What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-07-08 compared with 2024-04-08 · 149 added, 105 removed, 203 unchanged (56% of the section changed)

5 unchanged sentences

Whenever we use words such as "believe," "may," "could," "would," "might," "should," "expect," "intend," "plan," "estimate," "target," "anticipate" and negatives and derivatives of these or similar expressions, or when we make statements concerning future financial results, product offerings or other events that have not yet occurred, we are making forward-looking statements.

These forward-looking statements are based upon our present intent, beliefs or expectations, but are not guaranteed to occur and may not occur.

Actual future results may differ materially from those contained in or implied by our forward-looking statements due to various factors which are more fully described in Part I, Item 1A.

4 unchanged sentences

We undertake no obligation to update any forward-looking statements that we make.

Progress provides enterprise software products for the development, deployment and management of high-impact business applications.

Progress provides enterprise software products for the development, deployment and management of responsible, AI-powered applications and experiences.

Critical Accounting Policies

17 unchanged sentences

Three Months Ended % Change

(In thousands) February 29, 2024 February 28, 2023 As Reported Constant Currency

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

Revenue $ 175,077 $ 178,251 (2) % (2) %

Total revenue increased as compared to the same period last year due to our acquisition of MarkLogic in February 2023, as well as increases in our OpenEdge product offering.

MarkLogic revenue represents $26.7 million of the increase as the current period includes activity for the full quarter, whereas the prior period only included the month of February 2023.

Six Months Ended % Change

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

Revenue $ 359,762 $ 342,477 5 % 5 %

Total revenue was relatively flat across all of our product offerings in the second quarter of fiscal year 2024 as compared to the same period last year.

Compared to prior year, total revenue increased in the first six months of fiscal year 2024 due to MarkLogic as the current period includes activity for the full six months to date, whereas the prior period only included revenue from the acquisition in February 2023.

These increases were partially offset by a decrease in our DataDirect product offering as a result of the timing of renewals on multiyear subscription contracts.

1 unchanged sentence

Three Months Ended % Change

(In thousands) February 29, 2024 February 28, 2023 As Reported Constant Currency

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

Software licenses $ 53,979 $ 56,407 (4) % (4) %

As a percentage of total revenue 31 % 32 %

Software license revenue increased by $6.5 million as compared to the same period last year primarily due to our acquisition of MarkLogic in February 2023, which accounts for $15.4 million of the increase.

The increase is offset by a decline in revenue driven by the timing of multi-year subscription renewals.

Six Months Ended % Change

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

Software licenses $ 118,079 $ 113,975 4 % 3 %

As a percentage of total revenue 33 % 33 %

Software license revenue was relatively flat across all of our product offerings in the second quarter and first six months of fiscal year 2024 as compared to the same periods last year.

MarkLogic revenue is reflected in our results for the first six months of fiscal year 2024, whereas the prior period only includes revenue from the date of acquisition.

Maintenance and Services Revenue

Three Months Ended % Change

(In thousands) February 29, 2024 February 28, 2023 As Reported Constant Currency

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

Maintenance $ 102,503 $ 102,240 — % — %

4 unchanged sentences

As a percentage of total revenue 69 % 68 %

Maintenance revenue increased by $9.5 million as compared to the same period last year primarily due to our acquisition of MarkLogic in February 2023.

Services revenue increased by $4.4 million as compared to the same period last year due to increased services revenue from our acquisition of MarkLogic.

Six Months Ended % Change

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

Maintenance $ 204,528 $ 194,753 5 % 5 %

As a percentage of total revenue 57 % 57 %

Services 37,155 33,749 10 % 10 %

As a percentage of total revenue 10 % 10 %

Total maintenance and services revenue $ 241,683 $ 228,502 6 % 5 %

As a percentage of total revenue 67 % 67 %

Maintenance and services revenue remained relatively flat in the second quarter of fiscal year 2024 as compared to the same period last year.

