Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 10, 2018
 Progress Software Corporation
(Exact name of registrant as specified in its charter)
 
Commission file number: 0-19417
 
 
 
Delaware
04-2746201
(State or other jurisdiction of
incorporation or organization)
(I.R.S. employer
identification no.)
14 Oak Park
Bedford, Massachusetts 01730
(Address of principal executive offices, including zip code)
(781) 280-4000
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition

On January 10, 2018, Progress Software Corporation ("Progress") issued a press release announcing its financial results for the fiscal fourth quarter and fiscal year ended November 30, 2017. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not deemed incorporated by reference into any other filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.
Exhibit No.
 
Description
99.1
 
Press release issued by Progress Software Corporation dated January 10, 2018







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
Date:
January 10, 2018
Progress Software Corporation
 
 
 
 
 
 
By:
/s/ PAUL A. JALBERT
 
 
 
Paul A. Jalbert
 
 
 
Chief Financial Officer





Exhibit Index

Exhibit No.
 
Description
99.1
 



Exhibit
https://cdn.kscope.io/3bddf2346d29c5bd5b031cc545211586-newprogresslogoa06.jpg
 
Exhibit 99.1


P R E S S A N N O U N C E M E N T
Investor Contact:
 
Press Contact:
Brian Flanagan
 
Erica Burns
Progress Software
 
Progress Software
+1 781 280 4817
 
+1 888 365 2779 (x3135)
flanagan@progress.com
 
erica.burns@progress.com

Progress Reports 2017 Fiscal Fourth Quarter and Year End Results

Exceeds Expectations for Revenue, Earnings Per Share, Operating Margin and Cash Flow


BEDFORD, MA, January 10, 2018 (BUSINESSWIRE) — Progress (NASDAQ: PRGS) today announced results for its fiscal fourth quarter and fiscal year ended November 30, 2017.

Revenue was $116.1 million during the quarter compared to $117.7 million in the same quarter last year, a year-over-year decrease of 1% on an actual currency basis and 3% on a constant currency basis. On a non-GAAP basis, revenue was $116.3 million during the quarter compared to $118.0 million in the same quarter last year, a decrease of 1% on an actual currency basis and 3% on a constant currency basis.

On a GAAP basis, diluted earnings per share was $0.34 compared to a diluted loss per share of $1.52 in the same quarter last year.  On a non-GAAP basis, diluted earnings per share was $0.67 compared to $0.62 in the same quarter last year.

Yogesh Gupta, CEO at Progress, said: “Our strong Q4 performance allowed us to achieve better-than-expected revenue, earnings per share, operating margins and cash flow for 2017. We have strengthened our core operations, and now offer the best platform for building next-generation, mission-critical, cognitive-first business applications as well. We look forward to continued momentum in 2018, as we execute on a strategic plan that will drive sustainable, long-term value for all shareholders.”

Additional financial highlights included:

On a GAAP basis in the fiscal fourth quarter of 2017:

Revenue was $116.1 million compared to $117.7 million in the same quarter in fiscal year 2016;
Income from operations was $28.8 million compared to a loss from operations of $62.4 million in the same quarter last year;
Net income was $16.4 million compared to a net loss of $73.8 million in the same quarter last year;
Diluted earnings per share was $0.34 compared to a diluted loss per share of $1.52 in the same quarter last year; and
Cash from operations was $32.5 million compared to $33.9 million in the same quarter last year.

On a non-GAAP basis in the fiscal fourth quarter of 2017:

Revenue was $116.3 million compared to $118.0 million in the same quarter last year;
Income from operations was $49.1 million compared to $42.6 million in the same quarter last year;
Operating margin was 42% compared to 36% in the same quarter last year;
Net income was $32.1 million compared to $30.5 million in the same quarter last year;
Diluted earnings per share was $0.67 compared to $0.62 in the same quarter last year; and
Adjusted free cash flow was $32.4 million compared to $32.4 million in the same quarter last year.

Paul Jalbert, CFO, said: “We are pleased with our financial performance for Q4 and for the full year. We delivered on our commitment to operate our business efficiently, exceeding our cost-savings targets by reducing our total expenses by over $30

1


million. We are confident in our ability to generate continued strong operating margins and cash flows, and are well-positioned to achieve our financial goals in 2018."

Other fiscal fourth quarter and 2017 metrics and recent results included:

Cash, cash equivalents and short-term investments were $183.6 million at the end of the quarter;
DSO was 47 days, compared to 48 days in the fiscal third quarter of 2017 and 50 days in the fiscal fourth quarter of 2016;
Pursuant to the $250 million share authorization of the Board of Directors, Progress repurchased 0.8 million shares for $30.0 million during the fiscal fourth quarter of 2017. For the full fiscal year, Progress repurchased 2.2 million shares for $73.9 million; and
On January 5, 2018, our Board of Directors declared a quarterly dividend of $0.14 per share of common stock that will be paid on March 15, 2018 to shareholders of record as of the close of business on March 1, 2018.

