What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-06 compared with 2022-07-07 · 124 added, 110 removed, 334 unchanged (41% of the section changed)

26 unchanged sentences

(iv) if we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts;

(v) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners;

(v) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel

(vi) our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses;

4 unchanged sentences

(xi) Russia's recent invasion of Ukraine, and the international community's response, have created substantial political and economic disruption, uncertainty, and risk.

For further information regarding risks and uncertainties associated with Progress' business, please refer to Part II, Item 1A (Risk Factors) in our Quarterly Report on Form 10-Q, as

filed with the SEC on April 7, 2022;

For further information regarding risks and uncertainties associated with Progress' business, please refer to Part II, Item 1A (Risk Factors) in our Quarterly Report on Form 10-Q, as filed with the SEC on April 7, 2022;

and in Part I, Item 1A (Risk Factors) in our 2021 10-K.

12 unchanged sentences

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.

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

We operate as one operating segment.

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

12 unchanged sentences

These acquisitions met our strict financial criteria.

In recent years, our total growth strategy has resulted in the rapid expansion of our product portfolio.

As our portfolio continues to evolve, we continuously evaluate our organization for additional synergies and efficiencies.

Therefore, we are working to realign our go-to-market, product, and operational teams, as well as the increased centralization of additional shared services

and functions across our company.

We believe that these planned changes will improve collaboration among the teams that develop, sell, and support our products;

enhance our ability to integrate acquired businesses;

and lead to greater system uniformity and increased operating efficiency.

Multi-Faceted Capital Allocation Approach .

2 unchanged sentences

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

In the first six months of 2022, we repurchased and retired 1.1 million shares of our common stock for $51.5 million.

As of May 31, 2022, there was $103.5 million remaining under share repurchase authorization.

In the first nine months of 2022, we repurchased and retired 1.7 million shares of our common stock for $75.5 million.

As of August 31, 2022, there was $79.5 million remaining under share repurchase authorization.

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

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

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

dividend of $0.175 per share of common stock.

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

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

5 unchanged sentences

dollar have significantly impacted our results of operations and may impact our future results of operations.

Since approximately one-third of our revenue is denominated in foreign currency, and given the recent volatility in the global economy, our revenue results in the second fiscal quarter of 2022 were impacted by fluctuations in foreign currency exchange rates.

Since approximately one-third of our revenue is denominated in foreign currency, and given the recent volatility in the global economy, our revenue results in the third fiscal quarter of 2022 were impacted by fluctuations in foreign currency exchange rates.

Results of Operations

Three Months Ended % Change

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

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

Reported Constant

Revenue $ 151,217 $ 147,417 3 % 6 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Reported Constant

Revenue $ 444,886 $ 391,185 14 % 16 %

Total revenue increased in both the second fiscal quarter and six month period ended May 31, 2022 as compared to the same periods last year primarily due to our acquisition of Kemp in the fourth quarter of fiscal year 2021, as well as increases in our DataDirect and Chef product offerings.

These increases were partially offset by the negative impact of foreign exchange on license and maintenance revenue in our EMEA region.

Total revenue increased in both the third fiscal quarter and nine month period ended August 31, 2022 as compared to the same periods last year primarily due to our acquisition of Kemp in the fourth quarter of fiscal year 2021, as well as an increase in our Chef product offerings.

These increases were partially offset by decreases in our OpenEdge and DataDirect product offerings, as well as the negative impact of foreign exchange on license and maintenance revenue in our EMEA region.

Software License Revenue

Three Months Ended % Change

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

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

Reported Constant

1 unchanged sentence

As a percentage of total revenue 31 % 35 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Reported Constant

1 unchanged sentence

As a percentage of total revenue 30 % 29 %

Software license revenue increased in both the second quarter and first six months of fiscal year 2022 as compared to the same periods last year primarily due to our acquisition of Kemp and increases in license sales in our DataDirect product offerings.

Software license revenue decreased in the third quarter of fiscal year 2022 as compared to the same period last year primarily due to decreases in our DataDirect and OpenEdge product offerings, partially offset by our acquisition of Kemp and increases in license sales in our Chef product offerings.

