What changed in this filing

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Item 1. Financial Statements

2022-10-06 compared with 2022-07-07 · 130 added, 152 removed, 637 unchanged (31% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

(In thousands, except share data) May 31, 2022 November 30, 2021

(In thousands, except share data) August 31, 2022 November 30, 2021

Current assets:

46 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended

(In thousands, except per share data) May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

(In thousands, except per share data) August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Software licenses $ 47,618 $ 51,930 $ 135,182 $ 115,354

34 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended Six Months Ended

(In thousands) May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

(In thousands) August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Net income $ 21,797 $ 30,976 $ 71,361 $ 63,494

1 unchanged sentence

Foreign currency translation adjustments ( 7,632 ) ( 2,179 ) ( 10,955 ) 922

Unrealized gain on hedging activity, net of tax provision of $ 643 and $ 1,165 for the second quarter and first six months of 2022, respectively and net of tax provision of $ 76 and $ 347 for the second quarter and first six months of 2021, respectively

Unrealized gain on hedging activity, net of tax provision of $ 377 and $ 1,542 for the third quarter and first nine months of 2022, respectively and net of tax provision of $ 155 and $ 502 for the third quarter and first nine months of 2021, respectively

1,191 479 4,882 1,551

Unrealized loss on investments, net of tax benefit of $ 1 and $ 4 for the second quarter and first six months of 2022 and net of tax provision of $ 30 and a tax benefit of $ 12 for the second quarter and first six months of 2021, respectively

Unrealized loss on investments, net of tax of $ 0 and a tax benefit of $ 4 for the third quarter and first nine months of 2022 and net of tax benefit of $ 4 and $ 16 for the third quarter and first nine months of 2021, respectively

( 1 ) ( 15 ) ( 13 ) ( 54 )

Total other comprehensive income, net of tax ( 3,071 ) 2,058 356 4,134

Total other comprehensive (loss) income, net of tax ( 6,442 ) ( 1,715 ) ( 6,086 ) 2,419

Comprehensive income $ 15,355 $ 29,261 $ 65,275 $ 65,913

1 unchanged sentence

Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended May 31, 2022

Nine Months Ended August 31, 2022

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

10 unchanged sentences

Net income — — — 71,361 — 71,361

Other comprehensive income — — — — 356 356

Balance, May 31, 2022 43,454 $ 435 $ 309,913 $ 93,885 $ ( 32,087 ) $ 372,146

Three Months Ended May 31, 2022

Other comprehensive loss — — — — ( 6,086 ) ( 6,086 )

Balance, August 31, 2022 42,998 $ 430 $ 318,559 $ 86,513 $ ( 38,529 ) $ 366,973

Three Months Ended August 31, 2022

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

(in thousands) Number of Shares Amount

Balance, March 1, 2022 43,766 $ 438 $ 303,240 $ 93,661 $ ( 29,016 ) $ 368,323

Balance, June 1, 2022 43,454 $ 435 $ 309,913 $ 93,885 $ ( 32,087 ) $ 372,146

Issuance of stock under employee stock purchase plan 68 — 2,024 — — 2,024

Exercise of stock options 18 — 643 — — 643

Vesting of restricted stock units and release of deferred stock units 98 1 ( 1 ) — — —

Withholding tax payments related to net issuance of RSUs — — ( 2,266 ) — — ( 2,266 )

Stock-based compensation — — 8,639 — — 8,639

2 unchanged sentences

Net income — — — 21,797 — 21,797

Other comprehensive income — — — — ( 3,071 ) ( 3,071 )

Balance, May 31, 2022 43,454 $ 435 $ 309,913 $ 93,885 $ ( 32,087 ) $ 372,146

Six Months Ended May 31, 2021

Other comprehensive loss — — — — ( 6,442 ) ( 6,442 )

