Progress(PRGS) - 2022 Q4 - Annual Report

PART I Part I covers the company's business operations, risk factors, properties, legal proceedings, and mine safety disclosures Item 1. Business Progress Software Corporation provides products for developing, deploying, and managing business applications, driven by a 'Total Growth Strategy' focused on innovation, customer retention, and M&A, with a diverse product portfolio and capital allocation strategy - Progress Software Corporation is a trusted provider of products to develop, deploy, and manage high-impact business applications, enabling customers to drive innovation and accelerate success[15] - The company's strategic plan, 'Total Growth Strategy,' is built on three pillars: investing and innovating in the current product portfolio, focusing on customer and partner retention to drive recurring revenue and profitability, and growth through accretive acquisitions (M&A)[19][20][21] - Progress Software operates globally across North America, Latin America, EMEA, and Asia Pacific, utilizing local subsidiaries and independent distributors[17] - The capital allocation strategy emphasizes accretive M&A, dividends, and share repurchases to return capital to stockholders. In fiscal year 2022, the company repurchased 1.7 million shares for $77.0 million, and the Board increased the share repurchase authorization by $150.0 million to $228.0 million in January 2023[24][25] - Key products include OpenEdge (application development platform), Chef (DevOps/DevSecOps automation), Developer Tools (.NET/JavaScript UI components), Kemp LoadMaster (application delivery/security), MOVEit (Managed File Transfer), DataDirect (data connectivity), WhatsUp Gold (network monitoring), Sitefinity (Digital Experience Platform), Flowmon (network security), and Corticon (decision automation)[31][32][33][34][35][36] - The company sells products directly to end-users and indirectly through ISVs, OEMs, systems integrators, VARs, and distributors, with over half of license revenue from indirect channels. No single customer or partner accounted for more than 10% of total revenue in the last three fiscal years[41][42][46] Employee Headcount by Function (as of November 30, 2022) | Function | Number of Employees | | :------------------- | :------------------ | | Sales and Marketing | 664 | | Customer Support and Services | 324 | | Product Development | 842 | | Administration | 241 | | Total | 2,071 | Item 1A. Risk Factors The company faces risks from rapid technological changes, OpenEdge product dependence, intense competition, acquisition integration, international operations, cybersecurity, and debt obligations - The company's future success is highly dependent on its ability to continuously develop new products and enhance existing ones in response to rapid technological evolution and changing customer requirements[85] - A significant portion of revenue (approximately 42% in fiscal year 2022) is derived from OpenEdge products, making the company substantially dependent on its continued market acceptance[86] - The software industry is intensely competitive, with many competitors possessing greater resources, potentially leading to difficulties in maintaining market presence or increased pricing pressure[87] - The company's growth strategy relies on accretive M&A, which involves risks such as integration difficulties, inability to realize anticipated value, distraction of management, and potential impairment of goodwill or intangible assets[89][90][91] - International operations, which generated 43% of total fiscal 2022 revenue, expose the company to risks from global economic and political instability, including currency fluctuations and geopolitical conflicts like the Russia-Ukraine invasion[95][123] - Cybersecurity breaches pose a significant risk, as demonstrated by an incident in December 2022 involving unauthorized access and data exfiltration, which could lead to legal and financial exposure, reputational damage, and operational disruption[98][99] - The company's indebtedness, including $618 million as of November 30, 2022, could limit cash flow for operations, expose it to adverse economic conditions, and potentially dilute existing stockholders upon conversion of Convertible Senior Notes[129][132] Item 1B. Unresolved Staff Comments As of the report date, the company has no open comments from the SEC regarding its financial statements or periodic filings - No open comments from the SEC related to financial statements or periodic filings as of the report date[142] Item 2. Properties Progress Software Corporation's corporate headquarters moved to a leased office space in Burlington, Massachusetts, after selling its previous headquarters, maintaining various leased facilities globally for administrative, sales, support, marketing, product development, and distribution functions, with a flexible work approach adopted post-COVID-19 expected to aid in recruitment and retention - Corporate headquarters relocated to a leased 33,000 square foot facility in Burlington, Massachusetts, following the sale of the previous headquarters in Bedford[143] - The company maintains leased offices globally in North America (Morrisville, NC; Alpharetta, GA), EMEA (Sofia, Bulgaria; Limerick, Ireland; Brno, Czech Republic; Rotterdam, Netherlands), and Asia (Bengaluru, Hyderabad, India)[144] - A flexible work approach was adopted in late fiscal year 2021, allowing most employees to choose their office location or work from home, aiming to enhance recruitment and retention[145] Item 3. Legal Proceedings The company is involved in various legal proceedings and claims arising in the ordinary course of business, with management believing the outcome of these matters will not have a material effect on its consolidated financial position, results of operations, or cash flows - The company is subject to various legal proceedings and claims in the ordinary course of business[146] - Management does not believe the outcome of these legal matters will materially affect consolidated financial position, results of operations, or cash flows[146] Item 4. Mine Safety Disclosures This item is not applicable to Progress Software Corporation - Not applicable[147] PART II Part II details market for common equity, management's financial analysis, market risk disclosures, and audited financial statements Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock trades on NASDAQ under 'PRGS', with active share repurchases and quarterly dividends, and a recent increase in repurchase authorization - Common stock trades on the NASDAQ Global Select Market