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Progress Announces Third Quarter 2022 Financial Results

Progress Software Corporation
Progress Software Corporation

Revenue and EPS Exceed Prior Guidance

BURLINGTON, Mass., Sept. 27, 2022 (GLOBE NEWSWIRE) -- Progress (Nasdaq: PRGS), the trusted provider of infrastructure software, today announced financial results for its fiscal third quarter ended August 31, 2022.

Third Quarter 2022 Highlights1:

  • Revenue of $151.2 million increased 3% year-over-year on an actual currency basis, and 6% on a constant currency basis.

  • Non-GAAP revenue of $153.1 million remained flat year-over-year on an actual currency basis, and increased 4% on a constant currency basis.

  • Annualized Recurring Revenue (“ARR”) of $495 million increased 13% year-over-year on a constant currency basis.

  • Operating margin was 21% and Non-GAAP operating margin was 39%.

  • Diluted earnings per share was $0.50 compared to $0.70 in the same quarter last year, a decrease of 29%.

  • Non-GAAP diluted earnings per share was $1.00 compared to $1.18 in the same quarter last year, a decrease of 15%.

“We’re very pleased to report excellent quarterly results with revenue and earnings per share both exceeding the high end of our guidance ranges for the third consecutive quarter,” said Yogesh Gupta, CEO at Progress. “Our continued execution is further evident in our quarter ending ARR of $495 million and net dollar retention rates that exceeded 101%. The strength in our results was reflected across virtually all our products and provides a strong, durable base for Progress to continue to pursue our Total Growth Strategy.”

Additional financial highlights included:

 

Three Months Ended

 

GAAP

 

Non-GAAP1

(In thousands, except percentages and per share amounts)

August 31,
2022

 

August 31,
2021

 

%
Change

 

August 31,
2022

 

August 31,
2021

 

%
Change

Revenue

$

151,217

 

 

$

147,417

 

 

3

%

 

$

153,060

 

 

$

152,597

 

 

%

Income from operations

$

32,021

 

 

$

46,046

 

 

(30)

%

 

$

60,075

 

 

$

71,163

 

 

(16)

%

Operating margin

 

21

%

 

 

31

%

 

(1000) bps

 

 

39

%

 

 

47

%

 

(800) bps

Net income

$

21,797

 

 

$

30,976

 

 

(30)

%

 

$

44,090

 

 

$

52,577

 

 

(16)

%

Diluted earnings per share

$

0.50

 

 

$

0.70

 

 

(29)

%

 

$

1.00

 

 

$

1.18

 

 

(15)

%

Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP)

$

39,670

 

 

$

35,224

 

 

13

%

 

$

39,237

 

 

$

35,022

 

 

12

%

Other fiscal third quarter 2022 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $224.9 million at the end of the quarter.

  • Days sales outstanding was 48 days compared to 54 days in the fiscal third quarter of 2021 and 39 days in the fiscal second quarter of 2022.

  • On September 23, 2022, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock which will be paid on December 15, 2022 to shareholders of record as of the close of business on December 1, 2022.

Anthony Folger, CFO, said: “For the third consecutive quarter, Progress has delivered results that have exceeded the high end of our guidance ranges. These results were delivered in the face of global economic uncertainty and significant foreign exchange headwinds and demonstrate the incredible strength of our operating platform.”

______________________
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.

2022 Business Outlook

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

 

Updated FY 2022 Guidance
(September 27, 2022)

 

Prior FY 2022 Guidance
(June 28, 2022)

(In millions, except percentages and per share amounts)

GAAP

 

Non-GAAP1

 

GAAP

 

Non-GAAP1

Revenue

$601 - 609

 

$609 - $617

 

$601 - $609

 

$609 - $617

Diluted earnings per share

$2.12 - $2.20

 

$4.08 - $4.12

 

$2.11 - $2.21

 

$4.05 - $4.11

Operating margin

22% - 23%

 

39% - 40%

 

22% - 23%

 

39% - 40%

Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)

$188 - $193

 

$185 - $190

 

$188 - $193

 

$185 - $190

Effective tax rate

20% - 21%

 

20% - 21%

 

21%

 

20% - 21%


 

Q4 2022 Guidance

(In millions, except per share amounts)

GAAP

 

Non-GAAP1

Revenue

$156 - $164

 

$158 - $166

Diluted earnings per share

$0.53 - $0.57

 

$1.06 - $1.10

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 $15.9 million on GAAP and non-GAAP revenue, and approximately $0.06 on GAAP and non-GAAP diluted earnings per share. The expected negative currency translation impact on Progress' fiscal Q4 2022 business outlook compared to 2021 exchange rates on GAAP and non-GAAP revenue is approximately $5.0 million. The expected negative impact on GAAP and non-GAAP diluted Q4 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 third quarter of 2022 at 5:00 p.m. ET on Tuesday, September 27, 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 824-86-411#. 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.

Important Information Regarding Non-GAAP Financial Information

Progress furnishes certain non-GAAP supplemental information to its financial results. We use such non-GAAP financial measures to evaluate our period-over-period operating performance because our management believes that by excluding the effects of certain items that do not reflect the ordinary earnings of our operations, such information helps 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 (which are communicated internally and externally), 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 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 during and following the integration period of our acquisitions.

