January 12, 2016

Progress Software Reports 2015 Fiscal Fourth Quarter and Year End 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 fourth quarter and fiscal year ended November 30, 2015.

Revenue in the quarter was $112.7 million compared to $97.9 million in the same quarter last year, a year over year increase of 15% on an actual currency basis and 21% on a constant currency basis. On a non-GAAP basis, revenue was $115.4 million compared to $97.9 million in the same quarter last year, an increase of 18% on an actual currency basis and 24% on a constant currency basis.

Additional financial highlights included:

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

  • Revenue was $112.7 million compared to $97.9 million in the same quarter in fiscal year 2014;
  • Income from operations was $20.1 million compared to $27.0 million in the same quarter last year;
  • Net loss was $9.5 million compared to net income of $14.5 million in the same quarter last year;
  • Diluted loss per share was $0.19 compared to diluted earnings per share of $0.28 in the same quarter last year; and
  • Cash from operations was $27.6 million compared to $39.2 million in the same quarter in fiscal year 2014.

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

  • Revenue was $115.4 million compared to $97.9 million in the same quarter last year;
  • Income from operations was $40.5 million compared to $38.0 million in the same quarter last year;
  • Operating margin was 35% compared to 39% in the same quarter last year;
  • Net income was $27.3 million compared to $24.1 million in the same quarter last year;
  • Diluted earnings per share was $0.53 compared to $0.47 in the same quarter last year; and
  • Adjusted free cash flow was $28.7 million compared to $38.3 million in the same quarter last year.

"In FY2015 we achieved revenue growth in every business segment," said Phil Pead, President and CEO of Progress. "In the fourth quarter, we achieved record bookings for our Telerik products, positioning us well for FY2016, and both OpenEdge and our data business showed solid growth."

Other fiscal fourth quarter 2015 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $241.3 million; and
  • DSO from continuing operations was 52 days, compared to 54 days in the fiscal third quarter of 2015 and 63 days in the fiscal fourth quarter of 2014.

Full Year Results

On a GAAP basis in the fiscal year 2015:

  • Revenue was $377.6 million compared to $332.5 million in fiscal year 2014;
  • Income from operations was $14.8 million compared to $80.7 million in the prior fiscal year;
  • Net loss was $8.8 million compared to net income of $49.5 million in the prior fiscal year;
  • Diluted loss per share was $0.17 compared to diluted earnings per share of $0.96 in the prior fiscal year; and
  • Cash from operations was $104.5 million compared to $107.7 million in the prior fiscal year.

On a non-GAAP basis in the fiscal year 2015:

  • Revenue was $412.4 million compared to $332.5 million in fiscal year 2014;
  • Income from operations was $120.4 million compared to $117.4 million in fiscal year 2014;
  • Operating margin was 29% compared to 35% in the prior fiscal year;
  • Net income was $80.6 million compared to $77.9 million in the prior fiscal year;
  • Diluted earnings per share was $1.58 compared to $1.51 in the prior fiscal year; and
  • Adjusted free cash flow was $102.0 million compared to $99.0 million in the prior fiscal year.

2016 Business Outlook

Progress's fiscal 2016 financial guidance is based on current exchange rates. The negative currency translation impact on Progress's fiscal year 2016 business outlook compared to 2015 exchange rates is approximately $7.0 million on non-GAAP revenue and $0.02 to $0.03 on non-GAAP earnings per share. The negative currency translation impact on Progress's fiscal Q1 2016 business outlook compared to 2015 exchange rates is approximately $3.0 million to $4.0 million on non-GAAP revenue and $0.01 to $0.02 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 Software provides the following guidance for the fiscal year ending November 30, 2016:

  • Non-GAAP revenue is expected to be between $427 million and $433 million;
  • Non-GAAP earnings per share is expected to be between $1.59 and $1.65;
  • Non-GAAP operating margin is expected to be between 29% and 30%;
  • Adjusted free cash flow is expected to be between $97 million and $102 million; and
  • Non-GAAP effective tax rate is expected to be approximately 33%.

