What changed in this filing

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Item 1. Business

2022-01-27 compared with 2021-01-27 · 84 added, 85 removed, 174 unchanged (49% of the section changed)

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

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

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

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

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

Hundreds of thousands of enterprises, plus approximately 1,700 software companies and 3.5 million developers, depend on Progress to achieve their business goals.

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

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The key tenets of our strategic plan and operating model are as follows:

Trusted Provider of the Best Products to Develop, Deploy and Manage High Impact Business Applications .

A key element of our strategy is centered on providing the platform and tools enterprises need to build modern, strategic business applications.

Trusted Provider of the Best Products to Develop, Deploy and Manage High Impact Applications .

A key element of our strategy is centered on providing the platform and tools enterprises need to build, deploy, and manage modern, strategic business applications.

We offer these products and tools to both new customers and partners as well as our existing partner and customer ecosystems.

This strategy builds on our inherent DNA and our vast experience in application development that we've acquired over the past 40 years.

This strategy builds on our vast experience in application development that we've acquired over the past 40 years.

Focus on Customer and Partner Retention to Drive Recurring Revenue and Profitability .

Our organizational philosophy and operating principles focus primarily on customer and partner retention and success, and a streamlined operating approach in order to more efficiently drive, predictable and stable recurring revenue.

Total Growth Strategy Driven by Accretive M&A.

We are pursuing a total growth strategy driven by accretive acquisitions of businesses within the software infrastructure space, with products that appeal to both IT organizations and individual developers.

These acquisitions must meet strict financial and other criteria, which should enable us to drive significant stockholder returns by providing scale and increased cash flows.

As described below, in October 2020, we acquired Chef Software Inc.

("Chef") in a transaction that we expect will meet these strict financial criteria.

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

The purchase price for Chef was $220 million and we

funded the purchase price with a combination of existing cash balances and drawings under our revolving credit facility.

Chef is the developer of Chef Enterprise Automation Stack, automating infrastructure, compliance and application delivery for many of the Fortune 500.

These acquisitions must meet strict financial and other criteria, with the goal of driving significant stockholder returns by providing scale and increased cash flows.

As described below, in November 2021, we acquired Kemp Technologies, Inc.

("Kemp") in a transaction that we expect will meet these strict financial criteria.

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

The purchase price for Kemp was $258 million and we funded the purchase price with existing cash balances.

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

Kemp Loadmaster and Flowmon Network Visibility products monitor application performance, and distribute and balance traffic and workloads across servers, in the cloud or on premise, ensuring high performance and availability.

We expect to continue to pursue acquisitions meeting our financial criteria and designed to expand our business and drive significant stockholder returns.

Holistic Capital Allocation Approach .

We have adopted a shareholder friendly capital allocation policy that utilizes dividends and share repurchases to return capital to shareholders.

Pursuant to our capital allocation strategy that we initially announced in September 2017, we have targeted to return approximately 25% of our annual cash flows from operations to stockholders in the form of dividends.

We also intend to repurchase our shares in sufficient quantities to offset dilution from our equity plans.

Multi-Faceted Capital Allocation Strategy .

Our capital allocation policy emphasizes accretive M&A, which allows us to expand our business and drive significant stockholder returns, and utilizes dividends and share repurchases to return capital to stockholders.

We intend to repurchase our shares in sufficient quantities to offset dilution from our equity plans.

Lastly, we return a significant portion of our annual cash flows from operations to stockholders in the form of dividends.

In fiscal year 2021, we repurchased and retired 0.8 million shares of our common stock for $35.0 million.

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The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors, and the Board of Directors may choose to suspend, expand or discontinue the repurchase program at any time.

We began paying quarterly cash dividends of $0.125 per share of common stock to Progress stockholders in December 2016 and increased the quarterly cash dividend annually in fiscal years 2017, 2018 and 2019.

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

We expect to continue paying quarterly cash dividends in subsequent quarters consistent with our capital allocation strategy.

Our Business Segments

OpenEdge Business Segment

The OpenEdge business segment drives growth within OpenEdge’s large, diverse partner base by providing the technology enhancements and marketing support these partners need to sell more of their existing solutions to their customers.

The OpenEdge business segment is also focused on providing partners and direct end users with a clear path to develop and integrate cloud-based applications.

Our professional services organization helps partners and customers leverage their core assets and develop strategies that protect current investments, while addressing changing business requirements.

The solutions within the OpenEdge business segment include:

Progress OpenEdge

Progress OpenEdge is development software for building dynamic multi-language applications for secure deployment across any platform, any device, and any cloud.

