What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-10-08 compared with 2024-07-08 · 111 added, 119 removed, 499 unchanged (32% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

(in thousands, except share data) May 31, 2024 November 30, 2023

(in thousands, except share data) August 31, 2024 November 30, 2023

Current assets:

43 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended

(in thousands, except per share data) May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Three Months Ended Nine Months Ended

(in thousands, except per share data) August 31, 2024 August 31, 2023 August 31, 2024 August 31, 2023

Software licenses $ 57,850 $ 50,544 $ 175,929 $ 164,519

34 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Net income $ 28,464 $ 19,098 $ 67,291 $ 54,862

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 2,084 1,667 643 5,124

Unrealized loss on hedging activity, net of tax benefit of $ 142 and $ 360 for the three and six months ended May 31, 2024, respectively, and $ 250 and $ 295 for the three and six months ended May 31, 2023, respectively

Unrealized loss on hedging activity, net of tax benefit of $ 0 and $ 360 for the three and nine months ended August 31, 2024, respectively, and $ 170 and $ 465 for the three and nine months ended August 31, 2023, respectively

— ( 537 ) ( 1,135 ) ( 1,476 )

Unrealized loss on investments, net of tax benefit of $ 4 and $ 0 for the three and six months ended May 31, 2023, respectively

Total other comprehensive (loss) income, net of tax ( 340 ) 929 ( 2,576 ) 2,518

Total other comprehensive income (loss), net of tax 2,084 1,130 ( 492 ) 3,648

Comprehensive income $ 30,548 $ 20,228 $ 66,799 $ 58,510

1 unchanged sentence

Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended May 31, 2024

Nine Months Ended August 31, 2024

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

11 unchanged sentences

Other comprehensive loss — — — — ( 492 ) ( 492 )

Balance, May 31, 2024 43,063 $ 431 $ 330,382 $ 105,590 $ ( 34,736 ) $ 401,667

Three Months Ended May 31, 2024

Balance, August 31, 2024 42,899 $ 429 $ 338,594 $ 119,241 $ ( 32,652 ) $ 425,612

Three Months Ended August 31, 2024

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

(in thousands) Number of Shares Amount

Balance, March 1, 2024 43,689 $ 437 $ 372,273 $ 123,429 $ ( 34,396 ) $ 461,743

Balance, June 1, 2024 43,063 $ 431 $ 330,382 $ 105,590 $ ( 34,736 ) $ 401,667

Issuance of stock under employee stock purchase plan 78 1 2,971 — — 2,972

Exercise of stock options 45 1 1,993 — — 1,994

Vesting of restricted stock units and release of deferred stock units 254 3 ( 3 ) — — —

Withholding tax payments related to net issuance of RSUs — ( 2 ) ( 33 ) — — ( 35 )

Stock-based compensation — — 10,558 — — 10,558

Purchase of capped calls, net of tax — — ( 32,080 ) — — ( 32,080 )

Dividends declared — — — ( 7,764 ) — ( 7,764 )

1 unchanged sentence

Net income — — — 28,464 — 28,464

Other comprehensive loss — — — — ( 340 ) ( 340 )

Balance, May 31, 2024 43,063 $ 431 $ 330,382 $ 105,590 $ ( 34,736 ) $ 401,667

Six Months Ended May 31, 2023

Other comprehensive income — — — — 2,084 2,084

Balance, August 31, 2024 42,899 $ 429 $ 338,594 $ 119,241 $ ( 32,652 ) $ 425,612

Nine Months Ended August 31, 2023

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

10 unchanged sentences

Other comprehensive income — — — — 3,648 3,648

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

Three Months Ended May 31, 2023

Balance, August 31, 2023 43,565 $ 438 $ 361,062 $ 115,133 $ ( 31,587 ) $ 445,046

Three Months Ended August 31, 2023

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

(in thousands) Number of Shares Amount

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

Balance, June 1, 2023 43,358 $ 436 $ 347,101 $ 103,995 $ ( 32,717 ) $ 418,815

Issuance of stock under employee stock purchase plan 67 1 2,498 — — 2,499

Exercise of stock options 140 1 1,391 — — 1,392

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

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

Stock-based compensation — — 10,072 — — 10,072

Dividends declared — — — ( 7,960 ) — ( 7,960 )

