What changed in this filing

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Item 1. Financial Statements

2025-03-31 compared with 2024-10-08 · 158 added, 307 removed, 303 unchanged (61% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

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

(in thousands, except share data) February 28, 2025 November 30, 2024

Current assets:

Cash and cash equivalents $ 124,161 $ 118,077

Accounts receivable (less allowances of $ 791 and $ 851 , respectively)

87,680 125,825

Accounts receivable, net 126,366 163,575

Unbilled receivables 35,454 34,672

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Short-term deferred revenue, net 328,798 332,142

Current portion of long-term debt, net — 13,109

Accrued compensation and related taxes 43,919 49,559

Dividends payable to stockholders 8,423 8,376

Accrued compensation and related payroll taxes 43,154 64,672

Short-term operating lease liabilities 8,975 9,202

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Condensed Consolidated Statements of Operations

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands, except per share data) February 28, 2025 February 29, 2024

Software licenses $ 58,445 $ 64,100

Maintenance and services 120,836 124,448 362,519 352,950

Maintenance, SaaS, and professional services 179,570 120,585

Total revenue 238,015 184,685

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Cost of software licenses 2,925 2,731

Cost of maintenance and services 20,057 22,192 64,452 62,663

Cost of maintenance, SaaS, and professional services 32,884 22,219

Amortization of acquired intangibles 10,422 7,859

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Amortization of acquired intangibles 25,808 17,389

Cyber incident and vulnerability response expenses, net 927 951 4,950 5,126

Cyber vulnerability response expenses, net 737 987

Restructuring expenses 7,029 2,349

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Condensed Consolidated Statements of Comprehensive Income

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) February 28, 2025 February 29, 2024

Net income $ 10,946 $ 22,639

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments ( 1,412 ) ( 1,546 )

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 )

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

Unrealized loss on hedging activity, net of tax benefit of $ 218 for the three months ended February 29, 2024

Total other comprehensive loss, net of tax ( 1,412 ) ( 2,236 )

Comprehensive income $ 9,534 $ 20,403

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Condensed Consolidated Statements of Stockholders’ Equity

Nine Months Ended August 31, 2024

Three Months Ended February 28, 2025

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

3 unchanged sentences

Exercise of stock options 37 — 1,470 — — 1,470

Vesting of restricted stock units and release of deferred stock units 498 5 ( 5 ) — — —

Vesting of restricted stock units 187 2 ( 2 ) — — —

Withholding tax payments related to net issuance of RSUs ( 81 ) ( 1 ) ( 4,640 ) — — ( 4,641 )

Stock-based compensation — — 14,683 — — 14,683

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

Dividends declared — — — ( 23,861 ) — ( 23,861 )

Treasury stock repurchases and retirements ( 1,642 ) ( 16 ) ( 41,714 ) ( 45,047 ) — ( 86,777 )

Treasury stock repurchases and retirements, including excise tax ( 539 ) ( 5 ) ( 14,826 ) ( 15,352 ) — ( 30,183 )

Net income — — — 10,946 — 10,946

Other comprehensive loss — — — — ( 1,412 ) ( 1,412 )

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, 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

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

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

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

Treasury stock repurchases and retirements ( 287 ) ( 2 ) ( 7,277 ) ( 7,049 ) — ( 14,328 )

Net income — — — 28,464 — 28,464

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

Balance, February 28, 2025 43,022 $ 430 $ 353,039 $ 115,999 $ ( 37,621 ) $ 431,847

Three Months Ended February 29, 2024

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

3 unchanged sentences

Exercise of stock options 80 1 3,249 — — 3,250

Vesting of restricted stock units and release of deferred stock units 378 4 ( 4 ) — — —

Vesting of restricted stock units 244 2 ( 2 ) — — —

Withholding tax payments related to net issuance of RSUs ( 103 ) ( 1 ) ( 5,889 ) — — ( 5,890 )