Balance, August 31, 2022 42,998 $ 430 $ 318,559 $ 86,513 $ ( 38,529 ) $ 366,973

Nine Months Ended August 31, 2021

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

11 unchanged sentences

Net income — — — 63,494 — 63,494

Other comprehensive loss — — — — 4,134 4,134

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

Three Months Ended May 31, 2021

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

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

Three Months Ended August 31, 2021

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

(in thousands) Number of Shares Amount

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

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

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

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

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

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

3 unchanged sentences

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

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

Net income — — — 30,976 — 30,976

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

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

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

Condensed Consolidated Statements of Cash Flows

Six Months Ended

(In thousands) May 31, 2022 May 31, 2021

Nine Months Ended

(In thousands) August 31, 2022 August 31, 2021

Cash flows from operating activities:

6 unchanged sentences

Non-cash lease expense 5,919 6,095

Loss on disposal of property and equipment 8 3

Gain on sale of assets held for sale ( 10,770 ) —

32 unchanged sentences

Condensed Consolidated Statements of Cash Flows, continued

Six Months Ended

May 31, 2022 May 31, 2021

Nine Months Ended

August 31, 2022 August 31, 2021

Supplemental disclosure:

10 unchanged sentences

Progress helps businesses drive faster cycles of innovation, fuel momentum and accelerate their path to success.

As the trusted provider of the leading products to develop, deploy and manage high-impact applications, Progress enables customers to develop the applications and experiences the need, deploy where and how they want and manage it all safely and securely.

As the trusted provider of the best products to develop, deploy and manage high-impact applications, Progress enables customers to develop the applications and experiences the need, deploy where and how they want and manage it all safely and securely.

Hundreds of thousands of enterprises, including 1,700 software companies and 3.5 million developers depend on Progress to achieve their goals—with confidence.

48 unchanged sentences

Cash, Cash Equivalents and Investments

A summary of our cash, cash equivalents and available-for-sale investments at May 31, 2022 is as follows (in thousands):

A summary of our cash, cash equivalents and available-for-sale investments at August 31, 2022 is as follows (in thousands):

Amortized Cost Basis Unrealized Gains Unrealized Losses Fair Value

2 unchanged sentences

treasury bonds 750 — ( 1 ) 749

Corporate bonds 300 — — 300

Total $ 224,865 $ — $ ( 1 ) $ 224,864

7 unchanged sentences

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

May 31, 2022 November 30, 2021

August 31, 2022 November 30, 2021

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

4 unchanged sentences

Total $ 224,115 $ 749 $ 155,406 $ 1,967

The fair value of debt securities by contractual maturity due in one year or less was $ 1.1 million and $ 2.0 million as of May 31, 2022 and November 30, 2021, respectively.

There were no debt securities by contractual maturity due after one year as of May 31, 2022 or November 30, 2021.

We did not hold any investments with continuous unrealized losses as of May 31, 2022 or November 30, 2021.

The fair value of debt securities by contractual maturity due in one year or less was $ 0.7 million and $ 2.0 million as of August 31, 2022 and November 30, 2021, respectively.

There were no debt securities by contractual maturity due after one year as of August 31, 2022 or November 30, 2021.

We did not hold any investments with continuous unrealized losses as of August 31, 2022 or November 30, 2021.

Derivative Instruments

8 unchanged sentences

We reassessed the hedge in connection with the debt amendment and determined that it is still highly effective.

As of May 31, 2022 , the fair value of the hedge was a gain of $ 1.8 million, which was included in other assets on our condensed consolidated balance sheets.

As of August 31, 2022 , the fair value of the hedge was a gain of $ 3.3 million, which was included in other assets on our condensed consolidated balance sheets.

The following table presents our interest rate swap contract where the notional amount reflects the quarterly amortization of the interest rate swap, which is equal to approximately one-half of the corresponding reduction in the balance of our term loan as we make scheduled principal payments.

