UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 13, 2015
Progress Software Corporation
(Exact name of registrant as specified in its charter)
Commission file number: 0-19417
Massachusetts | 04-2746201 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) |
14 Oak Park
Bedford, Massachusetts 01730
(Address of principal executive offices, including zip code)
(781) 280-4000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 – Financial Information
Item 2.02 Results of Operations and Financial Condition.
On January 13, 2015, Progress Software Corporation issued a press release announcing its financial results for the fiscal fourth quarter and fiscal year ended November 30, 2014. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not deemed incorporated by reference into any other filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.
Non-GAAP Financial Measures – We disclosed non-GAAP financial measures in the press release. These non-GAAP measures include expenses, income from operations, income from continuing operations, earnings per share from continuing operations, and operating margin. We also provide guidance on free cash flow, which is equal to cash flows from operating activities less purchases of property and equipment and capitalized software development costs. We provide non-GAAP financial measures to enhance the overall understanding of our current financial performance and prospects for the future as well as to enable investors to evaluate our performance in the same way that management does.
We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. These non-GAAP financial measures are also utilized by analysts to calculate consensus estimates.
However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on our financial results. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.
In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:
• | Amortization of acquired intangibles – In all periods presented, we excluded amortization of acquired intangibles because such expenses are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired. |
• | Stock-based compensation – In all periods presented, we excluded stock-based compensation to be consistent with the way management and the financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. |
• | Restructuring expenses – In all periods presented, we excluded restructuring expenses incurred because such expenses distort trends and are not part of our core operating results. |
• | Acquisition-related and transition expenses – In all periods presented, we excluded acquisition-related expenses because such expenses distort trends and are not part of our core operating results. In recent years, we have completed a number of acquisitions, which result in our incurring operating expenses which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items in connection with acquisitions, to allow more meaningful comparisons of the financial results to our historical operations and forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. |
• | Realized loss on sales of auction rate securities – In all periods presented, we excluded realized losses on sales of auction rate securities because such expenses distort trends and are not part of our core operating results. |
• | Income tax adjustment – In all periods presented, we adjusted our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above. |
• | Acquisition-related revenue – In our fiscal year 2015 guidance, we included acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue by Telerik AD ("Telerik") that would otherwise have |
been recognized but for the purchase accounting treatment of the acquisition of Telerik. We acquired Telerik on December 2, 2014. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business because, although we cannot be certain that customers will renew their contracts, we (and Telerik) have historically experienced high renewal rates on maintenance and support agreements and other customer contracts. Additionally, although acquisition-related revenue adjustments are non-recurring with respect to past acquisitions, we expect to incur these adjustments in connection with any future acquisitions.
Constant Currency – Revenue from our international operations has historically represented more than half of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.
As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue growth rates on a constant currency basis helps improve the ability to understand our revenue results and evaluate our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit No. | Description | |
99.1 | Press release issued by Progress Software Corporation dated January 13, 2015 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | January 13, 2015 | Progress Software Corporation | |
By: | /s/ CHRIS E. PERKINS | ||
Chris E. Perkins | |||
Senior Vice President, Finance and Administration and Chief Financial Officer | |||
 | Exhibit 99.1 | |
P R E S S A N N O U N C E M E N T
Investor Contact: | Press Contact: | |
Brian Flanagan | Erica Burns | |
Progress Software | Progress Software | |
+1 781 280 4817 | +1 888 365 2779 (x3135) | |
flanagan@progress.com | erica.burns@progress.com | |
Progress Software Reports 2014 Fiscal Fourth Quarter and Year End Results
BEDFORD, MA, January 13, 2015 (BUSINESSWIRE) — Progress Software Corporation (NASDAQ: PRGS), a global software company that simplifies and enables the development, deployment and management of business applications, today announced results for its fiscal fourth quarter and fiscal year ended November 30, 2014.
Revenue from continuing operations was $97.9 million in the fourth quarter compared to $91.0 million in the same quarter last year, a year over year increase of 8% on an actual currency basis and 10% on a constant currency basis.
