What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-03-31 compared with 2025-09-29 · 107 added, 204 removed, 138 unchanged (69% of the section changed)

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We undertake no obligation to update any forward-looking statements that we make.

Progress provides software products that enable our customers to develop, deploy and manage responsible AI-powered applications and digital experiences.

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.

Critical Accounting Policies

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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.

For further information regarding the application of these and other accounting policies, see Note 1, Nature of Business and Summary of Significant Accounting Policies to our Consolidated Financial Statements in Item 8 of our 2025 Annual Report.

There have been no significant changes to our critical accounting policies and estimates since our 2025 Annual Report.

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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.

These results should be considered in addition to, not as a substitute for, results reported in accordance with accounting principles generally accepted in the United States of America.

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.

Three Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

Revenue $ 249,795 $ 178,686 40 % 38 %

Nine Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

Three Months Ended Percentage Change

(in thousands) February 28, 2026 February 28, 2025 As Reported Constant Currency

Revenue $ 247,799 $ 238,015 4 % 2 %

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 third quarter and first nine months of fiscal year 2025 was $64.6 million and $194.1 million, respectively.

Software License Revenue

Three Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

Software licenses $ 63,437 $ 57,850 10 % 8 %

As a percentage of total revenue 25 % 32 %

Nine Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

Total revenue increased as compared to the same period last year primarily due to increases in license sales of our OpenEdge product offering and a positive foreign currency impact.

Software Licenses Revenue

Three Months Ended Percentage Change

(in thousands) February 28, 2026 February 28, 2025 As Reported Constant Currency

Software licenses $ 67,581 $ 58,445 16 % 11 %

As a percentage of total revenue 27 % 25 %

Software license revenue increased in the third quarter of fiscal year 2025 due to increases in our DataDirect and MarkLogic product offerings due to the timing of renewals on multiyear subscription contracts.

Software license revenue was relatively flat in the first nine months of fiscal year 2025 compared to the same period last year.

Software licenses revenue increased in the first quarter of fiscal year 2026 primarily due to increases in our OpenEdge product offering.

Maintenance, SaaS, and Professional Services Revenue

Three Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

Maintenance $ 104,849 $ 103,088 2 % — %

As a percentage of total revenue 42 % 58 %

SaaS 71,512 6,082 1,076 % 1,075 %

As a percentage of total revenue 29 % 3 %

Professional services 9,997 11,666 (14) % (15) %

As a percentage of total revenue 4 % 7 %

Total maintenance, SaaS, and professional services revenue $ 186,358 $ 120,836 54 % 53 %

As a percentage of total revenue 75 % 68 %

Nine Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

Three Months Ended Percentage Change

(in thousands) February 28, 2026 February 28, 2025 As Reported Constant Currency

Maintenance $ 100,339 $ 99,535 1 % (2) %

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As a percentage of total revenue 4 % 4 %

Total maintenance, SaaS, and professional services revenue $ 552,488 $ 362,519 52 % 52 %

As a percentage of total revenue 76 % 67 %

Maintenance revenue increased in the third quarter of fiscal year 2025 due to increases in our OpenEdge product offerings.

Maintenance revenue in the first nine months of fiscal year 2025 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.

Revenue by Region

Three Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

North America $ 163,404 $ 104,369 57 % 57 %

As a percentage of total revenue 65 % 58 %

EMEA $ 68,339 $ 57,031 20 % 15 %

As a percentage of total revenue 27 % 32 %

Latin America $ 6,221 $ 5,363 16 % 17 %

As a percentage of total revenue 2 % 3 %

Asia Pacific $ 11,831 $ 11,923 (1) % (1) %

As a percentage of total revenue 5 % 7 %

Nine Months Ended % Change

(in thousands) August 31, 2025 August 31, 2024 As Reported Constant Currency

North America $ 465,376 $ 314,553 48 % 48 %

As a percentage of total revenue 64 % 58 %

EMEA $ 208,321 $ 177,656 17 % 16 %

As a percentage of total revenue 29 % 33 %

Latin America $ 16,126 $ 14,630 10 % 17 %

As a percentage of total revenue 2 % 3 %

Asia Pacific $ 35,342 $ 31,609 12 % 13 %

Total maintenance, SaaS, and professional services $ 180,218 $ 179,570 — % (2) %

As a percentage of total revenue 73 % 75 %

Total revenue generated in North America increased $59.0 million and $150.8 million in the third quarter and first nine months of fiscal year 2025, respectively.

