Press Release

<< Back
Jan 16, 2020
Progress Reports 2019 Fiscal Fourth Quarter and Year End Results

Exceeds Annual Guidance for Revenue, Achieves Record Cash Flows

Board of Directors Increases Share Repurchase Authorization to $250 Million

BEDFORD, Mass., Jan. 16, 2020 (GLOBE NEWSWIRE) -- Progress (NASDAQ: PRGS), the leading provider of application development and digital experience technologies, today announced results for its fiscal fourth quarter and fiscal year ended November 30, 2019.

On a GAAP basis, revenue was $117.0 million during the quarter compared to $98.1 million in the same quarter last year, a year-over-year increase of 19% on an actual currency basis and 21% on a constant currency basis. On a non-GAAP basis, revenue was $123.4 million during the quarter compared to $98.3 million in the same quarter last year, an increase of 26% on an actual currency basis and 27% on a constant currency basis.

On a GAAP basis, diluted loss per share during the quarter was $0.11 compared to diluted earnings per share of $0.19 in the same quarter last year, a decrease of 158%. On a non-GAAP basis, diluted earnings per share during the quarter was $0.79 compared to $0.54 in the same quarter last year, an increase of 46%.

“Our fourth quarter performance was very strong, allowing us to exceed both our revenue and EPS guidance for fiscal 2019," said Yogesh Gupta, CEO at Progress. "Once again, in Q4 we had a better-than-expected contribution from Ipswitch, our recent acquisition, further validating our focus on accretive M&A as our go-forward strategy. We look forward to continued momentum in 2020, as we execute on a strategic plan that will drive sustainable, long-term value for all shareholders.”

Additional financial highlights included(1):

   
  Three Months Ended
  GAAP   Non-GAAP
(In thousands, except percentages and per share amounts) November 30,
2019
  November 30,
2018
  %
Change
  November 30,
2019
  November 30,
2018
  %
Change
Revenue $ 117,038     $ 98,103     19 %   $ 123,416     $ 98,257     26 %
(Loss) income from operations $ (6,026 )   $ 11,029     (155 )%   $ 47,285     $ 30,975     53 %
Operating margin (5 )%   11 %   (145 )%   38 %   32 %   19 %
Net (loss) income $ (4,740 )   $ 8,643     (155 )%   $ 35,720     $ 24,440     46 %
Diluted (loss) earnings per share $ (0.11 )   $ 0.19     (158 )%   $ 0.79     $ 0.54     46 %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) $ 36,601     $ 24,327     50 %   $ 36,705     $ 23,232     58 %

(1)The Company adopted the new accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.

Paul Jalbert, CFO, said: “We are very pleased with our financial performance in Q4 and for the full fiscal year.  We delivered record cash flow for 2019 and are projecting a very significant increase for 2020, perhaps the best indication of our efficient approach to running our company. With the Ipswitch integration behind us, our business is well-positioned to sustain our momentum in 2020 and beyond.”

Other fiscal fourth quarter 2019 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $173.7 million at the end of the quarter;
  • DSO was 56 days, compared to 53 days in the fiscal third quarter of 2019 and 47 days in the fiscal fourth quarter of 2018;
  • On January 8, 2020, our Board of Directors declared a quarterly dividend of $0.165 per share of common stock that will be paid on March 16, 2020 to shareholders of record as of the close of business on March 2, 2020.

Full Year Results(1)

   
  Fiscal Year Ended
  GAAP   Non-GAAP
(In thousands, except percentages and per share amounts) November 30,
2019
  November 30,
2018
  %
Change
  November 30,
2019
  November 30,
2018
  %
Change
Revenue $ 413,298     $ 378,981     9 %   $ 431,961     $ 379,447     14 %
Income from operations $ 40,084     $ 67,814     (41 )%   $ 162,258     $ 133,952     21 %
Operating margin 10 %   18 %   (44 )%   38 %   35 %   9 %
Net income $ 26,400     $ 49,670     (47 )%   $ 121,745     $ 101,180     20 %
Diluted earnings per share $ 0.58     $ 1.08     (46 )%   $ 2.69     $ 2.19     23 %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) $ 128,484     $ 121,352     6 %   $ 128,893     $ 120,213     7 %

(1)The Company adopted the new accounting standard related to revenue recognition ("ASC 606") effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.

