Exceeds Annual Guidance for Revenue, Achieves Record Cash Flows

Board of Directors Increases Share Repurchase Authorization to $250 Million

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

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

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

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

Additional financial highlights included(1):

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

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

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

Other fiscal fourth quarter 2019 metrics and recent results included:

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

Full Year Results(1)

  
 Fiscal Year Ended
 GAAP Non-GAAP
(In thousands, except percentages and per share amounts)November 30,
2019
 November 30,
2018
 %
Change
 November 30,
2019
 November 30,
2018
 %
Change
Revenue$413,298  $378,981  9% $431,961  $379,447  14%
Income from operations$40,084  $67,814  (41)% $162,258  $133,952  21%
Operating margin10% 18% (44)% 38% 35% 9%
Net income$26,400  $49,670  (47)% $121,745  $101,180  20%
Diluted earnings per share$0.58  $1.08  (46)% $2.69  $2.19  23%
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP)$128,484  $121,352  6% $128,893  $120,213  7%

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

2020 Business Outlook

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

     
 FY 2019 Actual FY 2020 Guidance 
(In millions, except percentages and per share amounts)FY 2019
GAAP
 FY 2019
Non-GAAP
 FY 2020
GAAP
  FY 2020
Non-GAAP
 
Revenue$413  $432  $440 - $447  $448 - $455 
Diluted earnings per share$0.58  $2.69  $1.96 - $2.01  $2.87 - $2.92 
Operating margin10 38  27%  39%
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$128  $129  $149 - $154  $145 - $150 
Effective tax rate7 19 17%   20%
            


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

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

Share Repurchase Program

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

Conference Call

Progress will hold a conference call to review its financial results for the fiscal fourth quarter of 2019 at 5:00 p.m. ET on Thursday, January 16, 2020. The call can be accessed on the investor relations section of the company’s website, located at www.progress.com.  Additionally, you can listen to the call by telephone by dialing 1-800-458-4121, pass code 4393532. The conference call will include comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress website within the investor relations section after the live conference call.

Legal Notice Regarding Non-GAAP Financial Information

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

Note Regarding Forward-Looking Statements

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

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

(1) Economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts. (3) Our ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts. (5) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. (6) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (7) If the security measures for our software, services or other offerings are compromised or subject to a successful cyber-attack, or if such offerings contain significant coding or configuration errors, we may experience reputational harm, legal claims and financial exposure. (8) We have made acquisitions, including our recent acquisition of Ipswitch, and may make acquisitions in the future, and those acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. For further information regarding risks and uncertainties associated with Progress' business, please refer to Progress' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2018 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended February 28, 2019, May 31, 2019 and August 31, 2019. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

About Progress

Progress (NASDAQ: PRGS) offers the leading platform for developing and deploying strategic business applications. We enable customers and partners to deliver modern, high-impact digital experiences with a fraction of the effort, time and cost. Progress offers powerful tools for easily building adaptive user experiences across any type of device or touchpoint, the flexibility of a cloud-native app dev platform to deliver modern apps, leading data connectivity technology, web content management, business rules, secure file transfer, network monitoring, plus award-winning machine learning that enables cognitive capabilities to be a part of any application. Over 1,700 independent software vendors, 100,000 enterprise customers, and two million developers rely on Progress to power their applications. Learn about Progress at www.progress.com or +1-800-477-6473.