Progress Software provides the following guidance for the first fiscal quarter ending February 29, 2016:

  • Non-GAAP revenue is expected to be between $92 million and $94 million; and
  • Non-GAAP earnings per share is expected to be between $0.27 and $0.29.

Conference Call

The Progress quarterly investor conference call to review its fiscal fourth quarter of 2015 will be broadcast live at 5:00 p.m. ET on Tuesday, January 12, 2016 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 1-877-719-9799, pass code 242101. 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 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'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) Economic, geopolitical and market conditions, including the continued slow economic recovery in Europe, parts of the U.S. 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 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'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 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2015, May 31, 2015 and August 31, 2015. 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 Software 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 Fiscal Year Ended
(In thousands, except per share data)

November
30, 2015

   

November
30, 2014

    % Change

November
30, 2015

   

November
30, 2014

    % Change
Revenue:
Software licenses $ 44,457 $ 41,154 8 % $ 130,250 $ 117,801 11 %
Maintenance and services 68,261   56,740   20 % 247,304   214,732   15 %
Total revenue 112,718   97,894   15 % 377,554   332,533   14 %
Costs of revenue:
Cost of software licenses 1,453 1,445 1 % 5,979 6,396 (7 )%
Cost of maintenance and services 9,758 8,574 14 % 40,933 24,864 65 %
Amortization of acquired intangibles 4,025   1,106   264 % 16,830   2,999   461 %
Total costs of revenue 15,236   11,125   37 % 63,742   34,259   86 %
Gross profit 97,482   86,769   12 % 313,812   298,274   5 %
Operating expenses:
Sales and marketing 32,259 30,085 7 % 124,867 101,496 23 %
Product development 21,391 13,397 60 % 86,924 58,965 47 %
General and administrative 15,229 13,056 17 % 57,294 48,292 19 %
Amortization of acquired intangibles 3,186 225 1,316 % 12,745 653 1,852 %
Restructuring expenses 4,274 265 1,513 % 12,989 2,266 473 %
Acquisition-related expenses 1,059   2,714   (61 )% 4,239   5,862   (28 )%
Total operating expenses 77,398   59,742   30 % 299,058   217,534   37 %
Income from operations 20,084   27,027   (26 )% 14,754   80,740   (82 )%
Other (expense) income, net (1,142 ) (357 ) (220 )% (2,400 ) (2,936 ) (18 )%
Income before income taxes 18,942   26,670   (29 )% 12,354   77,804   (84 )%
Provision for income taxes 28,412   12,207   133 % 21,155   28,346   (25 )%
Net (loss) income $ (9,470 ) $ 14,463   (165 )% $ (8,801 ) $ 49,458   (118 )%
 
Earnings per share:
Basic $ (0.19 ) $ 0.29 (166 )% $ (0.17 ) $ 0.97 (118 )%
Diluted $ (0.19 ) $ 0.28 (168 )% $ (0.17 ) $ 0.96 (118 )%
Weighted average shares outstanding:
Basic 50,435 50,432 % 50,391 50,840 (1 )%
Diluted 50,435 51,121 (1 )% 50,391 51,466 (2 )%
 
           

CONDENSED CONSOLIDATED BALANCE SHEETS

 
(In thousands)

November 30,
2015

November 30,
2014

Assets
Current assets:
Cash, cash equivalents and short-term investments $ 241,279 $   283,268
Accounts receivable, net 66,459 68,311
Other current assets 15,671   24,028
Total current assets 323,409   375,607
Property and equipment, net 54,226 59,351
Goodwill and intangible assets, net 484,098 253,414
Other assets 15,390   14,384
Total assets $ 877,123   $   702,756
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other current liabilities $ 65,314 $ 60,746
Current portion of long-term debt 9,375
Short-term deferred revenue 125,227   92,557
Total current liabilities 199,916   153,303
Long-term deferred revenue 8,844 3,683
Long-term debt 135,000
Other long-term liabilities 10,899 2,525
Shareholders' equity:
Common stock and additional paid-in capital 227,930 209,778
Retained earnings 294,534   333,467
Total shareholders' equity 522,464   543,245
Total liabilities and shareholders' equity $ 877,123   $   702,756
 
