Third Quarter Results Ahead of Estimates
ARR Up 18%; Raises Full Year Outlook
BURLINGTON, Mass., Sept. 26, 2023 (GLOBE NEWSWIRE) -- Progress (Nasdaq: PRGS), the trusted provider of infrastructure software, today announced financial results for its fiscal third quarter ended August 31, 2023.
Third Quarter 2023 Highlights1:
- Revenue of $175.0 million increased 16% year-over-year on an actual currency basis and 14% on a constant currency basis.
- Non-GAAP revenue of $175.8 million increased 15% year-over-year on an actual currency basis and 13% on a constant currency basis.
- Annualized Recurring Revenue ("ARR") of $577 million increased 18% year-over-year on a constant currency basis.
- Operating margin was 17% and non-GAAP operating margin was 39%.
- Diluted earnings per share was $0.42 compared to $0.50 in the same quarter last year, a decrease of 16%.
- Non-GAAP diluted earnings per share was $1.08 compared to $1.00 in the same quarter last year, an increase of 8%.
"We are delighted that we delivered another strong quarter driven by sustained demand around the world, and continue to be confident in our business as evidenced by our increased guidance for the full year," said Yogesh Gupta, CEO at Progress. "In addition to our solid Q3 performance, with net retention again over 100% and integration of MarkLogic on plan, we continue to be active in the search for our next M&A transaction in a market that, we believe, will keep moving in our favor as the acquirer of choice in infrastructure software."
Additional financial highlights included:
| Three Months Ended | |||||||||||||||||||||
| GAAP | Non-GAAP1 | ||||||||||||||||||||
| (In thousands, except percentages and per share amounts) | August 31, 2023 | August 31, 2022 | % Change | August 31, 2023 | August 31, 2022 | % Change | |||||||||||||||
| Revenue | $ | 174,992 | $ | 151,217 | 16 | % | $ | 175,783 | $ | 153,060 | 15 | % | |||||||||
| Income from operations | $ | 29,371 | $ | 32,021 | (8)% | $ | 68,390 | $ | 60,075 | 14 | % | ||||||||||
| Operating margin | 17 | % | 21 | % | (400) bps | 39 | % | 39 | % | - | |||||||||||
| Net income | $ | 19,098 | $ | 21,797 | (12)% | $ | 48,749 | $ | 44,090 | 11 | % | ||||||||||
| Diluted earnings per share | $ | 0.42 | $ | 0.50 | (16)% | $ | 1.08 | $ | 1.00 | 8 | % | ||||||||||
| Cash from operations (GAAP) /Adjusted free cash flow (non-GAAP) | $ | 46,041 | $ | 39,670 | 16 | % | $ | 47,649 | $ | 39,237 | 21 | % | |||||||||
Other fiscal third quarter 2023 metrics and recent results included:
- Cash and cash equivalents were $138.0 million at the end of the quarter.
- Days sales outstanding was 49 days compared to 48 days in the fiscal third quarter of 2022 and 44 days in the fiscal second quarter of 2023.
- On September 20, 2023, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock which will be paid on December 15, 2023 to shareholders of record as of the close of business on December 1, 2023.
1 See Important Information Regarding Non-GAAP Financial Information and a reconciliation of non-GAAP adjustments to Progress' GAAP financial results at the end of this press release.
Anthony Folger, CFO, said: "We're delighted to see continued strength in demand for our products, and we are pleased that our positive outlook remains on track. ARR expanded 18% in constant currency to $577M, or 2% on a pro-forma basis. Net retention rates remained above our target of +100%, at 100.6%. Operating margins for the quarter came in at 39%, MarkLogic continues to pace our integration milestones, and the balance sheet remains strong as we pay down debt while actively pursuing accretive M&A opportunities."