Progress and Progress Software are trademarks or registered trademarks of Progress Software Corporation and/or its subsidiaries or affiliates in the U.S. and other countries. Any other names contained herein may be trademarks of their respective owners.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 Three Months Ended Fiscal Year Ended
(In thousands, except per share data)November 30,
2019
 November 30,
2018(1)
 %
Change
 November 30,
2019
 November 30,
2018(1)
 %
Change
Revenue:           
Software licenses$39,336  $28,367  39% $122,552  $99,800  23%
Maintenance and services77,702  69,736  11% 290,746  279,181  4%
Total revenue117,038  98,103  19% 413,298  378,981  9%
Costs of revenue:           
Cost of software licenses1,598  1,198  33% 4,894  4,769  3%
Cost of maintenance and services12,281  10,025  23% 44,463  39,470  13%
Amortization of acquired intangibles6,887  5,508  25% 25,884  22,734  14%
Total costs of revenue20,766  16,731  24% 75,241  66,973  12%
Gross profit96,272  81,372  18% 338,057  312,008  8%
Operating expenses:           
Sales and marketing29,369  28,198  4% 101,701  93,036  9%
Product development23,868  20,334  17% 88,572  79,739  11%
General and administrative14,915  13,380  11% 53,360  49,050  9%
Amortization of acquired intangibles7,414  3,285  126% 22,255  13,241  68%
Impairment of intangible & long-lived assets(2)24,096     * 24,096     *
Restructuring expenses2,338  (131)  * 6,331  2,251  181%
Acquisition-related expenses298  130  129% 1,658  258   *
Loss on assets held for sale  5,147   *   5,147   *
Fees related to shareholder activist     *   1,472   *
Total operating expenses102,298  70,343  45% 297,973  244,194  22%
(Loss) income from operations(6,026) 11,029  (155)% 40,084  67,814  (41)%
Other expense, net(3,551) (2,188) (62)% (11,589) (7,018) (65)%
(Loss) income before income taxes(9,577) 8,841  (208)% 28,495  60,796  (53)%
(Benefit) provision for income taxes(4,837) 198   * 2,095  11,126  (81)%
Net (loss) income$(4,740) $8,643  (155)% $26,400  $49,670  (47)%
            
(Loss) earnings per share:           
Basic$(0.11) $0.19  (158)% $0.59  $1.09  (46)%
Diluted$(0.11) $0.19  (158)% $0.58  $1.08  (46)%
Weighted average shares outstanding:           
Basic44,882  45,055  % 44,791  45,561  (2)%
Diluted44,882  45,401  (1)% 45,340  46,135  (2)%
            
Cash dividends declared per common share$0.165  $0.155  6% $0.630  $0.575  10%
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
(2)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.


Stock-based compensation is included in the condensed consolidated statements of operations, as follows:      
            
Cost of revenue$323  $197  64% $1,134  $616  84%
Sales and marketing950  832  14% 4,155  2,959  40%
Product development1,812  2,468  (27)% 7,205  8,242  (13)%
General and administrative2,815  2,356  19% 10,817  8,752  24%
Total$5,900  $5,853  1% $23,311  $20,569  13%
                      

*Not meaningful


CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands)November 30,
2019
 November 30,
2018(1)
Assets
   
Current assets:   
Cash, cash equivalents and short-term investments$173,685  $139,513 
Accounts receivable, net72,820  59,715 
Unbilled receivables and contract assets10,880  1,421 
Other current assets27,280  25,080 
Assets held for sale  5,776 
Total current assets284,665  231,505 
Property and equipment, net29,765  30,714 
Goodwill and intangible assets, net532,216  373,911 
Long-term unbilled receivables and contract assets12,492  1,811 
Other assets22,133  6,209 
Total assets$881,271  $644,150 
Liabilities and shareholders' equity   
Current liabilities:   
Accounts payable and other current liabilities$72,674  $57,005 
Current portion of long-term debt, net10,717  5,819 
Short-term deferred revenue157,494  123,210 
Total current liabilities240,885  186,034 
Long-term debt, net284,002  110,270 
Long-term deferred revenue19,752  12,730 
Other long-term liabilities6,350  11,114 
Shareholders' equity:   
Common stock and additional paid-in capital295,953  267,053 
Retained earnings34,329  56,949 
Total shareholders' equity330,282  324,002 
Total liabilities and shareholders' equity$881,271  $644,150 
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  

