Executive Overview Our clients face many challenges. Developing new therapies is time-consuming and expensive, requiring an average of 10-15 years and an average cost of approximately $2.2 billion to develop a single drug. Drug sponsors must prioritize not only efficacy and safety of the drug, but also issues like drug-drug interactions, inclusion of patients representative of the indicated population, regulatory approvals, minimization of animal testing, safety and compliance during clinical trials, and commercial success. Our clients face many macroeconomic issues including the current attention on global drug pricing resulting in temporary reduction in R&D spending on the part of pharmaceutical and biotech companies. Table of Contents Our software and services allow clients to use modeling and simulation to accelerate drug development, reduce the costs of R&D, comply with regulatory guidance and best practices, and increase confidence in the safety and efficacy of their drugs and biologics. Our adaptive learning solutions support the success of clinical trials by accelerating recruitment of an appropriate patient population, increasing retention of participants, and by driving competency and compliance with trial protocols, while our medical communications solutions provide support in obtaining regulatory approval and commercialization of drugs. The Company is headquartered in Research Triangle Park, North Carolina, and has a European office in Paris, France. The Company has a remote work culture that supports employee work-life balance and minimizes its carbon footprint. Forward-Looking Statements This quarterly report and the documents incorporated in this Quarterly Report by reference contain forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report and the materials accompanying this document are forward-looking statements. The forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as “believes,” “expects,” “anticipates,” “intends,” “will,” “may,” “could,” “would,” “projects,” “continues,” “estimates,” or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by the forward-looking statements. The forward-looking statements contained or incorporated by reference in this Quarterly Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs, or current expectations. The forward-looking statements contained primarily in this Quarterly Report include but are not limited to: •the proposed Merger and the anticipated timing, completion of the transaction; •the ability of the parties to satisfy the conditions to closing the Merger, including obtaining stockholder approval and required regulatory approvals; •the expected timing and outcome of the stockholder meeting relating to the proposed Merger; •the availability and sufficiency of financing arrangements for the proposed Merger and the potential impact of any financing-related developments on the timing or completion of the transaction; •the Company's business, operating strategy, and strategic initiatives pending completion of the Merger; •anticipated operating results, financial performance, cash flows, liquidity, and capital resources; •expected demand for the Company's software products and consulting services; •investments in research and development, including cloud-enabled platforms and artificial intelligence-enabled capabilities; •expected revenues, gross margins, operating expenses, profitability, and tax rates; •capitalized software development costs, goodwill, intangible assets, and impairment assessments; •expected future acquisitions, strategic partnerships, and investments; •the impact of recently issued accounting standards; and •other statements that are not historical facts. Among the important factors that could cause actual results to differ materially from those indicated by forward-looking statements are the risks and uncertainties described under “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on December 1, 2025, as updated by Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q and elsewhere in this document and in our other filings with the SEC. Table of Contents Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this Quarterly Report are made as of the date of this filing and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events, or otherwise. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Results of Operations Comparison of Three Months Ended May 31, 2026, and May 31, 2025 Table of Contents (in thousands) Three Months Ended % of Revenue May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 $ Change % Change Revenues Software $ 12,608 $ 12,615 58 % 62 % $ (7) 0 % Services 9,278 7,748 42 % 38 % 1,530 20 % Total revenues 21,886 20,363 100 % 100 % 1,523 7 % Cost of revenue Software 1,513 2,540 7 % 12 % (1,027) -40 % Services 5,246 4,791 24 % 24 % 455 9 % Total cost of revenues 6,759 7,331 31 % 36 % (572) -8 % Gross profit 15,127 13,032 69 % 64 % 2,095 16 % Research and development 3,406 1,216 16 % 6 % 2,190 180 % Sales and marketing 2,538 2,680 12 % 13 % (142) -5 % General and administrative 4,684 6,141 21 % 30 % (1,457) -24 % Impairments — 77,221 0 % 379 % (77,221) NM Total operating expenses 10,628 87,258 49 % 429 % (76,630) -88 % Income (loss) from operations 4,499 (74,226) 21 % -365 % 78,725 -106 % Other income, net 307 182 1 % 1 % 125 69 % Income (loss) before income taxes 4,806 (74,044) 22 % -364 % 78,850 -106 % Income tax (expense) benefit (1,231) 6,727 -6 % 33 % (7,958) -118 % Net income (loss) $ 3,575 $ (67,317) 16 % -331 % $ 70,892 -105 % Revenues Revenues increased by $1.5 million, or 7%, to $21.9 million for the three months ended May 31, 2026, compared to $20.4 million for the three months ended May 31, 2025. This increase is primarily due to a $1.5 million, or 20%, increase in service-related revenue when compared to the three months ended May 31, 2025. The software-related revenue was flat compared to the three months ended May 31, 2025. The service-related revenue increase of $1.5 million, or 20%, compared to the three months ended May 31, 2025, was primarily due to organic revenue growth of $1.5 million from Development solutions. Cost of revenues Cost of revenues decreased by $0.6 million, or 8%, for the three months ended May 31, 2026, compared to the three months ended May 31, 2025. This decrease is primarily due to a $1.0 million, or 40%, decrease in software-related costs, partially offset by a $0.5 million, or 9%, increase in service-related costs. The software-related costs decrease of $1.0 million, or 40%, compared to the three months ended May 31, 2025, was primarily due to less amortization of $1.1 million, mainly due to the impairment of the Pro-ficiency developed technology in the third quarter of fiscal 2025. The service-related costs increased $0.5 million, or 9%, compared to the three months ended May 31, 2025; the increase was primarily due to higher fulfillment costs associated with increased client services activity. The modest increase in service-related costs relative to revenue growth also reflected improved operating efficiency from headcount reductions implemented in the third quarter of fiscal 2025, and organizational changes that shifted certain internal resources from supporting services to research and development, improved billable utilization, and higher average yields. Gross profit Table of Contents Gross profit increased $2.1 million, or 16%, to $15.1 million for the three months ended May 31, 2026, compared to $13.0 million for the three months ended May 31, 2025. This increase was primarily driven by higher revenues, lower software-related costs, organizational changes that shifted certain internal resources from supporting services to research and development, improved billable utilization, and higher average yields. Software gross profit increased by $1.0 million to 88% gross margin compared to 80% gross margin for the three months ended May 31, 2025. This improvement was primarily driven by lower software-related costs, largely reflecting reduced amortization expense mainly due to the impairment of the Pro-ficiency developed technology in the third quarter of fiscal 2025. Services gross profit increased by $1.1 million to 43% gross margin compared to 38% gross margin for the three months ended May 31, 2025. The increase was primarily attributable to higher services revenue from increased client services activity within Development solutions, as well as improved operating efficiency driven by headcount reductions implemented in the third quarter of fiscal 2025, organizational changes that shifted certain internal resources from supporting services to research and development, higher billable utilization, and higher average yields. Overall gross margin was 69% for the three months ended May 31, 2026, compared to 64% for the three months ended May 31, 2025, primarily due to higher services revenue, lower software amortization expense, organizational changes that shifted certain internal resources from supporting services to research and development, higher billable utilization, and higher average yields. Research and development We incurred $4.1 million of research and development costs during the three months ended May 31, 2026. Of this amount, $0.7 million was capitalized as part of capitalized software development costs, and $3.4 million was expensed. We incurred $2.1 million of research and development costs during the three months ended May 31, 2025. Of this amount, $0.9 million was capitalized, and $1.2 million was expensed. Research and development spend increased by $2.0 million, or 98%, for the three months ended May 31, 2026, compared to the three months ended May 31, 2025, representing our continued investment in innovation for future growth, including the development of an integrated, cloud-enabled modeling