What changed in this filing

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Item 1. Financial Statements

2021-07-07 compared with 2021-04-05 · 287 added, 174 removed, 467 unchanged (50% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

(In thousands, except share data) February 28, 2021 November 30, 2020

(In thousands, except share data) May 31, 2021 November 30, 2020

Current assets:

27 unchanged sentences

Long-term debt, net 254,757 364,260

Convertible senior notes, net 288,023 —

Long-term operating lease liabilities 26,541 26,966

15 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended

(In thousands, except per share data) February 28, 2021 February 29, 2020

Three Months Ended Six Months Ended

(In thousands, except per share data) May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

Software licenses $ 30,107 $ 19,663 $ 63,424 $ 50,292

33 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended

(In thousands) February 28, 2021 February 29, 2020

Three Months Ended Six Months Ended

(In thousands) May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

Net income $ 13,557 $ 16,968 $ 32,518 $ 38,084

1 unchanged sentence

Foreign currency translation adjustments 1,876 ( 2,982 ) 3,101 ( 4,190 )

Unrealized gain (loss) on hedging activity, net of tax provision of $ 271 and tax benefit of $ 708 for the first quarter of 2021 and 2020, respectively

Unrealized gain (loss) on hedging activity, net of tax provision of $ 76 and $ 347 for the second quarter and first six months of 2021, respectively and net of tax benefit of $ 760 and $ 1,468 for the second quarter and first six months of 2020, respectively

235 ( 2,058 ) 1,072 ( 4,164 )

Unrealized gain on investments, net of tax benefit of $ 42 and tax provision of $ 4 for the first quarter of 2021 and 2020, respectively

Unrealized (loss) gain on investments, net of tax provision of $ 30 and a tax benefit of $ 12 for the second quarter and first six months of 2021, respectively and net of tax provision of $ 41 and $ 45 for the second quarter and first six months of 2020, respectively

( 53 ) 13 ( 39 ) 84

Total other comprehensive income (loss), net of tax 2,058 ( 5,027 ) 4,134 ( 8,270 )

2 unchanged sentences

Condensed Consolidated Statements of Shareholders’ Equity

Three Months Ended February 28, 2021

Six Months Ended May 31, 2021

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

4 unchanged sentences

Vesting of restricted stock units and release of deferred stock units 100 1 ( 1 ) — — —

Withholding tax payments related to net issuance of restricted stock units — — ( 892 ) — — ( 892 )

Withholding tax payments related to net issuance of RSUs — — ( 2,373 ) — — ( 2,373 )

Stock-based compensation — — 15,146 — — 15,146

Equity components of Notes, net of issuance costs and tax — — 47,797 — — 47,797

Purchase of capped calls, net of tax — — ( 32,752 ) — — ( 32,752 )

Dividends declared — — — ( 15,634 ) — ( 15,634 )

1 unchanged sentence

Net income — — — 32,518 — 32,518

Other comprehensive loss — — — — 2,076 2,076

Balance, February 28, 2021 44,000 $ 440 $ 311,697 $ 71,118 $ ( 30,702 ) $ 352,553

Three Months Ended February 29, 2020

Other comprehensive income — — — — 4,134 4,134

Balance, May 31, 2021 43,745 $ 437 $ 333,627 $ 60,301 $ ( 28,644 ) $ 365,721

Three Months Ended May 31, 2021

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

(in thousands) Number of Shares Amount

Balance, March 1, 2021 44,000 $ 440 $ 311,697 $ 71,118 $ ( 30,702 ) $ 352,553

Issuance of stock under employee stock purchase plan 89 — 2,495 — — 2,495

Exercise of stock options 28 1 914 — — 915

Vesting of restricted stock units and release of deferred stock units 72 1 ( 1 ) — — —

Withholding tax payments related to net issuance of RSUs — — ( 1,481 ) — — ( 1,481 )

Stock-based compensation — — 8,362 — — 8,362

Equity components of Notes, net of issuance costs and tax — — 47,797 — — 47,797

Purchase of capped calls, net of tax — — ( 32,752 ) — — ( 32,752 )

Dividends declared — — — ( 7,783 ) — ( 7,783 )

Treasury stock repurchases and retirements ( 444 ) ( 5 ) ( 3,404 ) ( 16,591 ) — ( 20,000 )

Net income — — — 13,557 — 13,557

Other comprehensive income — — — — 2,058 2,058

Balance, May 31, 2021 43,745 $ 437 $ 333,627 $ 60,301 $ ( 28,644 ) $ 365,721

Six Months Ended May 31, 2020

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

(in thousands) Number of Shares Amount

Balance, December 1, 2019 45,037 $ 450 $ 295,503 $ 64,303 $ ( 29,974 ) $ 330,282

2 unchanged sentences

Vesting of restricted stock units and release of deferred stock units 185 2 ( 2 ) — — —

