Revenue and Earnings Per Share Exceed Guidance ARR surges to $569M; MarkLogic Integration Underway
BURLINGTON, Mass., March 28, 2023 (GLOBE NEWSWIRE) -- Progress (Nasdaq: PRGS), the trusted provider of infrastructure software, today announced financial results for its fiscal first quarter ended February 28, 2023.
FirstQuarter 2023Highlights1:
“Our fiscal 2023 started off very strong, with excellent results across virtually all products and geographies and a continuation of the strong demand and superb execution we saw in 2022,” said Yogesh Gupta, CEO at Progress. “Our customers continue to depend heavily on Progress products for reliable, cost-effective, highly functional solutions that help them develop, deploy and manage their high-impact business applications in difficult macroeconomic conditions. Importantly, our integration of MarkLogic, which closed just a couple of weeks before quarter-end, is gaining steam. We are thrilled to welcome our new team-members and look forward to their continued contributions through the year.”
Additional financial highlights included:
Three Months Ended | |||||||||||||||||||||
GAAP | Non-GAAP1 | ||||||||||||||||||||
(In thousands, except percentages and per share amounts) | February 28, 2023 | February 28, 2022 | % Change | February 28, 2023 | February 28, 2022 | % Change | |||||||||||||||
Revenue | $ | 164,226 | $ | 144,922 | 13 | % | $ | 165,611 | $ | 147,505 | 12 | % | |||||||||
Income from operations | $ | 35,588 | $ | 29,432 | 21 | % | $ | 72,432 | $ | 58,732 | 23 | % | |||||||||
Operating margin | 22 | % | 20 | % | 200 bps | 44 | % | 40 | % | 400 bps | |||||||||||
Net income | $ | 23,674 | $ | 20,454 | 16 | % | $ | 52,759 | $ | 43,560 | 21 | % | |||||||||
Diluted earnings per share | $ | 0.53 | $ | 0.46 | 15 | % | $ | 1.19 | $ | 0.97 | 23 | % | |||||||||
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) | $ | 46,767 | $ | 44,093 | 6 | % | $ | 46,871 | $ | 44,681 | 5 | % |
1 See Important Information Regarding Non-GAAP Financial Information and a reconciliation of non-GAAP adjustments to Progress’ GAAP financial results at the end of this press release.
Other fiscal firstquarter 2023metrics and recent results included:
Anthony Folger, CFO, said: “I’m very pleased with our first quarter results, driven by a strong top line performance across nearly every product line. ARR of $569M grew 20% in constant currency and 4% on a pro-forma basis, while net retention rates increased to 102%. Operating margins came in strong at almost 44%, and our balance sheet remains in great shape, with modest net leverage.”
2023Business Outlook
Progress provides the following guidance for the fiscal year ending November 30, 2023 and the fiscal second quarter ending May 31, 2023:
Updated FY 2023 Guidance(March 28, 2023) | Prior FY 2023 Guidance(January 17, 2023) | ||||||
(In millions, except percentages and per share amounts) | GAAP | Non-GAAP1 | GAAP | Non-GAAP1 | |||
Revenue | $676 - $684 | $680 - $688 | $671 - $681 | $675 - $685 | |||
Diluted earnings per share | $1.32 - $1.40 | $4.09 - $4.17 | $1.38 - $1.46 | $4.09 - $4.17 | |||
Operating margin | 15% - 16% | 38% - 39% | 16% | 38% | |||
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) | $173 - $183 | $175 - $185 | $173 - $183 | $175 - $185 | |||
Effective tax rate | 20% - 21% | 20% - 21% | 20% - 21% | 20% - 21% |
Q2 2023 Guidance | |||
(In millions, except per share amounts) | GAAP | Non-GAAP1 | |
Revenue | $167 - $171 | $168 - 172 | |
Diluted earnings per share | $0.12 - $0.16 | $0.88 - $0.92 |
Based on current exchange rates, the expected currency translation impact on Progress' fiscal year 2023 business outlook compared to 2022 exchange rates on GAAP and non-GAAP revenue and GAAP and non-GAAP diluted earnings per share is not expected to be material from an accounting perspective. The expected negative currency translation impact on Progress' fiscal Q2 2023 business outlook compared to 2022 exchange rates on GAAP and non-GAAP revenue is approximately $1.0 million. The expected impact on GAAP and non-GAAP diluted Q2 2023 earnings per share is not expected to be material from an accounting perspective. 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 2023 at 5:00 p.m. ET on Tuesday, March 28, 2023. Participants must register for the conference call here: https://register.vevent.com/register/BIc9baf1a1c869434aafddfc9378718010. The webcast can be accessed at: https://edge.media-server.com/mmc/p/cgfomqnf. The conference call will include comments followed by questions and answers. Attendees must register for the webcast and 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.