3 unchanged sentences

Net income — — — 22,639 — 22,639

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

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, 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

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

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

Net income — — — 19,098 — 19,098

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

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

Other comprehensive loss — — — — ( 2,236 ) ( 2,236 )

Balance, February 29, 2024 43,689 $ 437 $ 372,273 $ 123,429 $ ( 34,396 ) $ 461,743

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

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

Three Months Ended

(in thousands) February 28, 2025 February 29, 2024

Cash flows from operating activities:

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Amortization of acquired intangibles and other 36,581 25,408

Amortization of debt discount and issuance costs on Notes 2,540 1,621

Amortization of debt discount and issuance costs 1,009 547

Stock-based compensation 14,683 12,464

5 unchanged sentences

Other assets ( 2,168 ) 1,530

Inventories — 2,209

Accounts payable and accrued liabilities ( 22,821 ) ( 24,897 )

3 unchanged sentences

Net cash flows from operating activities 68,947 70,504

Cash flows used in investing activities:

Purchases of investments — ( 15,262 )

Sales and maturities of investments — 15,700

Net cash flows used in investing activities:

Purchases of property and equipment ( 1,290 ) ( 309 )

Payments for acquisitions, net of cash acquired — ( 355,250 )

Payments for acquisitions ( 1,195 ) —

Net cash flows used in investing activities ( 2,485 ) ( 309 )

Cash flows (used in) from financing activities:

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

Net cash flows used in financing activities:

Proceeds from equity plans 6,238 7,583

Payments for taxes related to net share settlements of equity awards ( 4,641 ) ( 5,890 )

Repurchases of common stock ( 86,777 ) ( 30,000 )

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

Purchase of capped calls ( 42,210 ) —

Dividend payments to stockholders ( 23,814 ) ( 23,669 )

Proceeds from the issuance of debt — 195,000

Repurchases of common stock, including excise tax ( 30,108 ) ( 22,500 )

Dividend equivalent and dividend payments to stockholders ( 359 ) ( 8,171 )

Repayment of revolving line of credit ( 30,000 ) ( 30,000 )

Principal payment on term loan — ( 3,437 )

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

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

Net cash flows used in financing activities ( 58,870 ) ( 62,415 )

Effect of exchange rate changes on cash and cash equivalents ( 1,508 ) ( 1,516 )

Net increase (decrease) in cash and cash equivalents 105,755 ( 118,278 )

Net increase in cash and cash equivalents 6,084 6,264

Cash and cash equivalents, beginning of period 118,077 126,958

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows, continued

Nine Months Ended

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

Three Months Ended

(in thousands) February 28, 2025 February 29, 2024

Supplemental disclosure:

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Basis of Presentation

Company Overview - Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") provides enterprise software products for the development, deployment and management of responsible, AI-powered applications and experiences.

Our products are generally sold as perpetual licenses, but certain products also use term licensing models and our cloud-based offerings use a subscription-based model.

More than half of our worldwide license revenue is realized through relationships with indirect channel partners, principally independent software vendors, original equipment manufacturers, distributors and value-added resellers.

Independent software vendors develop and market applications using our technology and resell our products in conjunction with sales of their own products that incorporate our technology.

Original equipment manufacturers are companies that embed our products into their own software products or devices.

Company Overview - Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") provides software products that enable our customers to develop, deploy and manage responsible AI-powered applications and digital experiences.

Many of our products are sold as perpetual licenses, but certain products use term licensing models and our cloud-based offerings are marketed as software-as-a-service ("SaaS") offerings.

More than half of our worldwide license revenue is realized through relationships with indirect channel partners, principally independent software vendors ("ISVs"), original equipment manufacturers ("OEMs"), distributors and value-added resellers.

ISVs develop and market applications using our technology and resell our products in conjunction with sales of their own products that incorporate our technology.

OEMs are companies that embed our products into their own software products or devices.

Value-added resellers are companies that add features or services to our product, then resell it as an integrated product or complete "turn-key" solution.

