What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-01-27 compared with 2021-01-27 · 460 added, 480 removed, 1031 unchanged (48% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Progress Software Corporation

To the stockholders and the Board of Directors of Progress Software Corporation

Opinion on the Financial Statements

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

We have audited the accompanying consolidated balance sheets of Progress Software Corporation and subsidiaries (the "Company") as of November 30, 2021 and 2020, the related consolidated statements of operation, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended November 30, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

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

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

Given the accounting complexity and the management judgment necessary to identify performance obligations in the arrangement and determine the timing and allocation of revenue in arrangements with multiple performance obligations, auditing revenue recognition for such arrangements required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

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

Chef Acquisition - Refer to Note 7 to the financial statements

Convertible senior notes and capped calls - Refer to Note 9 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Chef Software, Inc.

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

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

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

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

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

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

In April 2021, the Company issued Convertible Senior Notes (the "Notes") with an aggregate principal amount of $360 million, due 2026, in a private placement.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components.

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

The fair value was determined utilizing a discounted cash flow model that includes assumptions such as implied credit spread, expected volatility, and the risk-free rate for notes with a similar term.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In April 2021, the Company also entered into privately negotiated capped call transactions (“Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions are generally expected to reduce potential dilution to the 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.

The Capped Call Transactions was recorded as a reduction of additional paid-in-capital.

There is complexity in applying the accounting framework for the Notes and the related Capped Call Transactions.

In addition, the determination of the fair value of the liability component of the convertible notes requires the Company to make significant estimates and assumptions relating to the implied credit spread, expected volatility, and the risk-free rate for the liability component of the Convertible Notes.

Performing audit procedures to evaluate the appropriateness of the accounting framework and the reasonableness of the estimates and assumptions used in the fair value of the liability component of the Notes required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

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

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

• We assessed the reasonableness of management’s revenue growth projections and customer attrition rate by comparing these assumptions to historical results and certain peer companies.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) valuation assumptions by:

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

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

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

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

Our audit procedures related to the accounting for the Notes and Capped Call Transactions, including the Company’s judgments and calculations related to the fair value of the liability component of the Notes, included the following procedures, among others:

• We tested the effectiveness of controls over the Company’s accounting for the Notes and Capped Call Transactions, and over the determination of the fair value of the liability component of the Notes.

• With the assistance of professionals in our firm having expertise in debt issuance and derivative transaction accounting, we evaluated the Company’s conclusions regarding the accounting treatment applied to the Notes and Capped Call Transactions.

• With the assistance of fair value specialists, we evaluated the reasonableness of the valuation methodologies and the significant assumptions used to determine the respective fair values of the liability component of the Notes, by:

– Testing the source information underlying the respective fair values of the liability component of the Notes and the mathematical accuracy of the calculations.

– Developing estimates of the respective fair values of the liability component of the Notes using independent expectations of the significant assumptions, and comparing our estimates of fair value to the Company’s estimates.

Kemp Acquisition - Refer to Note 8 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Kemp Technologies, Inc.

(“Kemp”) for cash consideration of approximately $258 million on November 1, 2021.

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

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on the Company’s initial preliminary estimate of their respective fair values.

The method by management for determining the preliminary estimated fair value varied depending on the type of asset or liability.

The preliminary estimated fair value of the customer relationships and purchased technology required management to make significant estimates and assumptions related to the discount rates, customer attrition rate, and revenue growth projections.

We identified the preliminary valuation of the intangible assets of Kemp as a critical audit matter because it involves estimates made by management.

The assessment of the preliminary estimate of fair value required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s preliminary estimate of fair value of the customer relationships and purchased technology based on assumptions related to the discount rates, customer attrition rate, and revenue growth projections.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the preliminary estimate of the fair value of acquired customer relationships and purchased technology for Kemp included the following, among others:

• We tested the effectiveness of controls over the preliminary valuation of customer relationships and purchased technology, including management’s controls over forecasts of revenue growth projections, customer attrition rate, and selection of the discount rates.

• We assessed the reasonableness of management’s preliminary estimate of revenue growth projections and customer attrition rate by comparing these assumptions to historical results and certain peer companies.

• We assessed the reasonableness of management’s preliminary estimate of the discount rate by comparison to the historical discount rates used on similar prior acquisitions.

• We evaluated the reasonableness of the preliminary estimate of fair value of the customer relationships and purchased technology by:

– Assessing the reasonableness of the source information underlying the determination of the preliminary estimated valuation assumptions and testing the mathematical accuracy of the preliminary calculation.

– Evaluating whether the preliminary valuation methodology applied was reasonable.

/s/ Deloitte & Touche LLP

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Consolidated Balance Sheets

(In thousands, except share data) November 30,

2020 November 30,

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

Current assets:

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Other current assets 39,549 23,983

Assets held for sale 15,255 —

Total current assets 337,808 238,935

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Total assets $ 1,363,537 $ 1,041,782

Liabilities and shareholders’ equity

Liabilities and stockholders’ equity

Current liabilities:

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Accrued compensation and related taxes 47,116 36,816

Dividends payable to shareholders 7,904 7,498

Dividends payable to stockholders 7,925 7,904

Short-term operating lease liabilities 7,926 7,015

Income taxes payable 1,899 1,444

Other accrued liabilities 19,491 16,201

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Long-term debt, net 239,992 364,260

Convertible senior notes, net 294,535 —

Long-term operating lease liabilities 23,130 26,966

Long-term deferred revenue 47,359 26,908

Deferred tax liabilities 14,163 —

Other noncurrent liabilities 8,940 15,092

Commitments and contingencies (Note 11)

Shareholders’ equity:

Stockholders’ equity:

Preferred stock, $ 0.01 par value;

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Accumulated other comprehensive loss ( 32,443 ) ( 32,778 )

Total shareholders’ equity 346,013 330,282

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

Total stockholders’ equity 412,489 346,013

Total liabilities and stockholders’ equity $ 1,363,537 $ 1,041,782

See notes to consolidated financial statements.

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Fiscal Year Ended

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

2020 November 30,

2019 November 30,

As Adjusted (1)

(In thousands, except per share data) November 30, 2021 November 30, 2020 November 30, 2019

Software licenses $ 156,590 $ 115,249 $ 122,552

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Acquisition-related expenses 4,102 3,637 1,658

Loss on assets held for sale — — 5,147

Fees related to shareholder activist — — 1,472

Total operating expenses 336,762 272,308 297,973

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Cash dividends declared per common share $ 0.700 $ 0.670 $ 0.630

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

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

See notes to consolidated financial statements.

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Fiscal Year Ended

(In thousands) November 30,

2020 November 30,

2019 November 30,

As Adjusted (1)

(In thousands) November 30, 2021 November 30, 2020 November 30, 2019

Net income $ 78,420 $ 79,722 $ 26,400

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Foreign currency translation adjustments ( 2,439 ) 777 ( 420 )

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

Unrealized gain (loss) on hedging activity, net of tax provision of $ 940 in 2021 and a tax benefit of $ 1,176 and $ 503 in 2020 and 2019, respectively

2,837 ( 3,625 ) ( 1,551 )

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

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

Unrealized (loss) gain on investments, net of tax benefit of $ 20 in 2021 and a tax provision of $ 32 and $ 60 in 2020 and 2019, respectively

( 63 ) 44 173

Total other comprehensive income (loss), net of tax 335 ( 2,804 ) ( 1,798 )

Comprehensive income $ 78,755 $ 76,918 $ 24,602

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

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

See notes to consolidated financial statements.