Important Information Regarding Non-GAAP Financial Information
Progress furnishes certain non-GAAP supplemental information to our financial results. We use such non-GAAP financial measures to evaluate our period-over-period operating performance because our management team believes that by excluding the effects of certain GAAP-related items that in their opinion do not reflect the ordinary earnings of our operations, such information helps to illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as greater understanding of the results from the primary operations of our business. Management also uses such non-GAAP financial measures to establish budgets and operational goals, evaluate performance, and allocate resources. In addition, the compensation of our executives and non-executive employees is based in part on the performance of our business as evaluated by such non-GAAP financial measures. We believe these non-GAAP financial measures enhance investors’ overall understanding of our current financial performance and our prospects for the future by: (i) providing more transparency for certain financial measures, (ii) presenting disclosure that helps investors understand how we plan and measure the performance of our business, (iii) affords a view of our operating results that may be more easily compared to our peer companies, and (iv) enables investors to consider our operating results on both a GAAP and non-GAAP basis (including following the integration period of our prior and proposed 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 may have a material impact on Progress’ financial results. A reconciliation of non-GAAP adjustments to Progress' GAAP financial results is included in the tables at the end of this press release.
In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:
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.
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 (including the integration of MarkLogic) 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: (i) 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; (ii) 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; (iii) 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; (iv) 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; and (v) risks related to the disruption associated with the ongoing integration of MarkLogic. 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, 2022. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
About Progress
Dedicated to propelling business forward in a technology-driven world, Progress (Nasdaq: PRGS) helps businesses drive faster cycles of innovation, fuel momentum and accelerate their path to success. As the trusted provider of the best products to develop, deploy and manage high-impact applications, Progress enables customers to develop the applications and experiences they need, deploy where and how they want and manage it all safely and securely. Hundreds of thousands of enterprises, including 1,700 software companies and 3.5 million developers, depend on Progress to achieve their goals—with confidence. Learn more at www.progress.com.
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 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
Three Months Ended | |||||||||
(In thousands, except per share data) | February 28, 2023 | February 28, 2022 | % Change | ||||||
Revenue: | |||||||||
Software licenses | $ | 57,568 | $ | 42,750 | 35% | ||||
Maintenance and services | 106,658 | 102,172 | 4% | ||||||
Total revenue | 164,226 | 144,922 | 13% | ||||||
Costs of revenue: | |||||||||
Cost of software licenses | 2,452 | 2,609 | (6)% | ||||||
