What changed in this filing

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Item 1. Financial Statements

2023-07-07 compared with 2023-04-07 · 149 added, 93 removed, 401 unchanged (38% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

(In thousands, except share data) February 28, 2023 November 30, 2022

(In thousands, except share data) May 31, 2023 November 30, 2022

Current assets:

Cash and cash equivalents $ 125,531 $ 256,277

Short-term investments 14,944 —

Total cash, cash equivalents and short-term investments 122,925 256,277

Accounts receivable (less allowances of $ 701 and $ 859 , respectively)

41 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended

(In thousands, except per share data) February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

(In thousands, except per share data) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Software licenses $ 56,407 $ 44,814 $ 113,975 $ 87,564

12 unchanged sentences

Amortization of acquired intangibles 17,546 11,892 31,157 23,614

Cyber incident 2,692 —

Cyber incident and vulnerability response expenses, net 1,483 — 4,175 —

Restructuring expenses 3,990 143 5,387 654

Acquisition-related expenses 1,991 2,736 3,734 3,648

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

Total operating expenses 121,446 84,555 223,867 176,833

17 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended

(In thousands) February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

(In thousands) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Net income $ 12,090 $ 29,110 $ 35,764 $ 49,564

1 unchanged sentence

Foreign currency translation adjustments 1,720 ( 5,104 ) 3,457 ( 3,323 )

Unrealized (loss) gain on hedging activity, net of tax benefit of $ 45 and a tax provision of $ 522 for the first quarter of 2023 and 2022, respectively

Unrealized gain on hedging activity, net of tax benefit of $ 250 and $ 295 for the second quarter and first six months of 2023, respectively and net of tax provision of $ 643 and $ 1,165 for the second quarter and first six months of 2022, respectively

( 812 ) 2,038 ( 939 ) 3,691

Unrealized loss on investments, net of tax provision of $ 4 and a tax benefit of $ 3 for the first quarter of 2023 and 2022, respectively

Unrealized loss on investments, net of tax benefit of $ 4 and $ 0 for the second quarter and first six months of 2023, respectively and net of a tax benefit of $ 1 and $ 4 for the second quarter and first six months of 2022, respectively

21 ( 5 ) — ( 12 )

Total other comprehensive income, net of tax 929 ( 3,071 ) 2,518 356

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended February 28, 2023

Six Months Ended May 31, 2023

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

10 unchanged sentences

Other comprehensive income — — — — 2,518 2,518

Balance, February 28, 2023 43,307 $ 433 $ 338,370 $ 108,286 $ ( 33,646 ) $ 413,443

Three Months Ended February 28, 2022

Balance, May 31, 2023 43,358 $ 436 $ 347,101 $ 103,995 $ ( 32,717 ) $ 418,815

Three Months Ended May 31, 2023

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

(in thousands) Number of Shares Amount

Balance, March 1, 2023 43,307 $ 433 $ 338,370 $ 108,286 $ ( 33,646 ) $ 413,443

Issuance of stock under employee stock purchase plan 95 1 3,482 — — 3,483

Exercise of stock options 119 2 4,764 — — 4,766

Vesting of restricted stock units and release of deferred stock units 163 2 ( 2 ) — — —

Withholding tax payments related to net issuance of RSUs ( 57 ) — ( 3,284 ) — — ( 3,284 )

Stock-based compensation — — 10,287 — — 10,287

Dividends declared — — — ( 7,899 ) — ( 7,899 )

Treasury stock repurchases and retirements ( 269 ) ( 2 ) ( 6,516 ) ( 8,482 ) — ( 15,000 )

Net income — — — 12,090 — 12,090

Other comprehensive income — — — — 929 929

Balance, May 31, 2023 43,358 $ 436 $ 347,101 $ 103,995 $ ( 32,717 ) $ 418,815

Six Months Ended May 31, 2022

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

(in thousands) Number of Shares Amount

Balance, December 1, 2021 44,146 $ 441 $ 354,235 $ 90,256 $ ( 32,443 ) $ 412,489

9 unchanged sentences

Other comprehensive income — — — — 356 356

Balance, February 28, 2022 43,766 $ 438 $ 303,240 $ 93,661 $ ( 29,016 ) $ 368,323