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

Net income — — — 19,098 — 19,098

Other comprehensive income — — — — 1,130 1,130

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

Balance, August 31, 2023 43,565 $ 438 $ 361,062 $ 115,133 $ ( 31,587 ) $ 445,046

Condensed Consolidated Statements of Cash Flows

Six Months Ended

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

Nine Months Ended

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

Cash flows from operating activities:

40 unchanged sentences

Condensed Consolidated Statements of Cash Flows, continued

Six Months Ended

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

Nine Months Ended

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

Supplemental disclosure:

46 unchanged sentences

Cash and Cash Equivalents

A summary of our cash and cash equivalents at May 31, 2024 is as follows:

A summary of our cash and cash equivalents at August 31, 2024 is as follows:

(in thousands) Amortized Cost Basis Unrealized Gains Unrealized Losses Fair Value

5 unchanged sentences

Cash $ 126,958 $ — $ — $ 126,958

There were no debt securities by contractual maturity due after one year as of May 31, 2024.

There were no debt securities by contractual maturity due after one year as of August 31, 2024.

Derivative Instruments

4 unchanged sentences

The interest rate swap was designated as a cash flow hedge and the effectiveness of the hedge was assessed both at the onset of the hedge and at regular intervals throughout the life of the derivative.

As the interest rate swap was highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative were included as a component of other comprehensive loss on our condensed consolidated balance sheets through the first quarter of fiscal year 2024.

As the interest rate swap was highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative were included as a component of accumulated other comprehensive loss on our condensed consolidated balance sheets through the first quarter of fiscal year 2024.

On March 1, 2024, we repaid our variable rate debt in full and reclassified an unrealized gain of $ 0.6 million from accumulated other comprehensive loss to interest expense in our condensed consolidated statements of operations.

The net amount of accumulated other comprehensive loss reclassified to interest expense during the six months ended May 31, 2024 and May 31, 2023 was a decrease of $ 1.5 million and $ 1.6 million, respectively.

The net amount of accumulated other comprehensive loss reclassified to interest expense during the nine months ended August 31, 2024 and August 31, 2023 was $ 1.5 million and $ 2.6 million, respectively.

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

The fair value of the derivative represented 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:

May 31, 2024 November 30, 2023

August 31, 2024 November 30, 2023

(in thousands)

5 unchanged sentences

All forward contracts are recorded at fair value in other current assets, other assets, other accrued liabilities, or other noncurrent liabilities on the condensed consolidated balance sheets at the end of each reporting period and generally expire between thirty days and 3 years from the date the contract was entered.

At May 31, 2024, $ 0.2 million and $ 0.3 million was recorded in other accrued liabilities and other noncurrent liabilities, respectively, on our condensed consolidated balance sheets.

At August 31, 2024, $ 0.3 million, $ 0.1 million and $ 0.2 million was recorded in other current assets , other assets and other accrued liabilities, respectively, on our condensed consolidated balance sheets.

At November 30, 2023, $ 2.5 million was recorded in other accrued liabilities on our condensed consolidated balance sheets.

In the three and six months ended May 31, 2024, realized and unrealized losses of $ 0.1 million and $ 0.7 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

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

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

In the three and nine months ended August 31, 2024, net realized and unrealized gains of $ 1.0 million and $ 0.3 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

In the three and nine months ended August 31, 2023, net realized and unrealized gains of $ 1.1 million and $ 2.7 million, respectively, from our forward contracts were recognized in foreign currency loss, net, on our condensed consolidated statements of operations.

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

May 31, 2024 November 30, 2023

August 31, 2024 November 30, 2023

(in thousands) Notional Value Fair Value Notional Value Fair Value

6 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at May 31, 2024:

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at August 31, 2024:

Fair Value Measurements Using

14 unchanged sentences

The following table details the fair value and carrying value of our Convertible Senior Notes due 2026 and 2030 (together referred to as “the Notes”):

May 31, 2024 November 30, 2023

August 31, 2024 November 30, 2023

(in thousands) Carrying Value Fair Value Carrying Value Fair Value

4 unchanged sentences

Total $ 795,282 $ 873,456 $ 354,772 $ 377,125

(1) The carrying value of the convertible senior notes due 2026 (the "2026 Notes"), are reflected net of $ 4.1 million and $ 5.2 million of unamortized debt issuance costs as of May 31, 2024 and November 30, 2023, respectively.

