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)
Progress Software Corporation
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission file number) | (I.R.S. Employer Identification No.) | ||||||
(Address of principal executive offices, including zip code)
(781 ) 280-4000
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
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:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On March 25, 2021, Progress Software Corporation ("Progress") issued a press release announcing its financial results for the fiscal first quarter ended February 28, 2021. 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 Information - Progress provides non-GAAP supplemental information to its financial results. We use this non-GAAP information to evaluate our period-over-period operating performance because our management believes the information helps illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as a greater understanding of the results from the primary operations of our business, by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. Management also uses this non-GAAP financial information to establish budgets and operational goals, which are communicated internally and externally, evaluate performance, and allocate resources. In addition, compensation of our executives and non-executive employees is based in part on the performance of our business evaluated using this same non-GAAP information. We believe this non-GAAP financial information enhances investors’ overall understanding of our current financial performance and our prospects for the future by providing more transparency for certain financial measures and providing a level of disclosure that helps investors understand how we plan and measure our business. We believe that providing this non-GAAP information affords investors a view of our operating results that may be more easily compared to our peer companies and enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions.
However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP") and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information often have a material impact on Progress’ financial results. A reconciliation of non-GAAP adjustments to Progress' GAAP financial results is included in the tables in the press release and is available on the Progress website at www.progress.com within the investor relations section.
As described in more detail below, non-GAAP revenue, non-GAAP costs of sales and operating expenses, non-GAAP income from operations and operating margin, non-GAAP net income, and non-GAAP diluted earnings per share exclude the effect of purchase accounting on the fair value of acquired deferred revenue, amortization of acquired intangible assets, stock-based compensation expense, restructuring charges, acquisition-related and transition expenses, and the related tax effects of the preceding items. We also provide guidance on adjusted free cash flow, which is equal to cash flows from operating activities less purchases of property and equipment, plus restructuring payments.
In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:
•Acquisition-related revenue - In all periods presented, we include acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. The acquisition-related revenue in our results relates to Chef Software, Inc. and Ipswitch, Inc., which we acquired on October 5, 2020 and April 30, 2019, respectively. 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 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.
•Amortization of acquired intangibles - In all periods presented, we exclude amortization of acquired intangibles because those 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 exclude 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. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include these charges in operating plans. Stock-based compensation will continue in future periods.
•Restructuring expenses - In all periods presented, we exclude restructuring expenses incurred because those expenses distort trends and are not part of our core operating results.
•Acquisition-related and transition expenses - In all periods presented, we exclude acquisition-related expenses because those 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. By excluding certain transition, integration and other acquisition-related expense items in connection with acquisitions, this provides 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.
•Income tax adjustment - In all periods presented, we adjust our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above.
Constant Currency - Revenue from our international operations has historically represented a substantial portion 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 strengthen, our consolidated results stated in U.S. dollars are positively impacted.
As exchange rates are an important factor in understanding period to period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and 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.
Annual Recurring Revenue ("ARR") - Beginning this period, Progress is providing an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years. ARR represents the annualized contract value for all active and contractually binding term-based contracts at the end of a period. ARR includes maintenance, software upgrade rights, public cloud and on-premises subscription-based transactions and managed services.
ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
Item 7.01 Regulation FD Disclosure
In connection with the issuance of the press release attached hereto as Exhibit 99.1, the supplemental data attached as Exhibit 99.2 to this Current Report will be available on the Progress website within the investor relations section prior to the live conference call.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
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: | March 25, 2021 | Progress Software Corporation | |||||||||
| By: | /s/ ANTHONY FOLGER | ||||||||||
| Anthony Folger | |||||||||||
| Chief Financial Officer | |||||||||||
 | Exhibit 99.1 | |||||||
P R E S S A N N O U N C E M E N T
Progress Announces First Quarter 2021 Financial Results
Revenue and Earnings Per Share Exceed Guidance Ranges
Full Year Guidance Increased for Revenue, Earnings Per Share and Free Cash Flow
BEDFORD, Mass, March 25, 2021 (GlobeNewswire) — Progress (NASDAQ: PRGS), the leading provider of products to develop, deploy and manage high-impact business applications, today announced financial results for its fiscal first quarter ended February 28, 2021.
First Quarter 2021 Highlights:
•Revenue of $121.3 million increased 11% year-over-year on an actual currency basis, and 9% on a constant currency basis.
•Non-GAAP revenue of $131.8 million increased 16% on an actual currency basis, and 14% on a constant currency basis.
•Annualized Recurring Revenue (ARR) of $432 million increased 22% year-over-year on a constant currency basis with growth primarily driven by the acquisition of Chef Software.
