Progress Software Corporation

01/20/2026 | Press release | Distributed by Public on 01/20/2026 15:13

Annual Report for Fiscal Year Ending November 30, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the results of operations and financial condition of Progress Software Corporation. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements in Part II, Item 8 of this Form 10-K. This section generally discusses the results of our operations for the year ended November 30, 2025 compared to the year ended November 30, 2024. For a discussion of the year ended November 30, 2024 compared to the year ended November 30, 2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended November 30, 2024.
Forward-Looking Statements
Certain statements below about anticipated results and our products and markets are forward-looking statements that are based on our current plans and assumptions. Important information about the bases for these plans and assumptions and factors that may cause our actual results to differ materially from these statements is contained below and in Part I, Item 1A. "Risk Factors" of this Annual Report on Form 10-K.
Use of Constant Currency
Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries strengthen, our consolidated results stated in U.S. Dollars are positively impacted.
As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue growth rates on a constant currency basis enhances the understanding of our revenue results and evaluation of our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Overview
Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") provides software products that enable our customers to develop, deploy and manage responsible AI-powered applications and digital experiences.
A key element of our strategy is centered on the goal of building and maintaining leading products and tools enterprises need to build, deploy, and manage modern, strategic business applications. We offer our products and tools to both new customers and partners, as well as our existing partner and customer ecosystems.
Our organizational philosophy and operating principles focus primarily on customer and partner retention and success, and a streamlined operating approach to drive predictable and stable recurring revenue and high levels of profitability.
We are pursuing a total growth strategy driven by accretive acquisitions of businesses and products that meet our strict strategic, financial, and operating criteria, which help to further our goal of providing stockholder returns. In April 2019, we acquired Ipswitch; in October 2020, we acquired Chef Software; in November 2021, we acquired Kemp Technologies; in February 2023, we acquired MarkLogic; in October 2024, we acquired ShareFile; and in June 2025, we acquired Nuclia.
Our capital allocation policy emphasizes accretive M&A, which we believe allows us to expand our business and drive significant stockholder returns. We also utilize share repurchases to return capital to stockholders. We currently intend to continue to repurchase our shares in sufficient quantities to offset dilution from our equity plans and may elect to conduct additional repurchases based on market conditions and other factors.
We expect to continue to pursue acquisitions meeting our financial criteria that are designed to expand our business and drive significant stockholder returns. As a result, our expected uses of cash could change, our cash position could be reduced, and we may incur additional debt obligations to the extent we complete additional acquisitions. However, we currently believe that existing cash balances, together with funds generated from operations and amounts available under our Credit Facility, will be sufficient to finance our operations and meet our foreseeable cash requirements, including stock repurchases, through at least the next twelve months.
Results of Operations
Business Development
On October 31, 2024, we acquired ShareFile from Cloud Software Group, Inc. As a result of this acquisition, we recorded $96.2 million of deferred revenue and $464.0 million of intangible assets, as further described in Note 5, Business Combinations, in Part II, Item 8 of this Form 10-K. During fiscal 2025, the revenue from ShareFile was $261.6 million. We expect to recognize additional Software-as-a-Service ("SaaS") revenue, as well as increased amortization expense and interest expense, in future periods as a result of this acquisition.
Fiscal Year 2025 Compared to Fiscal Year 2024
Revenue
Fiscal Year Ended Percentage Change
(in thousands) November 30, 2025 November 30, 2024 As Reported Constant
Currency
Revenue $ 977,831 $ 753,409 30 % 29 %
Total revenue increased as compared to the same period last year primarily due to our acquisition of ShareFile in the fourth quarter of fiscal year 2024. ShareFile revenue in fiscal year 2025 was $261.6 million. With an acquisition date of November 2024, ShareFile only contributed one month of revenue in fiscal year 2024 totaling $21.1 million.
Software Licenses Revenue
Fiscal Year Ended Percentage Change
(in thousands) November 30, 2025 November 30, 2024 As Reported Constant
Currency
Software licenses $ 237,887 $ 249,331 (5) % (5) %
As a percentage of total revenue 24 % 33 %
Software licenses revenue decreased by $11.4 million as compared to the same period last year primarily due to timing of multi-year subscription renewals in our DataDirect product offering.