Software license revenue increased in the first nine months of fiscal year 2022 as compared to the same period last year primarily due to our acquisition of Kemp and increases in license sales in our Chef product offerings, partially offset by decreases in license sales in our OpenEdge, DataDirect, and Ipswitch product offerings.

Maintenance and Services Revenue

Three Months Ended % Change

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

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

Reported Constant

5 unchanged sentences

As a percentage of total revenue 69 % 65 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Reported Constant

5 unchanged sentences

As a percentage of total revenue 70 % 71 %

Maintenance revenue increased in the second quarter and first six months of fiscal year 2022 as compared to the same periods last year primarily due to our acquisition of Kemp and increased maintenance revenue from our Chef product offerings.

Our Ipswitch and DevTools product offerings also contributed to the year to date increase in maintenance revenue.

Services revenue increased in the second quarter and first six months of fiscal year 2022 as compared to the same periods last year primarily due to increased services revenue from our OpenEdge and Ipswitch product offerings.

Maintenance revenue increased in the third quarter and first nine months of fiscal year 2022 as compared to the same periods last year primarily due to our acquisition of Kemp and increased maintenance revenue from our Chef, Ipswitch, and DevTools product offerings.

Services revenue remained flat in the third quarter of fiscal year 2022 as compared to the same period last year.

Services revenue increased in the first nine months of fiscal year 2022 as compared to the same period last year primarily due to increased services revenue from our Sitefinity and Ipswitch product offerings.

The maintenance and services increases were partially offset by the negative impact of foreign exchange in our EMEA region.

1 unchanged sentence

Three Months Ended % Change

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

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

Reported Constant

7 unchanged sentences

As a percentage of total revenue 6 % 5 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Reported Constant

7 unchanged sentences

As a percentage of total revenue 6 % 6 %

Total revenue generated in North America increased $14.3 million and $20.9 million in the second quarter and first six months of fiscal year 2022, respectively.

The increases were primarily due to our acquisition of Kemp, as well as increases from our DataDirect and Chef product offerings.

Total revenue generated in North America decreased $9.1 million and increased $11.8 million in the third quarter and first nine months of fiscal year 2022, respectively.

The decrease in the third quarter was primarily due to decreases from our DataDirect and OpenEdge product offerings.

The increase in the first nine months was primarily due to our acquisition of Kemp and increases from our Chef product offerings.

The increase in revenue generated in EMEA was primarily due to our acquisition of Kemp, as well as increased revenue from Chef, partially offset by a negative impact of foreign exchange.

The increases in revenue generated in both Latin America and Asia Pacific were due to our acquisition of Kemp, as well as increased revenue from our OpenEdge product offerings.

In the first six months of fiscal year 2022 revenue generated in markets outside North America represented 44% of total revenue compared to 45% of total revenue on a constant currency basis.

In the first six months of fiscal year 2021 revenue generated in markets outside North America represented 42% of total revenue at both actual rates and on a constant currency basis.

The decrease in revenue in Latin America in third fiscal quarter of 2022 was primarily due to decreases in our OpenEdge product offerings.

The increases in revenue generated in Latin America in the first nine months of fiscal year 2022 and in all periods for Asia Pacific was due to our acquisition of Kemp.

In the first nine months of fiscal year 2022 revenue generated in markets outside North America represented 44% of total revenue compared to 46% of total revenue on a constant currency basis.

In the first nine months of fiscal year 2021 revenue generated in markets outside North America represented 40% of total revenue at both actual rates and on a constant currency basis.

Cost of Software Licenses

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Cost of software licenses $ 2,477 $ 1,574 $ 903 57 % $ 7,669 $ 3,763 $ 3,906 104 %

1 unchanged sentence

As a percentage of total revenue 2 % 1 % 2 % 1 %

Cost of software licenses consists primarily of costs of royalties, electronic software distribution, duplication, and packaging.

Cost of software licenses consists primarily of costs of inventories, royalties, electronic software distribution, duplication, and packaging.

Cost of software licenses as a percentage of software license revenue varies from period to period depending upon the relative product mix.

1 unchanged sentence

Cost of Maintenance and Services

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Cost of maintenance and services $ 15,761 $ 14,895 $ 866 6 % $ 46,707 $ 42,887 $ 3,820 9 %

7 unchanged sentences

Cost of maintenance and services consists primarily of costs of providing customer support, consulting, and education.