Total revenue generated outside North America increased $12.1 million and $35.9 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 35% and 42% of total revenue in the third quarter of fiscal year 2025 and fiscal year 2024, respectively.

In the first nine months of fiscal year 2025 and fiscal year 2024 total revenue generated in markets outside North America represented 36% and 42%, respectively.

Maintenance revenue increased in the first quarter of fiscal year 2026 due to a positive foreign currency impact.

SaaS revenue slightly increased as compared to the same period last year.

Professional services revenue decreased across multiple product offerings as compared to the same period last year.

Cost of Software Licenses

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 Change August 31, 2025 August 31, 2024 Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Cost of software licenses $ 3,013 $ 2,925 3 %

As a percentage of software license revenue 4 % 5 % 5 % 5 %

As a percentage of software licenses revenue 4 % 5 %

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 third 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 nine months of fiscal year 2025 as compared to the same period last year was primarily due to increased hardware sales.

The increase in the first quarter of fiscal year 2026 compared to the same period last year was related to increased royalty costs.

Cost of Maintenance, SaaS, and Professional Services

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 Change August 31, 2025 August 31, 2024 Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Cost of maintenance, SaaS, and professional services $ 32,100 $ 32,884 (2) %

As a percentage of maintenance, SaaS, and professional services revenue 18 % 18 %

Components of cost of maintenance, SaaS, and professional services:

Personnel related costs $ 22,081 $ 15,503 $ 6,578 42 % $ 64,133 $ 49,317 $ 14,816 30 %

Hosting and other 8,942 1,790 7,152 400 % 26,899 5,460 21,439 393 %

Contractors and outside services 2,896 2,764 132 5 % 9,535 9,675 (140) (1) %

Total cost of maintenance, SaaS, and professional services $ 33,919 $ 20,057 $ 13,862 69 % $ 100,567 $ 64,452 $ 36,115 56 %

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 Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Cost of maintenance, SaaS, and professional services consist primarily of hosting costs, and personnel-related costs attributable to customer support, cloud operations, consulting, and education.

The decrease year-over-year was primarily due to decreased contractors and headcount related costs in fiscal year 2026.

Amortization of Acquired Intangibles – Costs of Revenue

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Amortization of acquired intangibles $ 8,751 $ 10,422 (16) %

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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 acquisitions of ShareFile and Nuclia.

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Gross profit $ 202,259 $ 149,622 35 % $ 584,110 $ 444,504 31 %

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

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.

Gross profit as a percentage of total revenue decreased due to higher hosting costs associated with our acquisition of ShareFile.

The year-over-year decrease is due to certain existing intangible assets being fully amortized as compared to the prior period.

Sales and Marketing

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 Change August 31, 2025 August 31, 2024 Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Sales and marketing $ 51,997 $ 51,296 1 %

As a percentage of total revenue 21 % 22 %

Components of sales and marketing:

Personnel related costs $ 44,172 $ 32,774 $ 11,398 35 % $ 129,476 $ 99,108 $ 30,368 31 %

Marketing programs and other 6,309 3,439 2,870 83 % 19,324 12,675 6,649 52 %

Contractors and outside services 1,369 928 441 48 % 4,023 2,358 1,665 71 %

Total sales and marketing $ 51,850 $ 37,141 $ 14,709 40 % $ 152,823 $ 114,141 $ 38,682 34 %

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.

Sales and marketing expenses increased due to increased marketing and sales events costs, partially offset by lower personnel-related costs.

