What changed in this filing

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Item 1. Financial Statements

2021-10-07 compared with 2021-07-07 · 129 added, 118 removed, 636 unchanged (28% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

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

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

Current assets:

45 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Software licenses $ 51,930 $ 27,514 $ 115,354 $ 77,806

33 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Net income $ 30,976 $ 23,977 $ 63,494 $ 62,061

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 2,179 ) 4,564 922 374

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

Unrealized gain (loss) on hedging activity, net of tax provision of $ 155 and $ 502 for the third quarter and first nine months of 2021, respectively, and net of tax provision of $ 166 and tax benefit of $ 1,302 for the third quarter and first nine months of 2020, respectively

479 58 1,551 ( 4,106 )

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

Unrealized (loss) gain on investments, net of tax benefit of $ 4 and $ 16 for the third quarter and first nine months of 2021, respectively and net of tax benefit of $ 42 and tax provision of $ 3 for the third quarter and first nine months of 2020, respectively

( 15 ) 21 ( 54 ) 105

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

Total other comprehensive (loss) income, net of tax ( 1,715 ) 4,643 2,419 ( 3,627 )

Comprehensive income $ 29,261 $ 28,620 $ 65,913 $ 58,434

1 unchanged sentence

Condensed Consolidated Statements of Shareholders’ Equity

Six Months Ended May 31, 2021

Nine Months Ended August 31, 2021

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

12 unchanged sentences

Other comprehensive income — — — — 2,419 2,419

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

Three Months Ended May 31, 2021

Balance, August 31, 2021 43,843 $ 438 $ 343,239 $ 83,455 $ ( 30,359 ) $ 396,773

Three Months Ended August 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

Balance, June 1, 2021 43,745 $ 437 $ 333,627 $ 60,301 $ ( 28,644 ) $ 365,721

Issuance of stock under employee stock purchase plan 67 1 1,885 — — 1,886

Exercise of stock options 31 — 1,009 — — 1,009

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

Withholding tax payments related to net issuance of RSUs — — ( 25 ) — — ( 25 )

3 unchanged sentences

Dividends declared — — — ( 7,822 ) — ( 7,822 )

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

Net income — — — 30,976 — 30,976

Other comprehensive income — — — — ( 1,715 ) ( 1,715 )

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

Six Months Ended May 31, 2020

Balance, August 31, 2021 43,843 $ 438 $ 343,239 $ 83,455 $ ( 30,359 ) $ 396,773

Nine Months Ended August 31, 2020

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

10 unchanged sentences

Other comprehensive loss — — — — ( 3,627 ) ( 3,627 )

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

Three Months Ended May 31, 2020

Balance, August 31, 2020 45,101 $ 451 $ 310,891 $ 90,425 $ ( 33,601 ) $ 368,166

Three Months Ended August 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

Balance, June 1, 2020 45,033 $ 450 $ 303,832 $ 73,923 $ ( 38,244 ) $ 339,961

Issuance of stock under employee stock purchase plan 54 1 1,472 — — 1,473

6 unchanged sentences

Other comprehensive loss — — — — 4,643 4,643

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

Balance, August 31, 2020 45,101 $ 451 $ 310,891 $ 90,425 $ ( 33,601 ) $ 368,166

Condensed Consolidated Statements of Cash Flows

Six Months Ended

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

Nine Months Ended

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

Cash flows from operating activities:

21 unchanged sentences

Purchases of property and equipment ( 2,741 ) ( 3,419 )

Decrease in escrow receivable 2,130 —

Decrease in escrow receivable and other 2,330 —

Net cash flows from investing activities 3,739 6,473

14 unchanged sentences

Condensed Consolidated Statements of Cash Flows, continued

Six Months Ended

May 31, 2021 May 31, 2020

Nine Months Ended

August 31, 2021 August 31, 2020

Supplemental disclosure:

60 unchanged sentences

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.

On a preliminary basis, we believe that the retrospective impact of the adoption of the standard on fiscal year 2021 results will be a decrease 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 an increase 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 May 31, 2021 is as follows (in thousands):

A summary of our cash, cash equivalents and available-for-sale investments at August 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):

May 31, 2021 November 30, 2020

August 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):

May 31, 2021 November 30, 2020

August 31, 2021 November 30, 2020

Due in one year or less $ 3,021 $ 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 May 31, 2021 or November 30, 2020.

We did not hold any investments with continuous unrealized losses as of August 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 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.

As of August 31, 2021 , the fair value of the hedge was a loss of $ 4.8 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):

May 31, 2021 November 30, 2020

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

At August 31, 2021, $ 1.7 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 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.