Maintenance and services revenue increased in the first six months of fiscal year 2024 as compared to the same period last year primarily due to our acquisition of MarkLogic.

Revenue by Region

Three Months Ended % Change

(In thousands) February 29, 2024 February 28, 2023 As Reported Constant Currency

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

North America $ 102,902 $ 105,732 (3) % (3) %

6 unchanged sentences

As a percentage of total revenue 5 % 6 %

Total revenue generated in North America increased $8.5 million in the first quarter fiscal year 2024.

The increase was primarily due to our acquisition of MarkLogic and increased revenue from our OpenEdge product offerings, partially offset by decreases in our DataDirect and Chef product offerings.

The increases in revenue over the period in EMEA was primarily due to our acquisition of MarkLogic, increased revenue from our OpenEdge and DataDirect product offerings, and a positive impact from foreign exchange in our EMEA region.

The increases in revenue in Latin America were primarily due to increases in our OpenEdge product offerings.

The increases in revenue generated in Asia Pacific were due to increases in our Kemp, MarkLogic, and Chef product offerings.

In the first three months of fiscal year 2024 revenue generated in markets outside North America represented 42% of total revenue on an actual and constant currency basis.

In the first three months of fiscal year 2023 revenue generated in markets outside North America represented 40% and 42% of total revenue on an actual and a constant currency basis, respectively.

Six Months Ended % Change

(in thousands) May 31, 2024 May 31, 2023 As Reported Constant Currency

North America $ 210,184 $ 204,560 3 % 3 %

As a percentage of total revenue 58 % 60 %

Europe, the Middle East and Africa ("EMEA") $ 120,625 $ 109,590 10 % 9 %

As a percentage of total revenue 34 % 32 %

Latin America $ 9,267 $ 8,979 3 % 2 %

As a percentage of total revenue 3 % 3 %

Asia Pacific $ 19,686 $ 19,348 2 % 3 %

As a percentage of total revenue 5 % 5 %

Total revenue generated in North America decreased $2.8 million and increased $5.6 million in the second quarter and first six months of fiscal year 2 024, respectively.

The increase in the first six months of fiscal year 2024 in North America was primarily due to the timing of our acquisition of MarkLogic, as described above.

Total revenue generated in EMEA increased $1.4 million and $11.0 million in the second quarter and first six months of fiscal year 2024, respectively.

These increases were primarily due to an increase in our DataDirect product offering as a result of the timing of renewals on multiyear subscription contracts.

Total revenue in Latin America and Asia Pacific remained relatively flat in all periods presented.

In the first six months of fiscal year 2024 revenue generated in markets outside North America represented 42% of total revenue compared to 41% of total revenue on a constant currency basis.

In the first six months of fiscal year 2023 revenue generated in markets outside North America represented 40% of total revenue compared to 41% of total revenue on a constant currency basis.

Cost of Software Licenses

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Cost of software licenses $ 2,497 $ 2,814 $ (317) (11) % $ 5,228 $ 5,266 $ (38) (1) %

As a percentage of software license revenue 5 % 5 % 4 % 5 %

As a percentage of total revenue 1 % 1 %

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

1 unchanged sentence

Cost of Maintenance and Services

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Cost of maintenance and services $ 22,176 $ 22,970 $ (794) (3) % $ 44,395 $ 40,471 $ 3,924 10 %

As a percentage of maintenance and services revenue 18 % 19 % 18 % 18 %

As a percentage of total revenue 12 % 11 %

Components of cost of maintenance and services:

4 unchanged sentences

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

The increase was primarily due to increased personnel related costs, contractor and outside services costs, and hosting costs resulting from our acquisition of MarkLogic.

The decrease in the second quarter of fiscal year 2024 was primarily due to decreased contractor and outside services costs and decreased hosting costs.

The increase in first six months of fiscal year 2024 is due to increased personnel related costs resulting from our acquisition of MarkLogic.

