October 1, 2015

Progress Reports 2015 Fiscal Third Quarter Results

BEDFORD, Mass.--(BUSINESS WIRE)-- Progress (NASDAQ: PRGS), a global software company that simplifies and enables the development, deployment and management of business applications, today announced results for its fiscal third quarter ended August 31, 2015.

Revenue in the quarter was $94.6 million compared to $79.3 million in the same quarter last year, a year over year increase of 19% on an actual currency basis and 29% on a constant currency basis. On a non-GAAP basis, revenue was $100.7 million compared to $79.3 million in the same quarter last year.

Additional financial highlights included:

On a GAAP basis in the fiscal third quarter of 2015:

  • Revenue was $94.6 million compared to $79.3 million in the same quarter in fiscal year 2014;
  • Income from operations was $8.6 million compared to $19.4 million in the same quarter last year;
  • Net loss was $4.1 million compared to net income of $11.1 million in the same quarter last year; and
  • Diluted loss per share was $0.08 compared to diluted earnings per share of $0.22 in the same quarter last year.

On a non-GAAP basis in the fiscal third quarter of 2015:

  • Revenue was $100.7 million compared to $79.3 million in the same quarter last year;
  • Income from operations was $31.7 million compared to $29.6 million in the same quarter last year;
  • Operating margin was 31% compared to 37% in the same quarter last year;
  • Net income was $20.0 million, unchanged from the same quarter last year;
  • Diluted earnings per share was $0.39, unchanged from the same quarter last year; and
  • Free cash flow was $17.3 million compared to $23.8 million in the same quarter last year.

"We achieved continued positive momentum in key areas of our business in the third quarter," said Phil Pead, President and CEO of Progress. "OpenEdge continued to grow, with significant strength in enterprise sales. We achieved growth in our data business, and several of our Telerik solutions achieved record bookings for the quarter."

Other fiscal third quarter 2015 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $218.3 million;
  • Cash flows from operations were $19.3 million compared to $25.9 million in the same quarter in fiscal year 2014; and
  • DSO was 54 days, compared to 50 days in the fiscal second quarter of 2015.

Business Outlook

Progress's fiscal 2015 financial guidance includes the impact of the significant strengthening of the US dollar that began in late 2014 and is based on current exchange rates. The negative currency translation impact on Progress's 2015 business outlook compared to 2014 exchange rates is $25 - $26 million on non-GAAP revenue and $0.14 - $0.15 on non-GAAP earnings per share. To the extent that there are further changes in exchange rates versus the current environment, this may have an additional impact on Progress's business outlook.

Progress provides the following revised guidance for the fiscal year ending November 30, 2015:

  • Non-GAAP revenue is expected to be between $410 million and $415 million (previously $415-$425 million);
  • Non-GAAP earnings per share is expected to be between $1.51 and $1.55 (previously $1.45-$1.52);
  • Non-GAAP operating margin is expected to be approximately 29% (previously 28%);
  • Free cash flow is expected to be between $92 million and $95 million (unchanged); and
  • Non-GAAP effective tax rate is expected to be approximately 33% (unchanged).

Progress provides the following guidance for the fiscal fourth quarter ending November 30, 2015:

  • Non-GAAP revenue is expected to be between $113 million and $118 million; and
  • Non-GAAP earnings per share is expected to be between $0.47 and $0.51.

Share Repurchase Program

Progress also announced today that its Board of Directors has authorized a new $100 million share repurchase program. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors, and the Board of Directors may choose to suspend, expand or discontinue the repurchase program at any time.

Conference Call

The Progress quarterly investor conference call to review its fiscal third quarter of 2015 will be broadcast live at 5:00 p.m. ET on Thursday, October 1, 2015 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 1-888-401-4669, pass code 2038969. The conference call will include brief 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. Management uses these non-GAAP results to compare the company's performance to that of prior periods for analysis of trends and for budget and planning purposes. A reconciliation of non-GAAP adjustments to the company's GAAP financial results is included in the tables below. 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 available on the Progress website at www.progress.com 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's 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) Market acceptance of Progress's strategy and product development initiatives; (2) pricing pressures and the competitive environment in the software industry and Platform-as-a-Service market; (3) Progress's ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy; (4) uncertainties relating to Progress' acquisition of Telerik, including whether Progress will be able to realize expected benefits and anticipated synergies of the acquisition and whether Telerik's business will be successfully integrated with Progress Software's business; (5) Progress's ability to make acquisitions and to realize the expected benefits and anticipated synergies from such acquisitions; (6) the continuing uncertainty in the U.S. and international economies, which could result in fewer sales of Progress's products and may otherwise harm Progress's business; (7) business and consumer use of the Internet and the continuing adoption of Cloud technologies; (8) Progress's ability to expand its relationships with channel partners; (9) the timely release of enhancements to Progress's products and customer acceptance of new products; (10) the positioning of Progress's products in its existing and new markets; (11) variations in the demand for professional services and technical support; (12) Progress's ability to penetrate international markets and manage its international operations; and (13) changes in exchange rates. For further information regarding risks and uncertainties associated with Progress's business, please refer to Progress's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2014. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

