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Increases 2020 Guidance for Revenue and Earnings Per Share
BEDFORD, Mass., June 25, 2020 (GLOBE NEWSWIRE) -- Progress (NASDAQ: PRGS), the leading provider of application development and digital experience technologies, today announced financial results for its fiscal second quarter ended May 31, 2020.
Second Quarter 2020 Highlights:
“Q2 was a very strong quarter for us,” said Yogesh Gupta, CEO at Progress. “We had solid performances across our segments and products, and our business has proven to be extremely durable, despite the ongoing economic disruption caused by COVID-19. Our confidence in our ability to execute is reflected in our increased full year guidance for revenue and EPS.”
Additional financial highlights included:
| Three Months Ended | |||||||||||||||||||||
| GAAP | Non-GAAP | ||||||||||||||||||||
| (In thousands, except percentages and per share amounts) | May 31,2020 | May 31,2019 | %Change | May 31,2020 | May 31,2019 | %Change | |||||||||||||||
| Revenue | $ | 100,383 | $ | 99,995 | — | % | $ | 102,505 | $ | 103,475 | (1 | )% | |||||||||
| Income from operations | $ | 25,309 | $ | 14,741 | 72 | % | $ | 39,590 | $ | 38,888 | 2 | % | |||||||||
| Operating margin | 25 | % | 15 | % | 67 | % | 39 | % | 38 | % | 3 | % | |||||||||
| Net income | $ | 16,968 | $ | 8,181 | 107 | % | $ | 28,656 | $ | 29,417 | (3 | )% | |||||||||
| Diluted earnings per share | $ | 0.37 | $ | 0.18 | 106 | % | $ | 0.63 | $ | 0.65 | (3 | )% | |||||||||
| Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) | $ | 37,957 | $ | 40,674 | (7 | )% | $ | 38,399 | $ | 40,438 | (5 | )% | |||||||||
Other fiscal second quarter 2020 metrics and recent results included:
Anthony Folger, CFO, said: “We are confident in the stability of our business model and our ability to deliver solid results even in this uncertain environment, and will utilize our strong balance sheet to execute aggressively on our strategy to drive long-term value through accretive M&A.”
2020 Business Outlook
Progress provides the following updated guidance for the fiscal year ending November 30, 2020 and the fiscal third quarter ending August 31, 2020:
| Prior FY 2020 Guidance(March 26, 2020) | Updated FY 2020 Guidance(June 25, 2020) | ||||||
| (In millions, except percentages and per share amounts) | FY 2020GAAP | FY 2020Non-GAAP | FY 2020GAAP | FY 2020Non-GAAP | |||
| Revenue | $420 - $430 | $428 - $438 | $425 - $435 | $433 - $443 | |||
| Diluted earnings per share | $1.73 - $1.80 | $2.73 - $2.80 | $1.81 - $1.85 | $2.82 - $2.86 | |||
| Operating margin | 27% | 39% | 27% | 40% | |||
| Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) | $128 - $138 | $125 - $135 | $129 - $139 | $125 - $135 | |||
| Effective tax rate | 22% | 21% | 22% | 21% | |||
| Q3 2020 Guidance | |||
| (In millions, except per share amounts) | Q3 2020GAAP | Q3 2020Non-GAAP | |
| Revenue | $103 - $108 | $104 - $109 | |
| Diluted earnings per share | $0.47 - $0.49 | $0.69 - $0.71 | |
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 $2.2 million on GAAP and non-GAAP revenue, and approximately $0.02 on GAAP and non-GAAP diluted earnings per share. The expected negative currency translation impact on Progress' fiscal Q3 2020 business outlook compared to 2019 exchange rates on GAAP and non-GAAP revenue and earnings per share is not meaningful. 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 second quarter of 2020 at 5:00 p.m. ET on Thursday, June 25, 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 5687996. 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.
