PROGRESS SOFTWARE CORP /MA 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of November 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 27, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion . Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue recognition - Refer to Note 1 to the financial statements Critical Audit Matter Description The Company derives revenue from multiple sources, including software licenses, maintenance and services. Frequently, the customer arrangements provide software licenses combined with maintenance and therefore including multiple performance obligations under ASC 606, Revenue from Contracts with Customer. The identification of performance obligations of the arrangement, particularly for more complex customer arrangements, requires a detailed analysis of the contractual terms and application of more complex accounting guidance. In addition, the allocation of the transaction price to each performance obligations within an arrangement (license, maintenance and services) and the timing of revenue recognition, requires the application of management judgment. Revenue arrangements with higher contract values frequently require more complex management judgments. Given the accounting complexity and the management judgment necessary to 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. 37 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the recognition of revenue from multiple-performance-obligation arrangements included the following, among others: • We tested the effectiveness of controls over revenue recognition, including those over the identification of performance obligations included in the transaction, the allocation of transaction price to these performance obligations, the timing of revenue recognition, • We evaluated the Company’s accounting policies in the context of the applicable accounting standards. • We evaluated the appropriateness and consistency of the methods and assumptions used by management to determine the standalone selling price of delivered and undelivered performance obligations of the arrangement. • We selected a sample of revenue arrangements, including those arrangements that we considered individually significant, and performed the following: – We obtained related contracts and evaluated whether the contracts properly documented the terms of the arrangements in accordance with the Company’s policies. – We tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated. – We evaluated whether the Company appropriately determined all performance obligations in the arrangement and whether the methodology to allocate the transaction price to the individual performance obligation was appropriately applied based on their stand-alone selling prices. – We compared the transaction price to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers. – We tested the allocation of the transaction price to each distinct performance obligation by comparing the relative standalone selling prices to the selling prices of similar goods or services. – We evaluated whether the value allocated to each performance obligation was appropriately recognized in the correct accounting period. We obtained evidence of delivery of the performance obligations of the arrangement to the customer. Convertible senior notes and capped calls - Refer to Note 9 to the financial statements Critical Audit Matter Description 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. 38 How the Critical Audit Matter Was Addressed in 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 Boston, Massachusetts January 27, 2022 We have served as the Company's auditor since 1990. 39 PROGRESS SOFTWARE CORPORATION Consolidated Balance Sheets (In thousands, except share data) November 30, 2021 November 30, 2020 Assets Current assets: Cash and cash equivalents $ 155,406 $ 97,990 Short-term investments 1,967 8,005 Total cash, cash equivalents and short-term investments 157,373 105,995 Accounts receivable (less allowances of $ 634 in 2021 and $ 1,315 in 2020) 99,815 84,040 Unbilled receivables and contract assets 25,816 24,917 Other current assets 39,549 23,983 Assets held for sale 15,255 — Total current assets 337,808 238,935 Long-term unbilled receivables and contract assets 17,464 17,133 Property and equipment, net 14,345 29,817 Intangible assets, net 287,185 212,747 Goodwill 671,152 491,726 Right-of-use lease assets 25,253 30,635 Deferred tax assets 1,415 14,490 Other assets 8,915 6,299 Total assets $ 1,363,537 $ 1,041,782 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt, net $ 25,767 $ 18,242 Accounts payable 9,683 9,978 Accrued compensation and related taxes 47,116 36,816 Dividends payable to stockholders 7,925 7,904 Short-term operating lease liabilities 7,926 7,015 Other accrued liabilities 19,491 16,201 Short-term deferred revenue 205,021 166,387 Total current liabilities 322,929 262,543 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) Stockholders’ equity: Preferred stock, $ 0.01 par value; authorized, 10,000,000 shares; issued, none — — Common stock, $ 0.01 par value, and additional paid-in capital; authorized, 200,000,000 shares; issued and outstanding, 44,146,193 shares in 2021 and 44,240,635 shares in 2020 441 442 Additional paid-in capital 354,235 305,802 Retained earnings 90,256 72,547 Accumulated other comprehensive loss ( 32,443 ) ( 32,778 ) Total stockholders’ equity 412,489 346,013 Total liabilities and stockholders’ equity $ 1,363,537 $ 1,041,782 See notes to consolidated financial statements. 40 PROGRESS SOFTWARE CORPORATION Consolidated Statements of Operations Fiscal Year Ended (In thousands, except per share data) November 30, 2021 November 30, 2020 November 30, 2019 Revenue: Software licenses $ 156,590 $ 115,249 $ 122,552 Maintenance and services 374,723 326,901 290,746 Total revenue 531,313 442,150 413,298 Costs of revenue: Cost of software licenses 5,271 4,473 4,894 Cost of maintenance and services 58,242 49,744 44,463 Amortization of acquired intangibles 14,936 7,897 25,884 Total costs of revenue 78,449 62,114 75,241 Gross profit 452,864 380,036 338,057 Operating expenses: Sales and marketing 125,890 100,113 101,701 Product development 103,338 88,599 88,572 General and administrative 65,128 54,004 53,360 Amortization of acquired intangibles 31,996 20,049 22,255 Impairment of intangible and long-lived assets — — 24,096 Restructuring expenses 6,308 5,906 6,331 Acquisition-related expenses 4,102 3,637 1,658 Total operating expenses 336,762 272,308 297,973 Income from operations 116,102 107,728 40,084 Other (expense) income: Interest expense ( 20,045 ) ( 10,170 ) ( 9,913 ) Interest income and other, net 777 1,495 1,143 Foreign currency loss, net ( 1,300 ) ( 2,418 ) ( 2,819 ) Total other expense, net ( 20,568 ) ( 11,093 ) ( 11,589 ) Income before income taxes 95,534 96,635 28,495 Provision for income taxes 17,114 16,913 2,095 Net income $ 78,420 $ 79,722 $ 26,400 Earnings per share: Basic $ 1.79 $ 1.78 $ 0.59 Diluted $ 1.76 $ 1.76 $ 0.58 Weighted average shares outstanding: Basic 43,916 44,886 44,791 Diluted 44,620 45,321 45,340 Cash dividends declared per common share $ 0.700 $ 0.670 $ 0.630 See notes to consolidated financial statements. 41 PROGRESS SOFTWARE CORPORATION Consolidated Statements of Comprehensive Income Fiscal Year Ended (In thousands) November 30, 2021 November 30, 2020 November 30, 2019 Net income $ 78,420 $ 79,722 $ 26,400 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ( 2,439 ) 777 ( 420 ) 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 (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 See notes to consolidated financial statements. 42 PROGRESS SOFTWARE CORPORATION 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, 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 Exercise of stock options 119 1 3,620 — — 3,621 Vesting of restricted stock units and release of deferred stock units 364 4 ( 1 ) — — 3 Withholding tax payments related to net issuance of restricted stock units ( 106 ) ( 1 ) ( 4,277 ) — — ( 4,278 ) Stock-based compensation — — 23,311 — — 23,311 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 ) Treasury stock repurchases and retirements ( 688 ) ( 7 ) ( 1,257 ) ( 23,736 ) — ( 25,000 ) Net income — — — 26,400 — 26,400 Other comprehensive loss — — — — ( 1,798 ) ( 1,798 ) 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 Exercise of stock options 137 1 4,360 — — 4,361 Vesting of restricted stock units and release of deferred stock units 416 4 ( 4 ) — — — Withholding tax payments related to net issuance of restricted stock units ( 140 ) ( 1 ) ( 5,330 ) — — ( 5,331 ) Stock-based compensation — — 23,482 — — 23,482 Dividends declared — — — ( 30,305 ) — ( 30,305 ) Treasury stock repurchases and retirements ( 1,446 ) ( 14 ) ( 18,813 ) ( 41,173 ) — ( 60,000 ) Net income — — — 79,722 — 79,722 Other comprehensive loss — — — — ( 2,804 ) ( 2,804 ) Balance, November 30, 2020 44,241 $ 442 $ 305,802 $ 72,547 $ ( 32,778 ) $ 346,013 Issuance of stock under employee stock purchase plan 277 3 7,815 — — 7,818 Exercise of stock options 195 2 6,995 — — 6,997 Vesting of restricted stock units and release of deferred stock units 342 3 ( 3 ) — — — Withholding tax payments related to net issuance of restricted stock units ( 112 ) ( 1 ) ( 5,185 ) — — ( 5,186 ) 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 ) Treasury stock repurchases and retirements ( 797 ) ( 8 ) ( 5,862 ) ( 29,130 ) — ( 35,000 ) Net income — — — 78,420 — 78,420 Other comprehensive income — — — — 335 335 Balance, November 30, 2021 44,146 $ 441 $ 354,235 $ 90,256 $ ( 32,443 ) $ 412,489 See notes to consolidated financial statements. 