Withholding tax payments related to net issuance of restricted stock units — — ( 1,949 ) — — ( 1,949 )

Withholding tax payments related to net issuance of RSUs — — ( 3,895 ) — — ( 3,895 )

Stock-based compensation — — 11,674 — — 11,674

3 unchanged sentences

Other comprehensive loss — — — — ( 8,270 ) ( 8,270 )

Balance, February 29, 2020 44,769 $ 448 $ 296,251 $ 64,475 $ ( 33,217 ) $ 327,957

Balance, May 31, 2020 45,033 $ 450 $ 303,832 $ 73,923 $ ( 38,244 ) $ 339,961

Three Months Ended May 31, 2020

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

(in thousands) Number of Shares Amount

Balance, March 1, 2020 44,769 $ 448 $ 296,251 $ 64,475 $ ( 33,217 ) $ 327,957

Issuance of stock under employee stock purchase plan 85 1 2,318 — — 2,319

Exercise of stock options 51 — 1,587 — — 1,587

Vesting of restricted stock units and release of deferred stock units 128 1 ( 1 ) — — —

Withholding tax payments related to net issuance of RSUs — — ( 1,946 ) — — ( 1,946 )

Stock-based compensation — — 5,623 — — 5,623

Dividends declared — — — ( 7,520 ) — ( 7,520 )

Net income — — — 16,968 — 16,968

Other comprehensive loss — — — — ( 5,027 ) ( 5,027 )

Balance, May 31, 2020 45,033 $ 450 $ 303,832 $ 73,923 $ ( 38,244 ) $ 339,961

Condensed Consolidated Statements of Cash Flows

Three Months Ended

(In thousands) February 28, 2021 February 29, 2020

Six Months Ended

(In thousands) May 31, 2021 May 31, 2020

Cash flows from operating activities:

3 unchanged sentences

Amortization of acquired intangibles and other 22,267 11,993

Amortization of debt discount and issuance costs on Notes 1,683 —

Stock-based compensation 15,146 11,674

21 unchanged sentences

Repurchases of common stock ( 35,000 ) ( 20,000 )

Proceeds from issuance of senior convertible notes, net of issuance costs of $ 9,900

Purchase of capped calls ( 43,056 ) —

Dividend payments to shareholders ( 15,617 ) ( 14,906 )

Payment of principal on long-term debt ( 106,025 ) ( 3,762 )

Net cash flows used in financing activities ( 39,024 ) ( 27,054 )

Payment of debt issuance costs ( 904 ) —

Net cash flows from (used in) financing activities 153,425 ( 35,255 )

Effect of exchange rate changes on cash 3,903 ( 4,040 )

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows, continued

Three Months Ended

February 28, 2021 February 29, 2020

Six Months Ended

May 31, 2021 May 31, 2020

Supplemental disclosure:

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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.

With Progress, organizations can accelerate the creation and delivery of strategic business applications, automate the process by which applications 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 3 million developers rely on Progress to power their applications.

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Basis of Presentation and Significant Accounting Policies - We prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting.

Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements and these unaudited financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2020, as amended by Form 10-K/A filed on March 30, 2021 ("2020 10-K").

We made no material changes in the application of our significant accounting policies that were disclosed in our 2020 10-K.

17 unchanged sentences

Financial Instruments - Credit Losses

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

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

3 unchanged sentences

The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Convertible Debt

In August 2020, the FASB issued Accounting Standards Update No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

The standard eliminates the liability and equity separation model for convertible instruments with a cash conversion feature.

As a result, after adoption, entities will no longer separately present an embedded conversion feature for such debt in equity.

Additionally, the debt discount resulting from the separation of the embedded conversion feature will no longer be amortized into income as interest expense over the instrument’s life.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging , or (2) a convertible debt instrument was issued at a substantial premium.

The standard also requires applying the if-converted method to calculate the impact of the convertible instrument on diluted earnings per share.

The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020.

It can be adopted on either a full retrospective or modified retrospective basis.

The Company plans to adopt this standard in accordance with the full retrospective approach in the first quarter of fiscal year 2022.

We have substantially completed our assessment of the retrospective application of this new standard to our historical financial statements.

On a preliminary basis, we believe that the retrospective impact of the adoption of the standard on fiscal year 2021 results will be an increase of interest expense of approximately $ 6.9 million, an increase of notes payable of approximately $ 56.0 million, a decrease of deferred tax liabilities of approximately $ 13.7 million, a decrease of additional paid-in capital of approximately $ 49.2 million, and a decrease of retained earnings of approximately $ 6.9 million.

We will finalize our retrospective presentation of our historical financial statements under the new standard in connection with our 10-Q filings during fiscal year 2022 and our 10-K for the fiscal year ending November 30, 2022.