Additional financial highlights included:
On a GAAP basis in the fiscal fourth quarter of 2014:
• | Income from operations was $27.0 million compared to $23.9 million in the same quarter last year; |
• | Income from continuing operations was $14.5 million compared to $14.6 million in the same quarter last year; |
• | Net income was $14.5 million compared to $15.0 million in the same quarter last year; and |
• | Diluted earnings per share from continuing operations was $0.28, unchanged from the same quarter last year. |
On a non-GAAP basis in the fiscal fourth quarter of 2014:
• | Income from operations was $38.0 million compared to $33.5 million in the same quarter last year; |
• | Operating margin was 39% compared to 37% in the same quarter last year; |
• | Income from continuing operations was $24.1 million compared to $22.5 million in the same quarter last year; and |
• | Diluted earnings per share from continuing operations was $0.47 compared to $0.43 in the same quarter last year. |
“Our positive momentum continued in 2014, resulting in significant growth in operating income and cash flow over the previous year,” said Phil Pead, President and CEO of Progress Software. “Entering 2015, we are now able to offer application developers an unrivaled choice. With Progress, developers have seamless access to the broadest range of data sources, tools to create the most engaging user experiences and a leading platform to build mobile apps. They also benefit from the choice to build and deploy apps from scratch or take advantage of our productivity platform. Further, the recent addition of Telerik Sitefinity to our portfolio provides developers with an intuitive end-to-end web content management, digital marketing and customer analytics solution. These choices underscore our commitment to becoming the preferred destination for application developers.”
Other fiscal fourth quarter 2014 metrics and recent results included:
• | Cash, cash equivalents and short-term investments were $283.3 million; |
• | Cash from operations was $39.2 million compared to $17.9 million in the same quarter in fiscal year 2013; and |
• | DSO from continuing operations was 63 days, compared to 66 days in the fiscal third quarter of 2014. |
In addition, as previously announced, during the fourth quarter, Progress began operating as three distinct business units: OpenEdge, Application Development and Deployment, and Data Connectivity and Integration, each with dedicated sales, product management and product marketing functions. Progress adopted segment reporting for its three business units in the fourth quarter, and this press release includes quarterly results of operations by segment for fiscal 2013 and fiscal 2014.
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Also during the fourth quarter of fiscal year 2014, Progress acquired 100% of the capital stock of BravePoint, Inc. (BravePoint) from Chesapeake Utilities Corporation in exchange for an aggregate sum of $12.0 million in cash. BravePoint is based in Norcross, Georgia and is a leading provider of consulting, training and application development services designed to increase customers' profitability and competitiveness through the use of technology.
Furthermore, shortly after the fourth quarter ended, Progress completed the acquisition of privately held Telerik AD, a leading provider of application development tools, for $262.5 million. Telerik enables its 1.4 million strong developer community to create compelling user experiences across cloud, web, mobile and desktop applications. Through this acquisition, Progress now provides comprehensive cloud and on-premise platform offerings that enable developers to rapidly create beautiful applications, driven by data for any web, desktop or mobile platform. Progress funded the purchase price from a combination of existing cash resources and a $150 million term loan, which is part of a new $300 million term and revolving credit facility with JPMorgan Chase Bank, N.A. and a syndicate of other lenders. This new credit facility replaced Progress’ prior $150 million revolving credit facility.
Full Year Results
On a GAAP basis in the fiscal year 2014:
• | Revenue from continuing operations was $332.5 million compared to $334.0 million in fiscal year 2013; |
• | Income from operations was $80.7 million compared to $63.7 million in the prior fiscal year; |
• | Income from continuing operations was $49.5 million compared to $39.8 million in the prior fiscal year; |
• | Net income was $49.5 million compared to $74.9 million in the prior fiscal year; |
• | Diluted earnings per share from continuing operations was $0.96 compared to $0.72 in the prior fiscal year; and |
• | Cash from operations was $107.7 million compared to $4.6 million in the prior fiscal year. |
On a non-GAAP basis in the fiscal year 2014:
• | Income from operations was $117.4 million compared to $100.1 million in fiscal year 2013; |
• | Operating margin was 35% compared to 30% in the prior fiscal year; |
• | Income from continuing operations was $77.9 million compared to $66.0 million in the prior fiscal year; and |
• | Diluted earnings per share from continuing operations was $1.51 compared to $1.19 in the prior fiscal year. |
2015 Business Outlook
Progress Software provides the following guidance for the fiscal year ending November 30, 2015:
• | Non-GAAP revenue is expected to be between $425 million and $435 million; |
• | Non-GAAP earnings per share is expected to be between $1.37 and $1.47; |
• | Non-GAAP operating margin is expected to be approximately 27%; |
• | Free cash flow is expected to be between $90 million and $93 million; and |
• | Non-GAAP effective tax rate is expected to be between 33% and 34%. |
Progress Software provides the following guidance for the first fiscal quarter ending February 28, 2015:
• | Non-GAAP revenue is expected to be between $93 million and $96 million; and |
• | Non-GAAP earnings per share is expected to be between $0.22 and $0.24. |
Our fiscal 2015 business outlook reflects the following:
• | Full year impact of the Modulus, BravePoint, and Telerik acquisitions and related financing; and |
• | Our financial guidance includes the impact of the recent significant strengthening of the US dollar and is based on current exchange rates. With approximately 55% of our revenue stream outside of North America, this has a negative impact on our 2015 business outlook of $17-$18 million on non-GAAP revenue and $0.10-$0.11 cents on our non-GAAP earnings per share, when compared to 2014 actual exchange rates. To the extent that there are further changes in exchange rates versus the current environment, this may have an additional impact on our business outlook. |
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Free cash flow is equal to cash flows from operating activities less purchases of property and equipment and capitalized software development costs.
