What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-01-26 compared with 2023-01-27 · 291 added, 330 removed, 940 unchanged (40% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Progress Software Corporation and subsidiaries (the "Company") as of November 30, 2022 and 2021, the related consolidated statements of operation, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended November 30, 2022, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Progress Software Corporation and subsidiaries (the "Company") as of November 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended November 30, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

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Critical Audit Matters

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.

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) 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 matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition - Refer to Note 1 to the financial statements

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The Company derives revenue from multiple sources, including software licenses, maintenance, and services.

Frequently, the customer arrangements provide software licenses combined with maintenance and therefore including multiple performance obligations under ASC 606, Revenue from Contracts with Customer.

The identification of performance obligations of the arrangement, particularly for more complex customer arrangements, requires a detailed analysis of the contractual terms and application of more complex accounting guidance.

In addition, the allocation of the transaction price to each performance obligations within an arrangement (license, maintenance, and services) and the timing of revenue recognition, requires the application of management judgment.

Frequently, the customer arrangements provide software licenses combined with maintenance resulting in multiple performance obligations under ASC 606, Revenue from Contracts with Customer .

The identification of distinct performance obligations, particularly for more complex customer arrangements, requires a detailed analysis of the contractual terms and application of more complex accounting guidance.

In addition, the allocation of the arrangement consideration to each performance obligation within an arrangement (license, maintenance, and services) requires the application of management judgment.

Revenue arrangements with higher contract values frequently require more complex management judgments.

Given the accounting complexity and the management judgment necessary to identify performance obligations in the arrangement and determine the timing and allocation of revenue in arrangements with multiple performance obligations, auditing revenue recognition for such arrangements required a high degree of auditor judgment and an increased extent of effort.

Given the accounting complexity and the management judgment necessary to identify performance obligations and determine the timing and allocation of revenue in arrangements with multiple performance obligations, auditing revenues required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the recognition of revenue from multiple-performance-obligation arrangements included the following, among others:

• We tested the effectiveness of controls over revenue recognition, including those over the identification of performance obligations included in the transaction, the allocation of transaction price to these performance obligations, the timing of revenue recognition.

Our audit procedures related to the recognition of revenue from arrangements with multiple performance obligations included the following, among others:

• We tested the effectiveness of controls over revenue recognition, including those over the identification of distinct performance obligations and the allocation of arrangement consideration.

• We evaluated the Company’s accounting policies in the context of the applicable accounting standards.

• We evaluated the appropriateness and consistency of the methods and assumptions used by management to determine the standalone selling price of delivered and undelivered performance obligations of the arrangement.

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

• We evaluated the appropriateness and consistency of the methods and assumptions used by management to determine the standalone selling price of distinct performance obligations.

• We selected a sample of revenue arrangements 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.

– We evaluated whether management properly identified the contract terms and tested management’s application of the Company’s policies, including the identification of the performance obligations and allocation of the arrangement consideration.

– We tested the mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial statements.

MOVEit Vulnerability – Refer to Note 19 to the Financial Statements

Critical Audit Matter Description

In May 2023, the Company identified a zero-day vulnerability in its MOVEit Transfer and MOVEit Cloud software product offerings (the MOVEit Vulnerability).

A number of customers and others have disclosed that they have been impacted by the MOVEit Vulnerability and certain customers have sent formal letters to the Company, some of which have indicated that they intend to seek indemnification from the Company.

Additionally, the Company has received several inquiries from data privacy regulators, state attorneys general, regulatory agencies, and a law enforcement agency seeking various documents and information relating to the MOVEit Vulnerability, which may result in adverse judgments, settlements, fines, penalties and other resolutions if enforcement actions are brought against the Company.

These claims and proceedings are subject to inherent uncertainties and unascertainable damages.

Further, the outcome of these matters may not be known for prolonged periods of time.

Given the uncertainty and inability to develop a reasonable estimate of the potential loss or range of loss incurred related to this matter, the Company has not recognized a loss accrual in respect of the MOVEit Vulnerability.

The Company could incur judgments or enter into settlements regarding the outcome of these claims and proceedings, which could have a material effect on the estimated amount of the liability in the period in which the effect becomes probable and reasonably estimable.

The Company recognizes a liability for loss contingencies for which it is probable that a liability has been incurred at the date of the consolidated financial statements and the amount is reasonably estimable.

There is complexity in applying this accounting framework for the potential losses arising from the MOVEit Vulnerability and in determining whether a loss is probable and estimable.

Performing audit procedures to evaluate the appropriateness of the Company’s application of the accounting framework required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting for the potential losses and related disclosures related to the MOVEit Vulnerability, include the following procedures, among others:

• We tested the effectiveness of controls over the Company’s accounting for the loss contingencies and related disclosures related to the MOVEit Vulnerability.

• With the assistance of professionals in our firm having subject matter expertise in accounting for loss contingencies, we evaluated the Company’s accounting and disclosures related to the MOVEit Vulnerability for compliance with ASC 450, Contingencies.

• We inquired of the Company’s internal and external legal counsel to understand the legal merits and the basis for the Company’s conclusions specific to the likelihood of loss and the inability to estimate a potential loss or range of loss.

• We requested and received written responses from internal and external legal counsel.

• We made inquiries of management and read the letters and pleadings on a sample basis to evaluate and corroborate our understanding obtained through inquiries of internal legal counsel.

• We inspected Board of Directors meeting minutes and performed inquiries with executive management and the audit committee regarding the information discussed and presented to the Board of Directors during the relevant committee meetings.

• We performed public domain searches using relevant and reliable sources for evidence contrary to management’s analysis.

• We evaluated any events subsequent to November 30, 2023 that might impact our evaluation of loss contingencies, including any related accrual or disclosure.

• We obtained written representations from executives of the Company.

