Press Release

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Jun 24, 2021
Progress Announces Second Quarter 2021 Financial Results

Q2 Revenue and Earnings Per Share Exceed Guidance 
Full Year Guidance Raised

BEDFORD, Mass., June 24, 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 second quarter ended May 31, 2021.

Second Quarter 2021 Highlights:

  • Revenue of $122.5 million increased 22% year-over-year on an actual currency basis, and 19% on a constant currency basis.
  • Non-GAAP revenue of $129.2 million increased 26% on an actual currency basis, and 23% on a constant currency basis.
  • Annualized Recurring Revenue (ARR) of $437 million increased 23% year-over-year on a constant currency basis.
  • Operating margin was 18% and Non-GAAP operating margin was 38%.
  • Diluted earnings per share was $0.30 compared to $0.37 in the same quarter last year, a decrease of 19%. 
  • Non-GAAP diluted earnings per share was $0.82 compared to $0.63 in the same quarter last year, an increase of 30%.

“We delivered a strong second quarter, which came in well ahead of our top- and bottom-line guidance ranges, demonstrating the success of our total growth strategy,” said Yogesh Gupta, CEO at Progress. “Our outperformance was driven by a combination of strength in our core business coupled with our acquired DevOps products from Chef, which is achieving nearly all of the integration synergies we expected ahead of schedule. The combination of another quarter of outperformance in our core businesses along with Chef proceeding ahead of plan makes us increasingly confident in our expectations for a strong year.”

Additional financial highlights included(1):

  Three Months Ended
  GAAP   Non-GAAP
(In thousands, except percentages and per share amounts) May 31, 2021   May 31, 2020   %
Change
  May 31, 2021   May 31, 2020   %
Change
Revenue $ 122,488      $ 100,383     22   %   $ 129,198      $ 102,505     26 %
Income from operations $ 22,282      $ 25,309     (12 ) %   $ 49,712      $ 39,590     26 %
Operating margin 18  %   25 %   (700) bps       38  %   39 %   (100) bps  
Net income $ 13,557      $ 16,968     (20 ) %   $ 36,513      $ 28,656     27 %
Diluted earnings per share $ 0.30      $ 0.37     (19 ) %   $ 0.82      $ 0.63     30 %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) $ 54,690      $ 37,957     44   %   $ 55,411      $ 38,399     44 %

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

Other fiscal second quarter 2021 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $362.7 million at the end of the quarter.
  • DSO was 44 days compared to 47 days in the fiscal second quarter of 2020 and 53 days in the fiscal first quarter of 2021.
  • Pursuant to the $250 million share authorization by the Board of Directors, Progress repurchased 0.4 million shares for $20.0 million during the second fiscal quarter of 2021. As of May 31, 2021, there was $155.0 million remaining under this authorization.
  • During the second quarter, the company completed an offering of convertible senior unsecured notes in the aggregate amount of $360,000,000, including the over allotment. To mitigate potential dilution to existing shareholders, the company privately negotiated capped call transactions that effectively doubled the conversion premium, for an effective conversion price of $89.88 per share.
  • On June 22, 2021, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on September 15, 2021 to shareholders of record as of the close of business on September 1, 2021.
  • During the second quarter, Progress began operating as one distinct segment to align with the way that management internally analyzes the business. Progress previously reported results based on three segments.

Anthony Folger, CFO, said: “We’re very pleased with the performance of our core business and our continued success integrating Chef. Our second quarter results reflect strength across all product lines and we're very pleased with the growth in ARR and the improvement in our net retention rates, both of which were introduced as key metrics last quarter. At the same time, we are achieving acquisition synergies sooner than anticipated, which contributed to our strong profitability and cash flows. These results reinforce our optimism and increase our confidence, providing us with comfort to raise our FY21 guidance again this quarter.”

2021 Business Outlook

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

  Updated FY 2021 Guidance
(June 24, 2021)
  Prior FY 2021 Guidance
(March 25, 2021)
(In millions, except percentages and per share amounts) GAAP   Non-GAAP   GAAP   Non-GAAP
Revenue $503 - $509   $529 - $535   $493 - $501   $519 - $527
Diluted earnings per share $1.51 - $1.55   $3.46 - $3.50   $1.56 - $1.60   $3.38 - $3.42
Operating margin 21%   39%   20%   38%
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$160 - $164   $158 - $162   $157 - $162   $155 - $160
Effective tax rate 20% - 21%   20% - 21%   21 %   20 %


  Q3 2021 Guidance
(In millions, except per share amounts) GAAP   Non-GAAP
Revenue $124 - $127   $129 - $132
Diluted earnings per share $0.34 - $0.36   $0.81 - $0.83