Conference Call
The Progress Software quarterly investor conference call to review its fiscal fourth quarter of 2014 will be broadcast live at 5:00 p.m. ET on Tuesday, January 13, 2015 and can be accessed on the investor relations section of the company’s website, located at www.progress.com. Additionally, you can listen to the call by telephone by dialing 1-888-539-3612, pass code 7867622. The conference call will include brief comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress Software website within the investor relations section after the live conference call.
Legal Notice Regarding Non-GAAP Financial Information
Progress Software 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 Software believes that the non-GAAP results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. Management uses these non-GAAP results to compare the company's performance to that of prior periods for analysis of trends and for budget and planning purposes. A reconciliation of non-GAAP adjustments to the company's GAAP financial results is included in the tables below. Additional information regarding the company's non-GAAP financial information is contained in the company's Current Report on Form 8-K furnished to the Securities and Exchange Commission in connection with this press release, which is available on the Progress website at www.progress.com within the investor relations section.
Note Regarding Forward-Looking Statements
This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “should,”“expect,” “intend,” “plan,” “target,” “anticipate” and “continue,” the negative of these words, other terms of similar meaning or the use of future dates.
Forward-looking statements in this press release include, but are not limited to, statements regarding Progress's strategic plans; future revenue growth, operating margin and cost savings; product development, strategic partnering and marketing initiatives; the growth rates of certain markets; and other statements regarding the future operation, direction and success of Progress's business. There are a number of factors that could cause actual results or future events to differ materially from those anticipated by the forward-looking statements, including, without limitation:
(1) Market acceptance of Progress’s strategy and product development initiatives; (2) pricing pressures and the competitive
environment in the software industry and Platform-as-a-Service market; (3) Progress's ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy; (4)
uncertainties relating to Progress’ acquisition of Telerik, including whether Progress will be able to realize expected benefits and anticipated synergies of the acquisition and whether Telerik’s business will be successfully integrated with Progress Software's business; (5) Progress's ability to make acquisitions and to realize the expected benefits and anticipated synergies from such acquisitions; (6) the continuing uncertainty in the U.S. and international economies, which could result in fewer sales of Progress's products and may otherwise harm Progress's business; (7) business and consumer use of the Internet and the continuing adoption of Cloud technologies; (8) the receipt and shipment of new orders; (9) Progress's ability to expand its relationships with channel partners and to manage the interaction of channel partners with its direct sales force; (10) the timely release of enhancements to Progress's products and customer acceptance of new products; (11) the positioning of Progress's products in its existing and new markets; (12) variations in the demand for professional services and technical support; (13) Progress's ability to penetrate international markets and manage its international operations; and (14) changes in exchange rates. For further information regarding risks and uncertainties associated with Progress's business, please refer to Progress's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2013 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2014, May 31, 2014 and August 31, 2014. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
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Progress Software Corporation
Progress Software Corporation (NASDAQ: PRGS) is a global software company that simplifies the development, deployment and management of business applications on-premise or in the cloud, on any platform or device, to any data source, with enhanced performance, minimal IT complexity and low total cost of ownership. Progress Software can be reached at www.progress.com or 1-781-280-4000.