2020 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2020 and for the fiscal first quarter ending February 29, 2020, together with actual results for the same periods in the fiscal year ending November 30, 2019:

         
  FY 2019 Actual   FY 2020 Guidance  
(In millions, except percentages and per share amounts) FY 2019
GAAP
  FY 2019
Non-GAAP
  FY 2020
GAAP
    FY 2020
Non-GAAP
 
Revenue $ 413     $ 432     $440 - $447     $448 - $455  
Diluted earnings per share $ 0.58     $ 2.69     $1.96 - $2.01     $2.87 - $2.92  
Operating margin 10   38     27 %     39 %
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$ 128     $ 129     $149 - $154     $145 - $150  
Effective tax rate 7   19   17%       20 %
                       


  Q1 2019 Actual   Q1 2020 Guidance
(In millions, except per share amounts) Q1 2019
GAAP
  Q1 2019
Non-GAAP
  Q1 2020
GAAP
  Q1 2020
Non-GAAP
Revenue $ 90     $ 90     $106 - $109   $110 - $113
Diluted earnings per share $ 0.21     $ 0.50     $0.40 - $0.42   $0.69 - $0.71
                       

Based on current exchange rates, the expected negative currency translation impact on Progress' fiscal year 2020 business outlook compared to 2019 exchange rates is approximately $0.6 million on GAAP and non-GAAP revenue. The expected negative currency translation impact on Progress' fiscal Q1 2020 business outlook compared to 2019 exchange rates on GAAP and non-GAAP revenue is approximately $0.5 million. The expected currency translation impact on GAAP and non-GAAP earnings per share for fiscal year 2020 and fiscal Q1 2020 is not material. To the extent that there are changes in exchange rates versus the current environment, this may have an impact on Progress' business outlook.

Share Repurchase Program

Progress also announced today that its Board of Directors has increased the total share repurchase authorization from the $75 million remaining on the previous authorization to $250 million.

Conference Call

Progress will hold a conference call to review its financial results for the fiscal fourth quarter of 2019 at 5:00 p.m. ET on Thursday, January 16, 2020. 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 1-800-458-4121, pass code 4393532. 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 or other offerings are compromised or subject to a successful cyber-attack, or if such offerings contain significant coding or configuration errors, we may experience reputational harm, legal claims and financial exposure. (8) We have made acquisitions, including our recent acquisition of Ipswitch, 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. 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, 2018 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2019, May 31, 2019 and August 31, 2019. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

About Progress

Progress (NASDAQ: PRGS) offers the leading platform for developing and deploying strategic business applications. We enable customers and partners to deliver modern, high-impact digital experiences with a fraction of the effort, time and cost. Progress offers powerful tools for easily building adaptive user experiences across any type of device or touchpoint, the flexibility of a cloud-native app dev platform to deliver modern apps, leading data connectivity technology, web content management, business rules, secure file transfer, network monitoring, plus award-winning machine learning that enables cognitive capabilities to be a part of any application. Over 1,700 independent software vendors, 100,000 enterprise customers, and two 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.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