| Investor Contact: | Press Contact: | |
| Brian Flanagan | Erica McShane | |
| Progress Software | Progress Software | |
| +1 781 280 4817 | +1 888 365 2779 (x3135) | |
| Investor-Relations@progress.com | PR@progress.com |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited) | |||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| (In thousands, except per share data) | May 31,2020 | May 31,2019 | % Change | May 31,2020 | May 31,2019 | %Change | |||||||||||||||
| Revenue: | |||||||||||||||||||||
| Software licenses | $ | 19,663 | $ | 29,728 | (34 | )% | $ | 50,292 | $ | 52,530 | (4 | )% | |||||||||
| Maintenance and services | 80,720 | 70,267 | 15 | % | 159,774 | 137,014 | 17 | % | |||||||||||||
| Total revenue | 100,383 | 99,995 | — | % | 210,066 | 189,544 | 11 | % | |||||||||||||
| Costs of revenue: | |||||||||||||||||||||
| Cost of software licenses | 810 | 925 | (12 | )% | 2,199 | 2,092 | 5 | % | |||||||||||||
| Cost of maintenance and services | 11,785 | 10,580 | 11 | % | 23,636 | 20,019 | 18 | % | |||||||||||||
| Amortization of acquired intangibles | 1,664 | 6,106 | (73 | )% | 3,310 | 11,539 | (71 | )% | |||||||||||||
| Total costs of revenue | 14,259 | 17,611 | (19 | )% | 29,145 | 33,650 | (13 | )% | |||||||||||||
| Gross profit | 86,124 | 82,384 | 5 | % | 180,921 | 155,894 | 16 | % | |||||||||||||
| Operating expenses: | |||||||||||||||||||||
| Sales and marketing | 21,716 | 24,832 | (13 | )% | 45,914 | 47,155 | (3 | )% | |||||||||||||
| Product development | 21,787 | 21,688 | — | % | 43,441 | 41,578 | 4 | % | |||||||||||||
| General and administrative | 12,440 | 12,654 | (2 | )% | 25,188 | 24,939 | 1 | % | |||||||||||||
| Amortization of acquired intangibles | 4,177 | 4,585 | (9 | )% | 8,308 | 7,773 | 7 | % | |||||||||||||
| Restructuring expenses | 695 | 2,777 | (75 | )% | 1,735 | 3,192 | (46 | )% | |||||||||||||
| Acquisition-related expenses | — | 1,107 | * | 314 | 1,107 | (72 | )% | ||||||||||||||
| Total operating expenses | 60,815 | 67,643 | (10 | )% | 124,900 | 125,744 | (1 | )% | |||||||||||||
| Income from operations | 25,309 | 14,741 | 72 | % | 56,021 | 30,150 | 86 | % | |||||||||||||
| Other expense, net | (2,847 | ) | (2,317 | ) | (23 | )% | (6,244 | ) | (4,320 | ) | (45 | )% | |||||||||
| Income before income taxes | 22,462 | 12,424 | 81 | % | 49,777 | 25,830 | 93 | % | |||||||||||||
| Provision for income taxes | 5,494 | 4,243 | 29 | % | 11,693 | 8,247 | 42 | % | |||||||||||||
| Net income | $ | 16,968 | $ | 8,181 | 107 | % | $ | 38,084 | $ | 17,583 | 117 | % | |||||||||
| Earnings per share: | |||||||||||||||||||||
| Basic | $ | 0.38 | $ | 0.18 | 111 | % | $ | 0.85 | $ | 0.39 | 118 | % | |||||||||
| Diluted | $ | 0.37 | $ | 0.18 | 106 | % | $ | 0.84 | $ | 0.39 | 115 | % | |||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||
| Basic | 44,889 | 44,611 | 1 | % | 44,893 | 44,784 | — | % | |||||||||||||
| Diluted | 45,267 | 45,287 | — | % | 45,391 | 45,287 | — | % | |||||||||||||
| Cash dividends declared per common share | $ | 0.165 | $ | 0.155 | 6 | % | $ | 0.330 | $ | 0.310 | 6 | % | |||||||||
| *Not meaningful | |||||||||||||||||||||
| Stock-based compensation is included in the condensed consolidated statements of operations, as follows: | |||||||||||||||||||||