Amortization of Intangibles

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Amortization of intangibles $ 7,398 $ 7,994 (7) % $ 15,257 $ 14,258 7 %

1 unchanged sentence

Amortization of intangibles included in costs of revenue primarily represents the amortization of the value assigned to technology-related intangible assets obtained in business combinations.

The year over year is due to the acquisition of MarkLogic.

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

The decrease in the second quarter of fiscal year 2024 is due to certain intangible assets becoming fully amortized in the period.

The year over year increase in the first six months of fiscal year 2024 is due to the acquisition of MarkLogic.

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Gross profit $ 143,006 $ 144,473 (1) % $ 294,882 $ 282,482 4 %

As a percentage of total revenue 82 % 81 % 82 % 82 %

Our gross profit increased due to the increases in revenue, offset by the increases in costs of software licenses, costs of maintenance and services and the amortization of intangibles, each as described above.

Our gross profit decreased slightly in the second quarter of fiscal year 2024 as compared to the same period last year due to the decreases in revenue, offset by the decreases in costs of software licenses, costs of maintenance and services and the amortization of intangibles, each as described above.

Our gross profit increased in the first six months of fiscal year 2024 as compared to the same period last year due to the increases in revenue, offset by the increases in costs of maintenance and services and the amortization of intangibles, each as described above.

Sales and Marketing

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Sales and marketing $ 37,889 $ 40,147 $ (2,258) (6) % $ 77,000 $ 73,901 $ 3,099 4 %

5 unchanged sentences

Total sales and marketing $ 37,889 $ 40,147 $ (2,258) (6) % $ 77,000 $ 73,901 $ 3,099 4 %

Sales and marketing expenses increased primarily due to increased personnel related costs associated with our acquisition of MarkLogic, as well as increases in marketing and sales events costs, partially offset by decreases in contractors and outside services costs.

Sales and marketing expenses decreased in the second quarter of fiscal year 2024 due to decreased personnel related costs, contractors and outside services costs, and marketing and sales events costs.

Sales and marketing expenses increased in the first six months of fiscal year 2024 primarily due to increased personnel related costs associated with our acquisition of MarkLogic, as well as increases in marketing and sales events costs, partially offset by decreases in contractors and outside services costs.

Product Development

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

Product development costs $ 35,435 $ 34,820 $ 615 2 % $ 70,423 $ 65,258 $ 5,165 8 %

5 unchanged sentences

Total product development costs $ 35,435 $ 34,820 $ 615 2 % $ 70,423 $ 65,258 $ 5,165 8 %

Product development expenses increased primarily due to increased personnel related costs associated with our acquisition of MarkLogic, as well as increases in contractors and outside services costs and other product development costs.

Product development expenses increased in the second quarter of fiscal year 2024 as compared to the same period in the prior year primarily due to increased personnel related costs.

Product development expenses increased in the first six months of fiscal year 2024 primarily due to increased personnel related costs associated with our acquisition of MarkLogic, as well as an increase in contractors and outside services costs.

General and Administrative

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 Change May 31, 2024 May 31, 2023 Change

General and administrative $ 21,983 $ 21,469 $ 514 2 % $ 43,327 $ 40,255 $ 3,072 8 %

6 unchanged sentences

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

General and administrative expenses increased primarily due to higher personnel costs, as well as increases in contractors and outside services costs and other general and administrative costs.

General and administrative expenses increased in all periods primarily due to higher personnel costs and other general and administrative costs.

These increases were offset by decreases in contractors and outside services costs in all periods.

Amortization of Intangibles

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Amortization of intangibles $ 16,316 $ 17,546 (7) % $ 33,705 $ 31,157 8 %

1 unchanged sentence

Amortization of intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology.

Amortization of intangibles increased due to the addition of MarkLogic intangible assets, as discussed above.

The decrease in the second quarter of fiscal year 2024 is due to certain intangible assets becoming fully amortized in the period.

Amortization of intangibles increased in the first six months of fiscal year 2024 due to the addition of MarkLogic intangible assets, as discussed above.