Maintenance, SaaS, and Professional Services Revenue
Fiscal Year Ended Percentage Change
(in thousands) November 30, 2025 November 30, 2024 As Reported Constant
Currency
Maintenance $ 410,174 $ 410,556 - % (1) %
As a percentage of total revenue 42 % 55 %
SaaS $ 287,928 $ 44,564 546 % 546 %
As a percentage of total revenue 29 % 6 %
Professional services $ 41,842 $ 48,958 (15) % (15) %
As a percentage of total revenue 4 % 6 %
Total maintenance, SaaS, and professional services revenue $ 739,944 $ 504,078 47 % 46 %
As a percentage of total revenue 76 % 67 %
Maintenance revenue remained relatively flat as compared to the same period last year. SaaS revenue increased as compared to the same period last year due to our acquisition of ShareFile. Professional services revenue decreased compared to the same period last year primarily due to a decrease in MarkLogic professional services revenue.
Cost of Software Licenses
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Cost of software licenses $ 12,605 $ 10,942 15 %
As a percentage of software license revenue 5 % 4 %
Cost of software licenses consists primarily of royalties, electronic software distribution, duplication, and packaging. Cost of software licenses as a percentage of software licenses revenue varies from period to period depending upon the relative product mix. The increase as compared to the same period last year was primarily due to increased hardware sales.
Cost of Maintenance, SaaS, and Professional Services
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Cost of maintenance, SaaS, and professional services $ 133,750 $ 90,318 48 %
As a percentage of maintenance, SaaS, and professional services revenue 18 % 18 %
Cost of maintenance, SaaS, and professional services consists primarily of costs of hosting, personnel costs for providing customer support, consulting, and education. The increase year-over-year was primarily due to increased headcount and hosting costs resulting from our acquisition of ShareFile, partially offset by decreased contractors and outside services costs.
Amortization of Acquired Intangibles - Costs of Revenue
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Amortization of acquired intangibles $ 41,226 $ 29,222 41 %
As a percentage of total revenue 4 % 4 %
Amortization of acquired intangibles included in costs of revenue primarily represents the amortization of the value assigned to technology-related intangible assets obtained in business combinations. The year-over-year increase was due to the acquisitions of ShareFile and Nuclia.
Sales and Marketing
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Sales and marketing $ 211,013 $ 164,570 28 %
As a percentage of total revenue 22 % 22 %
Sales and marketing expenses increased in fiscal year 2025 due to increased personnel related costs, increased marketing and sales events costs, and increased contractors and outside services costs, each associated with our acquisition of ShareFile.
Product Development
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Product development $ 192,265 $ 146,342 31 %
As a percentage of total revenue 20 % 19 %
Product development expenses increased in fiscal year 2025 primarily due to increased personnel related costs, as well as an increase in contractors and outside services costs, each associated with our acquisition of ShareFile.
General and Administrative
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
General and administrative $ 108,215 $ 89,518 21 %
As a percentage of total revenue 11 % 12 %
General and administrative expenses include the costs of our finance, human resources, legal, information systems, and administrative departments. General and administrative expenses increased in fiscal year 2025 primarily due to higher personnel related costs, contractors and outside services, and other general and administrative costs, each associated with our acquisition of ShareFile.
Amortization of Acquired Intangibles - Operating Expenses
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Amortization of acquired intangibles $ 104,266 $ 65,290 60 %
As a percentage of total revenue 11 % 9 %
Amortization of intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology. The year-over-year increase was due to the acquisitions of ShareFile and Nuclia.
Restructuring Expenses
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Restructuring expenses $ 13,109 $ 10,454 25 %
As a percentage of total revenue 1 % 1 %
Restructuring expenses recorded in fiscal year 2025 primarily relate to headcount reductions in connection with the restructuring action related to the ShareFile acquisition in November 2024 and to a headcount reduction action in November 2025. See Note 13, Restructuring, in Part II, Item 8 of this Form 10-K for additional details, including types of expenses incurred and the timing of future expenses and cash payments.