Cost of maintenance and services | 17,501 | 15,145 | 16% | ||||||
Amortization of acquired intangibles | 6,264 | 5,458 | 15% | ||||||
Total costs of revenue | 26,217 | 23,212 | 13% | ||||||
Gross profit | 138,009 | 121,710 | 13% | ||||||
Operating expenses: | |||||||||
Sales and marketing | 33,754 | 33,469 | 1% | ||||||
Product development | 30,438 | 28,673 | 6% | ||||||
General and administrative | 18,786 | 16,991 | 11% | ||||||
Amortization of acquired intangibles | 13,611 | 11,722 | 16% | ||||||
Cyber incident | 2,692 | — | * | ||||||
Restructuring expenses | 1,397 | 511 | 173% | ||||||
Acquisition-related expenses | 1,743 | 912 | 91% | ||||||
Total operating expenses | 102,421 | 92,278 | 11% | ||||||
Income from operations | 35,588 | 29,432 | 21% | ||||||
Other expense, net | (5,664 | ) | (3,480 | ) | 63% | ||||
Income before income taxes | 29,924 | 25,952 | 15% | ||||||
Provision for income taxes | 6,250 | 5,498 | 14% | ||||||
Net income | $ | 23,674 | $ | 20,454 | 16% | ||||
Earnings per share: | |||||||||
Basic | $ | 0.55 | $ | 0.47 | 17% | ||||
Diluted | $ | 0.53 | $ | 0.46 | 15% | ||||
Weighted average shares outstanding: | |||||||||
Basic | 43,300 | 43,981 | (2)% | ||||||
Diluted | 44,353 | 44,708 | (1)% | ||||||
Cash dividends declared per common share | $ | 0.175 | $ | 0.175 | —% |
Stock-based compensation is included in the condensed consolidated statements of operations, as follows: | |||||||||
Cost of revenue | $ | 620 | $ | 411 | 51% | ||||
Sales and marketing | 1,495 | 1,402 | 7% | ||||||
Product development | 2,998 | 2,222 | 35% | ||||||
General and administrative | 4,639 | 4,079 | 14% | ||||||
Total | $ | 9,752 | $ | 8,114 | 20% |
*not meaningful
CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)
(In thousands) | February 28, 2023 | November 30, 2022 | |||
Assets | |||||
Current assets: | |||||
Cash, cash equivalents and short-term investments | $ | 122,925 | $ | 256,277 | |
Accounts receivable, net | 93,347 | 97,834 | |||
Unbilled receivables and contract assets, net | 33,596 | 29,158 | |||
Other current assets | 42,833 | 42,784 | |||
Total current assets | 292,701 | 426,053 | |||
Property and equipment, net | 14,981 | 14,927 | |||
Goodwill and intangible assets, net | 1,252,801 | 888,392 | |||
Right-of-use lease assets | 21,768 | 17,574 | |||
Long-term unbilled receivables and contract assets, net | 47,922 | 39,936 | |||
Other assets | 13,434 | 24,597 | |||
Total assets | $ | 1,643,607 | $ | 1,411,479 | |
Liabilities and shareholders’ equity | |||||
Current liabilities: | |||||
Accounts payable and other current liabilities | $ | 75,150 | $ | 76,629 | |
Current portion of long-term debt, net | 7,953 | 6,234 | |||
Short-term operating lease liabilities | 9,321 | 7,471 | |||
Short-term deferred revenue, net | 244,733 | 227,670 | |||
Total current liabilities | 337,157 | 318,004 | |||
Long-term debt, net | 450,943 | 259,220 | |||
Convertible senior notes, net | 353,159 | 352,625 | |||
Long-term operating lease liabilities | 17,341 | 15,041 | |||
Long-term deferred revenue, net | 57,114 | 54,770 | |||
Other long-term liabilities | 14,450 | 13,315 | |||
Shareholders’ equity: | |||||
Common stock and additional paid-in capital | 338,803 | 332,083 | |||
Retained earnings | 74,640 | 66,421 | |||
Total shareholders’ equity | 413,443 | 398,504 | |||
Total liabilities and shareholders’ equity | $ | 1,643,607 | $ | 1,411,479 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
Three Months Ended | |||||||
(In thousands) | February 28, 2023 | February 28, 2022 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 23,674 | $ | 20,454 | |||
Depreciation and amortization | 22,142 | 19,218 | |||||