• We read the Company’s related disclosures and evaluated the disclosures for consistency with our testing.

/s/ Deloitte & Touche LLP

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Cash and cash equivalents $ 126,958 $ 256,277

Short-term investments — 1,967

Total cash, cash equivalents and short-term investments 256,277 157,373

Accounts receivable (less allowances of $ 851 in 2023 and $ 859 in 2022)

125,825 97,834

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

Unbilled receivables 29,965 29,158

Other current assets 48,040 42,784

Assets held for sale — 15,255

Total current assets 330,788 426,053

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

Long-term unbilled receivables 28,373 39,936

Property and equipment, net 15,225 14,927

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Other noncurrent liabilities 4,547 8,687

Commitments and contingencies (Note 11)

Commitments and contingencies (Note 10 and note 19)

Stockholders’ equity:

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authorized, 10,000,000 shares;

Common stock, $ 0.01 par value, and additional paid-in capital;

Common stock, $ 0.01 par value;

authorized, 200,000,000 shares;

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Acquisition-related expenses 4,704 4,603 4,102

Cyber incident 602 — —

Cyber incident and vulnerability response expenses, net 6,164 602 —

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

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Net income $ 70,197 $ 95,069 $ 78,420

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 5,289 ( 8,468 ) ( 2,439 )

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

Unrealized (loss) gain on hedging activity, net of tax benefit of $ 698 in 2023, and tax provision of $ 1,797 and $ 940 in 2022 and 2021, respectively

( 2,214 ) 5,688 2,837

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

Unrealized loss on investments, net of tax benefit of $ 4 and $ 20 in 2022 and 2021, respectively

— ( 12 ) ( 63 )

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

Total other comprehensive income (loss), net of tax 3,075 ( 2,792 ) 335

Comprehensive income $ 73,272 $ 92,277 $ 78,755

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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

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

Issuance of stock under employee stock purchase plan 279 2 10,287 — — 10,289

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Net income — — — 70,197 — 70,197

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

Other comprehensive income — — — — 3,075 3,075

Balance, November 30, 2023 43,796 $ 438 $ 370,579 $ 120,858 $ ( 32,160 ) $ 459,715

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Deferred income taxes ( 28,641 ) ( 7,602 ) ( 908 )

Allowances for bad debt and sales credits 774 ( 282 ) 164

Gain on sale of intangible assets — — ( 889 )

Credit losses and other sales allowances 488 774 ( 282 )

Changes in operating assets and liabilities:

Accounts receivable and unbilled receivables ( 27,254 ) ( 10,998 ) 10,682

Accounts receivable 12,119 ( 27,254 ) ( 10,998 )

Other assets ( 1,579 ) ( 2,214 ) ( 15,105 )

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Net cash flows from operating activities 173,920 192,160 178,530

Cash flows from (used in) investing activities:

Cash flows (used in) from investing activities:

Purchases of investments ( 15,262 ) — —

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

Decrease in escrow receivable and other 134 2,330 —

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

Other investing activities — 134 2,330

Net cash flows (used in) from investing activities ( 360,382 ) 21,992 ( 250,335 )

Cash flows from (used in) financing activities:

Proceeds from equity plans 25,956 16,165 15,033

Payments for taxes related to net share settlements of equity awards ( 12,377 ) ( 7,824 ) ( 5,186 )

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Proceeds from the issuance of debt 195,000 7,475 —

Payment of principal on long-term debt ( 6,873 ) ( 117,313 ) ( 11,288 )

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

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

Repayment of revolving line of credit ( 85,000 ) — —

Principal payment on term loan ( 6,875 ) ( 6,873 ) ( 117,313 )

Payment of debt issuance costs — ( 2,262 ) ( 904 )

Net cash flows from (used in) financing activities 51,188 ( 101,423 ) 132,113

Effect of exchange rate changes on cash 5,955 ( 11,858 ) ( 2,892 )

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

Net (decrease) increase in cash and cash equivalents ( 129,319 ) 100,871 57,416

Cash and cash equivalents, beginning of year 256,277 155,406 97,990

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Non-cash investing and financing activities:

Total fair value of restricted stock awards, restricted stock units and deferred stock units on date vested $ 27,626 $ 18,102 $ 17,046

Dividends declared $ 8,115 $ 7,925 $ 7,904

Dividends declared and unpaid $ 8,376 $ 8,115 $ 7,925

See notes to consolidated financial statements.

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Nature of Business and Summary of Significant Accounting Policies

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.

Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") provides enterprise software products for the development, deployment and management of high-impact business applications.

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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These estimates are based on historical data and experience, as well as various other assumptions that management believes to be reasonable under the circumstances.

The most significant estimates relate to:

the timing and amount of revenue recognition, including the determination of the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and the transaction price allocated to performance obligations;

the realization of tax assets and estimates of tax liabilities;

fair values of investments in marketable securities;

assets held for sale;

intangible assets and goodwill valuations;

the recognition and disclosure of contingent liabilities;

the collectability of accounts receivable;

and assumptions used to determine the fair value of stock-based compensation.

Actual results could differ from those estimates.

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Transaction gains or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in foreign currency loss, net in the statements of operations as incurred.

Cash Equivalents and Investments

Cash Equivalents

Cash equivalents include short-term, highly liquid investments purchased with remaining maturities of three months or less.

As of November 30, 2023, all of our cash equivalents were invested in money market funds.

We classify investments, state and municipal bond obligations, U.S.

treasury and government agency bonds, and corporate bonds and notes, as investments available-for-sale, which are stated at fair value.

We include aggregate unrealized holding gains and losses, net of taxes, on available-for-sale securities as a component of accumulated other comprehensive loss in stockholders’ equity.

We include realized gains and losses in interest income and other, net on the consolidated statements of operations.

We monitor our investment portfolio for impairment on a periodic basis.

