Progress Announces Second Quarter 2022 Financial Results


Revenue and EPS Exceed Prior Guidance

BURLINGTON, Mass., June 28, 2022 (GLOBE NEWSWIRE) — Progress (Nasdaq: PRGS), the trusted provider of infrastructure software, today announced financial results for its fiscal second quarter ended May 31, 2022.

Second Quarter 2022 Highlights:

  • Revenue of $148.7 million increased 21% year-over-year on an actual currency basis, and 24% on a constant currency basis.
  • Non-GAAP revenue of $150.9 million increased 17% on an actual currency basis, and 19% on a constant currency basis.
  • Annualized Recurring Revenue (ARR) of $486 million increased 13% year-over-year on a constant currency basis.
  • Operating margin was 27% and Non-GAAP operating margin was 41%.
  • Diluted earnings per share was $0.66 compared to $0.30 in the same quarter last year, an increase of 120%. 
  • Non-GAAP diluted earnings per share was $1.04 compared to $0.82 in the same quarter last year, an increase of 27%.

“Once again, we are very pleased to report excellent quarterly results, especially during so much market turmoil and global uncertainty,” said Yogesh Gupta, CEO at Progress. “Progress again performed exceptionally well across the board, exceeding revenue and EPS guidance, which was driven by a Total Growth Strategy that layers accretive M&A over a highly profitable and predictable business with strong recurring revenue and very high retention rates. Despite a tumultuous market and an economy with increasing risks, Progress remains well positioned to continue our steady execution for the remainder of 2022 and beyond.”

Additional financial highlights included(1):

  Three Months Ended
  GAAP   Non-GAAP
(In thousands, except percentages and per share amounts) May 31, 2022   May 31, 2021   % Change   May 31, 2022   May 31, 2021   % Change
Revenue $ 148,747     $ 122,488     21 %   $ 150,879     $ 129,198     17 %
Income from operations $ 40,235     $ 22,282     81 %   $ 61,298     $ 49,712     23 %
Operating margin   27 %     18 %   900bps     41 %     38 %   300bps
Net income $ 29,110     $ 13,557     115 %   $ 45,886     $ 36,513     26 %
Diluted earnings per share $ 0.66     $ 0.30     120 %   $ 1.04     $ 0.82     27 %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) $ 68,260     $ 54,690     25 %   $ 68,038     $ 55,411     23 %

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

Other fiscal second quarter 2022 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $225.9 million at the end of the quarter.
  • DSO was 39 days compared to 44 days in the fiscal second quarter of 2021 and 52 days in the fiscal first quarter of 2022.
  • On June 21, 2022, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on September 15, 2022 to shareholders of record as of the close of business on September 1, 2022.

Anthony Folger, CFO, said: “Despite the recent challenges in the global economy, our business continues to perform well across virtually all product lines. Our integration of Kemp is on track, our balance sheet continues to strengthen, and the recurring nature of our revenues and our strong retention rates will continue to serve us well in this environment.”

2022 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2022 and the fiscal third quarter ending August 31, 2022:

  Updated FY 2022 Guidance
(June 28, 2022)
  Prior FY 2022 Guidance
(March 29, 2022)
(In millions, except percentages and per share amounts) GAAP   Non-GAAP   GAAP   Non-GAAP
Revenue $601 – $609   $609 – $617   $601 – $609   $609 – $617
Diluted earnings per share $2.11 – $2.21   $4.05 – $4.11   $2.16 – $2.23   $4.01 – $4.09
Operating margin 22% – 23%   39% – 40%   23 %   39% – 40%
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$188 – $193   $185 – $190   $188 – $193   $185 – $190
Effective tax rate 21 %   20% – 21%   21 %   20% – 21%
  Q3 2022 Guidance
(In millions, except per share amounts) GAAP   Non-GAAP
Revenue $145 – $148   $147 – $150
Diluted earnings per share $0.46 – $0.48   $0.96 – $0.98