The increases in all periods were primarily due to increased headcount and hosting costs resulting from our acquisition of Kemp.

The increases in all periods were primarily due to increased headcount and hosting costs resulting from our acquisition of Kemp, partially offset by decreased contractors and outside services costs.

Amortization of Intangibles

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Amortization of intangibles $ 5,558 $ 3,599 54 % $ 16,589 $ 10,719 55 %

2 unchanged sentences

The increases in both periods shown were due to the acquisition of Kemp.

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Gross profit $ 127,421 $ 127,349 — % $ 373,921 $ 333,816 12 %

2 unchanged sentences

Sales and Marketing

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Sales and marketing $ 34,595 $ 29,737 $ 4,858 16 % $ 100,768 $ 88,468 $ 12,300 14 %

7 unchanged sentences

Product Development

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Product development costs $ 28,650 $ 25,616 $ 3,034 12 % $ 85,966 $ 76,579 $ 9,387 12 %

5 unchanged sentences

Total product development costs $ 28,650 $ 25,616 $ 3,034 12 % $ 85,966 $ 76,579 $ 9,387 12 %

Product development expenses increased in both periods shown primarily due to increased personnel related costs associated with our acquisition of Kemp.

Product development expenses increased in both periods shown primarily due to increased personnel related costs associated with our acquisition of Kemp, partially offset by decreased contractors and outside services costs.

General and Administrative

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

General and administrative $ 20,141 $ 16,451 $ 3,690 22 % $ 56,339 $ 46,335 $ 10,004 22 %

6 unchanged sentences

General and administrative expenses include the costs of our finance, human resources, legal, information systems and administrative departments.

General and administrative expenses increased in both periods shown primarily due to higher personnel costs and contractors and outside services costs associated with our acquisition of Kemp, as well as an increase in other general and administrative costs.

General and administrative expenses increased in both periods shown primarily due to higher personnel costs associated with our acquisition of Kemp, as well as an increase in other general and administrative costs.

Amortization of Intangibles

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Amortization of intangibles $ 11,716 $ 7,978 47 % $ 35,330 $ 22,836 55 %

3 unchanged sentences

Restructuring Expenses

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Restructuring expenses $ 130 $ 40 225 % $ 784 $ 1,133 (31) %

As a percentage of total revenue — % — % — % — %

Restructuring expenses recorded in the second quarter and first six months of fiscal year 2022 relate to the restructuring activities that occurred in the fourth quarters of fiscal years 2021 and 2020 resulting from the acquisitions of Kemp and Chef, respectively.

Restructuring expenses recorded in the second quarter and first six months of fiscal year 2021 are comprised mostly of costs related to the Chef restructuring action of 2020.

Restructuring expenses recorded in the third quarter and first nine months of fiscal year 2022 relate to the restructuring activities that occurred in the fourth quarters of fiscal years 2021 and 2020 resulting from the acquisitions of Kemp and Chef, respectively.

Restructuring expenses recorded in the third quarter and first nine months of fiscal year 2021 are comprised mostly of costs related to the Chef restructuring action of 2020.

See the Liquidity and Capital Resources section of this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Acquisition-Related Expenses

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Acquisition-related expenses $ 168 $ 1,481 (89) % $ 3,816 $ 2,721 40 %

2 unchanged sentences

These costs consist of professional service fees, including third-party legal and valuation-related fees.

Acquisition-related expenses increased in the second quarter and first six months of fiscal year 2022 due to our pursuit of other acquisition opportunities, as well as our acquisition of Kemp.

Acquisition-related expenses in the same periods of fiscal year 2021 were primarily related to the acquisition of Chef.

Acquisition-related expenses were higher in the third quarter of fiscal year 2021 compared to the current quarter due to costs incurred associated with our acquisition of Kemp.

Acquisition-related expenses increased in the first nine months of fiscal year 2022 due to our pursuit of other acquisition opportunities, as well as our acquisition of Kemp.

Acquisition-related expenses in the same periods of fiscal year 2021 were primarily related to the acquisition of Kemp.