Progress is a trademark or registered trademarks of Progress Software Corporation or one of its subsidiaries or affiliates in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended | Fiscal Year Ended | ||||||||||||||||||||
(In thousands, except per share data) | November 30, 2014 | November 30, 2013 | % Change | November 30, 2014 | November 30, 2013 | % Change | |||||||||||||||
Revenue: | |||||||||||||||||||||
Software licenses | $ | 41,154 | $ | 37,392 | 10 | % | $ | 117,801 | $ | 122,312 | (4 | )% | |||||||||
Maintenance and services | 56,740 | 53,588 | 6 | % | 214,732 | 211,684 | 1 | % | |||||||||||||
Total revenue | 97,894 | 90,980 | 8 | % | 332,533 | 333,996 | — | % | |||||||||||||
Costs of revenue: | |||||||||||||||||||||
Cost of software licenses | 1,445 | 1,856 | (22 | )% | 6,396 | 6,889 | (7 | )% | |||||||||||||
Cost of maintenance and services | 8,574 | 5,710 | 50 | % | 24,864 | 26,753 | (7 | )% | |||||||||||||
Amortization of acquired intangibles | 1,106 | 529 | 109 | % | 2,999 | 1,340 | 124 | % | |||||||||||||
Total costs of revenue | 11,125 | 8,095 | 37 | % | 34,259 | 34,982 | (2 | )% | |||||||||||||
Gross profit | 86,769 | 82,885 | 5 | % | 298,274 | 299,014 | — | % | |||||||||||||
Operating expenses: | |||||||||||||||||||||
Sales and marketing | 30,085 | 26,911 | 12 | % | 101,496 | 105,997 | (4 | )% | |||||||||||||
Product development | 13,397 | 14,428 | (7 | )% | 58,965 | 57,336 | 3 | % | |||||||||||||
General and administrative | 13,056 | 13,604 | (4 | )% | 48,292 | 55,994 | (14 | )% | |||||||||||||
Amortization of acquired intangibles | 225 | 211 | 7 | % | 653 | 760 | (14 | )% | |||||||||||||
Restructuring expenses | 265 | 2,856 | (91 | )% | 2,266 | 11,983 | (81 | )% | |||||||||||||
Acquisition-related expenses | 2,714 | 975 | 178 | % | 5,862 | 3,204 | 83 | % | |||||||||||||
Total operating expenses | 59,742 | 58,985 | 1 | % | 217,534 | 235,274 | (8 | )% | |||||||||||||
Income from operations | 27,027 | 23,900 | 13 | % | 80,740 | 63,740 | 27 | % | |||||||||||||
Other (expense) income, net | (357 | ) | (294 | ) | (21 | )% | (2,936 | ) | (957 | ) | 207 | % | |||||||||
Income from continuing operations before income taxes | 26,670 | 23,606 | 13 | % | 77,804 | 62,783 | 24 | % | |||||||||||||
Provision for income taxes | 12,207 | 8,988 | 36 | % | 28,346 | 23,006 | 23 | % | |||||||||||||
Income from continuing operations | 14,463 | 14,618 | (1 | )% | 49,458 | 39,777 | 24 | % | |||||||||||||
Income (loss) from discontinued operations, net | — | 418 | (100 | )% | — | 35,130 | (100 | )% | |||||||||||||
Net income | $ | 14,463 | $ | 15,036 | (4 | )% | $ | 49,458 | $ | 74,907 | (34 | )% | |||||||||
Earnings per share: | |||||||||||||||||||||
Basic: | |||||||||||||||||||||
Continuing operations | $ | 0.29 | $ | 0.28 | 4 | % | $ | 0.97 | $ | 0.73 | 33 | % | |||||||||
Discontinued operations | — | 0.01 | (100 | )% | — | 0.64 | (100 | )% | |||||||||||||
Net income per share | $ | 0.29 | $ | 0.29 | — | % | 0.97 | $ | 1.37 | (29 | )% | ||||||||||
Diluted: | |||||||||||||||||||||
Continuing operations | $ | 0.28 | $ | 0.28 | — | % | $ | 0.96 | $ | 0.72 | 33 | % | |||||||||
Discontinued operations | — | 0.01 | (100 | )% | — | 0.63 | (100 | )% | |||||||||||||
Net income per share | $ | 0.28 | $ | 0.29 | (3 | )% | $ | 0.96 | $ | 1.35 | (29 | )% | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 50,432 | 51,731 | (3 | )% | 50,840 | 54,516 | (7 | )% | |||||||||||||
Diluted | 51,121 | 52,655 | (3 | )% | 51,466 | 55,379 | (7 | )% | |||||||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) | November 30, 2014 | November 30, 2013 | |||||
Assets | |||||||
Current assets: | |||||||