| Cost of revenue | $ | 338 | $ | 250 | 35 | % | $ | 657 | $ | 494 | 33 | % | |||||||||
| Sales and marketing | 1,110 | 1,190 | (7 | )% | 2,160 | 2,238 | (3 | )% | |||||||||||||
| Product development | 1,899 | 1,936 | (2 | )% | 3,825 | 3,864 | (1 | )% | |||||||||||||
| General and administrative | 2,276 | 2,740 | (17 | )% | 5,032 | 5,326 | (6 | )% | |||||||||||||
| Total | $ | 5,623 | $ | 6,116 | (8 | )% | $ | 11,674 | $ | 11,922 | (2 | )% | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) | |||||||
| (In thousands) | May 31, 2020 | November 30, 2019 | |||||
| Assets | |||||||
| Current assets: | |||||||
| Cash, cash equivalents and short-term investments | $ | 203,645 | $ | 173,685 | |||
| Accounts receivable, net | 54,527 | 72,820 | |||||
| Unbilled receivables and contract assets | 12,540 | 10,880 | |||||
| Other current assets | 20,686 | 27,280 | |||||
| Total current assets | 291,398 | 284,665 | |||||
| Long-term unbilled receivables and contract assets | 10,194 | 12,492 | |||||
| Property and equipment, net | 27,693 | 29,765 | |||||
| Goodwill and intangible assets, net | 519,643 | 532,216 | |||||
| Right-of-use lease assets | 24,681 | — | |||||
| Other assets | 21,993 | 22,133 | |||||
| Total assets | $ | 895,602 | $ | 881,271 | |||
| Liabilities and shareholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable and other current liabilities | $ | 50,525 | $ | 72,674 | |||
| Current portion of long-term debt, net | 14,480 | 10,717 | |||||
| Short-term lease liability | 6,618 | — | |||||
| Short-term deferred revenue | 153,549 | 157,494 | |||||
| Total current liabilities | 225,172 | 240,885 | |||||
| Long-term debt, net | 276,762 | 284,002 | |||||
| Long-term lease liability | 19,896 | — | |||||
| Long-term deferred revenue | 19,741 | 19,752 | |||||
| Other long-term liabilities | 14,070 | 6,350 | |||||
| Shareholders’ equity: | |||||||
| Common stock and additional paid-in capital | 304,282 | 295,953 | |||||
| Retained earnings | 35,679 | 34,329 | |||||
| Total shareholders’ equity | 339,961 | 330,282 | |||||
| Total liabilities and shareholders’ equity | $ | 895,602 | $ | 881,271 | |||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In thousands) | May 31, 2020 | May 31, 2019 | May 31, 2020 | May 31, 2019 | |||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net income | $ | 16,968 | $ | 8,181 | $ | 38,084 | $ | 17,583 | |||||||
| Depreciation and amortization | 7,572 | 12,852 | 15,241 | 23,338 | |||||||||||
| Stock-based compensation | 5,623 | 6,116 | 11,674 | 11,922 | |||||||||||
| Other non-cash adjustments | 2,309 | (3,611 | ) | 7,656 | (6,438 | ) | |||||||||
| Changes in operating assets and liabilities | 5,485 | 17,136 | (1,682 | ) | 18,713 | ||||||||||
| Net cash flows from operating activities | 37,957 | 40,674 | 70,973 | 65,118 | |||||||||||
| Capital expenditures | (609 | ) | (834 | ) | (1,757 | ) | (1,080 | ) | |||||||
| Issuances of common stock, net of repurchases | 3,063 | 2,409 | (12,692 | ) | (20,697 | ) | |||||||||
| Dividend payments to shareholders | (7,438 | ) | (6,894 | ) | (14,906 | ) | (13,886 | ) | |||||||
| Payments for acquisitions, net of cash acquired | — | (225,298 | ) | — | (225,298 | ) | |||||||||
| Proceeds from the issuance of debt, net of payment of issuance costs | — | 183,374 | — | 183,374 | |||||||||||
| Proceeds from sale of property, plant and equipment, net | — | 6,146 | — | 6,146 | |||||||||||
| Payments of principal on long-term debt | (1,880 | ) | — | (3,762 | ) | (1,547 | ) | ||||||||
| Other | (4,503 | ) | (4,482 | ) | (7,896 | ) | (3,090 | ) | |||||||
| Net change in cash, cash equivalents and short-term investments | 26,590 | (4,905 | ) | 29,960 | (10,960 | ) | |||||||||
| Cash, cash equivalents and short-term investments, beginning of period | 177,055 | 133,458 | 173,685 | 139,513 | |||||||||||
| Cash, cash equivalents and short-term investments, end of period | $ | 203,645 | $ | 128,553 | $ | 203,645 | $ | 128,553 | |||||||
| RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - SECOND QUARTER(Unaudited) | ||||||||||||||||
| Three Months Ended | % Change | |||||||||||||||
| (In thousands, except per share data) | May 31, 2020 | May 31, 2019 | Non-GAAP | |||||||||||||
| Adjusted revenue: | ||||||||||||||||
| GAAP revenue | $ | 100,383 | $ | 99,995 | ||||||||||||
| Acquisition-related revenue(1) | 2,122 | 3,480 | ||||||||||||||
| Non-GAAP revenue | $ | 102,505 | 100 | % | $ | 103,475 | 100 | % | (1 | )% | ||||||
| Adjusted income from operations: | ||||||||||||||||
| GAAP income from operations | $ | 25,309 | 25 | % | $ | 14,741 | 15 | % | ||||||||
| Amortization of acquired intangibles | 5,841 | 6 | % | 10,691 | 10 | % | ||||||||||
| Restructuring expenses and other | 695 | 1 | % | 2,753 | 3 | % | ||||||||||
| Stock-based compensation | 5,623 | 5 | % | 6,116 | 6 | % | ||||||||||
| Acquisition-related revenue(1) and expenses | 2,122 | 2 | % | 4,587 | 4 | % | ||||||||||
| Non-GAAP income from operations | $ | 39,590 | 39 | % | $ | 38,888 | 38 | % | 2 | % | ||||||
| Adjusted net income: | ||||||||||||||||
| GAAP net income | $ | 16,968 | 17 | % | $ | 8,181 | 8 | % | ||||||||
| Amortization of acquired intangibles | 5,841 | 6 | % | 10,691 | 10 | % | ||||||||||
| Restructuring expenses and other | 695 | 1 | % | 2,753 | 2 | % | ||||||||||
| Stock-based compensation | 5,623 | 5 | % | 6,116 | 6 | % | ||||||||||
| Acquisition-related revenue(1) and expenses | 2,122 | 2 | % | 4,587 | 5 | % | ||||||||||
| Provision for income taxes | (2,593 | ) | (3 | )% | (2,911 | ) | (3 | )% | ||||||||
| Non-GAAP net income | $ | 28,656 | 28 | % | $ | 29,417 | 28 | % | (3 | )% | ||||||
| Adjusted diluted earnings per share: | ||||||||||||||||
| GAAP diluted earnings per share | $ | 0.37 | $ | 0.18 | ||||||||||||
| Amortization of acquired intangibles | 0.13 | 0.24 | ||||||||||||||
| Restructuring expenses and other | 0.02 | 0.06 | ||||||||||||||
| Stock-based compensation | 0.12 | 0.13 | ||||||||||||||
| Acquisition-related revenue(1) and expenses | 0.05 | 0.10 | ||||||||||||||
| Provision for income taxes | (0.06 | ) | (0.06 | ) | ||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.63 | $ | 0.65 | (3 | )% | ||||||||||
| Non-GAAP weighted avg shares outstanding - diluted | 45,267 | 45,287 | — | % | ||||||||||||
| (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. | ||||||||||||||||
| RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - YEAR TO DATE(Unaudited) | ||||||||||||||||
| Six Months Ended | % Change | |||||||||||||||
| (In thousands, except per share data) | May 31, 2020 | May 31, 2019 | Non-GAAP | |||||||||||||
| Adjusted revenue: | ||||||||||||||||
| GAAP revenue | $ | 210,066 | $ | 189,544 | ||||||||||||
| Acquisition-related revenue(1) | 6,201 | 3,480 | ||||||||||||||
| Non-GAAP revenue | $ | 216,267 | 100 | % | $ | 193,024 | 100 | % | 12 | % | ||||||
| Adjusted income from operations: | ||||||||||||||||
| GAAP income from operations | $ | 56,021 | 27 | % | $ | 30,150 | 16 | % | ||||||||
| Amortization of acquired intangibles | 11,618 | 5 | % | 19,312 | 10 | % | ||||||||||
| Restructuring expenses and other | 1,735 | — | % | 3,168 | 2 | % | ||||||||||
| Stock-based compensation | 11,674 | 5 | % | 11,922 | 6 | % | ||||||||||
| Acquisition-related revenue(1) and expenses | 6,515 | 3 | % | 4,587 | 2 | % | ||||||||||
| Non-GAAP income from operations | $ | 87,563 | 40 | % | $ | 69,139 | 36 | % | 27 | % | ||||||
| Adjusted net income: | ||||||||||||||||
| GAAP net income | $ | 38,084 | 18 | % | $ | 17,583 | 9 | % | ||||||||
| Amortization of acquired intangibles | 11,618 | 6 | % | 19,312 | 10 | % | ||||||||||
| Restructuring expenses and other | 1,735 | 1 | % | 3,168 | 2 | % | ||||||||||
| Stock-based compensation | 11,674 | 5 | % | 11,922 | 6 | % | ||||||||||
| Acquisition-related revenue(1) and expenses | 6,515 | 2 | % | 4,587 | 2 | % | ||||||||||
| Provision for income taxes | (6,267 | ) | (3 | )% | (4,395 | ) | (2 | )% | ||||||||
| Non-GAAP net income | $ | 63,359 | 29 | % | $ | 52,177 | 27 | % | 21 | % | ||||||
| Adjusted diluted earnings per share: | ||||||||||||||||
| GAAP diluted earnings per share | $ | 0.84 | $ | 0.39 | ||||||||||||
| Amortization of acquired intangibles | 0.26 | 0.43 | ||||||||||||||
| Restructuring expenses and other | 0.04 | 0.07 | ||||||||||||||
| Stock-based compensation | 0.26 | 0.26 | ||||||||||||||
| Acquisition-related revenue(1) and expenses | 0.14 | 0.10 | ||||||||||||||
| Provision for income taxes | (0.14 | ) | (0.10 | ) | ||||||||||||
| Non-GAAP diluted earnings per share | $ | 1.40 | $ | 1.15 | 22 | % | ||||||||||
| Non-GAAP weighted avg shares outstanding - diluted | 45,391 | 45,287 | — | % | ||||||||||||
| (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) | ||||||||||
| Quarter to Date Adjusted Free Cash Flow | ||||||||||
| (In thousands) | Q2 2020 | Q2 2019 | % Change | |||||||
| Cash flows from operations | $ | 37,957 | $ | 40,674 | (7 | )% | ||||
| Purchases of property and equipment | (609 | ) | (834 | ) | (27 | )% | ||||
| Free cash flow | 37,348 | 39,840 | (6 | )% | ||||||
| Add back: restructuring payments | 1,051 | 598 | 76 | % | ||||||
| Adjusted free cash flow | $ | 38,399 | $ | 40,438 | (5 | )% | ||||
| Year to Date Adjusted Free Cash Flow | ||||||||||
| (In thousands) | YTD 2020 | YTD Q2 2019 | % Change | |||||||
| Cash flows from operations | $ | 70,973 | $ | 65,118 | 9 | % | ||||
| Purchases of property and equipment | (1,757 | ) | (1,080 | ) | 63 | % | ||||
| Free cash flow | 69,216 | 64,038 | 8 | % | ||||||