Cash, Cash Equivalents and Investments

A summary of our cash, cash equivalents and available-for-sale investments at February 28, 2021 is as follows (in thousands):

A summary of our cash, cash equivalents and available-for-sale investments at May 31, 2021 is as follows (in thousands):

Amortized Cost Basis Unrealized Gains Unrealized Losses Fair Value

12 unchanged sentences

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

February 28, 2021 November 30, 2020

May 31, 2021 November 30, 2020

Cash and Equivalents Short-Term Investments Cash and Equivalents Short-Term Investments

5 unchanged sentences

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

February 28, 2021 November 30, 2020

May 31, 2021 November 30, 2020

Due in one year or less $ 4,230 $ 5,998

3 unchanged sentences

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

We did not hold any investments with continuous unrealized losses as of February 28, 2021 or November 30, 2020.

We did not hold any investments with continuous unrealized losses as of May 31, 2021 or November 30, 2020.

Derivative Instruments

6 unchanged sentences

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.

As of February 28, 2021 , the fair value of the hedge was a loss of $ 5.7 million, which was included in other noncurrent liabilities on our condensed consolidated balance sheets.

As of May 31, 2021 , the fair value of the hedge was a loss of $ 5.4 million, which was included in other noncurrent liabilities on our condensed 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 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):

February 28, 2021 November 30, 2020

May 31, 2021 November 30, 2020

Notional Value Fair Value Notional Value Fair Value

4 unchanged sentences

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 February 28, 2021, $ 2.3 million was recorded in other current assets on our condensed consolidated balance sheets.

At May 31, 2021, $ 3.2 million was recorded in other current assets on our condensed consolidated balance sheets.

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

In the three months ended February 28, 2021 and February 29, 2020, realized and unrealized gains of $ 1.7 million and losses of $ 0.6 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

In the three and six months ended May 31, 2021, realized and unrealized gains of $ 0.9 million and $ 2.6 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

In the three and six months ended May 31, 2020, realized and unrealized losses of $ 1.8 million and $ 2.4 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed 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):

February 28, 2021 November 30, 2020

May 31, 2021 November 30, 2020

Notional Value Fair Value Notional Value Fair Value

5 unchanged sentences

Fair Value Measurements

Recurring Fair Value Measurements

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at February 28, 2021 (in thousands):

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at May 31, 2021 (in thousands):

Fair Value Measurements Using

18 unchanged sentences

In certain cases where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

We did not have any nonrecurring fair value measurements as of February 28, 2021.

Fair Value of the Convertible Senior Notes

The liability component of the Company’s Notes (as defined in Note 7:

Debt ) was recorded at $ 295.2 million upon issuance, which reflected the fair value of a similar debt instrument that does not have an associated convertible feature.

The fair value was determined based on a discounted cash flow model and classified within Level 2 of the fair value hierarchy.

The discount rate used reflected both the time value of money and credit risk inherent in the Notes.

The carrying value of the liability component of the Notes will be accreted, over the remaining term to maturity, to their principal value of $ 360.0 million.

The Notes’ fair value, inclusive of the conversion feature embedded in the Notes, was $ 361.5 million as of May 31, 2021.

The fair value was determined based on the Notes’ quoted price in an over-the-counter market on the last trading day of the reporting period and classified within Level 1 in the fair value hierarchy.

Debt for additional information.

Intangible Assets and Goodwill

1 unchanged sentence

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

February 28, 2021 November 30, 2020

May 31, 2021 November 30, 2020

Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value

4 unchanged sentences

Total $ 437,268 $ ( 246,500 ) $ 190,768 $ 437,268 $ ( 224,521 ) $ 212,747

In the first quarter of fiscal years 2021 and 2020, amortization expense related to intangible assets was $ 10.4 million and $ 5.8 million, respectively.

Future amortization expense for intangible assets as of February 28, 2021, is as follows (in thousands):

In the three and six month ended May 31, 2021, amortization expense related to intangible assets was $ 11.6 million and $ 22.0 million, respectively.

In the three and six months ended May 31, 2020, amortization expense related to intangible assets was $ 5.8 million and $ 11.6 million, respectively.

Future amortization expense for intangible assets as of May 31, 2021, is as follows (in thousands):

Remainder of 2021 $ 22,912

1 unchanged sentence

Total $ 190,768

Changes in the carrying amount of goodwill in the three months ended February 28, 2021 are as follows (in thousands):

Changes in the carrying amount of goodwill in the six months ended May 31, 2021 are as follows (in thousands):

Balance, November 30, 2020 $ 491,726

Translation adjustments 5

Balance, February 28, 2021 $ 491,701

Changes in the goodwill balances by reportable segment in the three months ended February 28, 2021 are as follows (in thousands):

November 30, 2020 Translation adjustments February 28, 2021

OpenEdge $ 365,863 $ ( 25 ) $ 365,838

Data Connectivity and Integration 19,040 — 19,040

Application Development and Deployment 106,823 — 106,823

Total goodwill $ 491,726 $ ( 25 ) $ 491,701

During the quarter ending February 28, 2021, no triggering events occurred that would indicate that it is more likely than not that the carrying values of any of our reporting units exceeded their fair values.

