenses are related to employee costs, including severance, health benefits and outplacement services (but excluding stock-based compensation), facilities costs, which include fees to terminate lease agreements and costs for unused space, net of sublease assumptions, and other costs, which include asset impairment charges.

As part of this fiscal year 2017 restructuring, for the fiscal years ended November 30, 2019 and 2018 , we incurred expenses of $ 0.7 million and $ 2.3 million , respectively, which are recorded as restructuring expenses in the consolidated statements of operations.

As part of this fiscal year 2017 restructuring, for the fiscal years ended November 30, 2020, 2019 and 2018, we incurred expenses of $ 0.4 million, $ 0.7 million, $ 2.3 million respectively, which are recorded as restructuring expenses in the consolidated statements of operations.

A summary of activity for this restructuring action is as follows (in thousands):

Excess Facilities and Other Costs

Employee Severance and Related Benefits

Balance, December 1, 2016

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

Balance, November 30, 2017 $ 540 $ 3,556 $ 4,096

Costs incurred 1,011 1,240 2,251

Cash disbursements ( 1,279 ) ( 4,802 ) ( 6,081 )

Asset impairment

Translation adjustments and other 35 10 45

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Cash disbursements ( 760 ) ( 8 ) ( 768 )

Asset impairment ( 89 ) — ( 89 )

Translation adjustments and other ( 2 ) — ( 2 )

2 unchanged sentences

Cash disbursements ( 549 ) — ( 549 )

Asset impairment

Translation adjustments and other ( 3 ) — ( 3 )

1 unchanged sentence

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2020.

Accordingly, the balance of the restructuring reserve of $ 0.2 million is included in other accrued liabilities on the consolidated balance sheet at November 30, 2019 .

Accordingly, a minimal balance of the restructuring reserve is included in other accrued liabilities on the consolidated balance sheet at November 30, 2020.

The components of income before income taxes are as follows (in thousands):

Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

As Adjusted (1)

November 30, 2020 November 30, 2019 November 30, 2018

As Adjusted (1)

$ 83,279 $ ( 11,778 ) $ 59,440

Foreign 13,356 40,273 1,356

Total $ 96,635 $ 28,495 $ 60,796

(1) The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method.

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Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

Federal $ 12,294 $ 9,294 $ 8,979

State 3,871 1,862 1,387

Foreign 3,370 5,808 3,088

Total current 19,535 16,964 13,454

Deferred, as adjusted (1) :

Federal ( 1,613 ) ( 12,191 ) ( 863 )

State ( 969 ) ( 2,399 ) ( 51 )

Foreign ( 40 ) ( 279 ) ( 1,414 )

Total deferred ( 2,622 ) ( 14,869 ) ( 2,328 )

Total $ 16,913 $ 2,095 $ 11,126

(1) The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method.

3 unchanged sentences

Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

As Adjusted (1)

November 30, 2020 November 30, 2019 November 30, 2018

As Adjusted (1)

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Foreign derived intangible deduction ( 5,297 ) ( 2,300 ) —

Other 198 ( 82 ) ( 521 )

Total $ 16,913 $ 2,095 $ 11,126

(1) The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method.

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The components of deferred tax assets and liabilities are as follows (in thousands):

November 30, 2019

November 30, 2018

As Adjusted (1)

November 30, 2020 November 30, 2019

Deferred tax assets:

6 unchanged sentences

Tax credit and loss carryforwards 42,189 21,867

Operating lease liabilities 5,531 —

Gross deferred tax assets 69,098 51,692

2 unchanged sentences

Deferred tax liabilities:

Goodwill ( 20,624 ) ( 18,879 )

Right-of-use lease assets ( 4,837 ) —

Deferred revenue ( 3,027 ) ( 4,541 )

2 unchanged sentences

Total deferred tax liabilities ( 44,746 ) ( 24,230 )

(1) The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method.

Nature of Business and Summary of Significant Accounting Policies for further information.

Total $ 14,476 $ 18,598

The valuation allowance primarily applies to net operating loss carryforwards and unutilized tax credits in jurisdictions or under conditions where realization is not more likely than not.

The $ 1.0 million increase in the valuation allowance during fiscal year 2020 primarily relates to the currency revaluation of foreign net operating losses which have a valuation allowance recorded against them.

The $ 0.1 million increase in the valuation allowance during fiscal year 2019 primarily relates to acquired foreign net operating losses which have a valuation allowance recorded against them.

The $ 7.3 million increase in the valuation allowance during fiscal year 2018 primarily relates to losses in a foreign subsidiary that are more likely than not going to expire prior to utilization.

The $ 1.7 million decrease in the valuation allowance during fiscal year 2017 primarily relates to a foreign subsidiary that utilized net operating loss carryforwards in fiscal year 2017 that had a valuation allowance recorded against them.

At November 30, 2020, we have federal and foreign net operating loss carryforwards of $ 208.4 million expiring on various dates through 2034.

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Fiscal Year Ended

November 30, 2019

November 30, 2018

November 30, 2017

November 30, 2020 November 30, 2019 November 30, 2018

Balance, beginning of year $ 4,993 $ 5,787 $ 7,520

Tax positions related to current year

Tax positions related to a prior period 539 110 ( 15 )

Tax positions acquired 1,596 — —

Settlements with tax authorities ( 12 ) ( 181 ) ( 39 )

3 unchanged sentences

We recognize interest and penalties related to uncertain tax positions as a component of our provision for income taxes.