2023 Business Outlook
Progress provides the following guidance for the fiscal year ending November 30, 2023 and the fiscal fourth quarter ending November 30, 2023:
| Updated FY 2023 Guidance (September 26, 2023) | Prior FY 2023 Guidance (June 29, 2023) | ||||||
| (In millions, except percentages and per share amounts) | GAAP | Non-GAAP1 | GAAP | Non-GAAP1 | |||
| Revenue | $688 - $694 | $692 - $698 | $686 - $694 | $690 - $698 | |||
| Diluted earnings per share | $1.36 - $1.42 | $4.20 - $4.26 | $1.35 - $1.43 | $4.16 - $4.24 | |||
| Operating margin | 15% | 38% - 39% | 15% - 16% | 38% - 39% | |||
| Cash from operations (GAAP) / Adjusted free cash flow (non-GAAP) | $175 - $181 | $177 - $183 | $173 - $183 | $175 - $185 | |||
| Effective tax rate | 16% | 20% | 20% - 21% | 20% - 21% | |||
| Q4 2023 Guidance | |||
| (In millions, except per share amounts) | GAAP | Non-GAAP1 | |
| Revenue | $171 - $177 | $171 - $177 | |
| Diluted earnings per share | $0.13 - $0.19 | $0.87 - $0.93 | |
Based on current exchange rates, the expected positive currency translation impact on Progress' fiscal year 2023 business outlook compared to 2022 exchange rates on GAAP and non-GAAP revenue is approximately $2.3 million, and approximately $0.03 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress' fiscal Q4 2023 business outlook compared to 2022 exchange rates on GAAP and non-GAAP revenue is approximately $2.6 million, and approximately $0.01 on GAAP and non-GAAP diluted Q4 2023 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
Progress will hold a conference call to review its financial results for the fiscal third quarter of 2023 at 5:00 p.m. ET on Tuesday, September 26, 2023. Participants must register for the conference call here: https://register.vevent.com/register/BI72285db48dff4b828a4154f9ed1f81a8. The webcast can be accessed at: https://edge.media-server.com/mmc/p/sbf62nuj/. The conference call will include comments followed by questions and answers. Attendees must register for the webcast and 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.
Important Information Regarding Non-GAAP Financial Information
Progress furnishes certain non-GAAP supplemental information to our financial results. We use such non-GAAP financial measures to evaluate our period-over-period operating performance because our management team believes that by excluding the effects of certain GAAP-related items that in their opinion do not reflect the ordinary earnings of our operations, such information helps to illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as greater understanding of the results from the primary operations of our business. Management also uses such non-GAAP financial measures to establish budgets and operational goals, evaluate performance, and allocate resources. In addition, the compensation of our executives and non-executive employees is based in part on the performance of our business as evaluated by such non-GAAP financial measures. We believe these non-GAAP financial measures enhance investors' overall understanding of our current financial performance and our prospects for the future by: (i) providing more transparency for certain financial measures, (ii) presenting disclosure that helps investors understand how we plan and measure the performance of our business, (iii) affords a view of our operating results that may be more easily compared to our peer companies, and (iv) enables investors to consider our operating results on both a GAAP and non-GAAP basis (including following the integration period of our prior and proposed acquisitions). 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 may have a material impact on Progress' financial results. A reconciliation of non-GAAP adjustments to Progress' GAAP financial results is included in the tables at the end of this press release.
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 - We include acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue that would have been recognized prior to our adoption of Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08") during the fourth quarter of fiscal year 2021. The acquisition-related revenue in our results relates to Chef Software, Inc. and Ipswitch, Inc., which we acquired on October 5, 2020 and April 30, 2019, respectively. Since GAAP accounting required the elimination of this revenue prior to the adoption of ASU 2021-08, 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. Upon our adoption of ASU 2021-08, this adjustment is no longer applicable to subsequent acquisitions. The remaining adjustment is related to our acquisition of Chef and is expected to continue through the end of fiscal year 2023.
- Amortization of acquired intangibles - 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. Adjustments include preliminary estimates relating to the valuation of intangible assets from MarkLogic Corporation ("MarkLogic"), which we acquired on February 7, 2023. The final amounts will not be available until the Company's internal procedures and reviews are completed.
- Stock-based compensation - We exclude stock-based compensation to be consistent with the way management and, in our view, the overall 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.
- 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. Adjustments include preliminary estimates relating to restructuring expenses from MarkLogic. The final amounts will not be available until the Company's internal procedures and reviews are completed.
- Acquisition-related expenses - We exclude acquisition-related expenses in order to provide a more meaningful comparison 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.