Cash, cash equivalents and short-term investments | $ | 283,268 | $ | 231,440 | |||
Accounts receivable, net | 68,311 | 66,784 | |||||
Other current assets | 34,094 | 39,587 | |||||
Total current assets | 385,673 | 337,811 | |||||
Property and equipment, net | 59,351 | 57,030 | |||||
Goodwill and intangible assets, net | 253,414 | 234,236 | |||||
Other assets | 4,623 | 53,110 | |||||
Total assets | $ | 703,061 | $ | 682,187 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable and other current liabilities | $ | 60,746 | $ | 68,186 | |||
Short-term deferred revenue | 92,557 | 96,393 | |||||
Total current liabilities | 153,303 | 164,579 | |||||
Long-term deferred revenue | 3,683 | 1,144 | |||||
Other long-term liabilities | 2,830 | 2,810 | |||||
Shareholders’ equity: | |||||||
Common stock and additional paid-in capital | 209,778 | 205,307 | |||||
Retained earnings | 333,467 | 308,347 | |||||
Total shareholders’ equity | 543,245 | 513,654 | |||||
Total liabilities and shareholders’ equity | $ | 703,061 | $ | 682,187 | |||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended | Fiscal Year Ended | ||||||||||||||
(In thousands) | November 30, 2014 | November 30, 2013 | November 30, 2014 | November 30, 2013 | |||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 14,464 | $ | 15,036 | $ | 49,458 | $ | 74,907 | |||||||
Depreciation and amortization | 4,311 | 3,061 | 15,296 | 14,435 | |||||||||||
Stock-based compensation | 6,679 | 5,039 | 24,873 | 21,399 | |||||||||||
Net gains on sales of dispositions | — | (610 | ) | — | (71,601 | ) | |||||||||
Other non-cash adjustments | 15,545 | 8,985 | 17,777 | 9,432 | |||||||||||
Changes in operating assets and liabilities | (1,774 | ) | (13,652 | ) | 290 | (43,992 | ) | ||||||||
Net cash flows from operating activities | 39,225 | 17,859 | 107,694 | 4,580 | |||||||||||
Capital expenditures | (1,610 | ) | (2,073 | ) | (11,801 | ) | (5,062 | ) | |||||||
Redemptions and sales of auction-rate-securities | — | — | 26,196 | 25 | |||||||||||
Issuances of common stock, net of repurchases | 5,774 | (30,032 | ) | (36,116 | ) | (222,107 | ) | ||||||||
Payments for acquisitions, net of cash acquired | (12,000 | ) | — | (24,493 | ) | (9,450 | ) | ||||||||
Proceeds from divestitures, net | — | — | 3,300 | 111,120 | |||||||||||
Other | (9,413 | ) | 3,704 | (12,952 | ) | (2,883 | ) | ||||||||
Net change in cash, cash equivalents and short-term investments | 21,976 | (10,542 | ) | 51,828 | (123,777 | ) | |||||||||
Cash, cash equivalents and short-term investments, beginning of period | 261,292 | 241,982 | 231,440 | 355,217 | |||||||||||
Cash, cash equivalents and short-term investments, end of period | $ | 283,268 | $ | 231,440 | $ | 283,268 | $ | 231,440 | |||||||
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RESULTS OF OPERATIONS BY SEGMENT
(In thousands) | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | ||||||||||||||
Segment revenue: | |||||||||||||||||||
OpenEdge | $ | 66,734 | $ | 73,192 | $ | 71,847 | $ | 84,948 | $ | 296,721 | |||||||||
Data Connectivity and Integration | 7,639 | 7,407 | 7,175 | 12,551 | 34,772 | ||||||||||||||
Application Development and Deployment | 165 | 228 | 252 | 395 | 1,040 | ||||||||||||||
Total revenue | 74,538 | 80,827 | 79,274 | 97,894 | 332,533 | ||||||||||||||
Segment costs of revenue and operating expenses: | |||||||||||||||||||
OpenEdge | 17,391 | 15,855 | 15,524 | 22,041 | 70,811 | ||||||||||||||
Data Connectivity and Integration | 2,797 | 2,601 | 2,515 | 4,395 | 12,308 | ||||||||||||||
Application Development and Deployment | 1,553 | 1,763 | 2,446 | 3,592 | 9,354 | ||||||||||||||