The fair value of the derivative represents the discounted value of the expected future discounted cash flows for the interest rate swap, based on the amortization schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in thousands):

May 31, 2022 November 30, 2021

August 31, 2022 November 30, 2021

Notional Value Fair Value Notional Value Fair Value

3 unchanged sentences

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 3 years from the date the contract was entered.

At May 31, 2022, $ 1.6 million and $ 0.4 million was recorded in other noncurrent liabilities and other current assets on our condensed consolidated balance sheets.

All forward contracts are recorded at fair value on the consolidated balance sheets at the end of each reporting period and generally expire between 30 days and 2 years from the date the contract was entered.

At August 31, 2022, $ 4.3 million and $ 0.1 million was recorded in other noncurrent liabilities and other current assets on our condensed consolidated balance sheets.

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

In the three and six months ended May 31, 2022, realized and unrealized losses of $ 3.9 million and $ 3.6 million, respectively, from our forward contracts were recognized in foreign currency gain (loss), net, on our condensed consolidated statements of operations.

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

In the three and nine months ended August 31, 2022, realized and unrealized losses of $ 5.4 million and $ 9.0 million, respectively, from our forward contracts were recognized in foreign currency gain (loss), net, on our condensed consolidated statements of operations.

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

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

The table below details outstanding foreign currency forward contracts where the notional amount is determined using contract exchange rates (in thousands):

May 31, 2022 November 30, 2021

August 31, 2022 November 30, 2021

Notional Value Fair Value Notional Value Fair Value

6 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at May 31, 2022 (in thousands):

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at August 31, 2022 (in thousands):

Fair Value Measurements Using

2 unchanged sentences

treasury bonds 749 — 749 —

Corporate bonds 300 — 300 —

Interest rate swap 3,346 — 3,346 —

14 unchanged sentences

Fair Value of the Convertible Senior Notes

The Notes’ fair value, inclusive of the conversion feature embedded in the Notes, was $ 367.7 million as of May 31, 2022.

The Notes’ fair value, inclusive of the conversion feature embedded in the Notes, was $ 364.1 million as of August 31, 2022.

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.

1 unchanged sentence

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

May 31, 2022 November 30, 2021

Raw materials $ 1,001 $ 1,920

Work in process — —

August 31, 2022 November 30, 2021

Finished goods $ 1,773 $ 1,631

Purchased parts and fabricated assemblies 2,867 1,920

Total $ 4,640 $ 3,551

At May 31, 2022 and November 30, 2021, the inventories balances of $ 2.8 million and $ 3.6 million were recorded in other current assets on the condensed consolidated balance sheets.

At August 31, 2022 and November 30, 2021, the inventories balances of $ 4.6 million and $ 3.6 million were recorded in other current assets on the condensed consolidated balance sheets.

Intangible Assets and Goodwill

1 unchanged sentence

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

May 31, 2022 November 30, 2021

August 31, 2022 November 30, 2021

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

4 unchanged sentences

Total $ 558,619 $ ( 325,183 ) $ 233,436 $ 558,619 $ ( 271,434 ) $ 287,185

In the three and six months ended May 31, 2022, amortization expense related to intangible assets was $ 17.5 million and $ 34.6 million, respectively.

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

Future amortization expense for intangible assets as of May 31, 2022, is as follows (in thousands):

In the three and nine months ended August 31, 2022, amortization expense related to intangible assets was $ 17.3 million and $ 51.9 million, respectively.

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

Future amortization expense for intangible assets as of August 31, 2022, is as follows (in thousands):

Remainder of 2022 $ 17,177

1 unchanged sentence

Total $ 233,436

Changes in the carrying amount of goodwill in the six months ended May 31, 2022 are as follows (in thousands):

Changes in the carrying amount of goodwill in the nine months ended August 31, 2022 are as follows (in thousands):

Balance, November 30, 2021 $ 671,152

1 unchanged sentence

Translation adjustments ( 3 )

Balance, May 31, 2022 $ 673,066

Balance, August 31, 2022 $ 672,901

Business Combinations

26 unchanged sentences

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.