PROGRESS SOFTWARE CORPORATION

Consolidated Statements of Shareholders’ Equity

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

Consolidated Statements of Stockholders’ Equity

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

(in thousands) Number of Shares Amount

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

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

Balance, November 30, 2018, as adjusted 45,115 $ 451 $ 266,602 $ 85,125 $ ( 28,176 ) $ 324,002

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

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

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

Issuance of shares related to non-compete agreement (Note 8) 44 — 2,000 — — 2,000

Adjustment due to adoption of ASU 2016-16 — — — 4,781 — 4,781

Dividends declared — — — ( 28,267 ) — ( 28,267 )

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Net income — — — 26,400 — 26,400

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

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

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

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

Balance, November 30, 2019 45,037 $ 450 $ 295,503 $ 64,303 $ ( 29,974 ) $ 330,282

Issuance of stock under employee stock purchase plan 237 2 6,604 — — 6,606

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

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

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

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

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Stock-based compensation — — 29,724 — — 29,724

Equity component of Notes, net of issuance costs and tax — 47,456 47,456

Purchase of capped calls, net of tax — — ( 32,507 ) — — ( 32,507 )

Dividends declared — — — ( 31,581 ) — ( 31,581 )

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Net income — — — 78,420 — 78,420

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

Other comprehensive income — — — — 335 335

Balance, November 30, 2021 44,146 $ 441 $ 354,235 $ 90,256 $ ( 32,443 ) $ 412,489

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

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

See notes to consolidated financial statements.

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Fiscal Year Ended

(In thousands) November 30,

2020 November 30,

2019 November 30,

As Adjusted (1)

(In thousands) November 30, 2021 November 30, 2020 November 30, 2019

Cash flows from operating activities:

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Amortization of acquired intangibles and other 47,507 28,621 49,127

Amortization of debt discount and issuance costs on Notes 8,195 — —

Stock-based compensation 29,724 23,482 23,311

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Loss on disposal of property and equipment 7 1,025 376

Loss on assets held for sale — — 5,147

Impairment of intangible and long-lived assets — — 24,096

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Other assets ( 15,105 ) 1,561 ( 1,902 )

Inventories 245 — —

Accounts payable and accrued liabilities 5,486 ( 4,974 ) 9,116

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Net cash flows from operating activities 178,530 144,847 128,484

Cash flows (used in) from investing activities:

Cash flows used in investing activities:

Purchases of investments — ( 5,009 ) ( 10,550 )

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

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

Cash flows from (used in) financing activities:

Decrease in escrow receivable and other 2,330 — —

Net cash flows used in investing activities ( 250,335 ) ( 207,293 ) ( 208,380 )

Cash flows from financing activities:

Proceeds from stock-based compensation plans 15,033 11,099 9,265

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Repurchases of common stock ( 35,000 ) ( 60,000 ) ( 25,000 )

Dividend payments to shareholders ( 29,900 ) ( 27,760 ) ( 25,789 )

Proceeds from issuance of senior convertible notes, net of issuance costs of $ 9.9 million

Purchase of capped calls ( 43,056 ) — —

Dividend payments to stockholders ( 31,561 ) ( 29,900 ) ( 27,760 )

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

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Payment of issuance costs for long-term debt ( 904 ) — ( 1,611 )

Net cash flows from (used in) financing activities 3,080 130,292 ( 146,771 )

Net cash flows from financing activities 132,113 3,080 130,292

Effect of exchange rate changes on cash ( 2,892 ) 3,097 ( 1,263 )

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

Net increase (decrease) in cash and cash equivalents 57,416 ( 56,269 ) 49,133

Cash and cash equivalents, beginning of year 97,990 154,259 105,126

Cash and cash equivalents, end of year $ 155,406 $ 97,990 $ 154,259

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

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

Supplemental disclosure:

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Nature of Business and Summary of Significant Accounting Policies

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

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

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

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.

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.

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

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

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

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fair values of investments in marketable securities;

assets held for sale;

intangible assets and goodwill valuations;

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We translate income and expense items at average rates of exchange prevailing during each period.

We accumulate translation adjustments in accumulated other comprehensive loss, a component of shareholders’ equity.

We accumulate translation adjustments in accumulated other comprehensive loss, a component of stockholders’ equity.

For foreign operations where the U.S.

dollar is considered to be the functional currency, we remeasure monetary assets and liabilities into U.S.

dollars at the exchange rate on the balance sheet date and non-monetary assets and liabilities are remeasured

dollars at the exchange rate on the balance sheet date and non-monetary assets and liabilities are remeasured into U.S.

dollars at historical exchange rates.

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treasury and government agency bonds, and corporate bonds and notes, as investments available-for-sale, which are stated at fair value.

We include aggregate unrealized holding gains and losses, net of taxes, on available-for-sale securities as a component of accumulated other comprehensive loss in shareholders’ equity.

We include aggregate unrealized holding gains and losses, net of taxes, on available-for-sale securities as a component of accumulated other comprehensive loss in stockholders’ equity.

We include realized gains and losses in interest income and other, net on the consolidated statements of operations.

We monitor our investment portfolio for impairment on a periodic basis.

In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other than temporary, an impairment charge is recorded and a new cost basis for the investment is established.

In determining whether an other-than-temporary impairment exists, we consider the nature of the investment, the length of time and the extent to which the fair value has been less than cost, and our intent and ability to continue holding the security for a period sufficient for an expected recovery in fair value.

Fair value is calculated based on publicly available market information.

If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost.

To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence.

In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee.

If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other (expense) income, net and a new cost basis in the investment is established.

If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Allowances for Doubtful Accounts and Sales Credit Memos

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November 30, 2021 November 30, 2020 November 30, 2019

As Adjusted (1)

Beginning balance $ 886 $ 667 $ 574

ASC 606 adjustment — — 88

Charge to costs and expenses 58 429 606

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Ending balance $ 552 $ 886 $ 667

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

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

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

November 30, 2021 November 30, 2020 November 30, 2019

As Adjusted (1)

Beginning balance $ 429 $ 158 $ 266

ASC 606 adjustment — — 41

Charge (credit) to revenue 265 ( 60 ) 46

(Credit) charge to revenue ( 340 ) 265 ( 60 )

Write-offs and other — — ( 46 )

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Ending balance $ 82 $ 429 $ 158

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

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

Concentrations of Credit Risk

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We measure and record derivative financial instruments at fair value.

See Note 4 for further discussion of financial instruments that are carried at fair value on a recurring and nonrecurring basis.

Fair Value Measurements for further discussion of financial instruments that are carried at fair value on a recurring and nonrecurring basis.

Derivative Instruments

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

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

underlying exposure, thus managing the associated risk.