Full Year Results

On a GAAP basis in the fiscal year 2017:

Revenue was $397.6 million compared to $405.3 million in fiscal year 2016, a year-over-year decrease of 2% on both an actual and constant currency basis;
Income from operations was $70.6 million compared to a loss from operations of $29.7 million in the prior fiscal year;
Net income was $37.4 million compared to a net loss of $55.7 million in the prior fiscal year;
Diluted earnings per share was $0.77 compared to a diluted loss per share of $1.13 in the prior fiscal year; and
Cash from operations was $105.7 million compared to $102.8 million in the prior fiscal year.

On a non-GAAP basis in the fiscal year 2017:

Revenue was $398.6 million compared to $407.4 million in fiscal year 2016, a year-over-year decrease of 2% on both an actual and constant currency basis;
Income from operations was $144.5 million compared to $123.1 million in the prior fiscal year;
Operating margin was 36% compared to 30% in the prior fiscal year;
Net income was $92.5 million compared to $82.3 million in the prior fiscal year;
Diluted earnings per share was $1.91 compared to $1.65 in the prior fiscal year; and
Adjusted free cash flow was $121.5 million compared to $100.6 million in the prior fiscal year.

2018 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2018 and the first fiscal quarter ending February 28, 2018:

(In millions, except percentages and per share amounts)
FY 2018
GAAP
 
FY 2018
Non-GAAP
 
Q1 2018
GAAP
 
Q1 2018
Non-GAAP
Revenue
$398 - $404

 
$399 - $404

 
$90 - $93
 
$90 - $93
Diluted earnings per share
$1.14 - $1.21

 
$2.29 - $2.35

 
$0.15 - $0.19
 
$0.46 - $0.48
Operating margin
19% - 20%

 
35% - 36%

 
*
 
*
Adjusted free cash flow
$115 - $121

 
$115 - $120

 
*
 
*
Effective tax rate
26
%
 
22
%
 
*
 
*
*We do not provide guidance for this financial measure.

Progress' fiscal 2018 financial guidance is based on current exchange rates. The positive currency translation impact on Progress' fiscal year 2018 business outlook compared to 2017 exchange rates is approximately $4.0 million on GAAP and non-GAAP revenue. The currency translation impact on the fiscal 2018 GAAP and non-GAAP diluted earnings per share guidance is approximately $0.01. The positive currency translation impact on Progress' fiscal Q1 2018 business outlook compared to 2017 exchange rates is approximately $2.0 million on GAAP and non-GAAP revenue. The currency translation impact on Progress' fiscal Q1 2018 GAAP and non-GAAP diluted earnings per share guidance is approximately $0.01. To the extent that

2


there are further changes in exchange rates versus the current environment, this may have an additional impact on Progress' business outlook.

Conference Call

The Progress quarterly investor conference call to review its fiscal fourth quarter of 2017 will be broadcast live at 5:00 p.m. ET on Wednesday, January 10, 2018 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 1-800-967-7134, pass code 7064924. 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.

Non-GAAP Financial Information

Progress provides non-GAAP supplemental information to its financial results.

We use this non-GAAP information to evaluate our period-over-period operating performance because our management believes the information helps illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as a greater understanding of the results from the primary operations of our business, by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. Management also uses this non-GAAP financial information to establish budgets and operational goals, which are communicated internally and externally, evaluate performance, and allocate resources. In addition, compensation of our executives and non-executive employees is based in part on the performance of our business evaluated using this same non-GAAP information.

However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP) and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information often have a material impact on Progress’ financial results. A reconciliation of non-GAAP adjustments to Progress' 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.

As described in more detail below, non-GAAP revenue, non-GAAP costs of sales and operating expenses, non-GAAP income from operations and operating margin, non-GAAP net income, and non-GAAP diluted earnings per share exclude the effect of purchase accounting on the fair value of acquired deferred revenue, amortization of acquired intangible assets, impairment of acquired intangible assets, stock-based compensation expense, fees related to shareholder activist, restructuring charges, acquisition-related expenses, certain identified non-operating gains and losses, and the related tax effects of the preceding items. We also provide guidance on adjusted free cash flow, which is equal to cash flows from operating activities less purchases of property and equipment and capitalized software development costs, plus restructuring payments.

In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:

Acquisition-related revenue - In all periods presented, we include acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. The acquisition-related revenue relates to Telerik, which we acquired on December 2, 2014, and Kinvey, which we acquired on June 1, 2017. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business because, although we cannot be certain that customers will renew their contracts, we have historically experienced high renewal rates on maintenance and support agreements and other customer contracts. Additionally, although acquisition-related revenue adjustments are non-recurring with respect to past acquisitions, we expect to incur these adjustments in connection with any future acquisitions.

Amortization of acquired intangibles - In all periods presented, we exclude amortization of acquired intangibles because those expenses are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired.