under the symbol "PRGS"[148] - As of December 31, 2022, there were approximately 128 stockholders of record[149] Stock Repurchases in Q4 Fiscal Year 2022 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | | :------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------------- | | September 2022 | — | $ — | — | $ 79,476 | | October 2022 | 33,856 | $ 44.79 | 33,856 | $ 77,959 | | November 2022 | — | — | — | $ 77,959 | | Total | 33,856 | $ 44.79 | 33,856 | $ 77,959 | - On January 10, 2023, the Board of Directors increased the share repurchase authorization by $150.0 million, to an aggregate authorization of $228.0 million[152] Aggregate Quarterly Cash Dividends Declared and Paid | Fiscal Year Ended | Declared per Share | Total Paid (in millions) | | :---------------- | :----------------- | :----------------------- | | November 30, 2022 | $0.70 | $31.1 | | November 30, 2021 | $0.70 | $31.6 | | November 30, 2020 | $0.67 | $29.9 | 5-Year Cumulative Total Return (November 30, 2017 = $100) | Index | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :-------------------------- | :----- | :----- | :----- | :----- | :----- | :------ | | Progress Software Corporation | $100.00 | $85.05 | $99.49 | $97.00 | $117.20 | $128.98 | | NASDAQ Composite | $100.00 | $106.64 | $124.64 | $177.46 | $226.04 | $166.83 | | NASDAQ Computer | $100.00 | $104.71 | $135.95 | $208.91 | $293.19 | $210.78 | Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes FY2022 financial performance, highlighting revenue growth from acquisitions, strategic focus on M&A and retention, strong liquidity, and critical accounting estimates Forward-Looking Statements This section clarifies that the report contains forward-looking statements subject to risks that could cause actual results to differ - The report contains forward-looking statements based on current plans and assumptions, which are subject to various factors that could cause actual results to differ materially[158] Use of Constant Currency Explains the use of constant currency presentation to neutralize foreign exchange rate fluctuations for clearer revenue understanding - Constant currency presentation is used to enhance understanding of revenue results by translating current period results using prior period weighted average foreign currency exchange rates, mitigating the impact of exchange rate fluctuations[159][160] Overview Summarizes the company's business, 'Total Growth Strategy,' capital allocation, and the impact of foreign currency fluctuations on revenue - Progress Software Corporation is a provider of products for developing, deploying, and managing high-impact business applications, focusing on innovation, customer retention, and accretive M&A[161][162][163][164] - The company's 'Total Growth Strategy' has led to rapid product portfolio expansion and ongoing efforts to realign teams and centralize shared services for improved collaboration and operating efficiency[165] - Capital allocation strategy includes accretive M&A, dividends, and share repurchases. In fiscal year 2022, $77.0 million was used to repurchase 1.7 million shares, and the repurchase authorization was increased by $150.0 million in January 2023[166][167][168] - Quarterly cash dividends have been paid since December 2016, with a $0.175 per share dividend declared in September 2022 and January 2023[169] - Existing cash balances, funds from operations, and credit facility amounts are expected to be sufficient to finance operations and meet cash requirements for at least the next twelve months, despite potential changes from future acquisitions[170] - Approximately one-third of revenue is denominated in foreign currencies, leading to significant impact from exchange rate fluctuations on results of operations, particularly in fiscal years 2021 and 2022[171] Results of Operations Details financial performance, including revenue growth across segments and regions, and changes in costs, operating expenses, and net income Revenue (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | Percentage Change (As Reported) | Percentage Change (Constant Currency) | | :------------- | :-------- | :-------- | :------------------------------ | :------------------------------------ | | Revenue | $602,013 | $531,313 | 13 % | 16 % | - The increase in fiscal year 2022 revenue was driven by the acquisition of Kemp and growth in OpenEdge, DevTools, Sitefinity, and Corticon product offerings, partially offset by negative foreign exchange impacts in EMEA[172] Software License Revenue (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | Percentage Change (As Reported) | Percentage Change (Constant Currency) | | :------------- | :-------- | :-------- | :------------------------------ | :------------------------------------ | | License | $188,336 | $156,590 | 20 % | 24 % | | % of total revenue | 31 % | 29 % | | | - Software license revenue increased primarily due to the Kemp acquisition and higher license sales in DataDirect and Corticon, despite negative foreign exchange impacts[173] Maintenance and Services Revenue (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | Percentage Change (As Reported) | Percentage Change (Constant Currency) | | :------------------------- | :-------- | :-------- | :------------------------------ | :------------------------------------ | | Maintenance | $362,335 | $325,863 | 11 % | 14 % | | % of total revenue | 60 % | 61 % | | | | Professional services | $51,342 | $48,860 | 5 % | 7 % | | % of total revenue | 9 % | 10 % | | | | Total Maint. & Services | $413,677 | $374,723 | 10 % | 13 % | | % of total revenue | 69 % | 71 % | | | - Maintenance revenue increased due to the Kemp acquisition and growth in Chef, Ipswitch, and DevTools offerings, partially offset by foreign exchange impacts in EMEA. Professional services revenue grew from Sitefinity, Ipswitch, and DevTools[174] Revenue by Region (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | % of Total Revenue (2022) | 2021 | % of Total Revenue (2021) | Percentage Change (As Reported) | Percentage Change (Constant Currency) | | :------------- | :-------- | :------------------------ | :-------- | :------------------------ | :------------------------------ | :------------------------------------ | | North America | $341,154 | 57 % | $317,814 | 60 % | 7 % | 7 % | | EMEA | $207,707 | 35 % | $169,335 | 32 % | 23 % | 32 % | | Latin America | $18,053 | 3 % | $17,036 | 3 % | 6 % | 4 % | | Asia Pacific | $35,099 | 5 % | $27,128 | 5 % | 29 % | 33 % | - Revenue increases in North America and EMEA were primarily due to the Kemp acquisition and growth in DataDirect and