What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-01-27 compared with 2022-01-27 · 230 added, 451 removed, 1040 unchanged (40% of the section changed)

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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, 2022, 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, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for convertible debt effective December 1, 2021 due to the adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, using the modified retrospective adoption method.

Basis for Opinion

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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.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition - Refer to Note 1 to the financial statements

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• 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.

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.

• We selected a sample of revenue arrangements, including those arrangements that we considered individually significant, and performed the following procedures:

– We obtained and read the contracts and related contract documentation.

– We evaluated whether the management properly identified the contract terms of the arrangements and tested management’s application of the Company’s policies.

– We tested management’s identification of the performance obligations.

– We tested the measurement of the arrangement consideration expected to be received.

– We tested whether the Company appropriately allocated the transaction price to the performance obligations, based on the estimated stand-alone selling prices.

– We tested whether the consideration allocated to each performance obligation was recognized in the correct accounting period.

/s/ Deloitte & Touche LLP

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97,834 99,815

Unbilled receivables and contract assets 25,816 24,917

Unbilled receivables and contract assets, net 29,158 25,816

Other current assets 42,784 39,549

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Total current assets 426,053 337,808

Long-term unbilled receivables and contract assets 17,464 17,133

Long-term unbilled receivables and contract assets, net 39,936 17,464

Property and equipment, net 14,927 14,345

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Other accrued liabilities 16,765 19,491

Short-term deferred revenue 205,021 166,387

Short-term deferred revenue, net 227,670 205,021

Total current liabilities 318,004 322,929

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Long-term operating lease liabilities 15,041 23,130

Long-term deferred revenue 47,359 26,908

Long-term deferred revenue, net 54,770 47,359

Deferred tax liabilities 4,628 14,163

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Amortization of acquired intangibles 46,868 31,996 20,049

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

Restructuring expenses 879 6,308 5,906

Acquisition-related expenses 4,603 4,102 3,637

Cyber incident 602 — —

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

Total operating expenses 375,386 336,762 272,308

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Net income $ 95,069 $ 78,420 $ 79,722

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 8,468 ) ( 2,439 ) 777

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

Unrealized gain (loss) on hedging activity, net of tax provision of $ 1,797 and $ 940 in 2022 and 2021, respectively, and a tax benefit of $ 1,176 in 2020

5,688 2,837 ( 3,625 )

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

Unrealized (loss) gain on investments, net of tax benefit of $ 4 and $ 20 in 2022 and 2021, respectively, and a tax provision of $ 32 in 2020

( 12 ) ( 63 ) 44

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

Total other comprehensive (loss) income, net of tax ( 2,792 ) 335 ( 2,804 )

Comprehensive income $ 92,277 $ 78,755 $ 76,918

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(in thousands) Number of Shares Amount

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

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

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

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

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

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

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

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

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

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

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

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Net income — — — 78,420 — 78,420

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

Other comprehensive income — — — — 335 335

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

Cumulative effect of adoption of ASU 2020-06 — — ( 47,456 ) 4,893 — ( 42,563 )

Issuance of stock under employee stock purchase plan 301 3 9,201 — — 9,204

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Stock-based compensation — — 37,094 — — 37,094

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 — — — ( 31,253 ) — ( 31,253 )

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Net income — — — 95,069 — 95,069

Other comprehensive income — — — — 335 335

Other comprehensive loss — — — — ( 2,792 ) ( 2,792 )

Balance, November 30, 2022 43,257 $ 433 $ 331,650 $ 101,656 $ ( 35,235 ) $ 398,504

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Non-cash lease expense 7,781 10,946 8,609

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

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

Loss on disposal of long-lived assets, net — 7 1,025

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

Deferred income taxes ( 7,602 ) ( 908 ) ( 2,622 )

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Income taxes payable ( 120 ) ( 2,251 ) 3