Balance, May 31, 2021 $ 491,731

During the quarter ending May 31, 2021, no triggering events occurred that would indicate that it is more likely than not that the carrying values of any of our reporting units exceeded their fair values.

Business Combinations

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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.

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.

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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.

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 three months ended February 28, 2021, we incurred approximately $ 0.4 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 three months ended February 28, 2021 was approximately $ 12.0 million.

During the three and six months ended May 31, 2021, we incurred approximately $ 0.2 million and $ 0.6 million of acquisition-related costs, respectively, which are included in acquisition-related expenses on our consolidated statement of operations.

The operations of Chef were initially included in our operating results from the date of acquisition.

The amount of revenue of Chef included in our consolidated statement of operations during the three and six months ended May 31, 2021 was approximately $ 12.4 million and $ 24.3 million, respectively.

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.

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(In thousands, except per share data) Pro Forma

Three Months Ended February 29, 2020

Three Months Ended May 31, 2020

Revenue $ 117,342

2 unchanged sentences

Net income per diluted share $ 0.26

Term Loan and Line of Credit

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.

(In thousands, except per share data) Pro Forma

Six Months Ended May 31, 2020

Revenue $ 241,032

Net income $ 24,614

Net income per basic share $ 0.55

Net income per diluted share $ 0.54

As of May 31, 2021, future maturities of the Company's long-term debt were as follows:

(In thousands) 2026 Notes Credit Facility Maturing in 2024 Total

Remainder of 2021 $ — $ 11,288 $ 11,288

2022 — 26,338 26,338

2023 — 33,863 33,863

2024 — 206,937 206,937

2026 360,000 — 360,000

Total face value of long-term debt 360,000 278,426 638,426

Unamortized discount and issuance costs ( 71,977 ) ( 1,664 ) ( 73,641 )

Less current portion of long-term debt, net — ( 22,005 ) ( 22,005 )

Long-term debt $ 288,023 $ 254,757 $ 542,780

Notes Payable

Convertible Senior Notes and Capped Calls

In April 2021, the Company issued, in a private placement to certain initial purchasers in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act in transactions not involving any public offering, for resale by the initial purchasers to persons whom the initial purchasers believe are qualified institutional buyers pursuant to Rule144A under the Securities Act, Convertible Senior Notes (the "Notes") with an aggregate principal amount of $ 325 million, due April 15, 2026, unless earlier repurchased, redeemed or converted.

The proceeds from the Notes were used or are anticipated to be used for the Capped Call Transactions (described below), working capital, and other general corporate purposes, including acquisitions.

There are no required principal payments prior to the maturity of the Notes.

In addition, the Company also granted the initial purchasers of the Notes an option to purchase up to an additional $ 50.0 million aggregate principal amount of the Notes, for settlement within a 13 -day period beginning on, and including, April 13, 2021, of which $ 35 million of additional Notes were purchased for total proceeds of $ 360 million.

The Notes bear interest at an annual rate of 1 %, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021.

Proceeds from the Notes:

(In thousands)

Principal $ 360,000

issuance costs ( 10,804 )

Conversion Rights

Before January 15, 2026, Noteholders may convert their Notes in the following circumstances:

• During any fiscal quarter (and only during such fiscal quarter) commencing after the fiscal quarter ending on May 31, 2021, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least twenty trading days (whether or not consecutive) during the thirty consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter;

• During the five consecutive business days immediately after any ten consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of Company’s common stock on such trading day and the conversion rate on such trading day;

• Upon the occurrence of certain corporate events or distributions on the Company’s common stock, or if the Company calls such Notes for redemption, then the Noteholder of any Note may convert such Note at any time before the close of business on the business day immediately before the related redemption date.

From and after January 15, 2026, Noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will satisfy its conversion obligations by paying cash up to the aggregate principal amount of Notes to be converted, by issuing shares of its common stock or a combination of cash and shares of its common stock, at its election.

The initial conversion rate is 17.4525 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of approximately $ 57.30 per share of common stock.

The conversion rate will be adjusted upon the occurrence of certain events, including spin-offs, tender offers, exchange offers, make-whole fundamental change and certain stockholder distributions.

Repurchase Rights

On or after April 20, 2024, and on or before the 50th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the Notes, subject to the partial redemption limitation, at a repurchase price equal to 100 % of the principal amount, plus accrued and unpaid interest, if the last reported sale price per share of the Company’s common stock exceeded 130 % of the conversion price on (1) each of at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice and (2) the trading day immediately before the date the Company sends such notice.

Pursuant to the partial redemption limitation, the Company may not elect to redeem less than all of the outstanding Notes unless at least $ 100.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time it sends the related redemption notice.

