Press Release

Exceeds Guidance for Revenue

BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 17, 2019-- Progress (NASDAQ: PRGS), the leading provider of application development and digital experience technologies, today announced results for its fiscal fourth quarter and fiscal year ended November 30, 2018.

Revenue was $111.3 million during the quarter compared to $116.1 million in the same quarter last year, a year-over-year decrease of 4% on an actual currency basis and 3% on a constant currency basis. On a non-GAAP basis, revenue was $111.5 million during the quarter compared to $116.3 million in the same quarter last year, a decrease of 4% on an actual currency basis and 3% on a constant currency basis.

On a GAAP basis, diluted earnings per share during the quarter was $0.41 compared to $0.34 in the same quarter last year, an increase of 21%. On a non-GAAP basis, diluted earnings per share during the quarter was $0.76 compared to $0.67 in the same quarter last year, an increase of 13%.

“We achieved better-than-expected revenue and strong earnings per share in Q4, finishing a very solid financial year,” said Yogesh Gupta, CEO at Progress. “Our business continues to be healthy and stable, and demand for our high-productivity application development platform is growing. We look forward to continued momentum in 2019, as we execute on our strategic plan that will drive sustainable, long-term value for all shareholders.”

Additional financial highlights included:

		Three Months Ended
		GAAP											Non-GAAP
(In thousands, except percentages and per share amounts)		November 30, 2018				November 30, 2017				% Change			November 30, 2018				November 30, 2017				% Change
Revenue		$	111,333			$	116,079			(4	)%		$	111,495			$	116,335			(4	)%
Income from operations		$	24,259			$	28,809			(16	)%		$	44,213			$	49,076			(10	)%
Operating margin		22		%		25		%		(3	)%		40		%		42		%		(2	)%
Net income		$	18,430			$	16,429			12	%		$	34,590			$	32,073			8	%
Diluted earnings per share		$	0.41			$	0.34			21	%		$	0.76			$	0.67			13	%
Cash from operations (GAAP) / Adjusted free cash flow (Non-GAAP)		$	24,327			$	32,515			(25	)%		$	23,232			$	32,365			(28	)%

Paul Jalbert, CFO, said: “We are pleased with our financial performance for Q4 and for the full year. Operating margins and cash flows were very strong, and we returned nearly $150 million of capital to shareholders in 2018. Through our sustained focus on running lean operationally, we have reduced our annual expenses by almost $40 million over the past two years and are well-positioned for continued financial success as we enter 2019.”

Other fiscal fourth quarter 2018 metrics and recent results included:

• Cash, cash equivalents and short-term investments were $139.5 million at the end of the quarter;
• DSO was 47 days, consistent with the fiscal fourth quarter of 2017, and an increase of 4 days compared to 43 days in the fiscal third quarter of 2018;
• Pursuant to the $250 million share authorization by the Board of Directors, Progress repurchased 241,000 shares for $10.0 million during the fiscal fourth quarter of 2018. As of November 30, 2018, there was $100.0 million remaining under this authorization; and
• On January 8, 2019, our Board of Directors declared a quarterly dividend of $0.155 per share of common stock that will be paid on March 15, 2019 to shareholders of record as of the close of business on March 1, 2019.

Full Year Results
		Fiscal Year Ended
		GAAP											Non-GAAP
(In thousands, except percentages and per share amounts)		November 30, 2018				November 30, 2017				% Change			November 30, 2018				November 30, 2017				% Change
Revenue		$	397,165			$	397,572			—	%		$	397,695			$	398,587			—	%
Income from operations		$	85,998			$	70,614			22	%		$	152,200			$	144,453			5	%
Operating margin		22		%		18		%		4	%		38		%		36		%		2	%
Net income		$	63,491			$	37,417			70	%		$	115,040			$	92,493			24	%
Diluted earnings per share		$	1.38			$	0.77			79	%		$	2.49			$	1.91			30	%
Cash from operations (GAAP) / Adjusted free cash flow (Non-GAAP)		$	121,352			$	105,686			15	%		$	120,213			$	121,543			(1	)%

Impact of the New Revenue Recognition Accounting Standard

Progress adopted the new accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018, using the full retrospective method. Guidance for the fiscal year ending November 30, 2019, and for the first quarter ending February 28, 2019, has been prepared in accordance with the new standard. To provide comparable metrics to our fiscal year 2019 guidance, we have included preliminary adjustments to our quarterly and annual fiscal year 2018 results later in this release. These amounts are unaudited.

The largest impact from ASC 606 is on our Data Connectivity and Integration ("DCI") segment revenue. DCI license revenue is comprised primarily of multi-year term contracts, and was recognized upon payment due dates over the term of the agreement under the prior accounting standard. ASC 606, however, requires the license revenue for the entire term of these multi-year arrangements to be recognized up-front, and this change materially impacts the timing of our DCI segment revenue.

We do not expect a material impact from ASC 606 on our OpenEdge segment revenue, or on our Application Development and Deployment segment revenue.