Fair value is calculated based on publicly available market information.

If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost.

To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence.

In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee.

If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other (expense) income, net and a new cost basis in the investment is established.

If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Allowances for Doubtful Accounts and Sales Credit Memos

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Concentrations of Credit Risk

Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivative instruments and trade receivables.

We have cash investment policies which, among other things, limit investments to investment-grade securities.

We hold our cash and cash equivalents, investments and derivative instrument contracts with high quality financial institutions and we monitor the credit ratings of those institutions.

Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, derivative instruments and trade receivables.

We hold our cash and cash equivalents and derivative instrument contracts with high quality financial institutions and we monitor the credit ratings of those institutions.

We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the diversity, both by geography and by industry, of the customer base.

No single customer represented more than 10% of consolidated accounts receivable or revenue in fiscal years 2023, 2022 or 2021.

Fair Value of Financial Instruments

The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates fair value due to the short-term nature or market interest rates of these items.

We base the fair value of short-term investments on quoted market prices or other relevant information generated by market transactions involving identical or comparable assets.

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.

Fair Value Measurements

We account for certain assets and liabilities at fair value.

The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market.

We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

• Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets.

Our Level 1 investments

include money market funds.

• Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar

instruments in markets that are not active, and model-based valuation techniques (e.g.

the Black-Scholes model) for which all

significant inputs are observable in the market or can be corroborated by observable market data for substantially the full

term of the assets or liabilities.

Where applicable, these models project future cash flows and discount the future amounts to a

present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and

forward and spot prices for currencies.

Our Level 2 derivative assets and liabilities include certain over-the-counter forward

and swap contracts.

• Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

We do not have any Level 3 fair value measurements.

When developing fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs.

When available, we use quoted market prices to measure fair value.

The valuation technique used to measure fair value for our Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets.

If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates.

Derivative Instruments

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We do not enter into derivative instruments for speculative purposes, nor do we hold or issue any derivative instruments for trading purposes.

We enter into certain derivative instruments that do not qualify for hedge accounting and are not designated as hedges.

Although these derivatives do not qualify for hedge accounting, we believe that such instruments are closely correlated with the underlying exposure, thus managing the associated risk.

We enter into certain derivative instruments that are not designated as hedges.

Although these derivatives are not designated as hedges, we believe that such instruments are closely correlated with the underlying exposure, thus managing the associated risk.

The gains or losses from changes in the fair value of such derivative instruments that are not accounted for as hedges are recognized in earnings in foreign currency loss, net in the consolidated statements of operations.

Inventories consist of hardware and related component parts and are recorded at the lower of cost, as determined by the first-in, first-out method, or net realizable value.

The Company reduces inventory to net realizable value based on excess and obsolete inventories determined primarily by historical usage and forecasted demand.

If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to costs of revenue.

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

In fiscal year 2023, we recognized realized and unrealized gains of $ 2.3 million from our forward contracts.

Property and Equipment

We record property and equipment at cost.

We record property and equipment purchased in business combinations at fair value, which is then treated as the cost.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets.

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Repairs and maintenance costs are expensed as incurred.

Property and equipment is classified as held for sale when it meets the held for sale criteria of Accounting Standards Codification Topic 360, Property, Plant, and Equipment and is measured at the lower of the carrying value or the fair value less cost to sell.

Losses resulting from this measurement are recognized in the period in which the held for sale criteria are met while gains are not recognized until the date of sale.

Once designated as held for sale, we stop recording depreciation expense on the asset.

We assess the fair value less cost to sell of long-lived assets held for sale at each reporting period until it no longer meets this classification.

Goodwill, Intangible Assets, and Long-Lived Assets

Goodwill is the amount by which the cost of acquired net assets in a business combination exceeded the fair value of net identifiable assets on the date of purchase.

The Company has a single reporting unit.

We evaluate goodwill and other intangible assets with indefinite useful lives, if any, for impairment annually or on an interim basis when events and circumstances arise that indicate

impairment may have occurred.

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.

We did not recognize any goodwill impairment charges during fiscal years 2022, 2021 or 2020.

The Company operates as 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.

Intangible Assets and Long-Lived Assets

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We base each impairment test on a comparison of the undiscounted cash flows to the carrying value of the asset or asset group.

If impairment is indicated, we write down the asset to its estimated fair value based on a discounted cash flow analysis.

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

If impairment is indicated, we write down the asset to its estimated fair value.

We did no t recognize any intangible asset impairment charges in the years presented.

Comprehensive (Loss) Income

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Accumulated other comprehensive loss by components, net of tax (in thousands):

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

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

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

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Balance, December 1, 2022 $ ( 38,523 ) $ ( 61 ) $ 3,349 $ ( 35,235 )

Other comprehensive (loss) income ( 8,468 ) ( 12 ) 5,688 ( 2,792 )

Other comprehensive income (loss) 5,289 — ( 2,214 ) 3,075

Balance, November 30, 2023 $ ( 33,234 ) $ ( 61 ) $ 1,135 $ ( 32,160 )

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.

The tax effect on accumulated unrealized (losses) gains on hedging activity and unrealized losses on investments was a tax provision of $ 0.4 million and $ 1.1 million as of November 30, 2023 and November 30, 2022, respectively, and a tax benefit of $ 0.7 million as of November 30, 2021.

Revenue Recognition

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Stock-Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards, less the present value of expected dividends when applicable, measured at the grant date and recognized over the relevant service period.

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant service period.

We estimate the fair value of each stock-based award on the measurement date using either the current market price of the stock, the Black-Scholes option valuation model, or the Monte Carlo Simulation valuation model.

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We recognize stock-based compensation expense related to options and restricted stock units on a straight-line basis over the service period of the award, which is generally 4 or 5 years for options and 3 or 4 years for restricted stock units, and adjust the expense each period for actual forfeitures.