Progress Software Corporation

Progress Software Corporation (NASDAQ: PRGS) is a global software company that simplifies the development, deployment and management of business applications on-premise or in the cloud, on any platform or device, to any data source, with enhanced performance, minimal IT complexity and low total cost of ownership. Progress can be reached at www.progress.com or 1-781-280-4000.

Progress is a trademark or registered trademarks of Progress Software Corporation or one of its subsidiaries or affiliates in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

           
Three Months Ended Nine Months Ended
(In thousands, except per share data)

August 31,
2015

 

August 31,
2014

 

%
Change

August 31,
2015

 

August 31,
2014

 

%
Change

Revenue:
Software licenses $ 31,840 $ 26,393 21 % $ 85,794 $ 76,645 12 %
Maintenance and services 62,797   52,881   19 % 179,042   157,994   13 %
Total revenue 94,637   79,274   19 % 264,836   234,639   13 %
Costs of revenue:
Cost of software licenses 1,441 1,805 (20 )% 4,526 4,951 (9 )%
Cost of maintenance and services 9,612 5,222 84 % 31,174 16,276 92 %
Amortization of acquired intangibles 4,079   834   389 % 12,805   1,893   576 %
Total costs of revenue 15,132   7,861   92 % 48,505   23,120   110 %
Gross profit 79,505   71,413   11 % 216,331   211,519   2 %
Operating expenses:
Sales and marketing 30,004 22,477 33 % 92,607 71,425 30 %
Product development 20,422 14,975 36 % 65,533 45,568 44 %
General and administrative 14,076 12,162 16 % 42,065 35,236 19 %
Amortization of acquired intangibles 3,186 116 2,647 % 9,559 428 2,133 %
Restructuring expenses 2,561 1,680 52 % 8,715 2,001 336 %
Acquisition-related expenses 662   572   16 % 3,180   3,148   1 %
Total operating expenses 70,911   51,982   36 % 221,659   157,806   40 %
Income (loss) from operations 8,594   19,431   (56 )% (5,328 ) 53,713   (110 )%
Other (expense) income, net (1,165 ) (2,457 ) (53 )% (1,258 ) (2,581 ) (51 )%
Income (loss) before income taxes 7,429   16,974   (56 )% (6,586 ) 51,132   (113 )%
Provision (benefit) for income taxes 11,555   5,879   97 % (7,256 ) 16,138   (145 )%
Net (loss) income (4,126 ) 11,095   (137 )% 670   34,994   (98 )%
 
Earnings per share:
Basic $ (0.08 ) $ 0.22 (136 )% $ 0.01 $ 0.69 (99 )%
Diluted $ (0.08 ) $ 0.22 (136 )% $ 0.01 $ 0.68 (99 )%
Weighted average shares outstanding:
Basic 50,120 50,383 (1 )% 50,377 50,975 (1 )%
Diluted 50,120 50,931 (2 )% 51,117 51,590 (1 )%
 

CONDENSED CONSOLIDATED BALANCE SHEETS

           
(In thousands) August 31,
2015

November 30,
2014

Assets
Current assets:
Cash, cash equivalents and short-term investments $ 218,304 $ 283,268
Accounts receivable, net 60,335 68,311
Other current assets 51,728   34,094
Total current assets 330,367   385,673
Property and equipment, net 56,825 59,351
Goodwill and intangible assets, net 491,788 253,414
Other assets 7,654   4,623
Total assets $ 886,634   $ 703,061
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other current liabilities $ 65,606 $ 60,746
Current portion of long-term debt 7,500
Short-term deferred revenue 124,285   92,557
Total current liabilities 197,391   153,303
Long-term deferred revenue 6,711 3,683
Long-term debt 136,875
Other long-term liabilities 15,915 2,830
Shareholders' equity:
Common stock and additional paid-in capital 223,299 209,778
Retained earnings 306,443   333,467
Total shareholders' equity 529,742   543,245
Total liabilities and shareholders' equity $ 886,634   $ 703,061
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

