GlobeNewswire Inc | Mar 25, 2021 04:15PM EDT

March 25, 2021

Revenue and Earnings Per Share Exceed Guidance RangesFull Year Guidance Increased for Revenue, Earnings Per Share and Free Cash Flow

BEDFORD, Mass., March 25, 2021 (GLOBE NEWSWIRE) -- Progress (NASDAQ: PRGS), the leading provider of products to develop, deploy and manage high-impact business applications, today announced financial results for its fiscal first quarter ended February28, 2021.

First Quarter 2021 Highlights:

-- Revenue of $121.3 million increased 11% year-over-year on an actual currency basis, and 9% on a constant currency basis. -- Non-GAAP revenue of $131.8 million increased 16% on an actual currency basis, and 14% on a constant currency basis. -- Annualized Recurring Revenue (ARR) of $432 million increased 22% year-over-year on a constant currency basis with growth primarily driven by the acquisition of Chef Software. -- Operating margin was 23% and Non-GAAP operating margin was 43%. -- Diluted earnings per share was $0.42 compared to $0.46 in the same quarter last year, a decrease of 9%. -- Non-GAAP diluted earnings per share was $0.95 compared to $0.76 in the same quarter last year, an increase of 25%.

The first quarter marked an excellent start to 2021 highlighted by better-than-expected growth on both the top and bottom line, said Yogesh Gupta, CEO at Progress. Our performance was stronger than expected across virtually all product lines and all of our key metrics. I am especially proud of the continued hard work and dedication of our entire organization and our first quarter results position us well as we continue to execute our total growth strategy.

Additional financial highlights included(1)

Three Months Ended GAAP Non-GAAP(Inthousands,except February 28, February 29, % February 28, February 29, %percentages 2021 2020 Change 2021 2020 Changeand pershareamounts)Revenue $ 121,280 $ 109,683 11 % $ 131,784 $ 113,762 16 %Income from $ 27,416 $ 30,712 (11 )% $ 56,657 $ 47,973 18 %operationsOperating 23 % 28 % (500) 43 % 42 % 100margin bps bpsNet income $ 18,961 $ 21,116 (10 )% $ 42,504 $ 34,703 22 %Dilutedearnings $ 0.42 $ 0.46 (9 )% $ 0.95 $ 0.76 25 %per shareCash fromoperations(GAAP) /Adjusted $ 44,688 $ 33,016 35 % $ 46,515 $ 33,297 40 %free cashflow(Non-GAAP)

(1)See Legal Notice Regarding Non-GAAP Financial Information

Other fiscal first quarter 2021 metrics and recent results included:

-- Cash, cash equivalents and short-term investments were $114.4 million at the end of the quarter; -- DSO was 53 days compared to 49 days in the fiscal first quarter of 2020 and 54 days in the fiscal fourth quarter of 2020; -- Pursuant to the $250 million share authorization by the Board of Directors, Progress repurchased 0.4 million shares for $15.0 million during the first fiscal quarter of 2021. As of February 28, 2021, there was $175.0 million remaining under this authorization; and -- On March 23, 2021, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on June 15, 2021 to shareholders of record as of the close of business on June 1, 2021.

Anthony Folger, CFO, said: Progress delivered strong financial results across the board in the first quarter, which has given us even greater confidence in our prospects for 2021. The integration of Chef is tracking ahead of plan and Chefs first full quarter with Progress contributed better than expected performance and helped continue the trend of an increasing mix of revenue being derived from recurring sources.

Select Performance Metrics:

Management evaluates our financial performance using a number of financial and operating metrics. These metrics are periodically reviewed and revised to reflect changes in our business.

Beginning this period, Progress is providing an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years. ARR represents the annualized contract value for all active and contractually binding term-based contracts at the end of a period. ARR includes maintenance, software upgrade rights, public cloud and on-premises subscription-based transactions and managed services. Additional information regarding ARR 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.

ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

In addition, Progress is in the process of updating its segments based on changes to how performance is assessed and resources are allocated. Progress expects to begin operating as one distinct segment to align with the way that management internally analyzes the business. Progress previously reported results based on three segments. Progress plans to implement the new segment structure starting with results for the fiscal second quarter ending May 31, 2021.