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

Three Months Ended May 31, 2022

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

(in thousands) Number of Shares Amount

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

Issuance of stock under employee stock purchase plan 115 1 3,385 — — 3,386

Exercise of stock options 41 1 1,600 — — 1,601

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

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

Stock-based compensation — — 9,357 — — 9,357

Dividends declared — — — ( 7,821 ) — ( 7,821 )

Treasury stock repurchases and retirements ( 566 ) ( 6 ) ( 5,402 ) ( 21,065 ) — ( 26,473 )

Net income — — — 29,110 — 29,110

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

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

Condensed Consolidated Statements of Cash Flows

Three Months Ended

(In thousands) February 28, 2023 February 28, 2022

Six Months Ended

(In thousands) May 31, 2023 May 31, 2022

Cash flows from operating activities:

7 unchanged sentences

Loss on disposal of long-lived assets, net — 8

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

Deferred income taxes ( 11,036 ) 1,735

14 unchanged sentences

Payments for acquisitions, net of cash acquired ( 356,096 ) —

Net cash flows used in investing activities ( 371,068 ) ( 531 )

Proceeds from sale of long-lived assets, net — 25,998

Net cash flows (used in) from investing activities ( 357,627 ) 24,919

Cash flows from (used in) financing activities:

4 unchanged sentences

Proceeds from the issuance of debt 195,000 7,474

Payment of principal on long-term debt ( 1,719 ) ( 1,719 )

Repayment of revolving line of credit ( 25,000 ) —

Principal payment on term loan ( 3,437 ) ( 3,435 )

Payment of debt issuance costs — ( 1,957 )

Net cash flows from (used in) financing activities 128,956 ( 62,598 )

Effect of exchange rate changes on cash 1,207 729

Effect of exchange rate changes on cash and cash equivalents 3,207 ( 5,217 )

Net (decrease) increase in cash and cash equivalents ( 130,746 ) 69,457

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows, continued

Three Months Ended

February 28, 2023 February 28, 2022

Six Months Ended

May 31, 2023 May 31, 2022

Supplemental disclosure:

4 unchanged sentences

Total fair value of restricted stock awards, restricted stock units and deferred stock units on date vested $ 23,077 $ 18,204

Dividends declared $ 8,141 $ 8,062

Dividends declared and unpaid $ 8,192 $ 8,094

See notes to unaudited condensed consolidated financial statements.

20 unchanged sentences

The most significant estimates relate to revenue recognition and business combinations.

Refer to Note 1 to our Consolidated Financial Statements in Item 8 of our 2022 Annual Report for further information.

There have been no significant changes to our critical accounting policies and estimates since our 2022 Annual Report.

Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

Reference Rate Reform

6 unchanged sentences

The provisions apply only to those transactions that reference the London Interbank Offered Rate ("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 February 28, 2023, 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 February 28, 2023 is as follows (in thousands):

The Company adopted ASU 2020-04 in June 2023, in connection with the amendment of its interest rate swap agreement to implement certain changes in the reference rate from LIBOR to the Secured Overnight Financing Rate ("SOFR").

The application of this expedient preserves the cash flow hedge designation of the interest rate swaps and presentation consistent with past presentation and did not have a material impact on our consolidated financial statements.

Cash and Cash Equivalents

A summary of our cash and cash equivalents at May 31, 2023 is as follows (in thousands):

Amortized Cost Basis Unrealized Gains Unrealized Losses Fair Value

1 unchanged sentence

Money market funds 109 — — 109

Commercial papers 4,781 — — 4,781

treasuries 2,764 — ( 1 ) 2,763

government agency bonds 8,816 — ( 16 ) 8,800

Total $ 125,531 $ — $ — $ 125,531

4 unchanged sentences

Total $ 256,277 $ — $ — $ 256,277

The debt securities have a remaining contractual maturity of one year or less as of February 28, 2023.