Cyber Incident and Vulnerability Response Expenses, Net

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Cyber incident and vulnerability response expenses, net $ 3,036 $ 1,483 105 % $ 4,023 $ 4,175 (4) %

3 unchanged sentences

Restructuring Expenses

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Restructuring expenses $ 651 $ 3,990 (84) % $ 3,000 $ 5,387 (44) %

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

Restructuring expenses recorded in the first quarter of fiscal year 2024 relate to a facility closure in connection with the restructuring action from the first fiscal quarter of 2023.

Restructuring expenses recorded in the first quarter of fiscal year 2023 relate to headcount reduction from the same action.

Restructuring expenses recorded in the first six months of fiscal year 2024 primarily relate to a facility closure in connection with the restructuring action from the first fiscal quarter of 2023, related to the MarkLogic acquisition.

Restructuring expenses recorded in the first six months of fiscal year 2023 relate to headcount reduction from the same action.

Acquisition-Related Expenses

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Acquisition-related expenses $ 548 $ 1,991 (72) % $ 1,250 $ 3,734 (67) %

2 unchanged sentences

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

Acquisition-related expenses in the first quarter of fiscal year 2024 were primarily related to our pursuit of other acquisition opportunities.

Acquisition-related expenses in the first six months of fiscal year 2024 were primarily related to our pursuit of other acquisition opportunities.

Acquisition-related expenses in the same periods of fiscal year 2023 were primarily related to our acquisition of MarkLogic.

Income from Operations

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Income from operations $ 27,148 $ 23,027 18 % $ 62,154 $ 58,615 6 %

As a percentage of total revenue 16 % 13 % 17 % 17 %

Income from operations decreased in the first quarter of fiscal year 2024 due to an increase in costs of revenue and operating expenses, offset by increased revenue, as shown above.

Other (Expense) Income, Net

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Income from operations increased in the second quarter of fiscal year 2024 due to a decrease in costs of revenue and operating expenses, offset by decreased revenue, as shown above.

Income from operations increased in the first six months of fiscal year 2024 due to an increase in revenue, partially offset by an increase in costs of revenue and operating expenses, as shown above.

Other (Expense) Income

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Interest expense $ (7,007) $ (8,514) (18) % $ (14,351) $ (14,362) — %

3 unchanged sentences

As a percentage of total revenue (4) % (5) % (4) % (4) %

Other expense, net, increased due to increased interest expense on our term loan and our revolving line of credit, which we drew on to fund part of our acquisition of MarkLogic.

We expect our annual interest expense to decrease for the remainder of 2024 due to the reduced contractual interest rate on the 2030 convertible notes, which were used to finance the term loan and the borrowings outstanding under the revolver.

Other expense, net, decreased in the second quarter of fiscal year 2024 due to lower interest rates as a result of our debt refinancing, in which we issued the 2030 Notes and entered into an amended and restated credit facility.

Please refer to Note 7:

Debt for further discussion.

Interest income and other, net, was higher in fiscal year 2024, resulting from higher interest rates on our invested cash balance.

2 unchanged sentences

Provision for Income Taxes

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Provision for income taxes $ 3,940 $ 2,519 56 % $ 8,908 $ 8,769 2 %

As a percentage of income before income taxes 20 % 17 % 19 % 20 %

Our effective tax rate was 18% and 21% in the first fiscal quarter of 2024 and 2023, respectively.

The primary reason for the decrease in the effective rate was due to discrete tax benefits related to stock-based compensation and the statute of limitations expiring on uncertain tax positions in the first fiscal quarter of 2024.

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

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023 % Change

Our effective tax rate was 20% and 17% in the second fiscal quarter of 2024 and 2023, respectively.

The primary reason for the increase in the effective rate was due to discrete tax benefits related to stock-based compensation and the reversal of an uncertain tax position due to an audit settlement in the second fiscal quarter of 2023.