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

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

Inventories consist of hardware and related component parts and are recorded at the lower of cost, as determined by the first-in, first-out method, or net realizable value.

The Company reduces inventory to net realizable value based on excess and obsolete inventories determined primarily by historical usage and forecasted demand.

If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to costs of revenue.

At November 30, 2021, the Company had no reserve for excess and obsolete inventories.

Property and Equipment

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Repairs and maintenance costs are expensed as incurred.

Property and equipment is classified as held for sale when it meets the held for sale criteria of Accounting Standards Codification Topic 360, Property, Plant, and Equipment and is measured at the lower of the carrying value or the fair value less cost to sell.

Losses resulting from this measurement are recognized in the period in which the held for sale criteria are met while gains are not recognized until the date of sale.

Once designated as held for sale, we stop recording depreciation expense on the asset.

We assess the fair value less cost to sell of long-lived assets held for sale at each reporting period until it no longer meets this classification.

In the fourth quarter of fiscal year 2021, we reclassified certain corporate land and building assets previously reported as property and equipment to assets held for sale on our consolidated balance sheet as we began an active program to sell and expect to sell these assets within one year.

If the assets held for sale were carried at fair value, it would be considered a Level 3 fair value measurement, and determined based on the use of appraisals and input from market participants.

As we determined that fair value was significantly above carrying value as of November 30, 2021, we have continued to record the assets held for sale at their carrying value.

Product Development and Internal Use Software

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We did no t incur any amortization expense related to internal use software development costs during the fiscal years ended November 30, 2021 and 2020 as these costs were fully amortized as of November 30, 2019.

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

Goodwill, Intangible Assets, and Long-Lived Assets

Goodwill is the amount by which the cost of acquired net assets in a business combination exceeded the fair value of net identifiable assets on the date of purchase.

The Company has a single reporting unit.

We evaluate goodwill and other intangible assets with indefinite useful lives, if any, for impairment annually or on an interim basis when events and circumstances arise that indicate impairment may have occurred.

In performing our annual assessment, we first perform a qualitative test and if necessary, perform a quantitative test.

To conduct the quantitative impairment test of goodwill, we compare the fair value of a reporting unit to its carrying value.

If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss to the extent that the carrying value of goodwill exceeds its implied fair value.

We estimate the fair values of our reporting units using discounted cash flow models or other valuation models, such as comparative transactions and market multiples.

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

Intangible assets are comprised of purchased technology, customer-related assets, and trademarks and trade names acquired through business combinations (Note 7).

The Company performed a quantitative assessment as of October 31, 2021 and concluded that there was no impairment since it was not more likely than not that the fair value of its reporting unit was less than its carrying value.

We estimated the fair value of our reporting unit based on our market capitalization.

In performing our annual assessment as of October 31, 2020 and 2019, we first performed a qualitative test and if necessary, performed a quantitative test.

To conduct the quantitative impairment test of goodwill, we compared the fair value of a reporting unit to its carrying value.

We estimated the fair values of our reporting units using discounted cash flow models or other valuation models, such as comparative transactions and market multiples.

We did not recognize any goodwill impairment charges during fiscal years 2020 or 2019.

Intangible Assets and Long-Lived Assets

Intangible assets are comprised of purchased technology, customer-related assets, and trademarks and trade names acquired through business combinations.

All of our intangible assets are amortized using the straight-line method over their estimated useful life.

Refer to Note 8:

Business Combinations for further information.

We periodically review long-lived assets (primarily property and equipment) and intangible assets with finite lives for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of those assets are no longer appropriate.

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If impairment is indicated, we write down the asset to its estimated fair value based on a discounted cash flow analysis.

During fiscal year 2019, we recorded a $ 22.7 million asset impairment charge, which was primarily applicable to the intangible assets obtained in connection with our acquisitions of DataRPM and Kinvey during the second and third quarters of fiscal year 2017, respectively (Note 4).

We classify long-lived assets to be sold as held for sale in the period in which:

(i) we have approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Assets held for sale are initially measured at the lower of the carrying value or the fair value less cost to sell.

Losses resulting from this measurement are recognized in the period in which the held for sale criteria are met while gains are not recognized until the date of sale.

Once designated as held for sale, we stop recording depreciation expense on the asset.

We assess the fair value less cost to sell of long-lived assets held for sale at each reporting period until it no longer meets this classification.

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

As the fair value less cost to sell was less than the carrying value of these assets, we recognized an impairment charge of $ 5.1 million.

We sold these long-lived assets during fiscal year 2019 and recognized a net gain on the sale of approximately $ 0.1 million.

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

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

We did no t recognize any intangible asset impairment charges during fiscal years 2021 and 2020.

During fiscal year 2019, we incurred an impairment charge of $ 22.7 million as a result of our decision to reduce our current and ongoing spending levels within our cognitive application product lines, which consisted primarily of our DataRPM and Kinvey products.

Comprehensive (Loss) Income

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Balance, December 1, 2019 $ ( 28,393 ) $ ( 30 ) $ ( 1,551 ) $ ( 29,974 )

Other comprehensive (loss) income ( 420 ) 173 ( 1,551 ) ( 1,798 )

Other comprehensive income (loss) 777 44 ( 3,625 ) ( 2,804 )

Balance, December 1, 2020 $ ( 27,616 ) $ 14 $ ( 5,176 ) $ ( 32,778 )

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Balance, November 30, 2021 $ ( 30,055 ) $ ( 49 ) $ ( 2,339 ) $ ( 32,443 )

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

The tax effect on accumulated unrealized losses on hedging activity and unrealized (losses) gains on investments was $ 0.7 million, $ 1.6 million and $ 0.4 million as of November 30, 2021, November 30, 2020, and November 30, 2019, respectively.

Revenue Recognition

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The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield.

We recognize stock-based compensation expense related to options and restricted stock units on a straight-line basis over the service period of the award, which is generally 4 or 5 years for options and 3 years for restricted stock units.

We recognize stock-based compensation expense related to performance stock units and our employee stock purchase plan using an accelerated attribution method.

Fees Related to Shareholder Activist

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

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

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

Acquisition-Related Costs

Acquisition-related costs are expensed as incurred and include those costs incurred as a result of a business combination.

These costs consist of professional services fees, including third-party legal and valuation-related fees, as well as retention fees and earn-out payments treated as compensation expense.

These costs primarily consist of professional services fees, including third-party legal and valuation-related fees, as well as retention fees and earn-out payments treated as compensation expense.

We incurred $ 4.1 million, $ 3.6 million, and $ 1.7 million of acquisition-related costs, which are included in acquisition-related expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2021, November 30, 2020, and November 30, 2019, respectively.

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Recently Adopted Accounting Pronouncements

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

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

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

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

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

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

In February 2016, the FASB issued ASU No.

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

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

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

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

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

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

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

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

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

office leases, vehicle leases and equipment leases.

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

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

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

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

Refer to Note 9 for further details.

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

2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.

Under prior accounting standards, the recognition of current and deferred income taxes for an intra-entity transfer was prohibited until the asset has been sold to an outside party.