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 $8.4 million on GAAP and non-GAAP revenue, and approximately $0.05 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress' fiscal Q3 2021 business outlook compared to 2020 exchange rates on GAAP and non-GAAP revenue is approximately $2.2 million. The expected positive impact on GAAP and non-GAAP diluted Q3 2021 earnings per share is $0.02. 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 second quarter of 2021 at 5:00 p.m. ET on Thursday, June 24, 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 800-458-4121 or +1 773-377-9334, passcode 3588537. 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   Six Months Ended
(In thousands, except per share data) May 31,
2021
  May 31,
2020
  %
Change
  May 31,
2021
  May 31,
2020
  %
Change
Revenue:                      
Software licenses $ 30,107       $ 19,663       53    %   $ 63,424       $ 50,292       26    %
Maintenance and services 92,381       80,720       14    %   180,344       159,774       13    %
Total revenue 122,488       100,383       22    %   243,768       210,066       16    %
Costs of revenue:                      
Cost of software licenses 1,038       810       28    %   2,189       2,199       —    %
Cost of maintenance and services 14,673       11,785       25    %   27,992       23,636       18    %
Amortization of acquired intangibles 3,599       1,664       116    %   7,120       3,310       115    %
Total costs of revenue 19,310       14,259       35    %   37,301       29,145       28    %
Gross profit 103,178       86,124       20    %   206,467       180,921       14    %
Operating expenses:                      
Sales and marketing 29,262       21,716       35    %   58,731       45,914       28    %
Product development 26,415       21,787       21    %   50,963       43,441       17    %
General and administrative 16,460       12,440       32    %   29,884       25,188       19    %
Amortization of acquired intangibles 7,979       4,177       91    %   14,858       8,308       79    %
Restructuring expenses (64 )     695       (109 ) %   1,093       1,735       (37 ) %
Acquisition-related expenses 844             —    %   1,240       314       295    %
Total operating expenses 80,896       60,815       33    %   156,769       124,900       26    %
Income from operations 22,282       25,309       (12 ) %   49,698       56,021       (11 ) %
Other expense, net (5,218 )     (2,847 )     (83 ) %   (7,870 )     (6,244 )     (26 ) %
Income before income taxes 17,064       22,462       (24 ) %   41,828       49,777       (16 ) %
Provision for income taxes 3,507       5,494       (36 ) %   9,310       11,693       (20 ) %
Net income $ 13,557       $ 16,968       (20 ) %   $ 32,518       $ 38,084       (15 ) %
                       
Earnings per share:                      
Basic $ 0.31       $ 0.38       (18 ) %   $ 0.74       $ 0.85       (13 ) %
Diluted $ 0.30       $ 0.37       (19 ) %   $ 0.73       $ 0.84       (13 ) %
Weighted average shares outstanding:                      
Basic 43,818       44,889       (2 ) %   43,963       44,893       (2 ) %
Diluted 44,472       45,267       (2 ) %   44,562       45,391       (2 ) %
                       
Cash dividends declared per common share $ 0.175       $ 0.165         %   $ 0.350       $ 0.330         %


Stock-based compensation is included in the condensed consolidated statements of operations, as follows:            
Cost of revenue $ 468     $ 338     38  %   $ 860     $ 657     31  %
Sales and marketing 1,752     1,110     58  %   3,255     2,160     51  %
Product development 2,412     1,899     27  %   4,331     3,825     13  %
General and administrative 3,730     2,276     64  %   6,700     5,032     33  %
Total $ 8,362     $ 5,623     49  %   $ 15,146     $ 11,674     30  %

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands) May 31, 2021   November 30, 2020
Assets      
Current assets:      
Cash, cash equivalents and short-term investments $ 362,660     $ 105,995  
Accounts receivable, net 64,045     84,040  
Unbilled receivables and contract assets 23,157     24,917  
Other current assets 21,106     23,983  
Total current assets 470,968     238,935  
Property and equipment, net 29,333     29,817  
Goodwill and intangible assets, net 682,499     704,473  
Right-of-use lease assets 30,833     30,635  
Long-term unbilled receivables and contract assets 10,742     17,133  
Other assets 15,619     20,789  
Total assets $ 1,239,994     $ 1,041,782  
Liabilities and shareholders’ equity      
Current liabilities:      
Accounts payable and other current liabilities $ 61,239     $ 70,899  
Current portion of long-term debt, net 22,005     18,242  
Short-term operating lease liabilities 7,361     7,015  
Short-term deferred revenue 175,472     166,387  
Total current liabilities 266,077     262,543  
Long-term debt, net 254,757     364,260  
Convertible senior notes, net 288,023      
Long-term operating lease liabilities 26,541     26,966  
Long-term deferred revenue 27,158     26,908  
Other long-term liabilities 11,717     15,092  
Shareholders’ equity:      
Common stock and additional paid-in capital 334,064     306,244  
Retained earnings 31,657     39,769  
Total shareholders’ equity 365,721     346,013  
Total liabilities and shareholders’ equity $ 1,239,994     $ 1,041,782  

