PROGRESS SOFTWARE CORP /MA 10-Q

Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets (in thousands, except share data) May 31, 2026 November 30, 2025 Assets Current assets: Cash and cash equivalents $ 102,978 $ 94,807 Accounts receivable, net 125,209 195,783 Unbilled receivables, current portion 51,297 46,599 Other current assets 57,018 62,776 Total current assets 336,502 399,965 Unbilled receivables, non-current portion 44,139 29,950 Property and equipment, net 14,938 13,694 Intangible assets, net 514,579 584,028 Goodwill 1,309,750 1,309,054 Right-of-use lease assets 31,526 25,842 Deferred tax assets 78,300 77,442 Other assets 15,889 17,683 Total assets $ 2,345,623 $ 2,457,658 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 11,189 $ 15,934 Accrued compensation and related payroll taxes 47,446 71,804 Deferred revenue, current portion 324,469 324,750 Convertible senior notes, current portion, net — 359,163 Operating lease liabilities, current portion 8,144 8,490 Other accrued liabilities 24,787 29,593 Total current liabilities 416,035 809,734 Long-term debt 850,000 600,000 Convertible senior notes, non-current portion, net 442,147 441,186 Operating lease liabilities, non-current portion 26,467 21,077 Deferred revenue, non-current portion 98,756 100,329 Deferred tax liabilities 1,150 1,158 Other non-current liabilities 4,985 5,825 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, 41,311,679 shares in 2026 and 42,335,700 shares in 2025 413 423 Additional paid-in capital 415,630 383,696 Retained earnings 124,414 127,373 Accumulated other comprehensive loss ( 34,374 ) ( 33,143 ) Total stockholders' equity 506,083 478,349 Total liabilities and stockholders' equity $ 2,345,623 $ 2,457,658 See notes to unaudited condensed consolidated financial statements. 3 Condensed Consolidated Statements of Operations Three Months Ended Six Months Ended (in thousands, except per share data) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Revenue: Software licenses $ 68,979 $ 50,795 $ 136,560 $ 109,240 Maintenance, SaaS, and professional services 184,486 186,560 364,704 366,130 Total revenue 253,465 237,355 501,264 475,370 Costs of revenue: Cost of software licenses 3,675 2,987 6,688 5,912 Cost of maintenance, SaaS, and professional services 32,259 33,764 64,359 66,648 Amortization of acquired intangibles 8,938 10,537 17,689 20,959 Total costs of revenue 44,872 47,288 88,736 93,519 Gross profit 208,593 190,067 412,528 381,851 Operating expenses: Sales and marketing 54,341 49,677 106,338 100,973 Product development 48,840 46,570 99,314 92,945 General and administrative 32,236 25,637 58,740 51,260 Amortization of acquired intangibles 26,167 26,063 51,784 51,871 Cyber vulnerability response expenses, net 1,266 730 2,624 1,467 Restructuring expenses 1,480 1,043 2,186 8,072 Acquisition-related expenses ( 939 ) 1,731 ( 125 ) 4,221 Total operating expenses 163,391 151,451 320,861 310,809 Income from operations 45,202 38,616 91,667 71,042 Other (expense) income: Interest expense ( 15,911 ) ( 18,138 ) ( 31,157 ) ( 36,567 ) Interest income and other, net 233 294 550 781 Foreign currency loss, net ( 684 ) ( 908 ) ( 1,928 ) ( 2,090 ) Total other expense, net ( 16,362 ) ( 18,752 ) ( 32,535 ) ( 37,876 ) Income before income taxes 28,840 19,864 59,132 33,166 Provision for income taxes 7,767 2,835 15,246 5,191 Net income $ 21,073 $ 17,029 $ 43,886 $ 27,975 Earnings per share: Basic $ 0.50 $ 0.40 $ 1.04 $ 0.65 Diluted $ 0.50 $ 0.39 $ 1.03 $ 0.63 Weighted average shares outstanding: Basic 41,901 43,053 42,028 43,154 Diluted 42,310 44,156 42,519 44,522 See notes to unaudited condensed consolidated financial statements. 4 Condensed Consolidated Statements of Comprehensive Income Three Months Ended Six Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Net income $ 21,073 $ 17,029 $ 43,886 $ 27,975 Other comprehensive income: Foreign currency translation adjustments ( 1,707 ) 4,546 ( 1,231 ) 3,134 Comprehensive income $ 19,366 $ 21,575 $ 42,655 $ 31,109 See notes to unaudited condensed consolidated financial statements. 5 Condensed Consolidated Statements of Stockholders' Equity Three Months Ended May 31, 2026 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity (in thousands) Number of Shares Amount Balance, March 1, 2026 42,075 $ 421 $ 398,033 $ 133,008 $ ( 32,667 ) $ 498,795 Issuance of stock under employee stock purchase plan 223 2 4,870 — — 4,872 Exercise of stock options 4 — 152 — — 152 Vesting of RSUs 352 4 ( 4 ) — — — Withholding tax payments related to net issuance of RSUs ( 117 ) ( 1 ) ( 2,920 ) — — ( 2,921 ) Stock-based compensation — — 20,509 — — 20,509 Common stock repurchases and retirements ( 1,225 ) ( 13 ) ( 5,010 ) ( 29,667 ) — ( 34,690 ) Net income — — — 21,073 — 21,073 Other comprehensive loss — — — — ( 1,707 ) ( 1,707 ) Balance, May 31, 2026 41,312 $ 413 $ 415,630 $ 124,414 $ ( 34,374 ) $ 506,083 Six Months Ended May 31, 2026 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity (in thousands) Number of Shares Amount Balance, December 1, 2025 42,336 $ 423 $ 383,696 $ 127,373 $ ( 33,143 ) $ 478,349 Issuance of stock under employee stock purchase plan 286 3 7,171 — — 7,174 Exercise of stock options 18 — 642 — — 642 Vesting of RSUs 570 6 ( 6 ) — — — Withholding tax payments related to net issuance of RSUs ( 207 ) ( 2 ) ( 6,627 ) — — ( 6,629 ) Stock-based compensation — — 38,983 — — 38,983 Common stock repurchases and retirements ( 1,691 ) ( 17 ) ( 8,229 ) ( 46,845 ) — ( 55,091 ) Net income — — — 43,886 — 43,886 Other comprehensive loss — — — — ( 1,231 ) ( 1,231 ) Balance, May 31, 2026 41,312 $ 413 $ 415,630 $ 124,414 $ ( 34,374 ) $ 506,083 6 Three Months Ended May 31, 2025 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity (in thousands) Number of Shares Amount Balance, March 1, 2025 43,022 $ 430 $ 353,039 $ 115,999 $ ( 37,621 ) $ 431,847 Issuance of stock under employee stock purchase plan 119 1 5,206 — — 5,207 Exercise of stock options 118 2 2,780 — — 2,782 Vesting of RSUs 290 3 ( 3 ) — — — Withholding tax payments related to net issuance of RSUs ( 97 ) ( 1 ) ( 5,459 ) — — ( 5,460 ) Stock-based compensation — — 16,741 — — 16,741 Common stock repurchases and retirements ( 351 ) ( 4 ) ( 10,213 ) ( 9,774 ) — ( 19,991 ) Net income — — — 17,029 — 17,029 Other comprehensive income — — — — 4,546 4,546 Balance, May 31, 2025 43,101 $ 431 $ 362,091 $ 123,254 $ ( 33,075 ) $ 452,701 Six Months Ended May 31, 2025 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' 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 176 1 7,402 — — 7,403 Exercise of stock options 155 2 4,250 — — 4,252 Vesting of RSUs 477 5 ( 5 ) — — — Withholding tax payments related to net issuance of RSUs ( 178 ) ( 2 ) ( 10,099 ) — — ( 10,101 ) Stock-based compensation — — 31,424 — — 31,424 Common stock repurchases and retirements ( 890 ) ( 9 ) ( 25,039 ) ( 25,126 ) — ( 50,174 ) Net income — — — 27,975 — 27,975 Other comprehensive income — — — — 3,134 3,134 Balance, May 31, 2025 43,101 $ 431 $ 362,091 $ 123,254 $ ( 33,075 ) $ 452,701 See notes to unaudited condensed consolidated financial statements. 7 Condensed Consolidated Statements of Cash Flows Six Months Ended (in thousands) May 31, 2026 May 31, 2025 Operating activities: Net income $ 43,886 $ 27,975 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization of property and equipment 3,258 3,217 Amortization of acquired intangibles and other 69,473 73,532 Amortization of debt discount and issuance costs 2,915 2,028 Stock-based compensation 38,983 31,424 Non-cash lease expense 4,761 5,878 Deferred income taxes ( 895 ) ( 6,131 ) Credit losses and other sales allowances 7,095 1,991 Changes in operating assets and liabilities: Accounts receivable 46,057 23,635 Other assets 6,477 3,656 Accounts payable and accrued liabilities ( 32,587 ) ( 38,869 ) Lease liabilities ( 5,402 ) ( 6,988 ) Income taxes payable ( 3,441 ) ( 1,020 ) Deferred revenue ( 3,117 ) ( 21,385 ) Net cash flows provided by operating activities 177,463 98,943 Investing activities: Purchases of property and equipment ( 4,569 ) ( 1,785 ) Payments for acquisitions — ( 1,195 ) Net cash flows used in investing activities ( 4,569 ) ( 2,980 ) Financing activities: Proceeds from equity plans 8,065 12,760 Payments for taxes related to net share settlements of equity awards ( 6,629 ) ( 10,101 ) Repurchases of common stock ( 55,091 ) ( 50,108 ) Dividend equivalent payments to stockholders ( 363 ) ( 654 ) Repurchases of convertible senior notes ( 360,000 ) — Proceeds from revolving line of credit 360,000 — Repayment of revolving line of credit ( 110,000 ) ( 70,000 ) Net cash flows used in financing activities ( 164,018 ) ( 118,103 ) Effect of exchange rate changes on cash and cash equivalents ( 705 ) 6,069 Net increase (decrease) in cash and cash equivalents 8,171 ( 16,071 ) Cash and cash equivalents, beginning of period 94,807 118,077 Cash and cash equivalents, end of period $ 102,978 $ 102,006 8 Condensed Consolidated Statements of Cash Flows, continued Six Months Ended (in thousands) May 31, 2026 May 31, 2025 Supplemental disclosure: Cash paid for income taxes, net of refunds of $ 1,119 and $ 1,101 in 2026 and 2025, respectively $ 11,020 $ 6,740 Cash paid for interest $ 27,648 $ 33,387 Non-cash investing and financing activities: Total fair value of restricted stock awards, restricted stock units, and deferred stock units on date vested $ 18,573 $ 30,075 Operating lease liabilities arising from obtaining right-of-use lease assets $ 9,517 $ 451 See notes to unaudited condensed consolidated financial statements. 