Ipswitch. Latin America and Asia Pacific also saw increases, driven by Kemp and various product offerings[175] Costs of Revenue (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | Change ($) | Change (%) | | :----------------------------- | :-------- | :-------- | :--------- | :--------- | | Cost of software licenses | $10,243 | $5,271 | $4,972 | 94 % | | Cost of maintenance and services | $62,177 | $58,242 | $3,935 | 7 % | | Amortization of acquired intangibles | $22,076 | $14,936 | $7,140 | 48 % | | Total Costs of Revenue | $94,496 | $78,449 | $16,047 | 20 % | - Gross profit increased by 12% to $507.5 million in fiscal year 2022, reaching 84% of total revenue, driven by increased revenue despite higher costs of licenses, maintenance, services, and amortization of intangibles[180] Operating Expenses (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | Change ($) | Change (%) | | :----------------------------- | :-------- | :-------- | :--------- | :--------- | | Sales and marketing | $140,760 | $125,890 | $14,870 | 12 % | | Product development | $114,568 | $103,338 | $11,230 | 11 % | | General and administrative | $77,876 | $65,128 | $12,748 | 20 % | | Amortization of intangibles | $46,868 | $31,996 | $14,872 | 46 % | | Restructuring expenses | $879 | $6,308 | $(5,429) | (86)% | | Acquisition-related expenses | $4,603 | $4,102 | $501 | 12 % | | Cyber incident | $602 | $— | $602 | * | | Gain on sale of assets held for sale | $(10,770) | $— | $(10,770) | * | | Total Operating Expenses | $375,386 | $336,762 | $38,624 | 11 % | - Income from operations increased by 14% to $132.1 million in fiscal year 2022, maintaining 22% of total revenue, due to increased revenue offset by higher costs of revenue and operating expenses[189] Other (Expense) Income (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | Change ($) | Change (%) | | :------------------------ | :--------- | :--------- | :--------- | :--------- | | Interest expense | $(15,790) | $(20,045) | $4,255 | (21)% | | Interest income and other, net | $1,414 | $777 | $637 | 82 % | | Foreign currency loss, net | $(500) | $(1,300) | $800 | (62)% | | Total other expense, net | $(14,876) | $(20,568) | $5,692 | (28)% | - Total other expense, net, decreased by 28% in fiscal year 2022, primarily due to lower interest expense on convertible senior notes following ASU 2020-06 adoption, partially offset by increased interest on the term loan[190] Net Income (Fiscal Year Ended November 30, in thousands) | (In thousands) | 2022 | 2021 | % Change | | :------------- | :------- | :------- | :------- | | Net income | $95,069 | $78,420 | 21 % | | % of total revenue | 16 % | 15 % | | Select Performance Metrics Highlights key performance indicators like Annual Recurring Revenue (ARR) and Net Dollar Retention Rate, demonstrating predictable top-line performance - Annual Recurring Revenue (ARR) increased by 3.5% year-over-year to $497.0 million as of November 30, 2022, driven by multiple products including OpenEdge, DataDirect, Sitefinity, Chef, DevTools, and FileTransfer[196] - Net dollar retention rates have consistently ranged between 98% and 101% for all periods presented, indicating predictable and durable top-line performance[198] Liquidity and Capital Resources Details cash position, share repurchases, dividends, restructuring, debt, and cash flow, highlighting financial flexibility and capital management Cash, Cash Equivalents and Short-Term Investments (in thousands) | (In thousands) | November 30, 2022 | November 30, 2021 | | :----------------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $256,277 | $155,406 | | Short-term investments | — | $1,967 | | Total cash, cash equivalents and short-term investments | $256,277 | $157,373 | - The increase in cash, cash equivalents, and short-term investments by $98.9 million was primarily due to $192.2 million in cash inflows from operations and $26.0 million from asset sales, partially offset by share repurchases and dividend payments[199] - Foreign subsidiaries held $51.8 million in cash, cash equivalents, and short-term investments as of November 30, 2022, which are indefinitely reinvested outside the U.S. and not available for domestic operations without potential tax implications[200] Share Repurchases (in millions) | Fiscal Year Ended | Shares Repurchased (millions) | Cost (millions) | | :---------------- | :---------------------------- | :-------------- | | November 30, 2022 | 1.7 | $77.0 | | November 30, 2021 | 0.8 | $35.0 | | November 30, 2020 | 1.4 | $60.0 | - The Board of Directors increased the share repurchase authorization by $150.0 million to an aggregate of $228.0 million on January 10, 2023[201] Cash Dividends Paid (in millions) | Fiscal Year Ended | Total Cash Dividends Paid | | :---------------- | :------------------------ | | November 30, 2022 | $31.1 | | November 30, 2021 | $31.6 | | November 30, 2020 | $29.9 | - Restructuring activities related to the Chef acquisition (2020) and Kemp acquisition (2021) resulted in expenses of $0.4 million and $0.5 million, respectively, in fiscal year 2022, primarily for redundant positions and facility closures[203][204] - The company entered into an amended Credit Agreement on January 25, 2022, providing a $275.0 million secured term loan and a $300.0 million secured revolving credit facility, maturing in January 2027 (subject to springing maturity related to Notes)[205][207] - Convertible Senior Notes with an aggregate principal amount of $325 million (total $360 million with additional purchases) were issued in April 2021, bearing 1% annual interest and maturing on April 15, 2026[208] Net Cash Flows from Operating Activities (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--------------------------------- | :--------- | :--------- | :--------- | | Net income | $95,069 | $78,420 | $79,722 | | Non-cash reconciling items | $104,121 | $100,666 | $64,534 | | Changes in operating assets and liabilities | $(7,030) | $(556) | $591 | | Net cash flows from operating activities | $192,160 | $178,530 | $144,847 | - Operating cash flow increased in fiscal year 2022 due to increased collections from the Kemp acquisition and strong business performance, partially offset by higher compensation payments[209] Net Cash Flows from (used in) Investing Activities (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--------------------------------- | :--------- | :---------- | :---------- | | Net investment activity | $1,950 | $5,950 | $11,392 | | Purchases of property and equipment | $(6,090) | $(4,654) | $(6,517) | | Proceeds from sale of long-lived assets, net | $25,998 | — | $889 | | Decrease in escrow receivable and other | $134 | $2,330 | — | | Payments for acquisitions, net of cash acquired | — | $(253,961) | $(213,057) | | Net cash flows from (used in) investing activities | $21,992 | $(250,335) | $(207,293) | Net Cash Flows (used in) from Financing Activities (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--------------------------------- | :---------- | :---------- | :--------- | | Proceeds from stock-based compensation plans | $16,165 | $15,033 | $11,099 | | Payments for taxes related to net share settlements of equity awards | $(7,824) | $(5,186) | $(5,331) | | Repurchases of common stock | $(77,041) | $(35,000) | $(60,000) | | Proceeds from issuance of senior convertible notes, net | — | $350,100 | — | | Purchase of capped calls | — | $(43,056) | — | | Dividend payments to stockholders | $(31,063) | $(31,561) | $(29,900) | | Proceeds from the issuance of debt | $7,475 | — | $98,500 | | Payment of principal on long-term debt | $(6,873) | $(117,313) | $(11,288) | | Payment of issuance costs for long-term debt | $(2,262) | $(904) | — | | Net cash flows (used in) from financing activities | $(101,423) | $132,113 | $3,080 | Indemnification Obligations Outlines indemnification commitments for intellectual property and general liabilities, noting historically insignificant costs - The company includes standard intellectual property indemnification provisions in licensing agreements and other indemnification for property damage or personal injury. Historically, costs for these obligations have been insignificant, and their estimated fair value is immaterial[215] Liquidity Outlook Assesses liquidity, indicating sufficient funds for operations and foreseeable cash requirements, and details the MarkLogic acquisition - Existing cash balances, funds from operations, and available credit facility amounts are expected to be sufficient to finance operations and meet foreseeable cash requirements for at least the next twelve months[216] - On January 3, 2023, the company announced a definitive agreement to acquire MarkLogic for approximately $355 million, to be funded by $155.0 million of existing cash and a $200.0 million draw from the revolving credit facility, with closing expected in early 2023[217] Critical Accounting Estimates Discusses key accounting estimates requiring significant management judgment, including revenue recognition and business combinations - Key critical accounting estimates include revenue recognition (identifying distinct performance obligations, determining stand-alone selling price, and allocating transaction price), and business combinations (allocating purchase price to acquired assets and liabilities based on fair values, including intangible assets and goodwill)[220][221][224] Recent Accounting Pronouncements Outlines the impact of recently adopted accounting pronouncements, specifically ASU 2020-06 on convertible instruments - The company early adopted ASU 2020-06, 'Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,' on December 1, 2021, using a modified retrospective basis. This change eliminated the separation of convertible senior notes into liability and equity components, increasing net debt and reducing non-cash interest expense[308][309] - ASU 2020-04, 'Reference Rate Reform,' provides optional guidance for accounting for reference rate reform (e.g., LIBOR transition). The company has not yet adopted any expedients or exceptions under this ASU and continues to evaluate its impact[310] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Discusses market risks from interest rate fluctuations on variable-rate debt and foreign currency exchange rates, managed by swaps and forward contracts - The company is exposed to interest rate risk from its variable-rate Credit Agreement, with an outstanding term loan balance of $268.1 million as of November 30, 2022[228] - An interest rate swap contract with a notional amount of $120.0 million (as of November 30, 2022) is used to manage cash flow variability from variable-rate debt, designated as a cash flow hedge[229][230] - Foreign currency risk is managed using forward contracts for intercompany accounts and loans, primarily for the euro, British pound, Brazilian real, Indian rupee, and Australian dollar[231] - A hypothetical 10% adverse movement in foreign currency exchange rates could negatively impact revenue by approximately 3% ($17 million) and net income by approximately 6% ($6 million), excluding hedging program impacts[232] Outstanding Foreign Currency Forward Contracts (in thousands) | (In thousands) | November 30, 2022 Notional Value | November 30, 2022 Fair Value | November 30, 2021 Notional Value | November 30, 2021 Fair Value | | :------------------------------ | :------------------------------- | :--------------------------- | :------------------------------- | :--------------------------- | | Forward contracts to sell U.S. dollars | $74,578 | $(2,995) | $79,777 | $(371) | | Forward contracts to purchase U.S. dollars | $544 | $(5) | $119 | $(1) | | Total | $75,122 | $(3,000) | $79,896 | $(372) | Item 8. Financial Statements and Supplementary Data Presents audited consolidated financial statements for FY2022, 2021, 2020, with notes, including an unqualified audit opinion and a change in convertible debt accounting - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements for the period ended November 30, 2022, and on the effectiveness of internal control over financial reporting[234][235] - The company changed its method of accounting for convertible debt effective December 1, 2021, due to the adoption of ASU 2020-06, using the modified retrospective adoption method[236] Consolidated Balance Sheets (in thousands) | (In thousands) | November 30, 2022 | November 30, 2021 | | :------------------------------------------- | :---------------- | :---------------- | | Assets | | | | Total current assets | $426,053 | $337,808 | | Long-term unbilled receivables and contract assets, net | $39,936 | $17,464 | | Property and equipment, net | $14,927 | $14,345 | | Intangible assets, net | $217,355 | $287,185 | | Goodwill | $671,037 | $671,152 | | Right-of-use lease assets | $17,574 | $25,253 | | Deferred tax assets | $11,765 | $1,415 | | Other assets | $12,832 | $8,915 | | Total assets | $1,411,479 | $1,363,537 | | Liabilities and stockholders' equity | | | | Total current liabilities | $318,004 | $322,929 | | Long-term debt, net | $259,220 | $239,992 | | Convertible senior notes, net | $352,625 | $294,535 | | Long-term operating lease liabilities | $15,041 | $23,130 | | Long-term deferred revenue, net | $54,770 | $47,359 | | Deferred tax liabilities | $4,628 | $14,163 | | Other noncurrent liabilities | $8,687 | $8,940 | | Total stockholders' equity | $398,504 | $412,489 | | Total liabilities and stockholders' equity | $1,411,479 | $1,363,537 | Consolidated Statements of Operations (in thousands, except per share data) | (In thousands, except per share data) | 2022 | 2021 | 2020 | | :------------------------------------ | :--------- | :--------- | :--------- | | Revenue: | | | | | Software licenses | $188,336 | $156,590 | $115,249 | | Maintenance and services | $413,677 | $374,723 | $326,901 | | Total revenue | $602,013 | $531,313 | $442,150 | | Costs of revenue: | | | | | Total costs of revenue | $94,496 | $78,449 | $62,114 | | Gross profit | $507,517 | $452,864 | $380,036 | | Operating expenses: | | | | | Total operating expenses | $375,386 | $336,762 | $272,308 | | Income from operations | $132,131 | $116,102 | $107,728 | | Other (expense) income: | | | | | Total other expense, net | $(14,876) | $(20,568) | $(11,093) | | Income before income taxes | $117,255 | $95,534 | $96,635 | | Provision for income taxes | $22,186 | $17,114 | $16,913 | | Net income | $95,069 | $78,420 | $79,722 | | Earnings per share: | | | | | Basic | $2.19 | $1.79 | $1.78 | | Diluted | $2.15 | $1.76 | $1.76 | | Cash dividends declared per common share | $0.70 | $0.70 | $0.67 | Consolidated Statements of Comprehensive Income (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :--------------------------------------------------------------------------------------------------------- | :-------- | :-------- | :-------- | | Net income | $95,069 | $78,420 | $79,722 | | Other comprehensive (loss) income, net of tax: | | | | | Foreign currency translation adjustments | $(8,468) | $(2,439) | $777 | | Unrealized gain (loss) on hedging activity, net of tax provision of $1,797 and $940 in 2022 and 2021, respectively, and a tax benefit of $1,176 in 2020 | $5,688 | $2,837 | $(3,625) | | Unrealized (loss) gain on investments, net of tax benefit of $4 and $20 in 2022 and 2021, respectively, and a tax provision of $32 in 2020 | $(12) | $(63) | $44 | | Total other comprehensive (loss) income, net of tax | $(2,792) | $335 | $(2,804) | | Comprehensive income | $92,277 | $78,755 | $76,918 | Notes to Consolidated Financial Statements Provides detailed notes supporting consolidated financial statements, explaining accounting policies, financial line items, and disclosures Note 1: Nature of Business and Summary of Significant Accounting Policies Describes the business model, revenue streams, significant accounting policies, key management estimates, and recent accounting pronouncements - Progress Software Corporation provides products for developing, deploying, and managing high-impact applications, primarily through perpetual and term licenses, and subscription-based cloud offerings. Over half of license revenue comes from indirect channel partners[255][256] - Financial statements are prepared in conformity with GAAP, requiring significant management estimates for revenue recognition, tax assets/liabilities, fair values, intangible assets, goodwill, contingent liabilities, and stock-based compensation[258][260] - The company early adopted ASU 2020-06 on December 1, 2021, for convertible debt, eliminating the separation of liability and equity components, which increased net debt and reduced non-cash interest expense by $11.5 million in fiscal year 2022[308][309] Allowance for Doubtful Accounts Activity (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :----------------------- | :------ | :------ | :------ | | Beginning balance | $552 | $886 | $667 | | Charge to costs and expenses | $493 | $58 | $429 | | Write-offs and other | $(302) | $(408) | $(169) | | Translation adjustments | $(3) | $16 | $(41) | | Ending balance | $740 | $552 | $886 | Note 2: Cash, Cash Equivalents and Investments Provides a detailed breakdown of cash, cash equivalents, and short-term investments, including fair values and classifications Cash and Cash Equivalents (in thousands) | (In thousands) | Amortized Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | | :---------------- | :------------------- | :--------------- | :---------------- | :--------- | | Cash | $229,023 | $— | $— | $229,023 | | Money market funds | $27,254 | $— | $— | $27,254 | | Total | $256,277 | $— | $— | $256,277 | Cash, Cash Equivalents and Available-for-Sale Investments (November 30, 2021, in thousands) | (In thousands) | Amortized Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | | :---------------- | :------------------- | :--------------- | :---------------- | :--------- | | Cash | $130,371 | $— | $— | $130,371 | | Money market funds | $25,035 | $— | $— | $25,035 | | U.S. treasury bonds | $748 | $9 | $— | $757 | | Corporate bonds | $1,203 | $7 | $— | $1,210 | | Total | $157,357 | $16 | $— | $157,373 | Note 3: Derivative Instruments Describes the use of derivative instruments, including interest rate swaps for debt and forward contracts for foreign currency risk - The company uses an interest rate swap contract, designated as a cash flow hedge, with a notional value of $120.0 million as of November 30, 2022. Its fair value was a gain of $4.4 million[314][315][316] - Forward contracts are used to economically hedge foreign currency risk on intercompany accounts and loans, with a total notional value of $75.1 million and a fair value loss of $3.0 million as of November 30, 2022[317][318][320] Note 4: Fair Value Measurements Provides a breakdown of assets and liabilities measured at fair value, categorized by hierarchy levels, including convertible senior notes Fair Value Measurements (November 30, 2022, in thousands) | (In thousands) | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------ | :--------------- | :-------- | :-------- | :------ | | Assets | | | | | | Money market funds | $27,254 | $27,254 | — | — | | Interest rate swap | $4,407 | — | $4,407 | — | | Liabilities | | | | | | Foreign exchange derivatives | $(3,000) | — | $(3,000) | — | Fair Value Measurements (November 30, 2021, in thousands) | (In thousands) | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------ | :--------------- | :-------- | :-------- | :------ | | Assets | | | | | | Money market funds | $25,035 | $25,035 | — | — | | U.S. treasury bonds | $757 | — | $757 | — | | Corporate bonds | $1,210 | — | $1,210 | — | | Liabilities | | | | | | Foreign exchange derivatives | $(372) | — | $(372) | — | | Interest rate swap | $(3,078) | — | $(3,078) | — | - The fair value of the Convertible Senior Notes was $376.0 million as of November 