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Item 2. Management’s Discussion and Analysis

2024-10-08 compared with 2024-07-08 · 115 added, 115 removed, 237 unchanged (49% of the section changed)

31 unchanged sentences

Three Months Ended % Change

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

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

Revenue $ 178,686 $ 174,992 2 % 2 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Revenue $ 538,448 $ 517,469 4 % 4 %

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.

Total revenue slightly increased across multiple product offerings in the third quarter of fiscal year 2024 as compared to the same period last year.

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

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

Software License Revenue

Three Months Ended % Change

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

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

Software licenses $ 57,850 $ 50,544 14 % 15 %

As a percentage of total revenue 32 % 29 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Software licenses $ 175,929 $ 164,519 7 % 7 %

As a percentage of total revenue 33 % 32 %

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.

Software license revenue increased in the third quarter and first nine months of fiscal year 2024 as compared to the same periods last year.

The increase in the third quarter was due to modest growth across multiple products.

MarkLogic revenue is reflected in our results for the first nine 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) May 31, 2024 May 31, 2023 As Reported Constant Currency

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

Maintenance $ 103,088 $ 105,164 (2) % (2) %

4 unchanged sentences

As a percentage of total revenue 68 % 71 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

Maintenance $ 307,616 $ 299,917 3 % 3 %

4 unchanged sentences

As a percentage of total revenue 67 % 68 %

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.

Maintenance and services revenue slightly decreased across multiple products in the third quarter of fiscal year 2024 as compared to the same period last year.

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

Revenue by Region

Three Months Ended % Change

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

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

North America $ 104,369 $ 101,923 2 % 2 %

6 unchanged sentences

As a percentage of total revenue 7 % 6 %

Six Months Ended % Change

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

Nine Months Ended % Change

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

North America $ 314,553 $ 306,483 3 % 3 %

6 unchanged sentences

As a percentage of total revenue 6 % 6 %

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 generated in North America increased $2.4 million and increased $8.1 million in the third quarter and first nine months of fiscal year 2024, respectively.

The increase in the first nine 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 remained relatively flat in the third quarter.

Total revenue in EMEA increased by $11.3 million in the nine month period of fiscal year 2024 due to a slight increase across multiple product offerings.

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.

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

In the first nine months of fiscal year 2023 revenue generated in markets outside North America represented 41% of total revenue on an actual and a constant currency basis.

Cost of Software Licenses

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Cost of software licenses $ 2,700 $ 2,732 $ (32) (1) % $ 7,928 $ 7,998 $ (70) (1) %

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

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

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

Cost of software licenses as a percentage of software license revenue varies from period to period depending upon the relative product mix.

Cost of Maintenance and Services

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Cost of maintenance and services $ 20,057 $ 22,192 $ (2,135) (10) % $ 64,452 $ 62,663 $ 1,789 3 %

6 unchanged sentences

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

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.

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

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

Amortization of Intangibles

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Amortization of intangibles $ 6,307 $ 7,995 (21) % $ 21,564 $ 22,253 (3) %

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 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

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

The year over year decrease in the first nine months of fiscal year 2024 is due certain intangible assets becoming fully amortized in the period, offset by the acquisition of MarkLogic.

Three Months Ended Nine Months Ended

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

Gross profit $ 149,622 $ 142,073 5 % $ 444,504 $ 424,555 5 %

As a percentage of total revenue 84 % 81 % 83 % 82 %

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.

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

Sales and Marketing

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Sales and marketing $ 37,141 $ 38,612 $ (1,471) (4) % $ 114,141 $ 112,513 $ 1,628 1 %

5 unchanged sentences

Total sales and marketing $ 37,141 $ 38,612 $ (1,471) (4) % $ 114,141 $ 112,513 $ 1,628 1 %

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.

Sales and marketing expenses decreased in the third quarter of fiscal year 2024 primarily due to decreased personnel related costs as a result of lower headcount.

Sales and marketing expenses increased in the first nine 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Product development costs $ 34,720 $ 33,138 $ 1,582 5 % $ 105,143 $ 98,396 $ 6,747 7 %

5 unchanged sentences

Total product development costs $ 34,720 $ 33,138 $ 1,582 5 % $ 105,143 $ 98,396 $ 6,747 7 %

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.

Product development expenses increased in the third 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 nine 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

General and administrative $ 20,503 $ 20,791 $ (288) (1) % $ 63,830 $ 61,046 $ 2,784 5 %

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 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.

General and administrative expenses remained relatively flat during the third quarter of fiscal year 2024 compared to the same period in the prior year.

General and administrative expenses increased in the first nine months of fiscal year 2024 primarily due to higher personnel costs and other general and administrative costs.

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

Amortization of Intangibles

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Amortization of intangibles $ 13,810 $ 17,668 (22) % $ 47,515 $ 48,825 (3) %

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.

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.

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

Amortization of intangibles decreased in the first nine months of fiscal year 2024 due to certain intangible assets becoming fully amortized in the period, offset by the addition of MarkLogic intangible assets, as discussed above.

Cyber Incident and Vulnerability Response Expenses, Net

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Cyber incident and vulnerability response expenses, net $ 927 $ 951 (3) % $ 4,950 $ 5,126 (3) %

2 unchanged sentences

Cyber incident and MOVEit Vulnerability costs relate to the engagement of external cybersecurity experts and other incident response professionals and are net of received and expected insurance recoveries.

We did not incur costs related to the November 2022 cyber incident during fiscal year 2024 and do not expect to incur additional costs as the investigation is closed.

Please refer to Note 15:

Cyber Related Matters for additional details and updates regarding the MOVEit Vulnerability.

Restructuring Expenses

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Restructuring expenses $ 308 $ 843 (63) % $ 3,308 $ 6,230 (47) %

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

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.