           
Three Months Ended Nine Months Ended
(In thousands) August 31,
2015
  August 31,
2014
August 31,
2015
  August 31,
2014
Cash flows from operating activities:
Net (loss) income $ (4,128 ) $ 11,095 $ 670 $ 34,994
Depreciation and amortization 10,115 3,938 31,610 10,985
Stock-based compensation 6,537 6,940 18,812 18,194
Other non-cash adjustments 5,608 1,856 (19,800 ) 2,232
Changes in operating assets and liabilities 1,125   2,099   45,896   2,064  
Net cash flows from operating activities 19,257   25,928   77,188   68,469  
Capital expenditures (1,952 ) (2,154 ) (7,740 ) (10,191 )
Issuances of common stock, net of repurchases 4,103 (13,795 ) (22,409 ) (41,890 )
Payments for acquisitions (246,275 ) (12,493 )
Proceeds from the issuance of debt, net of payments of principle and debt issuance costs (1,955 ) 142,588
Proceeds from divestitures, net 4,500 3,300
Other (270 ) 24,737   (12,816 ) 22,657  
Net change in cash, cash equivalents and short-term investments 19,183   34,716   (64,964 ) 29,852  
Cash, cash equivalents and short-term investments, beginning of period 199,121   226,576   283,268   231,440  
Cash, cash equivalents and short-term investments, end of period $ 218,304   $ 261,292   $ 218,304   $ 261,292  
 

RESULTS OF OPERATIONS BY SEGMENT

           
Three Months Ended Nine Months Ended
(In thousands)

August 31,
2015

 

August 31,
2014

 

%
Change

August 31,
2015

 

August 31,
2014

 

%
Change

Segment revenue:
OpenEdge $ 73,398 $ 71,847 2 % $ 214,775 $ 211,773 1 %
Data Connectivity and Integration 8,281 7,175 15 % 22,669 22,221 2 %
Application Development and Deployment 12,958   252   5,042 % 27,392   645   4,147 %
Total revenue 94,637   79,274   19 % 264,836   234,639   13 %
Segment costs of revenue and operating expenses:
OpenEdge 18,550 15,524 19 % 56,529 48,770 16 %
Data Connectivity and Integration 3,180 2,515 26 % 9,563 7,913 21 %
Application Development and Deployment 9,933   2,446   306 % 30,169   5,762   424 %
Total costs of revenue and operating expenses 31,663   20,485   55 % 96,261   62,445   54 %
Segment contribution:
OpenEdge 54,848 56,323 (3 )% 158,246 163,003 (3 )%
Data Connectivity and Integration 5,101 4,660 9 % 13,106 14,308 (8 )%
Application Development and Deployment 3,025   (2,194 ) 238 % (2,777 ) (5,117 ) 46 %
Total contribution 62,974   58,789   7 % 168,575   172,194   (2 )%
Other unallocated expenses (1) 54,380   39,358   38 % 173,903   118,481   47 %
Income (loss) from operations 8,594   19,431   (56 )% (5,328 ) 53,713   (110 )%
Other (expense) income, net (1,165 ) (2,457 ) (53 )% (1,258 ) (2,581 ) (51 )%
Income (loss) before provision for income taxes 7,429   16,974   (56 )% (6,586 ) 51,132   (113 )%

(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: product development, corporate marketing, administration, amortization of acquired intangibles, stock-based compensation, restructuring, and acquisition related expenses.

SUPPLEMENTAL INFORMATION

                       
Revenue by Type
 
(In thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
License $ 26,393 $ 41,154 $ 25,231 $ 28,722 $ 31,840
Maintenance 50,746 51,268 49,239 52,656 55,365
Services 2,135   5,472   6,911   7,439   7,432
Total revenue $ 79,274   $ 97,894   $ 81,381   $ 88,817   $ 94,637
 
Revenue by Region
 
(In thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
North America $ 35,654 $ 43,654 $ 42,125 $ 47,520 $ 49,810
EMEA 32,995 35,327 27,863 31,146 30,656
Latin America 5,695 8,406 4,967 4,388 4,621
Asia Pacific 4,930   10,507   6,426   5,763   9,550
Total revenue $ 79,274   $ 97,894   $ 81,381   $ 88,817   $ 94,637
 