There were no significant discrete tax items in the second fiscal quarter of 2024.

Three Months Ended Six Months Ended

(in thousands) May 31, 2024 May 31, 2023 % Change May 31, 2024 May 31, 2023 % Change

Net income $ 16,188 $ 12,090 34 % $ 38,827 $ 35,764 9 %

4 unchanged sentences

Annualized Recurring Revenue ("ARR")

We provide an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years and comprises the vast majority of our total revenue.

ARR represents the annualized contract value for all active and contractually binding term-based contracts at the end of a period.

ARR includes maintenance, software upgrade rights, both public cloud instances and on-premises subscription-based transactions and managed services.

ARR mitigates fluctuations due to seasonality, contract term and the sales mix of subscriptions for term-based licenses and SaaS.

ARR is not calculated in accordance with GAAP.

We disclose ARR as a performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources currently represents the substantial majority of our revenues and is expected to continue in the future.

We define ARR as the annualized revenue of all active and contractually binding term-based contracts from all customers at a point in time.

ARR includes revenue from maintenance, software upgrade rights, public cloud, and on-premises subscription-based transactions and managed services.

ARR mitigates fluctuations in revenue due to seasonality, contract term and the sales mix of subscriptions for term-based licenses and SaaS.

Management uses ARR to understand customer trends and the overall health of the Company’s business, helping it to formulate strategic business decisions.

We calculate the annualized value of annual and multi-year contracts, and contracts with terms less than one year, by dividing the total contract value of each contract by the number of months in the term and then multiplying by 12.

Annualizing contracts with terms less than one-year results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period.

We generally do not sell contracts with a term of less than one year unless a customer is purchasing additional licenses under an existing annual or multi-year contract.

The expectation is that at the time of renewal, contracts with a term less than one year will renew with the same term as the existing contracts being renewed, such that both contracts are co-termed.

Historically contracts with a term of less than one year renew at rates equal to or better than annual or multi-year contracts.

Revenue from term-based license and on-premises subscription arrangements include a portion of the arrangement consideration that is allocated to the software license that is recognized up-front at the point in time control is transferred under ASC 606 revenue recognition principles.

ARR for these arrangements is calculated as described above.

The expectation is that the total contract value, inclusive of revenue recognized as software license, will be renewed at the end of the contract term.

The calculation is done at constant currency using the current year budgeted exchange rates for all periods presented.

ARR is not defined in GAAP and is not derived from a GAAP measure.

Rather, ARR generally aligns to billings (as opposed to GAAP revenue which aligns to the transfer of control of each performance obligation).

ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies.

1 unchanged sentence

ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

We define ARR as the annualized recurring revenue of term-based contracts from all customers at a point in time.

We calculate ARR by taking monthly recurring revenue, or MRR, and multiplying it by 12.

MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts, additional usage and monthly subscriptions.

The calculation is done at constant currency using the current year budgeted exchange rates for all periods presented.

Our ARR was $571.0 million and $570.0 million as of February 29, 2024 and February 28, 2023, respectively, remaining constant year-over-year.

Our ARR was $579.0 million and $574.0 million as of May 31, 2024 and May 31, 2023, respectively, which is an increase of 1% year-over-year.

Net Retention Rate

8 unchanged sentences

Cash and Cash Equivalents

(In thousands) February 29, 2024 November 30, 2023

(in thousands) May 31, 2024 November 30, 2023

Cash and cash equivalents $ 190,420 $ 126,958

The increase in cash and cash equivalents of $6.3 million from the end of fiscal year 2023 was due to cash inflows from operations of $70.5 million, $1.7 million in cash received from the issuance of common stock.

These cash inflows were offset by cash outflows of $30.0 million for the repayment of the revolving line of credit, repurchases of common stock of $22.5 million, dividend payments of $8.2 million, payments of debt obligations of $3.4 million, the effect of exchange rates on cash of $1.5 million, and purchases of property and equipment of $0.3 million.

