GlobeNewswire Inc | Sep 29, 2020 04:15PM EDT

September 29, 2020

Revenue Above Top End of Guidance RangePending Acquisition of Chef Supports Long-Term Growth Strategy

BEDFORD, Mass., Sept. 29, 2020 (GLOBE NEWSWIRE) -- Progress (NASDAQ: PRGS), the leading provider of application development and digital experience technologies, today announced financial results for its fiscal third quarter ended August31, 2020, which are consistent with the preliminary results it announced on September 8, 2020.

Third Quarter 2020 Highlights:

-- Revenue of $109.7 million increased 3% year-over-year on an actual and constant currency basis. -- Non-GAAP revenue of $110.9 million decreased 4% on an actual and constant currency basis. -- Operating margin was 30% and Non-GAAP operating margin was 42%. -- Diluted earnings per share was $0.53 compared to $0.30 in the same quarter last year, an increase of 77%. -- Non-GAAP diluted earnings per share was $0.78 compared to $0.75 in the same quarter last year, an increase of 4%. -- On September 8, 2020, we announced a definitive agreement to acquire Chef Software, a global leader in the growing Dev Ops and DevSecOps markets.

I am very pleased with our financial and operating results in the third quarter, said Yogesh Gupta, CEO at Progress. We delivered results that were above the top end of our guidance range and raised our 2020 outlook for revenue and Non-GAAP earnings per share. Our success in Q3 was driven by the incredible work and dedication of our employees under the challenging circumstances created by the continuing COVID-19 crisis. In addition, we are excited about our pending acquisition of Chef, which demonstrates continued execution of our growth strategy, and our closing and integration plans are moving forward as planned.

Additional financial highlights included:

Three Months Ended GAAP Non-GAAP(In thousands,except August 31, August 31, % August 31, August 31, %percentages 2020 2019 Change 2020 2019 Changeand per shareamounts)Revenue $ 109,699 $ 106,716 3 % $ 110,882 $ 115,521 (4 ) %Income from $ 33,193 $ 15,960 108 % $ 47,117 $ 45,835 3 %operationsOperating 30 % 15 % 100 % 42 % 40 % 5 %marginNet income $ 23,977 $ 13,557 77 % $ 35,605 $ 33,849 5 %Dilutedearnings per $ 0.53 $ 0.30 77 % $ 0.78 $ 0.75 4 %shareCash fromoperations(GAAP) / $ 31,112 $ 26,766 16 % $ 30,101 $ 27,394 10 %Adjusted freecash flow(Non-GAAP)

Other fiscal third quarter 2020 metrics and recent results included:

-- Cash, cash equivalents and short-term investments were $230.1 million at the end of the quarter; -- DSO was 49 days compared to 53 days in the fiscal third quarter of 2019 and 47 days in the fiscal second quarter of 2020; and -- On September 22, 2020, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on December 15, 2020 to shareholders of record as of the close of business on December 1, 2020. This represents an increase of 6% to the Company's quarterly dividend.

Anthony Folger, CFO, said: Our strong financial results for the third quarter were delivered against the backdrop of a major global pandemic, demonstrating the durability of our business model and disciplined approach to investing in our operations. With more than $230 million in cash at the end of the quarter and a net leverage ratio of 0.3X, we are well positioned to continue to execute our strategy, support our core business and increase our quarterly dividend for the third straight year.

2020 Business Outlook

Progress provides the following updated guidance for the fiscal year ending November 30, 2020 and the fiscal fourth quarter ending November30, 2020, which, in the case of the guidance for the fiscal year ending November 30, 2020, is consistent with the preliminary guidance it provided on September 8, 2020:

Prior FY 2020 Updated FY 2020 Guidance Guidance (June 25, 2020) (September 29, 2020)(In millions, except percentages and per share amounts)Revenue $425 - $433 - $438 - $452 - $435 $443 $442 $456Diluted earnings per share $1.81 - $2.82 - $1.63 - $2.94 - $1.85 $2.86 $1.66 $2.97Operating margin 27% 40% 24% 40%Cash from operations (GAAP) / $129 - $125 - $138 - $135 -Adjusted free cash flow (Non-GAAP) $139 $135 $143 $140Effective tax rate 22% 21% 21% 20% Q4 2020 Guidance(In millions, except per share amounts) Revenue $119 - $125 - $123 $129Diluted earnings per share $0.26 - $0.76 - $0.29 $0.79

The expected economic impact of the COVID-19 crisis on our current 2020 business outlook is a reduction of approximately $8 to $11 million on GAAP and non-GAAP revenue, and an increase of approximately $0.03 to $0.05 on GAAP and non-GAAP earnings per share.

The expected contribution resulting from the acquisition of Chef on our current 2020 business outlook is approximately $5 to $7 million of GAAP revenue and $10 to $12 million of non-GAAP revenue, and a negative impact of $0.27 to $0.31 to GAAP earnings per share and $0.00 to $0.04 to 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 $1.3 million on GAAP and non-GAAP revenue, and approximately $0.02 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress' fiscal Q4 2020 business outlook compared to 2019 exchange rates on GAAP and non-GAAP revenue is approximately $1.0 million. The expected impact on Q4 2020 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 third quarter of 2020 at 5:00 p.m. ET on Tuesday, September29, 2020. The call can be accessed on the investor relations section of the companys website, located at www.progress.com. Additionally, you can listen to the call by telephone by dialing 888-204-4368 or 323-994-2093, passcode 7969757. 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.comwithin 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, and may make acquisitions in the future, including our pending acquisition of Chef, and those acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (9) Delay or failure to consummate the proposed acquisition of Chef or to realize the expected synergies and benefits of the acquisition could negatively impact our future results of operations and financial condition; (10) 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 onProgressto power their applications. Learn aboutProgressatwww.progress.comor +1-800-477-6473.

Progress andProgress Softwareare trademarks or registered trademarks ofProgress Software Corporationand/or its subsidiaries or affiliates in theU.S.and other countries.Any other names contained herein may be trademarks of their respective owners.

Investor Contact: Press Contact:Garo Toomajanian Erica McShaneProgress Software Progress Software+1 781 280 4817 +1 781 280 4000Investor-Relations@progress.com PR@progress.com

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended Nine Months Ended(In thousands, August 31, August 31, August 31, August 31, %except per share 2020 2019 % Change 2020 2019 Changedata)Revenue: Software licenses $ 27,514 $ 30,686 (10 ) % $ 77,806 $ 83,216 (7 ) %Maintenance and 82,185 76,030 8 % 241,959 213,044 14 %servicesTotal revenue 109,699 106,716 3 % 319,765 296,260 8 %Costs of revenue: Cost of software 1,103 1,204 (8 ) % 3,302 3,296 ? %licensesCost of maintenance 11,971 12,163 (2 ) % 35,607 32,182 11 %and servicesAmortization ofacquired 1,664 7,458 (78 ) % 4,974 18,997 (74 ) %intangiblesTotal costs of 14,738 20,825 (29 ) % 43,883 54,475 (19 ) %revenueGross profit 94,961 85,891 11 % 275,882 241,785 14 %Operating expenses: Sales and marketing 22,186 25,177 (12 ) % 68,100 72,332 (6 ) %Product development 20,676 23,126 (11 ) % 64,117 64,704 (1 ) %General and 13,514 13,506 ? % 38,702 38,445 1 %administrativeAmortization ofacquired 4,176 7,068 (41 ) % 12,484 14,841 (16 ) %intangiblesRestructuring 91 801 (89 ) % 1,826 3,993 (54 ) %expensesAcquisition-related 1,125 253 345 % 1,439 1,360 6 %expensesTotal operating 61,768 69,931 (12 ) % 186,668 195,675 (5 ) %expensesIncome from 33,193 15,960 108 % 89,214 46,110 93 %operationsOther expense, net (2,962 ) (3,718 ) 20 % (9,206 ) (8,038 ) (15 ) %Income before 30,231 12,242 147 % 80,008 38,072 110 %income taxesProvision for 6,254 (1,315 ) (576 ) % 17,947 6,932 159 %income taxesNet income $ 23,977 $ 13,557 77 % $ 62,061 $ 31,140 99 % Earnings per share: Basic $ 0.53 $ 0.30 77 % $ 1.38 $ 0.70 97 %Diluted $ 0.53 $ 0.30 77 % $ 1.37 $ 0.69 99 %Weighted average shares outstanding:Basic 45,036 44,716 1 % 44,941 44,761 ? %Diluted 45,364 45,303 ? % 45,382 45,292 ? % Cash dividendsdeclared per common $ 0.165 $ 0.155 6 % $ 0.495 $ 0.465 6 %share*Not meaningfulStock-based compensation is included in the condensed consolidated statements of operations, as follows:Cost of revenue $ 322 $ 317 2 % $ 979 $ 811 21 %Sales and marketing 1,035 968 7 % 3,195 3,205 ? %Product development 1,693 1,529 11 % 5,518 5,393 2 %General and 2,635 2,676 (2 ) % 7,667 8,002 (4 ) %administrativeTotal $ 5,685 $ 5,490 4 % $ 17,359 $ 17,411 ? %

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands) August 31, November 30, 2020 2019Assets Current assets: Cash, cash equivalents and short-term investments $ 230,119 $ 173,685 Accounts receivable, net 60,463 72,820 Unbilled receivables and contract assets 13,967 10,880 Other current assets 15,657 27,280 Total current assets 320,206 284,665 Long-term unbilled receivables and contract assets 8,740 12,492 Property and equipment, net 28,111 29,765 Goodwill and intangible assets, net 513,798 532,216 Right-of-use lease assets 24,011 ? Other assets 24,602 22,133 Total assets $ 919,468 $ 881,271 Liabilities and shareholders? equity Current liabilities: Accounts payable and other current liabilities $ 53,554 $ 72,674 Current portion of long-term debt, net 16,361 10,717 Short-term lease liability 6,271 ? Short-term deferred revenue 151,505 157,494 Total current liabilities 227,691 240,885 Long-term debt, net 271,261 284,002 Long-term lease liability 19,442 ? Long-term deferred revenue 19,851 19,752 Other long-term liabilities 13,057 6,350 Shareholders? equity: Common stock and additional paid-in capital 311,342 295,953 Retained earnings 56,824 34,329 Total shareholders? equity 368,166 330,282 Total liabilities and shareholders? equity $ 919,468 $ 881,271

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended Nine Months Ended(In thousands) August 31, August 31, August 31, August 31, 2020 2019 2020 2019Cash flows fromoperating activities:Net income $ 23,977 $ 13,557 $ 62,061 $ 31,140 Depreciation and 7,480 16,822 22,721 40,160 amortizationStock-based 5,685 5,490 17,359 17,411 compensationOther non-cash 655 743 8,311 (5,695 ) adjustmentsChanges inoperating assets (6,685 ) (9,846 ) (8,367 ) 8,867 and liabilitiesNet cash flowsfrom operating 31,112 26,766 102,085 91,883 activitiesCapital (1,662 ) (750 ) (3,419 ) (1,830 ) expendituresIssuances ofcommon stock, net 1,719 2,044 (10,973 ) (18,653 ) of repurchasesDividend payments (7,452 ) (6,933 ) (22,358 ) (20,819 ) to shareholdersPayments foracquisitions, net ? ? ? (225,298 ) of cash acquiredProceeds from theissuance of debt, ? ? ? 183,373 net of payment ofissuance costsProceeds fromsale of property, ? ? ? 6,146 plant andequipment, netPayments ofprincipal on (3,763 ) (1,880 ) (7,525 ) (3,427 ) long-term debtOther 6,520 (2,403 ) (1,376 ) (5,491 ) Net change incash, cashequivalents and 26,474 16,844 56,434 5,884 short-terminvestmentsCash, cashequivalents andshort-term 203,645 128,553 173,685 139,513 investments,beginning ofperiodCash, cashequivalents andshort-term $ 230,119 $ 145,397 $ 230,119 $ 145,397 investments, endof period

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

Three Months Ended % Change(In thousands, except August 31, 2020 August 31, 2019 Non-GAAPper share data)Adjusted revenue: GAAP revenue $ 109,699 $ 106,716 Acquisition-related 1,183 8,805 revenue^(1)Non-GAAP revenue $ 110,882 100 % $ 115,521 100 % (4 ) % Adjusted income from operations:GAAP income from $ 33,193 30 % $ 15,960 15 % operationsAmortization of acquired 5,840 5 % 14,526 13 % intangiblesRestructuring expenses 91 ? % 801 1 % and otherStock-based compensation 5,685 5 % 5,490 4 % Acquisition-related 2,308 2 % 9,058 7 % revenue^(1) and expensesNon-GAAP income from $ 47,117 42 % $ 45,835 40 % 3 %operations Adjusted net income: GAAP net income $ 23,977 22 % $ 13,557 13 % Amortization of acquired 5,840 5 % 14,526 13 % intangiblesRestructuring expenses 91 ? % 801 1 % and otherStock-based compensation 5,685 5 % 5,490 4 % Acquisition-related 2,308 2 % 9,058 7 % revenue^(1) and expensesProvision for income (2,296 ) (2 ) % (9,583 ) (9 ) % taxesNon-GAAP net income $ 35,605 32 % $ 33,849 29 % 5 % Adjusted diluted earnings per share:GAAP diluted earnings $ 0.53 $ 0.30 per shareAmortization of acquired 0.12 0.32 intangiblesRestructuring expenses ? 0.02 and otherStock-based compensation 0.13 0.12 Acquisition-related 0.05 0.20 revenue^(1) and expensesProvision for income (0.05 ) (0.21 ) taxesNon-GAAP diluted $ 0.78 $ 0.75 4 %earnings per share Non-GAAP weighted avgshares outstanding - 45,364 45,303 ? %diluted (1)Acquisition-related revenue constitutes revenue reflected as pre-acquisitiondeferred revenue that would otherwise have been recognized but for the purchaseaccounting treatment of acquisitions. Since GAAP accounting requires theelimination of this revenue, GAAP results alone do not fully capture all of oureconomic activities. Acquisition-related revenue adjustments relate toProgress' OpenEdge business segment for Ipswitch.

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

Nine Months Ended % Change(In thousands, except August 31, 2020 August 31, 2019 Non-GAAPper share data)Adjusted revenue: GAAP revenue $ 319,765 $ 296,260 Acquisition-related 7,384 12,285 revenue^(1)Non-GAAP revenue $ 327,149 100 % $ 308,545 100 % 6 % Adjusted income from operations:GAAP income from $ 89,214 28 % $ 46,110 16 % operationsAmortization of acquired 17,458 5 % 33,838 11 % intangiblesRestructuring expenses 1,826 ? % 3,969 1 % and otherStock-based compensation 17,359 5 % 17,411 5 % Acquisition-related 8,823 3 % 13,645 4 % revenue^(1) and expensesNon-GAAP income from $ 134,680 41 % $ 114,973 37 % 17 %operations Adjusted net income: GAAP net income $ 62,061 19 % $ 31,140 11 % Amortization of acquired 17,458 5 % 33,838 11 % intangiblesRestructuring expenses 1,826 ? % 3,969 1 % and otherStock-based compensation 17,359 5 % 17,411 5 % Acquisition-related 8,823 3 % 13,645 4 % revenue^(1) and expensesProvision for income (8,563 ) (2 ) % (13,978 ) (4 ) % taxesNon-GAAP net income $ 98,964 30 % $ 86,025 28 % 15 % Adjusted diluted earnings per share:GAAP diluted earnings $ 1.37 $ 0.69 per shareAmortization of acquired 0.38 0.75 intangiblesRestructuring expenses 0.04 0.09 and otherStock-based compensation 0.39 0.38 Acquisition-related 0.19 0.30 revenue^(1) and expensesProvision for income (0.19 ) (0.31 ) taxesNon-GAAP diluted $ 2.18 $ 1.90 15 %earnings per share Non-GAAP weighted avgshares outstanding - 45,382 45,292 ? %diluted (1)Acquisition-related revenue constitutes revenue reflected as pre-acquisitiondeferred revenue that would otherwise have been recognized but for the purchaseaccounting treatment of acquisitions. Since GAAP accounting requires theelimination of this revenue, GAAP results alone do not fully capture all of oureconomic activities. Acquisition-related revenue adjustments relate toProgress' OpenEdge business segment for Ipswitch.

OTHER NON-GAAP FINANCIAL MEASURES (Unaudited)

Quarter to Date Adjusted Free Cash Flow (In thousands) Q3 2020 Q3 2019 % ChangeCash flows from operations $ 31,112 $ 26,766 16 %Purchases of property and (1,662 ) (750 ) 122 %equipmentFree cash flow 29,450 26,016 13 %Add back: restructuring payments 651 1,378 (53 ) %Adjusted free cash flow $ 30,101 $ 27,394 10 %Year to Date Adjusted Free Cash Flow (In thousands) YTD 2020 YTD Q3 2019 % ChangeCash flows from operations $ 102,085 $ 91,883 11 %Purchases of property and (3,419 ) (1,830 ) 87 %equipmentFree cash flow 98,666 90,053 10 %Add back: restructuring payments 3,131 2,135 47 %Adjusted free cash flow $ 101,797 $ 92,188 10 %

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

Fiscal Year 2020 Updated Revenue Guidance Fiscal Year Fiscal Year Ending Ended November November 30, 2020 30, 2019(In millions) Low % High % Change ChangeGAAP revenue $ 413.3 $ 438.3 6 % $ 442.3 7 %Acquisition-related 18.7 13.7 (27 ) % 13.7 (27 ) %adjustments - revenue^(1)Non-GAAP revenue $ 432.0 $ 452.0 5 % $ 456.0 6 %^(1)Acquisition-related revenue constitutes revenue reflected aspre-acquisition deferred revenue that would otherwise have been recognized butfor the purchase accounting treatment of acquisitions. Since GAAP accountingrequires the elimination of this revenue, GAAP results alone do not fullycapture all of our economic activities. Acquisition-related revenue adjustmentsrelate to Progress' OpenEdge business segment for Ipswitch and Progress?Application Development and Deployment segment forChef.

Fiscal Year 2020 Updated Non-GAAP Operating Margin Guidance Fiscal Year Ending November 30, 2020(In millions) Low HighGAAP income from operations $ 105.8 $ 107.4 GAAP operating margins 24 % 24 %Acquisition-related revenue 13.7 13.7 Acquisition-related expense 1.9 1.9 Restructuring expense 7.5 7.5 Stock-based compensation 23.4 23.4 Amortization of acquired intangibles 26.6 26.6 Total adjustments^(2) 73.1 73.1 Non-GAAP income from operations $ 178.9 $ 180.5 Non-GAAP operating margin 40 % 40 %^(2)Total adjustments include preliminary estimates relating to the valuationof intangible assets acquired from Chef and restructuring expenses. The finalamounts will not be available until the Company?s internal procedures andreviews are completed.

Fiscal Year 2020 Updated Non-GAAP Earnings per Share and Effective Tax RateGuidance Fiscal Year Ending November 30, 2020(In millions, except per share data) Low HighGAAP net income $ 74.2 $ 75.4 Adjustments (from previous table) 73.1 73.1 Income tax adjustment^(3) (13.7 ) (13.7 ) Non-GAAP net income $ 133.6 $ 134.8 GAAP diluted earnings per share $ 1.63 $ 1.66 Non-GAAP diluted earnings per share $ 2.94 $ 2.97 Diluted weighted average shares outstanding 45.4 45.4 ^(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately20% for Low and High, calculated as follows:Non-GAAP income from operations $ 178.9 $ 180.5 Other (expense) income (11.9 ) (11.9 ) Non-GAAP income from continuing operations 167.0 168.6 before income taxesNon-GAAP net income 133.6 134.8 Tax provision $ 33.4 $ 33.8 Non-GAAP tax rate 20 % 20 %

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

Fiscal Year 2020 Adjusted Free Cash Flow Guidance Fiscal Year Ending November 30, 2020(In millions) Low HighCash flows from operations (GAAP) $ 138 $ 143 Purchases of property and equipment (7 ) (7 ) Add back: restructuring payments 4 4 Adjusted free cash flow (non-GAAP) $ 135 $ 140

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2020 GUIDANCE (Unaudited)

Q4 2020 Revenue Guidance Three Months Three Months Ending Ended November November 30, 2020 30, 2019(In millions) Low % High % Change ChangeGAAP revenue $ 117 $ 118.6 1 % $ 122.6 5 %Acquisition-related 6.4 6.3 (2 ) % 6.3 (2 ) %adjustments - revenue^(1)Non-GAAP revenue $ 123.4 $ 124.9 1 % $ 128.9 4 %^(1)Acquisition-related revenue constitutes revenue reflected aspre-acquisition deferred revenue that would otherwise have been recognized butfor the purchase accounting treatment of acquisitions. Since GAAP accountingrequires the elimination of this revenue, GAAP results alone do not fullycapture all of our economic activities. Acquisition-related revenue adjustmentsrelate to Progress' OpenEdge business segment for Ipswitch and Progress?Application Development and Deployment segment for Chef.

Q4 2020 Non-GAAP Earnings per Share Guidance Three Months Ending November 30, 2020 Low HighGAAP diluted earnings per share $ 0.26 $ 0.29 Acquisition-related revenue 0.14 0.14 Acquisition-related expense 0.01 0.01 Restructuring expense 0.13 0.13 Stock-based compensation 0.13 0.13 Amortization of acquired intangibles 0.20 0.20 Total adjustments^(2) 0.61 0.61 Income tax adjustment (0.11 ) (0.11 ) Non-GAAP diluted earnings per share $ 0.76 $ 0.79 ^(2)Total adjustments include preliminary estimates relating to the valuationof intangible assets acquired from Chef and restructuring expenses. The finalamounts will not be available until the Company?s internal procedures andreviews are completed.