PROGRESS SOFTWARE CORP /MA 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q may contain information that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended; Section 21E of the Securities Exchange Act of 1934, as amended; and the Private Securities Litigation Reform Act of 1995. Whenever we use words such as "believe," "may," "could," "would," "might," "should," "expect," "intend," "plan," "estimate," "target," "anticipate" and negatives and derivatives of these or similar expressions, or when we make statements concerning future financial results, product offerings or other events that have not yet occurred, we are making forward-looking statements. Actual future results may differ materially from those contained in or implied by our forward-looking statements due to various factors which are more fully described in Part I, Item 1A. Risk 19 Factors in our 2024 Annual Report as well as any risk factors described in Part II, Item 1A of this Quarterly Report on Form 10-Q. Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized. We also cannot assure you that we have identified all possible issues that we might face. We undertake no obligation to update any forward-looking statements that we make. Overview Progress provides software products that enable our customers to develop, deploy and manage responsible AI-powered applications and digital experiences. Critical Accounting Policies Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. We make estimates and assumptions in the preparation of our consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. However, actual results may differ from these estimates. The most significant estimates relate to revenue recognition, loss contingencies and the MOVEit Vulnerability, and business combinations. For further information regarding the application of these and other accounting policies, see Note 1: Basis of Presentation to our Consolidated Financial Statements in Item 8 of our 2024 Annual Report. There have been no significant changes to our critical accounting policies and estimates since our 2024 Annual Report. Use of Constant Currency Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries strengthen, our consolidated results stated in U.S. dollars are positively impacted. As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue growth rates on a constant currency basis enhances the understanding of our revenue results and evaluation of our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results of Operations Business Development On October 31, 2024, we acquired ShareFile from Cloud Software Group, Inc. As a result of this acquisition, we recorded $96.2 million of deferred revenue and $464.0 million of intangible assets, as further described in Note 4: Business Combinations. We expect to recognize additional SaaS revenue, as well as increased amortization expense and interest expense, in future periods as a result of this acquisition. 20 Revenue Three Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency Revenue $ 237,355 $ 175,077 36 % 35 % Six Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency Revenue $ 475,370 $ 359,762 32 % 32 % Total revenue increased as compared to the same period last year primarily due to our acquisition of ShareFile in the fourth quarter of fiscal year 2024. ShareFile revenue in the second quarter and first six months of fiscal year 2025 was $65.9 million and $129.6 million, respectively. These increases were partially offset by a decrease in our DataDirect product offering in all periods presented as a result of the timing of renewals on multiyear subscription contracts. Software License Revenue Three Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency Software licenses $ 50,795 $ 53,979 (6) % (7) % As a percentage of total revenue 21 % 31 % Six Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency Software licenses $ 109,240 $ 118,079 (7) % (7) % As a percentage of total revenue 23 % 33 % Software license revenue decreased compared to the same period last year primarily due to the decrease in our DataDirect product offering, as described above. 21 Maintenance, SaaS, and Professional Services Revenue Three Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency Maintenance $ 103,491 $ 102,503 1 % — % As a percentage of total revenue 44 % 59 % SaaS 72,105 5,988 1,104 % 1,104 % As a percentage of total revenue 30 % 3 % Professional services 10,964 12,607 (13) % (14) % As a percentage of total revenue 5 % 7 % Total maintenance, SaaS, and professional services revenue $ 186,560 $ 121,098 54 % 54 % As a percentage of total revenue 79 % 69 % Six Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency Maintenance $ 203,026 $ 204,528 (1) % — % As a percentage of total revenue 43 % 57 % SaaS 141,515 11,559 1,124 % 1,124 % As a percentage of total revenue 30 % 3 % Professional services 21,589 25,596 (16) % (16) % As a percentage of total revenue 5 % 7 % Total maintenance, SaaS, and professional services revenue $ 366,130 $ 241,683 51 % 52 % As a percentage of total revenue 77 % 67 % Maintenance revenue remained relatively flat as compared to the same period last year. SaaS revenue increased as compared to the same periods last year due to our acquisition of ShareFile. Professional services revenue decreased as compared to the same periods last year primarily due to a decrease in MarkLogic professional services revenue. 22 Revenue by Region Three Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency North America $ 147,326 $ 102,902 43 % 43 % As a percentage of total revenue 62 % 59 % EMEA $ 73,039 $ 57,538 27 % 24 % As a percentage of total revenue 31 % 33 % Latin America $ 4,853 $ 4,599 6 % 13 % As a percentage of total revenue 2 % 3 % Asia Pacific $ 12,137 $ 10,038 21 % 21 % As a percentage of total revenue 5 % 5 % Six Months Ended % Change (in thousands) May 31, 2025 May 31, 2024 As Reported Constant Currency North America $ 301,972 $ 210,184 44 % 44 % As a percentage of total revenue 64 % 58 % EMEA $ 139,982 $ 120,625 16 % 16 % As a percentage of total revenue 29 % 34 % Latin America $ 9,905 $ 9,267 7 % 17 % As a percentage of total revenue 2 % 3 % Asia Pacific $ 23,511 $ 19,686 19 % 21 % As a percentage of total revenue 5 % 5 % Total revenue generated in North America increased $44.4 million and $91.8 million in the second quarter and first six months of fiscal year 2025, respectively. Total revenue generated outside North America increased $17.9 million and $23.8 million over the same periods. The increases in each region were primarily due to the acquisition of ShareFile. Total revenue generated in markets outside North America represented 38% and 41% of total revenue in the second quarter of fiscal year 2025 and fiscal year 2024, respectively. In the first six months of fiscal year 2025 and fiscal year 2024 total revenue generated in markets outside North America represented 36% and 42%, respectively. Cost of Software Licenses Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 Change May 31, 2025 May 31, 2024 Change Cost of software licenses $ 2,987 $ 2,497 $ 490 20 % $ 5,912 $ 5,228 $ 684 13 % As a percentage of software license revenue 6 % 5 % 5 % 4 % Cost of software licenses consists primarily of 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. The increase in the second quarter of fiscal year 2025 compared to the same period last year was related to increased royalty costs, credit card fees, and hardware sales. The increase in the first six months of fiscal year 2025 as compared to the same period last year was primarily due to increased hardware sales. 23 Cost of Maintenance, SaaS, and Professional Services Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 Change May 31, 2025 May 31, 2024 Change Cost of maintenance, SaaS, and professional services $ 33,764 $ 22,176 $ 11,588 52 % $ 66,648 $ 44,395 $ 22,253 50 % As a percentage of maintenance, SaaS, and professional services revenue 18 % 18 % 18 % 18 % Components of cost of maintenance, SaaS, and professional services: Personnel related costs $ 21,283 $ 16,770 $ 4,513 27 % $ 42,053 $ 33,814 $ 8,239 24 % Hosting and other 9,047 1,904 7,143 375 % 17,957 3,670 14,287 389 % Contractors and outside services 3,434 3,502 (68) (2) % 6,638 6,911 (273) (4) % Total cost of maintenance, SaaS, and professional services $ 33,764 $ 22,176 $ 11,588 52 % $ 66,648 $ 44,395 $ 22,253 50 % Cost of maintenance, SaaS, and professional services consists primarily of hosting costs, and personnel related costs attributable to customer support, cloud operations, consulting, and education. The increase year-over-year in all periods presented was primarily due to increased hosting and headcount related costs resulting from our acquisition of ShareFile. Amortization of Acquired Intangibles Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Amortization of acquired intangibles $ 10,537 $ 7,398 42 % $ 20,959 $ 15,257 37 % As a percentage of total revenue 4 % 4 % 4 % 4 % Amortization of acquired intangibles included in costs of revenue primarily represents the amortization of the value assigned to technology-related intangible assets obtained in business combinations. The year-over-year increase in all periods presented is due to the acquisition of ShareFile. Gross Profit Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Gross profit $ 190,067 $ 143,006 33 % $ 381,851 $ 294,882 29 % As a percentage of total revenue 80 % 82 % 80 % 82 % Our gross profit increased in all periods presented primarily due to the increase in revenue, partially offset by the increases in costs of maintenance, SaaS, and professional services, and amortization of acquired intangibles. 24 Sales and Marketing Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 Change May 31, 2025 May 31, 2024 Change Sales and marketing $ 49,677 $ 37,889 $ 11,788 31 % $ 100,973 $ 77,000 $ 23,973 31 % As a percentage of total revenue 21 % 22 % 21 % 21 % Components of sales and marketing: Personnel related costs $ 41,486 $ 33,241 $ 8,245 25 % $ 85,305 $ 66,334 $ 18,971 29 % Marketing programs and other 6,553 3,811 2,742 72 % 13,014 9,236 3,778 41 % Contractors and outside services 1,638 837 801 96 % 2,654 1,430 1,224 86 % Total sales and marketing $ 49,677 $ 37,889 $ 11,788 31 % $ 100,973 $ 77,000 $ 23,973 31 % Sales and marketing expenses in all periods presented increased primarily due to increased personnel related costs, increased marketing and sales events costs, and increased contractors and outside services costs, each associated with our acquisition of ShareFile. Product Development Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 Change May 31, 2025 May 31, 2024 Change Product development costs $ 46,570 $ 35,435 $ 11,135 31 % $ 92,945 $ 70,423 $ 22,522 32 % As a percentage of total revenue 20 % 20 % 20 % 20 % Components of product development costs: Personnel related costs $ 44,392 $ 34,151 $ 10,241 30 % $ 88,929 $ 67,747 $ 21,182 31 % Contractors and outside services 1,791 1,161 630 54 % 3,302 2,243 1,059 47 % Other product development costs 387 123 264 215 % 714 433 281 65 % Total product development costs $ 46,570 $ 35,435 $ 11,135 31 % $ 92,945 $ 70,423 $ 22,522 32 % Product development expenses in all periods presented increased primarily due to increased personnel related costs, as well as increased contractors and outside services costs, each associated with our acquisition of ShareFile. 25 General and Administrative Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 Change May 31, 2025 May 31, 2024 Change General and administrative $ 25,637 $ 21,983 $ 3,654 17 % $ 51,260 $ 43,327 $ 7,933 18 % As a percentage of total revenue 11 % 13 % 11 % 12 % Components of general and administrative: Personnel related costs $ 20,541 $ 17,963 $ 2,578 14 % $ 39,380 $ 35,926 $ 3,454 10 % Contractors and outside services 3,619 2,602 1,017 39 % 7,683 5,177 2,506 48 % Other general and administrative costs 1,477 1,418 59 4 % 4,197 2,224 1,973 89 % Total cost of general and administrative $ 25,637 $ 21,983 $ 3,654 17 % $ 51,260 $ 43,327 $ 7,933 18 % General and administrative expenses include the costs of our finance, human resources, legal, information systems and administrative departments. The increases in all periods presented in personnel related costs, contractors and outside services, and other general and administrative costs were primarily related to our acquisition of ShareFile. Amortization of Acquired Intangibles Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Amortization of acquired intangibles $ 26,063 $ 16,316 60 % $ 51,871 $ 33,705 54 % As a percentage of total revenue 11 % 9 % 11 % 9 % Amortization of acquired intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology. Amortization of acquired intangibles increased in all periods presented due to the addition of ShareFile intangible assets, as discussed above. Cyber Vulnerability Response Expenses, Net Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Cyber vulnerability response expenses, net $ 730 $ 3,036 (76) % $ 1,467 $ 4,023 (64) % As a percentage of total revenue — % 2 % — % 1 % As previously disclosed, following the discovery of the MOVEit Vulnerability that was disclosed on June 5, 2023, we engaged outside cybersecurity experts and other incident response professionals to conduct a forensic investigation and assess the extent and scope of this matter. Cyber vulnerability response costs relate to the engagement of external cybersecurity experts and other incident response professionals and are net of received and expected insurance recoveries. Please refer to Note 12: Cyber Related Matters for additional details and updates regarding the MOVEit Vulnerability. 26 Restructuring Expenses Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Restructuring expenses $ 1,043 $ 651 60 % $ 8,072 $ 3,000 169 % As a percentage of total revenue — % — % 2 % 1 % Restructuring expenses recorded in the second quarter and first six months of fiscal year 2025 primarily relate to headcount reductions and a facility closure in connection with the restructuring action related to the ShareFile acquisition in November 2024. See Note 9: Restructuring for additional details, including types of expenses incurred and the timing of future expenses and cash payments. Acquisition-Related Expenses Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Acquisition-related expenses $ 1,731 $ 548 216 % $ 4,221 $ 1,250 238 % As a percentage of total revenue 1 % — % 1 % — % Acquisition-related costs are expensed as incurred and include those costs incurred as a result of a business combination. These costs consist of professional service fees, including third-party legal and valuation-related fees. Acquisition-related expenses in the second quarter and first six months of fiscal year 2025 were primarily related to our acquisition of ShareFile. Acquisition-related expenses in the same periods of fiscal year 2024 were primarily related to our pursuit of other acquisition opportunities. Income from Operations Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Income from operations $ 38,616 $ 27,148 42 % $ 71,042 $ 62,154 14 % As a percentage of total revenue 16 % 16 % 15 % 17 % Income from operations increased year-over-year due to an increase in revenue, offset by increases in costs of revenue and operating expenses, as shown above. Other (Expense) Income Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Interest expense $ (18,138) $ (7,007) 159 % $ (36,567) $ (14,351) 155 % Interest income and other, net 294 928 (68) % 781 1,552 (50) % Foreign currency loss, net (908) (941) (4) % (2,090) (1,620) 29 % Total other expense, net $ (18,752) $ (7,020) 167 % $ (37,876) $ (14,419) 163 % As a percentage of total revenue (8) % (4) % (8) % (4) % Total other expense, net, increased in the second quarter and first six months of fiscal year 2025 as compared to the same periods last year primarily due to an increase in interest expense resulting from costs associated with drawing on our revolving line of credit to acquire ShareFile. Refer to Note 5: Debt, for further discussion. Foreign currency loss increased year-over-year due to rate volatility and timing of intercompany and hedge settlement activities. 27 Provision for Income Taxes Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Provision for income taxes $ 2,835 $ 3,940 (28) % $ 5,191 $ 8,908 (42) % As a percentage of income before income taxes 14 % 20 % 16 % 19 % Our effective tax rate was 14% and 20% in the second fiscal quarter of 2025 and 2024, respectively. The primary reason for the decrease in the effective rate was due to $1.1 million of discrete tax benefits in the second fiscal quarter of 2025 compared to $0.2 million of discrete tax benefits in the second fiscal quarter of 2024. Net Income Three Months Ended Six Months Ended (in thousands) May 31, 2025 May 31, 2024 % Change May 31, 2025 May 31, 2024 % Change Net income $ 17,029 $ 16,188 5 % $ 27,975 $ 38,827 (28) % As a percentage of total revenue 7 % 9 % 6 % 11 % Select Performance Metrics: We evaluate our financial performance using a number of financial and operating metrics. These metrics are periodically reviewed and revised to reflect changes in our business. Annualized Recurring Revenue ("ARR") We disclose ARR as a performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources currently represents the substantial majority of our revenues and is expected to continue in the future. We define ARR as the annualized revenue of all active and contractually binding term-based contracts from all customers at a point in time. ARR includes revenue from maintenance, software upgrade rights, public cloud, and on-premises subscription-based transactions and managed services. ARR mitigates fluctuations in revenue due to seasonality, contract term and the sales mix of subscriptions for term-based licenses and SaaS. We use ARR to understand customer trends and the overall health of our business, helping us to formulate strategic business decisions. We calculate the annualized value of annual and multi-year contracts, and contracts with terms less than one year, by dividing the total contract value of each contract by the number of months in the term and then multiplying by 12. Annualizing contracts with terms less than one-year results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period. We generally do not sell non-SaaS-based contracts with a term of less than one year unless a customer is purchasing additional licenses under an existing annual or multi-year contract. The expectation is that at the time of renewal, such contracts with a term less than one year will renew with the same term as the existing contracts being renewed, such that both contracts are co-termed. Historically, such contracts with a term of less than one year renew at rates equal to or better than annual or multi-year contracts. For SaaS-based contracts, there is a meaningful percentage of monthly auto-renewing contracts for which annualizing the contracts results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period. Revenue from term-based license and on-premises subscription arrangements include a portion of the arrangement consideration that is allocated to the software license that is recognized up-front at the point in time control is transferred under ASC 606 revenue recognition principles. ARR for these arrangements is calculated as described above. The expectation is that the total contract value, inclusive of revenue recognized as software license, will be renewed at the end of the contract term. The calculation is done at constant currency using the current year budgeted exchange rates for all periods presented. ARR is not defined in GAAP and is not derived from a GAAP measure. Rather, ARR generally aligns to billings (as opposed to GAAP revenue which aligns to the transfer of control of each performance obligation). ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those 28 items. 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 $838 million and $573 million as of May 31, 2025 and May 31, 2024, respectively, which is an increase of 46% year-over-year. The growth in ARR was primarily driven by the acquisition of ShareFile. Net Retention Rate We calculate net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period ARR"). We then calculate the ARR from these same customers as of the current period end ("Current Period ARR"). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net retention rate. Net retention rate is not calculated in accordance with GAAP and is not derived from a GAAP measure. Our net retention rates have generally ranged between 100% and 102% for all periods presented. We believe net retention rates can be a helpful indicator of the durability of top line performance. Liquidity and Capital Resources Cash and Cash Equivalents (in thousands) May 31, 2025 November 30, 2024 Cash and cash equivalents $ 102,006 $ 118,077 The decrease in cash and cash equivalents of $16.1 million from the end of fiscal year 2024 was due to cash outflows of $70.0 million to pay down the revolving line of credit, repurchases of common stock of $50.1 million, purchases of property and equipment of $1.8 million, a $1.2 million payment related to the acquisition of ShareFile, and $0.7 million in dividend equivalent payments to stockholders. The cash outflows described above were offset by cash inflows from operations of $98.9 million, the effect of exchange rates on cash of $6.1 million, and $2.7 million in cash received from the issuance of common stock. Except as described below, there are no limitations on our ability to access our cash and cash equivalents. As of May 31, 2025, $62.9 million of our cash and cash equivalents was held by our foreign subsidiaries. As a result of the debt obligations arising from the ShareFile acquisition, in the fourth quarter of fiscal 2024 we determined that a substantial portion of unremitted foreign earnings are no longer indefinitely reinvested. As a result of this, we plan to utilize worldwide cash based on the needs of the parent entity. These amounts will be repatriated as needed. Deferred taxes are recorded for earnings of our foreign operations that we determine are not indefinitely reinvested. Six Months Ended (in thousands) May 31, 2025 May 31, 2024 Net cash flows from operating activities $ 98,943 $ 134,185 Net cash flows used in investing activities $ (2,980) $ (1,264) Net cash flows used in financing activities $ (118,103) $ (67,798) Cash Flows From Operating Activities The decrease in cash generated from operations in the first six months of fiscal year 2025 as compared to the same period last year was primarily due to increased interest expense resulting from the draw down on our revolving line of credit in the fourth quarter of fiscal year 2024. Our gross accounts receivable as of May 31, 2025, decreased by $21.0 million from the end of fiscal year 2024. Our days sales outstanding (DSO) in accounts receivable increased to 53 days in the second quarter of fiscal year 2025 from 41 days in the second fiscal quarter of 2024 due to the timing of billings and collections. 29 Cash Flows Used in Investing Activities 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, as well as the timing of acquisitions and divestitures. In the first six months of fiscal year 2025, we purchased $1.8 million of property and equipment, and had payments for acquisitions of $1.2 million. Through the second quarter of fiscal year 2024 we had $1.3 million of purchases of property and equipment. Cash Flows Used in Financing Activities We received $12.8 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan in the first six months of fiscal year 2025 as compared to $12.9 million in the first six months of fiscal year 2024. We made withholding tax payments related to net share settlements of equity awards of $10.1 million in the first six months of fiscal year 2025 as compared to $10.6 million in the first six months of fiscal year 2024. We repurchased $50.1 million of our common stock under our share repurchase plan in the first six months of fiscal year 2025 as compared to $72.4 million in the same period of the prior year. Further, we made payments on our revolving line of credit of $70.0 million and $110.0 million through the second quarters of fiscal years 2025 and 2024, respectively. 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). 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). Finally, we made dividend equivalent payments of $0.7 million to our stockholders during the first six months of fiscal year 2025, as compared to $16.1 million of dividend and dividend equivalent payments made to stockholders through the first six months of fiscal year 2024. Share Repurchase Program 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, 2025 and May 31, 2024, we repurchased and retired 0.4 million shares for $20.0 million and 1.0 million shares for $49.9 million, respectively. In the six months ended May 31, 2025 and May 31, 2024, we repurchased and retired 0.9 million shares for $50.0 million and 1.4 million shares for $72.4 million, respectively. The shares were repurchased in both periods as part of the share repurchase program as authorized by our Board of Directors. As of May 31, 2025, there was $57.2 million remaining under the current authorization. Dividends As announced on September 9, 2024, our Board of Directors approved the suspension of our 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 See Note 9: Restructuring to the condensed consolidated financial statements. Long-term Debt and Credit Facility See Note 5: Debt to the condensed consolidated financial statements. Liquidity Outlook Cash from operations in fiscal year 2025 could be affected by various risks and uncertainties, including, but not limited to, the effects of various risks detailed in Part I, Item 1A. Risk Factors in our 2024 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. Our foreseeable cash needs include capital expenditures, acquisitions, debt repayments, share repurchases, lease commitments, restructuring obligations, and other long-term obligations. 30 We expect to continue to make payments on the revolving credit facility and are also continuously evaluating additional financing options, the net proceeds of which could be used for general corporate purposes or to repay amounts outstanding under our revolving credit facility. In the future, we may use the available capacity under our revolving credit facility for general corporate purposes, which may include payments made in connection with any settlement of the 2026 Notes upon conversion, redemption or repayment of our 2026 Notes at or prior to the 2026 Notes maturity. Legal and Other Regulatory Matters MOVEit Vulnerability 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. 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 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. Please see our 2024 Annual Report and previous SEC filings for additional information, including risk factors, related to the MOVEit Vulnerability. We are subject to litigation and governmental investigations related to the MOVEit Vulnerability, for which we have incurred expenses and will incur future costs. We expect our exposure to such expenses and liabilities to be reduced by insurance. Please refer to Note 12: Cyber Related Matters to the condensed consolidated financial statements for additional details and updates regarding the MOVEit Vulnerability. Recent Accounting Pronouncements Refer to Note 1: Basis of Presentation to the condensed consolidated financial statements for further discussion.