Progress Software Announces Preliminary Financial Results for Fiscal Q3 2017; Better-Than-Expected Q3 Revenues and Diluted Earnings Per Share; Board of Directors Raises Quarterly Dividend 12%

BEDFORD, Mass.–()–Progress (NASDAQ: PRGS) at this time introduced that it expects to report better-than-expected revenues and diluted earnings per share for its third fiscal quarter ended August 31, 2017:

                       
(In hundreds of thousands, besides percentages and per share quantities) Q3 2017

GAAP

GAAP
Guidance
Issued on
June 28, 2017

Q3 2017
Non-GAAP

 

Non-GAAP
Guidance
Issued on
June 28, 2017

Revenue $97.three $93 – $96 $97.6 $93 – $96
Diluted earnings per share $zero.23 $zero.17 – $zero.19 $zero.48 $zero.41 – $zero.43
Operating margin 20.9% * 36.5% *
Cash flows from operations/ adjusted free money circulate $13.four * $18.three *

*We don’t present quarterly steering for this monetary measure.

These preliminary monetary outcomes are topic to revision till the Company stories its full third quarter of fiscal 12 months 2017 outcomes on September 27, 2017.

“Our preliminary third quarter results exceed our guidance and reflect continued strong execution of the strategy set forth by our new leadership team earlier this year,” said Yogesh Gupta, the Company’s CEO. “These outcomes construct upon Progress’ second quarter income and earnings per share that additionally got here in above expectations, because the crew continues to strengthen our core companies. Our strategic plan is driving strong monetary efficiency and producing wholesome money circulate, additional validating the Board’s dedication to constructing shareholder worth. We look ahead to closing out the fiscal 12 months and starting 2018 with good momentum.”

Mr. Gupta added, “On September 27, when we formally report our third quarter performance, we will discuss further our strategy to support and grow our developer base and to be the platform of choice for the future of business application development. At that time, we also will provide additional detail on our approach to capital allocation, including insight on the strategic and financial criteria to be used in evaluating future potential acquisitions.”

Board Increases Quarterly Dividend 12%; Sets New Target Payout Ratio Based on Strong Cash Flow

Progress additionally introduced that its Board of Directors authorised a 12% improve within the Company’s quarterly money dividend from $zero.125 to $zero.14 per share of frequent inventory. This elevated dividend shall be paid on December 15, 2017 to shareholders of file as of December 1, 2017. The Board of Directors is dedicated to its coverage of repeatedly returning capital to our shareholders and this marks the primary improve within the dividend because the Company started paying dividends firstly of fiscal 2017.

The Board of Directors additionally set a goal dividend payout ratio of between 25-30% of the Company’s annual money circulate from operations, reflecting the continued energy of the Company’s money circulate era.

Progress to Host Third Quarter Conference Call on September 27, 2017

The Company will launch full outcomes for its third fiscal quarter ended August 31, 2017, together with its up to date outlook for the rest of the 12 months, after the market shut on Wednesday, September 27, 2017. Details relating to the associated convention name shall be offered in a press launch to be issued previous to the date.

CEO Issues Special Letter to Progress Shareholders

In addition to asserting better-than-expected preliminary revenues and diluted earnings per share for the Company’s fiscal third quarter, and a rise within the quarterly dividend, Progress’ CEO additionally printed an replace on the Company’s technique and enterprise in a letter to shareholders, which follows under:

Dear Fellow Progress Shareholder,

As we method my first anniversary as CEO of Progress, I wish to present an replace on our enterprise and the execution of our technique. I’m very happy with the robust preliminary fiscal third quarter outcomes we introduced at this time, which exceeded our personal expectations as set forth within the steering we offered on the finish of the second quarter. We will current our ultimate outcomes and our expectations for the fourth quarter on our earnings name on September 27, 2017.

As a reminder, in January 2017, three months after my appointment as CEO, I outlined our technique to drive shareholder worth. At the core of this technique is our unwavering dedication to serving the wants of our massive put in base of OpenEdge, DataDirect and Telerik clients. Customer retention is important to our long-term success.

At the identical time, we additionally articulated how we might leverage our inherent software growth DNA to construct on the capabilities of our merchandise and tackle the longer term wants of our robust buyer base. Progress has all the time delivered the platform and instruments that organizations must develop and deploy mission-critical enterprise purposes.

As the kinds of gadgets and interfaces on which purposes run proliferate, the quantity of programs that should be linked rises, and the quantity of knowledge produced skyrockets. Businesses and ISVs are trying for a platform that can allow them to shortly and simply develop fashionable, clever cloud purposes – what we name Cognitive Applications. These purposes will embrace automated machine-learning, enabling organizations to harness beforehand unused volumes of knowledge to make higher, quicker choices, and function far more effectively.

Through our acquisitions of Kinvey and DataRPM, together with our present core applied sciences, we now supply the perfect platform for constructing and deploying tomorrow’s purposes shortly and simply. With our give attention to predictive upkeep as our goal Cognitive Apps area, we’re focusing on our OpenEdge associate base, nearly half of whom have constructed manufacturing ERP purposes. By including these new applied sciences and new folks, now we have bolstered our core merchandise and at the moment are well-positioned to serve the longer term important software program wants of our ISV and enterprise clients. In addition to being extremely complementary to our OpenEdge base, Kinvey and DataRPM additionally allow us to win new clients.