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

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.

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

Acquisition-Related Costs

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These costs primarily consist of professional services fees, including third-party legal and valuation-related fees, as well as retention fees and earn-out payments treated as compensation expense.

We incurred $ 4.6 million, $ 4.1 million, and $ 3.6 million of acquisition-related costs, which are included in acquisition-related expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2022, November 30, 2021, and November 30, 2020, respectively.

We incurred $ 4.7 million, $ 4.6 million, and $ 4.1 million of acquisition-related costs, which are included in acquisition-related expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2023, 2022, and 2021, respectively.

Restructuring Charges

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We recognize and measure restructuring liabilities initially at fair value when the liability is incurred.

We incurred $ 0.9 million, $ 6.3 million, and $ 5.9 million of restructuring related costs, which are included in restructuring expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2022, November 30, 2021, and November 30, 2020, respectively.

We incurred $ 8.4 million, $ 0.9

million, and $ 6.3 million of restructuring related costs, which are included in restructuring expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2023, 2022, and 2021, respectively.

We provide for deferred income taxes resulting from temporary differences between financial and taxable income.

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Recently Adopted Accounting Pronouncements

Convertible Debt

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.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

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

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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

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.

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.

Recently Issued Accounting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued Accounting Standards Update No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07").

ASU 2023-07 updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update is effective beginning with the Company’s 2025 fiscal year annual reporting period, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and disclosures.

Cash and Cash Equivalents

A summary of our cash and cash equivalents at November 30, 2023 is as follows (in thousands):

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Cash $ 126,958 $ — $ — $ 126,958

Money market funds 27,254 — — 27,254

Total $ 256,277 $ — $ — $ 256,277

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

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Money market funds 27,254 — — 27,254

treasury bonds 748 9 — 757

Corporate bonds 1,203 7 — 1,210

Total $ 256,277 $ — $ — $ 256,277

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

November 30, 2022 November 30, 2021

Cash and Equivalents Short-Term

Investments Cash and Equivalents Short-Term

Cash $ 229,023 $ — $ 130,371 $ —

Money market funds 27,254 — 25,035 —

treasury bonds — — — 757

Corporate bonds — — — 1,210

Total $ 256,277 $ — $ 155,406 $ 1,967

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.

Derivative Instruments

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The contract matures on April 30, 2024 and requires periodic interest rate settlements.

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

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

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

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

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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, 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.

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):

As of November 30, 2023 and 2022 , the fair value of the hedge was a gain of $ 1.5 million and $ 4.4 million, respectively, and was included in other assets on our consolidated balance sheets.

The net amount of accumulated other comprehensive loss was reclassified to interest expense during fiscal years 2023, 2022, and 2021 and resulted in income of $ 3.6 million, and expense of $ 0.7 million, and $ 2.5 million, respectively.

The following table presents our interest rate swap contract where the notional amount is equal to approximately one-half of the corresponding reduction in the balance of our term loan.

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 payment schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in thousands):

November 30, 2023 November 30, 2022

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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, 2023, $ 2.5 million was recorded in other accrued liabilities on the 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 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.

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 2023, realized and unrealized gains of $ 2.3 million from our forward contracts were recognized in foreign currency loss, net on the consolidated statements of operations.

In fiscal year 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 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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Fair Value Measurements

Recurring Fair Value Measurements

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 November 30, 2023 (in thousands):

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Value Level 1 Level 2 Level 3

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

Interest rate swap $ 1,495 $ — $ 1,495 $ —

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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 —

When developing fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs.

When available, we use quoted market prices to measure fair value.

If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates.

In certain cases where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

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

Assets and Liabilities Not Carried at Fair Value

Fair Value of the Convertible Senior Notes

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.

Debt for additional information.

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

November 30, 2022 November 30, 2021

Finished goods $ 2,409 $ 1,631

Purchased parts and fabricated assemblies 2,634 1,920

Total $ 5,043 $ 3,551

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.

The fair value of our Convertible Senior Notes, with a carrying value of $ 354.8 million and $ 352.6 million, was $ 377.1 million and $ 376.0 million as of November 30, 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.

Fair Value of Other Financial Assets and Liabilities

The carrying amounts of other financial assets and liabilities including cash, accounts receivable, unbilled accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement.

Property and Equipment

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Computer equipment and software $ 46,405 $ 42,672

Land, buildings and leasehold improvements 8,771 8,023

Buildings and leasehold improvements 9,874 8,771

Furniture and fixtures 3,828 3,582

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2024 $ 89,077

Thereafter 38,683

Total $ 354,278

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

Measurement Period Adjustments (1)

( 88 ) ( 77 )

Additions (1)

Measurement period adjustments (2)

Translation adjustments ( 6 ) ( 27 )

Balance, end of year $ 832,101 $ 671,037

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

(1) The addition to goodwill during fiscal year 2023 is related to the acquisition of MarkLogic.

Refer to Note 7:

Business Combinations for further information.

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

(2) Represents final measurement period adjustments related to Kemp during fiscal year 2022.

Refer to Note 7:

Business Combinations for further information.

We assess the impairment of goodwill on an annual basis and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

During fiscal year 2023, we performed a quantitative assessment as of October 31, 2023 and concluded that there was no impairment since it was not more likely than not that the fair value of our reporting unit was less than its carrying value.

We did no t recognize any goodwill impairment charges during fiscal years 2022, 2021, or 2020.

We did no t recognize any goodwill impairment charges during the years presented.

Business Combinations

Kemp Acquisition

On November 1, 2021, we completed the acquisition of the parent company of Kemp Technologies, Inc.

MarkLogic Acquisition

On February 7, 2023, we completed the acquisition of the parent company of MarkLogic Corporation ("MarkLogic"), pursuant to the Stock Purchase Agreement (the "Purchase Agreement"), dated as of January 3, 2023.