Based on current exchange rates, the expected negative currency translation impact on Progress’ fiscal year 2022 business outlook compared to 2021 exchange rates is approximately $11.7 million on GAAP and non-GAAP revenue, and approximately $0.04 on GAAP and non-GAAP diluted earnings per share. The expected negative currency translation impact on Progress’ fiscal Q3 2022 business outlook compared to 2021 exchange rates on GAAP and non-GAAP revenue is approximately $3.6 million. The expected negative impact on GAAP and non-GAAP diluted Q3 2022 earnings per share is $0.02. 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 2022 at 5:00 p.m. ET on Tuesday, June 28, 2022. 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 866-374-5140 or +1 404-400-0571, passcode 186-83-835#. 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, 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 Kemp 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, 2021. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

About Progress

Dedicated to propelling business forward in a technology-driven world, Progress (Nasdaq: PRGS) helps businesses drive faster cycles of innovation, fuel momentum and accelerate their path to success. As the trusted provider of the best products to develop, deploy and manage high-impact applications, Progress enables customers to develop the applications and experiences they need, deploy where and how they want and manage it all safely and securely. Hundreds of thousands of enterprises, including 1,700 software companies and 3.5 million developers, depend on Progress to achieve their goals—with confidence. Learn more at www.progress.com

.

Progress and Progress Software are trademarks or registered trademarks of Progress Software Corporation and/or its subsidiaries or affiliates in the U.S. and other countries. Any other names contained herein may be trademarks of their respective owners.

Investor Contact: Press Contact:
Michael Micciche Erica McShane
Progress Software Progress Software
+1 781 850 8450 +1 781 280 4000
Investor-Relations@progress.com PR@progress.com

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

  Three Months Ended         Six Months Ended      
(In thousands, except per share data) May 31, 2022   May 31, 2021   % Change   May 31, 2022   May 31, 2021   % Change
Revenue:                                  
Software licenses $ 44,814     $ 30,107     49 %   $ 87,564     $ 63,424     38 %
Maintenance and services   103,933       92,381     13 %     206,105       180,344     14 %
Total revenue   148,747       122,488     21 %     293,669       243,768     20 %
Costs of revenue:                                  
Cost of software licenses   2,583       1,038     149 %     5,192       2,189     137 %
Cost of maintenance and services   15,801       14,673     8 %     30,946       27,992     11 %
Amortization of acquired intangibles   5,573       3,599     55 %     11,031       7,120     55 %
Total costs of revenue   23,957       19,310     24 %     47,169       37,301     26 %
Gross profit   124,790       103,178     21 %     246,500       206,467     19 %
Operating expenses:                                  
Sales and marketing   32,704       29,262     12 %     66,173       58,731     13 %
Product development   28,643       26,415     8 %     57,316       50,963     12 %
General and administrative   19,207       16,460     17 %     36,198       29,884     21 %
Amortization of acquired intangibles   11,892       7,979     49 %     23,614       14,858     59 %
Restructuring expenses   143       (64 )   (323 )%     654       1,093     (40 )%
Acquisition-related expenses   2,736       844     224 %     3,648       1,240     194 %
Gain on sale of assets held for sale   (10,770 )           *     (10,770 )           *
Total operating expenses   84,555       80,896     5 %     176,833       156,769     13 %
Income from operations   40,235       22,282     81 %     69,667       49,698     40 %
Other expense, net   (3,390 )     (5,218 )   35 %     (6,870 )     (7,870 )   13 %
Income before income taxes   36,845       17,064     116 %     62,797       41,828     50 %
Provision for income taxes   7,735       3,507     121 %     13,233       9,310     42 %
Net income $ 29,110     $ 13,557     115 %   $ 49,564     $ 32,518     52 %
                                   
Earnings per share:                                  
Basic $ 0.67     $ 0.31     116 %   $ 1.13     $ 0.74     53 %
Diluted $ 0.66     $ 0.30     120 %   $ 1.11     $ 0.73     52 %
Weighted average shares outstanding:                                  
Basic   43,575       43,818     (1 )%     43,778       43,963    
%
Diluted   44,253       44,472     %     44,480       44,562     %
                                   
Cash dividends declared per common share $ 0.175     $ 0.175     %   $ 0.350     $ 0.350     %
Stock-based compensation is included in the condensed consolidated statements of operations, as follows:                
Cost of revenue $ 472   $ 468   1 %   $ 883   $ 860   3 %
Sales and marketing   690     1,752   (61 )%     2,092     3,255   (36 )%
Product development   2,740     2,412   14 %     4,962     4,331   15 %
General and administrative   5,455     3,730   46 %     9,534     6,700   42 %
Total $ 9,357   $ 8,362   12 %   $ 17,471   $ 15,146   15 %

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands) May 31, 2022   November 30, 2021
Assets      
Current assets:      
Cash, cash equivalents and short-term investments $ 225,913   $ 157,373
Accounts receivable, net   64,733     99,815
Unbilled receivables and contract assets   32,735     25,816
Other current assets   32,488     39,549
Assets held for sale       15,255
Total current assets   355,869     337,808
Property and equipment, net   13,649     14,345
Goodwill and intangible assets, net   925,426     958,337
Right-of-use lease assets   21,364     25,253
Long-term unbilled receivables and contract assets   24,253     17,464
Other assets   14,021     10,330
Total assets $ 1,354,582   $ 1,363,537
Liabilities and shareholders’ equity      
Current liabilities:      
Accounts payable and other current liabilities $ 62,821   $ 84,215
Current portion of long-term debt, net   6,234     25,767
Short-term operating lease liabilities   7,843     7,926
Short-term deferred revenue   207,331     205,021
Total current liabilities   284,229     322,929
Long-term debt, net   262,337     239,992
Convertible senior notes, net   351,567     294,535
Long-term operating lease liabilities   18,965     23,130
Long-term deferred revenue   51,249     47,359
Other long-term liabilities   14,089     23,103
Shareholders’ equity:      
Common stock and additional paid-in capital   310,348     354,676
Retained earnings   61,798     57,813
Total shareholders’ equity   372,146     412,489
Total liabilities and shareholders’ equity $ 1,354,582   $ 1,363,537

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  

  Three Months Ended   Six Months Ended
(In thousands) May 31,
2022
  May 31,
2021
  May 31,
2022
  May 31,
2021
Cash flows from operating activities:              
Net income $ 29,110     $ 13,557     $ 49,564     $ 32,518  
Depreciation and amortization   19,379       14,829       38,597       26,691  
Gain on sale of assets held for sale   (10,770 )           (10,770 )      
Stock-based compensation   9,357       8,362       17,471       15,146  
Other non-cash adjustments   1,673       708       6,115       3,123  
Changes in operating assets and liabilities   19,511       17,234       11,376       21,900  
Net cash flows from operating activities   68,260       54,690       112,353       99,378  
Capital expenditures   (1,148 )     (950 )     (1,979 )     (2,116 )
Issuances of common stock, net of repurchases   (22,796 )     (17,185 )     (43,702 )     (28,700 )
Dividend payments to shareholders   (7,789 )     (7,763 )     (15,573 )     (15,617 )
Proceeds from the issuance of debt, net of payment of issuance costs               5,517        
Proceeds from sale of long-lived assets, net                      
Payments of principal on long-term debt   (1,716 )     (87,262 )     (3,435 )     (106,025 )
Proceeds from issuance of Notes, net of issuance costs         349,196             349,196  
Purchase of capped calls         (43,056 )           (43,056 )
Other   17,780       619       15,359       3,605  
Net change in cash, cash equivalents and short-term investments   52,591       248,289       68,540       256,665  
Cash, cash equivalents and short-term investments, beginning of period   173,322       114,371       157,373       105,995  
Cash, cash equivalents and short-term investments, end of period $ 225,913     $ 362,660     $ 225,913     $ 362,660  

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

  Three Months Ended   % Change
(In thousands, except per share data) May 31, 2022   May 31, 2021   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 148,747         $ 122,488          
Acquisition-related revenue(1)   2,132           6,710          
Non-GAAP revenue $ 150,879     100 %   $ 129,198     100 %   17 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 40,235     27 %   $ 22,282     18 %    
Amortization of acquired intangibles   17,465     12 %     11,578     9 %    
Restructuring expenses and other   143     %     (64 )   %    
Stock-based compensation   9,357     6 %     8,362     5 %    
Acquisition-related revenue(1) and expenses   4,868     3 %     7,554     6 %    
Gain on sale of assets held for sale   (10,770 )   (7)%         %    
Non-GAAP income from operations $ 61,298     41 %   $ 49,712     38 %   23 %
                   