ecosystem that connects our validated scientific engines with AI-driven capabilities and workflow automation across the drug development lifecycle. The increase was primarily attributable to higher personnel-related costs, including organizational changes that shifted certain internal resources from supporting services to research and development, as well as increased efforts to support these development initiatives. R&D spend as a percentage of revenue increased to 16% for the three months ended May 31, 2026, from 6% for the three months ended May 31, 2025, representing our continued investment in innovation for future growth. Total R&D cost (defined as capitalized R&D plus R&D expense) was 19% of revenue for the three months ended May 31, 2026, compared to 10% for the three months ended May 31, 2025. Sales and marketing expenses Sales and marketing expenses decreased by $0.1 million, or 5%, to $2.5 million for the three months ended May 31, 2026, compared to $2.7 million for the three months ended May 31, 2025. Sales and marketing as a percentage of revenue decreased to 12% for the three months ended May 31, 2026, from 13% for the three months ended May 31, 2025. The decrease is attributable to the headcount reduction implemented in the third quarter of fiscal 2025. General and administrative expenses G&A expenses decreased by $1.5 million, or 24%, to $4.7 million for the three months ended May 31, 2026, compared to $6.1 million for the three months ended May 31, 2025. G&A as a percentage of revenue, decreased to 21% for the three months ended May 31, 2026, from 30% for the three months ended May 31, 2025. The decrease was primarily due to lower corporate support costs and lower non-recurring expenses, including the absence of expenses associated with the company-wide employee summit that occurred in the prior-year period. Impairments During the three months ended May 31, 2025, the Company recorded $77.2 million of non-cash impairment charges. No impairment charges were recorded during the three months ended May 31, 2026. Table of Contents Other income Total other income was $0.3 million for the three months ended May 31, 2026, compared to $0.2 million for the three months ended May 31, 2025. The increase was primarily driven by higher interest income due to higher average balances of cash invested in interest-bearing accounts. For the three months ended May 31, 2025, the Company also recognized a $0.6 million gain from the change in fair value of contingent consideration related to the Immunetrics holdback liability, which was subsequently settled. Income tax expense The expense for income taxes was $1.2 million for the three months ended May 31, 2026, compared to income tax benefit of $6.7 million for the three months ended May 31, 2025. The Company tax rate increased to 26% for the three months ended May 31, 2026, compared to 9% for the three months ended May 31, 2025. The increase in the tax rate is primarily due to higher income in the US, which is taxed at higher tax rate than income in France. The France effective tax rate increased from 2% to 7% due to less qualifying R&D expenditures in France which drove up the effective tax rate. The Company incurred costs with respect to the Merger Agreement. These costs are deductible for GAAP purposes. Generally, many of the costs incurred must be capitalized and are not deductible for tax purposes. The fiscal year had a smaller benefit from Foreign-Derived Intangible Income ("FDII"). In the current fiscal year, the Company is accelerating deductions elected under the One Big Beautiful Bill Act ("OBBBA"). These deductions are expected to be favorable to cash flows as they accelerate the timing of tax benefits and reduce near-term cash tax payments. Results of Operations Comparison of Nine Months Ended May 31, 2026, and May 31, 2025 (in thousands) Nine Months Ended % of Revenue May 31, 2026 May 31, 2025 May 31, 2026 May 31, 2025 $ Change % Change Revenue Software $ 36,126 $ 36,814 56 % 60 % $ (688) -2 % Services 28,472 24,905 44 % 40 % 3,567 14 % Total revenues 64,598 61,719 100 % 100 % 2,879 5 % Cost of revenue Software 4,573 7,765 7 % 13 % (3,192) -41 % Services 17,864 17,577 28 % 28 % 287 2 % Total cost of revenues 22,437 25,342 35 % 41 % (2,905) -11 % Gross profit 42,161 36,377 65 % 59 % 5,784 16 % Research and development 9,856 5,207 15 % 8 % 4,649 89 % Sales and marketing 8,647 9,248 13 % 15 % (601) -6 % General and administrative 12,816 16,089 20 % 26 % (3,273) -20 % Impairments — 77,221 0 % 125 % (77,221) NM Total operating expenses 31,319 107,765 48 % 175 % (76,446) -71 % Income (loss) from operations 10,842 (71,388) 17 % -116 % 82,230 -115 % Other income, net 820 1,122 1 % 2 % (302) -27 % Income (loss) before income taxes 11,662 (70,266) 18 % -114 % 81,928 -117 % Income tax (expense) benefit (2,876) 6,229 -4 % 10 % (9,105) -146 % Net income (loss) $ 8,786 $ (64,037) 14 % -104 % $ 72,823 -114 % Table of Contents Revenues Revenues increased by $2.9 million, or 5%, to $64.6 million for the nine months ended May 31, 2026, compared to $61.7 million for the nine months ended May 31, 2025. This increase is primarily due to a $3.6 million, or 14%, increase in service-related revenue and a $0.7 million, or 2%, decrease in software-related revenue when compared to the nine months ended May 31, 2025. The service-related revenue increase of $3.6 million, or 14%, compared to the nine months ended May 31, 2025, was primarily due to organic revenue growth within Development solutions of $2.7 million and Commercialization solutions of $0.8 million. The software-related revenue decrease of $0.7 million, or 2%, compared to the nine months ended May 31, 2025, was primarily due to Clinical Operations solutions revenue decline of $2.0 million, partially offset by revenue growth of $1.0 million and $0.4 million within Development solutions and Discovery solutions, respectively. Cost of revenues Cost of revenues decreased by $2.9 million, or 11%, for the nine months ended May 31, 2026, compared to the nine months ended May 31, 2025. This decrease is primarily due to a $3.2 million or 41% decrease in software-related costs and a $0.3 million or 2% increase in service-related costs. The software-related costs decrease of $3.2 million or 41%, compared to the nine months ended May 31, 2025, was mainly attributable to $3.1 million less amortization of acquired technology from the Pro-ficiency as the balances were impaired in the third quarter of fiscal 2025. The service-related costs increase of $0.3 million or 2%, compared to the nine months ended May 31, 2025. The increase in service-related costs was primarily due to higher fulfillment costs associated with increased client services activity. The modest increase in service-related costs relative to service-related revenue growth reflected improved operating efficiency resulting from headcount reductions implemented in the third quarter of fiscal 2025, organizational changes that shifted certain internal resources from supporting services to research and development. Gross profit Gross profit increased to $42.2 million or 65% gross margin for the nine months ended May 31, 2026, compared to $36.4 million or 59% gross margin for the nine months ended May 31, 2025. The increase was primarily attributable to higher service-related revenues, lower software-related costs, organizational changes that shifted certain internal resources from supporting services to research and development, and improved operating efficiency. Software gross profit increased by $2.5 million, and software gross margin increased to 87% for the nine months ended May 31, 2026, compared to 79% for the nine months ended May 31, 2025. This improvement was primarily due to lower software-related costs, largely reflecting reduced amortization expense following the impairment of the Pro-ficiency acquired technology in the third quarter of fiscal 2025, partially offset by lower software-related revenue driven primarily by a decline in Clinical Operations solutions revenue. Services gross profit increased by $3.3 million, and services gross margin increased to 37% for the nine months ended May 31, 2026, compared to 29% for the nine months ended May 31, 2025. This improvement was primarily due to higher service-related revenue from organic growth within Development solutions and Commercialization solutions, together with improved operating efficiency resulting from headcount reductions implemented in the third quarter of fiscal 2025 and organizational changes that shifted certain internal resources from supporting services to research and development. Overall gross margin increased to 65% for the nine months ended May 31, 2026, compared to 59% for the nine months ended May 31, 2025, primarily due to higher service-related revenues, lower software amortization expense, organizational changes that shifted certain internal resources from supporting services to research and development, and improved operating efficiency. Research and development Table of Contents We incurred $12.3 million of research and development costs during the nine months ended May 31, 2026. Of this amount, $2.4 million was capitalized as part of capitalized software development costs and $9.9 million was expensed. We incurred $7.6 million of research and development costs during the nine months ended May 31, 2025. Of this amount, $2.4 million was capitalized and $5.2 million was expensed. Research and development spend increased by $4.7 million, or 62%, for the nine months ended May 31, 2026, compared to the nine months ended May 31, 2025, reflecting higher investment in product and platform development activities, including continued enhancement and expansion of our software offerings and related capabilities. The increase was primarily attributable