We adopted this standard at the beginning of the first quarter of fiscal year 2019.

Upon adoption, we reclassified approximately $ 3.4 million from non-current prepaid taxes, which is included in other assets on our consolidated balance sheet, to retained earnings as of December 1, 2018.

During the preparation of our consolidated financial statements for the three months ended August 31, 2019, we identified that a deferred tax asset of $ 8.2 million should also have been recorded upon adoption of this standard at the beginning of the first quarter of fiscal year 2019, with the offset recorded to retained earnings.

We determined that the error is not material to the first and second quarters of fiscal year 2019.

We also concluded that recording an out-of-period correction in the third quarter of fiscal year 2019 would not be material and therefore corrected this error by recording the $ 8.2 million deferred tax asset during the third quarter of fiscal year 2019.

Therefore, the impact of the adoption of ASU 2016-16 on our consolidated balance sheet was a reclassification of approximately $ 4.8 million to retained earnings.

In May 2014, the FASB issued Accounting Standards Update No.

2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606").

Under this standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

The standard also requires new disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers and provides guidance on the recognition of costs related to obtaining customer contracts.

We adopted this ASU effective December 1, 2018 in accordance with the full retrospective approach, which required us to retrospectively adjust certain previously reported results in the comparative prior periods presented.

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

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

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

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

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

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

• Revenue from transactions with multiple elements within our Application Development and Deployment segment (i.e., sales of perpetual licenses with maintenance and/or support) - Under the applicable revenue recognition guidance for fiscal years 2018 and prior, these transactions were recognized ratably over the associated maintenance period as the Company did not have vendor specific objective evidence ("VSOE") for maintenance or support.

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

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

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

Consolidated Balance Sheet

November 30, 2018

(in thousands) As Reported Adjustments As Adjusted

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

Short-term unbilled receivables — 1,421 1,421

Long-term unbilled receivables — 1,811 1,811

Deferred tax assets 1,922 ( 956 ) 966

Other assets (1)

580,237 — 580,237

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

Liabilities and shareholders’ equity

Short-term deferred revenue 133,194 ( 9,984 ) 123,210

Long-term deferred revenue 15,127 ( 2,397 ) 12,730

Deferred tax liabilities 3,797 2,002 5,799

Other liabilities (2)

178,409 — 178,409

Retained earnings 71,242 13,883 85,125

Accumulated other comprehensive loss ( 28,213 ) 37 ( 28,176 )

Other equity (3)

267,053 — 267,053

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

(1) Includes cash and cash equivalents, short-term investments, other current assets, assets held for sale, property and equipment, net, intangible assets, net, goodwill, and other assets.

(2) Includes current portion of long-term debt, net, accounts payable, accrued compensation and related taxes, dividends payable, income taxes payable, other accrued liabilities, long-term debt, net, and other noncurrent liabilities.

(3) Includes common stock and additional paid-in capital.

Consolidated Statements of Income

Fiscal Year Ended

November 30, 2018

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

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

Maintenance and services 275,028 4,153 279,181

Total revenue 397,165 ( 18,184 ) 378,981

Costs of revenue 66,973 — 66,973

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

Operating expenses 244,194 — 244,194

Income from operations 85,998 ( 18,184 ) 67,814

Other expense, net ( 7,018 ) — ( 7,018 )

Income before income taxes 78,980 ( 18,184 ) 60,796

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

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

Earnings (loss) per share:

Basic $ 1.39 $ ( 0.30 ) $ 1.09

Diluted $ 1.38 $ ( 0.30 ) $ 1.08

Weighted average shares outstanding:

Basic 45,561 — 45,561

Diluted 46,135 — 46,135

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04").

ASU 2017-04 amends Topic 350 to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

This update requires the performance of an annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value.

However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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

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

Business Combinations

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which improves the accounting for acquired revenue contracts with customers in a business combination by addressing inconsistency in practice related to (1) the recognition of an acquired contract liability;

and (2) payment terms and their effect on subsequent revenue recognized by the acquirer.

The amendments in this update require an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The guidance in ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

We adopted this standard at the beginning of the fourth quarter of fiscal year 2021.

Upon adoption, this update did not have a material effect on our consolidated financial position or results of operations.

Financial Instruments - Credit Losses

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

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

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

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

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

Early adoption is permitted.

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

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

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which requires measurement and recognition of expected credit losses for financial assets measured at amortized cost, including accounts receivable, upon initial recognition of that financial asset using a forward looking expected loss model, rather than an incurred loss model.

Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses when the fair value is below the amortized cost of the asset, removing the concept of "other-than-temporary" impairments.

The Company adopted this standard effective December 1, 2020.

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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 in equity an embedded conversion feature for such debt.

Additionally, 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.

Additionally, the standard requires applying the if-converted method to calculate convertible instruments’ impact on diluted earnings per share (“EPS”).

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.

We plan to early adopt the new standard in the first quarter of fiscal year 2022 in accordance with the modified retrospective approach.

Upon adoption, we expect to record a $ 47.5 million decrease to additional paid-in capital, a $ 56.0 million decrease to debt discount, a $ 4.9 million increase to retained earnings, and a $ 13.4 million decrease to long-term deferred tax liabilities.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 updates specific areas of ASC 740, Income Taxes , to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements.

The new standard will be effective for us in the first quarter of fiscal year 2022.

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

Cash, Cash Equivalents and Investments

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Money market funds 18,964 — — 18,964

State and municipal bond obligations 7,036 1 — 7,037

treasury bonds 4,993 58 — 5,051

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Money market funds 25,035 — 18,964 —

State and municipal bond obligations — — — 7,037

treasury bonds — 757 — 5,051

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

2020 November 30,

November 30, 2021 November 30, 2020

Due in one year or less $ 1,967 $ 5,998

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We generally do not hedge the net assets of our international subsidiaries.

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.

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 three years from the date the contract was entered.

At November 30, 2021, $ 0.3 million and $ 0.1 million were recorded in other noncurrent liabilities and other accrued liabilities, respectively, on the consolidated balance sheets.

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

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

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

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

In fiscal year 2021, realized and unrealized losses of $ 2.1 million from our forward contracts were recognized in foreign currency loss, net on the consolidated statement of operations.

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

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

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

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

State and municipal bond obligations 7,037 — 7,037 —

treasury bonds 5,051 — 5,051 —

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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.

Nonrecurring Fair Value Measurements

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

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

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

Total Fair Value Total Losses

Intangible assets $ — $ 22,688

The fair value measurements of intangible assets and long-lived assets were determined using an income-based valuation methodology, which incorporates unobservable inputs, including discounted expected cash flows over the remaining estimated useful life of the technology, thereby classifying the fair value as a Level 3 measurement within the fair value hierarchy.

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

Fair Value of the Convertible Senior Notes

The liability component of the Company's Notes, as defined in Note 9:

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 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 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 $ 372.1 million as of November 30, 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.

The components of inventories were as follows (in thousands):

November 30, 2021 November 30, 2020

Raw materials $ 1,920 $ —

Work in process — —

Finished goods 1,631 —

Total $ 3,551 $ —

At November 30, 2021, the inventories balance of $ 3.6 million was recorded in other current assets on the consolidated balance sheets.

