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Business Combinations | 12 Months Ended
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Nov. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations MarkLogic Acquisition On February 7, 2023, we completed the acquisition of the parent company of MarkLogic Corporation ("MarkLogic"), pursuant to the Stock Purchase Agreement (the "Purchase Agreement"), dated as of January 3, 2023. The acquisition was completed for a base purchase price of $355.0 million (subject to certain customary adjustments) in cash. We funded the acquisition through a combination of existing cash resources and by drawing down $195.0 million from our then-existing revolving credit facility. Refer to Note 8: Debt for further information. The acquisition consideration for MarkLogic has been preliminarily allocated to MarkLogic’s assets and assumed liabilities based on estimated fair values. The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period (up to one year from the acquisition date). The allocation of the purchase price is as follows (in thousands):
|  |  |  |  | Preliminary Purchase Price Allocation |  | Life
Net working capital |  |  |  |  | $ | 47,900 |  |  |
Property, plant and equipment |  |  |  |  | 723 |  |  |
Purchased technology |  |  |  |  | 67,300 |  |  | 7 years
Trade name |  |  |  |  | 12,500 |  |  | 7 years
Customer relationships |  |  |  |  | 152,300 |  |  | 7 years
Other assets, including long-term unbilled receivables |  |  |  |  | 4,789 |  |  |
Deferred taxes |  |  |  |  | (24,958) |  |  |
Deferred revenue |  |  |  |  | (33,116) |  |  |
Goodwill |  |  |  |  | 161,070 |  |  |
Net assets acquired |  |  |  |  | $ | 388,508 |  |  |
The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. The valuation assumptions take into consideration our estimates of customer attrition, technology obsolescence, and revenue growth projections. We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $161.1 million of goodwill, which is not deductible for tax purposes. Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) and certain acquisition restructuring and related charges are not included as a component of consideration transferred but are required to be expensed as incurred. During the fiscal year ended November 30, 2023, we incurred approximately $4.3 million of acquisition-related costs, which are included in acquisition-related expenses on our consolidated statement of operations. The amount of revenue of MarkLogic included in our consolidated statement of operations during the fiscal year ended November 30, 2023, was approximately $72.5 million. We determined that disclosing the amount of MarkLogic related earnings included in the consolidated statement of operations is impracticable, as certain operations of MarkLogic were integrated into the operations of the Company from the date of acquisition. Pro Forma Information The following pro forma financial information presents the combined results of operations of Progress and MarkLogic as if the acquisition had occurred on December 1, 2021, after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the MarkLogic acquisition and factually supportable. These pro forma adjustments include: (i) a net increase in amortization expense to record amortization expense relating to the $232.1 million of acquired identifiable intangible assets, (ii) an increase in interest expense to record interest for the period presented as a result of drawing down our revolving line of credit in connection with the acquisition, and (iii) the income tax effect of the adjustments made at the statutory tax rate of the U.S. (approximately 24.5%). The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on December 1, 2021.
(In thousands, except per share data) | Pro Forma Fiscal Year Ended November 30, 2023 |  | Pro Forma Fiscal Year Ended November 30, 2022
Revenue | $ | 733,289 |  |  | $ | 712,170 |
Net income | $ | 79,411 |  |  | $ | 77,058 |
Net income per basic share | $ | 1.83 |  |  | $ | 1.77 |
Net income per diluted share | $ | 1.78 |  |  | $ | 1.74 |
Kemp Acquisition On November 1, 2021, we completed the acquisition of the parent company of Kemp Technologies, Inc. (“Kemp”). The acquisition was completed for a base purchase price of $258.0 million (subject to certain customary adjustments) in cash. The acquisition consideration for Kemp has been allocated to Kemp’s tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values. The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill. We recorded measurement period adjustments based on our valuation and purchase price allocation procedures. The measurement period adjustments were completed during the fourth quarter of fiscal year 2022. The allocation of the purchase price is as follows (in thousands):
|  |  |  |  | Final Purchase Price Allocation |  | Life
Net working capital |  |  |  |  | $ | 26,650 |  |  |
Property, plant and equipment |  |  |  |  | 795 |  |  |
Purchased technology |  |  |  |  | 39,400 |  |  | 5 years
Trade name |  |  |  |  | 7,200 |  |  | 5 years
Customer relationships |  |  |  |  | 75,500 |  |  | 5 years
Other assets |  |  |  |  | 197 |  |  |
Other noncurrent liabilities |  |  |  |  | (1,404) |  |  |
Deferred taxes |  |  |  |  | (22,027) |  |  |
Deferred revenue |  |  |  |  | (29,997) |  |  |
Goodwill |  |  |  |  | 179,433 |  |  |
Net assets acquired |  |  |  |  | $ | 275,747 |  |  |
The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital. The valuation assumptions take into consideration our estimates of customer attrition, technology obsolescence, and revenue growth projections. Tangible assets acquired and assumed liabilities were recorded at fair value. We determined the acquisition date deferred revenue balance based on our assessment of the individual contracts acquired. A significant portion of the deferred revenue was recognized in the 12 months following the acquisition. We recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. We believe that the investment value of the future enhancement of our product and solution offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition of $179.4 million of goodwill, which is not deductible for tax purposes. Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) and certain acquisition restructuring and related charges are not included as a component of consideration transferred but are required to be expensed as incurred. Pro Forma Information The following pro forma financial information presents the combined results of operations of Progress and Kemp as if the acquisition had occurred on December 1, 2019, after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Kemp acquisition and factually supportable. These pro forma adjustments include: (i) an increase in revenue from Kemp as a result of the application of Topic 606 to recognize and measure contract assets and contract liabilities in the business combination, (ii) a net increase in amortization expense to record amortization expense relating to the $122.1 million of acquired identifiable intangible assets, (iii) a decrease in interest expense to remove the interest expense associated with Kemp’s debt obligations, and (iv) the income tax effect of the adjustments made at the statutory tax rate of the U.S. (approximately 24.5%). The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on December 1, 2019. These results are prepared in accordance with ASC 606.
(In thousands, except per share data) |  |  | Pro Forma Fiscal Year Ended November 30, 2021
Revenue |  |  | $ | 590,133 |
Net income |  |  | $ | 75,612 |
Net income per basic share |  |  | $ | 1.72 |
Net income per diluted share |  |  | $ | 1.69 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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