(2) The carrying value of the convertible senior notes due 2030 (the "2030 Notes"), are reflected net of $ 11.6 million of unamortized debt issuance costs as of May 31, 2024.

The fair value of the Notes is based on quoted prices in an over-the-counter market on the last trading day of the reporting period and classified within Level 2 in the fair value hierarchy.

(1) The carrying value of the convertible senior notes due 2026 (the "2026 Notes"), are reflected net of $ 3.6 million and $ 5.2 million of unamortized debt issuance costs as of August 31, 2024 and November 30, 2023, respectively.

(2) The carrying value of the convertible senior notes due 2030 (the "2030 Notes"), are reflected net of $ 11.1 million of unamortized debt issuance costs as of August 31, 2024.

The fair value of the Notes is based on quoted prices in an over-the-counter market on the last trading day of the reporting period and classified within Level 2 of the fair value hierarchy.

Fair Value of Other Financial Assets and Liabilities

The carrying amounts of other financial assets and liabilities including cash and cash equivalents, 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.

Intangible Assets and Goodwill

1 unchanged sentence

Intangible assets are comprised of the following significant classes:

May 31, 2024 November 30, 2023

August 31, 2024 November 30, 2023

(in thousands) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value

3 unchanged sentences

Total $ 788,719 $ ( 504,013 ) $ 284,706 $ 788,719 $ ( 434,441 ) $ 354,278

In the three and six months ended May 31, 2024, amortization expense related to intangible assets was $ 23.7 million and $ 49.0 million, respectively.

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

Future amortization expense for intangible assets as of May 31, 2024, is as follows:

In the three and nine months ended August 31, 2024, amortization expense related to intangible assets was $ 20.1 million and $ 69.1 million, respectively.

In the three and nine months ended August 31, 2023, amortization expense related to intangible assets was $ 25.7 million and $ 71.1 million, respectively.

Future amortization expense for intangible assets as of August 31, 2024, is as follows:

(in thousands)

2 unchanged sentences

Total $ 284,706

Changes in the carrying amount of goodwill in the six months ended May 31, 2024 are as follows:

Changes in the carrying amount of goodwill in the nine months ended August 31, 2024 are as follows:

(in thousands)

2 unchanged sentences

Translation adjustments ( 53 )

Balance, May 31, 2024

Balance, August 31, 2024

(1) The additions to goodwill during fiscal year 2024 represent measurement period adjustments related to the acquisition of MarkLogic Corporation ("MarkLogic") in February 2023.

37 unchanged sentences

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

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

(in thousands, except per share data) Pro Forma Nine Months Ended August 31, 2023

Revenue $ 556,319

22 unchanged sentences

Repurchase Rights

On or after March 5, 2027, and on or before the 60th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the 2030 Notes, subject to partial redemption limitation, at a repurchase price equal to 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.

On or after March 5, 2027, and on or before the 60th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the 2030 Notes, subject to partial redemption limitation, at a repurchase price equal to 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 twenty trading days (whether or not consecutive) during any thirty 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 2030 Notes unless at least $ 100.0 million aggregate principal amount of 2030 Notes are outstanding and not subject to redemption as of the time it sends the related redemption notice.

9 unchanged sentences

Issuance costs of $ 12.0 million were recorded as a reduction to the principal balance of the 2030 Notes and will be amortized as interest expense using the effective interest method over the contractual term.

Three Months Ended

(in thousands) May 31, 2024

Three Months Ended Nine Months Ended

(in thousands) August 31, 2024 August 31, 2024

Contractual interest expense ( 3.5 % coupon)

$ 3,938 $ 7,875

Amortization of debt discount and issuance costs (1)

$ 4,388 $ 8,771

(1) Amortization based upon an effective interest rate of 4.0 %.

4 unchanged sentences

The revolving credit facility 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.

We expect to use the revolving credit facility for general corporate purposes.

We expect to use the revolving credit facility to fund our proposed acquisition of ShareFile and for general corporate purposes.

Interest rates for the revolving credit facility are determined by reference to a Term Benchmark Rate or a base rate at our option and would range from 1.50 % to 3.00 % above the Term Benchmark Rate for Term Benchmark-based borrowings or from 0.50 % to 2.00 % above the defined base rate for base rate borrowings, in each case based upon our consolidated total net leverage ratio.

5 unchanged sentences

Accrued interest on the loans is payable quarterly in arrears.

As of May 31, 2024, the revolving credit facility was undrawn.

