10-Q 1 prgs-20220531.htm 10-Q prgs-20220531
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to _____.
Commission File Number: 0-19417
PROGRESS SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter) 
Delaware 04-2746201
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

15 Wayside Road, Suite 400
Burlington, Massachusetts 01803
(Address of principal executive offices) (Zip code)

(781280-4000
(Registrant’s telephone number, including area code)

Not applicable
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per sharePRGSThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer 
Non-accelerated filer 
(Do not check if a smaller reporting company)Smaller reporting company 
Emerging growth company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  
As of June 28, 2022, there were 43,462,098 shares of the registrant’s common stock, $.01 par value per share, outstanding.



PROGRESS SOFTWARE CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MAY 31, 2022
TABLE OF CONTENTS
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 6.
2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets
(In thousands, except share data)May 31, 2022November 30, 2021
Assets
Current assets:
Cash and cash equivalents$224,863 $155,406 
Short-term investments1,050 1,967 
Total cash, cash equivalents and short-term investments225,913 157,373 
Accounts receivable (less allowances of $869 and $634, respectively)
64,733 99,815 
Unbilled receivables and contract assets32,735 25,816 
Other current assets32,488 39,549 
Assets held for sale 15,255 
Total current assets355,869 337,808 
Long-term unbilled receivables and contract assets24,253 17,464 
Property and equipment, net13,649 14,345 
Intangible assets, net252,360 287,185 
Goodwill673,066 671,152 
Right-of-use lease assets21,364 25,253 
Deferred tax assets4,180 1,415 
Other assets9,841 8,915 
Total assets$1,354,582 $1,363,537 
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt, net$6,234 $25,767 
Accounts payable9,917 9,683 
Accrued compensation and related taxes29,341 47,116 
Dividends payable to stockholders8,094 7,925 
Short-term operating lease liabilities7,843 7,926 
Other accrued liabilities15,469 19,491 
Short-term deferred revenue207,331 205,021 
Total current liabilities284,229 322,929 
Long-term debt, net262,337 239,992 
Convertible senior notes, net351,567 294,535 
Long-term operating lease liabilities18,965 23,130 
Long-term deferred revenue51,249 47,359 
Deferred tax liabilities6,098 14,163 
Other noncurrent liabilities7,991 8,940 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized, 10,000,000 shares; issued, none
  
Common stock, $0.01 par value, and additional paid-in capital; authorized, 200,000,000 shares; issued and outstanding, 43,454,288 shares in 2022 and 44,146,193 shares in 2021
435 441 
Additional paid-in capital309,913 354,235 
Retained earnings93,885 90,256 
Accumulated other comprehensive loss(32,087)(32,443)
Total stockholders’ equity372,146 412,489 
Total liabilities and stockholders’ equity$1,354,582 $1,363,537 
See notes to unaudited condensed consolidated financial statements.
3


Condensed Consolidated Statements of Operations
 
 Three Months EndedSix Months Ended
(In thousands, except per share data)May 31, 2022May 31, 2021May 31, 2022May 31, 2021
Revenue:
Software licenses$44,814 $30,107 $87,564 $63,424 
Maintenance and services103,933 92,381 206,105 180,344 
Total revenue148,747 122,488 293,669 243,768 
Costs of revenue:
Cost of software licenses2,583 1,038 5,192 2,189 
Cost of maintenance and services15,801 14,673 30,946 27,992 
Amortization of acquired intangibles5,573 3,599 11,031 7,120 
Total costs of revenue23,957 19,310 47,169 37,301 
Gross profit124,790 103,178 246,500 206,467 
Operating expenses:
Sales and marketing32,704 29,262 66,173 58,731 
Product development28,643 26,415 57,316 50,963 
General and administrative19,207 16,460 36,198 29,884 
Amortization of acquired intangibles11,892 7,979 23,614 14,858 
Restructuring expenses143 (64)654 1,093 
Acquisition-related expenses2,736 844 3,648 1,240 
Gain on sale of assets held for sale(10,770) (10,770) 
Total operating expenses84,555 80,896 176,833 156,769 
Income from operations40,235 22,282 69,667 49,698 
Other (expense) income:
Interest expense(3,656)(4,601)(7,359)(7,115)
Interest income and other, net155 4 744 123 
Foreign currency gain (loss), net111 (621)(255)(878)
Total other expense, net(3,390)(5,218)(6,870)(7,870)
Income before income taxes36,845 17,064 62,797 41,828 
Provision for income taxes7,735 3,507 13,233 9,310 
Net income$29,110 $13,557 $49,564 $32,518 
Earnings per share:
Basic$0.67 $0.31 $1.13 $0.74 
Diluted$0.66 $0.30 $1.11 $0.73 
Weighted average shares outstanding:
Basic43,575 43,818 43,778 43,963 
Diluted44,253 44,472 44,480 44,562 
Cash dividends declared per common share$0.175 $0.175 $0.350 $0.350 
See notes to unaudited condensed consolidated financial statements.
4