2019 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2019 and for the fiscal first quarter ending February 28, 2019, as well as comparable fiscal 2018 periods adjusted results, under ASC 606:

		FY 2018 Adjusted(1)								FY 2019 Guidance
(In millions, except percentages and per share amounts)		FY 2018 GAAP				FY 2018 Non-GAAP				FY 2019 GAAP			FY 2019 Non-GAAP
Revenue		$	379			$	379			$380 - $386			$380 - $386
Diluted earnings per share		$	1.08			$	2.19			$1.19 - $1.24			$2.33 - $2.39
Operating margin			18	%			35	%		20	%		36	%
Cash from operations (GAAP) / Adjusted free cash flow (Non-GAAP)		$	121			$	120			$115 - $120			$115 - $120
Effective tax rate			18	%			20	%		24	%		19	%
		Q1 2018 Adjusted(1)								Q1 2019 Guidance
(In millions, except per share amounts)		Q1 2018 GAAP				Q1 2018 Non-GAAP				Q1 2019 GAAP			Q1 2019 Non-GAAP
Revenue		$	95			$	96			$85 - $88			$85 - $88
Diluted earnings per share		$	0.29			$	0.56			$0.18 - $0.20			$0.45 - $0.47

⁽¹⁾Progress adopted ASC 606 on December 1, 2018. As our GAAP results for fiscal year 2018 are reported under prior revenue recognition guidance, we have provided preliminary adjusted amounts for fiscal year 2018 for comparability to the first fiscal quarter and full fiscal year of 2019. These amounts are unaudited. Refer to the schedules later in this release, which include the preliminary adjustments to our quarterly and annual fiscal year 2018 results.

Based on current exchange rates, the expected negative currency translation impact on Progress' fiscal year 2019 business outlook compared to 2018 exchange rates is approximately $5.8 million on GAAP and non-GAAP revenue, and approximately $0.04 on GAAP and non-GAAP diluted earnings per share. The expected negative currency translation impact on Progress' fiscal Q1 2019 business outlook compared to 2018 exchange rates on GAAP and non-GAAP revenue, and on GAAP and non-GAAP diluted earnings per share is approximately $2.4 million and $0.02, respectively. To the extent that there are changes in exchange rates versus the current environment, this may have an impact on Progress' business outlook.

Conference Call

The Progress quarterly investor conference call to review its fiscal fourth quarter of 2018 will be broadcast live at 5:00 p.m. ET on Thursday, January 17, 2019 and can be accessed on the investor relations section of the company’s website, located at www.progress.com. Additionally, you can listen to the call by telephone by dialing 1-800-458-4121, pass code 9119737. The conference call will include comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress website within the investor relations section after the live conference call.

Legal Notice Regarding Non-GAAP Financial Information

Progress provides non-GAAP financial information as additional information for investors. These non-GAAP measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP"). Progress believes that the non-GAAP results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. A reconciliation of non-GAAP adjustments to the company's GAAP financial results is included in the tables below and is available on the Progress website at www.progress.com within the investor relations section. Additional information regarding the company's non-GAAP financial information is contained in the company's Current Report on Form 8-K furnished to the Securities and Exchange Commission in connection with this press release, which is also available on the Progress website within the investor relations section.

Note Regarding Forward-Looking Statements

This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “should,” “expect,” “intend,” “plan,” “target,” “anticipate” and “continue,” the negative of these words, other terms of similar meaning or the use of future dates.

Forward-looking statements in this press release include, but are not limited to, statements regarding Progress' business outlook and financial guidance. There are a number of factors that could cause actual results or future events to differ materially from those anticipated by the forward-looking statements, including, without limitation:

(1) Economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts. (3) Our ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts. (5) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. (6) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (7) If the security measures for our software, services or other offerings are compromised or subject to a successful cyber-attack, or if such offerings contain significant coding or configuration errors, we may experience reputational harm, legal claims and financial exposure. (8) We have made acquisitions, and may make acquisitions in the future, and those acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. For further information regarding risks and uncertainties associated with Progress' business, please refer to Progress' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2017, as amended, and its Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2018, May 31, 2018 and August 31, 2018. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

About Progress

Progress (NASDAQ: PRGS) offers the leading platform for developing and deploying strategic business applications. We enable customers and partners to deliver modern, high-impact digital experiences with a fraction of the effort, time and cost. Progress offers powerful tools for easily building adaptive user experiences across any type of device or touchpoint, award-winning machine learning that enables cognitive capabilities to be a part of any application, the flexibility of a serverless cloud to deploy modern apps, business rules, web content management, plus leading data connectivity technology. Over 1,700 independent software vendors, 100,000 enterprise customers, and 2 million developers rely on Progress to power their applications. Learn about Progress at www.progress.com or +1-800-477-6473.