  Three Months Ended   Fiscal Year Ended
(In thousands, except per share data) November 30,
2019
  November 30,
2018(1)
  %
Change
  November 30,
2019
  November 30,
2018(1)
  %
Change
Revenue:                      
Software licenses $ 39,336     $ 28,367     39 %   $ 122,552     $ 99,800     23 %
Maintenance and services 77,702     69,736     11 %   290,746     279,181     4 %
Total revenue 117,038     98,103     19 %   413,298     378,981     9 %
Costs of revenue:                      
Cost of software licenses 1,598     1,198     33 %   4,894     4,769     3 %
Cost of maintenance and services 12,281     10,025     23 %   44,463     39,470     13 %
Amortization of acquired intangibles 6,887     5,508     25 %   25,884     22,734     14 %
Total costs of revenue 20,766     16,731     24 %   75,241     66,973     12 %
Gross profit 96,272     81,372     18 %   338,057     312,008     8 %
Operating expenses:                      
Sales and marketing 29,369     28,198     4 %   101,701     93,036     9 %
Product development 23,868     20,334     17 %   88,572     79,739     11 %
General and administrative 14,915     13,380     11 %   53,360     49,050     9 %
Amortization of acquired intangibles 7,414     3,285     126 %   22,255     13,241     68 %
Impairment of intangible & long-lived assets(2) 24,096           *   24,096           *
Restructuring expenses 2,338     (131 )     *   6,331     2,251     181 %
Acquisition-related expenses 298     130     129 %   1,658     258       *
Loss on assets held for sale     5,147       *       5,147       *
Fees related to shareholder activist           *       1,472       *
Total operating expenses 102,298     70,343     45 %   297,973     244,194     22 %
(Loss) income from operations (6,026 )   11,029     (155 )%   40,084     67,814     (41 )%
Other expense, net (3,551 )   (2,188 )   (62 )%   (11,589 )   (7,018 )   (65 )%
(Loss) income before income taxes (9,577 )   8,841     (208 )%   28,495     60,796     (53 )%
(Benefit) provision for income taxes (4,837 )   198       *   2,095     11,126     (81 )%
Net (loss) income $ (4,740 )   $ 8,643     (155 )%   $ 26,400     $ 49,670     (47 )%
                       
(Loss) earnings per share:                      
Basic $ (0.11 )   $ 0.19     (158 )%   $ 0.59     $ 1.09     (46 )%
Diluted $ (0.11 )   $ 0.19     (158 )%   $ 0.58     $ 1.08     (46 )%
Weighted average shares outstanding:                      
Basic 44,882     45,055     %   44,791     45,561     (2 )%
Diluted 44,882     45,401     (1 )%   45,340     46,135     (2 )%
                       
Cash dividends declared per common share $ 0.165     $ 0.155     6 %   $ 0.630     $ 0.575     10 %
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
(2)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.


Stock-based compensation is included in the condensed consolidated statements of operations, as follows:            
                       
Cost of revenue $ 323     $ 197     64 %   $ 1,134     $ 616     84 %
Sales and marketing 950     832     14 %   4,155     2,959     40 %
Product development 1,812     2,468     (27 )%   7,205     8,242     (13 )%
General and administrative 2,815     2,356     19 %   10,817     8,752     24 %
Total $ 5,900     $ 5,853     1 %   $ 23,311     $ 20,569     13 %
                                           

*Not meaningful


CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands) November 30,
2019
  November 30,
2018(1)
Assets
     
Current assets:      
Cash, cash equivalents and short-term investments $ 173,685     $ 139,513  
Accounts receivable, net 72,820     59,715  
Unbilled receivables and contract assets 10,880     1,421  
Other current assets 27,280     25,080  
Assets held for sale     5,776  
Total current assets 284,665     231,505  
Property and equipment, net 29,765     30,714  
Goodwill and intangible assets, net 532,216     373,911  
Long-term unbilled receivables and contract assets 12,492     1,811  
Other assets 22,133     6,209  
Total assets $ 881,271     $ 644,150  
Liabilities and shareholders' equity      
Current liabilities:      
Accounts payable and other current liabilities $ 72,674     $ 57,005  
Current portion of long-term debt, net 10,717     5,819  
Short-term deferred revenue 157,494     123,210  
Total current liabilities 240,885     186,034  
Long-term debt, net 284,002     110,270  
Long-term deferred revenue 19,752     12,730  
Other long-term liabilities 6,350     11,114  
Shareholders' equity:      
Common stock and additional paid-in capital 295,953     267,053  
Retained earnings 34,329     56,949  
Total shareholders' equity 330,282     324,002  
Total liabilities and shareholders' equity $ 881,271     $ 644,150  
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  