3


Impairment of goodwill and acquired intangibles - In fiscal year 2016, we exclude impairment charges applicable to goodwill and acquired intangible assets because such expenses distort trends and are not part of our core operating results. Such impairment charges are inconsistent in amount and frequency and we believe that eliminating these amounts, when significant and not reflective of ongoing business and operating results, facilitates a more meaningful evaluation of our current operating performance and comparisons to our operating performance in other periods.

Stock-based compensation - In all periods presented, we exclude stock-based compensation to be consistent with the way management and the financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include these charges in operating plans. Stock-based compensation will continue in future periods.

Fees related to shareholder activist - In September 2017, Praesidium Investment Management, one of our largest shareholders, publicly announced in a Schedule 13D filed with the Securities and Exchange Commission its disagreement with our strategy and stated that it was seeking changes in the composition of our Board of Directors. In fiscal year 2017, we have incurred, and in fiscal year 2018 we expect to incur, professional and other fees relating to Praesidium’s actions. We exclude these fees because they distort trends and are not part of our core operating results.

Restructuring expenses - In all periods presented, we exclude restructuring expenses incurred because those expenses distort trends and are not part of our core operating results.

Acquisition-related and transition expenses - In all periods presented, we exclude acquisition-related expenses because those expenses distort trends and are not part of our core operating results. In recent years, we have completed a number of acquisitions, which result in our incurring operating expenses which would not otherwise have been incurred. By excluding certain transition, integration and other acquisition-related expense items in connection with acquisitions, this provides more meaningful comparisons of the financial results to our historical operations and forward-looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions.

Income tax adjustment - In all periods presented, we adjust our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above. In addition, in fiscal year 2016, we adjusted our income tax provision to remove from non-GAAP income the positive impact of an out-of-period adjustment recorded to the income tax provision during the fiscal second quarter of 2016.

Constant Currency

Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries strengthen, our consolidated results stated in U.S. dollars are positively impacted.

As exchange rates are an important factor in understanding period to period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP.

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,”

4


“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, including the uncertain economic environment in Europe as a result of the Brexit vote, and the continued difficult economic environment in Brazil and other parts of the world, 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. (9) Our business could be negatively affected by the actions of stockholder activists. 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, 2016 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2017, May 31, 2017 and August 31, 2017. 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 mission-critical business applications. Progress empowers enterprises and ISVs to build and deliver cognitive-first applications that harness big data to derive business insights and competitive advantage. Progress offers leading technologies for easily building powerful user interfaces across any type of device, a reliable, scalable and secure backend platform to deploy modern applications, leading data connectivity to all sources, and award-winning predictive analytics that brings the power of machine learning to any organization. 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.


5


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended
 
Fiscal Year Ended
(In thousands, except per share data)
November 30, 2017
 
November 30, 2016
 
% Change
 
November 30, 2017
 
November 30, 2016
 
% Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Software licenses
$
45,963

 
$
48,497

 
(5
)%
 
$
124,406

 
$
134,863

 
(8
)%
Maintenance and services
70,116

 
69,227

 
1

 
273,166

 
270,478

 
1

Total revenue
116,079

 
117,724

 
(1
)
 
397,572

 
405,341

 
(2
)
Costs of revenue:
 
 
 
 
 
 
 
 
 
 
 
Cost of software licenses
1,405

 
1,317

 
7

 
5,752

 
5,456

 
5

Cost of maintenance and services
10,575

 
11,543

 
(8
)
 
43,299

 
44,760

 
(3
)
Amortization of acquired intangibles
5,979

 
3,678

 
63

 
20,108

 
15,496

 
30

Total costs of revenue
17,959

 
16,538

 
9

 
69,159

 
65,712

 
5

Gross profit
98,120

 
101,186

 
(3
)
 
328,413

 
339,629

 
(3
)
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
26,229

 
32,853

 
(20
)
 
96,345

 
121,501

 
(21
)
Product development
21,243

 
22,786

 
(7
)
 
76,988

 
88,587

 
(13
)
General and administrative
12,401

 
10,478

 
18

 
45,739

 
46,532

 
(2
)
Impairment of goodwill and intangible assets

 
92,000

 
(100
)
 

 
97,051

 
(100
)
Amortization of acquired intangibles
3,318

 
3,179

 
4

 
13,039

 
12,735

 
2

Fees related to shareholder activist
2,020

 

 
100

 
2,020

 

 
100

Restructuring expenses
3,486

 
1,463

 
138

 
22,210

 
1,692

 
1,213

Acquisition-related expenses
614

 
791

 
(22
)
 
1,458

 
1,240

 
18

Total operating expenses
69,311

 
163,550

 
(58
)
 
257,799

 
369,338

 
(30
)
Income (loss) from operations
28,809

 
(62,364
)
 
146

 
70,614

 
(29,709
)
 
338

Other (expense) income, net
(728
)
 
(1,097
)
 
34

 
(5,027
)
 
(5,571
)
 
10

Income (loss) before income taxes
28,081

 
(63,461
)
 
144

 
65,587

 
(35,280
)
 