In October 2024, we acquired ShareFile, a SaaS offering.

We operate in North America, Latin America, Europe, the Middle East and Africa ("EMEA"), and Asia and Australia ("Asia Pacific"), through local subsidiaries as well as independent distributors.

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Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

On an on-going basis, management evaluates its estimates and records changes in estimates in the period in which they become known.

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

The most significant estimates relate to revenue recognition, loss contingencies and the MOVEit Vulnerability, and business combinations.

The most significant estimates relate to revenue recognition, loss contingencies and the MOVEit Vulnerability (as defined herein), and business combinations.

Actual results could differ from those estimates.

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Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (the "FASB") issued ASU 2023-07, Segment Reporting (Topic 280) .

The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements.

This update is effective for the Company in the consolidated financial statements for the year ending November 30, 2025, and interim periods beginning after December 1, 2025.

The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No.

2023-07, Segment Reporting (Topic 280):

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

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

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

The Company is currently evaluating the impact that the adoption of this standard and will include the additional disclosures in the financial statements for the fiscal year ended November 30, 2025.

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

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ASU 2023-09 is intended to improve the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective for the Company beginning with the annual period ending November 30, 2026, allowing for adoption on a prospective basis or a retrospective option.

ASU 2023-09 is effective for the Company beginning with the annual period ending November 30, 2026, allowing for adoption on a prospective basis or

a retrospective option.

Early adoption is permitted.

The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.

In March 2024, the SEC adopted the final rule under SEC Release No.

33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

This rule will require registrants to disclose certain climate-related information in registration statements and annual reports.

The disclosure requirements will apply to the Company's fiscal year beginning December 1, 2025.

The Company is currently evaluating the final rule to determine its impact on the Company's disclosures.

Cash and Cash Equivalents

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

Cash $ 116,673 $ — $ — $ 116,673

Money market funds 116,040 — — 116,040

Total $ 232,713 $ — $ — $ 232,713

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

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

Cash $ 126,958 $ — $ — $ 126,958

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

Derivative Instruments

Cash Flow Hedge

Our interest rate swap contract with an initial notional amount of $ 150.0 million matured on April 30, 2024.

We entered into the contract to manage the variability of cash flows associated with approximately one-half of our variable rate debt.

The contract required periodic interest rate settlements, and we received a floating rate based on the greater of 1-month SOFR or 0.00 % and paid a fixed rate of 1.855 % on the outstanding notional amount.

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 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 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:

August 31, 2024 November 30, 2023

(in thousands)

Notional Value Fair Value Notional Value Fair Value

Interest rate swap contracts designated as cash flow hedges $ — $ — $ 103,125 $ 1,495

Forward Contracts

We use forward contracts that are not designated as hedging instruments to hedge economically the impact of the variability in exchange rates on intercompany accounts receivable and loans receivable denominated in certain foreign currencies.

We generally do not hedge the net assets of our international subsidiaries.

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 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 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:

August 31, 2024 November 30, 2023

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

Forward contracts to sell U.S.

dollars $ 82,340 $ 85 $ 102,229 $ ( 2,526 )

Forward contracts to purchase U.S.

dollars 438 1 844 ( 4 )

Total $ 82,778 $ 86 $ 103,073 $ ( 2,530 )

In November 2024, the FASB issued Accounting Standards Update No.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses ("ASU 2024-03"), and in January 2025, the FASB issued Accounting Standards Update No.

2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date ("ASU 2025-01").

ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement.

ASU 2024-03, as clarified by ASU 2025-01, is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis.

Both early adoption and retrospective application are permitted.

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

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at February 28, 2025:

Fair Value Measurements Using

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(in thousands) Total Fair Value Level 1 Level 2 Level 3

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

Money market funds $ 1,823 $ 1,823 $ — $ —

Foreign exchange derivatives $ ( 624 ) $ — $ ( 624 ) $ —

6 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"):

August 31, 2024 November 30, 2023

February 28, 2025 November 30, 2024

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

4 unchanged sentences

Total $ 797,277 $ 877,639 $ 796,267 $ 999,921

(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.