43 PROGRESS SOFTWARE CORPORATION Consolidated Statements of Cash Flows Fiscal Year Ended (In thousands) November 30, 2021 November 30, 2020 November 30, 2019 Cash flows from operating activities: Net income $ 78,420 $ 79,722 $ 26,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 5,477 6,144 7,552 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 Non-cash lease expense 10,946 8,609 — Loss on disposal of property and equipment 7 1,025 376 Impairment of intangible and long-lived assets — — 24,096 Deferred income taxes ( 908 ) ( 2,622 ) ( 14,869 ) Allowances for bad debt and sales credits ( 282 ) 164 546 Gain on sale of intangible assets — ( 889 ) — Changes in operating assets and liabilities: Accounts receivable and unbilled receivables ( 10,998 ) 10,682 ( 24,655 ) Other assets ( 15,105 ) 1,561 ( 1,902 ) Inventories 245 — — Accounts payable and accrued liabilities 5,486 ( 4,974 ) 9,116 Lease liabilities ( 8,406 ) ( 8,101 ) — Income taxes payable ( 2,251 ) 3 ( 454 ) Deferred revenue 30,473 1,420 29,840 Net cash flows from operating activities 178,530 144,847 128,484 Cash flows used in investing activities: Purchases of investments — ( 5,009 ) ( 10,550 ) Sales and maturities of investments 5,950 16,401 25,320 Purchases of property and equipment ( 4,654 ) ( 6,517 ) ( 3,998 ) Payments for acquisitions, net of cash acquired ( 253,961 ) ( 213,057 ) ( 225,298 ) Proceeds from sale of long-lived assets, net — 889 6,146 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 Payments for taxes related to net share settlements of equity awards ( 5,186 ) ( 5,331 ) ( 4,278 ) Repurchases of common stock ( 35,000 ) ( 60,000 ) ( 25,000 ) Proceeds from issuance of senior convertible notes, net of issuance costs of $ 9.9 million 350,100 — — 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 Payment of principal on long-term debt ( 117,313 ) ( 11,288 ) ( 5,309 ) Payment of issuance costs for long-term debt ( 904 ) — ( 1,611 ) 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 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 44 Supplemental disclosure: Cash paid for income taxes, net of refunds of $ 894 in 2021, $ 724 in 2020 and $ 1,385 in 2019 $ 25,915 $ 16,107 $ 16,340 Cash paid for interest $ 8,537 $ 9,175 $ 8,666 Non-cash investing and financing activities: Total fair value of restricted stock awards, restricted stock units and deferred stock units on date vested $ 18,102 $ 17,046 $ 16,573 Dividends declared $ 7,925 $ 7,904 $ 7,498 See notes to consolidated financial statements. 45 PROGRESS SOFTWARE CORPORATION Notes to Consolidated Financial Statements Note 1: Nature of Business and Summary of Significant Accounting Policies The Company 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 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 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. OEMs are companies that embed our products into their own software products or devices. Value-added resellers are companies that add features or services to our product, then resell it as an integrated product or complete "turn-key" solution. We operate in North America and Latin America (the "Americas"); Europe, the Middle East and Africa ("EMEA"); and the Asia Pacific region, through local subsidiaries as well as independent distributors. Accounting Principles We prepare our consolidated financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Basis of Consolidation The consolidated financial statements include our accounts and those of our subsidiaries (all of which are wholly owned). We eliminate all intercompany balances and transactions. Use of Estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an on-going basis, management evaluates its estimates and records changes in estimates in the period in which they become known. These estimates are based on historical data and experience, as well as various other assumptions that management believes to be reasonable under the circumstances. The most significant estimates relate to: the timing and amount of revenue recognition, including the determination of the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and the transaction price allocated to performance obligations; the realization of tax assets and estimates of tax liabilities; fair values of investments in marketable securities; assets held for sale; intangible assets and goodwill valuations; the recognition and disclosure of contingent liabilities; the collectability of accounts receivable; and assumptions used to determine the fair value of stock-based compensation. Actual results could differ from those estimates. Foreign Currency Translation The functional currency of most of our foreign subsidiaries is the local currency in which the subsidiary operates. For foreign operations where the local currency is considered to be the functional currency, we translate assets and liabilities into U.S. dollars at the exchange rate on the balance sheet date. 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 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 into U.S. dollars at historical exchange rates. We translate income and expense items at average rates of exchange prevailing during each period. We recognize remeasurement adjustments currently as a component of foreign currency loss, net in the statements of operations. 46 Transaction gains or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in foreign currency loss, net in the statements of operations as incurred. Cash Equivalents and Investments Cash equivalents include short-term, highly liquid investments purchased with remaining maturities of three months or less. As of November 30, 2021, all of our cash equivalents were invested in money market funds. We classify investments, state and municipal bond obligations, U.S. 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 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. 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 We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. We establish this allowance using estimates that we make based on factors such as the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, changes to customer creditworthiness and current economic trends. We also record an allowance for estimates of potential sales credit memos. This allowance is determined based on an analysis of historical credit memos issued and current economic trends, and is recorded as a reduction of revenue. A summary of activity in the allowance for doubtful accounts is as follows (in thousands): November 30, 2021 November 30, 2020 November 30, 2019 Beginning balance $ 886 $ 667 $ 574 Charge to costs and expenses 58 429 606 Write-offs and other ( 408 ) ( 169 ) ( 457 ) Translation adjustments 16 ( 41 ) ( 56 ) Ending balance $ 552 $ 886 $ 667 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 Beginning balance $ 429 $ 158 $ 266 (Credit) charge to revenue ( 340 ) 265 ( 60 ) Write-offs and other — — ( 46 ) Translation adjustments ( 7 ) 6 ( 2 ) Ending balance $ 82 $ 429 $ 158 47 Concentrations of Credit Risk Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivative instruments and trade receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We hold our cash and cash equivalents, investments and derivative instrument contracts with high quality financial institutions and we monitor the credit ratings of those institutions. We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the diversity, both by geography and by industry, of the customer base. No single customer represented more than 10% of consolidated accounts receivable or revenue in fiscal years 2021, 2020 or 2019. Fair Value of Financial Instruments The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates fair value due to the short-term nature or market interest rates of these items. We base the fair value of short-term investments on quoted market prices or other relevant information generated by market transactions involving identical or comparable assets. We measure and record derivative financial instruments at fair value. See Note 4: Fair Value Measurements for further discussion of financial instruments that are carried at fair value on a recurring and nonrecurring basis. Derivative Instruments We record all derivatives on the consolidated balance sheets at fair value. We use derivative instruments to manage exposures to fluctuations in the value of foreign currencies, which exist as part of our ongoing business operations. Cash Flow Hedge We entered into an interest rate swap contract in July 2019 to manage the variability of cash flows associated with approximately one-half of our variable rate debt. We have designated the interes t rate swap as a cash flow hedge and we assessed the hedge's effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. To the extent that the interest rate swap is highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative are included as a component of other comprehensive loss on our consolidated balance sheets. Although we determined at the onset of the hedge that the interest rate swap will be a highly effective hedge throughout the term of the contract, any portion of the fair value swap subsequently determined to be ineffective will be recognized in earnings. Forward Contracts Certain assets and forecasted transactions are exposed to foreign currency risk. Our objective for holding derivatives is to eliminate or reduce the impact of these exposures. We periodically monitor our foreign currency exposures to enhance the overall economic effectiveness of our foreign currency hedge positions. Principal currencies hedged include the euro, British pound, Brazilian real, Indian rupee, and Australian dollar. We do not enter into derivative instruments for speculative purposes, nor do we hold or issue any derivative instruments for trading purposes. 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. 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. 48 Inventories 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 We record property and equipment at cost. We record property and equipment purchased in business combinations at fair value, which is then treated as the cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the useful lives of the assets. Useful lives by major asset class are as follows: computer equipment and software, 3 to 7 years; buildings and improvements, 5 to 39 years; and furniture and fixtures, 5 to 7 years. 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 Expenditures for product development, other than internal use software costs, are expensed as incurred. Product development expenses primarily consist of personnel and related expenses for our product development staff, the cost of various third-party contractor fees, and allocated overhead expenses. Software development costs associated with internal use software are incurred in three stages of development: the preliminary project stage, the application development stage, and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Certain internal and external qualifying costs incurred during the application development stage are capitalized as property and equipment. Internal use software is amortized on a straight-line basis over its estimated useful life of three years , beginning when the software is ready for its intended use. During the fiscal years ended November 30, 2021, 2020, and 2019, there were no internal use software development costs capitalized. We did no t incur any amortization expense related to internal use software development costs during the fiscal years ended November 30, 2021 and 2020 as these costs were fully amortized as of November 30, 2019. Goodwill, Intangible Assets, and Long-Lived Assets Goodwill 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. 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. 49 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. We base each impairment test on a comparison of the undiscounted cash flows to the carrying value of the asset or asset group. If impairment is indicated, we write down the asset to its estimated fair value based on 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 The components of comprehensive loss include, in addition to net income, foreign currency translation adjustments and unrealized gains and losses on investments and hedging activity. Accumulated other comprehensive loss by components, net of tax (in thousands): Foreign Currency Translation Adjustment Unrealized (Losses) Gains on Investments Unrealized Losses on Hedging Activity Total Balance, December 1, 2019 $ ( 28,393 ) $ ( 30 ) $ ( 1,551 ) $ ( 29,974 ) Other comprehensive income (loss) 777 44 ( 3,625 ) ( 2,804 ) Balance, December 1, 2020 $ ( 27,616 ) $ 14 $ ( 5,176 ) $ ( 32,778 ) Other comprehensive (loss) income ( 2,439 ) ( 63 ) 2,837 335 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 $ 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 Revenue Policy We derive our revenue primarily from software licenses and maintenance and services. Our license arrangements generally contain multiple performance obligations, including software maintenance services. Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. When an arrangement contains multiple performance obligations, we account for individual performance obligations separately if they are distinct. We recognize revenue through the application of the following steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to performance obligations in the contract; and (v) recognition of revenue when or as we satisfy the performance obligations. Sales taxes collected from customers and remitted to government authorities are excluded from revenue and we do not license our software with a right of return. Software Licenses Software licenses are on-premise and fully functional when made available to the customer. As the customer can use and benefit from the license on its own, on-premise software licenses represent distinct performance obligations. Revenue is recognized upfront at the point in time when control is transferred, which is defined as the point in time when the client can use and benefit from the license. Our licenses are sold as perpetual or term licenses, and the arrangements typically contain various combinations of maintenance and services, which are generally accounted for as separate performance obligations. We use the residual approach to allocate the transaction price to our software license performance obligations because, due to the pricing of our licenses being highly variable, they do not have an observable stand-alone selling price ("SSP"). As required, we evaluate the residual approach estimate compared to all available observable data in order to conclude the estimate is representative of its SSP. 50 Perpetual licenses are generally invoiced upon execution of the contract and payable within 30 days. Term licenses are generally invoiced in advance on an annual basis over the term of the arrangement, which is typically one to three years . Any difference between the revenue recognized and the amount invoiced to the customer is recognized on our consolidated balance sheets as unbilled receivables until the customer is invoiced, at which point the amount is reclassified to accounts receivable. Maintenance Maintenance revenue is made up of technical support, bug fixes, and when-and-if available unspecified software upgrades. As these maintenance services are considered to be a series of distinct services that are substantially the same and have the same duration and measure of progress, we have concluded that they represent one combined performance obligation. Revenue is recognized ratably over the contract period. The SSP of maintenance services is a percentage of the net selling price of the related software license, which has remained within a tight range and is consistent with the stand-alone pricing of subsequent maintenance renewals. Maintenance services are generally invoiced in advance on an annual basis over the term of the arrangement, which is typically one to three years . Services Services revenue primarily includes consulting and customer education services. In general, services are distinct performance obligations. Services revenue is generally recognized as the services are delivered to the customer. We apply the practical expedient of recognizing revenue upon invoicing for time and materials-based arrangements as the invoiced amount corresponds to the value of the services provided. The SSP of services is based upon observable prices in similar transactions using the hourly rates sold in stand-alone services transactions. Services are either sold on a time and materials basis or prepaid upfront. We also offer products via a software-as-a-service ("SaaS") model, which is a subscription-based model. Our customers can use hosted software over the contract period without taking possession of it and the cloud services are available to them throughout the entire term, even if they do not use the service. Revenue related to SaaS offerings is recognized ratably over the contract period. The SSP of SaaS performance obligations is determined based upon observable prices in stand-alone SaaS transactions. SaaS arrangements are generally invoiced in advance on a monthly, quarterly, or annual basis over the term of the arrangement, which is typically one to three years . Arrangements with Multiple Performance Obligations When an arrangement contains multiple performance obligations, we account for individual performance obligations separately if they are distinct. We allocate the transaction price to each performance obligation in a contract based on its relative SSP. Although we do not have a history of offering these elements, prior to allocating the transaction price to each performance obligation, we consider whether the arrangement has any discounts, material rights, or specified future upgrades that may represent additional performance obligations. Determining whether products and services are distinct performance obligations and the determination of the SSP may require significant judgment. Advertising Costs Advertising costs are expensed as incurred and were $ 0.9 million, $ 0.5 million, and $ 0.8 million in fiscal years 2021, 2020, and 2019, respectively. Warranty Costs We make periodic provisions for expected warranty costs. Historically, warranty costs have been insignificant. 51 Stock-Based Compensation Stock-based compensation expense reflects the fair value of stock-based awards, less the present value of expected dividends when applicable, measured at the grant date and recognized over the relevant service period. We estimate the fair value of each stock-based award on the measurement date using either the current market price of the stock, the Black-Scholes option valuation model, or the Monte Carlo Simulation valuation model. 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 or 4 years for restricted stock units, and adjust the expense each period for actual forfeitures. We recognize stock-based compensation expense related to performance stock units and our employee stock purchase plan using an accelerated attribution method. Acquisition-Related Costs Acquisition-related costs are expensed as incurred and include those costs incurred as a result of a business combination. 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. Restructuring Charges Our restructuring charges are comprised primarily of costs related to property abandonment, including future lease commitments, net of any sublease income, and associated leasehold improvements; and employee termination costs related to headcount reductions. We recognize and measure restructuring liabilities initially at fair value when the liability is incurred. We incurred $ 6.3 million, $ 5.9 million, and $ 6.3 million of restructuring related costs, which are included in restructuring expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2021, November 30, 2020, and November 30, 2019, respectively. Income Taxes We provide for deferred income taxes resulting from temporary differences between financial and taxable income. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. We recognize and measure uncertain tax positions taken or expected to be taken in a tax return utilizing a two-step approach. We first determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is that we measure the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes on our consolidated statements of operations. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements 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. 52 Financial Instruments - Credit Losses In June 2016, the FASB issued Accounting Standards Update No. 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. Income Taxes 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. Note 2: Cash, Cash Equivalents and Investments A summary of our cash, cash equivalents and available-for-sale investments at November 30, 2021 is as follows (in thousands): Amortized Cost Basis Unrealized Gains Unrealized Losses Fair Value Cash $ 130,371 $ — $ — $ 130,371 Money market funds 25,035 — — 25,035 U.S. treasury bonds 748 9 — 757 Corporate bonds 1,203 7 — 1,210 Total $ 157,357 $ 16 $ — $ 157,373 53 A summary of our cash, cash equivalents and available-for-sale investments at November 30, 2020 is as follows (in thousands): Amortized Cost Basis Unrealized Gains Unrealized Losses Fair Value Cash $ 79,026 $ — $ — $ 79,026 Money market funds 18,964 — — 18,964 U.S. treasury bonds 4,993 58 — 5,051 Corporate bonds 2,913 41 — 2,954 Total $ 105,896 $ 99 $ — $ 105,995 Such amounts are classified on our consolidated balance sheets as follows (in thousands): November 30, 2021 November 30, 2020 Cash and Equivalents Short-Term Investments Cash and Equivalents Short-Term Investments Cash $ 130,371 $ — $ 79,026 $ — Money market funds 25,035 — 18,964 — U.S. treasury bonds — 757 — 5,051 Corporate bonds — 1,210 — 2,954 Total $ 155,406 $ 1,967 $ 97,990 $ 8,005 The fair value of debt securities by contractual maturity is as follows (in thousands): November 30, 2021 November 30, 2020 Due in one year or less $ 1,967 $ 5,998 Due after one year (1) — 2,007 Total $ 1,967 $ 8,005 (1) Includes U.S. treasury bonds and corporate bonds, which are securities representing investments available for current operations and are classified as current on the consolidated balance sheets. We did not hold any investments with continuous unrealized losses as of November 30, 2021 or November 30, 2020. 54 Note 3: Derivative Instruments Cash Flow Hedge On July 9, 2019, we entered into an interest rate swap contract with an initial notional amount of $ 150.0 million to manage the variability of cash flows associated with approximately one-half of our variable rate debt. The contract matures on April 30, 2024 and requires periodic interest rate settlements. Under this interest rate swap contract, we receive a floating rate based on the greater of 1-month LIBOR or 0.00 % and pay a fixed rate of 1.855 % on the outstanding notional amount. We have designated the interes t rate swap as a cash flow hedge and assessed the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. To the extent that the interest rate swap is highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative are included as a component of other comprehensive loss on our consolidated balance sheets. Although we determined at the onset of the hedge that the interest rate swap will be a highly effective hedge throughout the term of the contract, any portion of the fair value swap subsequently determined to be ineffective will be recognized in earnings. As of November 30, 2021 and November 30, 2020 , the fair value of the hedge was a loss of $ 3.1 million and $ 6.9 million, respectively, and was included in other noncurrent liabilities on our consolidated balance sheets. The following table presents our interest rate swap contract where the notional amount reflects the quarterly amortization of the interest rate swap, which is equal to approximately one-half of the corresponding reduction in the balance of our term loan as we make our scheduled principal payments. The fair value of the derivative represents the discounted value of the expected future discounted cash flows for the interest rate swap, based on the amortization schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in thousands): November 30, 2021 November 30, 2020 Notional Value Fair Value Notional Value Fair Value Interest rate swap contracts designated as cash flow hedges $ 133,125 $ ( 3,078 ) $ 142,500 $ ( 6,855 ) Forward Contracts We generally use forward contracts that are not designated as hedging instruments to hedge economically the impact of the variability in exchange rates on intercompany accounts receivable and loans receivable denominated in certain foreign currencies. 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 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. 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. The table below details outstanding foreign currency forward contracts where the notional amount is determined using contract exchange rates (in thousands): November 30, 2021 November 30, 2020 Notional Value Fair Value Notional Value Fair Value Forward contracts to sell U.S. dollars $ 79,777 $ ( 371 ) $ 69,031 $ 1,445 Forward contracts to purchase U.S. dollars 119 ( 1 ) 440 ( 3 ) Total $ 79,896 $ ( 372 ) $ 69,471 $ 1,442 55 Note 4: Fair Value Measurements Recurring Fair Value Measurements The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at November 30, 2021 (in thousands): Fair Value Measurements Using Total Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 25,035 $ 25,035 $ — $ — U.S. treasury bonds 757 — 757 — Corporate bonds 1,210 — 1,210 — Liabilities Foreign exchange derivatives ( 372 ) — ( 372 ) $ — Interest rate swap $ ( 3,078 ) $ — $ ( 3,078 ) $ — The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at November 30, 2020 (in thousands): Fair Value Measurements Using Total Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 18,964 $ 18,964 $ — $ — U.S. treasury bonds 5,051 — 5,051 — Corporate bonds 2,954 — 2,954 — Foreign exchange derivatives 1,442 — 1,442 — Liabilities Interest rate swap $ ( 6,855 ) $ — $ ( 6,855 ) $ — When developing fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices to measure fair value. The valuation technique used to measure fair value for our Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. 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. 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. See Note 9: Debt for additional information. 56 Note 5: Inventories 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. Note 6: Property and Equipment Property and equipment consists of the following (in thousands): November 30, 2021 November 30, 2020 Computer equipment and software $ 45,774 $ 50,103 Land, buildings and leasehold improvements 8,023 31,610 Furniture and fixtures 3,539 5,107 Capitalized software development costs 276 276 Property and equipment, gross 57,612 87,096 Less accumulated depreciation and amortization ( 43,267 ) ( 57,279 ) Property and equipment, net $ 14,345 $ 29,817 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. 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 expect to sell them within one year. Refer to Note 1: Nature of Business and Summary of Significant Accounting Policies for further discussion. 57 Note 7: Intangible Assets and Goodwill Intangible Assets Intangible assets are comprised of the following significant classes (in thousands): November 30, 2021 November 30, 2020 Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Purchased technology $ 212,700 $ ( 128,797 ) $ 83,903 $ 173,486 $ ( 113,863 ) $ 59,623 Customer-related 306,308 ( 119,357 ) 186,951 231,342 ( 91,326 ) 140,016 Trademarks and trade names 37,611 ( 21,556 ) 16,055 30,440 ( 18,275 ) 12,165 Non-compete agreement 2,000 ( 1,724 ) 276 2,000 ( 1,057 ) 943 Total $ 558,619 $ ( 271,434 ) $ 287,185 $ 437,268 $ ( 224,521 ) $ 212,747 We amortize intangible assets assuming no expected residual value. 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 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): 2022 $ 69,106 2023 68,830 2024 56,014 2025 45,504 2026 36,148 Thereafter 11,583 Total $ 287,185 Goodwill Changes in the carrying amount of goodwill for fiscal years 2021 and 2020 are as follows (in thousands): November 30, 2021 November 30, 2020 Balance, beginning of year $ 491,726 $ 432,824 Measurement Period Adjustments (1) ( 77 ) ( 838 ) Additions (2) 179,521 59,858 Translation Adjustments ( 18 ) ( 118 ) Balance, end of year $ 671,152 $ 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 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. 58 Note 8: 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. 59 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 On October 5, 2020, we completed the acquisition of Chef Software Inc. (“Chef”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 4, 2020. The acquisition was completed for a base purchase price of $ 220.0 million, subject to certain customary adjustments as further described in the Merger Agreement (the “Aggregate Consideration”), which was paid in cash. Pursuant to the Merger Agreement, $ 12.0 million of the Aggregate Consideration was deposited into an escrow account to secure certain indemnification and other potential obligations of the former Chef equity holders. Chef is a global leader in DevOps and DevSecOps, providing complete infrastructure automation to build, deploy, manage and secure applications in modern multi-cloud and hybrid environments, as well as on-premises. Chef has enhanced our position as a trusted provider of the best products to develop, deploy and manage high-impact 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. 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. 60 The allocation of the purchase price is as follows (in thousands): Initial Purchase Price Allocation Measurement Period Adjustments Final Purchase Price Allocation Life Net working capital $ 52,330 $ 147 $ 52,477 Property, plant and equipment 498 — 498 Purchased technology 38,300 — 38,300 5 years Trade name 5,700 — 5,700 5 years Customer relationships 97,300 — 97,300 7 years Other assets 122 — 122 Other noncurrent liabilities ( 841 ) — ( 841 ) Lease liabilities, net ( 1,810 ) — ( 1,810 ) Deferred taxes ( 7,817 ) 126 ( 7,691 ) Deferred revenue ( 12,525 ) — ( 12,525 ) Goodwill 59,858 ( 273 ) 59,585 Net assets acquired $ 231,115 $ — $ 231,115 The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. The valuation assumptions take into consideration our estimates of customer attrition, technology obsolescence, and revenue growth projections. Tangible assets acquired and assumed liabilities were recorded at fair value. The valuation of the assumed deferred revenue was based on our contractual commitment to provide post-contract customer support to Chef customers and future contractual performance obligations under existing hosting arrangements. The fair value of this assumed liability was based on the estimated cost plus a reasonable margin to fulfill these service obligations. A significant portion of the deferred revenue was recognized in the 12 months following the acquisition. We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 59.6 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 $ 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 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. Pro Forma Information The following pro forma financial information presents the combined results of operations of Progress and Chef as if the acquisition had occurred on December 1, 2018, after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Chef acquisition and factually supportable. These pro forma adjustments include (i) a decrease in revenue from Chef due to the beginning balance of deferred revenue being adjusted to reflect the fair value of the acquired balance, (ii) a net increase in amortization expense to record amortization expense for the $ 141.3 million of acquired identifiable intangible assets, (iii) an increase in interest expense to record interest for the period presented as a result of drawing down our revolving credit facility in connection with the acquisition, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S. (approximately 24.5 %). The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on December 1, 2018. These results are prepared in accordance with ASC 606. 61 (In thousands, except per share data) Pro Forma Fiscal Year Ended November 30, 2020 Revenue $ 497,700 Net income $ 61,952 Net income per basic share $ 1.38 Net income per diluted share $ 1.37 Ipswitch Acquisition On April 30, 2019, we completed the acquisition of all of the outstanding equity interests of Ipswitch, Inc. (“Ipswitch”) from Roger Greene (the “Seller”) pursuant to the Stock Purchase Agreement, dated as of March 28, 2019, by and among Progress, Ipswitch and the Seller. The acquisition was completed for an aggregate purchase price of $ 225.0 million, subject to certain customary adjustments as further described in the Stock Purchase Agreement, which was paid in cash. Pursuant to the Stock Purchase Agreement, $ 22.5 million of the purchase price was deposited into an escrow account to secure certain indemnification and other potential obligations of the Seller to Progress. This escrow was released in full in May 2020 upon expiration of the twelve-month escrow period. The Seller also received an award of approximately $ 2.0 million in Progress restricted stock as consideration for the Seller entering into a non-competition agreement for three years as set forth in the Stock Purchase Agreement. Ipswitch enables approximately 24,000 small and medium-sized businesses and enterprises to provide secure data sharing and ensure high-performance infrastructure availability. 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. 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. 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 fourth quarter of fiscal year 2019 and the second quarter of fiscal year 2020 based on our valuation and purchase price allocation procedures. The measurement period adjustments, which were completed during the second quarter of fiscal year 2020, resulted in a decrease to goodwill of $ 0.6 million, primarily due to a decrease to the sales tax reserve, partially offset by increased accrued expenses. The following table discloses the net assets acquired in the business combination (in thousands) : Initial Purchase Price Allocation Measurement Period Adjustments Final Purchase Price Allocation Life Net working capital $ 6,068 $ 651 $ 6,719 Property, plant and equipment 4,661 — 4,661 Purchased technology 33,100 — 33,100 5 years Trade name 9,600 — 9,600 5 years Customer relationships 66,600 — 66,600 5 years Other assets 314 ( 4 ) 310 Deferred revenue ( 12,696 ) ( 29 ) ( 12,725 ) Goodwill 117,651 ( 618 ) 117,033 Net assets acquired $ 225,298 $ — $ 225,298 The fair value of the intangible assets has been 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 the Company's estimates of customer attrition, technology obsolescence, and revenue growth projections. Based on the valuation, the acquired intangible assets are comprised of customer relationships of approximately $ 66.6 million, existing technology of approximately $ 33.1 million, and trade names of approximately $ 9.6 million. 62 Tangible assets acquired and assumed liabilities were recorded at fair value. The valuation of the assumed deferred revenue was based on our contractual commitment to provide post-contract customer support to Ipswitch customers and future contractual performance obligations under existing hosting arrangements. The fair value of this assumed liability was based on the estimated cost plus a reasonable margin to fulfill these service obligations. A significant portion of the deferred revenue was recognized in the 12 months following the acquisition. We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. We believe that the investment value of the future enhancement of our product offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 117.0 million of goodwill, which is deductible for tax purposes. An election was made under Section 338(h)(10) of the Internal Revenue Code for Ipswitch to treat the transaction as a sale of all its assets on the acquisition date and subsequent liquidation. As a result, the identifiable intangible assets and goodwill are deductible for tax purposes. As previously noted, the Seller received a restricted stock award of approximately $ 2.0 million, subject to continued compliance with the three-year non-compete agreement. We concluded that the restricted stock award is not a compensation arrangement and we recorded the fair value of the award as an intangible asset separate from goodwill. We will recognize intangible asset amortization expense over the term of the agreement, which is 3 years. We recorded $ 0.7 million of amortization expense related to this restricted stock award for the fiscal year ended November 30, 2021 in operating expenses on our condensed consolidated statement of operations. 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. 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. 63 Note 9: Debt 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 2025 — — — 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 Less: issuance costs ( 10,804 ) $ 349,196 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; or • 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 64 cash up to the aggregate principal amount of Notes to be converted, by issuing shares of its common stock or a combination of cash and shares of its common stock, at its election. The initial conversion rate is 17.4525 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of approximately $ 57.30 per share of common stock. The conversion rate will be adjusted upon the occurrence of certain events, including spin-offs, tender offers, exchange offers, make-whole fundamental change and certain stockholder distributions. Repurchase Rights On or after April 20, 2024, and on or before the 50th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the Notes, subject to the partial redemption limitation, at a repurchase price equal to 100 % of the principal amount, plus accrued and unpaid interest, if the last reported sale price per share of the Company’s common stock exceeded 130 % of the conversion price on (1) each of at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice and (2) the trading day immediately before the date the Company sends such notice. Pursuant to the partial redemption limitation, the Company may not elect to redeem less than all of the outstanding Notes unless at least $ 100.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time it sends the related redemption notice. If certain corporate events that constitute a “fundamental change” (as described below) occur at any time, holders may, subject to certain exceptions, require the Company to purchase their Notes in whole or in part for cash at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. A fundamental change relates to events such as business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock. Capped Call Transactions On April 8, 2021, in connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (“Capped Call Transactions”) with one or more of the initial purchasers and/or their respective affiliates and/or other financial institutions. The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, approximately 6.3 million shares (representing the number of shares of common stock initially underlying the Notes) of the Company’s common stock. The Capped Call Transactions are generally expected to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the Capped Call Transactions will initially be $ 89.88 per share of common stock, which represents a premium of 100 % over the last reported sale price of the common stock of $ 44.94 per share on April 8, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions. The cost of the purchased capped calls of $ 43.1 million was recorded as a reduction to additional paid-in-capital. We elected to integrate the capped call options with the applicable Notes for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $ 43.1 million gross cost of the purchased capped calls will be deductible for income tax purposes as original discount interest over the term of the Notes. We recorded deferred tax assets of $ 10.6 million with respect to the capped calls which represents the tax benefit of these deductions with an offsetting entry to additional paid-in capital. Accounting for the Notes In accounting for the transaction, the Notes have been separated into liability and equity components. • The conversion option of the Notes does not require bifurcation as an embedded derivative. • The initial carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The excess of the Notes’ principal amount over the initial carrying amount of the liability component, referred to as the debt discount, is amortized as interest expense over the Notes’ contractual term. • The equity component, which represents the difference between the gross proceeds and the initial liability component, was recorded as an increase to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The Company incurred issuance costs of $ 10.8 million related to the Notes, allocated between the Notes’ liability and equity components proportionate to the initial carrying amount of the liability and equity components. • Issuance costs attributable to the liability component of $ 8.9 million are recorded as an offset to the Notes’ principal balance. They are amortized as interest expense using the effective interest method over the contractual term of the Notes. 65 • 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 ( 64,800 ) Unamortized discount ( 665 ) $ 294,535 Net carrying amount of the equity component, included in additional paid-in capital: (In thousands) November 30, 2021 Conversion options (1) $ 62,855 Capped call ( 43,056 ) $ 19,799 (1) Net of issuance costs Twelve Months Ended (In thousands) November 30, 2021 November 30, 2020 Contractual interest expense ( 1 % coupon) $ 2,280 $ — Amortization of debt discount (1) 7,209 — Amortization of issuance costs (1) 986 — $ 10,475 $ — (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. The revolving line of credit may be made available in U.S. Dollars and certain other currencies and may be increased by up to an additional $ 125.0 million if the existing or additional lenders are willing to make such increased commitments. The revolving line of credit has sublimits for swing line loans up to $ 25.0 million and for the issuance of standby letters of credit in a face amount up to $ 25.0 million. The Credit Agreement modified our prior credit facility by extending the maturity date to April 30, 2024 and extending the principal repayments of the term loan. We borrowed an additional $ 185.0 million under the term loan as part of this modified credit facility. The new term loan was used to partially fund our acquisition of Ipswitch in April 2019. During October 2020, we partially funded our acquisition of Chef by drawing down $ 98.5 million under the revolving line of credit, 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. The rates range from 1.50 % to 2.00 % above the Eurocurrency rate for Eurocurrency-based borrowings or from 0.50 % to 1.00 % above the defined base rate for base rate borrowings. Additionally, we may borrow certain foreign currencies at rates set in the same respective range above the London interbank offered interest rates for those currencies. A quarterly commitment fee on the undrawn portion of the revolving credit facility is required and ranges from 0.25 % to 0.35 % per annum based on our leverage ratio. The average interest rate of the credit facility during the fiscal year ended November 30, 2021 was 1.90 % and the interest rate as of November 30, 2021 was 1.88 %. The credit facility matures on April 30, 2024, when all amounts outstanding will be due and payable in full. The revolving line of credit does not require amortization of principal. The outstanding balance of the term loan as of November 30, 2021 was $ 267.1 million, with $ 26.3 million due in the next 12 months. The term loan requires repayment of principal at the end of each fiscal quarter, beginning with the fiscal quarter ended August 31, 2019. The principal repayment amounts are in accordance with the following schedule: (i) four payments of $ 1.9 million each, (ii) four payments of $ 3.8 million each, (iii) four payments of $ 5.6 million each, (iv) four payments of $ 7.5 million each, (v) three payments of $ 9.4 million each, and (vi) the last payment is of the remaining principal amount. Any amounts outstanding under the term loan thereafter would be due on the maturity date. The term loan may be prepaid before maturity in whole or in part at our option without penalty or premium. As of November 30, 2021, the carrying value of the term 66 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 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. Accrued interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of each interest rate period (or at each three-month interval in the case of loans with interest periods greater than three months) with respect to Eurocurrency rate loans. We may prepay the loans or terminate or reduce the commitments in whole or in part at any time, without premium or penalty, subject to certain conditions and reimbursement of certain costs in the case of Eurocurrency rate loans. 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. Our obligations under the Credit Agreement are secured by substantially all of our assets and each of our material domestic subsidiaries, as well as 100 % of the capital stock of our domestic subsidiaries and 65 % of the capital stock of our first-tier foreign subsidiaries, in each case, subject to certain exceptions as described in the Credit Agreement. Future material domestic subsidiaries will be required to guaranty our obligations under the Credit Agreement, and to grant security interests in substantially all of their assets to secure such obligations. The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, grant liens, make investments, make acquisitions, incur indebtedness, merge or consolidate, dispose of assets, pay dividends or make distributions, repurchase stock, change the nature of the business, enter into certain transactions with affiliates and enter into burdensome agreements, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain compliance with a consolidated fixed charge coverage ratio, a consolidated total leverage ratio and a consolidated senior secured leverage ratio. We are in compliance with these financial covenants as of November 30, 2021. Note 10: Leases In February 2016, the FASB issued ASC 842 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted ASC 842 on December 1, 2019 using the modified retrospective method and as a result did not adjust comparative periods or modify disclosures in those comparative periods. The new guidance provides a number of optional practical expedients in transition. The Company elected the package of practical expedients, which does not require the reassessment of prior conclusions about lease identification, lease classification and initial direct costs. Further, the Company elected the practical expedients to combine lease and non-lease components. Contracts may be comprised of lease components, non-lease components, and elements that are not components. Each lease component represents a lessee’s right to use an underlying asset in the contract if the lessee can benefit from the right-of-use of the asset either on its own or together with other readily available resources and if the right-of-use is neither highly dependent or highly interrelated with other rights-of-use. Non-lease components include items such as common area maintenance and utilities provided by the lessor. We also elected the practical expedient to not recognize right-of-use assets and lease liabilities for short-term leases. Leases with an initial term of 12 months or less are classified as short-term leases. Consideration in the contract is comprised of any fixed payments and variable payments that depend on an index or rate. Payments in the Company's operating lease arrangements primarily consist of base office rent. In accordance with ASC 842, variable payments in an agreement that are not dependent on an index or rate are excluded from the calculation of ROU assets and lease liabilities. The Company makes variable payments on certain of its leases related to taxes, insurance, common area maintenance, and utilities, among other things. The adoption of ASC 842 on December 1, 2019 resulted in the recognition of operating lease ROU assets of approximately $ 28.9 million and operating lease liabilities of approximately $ 29.9 million. The difference between the value of the ROU assets and lease liabilities is due to the reclassification of existing deferred rent, prepaid rent, and unamortized lease incentives as of December 1, 2019. Operating leases are included in ROU assets and lease liabilities on the Company’s balance sheets. ROU assets and lease liabilities are to be presented separately for operating and finance leases. However, the Company currently has no material finance leases. The adoption of ASC 842 did not have a material impact on the Company’s condensed consolidated statement of operations, consolidated statement of stockholders' equity, consolidated statement of comprehensive income (loss) or consolidated statement of 67 cash flows. The adoption of ASC 842 had no impact on liquidity or the Company’s debt-covenant compliance under its current debt agreements. The Company determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. Operating leases liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in the lease contracts is not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term. The Company has operating leases for administrative, product development, and sales and marketing facilities, vehicles, and equipment under various non-cancelable lease agreements. The Company’s leases have remaining lease terms ranging from 1 year to 8 years. The Company’s lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options. The Company considers several economic factors when making the determination as to whether the Company will exercise options to extend or terminate the lease, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of operating lease cost for the year ended November 30, 2021 was as follows (in thousands): Fiscal Year Ended November 30, 2021 Lease costs under long-term operating leases $ 7,867 Lease costs under short-term operating leases 32 Variable lease cost under short-term and long-term operating leases (1) 434 Operating lease right-of-use asset impairment 3,057 Total operating lease cost $ 11,390 (1) Lease costs that are not fixed at lease commencement. 68 The table below presents supplemental cash flow information related to leases during the year ended November 30, 2021 (in thousands): Fiscal Year Ended November 30, 2021 Cash paid for leases $ 8,406 Right-of-use assets recognized for new leases and amendments (non-cash) $ 3,222 Weighted average remaining lease term in years and weighted average discount rate are as follows: November 30, 2021 Weighted average remaining lease term in years 4.15 Weighted average discount rate 2.6 % Future payments under non-cancellable leases at November 30, 2021 are as follows (in thousands): 2022 $ 8,654 2023 8,158 2024 7,791 2025 5,110 Thereafter 3,146 Total lease payments 32,859 Less imputed interest (1) ( 1,803 ) Present value of lease liabilities $ 31,056 (1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated as a result of a lease reassessment event. Our operating lease arrangements are subject to customary renewal and base rental fee escalation clauses. Total rent expense, net of sublease income which is insignificant, under operating lease arrangements was approximately $ 9.3 million, $ 9.6 million and $ 8.9 million in fiscal years 2021, 2020 and 2019, respectively. Note 11: Commitments and Contingencies Guarantees and Indemnification Obligations We include standard intellectual property indemnification provisions in our licensing agreements in the ordinary course of business. Pursuant to our product license agreements, we will indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally business partners or customers, in connection with certain patent, copyright or other intellectual property infringement claims by third parties with respect to our products. Other agreements with our customers provide indemnification for claims relating to property damage or personal injury resulting from the performance of services by us or our subcontractors. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been insignificant. Accordingly, the estimated fair value of these indemnification provisions is immaterial. Legal Proceedings We are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. 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. Note 12: Stockholders’ Equity Preferred Stock Our Board of Directors is authorized to establish one or more series of preferred stock and to fix and determine the number and conditions of preferred shares, including dividend rates, redemption and/or conversion provisions, if any, preferences and voting rights. As of November 30, 2021, there was no preferred stock issued or outstanding. 69 Common Stock We have 200,000,000 shares of authorized common stock, $ 0.01 par value per share, of which 44,146,193 were issued and outstanding at November 30, 2021. There were 253,255 deferred stock units ("DSUs") outstanding at November 30, 2021. Each DSU represents one share of our common stock and all DSU grants have been made to non-employee members of our Board of Directors. DSUs do not have voting rights and can only be converted into common stock when the recipient ceases to be a member of the Board of Directors or a change in control of the Company occurs. Common Stock Repurchases In January 2020, our Board of Directors increased the total share repurchase authorization from $ 75.0 million to $ 250.0 million. In fiscal years 2021 and 2020, we repurchased and retired 0.8 million shares of our common stock for $ 35.0 million and 1.4 million shares of our common stock for $ 60.0 million, respectively, under this current authorization. In fiscal year 2019, we repurchased and retired 0.7 million shares of our common stock for $ 25.0 million. As of November 30, 2021, there was $ 155.0 million remaining under the current authorization. Dividends 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. We have paid aggregate cash dividends totaling $ 31.6 million, $ 29.9 million, and $ 27.8 million and for the years ended November 30, 2021, November 30, 2020, and November 30, 2019, respectively. Note 13: Stock-Based Compensation We currently have one stockholder-approved stock plan from which we can issue stock-based awards, which was approved by our stockholders in fiscal year 2008 ("2008 Plan"). The 2008 Plan replaced the 1992 Incentive and Nonqualified Stock Option Plan, the 1994 Stock Incentive Plan and the 1997 Stock Incentive Plan (collectively, the “Previous Plans”). The Previous Plans solely exist to satisfy outstanding options previously granted under those plans. The 2008 Plan permits the granting of stock awards to officers, members of the Board of Directors, employees and consultants. 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. 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: the 2002 Nonqualified Stock Plan ("2002 Plan") and the 2004 Inducement Stock Plan ("2004 Plan"). The 2002 Plan permits the granting of stock awards to non-executive officer employees and consultants. Executive officers and members of the Board of Directors are not eligible for awards under the 2002 Plan. 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 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 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. 70 A summary of stock option activity under all the plans is as follows: Shares Weighted Average Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1) (in thousands) Exercise Price (in years) (in thousands) Options outstanding, December 1, 2020 1,673 $ 39.28 Granted 645 43.17 Exercised ( 195 ) 35.82 Canceled ( 108 ) 42.85 Options outstanding, November 30, 2021 2,015 $ 40.67 4.6 $ 16,330 Exercisable, November 30, 2021 938 $ 38.84 3.6 $ 9,509 Vested or expected to vest, November 30, 2021 2,015 $ 40.67 4.6 $ 16,330 (1) The aggregate intrinsic value was calculated based on the difference between the closing price of our stock on November 30, 2021 of $ 48.46 and the exercise prices for all options outstanding. A summary of restricted stock units' activity is as follows (in thousands, except per share data): Number of Shares Weighted Average Fair Value Restricted stock units outstanding, December 1, 2020 796 $ 42.63 Granted 551 43.73 Issued ( 326 ) 41.79 Canceled ( 143 ) 46.37 Restricted stock units outstanding, November 30, 2021 878 $ 43.06 Each restricted stock unit represents one share of common stock. The restricted stock units generally vest semi-annually over a three-year period. Performance-based restricted stock units are subject to multi-year performance criteria aligned with our business plan and are earned only to the extent the performance criteria are achieved. The fair value of outright stock awards, restricted stock units and DSUs is equal to the closing price of our common stock on the date of grant, less the present value of expected dividends when applicable. Beginning in fiscal year 2020, restricted stock units have forfeitable dividend equivalent rights equal to the dividend paid on our common stock. During the first quarter of fiscal years 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 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. 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. The ESPP has a 27 -month offering period comprised of nine three-month purchase periods. 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 71 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. At November 30, 2021, approximately 687,000 shares were available and reserved for issuance under the ESPP. We estimated the fair value of stock options and ESPP awards granted in fiscal years 2021, 2020, and 2019 on the measurement dates using the Black-Scholes option valuation model, and LTIP awards using the Monte Carlo Simulation valuation model, with the following weighted average assumptions: Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 Stock options: Expected volatility 30.0 % 29.0 % 25.0 % Risk-free interest rate 0.5 % 1.1 % 2.5 % Expected life (in years) 4.8 4.8 4.8 Expected dividend yield 1.6 % 1.6 % 1.8 % Employee stock purchase plan: Expected volatility 33.1 % 38.2 % 30.6 % Risk-free interest rate 0.1 % 0.2 % 2.3 % Expected life (in years) 1.3 1.3 1.6 Expected dividend yield 1.5 % 2.0 % 1.7 % Long-term incentive plan: Expected volatility 36.3 % 34.7 % 32.2 % Risk-free interest rate 0.2 % 1.1 % 2.5 % Expected life (in years) 2.8 2.8 2.8 Expected dividend yield — % — % 1.7 % For each stock option award, the expected life in years is based on historical exercise patterns and post-vesting termination behavior. Expected volatility is based on historical volatility of our stock, and the risk-free interest rate is based on the U.S. Treasury yield curve for the period that is commensurate with the expected life at the time of grant. The expected annual dividend yield is based on the weighted-average of the dividend yield assumptions used for options granted during the applicable period. For each ESPP award, the expected life in years is based on the period of time between the beginning of the offering period and the date of purchase, plus an additional holding period of three months . Expected volatility is based on historical volatility of our stock, and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at each purchase period. The expected annual dividend yield is based on the weighted-average of the dividend yield assumptions used for options granted during the applicable period. Based on the above assumptions, the weighted average estimated fair value of stock options granted in fiscal years 2021, 2020, and 2019 was $ 9.46 , $ 9.59 , and $ 7.38 per share, respectively. We amortize the estimated fair value of stock options to expense over the vesting period using the straight-line method. The weighted average estimated fair value for shares issued under our ESPP in fiscal years 2021, 2020, and 2019 was $ 11.59 , $ 8.73 , and $ 11.07 per share, respectively. We amortize the estimated fair value of shares issued under the ESPP to expense over the vesting period using a graded vesting model. Total unrecognized stock-based compensation expense, net of expected forfeitures, related to unvested stock options and unvested restricted stock awards amounted to $ 36.5 million at November 30, 2021. These costs are expected to be recognized over a weighted average period of two years . 72 The following additional activity occurred under our plans (in thousands): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 Total intrinsic value of stock options on date exercised $ 2,523 $ 1,340 $ 1,388 Total fair value of deferred stock units on date vested 2,084 1,547 1,853 Total fair value of restricted stock units on date vested 16,018 15,499 14,720 The following table provides the classification of stock-based compensation as reflected in our consolidated statements of operations (in thousands): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 Cost of maintenance and services $ 1,561 $ 1,336 $ 1,134 Sales and marketing 6,055 4,462 4,155 Product development 8,104 7,286 7,205 General and administrative 14,004 10,398 10,817 Total stock-based compensation $ 29,724 $ 23,482 $ 23,311 Income tax benefit included in the provision for income taxes $ 5,281 $ 4,541 $ 4,661 Note 14: Retirement Plan We maintain a retirement plan covering all U.S. employees under Section 401(k) of the Internal Revenue Code. Company contributions to the plan are at the discretion of the Board of Directors and totaled approximately $ 4.0 million, $ 3.6 million and $ 2.3 million for fiscal years 2021, 2020 and 2019, respectively. Note 15: 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 73 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 Unbilled Receivables and Contract Assets The timing of revenue recognition may differ from the timing of customer invoicing. When revenue is recognized prior to invoicing and the right to the amount due from customers is conditioned only on the passage of time, we record an unbilled receivable on our consolidated balance sheets. Our multi-year term license arrangements, which are typically billed annually, result in revenue recognition in advance of invoicing and the recognition of unbilled receivables. As of November 30, 2021, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands): 2023 $ 10,279 2024 2,813 2025 1,498 Total $ 14,590 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. Deferred Revenue Deferred revenue is recorded when revenue is recognized subsequent to customer invoicing. Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is included in long-term liabilities on the consolidated balance sheets. Our deferred revenue balance is primarily made up of deferred maintenance. As of November 30, 2021, the changes in deferred revenue were as follows (in thousands): Balance, December 1, 2020 $ 193,295 Billings and other 560,401 Acquired from business combinations 29,997 Revenue recognized ( 531,313 ) Balance, November 30, 2021 $ 252,380 74 Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of November 30, 2021, transaction price allocated to remaining performance obligations was $ 213.7 million. We expect to recognize approximately 81 % of the revenue within the next year and the remainder thereafter. Deferred Contract Costs Deferred contract costs, which include certain sales incentive programs, are incremental and recoverable costs of obtaining a contract with a customer. Incremental costs of obtaining a contract with a customer are recognized as an asset if the expected benefit of those costs is longer than one year. We have applied the practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include a large majority of our sales incentive programs as we have determined that annual compensation is commensurate with annual sales activities. Certain of our sales incentive programs do meet the requirements to be capitalized. Depending upon the sales incentive program and the related revenue arrangement, such capitalized costs are amortized over the longer of (i) the product life, which is generally three to five years ; or (ii) the term of the related revenue contract. We determined that a three to five year product life represents the period of benefit that we receive from these incremental costs based on both qualitative and quantitative factors, which include customer contracts, industry norms, and product upgrades. Total deferred contract costs were $ 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. 75 Note 16: Restructuring 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, December 1, 2018 $ 307 $ 4 $ 311 Costs incurred 740 5,591 6,331 Cash disbursements ( 760 ) ( 3,647 ) ( 4,407 ) Translation adjustments and other ( 91 ) 59 ( 32 ) Balance, November 30, 2019 $ 196 $ 2,007 $ 2,203 Costs incurred 1,812 4,094 5,906 Cash disbursements ( 1,569 ) ( 2,554 ) ( 4,123 ) Translation adjustments and other ( 18 ) 5 ( 13 ) Balance, November 30, 2020 $ 421 $ 3,552 $ 3,973 Costs incurred 3,518 2,790 6,308 Cash disbursements ( 1,072 ) ( 4,447 ) ( 5,519 ) Translation adjustments and other 1,616 ( 6 ) 1,610 Balance, November 30, 2021 $ 4,483 $ 1,889 $ 6,372 2021 Restructurings 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. Excess Facilities and Other Costs Employee Severance and Related Benefits Total Balance, December 1, 2020 $ — $ — $ — Costs incurred — 1,965 1,965 Cash disbursements — ( 69 ) ( 69 ) Translation adjustments and other — ( 14 ) ( 14 ) Balance, November 30, 2021 $ — $ 1,882 $ 1,882 Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2022. Accordingly, the balance of the restructuring reserve of $ 1.9 million is included in other accrued 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. 2020 Restructurings 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. 76 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, December 1, 2019 $ — $ — $ — Costs incurred — 3,947 3,947 Cash disbursements — ( 429 ) ( 429 ) Translation adjustments and other — 5 5 Balance, November 30, 2020 $ — $ 3,523 $ 3,523 Costs incurred 3,323 826 4,149 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 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 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. 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): Excess Facilities and Other Costs Employee Severance and Related Benefits Total Balance, December 1, 2018 $ — $ — $ — Costs incurred — 2,494 2,494 Cash disbursements — ( 1,035 ) ( 1,035 ) 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 Costs incurred — 6 6 Cash disbursements — ( 28 ) ( 28 ) Balance, November 30, 2021 $ — $ — $ — 77 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, December 1, 2018 $ — $ — $ — Costs incurred 5 3,093 3,098 Cash disbursements — ( 2,604 ) ( 2,604 ) Translation adjustments and other $ — $ 58 $ 58 Balance, December 1, 2019 $ 5 $ 547 $ 552 Costs incurred 1,447 39 1,486 Cash disbursements ( 1,020 ) ( 579 ) ( 1,599 ) Asset impairment — — — Translation adjustments and other $ ( 15 ) $ — $ ( 15 ) Balance, November 30, 2020 417 7 424 Costs incurred ( 2 ) ( 7 ) ( 9 ) Cash disbursements ( 416 ) — ( 416 ) Translation adjustments and other 1 — 1 Balance, November 30, 2021 $ — $ — $ — We do not expect to incur additional material costs with respect to this restructuring. Note 17: Income Taxes The components of income before income taxes are as follows (in thousands): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 U.S. $ 80,508 $ 83,279 $ ( 11,778 ) Foreign 15,026 13,356 40,273 Total $ 95,534 $ 96,635 $ 28,495 78 The provision for income taxes is comprised of the following (in thousands): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 Current: Federal $ 11,964 $ 12,294 $ 9,294 State 2,602 3,871 1,862 Foreign 3,456 3,370 5,808 Total current 18,022 19,535 16,964 Deferred Federal 366 ( 1,613 ) ( 12,191 ) State ( 1,110 ) ( 969 ) ( 2,399 ) Foreign ( 164 ) ( 40 ) ( 279 ) Total deferred ( 908 ) ( 2,622 ) ( 14,869 ) Total $ 17,114 $ 16,913 $ 2,095 A reconciliation of the income taxes incurred at the U.S. Federal statutory rate compared to the effective tax rate is as follows (in thousands): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 Tax at U.S. Federal statutory rate $ 20,062 $ 20,293 $ 5,984 Foreign rate differences 193 ( 200 ) ( 2,619 ) Effects of foreign operations included in U.S. Federal provision ( 112 ) ( 167 ) 451 State income taxes, net 1,215 2,087 ( 918 ) Research credits ( 410 ) ( 905 ) ( 1,086 ) Domestic production activities deduction — — ( 248 ) Tax-exempt interest — ( 3 ) ( 27 ) Nondeductible stock-based compensation 1,548 422 1,043 Meals and entertainment 61 162 198 Compensation subject to 162(m) 346 324 422 Uncertain tax positions and tax settlements 89 245 ( 720 ) Net excess tax benefit or detriment from stock-based compensation plans ( 11 ) 61 ( 103 ) Global intangible low tax inclusion 606 ( 307 ) 2,100 Foreign derived intangible deduction ( 6,386 ) ( 5,297 ) ( 2,300 ) Other ( 87 ) 198 ( 82 ) Total $ 17,114 $ 16,913 $ 2,095 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. Our aggregate income tax rate in foreign jurisdictions is lower than our effective income tax rate in the United States. The majority of our income before provision for income taxes from foreign operations has been earned by our subsidiary in Bulgaria that is taxed at a 10% tax rate. Our United States income before provision for income taxes was at a deficit for fiscal year 2019 largely due to increased expense for amortization of acquired intangibles and due to an impairment expense of intangibles and long-lived assets. During the first quarter of fiscal year 2018, the Tax Cuts and Jobs Act (the "Act") was enacted in the United States. The Act reduced the U.S. 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. 79 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. The components of deferred tax assets and liabilities are as follows (in thousands): November 30, 2021 November 30, 2020 Deferred tax assets: Accounts receivable $ 143 $ 241 Accrued compensation 4,407 2,861 Accrued liabilities and other 2,898 4,430 Deferred revenue 8,081 9,032 Stock-based compensation 6,401 4,814 Original issue discount 9,132 — Tax credit and loss carryforwards 35,376 42,189 Operating lease liabilities 5,257 5,531 Gross deferred tax assets 71,695 69,098 Valuation allowance ( 7,315 ) ( 9,876 ) Total deferred tax assets 64,380 59,222 Deferred tax liabilities: Goodwill ( 21,867 ) ( 20,624 ) Right-of-use lease assets ( 3,925 ) ( 4,837 ) Deferred revenue ( 1,483 ) ( 3,027 ) Depreciation and amortization ( 34,532 ) ( 15,924 ) 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 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. 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. It is our intention to indefinitely reinvest the earnings of our non-U.S. subsidiaries. We have not provided for U.S. income taxes on the undistributed earnings of non-U.S. 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 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, 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. 80 A reconciliation of the balance of our unrecognized tax benefits is as follows (in thousands): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 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 Tax positions acquired 439 1,596 — Settlements with tax authorities ( 168 ) ( 12 ) ( 181 ) Lapses due to expiration of the statute of limitations ( 270 ) ( 897 ) ( 723 ) Balance, end of year $ 5,471 $ 6,219 $ 4,993 If recognized, all amounts of unrecognized tax benefits would affect the effective tax rate. We recognize interest and penalties related to uncertain tax positions as a component of our provision for income taxes. 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. Our federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2018. Our state income tax returns have been examined or are closed by statute for all years prior to fiscal year 2017, and we are no longer subject to audit for those periods. Tax authorities for certain non-U.S. jurisdictions are also examining tax returns and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal year 2016. Note 18: Earnings Per Share We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common shares outstanding plus the effect of outstanding dilutive stock options, restricted stock units and deferred stock units, using the treasury stock method. The following table sets forth the calculation of basic and diluted earnings per share from continuing operations (in thousands, expect per share data): Fiscal Year Ended November 30, 2021 November 30, 2020 November 30, 2019 Net income $ 78,420 $ 79,722 $ 26,400 Weighted average shares outstanding 43,916 44,886 44,791 Dilutive impact from common stock equivalents 704 435 549 Diluted weighted average shares outstanding 44,620 45,321 45,340 Basic earnings per share $ 1.79 $ 1.78 $ 0.59 Diluted earnings per share $ 1.76 $ 1.76 $ 0.58 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. Note 19: 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 ("CODM") in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer. 81 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. and $ 7.5 million, $ 7.0 million and $ 4.1 million outside of the U.S. at the end of fiscal years 2021, 2020, and 2019, respectively. No individual country outside of the U.S. accounted for more than 10% of our consolidated long-lived assets. Note 20: 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. 82 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.