 Three Months Ended Fiscal Year Ended
(In thousands)November 30, November 30,
2018(1)
 November 30, November 30,
2018(1)
20192019
Cash flows from operating activities:       
Net (loss) income$(4,740) $8,643  $26,400  $49,670 
Depreciation and amortization16,519  10,855  56,679  44,502 
Stock-based compensation5,900  5,853  23,311  20,569 
Loss on assets held for sale  5,147    5,147 
Impairment of intangible and long-lived assets(2)24,096    24,096   
Other non-cash adjustments(8,252) 389  (13,947) (1,676)
Changes in operating assets and liabilities3,078  (6,560) 11,945  3,140 
Net cash flows from operating activities36,601  24,327  128,484  121,352 
Capital expenditures(2,168) (1,282) (3,998) (7,250)
Issuances of common stock, net of repurchases2,918  (8,738) (15,735) (110,795)
Dividend payments to shareholders(6,941) (6,318) (27,760) (25,789)
Payments for acquisitions, net of cash acquired    (225,298)  
Proceeds from the issuance of debt, net of payment of issuance costs    183,374   
Proceeds from sale of property, plant and equipment, net    6,146   
Payments of principal on long-term debt(1,882) (1,547) (5,309) (6,188)
Other(240) (4,810) (5,732) (15,426)
Net change in cash, cash equivalents and short-term investments28,288  1,632  34,172  (44,096)
Cash, cash equivalents and short-term investments, beginning of period145,397  137,881  139,513  183,609 
Cash, cash equivalents and short-term investments, end of period$173,685  $139,513  $173,685  $139,513 
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
(2)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.
 

RESULTS OF OPERATIONS BY SEGMENT
(Unaudited)

 Three Months Ended Fiscal Year Ended
(In thousands)November 30,
2019
 November 30,
2018(1)
 %
Change
 November 30,
2019
 November 30,
2018(1)
 %
Change
Segment revenue:           
OpenEdge$85,250  $73,016  17% $296,929  $277,806  7%
Data Connectivity and Integration12,217  5,663  116% 39,903  23,129  73%
Application Development and Deployment19,571  19,424  1% 76,466  78,046  (2)%
Total revenue117,038  98,103  19% 413,298  378,981  9%
Segment costs of revenue and operating expenses:           
OpenEdge25,086  20,626  22% 85,209  67,820  26%
Data Connectivity and Integration2,724  2,811  (3)% 7,973  7,634  4%
Application Development and Deployment6,926  7,019  (1)% 23,993  27,087  (11)%
Total costs of revenue and operating expenses34,736  30,456  14% 117,175  102,541  14%
Segment contribution margin:           
OpenEdge60,164  52,390  15% 211,720  209,986  1%
Data Connectivity and Integration9,493  2,852  233% 31,930  15,495  106%
Application Development and Deployment12,645  12,405  2% 52,473  50,959  3%
Total contribution margin82,302  67,647  22% 296,123  276,440  7%
Other unallocated expenses(2)88,328  56,618  56% 256,039  208,626  23%
(Loss) income from operations(6,026) 11,029  (155)% 40,084  67,814  (41)%
Other expense, net(3,551) (2,188) (62)% (11,589) (7,018) (65)%
(Loss) income before income taxes$(9,577) $8,841  (208)% $28,495  $60,796  (53)%
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
(2)The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: certain product development and corporate sales and marketing expenses, customer support, administration, amortization and impairment of acquired intangibles, impairment of long-lived assets, loss on assets held for sale, stock-based compensation, fees related to shareholder activist, restructuring, and acquisition-related expenses.
       

SUPPLEMENTAL INFORMATION
(Unaudited)

Revenue by Type             
              
(In thousands)Q4 2018(1) Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018(1)
Software licenses$28,367  $22,802  $29,728  $30,686  $39,336  $122,552  $99,800 
Maintenance61,759  59,999  62,528  67,611  68,868  259,006  249,171 
Services7,977  6,748  7,739  8,419  8,834  31,740  30,010 
Total revenue$98,103  $89,549  $99,995  $106,716  $117,038  $413,298  $378,981 
              
Revenue by Region             
              
(In thousands)Q4 2018(1) Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018(1)
North America$54,952  $46,498  $57,060  $60,208  $70,145  $233,911  $204,257 
EMEA34,047  33,372  33,633  35,109  35,187  137,301  135,055 
Latin America4,260  4,461  4,108  5,470  5,626  19,665  18,046 
Asia Pacific4,844  5,218  5,194  5,929  6,080  22,421  21,623 
Total revenue$98,103  $89,549  $99,995  $106,716  $117,038  $413,298  $378,981 
              