(1) The carrying value of the convertible senior notes due 2026 (the "2026 Notes"), is reflected net of $ 2.5 million and $ 3.1 million of unamortized debt issuance costs as of February 28, 2025 and November 30, 2024, respectively.

(2) The carrying value of the convertible senior notes due 2030 (the "2030 Notes"), is reflected net of $ 10.2 million and $ 10.7 million of unamortized debt issuance costs as of February 28, 2025 and November 30, 2024, respectively.

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.

Fair Value of Other Financial Assets and Liabilities

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Intangible assets are comprised of the following significant classes:

August 31, 2024 November 30, 2023

February 28, 2025 November 30, 2024

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

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Total $ 1,252,719 $ ( 566,360 ) $ 686,359 $ 1,253,719 $ ( 530,148 ) $ 723,571

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 the three months ended February 28, 2025 and February 29, 2024, amortization expense related to intangible assets was $ 36.2 million and $ 25.2 million, respectively.

Future amortization expense for intangible assets as of February 28, 2025, is as follows:

(in thousands)

2 unchanged sentences

Total $ 686,359

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

Changes in the carrying amount of goodwill in the three months ended February 28, 2025 are as follows:

(in thousands)

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Translation adjustments 13

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.

Balance, February 28, 2025

(1) The additions to goodwill during fiscal year 2025 represent measurement period adjustments related to the acquisition of ShareFile in October 2024.

Business Combinations for additional information.

Business Combinations

MarkLogic Acquisition

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

The acquisition was completed for a base purchase price of $ 355.0 million, subject to certain customary adjustments, in cash.

The acquisition consideration for MarkLogic has been allocated to MarkLogic’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values.

The excess of total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.

During the first fiscal quarter of 2024, the measurement period adjustments were completed, which resulted in a $ 0.7 million increase in goodwill.

The purchase price allocation is now complete.

The allocation of the purchase price is as follows:

(in thousands) Purchase Price Allocation Life

ShareFile Acquisition

On October 31, 2024, we completed the acquisition of ShareFile from Cloud Software Group, Inc.

and its subsidiaries ("Cloud") for an aggregate purchase price of $ 875.0 million in cash, subject to a $ 25.0 million working capital credit and certain customary adjustments.

We funded the acquisition through $ 730.0 million in borrowings under our existing $ 900.0 million revolving credit facility and cash on hand.

Refer to Note 5:

Debt for further information.

The acquisition consideration for ShareFile has been preliminarily allocated to ShareFile’s assets and assumed liabilities based on estimated fair values.

The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period, which is up to one year from the acquisition date.

During the three months ended February 28, 2025, the Company identified measurement period adjustments that resulted in increases in goodwill totaling $ 1.6 million.

The preliminary allocation of the purchase price, including the measurement period adjustments, is as follows:

(in thousands) Initial Purchase Price Allocation Measurement Period Adjustments Adjusted Purchase Price Allocation Life

Net working capital $ 892 $ 940 $ 1,832

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Customer relationships 319,000 ( 1,000 ) 318,000 7 years

Other assets, including long-term unbilled receivables 4,477

Deferred taxes 23,456 ( 377 ) 23,079

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

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

We determined the acquisition date deferred revenue balances based on our assessment of the individual contracts acquired.

A significant portion of the deferred revenue was recognized in the 12 months following the acquisition.

We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill.

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 161.8 million of goodwill, which is not deductible for tax purposes.

We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $ 461.1 million of goodwill, of which a portion is deductible for tax purposes.

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

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

During the three months ended February 28, 2025, we incurred approximately $ 2.3 million of acquisition-related costs, which are included in acquisition-related expenses on our condensed consolidated statement of operations.