Condensed Consolidated Statements of Comprehensive Income
Three Months EndedSix Months Ended
(In thousands)May 31, 2022May 31, 2021May 31, 2022May 31, 2021
Net income$29,110 $13,557 $49,564 $32,518 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(5,104)1,876 (3,323)3,101 
Unrealized gain on hedging activity, net of tax provision of $643 and $1,165 for the second quarter and first six months of 2022, respectively and net of tax provision of $76 and $347 for the second quarter and first six months of 2021, respectively
2,038 235 3,691 1,072 
Unrealized loss on investments, net of tax benefit of $1 and $4 for the second quarter and first six months of 2022 and net of tax provision of $30 and a tax benefit of $12 for the second quarter and first six months of 2021, respectively
(5)(53)(12)(39)
Total other comprehensive income, net of tax(3,071)2,058 356 4,134 
Comprehensive income$26,039 $15,615 $49,920 $36,652 

See notes to unaudited condensed consolidated financial statements.

5


Condensed Consolidated Statements of Stockholders’ Equity
 
Six Months Ended May 31, 2022
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
(in thousands)Number of SharesAmount
Balance, December 1, 202144,146 $441 $354,235 $90,256 $(32,443)$412,489 
Cumulative effect of adoption of ASU 2020-06— — (47,456)4,893 — (42,563)
Issuance of stock under employee stock purchase plan178 2 5,211 — — 5,213 
Exercise of stock options60 1 2,235 — — 2,236 
Vesting of restricted stock units and release of deferred stock units188 2 (2)— —  
Withholding tax payments related to net issuance of RSUs— — (5,405)— — (5,405)
Stock-based compensation— — 17,471 — — 17,471 
Dividends declared— — — (15,742)— (15,742)
Treasury stock repurchases and retirements(1,118)(11)(16,376)(35,086)— (51,473)
Net income— — — 49,564 — 49,564 
Other comprehensive income— — — — 356 356 
Balance, May 31, 202243,454 $435 $309,913 $93,885 $(32,087)$372,146 

Three Months Ended May 31, 2022
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
(in thousands)Number of SharesAmount
Balance, March 1, 202243,766 $438 $303,240 $93,661 $(29,016)$368,323 
Issuance of stock under employee stock purchase plan115 1 3,385 — — 3,386 
Exercise of stock options41 1 1,600 — — 1,601 
Vesting of restricted stock units and release of deferred stock units98 1 (1)— —  
Withholding tax payments related to net issuance of RSUs— — (2,266)— — (2,266)
Stock-based compensation— — 9,357 — — 9,357 
Dividends declared— — — (7,821)— (7,821)
Treasury stock repurchases and retirements(566)(6)(5,402)(21,065)— (26,473)
Net income— — — 29,110 — 29,110 
Other comprehensive income— — — — (3,071)(3,071)
Balance, May 31, 202243,454 $435 $309,913 $93,885 $(32,087)$372,146 


6


Six Months Ended May 31, 2021
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
(in thousands)Number of SharesAmount
Balance, December 1, 202044,241 $442 $305,802 $72,547 $(32,778)$346,013 
Issuance of stock under employee stock purchase plan145 1 4,039 — — 4,040 
Exercise of stock options56 1 1,831 — — 1,832 
Vesting of restricted stock units and release of deferred stock units100 1 (1)— —  
Withholding tax payments related to net issuance of RSUs— — (2,373)— — (2,373)
Stock-based compensation— — 15,146 — — 15,146 
Equity components of Notes, net of issuance costs and tax— — 47,797 — — 47,797 
Purchase of capped calls, net of tax— — (32,752)— — (32,752)
Dividends declared— — — (15,634)— (15,634)
Treasury stock repurchases and retirements(797)(8)(5,862)(29,130)— (35,000)
Net income— — — 32,518 — 32,518 
Other comprehensive loss— — — — 4,134 4,134 
Balance, May 31, 202143,745 $437 $333,627 $60,301 $(28,644)$365,721 