We have additionally efficiently executed on our efforts to enhance how we handle our enterprise. I’ve constructed a brand new administration crew comprised of seasoned executives, who’ve delivered to Progress a constant method emphasizing buyer retention and maximizing efficiencies. In January, we undertook a big restructuring of our operations that included a 20% discount in our headcount. The financial savings from that effort, coupled with steps we took to streamline our operations, have enabled us to realize year-over-year enchancment in our working margins from 28% for the primary 9 months of fiscal 2016 to 34% for the primary 9 months of fiscal 2017, in addition to present further flexibility to put money into our enterprise. We will proceed to hunt out alternatives to additional improve our margins and drive incremental money circulate.

As a outcome of these efforts and prudent expense administration, we introduced on our second quarter earnings name in June that we had exceeded our expectations for income, working revenue and earnings per share, and we elevated our fiscal 2017 annual steering for working margin, EPS and free money circulate. Our preliminary outcomes for the third quarter exceed the steering we offered in our report of second quarter outcomes and construct upon the efficiency of our core enterprise within the first half of the 12 months.

Our new, highly-energized administration crew is complemented by a Board of Directors that has been refreshed with the addition of three new members over the previous 11 months. Our administration and board are 100% targeted on driving shareholder worth.

We have persistently demonstrated our dedication to returning capital to shareholders, as evidenced by the truth that Progress has returned over $60 million within the first three quarters of fiscal 2017 and $600 million to shareholders since 2012 by means of share repurchases, and starting in December 2016, by means of a quarterly dividend. On our September 27 earnings name, we’ll present extra particulars on our disciplined capital allocation framework.

In the interim, I’m completely happy to report that the Board has authorised a 12% improve within the Company’s quarterly money dividend. As a outcome, the quarterly money dividend will improve from $zero.125 to $zero.14 per share of frequent inventory. The dividend declared at this time is payable on December 15, 2017 to stockholders of file as of December 1, 2017. Furthermore, given the continued energy of our working money circulate, the Board has focused a dividend payout ratio of between 25-30% of our money circulate from operations.

On September 27, after we formally report our third quarter efficiency, we’ll focus on additional our technique to help and develop our developer base and to be the platform of selection for the longer term of enterprise software growth. We will even present further element on our method to capital allocation to additional enhance our return on invested capital and generate worth for our shareholders. In addition, we will even present extra detailed perception on the strategic and monetary standards for use in evaluating potential acquisitions.

Following our third quarter announcement, we shall be actively participating with our shareholders to debate our technique. I look ahead to these interactions. As half of our dedication to shareholders, our Board and administration worth common engagement with all shareholders, and we’re all the time receptive to constructive enter. It has lengthy been our follow to hearken to and thoughtfully contemplate all concepts that have the potential to reinforce shareholder worth.

In protecting with this method, we wished to supply an replace relating to current discussions with Praesidium Investment Management, one of the Company’s largest shareholders. Praesidium is a long-time shareholder and we worth their views and concepts. In a Schedule 13D submitting on August 2, 2017, Praesidium reported that it had met with our Board of Directors to “consider ways to enhance shareholder value.”

Among Praesidium’s concepts was the consideration of a possible acquisition of a specific, unrelated third celebration. We evaluated the thought however finally concluded that it was not in the perfect pursuits of Progress or its shareholders. Our Board appreciated the suggestion, in addition to the opposite constructive concepts to drive shareholder worth, and we look ahead to participating in additional discussions with Praesidium about their concepts.

Praesidium has additionally advised, amongst different issues, that our Board contemplate including particular people to our Board of Directors. Progress is dedicated to having a Board of Directors that has the precise expertise and range of expertise and supplies robust, impartial oversight of the Company. Above all else, our Board is guided by shareholders’ finest pursuits in each choice. The Nominating and Corporate Governance Committee of our Board will contemplate these and different people when evaluating future adjustments to the composition of our Board.

We are very happy with our progress up to now and enthusiastic about our future prospects, as we give attention to persevering with to reinforce our robust core companies. Based on our strong monetary efficiency and the Company’s wholesome money circulate era, we look ahead to closing out the fiscal 12 months and starting 2018 with good momentum. We encourage shareholders to take part in our earnings name on September 27 and I’m trying ahead to persevering with to satisfy with you and discussing our technique, aims and accomplishments.

I and the Board thanks for your funding in Progress and within the confidence you place in our management crew.