Acquisition-Related Expenses
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Acquisition-related expenses $ 5,317 $ 17,109 (69) %
As a percentage of total revenue 1 % 2 %
Acquisition-related costs are expensed as incurred and include those costs incurred as a result of a business combination. These costs primarily consist of professional services fees, including third-party legal and valuation-related fees, as well as retention fees. Acquisition-related expenses in fiscal year 2025 were primarily related to the acquisitions of ShareFile and Nuclia, as well as our pursuit of other acquisition opportunities. Acquisition-related expenses in fiscal year 2024 were primarily related to our acquisition of ShareFile, as well as our pursuit of other acquisition opportunities.
Cyber Incident and Vulnerability Response Expenses, Net
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Cyber incident and vulnerability responses expenses, net $ 2,775 $ 5,641 (51) %
As a percentage of total revenue - % 1 %
As previously disclosed, following the discovery of the MOVEit Vulnerability that was disclosed on June 5, 2023, in each instance, we engaged outside cybersecurity experts and other incident response professionals to conduct a forensic investigation and assess the extent and scope of these matters. Cyber incident and MOVEit Vulnerability costs relate to the engagement of external cybersecurity experts and other incident response professionals and are net of received and expected insurance recoveries. See Note 17, Cyber Related Matters, in Part II, Item 8 of this Form 10-K for further discussion.
Other (Expense) Income
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Interest expense $ (70,850) $ (32,012) 121 %
Interest income and other, net 1,759 4,734 (63) %
Foreign currency loss, net (2,571) (2,461) 4 %
Total other expense, net $ (71,662) $ (29,739) (141) %
As a percentage of total revenue (7) % (4) %
Total other expense, net, increased in fiscal year 2025 due to increases in interest expense resulting from costs associated with drawing on our revolving line of credit to acquire ShareFile. Refer to Note 6, Debt, in Part II, Item 8 of this Form 10-K for further discussion. Foreign currency loss, net increased year-over-year due to rate volatility and timing of intercompany and hedge settlement activities. Interest income and other, net decreased in fiscal year 2025 due to decreases in interest income on our invested cash balances.
Provision for Income Taxes
Fiscal Year Ended
(in thousands) November 30, 2025 November 30, 2024 Percentage Change
Provision for income taxes $ 8,495 $ 25,826 (67) %
As a percentage of income before income taxes 10 % 27 %
Our effective income tax rate was 10% and 27% for fiscal years 2025 and 2024, respectively. The primary reason for the year-over-year decrease in the effective rate was because the Company recorded tax expense of $13.7 million in fiscal year 2024 related to the taxes expected to be imposed upon the repatriation of unremitted foreign earnings that were not considered indefinitely reinvested. In fiscal year 2025, the Company recorded a tax benefit of $7.5 million as a result of a change in the Company's estimate of its deferred tax liability associated with unremitted foreign earnings.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law, introducing significant changes to the U.S. federal income tax system. The legislation contains key modifications to the provisions of the 2017 Tax Cuts and Jobs Act and has multiple effective dates. There is no material impact to the tax provision for fiscal 2025. The majority of the legislative provisions become effective in our fiscal years 2026 and 2027. The enactment of OBBBA is not expected to materially impact our fiscal year 2026 provision for income taxes; however, we do expect a reduction in current taxes payable as a result of OBBBA because beginning in our fiscal 2026, provisions under OBBBA allow for an immediate deduction for U.S. R&E expenditures. We will continue to evaluate the full impact of these legislative changes as additional guidance becomes available.
Select Performance Metrics:
Management evaluates our financial performance using a number of financial and operating metrics. These metrics are periodically reviewed and revised to reflect changes in our business.
Annualized Recurring Revenue ("ARR")
We disclose ARR as a performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources currently represents the substantial majority of our revenues and is expected to continue in the future. We define ARR as the annualized revenue of all active and contractually binding term-based contracts from all customers at a point in time. ARR includes revenue from maintenance, software upgrade rights, public cloud, and on-premises subscription-based transactions and managed services. ARR mitigates fluctuations in revenue due to seasonality, contract term, and the sales mix of subscriptions for term-based licenses and SaaS. We use ARR to understand customer trends and the overall health of the Company's business, helping it to formulate strategic business decisions.
