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Mar 25, 2021
Progress Announces First Quarter 2021 Financial Results

Revenue and Earnings Per Share Exceed Guidance Ranges
Full Year Guidance Increased for Revenue, Earnings Per Share and Free Cash Flow

BEDFORD, Mass., March 25, 2021 (GLOBE NEWSWIRE) -- Progress (NASDAQ: PRGS), the leading provider of products to develop, deploy and manage high-impact business applications, today announced financial results for its fiscal first quarter ended February 28, 2021.

First Quarter 2021 Highlights:

  • Revenue of $121.3 million increased 11% year-over-year on an actual currency basis, and 9% on a constant currency basis.
  • Non-GAAP revenue of $131.8 million increased 16% on an actual currency basis, and 14% on a constant currency basis.
  • Annualized Recurring Revenue (ARR) of $432 million increased 22% year-over-year on a constant currency basis with growth primarily driven by the acquisition of Chef Software.
  • Operating margin was 23% and Non-GAAP operating margin was 43%.
  • Diluted earnings per share was $0.42 compared to $0.46 in the same quarter last year, a decrease of 9%. 
  • Non-GAAP diluted earnings per share was $0.95 compared to $0.76 in the same quarter last year, an increase of 25%.

“The first quarter marked an excellent start to 2021 highlighted by better-than-expected growth on both the top and bottom line,” said Yogesh Gupta, CEO at Progress. “Our performance was stronger than expected across virtually all product lines and all of our key metrics. I am especially proud of the continued hard work and dedication of our entire organization and our first quarter results position us well as we continue to execute our total growth strategy.”

Additional financial highlights included(1):

  Three Months Ended
  GAAP   Non-GAAP
(In thousands, except percentages and per share amounts) February 28,
2021
  February 29,
2020
  %
Change
  February 28,
2021
  February 29,
2020
  %
Change
Revenue $ 121,280     $ 109,683     11  %   $ 131,784     $ 113,762     16  %
Income from operations $ 27,416     $ 30,712     (11 )%   $ 56,657     $ 47,973     18  %
Operating margin 23  %   28  %   (500) bps   43  %   42  %   100 bps
Net income $ 18,961     $ 21,116     (10 )%   $ 42,504     $ 34,703     22  %
Diluted earnings per share $ 0.42     $ 0.46     (9 )%   $ 0.95     $ 0.76     25  %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) $ 44,688     $ 33,016     35  %   $ 46,515     $ 33,297     40  %

(1)See Legal Notice Regarding Non-GAAP Financial Information

Other fiscal first quarter 2021 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $114.4 million at the end of the quarter;
  • DSO was 53 days compared to 49 days in the fiscal first quarter of 2020 and 54 days in the fiscal fourth quarter of 2020;
  • Pursuant to the $250 million share authorization by the Board of Directors, Progress repurchased 0.4 million shares for $15.0 million during the first fiscal quarter of 2021. As of February 28, 2021, there was $175.0 million remaining under this authorization; and
  • On March 23, 2021, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on June 15, 2021 to shareholders of record as of the close of business on June 1, 2021.

Anthony Folger, CFO, said: “Progress delivered strong financial results across the board in the first quarter, which has given us even greater confidence in our prospects for 2021. The integration of Chef is tracking ahead of plan and Chef’s first full quarter with Progress contributed better than expected performance and helped continue the trend of an increasing mix of revenue being derived from recurring sources.”

Select Performance Metrics:

Management evaluates our financial performance using a number of financial and operating metrics. These metrics are periodically reviewed and revised to reflect changes in our business.

Beginning this period, Progress is providing an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years. ARR represents the annualized contract value for all active and contractually binding term-based contracts at the end of a period. ARR includes maintenance, software upgrade rights, public cloud and on-premises subscription-based transactions and managed services. Additional information regarding ARR 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.

ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

In addition, Progress is in the process of updating its segments based on changes to how performance is assessed and resources are allocated. Progress expects to begin operating as one distinct segment to align with the way that management internally analyzes the business. Progress previously reported results based on three segments. Progress plans to implement the new segment structure starting with results for the fiscal second quarter ending May 31, 2021.