Sincerely,

Yogesh Gupta, Chief Executive Officer

Legal Notice Regarding Non-GAAP Financial Information

Progress Software supplies non-GAAP monetary data as further data for traders. These non-GAAP measures are usually not in accordance with, or a substitute for, typically accepted accounting ideas within the United States (GAAP). Progress Software believes that the non-GAAP outcomes described on this launch are helpful for an understanding of its ongoing operations and present further element and another technique of assessing its working outcomes. Management makes use of these non-GAAP outcomes to check the corporate’s efficiency to that of prior durations for evaluation of tendencies and for price range and planning functions. A reconciliation of non-GAAP changes to the corporate’s GAAP monetary outcomes is included within the desk under. Additional data relating to the corporate’s non-GAAP monetary data is contained within the firm’s Current Report on Form Eight-Okay furnished to the Securities and Exchange Commission in reference to this press launch, which is out there on the Progress web site at www.progress.com inside the investor relations part.

Note Regarding Forward-Looking Statements

This press launch comprises statements which can be “forward-looking statements” inside the that means 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 recognized some of these forward-looking statements with phrases like “believe,” “may,” “could,” “would,” “might,” “should,” “expect,” “intend,” “plan,” “target,” “anticipate” and “continue,” the unfavorable of these phrases, different phrases of comparable that means or the use of future dates.

Forward-looking statements on this press launch embrace, however are usually not restricted to, statements relating to Progress’ enterprise outlook and monetary steering. There are a quantity of components that might trigger precise outcomes or future occasions to vary materially from these anticipated by the forward-looking statements, together with, with out limitation:

(1) Economic, geopolitical and market circumstances, together with the unsure financial setting in Europe in consequence of the Brexit vote, and the continued troublesome financial setting in Brazil and different elements of the world, can adversely have an effect on our enterprise, outcomes of operations and monetary situation, together with our income progress and profitability, which in flip may adversely have an effect on our inventory value. (2) We might fail to realize our monetary forecasts as a result of such components as delays or measurement reductions in transactions, fewer massive transactions in a specific quarter, fluctuations in forex change charges, or a decline in our renewal charges for contracts. (three) Our capacity to efficiently handle transitions to new enterprise fashions and markets, together with an elevated emphasis on a cloud and subscription technique, is probably not profitable. (four) If we’re unable to develop new or sufficiently differentiated merchandise and providers, or to reinforce and enhance our present merchandise and providers in a well timed method to satisfy market demand, companions and clients might not buy new software program licenses or subscriptions or buy or renew help contracts. (5) We rely upon our in depth associate channel and we is probably not profitable in retaining or increasing with channel companions. (6) Our worldwide gross sales and operations topic us to further dangers that may adversely have an effect on our working outcomes, together with dangers regarding overseas forex beneficial properties and losses. (7) If the safety measures for our software program, providers or different choices are compromised or topic to a profitable cyber-attack, or if such choices include important coding or configuration errors, we might expertise reputational hurt, authorized claims and monetary publicity. (Eight) We have made acquisitions, and might make acquisitions sooner or later, and these acquisitions is probably not profitable, might contain unanticipated prices or different integration points or might disrupt our present operations. For additional data relating to dangers and uncertainties related to Progress’ enterprise, please discuss with Progress’ filings with the Securities and Exchange Commission, together with its Annual Report on Form 10-Okay for the fiscal 12 months ended November 30, 2016. Progress undertakes no obligation to replace any forward-looking statements, which communicate solely as of the date of this press launch.

About Progress

Progress (NASDAQ: PRGS) gives the main platform for growing and deploying mission-critical enterprise purposes. Progress empowers enterprises and ISVs to construct and ship cognitive-first purposes, that harness large knowledge to derive enterprise insights and aggressive benefit. Progress gives main applied sciences for simply constructing highly effective consumer interfaces throughout any sort of system, a dependable, scalable and safe backend platform to deploy fashionable purposes, main knowledge connectivity to all sources, and award-winning predictive analytics that brings the ability of machine studying to any group. Over 1,700 impartial software program distributors, 100,000 enterprise clients, and two million builders depend on Progress to energy their purposes. Learn about Progress at www.progress.com or +1-800-477-6473.

Progress and Progress Software are emblems or registered emblems of Progress Software Corporation and/or its subsidiaries or associates within the U.S. and different international locations. Any different names contained herein could also be emblems of their respective house owners.

     

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES – QTD

 
Three Months Ended
(In hundreds, besides per share knowledge) August 31, 2017
Adjusted income:
GAAP income $ 97,310
Acquisition-related income 313  
Non-GAAP income $ 97,623  
 
Adjusted revenue from operations:
GAAP working revenue $ 20,299
Amortization of acquired intangibles 9,087
Restructuring bills and different 923
Stock-based compensation four,296
Acquisition-related 1,064  
Non-GAAP revenue from operations $ 35,669  
 
Adjusted diluted earnings per share:
GAAP diluted earnings per share $ zero.23
Amortization of acquired intangibles zero.19
Restructuring bills and different zero.02
Stock-based compensation zero.09
Acquisition-related zero.02
Provision for revenue taxes (zero.07 )
Non-GAAP diluted earnings per share $ zero.48  
 
Non-GAAP weighted avg shares excellent – diluted 48,370
 
Adjusted Free Cash Flow      
Three Months Ended
(In hundreds) August 31, 2017
Cash flows from operations $ 13,442  
Purchases of property and gear (342 )
Free money circulate 13,100  
Add again: restructuring funds 5,241  
Adjusted free money circulate $ 18,341