If certain corporate events that constitute a “fundamental change” (as described below) occur at any time, holders may, subject to certain exceptions, require the Company to purchase their Notes in whole or in part for cash at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

A fundamental change relates to events such as business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

Capped Call Transactions

On April 8, 2021, in connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (“Capped Call Transactions”) with one or more of the initial purchasers and/or their respective affiliates and/or other financial institutions.

The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, approximately 6.3 million shares (representing the number of shares of common stock initially underlying the Notes) of the Company’s common stock.

The Capped Call Transactions are generally expected to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

The cap price of the Capped Call Transactions will initially be $ 89.88 per share of common stock, which represents a premium of 100 % over the last reported sale price of the common stock of $ 44.94 per share on April 8, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions.

The cost of the purchased capped calls of $ 43.1 million was recorded as a reduction to additional paid-in-capital.

We elected to integrate the capped call options with the applicable Notes for federal income tax purposes pursuant to applicable U.S.

Treasury Regulations.

Accordingly, the $ 43.1 million gross cost of the purchased capped calls will be deductible for income tax purposes as original discount interest over the term of the Notes.

We recorded deferred tax assets of $ 10.6 million with respect to the capped calls which represents the tax benefit of these deductions with an offsetting entry to additional paid-in capital.

Accounting for the Notes

In accounting for the transaction, the Notes have been separated into liability and equity components.

• The conversion option of the Notes does not require bifurcation as an embedded derivative.

• The initial carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature.

The excess of the Notes’ principal amount over the initial carrying amount of the liability component, referred to as the debt discount, is amortized as interest expense over the Notes’ contractual term.

• The equity component, which represents the difference between the gross proceeds and the initial liability component, was recorded as an increase to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

The Company incurred issuance costs of $ 10.8 million related to the Notes, allocated between the Notes’ liability and equity components proportionate to the initial carrying amount of the liability and equity components.

• Issuance costs attributable to the liability component of $ 8.9 million are recorded as an offset to the Notes’ principal balance.

They are amortized as interest expense using the effective interest method over the contractual term of the Notes.

• Issuance costs attributable to the equity component of $ 1.9 million are recorded as an offset to the equity component in additional paid-in capital and are not amortized.

Net carrying amount of the liability component:

(In thousands) May 31, 2021

Principal $ 360,000

Conversion option allocated to equity

Unamortized discount ( 7,177 )

Net carrying amount of the equity component, included in additional paid-in capital:

(In thousands) May 31, 2021

Conversion options (1)

Capped call ( 43,056 )

(1) Net of issuance costs

Interest expense related to the Notes:

Three and Six Months Ended

(In thousands) May 31, 2021 May 31, 2020

Contractual interest expense ( 1 % coupon)

Amortization of debt discount (1)

Amortization of issuance costs (1)

(1) Amortized based upon an effective interest rate of 5.7 %.

Credit Facility

Our credit facility provides for a $ 301.0 million secured term loan and a $ 100.0 million secured revolving line of credit.

The revolving line of credit is 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.

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 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 6).

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.

Additionally, we may borrow certain foreign currencies at rates set in the same respective range above the London interbank offered interest rates for those currencies.

A quarterly commitment fee on the undrawn portion of the revolving line of credit is required and ranges from 0.25 % to 0.35 % per annum based on our leverage ratio.

The interest rate as of February 28, 2021 was 1.75 %.

The term loan was used to partially fund our acquisition of Ipswitch in April 2019 and we partially funded our acquisition of Chef by drawing down $ 98.5 million under the revolving line of credit in October 2020 (Note 6).

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

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

The outstanding balance of the term loan as of February 28, 2021 was $ 282.2 million, with $ 20.7 million due in the next 12 months.

The outstanding balance of the term loan as of May 31, 2021 was $ 278.4 million, with $ 22.6 million due in the next 12 months.

The term loan requires repayment of principal at the end of each fiscal quarter, beginning with the fiscal quarter ended August 31, 2019.

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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 February 28, 2021, 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 condensed consolidated balance sheets as of February 28, 2021.

As of May 31, 2021, 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.

The interest rate as of May 31, 2021 was 1.75 %.

Costs incurred to obtain our long-term debt of $ 2.9 million are recorded as debt issuance costs as a direct deduction from the carrying value of the debt liability on our condensed consolidated balance sheets as of May 31, 2021.

These costs are being amortized over the term of the debt agreement using the effective interest rate method.

Amortization expense related to the debt issuance costs was $ 0.1 million for each of the three months ended February 28, 2021 and February 29, 2020 is recorded in interest expense on our condensed consolidated statements of operations.

Amortization expense related to the debt issuance costs was $ 0.1 million for each of the three months ended May 31, 2021 and May 31, 2020.

Amortization expense related to the debt issuance costs was $ 0.3 million and for each of the six months ended May 31, 2021 and May 31, 2020.

These amounts are recorded in interest expense on our condensed consolidated statements of operations.

Revolving loans may be borrowed, repaid, and reborrowed until April 30, 2024, at which time all amounts outstanding must be repaid.