286

Provision for income taxes
11,652

 
10,332

 
13

 
28,170

 
20,446

 
38

Net income (loss)
$
16,429

 
$
(73,793
)
 
122
 %
 
$
37,417

 
$
(55,726
)
 
167
 %
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.35

 
$
(1.52
)
 
123
 %
 
$
0.78

 
$
(1.13
)
 
169
 %
Diluted
$
0.34

 
$
(1.52
)
 
122
 %
 
$
0.77

 
$
(1.13
)
 
168
 %
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
47,489

 
48,631

 
(2
)%
 
48,129

 
49,481

 
(3
)%
Diluted
48,171

 
48,631

 
(1
)%
 
48,516

 
49,481

 
(2
)%
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.140

 
$
0.125

 
12
 %
 
$
0.515

 
$
0.125

 
312
 %

6



CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(In thousands)
November 30,
2017
 
November 30, 2016
Assets
 
 
 
Current assets:
 
 
 
Cash, cash equivalents and short-term investments
$
183,609

 
$
249,754

Accounts receivable, net
61,210

 
65,678

Other current assets
18,588

 
20,621

Total current assets
263,407

 
336,053

Property and equipment, net
42,261

 
50,105

Goodwill and intangible assets, net
409,935

 
358,894

Other assets
3,115

 
9,775

Total assets
$
718,718

 
$
754,827

Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other current liabilities
$
69,661

 
$
59,778

Current portion of long-term debt
5,819

 
15,000

Short-term deferred revenue
132,538

 
128,960

Total current liabilities
208,018

 
203,738

Long-term deferred revenue
9,750

 
8,801

Long-term debt
116,090

 
120,000

Other long-term liabilities
8,776

 
15,659

Shareholders’ equity:
 
 
 
Common stock and additional paid-in capital
249,836

 
239,496

Retained earnings
126,248

 
167,133

Total shareholders’ equity
376,084

 
406,629

Total liabilities and shareholders’ equity
$
718,718

 
$
754,827




7


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  
 
Three Months Ended
 
Fiscal Year Ended
(In thousands)
November 30,
2017
 
November 30,
2016
 
November 30,
2017
 
November 30,
2016
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
16,429

 
$
(73,793
)
 
$
37,417

 
$
(55,726
)
Depreciation and amortization
11,572

 
9,525

 
42,896

 
39,321

Stock-based compensation
4,594

 
3,531

 
14,153

 
22,541

Other non-cash adjustments
(2,792
)
 
94,033

 
32

 
97,813

Changes in operating assets and liabilities
2,712

 
638

 
11,188

 
(1,104
)
Net cash flows from operating activities
32,515

 
33,934

 
105,686

 
102,845

Capital expenditures
(2,512
)
 
(2,042
)
 
(3,377
)
 
(5,786
)
Repurchases of common stock, net of issuances
(27,222
)
 
(5,930
)
 
(63,913
)
 
(69,270
)
Dividend payments to shareholders
(5,975
)
 

 
(24,126
)
 

Payments for acquisitions, net of cash acquired

 

 
(77,150
)
 

Payments of principal on long-term debt and debt issuance costs
(1,174
)
 
(1,875
)
 
(12,424
)
 
(9,375
)
Other
(3,339
)
 
(7,017
)
 
9,159

 
(9,939
)
Net change in cash, cash equivalents and short-term investments
(7,707
)
 
17,070

 
(66,145
)
 
8,475

Cash, cash equivalents and short-term investments, beginning of period
191,316

 
232,684

 
249,754

 
241,279

Cash, cash equivalents and short-term investments, end of period
$
183,609

 
$
249,754

 
$
183,609

 
$
249,754




8


RESULTS OF OPERATIONS BY SEGMENT
(Unaudited)
 
Three Months Ended
 
Fiscal Year Ended
(In thousands)
November 30, 2017
 
November 30, 2016
 
% Change
 
November 30, 2017
 
November 30, 2016
 
% Change
Segment revenue:
 
 
 
 
 
 
 
 
 
 
 
OpenEdge
$
77,639

 
$
77,672

 
 %
 
$
276,172

 
$
276,267

 
 %
Data Connectivity and Integration
18,044

 
17,157

 
5

 
40,955

 
48,009

 
(15
)
Application Development and Deployment
20,396

 
22,895

 
(11
)
 
80,445

 
81,065

 
(1
)
Total revenue
116,079

 
117,724

 
(1
)
 
397,572

 
405,341

 
(2
)
Segment costs of revenue and operating expenses:
 
 
 
 
 
 
 
 
 
 
 
OpenEdge
19,959

 
19,399

 
3

 
72,497

 
72,938

 
(1
)
Data Connectivity and Integration
2,798

 
3,896

 
(28
)
 
9,329

 
12,760

 
(27
)
Application Development and Deployment
6,749

 
10,625

 
(36
)
 
26,645

 
40,180

 
(34
)
Total costs of revenue and operating expenses
29,506

 
33,920

 
(13
)
 
108,471

 
125,878

 
(14
)
Segment contribution:
 