Deferred revenue 30,473 1,420 29,840

Deferred revenue, net 36,268 30,473 1,420

Net cash flows from operating activities 192,160 178,530 144,847

Cash flows used in investing activities:

Cash flows from (used in) investing activities:

Purchases of investments — — ( 5,009 )

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Decrease in escrow receivable and other 134 2,330 —

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

Cash flows from financing activities:

Net cash flows from (used in) investing activities 21,992 ( 250,335 ) ( 207,293 )

Cash flows (used in) from financing activities:

Proceeds from stock-based compensation plans 16,165 15,033 11,099

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Payment of issuance costs for long-term debt ( 2,262 ) ( 904 ) —

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

Net cash flows (used in) from financing activities ( 101,423 ) 132,113 3,080

Effect of exchange rate changes on cash ( 11,858 ) ( 2,892 ) 3,097

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

Net increase in cash and cash equivalents 100,871 57,416 ( 56,269 )

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

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Nature of Business and Summary of Significant Accounting Policies

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

Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") is dedicated to propelling business forward in a technology-driven world.

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

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.

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

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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.

We operate in North America, Latin America, Europe, the Middle East and Africa ("EMEA"), and Asia and Australia ("Asia Pacific"), through local subsidiaries as well as independent distributors.

Accounting Principles

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Ending balance $ 740 $ 552 $ 886

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

Concentrations of Credit Risk

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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.

and record derivative financial instruments at fair value.

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

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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.

At November 30, 2022 and 2021, the Company had no reserve for excess and obsolete inventories.

Property and Equipment

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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.

computer equipment and software, 3 to 7 years and furniture and fixtures, 5 to 7 years.

Repairs and maintenance costs are expensed as incurred.

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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

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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 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.

Factors that could indicate that an impairment may exist include significant underperformance relative to plan or long-term projections, significant changes in business strategy, significant negative industry or economic trends or a significant decline in our stock price for a sustained period of time.

The Company performed a quantitative assessment as of October 31, 2022 and 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 2022, 2021 or 2020.

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We did no t recognize any intangible asset impairment charges during fiscal years 2022, 2021 and 2020.

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

Comprehensive (Loss) Income

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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

Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Investments Unrealized (Losses) Gains on Hedging Activity Total

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

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

Other comprehensive (loss) income ( 2,439 ) ( 63 ) 2,837 335

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

1 unchanged sentence

Balance, November 30, 2022 $ ( 38,523 ) $ ( 61 ) $ 3,349 $ ( 35,235 )

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.

The tax effect on accumulated unrealized (losses) gains on hedging activity and unrealized gains (losses) on investments was a tax provision of $ 1.1 million as of November 30, 2022, and a tax benefit of $ 0.7 million and $ 1.6 million as of November 30, 2021, and November 30, 2020, respectively.

Revenue Recognition

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Software Licenses

Software licenses are on-premise and fully functional when made available to the customer.

Software licenses are on-premise or cloud-based 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.

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

Cyber Incident Costs

Following the detection of irregular activity on certain portions of our corporate network, we engaged outside cybersecurity experts and other incident response professionals to conduct a forensic investigation and assess the extent and scope of the cyber incident.

Cyber incident costs relate to the engagement of external cybersecurity experts and other incident response professionals.

We incurred $ 0.6 million of cyber incident costs for the fiscal year ended November 30, 2022.

Acquisition-Related Costs

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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.

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.

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.

On December 1, 2021, we early adopted Accounting Standards Update No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06") on a modified retrospective basis.

Under ASU 2020-06, we no longer separate the convertible senior notes into liability and equity components.

We recognized the cumulative effect of initially applying this new standard as of December 1, 2021 as an adjustment to the December 1, 2021 opening balance of retained earnings.

The conversion option that was previously accounted for in equity under the cash conversion model was recombined into the convertible debt outstanding, and as a result, additional paid in capital and the related unamortized debt discount on the convertible senior notes were reduced.

The removal of the remaining debt discount recorded for this previous separation has the effect of increasing our net debt balance.