There were no debt securities by contractual maturity due after one year as of May 31, 2023.

Derivative Instruments

3 unchanged sentences

Under this interest rate swap contract, we receive a floating rate based on the greater of 1-month LIBOR or 0.00 %, and pay a fixed rate of 1.855 % on the outstanding notional amount .

In June 2023, the interest rate swap agreement was amended to implement certain changes in the reference rate from LIBOR to SOFR.

We have designated the interes t rate swap as a cash flow hedge and assess the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative.

1 unchanged sentence

Although we have 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 February 28, 2023 , the fair value of the hedge was a gain of $ 4.2 million, which was included in other assets on our condensed consolidated balance sheets.

The net amount of accumulated other comprehensive loss reclassified to interest expense during the three months ended February 28, 2023 and February 28, 2022 was a decrease of $ 0.7 million and an increase of $ 0.6 million, respectively.

As of May 31, 2023, the fair value of the hedge was a gain of $ 3.2 million, which was included in other current assets on our condensed consolidated balance sheets.

The net amount of accumulated other comprehensive loss reclassified to interest expense during the six months ended May 31, 2023 and May 31, 2022 was a decrease of $ 1.6 million and an increase of $ 1.0 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 scheduled principal payments.

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

February 28, 2023 November 30, 2022

May 31, 2023 November 30, 2022

Notional Value Fair Value Notional Value Fair Value

4 unchanged sentences

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

At February 28, 2023, $ 0.1 million and $ 3.0 million was recorded in other accrued liabilities and other noncurrent liabilities, respectively, on our condensed consolidated balance sheets.

At May 31, 2023, $ 2.9 million was recorded in other accrued liabilities on our condensed consolidated balance sheets.

At November 30, 2022, $ 3.1 million and $ 0.1 million were recorded in other noncurrent liabilities and other current assets, respectively, on our condensed consolidated balance sheets.

In the three months ended February 28, 2023 and February 28, 2022, realized and unrealized gains of $ 0.5 million and $ 0.3 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

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

In the three and six months ended May 31, 2023, realized and unrealized gains of $ 1.1 million and $ 1.6 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

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

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

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

February 28, 2023 November 30, 2022

May 31, 2023 November 30, 2022

Notional Value Fair Value Notional Value Fair Value

6 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at February 28, 2023 (in thousands):

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at May 31, 2023 (in thousands):

Fair Value Measurements Using

1 unchanged sentence

Money market funds $ 109 $ 109 $ — $ —

Commercial papers 4,781 398 4,383 —

treasuries 2,763 498 2,265 —

government agency bonds 8,800 504 8,296 —

Interest rate swap 3,173 — 3,173 —

12 unchanged sentences

Fair Value of the Convertible Senior Notes

The fair value of our Convertible Senior Notes, with a carrying value of $ 353.2 million and $ 352.6 million, was $ 394.7 million and $ 376.0 million as of February 28, 2023 and November 30, 2022, respectively.

The fair value of our Convertible Senior Notes, with a carrying value of $ 353.7 million and $ 352.6 million, was $ 404.1 million and $ 376.0 million as of May 31, 2023 and November 30, 2022, respectively.

The fair value was determined based on the 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.

6 unchanged sentences

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

February 28, 2023 November 30, 2022

May 31, 2023 November 30, 2022

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

4 unchanged sentences

Total $ 787,719 $ ( 383,204 ) $ 404,515 $ 558,619 $ ( 341,264 ) $ 217,355

In the first quarter of fiscal years 2023 and 2022, amortization expense related to intangible assets was $ 19.9 million and $ 17.2 million, respectively.

Future amortization expense for intangible assets as of February 28, 2023, is as follows (in thousands):

In the three and six months ended May 31, 2023, amortization expense related to intangible assets was $ 25.5 million and $ 45.4 million, respectively.