| Add back: restructuring payments | 2,480 | 757 | 228 | % | ||||||
| Adjusted free cash flow | $ | 71,696 | $ | 64,795 | 11 | % | ||||
| 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 | $ | 424.7 | 3 | % | $ | 434.7 | 5 | % | |||||||
| Acquisition-related adjustments - revenue(1) | 18.7 | 8.3 | (56 | )% | 8.3 | (56 | )% | ||||||||||
| Non-GAAP revenue | $ | 432.0 | $ | 433.0 | — | % | $ | 443.0 | 3 | % | |||||||
| (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 | $ | 116.6 | $ | 118.8 | |||
| GAAP operating margins | 27 | % | 27 | % | |||
| Acquisition-related revenue | 8.3 | 8.3 | |||||
| Acquisition-related expense | 0.3 | 0.3 | |||||
| Restructuring expense | 1.7 | 1.7 | |||||
| Stock-based compensation | 22.9 | 22.9 | |||||
| Amortization of acquired intangibles | 23.2 | 23.2 | |||||
| Total adjustments | 56.4 | 56.4 | |||||
| Non-GAAP income from operations | $ | 173.0 | $ | 175.2 | |||
| Non-GAAP operating margin | 40 | % | 40 | % | |||
| 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 | $ | 82.1 | $ | 83.9 | |||
| Adjustments (from previous table) | 56.4 | 56.4 | |||||
| Income tax adjustment(2) | (10.8 | ) | (10.8 | ) | |||
| Non-GAAP net income | $ | 127.7 | $ | 129.5 | |||
| GAAP diluted earnings per share | $ | 1.81 | $ | 1.85 | |||
| Non-GAAP diluted earnings per share | $ | 2.82 | $ | 2.86 | |||
| Diluted weighted average shares outstanding | 45.3 | 45.3 | |||||
| (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 | $ | 173.0 | $ | 175.2 | |||
| Other (expense) income | (11.3 | ) | (11.3 | ) | |||
| Non-GAAP income from continuing operations before income taxes | 161.7 | 163.9 | |||||
| Non-GAAP net income | 127.7 | 129.5 | |||||
| Tax provision | $ | 34.0 | $ | 34.4 | |||
| Non-GAAP tax rate | 21 | % | 21 | % | |||
| 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) | $ | 129 | $ | 139 | |||
| Purchases of property and equipment | (7 | ) | (7 | ) | |||
| Add back: restructuring payments | 3 | 3 | |||||
| Adjusted free cash flow (non-GAAP) | $ | 125 | $ | 135 | |||
| RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2020 GUIDANCE(Unaudited) | |||||||||||||||||
| Q3 2020 Revenue Guidance | |||||||||||||||||
| Three Months Ended | Three Months Ending | ||||||||||||||||
| August 31, 2019 | August 31, 2020 | ||||||||||||||||
| (In millions) | Low | % Change | High | % Change | |||||||||||||
| GAAP revenue | $ | 106.7 | $ | 102.8 | (4 | )% | $ | 107.8 | 1 | % | |||||||
| Acquisition-related adjustments - revenue(1) | 8.8 | 1.2 | (86 | )% | 1.2 | (86 | )% | ||||||||||
| Non-GAAP revenue | $ | 115.5 | $ | 104.0 | (10 | )% | $ | 109.0 | (6 | )% | |||||||
| (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. | |||||||||||||||||
| Q3 2020 Non-GAAP Earnings per Share Guidance | |||||||
| Three Months Ending August 31, 2020 | |||||||
| Low | High | ||||||
| GAAP diluted earnings per share | $ | 0.47 | $ | 0.49 | |||
| Acquisition-related revenue | 0.03 | 0.03 | |||||
| Stock-based compensation | 0.12 | 0.12 | |||||
| Amortization of acquired intangibles | 0.13 | 0.13 | |||||
| Total adjustments | 0.28 | 0.28 | |||||
| Income tax adjustment | (0.06 | ) | (0.06 | ) | |||
| Non-GAAP diluted earnings per share | $ | 0.69 | $ | 0.71 | |||