We recorded 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.

There was no impact to the Company’s statements of cash flows as the result of the adoption of ASU 2020-06.

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

The adoption of ASU 2020-06 reduced non-cash interest expense in the current year and in future periods due to the de-recognition of the debt discount associated with the bifurcated components of our Notes.

As a result of the adoption of this guidance, interest expense decreased by $ 11.5 million.

For the fiscal year ending November 30, 2022, total interest expense for the Notes was $ 5.7 million.

The new standard requires the use of the "if-converted" method to calculate the diluted earnings per common share.

Recently Issued Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued Accounting Standards Update No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), as amended in December 2022 by Accounting Standards Update No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 ("ASU 2022-06").

ASU 2020-04 provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform.

The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2024, as amended by ASU 2022-06.

As of November 30, 2022, we have not adopted any expedients and exceptions under ASU 2020-04.

We will continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements.

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):

A summary of our cash and cash equivalents at November 30, 2022 is as follows (in thousands):

Amortized Cost Basis Unrealized

3 unchanged sentences

Money market funds 27,254 — — 27,254

treasury bonds 748 9 — 757

Corporate bonds 1,203 7 — 1,210

Total $ 256,277 $ — $ — $ 256,277

17 unchanged sentences

Total $ 256,277 $ — $ 155,406 $ 1,967

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)

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.

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

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

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

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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.

As of November 30, 2022 and November 30, 2021 , the fair value of the hedge was a gain of $ 4.4 million and a loss of $ 3.1 million, respectively, and was included in other assets and other noncurrent liabilities, respectively, on our consolidated balance sheets.

The net amount of accumulated other comprehensive loss reclassified to interest expense during fiscal years 2022 and 2021 was an increase of $ 0.7 million and $ 2.5 million, respectively.

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.

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

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

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

At November 30, 2022, $ 3.1 million and $ 0.1 million were recorded in other noncurrent liabilities and other current assets, respectively, on the 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 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.

In fiscal years 2022 and 2021, realized and unrealized losses of $ 7.7 million and $ 2.1 million, respectively, from our forward contracts were recognized in foreign currency loss, net on the consolidated statement of operations.

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

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

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Money market funds $ 27,254 $ 27,254 $ — $ —

treasury bonds 757 — 757 —

Corporate bonds 1,210 — 1,210 —

Foreign exchange derivatives ( 372 ) — ( 372 ) $ —

Interest rate swap 4,407 — 4,407 —

Foreign exchange derivatives $ ( 3,000 ) $ — $ ( 3,000 ) $ —

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):

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

Debt, inclusive of the conversion feature embedded in the Notes, was $ 376.0 million as of November 30, 2022 and $ 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.

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November 30, 2022 November 30, 2021

Raw materials $ 1,920 $ —

Work in process — —

Finished goods $ 2,409 $ 1,631

Purchased parts and fabricated assemblies 2,634 1,920

Total $ 5,043 $ 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.

At November 30, 2022 and November 30, 2021, the inventories balances of $ 5.0 million and $ 3.6 million, respectively, were recorded in other current assets on the consolidated balance sheets.

Property and Equipment

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Depreciation and amortization expense related to property and equipment was $ 5.0 million, $ 5.5 million, and $ 6.1 million for the years ended November 30, 2022, 2021, and 2020, respectively.

Refer to Note 1:

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

Intangible Assets and Goodwill

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Amortization expense related to these intangible assets was $ 68.9 million, $ 46.9 million, and $ 27.9 million in fiscal years 2022, 2021, and 2020, 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, 2022 is as follows (in thousands):

2023 $ 68,895

Thereafter 11,583

Total $ 217,355

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Additions (2)

179,521 59,858

Translation Adjustments ( 27 ) ( 18 )

Balance, end of year $ 671,037 $ 671,152

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

(1) Represents final measurement period adjustments related to our Kemp acquisition.

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.