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

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

2 unchanged sentences

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

During the three and six months ended May 31, 2022, we incurred approximately $ 0.4 million and $ 0.8 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

During the three and nine months ended August 31, 2022, we incurred approximately $ 0.1 million and $ 0.9 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

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.

7 unchanged sentences

These results are prepared in accordance with ASC 606.

(in thousands, except per share data) Pro Forma Three Months Ended May 31, 2021

(in thousands, except per share data) Pro Forma Three Months Ended August 31, 2021

Revenue $ 163,735

2 unchanged sentences

Net income per diluted share $ 0.68

(in thousands, except per share data) Pro Forma Six Months Ended May 31, 2021

(in thousands, except per share data) Pro Forma Nine Months Ended August 31, 2021

Revenue $ 438,372

6 unchanged sentences

The acquisition was completed for a base purchase price of $ 220.0 million (subject to certain customary adjustments) in cash.

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

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

Refer to Note 8:

Debt for further information.

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

26 unchanged sentences

During the three and six months ended May 31, 2022, we incurred approximately $ 0.1 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

During the three and nine months ended August 31, 2022, we incurred approximately $ 0.1 million and $ 0.2 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

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

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

The Company adopted ASU 2020-06 on December 1, 2021.

See Note 1 for further discussion of this recently adopted accounting policy.

As of May 31, 2022, future maturities of the Company's long-term debt were as follows:

As of August 31, 2022, future maturities of the Company's long-term debt were as follows:

(In thousands) 2026 Notes Revolving Credit Facility Total

17 unchanged sentences

The Company incurred approximately $ 10.8 million in issuance cost for the issuance of the Notes.

During the six months ended May 31, 2022, the Company did not enter into any new or amended Notes.

During the nine months ended August 31, 2022, the Company did not enter into any new or amended Notes.

Conversion Rights

19 unchanged sentences

Accounting for the Notes

In accounting for the transaction, prior to the adoption of ASU 2020-06, the Notes were separated into liability and equity components.

In accounting for the transaction, prior to the adoption of ASU 2020-06 on December 1, 2021, the Notes were separated into liability and equity components.

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

11 unchanged sentences

Interest expense related to the Notes:

Three Months Ended Six Months Ended

(In thousands) May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

(In thousands) August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Contractual interest expense ( 1 % coupon)

2 unchanged sentences

$ 1,441 $ 4,160 $ 4,285 $ 6,312

Prior to adoption of ASU 2020-06, the effective interest rate for the Notes was 5.71 %.

After the adoption of ASU 2020-06, the effective interest rate for the Notes is 1.63 %.

Prior to adoption of ASU 2020-06, the effective interest rate for the Notes was 5.71 %.

Credit Facility

10 unchanged sentences

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

The outstanding balance of the term loan as of May 31, 2022 was $ 271.6 million, with $ 6.9 million due in the next 12 months.

The outstanding balance of the term loan as of August 31, 2022 was $ 269.8 million, with $ 6.9 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 February 28, 2022.

3 unchanged sentences

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

As of May 31, 2022, the carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds.

The interest rate as of May 31, 2022 was 2.63 %.

Costs incurred to obtain our long-term debt of $ 3.2 million, including $ 1.1 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 long-term debt liability on our condensed consolidated balance sheets as of May 31, 2022.

As of August 31, 2022, the carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds.

The interest rate as of August 31, 2022 was 3.81 %.

These costs are being amortized over the term of the Credit Agreement using the effective interest rate method.

Amortization expense related to the debt issuance costs was $ 0.2 million and $ 0.1 million, for the three months ended May 31, 2022 and May 31, 2021, respectively.

Amortization expense related to the debt issuance costs was $ 0.5 million and $ 0.3 million for the six months ended May 31, 2022 and May 31, 2021, respectively.