- Gain on sale of assets held for sale - We exclude the gain associated with the sale of our Bedford, Massachusetts headquarters during fiscal year 2022. We don't believe such gains are part of our core operating results because they are inconsistent in amount and frequency and therefore may distort operating trends.
- Cyber incident and vulnerability response expenses, net
- Cyber incident - We exclude certain expenses resulting from the detection of irregular activity on certain portions of our corporate network, as more thoroughly described in the Form 8-K that we filed on December 19, 2022.
- MOVEit Vulnerability - We exclude certain expenses resulting from the zero-day MOVEit Vulnerability, as more thoroughly described in the Form 8-K that we filed on June 5, 2023 and Form 10-Q filed on July 7, 2023. We currently intend to provide additional details regarding the MOVEit Vulnerability in our Form 10-Q for the quarter ended August 31, 2023.
Expenses include costs to investigate and remediate these cyber related matters, as well as legal and other professional services related thereto. Expenses related to such cyber matters are provided net of expected insurance recoveries, although the timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. Costs associated with the enhancement of our cybersecurity program are not included within this adjustment. We expect to continue to incur legal and other professional services expenses in future periods. Expenses related to such cyber matters are expected to result in operating expenses that would not have otherwise been incurred in the normal course of business operations. We believe that excluding these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.
- Provision for income taxes - 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. 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.
- Annual Recurring Revenue ("ARR") - We provide 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 reporting period. ARR includes maintenance, software upgrade rights, public cloud and on-premises subscription-based transactions and managed services. 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.
- Net Retention Rate - We calculate net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period ARR"). We then calculate the ARR from these same customers as of the current period end ("Current Period ARR"). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net retention rate. Net retention rate is not calculated in accordance with GAAP.
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.
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 (including the integration of MarkLogic and future acquisition activity) 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: (i) 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; (ii) 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; (iii) 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; (iv) 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 or zero-day vulnerabilities, we may experience reputational harm, legal claims and financial exposure; and (v) risks related to the disruption associated with the ongoing integration of MarkLogic. 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, 2022 and Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2023. 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 | Nine Months Ended | ||||||||||||||||||||
| (In thousands, except per share data) | August 31, 2023 | August 31, 2022 | % Change | August 31, 2023 | August 31, 2022 | % Change | |||||||||||||||
| Revenue: | |||||||||||||||||||||
| Software licenses | $ | 50,544 | $ | 47,618 | 6 | % | $ | 164,519 | $ | 135,182 | 22 | % | |||||||||