  Three Months Ended   Fiscal Year Ended
(In thousands) November 30,   November 30,
2018(1)
  November 30,   November 30,
2018(1)
2019 2019
Cash flows from operating activities:              
Net (loss) income $ (4,740 )   $ 8,643     $ 26,400     $ 49,670  
Depreciation and amortization 16,519     10,855     56,679     44,502  
Stock-based compensation 5,900     5,853     23,311     20,569  
Loss on assets held for sale     5,147         5,147  
Impairment of intangible and long-lived assets(2) 24,096         24,096      
Other non-cash adjustments (8,252 )   389     (13,947 )   (1,676 )
Changes in operating assets and liabilities 3,078     (6,560 )   11,945     3,140  
Net cash flows from operating activities 36,601     24,327     128,484     121,352  
Capital expenditures (2,168 )   (1,282 )   (3,998 )   (7,250 )
Issuances of common stock, net of repurchases 2,918     (8,738 )   (15,735 )   (110,795 )
Dividend payments to shareholders (6,941 )   (6,318 )   (27,760 )   (25,789 )
Payments for acquisitions, net of cash acquired         (225,298 )    
Proceeds from the issuance of debt, net of payment of issuance costs         183,374      
Proceeds from sale of property, plant and equipment, net         6,146      
Payments of principal on long-term debt (1,882 )   (1,547 )   (5,309 )   (6,188 )
Other (240 )   (4,810 )   (5,732 )   (15,426 )
Net change in cash, cash equivalents and short-term investments 28,288     1,632     34,172     (44,096 )
Cash, cash equivalents and short-term investments, beginning of period 145,397     137,881     139,513     183,609  
Cash, cash equivalents and short-term investments, end of period $ 173,685     $ 139,513     $ 173,685     $ 139,513  
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
(2)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.
 

RESULTS OF OPERATIONS BY SEGMENT
(Unaudited)

  Three Months Ended   Fiscal Year Ended
(In thousands) November 30,
2019
  November 30,
2018(1)
  %
Change
  November 30,
2019
  November 30,
2018(1)
  %
Change
Segment revenue:                      
OpenEdge $ 85,250     $ 73,016     17 %   $ 296,929     $ 277,806     7 %
Data Connectivity and Integration 12,217     5,663     116 %   39,903     23,129     73 %
Application Development and Deployment 19,571     19,424     1 %   76,466     78,046     (2 )%
Total revenue 117,038     98,103     19 %   413,298     378,981     9 %
Segment costs of revenue and operating expenses:                      
OpenEdge 25,086     20,626     22 %   85,209     67,820     26 %
Data Connectivity and Integration 2,724     2,811     (3 )%   7,973     7,634     4 %
Application Development and Deployment 6,926     7,019     (1 )%   23,993     27,087     (11 )%
Total costs of revenue and operating expenses 34,736     30,456     14 %   117,175     102,541     14 %
Segment contribution margin:                      
OpenEdge 60,164     52,390     15 %   211,720     209,986     1 %
Data Connectivity and Integration 9,493     2,852     233 %   31,930     15,495     106 %
Application Development and Deployment 12,645     12,405     2 %   52,473     50,959     3 %
Total contribution margin 82,302     67,647     22 %   296,123     276,440     7 %
Other unallocated expenses(2) 88,328     56,618     56 %   256,039     208,626     23 %
(Loss) income from operations (6,026 )   11,029     (155 )%   40,084     67,814     (41 )%
Other expense, net (3,551 )   (2,188 )   (62 )%   (11,589 )   (7,018 )   (65 )%
(Loss) income before income taxes $ (9,577 )   $ 8,841     (208 )%   $ 28,495     $ 60,796     (53 )%
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
(2)The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: certain product development and corporate sales and marketing expenses, customer support, administration, amortization and impairment of acquired intangibles, impairment of long-lived assets, loss on assets held for sale, stock-based compensation, fees related to shareholder activist, restructuring, and acquisition-related expenses.
             