Total costs of revenue and operating expenses | 21,741 | 20,219 | 20,485 | 30,028 | 92,473 | ||||||||||||||
Segment contribution margin: | |||||||||||||||||||
OpenEdge | 49,343 | 57,337 | 56,323 | 62,907 | 225,910 | ||||||||||||||
Data Connectivity and Integration | 4,842 | 4,806 | 4,660 | 8,156 | 22,464 | ||||||||||||||
Application Development and Deployment | (1,388 | ) | (1,535 | ) | (2,194 | ) | (3,197 | ) | (8,314 | ) | |||||||||
Total contribution margin | 52,797 | 60,608 | 58,789 | 67,866 | 240,060 | ||||||||||||||
Corporate expenses (1) | 31,415 | 32,187 | 29,216 | 29,850 | 122,668 | ||||||||||||||
Non-GAAP operating income | 21,382 | 28,421 | 29,573 | 38,016 | 117,392 | ||||||||||||||
GAAP adjustment (2) | 7,380 | 8,141 | 10,142 | 10,989 | 36,652 | ||||||||||||||
GAAP operating income | 14,002 | 20,280 | 19,431 | 27,027 | 80,740 | ||||||||||||||
(In thousands) | Q1 2013 | Q2 2013 | Q3 2013 | Q4 2013 | FY 2013 | ||||||||||||||
Segment revenue: | |||||||||||||||||||
OpenEdge | $ | 74,368 | $ | 70,929 | $ | 69,406 | $ | 78,805 | $ | 293,508 | |||||||||
Data Connectivity and Integration | 9,365 | 10,772 | 7,955 | 11,997 | 40,089 | ||||||||||||||
Application Development and Deployment | — | 4 | 217 | 178 | 399 | ||||||||||||||
Total revenue | 83,733 | 81,705 | 77,578 | 90,980 | 333,996 | ||||||||||||||
Segment costs of revenue and operating expenses: | |||||||||||||||||||
OpenEdge | 24,579 | 20,063 | 18,988 | 20,045 | 83,675 | ||||||||||||||
Data Connectivity and Integration | 2,582 | 3,132 | 3,090 | 3,593 | 12,397 | ||||||||||||||
Application Development and Deployment | — | — | 589 | 1,023 | 1,612 | ||||||||||||||
Total costs of revenue and operating expenses | 27,161 | 23,195 | 22,667 | 24,661 | 97,684 | ||||||||||||||
Segment contribution margin: | |||||||||||||||||||
OpenEdge | 49,789 | 50,866 | 50,418 | 58,760 | 209,833 | ||||||||||||||
Data Connectivity and Integration | 6,783 | 7,640 | 4,865 | 8,404 | 27,692 | ||||||||||||||
Application Development and Deployment | — | 4 | (372 | ) | (845 | ) | (1,213 | ) | |||||||||||
Total contribution margin | 56,572 | 58,510 | 54,911 | 66,319 | 236,312 | ||||||||||||||
Corporate expenses (1) | 35,020 | 34,795 | 33,552 | 32,809 | 136,176 | ||||||||||||||
Non-GAAP operating income | 21,552 | 23,715 | 21,359 | 33,510 | 100,136 | ||||||||||||||
GAAP adjustment (2) | 5,759 | 9,329 | 11,698 | 9,610 | 36,396 | ||||||||||||||
GAAP operating income | 15,793 | 14,386 | 9,661 | 23,900 | 63,740 | ||||||||||||||
(1) The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: product development, corporate marketing, and general and administration. | |||||||||||||||||||
(2) The following expenses are included in the GAAP adjustment: amortization of acquired intangibles, stock-based compensation, restructuring, acquisition related, and transition expenses. | |||||||||||||||||||
8
SUPPLEMENTAL INFORMATION
Revenue from continuing operations by Type | |||||||||||||||||||||||||||
(In thousands) | Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | FY 2013 | ||||||||||||||||||||
License | $ | 37,392 | $ | 22,264 | $ | 27,988 | $ | 26,393 | $ | 41,154 | $ | 117,799 | $ | 122,312 | |||||||||||||
Maintenance | 51,230 | 50,181 | 50,305 | 50,746 | 51,268 | 202,500 | 202,857 | ||||||||||||||||||||
Professional services | 2,358 | 2,093 | 2,534 | 2,135 | 5,472 | 12,234 | 8,827 | ||||||||||||||||||||
Total revenue | $ | 90,980 | $ | 74,538 | $ | 80,827 | $ | 79,274 | $ | 97,894 | $ | 332,533 | $ | 333,996 | |||||||||||||
Revenue from continuing operations by Region | |||||||||||||||||||||||||||
(In thousands) | Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | FY 2013 | ||||||||||||||||||||