Product Development

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 Change August 31, 2025 August 31, 2024 Change

Product development costs $ 49,432 $ 34,720 $ 14,712 42 % $ 142,377 $ 105,143 $ 37,234 35 %

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Product development $ 50,474 $ 46,375 9 %

As a percentage of total revenue 20 % 19 %

Components of product development costs:

Personnel related costs $ 46,924 $ 32,952 $ 13,972 42 % $ 135,852 $ 100,700 $ 35,152 35 %

Contractors and outside services 1,940 1,503 437 29 % 5,241 3,746 1,495 40 %

Other product development costs 568 265 303 114 % 1,284 697 587 84 %

Total product development costs $ 49,432 $ 34,720 $ 14,712 42 % $ 142,377 $ 105,143 $ 37,234 35 %

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.

Product development expenses increased primarily due to increased personnel-related costs associated with higher headcount.

General and Administrative

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 Change August 31, 2025 August 31, 2024 Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

General and administrative $ 26,504 $ 25,623 3 %

As a percentage of total revenue 11 % 11 %

Components of general and administrative:

Personnel related costs $ 23,119 $ 16,925 $ 6,194 37 % $ 62,499 $ 52,852 $ 9,647 18 %

Contractors and outside services 3,191 2,772 419 15 % 10,874 7,949 2,925 37 %

Other general and administrative costs 1,998 806 1,192 148 % 6,195 3,029 3,166 105 %

Total cost of general and administrative $ 28,308 $ 20,503 $ 7,805 38 % $ 79,568 $ 63,830 $ 15,738 25 %

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 Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

The increase was due to higher stock-based compensation expense, partially offset by lower contractors and outside services and other general and administrative costs.

Amortization of Acquired Intangibles – Operating Expenses

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Amortization of acquired intangibles $ 25,617 $ 25,808 (1) %

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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 and Nuclia intangible assets, as discussed above.

Amortization of acquired intangibles decreased in the first quarter of fiscal year 2026 due to certain existing intangible assets being fully amortized as compared to the prior period.

Cyber Vulnerability Response Expenses, Net

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Cyber vulnerability response expenses, net $ 1,358 $ 737 84 %

As a percentage of total revenue 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.

As previously disclosed, since the discovery of the MOVEit Vulnerability that was disclosed on June 5, 2023, we have incurred expenses and will incur future costs related to litigation and governmental investigations related to the MOVEit Vulnerability.

Such costs and expenses 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.

Restructuring Expenses

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Restructuring expenses $ 706 $ 7,029 (90) %

As a percentage of total revenue — % 3 %

Restructuring expenses recorded in the third quarter and first nine 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.

Restructuring for additional details, including types of expenses incurred and the timing of future expenses and cash payments.

Restructuring expenses recorded in the first quarter of fiscal year 2026 primarily relate to the headcount reduction action in November 2025, and facility closures in other existing restructuring actions.

Restructuring expenses recorded in the first quarter 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 Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Acquisition-related expenses $ 814 $ 2,490 (67) %

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

Acquisition-related expenses in the third quarter and first nine months of fiscal year 2025 were primarily related to our acquisitions of Nuclia and 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 Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Income from operations $ 43,874 $ 40,349 9 % $ 114,916 $ 102,503 12 %

As a percentage of total revenue 18 % 23 % 16 % 19 %

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.

Acquisition-related expenses in the first quarter of fiscal year 2026 primarily related to our pursuit of other acquisition opportunities.

Acquisition-related expenses in the same period of fiscal year 2025 were primarily related to our acquisition of ShareFile.

Other (Expense) Income

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Interest expense $ (15,246) $ (18,429) (17) %

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As a percentage of total revenue (7) % (8) %

Total other expense, net, increased in the third quarter and first nine 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 decreased year-over-year due to rate volatility and timing of intercompany and hedge settlement activities.

Total other expense, net, decreased in the first quarter of fiscal year 2026 as compared to the same period last year primarily due to a decrease in interest expense resulting from principal payments made on our revolving line of credit.

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.

Provision for Income Taxes

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025 Percentage Change

Provision for income taxes $ 7,479 $ 2,356 217 %

As a percentage of income before income taxes 25 % 18 %

Our effective tax rate was 26% and 17% in the third fiscal quarter of 2025 and 2024, respectively.

The primary reason for the increase in the effective rate was a discrete tax expense of $2.0 million in the third fiscal quarter of 2025 compared to a minimal amount of discrete tax expense in the third fiscal quarter of 2024.