The addition of inventories during fiscal year 2021 is related to the acquisition of Kemp.

Refer to Note 8:

Business Combinations for further information.

Property and Equipment

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Depreciation and amortization expense related to property and equipment was $ 5.5 million, $ 6.1 million, and $ 7.6 million for the years ended November 30, 2021, 2020, and 2019, respectively.

Refer to Note 1:

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

Intangible Assets and Goodwill

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Amortization expense related to these intangible assets was $ 46.9 million, $ 27.9 million, and $ 48.1 million in fiscal years 2021, 2020, and 2019, respectively.

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

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

As a result of our decision to reduce our current and ongoing spending levels within our cognitive application product lines, which consist primarily of our DataRPM and Kinvey products, we determined that the intangible assets were fully impaired and incurred an impairment charge of $ 22.7 million (Note 4).

The additions to intangible assets during fiscal years 2021 and 2020 are related to the acquisition of Kemp in November 2021 and Chef in October 2020, respectively.

Refer to Note 8:

Business Combinations for further information.

Future amortization expense for intangible assets as of November 30, 2021 is as follows (in thousands):

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Measurement Period Adjustments (1)

( 77 ) ( 838 )

Additions (2)

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Balance, end of year $ 671,152 $ 491,726

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

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

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

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

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

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

Application Development and Deployment 46,965 — 59,858 — 106,823

Total goodwill $ 432,824 $ ( 838 ) $ 59,858 $ ( 118 ) $ 491,726

(1) Represents final measurement period adjustments related to our Chef and Ipswitch acquisitions.

Refer to Note 8:

Business Combinations for further information.

(2) The additions to goodwill during fiscal years 2021 and 2020 are related to the acquisition of Kemp in November 2021 and Chef in October 2020, respectively.

Refer to Note 8:

Business Combinations for further information.

We assess the impairment of goodwill on an annual basis and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

During fiscal year 2020, we tested goodwill for impairment for each of our reporting units as of October 31, 2020.

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

During fiscal year 2021, we performed a quantitative assessment as of October 31, 2021 and concluded that there was no impairment since it was not more likely than not that the fair value of our reporting unit was less than its carrying value.

We did no t recognize any goodwill impairment charges during fiscal years 2021, 2020, or 2019.

Business Combinations

Kemp Acquisition

On November 1, 2021, we completed the acquisition of the parent company of Kemp Technologies, Inc.

(“Kemp”) pursuant to the Stock Purchase Agreement (the “Purchase Agreement”), dated as of September 23, 2021.

The acquisition was completed for a base purchase price of $ 258.0 million, subject to certain customary adjustments as further described in the Purchase Agreement (the “Aggregate Consideration”), which was paid in cash from existing cash balances.

Pursuant to the Purchase Agreement, $ 2.0 million of the Aggregate Consideration was deposited into an escrow account to secure certain potential obligations of the former Kemp equity holders.

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

With this acquisition, we extended our portfolio of 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.

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

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

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

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

Preliminary Purchase Price Allocation Life

Net working capital $ 27,075

Property, plant and equipment 803

Purchased technology 39,400 5 years

Trade name 7,200 5 years

Customer relationships 75,500 5 years

Other assets 170

Other noncurrent liabilities ( 604 )

Deferred taxes ( 23,187 )

Deferred revenue ( 29,997 )

Goodwill 179,521

Net assets acquired $ 275,881

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

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

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

Based on the preliminary valuation, the acquired intangible assets are comprised of customer relationships of approximately $ 75.5 million, existing technology of approximately $ 39.4 million, and trade names of approximately $ 7.2 million.

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

As described in Note 1:

Nature of Business and Summary of Significant Accounting Policies, we adopted ASU 2021-08, which amended ASC 805 to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.

We determined the acquisition date deferred revenue balance based on our assessment of the individual contracts acquired and our application of Topic 606.

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

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

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 179.5 million of goodwill, which is not deductible for tax purposes.

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

During the fiscal year ended November 30, 2021, we incurred approximately $ 1.9 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

The amount of revenue of Kemp included in our consolidated statement of operations during the fiscal year ended November 30, 2021 was approximately $ 5.9 million.

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

Pro Forma Information

The following pro forma financial information presents the combined results of operations of Progress and Kemp as if the acquisition had occurred on December 1, 2019, after giving effect to certain pro forma adjustments.

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

These pro forma adjustments include:

(i) an increase in revenue from Kemp as a result of the application of Topic 606 to recognize and measure contract assets and contract liabilities in the business combination, (ii) a net increase in amortization expense to record amortization expense relating to the $ 122.1 million of acquired identifiable intangible assets, (iii) a decrease in interest expense to remove the interest expense associated with Kemp’s debt obligations, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

(approximately 24.5 %).

The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on December 1, 2019.

These results are prepared in accordance with ASC 606.

(In thousands, except per share data) Pro Forma Fiscal Year Ended November 30, 2021 Pro Forma Fiscal Year Ended November 30, 2020

Revenue $ 590,133 $ 490,229

Net income $ 75,612 $ 65,360

Net income per basic share $ 1.72 $ 1.46

Net income per diluted share $ 1.69 $ 1.44

Chef Acquisition

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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 applications by providing industry-leading compliance and application automation products for multi-cloud and on-prem infrastructure.

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

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

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

Refer to Note 9:

Debt for further information.

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

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

We recorded measurement period adjustments in accordance with FASB’s guidance regarding business combinations in the third and fourth quarters of fiscal year 2021 based on our valuation and purchase price allocation procedures.

The measurement period adjustments, which were completed during the fourth quarter of fiscal year 2021, resulted in a decrease to goodwill of $ 0.3 million, primarily due to a decrease to accrued expenses and deferred taxes.

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

Initial Purchase Price Allocation Life

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

Net working capital $ 52,330 $ 147 $ 52,477

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

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

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

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

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

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

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

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During the fiscal year ended November 30, 2021, we incurred approximately $ 0.7 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

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

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

The operations of Chef are included in our operating results from 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.

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(In thousands, except per share data) Pro Forma

Fiscal Year Ended November 30, 2020 Pro Forma

Fiscal Year Ended November 30, 2020

Revenue $ 497,700

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

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

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

Net income $ 61,952

Net income per basic share $ 1.38

Net income per diluted share $ 1.37

Ipswitch Acquisition

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

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

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

Refer to Note 9:

Debt for further information.

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

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

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

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

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

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

Pro Forma Information

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

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

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

(approximately 24.5 %).

In addition, prior to the acquisition Ipswitch did not pay entity level corporate tax, with the exception of some states, because it was registered as an S-Corporation.

Therefore, we applied the statutory tax rate of the U.S.

(approximately 24.5 %) to the income before tax of Ipswitch as if the acquisition had occurred on December 1, 2017.

These results are prepared in accordance with ASC 606.