(2) The additions to goodwill during fiscal year 2021 are related to the acquisition of Kemp in November 2021.

Refer to Note 8:

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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

The acquisition was completed for a base purchase price of $ 258.0 million (subject to certain customary adjustments) in cash.

The acquisition consideration for Kemp has been allocated to Kemp’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 first and fourth quarters of fiscal year 2022 based on our valuation and purchase price allocation procedures.

The measurement period adjustments were completed during the fourth quarter of fiscal year 2022.

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 $ 27,075 $ ( 425 ) $ 26,650

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

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

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

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During the fiscal year ended November 30, 2022, we incurred approximately $ 0.9 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.

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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.

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 existing revolving credit facility.

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

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

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

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

The measurement period adjustments were completed during the fourth quarter of fiscal year 2021.

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

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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.

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.

As of November 30, 2022, future maturities of the Company's long-term debt were as follows:

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

(In thousands) 2026 Notes Revolving Credit Facility Total

2023 $ — $ 6,875 $ 6,875

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2026 360,000 20,625 380,625

2027 — 206,250 206,250

Total face value of long-term debt 360,000 268,125 628,125

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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.

Convertible Senior Notes

In April 2021, the Company issued, in a private placement, Convertible Senior Notes (the "Notes") with an aggregate principal amount of $ 325 million, due April 15, 2026, unless earlier repurchased, redeemed or converted.

There are no required principal payments prior to the maturity of the Notes.

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The Notes bear interest at an annual rate of 1 %, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021.

Proceeds from the Notes:

(In thousands)

Principal $ 360,000

issuance costs ( 10,804 )

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

During the twelve months ended November 30, 2022, the Company did not enter into any new or amended agreements.

Conversion Rights

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From and after January 15, 2026, Noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will satisfy its conversion obligations by paying

cash up to the aggregate principal amount of Notes to be converted, by issuing shares of its common stock or a combination of cash and shares of its common stock, at its election.

The Company will satisfy its conversion obligations by paying cash up to the aggregate principal amount of Notes to be converted, by issuing shares of its common stock or a combination of cash and shares of its common stock, at its election.

The initial conversion rate is 17.4525 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of approximately $ 57.30 per share of common stock.

1 unchanged sentence

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.

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.

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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 Company adopted ASU 2020-06 using the modified retrospective approach on December 1, 2021.

Under ASU 2020-06, we no longer separate the Notes into liability and equity components.

We recognized the cumulative effect of applying this new standard as of December 1, 2021.

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

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

• The equity component, which represents the difference between the gross proceeds and the initial liability component, was recorded as an increase to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

The Company incurred issuance costs of $ 10.8 million related to the Notes, allocated between the Notes’ liability and equity components proportionate to the initial carrying amount of the liability and equity components.

• Issuance costs attributable to the liability component of $ 8.9 million are recorded as an offset to the Notes’ principal balance.

They are amortized as interest expense using the effective interest method over the contractual term of the Notes.

• Issuance costs attributable to the equity component of $ 1.9 million are recorded as an offset to the equity component in additional paid-in capital and are not amortized.

Net carrying amount of the liability component:

The excess of the Notes’ principal amount over the initial carrying amount of the liability component, referred to as the debt discount, was amortized as interest expense over the Notes’ contractual term.

(In thousands) November 30, 2021

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Unamortized discount ( 665 )

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

Net carrying amount of the liability component $ 294,535

• The equity component, which represented the difference between the gross proceeds and the initial liability component, was recorded as an increase to additional paid-in capital and was not remeasured.

(In thousands) November 30, 2021

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Capped call ( 43,056 )

Net carrying amount of the equity component $ 19,799

(1) Net of issuance costs

Twelve Months Ended

Upon adoption of ASU 2020-06 on December 1, 2021, the Company reversed the separation of the debt and equity components and accounted for the Notes wholly as debt.

The Company also reversed the amortization of the debt discount that was due to the equity component, with a cumulative adjustment to retained earnings on the adoption date.