As of August 31, 2024, the revolving credit facility was undrawn.

Costs incurred to obtain our long-term debt of $ 6.0 million, along with $ 1.0 million of unamortized debt issuance costs related to the previous credit agreement, were recorded as debt issuance costs and will be amortized over the term of the debt agreement using the effective interest method.

5 unchanged sentences

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

In the three months ended 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.

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

In the three months ended August 31, 2024, we repurchased and retired 0.3 million shares for $ 14.3 million.

In the three months ended August 31, 2023, we did no t repurchase any shares of our common stock.

In the nine months ended August 31, 2024 and August 31, 2023, we repurchased and retired 1.6 million shares for $ 86.8 million and 0.5 million shares for $ 30.0 million, respectively.

As of August 31, 2024, there was $ 107.2 million remaining under the current authorization.

Stock-Based Compensation

10 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Cost of maintenance and services $ 834 $ 797 $ 2,732 $ 2,146

4 unchanged sentences

Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss during the six months ended May 31, 2024:

The following table summarizes the changes in accumulated balances of other comprehensive loss during the nine months ended August 31, 2024:

(in thousands) Foreign Currency Translation Adjustment Unrealized Gains (Losses) on Hedging Activity Accumulated Other Comprehensive Loss

Balance, December 1, 2023 $ ( 33,295 ) $ 1,135 $ ( 32,160 )

Other comprehensive loss before reclassifications, net of tax ( 1,441 ) ( 689 ) ( 2,130 )

Other comprehensive gain (loss) before reclassifications, net of tax 643 ( 689 ) ( 46 )

Amount of gain reclassified from accumulated other comprehensive loss into net income, net of tax — ( 446 ) ( 446 )

Balance, May 31, 2024 $ ( 34,736 ) $ — $ ( 34,736 )

The tax effect on accumulated unrealized gains (losses) on our hedging activity and unrealized losses on investments was a tax provision of $ 0.1 million and $ 0.4 million as of May 31, 2024 and November 30, 2023, respectively.

Balance, August 31, 2024 $ ( 32,652 ) $ — $ ( 32,652 )

The tax effect on accumulated unrealized gains (losses) on our hedging activity was minimal as of August 31, 2024 and was a tax provision of $ 0.4 million as of November 30, 2023.

Revenue Recognition

2 unchanged sentences

Information relating to revenue from external customers by revenue type is as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Performance obligations transferred at a point in time:

10 unchanged sentences

Information relating to revenue from external customers from different geographical areas is as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

North America $ 104,369 $ 101,923 $ 314,553 $ 306,483

4 unchanged sentences

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

accounted for more than 10% of our total revenue for the three and six months ended May 31, 2024 or May 31, 2023.

accounted for more than 10% of our total revenue for the three and nine months ended August 31, 2024 or August 31, 2023.

Contract Balances

Unbilled Receivables and Contract Assets

As of May 31, 2024, billing of our long-term unbilled receivables is expected to occur as follows:

As of August 31, 2024, billing of our long-term unbilled receivables is expected to occur as follows:

(in thousands)

2 unchanged sentences

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 May 31, 2024 or November 30, 2023.

We did not have any net contract assets as of August 31, 2024 or November 30, 2023.

Deferred Revenue

1 unchanged sentence

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

The changes in net deferred revenue for the six months ended May 31, 2024 were as follows:

The changes in net deferred revenue for the nine months ended August 31, 2024 were as follows:

(in thousands)

3 unchanged sentences

Revenue recognized from current period arrangements ( 302,799 )

Balance, May 31, 2024 $ 291,574

As of May 31, 2024, transaction price allocated to remaining performance obligations was $ 344 million.

Balance, August 31, 2024 $ 285,384

As of August 31, 2024, transaction price allocated to remaining performance obligations was $ 346 million.

We expect to recognize approximately 73 % of the revenue within the next year and the remainder thereafter.

4 unchanged sentences

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

Total deferred contract costs were $ 6.6 million and $ 7.6 million as of May 31, 2024 and November 30, 2023, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

Total deferred contract costs were $ 6.1 million and $ 7.6 million as of August 31, 2024 and November 30, 2023, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

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

5 unchanged sentences

Cash disbursements ( 2,056 ) ( 2,231 ) ( 4,287 )

Translation and other adjustments 2 ( 5 ) ( 3 )

Balance, May 31, 2024 $ 4,504 $ 324 $ 4,828

Costs incurred during the three and six months ended May 31, 2024 are primarily related to a facility closure in connection with the restructuring action from the first fiscal quarter of 2023.