SUPPLEMENTAL INFORMATION
(Unaudited)

Revenue by Type                          
                           
(In thousands) Q4 2018(1)   Q1 2019   Q2 2019   Q3 2019   Q4 2019   FY 2019   FY 2018(1)
Software licenses $ 28,367     $ 22,802     $ 29,728     $ 30,686     $ 39,336     $ 122,552     $ 99,800  
Maintenance 61,759     59,999     62,528     67,611     68,868     259,006     249,171  
Services 7,977     6,748     7,739     8,419     8,834     31,740     30,010  
Total revenue $ 98,103     $ 89,549     $ 99,995     $ 106,716     $ 117,038     $ 413,298     $ 378,981  
                           
Revenue by Region                          
                           
(In thousands) Q4 2018(1)   Q1 2019   Q2 2019   Q3 2019   Q4 2019   FY 2019   FY 2018(1)
North America $ 54,952     $ 46,498     $ 57,060     $ 60,208     $ 70,145     $ 233,911     $ 204,257  
EMEA 34,047     33,372     33,633     35,109     35,187     137,301     135,055  
Latin America 4,260     4,461     4,108     5,470     5,626     19,665     18,046  
Asia Pacific 4,844     5,218     5,194     5,929     6,080     22,421     21,623  
Total revenue $ 98,103     $ 89,549     $ 99,995     $ 106,716     $ 117,038     $ 413,298     $ 378,981  
                           
Revenue by Segment                          
                           
(In thousands) Q4 2018(1)   Q1 2019   Q2 2019   Q3 2019   Q4 2019   FY 2019   FY 2018(1)
OpenEdge $ 73,016     $ 65,252     $ 67,820     $ 78,607     $ 85,250     $ 296,929     $ 277,806  
Data Connectivity and Integration 5,663     6,000     12,932     8,754     12,217     39,903     23,129  
Application Development and Deployment 19,424     18,297     19,243     19,355     19,571     76,466     78,046  
Total revenue $ 98,103     $ 89,549     $ 99,995     $ 106,716     $ 117,038     $ 413,298     $ 378,981  
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
                                                       

 

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

  Three Months Ended   % Change
(In thousands, except per share data) November 30, 2019   November 30, 2018(1)   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 117,038         $ 98,103          
Acquisition-related revenue(2) 6,378         154          
Non-GAAP revenue $ 123,416     100 %   $ 98,257     100 %   26 %
                   
Adjusted income from operations:                  
GAAP (loss) income from operations $ (6,026 )   (5 )%   $ 11,029     11 %    
Amortization of acquired intangibles 14,301         8,793          
Stock-based compensation 5,900         5,853          
Impairment of intangible and long-lived assets(3) 24,096                  
Restructuring expenses and other 2,338         (131 )        
Acquisition-related revenue(2) and expenses 6,676         284          
Loss on assets held for sale         5,147          
Non-GAAP income from operations $ 47,285     38 %   $ 30,975     32 %   53 %
                   