The amount of revenue of ShareFile included in our condensed consolidated statement of operations during the three months ended February 28, 2025, was $ 63.6 million.

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

In connection and concurrent with the ShareFile acquisition, we entered into a Transition Services Agreement ("TSA") with Cloud for a period of six months from the date of acquisition, with the option to extend the TSA beyond this period for certain services.

Expenses related to the TSA were not significant during the three months ended February 28, 2025 and are not expected to be significant in future periods.

Pro Forma Information

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

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

The following pro forma financial information presents the combined results of operations of Progress and ShareFile as if the acquisition had occurred on December 1, 2022, after giving effect to certain pro forma adjustments.

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

These pro forma adjustments include:

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

(i) a net increase in amortization expense to record amortization expense relating to the $ 464.0 million of acquired identifiable intangible assets, (ii) an increase in interest expense to record interest for the periods presented as a result of drawing down our revolving line of credit in connection with the acquisition, (iii) an increase in acquisition-related expenses in connection with the acquisition that were not included in the purchase price, (iv) additional expense related to the TSA entered into between Progress and Cloud, and (v) the income tax effect of the adjustments made at the statutory tax rate of the U.S.

(approximately 24.0%).

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, 2022.

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

(in thousands, except per share data) Pro Forma Three Months Ended February 29, 2024

Revenue $ 244,595

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Net income per diluted share $ 0.28

In March of 2024, the Company refinanced its debt by issuing the 2030 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.

We also entered into an amended and restated credit facility as described below.

Notes Payable

2030 Convertible Senior Notes

On March 1, 2024, the Company issued, in a private placement, convertible senior notes with an aggregate principal amount of $ 450 million, due March 1, 2030, unless earlier repurchased, redeemed or converted.

The proceeds from the 2030 Notes were used in part to enter into the 2024 Capped Call Transactions, described below, for working capital, and for other general corporate purposes, including paying off the existing term loan and revolving line of credit.

There are no required principal payments prior to the maturity of the 2030 Notes.

The 2030 Notes bear interest at an annual rate of 3.5 %, payable semi-annually in arrears on September 1 and March 1 of each year, beginning on September 1, 2024.

The Company incurred approximately $ 12.0 million in issuance costs for the issuance of the 2030 Notes.

Conversion Rights

Before November 1, 2029, Noteholders may convert their 2030 Notes in the following circumstances:

• During any fiscal quarter commencing after the fiscal quarter ending on May 31, 2024, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least twenty trading days (whether or not consecutive) during the thirty consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter;

• During the five consecutive business days immediately after any ten consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of Company’s common stock on such trading day and the conversion rate on such trading day;

• Upon the occurrence of distributions on the Company’s common stock, which distribution per share of common stock has a value exceeding 10 % of the last reported sale price per share on the trading day immediately before the date such distribution is announced;

• Upon the occurrence of certain corporate events or if the Company calls such Notes for redemption, then the Noteholder of any Note may convert such Note.

From and after November 1, 2029, Noteholders may convert their 2030 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will satisfy its conversion obligations by paying cash up to the aggregate principal amount of 2030 Notes to be converted, by issuing shares of its common stock or a combination of cash and shares of its common stock, at its election.

The initial conversion rate is 14.7622 shares of common stock per $1,000 principal amount of the 2030 Notes, representing an initial conversion price of approximately $ 67.74 per share of common stock.

The conversion rate will be adjusted upon the occurrence of certain events, including spin-offs, tender offers, exchange offers, make-whole fundamental change and certain stockholder distributions.

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 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.

If certain corporate events that constitute a fundamental change (e.g., events such as business combination transactions involving the Company, shareholder approval of liquidation or dissolution of the Company, and certain de-listing events with respect to the Company’s common stock) occur at any time, holders may, subject to certain exceptions, require the Company to purchase their 2030 Notes in whole or in part for cash at a price equal to the principal amount of the 2030 Notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the fundamental change repurchase date.