(In thousands, except per share data) Pro Forma

Fiscal Year Ended November 30, 2019

Revenue $ 442,286

Net income $ 19,641

Net income per basic share $ 0.44

Net income per diluted share $ 0.43

Term Loan and Line of Credit

We did not incur acquisition-related transaction costs during the fiscal year ended November 30, 2021.

The operations of Ipswitch are included in our operating results during the fiscal year ending November 30, 2021.

We determined that disclosing the amount of Ipswitch related earnings included in the consolidated statements of operations during fiscal year ending November 30, 2021 is impracticable, as certain operations of Ipswitch have been integrated into the operations of the Company.

As of November 30, 2021, future maturities of the Company's long-term debt were as follows:

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

2022 $ — $ 26,338 $ 26,338

2023 — 33,863 33,863

2024 — 206,936 206,936

2026 360,000 — 360,000

Total face value of long-term debt 360,000 267,137 627,137

Unamortized discount and issuance costs ( 65,465 ) ( 1,378 ) ( 66,843 )

Less current portion of long-term debt, net — ( 25,767 ) ( 25,767 )

Long-term debt $ 294,535 $ 239,992 $ 534,527

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 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) November 30, 2021

Principal $ 360,000

Conversion option allocated to equity

Unamortized discount ( 665 )

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

(In thousands) November 30, 2021

Conversion options (1)

Capped call ( 43,056 )

(1) Net of issuance costs

Twelve Months Ended

(In thousands) November 30, 2021 November 30, 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

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.

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

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

During October 2020, we partially funded our acquisition of Chef by drawing down $ 98.5 million under the revolving line of credit, which we repaid in full during fiscal year 2021.

Refer to Note 8:

Business Combinations for further discussion.

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.

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

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

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

As of November 30, 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 consolidated balance sheets as of November 30, 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 of $ 0.6 million for the fiscal year ended November 30, 2020 and $ 0.4 million for the fiscal years ended November 30, 2019 and 2018 is recorded in interest expense on our consolidated statements of operations.

Amortization expense related to the debt issuance costs of $ 0.6 million for the fiscal years ended November 30, 2021 and 2020 and $ 0.4 million for the fiscal year ended November 30, 2019 and is recorded in interest expense on our 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.

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

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

As of November 30, 2021, there were no outstanding amounts under the revolving line of credit and $ 2.3 million of letters of credit.

We are the sole borrower under the credit facility.

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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.

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We are in compliance with these financial covenants as of November 30, 2021.

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

2021 $ 18,812

Total $ 384,450

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

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However, the Company currently has no material finance leases.

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

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

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While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material effect on our financial position, results of operations or cash flows.

Shareholders’ Equity

Stockholders’ Equity

Preferred Stock

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As of November 30, 2021, there was $ 155.0 million remaining under the current authorization.

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

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 to $ 0.14 per share in September 2017.

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

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

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

We 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.

We have declared aggregate per share quarterly cash dividends totaling $ 0.700 , $ 0.670 , and $ 0.630 for the years ended November 30, 2021, November 30, 2020, and November 30, 2019, respectively.

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Awards under the 2008 Plan may include nonqualified stock options, incentive stock options, grants of conditioned or restricted stock, unrestricted grants of stock, grants of stock contingent upon the attainment of performance goals, deferred stock units and stock appreciation rights.

A total of 54,510,000 shares are issuable under these plans, of which 3,043,910 shares were available for grant as of November 30, 2020.

In May 2021, stockholders of the Company approved an amendment to the 2008 Plan to add 4,500,000 shares to the plan.

A total of 6,534,788 shares were available for issuance as of November 30, 2021.

We have adopted two stock plans for which the approval of stockholders was not required:

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Awards under the 2002 Plan may include nonqualified stock options, grants of conditioned or restricted stock, unrestricted grants of stock, grants of stock contingent upon the attainment of performance goals and stock appreciation rights.

A total of 9,750,000 shares are issuable under the 2002 Plan, of which 438,813 shares were available for grant as of November 30, 2020.

A total of 107,329 shares were available for issuance under the 2002 Plan as of November 30, 2021.

Additional shares cannot be added to the 2002 Plan without stockholder approval.

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

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

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

A total of 466,534 shares were available for issuance under the 2004 Plan as of November 30, 2021.

Additional shares cannot be added to the 2002 Plan without stockholder approval.

Under all of our plans, the options granted generally begin to vest within one year of the grant.

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During the first quarter of fiscal years 2019, 2020, and 2021, we granted performance-based restricted stock units that include two performance metrics under a Long-Term Incentive Plan (“LTIP”) where the performance measurement period is three years .

Vesting of these LTIP awards is as follows:

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

Vesting of the LTIP awards for the 2019 and 2020 plans is based on the following:

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

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

(i) 75 % is based on achievement of a three-year cumulative operating income, and (ii) 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.

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

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

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

In order to estimate the fair value of such awards, we used a Monte Carlo Simulation valuation model for the market condition portion of the award and used the closing price of our common stock on the date of grant, less the present value of expected dividends when applicable, for the portion related to the performance condition.

The 1991 Employee Stock Purchase Plan ("ESPP") permits eligible employees to purchase up to an aggregate of 10,250,000 shares of our common stock through accumulated payroll deductions.

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The purchase price of the stock is equal to 85 % of the lesser of the market value of such shares at the beginning of a 27 -month offering period or the end of each three-month segment within such offering period.

If the market price at any of the nine purchase periods is less than the market price on the first date of the 27 -month offering period, subsequent to the purchase, the offering period is canceled and the employee is entered into a new 27 -month offering period with the then current market price as the new base price.

We issued 277,000 shares, 237,000 shares, and 189,000 shares with weighted average purchase prices of $ 28.20 , $ 27.86 , and $ 29.23 per share, respectively, in fiscal years 2021, 2020, and 2019, respectively.

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Income tax benefit included in the provision for income taxes $ 5,281 $ 4,541 $ 4,661

Separation Arrangements

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

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

Retirement Plan

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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:

Fiscal Year Ended

(In thousands) November 30, 2021 November 30, 2020 November 30, 2019

Performance obligations transferred at a point in time:

Software licenses $ 156,590 $ 115,249 $ 122,552

Performance obligations transferred over time:

Maintenance 325,863 288,887 259,006

Services 48,860 38,014 31,740

Total revenue $ 531,313 $ 442,150 $ 413,298

Geographic Revenue

In the following table, revenue attributed to the United States includes sales to customers in the U.S.

and sales to certain multinational organizations.

Revenue from Canada, 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:

Fiscal Year Ended

(In thousands) November 30, 2021 November 30, 2020 November 30, 2019

United States $ 294,947 $ 240,717 $ 213,252

Canada 22,867 20,281 20,659

EMEA 169,335 143,754 137,301

Latin America 17,036 14,574 19,665

Asia Pacific 27,128 22,824 22,421

Total revenue $ 531,313 $ 442,150 $ 413,298

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

has accounted for more than 10% of our consolidated revenue in any year presented.

Contract Balances

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As of November 30, 2021, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

2023 $ 10,279

Total $ 14,590

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

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 $ 5.0 million and $ 11.3 million as of November 30, 2021 and November 30, 2020, respectively.