We began paying quarterly cash dividends of $0.125 per share of common stock to Progress stockholders in December 2016 and have paid quarterly dividends since that time.

On September 21, 2021, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that was paid on December 15, 2021 to stockholders of record as of the close of business on December 1, 2021.

Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

Our Products and Solutions

We provide the best products to develop, deploy and manage high-impact applications.

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

Described below are some of the solutions that make up our comprehensive product portfolio.

OpenEdge is development software for building dynamic multi-language applications for secure deployment across any platform, any device, and any cloud.

OpenEdge provides a unified environment comprising development tools, application servers, application management tools, an embedded relational database management system, and the capability to connect and integrate with other applications and data sources independently or with other Progress products.

Progress Corticon

Progress Corticon is a market-leading Business Rules Management System that provides applications with decision automation, decision change process and decision-related insight capabilities.

Corticon helps both business and IT users to quickly create or reuse business rules as well as create, improve, collaborate on, and maintain decision logic.

MOVEit provides secure collaboration and automated file transfers of critical business information between users, locations and partners in compliance with data security regulations such as the Health Insurance Portability and Accountability Act (HIPAA), the Payment Card Industry Data Security Standard and the European Union's General Data Protection Regulation, and advanced workflow automation capabilities without the need for scripting.

WhatsUp Gold is an award-winning network monitoring solution, which enables small and medium-sized businesses and enterprises to continuously monitor and manage their IT infrastructure and applications, assuring high levels of performance and availability.

Progress Kinvey

Progress Kinvey is a modern platform for rapidly building complex enterprise applications and scalable consumer applications experiences.

from mission-critical consumer and business experiences for global insurance, manufacturing and media companies, to HIPAA-compliant and life-critical apps for healthcare, health implant manufacturers and pharma.

Data Connectivity and Integration Business Segment

The Data Connectivity and Integration ("DCI") business segment is focused on the growth of our data assets, including the data integration components of our cloud offerings.

Data is at the core of every application, and with the exponential growth in the number and volume of data sources, this business segment addresses the increasingly complex challenges that organizations have in accessing and integrating that data.

The solutions within the DCI business segment include:

Progress DataDirect Connect

Progress DataDirect Connect provides data connectivity using industry-standard interfaces to connect applications running on various platforms to any major database, for both corporate IT organizations and software vendors.

With software components embedded in the products of over 350 software companies and in the applications of thousands of large enterprises, DataDirect Connect is a global leader in the data connectivity market.

The primary products, in addition to other drivers we have developed, are ODBC drivers, JDBC drivers and ADO.NET providers.

They provide the capability to connect and integrate with other applications and data sources independently or with our cloud-based offerings.

Progress DataDirect Hybrid Data Pipeline

Progress DataDirect Hybrid Data Pipeline is a data access service that provides simple, secure access to organizations' cloud and on-premises data sources for hybrid cloud applications, such as customer resource management, data management platforms or hosted analytics.

It enables developers to integrate applications and data quickly, no matter whether that data lives-on-site, in the cloud or both.

Application Development and Deployment Business Segment

The Application Development and Deployment ("AD&D") business segment is focused on serving the evolving needs of our substantial developer community in creating modern and engaging applications and digital experiences.

This business segment is agile and digitally-driven in its go-to-market, able to react quickly to changes in this rapidly-evolving market.

Products in this segment focus on user interface development and content-driven digital experiences.

The solutions within the AD&D business segment include:

Developer Tools

Our Developer Tools (DevTools) business offers a leading set of components for user interface (UI) development for Web, Mobile, Desktop, Chat and AR/VR apps, plus automated application testing and reporting tools.

Our Developer Tools products consist of a leading set of components for user interface (UI) development for Web, Mobile, Desktop, Chat and AR/VR apps, plus automated application testing and reporting tools.

These products make development of modern, engaging application UIs fast and easy for .NET and JavaScript developers.

Product lines include Telerik, Kendo UI, Fiddler, and Test Studio.

Developer Tools is focused on serving the evolving needs of our substantial developer community in creating modern and engaging applications.

The products within Developer Tools are Telerik, Kendo UI, Fiddler and Test Studio.

Sitefinity is a next-generation web content management and customer analytics platform for managing and optimizing digital experiences.

Sitefinity combines superior end user experience with a high level of customization capabilities for developers.

Corticon is a market-leading Business Rules Management System that provides applications with decision automation, decision change process and decision-related insight capabilities.

Corticon helps both business and IT users to quickly create or reuse business rules as well as create, improve, collaborate on, and maintain decision logic.