Three Months Ended May 31, 2021
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
(in thousands)Number of SharesAmount
Balance, March 1, 202144,000 $440 $311,697 $71,118 $(30,702)$352,553 
Issuance of stock under employee stock purchase plan89  2,495 — — 2,495 
Exercise of stock options28 1 914 — — 915 
Vesting of restricted stock units and release of deferred stock units72 1 (1)— —  
Withholding tax payments related to net issuance of RSUs— — (1,481)— — (1,481)
Stock-based compensation— — 8,362 — — 8,362 
Equity components of Notes, net of issuance costs and tax— — 47,797 — — 47,797 
Purchase of capped calls, net of tax— — (32,752)— — (32,752)
Dividends declared— — — (7,783)— (7,783)
Treasury stock repurchases and retirements(444)(5)(3,404)(16,591)— (20,000)
Net income— — — 13,557 — 13,557 
Other comprehensive loss— — — — 2,058 2,058 
Balance, May 31, 202143,745 $437 $333,627 $60,301 $(28,644)$365,721 


7


Condensed Consolidated Statements of Cash Flows
 
 Six Months Ended
(In thousands)May 31, 2022May 31, 2021
Cash flows from operating activities:
Net income$49,564 $32,518 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment2,432 2,741 
Amortization of acquired intangibles and other35,111 22,267 
Amortization of debt discount and issuance costs on Notes1,054 1,683 
Stock-based compensation17,471 15,146 
Non-cash lease expense4,033 4,183 
Loss on disposal of property and equipment8 3 
Gain on sale of assets held for sale(10,770)
Deferred income taxes1,735 (705)
Allowances for bad debt and sales credits339 (358)
Changes in operating assets and liabilities:
Accounts receivable19,894 29,105 
Other assets6,833 1,722 
Inventories738  
Accounts payable and accrued liabilities(20,330)(11,554)
Lease liabilities(4,337)(4,467)
Income taxes payable(200)(1,059)
Deferred revenue8,778 8,153 
Net cash flows from operating activities112,353 99,378 
Cash flows from investing activities:
Sales and maturities of investments900 2,650 
Purchases of property and equipment(1,979)(2,116)
Proceeds from sale of long-lived assets, net25,998  
Decrease in escrow receivable and other 2,130 
Net cash flows from investing activities24,919 2,664 
Cash flows (used in) from financing activities:
Proceeds from stock-based compensation plans7,771 6,300 
Payments for taxes related to net share settlements of equity awards(5,405)(2,373)
Repurchases of common stock(51,473)(35,000)
Proceeds from issuance of senior convertible notes, net of issuance costs of $9.9 million
 350,100 
Purchase of capped calls (43,056)
Dividend payments to stockholders(15,573)(15,617)
Proceeds from the issuance of debt7,474  
Payment of principal on long-term debt(3,435)(106,025)
Payment of debt issuance costs(1,957)(904)
Net cash flows (used in) from financing activities(62,598)153,425 
Effect of exchange rate changes on cash(5,217)3,903 
Net increase in cash and cash equivalents69,457 259,370 
Cash and cash equivalents, beginning of period155,406 97,990 
Cash and cash equivalents, end of period$224,863 $357,360 
8


Condensed Consolidated Statements of Cash Flows, continued
Six Months Ended
May 31, 2022May 31, 2021
Supplemental disclosure:
Cash paid for income taxes, net of refunds of $364 in 2022 and $488 in 2021
$4,982 $6,677 
Cash paid for interest$3,291 $4,480 
Non-cash investing and financing activities:
Total fair value of restricted stock awards, restricted stock units and deferred stock units on date vested$18,204 $8,698 
Dividends declared$8,094 $7,921 
See notes to unaudited condensed consolidated financial statements.
9


Notes to Condensed Consolidated Financial Statements

Note 1: Basis of Presentation

Company Overview - Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") is dedicated to propelling business forward in a technology-driven world. Progress helps businesses drive faster cycles of innovation, fuel momentum and accelerate their path to success. As the trusted provider of the leading products to develop, deploy and manage high-impact applications, Progress enables customers to develop the applications and experiences the need, deploy where and how they want and manage it all safely and securely. Hundreds of thousands of enterprises, including 1,700 software companies and 3.5 million developers depend on Progress to achieve their goals—with confidence.

