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Nature of Business and Summary of Significant Accounting Policies | 12 Months Ended
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Nov. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Nature of Business and Summary of Significant Accounting Policies | Nature of Business and Summary of Significant Accounting Policies The Company Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") provides the best products to develop, deploy and manage high-impact business applications. Our comprehensive product stack is designed to make technology teams more productive and we have a deep commitment to the developer community, both open source and commercial alike. With Progress, organizations can accelerate the creation and delivery of strategic business applications, automate the process by which apps are configured, deployed and scaled, and make critical data and content more accessible and secure—leading to competitive differentiation and business success. Over 1,700 independent software vendors ("ISVs"), 100,000 enterprise customers, and three million developers rely on Progress to power their applications. 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 ISVs, original equipment manufacturers ("OEMs"), distributors and value-added resellers. ISVs 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 America 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. Accounting Principles We prepare our consolidated financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Basis of Consolidation The consolidated financial statements include our accounts and those of our subsidiaries (all of which are wholly owned). We eliminate all intercompany balances and transactions. Use of Estimates The preparation of consolidated 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. Foreign Currency Translation The functional currency of most of our foreign subsidiaries is the local currency in which the subsidiary operates. For foreign operations where the local currency is considered to be the functional currency, we translate assets and liabilities into U.S. dollars at the exchange rate on the balance sheet date. We translate income and expense items at average rates of exchange prevailing during each period. We accumulate translation adjustments in accumulated other comprehensive loss, a component of shareholders’ equity. For foreign operations where the U.S. dollar is considered to be the functional currency, we remeasure monetary assets and liabilities into U.S. dollars at the exchange rate on the balance sheet date and non-monetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. We translate income and expense items at average rates of exchange prevailing during each period. We recognize remeasurement adjustments currently as a component of foreign currency loss, net in the statements of operations. Transaction gains or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in foreign currency loss, net in the statements of operations as incurred. Cash Equivalents and Investments Cash equivalents include short-term, highly liquid investments purchased with remaining maturities of three months or less. As of November 30, 2020, all of our cash equivalents were invested in money market funds. We classify investments, state and municipal bond obligations, U.S. treasury and government agency bonds, and corporate bonds and notes, as investments available-for-sale, which are stated at fair value. We include aggregate unrealized holding gains and losses, net of taxes, on available-for-sale securities as a component of accumulated other comprehensive loss in shareholders’ equity. We include realized gains and losses in interest income and other, net on the consolidated statements of operations. We monitor our investment portfolio for impairment on a periodic basis. In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other than temporary, an impairment charge is recorded and a new cost basis for the investment is established. In determining whether an other-than-temporary impairment exists, we consider the nature of the investment, the length of time and the extent to which the fair value has been less than cost, and our intent and ability to continue holding the security for a period sufficient for an expected recovery in fair value. Allowances for Doubtful Accounts and Sales Credit Memos We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. We establish this allowance using estimates that we make based on factors such as the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, changes to customer creditworthiness and current economic trends. We also record an allowance for estimates of potential sales credit memos. This allowance is determined based on an analysis of historical credit memos issued and current economic trends, and is recorded as a reduction of revenue. A summary of activity in the allowance for doubtful accounts is as follows (in thousands):
| November 30, 2020 |  | November 30, 2019 |  | November 30, 2018
|  |  |  |  | As Adjusted(1)
Beginning balance | $ | 667 |  |  | $ | 574 |  |  | $ | 498 |
ASC 606 adjustment | — |  |  | — |  |  | 88 |
Charge to costs and expenses | 429 |  |  | 606 |  |  | 216 |
Write-offs and other | (169) |  |  | (457) |  |  | (232) |
Translation adjustments | (41) |  |  | (56) |  |  | 4 |
Ending balance | $ | 886 |  |  | $ | 667 |  |  | $ | 574 |
(1)The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method. See Note 1. Nature of Business and Summary of Significant Accounting Policies for further information.
A summary of activity in the allowance for sales credit memos is as follows (in thousands):
| November 30, 2020 |  | November 30, 2019 |  | November 30, 2018
|  |  |  |  | As Adjusted(1)
Beginning balance | $ | 158 |  |  | $ | 266 |  |  | $ | 178 |
ASC 606 adjustment | — |  |  | — |  |  | 41 |
Charge (credit) to revenue | 265 |  |  | (60) |  |  | 46 |
Write-offs and other | — |  |  | (46) |  |  | — |
Translation adjustments | 6 |  |  | (2) |  |  | 1 |
Ending balance | $ | 429 |  |  | $ | 158 |  |  | $ | 266 |
(1)The Company adopted the accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018 using the full retrospective method. See Note 1. Nature of Business and Summary of Significant Accounting Policies for further information.