•Operating margin was 23% and Non-GAAP operating margin was 43%.
•Diluted earnings per share was $0.42 compared to $0.46 in the same quarter last year, a decrease of 9%.
•Non-GAAP diluted earnings per share was $0.95 compared to $0.76 in the same quarter last year, an increase of 25%.
“The first quarter marked an excellent start to 2021 highlighted by better-than-expected growth on both the top and bottom line” said Yogesh Gupta, CEO at Progress. “Our performance was stronger than expected across virtually all product lines and all of our key metrics. I am especially proud of the continued hard work and dedication of our entire organization and our first quarter results position us well as we continue to execute our total growth strategy.”
Additional financial highlights included(1):
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| GAAP | Non-GAAP | ||||||||||||||||||||||||||||||||||
| (In thousands, except percentages and per share amounts) | February 28, 2021 | February 29, 2020 | % Change | February 28, 2021 | February 29, 2020 | % Change | |||||||||||||||||||||||||||||
| Revenue | $ | 121,280 | $ | 109,683 | 11 | % | $ | 131,784 | $ | 113,762 | 16 | % | |||||||||||||||||||||||
| Income from operations | $ | 27,416 | $ | 30,712 | (11) | % | $ | 56,657 | $ | 47,973 | 18 | % | |||||||||||||||||||||||
| Operating margin | 23 | % | 28 | % | (500) bps | 43 | % | 42 | % | 100 bps | |||||||||||||||||||||||||
| Net income | $ | 18,961 | $ | 21,116 | (10) | % | $ | 42,504 | $ | 34,703 | 22 | % | |||||||||||||||||||||||
| Diluted earnings per share | $ | 0.42 | $ | 0.46 | (9) | % | $ | 0.95 | $ | 0.76 | 25 | % | |||||||||||||||||||||||
| Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) | $ | 44,688 | $ | 33,016 | 35 | % | $ | 46,515 | $ | 33,297 | 40 | % | |||||||||||||||||||||||
(1)See Legal Notice Regarding Non-GAAP Financial Information
Other fiscal first quarter 2021 metrics and recent results included:
•Cash, cash equivalents and short-term investments were $114.4 million at the end of the quarter;
•DSO was 53 days compared to 49 days in the fiscal first quarter of 2020 and 54 days in the fiscal fourth quarter of 2020;
•Pursuant to the $250 million share authorization by the Board of Directors, Progress repurchased 0.4 million shares for $15.0 million during the first fiscal quarter of 2021. As of February 28, 2021, there was $175.0 million remaining under this authorization; and
•On March 23, 2021, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on June 15, 2021 to shareholders of record as of the close of business on June 1, 2021.
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Anthony Folger, CFO, said: “Progress delivered strong financial results across the board in the first quarter, which has given us even greater confidence in our prospects for 2021. The integration of Chef is tracking ahead of plan and Chef’s first full quarter with Progress contributed better than expected performance and helped continue the trend of an increasing mix of revenue being derived from recurring sources.”
Select Performance Metrics:
Management evaluates our financial performance using a number of financial and operating metrics. These metrics are periodically reviewed and revised to reflect changes in our business.
Beginning this period, Progress is providing an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years. ARR represents the annualized contract value for all active and contractually binding term-based contracts at the end of a period. ARR includes maintenance, software upgrade rights, public cloud and on-premises subscription-based transactions and managed services. Additional information regarding ARR is contained in the company's Current Report on Form 8-K furnished to the Securities and Exchange Commission in connection with this press release, which is also available on the Progress website within the investor relations section.
ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
In addition, Progress is in the process of updating its segments based on changes to how performance is assessed and resources are allocated. Progress expects to begin operating as one distinct segment to align with the way that management internally analyzes the business. Progress previously reported results based on three segments. Progress plans to implement the new segment structure starting with results for the fiscal second quarter ending May 31, 2021.