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

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

Acquisition-Related Expenses

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Acquisition-related expenses $ 1,864 $ 699 167 % $ 3,114 $ 4,433 (30) %

2 unchanged sentences

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

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 third quarter of fiscal year 2024 were primarily related to our pursuit of ShareFile.

Acquisition-related expenses in the first nine months of fiscal year 2024 were primarily related to our pursuit of ShareFile and 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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Income from operations $ 40,349 $ 29,371 37 % $ 102,503 $ 87,986 16 %

As a percentage of total revenue 23 % 17 % 19 % 17 %

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.

Income from operations increased in the third quarter of fiscal year 2024 due to increased revenue and decreases in costs of revenue and operating expenses, as shown above.

Income from operations increased in the first nine months of fiscal year 2024 due to an increase in revenue, partially offset by fluctuations 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

Three Months Ended Nine Months Ended

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

Interest expense $ (6,765) $ (8,532) (21) % $ (21,116) $ (22,894) (8) %

3 unchanged sentences

As a percentage of total revenue (3) % (5) % (4) % (4) %

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.

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

Please refer to Note 7:

1 unchanged sentence

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

We expect interest income to continue growing during fiscal year 2024.

Foreign currency loss increased year over year due to rate volatility and timing of intercompany and hedge settlement activitie s.

Provision for Income Taxes

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Provision for income taxes $ 5,815 $ 1,854 214 % $ 14,723 $ 10,623 39 %

As a percentage of income before income taxes 17 % 9 % 18 % 16 %

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

Our effective tax rate was 17% and 9% in the third fiscal quarter of 2024 and 2023, respectively.

The primary reason for the increase in the effective rate was due to discrete tax benefits in the third fiscal quarter of 2023 related to stock-based compensation and the impacts of Notice 2023-55, which was issued by the Internal Revenue Service during July 2023 and provided temporary relief for taxpayers in determining whether a foreign tax is eligible for a foreign tax credit under Sections 901 and 903 of the Internal Revenue Code.

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

Three Months Ended Nine Months Ended

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

Net income $ 28,464 $ 19,098 49 % $ 67,291 $ 54,862 23 %

21 unchanged sentences

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

ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items.

ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those

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.

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.

Our ARR was $582.0 million and $581.0 million as of August 31, 2024 and August 31, 2023, respectively, which is relatively flat year-over-year.

Net Retention Rate

8 unchanged sentences

Cash and Cash Equivalents

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

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

Cash and cash equivalents $ 232,713 $ 126,958

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.

The increase in cash and cash equivalents of $105.8 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 $191.8 million, $6.8 million in cash received from the issuance of common stock, and the effect of exchange rates on cash of $1.5 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.

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.

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 $86.8 million, dividend payments of $23.8 million, payment of debt issuance costs of $6.8 million, and purchases of property and equipment of $2.3 million.

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

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

As of August 31, 2024, $77.2 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.

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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 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.

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 not 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.

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

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.

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

As announced on September 9, 2024, Progress’ Board of Directors approved the suspension of Progress’ quarterly dividend in connection with the ShareFile acquisition and plans to redirect such capital toward the repayment of debt to increase liquidity for future M&A and for share repurchases, both of which are prioritized in our capital allocation policy.

Restructuring Activities

3 unchanged sentences

Cash Flows From Operating Activities

Six Months Ended

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

Nine Months Ended

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

Net income $ 67,291 $ 54,862

2 unchanged sentences

Net cash flows from operating activities $ 191,843 $ 140,759

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.

In the first nine months of fiscal year 2024, operating cash flows increased due to higher billings and collections, and lower interest rates as a result of our debt refinancing in the second quarter of fiscal year 2024.

Our gross accounts receivable as of August 31, 2024, decreased by $38.2 million from the end of fiscal year 2023.

Our days sales outstanding (DSO) in accounts receivable decreased to 45 days in the third fiscal quarter of 2024 from 49 days in the third fiscal quarter of 2023 due to the timing of billings and collections.

Cash Flows Used in Investing Activities

Six Months Ended

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

Nine Months Ended

(in thousands) August 31, 2024 August 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 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.

In the first nine months of fiscal year 2024, we purchased $2.3 million of property and equipment.

In the first nine months of fiscal year 2023 we also had payments for acquisitions net of cash acquired of $355.3 million, and $3.2 million of purchases of property and equipment.

Cash Flows (Used in) From Financing Activities

Six Months Ended

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

Nine Months Ended

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

Proceeds from stock-based compensation plans $ 17,474 $ 20,373

9 unchanged sentences

Net cash flows (used in) from financing activities $ (85,275) $ 93,446

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).

Our financing activities are significantly impacted by non-recurring financing transactions, including those detailed above and as explained in Note 7 to the condensed consolidated financial statements.

Further, we repurchased $86.8 million of our common stock under our share repurchase plan compared to $30.0 million in the same period of the prior year.

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.

Finally, we made dividend payments of $23.8 million to our stockholders during the first nine months of fiscal year 2024 and $23.7 million in the first nine months of fiscal year 2023.

As noted above, the Board of Directors has announced a suspension of future dividends.

Liquidity Outlook

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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, including funding our proposed acquisition of ShareFile with a combination of existing cash on hand and borrowings under our existing revolving credit facility.

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

Our foreseeable cash needs include capital expenditures, acquisitions, debt repayments, quarterly cash dividends, share repurchases, lease commitments, restructuring obligations and other long-term obligations.

Our foreseeable cash needs include capital expenditures, acquisitions, debt repayments, share repurchases, lease commitments, restructuring obligations and other long-term obligations.

Legal and Other Regulatory Matters

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 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.

We are subject to litigation and governmental investigations related to the MOVEit Vulnerability, for which we have incurred expenses and will incur future costs.

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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