DataDirect Connect

DataDirect Connect provides data connectivity using industry-standard interfaces to connect applications running on various platforms to any major database, for both corporate IT organizations and software vendors.

The primary products, in addition to other drivers we have developed, are ODBC drivers, JDBC drivers and ADO.NET providers.

They provide the capability to connect and integrate with other applications and data sources independently or with our cloud-based offerings.

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

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For more than ten years, Chef has led the industry in DevOps innovation, uniting teams at organizations of all sizes and optimizing processes and outcomes to accelerate its customers’ business growth.

The Chef offerings incorporate software components licensed to the general public under open source licenses.

We obtain many components from software developed and released by contributors to independent open source components of our offerings.

Under the open source licensing model, a software developer distributes the software under an open source license that provides relatively broad rights for recipients of the software to use, copy, modify and redistribute the software.

These rights afford significant latitude for recipients to inspect, suggest changes to, customize or enhance the software.

Chef software is developed as 100% open source.

The primary solutions within the Chef Enterprise Automation Stack are Chef Infra, Chef InSpec, Chef Habitat, Chef Compliance, Chef Automate and Chef Desktop.

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Chef InSpec provides a language for describing security and compliance rules that can be shared between software engineers, operations and security engineers.

Chef Habitat provides automation capabilities for defining, packaging and delivering applications to almost any environment, regardless of operating system or deployment platform.

Chef Habitat provides automation capabilities for defining, packages and delivering applications to almost any environment, regardless of operating system or deployment platform.

Chef Automate is an enterprise dashboard and analytics tool enabling cross-team collaboration with actionable insights for configuration and compliance and an auditable history of changes to environments.

Chef Compliance helps enterprises maintain compliance and prevent security incidents across heterogeneous estates.

Chef Compliance helps enterprises maintain compliance and prevent security incidents across heterogenous estates.

Chef Desktop allows IT teams to automate the deployment, management and ongoing compliance of IT resources.

Kemp Loadmaster

The Kemp LoadMaster load balancing solutions and extensive library of application deployment templates provide high performance and secure delivery of application workloads from a wide range of vendors in multiple sectors.

Kemp Flowmon Network Visibility

The Kemp Flowmon network performance monitoring and diagnostic (NPMD) solutions collect and analyze rich network telemetry from various sources, saving hours of tedious network troubleshooting and accelerating time-to-resolution.

The Kemp Flowmon network detection and response (NDR) solutions combine machine learning, heuristics and advanced analytics to improve network performance, alert on network anomalies and provide early detection of advanced persistent threats.

Product Development

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Madison, Wisconsin;

Seattle, Washington;

Sofia, Bulgaria;

Limerick, Ireland;

Brno, Czech Republic;

and Bangalore and Hyderabad, India.

We market our products globally through several channels:

directly to end users and indirectly to independent software vendors, OEMs, and system integrators.

Sales of our solutions and products through our direct sales force have historically been to business managers or IT managers in corporations and governmental agencies.

We sell our products globally through several channels:

directly to end users and indirectly through independent software vendors, OEMs, and system integrators.

Sales of our solutions and products through our direct sales force have historically been to business

managers or IT managers in corporations and governmental agencies.

We also target developers who create business applications, from individuals to teams, within enterprises of all sizes.

We also market our products through indirect channels, primarily ISVs.

We also sell our products through indirect channels, primarily ISVs.

OEMs, and value-added resellers, who embed or add features to our products as part of an integrated solution.

We use distributors, both internationally and domestically, in certain locations where we do not have a direct presence or where it is more economically feasible for us to do so.

We use distributors and resellers, both internationally and domestically, in certain locations where we do not have a direct presence or where it is more economically or contractually feasible for us to do so.

More than half of our license revenues are derived from these indirect channels.

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However, there is no assurance that they will continue to renew in the future.

If any of our largest OEM customers were not to renew their agreements in the future, this could materially impact our DCI segment.

If any of our largest OEM customers were not to renew their agreements in the future, this could materially impact our DataDirect Connect product line.

Value Added Resellers

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Our sales and marketing efforts with respect to certain of our products differ from our traditional sales and marketing efforts because the target markets are different.

For these products, we have designed our marketing and sales model to be efficient for high volumes of lower-price transactions.

For these products, we have designed our marketing and sales model to be efficient for high volumes

of lower-price transactions.

Our marketing efforts focus on driving traffic to our websites and on generating high quality sales leads, in many cases, consisting of developer end users who download a free evaluation of our software.