The increase in cash and cash equivalents of $63.5 million from the end of fiscal year 2023 was due to proceeds from the issuance of convertible senior notes of $396.5 million (net of purchases of capped calls in connection with the convertible notes offering of $42.2 million and issuance costs of $11.2 million), cash inflows from operations of $134.2 million, and $2.3 million in cash received from the issuance of common stock.

We refinanced our debt by issuing the convertible senior notes and used the proceeds to pay off the outstanding balance of the term loan and revolving line of credit under our previous credit agreement.

As such, the cash inflows described above were offset by cash outflows of $261.3 million to pay off the balance of the term loan, $110.0 million to pay off the revolving line of credit, repurchases of common stock of $72.5 million, dividend payments of $16.1 million, payment of debt issuance costs of $6.8 million, the effect of exchange rates on cash of $1.7 million, and purchases of property and equipment of $1.3 million.

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

As of February 29, 2024, $73.0 million of our cash and cash equivalents was held by our foreign subsidiaries.

As of May 31, 2024, $76.0 million of our cash and cash equivalents was held by our foreign subsidiaries.

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

4 unchanged sentences

In January 2023, our Board of Directors increased our share repurchase authorization by $150 million, to an aggregate authorization of $228.0 million.

In the three months ended February 29, 2024 and February 28, 2023, we repurchased and retired 0.4 million shares for $22.5 million and 0.3 million shares for $15.0 million, respectively.

In the three months ended May 31, 2024 and May 31, 2023, we repurchased and retired 1.0 million shares for $49.9 million and 0.3 million shares for $15.0 million, respectively.

In the six months ended May 31, 2024 and May 31, 2023, we repurchased and retired 1.4 million shares for $72.4 million and 0.5 million shares for $30.0 million, respectively.

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

As of February 29, 2024, there was $171.5 million remaining under the current authorization.

On March 1, 2024, the Company repurchased and retired 0.4 million shares for $25.0 million.

On March 19, 2024, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock, which will be paid on June 17, 2024 to stockholders of record as of the close of business on June 3, 2024.

As of May 31, 2024, there was $121.5 million remaining under the current authorization.

On June 17, 2024, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock, which will be paid on September 16, 2024 to stockholders of record as of the close of business on September 2, 2024.

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

4 unchanged sentences

Cash Flows From Operating Activities

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023

Six Months Ended

(in thousands) May 31, 2024 May 31, 2023

Net income $ 38,827 $ 35,764

2 unchanged sentences

Net cash flows from operating activities $ 134,185 $ 94,718

In the first three months of fiscal year 2024, operating cash flows increased due to higher billings and collections.

Our gross accounts receivable as of February 29, 2024, decreased by $36.6 million from the end of fiscal year 2023.

Our days sales outstanding (DSO) in accounts receivable increased to 50 days from 42 days in the first fiscal quarter of 2023 due to the timing of billings.

In the first six months of fiscal year 2024, operating cash flows increased due to higher billings and collections.

Our gross accounts receivable as of May 31, 2024, decreased by $43.4 million from the end of fiscal year 2023.

Our days sales outstanding (DSO) in accounts receivable decreased to 41 days from 44 days in the second fiscal quarter of 2023 due to the timing of billings.

Cash Flows Used in Investing Activities

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023

Six Months Ended

(in thousands) May 31, 2024 May 31, 2023

Net investment activity $ — $ 438

3 unchanged sentences

Net cash outflows and inflows of our net investment activity are generally a result of the timing of our purchases and maturities of securities, which are classified as cash equivalents or short-term securities.

In the first three months of fiscal year 2024, we purchased $0.3 million of property and equipment.

In the first quarter of fiscal year 2023 we had payments for acquisitions net of cash acquired of $355.8 million, and $0.4 million of purchases of property and equipment.

In the first six months of fiscal year 2024, we purchased $1.3 million of property and equipment.

In the first six months of fiscal year 2023 we had payments for acquisitions net of cash acquired of $356.1 million, and $2.0 million of purchases of property and equipment.