2021 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2021 and the fiscal second quarter ending May 31, 2021:

  Updated FY 2021 Guidance
(March 25, 2021)
  FY 2021 Guidance
(January 14, 2021)
(In millions, except percentages and per share amounts) GAAP   Non-GAAP   GAAP   Non-GAAP
Revenue $493 - $501   $519 - $527   $487 - $495   $513 - $521
Diluted earnings per share $1.56 - $1.60   $3.38 - $3.42   $1.40 - $1.46   $3.22 - $3.28
Operating margin 20%   38%   19%   37%
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$157 - $162   $155 - $160   $151 - $156   $150 - $155
Effective tax rate 21%   20%   21%   20%


  Q2 2021 Guidance
(In millions, except per share amounts) GAAP   Non-GAAP
Revenue $112 - $116   $119 - $123
Diluted earnings per share $0.25 - $0.27   $0.72 - $0.74
       

Based on current exchange rates, the expected positive currency translation impact on Progress' fiscal year 2021 business outlook compared to 2020 exchange rates is approximately $5.8 million on GAAP and non-GAAP revenue, and approximately $0.02 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress' fiscal Q2 2021 business outlook compared to 2020 exchange rates on GAAP and non-GAAP revenue is approximately $2.4 million. The expected positive impact on GAAP and non-GAAP diluted Q2 2021 earnings per share is $0.01. To the extent that there are changes in exchange rates versus the current environment, this may have an impact on Progress' business outlook.

Conference Call

Progress will hold a conference call to review its financial results for the fiscal first quarter of 2021 at 5:00 p.m. ET on Thursday, March 25, 2021. The call 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 800-367-2403 or 334-777-6978, passcode 3276569. The conference call will include comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress website within the investor relations section after the live conference call.

Legal Notice Regarding Non-GAAP Financial Information

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

Note Regarding Forward-Looking Statements

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

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

(1) Economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts. (3) Our ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts. (5) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. (6) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (7) If the security measures for our software, services, other offerings or our internal information technology infrastructure are compromised or subject to a successful cyber-attack, or if our software 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) Delay or failure to realize the expected synergies and benefits of the Chef acquisition could negatively impact our future results of operations and financial condition. (10) The continuing impact of the coronavirus disease (COVID-19) outbreak on our employees, customers, partners, and the global financial markets could adversely affect our business, results of operations and financial condition. 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, 2020. 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) provides the best products to develop, deploy and manage high-impact business applications. Our comprehensive product stack is designed to make technology teams more productive and we have a deep commitment to the developer community, both open source and commercial alike. With Progress, organizations can accelerate the creation and delivery of strategic business applications, automate the process by which apps are configured, deployed and scaled, and make critical data and content more accessible and secure—leading to competitive differentiation and business success. Over 1,700 independent software vendors, 100,000 enterprise customers, and three 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.

Investor Contact: Press Contact:
Michael Micciche Erica McShane
Progress Software Progress Software
+1 781 850 8450 +1 781 280 4000
Investor-Relations@progress.com PR@progress.com
   


 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
   
  Three Months Ended
(In thousands, except per share data) February 28,
2021
  February 29,
2020
  %
Change
Revenue:          
Software licenses $ 33,317     $ 30,629      %
Maintenance and services 87,963     79,054     11   %
Total revenue 121,280     109,683     11   %
Costs of revenue:          
Cost of software licenses 1,151     1,389     (17 )%
Cost of maintenance and services 13,319     11,851     12   %
Amortization of acquired intangibles 3,521     1,646     114   %
Total costs of revenue 17,991     14,886     21   %
Gross profit 103,289     94,797      %
Operating expenses:          
Sales and marketing 29,469     24,198     22   %
Product development 24,548     21,654     13   %
General and administrative 13,424     12,748      %
Amortization of acquired intangibles 6,879     4,131     67   %
Restructuring expenses 1,157     1,040     11   %
Acquisition-related expenses 396     314     26   %
Total operating expenses 75,873     64,085     18   %
Income from operations 27,416     30,712     (11 )%
Other expense, net (2,652 )   (3,397 )   22   %
Income before income taxes 24,764     27,315     (9 )%
Provision for income taxes 5,803     6,199     (6 )%
Net income $ 18,961     $ 21,116     (10 )%
           
Earnings per share:          
Basic $ 0.43     $ 0.47     (9 )%
Diluted $ 0.42     $ 0.46     (9 )%
Weighted average shares outstanding:          
Basic 44,108     44,897     (2 )%
Diluted 44,652     45,515     (2 )%
           
Cash dividends declared per common share $ 0.175     $ 0.165      %


Stock-based compensation is included in the condensed consolidated statements of operations, as follows:
Cost of revenue $ 392     $ 319     23   %
Sales and marketing 1,503     1,050     43   %
Product development 1,919     1,926     —   %
General and administrative 2,970     2,756      %
Total $ 6,784     $ 6,051     12   %
                     