The acquisition was completed for a base purchase price of $ 355.0 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.

We funded the acquisition through a combination of existing cash resources and by drawing down $ 195.0 million from our then-existing revolving credit facility.

Refer to Note 8:

Debt for further information.

The acquisition consideration for MarkLogic has been preliminarily allocated to MarkLogic’s assets and assumed liabilities based on 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 allocation of the purchase price is as follows (in thousands):

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

Preliminary Purchase Price Allocation Life

Net working capital $ 47,900

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Customer relationships 152,300 7 years

Other assets 170 27 197

Other noncurrent liabilities ( 604 ) ( 800 ) ( 1,404 )

Other assets, including long-term unbilled receivables 4,789

Deferred taxes ( 24,958 )

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The valuation assumptions take into consideration our estimates of customer attrition, technology obsolescence, and revenue growth projections.

Based on the preliminary valuation, the acquired intangible assets are comprised of customer relationships of approximately $ 75.5 million, existing technology of approximately $ 39.4 million, and trade names of approximately $ 7.2 million.

Tangible assets acquired and assumed liabilities were recorded at fair value.

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, 2023, we incurred approximately $ 4.3 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

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

The amount of revenue of MarkLogic included in our consolidated statement of operations during the fiscal year ended November 30, 2023, was approximately $ 72.5 million.

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

The following pro forma financial information presents the combined results of operations of Progress and Kemp as if the acquisition had occurred on December 1, 2019, after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Kemp acquisition and factually supportable.

The following pro forma financial information presents the combined results of operations of Progress and MarkLogic as if the acquisition had occurred on December 1, 2021, after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the MarkLogic acquisition and factually supportable.

These pro forma adjustments include:

(i) an increase in revenue from Kemp as a result of the application of Topic 606 to recognize and measure contract assets and contract liabilities in the business combination, (ii) a net increase in amortization expense to record amortization expense relating to the $ 122.1 million of acquired identifiable intangible assets, (iii) a decrease in interest expense to remove the interest expense associated with Kemp’s debt obligations, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

(i) a net increase in amortization expense to record amortization expense relating to the $ 232.1 million of acquired identifiable intangible assets, (ii) an increase in interest expense to record interest for the period presented as a result of drawing down our revolving line of credit in connection with the acquisition, and (iii) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

(approximately 24.5%).

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

These results are prepared in accordance with ASC 606.

(In thousands, except per share data) Pro Forma Fiscal Year Ended November 30, 2023 Pro Forma Fiscal Year Ended November 30, 2022

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Net income per diluted share $ 1.78 $ 1.74

Chef Acquisition

On October 5, 2020, we completed the acquisition of Chef Software Inc.

Kemp Acquisition

On November 1, 2021, we completed the acquisition of the parent company of Kemp Technologies, Inc.

The acquisition was completed for a base purchase price of $ 258.0 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.

Refer to Note 9:

Debt for further information.

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 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 third and fourth quarters of fiscal year 2021 based on our valuation and purchase price allocation procedures.

We recorded measurement period adjustments 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

Final Purchase Price Allocation Life

Net working capital $ 26,650

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Other noncurrent liabilities ( 1,404 )

Lease liabilities, net ( 1,810 ) — ( 1,810 )

Deferred taxes ( 22,027 )

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Tangible assets acquired and assumed liabilities were recorded at fair value.

The valuation of the assumed deferred revenue was based on our contractual commitment to provide post-contract customer support to Chef customers and future contractual performance obligations under existing hosting arrangements.

The fair value of this assumed liability was based on the estimated cost plus a reasonable margin to fulfill these service obligations.

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.

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

During the fiscal year ended November 30, 2022, we incurred approximately $ 0.2 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations.

The operations of Chef are included in our operating results from the date of acquisition.

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

Pro Forma Information

The following pro forma financial information presents the combined results of operations of Progress and Chef as if the acquisition had occurred on December 1, 2018, after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Chef acquisition and factually supportable.

These pro forma adjustments include (i) a decrease in revenue from Chef due to the beginning balance of deferred revenue being adjusted to reflect the fair value of the acquired balance, (ii) a net increase in amortization expense to record amortization expense for the $ 141.3 million of acquired identifiable intangible assets, (iii) an increase in interest expense to record interest for the period presented as a result of drawing down our revolving credit facility in connection with the acquisition, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Kemp acquisition and factually supportable.

These pro forma adjustments include:

(approximately 24.5%).

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These results are prepared in accordance with ASC 606.

(In thousands, except per share data) Pro Forma

Fiscal Year Ended November 30, 2020

(In thousands, except per share data) Pro Forma Fiscal Year Ended November 30, 2021

Revenue $ 590,133

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As of November 30, 2023, future maturities of the Company's long-term debt were as follows:

(In thousands) 2026 Notes Revolving Credit Facility Total

2023 $ — $ 6,875 $ 6,875

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

2024 $ — $ — $ 13,750 $ 13,750

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Long-term debt $ 354,772 $ 110,000 $ 246,111 $ 710,883

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

As of November 30, 2023, there was $ 110.0 million outstanding under the revolving line of credit.

Notes Payable

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

In addition, the Company also granted the initial purchasers of the Notes an option to purchase up to an additional $ 50.0 million aggregate principal amount of the Notes, for settlement within a 13 -day period beginning on, and including, April 13, 2021, of which $ 35 million of additional Notes were purchased for total proceeds of $ 360 million.

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

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

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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Repurchase Rights

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.

On or after April 20, 2024, and on or before the 50th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the Notes, subject to the partial redemption limitation, at a repurchase price equal to 100 % of the principal amount, plus accrued and unpaid interest, if the last reported sale price per share of the Company’s common stock exceeded 130 % of the conversion price on (1) each of at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice and (2) the trading day immediately before the date the Company sends such notice.

