BEDFORD, Mass., March 26, 2020 (GLOBE NEWSWIRE) -- Progress (NASDAQ: PRGS), the leading provider of application development and digital experience technologies, today announced results for its fiscal first quarter ended February 29, 2020.

On a GAAP basis, revenue was $109.7 million during the quarter compared to $89.5 million in the same quarter last year, a year-over-year increase of 22% on an actual currency basis and 23% on a constant currency basis. On a non-GAAP basis, revenue was $113.8 million during the quarter compared to $89.5 million in the same quarter last year, an increase of 27% on an actual currency basis and 28% on a constant currency basis.

On a GAAP basis, diluted earnings per share during the quarter was $0.46 compared to $0.21 in the same quarter last year, an increase of 119%.  On a non-GAAP basis, diluted earnings per share during the quarter was $0.76 compared to $0.50 in the same quarter last year, an increase of 52%.

“Q1 was a very strong quarter for us,” said Yogesh Gupta, CEO at Progress. “We exceeded both our revenue and EPS guidance, sustaining the momentum we achieved in 2019. Given the durable nature of our business, I’m confident that we can deliver solid results despite the current level of macro-economic uncertainty. Longer-term, we remain optimistic in our opportunity to drive shareholder value through accretive acquisitions in the software infrastructure space."

Additional financial highlights included:

  
 Three Months Ended
 GAAP Non-GAAP
(In thousands, except percentages and per share amounts)February 29,
2020
 February 28
2019
 %
Change
 February 29,
2020
 February 28,
2019
 %
Change
Revenue$109,683  $89,549  22% $113,762  $89,549  27%
Income from operations$30,712  $15,409  99% $47,973  $30,251  59%
Operating margin28% 17% 65% 42% 34% 24%
Net income$21,116  $9,402  125% $34,703  $22,725  53%
Diluted earnings per share$0.46  $0.21  119% $0.76  $0.50  52%
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP)$33,016  $24,444  35% $33,297  $24,357  37%
                      

Anthony Folger, CFO, said: “We achieved solid cash flows in Q1, and our strong operating margins and EPS growth for the quarter demonstrate the significant leverage we have in our business. While our 2020 results will be impacted by the economic challenges brought on by the COVID-19 crisis, we remain confident in the overall health of our business, and in our ability to continue to execute on our strategy.”

Other fiscal first quarter 2020 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $177.1 million at the end of the quarter;
  • DSO was 49 days compared to 56 days in both the fiscal first quarter of 2019 and the fiscal fourth quarter of 2019;
  • Pursuant to the $250 million share authorization by the Board of Directors, Progress repurchased 0.4 million shares for $20.0 million during the fiscal first quarter of 2020. As of February 29, 2020, there was $230.0 million remaining under this authorization; and
  • On March 18, 2020, our Board of Directors declared a quarterly dividend of $0.165 per share of common stock that will be paid on June 15, 2020 to shareholders of record as of the close of business on June 1, 2020.

2020 Updated Business Outlook

Progress provides the following updated guidance for the fiscal year ending November 30, 2020 and the fiscal second quarter ending May 31, 2020, which reflects the expected impact of COVID-19 and changes in currency translation:

    
 Prior FY 2020 Guidance
(January 16, 2020)
 Updated FY 2020 Guidance
(March 26, 2020)
(In millions, except percentages and per share amounts)FY 2020
GAAP*
 FY 2020
Non-GAAP
 FY 2020
GAAP
 FY 2020
Non-GAAP
Revenue$440 - $447 $448 - $455 $420 - $430 $428 - $438
Diluted earnings per share$1.87 - $1.91 $2.87 - $2.92 $1.73 - $1.80 $2.73 - $2.80
Operating margin27% 39% 27% 39%
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$149 - $154 $145 - $150 $128 - $138 $125 - $135
Effective tax rate21% 20% 22% 21%
        

*The FY2020 projected GAAP diluted earnings per share of $1.96 to $2.01 shown in the January 16, 2020 press release was incorrect, and should have been $1.87 to $1.91. The FY2020 projected GAAP effective tax rate of 17% shown in the January 16, 2020 press release was incorrect, and should have been 21%.