2024 Capped Call Transactions

On February 27, 2024, in connection with the pricing of the 2030 Notes, the Company entered into privately negotiated capped call transactions (“2024 Capped Call Transactions”).

The 2024 Capped Call Transactions cover approximately 6.6 million shares of the Company’s common stock, which represent the number of shares of common stock initially underlying the 2030 Notes.

The 2024 Capped Call Transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the 2030 Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

The cap price of the 2024 Capped Call Transactions will initially be $ 92.98 per share of common stock, which represents a premium of 75 % over the last reported sale price of the common stock of $ 53.13 per share on February 27, 2024, and is subject to certain adjustments under the terms of the 2024 Capped Call Transactions.

The cost of the purchased capped calls of $ 42.2 million was recorded as a reduction to additional paid-in-capital upon settlement in March 2024.

Accounting for the 2030 Notes

The 2030 Notes are classified as a non-current liability on our condensed consolidated balance sheets and the conversion option does not require bifurcation as an embedded derivative.

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 Nine Months Ended

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

Contractual interest expense ( 3.5 % coupon)

As of February 28, 2025 and November 30, 2024, we had the following debt obligations:

(in thousands) February 28, 2025 November 30, 2024

1.0 % convertible senior notes due 2026

$ 360,000 $ 360,000

Amortization of debt discount and issuance costs (1)

3.5 % convertible senior notes due 2030

450,000 450,000

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

Credit Facility

On March 7, 2024, the Company entered into an amended and restated credit agreement (the "Credit Agreement") with certain lenders, which provides a $ 900.0 million secured revolving credit facility ("revolving credit facility").

The revolving credit facility may be made available in U.S.

Dollars and certain other currencies and may be increased, and new term loan commitments may be entered into, by up to an additional $ 260.0 million if the existing or additional lenders are willing to make such increased commitments.

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 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.

Additionally, we may borrow certain foreign currencies at rates set in the same range above the respective Term Benchmark Rates for those currencies, based on our consolidated total net leverage ratio.

A quarterly commitment fee on the undrawn portion of the revolving credit facility is required, ranging from 0.150 % to 0.400 % per annum, based upon our consolidated total net leverage ratio.

The credit facility matures on March 7, 2029.

The revolving credit facility does not require amortization of principal.

Revolving loans may be borrowed, repaid and reborrowed until the maturity date, at which time all amounts outstanding must be repaid.

Accrued interest on the loans is payable quarterly in arrears.

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.

Unamortized debt issuance costs related to the repaid term loan were expensed.

We are the sole borrower under the credit facility and our obligations under the Credit Agreement are guaranteed by each of our material domestic subsidiaries and are secured by substantially all of our assets and each of our material domestic subsidiaries.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, grant liens, make investments, make acquisitions, incur indebtedness, merge or consolidate, dispose of assets, pay dividends or make distributions, repurchase stock, change the nature of the business, enter into certain transactions with affiliates and enter into burdensome agreements, in each case subject to customary exceptions for a credit facility of this size and type.

We are also required to maintain compliance with a consolidated interest charge coverage ratio, a consolidated senior secured net leverage ratio and a consolidated total net leverage ratio.

Revolving credit facility 700,000 730,000

Total face value of long-term debt 1,510,000 1,540,000

Unamortized discount and issuance costs for the Notes ( 12,723 ) ( 13,733 )

Long-term debt $ 1,497,277 $ 1,526,267

During the three months ended February 28, 2025, we repaid $ 30.0 million on the revolving credit facility.

The average interest rate of the revolving credit facility during the three months ended February 28, 2025 was 6.60 %, and the interest rate as of February 28, 2025 was 6.67 %.

Common Stock Repurchases

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

In the three months ended 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.

In the three months ended February 28, 2025 and February 29, 2024, we repurchased and retired 0.5 million shares for $ 30.0 million and 0.4 million shares for $ 22.5 million, respectively.

As of February 28, 2025, there was $ 77.2 million remaining under the current authorization.

Stock-Based Compensation

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In 2025, 2024, and 2023, we granted performance-based restricted stock units that include two performance metrics under our Long-Term Incentive Plan ("LTIP") where the performance measurement period is three years .

Vesting of the LTIP awards in the 2022, 2023, and 2024 plans are based on the following:

For the 2025, 2024, and 2023 plans, the vesting terms were based on the following:

(i) 75 % is based on achievement of a three-year cumulative operating income, and (ii) 25 % is based on our level of attainment of specified TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year periods.

The vesting of LTIP awards is also subject to continued employment of the grantees through the performance period, except in the event of a qualifying termination.

In order to estimate the fair value of such awards, we use a Monte Carlo Simulation valuation model for the market condition portion of the award, which uses the closing price of our common stock on the date of grant, less the present value of expected dividends when applicable, for the portion related to the performance condition.

In order to estimate the fair value of such awards, we use a Monte Carlo Simulation valuation model for the market condition portion of the award, and used the closing price of our common stock on the date of grant, less the present value of expected dividends when applicable, for the portion related to the performance condition.

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

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

Three Months Ended

(in thousands) February 28, 2025 February 29, 2024

Cost of maintenance, SaaS, and professional services $ 1,195 $ 986

Sales and marketing 3,032 2,312

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Total stock-based compensation $ 14,683 $ 12,464

Accumulated Other Comprehensive Loss

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 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, 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

Timing of Revenue Recognition

Our revenues are derived from licensing our products, and from related services, which consist of maintenance, hosting services, and consulting and education.

Our revenues are derived from licensing our products and from related services, which consist of maintenance, SaaS, and consulting and education.

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

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) February 28, 2025 February 29, 2024

Performance obligations transferred at a point in time:

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Maintenance 99,535 102,025

Services 17,748 19,284 54,903 53,033

SaaS 69,410 5,571

Professional services 10,625 12,989

Total revenue $ 238,015 $ 184,685

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In the following table, revenue attributed to North America includes sales to customers in the U.S.

and sales to certain multinational organizations.

and Canada and sales to certain multinational organizations.

Revenue from EMEA, Latin America and the Asia Pacific region includes sales to customers in each region plus sales from the U.S.

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

Three Months Ended Nine Months Ended

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

Three Months Ended

(in thousands) February 28, 2025 February 29, 2024

North America $ 154,646 $ 107,282

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

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

accounted for more than 10% of our total revenue for the three months ended February 28, 2025 or February 29, 2024.

Contract Balances

Unbilled Receivables and Contract Assets

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

As of February 28, 2025, billing of our long-term unbilled receivables is expected to occur as follows:

(in thousands)

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Total $ 30,416

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 August 31, 2024 or November 30, 2023.

Contract assets arise when revenue is recognized in excess of billings and the right to the amount due from customers is conditioned on something other than the passage of time, such as the completion of a related performance obligation.

We did not have any net contract assets as of February 28, 2025 or November 30, 2024.

Deferred Revenue

Deferred revenue is recorded when revenue is recognized subsequent to customer invoicing.

Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is included in long-term liabilities on the condensed consolidated balance sheets.

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

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

Our net deferred revenue balance is primarily made up of deferred maintenance and deferred revenue related to our SaaS offerings.

As of February 28, 2025, the changes in net deferred revenue were as follows:

(in thousands)

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Revenue recognized from current period arrangements ( 90,796 )

Balance, August 31, 2024 $ 285,384

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

Balance, February 28, 2025 $ 400,306

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

As of February 28, 2025, transaction price allocated to remaining performance obligations was $ 478.3 million.

We expect to recognize approximately 78 % of the revenue within the next year and the remainder thereafter.

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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 $ 6.1 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.