to higher personnel-related costs, including organizational changes that shifted certain internal resources from supporting services to research and development, as well as increased efforts to support these development initiatives. R&D spend as a percentage of revenue increased to 15% for the nine months ended May 31, 2026, from 8% for the nine months ended May 31, 2025, representing our continued investment in innovation for future growth, including the development of an integrated, cloud-enabled modeling ecosystem that connects our validated scientific engines with AI-driven capabilities and workflow automation across the drug development lifecycle. Total R&D cost (defined as capitalized R&D plus R&D expense) was 19% of revenue for the nine months ended May 31, 2026, compared to 12% for the nine months ended May 31, 2025. Sales and marketing expenses Sales and marketing expenses decreased by $0.6 million, or 6%, to $8.6 million for the nine months ended May 31, 2026, compared to $9.2 million for the nine months ended May 31, 2025. The decrease is attributable to lower compensation cost from the headcount reduction implemented in the third quarter of fiscal 2025, offset by higher customer-facing activities to support commercial execution and demand generation across our offerings. General and administrative expenses General and administrative (“G&A”) expenses decreased by $3.3 million, or 20%, to $12.8 million for the nine months ended May 31, 2026, compared to $16.1 million for the nine months ended May 31, 2025. The decrease primarily reflected lower corporate support costs and reduced non-recurring spending. In addition, facilities costs decreased as we continued to optimize our real estate footprint consistent with a remote-first operating model. Impairments During the nine months ended May 31, 2025, the Company recorded $77.2 million of non-cash impairment charges. No impairment charges were recorded during the nine months ended May 31, 2026. Other income Total other income was $0.8 million for the nine months ended May 31, 2026, compared to $1.1 million for the nine months ended May 31, 2025. The decrease was primarily attributable to a $0.6 million gain recognized in the prior-year period from the change in fair value of the Immunetrics earnout liability, as no earnout payment was anticipated for the second earnout measurement period. The liability was subsequently settled. This decrease was partially offset by a $0.4 million increase in interest income due to higher average balances of cash invested in interest-bearing accounts. Income tax expense The expense for income taxes was $2.9 million for the nine months ended May 31, 2026, compared to an income tax benefit of $6.2 million for the nine months ended May 31, 2025. The Company tax rate increased to 25% for the nine months ended May 31, 2026, compared to 9% for the nine months ended May 31, 2025. The increase in the tax rate is primarily due to the result of a favorable discrete item in the prior year that did not recur in the current year, a less favorable jurisdictional mix of earnings between the U.S. and France, increased unfavorable Global Intangible Low-Taxed Income ("GILTI") impacts driven by higher French taxable income, and a lower Foreign-Derived Intangible Income ("FDII") benefit. In addition, certain items affecting the current-year effective tax rate relate to accelerated deductions elected under the One Big Beautiful Bill Act ("OBBBA"). These deductions are expected to be favorable to cash flows as they accelerate the timing of tax benefits and reduce near-term cash tax payments. Table of Contents Liquidity and Capital Resources Our principal sources of capital have been cash flows from our operations. We expect existing cash, cash equivalents, short-term investments, cash generated by ongoing operations, and working capital will be sufficient to fund our operating activities and cash commitments for investing and financing activities and material capital expenditures for the next 12 months. Pursuant to the Merger Agreement entered into on June 15, 2026, the Company is subject to customary interim operating covenants pending completion of the merger. These covenants, subject to specified exceptions and the prior written consent of Parent, restrict certain capital allocation and corporate activities, including repurchases or redemptions of common stock, payment of dividends or other distributions, issuance of equity securities, incurrence of certain indebtedness, acquisitions and investments, significant capital expenditures, and certain other actions outside the ordinary course of business. Accordingly, the Company expects to operate within these contractual limitations until the merger is completed or the Merger Agreement is terminated. Except as discussed elsewhere in this Quarterly Report, we are not aware of any trends or demands, commitments, events, or uncertainties that are reasonably likely to result in a decrease in liquidity of our assets. Cash, Cash Equivalents, and Investments As of May 31, 2026, the Company had $35.3 million in cash and cash equivalents, $14.7 million in short-term investments, and net working capital of $61.6 million. Short-term investments consist of certificate of deposits, corporate bonds, and cash equivalents. The investments are U.S.