2021 Business Outlook
Progress provides the following guidance for the fiscal year ending November 30, 2021 and the fiscal second quarter ending May 31, 2021:
| Updated FY 2021 Guidance (March 25, 2021) | FY 2021 Guidance (January 14, 2021) | ||||||||||||||||||||||
| (In millions, except percentages and per share amounts) | GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||||||||
| Revenue | $493 - $501 | $519 - $527 | $487 - $495 | $513 - $521 | |||||||||||||||||||
| Diluted earnings per share | $1.56 - $1.60 | $3.38 - $3.42 | $1.40 - $1.46 | $3.22 - $3.28 | |||||||||||||||||||
| Operating margin | 20% | 38% | 19% | 37% | |||||||||||||||||||
| Cash from operations (GAAP) / Adjusted free cash flow (Non-GAAP) | $157 - $162 | $155 - $160 | $151 - $156 | $150 - $155 | |||||||||||||||||||
| Effective tax rate | 21 | % | 20 | % | 21 | % | 20 | % | |||||||||||||||
| Q2 2021 Guidance | |||||||||||
| (In millions, except per share amounts) | GAAP | Non-GAAP | |||||||||
| Revenue | $112 - $116 | $119 - $123 | |||||||||
| Diluted earnings per share | $0.25 - $0.27 | $0.72 - $0.74 | |||||||||
Based on current exchange rates, the expected positive currency translation impact on Progress' fiscal year 2021 business outlook compared to 2020 exchange rates is approximately $5.8 million on GAAP and non-GAAP revenue, and approximately $0.02 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress' fiscal Q2 2021 business outlook compared to 2020 exchange rates on GAAP and non-GAAP revenue is approximately $2.4 million. The expected positive impact on GAAP and non-GAAP diluted Q2 2021 earnings per share is $0.01. To the extent that there are changes in exchange rates versus the current environment, this may have an impact on Progress' business outlook.
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Conference Call
Progress will hold a conference call to review its financial results for the fiscal first quarter of 2021 at 5:00 p.m. ET on Thursday, March 25, 2021. The call can be accessed on the investor relations section of the company’s website, located at www.progress.com. Additionally, you can listen to the call by telephone by dialing 800-367-2403 or 334-777-6978, passcode 3276569. The conference call will include comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress website within the investor relations section after the live conference call.
Legal Notice Regarding Non-GAAP Financial Information
Progress provides non-GAAP financial information as additional information for investors. These non-GAAP measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP"). Progress believes that the non-GAAP results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. A reconciliation of non-GAAP adjustments to the company's GAAP financial results is included in the tables below and is available on the Progress website at www.progress.com within the investor relations section. Additional information regarding the company's non-GAAP financial information is contained in the company's Current Report on Form 8-K furnished to the Securities and Exchange Commission in connection with this press release, which is also available on the Progress website within the investor relations section.
Note Regarding Forward-Looking Statements
This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “should,” “expect,” “intend,” “plan,” “target,” “anticipate” and “continue,” the negative of these words, other terms of similar meaning or the use of future dates.
Forward-looking statements in this press release include, but are not limited to, statements regarding Progress' business outlook and financial guidance. There are a number of factors that could cause actual results or future events to differ materially from those anticipated by the forward-looking statements, including, without limitation:
(1) Economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts. (3) Our ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts. (5) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. (6) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (7) If the security measures for our software, services, other offerings or our internal information technology infrastructure are compromised or subject to a successful cyber-attack, or if our software offerings contain significant coding or configuration errors, we may experience reputational harm, legal claims and financial exposure. (8) We have made acquisitions, and may make acquisitions in the future, and those acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (9) Delay or failure to realize the expected synergies and benefits of the Chef acquisition could negatively impact our future results of operations and financial condition; (10) The continuing impact of the coronavirus disease (COVID-19) outbreak on our employees, customers, partners, and the global financial markets could adversely affect our business, results of operations and financial condition. For further information regarding risks and uncertainties associated with Progress' business, please refer to Progress' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2020. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