Stock-based compensation | 9,752 | 8,114 | |||||
Other non-cash adjustments | (4,207 | ) | 4,442 | ||||
Changes in operating assets and liabilities | (4,594 | ) | (8,135 | ) | |||
Net cash flows from operating activities | 46,767 | 44,093 | |||||
Capital expenditures | (385 | ) | (831 | ) | |||
Repurchases of common stock, net of issuances | (5,643 | ) | (20,906 | ) | |||
Dividend payments to shareholders | (8,023 | ) | (7,784 | ) | |||
Payments for acquisitions, net of cash acquired | (355,821 | ) | — | ||||
Proceeds from the issuance of debt, net of payment of issuance costs | 195,000 | 5,517 | |||||
Payments of principal on long-term debt | (1,719 | ) | (1,719 | ) | |||
Other | (3,528 | ) | (2,421 | ) | |||
Net change in cash, cash equivalents and short-term investments | (133,352 | ) | 15,949 | ||||
Cash, cash equivalents and short-term investments, beginning of period | 256,277 | 157,373 | |||||
Cash, cash equivalents and short-term investments, end of period | $ | 122,925 | $ | 173,322 |
RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES1(Unaudited)
Three Months Ended | |||||||
(In thousands, except per share data) | February 28, 2023 | February 28, 2022 | |||||
Adjusted revenue: | |||||||
GAAP revenue | $ | 164,226 | $ | 144,922 | |||
Acquisition-related revenue | 1,385 | 2,583 | |||||
Non-GAAP revenue | $ | 165,611 | $ | 147,505 | |||
Adjusted income from operations: | |||||||
GAAP income from operations | $ | 35,588 | $ | 29,432 | |||
Amortization of acquired intangibles | 19,875 | 17,180 | |||||
Restructuring expenses and other | 1,397 | 511 | |||||
Stock-based compensation | 9,752 | 8,114 | |||||
Acquisition-related revenue and expenses | 3,128 | 3,495 | |||||
Cyber incident | 2,692 | — | |||||
Non-GAAP income from operations | $ | 72,432 | $ | 58,732 | |||
Adjusted net income: | |||||||
GAAP net income | $ | 23,674 | $ | 20,454 | |||
Amortization of acquired intangibles | 19,875 | 17,180 | |||||
Restructuring expenses and other | 1,397 | 511 | |||||
Stock-based compensation | 9,752 | 8,114 | |||||
Acquisition-related revenue and expenses | 3,128 | 3,495 | |||||
Cyber incident | 2,692 | — | |||||
Provision for income taxes | (7,759 | ) | (6,194 | ) | |||
Non-GAAP net income | $ | 52,759 | $ | 43,560 | |||
Adjusted diluted earnings per share: | |||||||
GAAP diluted earnings per share | $ | 0.53 | $ | 0.46 | |||
Amortization of acquired intangibles | 0.45 | 0.38 | |||||
Stock-based compensation | 0.22 | 0.18 | |||||
Restructuring expenses and other | 0.03 | 0.01 | |||||
Acquisition-related revenue and expenses | 0.07 | 0.08 | |||||
Cyber incident | 0.06 | — | |||||
Provision for income taxes | (0.17 | ) | (0.14 | ) | |||
Non-GAAP diluted earnings per share | $ | 1.19 | $ | 0.97 | |||
Non-GAAP weighted avg shares outstanding - diluted | 44,353 | 44,708 | |||||
OTHER NON-GAAP FINANCIAL MEASURES1(Unaudited)
Adjusted Free Cash Flow | |||||||||
(In thousands) | Q1 2023 | Q1 2022 | % Change | ||||||
Cash flows from operations | $ | 46,767 | $ | 44,093 | 6% | ||||
Purchases of property and equipment | (385 | ) | (831 | ) | (54)% | ||||
Free cash flow | 46,382 | 43,262 | 7% | ||||||
Add back: restructuring payments | 489 | 1,419 | (66)% | ||||||
Adjusted free cash flow | $ | 46,871 | $ | 44,681 | 5% |
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2023GUIDANCE1(Unaudited)
Fiscal Year 2023 Updated Revenue Guidance | ||||||||||||
Fiscal Year Ended | Fiscal Year Ending | |||||||||||
November 30, 2022 | November 30, 2023 | |||||||||||
(In millions) | Low | % Change | High | % Change | ||||||||
GAAP revenue | $ | 602.0 | $ | 676.3 | 12% | $ | 684.3 | 14% | ||||