 
 
 
 
 
 
 
 
 
 
OpenEdge
57,680

 
58,273

 
(1
)
 
203,675

 
203,329

 

Data Connectivity and Integration
15,246

 
13,261

 
15

 
31,626

 
35,249

 
(10
)
Application Development and Deployment
13,647

 
12,270

 
11

 
53,800

 
40,885

 
32

Total contribution
86,573

 
83,804

 
3

 
289,101

 
279,463

 
3

Other unallocated expenses (1)
57,764

 
146,168

 
(60
)
 
218,487

 
309,172

 
(29
)
Income (loss) from operations
28,809

 
(62,364
)
 
146

 
70,614

 
(29,709
)
 
338

Other (expense) income, net
(728
)
 
(1,097
)
 
34

 
(5,027
)
 
(5,571
)
 
10

Income (loss) before provision for income taxes
$
28,081

 
$
(63,461
)
 
144
 %
 
$
65,587

 
$
(35,280
)
 
286
 %
 
 
 
 
 
 
 
 
 
 
 
 
(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 and impairment of acquired intangibles, impairment of goodwill, stock-based compensation, fees related to shareholder activist, restructuring, and acquisition-related expenses.


9


SUPPLEMENTAL INFORMATION
(Unaudited)

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
FY 2017
 
FY 2016
License
$
48,497

 
$
24,322

 
$
25,592

 
$
28,529

 
$
45,963

 
$
124,406

 
$
134,863

Maintenance
60,188

 
59,138

 
59,898

 
60,536

 
61,826

 
241,398

 
238,377

Professional services
9,039

 
7,510

 
7,723

 
8,245

 
8,290

 
31,768

 
32,101

Total revenue
$
117,724

 
$
90,970

 
$
93,213

 
$
97,310

 
$
116,079

 
$
397,572

 
$
405,341

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
FY 2017
 
FY 2016
North America
$
68,471

 
$
50,305

 
$
51,430

 
$
55,703

 
$
66,504

 
$
223,942

 
$
229,203

EMEA
35,301

 
29,844

 
30,646

 
31,830

 
38,039

 
130,359

 
130,818

Latin America
8,407

 
5,023

 
5,637

 
5,009

 
5,489

 
21,158

 
21,156

Asia Pacific
5,545

 
5,798

 
5,500

 
4,768

 
6,047

 
22,113

 
24,164

Total revenue
$
117,724

 
$
90,970

 
$
93,213

 
$
97,310

 
$
116,079

 
$
397,572

 
$
405,341

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
FY 2017
 
FY 2016
OpenEdge
$
77,672

 
$
64,508

 
$
65,890

 
$
68,135

 
$
77,639

 
$
276,172

 
$
276,267

Data Connectivity and Integration
17,157

 
6,828

 
7,096

 
8,987

 
18,044

 
40,955

 
48,009

Application Development and Deployment
22,895

 
19,634

 
20,227

 
20,188

 
20,396

 
80,445

 
81,065

Total revenue
$
117,724

 
$
90,970

 
$
93,213

 
$
97,310

 
$
116,079

 
$
397,572

 
$
405,341


10


RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - FOURTH QUARTER
(Unaudited)
 
Three Months Ended
 
% Change
(In thousands, except per share data)
November 30, 2017
 
November 30, 2016
 
Non-GAAP
Adjusted revenue:
 
 
 
 
 
 
 
 
 
GAAP revenue
$
116,079

 
 
 
$
117,724

 
 
 
 
Acquisition-related revenue (1)
256

 
 
 
288

 
 
 
 
Non-GAAP revenue
$
116,335

 
100
 %
 
$
118,012

 
100
 %
 
(1
)%
 
 
 
 
 
 
 
 
 
 
Adjusted gross margin:
 
 
 
 


 
 
 
 
GAAP gross margin
$
98,120

 
85
 %
 
$
101,186

 
86
 %
 
 
Amortization of acquired intangibles
5,979

 
5

 
3,678

 
3

 
 
Stock-based compensation (2)
226

 

 
299

 

 
 
Acquisition-related revenue (1)
256

 

 
288

 

 
 
Non-GAAP gross margin
$
104,581

 
90
 %
 
$
105,451

 
89
 %
 
(1
)%
 
 
 
 
 

 
 
 
 
Adjusted operating expenses:
 
 
 
 


 
 
 
 
GAAP operating expenses
$
69,311

 
60
 %
 
$
163,550

 
139
 %
 
 
Amortization and impairment of acquired intangibles
(3,318
)
 
(3
)
 
(3,179
)
 
(3
)
 
 
Impairment of goodwill

 

 
(92,000
)
 
(78
)
 
 
Fees related to shareholder activist
(2,020
)
 
(2
)
 

 

 
 
Restructuring expenses and other
(3,486
)
 
(3
)
 
(1,463
)
 
(1
)
 
 
Acquisition-related expenses
(614
)
 

 
(791
)
 
(1
)
 
 
Stock-based compensation (2)
(4,368
)
 