30, 2022, and $372.1 million as of November 30, 2021, classified within Level 1 of the fair value hierarchy[322] Note 5: Inventories Details inventory composition, recorded at lower of cost or net realizable value, confirming no excess or obsolete reserves Inventories (in thousands) | (In thousands) | November 30, 2022 | November 30, 2021 | | :------------------------------ | :---------------- | :---------------- | | Finished goods | $2,409 | $1,631 | | Purchased parts and fabricated assemblies | $2,634 | $1,920 | | Total | $5,043 | $3,551 | - Inventories are recorded at the lower of cost (FIFO) or net realizable value. No reserve for excess and obsolete inventories was held at November 30, 2022, or 2021[278][323] Note 6: Property and Equipment Provides a breakdown of property and equipment, net of depreciation and amortization, detailing associated expenses Property and Equipment, Net (in thousands) | (In thousands) | November 30, 2022 | November 30, 2021 | | :---------------------------------- | :---------------- | :---------------- | | Computer equipment and software | $42,672 | $45,774 | | Land, buildings and leasehold improvements | $8,771 | $8,023 | | Furniture and fixtures | $3,582 | $3,539 | | Capitalized software development costs | $276 | $276 | | Property and equipment, gross | $55,301 | $57,612 | | Less accumulated depreciation and amortization | $(40,374) | $(43,267) | | Property and equipment, net | $14,927 | $14,345 | - Depreciation and amortization expense for property and equipment was $5.0 million in fiscal year 2022, a decrease from $5.5 million in 2021[324] Note 7: Intangible Assets and Goodwill Details intangible assets and goodwill, including carrying amounts, amortization, and impairment assessments Intangible Assets (November 30, 2022, in thousands) | (In thousands) | Gross Carrying Amount | Accumulated Amortization | Net Book Value | | :---------------------- | :-------------------- | :----------------------- | :------------- | | Purchased technology | $212,700 | $(150,877) | $61,823 | | Customer-related | $306,308 | $(162,341) | $143,967 | | Trademarks and trade names | $37,611 | $(26,046) | $11,565 | | Non-compete agreement | $2,000 | $(2,000) | — | | Total | $558,619 | $(341,264) | $217,355 | - Amortization expense for intangible assets was $68.9 million in fiscal year 2022, an increase from $46.9 million in 2021, primarily due to the Kemp acquisition[326] Future Amortization Expense for Intangible Assets (as of November 30, 2022, in thousands) | Year | Amount (in thousands) | | :--- | :-------------------- | | 2023 | $68,895 | | 2024 | $56,079 | | 2025 | $45,569 | | 2026 | $36,098 | | 2027 | $10,714 | | Total | $217,355 | Goodwill Carrying Amount (in thousands) | (In thousands) | November 30, 2022 | November 30, 2021 | | :------------------------ | :---------------- | :---------------- | | Balance, beginning of year | $671,152 | $491,726 | | Measurement Period Adjustments | $(88) | $(77) | | Additions | — | $179,521 | | Translation Adjustments | $(27) | $(18) | | Balance, end of year | $671,037 | $671,152 | - Goodwill additions in fiscal year 2021 were related to the Kemp acquisition. The company performed a quantitative assessment as of October 31, 2022, and concluded no impairment of goodwill[328][329] Note 8: Business Combinations Details significant business acquisitions, including Kemp and Chef, outlining purchase prices, funding, and asset/liability allocation - On November 1, 2021, Progress Software acquired Kemp Technologies for a base purchase price of $258.0 million in cash. The acquisition resulted in $179.4 million of goodwill, which is not tax-deductible[330][334] Kemp Acquisition Purchase Price Allocation (in thousands) | (In thousands) | Final Purchase Price Allocation | | :-------------------------- | :------------------------------ | | Net working capital | $26,650 | | Property, plant and equipment | $795 | | Purchased technology | $39,400 | | Trade name | $7,200 | | Customer relationships | $75,500 | | Other assets | $197 | | Other noncurrent liabilities | $(1,404) | | Deferred taxes | $(22,027) | | Deferred revenue | $(29,997) | | Goodwill | $179,433 | | Net assets acquired | $275,747 | - On October 5, 2020, Progress Software acquired Chef Software Inc. for a base purchase price of $220.0 million in cash, funded by existing cash and a $98.5 million draw from its revolving credit facility. This acquisition resulted in $59.6 million of goodwill, which is not tax-deductible[340][345] Chef Acquisition Purchase Price Allocation (in thousands) | (In thousands) | Final Purchase Price Allocation | | :-------------------------- | :------------------------------ | | Net working capital | $52,477 | | Property, plant and equipment | $498 | | Purchased technology | $38,300 | | Trade name | $5,700 | | Customer relationships | $97,300 | | Other assets | $122 | | Other noncurrent liabilities | $(841) | | Lease liabilities, net | $(1,810) | | Deferred taxes | $(7,691) | | Deferred revenue | $(12,525) | | Goodwill | $59,585 | | Net assets acquired | $231,115 | Note 9: Debt Provides comprehensive information on debt obligations, including maturities, Convertible Senior Notes, Credit Agreement, and covenant compliance Future Maturities of Long-Term Debt (as of November 30, 2022, in thousands) | (In thousands) | 2026 Notes | Revolving Credit Facility | Total | | :------------- | :--------- | :------------------------ | :------ | | 2023 | $— | $6,875 | $6,875 | | 2024 | $— | $13,750 | $13,750 | | 2025 | $— | $20,625 | $20,625 | | 2026 | $360,000 | $20,625 | $380,625 | | 2027 | $— | $206,250 | $206,250 | | Total face value of long-term debt | $360,000 | $268,125 | $628,125 | | Unamortized discount and issuance costs | $(7,375) | $(2,671) | $(10,046) | | Less current portion of long-term debt, net | $— | $(6,234) | $(6,234) | | Long-term debt | $352,625 | $259,220 | $611,845 | - Convertible Senior Notes with an aggregate principal amount of $360 million were issued in April 2021, bearing 1% annual interest and maturing on April 15, 2026. Noteholders have conditional conversion rights and repurchase rights under certain circumstances[352][353][354][355][356] - Capped call transactions were entered into to reduce potential dilution from Note conversions, with a cap price of $89.88 per share. The $43.1 million cost was recorded as a reduction to additional paid-in-capital and is deductible for income tax purposes as original discount interest[357][358] - The company adopted ASU 2020-06 on December 1, 2021, accounting for the Notes wholly as debt, reversing the separation of debt and equity