Adjusted net income:                  
GAAP net income $ 29,110     20 %   $ 13,557     11 %    
Amortization of acquired intangibles   17,465     12 %     11,578     9 %    
Restructuring expenses and other   143     %     (64 )   %    
Stock-based compensation   9,357     5 %     8,362     6 %    
Acquisition-related revenue(1) and expenses   4,868     3 %     7,554     6 %    
Gain on sale of assets held for sale   (10,770 )   (7)%         %    
Amortization of discount on notes       %     1,480     1 %    
Provision for income taxes   (4,287 )   (3)%     (5,954 )   (5)%    
Non-GAAP net income $ 45,886     30 %   $ 36,513     28 %   26 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 0.66         $ 0.30          
Amortization of acquired intangibles   0.39           0.26          
Stock-based compensation   0.22           0.19          
Acquisition-related revenue(1) and expenses   0.11           0.17          
Gain on sale of assets held for sale   (0.24 )                  
Amortization of discount on notes             0.03          
Provision for income taxes   (0.10 )         (0.13 )        
Non-GAAP diluted earnings per share $ 1.04         $ 0.82         27 %
                   
Non-GAAP weighted avg shares outstanding – diluted   44,253           44,472         %
                   
(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.

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, 2022   May 31, 2021   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 293,669         $ 243,768          
Acquisition-related revenue(1)   4,715           17,214          
Non-GAAP revenue $ 298,384     100 %   $ 260,982     100 %   14 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 69,667     24 %   $ 49,698     20 %    
Amortization of acquired intangibles   34,645     12 %     21,978     8 %    
Restructuring expenses and other   654     %     1,093     %    
Stock-based compensation   17,471     5 %     15,146     6 %    
Acquisition-related revenue(1) and expenses   8,363     3 %     18,454     7 %    
Gain of sale of assets held for sale   (10,770 )   (4)%         %    
Non-GAAP income from operations $ 120,030     40 %   $ 106,369     41 %   13 %
                   
Adjusted net income:                  
GAAP net income $ 49,564     17 %   $ 32,518     13 %    
Amortization of acquired intangibles   34,645     12 %     21,978     8 %    
Restructuring expenses and other   654     %     1,093     %    
Stock-based compensation   17,471     6 %     15,146     6 %    
Acquisition-related revenue(1) and expenses   8,363     3 %     18,454     7 %    
Gain of sale of assets held for sale   (10,770 )   (4)%         %    
Amortization of discount on notes       %     1,480     %    
Provision for income taxes   (10,481 )   (4)%     (11,652 )   (4)%    
Non-GAAP net income $ 89,446     30 %   $ 79,017     30 %   13 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 1.11         $ 0.73          
Amortization of acquired intangibles   0.78           0.49          
Restructuring expenses and other   0.01           0.02          
Stock-based compensation   0.40           0.35          
Acquisition-related revenue(1) and expenses   0.19           0.41          
Gain of sale of assets held for sale   (0.24 )                  
Amortization of discount on notes             0.03          
Provision for income taxes   (0.24 )         (0.26 )        
Non-GAAP diluted earnings per share $ 2.01         $ 1.77         14 %
                   
Non-GAAP weighted avg shares outstanding – diluted   44,480           44,562         %
                   
(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.

OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)

Quarter to Date Adjusted Free Cash Flow          
           
(In thousands) Q2 2022   Q2 2021   % Change
Cash flows from operations $ 68,260     $ 54,690     25 %
Purchases of property and equipment   (1,148 )     (950 )   21 %
Free cash flow   67,112       53,740     25 %
Add back: restructuring payments   926       1,671     (45)%
Adjusted free cash flow $ 68,038     $ 55,411     23 %
Year to Date Adjusted Free Cash Flow          
           
(In thousands) Q2 2022   Q2 2021   % Change
Cash flows from operations $ 112,353     $ 99,378     13 %
Purchases of property and equipment   (1,979 )     (2,116 )   (6)%
Free cash flow   110,374       97,262     13 %
Add back: restructuring payments   2,345       4,664     (50)%
Adjusted free cash flow $ 112,719     $ 101,926     11 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2022 GUIDANCE
(Unaudited)

Fiscal Year 2022 Updated Revenue Guidance
  Fiscal Year Ended   Fiscal Year Ending
  November 30, 2021   November 30, 2022
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 531.3   $ 600.5   13 %   $ 608.5   15 %
Acquisition-related adjustments – revenue(1)   26.0     8.5   (67)%     8.5   (67)%
Non-GAAP revenue $ 557.3   $ 609.0   9 %   $ 617.0   11 %
(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 Ipswitch and Chef.
Fiscal Year 2022 Updated Non-GAAP Operating Margin Guidance
  Fiscal Year Ending November 30, 2022
(In millions) Low   High
GAAP income from operations $ 133.5     $ 139.8  
GAAP operating margins   22 %     23 %
Acquisition-related revenue   8.5       8.5  
Acquisition-related expense   4.9       4.9  
Restructuring expense   0.9       0.9  
Stock-based compensation   34.4       34.4  
Amortization of acquired intangibles   69.1       69.1  
Gain on sale of assets held for sale   (10.8 )     (10.8 )
Total adjustments(2)   107.0       107.0  
Non-GAAP income from operations $ 240.5     $ 246.8  
Non-GAAP operating margin   39 %     40 %
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Kemp and restructuring expenses. The final amounts will not be available until the Company’s internal procedures and reviews are completed.
Fiscal Year 2022 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance
  Fiscal Year Ending November 30, 2022
(In millions, except per share data) Low   High
GAAP net income $ 93.7     $ 98.2  
Adjustments (from previous table)   107.0       107.0  
Income tax adjustment(3)   (20.7 )     (22.5 )
Non-GAAP net income $ 180.0     $ 182.7  
       
GAAP diluted earnings per share $ 2.11     $ 2.21  
Non-GAAP diluted earnings per share $ 4.05     $ 4.11  
       
Diluted weighted average shares outstanding   44.5       44.5  
       
(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately 20% for Low and 21% for High, calculated as follows:
Non-GAAP income from operations $ 240.5     $ 246.8  
Other (expense) income   (15.5 )     (15.5 )
Non-GAAP income from continuing operations before income taxes   225.0       231.3  
Non-GAAP net income   180.0       182.7  
Tax provision $ 45.0     $ 48.6  
Non-GAAP tax rate   20 %     21 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2022 GUIDANCE
(Unaudited)

Fiscal Year 2022 Adjusted Free Cash Flow Guidance
  Fiscal Year Ending November 30, 2022
(In millions) Low   High
Cash flows from operations (GAAP) $ 188     $ 193  
Purchases of property and equipment   (6 )     (6 )
Add back: restructuring payments   3       3  
Adjusted free cash flow (non-GAAP) $ 185     $ 190  

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2022 GUIDANCE
(Unaudited)

Q3 2022 Revenue Guidance
  Three Months Ended   Three Months Ending
  August 31, 2021   August 31, 2022
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 147.4   $ 145.2   (1)%   $ 148.2   1 %
Acquisition-related adjustments – revenue(1)   5.2     1.8   (65)%     1.8   (65)%
Non-GAAP revenue $ 152.6   $ 147.0   (4)%   $ 150.0   (2)%
(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 Ipswitch and Chef.
Q3 2022 Non-GAAP Earnings per Share Guidance
  Three Months Ending August 31, 2022
  Low   High
GAAP diluted earnings per share $ 0.46     $ 0.48  
Acquisition-related revenue   0.04       0.04  
Acquisition-related expense   0.01       0.01  
Stock-based compensation   0.19       0.19  
Amortization of acquired intangibles   0.39       0.39  
Total adjustments(2)   0.63       0.63  
Income tax adjustment   (0.13 )     (0.13 )
Non-GAAP diluted earnings per share $ 0.96     $ 0.98  
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Kemp. The final amounts will not be available until the Company’s internal procedures and reviews are completed.

Progress Software Corporation



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