9 Notes to Condensed Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements of Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") included herein are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information in the footnote disclosures of the financial statements has been condensed or omitted where it substantially duplicated information provided in the Company's latest audited consolidated financial statements, in accordance with the rules and regulations of the SEC. In our opinion, the financial statements include all adjustments of a normal recurring nature necessary for fair financial statement presentation. Interim results are not necessarily indicative of the results to be expected for the full year ending November 30, 2026. We have made estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying footnote disclosures. Actual results could differ significantly from these estimates. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and footnote disclosures included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2025, as filed with the SEC on January 20, 2026 (our "2025 Annual Report"). Recent Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 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 us beginning with the annual period ending November 30, 2026, allowing for adoption on a prospective basis or a retrospective option. The adoption of this standard only impacts disclosures and is not expected to have a material impact on our consolidated financial statements. In November 2024, the FASB issued ASU 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 ASU 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. We are currently evaluating the impact that the adoption of these standards will have on our consolidated financial statements and disclosures. In September 2025, the FASB issued ASU 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"), which modernizes the accounting for internal-use software. ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. ASU 2025-06 will be effective for us in our first quarter of 2029, and may be adopted on a prospective basis, full retrospective basis, or modified prospective basis with a cumulative-effect adjustment through retained earnings. Early adoption is permitted. We are currently evaluating the timing, method of adoption, and impact of ASU 2025-06 on our consolidated financial statements and disclosures. 10 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 May 31, 2026: Fair Value Measurements Using (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 778 $ 778 $ — $ — Liabilities Foreign exchange derivatives $ ( 3 ) $ — $ ( 3 ) $ — The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at November 30, 2025: Fair Value Measurements Using (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 779 $ 779 $ — $ — Liabilities Foreign exchange derivatives $ ( 95 ) $ — $ ( 95 ) $ — Contingent consideration $ ( 1,080 ) $ — $ — $ ( 1,080 ) 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, 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 classify 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 acquisition date, and we have updated the fair value using an income approach in subsequent periods. The fair value of the contingent consideration, which is primarily dependent on the revenue of the acquired business in fiscal 2026, is remeasured each reporting period, with adjustments to fair value recorded as acquisition-related expenses in our condensed consolidated statements of operations. During the quarter ended May 31, 2026, we adjusted the carrying value of the contingent liability to zero . The gain was reported in acquisition-related expenses in the condensed consolidated statements of operations. The following table reflects the activity for our contingent consideration obligation measured at fair value using Level 3 inputs for the six months ended May 31, 2026: (in thousands) Balance, December 1, 2025 $ ( 1,080 ) Changes in fair value of contingent consideration 1,080 Balance, May 31, 2026 $ — There were no transfers between levels of the fair value measurement hierarchy during the six months ended May 31, 2026 and 2025. 