Revenue by Segment
 
(In thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
OpenEdge $ 71,847 $ 84,948 $ 69,471 $ 71,906 $ 73,398
Data Connectivity and Integration 7,175 12,551 7,113 7,275 8,281
Application Development and Deployment 252   395   4,797   9,636   12,958
Total revenue $ 79,274   $ 97,894   $ 81,381   $ 88,817   $ 94,637
 

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - QTD

           
Three Months Ended August 31, % Change
2015     2014
(In thousands, except per share data) GAAP   Adj.   Non-GAAP GAAP   Adj.   Non-GAAP Non-GAAP
TOTAL REVENUE $ 94,637 $ 6,086 $ 100,723 $ 79,274 $ $ 79,274 27 %
Software licenses (1) 31,840 1,418 33,258 26,393 26,393 26 %
Maintenance and services (1) 62,797 4,668 67,465 52,881 52,881 28 %
 
TOTAL COSTS OF REVENUE $ 15,132 $ (4,223 ) $ 10,909 $ 7,861 $ (975 ) $ 6,886 58 %
Amortization of acquired intangibles 4,079 (4,079 ) 834 (834 )
Stock-based compensation (2) 144 (144 ) 141 (141 )
 
GROSS MARGIN % 84 % 89 % 90 % 91 % (2 )%
 
TOTAL OPERATING EXPENSES $ 70,911 $ (12,803 ) $ 58,108 $ 51,982 $ (9,167 ) $ 42,815 36 %
Amortization of acquired intangibles 3,186 (3,186 ) 116 (116 )
Restructuring expenses 2,561 (2,561 ) 1,680 (1,680 )
Acquisition-related expenses 662 (662 ) 572 (572 )
Stock-based compensation (2) 6,394 (6,394 ) 6,799 (6,799 )
 
INCOME FROM OPERATIONS $ 8,594 $ 23,112 $ 31,706 $ 19,431 $ 10,142 $ 29,573 7 %
 
OPERATING MARGIN 9 % 31 % 25 % 37 % (7 )%
 
TOTAL OTHER (EXPENSE) INCOME, NET $ (1,165 ) $ $ (1,165 ) $ (2,457 ) $ 2,554 $ 97 1,301 %
 
PROVISION FOR INCOME TAXES $ 11,555 $ (1,034 ) $ 10,521 $ 5,879 $ 3,748 $ 9,627 9 %
 
NET (LOSS) INCOME $ (4,126 ) $ 24,146 $ 20,020 $ 11,095 $ 8,948 $ 20,043 %
 
DILUTED EARNINGS PER SHARE $ (0.08 ) $ 0.47 $ 0.39 $ 0.22 $ 0.17 $ 0.39 %
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 50,120 784 50,904 50,931 50,931 %

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue by
Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. 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 entirely relate to Progress' Application Development and Deployment business unit.

(2) Stock-based compensation is included in the GAAP statements of income, as follows:
 
Cost of revenue 144 141
Sales and marketing 1,604 1,546
Product development 912 1,407
General and administrative 3,878   3,846  
Total $ 6,538   $ 6,940  
 

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - YTD

           
Nine Months Ended August 31, % Change
2015     2014
(In thousands, except per share data) GAAP   Adj.   Non-GAAP GAAP   Adj.   Non-GAAP Non-GAAP
TOTAL REVENUE $ 264,836 $ 32,193 $ 297,029 $ 234,639 $ $ 234,639 27 %
Software licenses (1) 85,794 8,181 93,975 76,645 76,645 23 %
Maintenance and services (1) 179,042 24,012 203,054 157,994 157,994 29 %
 
TOTAL COSTS OF REVENUE $ 48,505 $ (13,267 ) $ 35,238 $ 23,120 $ (2,332 ) $ 20,788 70 %
Amortization of acquired intangibles 12,805 (12,805 ) 1,893 (1,893 )
Stock-based compensation (2) 462 (462 ) 439 (439 )
 
GROSS MARGIN % 82 % 88 % 90 % 91 % (3 )%
 
TOTAL OPERATING EXPENSES $ 221,659 $ (39,804 ) $ 181,855 $ 157,806 $ (23,332 ) $ 134,474 35 %
Amortization of acquired intangibles 9,559 (9,559 ) 428 (428 )
Restructuring expenses 8,715 (8,715 ) 2,001 (2,001 )
Acquisition-related expenses 3,180 (3,180 ) 3,148 (3,148 )
Stock-based compensation (2) 18,350 (18,350 ) 17,755 (17,755 )
 