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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 | |||||||
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | |||||||||||||||||
| (In thousands, except per share data) | February 28, 2021 | February 29, 2020 | % Change | ||||||||||||||
| Revenue: | |||||||||||||||||
| Software licenses | $ | 33,317 | $ | 30,629 | 9 | % | |||||||||||
| Maintenance and services | 87,963 | 79,054 | 11 | % | |||||||||||||
| Total revenue | 121,280 | 109,683 | 11 | % | |||||||||||||
| Costs of revenue: | |||||||||||||||||
| Cost of software licenses | 1,151 | 1,389 | (17) | % | |||||||||||||
| Cost of maintenance and services | 13,319 | 11,851 | 12 | % | |||||||||||||
| Amortization of acquired intangibles | 3,521 | 1,646 | 114 | % | |||||||||||||
| Total costs of revenue | 17,991 | 14,886 | 21 | % | |||||||||||||
| Gross profit | 103,289 | 94,797 | 9 | % | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales and marketing | 29,469 | 24,198 | 22 | % | |||||||||||||
| Product development | 24,548 | 21,654 | 13 | % | |||||||||||||
| General and administrative | 13,424 | 12,748 | 5 | % | |||||||||||||
| Amortization of acquired intangibles | 6,879 | 4,131 | 67 | % | |||||||||||||
| Restructuring expenses | 1,157 | 1,040 | 11 | % | |||||||||||||
| Acquisition-related expenses | 396 | 314 | 26 | % | |||||||||||||
| Total operating expenses | 75,873 | 64,085 | 18 | % | |||||||||||||
| Income from operations | 27,416 | 30,712 | (11) | % | |||||||||||||
| Other expense, net | (2,652) | (3,397) | 22 | % | |||||||||||||
| Income before income taxes | 24,764 | 27,315 | (9) | % | |||||||||||||
| Provision for income taxes | 5,803 | 6,199 | (6) | % | |||||||||||||
| Net income | $ | 18,961 | $ | 21,116 | (10) | % | |||||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.43 | $ | 0.47 | (9) | % | |||||||||||
| Diluted | $ | 0.42 | $ | 0.46 | (9) | % | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 44,108 | 44,897 | (2) | % | |||||||||||||
| Diluted | 44,652 | 45,515 | (2) | % | |||||||||||||
| Cash dividends declared per common share | $ | 0.175 | $ | 0.165 | 6 | % | |||||||||||
| Stock-based compensation is included in the condensed consolidated statements of operations, as follows: | |||||||||||||||||
| Cost of revenue | $ | 392 | $ | 319 | 23 | % | |||||||||||
| Sales and marketing | 1,503 | 1,050 | 43 | % | |||||||||||||
| Product development | 1,919 | 1,926 | — | % | |||||||||||||
| General and administrative | 2,970 | 2,756 | 8 | % | |||||||||||||
| Total | $ | 6,784 | $ | 6,051 | 12 | % | |||||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands) | February 28, 2021 | November 30, 2020 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash, cash equivalents and short-term investments | $ | 114,371 | $ | 105,995 | |||||||
| Accounts receivable, net | 77,573 | 84,040 | |||||||||
| Unbilled receivables and contract assets | 24,099 | 24,917 | |||||||||
| Other current assets | 23,266 | 23,983 | |||||||||
| Total current assets | 239,309 | 238,935 | |||||||||
| Property and equipment, net | 29,838 | 29,817 | |||||||||
| Goodwill and intangible assets, net | 694,048 | 704,473 | |||||||||
| Right-of-use lease assets | 31,265 | 30,635 | |||||||||
| Long-term unbilled receivables and contract assets | 14,334 | 17,133 | |||||||||
| Other assets | 18,263 | 20,789 | |||||||||
| Total assets | $ | 1,027,057 | $ | 1,041,782 | |||||||
| Liabilities and shareholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and other current liabilities | $ | 55,019 | $ | 70,899 | |||||||
| Current portion of long-term debt, net | 20,124 | 18,242 | |||||||||
| Short-term operating lease liabilities | 7,154 | 7,015 | |||||||||
| Short-term deferred revenue | 183,443 | 166,387 | |||||||||
| Total current liabilities | 265,740 | 262,543 | |||||||||
| Long-term debt, net | 343,758 | 364,260 | |||||||||
| Long-term operating lease liabilities | 27,342 | 26,966 | |||||||||
| Long-term deferred revenue | 25,535 | 26,908 | |||||||||
| Other long-term liabilities | 12,129 | 15,092 | |||||||||
| Shareholders’ equity: | |||||||||||
| Common stock and additional paid-in capital | 312,137 | 306,244 | |||||||||
| Retained earnings | 40,416 | 39,769 | |||||||||
| Total shareholders’ equity | 352,553 | 346,013 | |||||||||
| Total liabilities and shareholders’ equity | $ | 1,027,057 | $ | 1,041,782 | |||||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | |||||||||||
| (In thousands) | February 28, 2021 | February 29, 2020 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 18,961 | $ | 21,116 | |||||||