Adjusted net income:                  
GAAP net (loss) income $ (4,740 )   (4 )%   $ 8,643     9 %    
Amortization of acquired intangibles 14,301         8,793          
Stock-based compensation 5,900         5,853          
Impairment of intangible and long-lived assets(3) 24,096                  
Restructuring expenses and other 2,338         (131 )        
Acquisition-related revenue(2) and expenses 6,676         284          
Loss on assets held for sale         5,147          
Provision for income taxes (12,851 )       (4,149 )        
Non-GAAP net income $ 35,720     29 %   $ 24,440     25 %   46 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted (loss) earnings per share $ (0.11 )       $ 0.19          
Amortization of acquired intangibles 0.32         0.19          
Stock-based compensation 0.13         0.13          
Impairment of intangible and long-lived assets(3) 0.53                  
Restructuring expenses and other 0.05                  
Acquisition-related revenue(2) and expenses 0.15         0.01          
Loss on assets held for sale         0.11          
Provision for income taxes (0.28 )       (0.09 )        
Non-GAAP diluted earnings per share $ 0.79         $ 0.54         46 %
                   
Non-GAAP weighted avg shares outstanding - diluted 45,484         45,401         %
                   
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
(2)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' OpenEdge business segment for Ipswitch in fiscal year 2019 and to Progress' OpenEdge business segment for Kinvey and Application Development and Deployment business segment for Telerik in fiscal year 2018.
(3)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.
 

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

  Fiscal Year Ended   % Change
(In thousands, except per share data) November 30, 2019   November 30, 2018(1)   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 413,298         $ 378,981          
Acquisition-related revenue(2) 18,663         466          
Non-GAAP revenue $ 431,961     100 %   $ 379,447     100 %   14 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 40,084     10 %   $ 67,814     18 %    
Amortization of acquired intangibles 48,139         35,975          
Stock-based compensation 23,311         20,569          
Impairment of intangible and long-lived assets(3) 24,096                  
Restructuring expenses and other 6,307         2,251          
Acquisition-related revenue(2) and expenses 20,321         724          
Loss on assets held for sale         5,147          
Fees related to shareholder activist         1,472          
Non-GAAP income from operations $ 162,258     38 %   $ 133,952     35 %   21 %
                   
Adjusted net income:                  
GAAP net income $ 26,400     6 %   $ 49,670     13 %    
Amortization of acquired intangibles 48,139         35,975          
Stock-based compensation 23,311         20,569          
Impairment of intangible and long-lived assets(3) 24,096                  
Restructuring expenses and other 6,307         2,251          
Acquisition-related revenue(2) and expenses 20,321         724          
Loss on assets held for sale         5,147          
Fees related to shareholder activist         1,472          
Provision for income taxes (26,829 )       (14,628 )        
Non-GAAP net income $ 121,745     28 %   $ 101,180     27 %   20 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 0.58         $ 1.08          
Amortization of acquired intangibles 1.07         0.78          
Stock-based compensation 0.51         0.45          
Impairment of intangible and long-lived assets(3) 0.53                  
Restructuring expenses and other 0.14         0.04          
Acquisition-related revenue(2) and expenses 0.45         0.02          
Loss on assets held for sale         0.11          
Fees related to shareholder activist         0.03          
Provision for income taxes (0.59 )       (0.32 )        
Non-GAAP diluted earnings per share $ 2.69         $ 2.19         23 %
                   
Non-GAAP weighted avg shares outstanding - diluted 45,340         46,135         (2 )%
                   
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
(2)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' OpenEdge business segment for Ipswitch in fiscal year 2019 and to Progress' OpenEdge business segment for Kinvey and Application Development and Deployment business segment for Telerik in fiscal year 2018.
(3)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.
 

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

Revenue by Type          
           
(In thousands) Q4 2019   Non-GAAP
Adjustment(1)
  Non-GAAP
Revenue
Software licenses $ 39,336     $ 71     $ 39,407  
Maintenance 68,868     5,694     74,562  
Services 8,834     613     9,447  
Total revenue $ 117,038     $ 6,378     $ 123,416  
           
Revenue by Region          
           
(In thousands) Q4 2019   Non-GAAP
Adjustment(1)
  Non-GAAP
Revenue
North America $ 70,145     $ 4,711     $ 74,856  
EMEA 35,187     1,140     36,327  
Latin America 5,626     114     5,740  
Asia Pacific 6,080     413     6,493  
Total revenue $ 117,038     $ 6,378     $ 123,416  
           