Progress and Progress Software are trademarks or registered trademarks of Progress Software Corporation and/or its subsidiaries or affiliates in the U.S. and other countries. Any other names contained herein may be trademarks of their respective owners.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
		Three Months Ended											Fiscal Year Ended
(In thousands, except per share data)		November 30, 2018				November 30, 2017				% Change			November 30, 2018				November 30, 2017				% Change
Revenue:
Software licenses		$	43,151			$	45,963			(6	)%		$	122,137			$	124,406			(2	)%
Maintenance and services		68,182				70,116				(3	)%		275,028				273,166				1	%
Total revenue		111,333				116,079				(4	)%		397,165				397,572				—	%
Costs of revenue:
Cost of software licenses		1,198				1,405				(15	)%		4,769				5,752				(17	)%
Cost of maintenance and services		10,025				10,575				(5	)%		39,470				43,299				(9	)%
Amortization of acquired intangibles		5,508				5,979				(8	)%		22,734				20,108				13	%
Total costs of revenue		16,731				17,959				(7	)%		66,973				69,159				(3	)%
Gross profit		94,602				98,120				(4	)%		330,192				328,413				1	%
Operating expenses:
Sales and marketing		28,198				26,229				8	%		93,036				96,345				(3	)%
Product development		20,334				21,243				(4	)%		79,739				76,988				4	%
General and administrative		13,380				12,401				8	%		49,050				45,739				7	%
Amortization of acquired intangibles		3,285				3,318				(1	)%		13,241				13,039				2	%
Loss on assets held for sale		5,147				—				*			5,147				—				*
Fees related to shareholder activist		—				2,020				*			1,472				2,020				(27	)%
Restructuring expense		(131		)		3,486				(104	)%		2,251				22,210				(90	)%
Acquisition-related expenses		130				614				(79	)%		258				1,458				(82	)%
Total operating expenses		70,343				69,311				1	%		244,194				257,799				(5	)%
Income from operations		24,259				28,809				(16	)%		85,998				70,614				22	%
Other (expense) income		(2,188		)		(728		)		(201	)%		(7,018		)		(5,027		)		(40	)%
Income before income taxes		22,071				28,081				(21	)%		78,980				65,587				20	%
Provision for income taxes		3,641				11,652				(69	)%		15,489				28,170				(45	)%
Net income		$	18,430			$	16,429			12	%		$	63,491			$	37,417			70	%
Earnings per share:
Basic		$	0.41			$	0.35			17	%		$	1.39			$	0.78			78	%
Diluted		$	0.41			$	0.34			21	%		$	1.38			$	0.77			79	%
Weighted average shares outstanding:
Basic		45,055				47,489				(5	)%		45,561				48,129				(5	)%
Diluted		45,401				48,171				(6	)%		46,135				48,516				(5	)%
Cash dividends declared per common share		$	0.155			$	0.140			11	%		$	0.575			$	0.515			12	%

Stock-based compensation is included in the condensed consolidated statements of operations, as follows:
Cost of revenue		$	197			$	226			(13	)%		$	616			$	1,016			(39	)%
Sales and marketing		832				843				(1	)%		2,959				2,214				34	%
Product development		2,468				1,877				31	%		8,242				4,576				80	%
General and administrative		2,356				1,648				43	%		8,752				6,347				38	%
Total		$	5,853			$	4,594			27	%		$	20,569			$	14,153			45	%
*Not meaningful

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)		November 30, 2018				November 30, 2017
Assets
Current assets:
Cash, cash equivalents and short-term investments		$	139,513			$	183,609
Accounts receivable, net		58,450				61,210
Other current assets		25,080				18,588
Assets held for sale		5,776				—
Total current assets		228,819				263,407
Property and equipment, net		30,714				42,261
Goodwill and intangible assets, net		373,911				409,935
Other assets		7,165				3,115
Total assets		$	640,609			$	718,718
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other current liabilities		$	57,005			$	69,661
Current portion of long-term debt		5,819				5,819
Short-term deferred revenue		133,194				132,538
Total current liabilities		196,018				208,018
Long-term debt, net		110,270				116,090
Long-term deferred revenue		15,127				9,750
Other long-term liabilities		9,112				8,776
Shareholders' equity:
Common stock and additional paid-in capital		267,053				249,836
Retained earnings		43,029				126,248
Total shareholders' equity		310,082				376,084
Total liabilities and shareholders' equity		$	640,609			$	718,718

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended								Fiscal Year Ended
(In thousands)		November 30, 2018				November 30, 2017				November 30, 2018				November 30, 2017
Cash flows from operating activities:
Net income		$	18,430			$	16,429			$	63,491			$	37,417
Depreciation and amortization		10,855				11,572				44,502				42,896
Stock-based compensation		5,853				4,594				20,569				14,153
Loss on assets held for sale		5,147				—				5,147				—
Other non-cash adjustments		1,698				(2,792		)		2,687				32
Changes in operating assets and liabilities		(17,656		)		2,712				(15,044		)		11,188
Net cash flows from operating activities		24,327				32,515				121,352				105,686
Capital expenditures		(1,282		)		(2,515		)		(7,250		)		(3,377		)
Repurchases of common stock, net of issuances		(8,738		)		(27,222		)		(110,795		)		(63,911		)
Dividend payments to shareholders		(6,318		)		(5,975		)		(25,789		)		(24,127		)
Payments for acquisitions, net of cash acquired		—				—				—				(77,150		)
Payments of principal on long-term debt and debt issuance costs		(1,547		)		(1,174		)		(6,188		)		(12,424		)
Other		(4,810		)		(3,336		)		(15,426		)		9,158
Net change in cash, cash equivalents and short-term investments		1,632				(7,707		)		(44,096		)		(66,145		)
Cash, cash equivalents and short-term investments, beginning of period		137,881				191,316				183,609				249,754
Cash, cash equivalents and short-term investments, end of period		$	139,513			$	183,609			$	139,513			$	183,609