Balance, August 31, 2024 $ 4,145 $ 63 $ 4,208

Costs incurred during the three and nine months ended August 31, 2024 are primarily related to a facility closure in connection with the restructuring action from the first fiscal quarter of 2023.

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

3 unchanged sentences

The following table sets forth the calculation of basic and diluted earnings per share on an interim basis:

Three Months Ended Six Months Ended

(in thousands, except per share data) May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Three Months Ended Nine Months Ended

(in thousands, except per share data) August 31, 2024 August 31, 2023 August 31, 2024 August 31, 2023

Net income $ 28,464 $ 19,098 $ 67,291 $ 54,862

5 unchanged sentences

Effect of dilution from common stock equivalents 839 1,353 871 1,178

Effect of dilution from if-converted 2026 Notes — 176 — —

Diluted weighted average shares outstanding 43,711 44,981 44,167 44,543

Diluted earnings per share $ 0.65 $ 0.42 $ 1.52 $ 1.23

We excluded stock awards representing approximately 1,273,000 and 993,000 shares of common stock from the calculation of diluted earnings per share in the three and six months ended May 31, 2024, respectively, as these awards were anti-dilutive.

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

We excluded stock awards representing approximately 560,000 and 849,000 shares of common stock from the calculation of diluted earnings per share in the three and nine months ended August 31, 2024, respectively, as these awards were anti-dilutive.

We excluded stock awards representing approximately 252,000 and 286,000 shares of common stock from the calculation of diluted earnings per share in the three and nine months ended August 31, 2023, respectively, as these awards were anti-dilutive.

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

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

During the three and six months ended May 31, 2024, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money.

During the three and nine months ended August 31, 2024, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money.

For the three months ended August 31, 2023, the average daily closing price of the Company's common stock was greater than the conversion price for the 2026 Notes outstanding as of August 31, 2023.

Therefore, for this period, the Company applied the if-converted method for calculating diluted earnings per common share.

During the nine months ended August 31, 2023, the average daily closing price of the Company's common stock was less than the conversion price for the 2026 Notes.

Therefore, for this period, the 2026 Notes had no impact on the computation of diluted earnings per common share.

Segment Information

9 unchanged sentences

We did not incur costs related to this incident during fiscal year 2024 and do not expect to incur additional costs as the investigation is closed.

We incurred net expenses of $ 1.5 million and $ 4.2 million related to this incident during the three and six months ended May 31, 2023.

We did not incur any meaningful costs related to this cyber incident for the three months ended August 31, 2023.

We incurred net expenses of $ 4.2 million related to this incident during the nine months ended August 31, 2023.

MOVEit Vulnerability

As previously reported, 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).

As previously reported, on the evening of May 28, 2023, we learned that our MOVEit Transfer (the on-premise version) and MOVEit Cloud (a cloud-hosted version of MOVEit Transfer) products were attacked via a “zero-day vulnerability” that could provide for unauthorized escalated privileges and access to the customer’s underlying environment (the “MOVEit Vulnerability”).

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.

In parallel, our team developed a patch for all supported versions of MOVEit Transfer and MOVEit Cloud, which was released on May 31, 2023, and allowed for the restoration of MOVEit Cloud that same day.

We 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 six months ended May 31, 2024.

Litigation and Governmental Investigations

As of the date of the issuance of the financial statements, (i) we have received formal letters from 38 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 resulted in the filing of a lawsuit in the District of Massachusetts that has since been joined with the MDL (defined below), and (iii) we are party to approximately 144 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 (the "MDL").

We have also been cooperating with the following inquires and investigations (some of which are further described hereafter):

(i) several inquiries from domestic and foreign data privacy regulators;

(ii) several inquiries and two formal investigations from state attorneys general;

(iii) a formal investigation from a U.S.

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);

and (iv) a formal investigation from the SEC.

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 is cooperating fully with the SEC in its investigation.

On November 3, 2023, the United Kingdom’s Information Commissioner’s Office informed Progress that based upon the information provided, the Commissioner’s Office determined that regulatory action against Progress was not required in relation to the MOVEit Vulnerability.

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 is cooperating fully with the Office of the Attorney General for the District of Columbia in its investigation.