               

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Three Months Ended Fiscal Year Ended
(In thousands)

November 30,
2015

   

November 30,
2014

November 30,
2015

   

November 30,
2014

Cash flows from operating activities:
Net income $ (9,470 ) $ 14,464 $ (8,801 ) $ 49,458
Depreciation and amortization 10,069 4,311 41,680 15,296
Stock-based compensation 5,192 6,679 24,004 24,873
Net gains on sales of dispositions
Other non-cash adjustments 21,776 15,131 2,000 17,363
Changes in operating assets and liabilities (10 ) (1,360 ) 45,657   704  
Net cash flows from operating activities 27,557   39,225   104,540   107,694  
Capital expenditures (1,126 ) (1,610 ) (8,845 ) (11,801 )
Proceeds from the issuance of debt, net of payments of principle and debt issuance costs 142,588
Issuances of common stock, net of repurchases 2,610 5,774 (19,799 ) (36,116 )
Payments for acquisitions, net of cash acquired (12,000 ) (246,275 ) (24,493 )
Proceeds from divestitures, net 4,500 3,300
Other (6,066 ) (9,413 ) (18,698 ) 13,244  
Net change in cash, cash equivalents and short-term investments 22,975   21,976   (41,989 ) 51,828  
Cash, cash equivalents and short-term investments, beginning of period 218,304   261,292   283,268   231,440  
Cash, cash equivalents and short-term investments, end of period $ 241,279   $ 283,268   $ 241,279   $ 283,268  
 
               

RESULTS OF OPERATIONS BY SEGMENT

 
Three Months Ended Fiscal Year Ended
(In thousands)

November
30, 2015

   

November
30, 2014

   

%
Change

November
30, 2015

   

November
30, 2014

   

%
Change

Segment revenue:
OpenEdge $ 81,159 $ 84,948 (4 )% $ 295,934 $ 296,721 %
Data Connectivity and Integration 15,257 12,551 22 % 37,926 34,772 9 %
Application Development and Deployment 16,302   395   4,027 % 43,694   1,040   4,101 %
Total revenue 112,718   97,894   15 % 377,554   332,533   14 %
Segment costs of revenue and operating expenses:
OpenEdge 20,556 22,041 (7 )% 77,085 70,811 9 %
Data Connectivity and Integration 4,256 4,395 (3 )% 13,819 12,308 12 %
Application Development and Deployment 9,217   3,592   157 % 39,386   9,354   321 %
Total costs of revenue and operating expenses 34,029   30,028   13 % 130,290   92,473   41 %
Segment contribution:
OpenEdge 60,603 62,907 (4 )% 218,849 225,910 (3 )%
Data Connectivity and Integration 11,001 8,156 35 % 24,107 22,464 7 %
Application Development and Deployment 7,085   (3,197 ) 322 % 4,308   (8,314 ) 152 %
Total contribution 78,689   67,866   16 % 247,264   240,060   3 %
Other unallocated expenses (1) 58,605   40,839   44 % 232,510   159,320   46 %
Income (loss) from operations 20,084   27,027   (26 )% 14,754   80,740   (82 )%
Other (expense) income, net (1,142 ) (357 ) 220 % (2,400 ) (2,936 ) (18 )%
Income (loss) before provision for income taxes 18,942   26,670   (29 )% 12,354   77,804   (84 )%
 

(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) Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY 2015 FY 2014
License $ 41,154 $ 25,231 $ 28,722 $ 31,840 $ 44,457 $ 130,250 $ 117,801
Maintenance 51,268 49,239 52,656 55,365 60,458 217,718 202,496
Professional services 5,472   6,911   7,439   7,432   7,803   29,585   12,236
Total revenue $ 97,894   $ 81,381   $ 88,817   $ 94,637   $ 112,718   $ 377,553   $ 332,533
 