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We provide support to customers primarily through our main regional customer support centers in Bedford, Massachusetts;

Melville, New York;

Morrisville, North Carolina;

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Madison, Wisconsin;

Seattle, Washington;

Galway, Ireland;

Limerick, Ireland;

Rotterdam, The Netherlands;

Brno, Czech Republic;

Hyderabad, India;

Melbourne, Australia;

and Sofia, Bulgaria.

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We believe that due to the rapid pace of innovation within our industry, factors such as the technological and creative skills of our personnel are as important in establishing and maintaining a leadership position within the industry as are the various legal protections of our technology.

In addition, we believe that the nature of our customers, the importance of our products to them

and their need for continuing product support may reduce the risk of unauthorized reproduction, although no assurances can be made in this regard.

In addition, we believe that the nature of our customers, the importance of our products to them and their need for continuing product support may reduce the risk of unauthorized reproduction, although no assurances can be made in this regard.

Business Segment and Geographical Information

We operate and report as three distinct business segments:

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

For additional information on our business segments as well as our geographical financial information, see Note 18 to our Consolidated Financial Statements in Item 8 of this Form 10-K.

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.

Refer to Note 15:

Revenue Recognition and Note 19:

Business Segments and International Operations to our Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for information by geographic area.

Human Capital

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We empower our employees to drive their career aspirations and set personal development objectives in partnership with their managers.

To strengthen these conversations, we train managers across the globe to partner with employees through career conversations, as well provide career development training for all employees so that they can successfully leverage the many tools in place to support them.

To strengthen these conversations, we train managers across the globe to partner with employees through career conversations, as well as provide career development training for all employees so that they can successfully leverage the many tools in place to support them.

To match the location and learning specifics of our people, we combine various channels for personal and technical development:

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We also believe strongly in fostering our employees’ personal growth and offer programs like tuition reimbursement.

Our efforts to recruit and retain a diverse and passionate workforce include providing competitive compensation and benefit packages worldwide and ensuring we listen to our employees.

Our efforts to recruit and retain a diverse and inclusive workforce include providing competitive compensation and benefit packages worldwide and ensuring we listen to our employees.

To that end, we regularly survey our employees to obtain their views and assess employee satisfaction.

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This includes having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.

We also provide flexible work hours.

We have also provided a work-from-home reimbursement policy to assist employees in that transition and added several company-wide paid days off and caregiving support to help employees balance their work and life responsibilities.

We also provided a work-from-home reimbursement policy to assist employees in that transition and added several company-wide paid days off and caregiving support to help employees balance their work and life responsibilities.

Flexible Work Approach

The COVID‐19 pandemic has significantly changed the way employees think about where and how they work.

For most of our employees, productivity is no longer tied to being in an office and collaboration can happen between people anywhere.

Our view of our offices has evolved to places for collaboration and in-person interactions rather than the only places where productive work can occur.

In 2021 we announced a modern approach to work that gives our employees more flexibility to choose where to work.

Depending on their role, this means that employees can choose their office location, as well as continue to work from home some or all the time.

We expect this flexible approach will help us recruit and retain employees.

Inclusion and Diversity

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We are committed to creating a culture of innovation and inspiration, where employees feel a strong sense of community and pride in the company and the successes they have helped to achieve.

We have launched an inclusion and diversity (I&D) undertaking focused on fostering an inclusive environment and diverse workforce by strengthening the following core areas of our organization:

We launched an inclusion and diversity (I&D) undertaking focused on fostering an inclusive environment and diverse workforce by strengthening the following core areas of our organization:

culture and belonging;

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To ensure success of our I&D efforts, we formed an Inclusion and Diversity Advisory Committee, made up of a diverse group of Progress employees from around the globe with varying backgrounds, skill sets and viewpoints.

This committee has been tasked with supporting the formation and implementation of enterprise-wide I&D initiatives and ensuring a clear I&D vision is established and articulated in a way that is authentic for

everyone at Progress.

Among its many accomplishments, the committee helped to establish a governance framework for Progress Employee Resource Groups (ERGs), supported the formation of our first four ERGs, Progress for Her, Blacks at Progress, Plus (LGTBQ+) and veterans@progress, and contributed to the strengthening of our career and hiring processes.

Among its many accomplishments, the committee helped to establish a governance framework for Progress Employee Resource Groups (ERGs), supported the formation of our first ERGs, , and contributed to the strengthening of our career and hiring processes.

We now have six ERGs:

Progress for Her, Blacks at Progress, Plus (LGTBQ+), veterans@progress, ASPIRE (Asian Pacific Islanders) and Unidos en Progress.

Available Information

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

What changed 10-K

Item 1. Business