Gain on Sale of Assets Held for Sale

Three Months Ended Six Months Ended

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

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

Three Months Ended Nine Months Ended

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

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

As a percentage of total revenue — % — % (2) % — %

3 unchanged sentences

Income from Operations

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Income from operations $ 32,021 $ 46,046 (30) % $ 101,688 $ 95,744 6 %

As a percentage of total revenue 21 % 31 % 23 % 24 %

Income from operations increased in both periods shown due to increases of revenue, offset by an increase in costs of revenue and operating expenses as shown above.

Income from operations decreased in the third quarter of fiscal year 2022 due to increases in costs of revenue and operating expenses, offset by an increase to revenue.

Income from operations increased in the first nine months of fiscal year 2022 due to increases of revenue, offset by an increase in costs of revenue and operating expenses as shown above.

Other (Expense) Income, Net

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Interest expense $ (4,009) $ (6,510) 38 % $ (11,368) $ (13,625) 17 %

4 unchanged sentences

*not meaningful

Other expense, net, decreased in the second quarter and first six months of fiscal year 2022 as compared to the same periods last year primarily due to decreased foreign currency loss, net, in both periods, as well as higher interest income and other, net, which resulted from the recognition of grant income during the first quarter of fiscal year 2022.

Interest expense decreased in the second quarter of fiscal year 2022 as compared to the same period last year due to decreased interest expense on our convertible senior notes resulting from the adoption of ASU 2020-06.

Other expense, net, decreased in the third quarter and first nine months of fiscal year 2022 as compared to the same periods last year primarily due to decreased interest expense on our convertible senior notes resulting from the adoption of ASU 2020-06.

Refer to Note 1, Basis of Presentation for further details on the impact of adoption.

The decrease in interest expense on our convertible senior notes was offset by increased interest expense on our term loan, which was amended in the first quarter of fiscal year 2022.

Refer to Note 8, Debt.

for further details on the impact of the amendment.

Refer to Note 8:

Debt, for further details on the impact of the amendment.

Interest income and other, net, was higher in the first nine months of fiscal year 2022, resulting from the recognition of grant income during the first quarter of the year.

Foreign currency loss increased in the third quarter of fiscal year 2022 and decreased in the first nine months of fiscal year 2022.

Provision for Income Taxes

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Provision for income taxes $ 5,885 $ 8,531 (31) % $ 19,118 $ 17,841 7 %

As a percentage of total revenue 4 % 6 % 4 % 5 %

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.

Three Months Ended Six Months Ended

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

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.

Three Months Ended Nine Months Ended

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

Net income $ 21,797 $ 30,976 (30) % $ 71,361 $ 63,494 12 %

15 unchanged sentences

All periods are reported in constant currency, using current year budgeted exchange rates.

Our ARR was $486.0 million and $432.0 million as of May 31, 2022 and 2021, respectively, which is an increase

of 12.5% year-over-year.

Our ARR was $495.0 million and $439.0 million as of August 31, 2022 and 2021, respectively, which is an increase of 12.7% year-over-year.

The growth in our ARR is primarily driven by the acquisition of Kemp.

8 unchanged sentences

Cash, Cash Equivalents and Short-Term Investments

(In thousands) May 31, 2022 November 30, 2021

(In thousands) August 31, 2022 November 30, 2021

Cash and cash equivalents $ 224,115 $ 155,406

4 unchanged sentences

Except as described below, there are no limitations on our ability to access our cash, cash equivalents and short-term investments.

As of May 31, 2022, $56.1 million of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries.

As of August 31, 2022, $56.5 million of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries.

Foreign cash includes unremitted foreign earnings, which are invested indefinitely outside of the U.S.

4 unchanged sentences

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

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 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.

We began paying quarterly cash dividends to Progress stockholders in December 2016, and have paid a quarterly cash dividend since that time.

On June 21, 2022, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on September 15, 2022 to stockholders of record as of the close of business on September 1, 2022.

On September 23, 2022, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock which will be paid on December 15, 2022 to stockholders of record as of the close of business on December 1, 2022.

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

2 unchanged sentences

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

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

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

1 unchanged sentence

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.

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

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.

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, relating 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, relating to this restructuring.

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 short-term and long-term lease liabilities on the condensed 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.

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

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

Credit Facility

19 unchanged sentences

The amended credit agreement generally prohibits, with certain exceptions, any other liens on our assets and the assets of our subsidiaries, subject to certain exceptions as described in the amended credit agreement.