RESULTS OF OPERATIONS BY SEGMENT
(Unaudited)
		Three Months Ended											Fiscal Year Ended
(In thousands)		November 30, 2018				November 30, 2017				% Change			November 30, 2018				November 30, 2017				% Change
Segment revenue:
OpenEdge		$	73,854			$	77,639			(5	)%		$	278,258			$	276,172			1	%
Data Connectivity and Integration		18,041				18,044				—	%		39,030				40,955				(5	)%
Application Development and Deployment		19,438				20,396				(5	)%		79,877				80,445				(1	)%
Total revenue		111,333				116,079				(4	)%		397,165				397,572				—	%
Segment costs of revenue and operating expenses:
OpenEdge		20,626				19,959				3	%		67,820				72,497				(6	)%
Data Connectivity and Integration		2,811				2,798				—	%		7,634				9,329				(18	)%
Application Development and Deployment		7,019				6,749				4	%		27,087				26,645				2	%
Total costs of revenue and operating expenses		30,456				29,506				3	%		102,541				108,471				(5	)%
Segment contribution margin:
OpenEdge		53,228				57,680				(8	)%		210,438				203,675				3	%
Data Connectivity and Integration		15,230				15,246				—	%		31,396				31,626				(1	)%
Application Development and Deployment		12,419				13,647				(9	)%		52,790				53,800				(2	)%
Total contribution margin		80,877				86,573				(7	)%		294,624				289,101				2	%
Other unallocated expenses(1)		56,618				57,764				(2	)%		208,626				218,487				(5	)%
Income from operations		24,259				28,809				(16	)%		85,998				70,614				22	%
Other expense, net		(2,188		)		(728		)		(201	)%		(7,018		)		(5,027		)		(40	)%
Income before income taxes		$	22,071			$	28,081			(21	)%		$	78,980			$	65,587			20	%

⁽¹⁾The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: certain product development and corporate sales and marketing expenses, customer support, administration, amortization of acquired intangibles, loss on assets held for sale, stock-based compensation, fees related to shareholder activist, restructuring, and acquisition-related expenses.

SUPPLEMENTAL INFORMATION
(Unaudited)
Revenue by Type
(In thousands)		Q4 2017				Q1 2018				Q2 2018				Q3 2018				Q4 2018				FY 2018				FY 2017
Software licenses		$	45,963			$	25,343			$	26,439			$	27,204			$	43,151			$	122,137			$	124,406
Maintenance		61,826				61,479				62,323				60,566				60,454				244,822				241,398
Services		8,290				7,225				7,340				7,913				7,728				30,206				31,768
Total revenue		$	116,079			$	94,047			$	96,102			$	95,683			$	111,333			$	397,165			$	397,572
Revenue by Region
(In thousands)		Q4 2017				Q1 2018				Q2 2018				Q3 2018				Q4 2018				FY 2018				FY 2017
North America		$	66,504			$	51,641			$	50,823			$	52,212			$	65,246			$	219,922			$	223,942
EMEA		38,039				33,014				35,333				33,422				36,203				137,972				130,359
Latin America		5,489				4,461				4,256				4,341				4,579				17,637				21,158
Asia Pacific		6,047				4,931				5,690				5,708				5,305				21,634				22,113
Total revenue		$	116,079			$	94,047			$	96,102			$	95,683			$	111,333			$	397,165			$	397,572
Revenue by Segment
(In thousands)		Q4 2017				Q1 2018				Q2 2018				Q3 2018				Q4 2018				FY 2018				FY 2017
OpenEdge		$	77,639			$	66,408			$	69,967			$	68,029			$	73,854			$	278,258			$	276,172
Data Connectivity and Integration		18,044				7,604				5,788				7,597				18,041				39,030				40,955
Application Development and Deployment		20,396				20,035				20,347				20,057				19,438				79,877				80,445
Total revenue		$	116,079			$	94,047			$	96,102			$	95,683			$	111,333			$	397,165			$	397,572

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - FOURTH QUARTER
(Unaudited)
		Three Months Ended														% Change
(In thousands, except per share data)		November 30, 2018							November 30, 2017							Non-GAAP
Adjusted revenue:
GAAP revenue		$	111,333						$	116,079
Acquisition-related revenue(1)		162							256
Non-GAAP revenue		$	111,495			100	%		$	116,335			100	%		(4	)%
Adjusted income from operations:
GAAP income from operations		$	24,259			22	%		$	28,809			25	%
Amortization of acquired intangibles		8,793				8	%		9,297				8	%
Loss on assets held for sale(2)		5,147				5	%		—				—	%
Fees related to shareholder activist		—				—	%		2,020				2	%
Restructuring expenses and other		(131		)		—	%		3,486				3	%
Stock-based compensation		5,853				5	%		4,594				4	%
Acquisition-related revenue and expenses		292				—	%		870				—	%
Non-GAAP income from operations		$	44,213			40	%		$	49,076			42	%		(10	)%
Adjusted net income:
GAAP net income		$	18,430			17	%		$	16,429			14	%
Amortization of acquired intangibles		8,793				8	%		9,297				8	%
Loss on assets held for sale(2)		5,147				5	%		—				—	%
Fees related to shareholder activist		—				—	%		2,020				2	%
Restructuring expenses and other		(131		)		—	%		3,486				3	%
Stock-based compensation		5,853				5	%		4,594				4	%
Acquisition-related revenue and expenses		292				—	%		870				1	%
Tax adjustments		(3,794		)		(4	)%		(4,623		)		(4	)%
Non-GAAP net income		$	34,590			31	%		$	32,073			28	%		8	%
Adjusted diluted earnings per share:
GAAP diluted earnings per share		$	0.41						$	0.34
Amortization of acquired intangibles		0.19							0.20
Loss on assets held for sale(2)		0.11							—
Fees related to shareholder activist		—							0.04
Restructuring expenses and other		—							0.07
Stock-based compensation		0.12							0.10
Acquisition-related revenue and expenses		0.01							0.02
Provision for income taxes		(0.08		)					(0.10		)
Non-GAAP diluted earnings per share		$	0.76						$	0.67						13	%
Non-GAAP weighted avg shares outstanding - diluted		45,401							48,171							(6	)%