11 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 that were due and paid in April 2026 and our Convertible Senior Notes due 2030 (together referred to as "the Notes"): May 31, 2026 November 30, 2025 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Convertible senior notes due 2026 (1) $ — $ — $ 359,163 $ 357,300 Convertible senior notes due 2030 (2) 442,147 428,099 441,186 452,295 Total $ 442,147 $ 428,099 $ 800,349 $ 809,595 (1) The carrying value of the convertible senior notes due 2026 (the "2026 Notes"), is reflected net of $ 0.8 million of unamortized debt issuance costs as of November 30, 2025. (2) The carrying value of the convertible senior notes due 2030 (the "2030 Notes"), is reflected net of $ 7.9 million and $ 8.8 million of unamortized debt issuance costs as of May 31, 2026 and November 30, 2025, 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 a Level 2 input. Note 3: Intangible Assets and Goodwill Intangible Assets Intangible assets are comprised of the following significant classes: May 31, 2026 November 30, 2025 (in thousands) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Purchased technology $ 403,375 $ ( 269,180 ) $ 134,195 $ 403,375 $ ( 251,491 ) $ 151,884 Customer-related 777,930 ( 425,588 ) 352,342 777,930 ( 377,368 ) 400,562 Trademarks and trade names 77,111 ( 49,069 ) 28,042 77,111 ( 45,529 ) 31,582 Total $ 1,258,416 $ ( 743,837 ) $ 514,579 $ 1,258,416 $ ( 674,388 ) $ 584,028 In the three and six months ended May 31, 2026, amortization expense related to intangible assets was $ 35.1 million and $ 69.5 million, respectively. In the three and six months ended May 31, 2025, amortization expense related to intangible assets was $ 36.6 million and $ 72.8 million, respectively. 12 Future amortization expense for intangible assets as of May 31, 2026, is as follows: (in thousands) Remainder of 2026 $ 67,817 2027 112,166 2028 100,582 2029 100,582 2030 72,580 Thereafter 60,852 Total $ 514,579 Goodwill Changes in the carrying amount of goodwill in the six months ended May 31, 2026 are as follows: (in thousands) Balance, December 1, 2025 $ 1,309,054 Measurement period adjustments (1) and other 696 Balance, May 31, 2026 $ 1,309,750 (1) Represents measurement period adjustments related to Nuclia during fiscal year 2026. Refer to Note 4, Business Combinations for further information. 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. Refer to Note 2, Fair Value Measurements for information regarding changes in the fair value of the earn-out liability, which are recorded as acquisition-related expenses in our condensed consolidated statements of operations. 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. 13 Note 5: Debt As of May 31, 2026 and November 30, 2025, we had the following debt obligations: (in thousands) May 31, 2026 November 30, 2025 Current portion of long-term debt: 1.0 % convertible senior notes due 2026 $ — $ 360,000 Unamortized discount and issuance costs for the 2026 Notes — ( 837 ) Total current portion of long-term debt — 359,163 Long-term debt: 3.5 % convertible senior notes due 2030 450,000 450,000 Revolving credit facility (1) 850,000 600,000 Total face value of long-term debt 1,300,000 1,050,000 Unamortized discount and issuance costs for the 2030 Notes ( 7,853 ) ( 8,814 ) Total long-term debt 1,292,147 1,041,186 Total debt $ 1,292,147 $ 1,400,349 (1) Unamortized debt issuance costs related to the revolving credit facility of $ 9.3 million and $ 10.4 million are included in other assets on the condensed consolidated balance sheets as of May 31, 2026 and November 30, 2025, respectively. In April 2026, the Company paid $ 361.8 million to redeem the outstanding portion of the 2026 Notes, including the outstanding principal amount and accrued interest through the April 2026 maturity date. We funded the redemption through borrowings under our existing revolving credit facility and cash on hand. In April 2021, in connection with the pricing of the 2026 Notes, the Company entered into privately negotiated capped call transactions (the "2021 Capped Call Transactions") to reduce potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any potential cash payments the Company was required to make in excess of the principal amount of converted 2026 Notes. The 2021 Capped Call Transactions expired unexercised in April 2026. During the six months ended May 31, 2026, we repaid $ 110.00 million on the revolving credit facility. The interest rate as of May 31, 2026 was 5.37 %. Note 6: Common Stock 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. During the three and six months ended May 31, 2026, we repurchased and retired 1.2 million shares for $ 34.7 million and 1.7 million shares for $ 54.7 million, respectively. During the three and six months ended May 31, 2025, we repurchased and retired 0.4 million shares for $ 20.0 million and 0.9 million shares for $ 50.0 million, respectively. As of May 31, 2026, there was $ 147.5 million remaining under the current authorization. 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. 