| Maintenance and services | 124,448 | 103,599 | 20 | % | 352,950 | 309,704 | 14 | % | |||||||||||||
| Total revenue | 174,992 | 151,217 | 16 | % | 517,469 | 444,886 | 16 | % | |||||||||||||
| Costs of revenue: | |||||||||||||||||||||
| Cost of software licenses | 2,732 | 2,477 | 10 | % | 7,998 | 7,669 | 4 | % | |||||||||||||
| Cost of maintenance and services | 22,192 | 15,761 | 41 | % | 62,663 | 46,707 | 34 | % | |||||||||||||
| Amortization of acquired intangibles | 7,995 | 5,558 | 44 | % | 22,253 | 16,589 | 34 | % | |||||||||||||
| Total costs of revenue | 32,919 | 23,796 | 38 | % | 92,914 | 70,965 | 31 | % | |||||||||||||
| Gross profit | 142,073 | 127,421 | 11 | % | 424,555 | 373,921 | 14 | % | |||||||||||||
| Operating expenses: | |||||||||||||||||||||
| Sales and marketing | 38,612 | 34,595 | 12 | % | 112,513 | 100,768 | 12 | % | |||||||||||||
| Product development | 33,138 | 28,650 | 16 | % | 98,396 | 85,966 | 14 | % | |||||||||||||
| General and administrative | 20,791 | 20,141 | 3 | % | 61,046 | 56,339 | 8 | % | |||||||||||||
| Amortization of acquired intangibles | 17,668 | 11,716 | 51 | % | 48,825 | 35,330 | 38 | % | |||||||||||||
| Cyber incident and vulnerability response expenses, net | 951 | - | * | 5,126 | - | * | |||||||||||||||
| Restructuring expenses | 843 | 130 | * | 6,230 | 784 | * | |||||||||||||||
| Acquisition-related expenses | 699 | 168 | * | 4,433 | 3,816 | 16 | % | ||||||||||||||
| Gain on sale of assets held for sale | - | - | * | - | (10,770 | ) | * | ||||||||||||||
| Total operating expenses | 112,702 | 95,400 | 18 | % | 336,569 | 272,233 | 24 | % | |||||||||||||
| Income from operations | 29,371 | 32,021 | (8)% | 87,986 | 101,688 | (13)% | |||||||||||||||
| Other expense, net | (8,419 | ) | (4,339 | ) | 94 | % | (22,501 | ) | (11,209 | ) | 101 | % | |||||||||
| Income before income taxes | 20,952 | 27,682 | (24)% | 65,485 | 90,479 | (28)% | |||||||||||||||
| Provision for income taxes | 1,854 | 5,885 | (68)% | 10,623 | 19,118 | (44)% | |||||||||||||||
| Net income | $ | 19,098 | $ | 21,797 | (12)% | $ | 54,862 | $ | 71,361 | (23)% | |||||||||||
| Earnings per share: | |||||||||||||||||||||
| Basic | $ | 0.44 | $ | 0.50 | (12)% | $ | 1.27 | $ | 1.64 | (23)% | |||||||||||
| Diluted | $ | 0.42 | $ | 0.50 | (16)% | $ | 1.23 | $ | 1.61 | (24)% | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||
| Basic | 43,452 | 43,211 | 1 | % | 43,365 | 43,589 | (1)% | ||||||||||||||
| Diluted | 44,981 | 43,935 | 2 | % | 44,543 | 44,299 | 1 | % | |||||||||||||
| Cash dividends declared per common share | $ | 0.175 | $ | 0.175 | - | % | $ | 0.525 | $ | 0.525 | - | % | |||||||||
| Stock-based compensation is included in the condensed consolidated statements of operations, as follows: | |||||||||||||||||||||
| Cost of revenue | $ | 797 | $ | 527 | 51 | % | $ | 2,146 | $ | 1,410 | 52 | % | |||||||||
| Sales and marketing | 1,763 | 1,331 | 32 | % | 5,027 | 3,423 | 47 | % | |||||||||||||
| Product development | 3,065 | 2,586 | 19 | % | 9,112 | 7,548 | 21 | % | |||||||||||||
| General and administrative | 4,447 | 4,195 | 6 | % | 13,826 | 13,729 | 1 | % | |||||||||||||
| Total | $ | 10,072 | $ | 8,639 | 17 | % | $ | 30,111 | $ | 26,110 | 15 | % | |||||||||
*not meaningful
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands) | August 31, 2023 | November 30, 2022 | |||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 137,999 | $ | 256,277 | |
| Accounts receivable, net | 99,726 | 97,834 | |||
| Unbilled receivables | 31,668 | 29,158 | |||
| Other current assets | 33,447 | 42,784 | |||
| Total current assets | 302,840 | 426,053 | |||
| Property and equipment, net | 16,166 | 14,927 | |||
| Goodwill and intangible assets, net | 1,204,872 | 888,392 | |||