On February 9, 2024, Progress received a subpoena from the Office of the Attorney General for the State of New Jersey 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 is cooperating fully with the Office of the Attorney General for the State of New Jersey in its investigation.

On March 14, 2024, the Office of the Australian Information Commissioner’s Office informed Progress that based upon the information provided, the Commissioner’s Office determined that regulatory action against Progress was not required in relation to the MOVEit Vulnerability.

On May 29, 2024, the Agencia Española de Protección de Datos (the Spanish data protection authority also known as the AEPD) informed Progress that based upon the information provided, the AEPD determined that regulatory action against Progress was not required in relation to the MOVEit Vulnerability.

We continue to monitor the 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 nine months ended August 31, 2024.

Litigation and Governmental Investigations Arising from the MOVEit Vulnerability

As previously reported, as a result of the MOVEit Vulnerability, we are party to certain 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 (the "MDL").

The MDL also includes the previously disclosed subrogation claim (where an insurer is seeking recovery for expenses incurred on behalf of its insured in connection with the MOVEit Vulnerability).

Also as previously disclosed, we have also been cooperating with inquires and investigations from:

(i) several domestic and foreign data privacy regulators (a number of which have been closed without regulatory action), (ii) several state attorneys general, and (iii) one formal investigation from a U.S.

federal law enforcement agency (as of the date of the filing of the financial statements, this is not an enforcement action or formal governmental investigation of which we have been told that we are a target).

As previously disclosed, we received a subpoena from the Securities and Exchange Commission’s Division of Enforcement (the “SEC”) on October 2, 2023, as part of a fact-finding inquiry seeking various documents and information relating to the MOVEit Vulnerability.

In a letter dated August 7, 2024, the SEC notified us that the Commission had concluded its investigation and did not intend to recommend an enforcement action against Progress (the “Termination Letter”).

The Termination Letter was provided under the guidelines set out in the final paragraph of Securities Act Release No.

Expenses Incurred and Future Costs

For the three and six months ended May 31, 2024, we incurred costs of $ 3.0 million and $ 4.0 million, respectively, related to the MOVEit Vulnerability.

The costs recognized are net of insurance recoveries of $ 1.9 million.

For the three and nine months ended August 31, 2024, we incurred net costs of $ 0.9 million and $ 5.0 million , respectively, related to the MOVEit Vulnerability.

The costs recognized are net of insurance recoveries of $ 0.6 million and $ 2.5 million for the three and nine months ended August 31, 2024, respectively.

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 expect to continue 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.

2 unchanged sentences

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 May 31, 2024.

Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of August 31, 2024.

In addition, we may accelerate or make additional investments in our information technology systems, infrastructure, software products or networks following the MOVEit Vulnerability, however, we currently do not expect such amounts to be material to any fiscal period.

1 unchanged sentence

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 May 31, 2024, we have recorded approximately $ 7.0 million in insurance recoveries, of which $ 2.5 million was related to the November 2022 cyber incident and $ 4.5 million was related to the May 2023 MOVEit Vulnerability, providing us with approximately $ 8.0 million of additional cybersecurity insurance coverage under the applicable policy (which is subject to a $ 0.5 million retention per claim).

As of August 31, 2024, we have recorded approximately $ 7.5 million in insurance recoveries, of which $ 2.5 million was related to the November 2022 cyber incident and $ 5.0 million was related to the May 2023 MOVEit Vulnerability, providing us with approximately $ 7.5 million of additional cybersecurity insurance coverage under the applicable policy (which is subject to a $ 0.5 million retention per claim).

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

Subsequent Events

On September 9, 2024, we entered into a definitive agreement to acquire ShareFile from Cloud Software Group, Inc.

for approximately $ 875 million in cash, subject to a $ 25 million working capital credit.

The closing of the acquisition (the “Closing”) is expected to occur in the quarter ending November 30, 2024.

The acquisition is expected to be funded with a combination of existing cash on hand and borrowings under our existing revolving credit facility.

The acquisition will add product and service solutions to our capabilities with ShareFile’s SaaS-native, AI-powered document-centric collaboration and workflows, client portal, secure file sync and share and eSignature abilities.

Our Board of Directors has approved the suspension of Progress’ quarterly dividend in connection with the Closing and plans to redirect such capital toward the repayment of debt to increase liquidity for future M&A and for share repurchases.

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

What changed 10-Q

Item 1. Financial Statements