14 In 2026, 2025, and 2024, 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 2026, 2025, and 2024 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 used 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 in our condensed consolidated statements of operations: Three Months Ended Six Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Cost of maintenance, SaaS, and professional services $ 1,508 $ 1,560 $ 3,126 $ 2,755 Sales and marketing 4,059 3,663 8,142 6,695 Product development 5,847 4,984 11,442 9,394 General and administrative 9,095 6,534 16,273 12,580 Total stock-based compensation $ 20,509 $ 16,741 $ 38,983 $ 31,424 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 Six Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Performance obligations transferred at a point in time: Software licenses $ 68,979 $ 50,795 $ 136,560 $ 109,240 Performance obligations transferred over time: Maintenance 101,222 103,491 201,561 203,026 SaaS 73,005 72,105 143,466 141,515 Professional services 10,259 10,964 19,677 21,589 Total revenue $ 253,465 $ 237,355 $ 501,264 $ 475,370 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 Six Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 North America $ 162,529 $ 147,326 $ 315,218 $ 301,972 EMEA 70,608 73,039 148,988 139,982 Latin America 5,790 4,853 11,316 9,905 Asia Pacific 14,538 12,137 25,742 23,511 Total revenue $ 253,465 $ 237,355 $ 501,264 $ 475,370 No single customer, partner, or country outside the U.S. accounted for more than 10% of our total revenue for the three and six months ended May 31, 2026 or 2025. 15 Contract Balances Unbilled Receivables and Contract Assets As of May 31, 2026, billing of our non-current unbilled receivables is expected to occur as follows: (in thousands) 2027 $ 18,542 2028 16,101 2029 9,496 Total $ 44,139 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 May 31, 2026 or November 30, 2025. Deferred Revenue Deferred revenue is recorded when revenue is recognized subsequent to customer invoicing. Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is included in long-term liabilities on the condensed consolidated balance sheets. Our deferred revenue balance is primarily made up of deferred maintenance and deferred revenue related to our SaaS offerings. As of May 31, 2026, the changes in deferred revenue were as follows: (in thousands) Balance, December 1, 2025 $ 425,079 Billings and other 499,410 Revenue recognized that was deferred in prior periods ( 265,282 ) Revenue recognized from current period arrangements ( 235,982 ) Balance, May 31, 2026 $ 423,225 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 May 31, 2026, transaction price allocated to remaining performance obligations was $ 518.9 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 $ 5.3 million and $ 6.5 million as of May 31, 2026 and November 30, 2025, 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 statements of operations and was insignificant in all periods presented. 16 Note 9: Restructuring The following table provides a summary of activity for all of our restructuring actions: (in thousands) Excess Facilities and Other Costs Employee Severance and Related Benefits Total Balance, December 1, 2025 $ 2,585 $ 3,254 $ 5,839 Costs incurred 1,353 833 2,186 Cash disbursements ( 1,653 ) ( 3,504 ) ( 5,157 ) Asset impairment ( 447 ) — ( 447 ) Translation and other adjustments ( 2 ) ( 4 ) ( 6 ) Balance, May 31, 2026 $ 1,836 $ 579 $ 2,415 Costs incurred during the three and six months ended May 31, 2026 are primarily related to our restructuring action that commenced in fiscal year 2025 to optimize efficiency, while ensuring alignment with the Company's long-term financial objectives. Cash disbursements for expenses incurred to date under this restructuring are expected to be made through the fourth quarter of fiscal year 2026. The restructuring reserve is included in other accrued liabilities on the condensed consolidated balance sheet as of May 31, 2026. We do not expect to incur additional material expenses in connection with this restructuring. 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 Six Months Ended (in thousands, except per share data) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Net income $ 21,073 $ 17,029 $ 43,886 $ 27,975 Weighted average shares outstanding 41,901 43,053 42,028 43,154 Effect of dilution from common stock equivalents 409 1,043 491 1,104 Effect of dilution from if-converted convertible notes — 60 — 264 Diluted weighted average shares outstanding 42,310 44,156 42,519 44,522 Earnings per share: Basic $ 0.50 $ 0.40 $ 1.04 $ 0.65 Diluted $ 0.50 $ 0.39 $ 1.03 $ 0.63 We excluded stock awards representing approximately 4,289,000 and 3,888,000 shares of common stock from the calculation of diluted earnings per share in the three and six months ended May 31, 2026, respectively, as these awards were anti-dilutive. We excluded stock awards representing approximately 776,000 and 586,000 shares of common stock, from the calculation of diluted earnings per share in the three and six months ended May 31, 2025, respectively, as these awards were anti-dilutive. The dilutive impact of the Notes on our calculation of diluted earnings per share is measured using the if-converted method. However, because the principal amount of the 2026 Notes was settled in cash and the principal amount of the 2030 Notes will be settled in cash, the dilutive impact of applying the if-converted method is limited to the in-the-money portion, if any. During the three and six months ended May 31, 2026, we excluded 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 six months ended May 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. 