Concentrations of Credit Risk Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivative instruments and trade receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We hold our cash and cash equivalents, investments and derivative instrument contracts with high quality financial institutions and we monitor the credit ratings of those institutions. We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the diversity, both by geography and by industry, of the customer base. No single customer represented more than 10% of consolidated accounts receivable or revenue in fiscal years 2020, 2019 or 2018. Fair Value of Financial Instruments The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximates fair value due to the short-term nature or market interest rates of these items. We base the fair value of short-term investments on quoted market prices or other relevant information generated by market transactions involving identical or comparable assets. We measure and record derivative financial instruments at fair value. See Note 4 for further discussion of financial instruments that are carried at fair value on a recurring and nonrecurring basis. Derivative Instruments We record all derivatives on the consolidated balance sheets at fair value. We use derivative instruments to manage exposures to fluctuations in the value of foreign currencies, which exist as part of our ongoing business operations. Cash Flow Hedge We entered into an interest rate swap contract in July 2019 to manage the variability of cash flows associated with approximately one-half of our variable rate debt. We have designated the interes t rate swap as a cash flow hedge and we assessed the hedge's 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 consolidated balance sheets. Although we 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. Forward Contracts Certain assets and forecasted transactions are exposed to foreign currency risk. Our objective for holding derivatives is to eliminate or reduce the impact of these exposures. We periodically monitor our foreign currency exposures to enhance the overall economic effectiveness of our foreign currency hedge positions. Principal currencies hedged include the euro, British pound, Brazilian real, Indian rupee, and Australian dollar. We do not enter into derivative instruments for speculative purposes, nor do we hold or issue any derivative instruments for trading purposes. We enter into certain derivative instruments that do not qualify for hedge accounting and are not designated as hedges. Although these derivatives do not qualify for hedge accounting, we believe that such instruments are closely correlated with the underlying exposure, thus managing the associated risk. The gains or losses from changes in the fair value of such derivative instruments that are not accounted for as hedges are recognized in earnings in foreign currency loss, net in the consolidated statements of operations. Property and Equipment We record property and equipment at cost. We record property and equipment purchased in business combinations at fair value, which is then treated as the cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the useful lives of the assets. Useful lives by major asset class are as follows: computer equipment and software, 3 to 7 years; buildings and improvements, 5 to 39 years; and furniture and fixtures, 5 to 7 years. Repairs and maintenance costs are expensed as incurred. Product Development and Internal Use Software Expenditures for product development, other than internal use software costs, are expensed as incurred. Product development expenses primarily consist of personnel and related expenses for our product development staff, the cost of various third-party contractor fees, and allocated overhead expenses. Software development costs associated with internal use software are incurred in three stages of development: the preliminary project stage, the application development stage, and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Certain internal and external qualifying costs incurred during the application development stage are capitalized as property and equipment. Internal use software is amortized on a straight-line basis over its estimated useful life of three years, beginning when the software is ready for its intended use. During the fiscal years ended November 30, 2020, 2019, and 2018, there were no internal use software development costs capitalized. We did not incur any amortization expense related to internal use software development costs during the fiscal years ended November 30, 2020 and 2019 as these costs were fully amortized as of November 30, 2018. Amortization expense related to internal use software totaled $0.2 million during the fiscal year ended November 30, 2018. Goodwill, Intangible Assets and Long-Lived Assets Goodwill is the amount by which the cost of acquired net assets in a business combination exceeded the fair value of net identifiable assets on the date of purchase. We evaluate goodwill and other intangible assets with indefinite useful lives, if any, for impairment annually or on an interim basis when events and circumstances arise that indicate impairment may have occurred. In performing our annual assessment, we first perform a qualitative test and if necessary, perform a quantitative test. To conduct the quantitative impairment test of goodwill, we compare the fair value of a reporting unit to its carrying value. If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss to the extent that the carrying value of goodwill exceeds its implied fair