⁽¹⁾Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue under prior accounting guidance that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively. Upon our adoption of ASC 606 in fiscal year 2019, our GAAP revenue and Non-GAAP revenue results are the same.
⁽²⁾Loss on assets held for sale represents two buildings on our Bedford campus that the Company is actively marketing and intends to sell within one year. GAAP accounting requires long-lived assets designated as held for sale to be measured at the lower of the carrying value or the fair value less cost to sell. As this loss is not part of our core operating results and is infrequent in nature, we exclude it to facilitate a more meaningful evaluation of our current operating performance and comparisons to our operating performance in other periods.

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - FISCAL YEAR
(Unaudited)
		Fiscal Year Ended														% Change
(In thousands, except per share data)		November 30, 2018							November 30, 2017							Non-GAAP
Adjusted revenue:
GAAP revenue		$	397,165						$	397,572
Acquisition-related revenue(1)		530							1,015
Non-GAAP revenue		$	397,695			100	%		$	398,587			100	%		—	%
Adjusted income from operations:
GAAP income from operations		$	85,998			22	%		$	70,614			18	%
Amortization of acquired intangibles		35,975				9	%		33,147				8	%
Loss on assets held for sale(2)		5,147				1	%		—				—	%
Fees related to shareholder activist		1,472				—	%		2,020				—	%
Restructuring expenses and other		2,251				1	%		22,046				5	%
Stock-based compensation		20,569				5	%		14,153				4	%
Acquisition-related revenue and expenses		788				—	%		2,473				1	%
Non-GAAP income from operations		$	152,200			38	%		$	144,453			36	%		5	%
Adjusted net income:
GAAP net income		$	63,491			16	%		$	37,417			9	%
Amortization of acquired intangibles		35,975				9	%		33,147				8	%
Loss on assets held for sale(2)		5,147				1	%		—				—	%
Fees related to shareholder activist		1,472				—	%		2,020				—	%
Restructuring expenses and other		2,251				1	%		22,046				6	%
Stock-based compensation		20,569				5	%		14,153				4	%
Acquisition-related revenue and expenses		788				—	%		2,473				1	%
Tax adjustments		(14,653		)		(3	)%		(18,763		)		(5	)%
Non-GAAP net income		$	115,040			29	%		$	92,493			23	%		24	%
Adjusted diluted earnings per share:
GAAP diluted earnings per share		$	1.38						$	0.77
Amortization of acquired intangibles		0.78							0.68
Loss on assets held for sale(2)		0.11							—
Fees related to shareholder activist		0.03							0.04
Restructuring expenses and other		0.05							0.46
Stock-based compensation		0.44							0.29
Acquisition-related revenue and expenses		0.02							0.05
Provision for income taxes		(0.32		)					(0.38		)
Non-GAAP diluted earnings per share		$	2.49						$	1.91						30	%
Non-GAAP weighted avg shares outstanding - diluted		46,135							48,516							(5	)%

⁽¹⁾Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue under prior accounting guidance that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively. Upon our adoption of ASC 606 in fiscal year 2019, our GAAP revenue and Non-GAAP revenue results are the same.
⁽²⁾Loss on assets held for sale represents two buildings on our Bedford campus that the Company is actively marketing and intends to sell within one year. GAAP accounting requires long-lived assets designated as held for sale to be measured at the lower of the carrying value or the fair value less cost to sell. As this loss is not part of our core operating results and is infrequent in nature, we exclude it to facilitate a more meaningful evaluation of our current operating performance and comparisons to our operating performance in other periods.

OTHER NON-GAAP FINANCIAL MEASURES - FOURTH QUARTER
(Unaudited)
Revenue by Type
(In thousands)		Q4 2018				Non-GAAP Adjustment(1)				Non-GAAP Revenue
Software licenses		$	43,151			$	7			$	43,158
Maintenance		60,454				33				60,487
Services		7,728				122				7,850
Total revenue		$	111,333			$	162			$	111,495
Revenue by Region
(In thousands)		Q4 2018				Non-GAAP Adjustment(1)				Non-GAAP Revenue
North America		$	65,246			$	162			$	65,408
EMEA		36,203				—				36,203
Latin America		4,579				—				4,579
Asia Pacific		5,305				—				5,305
Total revenue		$	111,333			$	162			$	111,495
Revenue by Segment
(In thousands)		Q4 2018				Non-GAAP Adjustment(1)				Non-GAAP Revenue
OpenEdge		$	73,854			$	122			$	73,976
Data Connectivity and Integration		18,041				—				18,041
Application Development and Deployment		19,438				40				19,478
Total revenue		$	111,333			$	162			$	111,495
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue under prior accounting guidance that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively. Upon our adoption of ASC 606 in fiscal year 2019, our GAAP revenue and Non-GAAP revenue results are the same.
Adjusted Free Cash Flow
(In thousands)		Q4 2018				Q4 2017				% Change
Cash flows from operations		$	24,327			$	32,515			(25		)%
Purchases of property and equipment		(1,282		)		(2,515		)		(49		)%
Free cash flow		23,045				30,000				(23		)%
Add back: restructuring payments		187				2,365				(92		)%
Adjusted free cash flow		$	23,232			$	32,365			(28		)%