Pursuant to the partial redemption limitation, the Company may not elect to redeem less than all of the outstanding Notes unless at least $ 100.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time it sends the related redemption notice.

If certain corporate events that constitute a “fundamental change” (as described below) occur at any time, holders may, subject to certain exceptions, require the Company to purchase their Notes in whole or in part for cash at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

A fundamental change relates to events such as business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

Capped Call Transactions

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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 amount initially recognized for the equity component totaled $ 64.8 million.

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

Principal $ 360,000

Conversion option allocated to equity ( 64,800 )

Unamortized discount ( 665 )

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

Conversion options (1)

Capped call ( 43,056 )

Net carrying amount of the equity component $ 19,799

(1) Net of issuance costs

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.

Upon adoption of ASU 2020-06 on December 1, 2021, using the modified retrospective method, 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 )

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

As a result of the adoption of ASU 2020-06, non-cash interest expense decreased by approximately $ 11.5 million in 2022 and 2023 as well as in future periods due to the de-recognition of the debt discount associated with the previously bifurcated equity components of the Notes.

Further, the standard requires the use of the if converted method to calculate diluted earnings per share.

Refer to Note 17:

Earnings Per Share for further discussion about the impact of the adoption of ASU 2020-06 on diluted earnings per share upon adoption and as of the fiscal year ended November 30, 2023.

Fiscal Year Ended

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

(In thousands) November 30, 2023 November 30, 2022 November 30, 2021

Contractual interest expense ( 1 % coupon)

2 unchanged sentences

2,147 2,112 8,195

$ 5,747 $ 5,712 $ 10,475

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

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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.

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.

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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 February 28, 2022.

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

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

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, 2023.

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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.

As of November 30, 2023, there was $ 110.0 million outstanding amounts under the revolving line of credit and $ 2.5 million of letters of credit.

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.

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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.

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

The Company has operating leases for facilities, vehicles, and equipment under various non-cancelable lease agreements.

The Company’s leases have remaining lease terms ranging from 1 year to 7 years.

The Company’s lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options.

The Company’s lease terms may include options to extend or terminate the lease.

The Company considers several economic factors when making the determination as to whether the Company will exercise options to extend or terminate the lease, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease.

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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):

We sublease certain facilities to third parties, which have remaining lease terms of up to three years .

The components of net operating lease cost for the years ended November 30, 2023, 2022 and 2021 were as follows (in thousands):

Fiscal Year Ended

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Operating lease right-of-use asset impairment 115 — 3,057

Total operating lease cost $ 7,432 $ 11,390 $ 9,545

Sublease income ( 468 ) — —

Total net operating lease cost $ 9,106 $ 7,432 $ 11,390

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

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Future payments under non-cancellable leases at November 30, 2023 are as follows (in thousands):

2024 $ 11,063

Thereafter 14

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Present value of lease liabilities $ 23,114

(1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated as a result of a lease reassessment event.

Our operating lease arrangements are subject to customary renewal and base rental fee escalation clauses.

Total rent expense, net of sublease income which is insignificant, under operating lease arrangements was approximately $ 8.7 million, $ 9.3 million and $ 9.6 million in fiscal years 2022, 2021 and 2020, respectively.

Commitments and Contingencies

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Legal Proceedings

We are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business.

Please see Note 19:

Cyber Related Matters for a discussion of legal proceedings related to the MOVEit Vulnerability.

We also are subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business.

While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material effect on our financial position, results of operations or cash flows.

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Common Stock Repurchases

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.

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.

In fiscal years 2023, 2022, and 2021, we repurchased and retired 0.6 million, 1.7 million and 0.8 million shares of our common stock for $ 34.0 million, $ 77.0 million and $ 35.0 million, respectively.

As of November 30, 2023, there was $ 194.0 million remaining under the current authorization.

Stock-Based Compensation

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Awards under the 2008 Plan may include nonqualified stock options, incentive stock options, grants of conditioned or restricted stock, unrestricted grants of stock, grants of stock contingent upon the attainment of performance goals, deferred stock units and stock appreciation rights.

In May 2021, stockholders of the Company approved an amendment to the 2008 Plan to add 4,500,000 shares to the plan.

A total of 2,985,048 shares were available for issuance as of November 30, 2023.

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Awards under the 2002 Plan may include nonqualified stock options, grants of conditioned or restricted stock, unrestricted grants of stock, grants of stock contingent upon the attainment of performance goals and stock appreciation rights.

A total of 56,093 shares were available for issuance under the 2002 Plan as of November 30, 2022.

of 93,064 shares were available for issuance under the 2002 Plan as of November 30, 2023.

Additional shares cannot be added to the 2002 Plan without stockholder approval.

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Vested or expected to vest, November 30, 2023 2,052 $ 44.09 4.1 $ 19,187

(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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Performance-based restricted stock units are subject to multi-year performance criteria aligned with our business plan and are earned only to the extent the performance criteria are achieved.

The fair value of outright stock awards, restricted stock units and DSUs is equal to the closing price of our common stock on the date of grant, less the present value of expected dividends when applicable.

Beginning in fiscal year 2020, restricted stock units have forfeitable dividend equivalent rights equal to the dividend paid on our common stock.

The fair value of stock awards, restricted stock units and DSUs is equal to the closing price of our common stock on the date of grant, less the present value of expected dividends when applicable.

Restricted stock units have forfeitable dividend equivalent rights equal to the dividend paid on our common stock.

During the first quarter of fiscal years 2021, 2022, and 2023, 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 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 and 2022 plans, the vesting terms were changed to the following:

For the 2021, 2022 and 2023 plans, the vesting terms were based on 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.

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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 price.