In fiscal year 2019 a net benefit of $ 0.1 million was recorded to the provision for income taxes related to estimated interest and penalties of $ 0.1 million offset by a reduction of $ 0.2 million related to statute expirations.

In fiscal year 2018 a net benefit of $ 0.1 million was recorded to the provision for income taxes related to estimated interest and penalties of $ 0.2 million offset by a reduction of $ 0.3 million related to statute expirations.

In fiscal year 2017 estimated interest and penalties of $ 0.2 million were recorded to the provision for income taxes.

We have accrued $ 0.4 million and $ 0.4 million of estimated interest and penalties at November 30, 2019 and 2018, respectively.

The amount of interest and penalties accrued are not material in any of the periods presented.

We do not expect any significant changes to the amount of unrecognized tax benefits in the next twelve months.

Our Federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2017.

State income tax authorities in certain jurisdictions are examining state income tax returns and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income.

Our state income tax returns have been examined or are closed by statute for all years prior to fiscal year 2016, and we are no longer subject to audit for those periods.

8 unchanged sentences

Fiscal Year Ended

As Adjusted (1)

2020 November 30,

2019 November 30,

As Adjusted (1)

Net income $ 79,722 $ 26,400 $ 49,670

Weighted average shares outstanding 44,886 44,791 45,561

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Our chief operating decision maker is our Chief Executive Officer.

The changes made to our organization during fiscal years 2019 and 2018, as discussed in Note 13, did not change our determination of the three reportable segments as our organizational structure maintains the focus of the three business segments.

We operate as three distinct business segments:

OpenEdge, Data Connectivity and Integration, and Application Development and Deployment.

We do not manage our assets or capital expenditures by segment or assign other income (expense) and income taxes to segments.

2 unchanged sentences

Fiscal Year Ended

(In thousands)

November 30, 2019

November 30, 2018

November 30, 2017

As Adjusted (1)

(In thousands) November 30, 2020 November 30, 2019 November 30, 2018

As Adjusted (1)

Segment revenue:

OpenEdge $ 326,444 $ 296,929 $ 277,806

Data Connectivity and Integration 34,187 39,903 23,129

2 unchanged sentences

Segment costs of revenue and operating expenses:

OpenEdge 76,352 85,209 67,820

Data Connectivity and Integration 8,397 7,973 7,634

2 unchanged sentences

Segment contribution margin:

OpenEdge 250,092 211,720 209,986

Data Connectivity and Integration 25,790 31,930 15,495

2 unchanged sentences

Other unallocated expenses (2)

212,924 256,039 208,626

Income from operations 107,728 40,084 67,814

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(2) The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only:

certain product development and corporate sales and marketing expenses, customer support, administration, amortization and impairment of acquired intangibles, impairment of long-lived assets, loss on assets held for sale, stock-based compensation, fees related to shareholder activist, restructuring, and acquisition-related expenses.

product development, corporate marketing, administration, amortization and impairment of acquired intangibles, impairment of long-lived assets, stock-based compensation, restructuring, acquisition-related expenses, loss on assets held for sale, and fees related to shareholder activist.

Our revenues are derived from licensing our products, and from related services, which consist of maintenance, hosting services, and consulting and education.

1 unchanged sentence

Fiscal Year Ended

As Adjusted (1)

2020 November 30,

2019 November 30,

As Adjusted (1)

2 unchanged sentences

Performance obligations transferred over time:

Maintenance 288,887 259,006 249,171

Services 38,014 31,740 30,010

Total revenue $ 442,150 $ 413,298 $ 378,981

7 unchanged sentences

Fiscal Year Ended

As Adjusted (1)

2020 November 30,

2019 November 30,

As Adjusted (1)

United States $ 240,717 $ 213,252 $ 187,627

Canada 20,281 20,659 16,630

EMEA 143,754 137,301 135,055

Latin America 14,574 19,665 18,046

Asia Pacific 22,824 22,421 21,623

Total revenue $ 442,150 $ 413,298 $ 378,981

9 unchanged sentences

Selected Quarterly Financial Data (unaudited)

(in thousands, except per share data)

(in thousands, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Fiscal year 2020:

Revenue $ 109,683 $ 100,383 $ 109,699 $ 122,385

Gross profit 94,797 86,124 94,961 104,154

Income from operations 30,712 25,309 33,193 18,514

Net income 21,116 16,968 23,977 17,661

Basic earnings per share 0.47 0.38 0.53 0.39

Diluted earnings per share 0.46 0.37 0.53 0.39

Fiscal year 2019:

Revenue $ 89,549 $ 99,995 $ 106,716 $ 117,038

Gross profit 73,510 82,384 85,891 96,272

Income (loss) from operations 15,409 14,741 15,960 ( 6,026 )

2 unchanged sentences

Diluted earnings (loss) per share 0.21 0.18 0.30 ( 0.11 )

Fiscal year 2018 (1) :

Income from operations

Basic earnings per share

Diluted earnings per share

(1) The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method.

Nature of Business and Summary of Significant Accounting Policies for further information.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data