North America | $ | 42,833 | $ | 34,586 | $ | 36,827 | $ | 35,654 | $ | 43,654 | $ | 150,721 | $ | 154,279 | |||||||||||||
EMEA | 35,256 | 29,315 | 33,698 | 32,995 | 35,327 | 131,335 | 133,600 | ||||||||||||||||||||
Latin America | 6,526 | 5,108 | 5,703 | 5,695 | 8,406 | 24,912 | 25,370 | ||||||||||||||||||||
Asia Pacific | 6,365 | 5,529 | 4,599 | 4,930 | 10,507 | 25,565 | 20,747 | ||||||||||||||||||||
Total revenue | $ | 90,980 | $ | 74,538 | $ | 80,827 | $ | 79,274 | $ | 97,894 | $ | 332,533 | $ | 333,996 | |||||||||||||
9
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
Three Months Ended | Fiscal Year Ended | ||||||||||||||
(In thousands, except per share data) | November 30, 2014 | November 30, 2013 | November 30, 2014 | November 30, 2013 | |||||||||||
GAAP income from operations | $ | 27,027 | $ | 23,900 | $ | 80,740 | $ | 63,740 | |||||||
GAAP operating margin | 28 | % | 26 | % | 24 | % | 19 | % | |||||||
Amortization of acquired intangibles | 1,331 | 740 | 3,652 | 2,100 | |||||||||||
Stock-based compensation (1) | 6,679 | 5,039 | 24,873 | 19,109 | |||||||||||
Restructuring expenses | 265 | 2,856 | 2,266 | 11,983 | |||||||||||
Acquisition-related expenses | 2,427 | 975 | 5,575 | 3,204 | |||||||||||
Transition expenses | 287 | — | 287 | — | |||||||||||
Total operating adjustments | 10,989 | 9,610 | 36,653 | 36,396 | |||||||||||
Non-GAAP income from operations | $ | 38,016 | $ | 33,510 | $ | 117,393 | $ | 100,136 | |||||||
Non-GAAP operating margin | 39 | % | 37 | % | 35 | % | 30 | % | |||||||
GAAP income from continuing operations | $ | 14,463 | $ | 14,618 | $ | 49,458 | $ | 39,777 | |||||||
Operating adjustments (from above) | 10,989 | 9,610 | 36,653 | 36,396 | |||||||||||
Realized loss on sales of auction-rate-securities | — | — | 2,554 | — | |||||||||||
Income tax adjustment | (1,383 | ) | (1,759 | ) | (10,768 | ) | (10,159 | ) | |||||||
Total income from continuing operations adjustments | 9,606 | 7,851 | 28,439 | 26,237 | |||||||||||
Non-GAAP income from continuing operations | $ | 24,069 | $ | 22,469 | $ | 77,897 | $ | 66,014 | |||||||
GAAP diluted earnings per share from continuing operations | $ | 0.28 | $ | 0.28 | $ | 0.96 | $ | 0.72 | |||||||
Income from continuing operations adjustments (from above) | 0.19 | 0.15 | 0.55 | 0.47 | |||||||||||
Non-GAAP diluted earnings per share from continuing operations | $ | 0.47 | $ | 0.43 | $ | 1.51 | $ | 1.19 | |||||||
Diluted weighted average shares outstanding | 51,121 | 52,655 | 51,466 | 55,379 | |||||||||||
(1) Stock-based compensation is included in the GAAP statements of income, as follows: | |||||||||||||||
Cost of revenue | $ | 173 | $ | 101 | $ | 612 | $ | 601 | |||||||
Sales and marketing | 907 | 931 | 4,642 | 3,599 | |||||||||||
Product development | 1,103 | 1,036 | 5,289 | 4,723 | |||||||||||
General and administrative | 4,496 | 2,971 | 14,330 | 10,186 | |||||||||||
Stock-based compensation from continuing operations | $ | 6,679 | $ | 5,039 | $ | 24,873 | $ | 19,109 | |||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
(In thousands, except per share data) | November 30, 2014 | November 30, 2013 | November 30, 2014 | November 30, 2013 | |||||||||||
GAAP costs of revenue | $ | 11,125 | $ | 8,095 | $ | 34,259 | $ | 34,982 | |||||||
GAAP operating expenses | 59,742 | 58,985 | 217,534 | 235,274 | |||||||||||
GAAP expenses | 70,867 | 67,080 | 251,793 | 270,256 | |||||||||||
Operating adjustments (from above) | 10,989 | 9,610 | 36,653 | 36,396 | |||||||||||
Non-GAAP expenses | $ | 59,878 | $ | 57,470 | $ | 215,140 | $ | 233,860 | |||||||
10
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2015 GUIDANCE