On July 4, 2025, the One Big Beautiful Bill Act was enacted into law, introducing significant changes to the U.S.

Our effective tax rate was 25% and 18% in the first fiscal quarters of 2026 and 2025, respectively.

The increase in the effective rate is primarily due to changes in the jurisdictional mix of earnings, including the proportion of U.S.

versus non-U.S.

income and discrete tax expense of $0.5 million in the first fiscal quarter of 2026 compared to a discrete tax benefit of $0.3 million in the first fiscal quarter of 2025.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law, introducing significant changes to the U.S.

federal income tax system.

The legislation contains key modifications to the provisions of the 2017 Tax Cuts and Jobs Act and has multiple effective dates.

The Company is currently evaluating the full implications of the recently enacted legislation.

Based on preliminary analysis, no material impact is expected to the tax provision for fiscal year 2025.

The majority of the legislative provisions become effective in our fiscal years 2026 and 2027.

Three Months Ended Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024 % Change August 31, 2025 August 31, 2024 % Change

Net income $ 19,413 $ 28,464 (32) % $ 47,388 $ 67,291 (30) %

As a percentage of total revenue 8 % 16 % 7 % 12 %

In our fiscal 2026, provisions under OBBBA allow for an immediate deduction of U.S.

Research & Experimental expenditures and a return to interest expense limitations based on EBITDA, which results in a reduction to the current taxes payable.

Select Performance Metrics:

We evaluate our financial performance using a number of financial and operating metrics.

Management evaluates our financial performance using a number of financial and operating metrics.

These metrics are periodically reviewed and revised to reflect changes in our business.

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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 $849.0 million and $576.0 million as of August 31, 2025 and August 31, 2024, respectively, which is an increase of 47% year-over-year.

The growth in ARR was primarily driven by the acquisition of ShareFile.

Our ARR was $863.0 million and $849.0 million as of February 28, 2026 and February 28, 2025, respectively, which is an increase of 2% year-over-year.

Net Retention Rate

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Cash and Cash Equivalents

(in thousands) August 31, 2025 November 30, 2024

(in thousands) February 28, 2026 November 30, 2025

Cash and cash equivalents $ 113,171 $ 94,807

The decrease in cash and cash equivalents of $19.1 million from the end of fiscal year 2024 was due to cash outflows of $110.0 million to pay down the revolving line of credit, repurchases of common stock of $65.1 million, $20.7 million for acquisitions, payment of debt issuance costs of $6.0 million, purchases of property and equipment of $2.8 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 $172.4 million, the effect of exchange rates on cash of $7.8 million, and $5.9 million in cash received from the issuance of common stock.

The increase in cash and cash equivalents of $18.4 million from the end of fiscal year 2025 was due to cash inflows from operations of $98.6 million, $1.7 million in cash received from the issuance of common stock, and the effect of exchange rates on cash of $1.3 million.

The cash inflows described above were offset by cash outflows of $60.0 million to pay down the revolving line of credit, repurchases of common stock of $20.4 million, and purchases of property and equipment of $2.7 million.

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

As of August 31, 2025, $65.8 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 of February 28, 2026, $69.0 million of our cash and cash equivalents was held by our foreign subsidiaries.

The Company has 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.

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Deferred taxes are recorded for earnings of our foreign operations that we determine are not indefinitely reinvested.

Nine Months Ended

(in thousands) August 31, 2025 August 31, 2024

Net cash flows from operating activities $ 172,389 $ 191,843

Three Months Ended

(in thousands) February 28, 2026 February 28, 2025

Net cash flows provided by operating activities $ 98,626 $ 68,947

Net cash flows used in investing activities $ (2,705) $ (2,485)

Net cash flows used in financing activities $ (78,877) $ (58,870)

Cash Flows From Operating Activities

The decrease in cash generated from operations in the first nine 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 August 31, 2025, decreased by $8.6 million from the end of fiscal year 2024.

Our days sales outstanding ("DSO") in accounts receivable increased to 55 days in the third quarter of fiscal year 2025 from 45 days in the third fiscal quarter of 2024 due to the timing of billings and collections.