Amortization expense related to the debt issuance costs was $ 0.2 million and $ 0.1 million, for the three months ended August 31, 2022 and August 31, 2021, respectively.

Amortization expense related to the debt issuance costs was $ 0.5 million and $ 0.4 million for the nine months ended August 31, 2022 and August 31, 2021, respectively.

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

The revolving line of credit may be borrowed, repaid, and reborrowed until January 25, 2027, at which time all amounts outstanding must be repaid.

As of May 31, 2022, there were no amounts outstanding under the revolving line of credit and $ 2.1 million of letters of credit outstanding.

Upon adoption of ASC 842, there were a number of optional practical expedients to apply 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.

As of August 31, 2022, there were no amounts outstanding under the revolving line of credit and $ 2.1 million of letters of credit outstanding.

The Company has operating leases for administrative, product development, and sales and marketing facilities, vehicles, and equipment under various non-cancelable lease agreements.

3 unchanged sentences

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of operating lease cost for the three and six months ended May 31, 2022 were as follows (in thousands):

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2022

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.

The Company makes variable payments on certain of its leases related to taxes, insurance, common area maintenance, and utilities, among other things.

The components of operating lease cost for the three and nine months ended August 31, 2022 were as follows (in thousands):

Three Months Ended Nine Months Ended

August 31, 2022 August 31, 2022

Lease costs under long-term operating leases $ 1,760 $ 5,344

3 unchanged sentences

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

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

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2021

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

Three Months Ended Nine Months Ended

August 31, 2021 August 31, 2021

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

4 unchanged sentences

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

The table below presents supplemental cash flow information related to leases during the three and six months ended May 31, 2022 (in thousands):

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2022

Cash paid for leases $ 2,191 $ 4,337

Right-of-use assets recognized for new leases and amendments (non-cash) $ 80 $ 301

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

Three Months Ended Six Months Ended

May 31, 2021 May 31, 2021

The table below presents supplemental cash flow information related to leases during the nine months ended August 31, 2022 and August 31, 2021 (in thousands):

Nine Months Ended

August 31, 2022 August 31, 2021

Cash paid for leases $ 6,481 $ 6,440

1 unchanged sentence

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

May 31, 2022 November 30, 2021

August 31, 2022 November 30, 2021

Weighted average remaining lease term in years 3.54 4.15

1 unchanged sentence

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

August 31, 2022

Remainder of 2022 $ 2,100

6 unchanged sentences

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

In the three months ended May 31, 2022 and May 31, 2021, we repurchased and retired 0.6 million shares for $ 26.5 million and 0.4 million shares for $ 20.0 million, respectively.

In the six months ended May 31, 2022 and May 31, 2021, we repurchased and retired 1.1 million shares for $ 51.5 million and 0.8 million shares for $ 35.0 million, respectively.

In the three months ended August 31, 2022, we repurchased and retired 0.5 million shares for $ 24.1 million.

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

In the nine months ended August 31, 2022 and August 31, 2021, we repurchased and retired 1.7 million shares for $ 75.5 million and 0.8 million shares for $ 35.0 million, respectively.

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

As of May 31, 2022, there was $ 103.5 million remaining under the current authorization.

As of August 31, 2022, there was $ 79.5 million remaining under the current authorization.

Stock-Based Compensation

11 unchanged sentences

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

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Cost of maintenance and services $ 527 $ 374 $ 1,410 $ 1,234

4 unchanged sentences

Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss during the six months ended May 31, 2022 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive loss during the nine months ended August 31, 2022 (in thousands):

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

Balance, December 1, 2021 $ ( 30,055 ) $ ( 49 ) $ ( 2,339 ) $ ( 32,443 )

Other comprehensive income before reclassifications, net of tax ( 3,323 ) ( 12 ) 3,691 356

Balance, May 31, 2022 $ ( 33,378 ) $ ( 61 ) $ 1,352 $ ( 32,087 )

The tax effect on accumulated unrealized (losses) gains on hedging activity and unrealized (losses) on investments was $ 0.5 million and $ 0.7 million as of May 31, 2022 and November 30, 2021, respectively.