| Depreciation and amortization | 11,862 | 7,669 | |||||||||
| Stock-based compensation | 6,784 | 6,051 | |||||||||
| Other non-cash adjustments | 3,039 | 5,347 | |||||||||
| Changes in operating assets and liabilities | 4,042 | (7,167) | |||||||||
| Net cash flows from operating activities | 44,688 | 33,016 | |||||||||
| Capital expenditures | (1,166) | (1,148) | |||||||||
| Issuances of common stock, net of repurchases | (11,515) | (15,755) | |||||||||
| Dividend payments to shareholders | (7,854) | (7,468) | |||||||||
| Payments of principal on long-term debt | (18,763) | (1,882) | |||||||||
| Other | 2,986 | (3,393) | |||||||||
| Net change in cash, cash equivalents and short-term investments | 8,376 | 3,370 | |||||||||
| Cash, cash equivalents and short-term investments, beginning of period | 105,995 | 173,685 | |||||||||
| Cash, cash equivalents and short-term investments, end of period | $ | 114,371 | $ | 177,055 | |||||||
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RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES
(Unaudited)
| Three Months Ended | % Change | ||||||||||||||||||||||||||||
| (In thousands, except per share data) | February 28, 2021 | February 29, 2020 | Non-GAAP | ||||||||||||||||||||||||||
| Adjusted revenue: | |||||||||||||||||||||||||||||
| GAAP revenue | $ | 121,280 | $ | 109,683 | |||||||||||||||||||||||||
Acquisition-related revenue(1) | 10,504 | 4,079 | |||||||||||||||||||||||||||
| Non-GAAP revenue | $ | 131,784 | 100 | % | $ | 113,762 | 100 | % | 16 | % | |||||||||||||||||||
| Adjusted income from operations: | |||||||||||||||||||||||||||||
| GAAP income from operations | $ | 27,416 | 23 | % | $ | 30,712 | 28 | % | |||||||||||||||||||||
| Amortization of acquired intangibles | 10,400 | 8 | % | 5,777 | 5 | % | |||||||||||||||||||||||
| Restructuring expenses and other | 1,157 | 1 | % | 1,040 | 1 | % | |||||||||||||||||||||||
| Stock-based compensation | 6,784 | 3 | % | 6,051 | 4 | % | |||||||||||||||||||||||
Acquisition-related revenue(1) and expenses | 10,900 | 8 | % | 4,393 | 4 | % | |||||||||||||||||||||||
| Non-GAAP income from operations | $ | 56,657 | 43 | % | $ | 47,973 | 42 | % | 18 | % | |||||||||||||||||||
| Adjusted net income: | |||||||||||||||||||||||||||||
| GAAP net income | $ | 18,961 | 16 | % | $ | 21,116 | 19 | % | |||||||||||||||||||||
| Amortization of acquired intangibles | 10,400 | 8 | % | 5,777 | 5 | % | |||||||||||||||||||||||
| Restructuring expenses and other | 1,157 | 1 | % | 1,040 | 1 | % | |||||||||||||||||||||||
| Stock-based compensation | 6,784 | 3 | % | 6,051 | 5 | % | |||||||||||||||||||||||
Acquisition-related revenue(1) and expenses | 10,900 | 8 | % | 4,393 | 4 | % | |||||||||||||||||||||||
| Provision for income taxes | (5,698) | (4) | % | (3,674) | (3) | % | |||||||||||||||||||||||
| Non-GAAP net income | $ | 42,504 | 32 | % | $ | 34,703 | 31 | % | 22 | % | |||||||||||||||||||
| Adjusted diluted earnings per share: | |||||||||||||||||||||||||||||
| GAAP diluted earnings per share | $ | 0.42 | $ | 0.46 | |||||||||||||||||||||||||
| Amortization of acquired intangibles | 0.23 | 0.13 | |||||||||||||||||||||||||||
| Restructuring expenses and other | 0.03 | 0.02 | |||||||||||||||||||||||||||
| Stock-based compensation | 0.16 | 0.13 | |||||||||||||||||||||||||||
Acquisition-related revenue(1) and expenses | 0.24 | 0.10 | |||||||||||||||||||||||||||
| Provision for income taxes | (0.13) | (0.08) | |||||||||||||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.95 | $ | 0.76 | 25 | % | |||||||||||||||||||||||
| Non-GAAP weighted avg shares outstanding - diluted | 44,652 | 45,515 | (2) | % | |||||||||||||||||||||||||
| (1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' Application Development and Deployment business segment for Chef and Progress' OpenEdge business segment for Ipswitch. | |||||||||||||||||||||||||||||
8
OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)
| Adjusted Free Cash Flow | |||||||||||||||||
| (In thousands) | Q1 2021 | Q1 2020 | % Change | ||||||||||||||
| Cash flows from operations | $ | 44,688 | $ | 33,016 | 35 | % | |||||||||||
| Purchases of property and equipment | (1,166) | (1,148) | 2 | % | |||||||||||||
| Free cash flow | 43,522 | 31,868 | 37 | % | |||||||||||||
| Add back: restructuring payments | 2,993 | 1,429 | 109 | % | |||||||||||||
| Adjusted free cash flow | $ | 46,515 | $ | 33,297 | 40 | % | |||||||||||
9
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021 GUIDANCE
(Unaudited)
| Fiscal Year 2021 Updated Revenue Guidance | |||||||||||||||||||||||||||||
| Fiscal Year Ended | Fiscal Year Ending | ||||||||||||||||||||||||||||
| November 30, 2020 | November 30, 2021 | ||||||||||||||||||||||||||||
| (In millions) | Low | % Change | High | % Change | |||||||||||||||||||||||||
| GAAP revenue | $ | 442.1 | $ | 493.0 | 12 | % | $ | 501.0 | 13 | % | |||||||||||||||||||
Acquisition-related adjustments - revenue(1) | 14.1 | 26.0 | 84 | % | 26.0 | 84 | % | ||||||||||||||||||||||