Cash Flows (Used in) From Financing Activities

Three Months Ended

(In thousands) February 29, 2024 February 28, 2023

Six Months Ended

(in thousands) May 31, 2024 May 31, 2023

Proceeds from stock-based compensation plans $ 12,896 $ 16,365

Repurchases of common stock (72,449) (30,000)

Proceeds from issuance of senior convertible notes, net of issuance costs of $11,200 438,750 —

Purchase of capped calls (42,210) —

Proceeds from the issuance of debt — 195,000

3 unchanged sentences

Other financing activities (10,592) (8,101)

Payment of credit facility debt issuance costs (6,821) —

Net cash flows (used in) from financing activities $ (67,798) $ 128,956

We received $7.6 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan as compared to $9.4 million in the first three months of fiscal year 2023.

During the first three months of fiscal year 2024, we did not receive any proceeds from the issuance of debt, while in the same period in fiscal year 2023 we received $195.0 million in net proceeds from the issuance of debt to partially fund the acquisition of MarkLogic.

We received $12.9 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan as compared to $16.4 million in the first six months of fiscal year 2023.

During the second quarter of fiscal year 2024, we received net proceeds from the issuance of debt of $51.9 million (we refinanced our debt by issuing the convertible senior notes and used the proceeds to pay off the outstanding balance of the term loan and revolving line of credit under our previous credit

agreement, each as described above).

In the first quarter of fiscal year 2024 we made payments on our long-term debt of $33.4 million (including a $30.0 million repayment on the revolving line of credit).

In the first six months of fiscal year 2023 we received $195.0 million in net proceeds from the issuance of debt to partially fund the acquisition of MarkLogic and we also made payments on our long-term debt of $28.4 million (including a $25.0 million repayment on the revolving line of credit).

Further, we repurchased $72.5 million of our common stock under our share repurchase plan compared to $30.0 million in the same period of the prior year.

We also made payments on our long-term debt of $33.4 million (including a $30.0 million repayment on the revolving line of credit) in the first three months of fiscal year 2024 and $1.7 million in the same period in 2023.

Finally, we made dividend payments of $8.2 million to our stockholders during the first three months of fiscal year 2024 and $8.0 million in the first three months of fiscal year 2023.

Finally, we made dividend payments of $16.1 million to our stockholders during the first six months of fiscal year 2024 and $15.9 million in the first six months of fiscal year 2023.

Liquidity Outlook

Cash from operations in fiscal year 2024 could be affected by various risks and uncertainties, including, but not limited to, the effects of various risks detailed in Part I, Item 1A.

Risk Factors in our 2023 Annual Report which have led to increased disruption and volatility in capital markets and credit markets that could adversely affect our liquidity and capital resources in the future.

However, based on our current business plan, we believe that existing cash balances, together with funds generated from operations and amounts available under our Credit Facility, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months.

Risk Factors in our 2023 Annual Report, including increased disruption and volatility in capital markets and credit markets that could adversely affect our liquidity and capital resources in the future.

However, based on our current business plan, we believe that existing cash balances, together with funds generated from operations and amounts available under our revolving credit facility, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months.

We do not contemplate a need for any foreign repatriation of the earnings which are deemed invested indefinitely outside of the U.S.

4 unchanged sentences

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).

A “zero-day vulnerability” is a vulnerability that has been publicly disclosed (e.g., by an independent researcher or threat actor) before the software vendor has an opportunity to patch it.

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).

A “zero-day vulnerability” is a vulnerability that has been publicly disclosed and/or exploited (e.g., by an independent researcher or threat actor) before the software vendor has an opportunity to patch it.

The investigative team determined that 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 promptly took down MOVEit Cloud for further investigation and notified all then-known current and former MOVEit Transfer and MOVEit Cloud customers in order to apprise them of the MOVEit Vulnerability and alert them to immediate remedial actions.

8 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis