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Progress Software Corp Ma (PRGS) SEC Filing 8-K Material Event for the period ending Wednesday, March 28, 2018

SEC Filings

Progress Software Corp Ma

CIK: 876167 Ticker: PRGS
newprogresslogoa02.jpg
 
Exhibit 99.1


P R E S S A N N O U N C E M E N T
Investor Contact:
 
Press Contact:
Brian Flanagan
 
Erica Burns
Progress Software
 
Progress Software
+1 781 280 4817
 
+1 888 365 2779 (x3135)
flanagan@progress.com
 
erica.burns@progress.com

Progress Reports Better Than Expected 2018 Fiscal First Quarter Results

Raises Guidance for FY18 Earnings Per Share and Operating Margin


BEDFORD, MA, March 28, 2018 (BUSINESSWIRE) — Progress (NASDAQ: PRGS), the leading provider of application development and deployment technologies, today announced results for its fiscal first quarter ended February 28, 2018.

Revenue was $94.0 million during the quarter compared to $91.0 million in the same quarter last year, a year-over-year increase of 3% on an actual currency basis, and flat on a constant currency basis. On a non-GAAP basis, revenue was $94.2 million during the quarter compared to $91.2 million in the same quarter last year, an increase of 3% on an actual currency basis, and flat on a constant currency basis.

On a GAAP basis, diluted earnings per share was $0.27 compared to a diluted loss per share of $0.01 in the same quarter last year.  On a non-GAAP basis, diluted earnings per share was $0.54 compared to $0.34 in the same quarter last year, growth of 59%.

“We are very pleased with our strong start to 2018,” said Yogesh Gupta, CEO at Progress. “We exceeded both our revenue and earnings per share expectations in the first quarter, and the strength of our business has enabled us to increase our full year guidance for both operating margin and earnings per share. Our business is strong and stable, and we remain confident in our future prospects.”

Additional financial highlights included:

 
Three Months Ended
 
GAAP
 
Non-GAAP
(In thousands, except percentages and per share amounts)
February 28, 2018
 
February 28, 2017
 
% Change
 
February 28, 2018
 
February 28, 2017
 
% Change
Revenue
$
94,047

 
$
90,970

 
3
 %
 
$
94,194

 
$
91,203

 
3
 %
Income from operations
17,768

 
1,222

 
*

 
34,744

 
27,130

 
28
 %
Operating margin
19
%
 
1
%
 
*

 
37
%
 
30
%
 
23
 %
Net income (loss)
12,912

 
(525
)
 
*

 
25,519

 
16,847

 
51
 %
Diluted earnings (loss) per share
0.27

 
(0.01
)
 
*

 
0.54

 
0.34

 
59
 %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP)
$
31,595

 
$
37,300

 
(15
)%
 
$
32,948

 
$
42,981

 
(23
)%
*Not meaningful

Paul Jalbert, CFO, said: “Our strong Q1 operating margins reflect our ongoing commitment to running our business efficiently. We continue to generate strong cash flows, and maintained our disciplined approach to capital allocation by returning over $50 million to our shareholders during the quarter.”


1


Other fiscal first quarter 2018 metrics and recent results included:

Cash, cash equivalents and short-term investments were $167.5 million at the end of the quarter;
DSO was 51 days compared to 48 days in the fiscal first quarter of 2017 and 47 days in the fiscal fourth quarter of 2017;
Pursuant to the $250 million share authorization of the Board of Directors, Progress repurchased 1.1 million shares for $45.0 million during the fiscal first quarter of 2018. As of February 28, 2018, there was $175.0 million remaining under this authorization; and
On March 27, 2018, our Board of Directors declared a quarterly dividend of $0.14 per share of common stock that will be paid on June 15, 2018 to shareholders of record as of the close of business on June 1, 2018.

2018 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2018 and the second fiscal quarter ending May 31, 2018:

(In millions, except percentages and per share amounts)
FY 2018
GAAP
 
FY 2018
Non-GAAP
 
Q2 2018
GAAP
 
Q2 2018
Non-GAAP
Revenue
$398 - $404

 
$399 - $404

 
$93 - $96
 
$93 - $96
Diluted earnings per share
$1.24 - $1.32

 
$2.36 - $2.41

 
$0.24 - $0.26
 
$0.51 - $0.53
Operating margin
21% - 22%

 
36% - 37%

 
*
 
*
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$115 - $121

 
$115 - $120

 
*
 
*
Effective tax rate
26
%
 
22
%
 
*
 
*
* We do not provide guidance for this financial measure.

Based on current exchange rates, the expected positive currency translation impact on Progress' fiscal year 2018 business outlook compared to 2017 exchange rates is approximately $8 million on GAAP and non-GAAP revenue, and $0.04 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress' fiscal Q2 2018 business outlook compared to 2017 exchange rates is approximately $3 million on GAAP and non-GAAP revenue, and $0.01 on GAAP and non-GAAP diluted 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

The Progress quarterly investor conference call to review its fiscal first quarter of 2018 will be broadcast live at 5:00 p.m. ET on Wednesday, March 28, 2018 and 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 1-888-710-4011, pass code 9975518. 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.

Non-GAAP Financial Information

Progress provides non-GAAP supplemental information to its financial results.

We use this non-GAAP information to evaluate our period-over-period operating performance because our management believes the information helps illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as a greater understanding of the results from the primary operations of our business, by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. Management also uses this non-GAAP financial information to establish budgets and operational goals, which are communicated internally and externally, evaluate performance, and allocate resources. In addition, compensation of our executives and non-executive employees is based in part on the performance of our business evaluated using this same non-GAAP information.

However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP) and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information often have a material impact on Progress’ financial results. A reconciliation of non-GAAP adjustments

2


to Progress' 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.

As described in more detail below, non-GAAP revenue, non-GAAP costs of sales and operating expenses, non-GAAP income from operations and operating margin, non-GAAP net income, and non-GAAP diluted earnings per share exclude the effect of purchase accounting on the fair value of acquired deferred revenue, amortization of acquired intangible assets, stock-based compensation expense, fees related to shareholder activist, restructuring charges, acquisition-related expenses, certain identified non-operating gains and losses, and the related tax effects of the preceding items. We also provide guidance on adjusted free cash flow, which is equal to cash flows from operating activities less purchases of property and equipment, plus restructuring payments.

In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:

Acquisition-related revenue - In all periods presented, we include acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. The acquisition-related revenue relates to Telerik, which we acquired on December 2, 2014, and Kinvey, which we acquired on June 1, 2017. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business because, although we cannot be certain that customers will renew their contracts, we have historically experienced high renewal rates on maintenance and support agreements and other customer contracts. Additionally, although acquisition-related revenue adjustments are non-recurring with respect to past acquisitions, we expect to incur these adjustments in connection with any future acquisitions.

Amortization of acquired intangibles - In all periods presented, we exclude amortization of acquired intangibles because those expenses are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired.

Stock-based compensation - In all periods presented, we exclude stock-based compensation to be consistent with the way management and the financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include these charges in operating plans. Stock-based compensation will continue in future periods.

Fees related to shareholder activist - In September 2017, Praesidium Investment Management publicly announced in a Schedule 13D filed with the Securities and Exchange Commission its disagreement with our strategy and stated that it was seeking changes in the composition of our Board of Directors. We have incurred professional and other fees relating to Praesidium’s actions. We exclude these fees because they distort trends and are not part of our core operating results. We do not expect to incur additional professional and other fees related to this matter.

Restructuring expenses - In all periods presented, we exclude restructuring expenses incurred because those expenses distort trends and are not part of our core operating results.

Acquisition-related and transition expenses - In all periods presented, we exclude acquisition-related expenses because those expenses distort trends and are not part of our core operating results. In recent years, we have completed a number of acquisitions, which result in our incurring operating expenses which would not otherwise have been incurred. By excluding certain transition, integration and other acquisition-related expense items in connection with acquisitions, this provides more meaningful comparisons of the financial results to our historical operations and forward-looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions.

3



Income tax adjustment - In all periods presented, we adjust our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above.

Constant Currency

Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries strengthen, our consolidated results stated in U.S. dollars are positively impacted.

As exchange rates are an important factor in understanding period to period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP.

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, 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, 2017. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.


4


About Progress

Progress (NASDAQ: PRGS) offers the leading platform for developing and deploying mission-critical business applications. Progress empowers enterprises and ISVs to build and deliver cognitive-first applications that harness big data to derive business insights and competitive advantage. Progress offers leading technologies for easily building powerful user interfaces across any type of device, a reliable, scalable and secure backend platform to deploy modern applications, leading data connectivity to all sources, and award-winning predictive analytics that brings the power of machine learning to any organization. Over 1,700 independent software vendors, 100,000 enterprise customers, and 2 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.


5


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended
(In thousands, except per share data)
February 28, 2018
 
February 28, 2017
 
% Change
Revenue:
 
 
 
 
 
Software licenses
$
25,343

 
$
24,322

 
4
 %
Maintenance and services
68,704

 
66,648

 
3
 %
Total revenue
94,047

 
90,970

 
3
 %
Costs of revenue:
 
 
 
 
 
Cost of software licenses
1,261

 
1,588

 
(21
)%
Cost of maintenance and services
9,824

 
10,492

 
(6
)%
Amortization of acquired intangibles
5,818

 
3,678

 
58
 %
Total costs of revenue
16,903

 
15,758

 
7
 %
Gross profit
77,144

 
75,212

 
3
 %
Operating expenses:
 
 
 
 
 
Sales and marketing
21,428

 
25,721

 
(17
)%
Product development
20,245

 
17,334

 
17
 %
General and administrative
11,262

 
10,568

 
7
 %
Amortization of acquired intangibles
3,319

 
3,179

 
4
 %
Fees related to shareholder activist
1,258

 

 
*

Restructuring expenses
1,821

 
17,139

 
(89
)%
Acquisition-related expenses
43

 
49

 
(12
)%
Total operating expenses
59,376

 
73,990

 
(20
)%
Income from operations
17,768

 
1,222

 
*

Other (expense) income, net
(1,585
)
 
(1,347
)
 
(18
)%
Income (loss) before income taxes
16,183

 
(125
)
 
*

Provision for income taxes
3,271

 
400

 
*

Net income (loss)
$
12,912

 
$
(525
)
 
*

 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
Basic
$
0.28

 
$
(0.01
)
 
*

Diluted
$
0.27

 
$
(0.01
)
 
*

Weighted average shares outstanding:
 
 
 
 
 
Basic
46,529

 
48,733

 
(5
)%
Diluted
47,476

 
48,733

 
(3
)%
 
 
 
 
 
 
Cash dividends declared per common share
$
0.140

 
$
0.125

 
12
 %

Stock-based compensation is included in the condensed consolidated statements of operations, as follows:
 
 
 
 
 
 
Cost of revenue
$
246

 
$
256

 
(4
)%
Sales and marketing
370

 
363

 
2
 %
Product development
2,046

 
(104
)
 
*

General and administrative
1,908

 
1,115

 
71
 %
Total
$
4,570

 
$
1,630

 
180
 %

*Not meaningful

6



CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
(In thousands)
February 28,
2018
 
November 30, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash, cash equivalents and short-term investments
$
167,497

 
$
183,609

Accounts receivable, net
53,843

 
61,210

Other current assets
16,312

 
18,588

Total current assets
237,652

 
263,407

Property and equipment, net
41,761

 
42,261

Goodwill and intangible assets, net
400,863

 
409,935

Other assets
2,864

 
3,115

Total assets
$
683,140

 
$
718,718

Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other current liabilities
$
52,640

 
$
69,661

Current portion of long-term debt
5,819

 
5,819

Short-term deferred revenue
144,573

 
132,538

Total current liabilities
203,032

 
208,018

Long-term deferred revenue
9,655

 
9,750

Long-term debt
114,635

 
116,090

Other long-term liabilities
8,166

 
8,776

Shareholders’ equity:
 
 
 
Common stock and additional paid-in capital
255,047

 
249,836

Retained earnings
92,605

 
126,248

Total shareholders’ equity
347,652

 
376,084

Total liabilities and shareholders’ equity
$
683,140

 
$
718,718




7


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  
 
Three Months Ended
(In thousands)
February 28,
2018
 
February 28,
2017
Cash flows from operating activities:
 
 
 
Net income (loss)
$
12,912

 
$
(525
)
Depreciation and amortization
11,302

 
9,360

Stock-based compensation
4,570

 
1,630

Other non-cash adjustments
(134
)
 
4,125

Changes in operating assets and liabilities
2,945

 
22,710

Net cash flows from operating activities
31,595

 
37,300

Capital expenditures
(1,386
)
 
(383
)
Repurchases of common stock, net of issuances
(42,531
)
 
(12,420
)
Dividend payments to shareholders
(6,619
)
 
(6,072
)
Payments of principal on long-term debt
(1,547
)
 
(3,750
)
Other
4,376

 
(237
)
Net change in cash, cash equivalents and short-term investments
(16,112
)
 
14,438

Cash, cash equivalents and short-term investments, beginning of period
183,609

 
249,754

Cash, cash equivalents and short-term investments, end of period
$
167,497

 
$
264,192




8


RESULTS OF OPERATIONS BY SEGMENT
(Unaudited)

 
Three Months Ended
(In thousands)
February 28, 2018
 
February 28, 2017
 
% Change
Segment revenue:
 
 
 
 
 
OpenEdge
$
66,408

 
$
64,508

 
3
 %
Data Connectivity and Integration
7,604

 
6,828

 
11
 %
Application Development and Deployment
20,035

 
19,634

 
2
 %
Total revenue
94,047

 
90,970

 
3
 %
Segment costs of revenue and operating expenses:
 
 
 
 

OpenEdge
15,762

 
17,877

 
(12
)%
Data Connectivity and Integration
1,629

 
2,262

 
(28
)%
Application Development and Deployment
6,798

 
7,536

 
(10
)%
Total costs of revenue and operating expenses
24,189

 
27,675

 
(13
)%
Segment contribution:
 
 
 
 

OpenEdge
50,646

 
46,631

 
9
 %
Data Connectivity and Integration
5,975

 
4,566

 
31
 %
Application Development and Deployment
13,237

 
12,098

 
9
 %
Total contribution
69,858

 
63,295

 
10
 %
Other unallocated expenses (1)
52,090

 
62,073

 
(16
)%
Income from operations
17,768

 
1,222

 
*

Other (expense) income, net
(1,585
)
 
(1,347
)
 
(18
)%
Income (loss) before provision for income taxes
$
16,183

 
$
(125
)
 
*

 
 
 
 
 
 
(1) The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: certain product development and corporate sales and marketing expenses, customer support, administration, amortization of acquired intangibles, stock-based compensation, fees related to shareholder activist, restructuring, and acquisition-related expenses.
*Not meaningful

9


SUPPLEMENTAL INFORMATION
(Unaudited)

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
License
$
24,322

 
$
25,592

 
$
28,529

 
$
45,963

 
$
25,343

Maintenance
59,138

 
59,898

 
60,536

 
61,826

 
61,479

Services
7,510

 
7,723

 
8,245

 
8,290

 
7,225

Total revenue
$
90,970

 
$
93,213

 
$
97,310

 
$
116,079

 
$
94,047

 
 
 
 
 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
North America
$
50,305

 
$
51,430

 
$
55,703

 
$
66,504

 
$
51,641

EMEA
29,844

 
30,646

 
31,830

 
38,039

 
33,014

Latin America
5,023

 
5,637

 
5,009

 
5,489

 
4,461

Asia Pacific
5,798

 
5,500

 
4,768

 
6,047

 
4,931

Total revenue
$
90,970

 
$
93,213

 
$
97,310

 
$
116,079

 
$
94,047

 
 
 
 
 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
OpenEdge
$
64,508

 
$
65,890

 
$
68,135

 
$
77,639

 
$
66,408

Data Connectivity and Integration
6,828

 
7,096

 
8,987

 
18,044

 
7,604

Application Development and Deployment
19,634

 
20,227

 
20,188

 
20,396

 
20,035

Total revenue
$
90,970

 
$
93,213

 
$
97,310

 
$
116,079

 
$
94,047













10


RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES
(Unaudited)
 
Three Months Ended
 
% Change
(In thousands, except per share data)
February 28, 2018
 
February 28, 2017
 
Non-GAAP
Adjusted revenue:
 
 
 
 
 
 
 
 
 
GAAP revenue
$
94,047

 
 
 
$
90,970

 
 
 


Acquisition-related revenue (1)
147

 
 
 
233

 
 
 
 
Non-GAAP revenue
$
94,194

 
100
 %
 
$
91,203

 
100
 %
 
3
 %
 
 
 
 
 
 
 
 
 
 
Adjusted gross margin:


 
 
 
 
 
 
 


GAAP gross margin
$
77,144

 
82
 %
 
$
75,212

 
83
 %
 
 
Amortization of acquired intangibles
5,818

 
6
 %
 
3,678

 
4
 %
 
 
Stock-based compensation
246

 
 %
 
256

 
 %
 
 
Acquisition-related revenue (1)
147

 
 %
 
233

 
 %
 
 
Non-GAAP gross margin
$
83,355

 
88
 %
 
$
79,379

 
87
 %
 
5
 %
 
 
 
 
 
 
 
 
 
 
Adjusted operating expenses:
 
 
 
 
 
 
 
 


GAAP operating expenses
$
59,376

 
63
 %
 
$
73,990

 
81
 %
 
 
Amortization of acquired intangibles
(3,319
)
 
(4
)%
 
(3,179
)
 
(3
)%
 
 
Fees related to shareholder activist
(1,258
)
 
(1
)%
 

 
 %
 
 
Restructuring expenses
(1,821
)
 
(2
)%
 
(17,139
)
 
(19
)%
 
 
Acquisition-related expenses
(43
)
 
 %
 
(49
)
 
 %
 
 
Stock-based compensation
(4,324
)
 
(4
)%
 
(1,374
)
 
(2
)%
 
 
Non-GAAP operating expenses
$
48,611

 
52
 %
 
$
52,249

 
57
 %
 
(7
)%
 
 
 
 
 
 
 
 
 
 
Adjusted income from operations:
 
 
 
 
 
 
 
 
 
GAAP income from operations
$
17,768

 
19
 %
 
$
1,222

 
1
 %
 


Amortization of acquired intangibles
9,137

 
10
 %
 
6,857

 
8
 %
 
 
Fees related to shareholder activist
1,258

 
1
 %
 

 
 %
 
 
Restructuring expenses
1,821

 
2
 %
 
17,139

 
19
 %
 


Stock-based compensation
4,570

 
5
 %
 
1,630

 
2
 %
 
 
Acquisition-related
190

 
 %
 
282

 
 %
 
 
Non-GAAP income from operations
$
34,744

 
37
 %
 
$
27,130

 
30
 %
 
28
 %
 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share:
 
 
 
 
 
 
 
 
 
GAAP diluted earnings (loss) per share
$
0.27

 
 
 
$
(0.01
)
 
 
 
 
Amortization of acquired intangibles
0.19

 
 
 
0.14

 
 
 
 
Fees related to shareholder activist
0.03

 
 
 

 
 
 
 
Restructuring expenses
0.04

 
 
 
0.35

 
 
 
 
Stock-based compensation
0.10

 
 
 
0.03

 
 
 
 
Acquisition-related

 
 
 

 
 
 
 
Provision for income taxes
(0.09
)
 


 
(0.17
)
 


 


Non-GAAP diluted earnings per share
$
0.54


 
 
$
0.34

 
 
 
59
 %
 


 
 
 


 
 
 


Non-GAAP weighted avg shares outstanding - diluted
47,476

 
 
 
49,034

 
 
 
(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. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively.

11


OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2018
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
License
$
25,343

 
$
19

 
$
25,362

Maintenance
61,479

 
46

 
61,525

Services
7,225

 
82

 
7,307

Total revenue
$
94,047

 
$
147

 
$
94,194

 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2018
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
North America
$
51,641

 
$
147

 
$
51,788

EMEA
33,014

 

 
33,014

Latin America
4,461

 

 
4,461

Asia Pacific
4,931

 

 
4,931

Total revenue
$
94,047

 
$
147

 
$
94,194

 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2018
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
OpenEdge
$
66,408

 
$
82

 
$
66,490

Data Connectivity and Integration
7,604

 

 
7,604

Application Development and Deployment
20,035

 
65

 
20,100

Total revenue
$
94,047

 
$
147

 
$
94,194

 
 
 
 
 
 
(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. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively.
 
 
 
 
 
 
Adjusted Free Cash Flow
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2018
 
Q1 2017
 
% Change
Cash flows from operations
$
31,595

 
$
37,300

 
(15
)%
Purchases of property and equipment
(1,386
)
 
(383
)
 
262
 %
Free cash flow
30,209

 
36,917

 
(18
)%
Add back: restructuring payments
2,739

 
6,064

 
(55
)%
Adjusted free cash flow
$
32,948

 
$
42,981

 
(23
)%

12


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

(In thousands)
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
FY 2017
 
Q1 2018
GAAP revenue
$
19,634

 
$
20,227

 
$
20,188

 
$
20,396

 
$
80,445

 
$
20,035

Add: change in deferred revenue
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
52,971

 
51,298

 
52,400

 
52,615

 
52,971

 
53,794

Ending balance
51,298

 
52,400

 
52,615

 
53,794

 
53,794

 
52,927

Change in deferred revenue
(1,673
)
 
1,102

 
215

 
1,179

 
823

 
(867
)
Non-GAAP bookings
$
17,961

 
$
21,329

 
$
20,403

 
$
21,575

 
$
81,268

 
$
19,168



13


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2018 GUIDANCE
(Unaudited)
Fiscal Year 2018 Revenue Guidance
 
Fiscal Year Ended
 
Fiscal Year Ending
 
November 30, 2017
 
November 30, 2018
(In millions)
 
 
Low
 
% Change
 
High
 
% Change
GAAP revenue
$
397.6

 
$
398.3

 
 %
 
$
403.7

 
2
 %
Acquisition-related adjustments - revenue (1)
1.0

 
0.3

 
(70
)%
 
0.3

 
(70
)%
Non-GAAP revenue
$
398.6

 
$
398.6

 
 %
 
$
404.0

 
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. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively.
Fiscal Year 2018 Non-GAAP Operating Margin Guidance
 
Fiscal Year Ending November 30, 2018
(In millions)
Low
 
High
GAAP income from operations
$
83.3

 
$
88.4

GAAP operating margins
21
%
 
22
%
Acquisition-related revenue
0.3

 
0.3

Acquisition-related expense
0.2

 
0.2

Restructuring expense
3.0

 
2.0

Stock-based compensation
21.1

 
21.1

Amortization of intangibles
36.2

 
36.2

Fees related to shareholder activist
1.3

 
1.3

Total adjustments
62.1

 
61.1

Non-GAAP income from operations
$
145.4

 
$
149.5

Non-GAAP operating margin
36
%
 
37
%
Fiscal Year 2018 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
 
Fiscal Year Ending November 30, 2018
(In millions, except per share data)
Low
 
High
GAAP net income
$
57.5

 
$
61.3

Adjustments (from previous table)
62.1

 
61.1

Income tax adjustment (2)
(10.6
)
 
(10.1
)
Non-GAAP net income
$
109.0

 
$
112.3

 
 
 
 
GAAP diluted earnings per share
$
1.24

 
$
1.32

Non-GAAP diluted earnings per share
$
2.36

 
$
2.41

 
 
 
 
Diluted weighted average shares outstanding
46.3

 
46.5

 
 
 
 
(2) Tax adjustment is based on a non-GAAP effective tax rate of approximately 22% for Low and High, calculated as follows:
Non-GAAP income from operations
$
145.4

 
$
149.5

Other (expense) income
(5.6
)
 
(5.6
)
Non-GAAP income from continuing operations before income taxes
139.8

 
143.9

Non-GAAP net income
109.0

 
112.3

Tax provision
$
30.8

 
$
31.6

Non-GAAP tax rate
22
%
 
22
%

14


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2018 GUIDANCE
(Unaudited)

Fiscal Year 2018 Adjusted Free Cash Flow Guidance
 
Fiscal Year Ending November 30, 2018
(In millions)
Low
 
High
Cash flows from operations (GAAP)
$
115

 
$
121

Purchases of property and equipment
(7
)
 
(7
)
Add back: restructuring payments
7

 
6

Adjusted free cash flow (non-GAAP)
$
115

 
$
120



15


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2018 GUIDANCE
(Unaudited)

Q2 2018 Revenue Guidance
 
Three Months Ended
 
Three Months Ending
 
May 31, 2017
 
May 31, 2018
(In millions)
 
 
Low
 
% Change
 
High
 
% Change
GAAP revenue
$
93.2

 
$
92.9

 
 %
 
$
95.9

 
3
 %
Acquisition-related adjustments - revenue (1)
0.2

 
0.1

 
(50
)%
 
0.1

 
(50
)%
Non-GAAP revenue
$
93.4

 
$
93.0

 
 %
 
$
96.0

 
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. Note that acquisition-related revenue adjustments relate to Progress' OpenEdge and Application Development and Deployment business segments for Kinvey and Telerik, respectively.


Q2 2018 Non-GAAP Earnings per Share Guidance
 
Three Months Ending May 31, 2018
 
Low
 
High
GAAP diluted earnings per share
$
0.24

 
$
0.26

Restructuring expense
0.01

 
0.01

Stock-based compensation
0.12

 
0.12

Amortization of intangibles
0.20

 
0.20

Total adjustments
0.33

 
0.33

Income tax adjustment
(0.06
)
 
(0.06
)
Non-GAAP diluted earnings per share
$
0.51

 
$
0.53




16

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Progress Software Corp Ma provided additional information to their SEC Filing as exhibits

Ticker: PRGS
CIK: 876167
Form Type: 8-K Corporate News
Accession Number: 0000876167-18-000018
Submitted to the SEC: Wed Mar 28 2018 4:21:34 PM EST
Accepted by the SEC: Wed Mar 28 2018
Period: Wednesday, March 28, 2018
Industry: Prepackaged Software
Events:
  1. Earnings Release
  2. Financial Exhibit

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