We calculate the annualized value of annual and multi-year contracts, and contracts with terms less than one year, by dividing the total contract value of each contract by the number of months in the term and then multiplying by 12. Annualizing contracts with terms less than one-year results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period. We generally do not sell non-SaaS-based contracts with a term of less than one year unless a customer is purchasing additional licenses under an existing annual or multi-year contract. The expectation is that at the time of renewal, such contracts with a term less than one year will renew with the same term as the existing contracts being renewed, such that both contracts are co-termed. Historically, such contracts with a term of less than one year renew at rates equal to or better than annual or multi-year contracts.
For SaaS-based contracts, there is a meaningful percentage of monthly auto-renewing contracts for which annualizing the contracts results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period.
Revenue from term-based license and on-premises subscription arrangements include a portion of the arrangement consideration that is allocated to the software license that is recognized up-front at the point in time control is transferred under ASC 606 revenue recognition principles. ARR for these arrangements is calculated as described above. The expectation is that the total contract value, inclusive of revenue recognized as software license, will be renewed at the end of the contract term.
The calculation is done at constant currency using the current year budgeted exchange rates for all periods presented.
ARR is not defined in GAAP and is not derived from a GAAP measure. Rather, ARR generally aligns to billings (as opposed to GAAP revenue which aligns to the transfer of control of each performance obligation). ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
Our ARR was $852.0 million and $837.0 million as of November 30, 2025 and 2024, respectively, which is an increase of 2% year-over-year.
Net Retention Rate
We calculate net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period ARR"). We then calculate the ARR from these same customers as of the current period end ("Current Period ARR"). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net retention rate. Net retention rate is not calculated in accordance with GAAP and is not derived from a GAAP measure.
Our net retention rates have generally ranged between 100% and 102% for all periods presented. We believe net retention rates can be a helpful indicator of the durability of top line performance.
Liquidity and Capital Resources
Cash and Cash Equivalents
(in thousands) November 30, 2025 November 30, 2024
Cash and cash equivalents $ 94,807 $ 118,077
The decrease in cash and cash equivalents of $23.3 million from the end of fiscal year 2024 was primarily due to cash outflows of $130.0 million to pay down the revolving line of credit, repurchases of common stock of $105.0 million, $20.3 million to acquire Nuclia, payment of debt issuance costs of $6.2 million, and purchases of property and equipment of $5.7 million. These cash outflows were partially offset by cash inflows from operations of $235.2 million, the effect of exchange rates on cash of $6.8 million, and $3.8 million in cash received from the issuance of common stock. Except as described below, there are no limitations on our ability to access our cash and cash equivalents.
Cash and cash equivalents held by our foreign subsidiaries were $55.1 million at November 30, 2025. As a result of the ShareFile acquisition, in the fourth quarter of fiscal 2024 we determined that a substantial portion of unremitted foreign earnings are no longer indefinitely reinvested. As a result of this, we plan to utilize worldwide cash based on the needs of the parent entity. These amounts will be repatriated as needed. Deferred taxes are recorded for earnings of our foreign operations that we determine are not indefinitely reinvested. Refer to Note 14, Income Taxes, in Part II, Item 8 of this Form 10-K for further information.
Fiscal Year Ended
November 30, 2025 November 30, 2024 November 30, 2023
Net cash flows from operating activities $ 235,187 $ 211,494 $ 173,920
Net cash flows used in investing activities $ (26,919) $ (857,908) $ (360,382)
Net cash flows (used in) from financing activities $ (238,369) $ 640,823 $ 51,188
Cash Flows from Operating Activities
The increase in cash generated from operations in fiscal year 2025 as compared to fiscal year 2024 was primarily due to higher billings and collections, partially offset by increased interest expense resulting from the draw down on our revolving line of credit in the fourth quarter of fiscal year 2024, and increased costs of revenue and operating expenses associated with our acquisition of ShareFile.
Our gross accounts receivable as of November 30, 2025, increased by $37.7 million from the end of fiscal year 2024. Days sales outstanding ("DSO") in accounts receivable increased to 73 days as compared to 67 days in fiscal year 2024 due to the timing of billings and collections. In addition, our deferred revenue as of November 30, 2025, increased by $20.7 million from the end of fiscal year 2024.