-dollar-denominated securities. Cash Flows Operating Activities Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions (recoveries) for credit losses, depreciation and amortization, stock-based compensation, deferred taxes, and other non-cash items and (ii) changes in the balances of operating assets and liabilities. Net cash provided by operating activities was $19.4 million for the nine months ended May 31, 2026, compared to $12.5 million for the nine months ended May 31, 2025. The $6.8 million improvement was driven primarily by an increase in cash-adjusted net income, an increase in other liabilities and a decrease in deferred taxes, partially offset by an increase in accounts receivable. Investing Activities Net cash used in investing activities during the nine months ended May 31, 2026, was $15.4 million, compared to net cash provided by investing activities of $5.4 million during the nine months ended May 31, 2025. The decrease of $20.7 million primarily reflects deployment and rebalancing of our short-term investment portfolio and capitalized software development to support product and platform enhancements. During the nine months ended May 31, 2026, we invested $28.2 million in short-term investments as part of our treasury strategy to prudently invest excess cash while preserving liquidity and capital, and we incurred $2.3 million of capitalized computer software development costs to support ongoing product development and technology improvements. These uses of cash were partially offset by $15.0 million of maturities of short-term investments as securities matured in the normal course of portfolio management. Financing Activities Net cash provided by financing activities during the nine months ended May 31, 2026, was $0.5 million, compared to cash used in financing activities of $1.3 million for the nine months ended May 31, 2025. The $1.7 million increase was primarily attributable to the prior-year cash settlement of $1.6 million for holdback obligations related to the Immunetrics acquisition, as well as higher proceeds from the exercise of stock options. Share Repurchases Table of Contents For the three and nine months ended May 31, 2026, and May 31, 2025, respectively, we did not repurchase any shares of Company stock. As of May 31, 2026, $30 million remains available for additional repurchases under our authorized repurchase program. However, we are not obligated to repurchase any additional shares, and the timing, manner, price, and actual amount of further share repurchases will depend on a variety of factors, including stock price, market conditions, other capital management needs and opportunities, and corporate and regulatory considerations. The share repurchase program has no expiration date but may be terminated at any time at our Board of Directors’ discretion. Pursuant to the Merger Agreement entered into on June 15, 2026, the Company is subject to customary interim operating covenants pending completion of the merger. These covenants, subject to specified exceptions and the prior written consent of Parent, restrict certain capital allocation and corporate activities, including repurchases or redemptions of common stock, payment of dividends or other distributions, issuance of equity securities, incurrence of certain indebtedness, acquisitions and investments, significant capital expenditures, and certain other actions outside the ordinary course of business. Accordingly, the Company expects to operate within these contractual limitations until the merger is completed or the Merger Agreement is terminated. Critical Accounting Estimates Estimates Our financial statements and accompanying notes are prepared in accordance with GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Actual results could differ from those estimates. Critical Accounting Estimates for us include revenue recognition, accounting for capitalized software development costs, accounting for intangible assets and goodwill, valuation of stock options, business acquisitions and accounting for income taxes. Revenue Recognition We generate revenue primarily from the sale of software licenses, providing consulting services, and customizing a software platform tailored to the pharmaceutical industry for drug development. The Company determines revenue recognition through the following steps: i.Identification of the contract, or contracts, 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 the performance obligations in the