  
 Q2 2020 Guidance
(In millions, except per share amounts)Q2 2020
GAAP
 Q2 2020
Non-GAAP
Revenue$93 - $99 $95 - $101
Diluted earnings per share$0.36 - $0.40 $0.60 - $0.64
    

The expected economic impact of the COVID-19 crisis on our current 2020 business outlook is a reduction of approximately $10 to $13 million on GAAP and non-GAAP revenue, and approximately $0.06 to $0.08 on GAAP and non-GAAP earnings per share.

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 $7 million on GAAP and non-GAAP revenue, and $0.06 on GAAP and non-GAAP earnings per share. The expected negative currency translation impact on Progress' fiscal Q2 2020 business outlook compared to 2019 exchange rates is approximately $2.5 million on GAAP and non-GAAP revenue, and $0.02 on GAAP and non-GAAP earnings per share. To the extent that there are changes in exchange rates versus the current environment, this may have an impact on Progress' business outlook.

Conference Call

Progress will hold a conference call to review its financial results for the fiscal first quarter of 2020 at 5:00 p.m. ET on Thursday, March 26, 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 6922367. 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. (9) The coronavirus disease (COVID-19) outbreak and the impact it could have 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, 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
(In thousands, except per share data)February 29,
2020
 February 28,
2019
 % Change
Revenue:     
Software licenses$30,629  $22,802  34%
Maintenance and services79,054  66,747  18%
Total revenue109,683  89,549  22%
Costs of revenue:     
Cost of software licenses1,389  1,167  19%
Cost of maintenance and services11,851  9,439  26%
Amortization of acquired intangibles1,646  5,433  (70)%
Total costs of revenue14,886  16,039  (7)%
Gross profit94,797  73,510  29%
Operating expenses:     
Sales and marketing24,198  22,323  8%
Product development21,654  19,890  9%
General and administrative12,748  12,285  4%
Amortization of acquired intangibles4,131  3,188  30%
Restructuring expenses1,040  415  151%
Acquisition-related expenses314    *
Total operating expenses64,085  58,101  10%
Income from operations30,712  15,409  99%
Other expense, net(3,397) (2,003) (70)%
Income before income taxes27,315  13,406  104%
Provision for income taxes6,199  4,004  55%
Net income$21,116  $9,402  125%
      
Earnings per share:     
Basic$0.47  $0.21  124%
Diluted$0.46  $0.21  119%
Weighted average shares outstanding:     
Basic44,897  44,956  %
Diluted45,515  45,286  1%
      
Cash dividends declared per common share$0.165  $0.155  6%

*Not meaningful

Stock-based compensation is included in the condensed consolidated statements of operations, as follows:
      
Cost of revenue$319  $244  31%
Sales and marketing1,050  1,048  %
Product development1,926  1,928  %
General and administrative2,756  2,586  7%
Total$6,051  $5,806  4%
           

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 
(In thousands)February 29,
2020
 November 30,
 2019
Assets   
Current assets:   
Cash, cash equivalents and short-term investments$177,055  $173,685 
Accounts receivable, net62,184  72,820 
Unbilled receivables and contract assets10,908  10,880 
Other current assets24,591  27,280 
Total current assets274,738  284,665 
Long-term unbilled receivables and contract assets12,792  12,492 
Property and equipment, net29,150  29,765 
Goodwill and intangible assets, net526,404  532,216 
Right-of-use lease assets25,907   
Other assets21,191  22,133 
Total assets$890,182  $881,271 
Liabilities and shareholders' equity   
Current liabilities:   
Accounts payable and other current liabilities$50,473  $72,674 
Current portion of long-term debt, net12,599  10,717 
Short-term lease liability6,601   
Short-term deferred revenue161,049  157,494 
Total current liabilities230,722  240,885 
Long-term debt, net280,382  284,002 
Long-term lease liability21,049   
Long-term deferred revenue19,749  19,752 
Other long-term liabilities10,323  6,350 
Shareholders' equity:   
Common stock and additional paid-in capital296,699  295,953 
Retained earnings31,258  34,329 
Total shareholders' equity327,957  330,282 
Total liabilities and shareholders' equity$890,182  $881,271 
        