Revenue by Segment             
              
(In thousands)Q4 2018(1) Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 FY 2018(1)
OpenEdge$73,016  $65,252  $67,820  $78,607  $85,250  $296,929  $277,806 
Data Connectivity and Integration5,663  6,000  12,932  8,754  12,217  39,903  23,129 
Application Development and Deployment19,424  18,297  19,243  19,355  19,571  76,466  78,046 
Total revenue$98,103  $89,549  $99,995  $106,716  $117,038  $413,298  $378,981 
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
                            

 

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

 Three Months Ended % Change
(In thousands, except per share data)November 30, 2019 November 30, 2018(1) Non-GAAP
Adjusted revenue:         
GAAP revenue$117,038    $98,103     
Acquisition-related revenue(2)6,378    154     
Non-GAAP revenue$123,416  100% $98,257  100% 26%
          
Adjusted income from operations:         
GAAP (loss) income from operations$(6,026) (5)% $11,029  11%  
Amortization of acquired intangibles14,301    8,793     
Stock-based compensation5,900    5,853     
Impairment of intangible and long-lived assets(3)24,096         
Restructuring expenses and other2,338    (131)    
Acquisition-related revenue(2) and expenses6,676    284     
Loss on assets held for sale    5,147     
Non-GAAP income from operations$47,285  38% $30,975  32% 53%
          
Adjusted net income:         
GAAP net (loss) income$(4,740) (4)% $8,643  9%  
Amortization of acquired intangibles14,301    8,793     
Stock-based compensation5,900    5,853     
Impairment of intangible and long-lived assets(3)24,096         
Restructuring expenses and other2,338    (131)    
Acquisition-related revenue(2) and expenses6,676    284     
Loss on assets held for sale    5,147     
Provision for income taxes(12,851)   (4,149)    
Non-GAAP net income$35,720  29% $24,440  25% 46%
          
Adjusted diluted earnings per share:         
GAAP diluted (loss) earnings per share$(0.11)   $0.19     
Amortization of acquired intangibles0.32    0.19     
Stock-based compensation0.13    0.13     
Impairment of intangible and long-lived assets(3)0.53         
Restructuring expenses and other0.05         
Acquisition-related revenue(2) and expenses0.15    0.01     
Loss on assets held for sale    0.11     
Provision for income taxes(0.28)   (0.09)    
Non-GAAP diluted earnings per share$0.79    $0.54    46%
          
Non-GAAP weighted avg shares outstanding - diluted45,484    45,401    %
          
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
(2)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' OpenEdge business segment for Ipswitch in fiscal year 2019 and to Progress' OpenEdge business segment for Kinvey and Application Development and Deployment business segment for Telerik in fiscal year 2018.
(3)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.
 

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

 Fiscal Year Ended % Change
(In thousands, except per share data)November 30, 2019 November 30, 2018(1) Non-GAAP
Adjusted revenue:         
GAAP revenue$413,298    $378,981     
Acquisition-related revenue(2)18,663    466     
Non-GAAP revenue$431,961  100% $379,447  100% 14%
          
Adjusted income from operations:         
GAAP income from operations$40,084  10% $67,814  18%  
Amortization of acquired intangibles48,139    35,975     
Stock-based compensation23,311    20,569     
Impairment of intangible and long-lived assets(3)24,096         
Restructuring expenses and other6,307    2,251     
Acquisition-related revenue(2) and expenses20,321    724     
Loss on assets held for sale    5,147     
Fees related to shareholder activist    1,472     
Non-GAAP income from operations$162,258  38% $133,952  35% 21%
          
Adjusted net income:         
GAAP net income$26,400  6% $49,670  13%  
Amortization of acquired intangibles48,139    35,975     
Stock-based compensation23,311    20,569     
Impairment of intangible and long-lived assets(3)24,096         
Restructuring expenses and other6,307    2,251     
Acquisition-related revenue(2) and expenses20,321    724     
Loss on assets held for sale    5,147     
Fees related to shareholder activist    1,472     
Provision for income taxes(26,829)   (14,628)    
Non-GAAP net income$121,745  28% $101,180  27% 20%
          