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

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

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

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

As of November 30, 2021, the changes in deferred revenue were as follows (in thousands):

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Billings and other 560,401

Acquired from business combinations 29,997

Revenue recognized ( 531,313 )

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

Total deferred contract costs were $ 7.9 million, $ 2.5 million, and $ 1.7 million as of November 30, 2021, 2020, and 2019, respectively, and are included in other current assets and other assets on our consolidated balance sheets.

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

Restructuring

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

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

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

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

Balance, December 1, 2018 $ 307 $ 4 $ 311

Costs incurred 740 5,591 6,331

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Cash disbursements ( 1,072 ) ( 4,447 ) ( 5,519 )

Asset impairment ( 20 ) — ( 20 )

Translation adjustments and other 1,616 ( 6 ) 1,610

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2021 Restructurings

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

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

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

During the fourth quarter of fiscal year 2021, we restructured our operations in connection with the acquisition of Kemp.

Refer to Note 8:

Business Combinations for further discussion.

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

For the fiscal year ended November 30, 2021, we incurred expenses of $ 2.0 million related to this restructuring.

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

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

Facilities and

Other Costs Employee Severance and Related Benefits Total

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

Balance, December 1, 2020 $ — $ — $ —

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2020 Restructurings

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

This restructuring resulted in a reduction in positions primarily within the product development function.

In connection with this restructuring action, during the fourth quarter of fiscal year 2019, we evaluated the ongoing value of the intangible assets primarily associated with the technologies and trade names obtained in the acquisitions of DataRPM and Kinvey.

As a result, we wrote down these assets to fair value, which resulted in a $ 22.7 million asset impairment charge (Note 4).

Restructuring expenses are related to employee costs, including severance, health benefits and outplacement services (but excluding stock-based compensation).

For the fiscal year ended November 30, 2020, we incurred expenses of $ 0.1 million relating to this restructuring.

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

Refer to Note 8:

Business Combinations for further discussion.

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

For the fiscal years ended November 30, 2021 and November 30, 2020, we incurred expenses of $ 4.1 million and $ 3.9 million, respectively, related to this restructuring.

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

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

Facilities and

Other Costs Employee Severance and Related Benefits Total

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

Balance, December 1, 2019 $ — $ — $ —

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Cash disbursements ( 455 ) ( 4,350 ) ( 4,805 )

Translation adjustments and other 1,615 8 1,623

Balance, November 30, 2021 $ 4,483 $ 7 $ 4,490

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2027.

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

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

During the second quarter of fiscal year 2019, we restructured our operations in connection with the acquisition of Ipswitch (Note 7).

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

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

Accordingly, the balance of the restructuring reserve of $ 4.5 million is included in other accrued liabilities, and short-term and long-term lease liabilities on the consolidated balance sheet at November 30, 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 2022, but we do not expect these costs to be material.

2019 Restructurings

This restructuring resulted in a reduction in positions primarily within the product development function.

As a result, we wrote down these assets to fair value, which resulted in a $ 22.7 million asset impairment charge.

Restructuring expenses are related to employee costs, including severance, health benefits and outplacement services (but excluding stock-based compensation).

For the fiscal year ended November 30, 2021, we incurred minimal expenses related to this restructuring.

For the fiscal years ended November 30, 2020 and 2019, we incurred expenses of $ 0.1 million and $ 2.5 million, respectively, related to this restructuring.

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

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

Facilities and

Other Costs Employee Severance and Related Benefits Total

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

Balance, December 1, 2018 $ — $ — $ —

2 unchanged sentences

Translation adjustments and other — 1 1

Balance, December 1, 2019 $ — $ 1,460 $ 1,460

Costs incurred — 108 108

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

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

1 unchanged sentence

Cash disbursements — ( 28 ) ( 28 )

Asset impairment ( 20 ) — ( 20 )

Translation adjustments and other 5 — 5

Balance, November 30, 2021 $ — $ — $ —

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

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

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

2017 Restructuring

During the first quarter of fiscal year 2017, we undertook certain operational restructuring initiatives intended to significantly reduce annual costs.

As part of this action, management committed to a new strategic plan highlighted by a new product strategy and a streamlined operating approach.

To execute these operational restructuring initiatives, we reduced our global workforce by over 20 %.

These workforce reductions occurred in substantially all functional units and across all geographies in which we operate.

During the fourth quarter of fiscal year 2017, we incurred additional costs with respect to this restructuring, including reduction in redundant positions primarily within the product development and sales functions.

We also consolidated offices in various locations during fiscal years 2017 and 2018.

We expect to incur additional expenses related to facility closures as part of this restructuring action through fiscal year 2021, but we do not expect these additional costs to be material.

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

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

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

During the second quarter of fiscal year 2019, we restructured our operations in connection with the acquisition of Ipswitch.

Refer to Note 8:

Business Combinations for further discussion.

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

For the fiscal year ended November 30, 2021, we incurred minimal expenses related to this restructuring.

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

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

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

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

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

Balance, December 1, 2018 $ — $ — $ —

Costs incurred 5 3,093 3,098

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Translation adjustments and other $ — $ 58 $ 58

Balance, November 30, 2018 $ 307 $ 4 $ 311

Balance, December 1, 2019 $ 5 $ 547 $ 552

Costs incurred 1,447 39 1,486

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Balance, November 30, 2021 $ — $ — $ —

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

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

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

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

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November 30, 2021 November 30, 2020 November 30, 2019

As Adjusted (1)

$ 80,508 $ 83,279 $ ( 11,778 )

1 unchanged sentence

Total $ 95,534 $ 96,635 $ 28,495

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

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

The provision for income taxes is comprised of the following (in thousands):

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Total current 18,022 19,535 16,964

Deferred, as adjusted (1) :

Federal 366 ( 1,613 ) ( 12,191 )

3 unchanged sentences

Total $ 17,114 $ 16,913 $ 2,095

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

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

A reconciliation of the income taxes incurred at the U.S.

2 unchanged sentences

November 30, 2021 November 30, 2020 November 30, 2019

As Adjusted (1)

Federal statutory rate $ 20,062 $ 20,293 $ 5,984

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Uncertain tax positions and tax settlements 89 245 ( 720 )

Remeasurement of net deferred tax liabilities due to the Act — — ( 1,660 )

Net excess tax benefit or detriment from stock-based compensation plans ( 11 ) 61 ( 103 )

3 unchanged sentences

Total $ 17,114 $ 16,913 $ 2,095

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

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

The effective income tax rate is based on the income for the year, the composition of the income in different countries, changes related to valuation allowances and adjustments, if any, for the potential tax consequences or benefits of audits or other tax contingencies.

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federal corporate tax rate from 35% to 21% effective January 1, 2018, moved to a territorial tax system and eliminated the domestic production activities deduction.

The Act also provided for a one-time deemed repatriation transition tax on the post-1986 undistributed foreign subsidiary earnings and profits through December 31, 2017.

However, the Company concluded that it is not subject to the one-time transition tax due to the Company's foreign subsidiaries being in a net accumulated deficit position.

Other international provisions of the Act became effective in fiscal year 2019 for the Company.