In the three and nine months ended August 31, 2021, realized and unrealized losses of $ 2.3 million and realized and unrealized gains of $ 0.4 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

In the three and nine months ended August 31, 2020, realized and unrealized gains of $ 4.5 million and $ 2.1 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):

May 31, 2021 November 30, 2020

August 31, 2021 November 30, 2020

Notional Value Fair Value Notional Value Fair Value

6 unchanged sentences

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):

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

Fair Value Measurements Using

24 unchanged sentences

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 Notes’ fair value, inclusive of the conversion feature embedded in the Notes, was $ 364.7 million as of August 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.

3 unchanged sentences

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

May 31, 2021 November 30, 2020

August 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 $ ( 258,078 ) $ 179,190 $ 437,268 $ ( 224,521 ) $ 212,747

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):

In the three and nine months ended August 31, 2021, amortization expense related to intangible assets was $ 11.6 million and $ 33.6 million, respectively.

In the three and nine months ended August 31, 2020, amortization expense related to intangible assets was $ 5.8 million and $ 17.5 million, respectively.

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

Remainder of 2021 $ 11,334

1 unchanged sentence

Total $ 179,190

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

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

Balance, November 30, 2020 $ 491,726

Measurement period adjustments ( 326 )

Translation adjustments 12

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.

Balance, August 31, 2021 $ 491,412

Business Combinations

5 unchanged sentences

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.

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 7).

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 7).

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 preliminary fair value estimates of the net assets acquired were 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.

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

We are still finalizing the valuation and purchase price allocation as it relates to the net working capital amount in the table below.

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

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

Net working capital $ 52,330 $ 200 $ 52,530

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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 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.

During the three and nine months ended August 31, 2021, we incurred approximately $ 0.1 million and $ 0.7 million of acquisition-related costs, respectively, which are included in acquisition-related expenses on our consolidated statement of operations.

The operations of Chef were included in our operating results beginning on the date of acquisition.

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.

7 unchanged sentences

(In thousands, except per share data) Pro Forma

Three Months Ended May 31, 2020

Three Months Ended August 31, 2020

Revenue $ 128,782

3 unchanged sentences

(In thousands, except per share data) Pro Forma

Six Months Ended May 31, 2020

Nine Months Ended August 31, 2020

Revenue $ 369,814

2 unchanged sentences

Net income per diluted share $ 1.05

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

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

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

54 unchanged sentences

Net carrying amount of the liability component:

(In thousands) May 31, 2021

(In thousands) August 31, 2021

Principal $ 360,000

2 unchanged sentences

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

(In thousands) May 31, 2021

(In thousands) August 31, 2021

Conversion options (1)

2 unchanged sentences

Interest expense related to the Notes:

Three and Six Months Ended

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

Three Months Ended

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

Contractual interest expense ( 1 % coupon)

2 unchanged sentences

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

Nine Months Ended

(In thousands) August 31, 2021 August 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

3 unchanged sentences

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 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 May 31, 2021 was $ 278.4 million, with $ 22.6 million due in the next 12 months.

The outstanding balance of the term loan as of August 31, 2021 was $ 272.8 million, with $ 24.5 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.

3 unchanged sentences

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

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.

As of August 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 August 31, 2021 was 2.13 %.

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 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.

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

Amortization expense related to the debt issuance costs was $ 0.4 million and for each of the nine months ended August 31, 2021 and August 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.

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.

As of August 31, 2021, there were no amounts outstanding under the revolving line of credit and $ 2.4 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.

24 unchanged sentences

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 and six months ended May 31, 2021 were as follows (in thousands):

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2021

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

Three Months Ended Nine Months Ended

August 31, 2021 August 31, 2021

Lease costs under long-term operating leases $ 1,991 $ 6,135

4 unchanged sentences

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

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

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

Three Months Ended Nine Months Ended

August 31, 2020 August 31, 2020

Lease costs under long-term operating leases $ 1,714 $ 5,471

4 unchanged sentences

(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

The table below presents supplemental cash flow information related to leases during the nine months ended August 31, 2021 and August 31, 2020 (in thousands):

Nine Months Ended

August 31, 2021 August 31, 2020

Cash paid for leases $ 6,440 $ 5,979

1 unchanged sentence

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

May 31, 2021 November 30, 2020

August 31, 2021 November 30, 2020

Weighted average remaining lease term in years 4.46 5.02

1 unchanged sentence

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

August 31, 2021

Remainder of 2021 $ 2,013

6 unchanged sentences

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

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.