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 279,000 shares, 301,000 shares, and 277,000 shares with weighted average purchase prices of $ 36.88 , $ 30.59 , and $ 28.20 per share, respectively, in fiscal years 2023, 2022, and 2021, respectively.

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For each ESPP award, the expected life in years is based on the period of time between the beginning of the offering period and the date of purchase, plus an additional holding period of three months .

Expected volatility is based on historical volatility of our stock, and the risk-free interest rate is based on the U.S.

Treasury yield curve in effect at each purchase period.

The expected annual dividend yield is based on the weighted-average of the dividend yield assumptions used for options granted during the applicable period.

Based on the above assumptions, the weighted average estimated fair value of stock options granted in fiscal years 2023, 2022, and 2021 was $ 14.40 , $ 10.95 , and $ 9.46 per share, respectively.

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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.

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

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.

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Balance, November 30, 2022 $ 282,440

Billings and other 673,919

Acquired from business combinations 33,116

Revenue recognized ( 694,439 )

Balance, November 30, 2023 $ 295,036

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

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2023 Restructurings

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

Refer to Note 8:

Business Combinations for further discussion.

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

For the fiscal 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.

During the fourth quarter of fiscal year 2023, we restructured our operations to realign our business and strategic priorities.

In connection with this restructuring, we reduced our global workforce by 2 %.

These workforce reductions occurred within all functions and across most geographies in which we operate.

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, 2023, we incurred expenses of $ 1.7 million, which are recorded as restructuring expenses in the consolidated statements of operations.

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through the fourth quarter of fiscal year 2024.

The restructuring reserve is included in other accrued liabilities on the consolidated balance sheets as of November 30, 2023.

We do not expect to incur additional material expenses in connection with this restructuring.

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, 2023 $ — $ 1,643 $ 1,643

During the first quarter of fiscal year 2023, we restructured our operations in connection with the acquisition of MarkLogic.

Refer to Note 7:

Business Combinations for further discussion.

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

For the fiscal year ended November 30, 2023, we incurred expenses of $ 5.7 million, which are recorded as restructuring expenses in the consolidated statements of operations.

Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2024.

The restructuring reserve is included in other accrued liabilities on the consolidated balance sheets as of November 30, 2023.

We expect to incur additional expenses as part of this action related to facility closures as we consolidate offices during fiscal year 2024.

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, 2022 $ — $ — $ —

Costs incurred 186 5,542 5,728

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Balance, November 30, 2023 $ 105 $ 248 $ 353

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 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, 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.

For the fiscal years ended November 30, 2023, 2022 and 2021, we incurred expenses of $ 0.9 million, $ 0.4 million and $ 4.1 million, respectively, which are recorded as restructuring expenses in the consolidated statements of operations.

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 is included in short-term and long-term operating lease liabilities on the consolidated balance sheets at November 30, 2023.

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 2024, but we do not expect these costs to be material.

A summary of activity for this restructuring action is as follows (in thousands):

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

Translation adjustments and other 1,615 8 1,623

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

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Balance, November 30, 2023 $ 3,192 $ — $ 3,192

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 ( 894 ) ( 1,268 ) ( 410 )

Tax-exempt interest — — ( 3 )

Nondeductible stock-based compensation 2,498 2,725 1,548

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Uncertain tax positions and tax settlements ( 1,056 ) ( 163 ) 89

Net excess tax benefit or detriment from stock-based compensation plans ( 266 ) ( 11 ) 61

Net excess tax benefit from stock-based compensation plans ( 2,058 ) ( 266 ) ( 11 )

Global intangible low tax inclusion 244 17 606

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Total $ 9,460 $ 22,186 $ 17,114

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.

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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Operating lease liabilities 3,208 4,082

Capitalized research and development 20,814 —

Gross deferred tax assets 101,554 64,978

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Right-of-use lease assets ( 2,196 ) ( 2,938 )

Deferred revenue — ( 1,483 )

Depreciation and amortization ( 55,962 ) ( 20,875 )

Prepaid expenses ( 4,083 ) ( 4,008 )

Notes payable — ( 13,415 )

Total deferred tax liabilities ( 87,695 ) ( 51,566 )

Total $ 11,478 $ 7,137

The valuation allowance primarily applies to net operating loss carryforwards and unutilized tax credits in foreign jurisdictions under conditions where realization is not more likely than not.

Under provisions of the Tax Cuts and Jobs Act pursuant to Internal Revenue Code Section 174, beginning in fiscal year 2023 specific research and experimental (“R&E”) expenditures are now required to be capitalized and amortized over five years for U.S.

R&E and fifteen years for foreign R&E.

The valuation allowance primarily applies to net operating loss carryforwards in foreign jurisdictions under conditions where realization is not more likely than not.

The $ 4 million decrease in the valuation allowance during fiscal year 2023 primarily relates to losses in a foreign subsidiary that have expired prior to utilization.

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subsidiaries.

We have not provided for U.S.

income taxes on the undistributed earnings of non-U.S.

subsidiaries, which totaled $ 106.6 million as of November 30, 2022, as these earnings have been indefinitely reinvested.

Provisions have not been made for non-U.S.

withholding taxes or other applicable taxes on $ 105.6 million of undistributed earnings as of November 30, 2023, 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.

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withholding taxes and other federal, state and/or foreign taxes if they were remitted to the U.S.

As of November 30, 2022, the total amount of unrecognized tax benefits was $ 5.3 million, of which $ 1.3 million was recorded in other noncurrent liabilities on the consolidated balance sheet and $ 4.0 million of deferred tax assets, principally related to U.S net operating loss carry-forwards and federal and state research and development tax credits, have not been recorded.

As of November 30, 2023, the total amount of unrecognized tax benefits was $ 5.2 million, of which $ 0.8 million was recorded in other noncurrent liabilities on the consolidated balance sheet and $ 4.4 million as a reduction of deferred tax assets, principally related to U.S net operating loss carry-forwards and federal and state research and development tax credits.