Accrued interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of each interest rate period (or at each three-month interval in the case of loans with interest periods greater than three months) with respect to Eurocurrency rate loans.

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.

During October 2020, we partially funded our acquisition of Chef by drawing down $ 98.5 million under the revolving line of credit (Note 6).

During the first fiscal quarter of 2021, we paid down $ 15.0 million on the revolving line of credit.

As of February 28, 2021, there was $ 83.5 million outstanding under the revolving line of credit and $ 2.1 million of letters of credit outstanding.

We are the sole borrower under the credit facility.

Our obligations under the Credit Agreement are secured by substantially all of our assets and each of our material domestic subsidiaries, as well as 100 % of the capital stock of our domestic subsidiaries and 65 % of the capital stock of our first-tier foreign subsidiaries, in each case, subject to certain exceptions as described in the Credit Agreement.

Future material domestic subsidiaries will be required to guaranty our obligations under the Credit Agreement, and to grant security interests in substantially all of their assets to secure such obligations.

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

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.

As of February 28, 2021, aggregate future maturities of long-term debt were as follows (in thousands):

Remainder of 2021 $ 15,050

Total $ 365,688

We repaid in full the outstanding balance of the revolving line of credit during the fiscal quarter ended May 31, 2021.

As of May 31, 2021, there were no amounts outstanding under the revolving line of credit and $ 2.5 million of letters of credit outstanding.

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.

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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 three months ended February 28, 2021 and February 29, 2020 were as follows (in thousands):

Three Months Ended Three Months Ended

February 28, 2021 February 29, 2020

The components of operating lease cost for the three and six months ended May 31, 2021 were as follows (in thousands):

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2021

Lease costs under long-term operating leases $ 2,009 $ 4,144

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

The table below presents supplemental cash flow information related to leases during the three months ended February 28, 2021 and February 29, 2020 (in thousands):

Three Months Ended Three Months Ended

February 28, 2021 February 29, 2020

The components of operating lease cost for the three and six months ended May 31, 2020 were as follows (in thousands):

Three Months Ended Six Months Ended

May 31, 2020 May 31, 2020

Lease costs under long-term operating leases $ 1,799 $ 3,757

Lease costs under short-term operating leases 99 144

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

Operating lease right-of-use asset impairment 266 1,189

Total operating lease cost $ 2,246 $ 5,278

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

The table below presents supplemental cash flow information related to leases during the three and six months ended May 31, 2021 (in thousands):

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2021

Cash paid for leases $ 2,209 $ 4,467

Right-of-use assets recognized for new leases and amendments (non-cash) $ 1,309 $ 3,647

The table below presents supplemental cash flow information related to leases during the three and six months ended May 31, 2020 (in thousands):

Three Months Ended Six Months Ended

May 31, 2020 May 31, 2020

Cash paid for leases $ 1,720 $ 4,076

Right-of-use assets recognized for new leases and amendments (non-cash) $ 231 $ 231

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

February 28, 2021 November 30, 2020

May 31, 2021 November 30, 2020

Weighted average remaining lease term in years 4.77 5.02

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Future payments under non-cancellable leases are as follows (in thousands):

February 28, 2021

Remainder of 2021 $ 4,077

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In January 2020, our Board of Directors increased the total share repurchase authorization from $ 75 million to $ 250 million.

In the three months ended February 28, 2021 and February 29, 2020, we repurchased and retired 0.4 million shares for $ 15.0 million and 0.4 million shares for $ 20.0 million, respectively.

In the three months ended May 31, 2021, we repurchased and retired 0.4 million shares for $ 20.0 million.

In the three months ended May 31, 2020, we did no t repurchase any shares of our common stock.

In the six months ended May 31, 2021 and May 31, 2020, we repurchased and retired 0.8 million shares for $ 35.0 million and 0.4 million shares for $ 20.0 million, respectively.

The shares were repurchased in both periods as part of our Board of Directors authorized share repurchase program.

As of February 28, 2021, there was $ 175.0 million remaining under the current authorization.

As of May 31, 2021, there was $ 155.0 million remaining under the current authorization.

Stock-Based Compensation

We issue restricted stock units, performance-based restricted stock units and stock options under our equity plans.

We also issue common stock under our employee stock purchase plan that permits employees to purchase shares through accumulated payroll deductions.

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.

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For the 2021 plan, the vesting terms were changed to the following:

(i) 25 % 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) 75 % is based on achievement of a three-year cumulative performance condition (operating income).

(i) 25 % is based on our level of attainment of specified TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year periods, and (ii) 75 % is based on achievement of a three-year cumulative 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 for the portion related to the performance condition.