contract v.Recognition of revenue when, or as, the Company satisfies a performance obligation The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Contracts generally have fixed pricing terms and are not subject to variable pricing. The Company considers the nature and significance of each specific performance obligation under a contract when allocating the proceeds under each contract. Accounting for contracts includes significant judgment in the estimation of hours/cost to be incurred on consulting contracts, and the de minimis nature of the post-sales costs associated with software sales. Capitalized Computer Software Development Costs Software development costs are capitalized in accordance with ASC 985-20, “Costs of Software to Be Sold, Leased, or Marketed.” Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized computer software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries and direct payroll-related costs and the purchase of existing software to be used in the Company’s software products. Total capitalized computer software development costs were $0.7 million and $0.9 million for the three months ended May 31, 2026, and May 31, 2025, respectively, and $2.4 million and $2.4 million for the nine months ended May 31, 2026, and May 31, 2025, respectively. Table of Contents Amortization of capitalized computer software development costs is calculated on a product-by-product basis on the straight-line method over the estimated economic life of the products, not to exceed five years. Amortization of software development costs amounted to $0.8 million and $0.8 million, respectively, for the three months ended May 31, 2026, and May 31, 2025, respectively, and $2.5 million and $2.4 million, for the nine months ended May 31, 2026, and May 31, 2025, respectively. We expect future amortization expense to vary due to variations in capitalized computer software development costs. We test capitalized computer software development costs for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible Assets and Goodwill The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and recognizes the assets acquired and liabilities assumed at their acquisition-date fair value. Acquired intangible assets include customer relationships, software, trade names, and noncompete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed. Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. Goodwill is not amortized; instead, it is tested for impairment annually or when events or circumstances change that would indicate that goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company's use of the acquired assets or the strategy for the Company's overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment. As of May 31, 2026, the Company determined that it had two reporting units - Software and Services. As of May 31, 2026, the entire balance of goodwill was attributed to both of the Company's reporting units, Software and Services. Intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. No impairment losses were recorded during the three and nine months ended May 31, 2026. During the three and nine months ended May 31, 2025, the Company recorded impairments charges of $77.2 million. Business Acquisitions The Company accounted for the acquisitions using the acquisition method of accounting, where the assets acquired and liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses, and cash flows, weighted-average cost of capital, discount rates, and estimates of terminal values. Business acquisitions are included in the Company's consolidated financial statements as of the date of the acquisition. Research and Development Costs R&D costs are charged to expense as incurred until technological feasibility has been established, or when the costs are for maintenance and minor modification of existing software products that do not add significant new capabilities to the products. These costs include salaries and benefits, laboratory experiments, and purchased software that was developed by other companies and incorporated into, or used in the development of, our final products. Income Taxes The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been included in the financial statements or tax returns. Table of Contents Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. Stock-Based Compensation The Company accounts for stock options in accordance with ASC 718-10, “Compensation-Stock Compensation.” Under this method, compensation costs include the estimated grant-date fair value of awards amortized over the options’ vesting period. Stock-based compensation costs related to stock options, not including shares issued to directors for services, was $1.6 million and $1.4 million for the three months ended May 31, 2026, and May 31, 2025, respectively, and $4.6 million and $4.7 million for the nine months ended May 31, 2026, and May 31, 2025, respectively.