Our products are generally sold as perpetual licenses, but certain products also use term licensing models and our cloud-based offerings use a subscription-based model. More than half of our worldwide license revenue is realized through relationships with indirect channel partners (principally independent software vendors), original equipment manufacturers ("OEMs"), distributors and value-added resellers. Independent software vendors develop and market applications using our technology and resell our products in conjunction with sales of their own products that incorporate our technology. OEMs are companies that embed our products into their own software products or devices. Value-added resellers are companies that add features or services to our product, then resell it as an integrated product or complete "turn-key" solution.

We operate in North and Latin America (the "Americas"); Europe, the Middle East and Africa ("EMEA"); and the Asia Pacific region, through local subsidiaries as well as independent distributors.

Basis of Presentation and Significant Accounting Policies - We prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for complete financial statements and these unaudited financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021, as filed with the SEC on January 27, 2022, as amended by a Form 10-K/A filed on March 30, 2022 (together, the "2021 10-K").

We made no material changes in the application of our significant accounting policies that were disclosed in our 2021 10-K. We have prepared the accompanying unaudited condensed consolidated financial statements on the same basis as the audited financial statements included in our 2021 10-K, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full fiscal year.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an on-going basis, management evaluates its estimates and records changes in estimates in the period in which they become known. These estimates are based on historical data and experience, as well as various other assumptions that management believes to be reasonable under the circumstances. The most significant estimates relate to: the timing and amount of revenue recognition, including the determination of the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and the transaction price allocated to performance obligations; the realization of tax assets and estimates of tax liabilities; fair values of investments in marketable securities; intangible assets and goodwill valuations; the recognition and disclosure of contingent liabilities; the collectability of accounts receivable; and assumptions used to determine the fair value of stock-based compensation. Actual results could differ from those estimates.

10


Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements
Income Taxes

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 updates specific areas of ASC 740, Income Taxes, to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. The Company adopted this standard effective December 1, 2021. The adoption of this standard did not have a material effect on the Company's condensed consolidated financial position and results of operations.

Convertible Debt

On December 1, 2021, we early adopted Accounting Standards Update No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06") on a modified retrospective basis. Under ASU 2020-06, we no longer separate the convertible senior notes into liability and equity components. We recognized the cumulative effect of initially applying this new standard as of December 1, 2021 as an adjustment to the December 1, 2021 opening balance of retained earnings. The conversion option that was previously accounted for in equity under the cash conversion model was recombined into the convertible debt outstanding, and as a result, additional paid in capital and the related unamortized debt discount on the convertible senior notes were reduced. The removal of the remaining debt discount recorded for this previous separation has the effect of increasing our net debt balance. We recorded a $47.5 million decrease to additional paid-in capital, a $56.0 million decrease to debt discount, a $4.9 million increase to retained earnings, and a $13.4 million decrease to long-term deferred tax liabilities. There was no impact to the Company’s statements of cash flows as the result of the adoption of ASU 2020-06. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. See "Note 8: Debt" for additional information regarding the terms of the Convertible Senior Notes (the "Notes").

The new standard requires the use of the "if-converted" method to calculate the diluted earnings per common share. Refer to Note 16: Earnings Per Share for effect of the convertible notes on diluted earnings per common share.

Note 2: Cash, Cash Equivalents and Investments

A summary of our cash, cash equivalents and available-for-sale investments at May 31, 2022 is as follows (in thousands):
 
Amortized Cost BasisUnrealized GainsUnrealized LossesFair Value
Cash$198,897 $— $— $198,897 
Money market funds25,966 — — 25,966 
U.S. treasury bonds750   750 
Corporate bonds300   300 
Total$225,913 $ $ $225,913 

A summary of our cash, cash equivalents and available-for-sale investments at November 30, 2021 is as follows (in thousands):
 
Amortized Cost BasisUnrealized GainsUnrealized LossesFair Value
Cash$130,371 $— $— $130,371 
Money market funds25,035 — — 25,035 
U.S. treasury bonds748 9  757 
Corporate bonds1,203 7  1,210 
Total$157,357 $16 $ $157,373 

11


Such amounts are classified on our condensed consolidated balance sheets as follows (in thousands):
 
 May 31, 2022November 30, 2021
 Cash and EquivalentsShort-Term InvestmentsCash and EquivalentsShort-Term Investments
Cash$198,897 $— $130,371 $— 
Money market funds25,966 — 25,035 — 
U.S. treasury bonds— 750 — 757 
Corporate bonds— 300 — 1,210 
Total$224,863 $1,050 $155,406 $1,967 

The fair value of debt securities by contractual maturity due in one year or less was $1.1 million and $2.0 million as of May 31, 2022 and November 30, 2021, respectively. There were no debt securities by contractual maturity due after one year as of May 31, 2022 or November 30, 2021.
 