Adjusted diluted earnings per share:         
GAAP diluted earnings per share$0.58    $1.08     
Amortization of acquired intangibles1.07    0.78     
Stock-based compensation0.51    0.45     
Impairment of intangible and long-lived assets(3)0.53         
Restructuring expenses and other0.14    0.04     
Acquisition-related revenue(2) and expenses0.45    0.02     
Loss on assets held for sale    0.11     
Fees related to shareholder activist    0.03     
Provision for income taxes(0.59)   (0.32)    
Non-GAAP diluted earnings per share$2.69    $2.19    23%
          
Non-GAAP weighted avg shares outstanding - diluted45,340    46,135    (2)%
          
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method.  Prior period results have been adjusted to reflect the adoption of this standard.
(2)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' OpenEdge business segment for Ipswitch in fiscal year 2019 and to Progress' OpenEdge business segment for Kinvey and Application Development and Deployment business segment for Telerik in fiscal year 2018.
(3)Primarily represents a reduction in the carrying values of the intangible assets associated with Kinvey and DataRPM.
 

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

Revenue by Type     
      
(In thousands)Q4 2019 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
Software licenses$39,336  $71  $39,407 
Maintenance68,868  5,694  74,562 
Services8,834  613  9,447 
Total revenue$117,038  $6,378  $123,416 
      
Revenue by Region     
      
(In thousands)Q4 2019 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
North America$70,145  $4,711  $74,856 
EMEA35,187  1,140  36,327 
Latin America5,626  114  5,740 
Asia Pacific6,080  413  6,493 
Total revenue$117,038  $6,378  $123,416 
      
Revenue by Segment     
      
(In thousands)Q4 2019 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
OpenEdge$85,250  $6,378  $91,628 
Data Connectivity and Integration12,217    12,217 
Application Development and Deployment19,571    19,571 
Total revenue$117,038  $6,378  $123,416 
      
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' OpenEdge business segment for Ipswitch in fiscal year 2019.
      
Adjusted Free Cash Flow     
      
(In thousands)Q4 2019 Q4 2018 % Change
Cash flows from operations$36,601  $24,327  50%
Purchases of property and equipment(2,168) (1,282) 69%
Free cash flow34,433  23,045  49%
Add back: restructuring payments2,272  187  1,115%
Adjusted free cash flow$36,705  $23,232  58%
            

 

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

Revenue by Type     
      
(In thousands)FY 2019 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
Software licenses$122,552  $193  $122,745 
Maintenance259,006  17,289  276,295 
Services31,740  1,181  32,921 
Total revenue$413,298  $18,663  $431,961 
      
Revenue by Region     
      
(In thousands)FY 2019 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
North America$233,911  $13,885  $247,796 
EMEA137,301  3,245  140,546 
Latin America19,665  332  19,997 
Asia Pacific22,421  1,201  23,622 
Total revenue$413,298  $18,663  $431,961 
      
Revenue by Segment     
      
(In thousands)FY 2019 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
OpenEdge$296,929  $18,663  $315,592 
Data Connectivity and Integration39,903    39,903 
Application Development and Deployment76,466    76,466 
Total revenue$413,298  $18,663  $431,961 
      
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' OpenEdge business segment for Ipswitch in fiscal year 2019.
      
Adjusted Free Cash Flow     
      
(In thousands)FY 2019 FY 2018 % Change
Cash flows from operations$128,484  $121,352  6%
Purchases of property and equipment(3,998) (7,250) (45)%
Free cash flow124,486  114,102  9%
Add back: restructuring payments4,407  6,111  (28)%
Adjusted free cash flow$128,893  $120,213  7%
            

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

(In thousands)Q1 2018(1) Q2 2018(1) Q3 2018(1) Q4 2018(1) FY 2018(1)
GAAP revenue$19,255  $19,846  $19,521  $19,424  $78,046 
Add: change in deferred revenue         
Beginning balance, as adjusted42,128  42,041  41,593  42,789  42,128 
Ending balance, as adjusted42,041  41,593  42,789  45,291  45,291 
Change in deferred revenue(87) (448) 1,196  2,502  3,163 
Non-GAAP bookings$19,168  $19,398  $20,717  $21,926  $81,209 
(1)The Company adopted ASC 606 effective December 1, 2018, using the full retrospective method. Prior period results have been adjusted to reflect the adoption of this standard.
                    