| Non-GAAP revenue | $ | 456.2 | $ | 519.0 | 14 | % | $ | 527.0 | 16 | % | |||||||||||||||||||
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Ipswitch and Chef. | |||||||||||||||||||||||||||||
| Fiscal Year 2021 Updated Non-GAAP Operating Margin Guidance | |||||||||||
| Fiscal Year Ending November 30, 2021 | |||||||||||
| (In millions) | Low | High | |||||||||
| GAAP income from operations | $ | 99.5 | $ | 102.1 | |||||||
| GAAP operating margins | 20 | % | 20 | % | |||||||
| Acquisition-related revenue | 26.0 | 26.0 | |||||||||
| Acquisition-related expense | 0.9 | 0.9 | |||||||||
| Restructuring expense | 1.3 | 1.3 | |||||||||
| Stock-based compensation | 27.2 | 27.2 | |||||||||
| Amortization of acquired intangibles | 44.9 | 44.9 | |||||||||
Total adjustments(2) | 100.3 | 100.3 | |||||||||
| Non-GAAP income from operations | $ | 199.8 | $ | 202.4 | |||||||
| Non-GAAP operating margin | 38 | % | 38 | % | |||||||
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Chef and restructuring expenses. The final amounts will not be available until the Company’s internal procedures and reviews are completed. | |||||||||||
| Fiscal Year 2021 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance | |||||||||||
| Fiscal Year Ending November 30, 2021 | |||||||||||
| (In millions, except per share data) | Low | High | |||||||||
| GAAP net income | $ | 69.5 | $ | 71.5 | |||||||
| Adjustments (from previous table) | 100.3 | 100.3 | |||||||||
Income tax adjustment(3) | (19.2) | (19.2) | |||||||||
| Non-GAAP net income | $ | 150.6 | $ | 152.6 | |||||||
| GAAP diluted earnings per share | $ | 1.56 | $ | 1.60 | |||||||
| Non-GAAP diluted earnings per share | $ | 3.38 | $ | 3.42 | |||||||
| Diluted weighted average shares outstanding | 44.6 | 44.6 | |||||||||
(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately 20% for Low and High, calculated as follows: | |||||||||||
| Non-GAAP income from operations | $ | 199.8 | $ | 202.4 | |||||||
| Other (expense) income | (11.6) | (11.6) | |||||||||
| Non-GAAP income from continuing operations before income taxes | 188.2 | 190.8 | |||||||||
| Non-GAAP net income | 150.6 | 152.6 | |||||||||
| Tax provision | $ | 37.6 | $ | 38.2 | |||||||
| Non-GAAP tax rate | 20 | % | 20 | % | |||||||
10
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021 GUIDANCE
(Unaudited)
| Fiscal Year 2021 Adjusted Free Cash Flow Guidance | |||||||||||
| Fiscal Year Ending November 30, 2021 | |||||||||||
| (In millions) | Low | High | |||||||||
| Cash flows from operations (GAAP) | $ | 157 | $ | 162 | |||||||
| Purchases of property and equipment | (7) | (7) | |||||||||
| Add back: restructuring payments | 5 | 5 | |||||||||
| Adjusted free cash flow (non-GAAP) | $ | 155 | $ | 160 | |||||||
11
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2021 GUIDANCE
(Unaudited)
| Q2 2021 Revenue Guidance | |||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ending | ||||||||||||||||||||||||||||
| May 31, 2020 | May 31, 2021 | ||||||||||||||||||||||||||||
| (In millions) | Low | % Change | High | % Change | |||||||||||||||||||||||||
| GAAP revenue | $ | 100.4 | $ | 112.3 | 12 | % | $ | 116.3 | 16 | % | |||||||||||||||||||
Acquisition-related adjustments - revenue(1) | 2.1 | 6.7 | 219 | % | 6.7 | 219 | % | ||||||||||||||||||||||
| Non-GAAP revenue | $ | 102.5 | $ | 119.0 | 16 | % | $ | 123.0 | 20 | % | |||||||||||||||||||
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Ipswitch and Chef. | |||||||||||||||||||||||||||||
| Q2 2021 Non-GAAP Earnings per Share Guidance | |||||||||||
| Three Months Ending May 31, 2021 | |||||||||||
| Low | High | ||||||||||
| GAAP diluted earnings per share | $ | 0.25 | $ | 0.27 | |||||||
| Acquisition-related revenue | 0.15 | 0.15 | |||||||||
| Acquisition-related expense | 0.01 | 0.01 | |||||||||
| Stock-based compensation | 0.16 | 0.16 | |||||||||
| Amortization of acquired intangibles | 0.26 | 0.26 | |||||||||
Total adjustments(2) | 0.58 | 0.58 | |||||||||
| Income tax adjustment | (0.11) | (0.11) | |||||||||
| Non-GAAP diluted earnings per share | $ | 0.72 | $ | 0.74 | |||||||
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Chef. The final amounts will not be available until the Company’s internal procedures and reviews are completed. | |||||||||||
12
Q1 2021 Supplemental Data Progress Financial Results
2© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Legal Notice This presentation 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 presentation include, but are not limited to, statements regarding Progress’s strategy; acquisitions; future revenue growth, operating margin and cost savings; strategic partnering and marketing initiatives; and other statements regarding the future operation, direction, prospects 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: ▪ 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. ▪ 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. ▪ 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. ▪ 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. ▪ We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. ▪ 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. ▪ 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. ▪ 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. ▪ Delay or failure to realize the expected synergies and benefits of the Chef acquisition could adversely impact our future results of operations and financial condition. ▪ 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 our business, please refer to our filings with the Securities and Exchange Commission. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this presentation, except for statements relating to Progress' projected results for the quarter ended February 28, 2021 and fiscal year ended November 30, 2021, which speak only as of March 25, 2021. Finally, during this presentation we will be referring to non-GAAP financial measures such as non-GAAP revenue, non-GAAP income from operations and operating margin, adjusted free cash flow and non-GAAP diluted earnings per share. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation between non-GAAP and the most directly comparable GAAP financial measures appears in our earnings press release for the fiscal quarter ended February 28, 2021 and is available in the Investor Relations section of our Web site.
3© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. What: Progress Q1 2021 Financial Results Conference Call When: Thursday, March 25th, 2021 Time: 5:00 p.m. ET Live Call: 1-800-367-2403, pass code 3276569 Live / Recorded Webcast: http://investors.progress.com Conference Call Details
4© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. • Strong Financial Results — Non-GAAP Revenue, non-GAAP EPS and Free Cash Flow all above high end of guidance range – Results driven by top-line strength across all products, most notably OpenEdge – Chef exceeding our expectations on the top and bottom line as integration proceeds ahead of plan – Stable, durable top line driven by continued increase in recurring revenue mix — Top-line strength helped fuel operating margin above 40% • Products and Customer Experience — Portfolio of products fully addresses the application lifecycle of develop, deploy and manage — Continued investment to enhance and expand product set to ensure we’re delivering superior value to customers • M&A efforts continue unabated; growth in pipeline, expansion of sourcing channels and enhanced capabilities aimed at large and growing DevOps market opportunity Summary Highlights
5© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Leverage the Cloud Opportunity MOVEit Sitefinity CorticonOpenEdge Chef DataDirect
6© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. The Evolving Application / Technology Team Developers IT Ops DevOps Designers Data AnalystsBusiness Analysts Data Scientists DevSecOps QA
7© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Progress is a trusted provider of the best products to develop, deploy and manage high-impact business applications
8© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. M&A Framework --- Goal is to double the size of the company in 5 years --- Accretive M&A enables us to add scale and cash flows, and generate strong shareholder returns ▪ Target acquisition profile: ➢ Complementary to our business (product, audience, and growth profile) ➢ Significant recurring revenue and excellent retention rates ➢ Cost synergistic and accretive ➢ Operating margins after synergies that are consistent with our overall margins ➢ ROIC above our weighted average cost of capital
9© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Progress Investment Highlights Durable, predictable financial model High-quality revenue base and highly recurring revenue model Accretive M&A and operational efficiencies driving margin improvement Track record of successful acquisition integration and synergy achievement Delivering meaningful earnings per share and free cash flow growth Disciplined and shareholder-friendly capital allocation strategy
10© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Q1 2021 Results Q1 2021 Outlook (1/14/2021) GAAP Revenue $121 M $109 M - $113 M Non-GAAP Revenue $132 M $119 M - $123 M GAAP earnings per share (Diluted) $0.42 $0.21 - $0.25 Non-GAAP earnings per share (Diluted) $0.95 $0.72 - $0.76 GAAP Operating Margin 23% Not guided Non-GAAP Operating Margin 43% Not guided Adjusted Free Cash Flow $47 M Not guided Summary Q1 2021 Financial Results
11© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. $379 $432 $456 $523 $0 $150 $300 $450 $600 2018 2019 2020 2021 (F)* Revenue (non GAAP) Driving Total Growth ➢ 2021(F)* revenue growth of 15% ➢ Revenue CAGR of 11.3% 2018 – 2021(F)* * Represents our 2021 guidance or the mid-point of our 2021 guidance range
12© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. 74% 78% 80% >80% 70% 75% 80% 85% 90% $ $150 $300 $450 $600 2018 2019 2020 2021 (F)* Recurring Revenue Non Recurring Revenue % Recurring Increasing Mix of Recurring Revenue ➢ High percentage of recurring revenue ➢ Subscription-based revenue models associated with on-prem and SaaS offerings ➢ Recurring revenue CAGR of 15.7% 2018 – 2021(F)* ➢ Recurring revenue mix expected to move higher * Represents our 2021 guidance or the mid-point of our 2021 guidance range
13© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. $134 $162 $183 $201 $0 $50 $100 $150 $200 $250 2018 2019 2020 2021 (F)* Operating Income (non GAAP) Growing Profitability ➢ Consistent growth in operating income CAGR 14.5% 2018 – 2021(F)* ➢ Best-in-class operating margins consistently above 35%
14© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. What it is and what it’s not It is: ➢ The annualized value of all recurring revenue related contracts in place at the end of the period. ➢ An operating metric that should be viewed independently of revenue and deferred revenue. It is not: ➢ Intended to be combined with or replace revenue and deferred revenue ➢ A forecast of future revenue What’s included and excluded Included: ➢ Maintenance Revenue ➢ Subscription revenue derived from hosted/SaaS solutions and on prem term license arrangements Excluded: ➢ Revenue reported as perpetual license ➢ Non-Recurring professional services Introducing Annualized Recurring Revenue (ARR)
15© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Introducing Net Dollar Retention Rate It is: ➢ A calculation (detailed below) which attempts to capture all potential customer actions ➢ An operating metric that should be viewed independently of revenue It is not: ➢ Intended to be combined with or replace revenue and deferred revenue ➢ Meant to be a forecast of future revenue What it is and what it’s not Beginning ARR - ARR Churn - ARR on Customer Contracts that have declined in value (down-sell) + ARR on Customer Contracts that have increased in value (up-sell) Beginning ARR
16© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. $355 99.1% 98.8% 55.0% 65.0% 75.0% 85.0% 95.0% 105.0% $250 $300 $350 $400 $450 $500 Q1'20 Q1'21 ARR Chef Net $ Retention TTM Annualized Recurring Revenue (amounts reported in constant currency) $432 Note: ARR is a Non-GAAP operating metric and does not have a standardized definition. It is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. $422 $432 99.6% 98.8% 55.0% 65.0% 75.0% 85.0% 95.0% 105.0% $250 $300 $350 $400 $450 $500 Q1'20 Q1'21 ARR Net $ Retention TTM “As Reported” Chef adds less than $80M of ARR ARR growth = 22 % year-over-year Net Retention Rate has ranged between 97%-100% “Pro Forma” Chef ARR included in both periods presented ARR growth = 2.4 % year-over-year Net Retention Rate has ranged between 97%-100%
17© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Capital Allocation Focus • Continue to return capital to shareholders in the form of dividends • Accretive M&A that meets our disciplined criteria • Repurchase shares to offset dilution from our equity programs — Existing authorization $250M; $175M remaining — Flexibility to increase, reduce or suspend repurchases, depending on market conditions and size and timing of M&A Primary focus Share Repurchases $373 Cash Dividends $115 Debt Principal Payments $62 Capital Spending $28 Acquisitions $516 Capital Allocation 2016 – Q1 2021 Share repurchase authorization • Current total: $250M • Remaining: $175M
18© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Business Outlook (as of March 25, 2021) Q2 2021 Current Outlook FY 2021 Prior Outlook (As of 1/14/2021) FY 2021 Current Outlook Non-GAAP Revenue $119 M – $123 M $513 M – $521 M $519 M – $527 M Non-GAAP EPS $0.72 – $0.74 $3.22 – $3.28 $3.38 – $3.42 Non-GAAP Operating Margin Not guided 37% 38% Non-GAAP Adjusted Free Cash Flow Not guided $150 M – $155 M $155 M – $160 M Non-GAAP Effective Tax Rate Not guided 20% 20%
Supplemental Financial Information * * The following supplemental financial information is presented on a GAAP basis. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP numbers can be found in the financial results press release that we issued today.
20© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Results of Operations by Segment (Unaudited) (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: certain product development and corporate sales and marketing expenses, customer support, administration, amortization of acquired intangibles, stock-based compensation, restructuring, and acquisition-related expenses.
21© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Supplemental Revenue Information (Unaudited)
22© 2021 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Other NON-GAAP Financial Measures (Unaudited)