We did not hold any investments with continuous unrealized losses as of May 31, 2022 or November 30, 2021.

12


Note 3: Derivative Instruments

Cash Flow Hedge

On July 9, 2019, we entered into an interest rate swap contract with an initial notional amount of $150.0 million to manage the variability of cash flows associated with approximately one-half of our variable rate debt. The contract matures on April 30, 2024 and requires periodic interest rate settlements. Under this interest rate swap contract, we receive a floating rate based on the greater of 1-month LIBOR or 0.00%, and pay a fixed rate of 1.855% on the outstanding notional amount.

We have designated the interest rate swap as a cash flow hedge and assess the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. To the extent that the interest rate swap is highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative are included as a component of other comprehensive loss on our condensed consolidated balance sheets. Although we have determined at the onset of the hedge that the interest rate swap will be a highly effective hedge throughout the term of the contract, any portion of the fair value swap subsequently determined to be ineffective will be recognized in earnings. On January 25, 2022, we amended our prior credit facility (see Note 8: Debt). We reassessed the hedge in connection with the debt amendment and determined that it is still highly effective. As of May 31, 2022, the fair value of the hedge was a gain of $1.8 million, which was included in other assets on our condensed consolidated balance sheets.

The following table presents our interest rate swap contract where the notional amount reflects the quarterly amortization of the interest rate swap, which is equal to approximately one-half of the corresponding reduction in the balance of our term loan as we make scheduled principal payments. The fair value of the derivative represents the discounted value of the expected future discounted cash flows for the interest rate swap, based on the amortization schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in thousands):
 May 31, 2022November 30, 2021
 Notional ValueFair ValueNotional ValueFair Value
Interest rate swap contracts designated as cash flow hedges$127,500 $1,778 $133,125 $(3,078)

Forward Contracts

We generally use forward contracts that are not designated as hedging instruments to hedge economically the impact of the variability in exchange rates on intercompany accounts receivable and loans receivable denominated in certain foreign currencies. We generally do not hedge the net assets of our international subsidiaries.

All forward contracts are recorded at fair value on the consolidated balance sheets at the end of each reporting period and expire between 30 days and 3 years from the date the contract was entered. At May 31, 2022, $1.6 million and $0.4 million was recorded in other noncurrent liabilities and other current assets on our condensed consolidated balance sheets. At November 30, 2021, $0.3 million and $0.1 million were recorded in other noncurrent liabilities and other accrued liabilities, respectively, on our condensed consolidated balance sheets.

In the three and six months ended May 31, 2022, realized and unrealized losses of $3.9 million and $3.6 million, respectively, from our forward contracts were recognized in foreign currency gain (loss), net, on our condensed consolidated statements of operations. In the three and six month ended May 31, 2021, realized and unrealized gains of $0.9 million and $2.6 million, respectively, from our forward contracts were recognized in foreign currency gain (loss), net, on our condensed consolidated statements of operations. These gains and losses were substantially offset by realized and unrealized gains and losses in the offsetting positions.

13


The table below details outstanding foreign currency forward contracts where the notional amount is determined using contract exchange rates (in thousands):
 
 May 31, 2022November 30, 2021
 Notional ValueFair ValueNotional ValueFair Value
Forward contracts to sell U.S. dollars$84,291 $(1,206)$79,777 $(371)
Forward contracts to purchase U.S. dollars737 (8)119 (1)
Total$85,028 $(1,214)$79,896 $(372)

Note 4: 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, 2022 (in thousands):
 
  Fair Value Measurements Using
 Total Fair ValueLevel 1Level 2Level 3
Assets
Money market funds$25,966 $25,966 $ $ 
U.S. treasury bonds750  750  
Corporate bonds300  300  
Interest rate swap1,778  1,778  
Liabilities
Foreign exchange derivatives$(1,214)$ $(1,214)$ 

The following table details the fair value measurements within the fair value hierarchy of our financial assets and liabilities at November 30, 2021 (in thousands):
 
  Fair Value Measurements Using
 Total Fair ValueLevel 1Level 2Level 3
Assets
Money market funds$25,035 $25,035 $ $ 
U.S. treasury bonds757  757  
Corporate bonds1,210  1,210  
Liabilities
Foreign exchange derivatives(372) (372) 
Interest rate swap$(3,078)$ $(3,078)$