(In thousands)Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019
GAAP revenue$18,297  $19,243  $19,355  $19,571  $76,466 
Add: change in deferred revenue         
Beginning balance45,291  43,817  44,704  44,737  45,291 
Ending balance43,817  44,704  44,737  46,909  46,909 
Change in deferred revenue(1,474) 887  33  2,172  1,618 
Non-GAAP bookings$16,823  $20,130  $19,388  $21,743  $78,084 
                    

 

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

Fiscal Year 2020 Revenue Guidance
 Fiscal Year Ended Fiscal Year Ending
 30-Nov-19 November 30, 2020
(In millions)  Low % Change High % Change
GAAP revenue$413.3  $439.7  6% $446.7  8%
Acquisition-related adjustments - revenue(1)18.7  8.3  (56)% 8.3  (56)%
Non-GAAP revenue$432.0  $448.0  4% $455.0  5%
          
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' OpenEdge business segment for Ipswitch.
                  

 


Fiscal Year 2020 Non-GAAP Operating Margin Guidance
 Fiscal Year Ending November 30, 2020
(In millions)Low High
GAAP income from operations$120.0  $122.8 
GAAP operating margin27% 27%
Acquisition-related revenue8.3  8.3 
Restructuring expense1.0  1.0 
Stock-based compensation23.3  23.3 
Amortization of intangibles23.2  23.2 
Total adjustments55.8  55.8 
Non-GAAP income from operations$175.8  $178.6 
Non-GAAP operating margin39% 39%
        
Fiscal Year 2020 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
 Fiscal Year Ending November 30, 2020
(In millions, except per share data)Low High
GAAP net income$89.0  $91.3 
Adjustments (from previous table)55.8  55.8 
Income tax adjustment(2)(14.4) (14.5)
Non-GAAP net income$130.4  $132.6 
    
GAAP diluted earnings per share$1.96  $2.01 
Non-GAAP diluted earnings per share$2.87  $2.92 
    
Diluted weighted average shares outstanding45.4  45.4 
    
(2)Tax adjustment is based on a non-GAAP effective tax rate of approximately 20% for Low and High, calculated as follows:
Non-GAAP income from operations$175.8  $178.6 
Other (expense) income(12.8) (12.8)
Non-GAAP income from continuing operations before income taxes163.0  165.8 
Non-GAAP net income130.4  132.6 
Tax provision$32.6  $33.2 
Non-GAAP tax rate20% 20%
      

 

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

Fiscal Year 2020 Adjusted Free Cash Flow Guidance
 Fiscal Year Ending November 30, 2020
(In millions)Low High
Cash flows from operations (GAAP)$149  $154 
Purchases of property and equipment(5) (5)
Add back: restructuring payments1  1 
Adjusted free cash flow (non-GAAP)$145  $150 
        

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

Q1 2020 Revenue Guidance
 Three Months Ended Three Months Ending
 28-Feb-19 February 29, 2020
(In millions)  Low % Change High % Change
GAAP revenue$89.5  $105.9  18% $108.9  22%
Acquisition-related adjustments - revenue(1)  4.1   * 4.1   *
Non-GAAP revenue$89.5  $110.0  23% $113.0  26%
          
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Progress' OpenEdge business segment for Ipswitch.
*Not meaningful                 
                  


Q1 2020 Non-GAAP Earnings per Share Guidance
 Three Months Ending February 29, 2020
 Low High
GAAP diluted earnings per share$0.40  $0.42 
Acquisition-related revenue0.09  0.09 
Stock-based compensation0.14  0.14 
Amortization of intangibles0.13  0.13 
Total adjustments0.36  0.36 
Income tax adjustment(0.07) (0.07)
Non-GAAP diluted earnings per share$0.69  $0.71 
        

 


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