OTHER NON-GAAP FINANCIAL MEASURES - FISCAL YEAR
(Unaudited)
Revenue by Type
(In thousands)		FY 2018				Non-GAAP Adjustment(1)				Non-GAAP Revenue
Software licenses		$	122,137			$	63			$	122,200
Maintenance		244,822				191				245,013
Services		30,206				276				30,482
Total revenue		$	397,165			$	530			$	397,695
Revenue by Region
(In thousands)		FY 2018				Non-GAAP Adjustment(1)				Non-GAAP Revenue
North America		$	219,922			$	530			$	220,452
EMEA		137,972				—				137,972
Latin America		17,637				—				17,637
Asia Pacific		21,634				—				21,634
Total revenue		$	397,165			$	530			$	397,695
Revenue by Segment
(In thousands)		FY 2018				Non-GAAP Adjustment(1)				Non-GAAP Revenue
OpenEdge		$	278,258			$	276			$	278,534
Data Connectivity and Integration		39,030				—				39,030
Application Development and Deployment		79,877				254				80,131
Total revenue		$	397,165			$	530			$	397,695
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue under prior accounting guidance that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively. Upon our adoption of ASC 606 in fiscal year 2019, our GAAP revenue and Non-GAAP revenue results are the same.
Adjusted Free Cash Flow
(In thousands)		FY 2018				FY 2017				% Change
Cash flows from operations		$	121,352			$	105,686			15		%
Purchases of property and equipment		(7,250		)		(3,377		)		115		%
Free cash flow		114,102				102,309				12		%
Add back: restructuring payments		6,111				19,234				(68		)%
Adjusted free cash flow		$	120,213			$	121,543			(1		)%

Non-GAAP Bookings from Application Development and Deployment Segment
(Unaudited)
(In thousands)		Q1 2017				Q2 2017				Q3 2017				Q4 2017				FY 2017
GAAP revenue		$	19,634			$	20,227			$	20,188			$	20,396			$	80,445
Add: change in deferred revenue
Beginning balance		52,971				51,298				52,400				52,615				52,971
Ending balance		51,298				52,400				52,615				53,794				53,794
Change in deferred revenue		(1,673		)		1,102				215				1,179				823
Non-GAAP bookings		$	17,961			$	21,329			$	20,403			$	21,575			$	81,268
(In thousands)		Q1 2018				Q2 2018				Q3 2018				Q4 2018				FY 2018
GAAP revenue		$	20,035			$	20,347			$	20,057			$	19,438			$	79,877
Add: change in deferred revenue
Beginning balance		53,794				52,927				51,978				52,638				53,794
Ending balance		52,927				51,978				52,638				55,126				55,126
Change in deferred revenue		(867		)		(949		)		660				2,488				1,332
Non-GAAP bookings		$	19,168			$	19,398			$	20,717			$	21,926			$	81,209

EXPECTED IMPACT OF ADOPTION OF ASC 606 ON SELECT ANNUAL AND QUARTERLY REPORTED RESULTS - GAAP
(Unaudited)

Progress adopted ASC 606 on December 1, 2018. As our GAAP results for fiscal year 2018 are reported under prior revenue recognition guidance, we have provided preliminary adjusted amounts for fiscal year 2018 and the quarterly periods in fiscal 2018 for comparability to the first fiscal quarter and full fiscal year of 2019. These amounts are unaudited.

		Fiscal Year Ended
		November 30, 2018
(In thousands, except percentages and per share amounts)		As Reported				Adjustments				As Adjusted
Revenue:
Software licenses		$	122,137			$	(22,338	)		$	99,799
Maintenance and services		275,028				4,153				279,181
Total revenue		$	397,165			$	(18,185	)		$	378,980
Income from operations		$	85,998			$	(18,185	)		$	67,813
Operating margin		22		%		(4		)%		18		%
Net income		$	63,491			$	(13,822	)		$	49,669
Diluted EPS		$	1.38			$	(0.30	)		$	1.08
Cash from operations		$	121,352			$	—			$	121,352