Cash Flows used in Investing Activities
Net cash outflows and inflows of our net investment activity are generally a result of the timing of acquisitions. Included in investing activities in fiscal year 2025 was the acquisition of Nuclia for a net cash paid amount of $20.0 million, as well as $1.2 million of additional ShareFile purchase consideration. In fiscal year 2024 we acquired ShareFile for a net cash paid amount of $852.7 million.
Cash Flows (used in) from Financing Activities
During fiscal year 2025 we made payments on our revolving line of credit of $130.0 million and made $6.2 million in payments for issuance costs related to the amendment of the revolving credit facility. During fiscal year 2024 we received $748.5 million in net proceeds from debt related to the refinancing of our debt in the second quarter of fiscal year 2024 and the draw down on our revolving line of credit in the fourth quarter of 2024. We also repurchased $105.0 million of our common stock under our share repurchase plan in fiscal year 2025 as compared to $86.8 million in fiscal year 2024. In addition, in fiscal year 2025, we received $19.0 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan as compared to $27.8 million in fiscal year 2024.
Share Repurchases
In fiscal years 2025, 2024, and 2023, we repurchased and retired 2.1 million, 1.6 million, and 0.6 million shares of our common stock for $105.0 million, $86.8 million, and $34.0 million, respectively. 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. As of November 30, 2025, there was $202.2 million remaining under the current share repurchase authorization. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors, and the Board of Directors may choose to suspend, expand, or discontinue the repurchase program at any time. Excise tax was insignificant for all years presented.
Dividends
Upon the closing of the ShareFile acquisition on October 31, 2024, our Board of Directors approved the suspension of our quarterly dividends. We plan to redirect such capital toward the repayment of debt to increase liquidity for future M&A and for share repurchases, both of which are prioritized in our capital allocation policy. Prior to the suspension of the quarterly dividend in the fourth fiscal quarter of 2024, we had paid aggregate cash dividends totaling $31.5 million and $31.6 million for the years ended November 30, 2024 and 2023, respectively.
Convertible Senior Notes and Long-Term Debt
See Note 6, Debt, in Part II, Item 8 of this Form 10-K for further information.
Indemnification Obligations
We include standard intellectual property indemnification provisions in our licensing agreements in the ordinary course of business. Pursuant to our product license agreements, we will indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally business partners or customers, in connection with certain patent, copyright, or other intellectual property infringement claims by third parties with respect to our products. Other agreements with our customers provide indemnification for claims relating to property damage or personal injury resulting from the performance of services by us or our subcontractors. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been insignificant. Accordingly, the estimated fair value of these indemnification provisions is insignificant. Please see Note 17, Cyber Related Matters, in Part II, Item 8 of this Form 10-K for further details regarding indemnification claims related to the MOVEit Vulnerability.
Liquidity Outlook
Cash from operations in fiscal year 2026 could be affected by various risks and uncertainties, including, but not limited to, the effects of various risks detailed in Part I, Item 1A titled "Risk Factors", including increased disruption and volatility in capital markets and credit markets that could adversely affect our liquidity and capital resources in the future. However, based on our current business plan, we believe that existing cash balances, together with funds generated from operations and amounts available under the Credit Facility, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months. Our foreseeable cash needs include capital expenditures, acquisitions, debt repayments, share repurchases, lease commitments, restructuring obligations, and other long-term obligations.
We expect to continue to make payments on the Credit Facility and are also continuously evaluating additional financing options, the net proceeds of which could be used for general corporate purposes or to repay outstanding indebtedness. In the future, we expect to use the available capacity under the Credit Facility for any payments made in connection with any settlement of the 2026 Notes upon conversion, redemption, or repayment of our 2026 Notes at or prior to the 2026 Notes maturity. We may also use the available capacity for general corporate purposes.
Critical Accounting Estimates
Management's discussion and analysis of financial condition and results of operations are based on our consolidated financial statements which have been prepared in accordance with GAAP. We make estimates and assumptions in the preparation of our consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances.
These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
We have identified the following critical accounting policies and estimates that require the use of significant judgments and estimates in the preparation of our consolidated financial statements.