| Right-of-use lease assets | 20,596 | 17,574 | |||
| Long-term unbilled receivables | 33,121 | 39,936 | |||
| Other assets | 19,873 | 24,597 | |||
| Total assets | $ | 1,597,468 | $ | 1,411,479 | |
| Liabilities and shareholders' equity | |||||
| Current liabilities: | |||||
| Accounts payable and other current liabilities | $ | 83,624 | $ | 76,629 | |
| Current portion of long-term debt, net | 11,390 | 6,234 | |||
| Short-term operating lease liabilities | 10,088 | 7,471 | |||
| Short-term deferred revenue, net | 219,601 | 227,670 | |||
| Total current liabilities | 324,703 | 318,004 | |||
| Long-term debt, net | 389,388 | 259,220 | |||
| Convertible senior notes, net | 354,246 | 352,625 | |||
| Long-term operating lease liabilities | 15,086 | 15,041 | |||
| Long-term deferred revenue, net | 60,167 | 54,770 | |||
| Other long-term liabilities | 8,832 | 13,315 | |||
| Shareholders' equity: | |||||
| Common stock and additional paid-in capital | 361,500 | 332,083 | |||
| Retained earnings | 83,546 | 66,421 | |||
| Total shareholders' equity | 445,046 | 398,504 | |||
| Total liabilities and shareholders' equity | $ | 1,597,468 | $ | 1,411,479 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| (In thousands) | August 31, 2023 | August 31, 2022 | August 31, 2023 | August 31, 2022 | |||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net income | $ | 19,098 | $ | 21,797 | $ | 54,862 | $ | 71,361 | |||||||
| Depreciation and amortization | 27,892 | 19,219 | 77,432 | 57,816 | |||||||||||
| Gain on sale of assets held for sale | - | - | - | (10,770 | ) | ||||||||||
| Stock-based compensation | 10,072 | 8,639 | 30,111 | 26,110 | |||||||||||
| Other non-cash adjustments | (4,935 | ) | 234 | (11,091 | ) | 6,349 | |||||||||
| Changes in operating assets and liabilities | (6,086 | ) | (10,219 | ) | (10,555 | ) | 1,157 | ||||||||
| Net cash flows from operating activities | 46,041 | 39,670 | 140,759 | 152,023 | |||||||||||
| Capital expenditures | (1,212 | ) | (1,107 | ) | (3,181 | ) | (3,086 | ) | |||||||
| Issuances of common stock, net of repurchases | 4,008 | (21,438 | ) | (9,627 | ) | (65,140 | ) | ||||||||
| Dividend payments to shareholders | (7,798 | ) | (7,778 | ) | (23,669 | ) | (23,351 | ) | |||||||
| Payments for acquisitions, net of cash acquired | 846 | - | (355,250 | ) | - | ||||||||||
| Proceeds from the issuance of debt, net of payment of issuance costs | - | - | 195,000 | 5,517 | |||||||||||
| Principal payment on term loan and repayment of revolving line of credit | (31,720 | ) | (1,719 | ) | (60,157 | ) | (5,154 | ) | |||||||
| Other | 2,303 | (8,677 | ) | (2,153 | ) | 6,682 | |||||||||
| Net change in cash, cash equivalents and short-term investments | 12,468 | (1,049 | ) | (118,278 | ) | 67,491 | |||||||||
| Cash, cash equivalents and short-term investments, beginning of period | 125,531 | 225,913 | 256,277 | 157,373 | |||||||||||
| Cash, cash equivalents and short-term investments, end of period | $ | 137,999 | $ | 224,864 | $ | 137,999 | $ | 224,864 | |||||||
RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES1
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| (In thousands, except per share data) | August 31, 2023 | August 31, 2022 | August 31, 2023 | August 31, 2022 | |||||||||||
| Adjusted revenue: | |||||||||||||||
| GAAP revenue | $ | 174,992 | $ | 151,217 | $ | 517,469 | $ | 444,886 | |||||||
| Acquisition-related revenue | 791 | 1,843 | 3,158 | 6,558 | |||||||||||
| Non-GAAP revenue | $ | 175,783 | $ | 153,060 | $ | 520,627 | $ | 451,444 | |||||||
| Adjusted income from operations: | |||||||||||||||
| GAAP income from operations | $ | 29,371 | $ | 32,021 | $ | 87,986 | $ | 101,688 | |||||||
| Amortization of acquired intangibles | 25,663 | 17,274 | 71,078 | 51,919 | |||||||||||
| Restructuring expenses and other | 843 | 130 | 6,230 | 784 | |||||||||||
| Stock-based compensation | 10,072 | 8,639 | 30,111 | 26,110 | |||||||||||
| Acquisition-related revenue and expenses | 1,490 | 2,011 | 7,591 | 10,374 | |||||||||||
| Cyber incident and vulnerability response expenses, net | 951 | - | 5,126 | - | |||||||||||
| Gain on sale of assets held for sale | - | - | - | (10,770 | ) | ||||||||||
| Non-GAAP income from operations | $ | 68,390 | $ | 60,075 | $ | 208,122 | $ | 180,105 | |||||||
| Adjusted net income: | |||||||||||||||
| GAAP net income | $ | 19,098 | $ | 21,797 | $ | 54,862 | $ | 71,361 | |||||||
| Amortization of acquired intangibles | 25,663 | 17,274 | 71,078 | 51,919 | |||||||||||
| Restructuring expenses and other | 843 | 130 | 6,230 | 784 | |||||||||||
| Stock-based compensation | 10,072 | 8,639 | 30,111 | 26,110 | |||||||||||
| Acquisition-related revenue and expenses | 1,490 | 2,011 | 7,591 | 10,374 | |||||||||||
| Gain on sale of assets held for sale | - | - | - | (10,770 | ) | ||||||||||
| Cyber incident and vulnerability response expenses, net | 951 | - | 5,126 | - | |||||||||||
| Provision for income taxes | (9,368 | ) | (5,761 | ) | (26,553 | ) | (16,242 | ) | |||||||
| Non-GAAP net income | $ | 48,749 | $ | 44,090 | $ | 148,445 | $ | 133,536 | |||||||
| Adjusted diluted earnings per share: | |||||||||||||||
| GAAP diluted earnings per share | $ | 0.42 | $ | 0.50 | $ | 1.23 | $ | 1.61 | |||||||
| Amortization of acquired intangibles | 0.57 | 0.39 | 1.60 | 1.17 | |||||||||||
| Stock-based compensation | 0.23 | 0.19 | 0.67 | 0.59 | |||||||||||
| Restructuring expenses and other | 0.02 | - | 0.14 | 0.02 | |||||||||||
| Acquisition-related revenue and expenses | 0.03 | 0.05 | 0.17 | 0.23 | |||||||||||
| Gain on sale of assets held for sale | - | - | - | (0.24 | ) | ||||||||||
| Cyber incident and vulnerability response expenses, net | 0.02 | - | 0.12 | - | |||||||||||
| Provision for income taxes | (0.21 | ) | (0.13 | ) | (0.60 | ) | (0.37 | ) | |||||||
| Non-GAAP diluted earnings per share | $ | 1.08 | $ | 1.00 | $ | 3.33 | $ | 3.01 | |||||||
| Non-GAAP weighted avg shares outstanding - diluted | 44,981 | 43,935 | 44,543 | 44,299 | |||||||||||
OTHER NON-GAAP FINANCIAL MEASURES1
(Unaudited)
| Adjusted Free Cash Flow | |||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| (In thousands) | August 31, 2023 | August 31, 2022 | % Change | August 31, 2023 | August 31, 2022 | % Change | |||||||||||||||
| Cash flows from operations | $ | 46,041 | $ | 39,670 | 16 | % | $ | 140,759 | $ | 152,023 | (7)% | ||||||||||
| Purchases of property and equipment | (1,212 | ) | (1,107 | ) | 9 | % | (3,181 | ) | (3,086 | ) | 3 | % | |||||||||
| Free cash flow | 44,829 | 38,563 | 16 | % | 137,578 | 148,937 | (8)% | ||||||||||||||
| Add back: restructuring payments | 2,820 | 674 | 318 | % | 4,982 | 3,019 | 65 | % | |||||||||||||
| Adjusted free cash flow | $ | 47,649 | $ | 39,237 | 21 | % | $ | 142,560 | $ | 151,956 | (6)% | ||||||||||
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2023 GUIDANCE1
(Unaudited)
| Fiscal Year 2023 Updated Revenue Guidance | ||||||||||||||
| Fiscal Year Ended | Fiscal Year Ending | |||||||||||||
| November 30, 2022 | November 30, 2023 | |||||||||||||
| (In millions) | Low | % Change | High | % Change | ||||||||||
| GAAP revenue | $ | 602.0 | $ | 688.3 | 14 | % | $ | 694.3 | 15 | % | ||||
| Acquisition-related adjustments - revenue | 8.6 | 3.7 | (57)% | 3.7 | (57)% | |||||||||
| Non-GAAP revenue | $ | 610.6 | $ | 692.0 | 13 | % | $ | 698.0 | 14 | % | ||||
| Fiscal Year 2023 Updated Non-GAAP Operating Margin Guidance | |||||||