		Fiscal Year 2018 Quarter Ended
		February 28, 2018								May 31, 2018								August 31, 2018								November 30, 2018
(In thousands, except percentages and per share amounts)		As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted
Revenue:
Software licenses		$	25,343			$	26,054			$	26,439			$	22,526			$	27,204			$	22,852			$	43,151			$	28,367
Maintenance and services		68,704				69,356				69,663				70,338				68,479				69,751				68,182				69,736
Total revenue		$	94,047			$	95,410			$	96,102			$	92,864			$	95,683			$	92,603			$	111,333			$	98,103
Income from operations		$	17,768			$	19,131			$	21,788			$	18,550			$	22,183			$	19,103			$	24,259			$	11,029
Operating margin		19		%		20		%		23		%		20		%		23		%		21		%		22		%		11		%
Net income		$	12,912			$	13,732			$	15,403			$	12,904			$	16,746			$	14,390			$	18,430			$	8,643
Diluted EPS		$	0.27			$	0.29			$	0.33			$	0.28			$	0.37			$	0.32			$	0.41			$	0.19
Cash from operations		$	31,595			$	31,595			$	42,129			$	42,129			$	23,301			$	23,301			$	24,327			$	24,327

EXPECTED IMPACT OF ADOPTION OF ASC 606 ON SELECT ANNUAL AND QUARTERLY REPORTED RESULTS - NON-GAAP
(Unaudited)

Progress adopted ASC 606 on December 1, 2018. As our Non-GAAP results for fiscal year 2018 are reported under prior revenue recognition guidance, we have provided preliminary adjusted amounts for fiscal year 2018 and the quarterly periods in fiscal 2018 for comparability to the first fiscal quarter and full fiscal year of 2019. These amounts are unaudited.

		Fiscal Year Ended
		November 30, 2018
(In thousands, except percentages and per share amounts)		As Reported				Adjustments				As Adjusted
Non-GAAP revenue:
Software licenses		$	122,200			$	(22,402	)		$	99,798
Maintenance and services		275,495				4,153				279,648
Total non-GAAP revenue		$	397,695			$	(18,249	)		$	379,446
Non-GAAP income from operations		$	152,200			$	(18,249	)		$	133,951
Non-GAAP operating margin		38		%		(3		)%		35		%
Non-GAAP net income		$	115,040			$	(13,861	)		$	101,179
Non-GAAP diluted EPS		$	2.49			$	(0.30	)		$	2.19
Adjusted free cash flow		$	120,213			$	—			$	120,213

		Fiscal Year 2018 Quarter Ended
		February 28, 2018								May 31, 2018								August 31, 2018								November 30, 2018
(In thousands, except percentages and per share amounts)		As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted
Non-GAAP revenue:
Software licenses		$	25,362			$	26,054			$	26,457			$	22,526			$	27,223			$	22,852			$	43,158			$	28,366
Maintenance and services		68,832				69,483				69,755				70,430				68,571				69,844				68,337				69,891
Total non-GAAP revenue		$	94,194			$	95,537			$	96,212			$	92,956			$	95,794			$	92,696			$	111,495			$	98,257
Non-GAAP income from operations		$	34,744			$	36,087			$	37,378			$	34,121			$	35,865			$	32,767			$	44,213			$	30,976
Non-GAAP operating margin		37		%		38		%		39		%		37		%		37		%		35		%		40		%		32		%
Non-GAAP net income		$	25,519			$	26,581			$	27,763			$	25,301			$	27,168			$	24,856			$	34,590			$	24,441
Non-GAAP diluted EPS		$	0.54			$	0.56			$	0.60			$	0.55			$	0.60			$	0.54			$	0.76			$	0.54
Adjusted free cash flow		$	32,948			$	32,948			$	42,761			$	42,761			$	21,272			$	21,272			$	23,232			$	23,232

EXPECTED IMPACT OF ADOPTION OF ASC 606 ON REPORTED RESULTS OF OPERATIONS BY SEGMENT - GAAP
(Unaudited)

Progress adopted ASC 606 on December 1, 2018. As our GAAP and Non-GAAP results for fiscal year 2018 are reported under prior revenue recognition guidance, we have provided preliminary adjusted amounts for fiscal year 2018 and the quarterly periods in fiscal 2018 for comparability to the first fiscal quarter and full fiscal year of 2019. These amounts are unaudited.

		Fiscal Year 2018 Quarter Ended
		February 28, 2018								May 31, 2018								August 31, 2018								November 30, 2018
(In thousands)		As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted
Segment revenue:
OpenEdge		$	66,408			$	66,663			$	69,967			$	69,607			$	68,029			$	68,519			$	73,854			$	73,016
DCI		7,604				9,492				5,788				3,411				7,597				4,563				18,041				5,663
AD&D		20,035				19,255				20,347				19,846				20,057				19,521				19,438				19,424
		94,047				95,410				96,102				92,864				95,683				92,603				111,333				98,103
Segment costs of revenue and operating expenses:
OpenEdge		15,762				15,762				15,013				15,013				16,419				16,419				20,626				20,626
DCI		1,629				1,629				1,674				1,674				1,520				1,520				2,811				2,811
AD&D		6,798				6,798				6,199				6,199				7,071				7,071				7,019				7,019
		24,189				24,189				22,886				22,886				25,010				25,010				30,456				30,456
Segment contribution margin:
OpenEdge		50,646				50,901				54,954				54,594				51,610				52,100				53,228				52,390
DCI		5,975				7,863				4,114				1,737				6,077				3,043				15,230				2,852
AD&D		13,237				12,457				14,148				13,647				12,986				12,450				12,419				12,405
		$	69,858			$	71,221			$	73,216			$	69,978			$	70,673			$	67,593			$	80,877			$	67,647