Revenue by Segment          
           
(In thousands) Q4 2019   Non-GAAP
Adjustment(1)
  Non-GAAP
Revenue
OpenEdge $ 85,250     $ 6,378     $ 91,628  
Data Connectivity and Integration 12,217         12,217  
Application Development and Deployment 19,571         19,571  
Total revenue $ 117,038     $ 6,378     $ 123,416  
           
(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' OpenEdge business segment for Ipswitch in fiscal year 2019.
           
Adjusted Free Cash Flow          
           
(In thousands) Q4 2019   Q4 2018   % Change
Cash flows from operations $ 36,601     $ 24,327     50 %
Purchases of property and equipment (2,168 )   (1,282 )   69 %
Free cash flow 34,433     23,045     49 %
Add back: restructuring payments 2,272     187     1,115 %
Adjusted free cash flow $ 36,705     $ 23,232     58 %
                       

 

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

Revenue by Type          
           
(In thousands) FY 2019   Non-GAAP
Adjustment(1)
  Non-GAAP
Revenue
Software licenses $ 122,552     $ 193     $ 122,745  
Maintenance 259,006     17,289     276,295  
Services 31,740     1,181     32,921  
Total revenue $ 413,298     $ 18,663     $ 431,961  
           
Revenue by Region          
           
(In thousands) FY 2019   Non-GAAP
Adjustment(1)
  Non-GAAP
Revenue
North America $ 233,911     $ 13,885     $ 247,796  
EMEA 137,301     3,245     140,546  
Latin America 19,665     332     19,997  
Asia Pacific 22,421     1,201     23,622  
Total revenue $ 413,298     $ 18,663     $ 431,961  
           
Revenue by Segment          
           
(In thousands) FY 2019   Non-GAAP
Adjustment(1)
  Non-GAAP
Revenue
OpenEdge $ 296,929     $ 18,663     $ 315,592  
Data Connectivity and Integration 39,903         39,903  
Application Development and Deployment 76,466         76,466  
Total revenue $ 413,298     $ 18,663     $ 431,961  
           
(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' OpenEdge business segment for Ipswitch in fiscal year 2019.
           
Adjusted Free Cash Flow          
           
(In thousands) FY 2019   FY 2018   % Change
Cash flows from operations $ 128,484     $ 121,352     6 %
Purchases of property and equipment (3,998 )   (7,250 )   (45 )%
Free cash flow 124,486     114,102     9 %
Add back: restructuring payments 4,407     6,111     (28 )%
Adjusted free cash flow $ 128,893     $ 120,213     7 %
                       

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

(In thousands) Q1 2018(1)   Q2 2018(1)   Q3 2018(1)   Q4 2018(1)   FY 2018(1)
GAAP revenue $ 19,255     $ 19,846     $ 19,521     $ 19,424     $ 78,046  
Add: change in deferred revenue                  
Beginning balance, as adjusted 42,128     42,041     41,593     42,789     42,128  
Ending balance, as adjusted 42,041     41,593     42,789     45,291     45,291  
Change in deferred revenue (87 )   (448 )   1,196     2,502     3,163  
Non-GAAP bookings $ 19,168     $ 19,398     $ 20,717     $ 21,926     $ 81,209  
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
                                       
(In thousands) Q1 2019   Q2 2019   Q3 2019   Q4 2019   FY 2019
GAAP revenue $ 18,297     $ 19,243     $ 19,355     $ 19,571     $ 76,466  
Add: change in deferred revenue                  
Beginning balance 45,291     43,817     44,704     44,737     45,291  
Ending balance 43,817     44,704     44,737     46,909     46,909  
Change in deferred revenue (1,474 )   887     33     2,172     1,618  
Non-GAAP bookings $ 16,823     $ 20,130     $ 19,388     $ 21,743     $ 78,084  
                                       