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

Future amortization expense for intangible assets as of May 31, 2023, is as follows (in thousands):

Remainder of 2023 $ 50,970

1 unchanged sentence

Total $ 404,515

Changes in the carrying amount of goodwill in the three months ended February 28, 2023 are as follows (in thousands):

Changes in the carrying amount of goodwill in the six months ended May 31, 2023 are as follows (in thousands):

Balance, November 30, 2022 $ 671,037

1 unchanged sentence

Translation adjustments 8

Balance, February 28, 2023 $ 811,859

Balance, May 31, 2023 $ 825,944

(1) The additions to goodwill during fiscal year 2023 are related to the acquisition of MarkLogic in February 2023.

6 unchanged sentences

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

Preliminary Purchase Price Allocation Life

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

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

Net working capital $ 49,477 $ ( 799 ) $ 48,678

16 unchanged sentences

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

During the three months ended February 28, 2023, we incurred approximately $ 1.5 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

The amount of MarkLogic revenue and related earnings included in the consolidated statements of operations in the period subsequent to acquisition is not material.

During the three and six months ended May 31, 2023, we incurred approximately $ 2.1 million and $ 3.5 million, respectively, of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

The amount of revenue of MarkLogic included in our consolidated statement of operations during the three and six months ended May 31, 2023, was approximately $ 25.3 million and $ 30.3 million, respectively.

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

Pro Forma Information

5 unchanged sentences

The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on December 1, 2021.

(in thousands, except per share data) Pro Forma Three Months Ended February 28, 2023 Pro Forma Three Months Ended February 28, 2022

(in thousands, except per share data) Pro Forma Three Months Ended May 31, 2022

Revenue $ 171,111

2 unchanged sentences

Net income per diluted share $ 0.49

As of February 28, 2023, future maturities of the Company's long-term debt were as follows:

(in thousands, except per share data) Pro Forma Six Months Ended May 31, 2023 Pro Forma Six Months Ended May 31, 2022

Revenue $ 381,327 $ 336,933

Net income $ 44,996 $ 32,375

Net income per basic share $ 1.04 $ 0.74

Net income per diluted share $ 1.01 $ 0.73

As of May 31, 2023, future maturities of the Company's long-term debt were as follows:

(In thousands) 2026 Notes Revolving Line of Credit Term Loan Total

8 unchanged sentences

Long-term debt $ 353,696 $ 170,000 $ 252,666 $ 776,362

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

As of February 28, 2023, there was $ 195.0 million outstanding under the revolving line of credit.

The revolving line of credit has a term that ends on January 25, 2027, at which time all amounts outstanding must be repaid.

During February 2023, we partially funded our acquisition of MarkLogic by drawing down $ 195.0 million under the revolving line of credit.

As of May 31, 2023, there was $ 170.0 million outstanding under the revolving line of credit.

Common Stock Repurchases

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

In the three months ended February 28, 2023 and February 28, 2022, we repurchased and retired 0.3 million shares for $ 15.0 million and 0.6 million shares for $ 25.0 million, respectively.

In the three months ended May 31, 2023 and May 31, 2022, we repurchased and retired 0.3 million shares for $ 15.0 million and 0.6 million shares for $ 26.5 million, respectively.

In the six months ended May 31, 2023 and May 31, 2022, we repurchased and retired 0.5 million shares for $ 30.0 million and 1.1 million shares for $ 51.5 million, respectively.

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

As of February 28, 2023, there was $ 213.0 million remaining under the current authorization.

As of May 31, 2023, there was $ 198.0 million remaining under the current authorization.

Stock-Based Compensation

9 unchanged sentences

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

Three Months Ended

February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Cost of maintenance and services $ 729 $ 472 $ 1,349 $ 883

4 unchanged sentences

Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss during the three months ended February 28, 2023 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive loss during the six months ended May 31, 2023 (in thousands):

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

1 unchanged sentence

Other comprehensive income (loss) before reclassifications, net of tax 3,457 — ( 939 ) 2,518

Balance, February 28, 2023 $ ( 36,786 ) $ ( 82 ) $ 3,222 $ ( 33,646 )

The tax effect on accumulated unrealized gains (losses) on hedging activity and unrealized losses on investments was a tax provision of $ 1.1 million as of February 28, 2023 and November 30, 2022.