Revenue by Region
 
(In thousands) Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY 2015 FY 2014
North America $ 43,654 $ 42,125 $ 47,520 $ 49,810 $ 68,112 $ 207,567 $ 150,716
EMEA 35,327 27,863 31,146 30,656 34,504 124,169 131,335
Latin America 8,406 4,967 4,388 4,621 3,617 17,593 24,917
Asia Pacific 10,507   6,426   5,763   9,550   6,485   28,224   25,565
Total revenue $ 97,894   $ 81,381   $ 88,817   $ 94,637   $ 112,718   $ 377,553   $ 332,533
 
Revenue by Segment
 
(In thousands) Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY 2015 FY 2014
OpenEdge $ 84,948 $ 69,471 $ 71,906 $ 73,398 $ 81,159 $ 295,934 $ 296,721
Data Connectivity and Integration 12,551 7,113 7,275 8,281 15,257 37,926 34,772
Application Development and Deployment 395   4,797   9,636   12,958   16,302   43,693   1,040
Total revenue $ 97,894   $ 81,381   $ 88,817   $ 94,637   $ 112,718   $ 377,553   $ 332,533
 
               

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - FOURTH QUARTER

 
Three Months Ended November 30, % Change
2015         2014
(In thousands, except per share data) GAAP     Adj.     Non-GAAP GAAP     Adj.     Non-GAAP Non-GAAP
TOTAL REVENUE $ 112,718 $ 2,660 $ 115,378 $ 97,894 $ $ 97,894 18 %
Software licenses (1) 44,457 571 45,028 41,154 41,154 9 %
Maintenance and services (1) 68,261 2,089 70,350 56,740 56,740 24 %
 
TOTAL COSTS OF REVENUE $ 15,236 $ (4,180 ) $ 11,056 $ 11,125 $ (1,279 ) $ 9,846 12 %
Amortization of acquired intangibles 4,025 (4,025 ) 1,106 (1,106 )
Stock-based compensation (2) 155 (155 ) 173 (173 )
 
GROSS MARGIN % 86 % 90 % 89 % 90 % %
 
TOTAL OPERATING EXPENSES $ 77,398 $ (13,556 ) $ 63,842 $ 59,742 $ (9,710 ) $ 50,032 28 %
Amortization of acquired intangibles 3,186 (3,186 ) 225 (225 )
Restructuring expenses 4,274 (4,274 ) 265 (265 )
Acquisition-related expenses 1,059 (1,059 ) 2,714 (2,714 )
Stock-based compensation (2) 5,037 (5,037 ) 6,506 (6,506 )
 
INCOME FROM OPERATIONS $ 20,084 $ 20,396 $ 40,480 $ 27,027 $ 10,989 $ 38,016 6 %
 
OPERATING MARGIN 18 % 35 % 28 % 39 % (4 )%
 
TOTAL OTHER (EXPENSE) INCOME, NET $ (1,142 ) $ $ (1,142 ) $ (357 ) $ $ (357 ) (220 )%
 
PROVISION FOR INCOME TAXES $ 28,412 $ (16,342 ) $ 12,070 $ 12,207 $ 1,383 $ 13,590 (11 )%
 
NET (LOSS) INCOME $ (9,470 ) $ 36,738 $ 27,268 $ 14,463 $ 9,606 $ 24,069 13 %
 
DILUTED EARNINGS PER SHARE $ (0.19 ) $ 0.72 $ 0.53 $ 0.28 $ 0.19 $ 0.47 13 %
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 50,435 691 51,126 51,121 51,121 %

(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 155 173
Sales and marketing 477 907
Product development 1,957 1,103
General and administrative 2,603   4,496  
Total $ 5,192   $ 6,679  
 
               

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - FISCAL YEAR

 
Fiscal Year Ended November 30, % Change
2015         2014
(In thousands, except per share data) GAAP     Adj.     Non-GAAP GAAP     Adj.     Non-GAAP Non-GAAP
TOTAL REVENUE $ 377,554 $ 34,852 $ 412,406 $ 332,533 $ $ 332,533 24 %
Software licenses (1) 130,250 8,751 139,001 117,801 117,801 18 %
Maintenance and services (1) 247,304 26,101 273,405 214,732 214,732 27 %
 