EXPECTED IMPACT OF ADOPTION OF ASC 606 ON REPORTED REVENUE BY SEGMENT - NON-GAAP
(Unaudited)
		Fiscal Year 2018 Quarter Ended
		February 28, 2018								May 31, 2018								August 31, 2018								November 30, 2018
(In thousands)		As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted				As Reported				As Adjusted
Non-GAAP revenue:
OpenEdge		$	66,490			$	66,744			$	70,016			$	69,656			$	68,052			$	68,543			$	73,976			$	73,138
DCI		7,604				9,492				5,788				3,411				7,597				4,563				18,041				5,663
AD&D		20,100				19,301				20,408				19,889				20,145				19,590				19,478				19,456
		$	94,194			$	95,537			$	96,212			$	92,956			$	95,794			$	92,696			$	111,495			$	98,257

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2019GUIDANCE
(Unaudited)
Fiscal Year 2019 Revenue Guidance
		Fiscal Year Ended				Fiscal Year Ending
		November 30, 2018(1)				November 30, 2019
(In millions)						Low				% Change			High				% Change
GAAP revenue		$	379.0			$	380.0			—	%		$	386.0			2	%
Acquisition-related adjustments - revenue(2)		0.4				—				n/a			—				n/a
Non-GAAP revenue		$	379.4			$	380.0			—	%		$	386.0			2	%

⁽¹⁾Progress adopted ASC 606 on December 1, 2018. As our GAAP results for fiscal year 2018 are reported under prior revenue recognition guidance, we have provided preliminary adjusted amounts for fiscal year 2018 for comparability to fiscal year of 2019. These amounts are unaudited.
⁽²⁾Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue under prior accounting guidance that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively. Upon our adoption of ASC 606 in fiscal year 2019, our GAAP revenue and Non-GAAP revenue results are the same.

Fiscal Year 2019 Non-GAAP Operating Margin Guidance
		Fiscal Year Ending November 30, 2019
(In millions)		Low				High
GAAP income from operations		$	76.4			$	79.0
GAAP operating margins		20		%		20		%
Stock-based compensation		23.6				23.6
Amortization of intangibles		34.9				34.9
Total adjustments		58.5				58.5
Non-GAAP income from operations		$	134.9			$	137.5
Non-GAAP operating margin		36		%		36		%

Fiscal Year 2019 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
		Fiscal Year Ending November 30, 2019
(In millions, except per share data)		Low				High
GAAP net income		$	53.1			$	55.1
Adjustments (from previous table)		58.5				58.5
Income tax adjustment(3)		(7.8		)		(7.4		)
Non-GAAP net income		$	103.8			$	106.2
GAAP diluted earnings per share		$	1.19			$	1.24
Non-GAAP diluted earnings per share		$	2.33			$	2.39
Diluted weighted average shares outstanding		44.5				44.5
(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately 19% for Low and High, calculated as follows:
Non-GAAP income from operations		$	134.9			$	137.5
Other (expense) income		(6.5		)		(6.5		)
Non-GAAP income from continuing operations before income taxes		128.4				131.0
Non-GAAP net income		103.9				106.3
Tax provision		$	24.5			$	24.7
Non-GAAP tax rate		19		%		19		%

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2019 GUIDANCE
(Unaudited)
Fiscal Year 2019 Adjusted Free Cash Flow Guidance
		Fiscal Year Ending November 30, 2019
(In millions)		Low				High
Cash flows from operations (GAAP)		$	120			$	125
Purchases of property and equipment		(5		)		(5		)
Adjusted free cash flow (non-GAAP)		$	115			$	120

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q1 2019 GUIDANCE
(Unaudited)
Q1 2019 Revenue Guidance
	Three Months Ended				Three Months Ending
	February 28, 2018(1)				February 28, 2019
(In millions)					Low				% Change			High				% Change
GAAP revenue	$	95.4			$	85.0			(11	)%		$	88.0			(8	)%
Acquisition-related adjustments - revenue(2)	0.1				—				n/a			—				n/a
Non-GAAP revenue	$	95.5			$	85.0			(11	)%		$	88.0			(8	)%

⁽¹⁾Progress adopted ASC 606 on December 1, 2018. As our GAAP results for fiscal year 2018 are reported under prior revenue recognition guidance, we have provided preliminary adjusted amounts for fiscal year 2018 for comparability to the first fiscal quarter of fiscal year 2019. These amounts are unaudited.
⁽²⁾Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue under prior accounting guidance that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively. Upon our adoption of ASC 606 in fiscal year 2019, our GAAP revenue and Non-GAAP revenue results are the same.

Q1 2019 Non-GAAP Earnings per Share Guidance
	Three Months Ending February 28, 2019
	Low				High
GAAP diluted earnings per share	$	0.18			$	0.20
Stock-based compensation	0.13				0.13
Amortization of intangibles	0.19				0.19
Total adjustments	0.32				0.32
Income tax adjustment	(0.05		)		(0.05		)
Non-GAAP diluted earnings per share	$	0.45			$	0.47

View source version on businesswire.com: https://www.businesswire.com/news/home/20190117005714/en/

Source: Progress

Investor Contact:
Brian Flanagan
Progress Software
+1 781 280 4817
flanagan@progress.com

Press Contact:
Erica Burns
Progress Software
+1 888 365 2779 (x3135)
erica.burns@progress.com