Other comprehensive (loss) income before reclassifications, net of tax ( 10,955 ) ( 13 ) 4,882 ( 6,086 )

Balance, August 31, 2022 $ ( 41,010 ) $ ( 62 ) $ 2,543 $ ( 38,529 )

The tax effect on accumulated unrealized losses and gains on investments and hedging activity was $ 0.9 million and $ 0.7 million as of August 31, 2022 and November 30, 2021, respectively.

Revenue Recognition

2 unchanged sentences

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

Three Months Ended Six Months Ended

(In thousands) May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

(In thousands) August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Performance obligations transferred at a point in time:

10 unchanged sentences

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

Three Months Ended Six Months Ended

(In thousands) May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

(In thousands) August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

North America $ 84,826 $ 93,880 $ 248,313 $ 236,479

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

has accounted for more than 10% of our total revenue for the three months ended May 31, 2022 and May 31, 2021.

has accounted for more than 10% of our total revenue for the three and nine months ended August 31, 2022 and August 31, 2021.

Contract Balances

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Our multi-year term license arrangements, which are typically billed annually, result in revenue recognition in advance of invoicing and the recognition of unbilled receivables.

As of May 31, 2022, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

As of August 31, 2022, invoicing of our long-term unbilled receivables is expected to occur as follows (in thousands):

Total $ 25,972

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 $ 3.0 million as of May 31, 2022 and $ 5.0 million as of November 30, 2021.

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 $ 2.4 million as of August 31, 2022 and $ 5.0 million as of November 30, 2021.

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

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

As of May 31, 2022, the changes in deferred revenue were as follows (in thousands):

As of August 31, 2022, the changes in deferred revenue were as follows (in thousands):

Balance, December 1, 2021 $ 252,380

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Revenue recognized ( 444,886 )

Balance, May 31, 2022 $ 258,580

Balance, August 31, 2022 $ 251,121

Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

As of May 31, 2022, transaction price allocated to remaining performance obligations was $ 265 million.

of August 31, 2022, transaction price allocated to remaining performance obligations was $ 256 million.

We expect to recognize approximately 78 % 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 meet the requirements to be capitalized.

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We determined that a three to five year product life represents the period of benefit that we receive from these incremental costs based on both qualitative and quantitative factors, which include customer contracts, industry norms, and product upgrades.

Total deferred contract costs were $ 8.0 million and $ 7.9 million as of May 31, 2022 and November 30, 2021, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

Total deferred contract costs were $ 8.2 million and $ 7.9 million as of August 31, 2022 and November 30, 2021, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

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

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Cash disbursements ( 772 ) ( 2,247 ) ( 3,019 )

Balance, May 31, 2022 $ 4,183 $ 498 $ 4,681

During the fourth quarter of fiscal year 2021, we restructured our operations in connection with the acquisition of Kemp (Note 7).

Translation adjustments and other — ( 1 ) ( 1 )

Balance, August 31, 2022 $ 4,030 $ 106 $ 4,136

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

Refer to Note 7:

Business Combinations for further discussion.

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

For the three months ended May 31, 2022, we incurred minimal expenses related to this restructuring.

For the six months ended May 31, 2022, we incurred expenses of $ 0.4 million, related to this restructuring.

For the three and nine months ended August 31, 2022, we incurred expenses of $ 0.1 million and $ 0.5 million, respectively, related to this restructuring.

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

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Cash disbursements — ( 2,240 ) ( 2,240 )

Balance, May 31, 2022 $ — $ 498 $ 498

Translation adjustments and other — ( 1 ) ( 1 )

Balance, August 31, 2022 $ — $ 106 $ 106

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 liability of $ 0.5 million is included in other accrued liabilities on the consolidated balance sheet at May 31, 2022.