Further, the Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost that will be amortized as interest expense over the remaining term at an effective interest rate of 1.63 % with a cumulative adjustment to retained earnings on the adoption date.

Net carrying amount of the Notes:

(In thousands) November 30, 2022

Principal $ 360,000

Unamortized discount ( 7,375 )

Fiscal Year Ended

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

Contractual interest expense ( 1 % coupon)

Amortization of debt discount (1)

Amortization of issuance costs (1)

(1) Amortized based upon an effective interest rate of 5.7 %.

$ 3,600 $ 2,280

Amortization of debt discount and issuance costs (1)

$ 5,712 $ 10,475

(1) After the adoption of ASU 2020-06, the effective interest rate for the Notes was 1.63 %.

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

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.

On January 25, 2022, the Company entered into the Credit Agreement, which provides for a $ 275.0 million secured term loan and a $ 300.0 million secured revolving line of credit.

The revolving line of credit may be increased, and new term loan commitments may be entered into, 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.

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

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

Interest rates for the Credit Agreement are determined by reference to a term benchmark rate or a base rate at our option and would range from 1.00 % to 2.00 % above the term benchmark rate or would range from 0.00 % to 1.00 % above the defined base rate for base rate borrowings, in each case based upon our leverage ratio.

Additionally, we may borrow certain foreign currencies at rates set in the same range above the respective term benchmark rates for those currencies, based on our leverage ratio.

We will incur a quarterly commitment fee on the undrawn portion of the revolving credit facility, ranging from 0.125 % to 0.275 % per annum, based on our leverage ratio.

The average interest rate of the credit facility during the fiscal year ended November 30, 2022 was 2.85 % and the interest rate as of November 30, 2022 was 5.69 %.

The credit facility matures on April 30, 2024, when all amounts outstanding will be due and payable in full.

The credit facility matures on the earlier of (i) January 25, 2027, and (ii) the date that is 181 days prior to the maturity date of our Notes subject to certain conditions as set forth in the Credit Agreement, including the repayment of the Notes, the refinancing of the Notes including a maturity date that is at least 181 days after January 25, 2027 and compliance with a liquidity test 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, 2022 was $ 268.1 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 August 31, 2019.

The term loan requires repayment of principal at the end of each fiscal quarter, beginning with the fiscal quarter ended February 28, 2022.

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.

(i) eight payments of $ 1.7 million each, (ii) four payments of $ 3.4 million each, (iii) eight payments of $ 5.2 million each, and (iv) 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

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.

The term loan may be prepaid

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

As of November 30, 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.

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 consolidated balance sheets as of November 30, 2022.

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 $ 0.6 million for the fiscal years ended November 30, 2022, 2021 and 2020 and is recorded in interest expense on our consolidated statements of operations.

Revolving loans may be borrowed, repaid, and reborrowed until January 25, 2027, at which time all amounts outstanding must be repaid.

As of November 30, 2022, there were no outstanding amounts under the revolving line of credit and $ 2.1 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.

Our obligations under the Credit Agreement are guaranteed by each of our material domestic subsidiaries and are secured by substantially all of our assets and such 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.

The 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 Credit Agreement.

The 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.

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

The Credit Agreement includes customary events of default that include, among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, cross default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults and a change of control default.

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

We are in compliance with these financial covenants as of November 30, 2022.

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

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.

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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):

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 years ended November 30, 2022, 2021 and 2020 were as follows (in thousands):

Fiscal Year Ended

November 30, 2021

November 30, 2022 November 30, 2021 November 30, 2020

Lease costs under long-term operating leases $ 7,079 $ 7,867 $ 7,605

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

The table below presents supplemental cash flow information related to leases during the year ended November 30, 2021 (in thousands):

The table below presents supplemental cash flow information related to leases during the years ended November 30, 2022, 2021 and 2020 (in thousands):

Fiscal Year Ended

November 30, 2021

November 30, 2022 November 30, 2021 November 30, 2020

Cash paid for leases $ 8,571 $ 8,406 $ 8,101

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

November 30, 2021

November 30, 2022 November 30, 2021

Weighted average remaining lease term in years 3.33 4.15

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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.