(LOSS) INCOME FROM OPERATIONS $ (5,328 ) $ 85,264 $ 79,936 $ 53,713 $ 25,664 $ 79,377 1 %
 
OPERATING MARGIN (2 )% 27 % 23 % 34 % (7 )%
 
TOTAL OTHER (EXPENSE) INCOME, NET (3) $ (1,258 ) $ 266 $ (992 ) $ (2,581 ) $ 2,554 $ (27 ) (3,574 )%
 
(BENEFIT) PROVISION FOR INCOME TAXES $ (7,256 ) $ 32,916 $ 25,660 $ 16,138 $ 9,387 $ 25,525 1 %
 
NET INCOME $ 670 $ 52,614 $ 53,284 $ 34,994 $ 18,831 $ 53,825 (1 )%
 
DILUTED EARNINGS PER SHARE $ 0.01 $ 1.03 $ 1.04 $ 0.68 $ 0.36 $ 1.04 %
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 51,117 51,117 51,590 51,590 (1 )%

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue by
Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. 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 entirely relate to Progress' Application Development and Deployment business unit.

(2) Stock-based compensation is included in the GAAP statements of income, as follows:
 
Cost of revenue 462 439
Sales and marketing 4,328 3,736
Product development 3,476 4,186
General and administrative 10,546   9,833  
Total $ 18,812   $ 18,194  

(3) Adjustment to other income (expense), net relates to the termination of Progress' prior revolving credit facility with JPMorgan Chase
Bank, N.A. and the other lenders party to the credit facility in connection with entering into the new credit facility, which was used to
partially fund the acquisition of Telerik. Upon termination, the outstanding debt issuance costs related to the prior revolving credit facility
were written off to other income (expense) in the GAAP statements of income.

 

OTHER NON-GAAP FINANCIAL MEASURES - QTD

               
Revenue by Type
 
(In thousands) Q3 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
License $ 31,840 $ 1,418 $ 33,258
Maintenance 55,365 4,668 60,033
Services 7,432     7,432  
Total revenue $ 94,637   $ 6,086   $ 100,723  
 
Revenue by Region
 
(In thousands) Q3 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
North America $ 49,810 $ 5,775 $ 55,585
EMEA 30,656 246 30,902
Latin America 4,621 8 4,629
Asia Pacific 9,550   57   9,607  
Total revenue $ 94,637   $ 6,086   $ 100,723  
 
Revenue by Segment
 
(In thousands) Q3 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
OpenEdge $ 73,398 $ $ 73,398
Data Connectivity and Integration $ 8,281 $ $ 8,281
Application Development and Deployment $ 12,958   $ 6,086   $ 19,044  
Total revenue $ 94,637   $ 6,086   $ 100,723  
 

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue by
Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. 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 entirely relate to Progress' Application Development and Deployment business unit.

 
Free Cash Flow
 
(In thousands) Q3 2015 Q3 2014 % Change
Cash flows from operations $ 19,257 $ 25,928 (26 )%
Purchases of property and equipment $ (1,673 ) $ (1,084 ) (54 )%
Capitalized software development costs $ (279 ) $ (1,070 ) 74 %
Free cash flow $ 17,305   $ 23,774   (27 )%
 

OTHER NON-GAAP FINANCIAL MEASURES - YTD

               
Revenue by Type
 
(In thousands) YTD 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
License $ 85,794 $ 8,181 $ 93,975
Maintenance 157,259 24,012 181,271
Services 21,783     21,783  
Total revenue $ 264,836   $ 32,193   $ 297,029  
 
Revenue by Region
 
(In thousands) YTD 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
North America $ 139,454 $ 27,795 $ 167,249
EMEA 89,667 3,275 92,942
Latin America 13,977 195 14,172
Asia Pacific 21,738   928   22,666  
Total revenue $ 264,836   $ 32,193   $ 297,029  
 
Revenue by Segment
 
(In thousands) YTD 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
OpenEdge $ 214,775 $ $ 214,775
Data Connectivity and Integration $ 22,669 $ $ 22,669
Application Development and Deployment $ 27,392   $ 32,193   $ 59,585  
Total revenue $ 264,836   $ 32,193   $ 297,029  
 

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue by
Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. 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 entirely relate to Progress' Application Development and Deployment business unit.