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The following table provides the classification of stock-based compensation as reflected on our condensed consolidated statements of operations (in thousands):

Three Months Ended

February 28, 2021 February 29, 2020

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

Cost of maintenance and services $ 468 $ 338 $ 860 $ 657

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Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss during the three months ended February 28, 2021 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive loss during the six months ended May 31, 2021 (in thousands):

Foreign Currency Translation Adjustment Unrealized Gains on Investments Unrealized Losses on Hedging Activity Accumulated Other Comprehensive Loss

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Other comprehensive income before reclassifications, net of tax 3,101 ( 39 ) 1,072 4,134

Balance, February 28, 2021 $ ( 26,391 ) $ 28 $ ( 4,339 ) $ ( 30,702 )

The tax effect on accumulated unrealized losses on hedging activity and unrealized gains on investments was $ 1.4 million and $ 1.6 million as of February 28, 2021 and November 30, 2020, respectively.

Balance, May 31, 2021 $ ( 24,515 ) $ ( 25 ) $ ( 4,104 ) $ ( 28,644 )

The tax effect on accumulated unrealized losses on hedging activity and unrealized gains on investments was $ 1.3 million and $ 1.6 million as of May 31, 2021 and November 30, 2020, respectively.

Revenue Recognition

Timing of Revenue Recognition

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

Information relating to revenue from external customers by revenue type is as follows (in thousands):

Three Months Ended Six Months Ended

(In thousands) May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

Performance obligations transferred at a point in time:

Software licenses $ 30,107 $ 19,663 $ 63,424 $ 50,292

Performance obligations transferred over time:

Maintenance 80,069 71,686 157,046 141,742

Services 12,312 9,034 23,298 18,032

Total revenue $ 122,488 $ 100,383 $ 243,768 $ 210,066

Geographic Revenue

In the following table, revenue attributed to North America includes sales to customers in the U.S.

and sales to certain multinational organizations.

Revenue from EMEA, Latin America and the Asia Pacific region includes sales to customers in each region plus sales from the U.S.

to distributors in these regions.

Information relating to revenue from external customers from different geographical areas is as follows (in thousands):

Three Months Ended Six Months Ended

(In thousands) May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

North America $ 71,094 $ 56,564 $ 142,599 $ 121,977

EMEA 41,321 34,157 81,561 69,145

Latin America 3,753 3,346 7,246 7,346

Asia Pacific 6,320 6,316 12,362 11,598

Total revenue $ 122,488 $ 100,383 $ 243,768 $ 210,066

No single customer, partner, or country outside of the U.S.

has accounted for more than 10% of our total revenue for the three or six months ended May 31, 2021 and May 31, 2020.

Contract Balances

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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 February 28, 2021, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

As of May 31, 2021, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

Total $ 9,073

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 $ 7.9 million as of February 28, 2021 and $ 11.3 million as of November 30, 2020.

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 $ 6.4 million as of May 31, 2021 and $ 11.3 million as of November 30, 2020.

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

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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 February 28, 2021, the changes in deferred revenue were as follows (in thousands):

Our deferred revenue balance is primarily made up of deferred maintenance.

As of May 31, 2021, the changes in deferred revenue were as follows (in thousands):

Balance, December 1, 2020 $ 193,295

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Revenue recognized ( 243,768 )

Balance, February 28, 2021 $ 208,978

Balance, May 31, 2021 $ 202,630

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 February 28, 2021, transaction price allocated to remaining performance obligations was $ 223.3 million.

As of May 31, 2021, transaction price allocated to remaining performance obligations was $ 214.8 million.

We expect to recognize approximately 84 % of the revenue within the next year and the remainder thereafter.

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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 $ 3.3 million and $ 2.5 million as of February 28, 2021 and November 30, 2020, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

Total deferred contract costs were $ 4.2 million and $ 2.5 million as of May 31, 2021 and November 30, 2020, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

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

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Translation adjustments and other 1 8 9

Balance, February 28, 2021 $ 205 $ 1,944 $ 2,149

Balance, May 31, 2021 $ 25 $ 386 $ 411

During the fourth quarter of fiscal year 2020, we restructured our operations in connection with the acquisition of Chef (Note 6).

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

For the three months ended February 28, 2021, we incurred expenses of $ 0.9 million related to this restructuring.

For the three and six months ended May 31, 2021, we incurred expenses of $ 0.9 million related to this restructuring.

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

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Translation adjustments and other — 8 8

Balance, February 28, 2021 $ — $ 1,944 $ 1,944

Balance, May 31, 2021 $ 17 $ 386 $ 403

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 $ 1.9 million is included in other accrued liabilities on the consolidated balance sheet at February 28, 2021.

Accordingly, the balance of the restructuring reserve of $ 0.4 million is included in other accrued liabilities on the consolidated balance sheet at May 31, 2021.

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.

Our income tax provision for the first quarter of fiscal years 2021 and 2020 reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events, which are recorded in the period in which they occur.

Our income tax provision for the second quarter of fiscal years 2021 and 2020 reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events, which are recorded in the period in which they occur.

The estimates are reevaluated each quarter based on our estimated tax expense for the full fiscal year.