In fiscal years 2022, 2021, and 2020, we repurchased and retired 1.7 million, 0.8 million and 1.4 million shares of our common stock for $ 77.0 million, $ 35.0 million and $ 60.0 million, respectively, under this current authorization.

As of November 30, 2022, there was $ 78.0 million remaining under the current authorization.

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.

On January 10, 2023, our Board of Directors increased our share repurchase authorization by $ 150.0 million, to an aggregate authorization of $ 228.0 million.

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.

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 and most recently amended and approved by stockholders in May 2021 ("2008 Plan").

The 2008 Plan permits the granting of stock awards to officers, members of the Board of Directors, employees and consultants.

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A total of 4,719,864 shares were available for issuance as of November 30, 2022.

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

We have previously 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").

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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.

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

A summary of stock option activity under all the plans is as follows:

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Vested or expected to vest, November 30, 2022 2,480 $ 41.73 4.3 $ 27,609

(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.

(1) The aggregate intrinsic value was calculated based on the difference between the closing price of our stock on November 30, 2022 and the exercise prices for all options outstanding.

A summary of restricted stock units' activity is as follows (in thousands, except per share data):

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During the first quarter of fiscal years 2020, 2021, and 2022, 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:

Vesting of the LTIP awards for the 2020 plan 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:

For the 2021 and 2022 plans, 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.

The vesting of LTIP awards is also subject to continued employment of the grantees through the performance period, except in the event of a qualifying termination.

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 1991 Employee Stock Purchase Plan was most recently amended and approved by stockholders in May 2021 ("ESPP") and 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

If the market price at any of the nine purchase periods is less than the market price

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

We issued 301,000 shares, 277,000 shares, and 237,000 shares with weighted average purchase prices of $ 30.59 , $ 28.20 , and $ 27.86 per share, respectively, in fiscal years 2022, 2021, and 2020, respectively.

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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):

The timing of revenue recognition may differ from the timing of customer billing.

When revenue is recognized prior to billing 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 billing and the recognition of unbilled receivables.

As of November 30, 2022, billing of our long-term unbilled receivables is expected to occur as follows (in thousands):

2024 $ 17,594

Total $ 39,936

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.

Contract assets arise when revenue is recognized in excess of billings 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.

Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

We did not have any net contract assets as of November 30, 2022 and $ 5.0 million as of November 30, 2021.

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

Deferred Revenue

Deferred revenue is recorded when revenue is recognized subsequent to customer invoicing.

Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

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):

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

As of November 30, 2022, the changes in net deferred revenue were as follows (in thousands):

Balance, December 1, 2021 $ 252,380

Billings and other 632,073

Acquired from business combinations 29,997

Revenue recognized 602,013

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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, 2022 and November 30, 2021, we incurred expenses of $ 0.5 million and $ 2.0 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

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Balance, November 30, 2022 $ — $ 30 $ 30

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.

Minimal cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2023.

Accordingly, the minimal balance of the restructuring reserve is included in other accrued liabilities on the consolidated balance sheet at November 30, 2022.

We do not expect to incur additional material expenses as part of this action during fiscal year 2023.

2020 Restructurings

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

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

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

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

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 $ — $ — $ —

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.

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 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.

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

For the fiscal years ended November 30, 2022, 2021 and 2020, we incurred expenses of $ 0.4 million, $ 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.

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Translation adjustments and other — 5 5

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

Balance, November 30, 2020 $ — $ 3,523 $ 3,523

Costs incurred 3,323 826 4,149

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

Asset impairment — — —

Translation adjustments and other 1,615 8 1,623

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Cash disbursements ( 1,027 ) ( 7 ) ( 1,034 )

Translation adjustments and other 1 — 1

Balance, November 30, 2022 $ 3,870 $ — $ 3,870

We do not expect to incur additional material costs with respect 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 reserve of $ 3.9 million is included in short-term and long-term lease liabilities on the consolidated balance sheet at November 30, 2022.