 
Free Cash Flow
 
(In thousands) YTD 2015 YTD Q3 2014 % Change
Cash flows from operations $ 77,188 $ 68,469 13 %
Purchases of property and equipment $ (6,079 ) $ (7,183 ) 15 %
Capitalized software development costs $ (1,661 ) $ (3,008 ) 45 %
Free cash flow $ 69,448   $ 58,278   19 %
 

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2015 GUIDANCE
(Unaudited)

 
Fiscal Year 2015 Revenue Growth Guidance
        Fiscal Year Ended     Fiscal Year Ending
November 30, 2014 November 30, 2015
(In millions) Low   % Change   High   % Change
GAAP revenue $ 332.5 $ 375.0 13 % $ 380.0 14 %
Acquisition-related adjustments - revenue (1) $   $ 35.0   100 % $ 35.0   100 %
Non-GAAP revenue $ 332.5   $ 410.0   23 % $ 415.0   25 %
 

(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue by Telerik that would otherwise have been
recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAP accounting requires the elimination of this
revenue, GAAP results alone do not fully capture all of our economic activities.

 
 
Fiscal Year 2015 Non-GAAP Operating Margin Guidance
        Fiscal Year Ending November 30, 2015
(In millions) Low     High
GAAP income from operations $ 12.4 $ 14.7
GAAP operating margins 3 % 4 %
Acquisition-related revenue 35.0 35.0
Restructuring expense 11.2 11.2
Stock-based compensation 25.9 25.9
Acquisition related expense 4.0 4.0
Amortization of intangibles 29.6   29.6  
Total adjustments 105.7   105.7  
Non-GAAP income from operations $ 118.1   $ 120.4  
Non-GAAP operating margin 29 % 29 %
 
 
Fiscal Year 2015 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
        Fiscal Year Ending November 30, 2015
(In millions, except per share data) Low     High
GAAP net income $ 6.4 $ 7.9
Adjustments (from previous table) 105.7 105.7
Income tax adjustment (2) (34.7 ) (34.0 )
Non-GAAP net income $ 77.4   $ 79.6  
 
GAAP diluted earnings per share $ 0.13 $ 0.15
Non-GAAP diluted earnings per share $ 1.51 $ 1.55
 
Diluted weighted average shares outstanding 51.4 51.4
 
(2) Tax adjustment is based on a non-GAAP effective tax rate of 33% for both Low and High, calculated as follows:
Non-GAAP income from operations $ 118.1 $ 120.4
Other income (expense) (2.2 ) (2.2 )
Non-GAAP income from continuing operations before income taxes 115.9   118.2  
Non-GAAP net income 77.4   79.6  
Tax provision $ 38.5   $ 38.6  
Non-GAAP tax rate 33 % 33 %
 

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2015 GUIDANCE
(Unaudited)

 
Q4 2015 Revenue Growth Guidance
        Three Months Ended   Three Months Ending
November 30, 2014 November 30, 2015
(In millions) Low   % Change   High   % Change
GAAP revenue $ 97.9 $ 110.0 12 % $ 115.0 17 %
Acquisition-related adjustments - revenue (1) $   $ 3.0   100 % $ 3.0   100 %
Non-GAAP revenue $ 97.9   $ 113.0   15 % $ 118.0   21 %
 

(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue by Telerik that would otherwise have been
recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAP accounting requires the elimination of this
revenue, GAAP results alone do not fully capture all of our economic activities.

 
 
Q4 2015 Non-GAAP Earnings per Share Guidance
        Three Months Ending November 30, 2015
Low   High
GAAP diluted earnings per share $ (0.20 ) $ (0.16 )
Acquisition-related revenue 0.05 0.05
Restructuring expense 0.05 0.05
Stock-based compensation 0.14 0.14
Acquisition related expense 0.01 0.01
Amortization of intangibles 0.14   0.14  
Total adjustments 0.39   0.39  
Income tax adjustment $ 0.28   $ 0.28  
Non-GAAP diluted earnings per share $ 0.47   $ 0.51  
 

Progress Software
Investor Contact:
Brian Flanagan, +1 781-280-4817
flanagan@progress.com
or
Press Contact:
Erica Burns, +1 888-365-2779 (x3135)
erica.burns@progress.com

Source: Progress Software

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