The amended credit agreement contains customary affirmative and negative covenants, including covenants that limit or restrict us and our subsidiaries’ 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 its 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.

exceptions for a credit facility of this size and type.

We are also required to maintain compliance with a consolidated interest charge coverage ratio and a consolidated total net leverage ratio.

1 unchanged sentence

The occurrence of an event of default could result in the acceleration of the obligations under the amended credit agreement.

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

The interest rate as

of May 31, 2022 was 2.63%.

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 (Note 8).

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

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.

Refer to Note 8:

Debt for further discussion.

Convertible Senior Notes

7 unchanged sentences

Cash Flows From Operating Activities

Six Months Ended

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

Nine Months Ended

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

Net income $ 71,361 $ 63,494

2 unchanged sentences

Net cash flows from operating activities $ 152,023 $ 134,602

In the first six months of fiscal year 2022, operating cash flows increased due to the acquisition of Kemp and particularly strong collections of our receivables, partially offset by higher compensation related payments as compared to the same period in 2021.

Our gross accounts receivable as of May 31, 2022, decreased by $34.8 million from the end of fiscal year 2021 and our days sales outstanding (DSO) in accounts receivable decreased to 39 days from 44 days in the second fiscal quarter of 2021 due to the timing of billings and collections.

In the first nine months of fiscal year 2022, operating cash flows increased due to the acquisition of Kemp and particularly strong collections of our receivables, partially offset by higher compensation related payments as compared to the same period in 2021.

Our gross accounts receivable as of August 31, 2022, decreased by $17.0 million from the end of fiscal year 2021 and our days sales outstanding (DSO) in accounts receivable decreased to 48 days from 54 days in the third fiscal quarter of 2021 due to the timing of billings and collections.

Cash Flows From Investing Activities

Six Months Ended

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

Nine Months Ended

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

Net investment activity $ 1,200 $ 4,150

5 unchanged sentences

In the second quarter of fiscal year 2022 we received $26.0 million net proceeds from the sale of long-lived assets.

We also purchased $2.0 million of property and equipment in the first six months of fiscal year 2022, as compared to $2.1 million in the first six months of fiscal year 2021.

We also purchased $3.1 million of property and equipment in the first nine months of fiscal year 2022, as compared to $2.7 million in the first nine months of fiscal year 2021.

Cash Flows (Used in) From Financing Activities

Six Months Ended

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

Nine Months Ended

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

Proceeds from stock-based compensation plans $ 10,384 $ 9,247

8 unchanged sentences

Net cash flows (used in) from financing activities $ (93,533) $ 142,948

During the first six months of fiscal year 2022, we received $5.5 million in net proceeds from the issuance of debt.

During the first six months of fiscal year 2021, we received $349.2 million in net proceeds from the issuance of convertible senior notes and paid $43.1 million to purchase capped calls in connection with the convertible note offering.

We also received $7.8 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan as compared to $6.3 million in the first six months of fiscal year 2021.

During the first nine months of fiscal year 2022, we received $5.5 million in net proceeds from the issuance of debt.

During the first nine months of fiscal year 2021, we received $349.2 million in net proceeds from the issuance of convertible senior notes and paid $43.1 million to purchase capped calls in connection with the convertible note offering.

We received $10.4 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan as compared to $9.2 million in the first nine months of fiscal year 2021.

Further, we repurchased $75.5 million of our common stock under our share repurchase plan compared to $35.0 million in the same period of the prior year.

We also made payments on our long-term debt of $3.4 million in the first six months of fiscal year 2022 compared to $106.0 million in the same period of the prior year (including a $98.5 million repayment on the revolving line of credit).

Finally, we made dividend payments of $15.6 million to our stockholders during the first six months of both fiscal year 2022 and 2021.

We also made payments on our long-term debt of $5.2 million in the first nine months of fiscal year 2022 compared to $111.7 million in the same period of the prior year (including a $98.5 million repayment on the revolving line of credit).

Finally, we made dividend payments of $23.4 million to our stockholders during the first nine months of both fiscal year 2022 and 2021.

Indemnification Obligations

15 unchanged sentences

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 2. Management’s Discussion and Analysis