Certain international provisions of the Act became effective in fiscal year 2019 for the Company.

The global intangible low-taxed income ("GILTI") provisions require the Company to include in its U.S.

income tax base foreign subsidiary earnings in excess of an allowable return of the foreign subsidiary's tangible assets.

During fiscal year 2018, the Company recognized a $ 1.7 million income tax benefit due to the re-measurement of its net U.S.

deferred tax liabilities due to the Act.

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

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Stock-based compensation 6,401 4,814

Depreciation and amortization — 15,341

Original issue discount 9,132 —

Tax credit and loss carryforwards 35,376 42,189

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Prepaid expenses ( 1,906 ) ( 334 )

Notes payable ( 13,415 ) —

Total deferred tax liabilities ( 77,128 ) ( 44,746 )

Total $ ( 12,748 ) $ 14,476

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

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

The $ 2.6 million decrease in the valuation allowance during fiscal year 2021 primarily relates to losses in a foreign subsidiary that have expired prior to utilization.

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

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

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

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

In addition, we have state net operating loss carryforwards of $ 26.9 million expiring on various dates through 2028.

At November 30, 2020, we have state tax credit carryforwards of approximately $ 3.6 million expiring on various

dates through 2035 and $ 2.3 million that may be carried forward indefinitely.

At November 30, 2021, we have federal and foreign net operating loss carryforwards of $ 130.1 million expiring on various dates through 2036 and $ 26.6 million that do not expire.

In addition, we have state net operating loss carryforwards of $ 49.7 million expiring on various dates through 2044 and a minimal amount that does not expire.

At November 30, 2021, we have state tax credit carryforwards of approximately $ 3.7 million expiring on various dates through 2036 and $ 2.4 million that may be carried forward indefinitely.

In addition, we have federal tax credit carryforwards of approximately $ 5.9 million expiring on various dates through 2039.

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subsidiaries, which totaled $ 98.4 million as of November 30, 2021, as these earnings have been indefinitely reinvested.

It is not practicable to determine the amount of the unrecognized deferred tax liability if the undistributed earnings were to be repatriated due to the complexity of the income tax laws and regulations and the effects of the Tax Reform Act.

These earnings could be subject to non-U.S.

withholding taxes and other federal, state and/or foreign taxes if they were remitted to the U.S.

As of November 30, 2020, the total amount of unrecognized tax benefits was $ 6.2 million, of which $ 2.6 million was recorded in other noncurrent liabilities on the consolidated balance sheet and $ 3.6 million of deferred tax assets, principally related to U.S and foreign net operating loss carry-forwards and state research and development tax credits, have not been recorded.

As of November 30, 2021, the total amount of unrecognized tax benefits was $ 5.5 million, of which $ 1.5 million was recorded in other noncurrent liabilities on the consolidated balance sheet and $ 4.0 million of deferred tax assets, principally related to U.S net operating loss carry-forwards and federal and state research and development tax credits, have not been recorded.

A reconciliation of the balance of our unrecognized tax benefits is as follows (in thousands):

2 unchanged sentences

Balance, beginning of year $ 6,219 $ 4,993 $ 5,787

Tax positions related to current period 71 — —

Tax positions related to a prior period ( 820 ) 539 110

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

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

In fiscal year 2021 a net expense of $ 0.8 million was recorded to the provision for income taxes related to estimated interest and penalties.

In fiscal years 2020 and 2019 there was a minimal amount of estimated interest and penalties recorded in the provision for income taxes.

We have accrued $ 1.2 million and $ 0.4 million of estimated interest and penalties at November 30, 2021 and 2020, respectively.

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

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Fiscal Year Ended

2020 November 30,

2019 November 30,

As Adjusted (1)

November 30, 2021 November 30, 2020 November 30, 2019

Net income $ 78,420 $ 79,722 $ 26,400

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Diluted earnings per share $ 1.76 $ 1.76 $ 0.58

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

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

We excluded stock awards representing approximately 1,232,000 shares, 1,268,000 shares, and 932,000 shares of common stock from the calculation of diluted earnings per share in the fiscal years ended November 30, 2021, 2020 and 2019, respectively, because 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 the consolidated income from continuing operations before income taxes:

Fiscal Year Ended

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

As Adjusted (1)

Segment revenue:

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

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

Application Development and Deployment 81,519 76,466 78,046

Total revenue 442,150 413,298 378,981

Segment costs of revenue and operating expenses:

OpenEdge 76,352 85,209 67,820

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

Application Development and Deployment 36,749 23,993 27,087

Total costs of revenue and operating expenses 121,498 117,175 102,541

Segment contribution margin:

OpenEdge 250,092 211,720 209,986

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

Application Development and Deployment 44,770 52,473 50,959

Total contribution margin 320,652 296,123 276,440

Other unallocated expenses (2)

212,924 256,039 208,626

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

Other expense, net ( 11,093 ) ( 11,589 ) ( 7,018 )

Income before income taxes $ 96,635 $ 28,495 $ 60,796

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

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

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

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

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

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

Fiscal Year Ended

2020 November 30,

2019 November 30,

As Adjusted (1)

Performance obligations transferred at a point in time:

Software licenses $ 115,249 $ 122,552 $ 99,800

Performance obligations transferred over time:

Maintenance 288,887 259,006 249,171

Services 38,014 31,740 30,010

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

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

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

In the following table, revenue attributed to the United States includes sales to customers in the U.S.

and sales to certain multinational organizations.

Revenue from Canada, 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):

Fiscal Year Ended

2020 November 30,

2019 November 30,

As Adjusted (1)

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

Canada 20,281 20,659 16,630

EMEA 143,754 137,301 135,055

Latin America 14,574 19,665 18,046

Asia Pacific 22,824 22,421 21,623

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

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

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

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

has accounted for more than 10% of our consolidated revenue in any year presented.

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 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.

Long-lived assets totaled $ 22.1 million, $ 22.8 million and $ 25.7 million in the U.S.

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accounted for more than 10% of our consolidated long-lived assets.

Selected Quarterly Financial Data (unaudited)

(in thousands, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Fiscal year 2020:

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

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

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

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

Basic earnings per share 0.47 0.38 0.53 0.39

Diluted earnings per share 0.46 0.37 0.53 0.39

Fiscal year 2019:

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

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

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

Net income (loss) 9,402 8,181 13,557 ( 4,740 )

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

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

Subsequent Events

On January 25, 2022, we entered into an amended credit agreement providing for a $ 275.0 million secured term loan and a $ 300.0 million secured revolving credit facility.

The revolving credit facility may be increased, and new term loan commitments may be entered into, by up to an additional amount up to the sum of (A) the greater of (x) $ 260.0 million and (y) 100 % of our consolidated EBITDA and (B) an unlimited additional amount subject to pro forma compliance with a consolidated senior secured net leverage ratio of no greater than 3.75 to 1.00 if the existing or additional lenders are willing to make such increased commitments.

This new credit facility replaces our existing secured credit facility dated April 30, 2019.

The amount of the term loan outstanding under our existing secured credit facility was incorporated into the amended and restated credit facility.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data