In the three months ended August 31, 2021 and August 31, 2020, we did no t repurchase any shares of our common stock.

In the nine months ended August 31, 2021 and August 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 May 31, 2021, there was $ 155.0 million remaining under the current authorization.

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

Stock-Based Compensation

13 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Cost of maintenance and services $ 374 $ 322 $ 1,234 $ 979

4 unchanged sentences

Accumulated Other Comprehensive Loss

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

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

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

1 unchanged sentence

Other comprehensive income before reclassifications, net of tax 922 ( 54 ) 1,551 2,419

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.

Balance, August 31, 2021 $ ( 26,694 ) $ ( 40 ) $ ( 3,625 ) $ ( 30,359 )

The tax effect on accumulated unrealized losses on hedging activity and unrealized gains on investments was $ 1.1 million and $ 1.6 million as of August 31, 2021 and November 30, 2020, respectively.

Revenue Recognition

2 unchanged sentences

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

Three Months Ended Nine Months Ended

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

Performance obligations transferred at a point in time:

10 unchanged sentences

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

Three Months Ended Nine Months Ended

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

North America $ 93,880 $ 62,927 $ 236,479 $ 184,904

4 unchanged sentences

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.

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

Contract Balances

3 unchanged sentences

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

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

Total $ 17,249

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.

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 $ 6.9 million as of August 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.

2 unchanged sentences

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):

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

Balance, December 1, 2020 $ 193,295

1 unchanged sentence

Revenue recognized ( 391,185 )

Balance, May 31, 2021 $ 202,630

Balance, August 31, 2021 $ 203,020

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

As of August 31, 2021, transaction price allocated to remaining performance obligations was $ 213.7 million.

We expect to recognize approximately 81 % of the revenue within the next year and the remainder thereafter.

8 unchanged sentences

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 $ 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.

Total deferred contract costs were $ 5.3 million and $ 2.5 million as of August 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.

6 unchanged sentences

Translation adjustments and other 1 11 12

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

Balance, August 31, 2021 $ — $ 31 $ 31

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

For the three months ended August 31, 2021, we incurred minimal expenses related to this restructuring.

For the nine months ended August 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 — 11 11

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

Balance, August 31, 2021 $ — $ 31 $ 31

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 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 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.

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

In September 2021, we closed a facility as part of this restructuring action and expect to incur restructuring charges of approximately $ 2.9 million during the fourth quarter of fiscal year 2021.

Our income tax provision for the third 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 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 effective tax rate was 22 % in the third fiscal quarter of 2021, compared to 21 % in the third fiscal quarter of 2020.

The increase is due primarily to discrete tax benefits in the third fiscal quarter of 2020.

There were no significant discrete tax items in the third fiscal quarter of 2021.

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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With some exceptions, we are generally not subject to tax examinations in non-U.S.

jurisdictions for years prior to fiscal year 2014.

jurisdictions for years prior to fiscal year 2014 because they are closed by statute.

Earnings per share

2 unchanged sentences

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 Six Months Ended

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

Three Months Ended Nine Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Net income $ 30,976 $ 23,977 $ 63,494 $ 62,061

4 unchanged sentences

Diluted earnings per share $ 0.70 $ 0.53 $ 1.43 $ 1.37

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.

We excluded stock awards representing approximately 1,250,000 and 1,241,000 shares of common stock from the calculation of diluted earnings per share in the three and nine months ended August 31, 2021, respectively, because these awards were anti-dilutive.

In the three and nine months ended August 31, 2020, we excluded stock awards representing 1,450,000 shares and 1,216,000 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.

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

Subsequent Events

On September 23, 2021, we entered into a definitive agreement to acquire MPC Kappa Holdings, Inc.

(“MPC”), the ultimate beneficial owner of Kemp Technologies, Inc.

and Flowmon Networks a.s.

and their subsidiaries (collectively, “Kemp”), for approximately $ 258 million in cash (the “Purchase Price”), subject to customary adjustments.

The closing of the acquisition (the “Closing”) is expected to occur during the fourth quarter of our fiscal year 2021.

The acquisition will be funded with existing cash on hand at the Closing.

Kemp is the always-on application experience company that helps enterprises deliver, optimize and secure applications and networks across any cloud or hybrid environment.

With this acquisition, we will extend our portfolio of market-leading products in DevOps, Application Development, Data Connectivity and Digital Experience, adding Application Experience Management (AX).

Results of operations for Kemp will be included in our consolidated financial statements from the date of the Closing.

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