We expect to incur additional expenses as part of this action related to facility closures as we consolidate offices in various locations during fiscal year 2023, but we do not expect these costs to be material.

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

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Research credits ( 1,268 ) ( 410 ) ( 905 )

Domestic production activities deduction — — ( 248 )

Tax-exempt interest — — ( 3 )

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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.

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.

fiscal year 2022, our aggregate effective income tax rate in foreign jurisdictions is not materially different than our effective income tax rate in the United States.

Our effective tax rate differed from the statutory U.S.

Federal income tax rate primarily due to the net effects of the foreign derived intangible income (FDII) regime.

In fiscal years 2021 and 2020 our aggregate effective income tax rate in foreign jurisdictions was lower than our effective income tax rate in the United States.

A significant portion of income before provision for income taxes from foreign operations has been earned by subsidiaries with statutory income tax rates lower than the statutory U.S.

Federal income tax rate.

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

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The $ 1 million decrease in the valuation allowance during fiscal year 2022 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, 2022, we have federal and foreign net operating loss carryforwards of $ 96.9 million expiring on various dates through 2036 and $ 19.4 million that do not expire.

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subsidiaries, which totaled $ 106.6 million as of November 30, 2022, 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.

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

In fiscal year 2022 there was a minimal amount of estimated interest and penalties recorded in the 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.

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

We have accrued $ 1.3 million and $ 1.2 million of estimated interest and penalties at November 30, 2022 and 2021, respectively.

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Weighted average shares outstanding 43,475 43,916 44,886

Dilutive impact from common stock equivalents 704 435 549

Basic earnings per common share $ 2.19 $ 1.79 $ 1.78

Diluted earnings per common share:

Net income $ 95,069 $ 78,420 $ 79,722

Weighted average shares outstanding 43,475 43,916 44,886

Effect of dilution from common stock equivalents 772 704 435

Diluted weighted average shares outstanding 44,247 44,620 45,321

Basic earnings per share $ 1.79 $ 1.78 $ 0.59

Diluted earnings per share $ 2.15 $ 1.76 $ 1.76

We excluded stock awards representing approximately 1,751,000 shares, 1,232,000 shares, and 1,268,000 shares of common stock from the calculation of diluted earnings per share in the fiscal years ended November 30, 2022, 2021 and 2020, respectively, because these awards 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 fiscal year ended November 30, 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.

Business Segments and International Operations

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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 applications.

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at the end of fiscal years 2022, 2021, and 2020, respectively.

No individual country outside of the U.S.

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

During the fiscal year ended November 30, 2022, two countries outside of the U.S.

accounted for more than 10% of our consolidated long-lived assets, and no individual country outside of the U.S.

accounted for more than 10% of our consolidated long-lived assets in 2021 and 2020.

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.

On January 3, 2023, we entered into a definitive agreement with Vector Maven Holdings, Inc.

and Vector Maven Holdings, L.P., subject to the satisfaction of the terms and conditions set forth in the definitive agreement, to acquire MarkLogic, a leader in managing complex data and metadata.

Upon closing of the proposed transaction, MarkLogic is expected to enhance Progress’ commitment to delivering the best products to develop, deploy and manage high-impact applications by providing a unified enterprise-grade semantic data platform that empowers customers to derive value from complex data.

The acquisition is currently expected to close in early 2023, subject to obtaining regulatory approvals and satisfaction of other customary closing conditions set forth in the definitive agreement.

At closing, we will acquire all of the outstanding equity interests of Vector Maven Holdings, Inc.

from Vector Maven Holdings, L.P.

for an aggregate purchase price of approximately $ 355 million, subject to certain working capital and customary other adjustments, to be paid in cash.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data