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  

  
 Three Months Ended
(In thousands)February 29,
2020
 February 28,
2019
Cash flows from operating activities:   
Net income$21,116  $9,402 
Depreciation and amortization7,669  10,486 
Stock-based compensation6,051  5,806 
Other non-cash adjustments5,347  (2,827)
Changes in operating assets and liabilities(7,167) 1,577 
Net cash flows from operating activities33,016  24,444 
Capital expenditures(1,148) (246)
Repurchases of common stock, net of issuances(15,755) (23,106)
Dividend payments to shareholders(7,468) (6,992)
Payments of principal on long-term debt(1,882) (1,547)
Other(3,393) 1,392 
Net change in cash, cash equivalents and short-term investments3,370  (6,055)
Cash, cash equivalents and short-term investments, beginning of period173,685  139,513 
Cash, cash equivalents and short-term investments, end of period$177,055  $133,458 
        

RESULTS OF OPERATIONS BY SEGMENT
(Unaudited)

  
 Three Months Ended
(In thousands)February 29,
2020
 February 28,
2019
 % Change
Segment revenue:     
OpenEdge$77,079  $65,252  18%
Data Connectivity and Integration13,685  6,000  128%
Application Development and Deployment18,919  18,297  3%
Total revenue109,683  89,549  22%
Segment costs of revenue and operating expenses:     
OpenEdge19,750  18,315  8%
Data Connectivity and Integration2,680  1,500  79%
Application Development and Deployment7,288  5,427  34%
Total costs of revenue and operating expenses29,718  25,242  18%
Segment contribution margin:     
OpenEdge57,329  46,937  22%
Data Connectivity and Integration11,005  4,500  145%
Application Development and Deployment11,631  12,870  (10)%
Total contribution margin79,965  64,307  24%
Other unallocated expenses(1)49,253  48,898  1%
Income from operations30,712  15,409  99%
Other expense, net(3,397) (2,003) (70)%
Income before income taxes$27,315  $13,406  104%
      
(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 and impairment of acquired intangibles, impairment of long-lived assets, loss on assets held for sale, stock-based compensation, restructuring, and acquisition-related expenses.

SUPPLEMENTAL INFORMATION
(Unaudited)

Revenue by Type        
          
(In thousands)Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
Software licenses$22,802  $29,728  $30,686  $39,336  $30,629 
Maintenance59,999  62,528  67,611  68,868  70,056 
Services6,748  7,739  8,419  8,834  8,998 
Total revenue$89,549  $99,995  $106,716  $117,038  $109,683 
          
Revenue by Region        
          
(In thousands)Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
North America$46,498  $57,060  $60,208  $70,145  $65,413 
EMEA33,372  33,633  35,109  35,187  34,988 
Latin America4,461  4,108  5,470  5,626  4,000 
Asia Pacific5,218  5,194  5,929  6,080  5,282 
Total revenue$89,549  $99,995  $106,716  $117,038  $109,683 
          
Revenue by Segment         
          
(In thousands)Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
OpenEdge$65,252  $67,820  $78,607  $85,250  $77,079 
Data Connectivity and Integration6,000  12,932  8,754  12,217  13,685 
Application Development and Deployment18,297  19,243  19,355  19,571  18,919 
Total revenue$89,549  $99,995  $106,716  $117,038  $109,683 
                    

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

    
 Three Months Ended % Change
(In thousands, except per share data)February 29, 2020 February 28, 2019 Non-GAAP
Adjusted revenue:         
GAAP revenue$109,683    $89,549     
Acquisition-related revenue(1)4,079         
Non-GAAP revenue$113,762  100% $89,549  100% 27%
          
Adjusted income from operations:         
GAAP income from operations$30,712  28% $15,409  17%  
Amortization of acquired intangibles5,777    8,621     
Restructuring expenses1,040    415     
Stock-based compensation6,051    5,806     
Acquisition-related revenue(1) and expenses4,393         
Non-GAAP income from operations$47,973  42% $30,251  34% 59%
          
Adjusted net income:         
GAAP net income$21,116  19% $9,402  10%  
Amortization of acquired intangibles5,777    8,621     
Restructuring expenses1,040    415     
Stock-based compensation6,051    5,806     
Acquisition-related revenue(1) and expenses4,393         
Provision for income taxes(3,674)   (1,519)    
Non-GAAP net income$34,703  31% $22,725  25% 53%
          
Adjusted diluted earnings per share:         
GAAP diluted earnings per share$0.46    $0.21     
Amortization of acquired intangibles0.13    0.19     
Restructuring expenses0.02    0.01     
Stock-based compensation0.13    0.12     
Acquisition-related revenue(1) and expenses0.10         
Provision for income taxes(0.08)   (0.03)    
Non-GAAP diluted earnings per share$0.76    $0.50    52%
          
Non-GAAP weighted avg shares outstanding - diluted45,515    45,286    1%
          
(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.
 

OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)

Revenue by Type     
      
(In thousands)Q1 2020 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
Software licenses$30,629  $54  $30,683 
Maintenance70,056  3,823  73,879 
Services8,998  202  9,200 
Total revenue$109,683  $4,079  $113,762 
      
Revenue by Region     
      
(In thousands)Q1 2020 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
North America$65,413  $3,002  $68,415 
EMEA34,988  741  35,729 
Latin America4,000  66  4,066 
Asia Pacific5,282  270  5,552 
Total revenue$109,683  $4,079  $113,762 
      
Revenue by Segment     
      
(In thousands)Q1 2020 Non-GAAP
Adjustment(1)
 Non-GAAP
Revenue
OpenEdge$77,079  $4,079  $81,158 
Data Connectivity and Integration13,685    13,685 
Application Development and Deployment18,919    18,919 
Total revenue$109,683  $4,079  $113,762 
      
(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.


Adjusted Free Cash Flow     
      
(In thousands)Q1 2020 Q1 2019 % Change
Cash flows from operations$33,016  $24,444  35%
Purchases of property and equipment(1,148) (246) 367%
Free cash flow31,868  24,198  32%
Add back: restructuring payments1,429  159  799%
Adjusted free cash flow$33,297  $24,357  37%
           

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

Fiscal Year 2020 Updated Revenue Guidance
 Fiscal Year Ended Fiscal Year Ending
 November 30, 2019 November 30, 2020
(In millions)  Low % Change High % Change
GAAP revenue$413.3  $419.7  2% $429.7  4%
Acquisition-related adjustments - revenue(1)18.7  8.3  (56)% 8.3  (56)%
Non-GAAP revenue$432.0  $428.0  (1)% $438.0  1%
(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 Updated Non-GAAP Operating Margin Guidance
 Fiscal Year Ending November 30, 2020
(In millions)Low High
GAAP income from operations$112.2  $116.1 
GAAP operating margins27% 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$168.0  $171.9 
Non-GAAP operating margin39% 39%
      


Fiscal Year 2020 Updated 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$77.9  $81.0 
Adjustments (from previous table)55.8  55.8 
Income tax adjustment(2)(10.7) (10.7)
Non-GAAP net income$123.0  $126.1 
    
GAAP diluted earnings per share$1.73  $1.80 
Non-GAAP diluted earnings per share$2.73  $2.80 
    
Diluted weighted average shares outstanding45.0  45.0 
    
(2)Tax adjustment is based on a non-GAAP effective tax rate of approximately 21% for Low and High, calculated as follows:
Non-GAAP income from operations$168.0  $171.9 
Other (expense) income(12.3) (12.3)
Non-GAAP income from continuing operations before income taxes155.7  159.6 
Non-GAAP net income123.0  126.1 
Tax provision$32.7  $33.5 
Non-GAAP tax rate21% 21%
      

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

Fiscal Year 2020 Updated Adjusted Free Cash Flow Guidance
 Fiscal Year Ending November 30, 2020
(In millions)Low High
Cash flows from operations (GAAP)$128  $138 
Purchases of property and equipment(6) (6)
Add back: restructuring payments3  3 
Adjusted free cash flow (non-GAAP)$125  $135 
        

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2020 GUIDANCE
(Unaudited)

Q2 2020 Revenue Guidance
 Three Months Ended Three Months Ending
 May 31, 2019 May 31, 2020
(In millions)  Low % Change High % Change
GAAP revenue$100.0  $92.9  (7)% $98.9  (1)%
Acquisition-related adjustments - revenue(1)3.5  2.1  (40)% 2.1  (40)%
Non-GAAP revenue$103.5  $95.0  (8)% $101.0  (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' OpenEdge business segment for Ipswitch.


Q2 2020 Non-GAAP Earnings per Share Guidance
 Three Months Ending May 31, 2020
 Low High
GAAP diluted earnings per share$0.36  $0.40 
Acquisition-related revenue0.05  0.05 
Stock-based compensation0.11  0.11 
Amortization of intangibles0.13  0.13 
Total adjustments0.29  0.29 
Income tax adjustment(0.05) (0.05)
Non-GAAP diluted earnings per share$0.60  $0.64 
        


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