Balance, May 31, 2023 $ ( 35,066 ) $ ( 61 ) $ 2,410 $ ( 32,717 )

The tax effect on accumulated unrealized gains (losses) on hedging activity and unrealized losses on investments was a tax provision of $ 0.8 million and $ 1.1 million as of May 31, 2023 and November 30, 2022, respectively.

Revenue Recognition

2 unchanged sentences

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

Three Months Ended

(In thousands) February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

(In thousands) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Performance obligations transferred at a point in time:

10 unchanged sentences

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

Three Months Ended

(In thousands) February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

(In thousands) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

North America $ 105,732 $ 85,394 $ 204,560 $ 163,487

4 unchanged sentences

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

has accounted for more than 10% of our total revenue for the three months ended February 28, 2023 and February 28, 2022.

has accounted for more than 10% of our total revenue for the three and six months ended May 31, 2023 and May 31, 2022.

Contract Balances

Unbilled Receivables and Contract Assets

As of February 28, 2023, billing of our long-term unbilled receivables is expected to occur as follows (in thousands):

As of May 31, 2023, billing of our long-term unbilled receivables is expected to occur as follows (in thousands):

2024 $ 12,880

1 unchanged sentence

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 February 28, 2023 or November 30, 2022.

We did not have any net contract assets as of May 31, 2023 or November 30, 2022.

Deferred Revenue

1 unchanged sentence

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

As of February 28, 2023, the changes in net deferred revenue were as follows (in thousands):

As of May 31, 2023, the changes in net deferred revenue were as follows (in thousands):

Balance, December 1, 2022 $ 282,440

1 unchanged sentence

Revenue recognized ( 342,477 )

Balance, February 28, 2023 $ 301,847

As of February 28, 2023, transaction price allocated to remaining performance obligations was $ 309 million.

Balance, May 31, 2023 $ 283,637

As of May 31, 2023, transaction price allocated to remaining performance obligations was $ 288 million.

We expect to recognize approximately 80 % of the revenue within the next year and the remainder thereafter.

4 unchanged sentences

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

Total deferred contract costs were $ 8.4 million and $ 8.8 million as of February 28, 2023 and November 30, 2022, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

Total deferred contract costs were $ 7.7 million and $ 8.8 million as of May 31, 2023 and November 30, 2022, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

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

Restructuring Charges

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

The following table provides a summary of activity for our restructuring actions (in thousands):

Excess Facilities and Other Costs Employee Severance and Related Benefits Total

2 unchanged sentences

Cash disbursements ( 781 ) ( 1,381 ) ( 2,162 )

Balance, February 28, 2023 $ 3,705 $ 1,103 $ 4,808

During the first quarter of fiscal year 2023, we restructured our operations in connection with the acquisition of MarkLogic, which resulted in a reduction in redundant positions, primarily within administrative functions.

Translation adjustments and other — ( 11 ) ( 11 )

Balance, May 31, 2023 $ 3,537 $ 3,577 $ 7,114

During fiscal year 2023, we restructured our operations in connection with the acquisition of MarkLogic, which resulted in a reduction in redundant positions, primarily within administrative functions.

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

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

Our effective tax rate was 21 % in the first fiscal quarter of both 2023 and 2022.

There were no significant discrete tax items in the first fiscal quarter of either 2023 or 2022.

Our federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2019.

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

Tax authorities for certain non-U.S.

jurisdictions are also examining returns.

With some exceptions, we are generally not subject to tax examinations in non-U.S.

jurisdictions for years prior to fiscal year 2017 because they are closed by statute.

We expect to incur additional expenses as part of these actions related to employee costs and facility closures during fiscal year 2023, but we do not expect these costs to be material.

Earnings per share

2 unchanged sentences

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

Three Months Ended

February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Net income $ 12,090 $ 29,110 $ 35,764 $ 49,564

7 unchanged sentences

Diluted earnings per share $ 0.27 $ 0.66 $ 0.81 $ 1.11

We excluded stock awards representing approximately 340,000 and 1,536,000 shares of common stock from the calculation of diluted earnings per share in the three months ended February 28, 2023 and February 28, 2022, respectively, as these awards were anti-dilutive.