(4
)
 
(3,232
)
 
(3
)
 
 
Non-GAAP operating expenses
$
55,505

 
48
 %
 
$
62,885

 
53
 %
 
(12
)%
 
 
 
 
 
 
 
 
 
 
Adjusted income (loss) from operations:

 
 
 

 

 
 
GAAP operating income (loss)
$
28,809

 
25
 %
 
$
(62,364
)
 
(53
)%
 
 
Amortization and impairment of acquired intangibles
9,297

 
8

 
6,857

 
6

 
 
Impairment of goodwill

 

 
92,000

 
78

 
 
Fees related to shareholder activist
2,020

 
2

 

 

 
 
Restructuring expenses and other
3,486

 
3

 
1,463

 
1

 
 
Stock-based compensation (2)
4,594

 
4

 
3,531

 
3

 
 
Acquisition-related
870

 

 
1,079

 
1

 
 
Non-GAAP income from operations
$
49,076

 
42
 %
 
$
42,566

 
36
 %
 
15
 %
 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings (loss) per share:


 


 


 


 


GAAP diluted earnings (loss) per share
$
0.34

 
 
 
$
(1.52
)
 
 
 
 
Amortization and impairment of acquired intangibles
0.20

 


 
0.14

 
 
 


Impairment of goodwill

 
 
 
1.87

 
 
 
 
Fees related to shareholder activist
0.04

 
 
 

 
 
 
 
Restructuring expenses and other
0.07

 
 
 
0.03

 
 
 
 
Stock-based compensation (2)
0.10

 
 
 
0.08

 
 
 
 
Acquisition-related
0.02

 
 
 
0.03

 
 
 
 
Provision for income taxes
(0.10
)
 
 
 
(0.01
)
 
 
 
 
Non-GAAP diluted earnings per share
$
0.67

 
 
 
$
0.62

 
 
 
8
 %
 
 
 
 
 
 
 
 
 
 
Non-GAAP weighted avg shares outstanding - diluted
48,171

 
 
 
49,229

 

 
(2
)%
 
 
 
 
 
 
 
 
 
 
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue 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.
(2) Stock-based compensation is included in the GAAP statements of income, as follows:
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
226

 
 
 
$
299

 
 
 
 
Operating expenses
4,368

 
 
 
3,232

 
 
 
 
Total
$
4,594

 
 
 
$
3,531

 
 
 
 

11


RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - FISCAL YEAR
(Unaudited)
 
Fiscal Year Ended
 
% Change
(In thousands, except per share data)
November 30, 2017
 
November 30, 2016
 
Non-GAAP
Adjusted revenue:
 
 
 
 
 
 
 
 
 
GAAP revenue
$
397,572

 
 
 
$
405,341

 
 
 
 
Acquisition-related revenue (1)
1,015

 
 
 
2,014

 
 
 
 
Non-GAAP revenue
$
398,587

 
100
 %
 
$
407,355

 
100
 %
 
(2
)%
 
 
 
 
 
 
 
 
 
 
Adjusted gross margin:
 
 
 
 


 
 
 
 
GAAP gross margin
$
328,413

 
83
 %
 
$
339,629

 
84
 %
 
 
Amortization of acquired intangibles
20,108

 
5

 
15,496

 
4

 
 
Stock-based compensation (2)
1,016

 

 
899

 

 
 
Acquisition-related revenue (1)
1,015

 

 
2,014

 

 
 
Non-GAAP gross margin
$
350,552

 
88
 %
 
$
358,038

 
88
 %
 
(2
)%
 
 
 
 
 

 
 
 
 
Adjusted operating expenses:
 
 
 
 


 
 
 
 
GAAP operating expenses
$
257,799

 
65
 %
 
$
369,338

 
91
 %
 
 
Amortization and impairment of acquired intangibles
(13,039
)
 
(3
)
 
(17,786
)
 
(4
)
 
 
Impairment of goodwill

 

 
(92,000
)
 
(23
)
 
 
Fees related to shareholder activist
(2,020
)
 
(1
)
 

 

 
 
Restructuring expenses and other
(22,046
)
 
(6
)
 
(1,692
)
 
(1
)
 
 
Acquisition-related expenses
(1,458
)
 

 
(1,240
)
 

 
 
Stock-based compensation (2)
(13,137
)
 
(3
)
 
(21,642
)
 
(5
)
 
 
Non-GAAP operating expenses
$
206,099

 
52
 %
 
$
234,978

 
58
 %
 
(12
)%
 
 
 
 
 
 
 
 
 
 
Adjusted income (loss) from operations:

 
 
 

 

 
 
GAAP operating (loss)
$
70,614

 
18
 %
 
$
(29,709
)
 
(7
)%
 
 
Amortization and impairment of acquired intangibles
33,147

 
8

 
33,282

 
8

 
 
Impairment of goodwill

 

 
92,000

 
23

 
 
Fees related to shareholder activist
2,020

 

 

 

 
 
Restructuring expenses and other
22,046

 
5

 
1,692

 