 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
       
(In thousands) February 28,
2021
  November 30,
2020
Assets      
Current assets:      
Cash, cash equivalents and short-term investments $ 114,371     $ 105,995  
Accounts receivable, net 77,573     84,040  
Unbilled receivables and contract assets 24,099     24,917  
Other current assets 23,266     23,983  
Total current assets 239,309     238,935  
Property and equipment, net 29,838     29,817  
Goodwill and intangible assets, net 694,048     704,473  
Right-of-use lease assets 31,265     30,635  
Long-term unbilled receivables and contract assets 14,334     17,133  
Other assets 18,263     20,789  
Total assets $ 1,027,057     $ 1,041,782  
Liabilities and shareholders’ equity      
Current liabilities:      
Accounts payable and other current liabilities $ 55,019     $ 70,899  
Current portion of long-term debt, net 20,124     18,242  
Short-term operating lease liabilities 7,154     7,015  
Short-term deferred revenue 183,443     166,387  
Total current liabilities 265,740     262,543  
Long-term debt, net 343,758     364,260  
Long-term operating lease liabilities 27,342     26,966  
Long-term deferred revenue 25,535     26,908  
Other long-term liabilities 12,129     15,092  
Shareholders’ equity:      
Common stock and additional paid-in capital 312,137     306,244  
Retained earnings 40,416     39,769  
Total shareholders’ equity 352,553     346,013  
Total liabilities and shareholders’ equity $ 1,027,057     $ 1,041,782  
               


 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
  Three Months Ended
(In thousands) February 28,
2021
  February 29,
2020
Cash flows from operating activities:      
Net income $ 18,961     $ 21,116  
Depreciation and amortization 11,862     7,669  
Stock-based compensation 6,784     6,051  
Other non-cash adjustments 3,039     5,347  
Changes in operating assets and liabilities 4,042     (7,167 )
Net cash flows from operating activities 44,688     33,016  
Capital expenditures (1,166 )   (1,148 )
Issuances of common stock, net of repurchases (11,515 )   (15,755 )
Dividend payments to shareholders (7,854 )   (7,468 )
Payments of principal on long-term debt (18,763 )   (1,882 )
Other 2,986     (3,393 )
Net change in cash, cash equivalents and short-term investments 8,376     3,370  
Cash, cash equivalents and short-term investments, beginning of period 105,995     173,685  
Cash, cash equivalents and short-term investments, end of period $ 114,371     $ 177,055  
               


 
RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES
(Unaudited)
       
  Three Months Ended   % Change
(In thousands, except per share data) February 28, 2021   February 29, 2020   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 121,280         $ 109,683          
Acquisition-related revenue(1) 10,504         4,079          
Non-GAAP revenue $ 131,784     100  %   $ 113,762     100  %   16  %
                   
Adjusted income from operations:                  
GAAP income from operations $ 27,416     23  %   $ 30,712     28  %    
Amortization of acquired intangibles 10,400     8  %   5,777     5  %    
Restructuring expenses and other 1,157     1  %   1,040     1  %    
Stock-based compensation 6,784     3  %   6,051     4  %    
Acquisition-related revenue(1) and expenses 10,900     8  %   4,393     4  %    
Non-GAAP income from operations $ 56,657     43  %   $ 47,973     42  %   18  %
                   
Adjusted net income:                  
GAAP net income $ 18,961     16  %   $ 21,116     19  %    
Amortization of acquired intangibles 10,400     8  %   5,777     5  %    
Restructuring expenses and other 1,157     1  %   1,040     1  %    
Stock-based compensation 6,784     3  %   6,051     5  %    
Acquisition-related revenue(1) and expenses 10,900     8  %   4,393     4  %    
Provision for income taxes (5,698 )   (4 )%   (3,674 )   (3 )%    
Non-GAAP net income $ 42,504     32  %   $ 34,703     31  %   22  %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 0.42         $ 0.46          
Amortization of acquired intangibles 0.23         0.13          
Restructuring expenses and other 0.03         0.02          
Stock-based compensation 0.16         0.13          
Acquisition-related revenue(1) and expenses 0.24         0.10          
Provision for income taxes (0.13 )       (0.08 )        
Non-GAAP diluted earnings per share $ 0.95         $ 0.76         25  %
                   
Non-GAAP weighted avg shares outstanding - diluted 44,652         45,515         (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. Acquisition-related revenue adjustments relate to Progress' Application Development and Deployment business segment for Chef and Progress' OpenEdge business segment for Ipswitch.
 