(Unaudited)
Fiscal Year 2015 Revenue Growth Guidance | |||||||||||||||||
Fiscal Year Ended | Fiscal Year Ending | ||||||||||||||||
November 30, 2014 | November 30, 2015 | ||||||||||||||||
(In millions) | Low | % Change | High | % Change | |||||||||||||
GAAP revenue | $ | 332.5 | $ | 390.0 | 17 | % | $ | 400.0 | 20 | % | |||||||
Acquisition-related adjustments - revenue (1) | $ | — | $ | 35.0 | 100 | % | $ | 35.0 | 100 | % | |||||||
Non-GAAP revenue | $ | 332.5 | $ | 425.0 | 28 | % | $ | 435.0 | 31 | % | |||||||
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue by Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. | |||||||||||||||||
Fiscal Year 2015 Non-GAAP Operating Margin Guidance | |||||||
Fiscal Year Ending November 30, 2015 | |||||||
(In millions) | Low | High | |||||
GAAP income from operations | $ | 22.4 | $ | 26.2 | |||
GAAP operating margins | 6 | % | 7 | % | |||
Acquisition-related revenue | 35.0 | 35.0 | |||||
Restructuring expense | 5.5 | 5.5 | |||||
Stock-based compensation | 30.6 | 30.6 | |||||
Acquisition related expense | 3.4 | 3.4 | |||||
Amortization of intangibles | 16.8 | 16.8 | |||||
Total adjustments | 91.3 | 91.3 | |||||
Non-GAAP income from operations | $ | 113.7 | $ | 117.5 | |||
Non-GAAP operating margin | 27 | % | 27 | % | |||
Fiscal Year 2015 Non-GAAP Earnings per Share and Effective Tax Rate Guidance | |||||||
Fiscal Year Ending November 30, 2015 | |||||||
(In millions, except per share data) | Low | High | |||||
GAAP net income | $ | 11.7 | $ | 14.3 | |||
Adjustments (from above) | 91.3 | 91.3 | |||||
Income tax adjustment (2) | (30.5 | ) | (29.5 | ) | |||
Non-GAAP net income | $ | 72.5 | $ | 76.1 | |||
GAAP diluted earnings per share | $ | 0.22 | $ | 0.28 | |||
Non-GAAP diluted earnings per share | $ | 1.37 | $ | 1.47 | |||
Diluted weighted average shares outstanding | 53.0 | 51.7 | |||||
(2) Tax adjustment is based on a non-GAAP effective tax rate of 34% for Low and 33% for High, calculated as follows: | |||||||
Non-GAAP income from operations | $ | 113.7 | $ | 117.5 | |||
Other income (expense) | (3.9 | ) | (3.9 | ) | |||
Non-GAAP income from continuing operations before income taxes | 109.8 | 113.6 | |||||
Non-GAAP net income | 72.5 | 76.1 | |||||
Tax provision | 37.3 | 37.5 | |||||
Non-GAAP tax rate | 34 | % | 33 | % | |||
11
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q1 2015 GUIDANCE
(Unaudited)
Q1 2015 Revenue Growth Guidance | |||||||||||||||||
Three Months Ended | Three Months Ending | ||||||||||||||||
February 28, 2014 | February 28, 2015 | ||||||||||||||||
(In millions) | Low | % Change | High | % Change | |||||||||||||
GAAP revenue | $ | 74.5 | $ | 79.5 | 7 | % | $ | 82.5 | 11 | % | |||||||
Acquisition-related adjustments - revenue (1) | $ | — | $ | 13.5 | 100 | % | $ | 13.5 | 100 | % | |||||||
Non-GAAP revenue | $ | 74.5 | $ | 93.0 | 25 | % | $ | 96.0 | 29 | % | |||||||
(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue by Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. | |||||||||||||||||
Q1 2015 Non-GAAP Earnings per Share Guidance | |||||||
Three Months Ending February 28, 2015 | |||||||
Low | High | ||||||
GAAP diluted earnings per share | $ | (0.14 | ) | $ | (0.12 | ) | |
Acquisition-related revenue | 0.26 | 0.26 | |||||
Restructuring expense | 0.03 | 0.03 | |||||
Stock-based compensation | 0.15 | 0.15 | |||||
Acquisition related expense | 0.02 | 0.02 | |||||
Amortization of intangibles | 0.08 | 0.08 | |||||
Total adjustments | 0.54 | 0.54 | |||||
Income tax adjustment | $ | (0.18 | ) | $ | (0.18 | ) | |
Non-GAAP diluted earnings per share | $ | 0.22 | $ | 0.24 | |||
12