components. This resulted in a $47.5 million decrease to additional paid-in capital and a $4.9 million increase to retained earnings[359][361] - A new Credit Agreement was entered into on January 25, 2022, providing a $275.0 million secured term loan and a $300.0 million secured revolving line of credit, maturing in January 2027. The average interest rate for the credit facility in fiscal year 2022 was 2.85%[363][365][366] - The Credit Agreement contains customary affirmative and negative covenants, including financial ratios, and the company was in compliance as of November 30, 2022[371][372] Note 10: Leases Outlines operating lease arrangements for facilities and equipment, including terms, costs, and future payment obligations - The company has operating leases for facilities, vehicles, and equipment with remaining terms ranging from 1 to 7 years. Lease costs for fiscal year 2022 totaled $7.4 million[373][376] Future Payments Under Non-Cancellable Leases (as of November 30, 2022, in thousands) | Year | Amount (in thousands) | | :--------- | :-------------------- | | 2023 | $7,985 | | 2024 | $7,561 | | 2025 | $4,931 | | 2026 | $1,799 | | 2027 | $1,183 | | Thereafter | $112 | | Total lease payments | $23,571 | | Less imputed interest | $(1,059) | | Present value of lease liabilities | $22,512 | Note 11: Commitments and Contingencies Describes indemnification obligations and legal proceedings, with management anticipating no material impact on financial position - The company provides standard intellectual property indemnification in licensing agreements and other indemnifications, with historically insignificant costs. Management does not believe current legal proceedings will materially affect financial position, results of operations, or cash flows[377][378] Note 12: Stockholders' Equity Provides information on common stock, including shares outstanding, repurchase activities, and authorization increases - As of November 30, 2022, the company had 43,257,008 shares of common stock issued and outstanding. There were no preferred shares issued or outstanding[379][380] - In fiscal year 2022, the company repurchased and retired 1.7 million shares of common stock for $77.0 million. The share repurchase authorization was increased by $150.0 million to $228.0 million on January 10, 2023[382] Note 13: Stock-Based Compensation Details stock-based compensation plans, including available shares, option/RSU activity, unrecognized expense, and functional breakdown - The company has several stock plans (2008 Plan, 2002 Plan, 2004 Plan, ESPP) for granting stock-based awards to employees, directors, and consultants. As of November 30, 2022, 4,719,864 shares were available under the 2008 Plan[383][384][385] Stock Option Activity (in thousands, except per share data) | (in thousands) | Shares | Weighted Average Exercise Price | | :------------------------------ | :----- | :------------------------------ | | Options outstanding, Dec 1, 2021 | 2,015 | $40.67 | | Granted | 823 | $44.30 | | Exercised | (174) | $39.04 | | Canceled | (184) | $44.18 | | Options outstanding, Nov 30, 2022 | 2,480 | $41.73 | | Exercisable, Nov 30, 2022 | 1,244 | $40.00 | Restricted Stock Units Activity (in thousands, except per share data) | (in thousands) | Number of Shares | Weighted Average Fair Value | | :----------------------------------- | :--------------- | :-------------------------- | | Restricted stock units outstanding, Dec 1, 2021 | 878 | $43.06 | | Granted | 778 | $44.24 | | Issued | (466) | $41.04 | | Canceled | (139) | $44.52 | | Restricted stock units outstanding, Nov 30, 2022 | 1,051 | $44.80 | - Total unrecognized stock-based compensation expense was $45.8 million at November 30, 2022, expected to be recognized over a weighted average period of two years[395] Stock-Based Compensation Expense by Classification (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :------------------------------ | :-------- | :-------- | :-------- | | Cost of maintenance and services | $1,969 | $1,561 | $1,336 | | Sales and marketing | $4,884 | $6,055 | $4,462 | | Product development | $10,326 | $8,104 | $7,286 | | General and administrative | $19,915 | $14,004 | $10,398 | | Total stock-based compensation | $37,094 | $29,724 | $23,482 | Note 14: Retirement Plan Provides information on the 401(k) retirement plan for U.S. employees, including company contributions for recent fiscal years - The company maintains a 401(k) retirement plan for all U.S. employees. Company contributions were approximately $3.3 million in fiscal year 2022, $4.0 million in 2021, and $3.6 million in 2020[397] Note 15: Revenue Recognition Details revenue recognition policies, presenting revenue by timing and geographic region, and disclosing remaining performance obligations Revenue by Timing of Recognition (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :------------------------------------------- | :-------- | :-------- | :-------- | | Performance obligations transferred at a point in time: | | | | | Software licenses | $188,336 | $156,590 | $115,249 | | Performance obligations transferred over time: | | | | | Maintenance | $362,335 | $325,863 | $288,887 | | Services | $51,342 | $48,860 | $38,014 | | Total revenue | $602,013 | $531,313 | $442,150 | Geographic Revenue (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :------------- | :-------- | :-------- | :-------- | | United States | $310,917 | $294,947 | $240,717 | | Canada | $30,237 | $22,867 | $20,281 | | EMEA | $207,707 | $169,335 | $143,754 | | Latin America | $18,053 | $17,036 | $14,574 | | Asia Pacific | $35,099 | $27,128 | $22,824 | | Total revenue | $602,013 | $531,313 | $442,150 | - As of November 30, 2022, the transaction price allocated to remaining performance obligations was $295.0 million, with approximately 81% expected to be recognized within the next year[404] Note 16: Restructuring Summarizes restructuring activities, including costs, cash disbursements, and remaining balances for facilities and employee benefits Summary of Restructuring Activity (in thousands) | (In thousands) | Excess Facilities and Other Costs | Employee Severance and Related Benefits | Total | | :------------------------ | :-------------------------------- | :-------------------------------------- | :------ | | Balance, Dec 1, 2019 | $196 | $2,007 | $2,203 | | Costs incurred | $1,812 | $4,094 | $5,906 | | Cash disbursements | $(1,569) | $(2,554) | $(4,123) | | Translation adjustments and other | $(18) | $5 | $(13) | | Balance, Nov 30, 2020 | $421 | $3,552 | $3,973 | | Costs incurred | $3,518 | $2,790 | $6,308 | | Cash disbursements | $(1,072) | $(4,447) | $(5,519) | | Translation adjustments and other | $1,616 | $(6) | $1,610 | | Balance, Nov 30, 2021 | $4,483 | $1,889 | $6,372 | | Costs incurred | $414 | $465 | $879 | | Cash disbursements | $(1,027) | $(2,321) | $(3,348) | | Translation adjustments and other | — | $(3) | $(3) | | Balance, Nov 30, 2022 | $3,870 | $30 | $3,900 | - Restructuring expenses in fiscal year 2022 totaled $0.879 million, primarily related to activities from fiscal years 2021 (Kemp acquisition) and 2020 (Chef acquisition), involving headcount reductions and facility consolidations[185][304][408][412] Note 17: Income Taxes Provides income tax breakdown by jurisdiction, provision for income taxes, effective tax rate, and unrecognized tax benefits Income Before Income Taxes by Jurisdiction (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :------------- | :--------- | :--------- | :--------- | | U.S. | $103,917 | $80,508 | $83,279 | | Foreign | $13,338 | $15,026 | $13,356 | | Total | $117,255 | $95,534 | $96,635 | Provision for Income Taxes (in thousands) | (In thousands) | 2022 | 2021 | 2020 | | :------------- | :-------- | :-------- | :-------- | | Current | $29,788 | $18,022 | $19,535 | | Deferred | $(7,602) | $(908) | $(2,622) | | Total | $22,186 | $17,114 | $16,913 | - The effective income tax rate was 19% in fiscal year 2022, up from 18% in 2021, primarily due to the jurisdictional mix of profits and the net effects of the foreign derived intangible income (FDII) regime[191][417] - As of November 30, 2022, the total unrecognized tax benefits amounted to $5.3 million, with $1.3 million recorded in other noncurrent liabilities[421] Note 18: Earnings Per Share Details the calculation of basic and diluted earnings per share, including weighted average shares and convertible note impact Earnings Per Share Calculation (in thousands, except per share data) | (in thousands, except per share data) | 2022 | 2021 | 2020 | | :------------------------------------ | :-------- | :-------- | :-------- | | Net income | $95,069 | $78,420 | $79,722 | | Weighted average shares outstanding | 43,475 | 43,916 | 44,886 | | Basic earnings per common share | $2.19 | $1.79 | $1.78 | | Diluted weighted average shares outstanding | 44,247 | 44,620 | 45,321 | | Diluted earnings per share | $2.15 | $1.76 | $1.76 | - The dilutive impact of the Convertible Senior Notes is considered using the if-converted method after adopting ASU 2020-06. In fiscal year 2022, the Notes were excluded from diluted EPS calculation as the conversion feature was out of the money[427] Note 19: Business Segments and International Operations Clarifies the company operates as a single business segment and provides a breakdown of long-lived assets by geographic location - The company operates as one operating segment: software products to develop, deploy, and manage high-impact applications. The Chief Executive Officer evaluates financial information on a consolidated basis[428][429] - Long-lived assets in the U.S. totaled $7.6 million and outside the U.S. totaled $7.3 million at November 30, 2022. Two countries outside the U.S. accounted for more than 10% of consolidated long-lived assets in fiscal year 2022[430] Note 20: Subsequent Events Discloses significant events after the balance sheet date, specifically the definitive agreement to acquire MarkLogic Corporation - On January 3, 2023, the company entered into a definitive agreement to acquire MarkLogic Corporation for approximately $355 million, subject to customary adjustments and regulatory approvals. The acquisition is expected to close in early 2023 and will be funded by existing cash and a draw from the revolving credit facility[431] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure during the reported period - No changes in or disagreements with accountants on accounting and financial disclosure[433] Item 9A. Controls and Procedures Management affirmed effective disclosure controls and internal control over financial reporting as of November 30, 2022, with no material changes - Management concluded that disclosure controls and procedures were effective as of November 30, 2022, ensuring timely and accurate reporting of information[434][435] - Management assessed and affirmed the effectiveness of internal control over financial reporting as of November 30, 2022, based on the COSO framework[436][437] - Deloitte & Touche LLP issued an unqualified attestation report on the company's internal control over financial reporting[438][441] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended November 30, 2022[439] Item 9B. Other Information This item is not applicable and contains no additional information - Not applicable[448] PART III Part III covers directors, executive officers, corporate governance, compensation, security ownership, and related transactions, all incorporated by reference Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[449] Item 11. Executive Compensation Information regarding executive compensation will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[450] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[451] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, and director independence, will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[452] Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[453] PART IV Part IV lists all exhibits and financial statement schedules filed as part of the Annual Report on Form 10-K, many incorporated by reference Item 15. Exhibits, Financial Statement Schedules This section lists all documents filed as part of the Annual Report on Form 10-K, including the financial statements and various exhibits, with financial statement schedules omitted as they are either not required or the information is included in the consolidated financial statements, and exhibits including stock purchase agreements, organizational documents, debt instruments, stock plans, and employment agreements, many of which are incorporated by reference from previous SEC filings - The section includes a list of financial statements and schedules, with schedules omitted if not required or information is already in consolidated financial statements[455] - Exhibits include various agreements such as stock purchase agreements (e.g., Kemp, Chef, MarkLogic), organizational documents, debt instruments (Convertible Senior Notes, Credit Agreement), stock plans, and employment agreements[458][459][463] - Many exhibits are incorporated by reference from previous filings with the SEC[456] Item 16. Form 10-K Summary This item is not applicable and contains no summary - Not applicable[462]