Cash Flows Provided by Operating Activities

The increase in cash generated from operations in the first three months of fiscal year 2026 as compared to the same period last year was primarily due to increased collections in fiscal year 2026.

Our gross accounts receivable as of February 28, 2026, decreased by $50.8 million from the end of fiscal year 2025.

Our days sales outstanding ("DSO") in accounts receivable was 52 days in the first quarter of fiscal year 2026 compared to 48 days and 73 days in the first and fourth fiscal quarters of 2025, respectively, due to the timing of billings and collections.

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 nine months of fiscal year 2025, we had payments for acquisitions of $20.7 million, and purchased $2.8 million of property and equipment.

Through the third quarter of fiscal year 2024 we had $2.3 million of purchases of property and equipment.

In the first three months of fiscal year 2026, we purchased $2.7 million of property and equipment.

In the first quarter of fiscal year 2025 we had $1.3 million of purchases of property and equipment and a payment of $1.2 million related to the acquisition of ShareFile.

Cash Flows Used in Financing Activities

We received $16.0 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan in the first nine months of fiscal year 2025 as compared to $17.5 million in the first nine 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 nine months of fiscal year 2025 as compared to $10.6 million in the first nine months of fiscal year 2024.

We repurchased $65.1 million of our common stock under our share repurchase plan in the first nine months of fiscal year 2025 as compared to $86.8 million in the same period of the prior year.

Further, we made payments on our revolving line of credit of $110.0 million through the third quarters of fiscal years 2025 and 2024.

During the third quarter of fiscal year 2025, we paid debt issuance costs of $6.0 million to increase our revolving line of credit to $1.5 billion.

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 nine months of fiscal year 2025, as compared to $23.8 million of dividend and dividend equivalent payments made to stockholders through the first nine months of fiscal year 2024.

Share Repurchase Program

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.

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

As of August 31, 2025, there was $42.2 million remaining under the current authorization.

We received $5.4 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan in the first three months of fiscal year 2026 as compared to $6.2 million in the first three months of fiscal year 2025.

We made withholding tax payments related to net share settlements of equity awards of $3.7 million in the first three months of fiscal year 2026 as compared to $4.6 million in the first three months of fiscal year 2025.

We repurchased $20.4 million of our common stock under our share repurchase plan in the first three months of fiscal year 2026 as compared to $30.1 million in the same period of the prior year.

Further, we made payments on our revolving line of credit of $60.0 million through the first quarter of fiscal year 2026 as compared to $30.0 million in the first quarter of fiscal year 2025.

Share Repurchases

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.

In the three months ended February 28, 2026 and 2025, we repurchased and retired 0.5 million shares for $20.0 million and 0.5 million shares for $30.0 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 February 28, 2026, there was $182.2 million remaining under the current authorization.

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

Restructuring to the condensed consolidated financial statements.

Long-term Debt and Credit Facility

Debt to the condensed consolidated financial statements.

See Note 9, Restructuring to the condensed consolidated financial statements.

Convertible Senior Notes and Long-Term Debt

See Note 5, Debt to the condensed consolidated financial statements.

Liquidity Outlook

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

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.

In the future, we may use the available capacity under our revolving credit facility for any 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.

We may also use the available capacity for general corporate purposes.

Legal and Other Regulatory Matters

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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 were filed and partially granted, 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 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.

The MDL has also consolidated an insurance subrogation complaint (where an insurer is seeking recovery for expenses incurred on behalf of its insured in connection with the MOVEit Vulnerability) and, as of the date of this filing, one customer cross-claim.

The MDL remains in a relatively early stage and is not expected to conclude within the next twelve months.

Motions to dismiss were filed and partially granted in July 2025, then further partially granted in January 2026 in response to our motions for reconsideration.

In all, the court has dismissed, in whole or in part, 23 of the 33 claims asserted by the plaintiffs in the MDL.

As previously disclosed, we have also cooperated with inquiries and investigations from various governmental authorities, a number of which have been formally closed and, as of the date of this filing, have not resulted in any prosecution or enforcement actions.

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.

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.

Refer to Note 1, Summary of Significant Accounting Policies to the condensed consolidated financial statements for further discussion.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis