PROGRESS SOFTWARE CORP /MA 10-Q

Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets (in thousands, except share data) August 31, 2025 November 30, 2024 Assets Current assets: Cash and cash equivalents $ 99,008 $ 118,077 Accounts receivable, net 151,431 163,575 Unbilled receivables, current portion 35,930 34,672 Other current assets 49,176 52,489 Total current assets 335,545 368,813 Unbilled receivables, non-current portion 30,760 28,893 Property and equipment, net 13,134 13,746 Intangible assets, net 619,363 723,571 Goodwill 1,309,252 1,292,177 Right-of-use lease assets 27,727 30,894 Deferred tax assets 68,823 56,179 Other assets 17,107 12,693 Total assets $ 2,421,711 $ 2,526,966 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 12,847 $ 13,910 Deferred revenue, current portion, net 298,716 332,142 Convertible senior notes, current portion, net 358,619 — Accrued compensation and related payroll taxes 63,323 64,672 Operating lease liabilities, current portion 8,788 9,202 Other accrued liabilities 27,516 35,219 Total current liabilities 769,809 455,145 Deferred revenue, non-current portion, net 82,346 72,270 Convertible senior notes, non-current portion, net 440,713 796,267 Long-term debt, net 620,000 730,000 Operating lease liabilities, non-current portion 22,705 26,259 Deferred tax liabilities 2,599 2,279 Other non-current liabilities 5,857 5,958 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.01 par value; authorized, 10,000,000 shares; issued, none — — Common stock, $ 0.01 par value; authorized, 200,000,000 shares; issued and outstanding, 42,905,397 shares in 2025 and 43,360,695 shares in 2024 429 434 Additional paid-in capital 371,623 354,158 Retained earnings 138,051 120,405 Accumulated other comprehensive loss ( 32,421 ) ( 36,209 ) Total stockholders’ equity 477,682 438,788 Total liabilities and stockholders’ equity $ 2,421,711 $ 2,526,966 See notes to unaudited condensed consolidated financial statements. 3 Condensed Consolidated Statements of Operations Three Months Ended Nine Months Ended (in thousands, except per share data) August 31, 2025 August 31, 2024 August 31, 2025 August 31, 2024 Revenue: Software licenses $ 63,437 $ 57,850 $ 172,677 $ 175,929 Maintenance, SaaS, and professional services 186,358 120,836 552,488 362,519 Total revenue 249,795 178,686 725,165 538,448 Costs of revenue: Cost of software licenses 2,833 2,700 8,745 7,928 Cost of maintenance, SaaS, and professional services 33,919 20,057 100,567 64,452 Amortization of acquired intangibles 10,784 6,307 31,743 21,564 Total costs of revenue 47,536 29,064 141,055 93,944 Gross profit 202,259 149,622 584,110 444,504 Operating expenses: Sales and marketing 51,850 37,141 152,823 114,141 Product development 49,432 34,720 142,377 105,143 General and administrative 28,308 20,503 79,568 63,830 Amortization of acquired intangibles 26,415 13,810 78,286 47,515 Cyber vulnerability response expenses, net 659 927 2,126 4,950 Restructuring expenses 907 308 8,979 3,308 Acquisition-related expenses 814 1,864 5,035 3,114 Total operating expenses 158,385 109,273 469,194 342,001 Income from operations 43,874 40,349 114,916 102,503 Other (expense) income: Interest expense ( 17,737 ) ( 6,765 ) ( 54,304 ) ( 21,116 ) Interest income and other, net 260 1,896 1,041 3,448 Foreign currency loss, net ( 191 ) ( 1,201 ) ( 2,281 ) ( 2,821 ) Total other expense, net ( 17,668 ) ( 6,070 ) ( 55,544 ) ( 20,489 ) Income before income taxes 26,206 34,279 59,372 82,014 Provision for income taxes 6,793 5,815 11,984 14,723 Net income $ 19,413 $ 28,464 $ 47,388 $ 67,291 Earnings per share: Basic $ 0.45 $ 0.66 $ 1.10 $ 1.55 Diluted $ 0.44 $ 0.65 $ 1.07 $ 1.52 Weighted average shares outstanding: Basic 42,988 42,872 43,099 43,296 Diluted 43,717 43,711 44,253 44,167 Cash dividends declared per common share $ — $ 0.175 $ — $ 0.525 See notes to unaudited condensed consolidated financial statements. 4 Condensed Consolidated Statements of Comprehensive Income Three Months Ended Nine Months Ended (in thousands) August 31, 2025 August 31, 2024 August 31, 2025 August 31, 2024 Net income $ 19,413 $ 28,464 $ 47,388 $ 67,291 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 654 2,084 3,788 643 Unrealized loss on hedging activity, net of tax benefit of $ 0 and $ 360 for the three and nine months ended August 31, 2024, respectively — — — ( 1,135 ) Total other comprehensive income (loss), net of tax 654 2,084 3,788 ( 492 ) Comprehensive income $ 20,067 $ 30,548 $ 51,176 $ 66,799 See notes to unaudited condensed consolidated financial statements. 5 Condensed Consolidated Statements of Stockholders’ Equity Nine Months Ended August 31, 2025 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity (in thousands) Number of Shares Amount Balance, December 1, 2024 43,361 $ 434 $ 354,158 $ 120,405 $ ( 36,209 ) $ 438,788 Issuance of stock under employee stock purchase plan 250 2 11,002 — — 11,004 Exercise of stock options 170 2 4,587 — — 4,589 Vesting of restricted stock units 477 5 ( 5 ) — — — Withholding tax payments related to net issuance of RSUs ( 180 ) ( 2 ) ( 10,099 ) — — ( 10,101 ) Stock-based compensation — — 47,394 — — 47,394 Treasury stock repurchases and retirements, including excise tax ( 1,173 ) ( 12 ) ( 35,414 ) ( 29,742 ) — ( 65,168 ) Net income — — — 47,388 — 47,388 Other comprehensive income — — — — 3,788 3,788 Balance, August 31, 2025 42,905 $ 429 $ 371,623 $ 138,051 $ ( 32,421 ) $ 477,682 Three Months Ended August 31, 2025 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity (in thousands) Number of Shares Amount Balance, June 1, 2025 43,101 $ 431 $ 362,091 $ 123,254 $ ( 33,075 ) $ 452,701 Issuance of stock under employee stock purchase plan 74 1 3,600 — — 3,601 Exercise of stock options 15 — 337 — — 337 Withholding tax payments related to net issuance of RSUs ( 2 ) — — — — — Stock-based compensation — — 15,970 — — 15,970 Treasury stock repurchases and retirements, including excise tax ( 283 ) ( 3 ) ( 10,375 ) ( 4,616 ) — ( 14,994 ) Net income — — — 19,413 — 19,413 Other comprehensive income — — — — 654 654 Balance, August 31, 2025 42,905 $ 429 $ 371,623 $ 138,051 $ ( 32,421 ) $ 477,682 6 Nine 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, December 1, 2023 43,796 $ 438 $ 370,579 $ 120,858 $ ( 32,160 ) $ 459,715 Issuance of stock under employee stock purchase plan 260 3 9,889 — — 9,892 Exercise of stock options 179 2 7,538 — — 7,540 Vesting of restricted stock units 498 5 ( 5 ) — — — Withholding tax payments related to net issuance of RSUs ( 192 ) ( 3 ) ( 10,624 ) — — ( 10,627 ) Stock-based compensation — — 35,011 — — 35,011 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 ) Net income — — — 67,291 — 67,291 Other comprehensive loss — — — — ( 492 ) ( 492 ) 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 7 Condensed Consolidated Statements of Cash Flows Nine Months Ended (in thousands) August 31, 2025 August 31, 2024 Cash flows from operating activities: Net income $ 47,388 $ 67,291 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 4,753 4,806 Amortization of acquired intangibles and other 111,081 70,835 Amortization of debt discount and issuance costs 3,064 2,540 Stock-based compensation 47,394 35,011 Non-cash lease expense 8,749 8,898 Deferred income taxes ( 12,884 ) ( 14,840 ) Credit losses and other sales allowances 3,510 329 Changes in operating assets and liabilities: Accounts receivable 9,129 25,407 Other assets 4,575 15,090 Accounts payable and accrued liabilities ( 15,016 ) ( 6,796 ) Lease liabilities ( 9,533 ) ( 8,682 ) Income taxes payable 1,131 1,341 Deferred revenue, net ( 30,952 ) ( 9,387 ) Net cash flows from operating activities 172,389 191,843 Net cash flows used in investing activities: Purchases of property and equipment ( 2,840 ) ( 2,328 ) Payments for acquisitions, net of cash acquired ( 20,653 ) — Net cash flows used in investing activities ( 23,493 ) ( 2,328 ) Net cash flows used in financing activities: Proceeds from equity plans 16,040 17,474 Payments for taxes related to net share settlements of equity awards ( 10,101 ) ( 10,627 ) Repurchases of common stock, including excise tax ( 65,108 ) ( 86,777 ) Proceeds from issuance of senior convertible notes, net of issuance costs of $ 11,200 — 438,750 Purchase of capped calls — ( 42,210 ) Dividend equivalent and dividend payments to stockholders ( 654 ) ( 23,814 ) Repayment of revolving line of credit ( 110,000 ) ( 110,000 ) Principal payment on term loan — ( 261,250 ) Payment of credit facility debt issuance costs ( 5,961 ) ( 6,821 ) Net cash flows used in financing activities ( 175,784 ) ( 85,275 ) Effect of exchange rate changes on cash and cash equivalents 7,819 1,515 Net (decrease) increase in cash and cash equivalents ( 19,069 ) 105,755 Cash and cash equivalents, beginning of period 118,077 126,958 Cash and cash equivalents, end of period $ 99,008 $ 232,713 8 Condensed Consolidated Statements of Cash Flows, continued Nine Months Ended (in thousands) August 31, 2025 August 31, 2024 Supplemental disclosure: Cash paid for income taxes, net of refunds of $ 1,875 in 2025 and $ 2,242 in 2024 $ 13,412 $ 15,865 Cash paid for interest $ 44,202 $ 7,961 Non-cash investing and financing activities: Total fair value of restricted stock awards, restricted stock units and deferred stock units on date vested $ 30,075 $ 29,036 Dividends declared and unpaid $ — $ 8,423 Contingent consideration payable in Nuclia acquisition $ 1,080 $ — See notes to unaudited condensed consolidated financial statements. 9 Notes to Condensed Consolidated Financial Statements Note 1: Basis of Presentation 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. Basis of Presentation and Significant Accounting Policies - We prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements and these unaudited financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2024, as filed with the SEC on January 21, 2025 (our "2024 Annual Report"). We made no material changes in the application of our significant accounting policies that were disclosed in our 2024 Annual Report. We have prepared the accompanying unaudited condensed consolidated financial statements on the same basis as the audited financial statements included in our 2024 Annual Report, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full fiscal year. Use of Estimates 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 (as defined herein), and business combinations. Actual results could differ from those estimates. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted 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 ending November 30, 2025. In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). 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 10 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 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. In September 2025, the FASB issued Accounting Standards Update No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). ASU 2025-06 modernizes the accounting for internal-use software costs by increasing the operability of the recognition guidance considering different methods of software development. ASU 2025-06, which can be applied prospectively, retrospectively, or with a modified transition approach, is effective for the Company for annual reporting as well as interim period reporting beginning in fiscal year 2029. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and disclosures. Note 2: 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, 2025: Fair Value Measurements Using (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 1,175 $ 1,175 $ — $ — Foreign exchange derivatives $ 112 $ — $ 112 $ — Liabilities Contingent consideration $ ( 1,080 ) $ — $ — $ ( 1,080 ) The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at November 30, 2024: Fair Value Measurements Using (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 1,823 $ 1,823 $ — $ — Liabilities Foreign exchange derivatives $ ( 624 ) $ — $ ( 624 ) $ — When developing fair value estimates, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices to measure fair value. The valuation technique used to measure fair value for our Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases, 11 where market rate assumptions are not available, we are required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument. We classified contingent consideration related to the Nuclia acquisition, which occurred in the third fiscal quarter of 2025, within Level 3 of the fair value hierarchy because the fair value is derived using significant unobservable inputs. We utilized the Monte Carlo simulation method to estimate the fair value of the contingent liability as of the reporting date. Thousands of iterations of the simulation were performed using forecasted financial data to develop a distribution of future values which, in turn, provide indicated earn-out payments. The total estimated fair value equals the sum of the average present values of the indicated earn-out payments. The fair value of the contingent consideration will be remeasured each reporting period and any required adjustment will be recorded to acquisition-related expenses in our condensed consolidated statement of operations. See Note 4: Business Combinations for additional details. The following table reflects the activity for our contingent consideration obligation measured at fair value using Level 3 inputs for the nine months ended August 31, 2025: (in thousands) Balance, December 1, 2024 $ — Acquisition date fair value of contingent consideration ( 1,080 ) Balance, August 31, 2025 $ ( 1,080 ) There were no transfers between levels of the fair value measurement hierarchy during the nine months ended August 31, 2025 and 2024. Assets and Liabilities Not Carried at Fair Value Fair Value of the Convertible Senior Notes 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, 2025 November 30, 2024 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Convertible senior notes due 2026 (1) $ 358,619 $ 362,778 $ 356,946 $ 449,094 Convertible senior notes due 2030 (2) 440,713 460,752 439,321 550,827 Total $ 799,332 $ 823,530 $ 796,267 $ 999,921 (1) The carrying value of the convertible senior notes due 2026 (the "2026 Notes"), is reflected net of $ 1.4 million and $ 3.1 million of unamortized debt issuance costs as of August 31, 2025 and November 30, 2024, respectively. (2) The carrying value of the convertible senior notes due 2030 (the "2030 Notes"), is reflected net of $ 9.3 million and $ 10.7 million of unamortized debt issuance costs as of August 31, 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 The carrying amounts of other financial assets and liabilities including cash and cash equivalents, accounts receivable, unbilled accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values due to their immediate or short-term maturities. Borrowings under our revolving credit facility are recorded at carrying value, which approximates fair value due to the frequent nature of such borrowings and repayments. The Company considers this as a Level 2 input. 12 Note 3: Intangible Assets and Goodwill Intangible Assets Intangible assets are comprised of the following significant classes: August 31, 2025 November 30, 2024 (in thousands) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Purchased technology $ 403,236 $ ( 242,008 ) $ 161,228 $ 399,000 $ ( 210,264 ) $ 188,736 Customer-related 777,969 ( 353,280 ) 424,689 777,608 ( 282,384 ) 495,224 Trademarks and trade names 77,111 ( 43,665 ) 33,446 77,111 ( 37,500 ) 39,611 Total $ 1,258,316 $ ( 638,953 ) $ 619,363 $ 1,253,719 $ ( 530,148 ) $ 723,571 In the three and nine months ended August 31, 2025, amortization expense related to intangible assets was $ 37.2 million and $ 110.0 million, respectively. 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. Future amortization expense for intangible assets as of August 31, 2025, is as follows: (in thousands) Remainder of 2025 $ 35,246 2026 137,423 2027 112,146 2028 100,562 2029 100,562 Thereafter 133,424 Total $ 619,363 Goodwill Changes in the carrying amount of goodwill in the nine months ended August 31, 2025 are as follows: (in thousands) Balance, December 1, 2024 $ 1,292,177 Additions from business combinations (1) 15,397 Measurement period adjustments (2) 1,632 Translation adjustments 46 Balance, August 31, 2025 $ 1,309,252 (1) The additions to goodwill during fiscal year 2025 are related to the acquisition of Nuclia. Refer to Note 4: Business Combinations for additional information. (2) Represents measurement period adjustments related to ShareFile during fiscal year 2025. Refer to Note 4: Business Combinations for additional information. 13 Note 4: Business Combinations Nuclia Acquisition On June 30, 2025, we completed the acquisition of Nuclia, an innovator in agentic Retrieval-Augmented Generation AI solutions, for a purchase price with an aggregate fair value of $ 21.4 million, which was primarily allocated to purchased technology and goodwill. The purchase consideration consisted of $ 20.3 million of cash paid at closing and contingent consideration with an estimated fair value of $ 1.1 million. We are required to pay contingent earn-out consideration of up to $ 5.0 million to former Nuclia shareholders, based on the achievement of certain revenue targets during fiscal year 2026. The fair value of the earn-out liability was determined to be $ 1.1 million as of the acquisition date. See Note 2: Fair Value Measurements for additional details. We have not disclosed the amount of revenues and earnings of Nuclia since acquisition, nor pro forma financial information, as those amounts are not significant to our condensed consolidated financial statements. ShareFile Acquisition On October 31, 2024, we completed the acquisition of ShareFile from Cloud Software Group, Inc. and its subsidiaries 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 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 first quarter of fiscal year 2025, the Company identified measurement period adjustments that resulted in increases in goodwill totaling $ 1.6 million. There were no measurement period adjustments identified in the second or third quarter of fiscal year 2025. 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 Property, plant and equipment 54 — 54 Purchased technology 119,000 — 119,000 7 years Trade name 27,000 — 27,000 7 years Customer relationships 319,000 ( 1,000 ) 318,000 7 years Deferred taxes 23,456 ( 377 ) 23,079 Deferred revenue ( 96,159 ) — ( 96,159 ) Goodwill 459,459 1,632 461,091 Net assets acquired $ 852,702 $ 1,195 $ 853,897 The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. The valuation assumptions take into consideration our estimates of customer attrition, technology obsolescence, and revenue growth projections. 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 $ 461.1 million of goodwill, of which a portion is deductible for tax purposes. 14 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. During the three and nine months ended August 31, 2025, we incurred approximately $ 0.1 million and $ 3.8 million, respectively, 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 and nine months ended August 31, 2025, was $ 64.6 million and $ 194.1 million, respectively. 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 Software Group, Inc. for a period of six months from the date of acquisition, with the option to extend the TSA beyond this period for certain services. The TSA was terminated during the second quarter of fiscal year 2025 and expenses related to the TSA were not significant during the three and nine months ended August 31, 2025. Pro Forma Information 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 $ 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 Software Group, Inc., 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 Three Months Ended August 31, 2024 Revenue $ 240,872 Net income $ 20,082 Net income per basic share $ 0.47 Net income per diluted share $ 0.46 (in thousands, except per share data) Pro Forma Nine Months Ended August 31, 2024 Revenue $ 722,032 Net income $ 39,886 Net income per basic share $ 0.92 Net income per diluted share $ 0.90 15 Note 5: Debt As of August 31, 2025, we had the following debt obligations: (in thousands) Outstanding Principal Unamortized Discount and Issuance Costs for the Notes Net Carrying Amount Long-term debt: 3.5 % convertible senior notes due 2030 $ 450,000 $ ( 9,287 ) $ 440,713 Revolving credit facility 620,000 — 620,000 Total long-term debt 1,070,000 ( 9,287 ) 1,060,713 Current portion of long-term debt: 1.0 % convertible senior notes due 2026 360,000 ( 1,381 ) 358,619 Total debt $ 1,430,000 $ ( 10,668 ) $ 1,419,332 As of November 30, 2024, we had the following debt obligations: (in thousands) Outstanding Principal Unamortized Discount and Issuance Costs for the Notes Net Carrying Amount Long-term debt: 1.0 % convertible senior notes due 2026 $ 360,000 $ ( 3,054 ) $ 356,946 3.5 % convertible senior notes due 2030 450,000 ( 10,679 ) 439,321 Revolving credit facility 730,000 — 730,000 Total debt $ 1,540,000 $ ( 13,733 ) $ 1,526,267 Credit Facility On July 21, 2025, the Company entered into an amended and restated credit agreement (the "Credit Agreement") with certain lenders, which provides a $ 1.5 billion secured revolving credit facility (the "revolving credit facility"). 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. The amount outstanding under our prior secured credit facility is now outstanding under the amended and restated credit facility. 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 1.25 % to 2.50 % above the Term Benchmark Rate for Term Benchmark-based borrowings or from 0.25 % to 1.50 % above the defined base rate for base rate borrowings, in each case based upon our consolidated total net leverage ratio. During the third fiscal quarter of 2025, we repaid $ 40.0 million on the revolving credit facility. The interest rate as of August 31, 2025 was 6.32 %. The revolving credit facility matures on the earlier of (i) July 21, 2030, and (ii) the date that is 91 days prior to the maturity date of our 2030 Notes subject to certain conditions as set forth in the Credit Agreement, including the repayment of the 2030 Notes, the refinancing of the 2030 Notes including a maturity date that is on or after October 21, 2030, and compliance with a liquidity test when all amounts outstanding will be due and payable in full. 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, 2025, there was $ 620.0 million outstanding under the revolving credit facility and $ 2.1 million of letters of credit. Costs incurred to obtain the Credit Agreement of $ 6.2 million, along with $ 5.2 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. 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, 16 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 and a consolidated senior secured net leverage ratio. Note 6: Common Stock Repurchases In the three months ended August 31, 2025 and August 31, 2024, we repurchased and retired 0.3 million shares for $ 15.0 million and 0.3 million shares for $ 14.3 million, respectively. In the nine months ended August 31, 2025 and August 31, 2024, we repurchased and retired 1.2 million shares for $ 65.1 million and 1.6 million shares for $ 86.8 million, respectively. As of August 31, 2025, there was $ 42.2 million remaining under the current authorization. On September 23, 2025, our Board of Directors increased the share repurchase authorization by $ 200.0 million to an aggregate authorization of $ 242.2 million. Note 7: Stock-Based Compensation Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant service period. We estimate the fair value of each stock-based award on the measurement date using either the current market price of the stock, the Black-Scholes option valuation model, or the Monte Carlo Simulation valuation model. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate, and dividend yield. We recognize stock-based compensation expense related to options and restricted stock units on a straight-line basis over the service period of the award, which is generally four or five years for options and three or four years for restricted stock units, and adjust the expense each period for actual forfeitures. We recognize stock-based compensation expense related to performance stock units and our employee stock purchase plan using an accelerated attribution. 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 . 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, 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, 2025 August 31, 2024 August 31, 2025 August 31, 2024 Cost of maintenance, SaaS, and professional services $ 1,486 $ 834 $ 4,241 $ 2,732 Sales and marketing 3,275 2,169 9,970 6,939 Product development 4,709 3,199 14,103 10,255 General and administrative 6,500 4,356 19,080 15,085 Total stock-based compensation $ 15,970 $ 10,558 $ 47,394 $ 35,011 17 Note 8: Revenue Recognition Timing of Revenue Recognition Our revenues are derived from licensing our products and from related services, which consist of maintenance, SaaS, and professional services. Information relating to revenue from external customers by revenue type is as follows: Three Months Ended Nine Months Ended (in thousands) August 31, 2025 August 31, 2024 August 31, 2025 August 31, 2024 Performance obligations transferred at a point in time: Software licenses $ 63,437 $ 57,850 $ 172,677 $ 175,929 Performance obligations transferred over time: Maintenance 104,849 103,088 307,875 307,616 SaaS 71,512 6,082 213,027 17,641 Professional services 9,997 11,666 31,586 37,262 Total revenue $ 249,795 $ 178,686 $ 725,165 $ 538,448 Geographic Revenue In the following table, revenue attributed to North America includes sales to customers in the U.S. 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. to distributors in these regions. Information relating to revenue from external customers from different geographical areas is as follows: Three Months Ended Nine Months Ended (in thousands) August 31, 2025 August 31, 2024 August 31, 2025 August 31, 2024 North America $ 163,404 $ 104,369 $ 465,376 $ 314,553 EMEA 68,339 57,031 208,321 177,656 Latin America 6,221 5,363 16,126 14,630 Asia Pacific 11,831 11,923 35,342 31,609 Total revenue $ 249,795 $ 178,686 $ 725,165 $ 538,448 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, 2025 or August 31, 2024. Contract Balances Unbilled Receivables and Contract Assets As of August 31, 2025, billing of our non-current unbilled receivables is expected to occur as follows: (in thousands) 2026 $ 13,945 2027 16,815 Total $ 30,760 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 August 31, 2025 or November 30, 2024. 18 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 net deferred revenue balance is primarily made up of deferred maintenance and deferred revenue related to our SaaS offerings. As of August 31, 2025, the changes in net deferred revenue were as follows: (in thousands) Balance, December 1, 2024 $ 404,412 Billings and other 701,815 Revenue recognized that was deferred in prior periods ( 328,553 ) Revenue recognized from current period arrangements ( 396,612 ) Balance, August 31, 2025 $ 381,062 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 August 31, 2025, transaction price allocated to remaining performance obligations was $ 592.3 million. We expect to recognize approximately 74 % of the revenue within the next year and the remainder thereafter. Deferred Contract Costs Certain of our sales incentive programs meet the requirements to be capitalized. Depending upon the sales incentive program and the related revenue arrangement, such capitalized costs are amortized over the longer of (i) the product life, which is generally three to five years ; or (ii) the term of the related revenue contract. 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 $ 5.8 million and $ 6.7 million as of August 31, 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. Note 9: Restructuring The following table provides a summary of activity for our restructuring actions: (in thousands) Excess Facilities and Other Costs Employee Severance and Related Benefits Total Balance, December 1, 2024 $ 4,339 $ 5,695 $ 10,034 Costs incurred 2,466 6,513 8,979 Cash disbursements ( 3,604 ) ( 11,554 ) ( 15,158 ) Translation and other adjustments — 25 25 Balance, August 31, 2025 $ 3,201 $ 679 $ 3,880 Costs incurred during the three and nine months ended August 31, 2025 are primarily related to our restructuring action that commenced in fiscal year 2024, arising from the integration of the ShareFile business. Cash disbursements for expenses incurred to date under this restructuring are expected to be made through the fourth quarter of fiscal year 2025. The restructuring reserve is included in other accrued liabilities on the condensed consolidated balance sheet as of August 31, 2025. We do not expect to incur additional material expenses in connection with this restructuring. 19 Note 10: 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 and the effect of our convertible debt using the if-converted 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, 2025 August 31, 2024 August 31, 2025 August 31, 2024 Net income $ 19,413 $ 28,464 $ 47,388 $ 67,291 Weighted average shares outstanding 42,988 42,872 43,099 43,296 Effect of dilution from common stock equivalents 729 839 978 871 Effect of dilution from if-converted convertible notes — — 176 — Diluted weighted average shares outstanding 43,717 43,711 44,253 44,167 Earnings per share: Basic $ 0.45 $ 0.66 $ 1.10 $ 1.55 Diluted $ 0.44 $ 0.65 $ 1.07 $ 1.52 We excluded stock awards representing approximately 844,000 and 672,000 shares of common stock, respectively, from the calculation of diluted earnings per share in the three and nine months ended August 31, 2025 as these awards were anti-dilutive. We excluded stock awards representing approximately 560,000 and 849,000 shares of common stock, respectively, from the calculation of diluted earnings per share in the three and nine months ended August 31, 2024, 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 nine months ended August 31, 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 August 31, 2025, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money. During the three and nine months ended August 31, 2024, we did not include the Notes in our diluted earnings per share calculation because the conversion feature in the Notes was out of the money. Note 11: Segment Information Operating segments are components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker ("CODM") in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer. We operate as one operating segment: 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. 20 Note 12: Cyber Related 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 (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 were filed and partially granted in July 2025, resulting in the dismissal of approximately half of the pending claims. Following the court’s ruling on the motions to dismiss, we filed a motion for reconsideration in which we asked the court to reconsider its ruling on some of the undismissed claims. The MDL is not expected to conclude within this fiscal year. We have also been cooperating with inquiries 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 During the three and nine months ended August 31, 2025, we incurred net costs of approximately $ 0.7 million and $ 2.1 million, respectively, related to the MOVEit Vulnerability. The costs recognized are net of insurance recoveries of $ 0.4 million and $ 1.7 million for the three and nine months ended August 31, 2025, respectively. During the three and nine months ended August 31, 2024, we incurred net costs of approximately $ 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 th e three and nine months ended August 31, 2024, respectively. The timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. We expect to continue to incur investigation, legal and professional services expenses associated with the MOVEit Vulnerability in future periods. We will recognize these expenses as services are received, net of insurance recoveries. 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 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. Also, each of the governmental inquiries and investigations mentioned above could result in adverse judgments, settlements, fines, penalties, or other resolutions, the amount, scope and timing of which could be material, but of which we are currently unable to reasonably estimate. Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of August 31, 2025. Insurance Coverage 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 August 31, 2025, we have approximately $ 5.0 million of remaining cybersecurity insurance coverage under the applicable policy. We will pursue recoveries to the maximum extent available under our insurance policies.