value. We estimate the fair values of our reporting units using discounted cash flow models or other valuation models, such as comparative transactions and market multiples. We did not recognize any goodwill impairment charges during fiscal years 2020, 2019, or 2018. Intangible assets are comprised of purchased technology, customer-related assets, and trademarks and trade names acquired through business combinations (Note 7). All of our intangible assets are amortized using the straight-line method over their estimated useful life. We periodically review long-lived assets (primarily property and equipment) and intangible assets with finite lives for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of those assets are no longer appropriate. We base each impairment test on a comparison of the undiscounted cash flows to the carrying value of the asset or asset group. If impairment is indicated, we write down the asset to its estimated fair value based on a discounted cash flow analysis. During fiscal year 2019, we recorded a $22.7 million asset impairment charge, which was primarily applicable to the intangible assets obtained in connection with our acquisitions of DataRPM and Kinvey during the second and third quarters of fiscal year 2017, respectively (Note 4). We classify long-lived assets to be sold as held for sale in the period in which: (i) we have approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Assets held for sale are initially measured at the lower of the carrying value or the fair value less cost to sell. Losses resulting from this measurement are recognized in the period in which the held for sale criteria are met while gains are not recognized until the date of sale. Once designated as held for sale, we stop recording depreciation expense on the asset. We assess the fair value less cost to sell of long-lived assets held for sale at each reporting period until it no longer meets this classification. In the fourth quarter of fiscal year 2018, we reclassified certain corporate land and building assets previously reported as property and equipment to assets held for sale on our consolidated balance sheet. As the fair value less cost to sell was less than the carrying value of these assets, we recognized an impairment charge of $5.1 million. We sold these long-lived assets during fiscal year 2019 and recognized a net gain on the sale of approximately $0.1 million. During the fourth quarter of fiscal year 2019, we incurred an additional asset impairment charge of $1.4 million related to the abandonment of certain long-lived assets associated with this sale of corporate land and buildings. The fair value of the assets held for sale was measured using third-party valuation models, which included a discounted cash flow analysis. Comprehensive (Loss) Income The components of comprehensive loss include, in addition to net income, foreign currency translation adjustments and unrealized gains and losses on investments and hedging activity. Accumulated other comprehensive loss by components, net of tax (in thousands):
| Foreign Currency Translation Adjustment |  | Unrealized (Losses) Gains on Investments |  | Unrealized Losses on Hedging Activity |  | Total
Balance, December 1, 2018 | $ | (27,973) |  |  | $ | (203) |  |  | $ | — |  |  | $ | (28,176) |
Other comprehensive (loss) income | (420) |  |  | 173 |  |  | (1,551) |  |  | (1,798) |
Balance, December 1, 2019 | $ | (28,393) |  |  | $ | (30) |  |  | $ | (1,551) |  |  | $ | (29,974) |
Other comprehensive (loss) income | 777 |  |  | 44 |  |  | (3,625) |  |  | (2,804) |
Balance, November 30, 2020 | $ | (27,616) |  |  | $ | 14 |  |  | $ | (5,176) |  |  | $ | (32,778) |
The tax effect on accumulated unrealized losses on hedging activity and unrealized (losses) gains on investments was $1.6 million, $0.4 million and minimal as of November 30, 2020, November 30, 2019, and November 30, 2018, respectively. Revenue Recognition Revenue Policy We derive our revenue primarily from software licenses and maintenance and services. Our license arrangements generally contain multiple performance obligations, including software maintenance services. Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. When an arrangement contains multiple performance obligations, we account for individual performance obligations separately if they are distinct. We recognize revenue through the application of the following steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to performance obligations in the contract; and (v) recognition of revenue when or as we satisfy the performance obligations. Sales taxes collected from customers and remitted to government authorities are excluded from revenue and we do not license our software with a right of return. Software Licenses Software licenses are on-premise and fully functional when made available to the customer. As the customer can use and benefit from the license on its own, on-premise software licenses represent distinct performance obligations. Revenue is recognized upfront at the point in time when control is transferred, which is defined as the point in time when the client can use and benefit from the license. Our licenses are sold as perpetual or term licenses, and the arrangements typically contain various combinations of maintenance and services, which are generally accounted for as separate performance obligations. 