Our effective tax rate was 23 % in both the first fiscal quarter of 2021 and in the first fiscal quarter of 2020.

There were no significant discrete tax items in either the first fiscal quarter of 2021 or the first fiscal quarter of 2020.

Our effective tax rate was 21 % in the second fiscal quarter of 2021, compared to 25 % in the second fiscal quarter of 2020.

The decrease is due primarily to the estimated impact of the international tax provisions of the Tax Cuts and Jobs Act for fiscal year 2021 as compared to fiscal year 2020.

There were no significant discrete tax items in either the second fiscal quarter of 2021 or the second fiscal quarter of 2020.

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

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The following table sets forth the calculation of basic and diluted earnings per share on an interim basis (in thousands, except per share data):

Three Months Ended

February 28, 2021 February 29, 2020

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

Net income $ 13,557 $ 16,968 $ 32,518 $ 38,084

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Diluted earnings per share $ 0.30 $ 0.37 $ 0.73 $ 0.84

We excluded stock awards representing approximately 1,078,000 and 661,000 shares of common stock from the calculation of diluted earnings per share in the three months ended February 28, 2021 and February 29, 2020, respectively, as these awards were anti-dilutive.

Business Segments and International Operations

Operating segments are components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and assess performance.

Our chief operating decision maker is our Chief Executive Officer.

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.

We manage and report such items on a consolidated company basis.

The following table provides revenue and contribution margin from our reportable segments and reconciles to our consolidated income from continuing operations before income taxes:

Three Months Ended

(In thousands) February 28, 2021 February 29, 2020

Segment revenue:

OpenEdge $ 84,603 $ 77,079

Data Connectivity and Integration 5,528 13,685

Application Development and Deployment 31,149 18,919

Total revenue 121,280 109,683

Segment costs of revenue and operating expenses:

OpenEdge 18,916 19,750

Data Connectivity and Integration 1,170 2,680

Application Development and Deployment 15,410 7,288

Total costs of revenue and operating expenses 35,496 29,718

Segment contribution margin:

OpenEdge 65,687 57,329

Data Connectivity and Integration 4,358 11,005

Application Development and Deployment 15,739 11,631

Total contribution margin 85,784 79,965

Other unallocated expenses (1)

58,368 49,253

Income from operations 27,416 30,712

Other expense, net ( 2,652 ) ( 3,397 )

Income before income taxes $ 24,764 $ 27,315

(1) 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 of acquired intangibles, stock-based compensation, restructuring, and acquisition-related expenses.

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

Information relating to revenue from external customers by revenue type is as follows (in thousands):

Three Months Ended

(In thousands) February 28, 2021 February 29, 2020

Performance obligations transferred at a point in time:

Software licenses $ 33,317 $ 30,629

Performance obligations transferred over time:

Maintenance 76,977 70,056

Services 10,986 8,998

Total revenue $ 121,280 $ 109,683

In the following table, revenue attributed to North America includes sales to customers in the U.S.

and sales to certain multinational organizations.

Revenue from EMEA, Latin America and the Asia Pacific region includes sales to customers in each region plus sales from the U.S.

to distributors in these regions.

Information relating to revenue from external customers from different geographical areas is as follows (in thousands):

Three Months Ended

(In thousands) February 28, 2021 February 29, 2020

North America $ 71,505 $ 65,413

EMEA 40,240 34,988

Latin America 3,493 4,000

Asia Pacific 6,042 5,282

Total revenue $ 121,280 $ 109,683

No single customer, partner, or country outside of the U.S.

has accounted for more than 10% of our total revenue for the three months ended February 28, 2021 and February 29, 2020.

As of February 28, 2021 and November 30, 2020, no individual customer accounted for 10% or more of our net accounts receivable balance.

As of February 28, 2021 and November 30, 2020, no individual foreign country accounted for 10% or more of total consolidated assets.

We excluded stock awards representing approximately 1,396,000 and 1,237,000 shares of common stock from the calculation of diluted earnings per share in the three and six months ended May 31, 2021, respectively, because these awards were anti-dilutive.

In the three and six months ended May 31, 2020, we excluded stock awards representing 1,538,000 shares and 1,099,000 shares of common stock, respectively, from the calculation of diluted earnings per share as they were anti-dilutive.

In connection with the issuance of the Notes, we entered into Capped Calls (Note 7), which were not included for the purpose of calculating the number of diluted shares outstanding, as their effect would have been antidilutive.

Segment Information

Operating segments are components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker ("CODM") in deciding how to allocate resources and assess performance.

Our CODM is our Chief Executive Officer.

Beginning in the second quarter of fiscal year 2021, we operate as one operating segment:

software products to develop, deploy, and manage high-impact business applications.

Our CODM evaluates financial information on a consolidated basis.

As we operate as one operating segment, the required financial segment information can be found in the condensed consolidated financial statements.

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-Q

Item 1. Financial Statements