 

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2020 GUIDANCE
(Unaudited)

Fiscal Year 2020 Revenue Guidance
  Fiscal Year Ended   Fiscal Year Ending
  30-Nov-19   November 30, 2020
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 413.3     $ 439.7     6 %   $ 446.7     8 %
Acquisition-related adjustments - revenue(1) 18.7     8.3     (56 )%   8.3     (56 )%
Non-GAAP revenue $ 432.0     $ 448.0     4 %   $ 455.0     5 %
                   
(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' OpenEdge business segment for Ipswitch.
                                   

 


Fiscal Year 2020 Non-GAAP Operating Margin Guidance
  Fiscal Year Ending November 30, 2020
(In millions) Low   High
GAAP income from operations $ 120.0     $ 122.8  
GAAP operating margin 27 %   27 %
Acquisition-related revenue 8.3     8.3  
Restructuring expense 1.0     1.0  
Stock-based compensation 23.3     23.3  
Amortization of intangibles 23.2     23.2  
Total adjustments 55.8     55.8  
Non-GAAP income from operations $ 175.8     $ 178.6  
Non-GAAP operating margin 39 %   39 %
               
Fiscal Year 2020 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
  Fiscal Year Ending November 30, 2020
(In millions, except per share data) Low   High
GAAP net income $ 89.0     $ 91.3  
Adjustments (from previous table) 55.8     55.8  
Income tax adjustment(2) (14.4 )   (14.5 )
Non-GAAP net income $ 130.4     $ 132.6  
       
GAAP diluted earnings per share $ 1.96     $ 2.01  
Non-GAAP diluted earnings per share $ 2.87     $ 2.92  
       
Diluted weighted average shares outstanding 45.4     45.4  
       
(2)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 $ 175.8     $ 178.6  
Other (expense) income (12.8 )   (12.8 )
Non-GAAP income from continuing operations before income taxes 163.0     165.8  
Non-GAAP net income 130.4     132.6  
Tax provision $ 32.6     $ 33.2  
Non-GAAP tax rate 20 %   20 %
           

 

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2020 GUIDANCE
(Unaudited)

Fiscal Year 2020 Adjusted Free Cash Flow Guidance
  Fiscal Year Ending November 30, 2020
(In millions) Low   High
Cash flows from operations (GAAP) $ 149     $ 154  
Purchases of property and equipment (5 )   (5 )
Add back: restructuring payments 1     1  
Adjusted free cash flow (non-GAAP) $ 145     $ 150  
               

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q1 2020 GUIDANCE
(Unaudited)

Q1 2020 Revenue Guidance
  Three Months Ended   Three Months Ending
  28-Feb-19   February 29, 2020
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 89.5     $ 105.9     18 %   $ 108.9     22 %
Acquisition-related adjustments - revenue(1)     4.1       *   4.1       *
Non-GAAP revenue $ 89.5     $ 110.0     23 %   $ 113.0     26 %
                   
(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' OpenEdge business segment for Ipswitch.
*Not meaningful                                  
                                   


Q1 2020 Non-GAAP Earnings per Share Guidance
  Three Months Ending February 29, 2020
  Low   High
GAAP diluted earnings per share $ 0.40     $ 0.42  
Acquisition-related revenue 0.09     0.09  
Stock-based compensation 0.14     0.14  
Amortization of intangibles 0.13     0.13  
Total adjustments 0.36     0.36  
Income tax adjustment (0.07 )   (0.07 )
Non-GAAP diluted earnings per share $ 0.69     $ 0.71  
               

 


     
Investor Contact:   Press Contact:
Brian Flanagan   Erica McShane
Progress Software   Progress Software
+1 781 280 4817   +1 888 365 2779 (x3135)
flanagan@progress.com   erica.mcshane@progress.com

Progress_logo.jpg

Source: Progress Software Corporation