 
 
Stock-based compensation (2)
14,153

 
4

 
22,541

 
5

 
 
Acquisition-related
2,473

 
1

 
3,254

 
1

 
 
Non-GAAP income from operations
$
144,453

 
36
 %
 
$
123,060

 
30
 %
 
17
 %
 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share:


 


 


 


 


GAAP diluted earnings (loss) per share
$
0.77

 
 
 
$
(1.13
)
 
 
 
 
Amortization and impairment of acquired intangibles
0.68

 


 
0.67

 
 
 


Impairment of goodwill

 
 
 
1.85

 
 
 
 
Fees related to shareholder activist
0.04

 
 
 

 
 
 
 
Restructuring expenses and other
0.46

 
 
 
0.03

 
 
 
 
Stock-based compensation (2)
0.29

 
 
 
0.45

 
 
 
 
Acquisition-related
0.05

 
 
 
0.07

 
 
 
 
Provision for income taxes
(0.38
)
 
 
 
(0.29
)
 
 
 
 
Non-GAAP diluted earnings per share
$
1.91

 
 
 
$
1.65

 
 
 
16
 %
 
 
 
 
 
 
 
 
 
 
Non-GAAP weighted avg shares outstanding - diluted
48,516

 
 
 
50,039

 

 
(3
)%
 
 
 
 
 
 
 
 
 
 
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue 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.
(2) Stock-based compensation is included in the GAAP statements of income, as follows:
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
1,016

 
 
 
$
899

 
 
 
 
Operating expenses
13,137

 
 
 
21,642

 
 
 
 
Total
$
14,153

 
 
 
$
22,541

 
 
 
 

12


OTHER NON-GAAP FINANCIAL MEASURES - FOURTH QUARTER
(Unaudited)

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2017
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
License
$
45,963

 
$
26

 
$
45,989

Maintenance
61,826

 
62

 
61,888

Services
8,290

 
168

 
8,458

Total revenue
$
116,079

 
$
256

 
$
116,335

 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2017
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
North America
$
66,504

 
$
256

 
$
66,760

EMEA
38,039

 

 
38,039

Latin America
5,489

 

 
5,489

Asia Pacific
6,047

 

 
6,047

Total revenue
$
116,079

 
$
256

 
$
116,335

 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2017
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
OpenEdge
$
77,639

 
$
168

 
$
77,807

Data Connectivity and Integration
18,044

 

 
18,044

Application Development and Deployment
20,396

 
88

 
20,484

Total revenue
$
116,079

 
$
256

 
$
116,335

 
 
 
 
 
 
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue 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.
 
 
 
 
 
 
Adjusted Free Cash Flow
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q4 2017
 
Q4 2016
 
% Change
Cash flows from operations
$
32,515

 
$
33,934

 
(4
)%
Purchases of property and equipment
(2,512
)
 
(2,042
)
 
23

Free cash flow
30,003

 
31,892

 
(6
)
Add back: restructuring payments
2,362

 
515

 
359

Adjusted free cash flow
$
32,365

 
$
32,407

 
 %

13


OTHER NON-GAAP FINANCIAL MEASURES - FISCAL YEAR
(Unaudited)

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
FY 2017
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
License
$
124,406

 
$
163

 
$
124,569

Maintenance
241,398

 
525

 
241,923

Services
31,768

 
327

 
32,095

Total revenue
$
397,572

 
$
1,015

 
$
398,587

 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
FY 2017
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
North America
$
223,942

 
$
1,015

 
$
224,957

EMEA
130,359

 

 
130,359

Latin America
21,158

 

 
21,158

Asia Pacific
22,113

 

 
22,113

Total revenue
$
397,572

 
$
1,015

 
$
398,587

 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
FY 2017
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
OpenEdge
$
276,172

 
$
327

 
$
276,499

Data Connectivity and Integration
40,955

 

 
40,955

Application Development and Deployment
80,445

 
688

 
81,133

Total revenue
$
397,572

 
$
1,015

 
$
398,587

 
 
 
 
 
 
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue 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.
 
 
 
 
 
 
Adjusted Free Cash Flow
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
FY 2017
 
FY 2016
 
% Change
Cash flows from operations
$
105,686

 
$
102,845

 
3
 %
Purchases of property and equipment
(3,377
)
 
(5,786
)
 
(42
)
Free cash flow
102,309

 
97,059

 
5

Add back: restructuring payments
19,234

 
3,539

 
443

Adjusted free cash flow
$
121,543

 
$
100,598

 
21
 %




14


Non-GAAP Bookings from Application Development and Deployment Segment
(Unaudited)

(In thousands)
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
FY 2016
GAAP revenue
$
18,752

 
$
19,185

 
$
20,233

 
$
22,895

 
$
81,065

Add: change in deferred revenue
 
 
 
 
 
 
 
 
 
Beginning balance
49,252

 
49,237

 
51,693

 
51,736

 
49,252

Ending balance
49,237

 
51,693

 
51,736

 
52,971

 
52,971

Change in deferred revenue
(15
)
 