Total deferred contract costs were $ 5.9 million and $ 6.7 million as of February 28, 2025 and November 30, 2024, respectively, and are included in other current assets and other assets on our condensed consolidated balance sheets.

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

Restructuring Charges

Restructuring

The following table provides a summary of activity for our restructuring actions:

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Cash disbursements ( 908 ) ( 4,646 ) ( 5,554 )

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.

Translation and other adjustments — ( 4 ) ( 4 )

Balance, February 28, 2025 $ 5,055 $ 6,450 $ 11,505

Costs incurred during the three months ended February 28, 2025 are primarily related to our restructuring action in fiscal year 2024, as well as facility closures in connection with previous restructuring actions in fiscal years 2023 and 2020.

We do not expect to incur additional material expenses as part of these actions.

Earnings Per Share

We compute basic earnings per share using the weighted average number of common shares outstanding.

We compute diluted earnings per share using the weighted average number of common shares outstanding plus the effect of outstanding dilutive stock options, restricted stock units, and deferred stock units, using the treasury stock method.

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

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

Weighted average shares outstanding 42,872 43,452 43,296 43,365

Basic earnings per common share $ 0.66 $ 0.44 $ 1.55 $ 1.27

Diluted earnings per common share:

Three Months Ended

(in thousands, except per share data) February 28, 2025 February 29, 2024

Net income $ 10,946 $ 22,639

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Effect of dilution from common stock equivalents 1,163 1,024

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

Effect of dilution from if-converted convertible notes 468 —

Diluted weighted average shares outstanding 44,887 44,826

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

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 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.

Earnings per share:

Basic $ 0.25 $ 0.52

Diluted $ 0.24 $ 0.51

We excluded stock awards representing approximately 397,000 and 714,000 shares of common stock from the calculation of diluted earnings per share in the three months ended February 28, 2025 and February 29, 2024, respectively, as these awards were anti-dilutive.

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

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

During the three months ended February 28, 2025, we included the 2026 Notes in our diluted earnings per share calculation and we excluded the 2030 Notes in our diluted earnings per share calculation because the conversion feature in the 2030 Notes was out of the money.

During the three months ended February 29, 2024, we did not include the 2026 Notes in our diluted earnings per share calculation because the conversion feature was out of the money.

Segment Information

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We operate as one operating segment:

software products to develop, deploy, and manage high-impact applications.

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

Our CODM evaluates financial information on a consolidated basis.

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

Cyber Related Matters

November 2022 Cyber Incident

Following the detection of irregular activity on certain portions of our corporate network, we engaged outside cybersecurity experts and other incident response professionals to conduct a forensic investigation and assess the extent and scope of the incident.

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 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, 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.

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.

As previously disclosed, 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 by a threat actor who compromised and exfiltrated personal data from various customer-controlled MOVEit Transfer environments (the "MOVEit Vulnerability").

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 have been centralized in multi-district litigation in the District of Massachusetts (the "MDL").

The MDL remains in a relatively early litigation stage in which motions to dismiss have been filed but not yet ruled upon.

In the event dismissals are not granted, the MDL is not expected to conclude within this fiscal year.

We have also been cooperating with inquires and investigations from various governmental authorities, none of which have, as of this filing, resulted in any prosecution or enforcement actions.

Expenses Incurred and Future Costs

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.

For the three months ended February 28, 2025 and February 29, 2024, we incurred net costs of $ 0.7 million and $ 1.0 million , respectively, related to the MOVEit Vulnerability.

The costs recognized are net of insurance recoveries of $ 0.7 million and $ 0.8 million for the three months ended February 28, 2025 and February 29, 2024, respectively.

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

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

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

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

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

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

Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of February 28, 2025.

Insurance Coverage

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

As of 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).

During the period when 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 February 28, 2025, we have recorded approximately $ 6.5 million of insurance recoveries related to the MOVEit Vulnerability, providing us with approximately $ 6.0 million of remaining cybersecurity insurance coverage under the applicable policy.

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