2021 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2021 and the fiscal second quarter ending May 31, 2021:

Updated FY 2021 FY 2021 Guidance Guidance (January 14, 2021) (March 25, 2021)(In millions, except percentages GAAP Non-GAAP GAAP Non-GAAPand per share amounts)Revenue $493 - $519 - $487 - $513 - $501 $527 $495 $521Diluted earnings per share $1.56 - $3.38 - $1.40 - $3.22 - $1.60 $3.42 $1.46 $3.28Operating margin 20% 38% 19% 37%Cash from operations (GAAP) / $157 - $155 - $151 - $150 -Adjusted free cash flow (Non-GAAP) $162 $160 $156 $155Effective tax rate 21% 20% 21% 20%

Q2 2021 Guidance(In millions, except per share amounts) GAAP Non-GAAPRevenue $112 - $116 $119 - $123Diluted earnings per share $0.25 - $0.27 $0.72 - $0.74

Based on current exchange rates, the expected positive currency translation impact on Progress' fiscal year 2021 business outlook compared to 2020 exchange rates is approximately $5.8 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 Q2 2021 business outlook compared to 2020 exchange rates on GAAP and non-GAAP revenue is approximately $2.4 million. The expected positive impact on GAAP and non-GAAP diluted Q2 2021 earnings per share is $0.01. 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 2021 at 5:00 p.m. ET on Thursday, March25, 2021. 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 800-367-2403 or 334-777-6978, passcode 3276569. 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, 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. (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. (9) Delay or failure to realize the expected synergies and benefits of the Chef acquisition could negatively impact our future results of operations and financial condition. (10) The continuing impact of the coronavirus disease (COVID-19) outbreak 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, 2020. 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) provides the best products to develop, deploy and manage high-impact business applications. Our comprehensive product stack is designed to make technology teams more productive and we have a deep commitment to the developer community, both open source and commercial alike. With Progress, organizations can accelerate the creation and delivery of strategic business applications, automate the process by which apps are configured, deployed and scaled, and make critical data and content more accessible and secureleading to competitive differentiation and business success. Over 1,700 independent software vendors, 100,000 enterprise customers, and three 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:Michael Micciche Erica McShaneProgress Software Progress Software+1 781 850 8450 +1 781 280 4000Investor-Relations@progress.com PR@progress.com

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited) Three Months Ended(In thousands, except per share data) February 28, February 29, % 2021 2020 ChangeRevenue: Software licenses $ 33,317 $ 30,629 9 %Maintenance and services 87,963 79,054 11 %Total revenue 121,280 109,683 11 %Costs of revenue: Cost of software licenses 1,151 1,389 (17 )%Cost of maintenance and services 13,319 11,851 12 %Amortization of acquired intangibles 3,521 1,646 114 %Total costs of revenue 17,991 14,886 21 %Gross profit 103,289 94,797 9 %Operating expenses: Sales and marketing 29,469 24,198 22 %Product development 24,548 21,654 13 %General and administrative 13,424 12,748 5 %Amortization of acquired intangibles 6,879 4,131 67 %Restructuring expenses 1,157 1,040 11 %Acquisition-related expenses 396 314 26 %Total operating expenses 75,873 64,085 18 %Income from operations 27,416 30,712 (11 )%Other expense, net (2,652 ) (3,397 ) 22 %Income before income taxes 24,764 27,315 (9 )%Provision for income taxes 5,803 6,199 (6 )%Net income $ 18,961 $ 21,116 (10 )% Earnings per share: Basic $ 0.43 $ 0.47 (9 )%Diluted $ 0.42 $ 0.46 (9 )%Weighted average shares outstanding: Basic 44,108 44,897 (2 )%Diluted 44,652 45,515 (2 )% Cash dividends declared per common $ 0.175 $ 0.165 6 %share

Stock-based compensation is included in the condensed consolidated statementsof operations, as follows:Cost of revenue $ 392 $ 319 23 %Sales and marketing 1,503 1,050 43 %Product development 1,919 1,926 ? %General and administrative 2,970 2,756 8 %Total $ 6,784 $ 6,051 12 %

CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) (In thousands) February 28, November 30, 2021 2020Assets Current assets: Cash, cash equivalents and short-term investments $ 114,371 $ 105,995 Accounts receivable, net 77,573 84,040 Unbilled receivables and contract assets 24,099 24,917 Other current assets 23,266 23,983 Total current assets 239,309 238,935 Property and equipment, net 29,838 29,817 Goodwill and intangible assets, net 694,048 704,473 Right-of-use lease assets 31,265 30,635 Long-term unbilled receivables and contract 14,334 17,133 assetsOther assets 18,263 20,789 Total assets $ 1,027,057 $ 1,041,782 Liabilities and shareholders? equity Current liabilities: Accounts payable and other current liabilities $ 55,019 $ 70,899 Current portion of long-term debt, net 20,124 18,242 Short-term operating lease liabilities 7,154 7,015 Short-term deferred revenue 183,443 166,387 Total current liabilities 265,740 262,543 Long-term debt, net 343,758 364,260 Long-term operating lease liabilities 27,342 26,966 Long-term deferred revenue 25,535 26,908 Other long-term liabilities 12,129 15,092 Shareholders? equity: Common stock and additional paid-in capital 312,137 306,244 Retained earnings 40,416 39,769 Total shareholders? equity 352,553 346,013 Total liabilities and shareholders? equity $ 1,027,057 $ 1,041,782

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) Three Months Ended(In thousands) February 28, February 29, 2021 2020Cash flows from operating activities: Net income $ 18,961 $ 21,116 Depreciation and amortization 11,862 7,669 Stock-based compensation 6,784 6,051 Other non-cash adjustments 3,039 5,347 Changes in operating assets and liabilities 4,042 (7,167 )Net cash flows from operating activities 44,688 33,016 Capital expenditures (1,166 ) (1,148 )Issuances of common stock, net of repurchases (11,515 ) (15,755 )Dividend payments to shareholders (7,854 ) (7,468 )Payments of principal on long-term debt (18,763 ) (1,882 )Other 2,986 (3,393 )Net change in cash, cash equivalents and 8,376 3,370 short-term investmentsCash, cash equivalents and short-term 105,995 173,685 investments, beginning of periodCash, cash equivalents and short-term $ 114,371 $ 177,055 investments, end of period

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES(Unaudited) Three Months Ended % Change(In thousands, except February 28, 2021 February 29, 2020 Non-GAAPper share data)Adjusted revenue: GAAP revenue $ 121,280 $ 109,683 Acquisition-related 10,504 4,079 revenue^(1)Non-GAAP revenue $ 131,784 100 % $ 113,762 100 % 16 % Adjusted income from operations:GAAP income from $ 27,416 23 % $ 30,712 28 % operationsAmortization of acquired 10,400 8 % 5,777 5 % intangiblesRestructuring expenses 1,157 1 % 1,040 1 % and otherStock-based compensation 6,784 3 % 6,051 4 % Acquisition-related 10,900 8 % 4,393 4 % revenue^(1) and expensesNon-GAAP income from $ 56,657 43 % $ 47,973 42 % 18 %operations Adjusted net income: GAAP net income $ 18,961 16 % $ 21,116 19 % Amortization of acquired 10,400 8 % 5,777 5 % intangiblesRestructuring expenses 1,157 1 % 1,040 1 % and otherStock-based compensation 6,784 3 % 6,051 5 % Acquisition-related 10,900 8 % 4,393 4 % revenue^(1) and expensesProvision for income (5,698 ) (4 )% (3,674 ) (3 )% taxesNon-GAAP net income $ 42,504 32 % $ 34,703 31 % 22 % Adjusted diluted earnings per share:GAAP diluted earnings $ 0.42 $ 0.46 per shareAmortization of acquired 0.23 0.13 intangiblesRestructuring expenses 0.03 0.02 and otherStock-based compensation 0.16 0.13 Acquisition-related 0.24 0.10 revenue^(1) and expensesProvision for income (0.13 ) (0.08 ) taxesNon-GAAP diluted $ 0.95 $ 0.76 25 %earnings per share Non-GAAP weighted avgshares outstanding - 44,652 45,515 (2 )%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' Application Development and Deployment business segment for Chef andProgress' OpenEdge business segment for Ipswitch.