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  

  Three Months Ended   Six Months Ended
(In thousands) May 31,
2021
  May 31,
2020
  May 31,
2021
  May 31,
2020
Cash flows from operating activities:              
Net income $ 13,557       $ 16,968       $ 32,518       $ 38,084    
Depreciation and amortization 14,829       7,572       26,691       15,241    
Stock-based compensation 8,362       5,623       15,146       11,674    
Other non-cash adjustments 708       2,309       3,123       7,656    
Changes in operating assets and liabilities 17,234       5,485       21,900       (1,682 )  
Net cash flows from operating activities 54,690       37,957       99,378       70,973    
Capital expenditures (950 )     (609 )     (2,116 )     (1,757 )  
Issuances of common stock, net of repurchases (17,185 )     3,063       (28,700 )     (12,692 )  
Dividend payments to shareholders (7,763 )     (7,438 )     (15,617 )     (14,906 )  
Payments of principal on long-term debt (87,262 )     (1,880 )     (106,025 )     (3,762 )  
Proceeds from issuance of Notes, net of issuance costs 349,196             349,196          
Purchase of capped calls (43,056 )           (43,056 )        
Other 619       (4,503 )     3,605       (7,896 )  
Net change in cash, cash equivalents and short-term investments 248,289       26,590       256,665       29,960    
Cash, cash equivalents and short-term investments, beginning of period 114,371       177,055       105,995       173,685    
Cash, cash equivalents and short-term investments, end of period $ 362,660       $ 203,645       $ 362,660       $ 203,645    

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - SECOND QUARTER
(Unaudited)

  Three Months Ended   % Change
(In thousands, except per share data) May 31, 2021   May 31, 2020   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 122,488           $ 100,383            
Acquisition-related revenue(1) 6,710           2,122            
Non-GAAP revenue $ 129,198       100   %   $ 102,505       100   %   26 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 22,282       18   %   $ 25,309       25   %    
Amortization of acquired intangibles 11,578       9   %   5,841       6   %    
Restructuring expenses and other (64 )       %   695       1   %    
Stock-based compensation 8,362       5   %   5,623       5   %    
Acquisition-related revenue(1) and expenses 7,554       6   %   2,122       2   %    
Non-GAAP income from operations $ 49,712       38   %   $ 39,590       39   %   26 %
                   
Adjusted net income:                  
GAAP net income $ 13,557       11   %   $ 16,968       17   %    
Amortization of acquired intangibles 11,578       9   %   5,841       6   %    
Restructuring expenses and other (64 )       %   695       1   %    
Stock-based compensation 8,362       6   %   5,623       5   %    
Acquisition-related revenue(1) and expenses 7,554       6   %   2,122       2   %    
Amortization of discount on notes 1,480       1   %           %    
Provision for income taxes (5,954 )     (5 ) %   (2,593 )     (3 ) %    
Non-GAAP net income $ 36,513       28   %   $ 28,656       28   %   27 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 0.30           $ 0.37            
Amortization of acquired intangibles 0.26           0.13            
Restructuring expenses and other           0.02            
Stock-based compensation 0.19           0.12            
Acquisition-related revenue(1) and expenses 0.17           0.05            
Amortization of discount on notes 0.03                      
Provision for income taxes (0.13 )         (0.06 )          
Non-GAAP diluted earnings per share $ 0.82           $ 0.63           30 %
                   
Non-GAAP weighted avg shares outstanding - diluted 44,472           45,267           (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.

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - YEAR TO DATE
(Unaudited)

  Six Months Ended   % Change
(In thousands, except per share data) May 31, 2021   May 31, 2020   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 243,768           $ 210,066            
Acquisition-related revenue(1) 17,214           6,201            
Non-GAAP revenue $ 260,982       100   %   $ 216,267       100   %   21 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 49,698       20   %   $ 56,021       27   %    
Amortization of acquired intangibles 21,978       8   %   11,618       5   %    
Restructuring expenses and other 1,093         %   1,735         %    
Stock-based compensation 15,146       6   %   11,674       5   %    
Acquisition-related revenue(1) and expenses 18,454       7   %   6,515       3   %    
Non-GAAP income from operations $ 106,369       41   %   $ 87,563       40   %   21 %
                   