A reconciliation of the balance of our unrecognized tax benefits is as follows (in thousands):

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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 2023 a net benefit of $ 0.8 million was recorded to the provision for income taxes related to interest and penalties.

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

We have accrued $ 0.5 million and $ 1.3 million of estimated interest and penalties at November 30, 2023 and 2022, respectively.

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Tax authorities for certain non-U.S.

jurisdictions are also examining tax returns and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income.

jurisdictions are also examining tax returns for various years dating back to 2016 and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income.

With some exceptions, we are generally no longer subject to tax examinations in non-U.S.

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Effect of dilution from common stock equivalents 1,158 772 704

Effect of dilution from if-converted Convertible Senior Notes 44 — —

Diluted weighted average shares outstanding 44,658 44,247 44,620

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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, 2023, we included the Notes in our diluted earnings per share calculation.

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.

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

Long-lived assets totaled $ 7.6 million, $ 22.1 million and $ 22.8 million in the U.S.

Long-lived assets, comprised of our property and equipment, totaled $ 8.2 million, $ 7.6 million and $ 22.1 million in the U.S.

and $ 7.0 million, $ 7.3 million and $ 7.5 million outside of the U.S.

at the end of fiscal years 2023, 2022, and 2021, respectively.

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 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.

During the fiscal year ended November 30, 2023, India accounted for more than 10% of our consolidated long-lived assets.

During the fiscal year ended November 30, 2022, India and Bulgaria accounted for more than 10% of our consolidated long-lived assets.

No individual country outside of the U.S.

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

Cyber Related Matters

November 2022 Cyber Incident

Costs for this incident were primarily related to the engagement of external cybersecurity experts and other incident response professionals.

the fiscal year ended November 30, 2023, we incurred $ 4.7 million of costs related to this incident.

Costs are provided net of insurance recoveries of $ 2.5 million.

We do not expect to incur additional costs related to this incident as the investigation is closed.

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 customer-dedicated cloud instances that are hosted, separate and apart from the public instances of our MOVEit Cloud platform).

We will continue to assess the potential impact of the MOVEit Vulnerability on our business, operations, and financial results.

MOVEit Transfer and MOVEit Cloud represented less than 4 % in aggregate of our revenue for the fiscal year ended November 30, 2023.

Litigation and Governmental Investigations

As of the date of the filing of this report on Form 10-K, (i) we have received formal letters from 31 customers and others that claim to have been impacted by the MOVEit Vulnerability, some of which have indicated that they intend to seek indemnification from us related to the MOVEit Vulnerability, (ii) we have received a letter from an insurer providing for notice of a subrogation claim (where the insurer is seeking recovery for all expenses incurred in connection with the MOVEit Vulnerability), which has resulted in the filing of a lawsuit in the District of Massachusetts, and (iii) we are party to approximately 118 class action lawsuits filed by individuals who claim to have been impacted by the exfiltration of data from the environments of our MOVEit Transfer customers, which the Judicial Panel on Multidistrict Litigation transferred to the District of Massachusetts for coordinated and consolidated proceedings.

We have also been cooperating with several inquiries from domestic and foreign data privacy regulators;

inquiries from several state attorneys general;

as well as formal investigations from:

federal law enforcement agency (as of the date of the filing of this report, the law enforcement investigation that we are cooperating with is not an enforcement action or formal governmental investigation of which we have been told that we are a target), (ii) the SEC (as further described hereafter), and (iii) the Office of the Attorney General for the District of Columbia (as further described hereafter).

On October 2, 2023, Progress received a subpoena from the SEC seeking various documents and information relating to the MOVEit Vulnerability.

As described in the cover letter accompanying the subpoena, at this stage, the SEC investigation is a fact-finding inquiry, the investigation does not mean that Progress or anyone else has violated federal securities laws, and the investigation does not mean that the SEC has a negative opinion of any person, entity, or security.

Progress intends to cooperate fully with the SEC in its investigation.

On December 21, 2023, Progress received a preservation notice from the Federal Trade Commission (the "FTC"), but has not otherwise received a request for information nor is Progress aware of any formal FTC investigation.

On January 18, 2024, Progress received a subpoena from the Office of the Attorney General for the District of Columbia seeking various documents and information relating to the MOVEit Vulnerability.

At this stage, the investigation is a fact-finding inquiry, and the investigation does not mean that Progress or anyone else has violated applicable laws.

Progress intends to cooperate fully with the Office of the Attorney General for the District of Columbia in its investigation.

Expenses Incurred and Future Costs

For the fiscal year ended November 30, 2023, we incurred $ 1.5 million of costs related to the MOVEit Vulnerability.

The costs recognized are net of received and expected insurance recoveries of approximately $ 3.7 million.

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

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 insurance recoveries.

While a loss from these matters is reasonably possible, we cannot reasonably estimate a range of possible losses at this time, particularly while the foregoing matters remain 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.

Also, each of the governmental inquiries and investigations mentioned above could result in adverse judgements, settlements, fines, penalties, or other resolutions, the amount, scope and timing of which could be material, but which we are currently unable to predict.

Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of November 30, 2023.

Insurance Coverage

During the period when the November 2022 Cyber Incident and the MOVEit Vulnerability occurred, we maintained $ 15.0 million of cybersecurity insurance coverage, which is expected to reduce our exposure to expenses and liabilities arising from these events.

As of November 30, 2023, we have recorded approximately $ 6.2 million in insurance recoveries, of which $ 2.5 million was related to the November 2022 Cyber Incident and $ 3.7 million was related to the May 2023 MOVEit Vulnerability, providing us with $ 8.8 million of additional cybersecurity insurance coverage (which is subject to a $ 0.5 million retention per claim).

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

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