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 stand-alone selling price ("SSP"). As required, we evaluate the residual approach estimate compared to all available observable data in order to conclude the estimate is representative of its SSP. Perpetual licenses are generally invoiced upon execution of the contract and payable within 30 days. Term licenses are generally invoiced in advance on an annual basis over the term of the arrangement, which is typically one to three years. Any difference between the revenue recognized and the amount invoiced to the customer is recognized on our consolidated balance sheets as unbilled receivables until the customer is invoiced, at which point the amount is reclassified to accounts receivable. Maintenance Maintenance revenue is made up of technical support, bug fixes, and when-and-if available unspecified software upgrades. As these maintenance services are considered to be a series of distinct services that are substantially the same and have the same duration and measure of progress, we have concluded that they represent one combined performance obligation. Revenue 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, which has remained within a tight range and is consistent with the stand-alone pricing of subsequent maintenance renewals. Maintenance services are generally invoiced in advance on an annual basis over the term of the arrangement, which is typically one to three years. Services Services revenue primarily includes consulting and customer education services. In general, services are distinct performance obligations. Services revenue is generally recognized as the services are delivered to the customer. We apply the practical expedient of recognizing revenue upon invoicing for time and materials-based arrangements as the invoiced amount corresponds to the value of the services provided. The SSP of services is based upon observable prices in similar transactions using the hourly rates sold in stand-alone services transactions. Services are either sold on a time and materials basis or prepaid upfront. We also offer products via a software-as-a-service ("SaaS") model, which is a subscription-based model. Our customers can use hosted software over the contract period without taking possession of it and the cloud services are available to them throughout the entire term, even if they do not use the service. Revenue related to SaaS offerings is recognized ratably over the contract period. The SSP of SaaS performance obligations is determined based upon observable prices in stand-alone SaaS transactions. SaaS arrangements are generally invoiced in advance on a monthly, quarterly, or annual basis over the term of the arrangement, which is typically one to three years. Arrangements with Multiple Performance Obligations When an arrangement contains multiple performance obligations, we account for individual performance obligations separately if they are distinct. We allocate the transaction price to each performance obligation in a contract based on its relative SSP. Although we do not have a history of offering these elements, prior to allocating the transaction price to each performance obligation, we consider whether the arrangement has any discounts, material rights, or specified future upgrades that may represent additional performance obligations. Determining whether products and services are distinct performance obligations and the determination of the SSP may require significant judgment. Advertising Costs Advertising costs are expensed as incurred and were $0.5 million, $0.8 million, and $1.4 million in fiscal years 2020, 2019, and 2018, respectively. Warranty Costs We make periodic provisions for expected warranty costs. Historically, warranty costs have been insignificant. Stock-Based Compensation Stock-based compensation expense reflects the fair value of stock-based awards, less the present value of expected dividends when applicable, measured at the grant date and recognized over the relevant service period. We estimate the fair value of each stock-based award on the measurement date using either the current market price of the stock, the Black-Scholes option valuation model, or the Monte Carlo Simulation valuation model. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. We recognize stock-based compensation expense related to options and restricted stock units on a straight-line basis over the service period of the award, which is generally 4 or 5 years for options and 3 years for restricted stock units. We recognize stock-based compensation expense related to performance stock units and our employee stock purchase plan using an accelerated attribution method. Fees Related to Shareholder Activist In September 2017, Praesidium Investment Management, then one of our largest stockholders, publicly announced its disagreement with our strategy in a Schedule 13D filed with the Securities and Exchange Commission (the “SEC”) and stated that it was seeking changes in the composition of our Board of Directors. In fiscal year 2018, we incurred professional and other fees relating to Praesidium’s actions. We did not incur any fees related to Praesidium's actions during fiscal year 2020 or 2019. Acquisition-Related Costs Acquisition-related costs are expensed as incurred and include those costs incurred as a result of a business combination. These costs consist of professional services fees, including third-party legal and valuation-related fees, as well as retention fees and earn-out payments treated as compensation expense. We incurred $3.6 million, $1.7 million, and $0.3 million of acquisition-related costs, which are included in acquisition-related expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2020, November 30, 2019, and November 30, 2018, respectively. Restructuring Charges Our restructuring charges are comprised primarily of costs related to property abandonment, including future lease commitments, net of any sublease income, and associated leasehold improvements; and employee termination costs related to headcount reductions. We recognize and measure restructuring liabilities initially at fair value when the liability is incurred. We incurred $5.9 million, $6.3 million, and $2.3 million of restructuring related costs, which are included in restructuring expenses in our consolidated statement of operations, for the fiscal years ended November 30, 2020, November 30, 2019, and November 30, 2018, respectively. Income Taxes We provide for deferred income taxes resulting from temporary differences between financial and taxable income. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. We recognize and measure uncertain tax positions taken or expected to be taken in a tax return utilizing a two-step approach. We first determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is that we measure the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes on our consolidated statements of operations. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 intends to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. We adopted this standard at the beginning of the first quarter of fiscal year 2020. However, because our existing accounting aligned with the guidance of ASU 2017-12 there was no impact to our financial statements from adoption. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASC 842"). ASC 842 supersedes the requirements in Topic 840, Leases, and requires lessees to recognize right-of-use ("ROU") assets and liabilities for leases with lease terms of more than twelve months. ASC 842 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. We adopted ASC 842 effective December 1, 2019 using the modified retrospective transition method of applying the new standard at the adoption date. Results for reporting periods beginning on or after December 1, 2019 are presented under the new guidance, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance. Disclosures required under the new standard will not be provided for dates and periods before December 1, 2019. The new standard provided a number of optional practical expedients in transition. We elected the transition package of practical expedients available in the standard, which allowed the carry forward of historical assessments of whether a contract contains a lease, lease classification and initial direct costs. We also elected the practical expedient provided in ASC 842 to not separate lease components from non-lease components for each material underlying asset class: office leases, vehicle leases and equipment leases. For each lease, the non-lease components and related lease components are accounted for as a single lease component. Items or activities that do not transfer goods or services to the lessee, such as administrative tasks to set up the contract and reimbursement or payment of lessor costs, are not components of the contract and therefore no contract consideration is allocated to such items or activities. We did not elect the hindsight practical expedient to determine the lease term for existing leases. The adoption of the new standard also resulted in significant additional disclosures regarding our leasing activities. Refer to Note 9 for further details. In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Under prior accounting standards, the recognition of current and deferred income taxes for an intra-entity transfer was prohibited until the asset has been sold to an outside party. We adopted this standard at the beginning of the first quarter of fiscal year 2019. Upon adoption, we reclassified approximately $3.4 million from non-current prepaid taxes, which is included in other assets on our consolidated balance sheet, to retained earnings as of December 1, 2018. During the preparation of our consolidated financial statements for the three months ended August 31, 2019, we identified that a deferred tax asset of $8.2 million should also have been recorded upon adoption of this standard at the beginning of the first quarter of fiscal year 2019, with the offset recorded to retained earnings. We determined that the error is not material to the first and second quarters of fiscal year 2019. We also concluded that recording an out-of-period correction in the third quarter of fiscal year 2019 would not be material and therefore corrected this error by recording the $8.2 million deferred tax asset during the third quarter of fiscal year 2019. Therefore, the impact of the adoption of ASU 2016-16 on our consolidated balance sheet was a reclassification of approximately $4.8 million to retained earnings. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). Under this standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The standard also requires new disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers and provides guidance on the recognition of costs related to obtaining customer contracts. We adopted this ASU effective December 1, 2018 in accordance with the full retrospective approach, which required us to retrospectively adjust certain previously reported results in the comparative prior periods presented. Upon adoption, we recorded a cumulative $31 million increase to our 2017 beginning retained earnings balance, a $15 million decrease to deferred revenue, a $28 million increase to unbilled receivables, and a $12 million increase to deferred tax liabilities. The revenue recognition related to accounting for the following