TOTAL COSTS OF REVENUE $ 63,742 $ (17,447 ) $ 46,295 $ 34,259 $ (3,611 ) $ 30,648 51 %
Amortization of acquired intangibles 16,830 (16,830 ) 2,999 (2,999 )
Stock-based compensation (2) 617 (617 ) 612 (612 )
 
GROSS MARGIN % 83 % 89 % 90 % 91 % (2 )%
 
TOTAL OPERATING EXPENSES $ 299,058 $ (53,360 ) $ 245,698 $ 217,534 $ (33,042 ) $ 184,492 33 %
Amortization of acquired intangibles 12,745 (12,745 ) 653 (653 )
Restructuring expenses 12,989 (12,989 ) 2,266 (2,266 )
Acquisition-related expenses 4,239 (4,239 ) 5,862 (5,862 )
Stock-based compensation (2) 23,387 (23,387 ) 24,261 (24,261 )
 
(LOSS) INCOME FROM OPERATIONS $ 14,754 $ 105,659 $ 120,413 $ 80,740 $ 36,653 $ 117,393 3 %
 
OPERATING MARGIN 4 % 29 % 24 % 35 % (6 )%
 
TOTAL OTHER (EXPENSE) INCOME, NET (3) $ (2,400 ) $ 266 $ (2,134 ) $ (2,936 ) $ 2,554 $ (382 ) (459 )%
 
(BENEFIT) PROVISION FOR INCOME TAXES $ 21,155 $ 16,574 $ 37,729 $ 28,346 $ 10,768 $ 39,114 (4 )%
 
NET INCOME $ (8,801 ) $ 89,351 $ 80,550 $ 49,458 $ 28,439 $ 77,897 3 %
 
DILUTED EARNINGS PER SHARE $ (0.17 ) $ 1.75 $ 1.58 $ 0.96 $ 0.55 $ 1.51 5 %
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 50,391 729 51,120 51,466 51,466 (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 617 612
Sales and marketing 4,805 4,642
Product development 5,433 5,289
General and administrative 13,149   14,330  
Total $ 24,004   $ 24,873  
(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 - FOURTH QUARTER

 
Revenue by Type
 
(In thousands) Q4 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
License $ 44,457 $ 571 $ 45,028
Maintenance 60,458 2,089 62,547
Services 7,803     7,803  
Total revenue $ 112,718   $ 2,660   $ 115,378  
 
Revenue by Region
 
(In thousands) Q4 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
North America $ 68,112 $ 2,506 $ 70,618
EMEA 34,504 126 34,630
Latin America 3,617 4 3,621
Asia Pacific 6,485   24   6,509  
Total revenue $ 112,718   $ 2,660   $ 115,378  
 
Revenue by Segment
 
(In thousands) Q4 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
OpenEdge $ 81,159 $ $ 81,159
Data Connectivity and Integration $ 15,257 $ $ 15,257
Application Development and Deployment $ 16,302   $ 2,660   $ 18,962  
Total revenue $ 112,718   $ 2,660   $ 115,378  
 
(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.
 
Adjusted Free Cash Flow
 
(In thousands) Q4 2015 Q4 2014 % Change
Cash flows from operations $ 27,557 $ 39,225 (30 )%
Purchases of property and equipment $ (1,126 ) $ (802 ) (40 )%
Capitalized software development costs $   $ (808 ) 100 %
Free cash flow $ 26,431   $ 37,615   (30 )%
Add back: restructuring payments $ 2,246   $ 714   215 %
Adjusted free cash flow $ 28,677   $ 38,329   (25 )%
 
               

OTHER NON-GAAP FINANCIAL MEASURES - FISCAL YEAR

 
Revenue by Type
 
(In thousands) FY 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
License $ 130,250 $ 8,751 $ 139,001
Maintenance 217,718 26,101 243,819
Services 29,586     29,586  
Total revenue $ 377,554   $ 34,852   $ 412,406  
 
Revenue by Region
 
(In thousands) FY 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
North America $ 207,566 $ 30,301 $ 237,867
EMEA 124,171 3,400 127,571
Latin America 17,594 199 17,793
Asia Pacific 28,223   952   29,175  
Total revenue $ 377,554   $ 34,852   $ 412,406  
 
Revenue by Segment
 
(In thousands) FY 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
OpenEdge $ 295,935 $ $ 295,935
Data Connectivity and Integration $ 37,926 $ $ 37,926
Application Development and Deployment $ 43,693   $ 34,852   $ 78,545  
Total revenue $ 377,554   $ 34,852   $ 412,406  
 
(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.
 