2,456

 
43

 
1,235

 
3,719

Non-GAAP bookings
$
18,737

 
$
21,641

 
$
20,276

 
$
24,130

 
$
84,784

(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



SaaS Revenue (Hosted Services) from Application Development and Deployment Segment
(Unaudited)

(In thousands)
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 2016
 
FY 2016
SaaS Revenue - Application Development and Deployment
$
1,071

 
$
1,079

 
$
1,160

 
$
1,163

 
$
4,473

(In thousands)
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
FY 2017
SaaS Revenue - Application Development and Deployment
$
963

 
$
854

 
$
799

 
$
741

 
$
3,357



15


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2018 GUIDANCE
(Unaudited)
Fiscal Year 2018 Non-GAAP Revenue Guidance
 
Fiscal Year Ended
 
Fiscal Year Ending
 
November 30, 2017
 
November 30, 2018
(In millions)
 
 
Low
 
% Change
 
High
 
% Change
GAAP revenue
$
397.6

 
$
398.3

 
 %
 
$
403.7

 
2
 %
Acquisition-related adjustments - revenue (1)
1.0

 
0.3

 
(70
)
 
0.3

 
(70
)
Non-GAAP revenue
$
398.6

 
$
398.6

 
 %
 
$
404.0

 
1
 %
 
 
 
 
 
 
 
 
 
 
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue 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.
Fiscal Year 2018 Non-GAAP Operating Margin Guidance
 
Fiscal Year Ending November 30, 2018
(In millions)
Low
 
High
GAAP income from operations
$
76.8

 
$
81.7

GAAP operating margins
19
%
 
20
%
Acquisition-related revenue
0.3

 
0.3

Acquisition-related expense
0.2

 
0.2

Restructuring expense
3.0

 
2.0

Stock-based compensation
22.0

 
22.0

Amortization of intangibles
36.4

 
36.4

Fees related to shareholder activist
2.8

 
2.8

Total adjustments
64.7

 
63.7

Non-GAAP income from operations
$
141.5

 
$
145.4

Non-GAAP operating margin
35
%
 
36
%
Fiscal Year 2018 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
 
Fiscal Year Ending November 30, 2018
(In millions, except per share data)
Low
 
High
GAAP net income
$
52.6

 
$
56.2

Adjustments (from previous table)
64.7

 
63.7

Income tax adjustment (2)
(11.4
)
 
(11.0
)
Non-GAAP net income
$
105.9

 
$
108.9

 


 


GAAP diluted earnings per share
$
1.14

 
$
1.21

Non-GAAP diluted earnings per share
$
2.29

 
$
2.35

 
 
 
 
Diluted weighted average shares outstanding
46.3

 
46.3

 
 
 
 
(2) Tax adjustment is based on a non-GAAP effective tax rate of approximately 22% for Low and High, calculated as follows:
Non-GAAP income from operations
$
141.5

 
$
145.4

Other (expense) income
(5.7
)
 
(5.7
)
Non-GAAP income from continuing operations before income taxes
135.8

 
139.7

Non-GAAP net income
105.9

 
108.9

Tax provision
$
29.9

 
$
30.8

Non-GAAP tax rate
22
%
 
22
%

16


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2018 GUIDANCE
(Unaudited)

Fiscal Year 2018 Adjusted Free Cash Flow Guidance
 
Fiscal Year Ending November 30, 2018
(In millions)
Low
 
High
Cash flows from operations (GAAP)
$
115

 
$
121

Purchases of property and equipment
(7
)
 
(7
)
Add back: restructuring payments
7

 
6

Adjusted free cash flow (non-GAAP)
$
115

 
$
120



17


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q1 2018 GUIDANCE
(Unaudited)

Q1 2018 Non-GAAP Revenue Guidance
 
Three Months Ended
 
Three Months Ending
 
February 28, 2017
 
February 28, 2018
(In millions)
 
 
Low
 
% Change
 
High
 
% Change
GAAP revenue
$
91.0

 
$
89.9

 
(1
)%
 
$
92.9

 
2
 %
Acquisition-related adjustments - revenue (1)
0.2

 
0.1

 
(50
)
 
0.1

 
(50
)
Non-GAAP revenue
$
91.2

 
$
90.0

 
(1
)%
 
$
93.0

 
2
 %
 
 
 
 
 
 
 
 
 
 
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue 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.


Q1 2018 Non-GAAP Earnings per Share Guidance
 
February 28, 2018
 
Low
 
High
GAAP diluted earnings per share
$
0.15

 
$
0.19

Restructuring expense
0.04

 
0.02

Stock-based compensation
0.12

 
0.12

Amortization of intangibles
0.20

 
0.20

Fees related to shareholder activist
0.03

 
0.03

Total adjustments
0.39

 
0.37

Income tax adjustment
(0.08
)
 
(0.08
)
Non-GAAP diluted earnings per share
$
0.46

 
$
0.48



18