transactions was most impacted by our adoption of this standard: •Revenue from term licenses with extended payment terms over the term of the agreement within our Data Connectivity and Integration segment - Under the applicable revenue recognition guidance for fiscal years 2018 and prior, these transactions were recognized when the amounts were billed to the customer. In accordance with ASC 606, revenue from term license performance obligations is recognized upon delivery and revenue from maintenance performance obligations is expected to be recognized over the contract term. To the extent that we have entered into these transactions after adoption of ASC 606, revenue from term licenses with extended payment terms is being recognized prior to the customer being billed and we recognize an unbilled receivable on the balance sheet. Accordingly, the recognition of license revenue is accelerated under ASC 606 as we historically did not recognize revenue until the amounts had been billed to the customer. •Revenue from transactions with multiple elements within our Application Development and Deployment segment (i.e., sales of perpetual licenses with maintenance and/or support) - Under the applicable revenue recognition guidance for fiscal years 2018 and prior, these transactions were recognized ratably over the associated maintenance period as the Company did not have vendor specific objective evidence ("VSOE") for maintenance or support. Under ASC 606, the requirement to have VSOE for undelivered elements that existed under prior guidance is eliminated. Accordingly, the Company is recognizing a portion of the sales price as revenue upon delivery of the license instead of recognizing the entire sales price ratably over the maintenance period. The impact of the adoption of this standard on our previously reported consolidated balance sheet and consolidated statements of operations was as follows: Consolidated Balance Sheet
| November 30, 2018
(in thousands) | As Reported |  | Adjustments |  | As Adjusted
Assets |  |  |  |  |
Accounts receivable, net | $ | 58,450 |  |  | $ | 1,265 |  |  | $ | 59,715 |
Short-term unbilled receivables | — |  |  | 1,421 |  |  | 1,421 |
Long-term unbilled receivables | — |  |  | 1,811 |  |  | 1,811 |
Deferred tax assets | 1,922 |  |  | (956) |  |  | 966 |
Other assets(1) | 580,237 |  |  | — |  |  | 580,237 |
Total assets | $ | 640,609 |  |  | $ | 3,541 |  |  | $ | 644,150 |
Liabilities and shareholders’ equity |  |  |  |  |
Short-term deferred revenue | 133,194 |  |  | (9,984) |  |  | 123,210 |
Long-term deferred revenue | 15,127 |  |  | (2,397) |  |  | 12,730 |
Deferred tax liabilities | 3,797 |  |  | 2,002 |  |  | 5,799 |
Other liabilities(2) | 178,409 |  |  | — |  |  | 178,409 |
Retained earnings | 71,242 |  |  | 13,883 |  |  | 85,125 |
Accumulated other comprehensive loss | (28,213) |  |  | 37 |  |  | (28,176) |
Other equity(3) | 267,053 |  |  | — |  |  | 267,053 |
Total liabilities and shareholders’ equity | $ | 640,609 |  |  | $ | 3,541 |  |  | $ | 644,150 |
(1)Includes cash and cash equivalents, short-term investments, other current assets, assets held for sale, property and equipment, net, intangible assets, net, goodwill, and other assets.
(2)Includes current portion of long-term debt, net, accounts payable, accrued compensation and related taxes, dividends payable, income taxes payable, other accrued liabilities, long-term debt, net, and other noncurrent liabilities.
(3)Includes common stock and additional paid-in capital.
Consolidated Statements of Income
| Fiscal Year Ended
| November 30, 2018
(In thousands, except per share data) | As Reported |  | Adjustments |  | As Adjusted
Revenue: |  |  |  |  |
Software licenses | $ | 122,137 |  |  | $ | (22,337) |  |  | $ | 99,800 |
Maintenance and services | 275,028 |  |  | 4,153 |  |  | 279,181 |
Total revenue | 397,165 |  |  | (18,184) |  |  | 378,981 |
Costs of revenue | 66,973 |  |  | — |  |  | 66,973 |
Gross Profit | 330,192 |  |  | (18,184) |  |  | 312,008 |
Operating expenses | 244,194 |  |  | — |  |  | 244,194 |
Income from operations | 85,998 |  |  | (18,184) |  |  | 67,814 |
Other expense, net | (7,018) |  |  | — |  |  | (7,018) |
Income before income taxes | 78,980 |  |  | (18,184) |  |  | 60,796 |
Provision for income taxes | 15,489 |  |  | (4,363) |  |  | 11,126 |
Net income | $ | 63,491 |  |  | $ | (13,821) |  |  | $ | 49,670 |
Earnings (loss) per share: |  |  |  |  |
Basic | $ | 1.39 |  |  | $ | (0.30) |  |  | $ | 1.09 |
Diluted | $ | 1.38 |  |  | $ | (0.30) |  |  | $ | 1.08 |
Weighted average shares outstanding: |  |  |  |  |
Basic | 45,561 |  |  | — |  |  | 45,561 |
Diluted | 46,135 |  |  | — |  |  | 46,135 |
The adoption of ASC 606 had no impact on total cash from or used in operating, financing, or investing activities on our consolidated cash flow statements. Recently Issued Accounting Pronouncements Not Yet Adopted In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 amends Topic 350 to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This update requires the performance of an annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance in ASU 2017-04 is required for annual reporting periods beginning after December 15, 2019, with early adoption permitted. Upon adoption, we do not expect this update to have a material effect on our consolidated financial position and results of operations. In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, contract assets, held-to-maturity debt securities, loans, and other instruments. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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