| Fiscal Year Ending November 30, 2023 | |||||||
| (In millions) | Low | High | |||||
| GAAP income from operations | $ | 102.8 | $ | 106.6 | |||
| GAAP operating margins | 15 | % | 15 | % | |||
| Acquisition-related revenue | 3.7 | 3.7 | |||||
| Acquisition-related expense | 5.0 | 5.0 | |||||
| Restructuring expense | 10.0 | 10.0 | |||||
| Stock-based compensation | 40.7 | 40.7 | |||||
| Amortization of acquired intangibles | 96.6 | 96.6 | |||||
| Cyber incident and vulnerability response expenses, net | 6.8 | 6.8 | |||||
| Total adjustments(2) | 162.8 | 162.8 | |||||
| Non-GAAP income from operations | $ | 265.6 | $ | 269.4 | |||
| Non-GAAP operating margin | 38 | % | 39 | % | |||
| (2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from MarkLogic and restructuring expenses. The final amounts will not be available until the Company's internal procedures and reviews are completed. | |||||||
| Fiscal Year 2023 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance | |||||||
| Fiscal Year Ending November 30, 2023 | |||||||
| (In millions, except per share data) | Low | High | |||||
| GAAP net income | $ | 60.8 | $ | 63.8 | |||
| Adjustments (from previous table) | 162.8 | 162.8 | |||||
| Income tax adjustment(3) | (35.4 | ) | (35.7 | ) | |||
| Non-GAAP net income | $ | 188.2 | $ | 190.9 | |||
| GAAP diluted earnings per share | $ | 1.36 | $ | 1.42 | |||
| Non-GAAP diluted earnings per share | $ | 4.20 | $ | 4.26 | |||
| Diluted weighted average shares outstanding | 44.8 | 44.8 | |||||
| 2Tax adjustment is based on a non-GAAP effective tax rate of approximately 20%, calculated as follows: | |||||||
| Non-GAAP income from operations | $ | 265.6 | $ | 269.4 | |||
| Other (expense) income | (30.5 | ) | (30.5 | ) | |||
| Non-GAAP income from continuing operations before income taxes | 235.1 | 238.9 | |||||
| Non-GAAP net income | 188.2 | 190.9 | |||||
| Tax provision | $ | 46.9 | $ | 48.0 | |||
| Non-GAAP tax rate | 20 | % | 20 | % | |||
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2023 GUIDANCE1
(Unaudited)
| Fiscal Year 2023 Adjusted Free Cash Flow Guidance | |||||||
| Fiscal Year Ending November 30, 2023 | |||||||
| (In millions) | Low | High | |||||
| Cash flows from operations (GAAP) | $ | 175 | $ | 181 | |||
| Purchases of property and equipment | (5 | ) | (5 | ) | |||
| Add back: restructuring payments | 7 | 7 | |||||
| Adjusted free cash flow (non-GAAP) | $ | 177 | $ | 183 | |||
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2023 GUIDANCE1
(Unaudited)
| Q4 2023 Revenue Guidance | ||||||||||||||
| Three Months Ended | Three Months Ending | |||||||||||||
| November 30, 2022 | November 30, 2023 | |||||||||||||
| (In millions) | Low | % Change | High | % Change | ||||||||||
| GAAP revenue | $ | 157.1 | $ | 170.8 | 9 | % | $ | 176.8 | 13 | % | ||||
| Acquisition-related adjustments - revenue | 2.1 | 0.6 | (71)% | 0.6 | (71)% | |||||||||
| Non-GAAP revenue | $ | 159.2 | $ | 171.4 | 8 | % | $ | 177.4 | 11 | % | ||||
| Q4 2023 Non-GAAP Earnings per Share Guidance | |||||||
| Three Months Ending November 30, 2023 | |||||||
| Low | High | ||||||
| GAAP diluted earnings per share | $ | 0.13 | $ | 0.19 | |||
| Acquisition-related revenue | 0.01 | 0.01 | |||||
| Acquisition-related expense | 0.01 | 0.01 | |||||
| Restructure expense | 0.08 | 0.08 | |||||
| Stock-based compensation | 0.23 | 0.23 | |||||
| Amortization of acquired intangibles | 0.56 | 0.56 | |||||
| Cyber incident and vulnerability response expenses, net | 0.04 | 0.04 | |||||
| Total adjustments | 0.93 | 0.93 | |||||
| Income tax adjustment | (0.19 | ) | (0.19 | ) | |||
| Non-GAAP diluted earnings per share | $ | 0.87 | $ | 0.93 | |||