We excluded stock awards representing approximately 268,000 and 304,000 shares of common stock from the calculation of diluted earnings per share in the three and six months ended May 31, 2023, respectively, as these awards were anti-dilutive.

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

The dilutive impact of the Notes on our calculation of diluted earnings per share is considered using the if-converted method.

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

During the three months ended February 28, 2023, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money.

During the three and six months ended May 31, 2023, 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.

Segment Information

5 unchanged sentences

As we operate as one operating segment, the required financial segment information can be found in the condensed consolidated financial statements.

Cyber Related Matters

November 2022 Cyber Incident

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 $ 1.5 million and $ 4.2 million of cyber incident costs for the three and six month periods ended May 31, 2023, respectively.

Costs are provided net of received and expected insurance recoveries of approximately $ 3.0 million, which was recognized during the first quarter of fiscal year 2023.

The timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses.

MOVEit Vulnerability

On the evening of May 28, 2023, our MOVEit technical support team received an initial customer support call indicating unusual activity within their MOVEit Transfer instance.

An investigative team was mobilized and, on May 30, 2023, the

investigative team discovered a zero-day vulnerability in MOVEit Transfer (including our cloud-hosted version of MOVEit Transfer known as MOVEit Cloud).

The investigative team determined the zero-day vulnerability (the “MOVEit Vulnerability”) could provide for unauthorized escalated privileges and access to the customer’s underlying environment in both MOVEit Transfer (the on-premise version) and MOVEit Cloud (a cloud-hosted version of MOVEit Transfer that we deploy in both (i) a public cloud format, as well as (ii) for a small group of customers, in a customer-dedicated cloud instance which is managed separately from the public-cloud).

The Company has engaged outside cybersecurity experts and other incident response professionals to conduct a forensic investigation and assess the extent and scope of the MOVEit Vulnerability.

As the investigation remains ongoing, the Company will continue to assess the potential impact on its business, operations and financial results.

MOVEit Transfer and MOVEit Cloud represented approximately 4 % in aggregate of the Company’s revenue for the six months ended May 31, 2023.

Litigation and Governmental Investigations

As of the date of the filing of this report on Form 10-Q, (i) four customers that claim to have been impacted by the MOVEit Vulnerability have indicated that they intend to seek indemnification from the Company related to the MOVEit Vulnerability, and (ii) there have been eleven class action lawsuits filed by individuals who claim to have been impacted by exfiltration of data from the environments of our MOVEit Transfer customers.

The Company has also been cooperating with several inquiries and one formal investigation from domestic and foreign law enforcement agencies and data privacy regulators.

Expenses Incurred and Future Costs

Given that the MOVEit Vulnerability occurred near the end of the current quarter, we incurred minimal costs during the second quarter of fiscal year 2023.

We expect to incur investigation, legal and professional services expenses associated with the MOVEit Vulnerability in future periods.

We will recognize these expenses as services are received, net of received and expected insurance recoveries.

While a loss from these matters is possible, we cannot reasonably estimate a range of possible losses at this time and our investigation into the matter is ongoing.

Furthermore, with respect to the litigation, the proceedings remain in the early stages, alleged damages have not been specified, there is uncertainty as to the likelihood of a class or classes being certified or the ultimate size of any class if certified, and there are significant factual and legal issues to be resolved.

Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of May 31, 2023.

Insurance Coverage

We maintain cybersecurity insurance and other types of insurance coverage for up to $ 15.0 million in losses, which are expected to reduce our exposure to liabilities arising from the November 2022 cyber incident and the MOVEit Vulnerability.

We will pursue recoveries to the maximum extent available under the policies.

As of May 31, 2023, we have recorded approximately $ 3.0 million in insurance recoveries, all of which was related to the November 2022 cyber incident, providing us with $ 12.0 million of additional coverage (which is subject to a $ 0.5 million per claim deductible).

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

What changed 10-Q

Item 1. Financial Statements