Revenue Recognition
Our contracts with customers typically include promises to license one or more products and services to a customer. Determining whether products and services are distinct performance obligations that should be accounted for separately requires significant judgment. Significant judgment is also required to determine the stand-alone selling price ("SSP") of each distinct performance obligation. Our licenses are sold as perpetual or term licenses, and the arrangements typically contain various combinations of maintenance, SaaS, and professional services, which are generally accounted for as separate performance obligations. For certain product offerings, we use the residual approach to allocate the transaction price to our software license performance obligations because, due to the pricing of our licenses being highly variable, they do not have an observable SSP.
Revenue related to maintenance and SaaS offerings is recognized ratably over the contract period. The SSP of maintenance services is a percentage of the net selling price of the related software license. The SSP of SaaS performance obligations is determined based upon observable prices in stand-alone SaaS transactions. Professional services revenue is generally recognized as the services are delivered to the customer. The SSP of professional services is based upon observable prices in similar transactions using the hourly rates sold in stand-alone services transactions. Professional services are either sold on a time and materials basis or prepaid upfront.
We also consider whether an arrangement has any discounts, material rights, or specified future upgrades that may represent additional performance obligations, although we do not have a history of offering these elements. We do not have any material revenue arrangements that include estimates for variable consideration.
Loss Contingencies and the MOVEit Vulnerability
The Company recognizes a liability for loss contingencies for which it is probable that a liability has been incurred at the date of the consolidated financial statements and the amount is reasonably estimable. The Company has not incurred any significant litigation costs or entered into large settlements in recent history.
As more fully discussed in Note 17, Cyber Related Matters, in Part II, Item 8 of this Form 10-K, in May 2023, the Company discovered the MOVEit Vulnerability, which resulted in government inquiries and investigations, as well as the MDL, which may result in adverse judgments, settlements, fines, penalties, or other resolutions, the amount, scope and timing of which could be material, but which the Company is currently unable to predict.
There is complexity in applying this accounting framework for the potential losses arising from the MOVEit Vulnerability and in determining whether a loss is probable and estimable as these claims and proceedings are subject to inherent uncertainties and potential damages for which we are unable to arrive at a reasonable estimate. Further, the outcome of these matters may not be known for prolonged periods of time. Since the MDL remains in a relatively early stage, 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, we are currently unable to develop an estimate of the losses or range of losses incurred (if any). Therefore, we have not recorded a loss contingency liability for the MOVEit Vulnerability as of November 30, 2025. The Company could incur judgments or enter into settlements regarding the outcome of these claims and proceedings, which could have a material effect on the estimated amount of the liability in the period in which the effect becomes probable and reasonably estimable.
We have incurred expenses related to our efforts to investigate and remediate the MOVEit Vulnerability, as well as legal and other professional services related thereto. Expenses are recognized as they are incurred and are recognized net of expected insurance recoveries, although the timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. We incurred expenses of $2.8 million, $5.6 million, and $1.5 million, net, related to the MOVEit Vulnerability for the fiscal years ended November 30, 2025, 2024, and 2023, respectively.
During the period when the MOVEit Vulnerability occurred, we maintained $15.0 million of cybersecurity insurance coverage, which is expected to reduce our exposure to expenses and liabilities arising from these events. As of November 30, 2025, we have approximately $4.5 million of remaining cybersecurity insurance coverage under the applicable policy. We will pursue recoveries to the maximum extent available under our insurance policies.
Business Combinations
We allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The estimates used to value the net assets acquired are based in part on historical experience and information obtained from the management of the acquired company. We generally value the identifiable intangible assets acquired using a discounted cash flow model. The significant estimates used in valuing certain of the intangible assets include, but are not limited to: future expected cash flows of the asset, discount rates to determine the present value of the future cash flows, attrition rates of customers, and expected technology life cycles. We also estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset.
Our estimates of fair value are based on assumptions believed to be reasonable at that time. If management made different estimates or judgments, material differences in the fair values of the net assets acquired may result.
Recent Accounting Pronouncements
Refer to Note 1, Nature of Business and Summary of Significant Accounting Policies, in Part II, Item 8 of this Form 10-K.
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