17 Note 11: Segment Information Operating segments are components of an enterprise that engages 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 and reportable segment that is managed on a consolidated basis and derives substantially all of its revenue from the sale and support of one group of similar products and services, comprised of software products for the development, deployment, and management of responsible, AI-powered applications and digital experiences. The accounting policies of the Company's operating segment are the same as those described in Note 1, Nature of Business and Summary of Significant Accounting Policies to our Consolidated Financial Statements in Item 8 of our 2025 Annual Report. Our CODM does not receive profitability information at a lower level than consolidated results, and evaluates net income on a consolidated basis to set financial performance targets, assess performance, and make resource allocation decisions, primarily through comparison of actual results to forecasted results, year-over-year analysis, and review of historical performance trends. The measure of segment assets is reported on the Company's consolidated balance sheets as total consolidated assets. The Company's significant expenses and other segment items are provided in the table below: Three Months Ended Six Months Ended (in thousands) May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 Revenue $ 253,465 $ 237,355 $ 501,264 $ 475,370 Costs of revenue (1) 34,426 35,191 67,921 69,805 Sales and marketing (2) 50,282 46,014 98,196 94,278 Product development (2) 42,993 41,586 87,872 83,551 General and administrative (2) 23,141 19,103 42,467 38,680 Stock-based compensation 20,509 16,741 38,983 31,424 Amortization of intangibles 35,105 36,600 69,473 72,830 Other segment items, net (3) 25,936 25,091 52,466 56,827 Net income $ 21,073 $ 17,029 $ 43,886 $ 27,975 (1) Excludes amortization of intangibles and stock-based compensation. (2) Excludes stock-based compensation. (3) Includes restructuring expenses, acquisition-related expenses, cyber vulnerability response expenses, net, interest expense, interest income and other, net, foreign currency loss, net, and provision for income taxes. 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 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. 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 bellwether plaintiffs in the MDL. The court has ordered the conclusion of fact discovery by September 29, 2026, and that the filing of class certification briefing will begin on August 28, 2026, and continue into the fourth quarter of 2026. The MDL is not expected to conclude within the next twelve months. 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. 18 Expenses Incurred and Future Costs During the three and six months ended May 31, 2026, we incurred net costs of approximately $ 1.3 million and $ 2.6 million, respectively, related to the MOVEit Vulnerability. The costs recognized are net of insurance recoveries of $ 2.4 million and $ 3.4 million for the three and six months ended May 31, 2026, respectively. During the three and six months ended May 31, 2025, we incurred net costs of approximately $ 0.7 million and $ 1.5 million, respectively, related to the MOVEit Vulnerability. The costs recognized are net of insurance recoveries of $ 0.6 million and $ 1.3 million for the three and six months ended May 31, 2025, respectively. The timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. We expect to continue to incur 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, 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. With respect to the governmental inquiries and investigations, we are currently unable to reasonably estimate any possible adverse judgments, settlements, fines, or penalties. Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of May 31, 2026. Insurance Coverage During the period when the MOVEit Vulnerability occurred, we maintained $ 15.0 million of cybersecurity insurance coverage, which has reduced our exposure to expenses and liabilities arising from these events. As of May 31, 2026, we have approximately $ 1.1 million of remaining cybersecurity insurance coverage under the applicable policy. We will pursue recoveries to the maximum extent available under our insurance policies.