Accordingly, the balance of the restructuring liability of $ 0.1 million is included in other accrued liabilities on the consolidated balance sheet at August 31, 2022.

We expect to incur additional expenses as part of this action related to employee costs during fiscal year 2022, but we do not expect these costs to be material.

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

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

Refer to Note 7:

Business Combinations for further discussion.

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

For the three and six months ended May 31, 2022, we incurred expenses of $ 0.1 million and $ 0.2 million, respectively, related to this restructuring.

For the three and nine months ended August 31, 2022, we incurred expenses of $ 0.2 million and $ 0.3 million, respectively, related to this restructuring.

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

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Cash disbursements ( 772 ) ( 7 ) ( 779 )

Balance, May 31, 2022 $ 4,183 $ — $ 4,183

Balance, August 31, 2022 $ 4,030 $ — $ 4,030

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 liability of $ 4.2 million is included in other accrued liabilities, and short-term and long-term lease liabilities on the consolidated balance sheet at May 31, 2022.

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.

Our income tax provision for the second quarter of fiscal years 2022 and 2021 reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events, which are recorded in the period in which they occur.

Accordingly, $ 1.0 million and $ 3.0 million of the total restructuring liability of $ 4.0 million is included in short-term and long-term lease liabilities, respectively, on the consolidated balance sheet at August 31, 2022.

We do not expect to incur additional material expenses as part of this action.

Our income tax provision for the third quarter of fiscal years 2022 and 2021 reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events, which are recorded in the period in which they occur.

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

Our effective tax rate was 21 % in the second fiscal quarter of both 2022 and 2021.There were no significant discrete tax items in the second fiscal quarter of either 2022 or 2021.

Our effective tax rate was 21 % in the third fiscal quarter of 2022, compared to 22 % in the third fiscal quarter of 2021.There were no significant discrete tax items in the third fiscal quarter of either 2022 or 2021.

Our federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2018.

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

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Net income $ 21,797 $ 30,976 $ 71,361 $ 63,494

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Diluted earnings per share $ 0.50 $ 0.70 $ 1.61 $ 1.43

We excluded stock awards representing approximately 1,904,000 and 1,720,000 shares of common stock from the calculation of diluted earnings per share in the three and six months ended May 31, 2022, respectively, as these awards were anti-dilutive.

In the three and six months ended May 31, 2021, we excluded stock awards representing 1,396,000 shares and 1,237,000 shares of common stock, respectively, from the calculation of diluted earnings per share as they were anti-dilutive.

As a result of our adoption of ASU 2020-06 on December 1, 2021, the dilutive impact of the Notes on our calculation of diluted net income per share is considered using the if-converted method.

We excluded stock awards representing approximately 1,777,000 and 1,739,000 shares of common stock from the calculation of diluted earnings per share in the three and nine months ended August 31, 2022, respectively, as these awards were anti-dilutive.

In the three and nine months ended August 31, 2021, we excluded stock awards representing 1,250,000 shares and 1,241,000 shares of common stock, respectively, from the calculation of diluted earnings per share as they were anti-dilutive.

As a result of our adoption of ASU 2020-06 on December 1, 2021, the dilutive impact of the Notes on our calculation of diluted earnings per share is considered using the if-converted method.

However, because the principal amount of the Notes must be settled in cash, the dilutive impact of applying the if-converted method is limited to the in-the-money portion, if any, of the Notes.

During the three and six months ended May 31, 2022, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money.

During the three and nine months ended August 31, 2022, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money.

For periods prior to our December 1, 2021 adoption of ASU 2020-06, we applied the treasury stock method to account for the dilutive impact of the Notes for diluted earnings per share purposes.

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Our CODM is our Chief Executive Officer.

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

We operate as one operating segment:

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

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

What changed 10-Q

Item 1. Financial Statements