Adjusted Free Cash Flow
 
(In thousands) FY 2015 FY 2014 % Change
Cash flows from operations $ 104,540 $ 107,694 (3 )%
Purchases of property and equipment $ (7,184 ) $ (7,985 ) 10 %
Capitalized software development costs $ (1,661 ) $ (3,816 ) 56 %
Free cash flow $ 95,695   $ 95,893   %
Add back: restructuring payments $ 6,343   $ 3,122   103 %
Adjusted free cash flow $ 102,038   $ 99,015   3 %
 
 

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2016 GUIDANCE

(Unaudited)

 

Fiscal Year 2016 Revenue Growth Guidance

Fiscal Year Ended   Fiscal Year Ending
November 30, 2015 November 30, 2016
(In millions) Low   % Change   High   % Change
GAAP revenue $ 377.6 $ 425.0 13 % $ 431.0 14 %
Acquisition-related adjustments - revenue (1) $ 34.8   $ 2.0   (94 )% $ 2.0   (94 )%
Non-GAAP revenue $ 412.4   $ 427.0   4 % $ 433.0   5 %
 

(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 2016 Non-GAAP Operating Margin Guidance
        Fiscal Year Ending November 30, 2016
(In millions) Low     High
GAAP income from operations $ 67.2 $ 71.5
GAAP operating margins 16 % 17 %
Acquisition-related revenue 2.0 2.0
Stock-based compensation 27.0 27.0
Amortization of intangibles 28.5   28.5  
Total adjustments 57.5   57.5  
Non-GAAP income from operations $ 124.7   $ 129.0  
Non-GAAP operating margin 29 % 30 %
 
 
Fiscal Year 2016 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
        Fiscal Year Ending November 30, 2016
(In millions, except per share data) Low     High
GAAP net income $ 34.8 $ 37.3
Adjustments (from above) 57.5 57.5
Income tax adjustment (2) (10.1 ) (10.0 )
Non-GAAP net income $ 82.2   $ 84.8  
 
GAAP diluted earnings per share $ 0.67 $ 0.72
Non-GAAP diluted earnings per share $ 1.59 $ 1.65
 
Diluted weighted average shares outstanding 51.8 51.5
 
(2) Tax adjustment is based on a non-GAAP effective tax rate of approximately 33% for Low and High, calculated as follows:
Non-GAAP income from operations $ 124.7 $ 129.0
Other (expense) income (2.8 ) (2.5 )
Non-GAAP income from continuing operations before income taxes 121.9   126.5  
Non-GAAP net income 82.2   84.8  
Tax provision 39.7   41.7  
Non-GAAP tax rate 33 % 33 %
 
 

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q1 2016 GUIDANCE

(Unaudited)

 
Q1 2016 Revenue Growth Guidance
        Three Months Ended         Three Months Ending
February 28, 2015 February 29, 2016
(In millions) Low     % Change     High     % Change
GAAP revenue $ 81.4 $ 91.2 12 % $ 93.2 14 %
Acquisition-related adjustments - revenue (1) $ 14.1   $ 0.8   (94 )% $ 0.8   (94 )%
Non-GAAP revenue $ 95.5   $ 92.0   (4 )% $ 94.0   (2 )%
 

(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.

 
Q1 2016 Non-GAAP Earnings per Share Guidance
        Three Months Ending February 29, 2016
Low     High
GAAP diluted earnings per share $ 0.06 $ 0.08
Acquisition-related revenue 0.01 0.01
Stock-based compensation 0.13 0.13
Amortization of intangibles 0.14   0.14  
Total adjustments 0.28   0.28  
Income tax adjustment $ (0.07 ) $ (0.07 )
Non-GAAP diluted earnings per share $ 0.27   $ 0.29  
 

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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