Acquisition-related adjustments - revenue | 8.6 | 3.7 | (57)% | 3.7 | (57)% | |||||||
Non-GAAP revenue | $ | 610.6 | $ | 680.0 | 11% | $ | 688.0 | 13% |
Fiscal Year 2023 Updated Non-GAAP Operating Margin Guidance | |||||||
Fiscal Year Ending November 30, 2023 | |||||||
(In millions) | Low | High | |||||
GAAP income from operations | $ | 104.7 | $ | 109.2 | |||
GAAP operating margins | 15 | % | 16 | % | |||
Acquisition-related revenue | 3.7 | 3.7 | |||||
Acquisition-related expense | 4.5 | 4.5 | |||||
Restructuring expense | 5.0 | 5.0 | |||||
Stock-based compensation | 41.4 | 41.4 | |||||
Amortization of acquired intangibles | 98.0 | 98.0 | |||||
Cyber incident | 3.1 | 3.1 | |||||
Total adjustments(2) | 155.7 | 155.7 | |||||
Non-GAAP income from operations | $ | 260.4 | $ | 264.9 | |||
Non-GAAP operating margin | 38 | % | 39 | % | |||
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from MarkLogic and restructuring expenses. The final amounts will not be available until the Company's internal procedures and reviews are completed. |
Fiscal Year 2023 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance | |||||||
Fiscal Year Ending November 30, 2023 | |||||||
(In millions, except per share data) | Low | High | |||||
GAAP net income | $ | 58.8 | $ | 62.3 | |||
Adjustments (from previous table) | 155.7 | 155.7 | |||||
Income tax adjustment(3) | (31.9 | ) | (31.9 | ) | |||
Non-GAAP net income | $ | 182.6 | $ | 186.1 | |||
GAAP diluted earnings per share | $ | 1.32 | $ | 1.40 | |||
Non-GAAP diluted earnings per share | $ | 4.09 | $ | 4.17 | |||
Diluted weighted average shares outstanding | 44.6 | 44.6 |
2Tax adjustment is based on a non-GAAP effective tax rate of approximately 20% for Low and 21% for High, calculated as follows: | |||||||
Non-GAAP income from operations | $ | 260.4 | $ | 264.9 | |||
Other (expense) income | (30.8 | ) | (30.8 | ) | |||
Non-GAAP income from continuing operations before income taxes | 229.6 | 234.1 | |||||
Non-GAAP net income | 182.6 | 186.1 | |||||
Tax provision | $ | 47.0 | $ | 48.0 | |||
Non-GAAP tax rate | 20 | % | 21 | % |
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2023GUIDANCE1(Unaudited)
Fiscal Year 2023 Adjusted Free Cash Flow Guidance | |||||||
Fiscal Year Ending November 30, 2023 | |||||||
(In millions) | Low | High | |||||
Cash flows from operations (GAAP) | $ | 173 | $ | 183 | |||
Purchases of property and equipment | (5 | ) | (5 | ) | |||
Add back: restructuring payments | 7 | 7 | |||||
Adjusted free cash flow (non-GAAP) | $ | 175 | $ | 185 |
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2023GUIDANCE1(Unaudited)
Q2 2023 Revenue Guidance | ||||||||||||
Three Months Ended | Three Months Ending | |||||||||||
May 31, 2022 | May 31, 2023 | |||||||||||
(In millions) | Low | % Change | High | % Change | ||||||||
GAAP revenue | $ | 148.7 | $ | 167.0 | 12% | $ | 171.0 | 15% | ||||
Acquisition-related adjustments - revenue | 2.2 | 1.0 | (55)% | 1.0 | (55)% | |||||||
Non-GAAP revenue | $ | 150.9 | $ | 168.0 | 11% | $ | 172.0 | 14% |
Q2 2023 Non-GAAP Earnings per Share Guidance | |||||||
Three Months Ending May 31, 2023 | |||||||
Low | High | ||||||
GAAP diluted earnings per share | $ | 0.12 | $ | 0.16 | |||
Acquisition-related revenue | 0.02 | 0.02 | |||||
Acquisition-related expense | 0.03 | 0.03 | |||||
Restructure expense | 0.06 | 0.06 | |||||
Stock-based compensation | 0.24 | 0.24 | |||||
Amortization of acquired intangibles | 0.59 | 0.59 | |||||
Cyber incident | 0.01 | 0.01 | |||||
Total adjustments | 0.95 | 0.95 | |||||
Income tax adjustment | (0.19 | ) | (0.19 | ) | |||
Non-GAAP diluted earnings per share | $ | 0.88 | $ | 0.92 |
Source: Progress Software Corporation