Adjusted net income:                  
GAAP net income $ 32,518       13   %   $ 38,084       18   %    
Amortization of acquired intangibles 21,978       8   %   11,618       6   %    
Restructuring expenses and other 1,093         %   1,735       1   %    
Stock-based compensation 15,146       6   %   11,674       5   %    
Acquisition-related revenue(1) and expenses 18,454       7   %   6,515       2   %    
Amortization of discount on notes 1,480         %           %    
Provision for income taxes (11,652 )     (4 ) %   (6,267 )     (3 ) %    
Non-GAAP net income $ 79,017       30   %   $ 63,359       29   %   25 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 0.73           $ 0.84            
Amortization of acquired intangibles 0.49           0.26            
Restructuring expenses and other 0.02           0.04            
Stock-based compensation 0.35           0.26            
Acquisition-related revenue(1) and expenses 0.41           0.14            
Amortization of discount on notes 0.03                      
Provision for income taxes (0.26 )         (0.14 )          
Non-GAAP diluted earnings per share $ 1.77           $ 1.40           26 %
                   
Non-GAAP weighted avg shares outstanding - diluted 44,562           45,391           (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.

OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)

Quarter to Date Adjusted Free Cash Flow          
           
(In thousands) Q2 2021   Q2 2020   % Change
Cash flows from operations $ 54,690       $ 37,957       44  %
Purchases of property and equipment (950 )     (609 )     56  %
Free cash flow 53,740       37,348       44  %
Add back: restructuring payments 1,671       1,051       59  %
Adjusted free cash flow $ 55,411       $ 38,399       44  %


Year to Date Adjusted Free Cash Flow          
           
(In thousands) Q2 2021   Q2 2020   % Change
Cash flows from operations $ 99,378       $ 70,973       40  %
Purchases of property and equipment (2,116 )     (1,757 )     20  %
Free cash flow 97,262       69,216       41  %
Add back: restructuring payments 4,664       2,480       88  %
Adjusted free cash flow $ 101,926       $ 71,696       42  %

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     $ 503.0     14 %   $ 509.0     15 %
Acquisition-related adjustments - revenue(1) 14.1     26.0     84 %   26.0     84 %
Non-GAAP revenue $ 456.2     $ 529.0     16 %   $ 535.0     17 %
(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 $ 106.2     $ 108.4  
GAAP operating margins 21  %   21  %
Acquisition-related revenue 26.0     26.0  
Acquisition-related expense 1.3     1.3  
Restructuring expense 1.2     1.2  
Stock-based compensation 28.8     28.8  
Amortization of acquired intangibles 44.9     44.9  
Total adjustments(2) 102.2     102.2  
Non-GAAP income from operations $ 208.4     $ 210.6  
Non-GAAP operating margin 39  %   39  %
(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 $ 67.3       $ 69.1    
Adjustments (from previous table) 102.2       102.2    
Amortization of discount on notes 7.2       7.2    
Income tax adjustment(3) (22.4 )     (22.4 )  
Non-GAAP net income $ 154.3       $ 156.1    
       
GAAP diluted earnings per share $ 1.51       $ 1.55    
Non-GAAP diluted earnings per share $ 3.46       $ 3.50    
       
Diluted weighted average shares outstanding 44.6       44.6    
       
(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately 21% for Low and 20% for High, calculated as follows:
Non-GAAP income from operations $ 208.4       $ 210.6    
Other (expense) income (14.3 )     (14.3 )  
Non-GAAP income from continuing operations before income taxes 194.1       196.3    
Non-GAAP net income 154.3       156.1    
Tax provision $ 39.8       $ 40.2    
Non-GAAP tax rate 21   %   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) $ 160       $ 164    
Purchases of property and equipment (7 )     (7 )  
Add back: restructuring payments 5       5    
Adjusted free cash flow (non-GAAP) $ 158       $ 162    

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2021 GUIDANCE
(Unaudited)

Q3 2021 Revenue Guidance
  Three Months Ended   Three Months Ending
  August 31, 2020   August 31, 2021
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 109.7     $ 123.8     13 %   $ 126.8     16 %
Acquisition-related adjustments - revenue(1) 1.2     5.2     333 %   5.2     333 %
Non-GAAP revenue $ 110.9     $ 129.0     16 %   $ 132.0     19 %
(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.


Q3 2021 Non-GAAP Earnings per Share Guidance
  Three Months Ending August 31, 2021
  Low   High
GAAP diluted earnings per share $ 0.34       $ 0.36    
Acquisition-related revenue 0.12       0.12    
Stock-based compensation 0.15       0.15    
Amortization of acquired intangibles 0.26       0.26    
Total adjustments(2) 0.53       0.53    
Amortization of discount on notes 0.06       0.06    
Income tax adjustment (0.12 )     (0.12 )  
Non-GAAP diluted earnings per share $ 0.81       $ 0.83    
(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