 
OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)
           
Adjusted Free Cash Flow          
           
(In thousands) Q1 2021   Q1 2020   % Change
Cash flows from operations $ 44,688     $ 33,016     35  %
Purchases of property and equipment (1,166 )   (1,148 )   2  %
Free cash flow 43,522     31,868     37  %
Add back: restructuring payments 2,993     1,429     109  %
Adjusted free cash flow $ 46,515     $ 33,297     40  %
                     


 
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021 GUIDANCE
(Unaudited)
 
Fiscal Year 2021 Updated Revenue Guidance
  Fiscal Year Ended   Fiscal Year Ending
  November 30, 2020   November 30, 2021
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 442.1     $ 493.0     12  %   $ 501.0     13  %
Acquisition-related adjustments - revenue(1) 14.1     26.0     84  %   26.0     84  %
Non-GAAP revenue $ 456.2     $ 519.0     14  %   $ 527.0     16  %
                                   
(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. Acquisition-related revenue adjustments relate to Ipswitch and Chef.


Fiscal Year 2021 Updated Non-GAAP Operating Margin Guidance
  Fiscal Year Ending November 30, 2021
(In millions) Low   High
GAAP income from operations $ 99.5     $ 102.1  
GAAP operating margins 20  %   20  %
Acquisition-related revenue 26.0     26.0  
Acquisition-related expense 0.9     0.9  
Restructuring expense 1.3     1.3  
Stock-based compensation 27.2     27.2  
Amortization of acquired intangibles 44.9     44.9  
Total adjustments(2) 100.3     100.3  
Non-GAAP income from operations $ 199.8     $ 202.4  
Non-GAAP operating margin 38  %   38  %
           
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Chef and restructuring expenses. The final amounts will not be available until the Company’s internal procedures and reviews are completed.


Fiscal Year 2021 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance
  Fiscal Year Ending November 30, 2021
(In millions, except per share data) Low   High
GAAP net income $ 69.5     $ 71.5  
Adjustments (from previous table) 100.3     100.3  
Income tax adjustment(3) (19.2 )   (19.2 )
Non-GAAP net income $ 150.6     $ 152.6  
       
GAAP diluted earnings per share $ 1.56     $ 1.60  
Non-GAAP diluted earnings per share $ 3.38     $ 3.42  
       
Diluted weighted average shares outstanding 44.6     44.6  
       
(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately 20% for Low and High, calculated as follows:
Non-GAAP income from operations $ 199.8     $ 202.4  
Other (expense) income (11.6 )   (11.6 )
Non-GAAP income from continuing operations before income taxes 188.2     190.8  
Non-GAAP net income 150.6     152.6  
Tax provision $ 37.6     $ 38.2  
Non-GAAP tax rate 20  %   20  %
           


 
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021 GUIDANCE
(Unaudited)
 
Fiscal Year 2021 Adjusted Free Cash Flow Guidance
  Fiscal Year Ending November 30, 2021
(In millions) Low   High
Cash flows from operations (GAAP) $ 157     $ 162  
Purchases of property and equipment (7 )   (7 )
Add back: restructuring payments 5     5  
Adjusted free cash flow (non-GAAP) $ 155     $ 160  
               


 
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2021 GUIDANCE
(Unaudited)
 
Q2 2021 Revenue Guidance
  Three Months Ended   Three Months Ending
  May 31, 2020   May 31, 2021
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 100.4     $ 112.3     12  %   $ 116.3     16  %
Acquisition-related adjustments - revenue(1) 2.1     6.7     219  %   6.7     219  %
Non-GAAP revenue $ 102.5     $ 119.0     16  %   $ 123.0     20  %
                                   
(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. Acquisition-related revenue adjustments relate to Ipswitch and Chef.


Q2 2021 Non-GAAP Earnings per Share Guidance
  Three Months Ending May 31, 2021
  Low   High
GAAP diluted earnings per share $ 0.25     $ 0.27  
Acquisition-related revenue 0.15     0.15  
Acquisition-related expense 0.01     0.01  
Stock-based compensation 0.16     0.16  
Amortization of acquired intangibles 0.26     0.26  
Total adjustments(2) 0.58     0.58  
Income tax adjustment (0.11 )   (0.11 )
Non-GAAP diluted earnings per share $ 0.72     $ 0.74  
               
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Chef. The final amounts will not be available until the Company’s internal procedures and reviews are completed.
 


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Source: Progress Software Corporation