OTHER NON-GAAP FINANCIAL MEASURES(Unaudited) Adjusted Free Cash Flow (In thousands) Q1 2021 Q1 2020 % ChangeCash flows from operations $ 44,688 $ 33,016 35 %Purchases of property and equipment (1,166 ) (1,148 ) 2 %Free cash flow 43,522 31,868 37 %Add back: restructuring payments 2,993 1,429 109 %Adjusted free cash flow $ 46,515 $ 33,297 40 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021GUIDANCE(Unaudited)

Fiscal Year 2021 Updated Revenue Guidance Fiscal Year Fiscal Year Ending Ended November November 30, 2021 30, 2020(In millions) Low % High % Change ChangeGAAP revenue $ 442.1 $ 493.0 12 % $ 501.0 13 %Acquisition-relatedadjustments - 14.1 26.0 84 % 26.0 84 %revenue^(1)Non-GAAP revenue $ 456.2 $ 519.0 14 % $ 527.0 16 % ^(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 Ipswitch and Chef.

Fiscal Year 2021 Updated Non-GAAP Operating Margin Guidance Fiscal Year Ending November 30, 2021(In millions) Low HighGAAP income from operations $ 99.5 $ 102.1 GAAP operating margins 20 % 20 %Acquisition-related revenue 26.0 26.0 Acquisition-related expense 0.9 0.9 Restructuring expense 1.3 1.3 Stock-based compensation 27.2 27.2 Amortization of acquired intangibles 44.9 44.9 Total adjustments^(2) 100.3 100.3 Non-GAAP income from operations $ 199.8 $ 202.4 Non-GAAP operating margin 38 % 38 % ^(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 2021 Updated Non-GAAP Earnings per Share and Effective Tax RateGuidance Fiscal Year Ending November 30, 2021(In millions, except per share data) Low HighGAAP net income $ 69.5 $ 71.5 Adjustments (from previous table) 100.3 100.3 Income tax adjustment^(3) (19.2 ) (19.2 )Non-GAAP net income $ 150.6 $ 152.6 GAAP diluted earnings per share $ 1.56 $ 1.60 Non-GAAP diluted earnings per share $ 3.38 $ 3.42 Diluted weighted average shares outstanding 44.6 44.6 ^(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 $ 199.8 $ 202.4 Other (expense) income (11.6 ) (11.6 )Non-GAAP income from continuing operations before 188.2 190.8 income taxesNon-GAAP net income 150.6 152.6 Tax provision $ 37.6 $ 38.2 Non-GAAP tax rate 20 % 20 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021GUIDANCE(Unaudited)

Fiscal Year 2021 Adjusted Free Cash Flow Guidance Fiscal Year Ending November 30, 2021(In millions) Low HighCash flows from operations (GAAP) $ 157 $ 162 Purchases of property and equipment (7 ) (7 )Add back: restructuring payments 5 5 Adjusted free cash flow (non-GAAP) $ 155 $ 160

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2021 GUIDANCE(Unaudited)

Q2 2021 Revenue Guidance Three Months Three Months Ending Ended May 31, May 31, 2021 2020(In millions) Low % High % Change ChangeGAAP revenue $ 100.4 $ 112.3 12 % $ 116.3 16 %Acquisition-relatedadjustments - 2.1 6.7 219 % 6.7 219 %revenue^(1)Non-GAAP revenue $ 102.5 $ 119.0 16 % $ 123.0 20 % ^(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 Ipswitch and Chef.

Q2 2021 Non-GAAP Earnings per Share Guidance Three Months Ending May 31, 2021 Low HighGAAP diluted earnings per share $ 0.25 $ 0.27 Acquisition-related revenue 0.15 0.15 Acquisition-related expense 0.01 0.01 Stock-based compensation 0.16 0.16 Amortization of acquired intangibles 0.26 0.26 Total adjustments^(2) 0.58 0.58 Income tax adjustment (0.11 ) (0.11 )Non-GAAP diluted earnings per share $ 0.72 $ 0.74 ^(2)Total adjustments include preliminary estimates relating to the valuationof intangible assets acquired from Chef. The final amounts will not beavailable until the Company?s internal procedures and reviews are completed.