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 related to Chef Software, Inc. and Ipswitch, Inc that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. We believe these adjustments are useful to 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.

  • 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 acquired from Kemp. 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 the 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 Kemp. The final amounts will not be available until the Company's internal procedures and reviews are completed.

  • Acquisition-related and transition 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.

  • Amortization of the discount on our convertible senior notes - In April 2021, in a private offering, we issued 1.0% Convertible Senior Notes with an aggregate principal amount of $360 million, including the over allotment, due April 15, 2026, unless earlier repurchased, redeemed or converted (the "Notes"). We exclude the portion of amortization of debt discount that relates to the equity component of the Notes as they are non-cash and have no direct correlation to the operations of our business. Upon adoption of ASU 2020-06 on December 1, 2021, the Company reversed the separation of the debt and equity components and accounted for the Notes wholly as debt.

  • 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.

  • Income tax adjustment - 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 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.

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.

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 often 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 and is available on the Progress website at www.progress.com 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, Total Growth Strategy, 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, we may experience reputational harm, legal claims and financial exposure; (v) 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; and (vi) optimization initiatives may disrupt our operations and we may not achieve the expected benefits from our efforts. 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

 

Nine Months Ended

(In thousands, except per share data)

August 31,
2022

 

August 31,
2021

 

%
Change

 

August 31,
2022

 

August 31,
2021

 

%
Change

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Software licenses

$

47,618

 

 

$

51,930

 

 

(8)

%

 

$

135,182

 

 

$

115,354

 

 

17

%

Maintenance and services

 

103,599

 

 

 

95,487

 

 

8

%

 

 

309,704

 

 

 

275,831

 

 

12

%

Total revenue

 

151,217

 

 

 

147,417

 

 

3

%

 

 

444,886

 

 

 

391,185

 

 

14

%

Costs of revenue:

 

 

 

 

 

 

 

 

 

 

 

Cost of software licenses

 

2,477

 

 

 

1,574

 

 

57

%

 

 

7,669

 

 

 

3,763

 

 

104

%

Cost of maintenance and services

 

15,761

 

 

 

14,895

 

 

6

%

 

 

46,707

 

 

 

42,887

 

 

9

%

Amortization of acquired intangibles

 

5,558

 

 

 

3,599

 

 

54

%

 

 

16,589

 

 

 

10,719

 

 

55

%

Total costs of revenue

 

23,796

 

 

 

20,068

 

 

19

%

 

 

70,965

 

 

 

57,369

 

 

24

%

Gross profit

 

127,421

 

 

 

127,349

 

 

%

 

 

373,921

 

 

 

333,816

 

 

12

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

34,595

 

 

 

29,737

 

 

16

%

 

 

100,768

 

 

 

88,468

 

 

14

%

Product development

 

28,650

 

 

 

25,616

 

 

12

%

 

 

85,966

 

 

 

76,579

 

 

12

%

General and administrative

 

20,141

 

 

 

16,451

 

 

22

%

 

 

56,339

 

 

 

46,335

 

 

22

%

Amortization of acquired intangibles

 

11,716

 

 

 

7,978

 

 

47

%

 

 

35,330

 

 

 

22,836

 

 

55

%

Restructuring expenses

 

130

 

 

 

40

 

 

225

%

 

 

784

 

 

 

1,133

 

 

(31)

%

Acquisition-related expenses

 

168

 

 

 

1,481

 

 

(89)

%

 

 

3,816

 

 

 

2,721

 

 

40

%

Gain on sale of assets held for sale

 

 

 

 

 

 

*

 

 

 

(10,770

)

 

 

 

 

*

 

Total operating expenses

 

95,400

 

 

 

81,303

 

 

17

%

 

 

272,233

 

 

 

238,072

 

 

14

%

Income from operations

 

32,021

 

 

 

46,046

 

 

(30)

%

 

 

101,688

 

 

 

95,744

 

 

6

%

Other expense, net

 

(4,339

)

 

 

(6,539

)

 

34

%

 

 

(11,209

)

 

 

(14,409

)

 

22

%

Income before income taxes

 

27,682

 

 

 

39,507

 

 

(30)

%

 

 

90,479

 

 

 

81,335

 

 

11

%

Provision for income taxes

 

5,885

 

 

 

8,531

 

 

(31)

%

 

 

19,118

 

 

 

17,841

 

 

7

%

Net income

$

21,797

 

 

$

30,976

 

 

(30)

%

 

$

71,361

 

 

$

63,494

 

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.50

 

 

$

0.71

 

 

(30)

%

 

$

1.64

 

 

$

1.45

 

 

13

%

Diluted

$

0.50

 

 

$

0.70

 

 

(29)

%

 

$

1.61

 

 

$

1.43

 

 

13

%

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

43,211

 

 

 

43,762

 

 

(1)

%

 

 

43,589

 

 

 

43,896

 

 

(1)

%

Diluted

 

43,935

 

 

 

44,502

 

 

(1)

%

 

 

44,299

 

 

 

44,542

 

 

(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

$

527

 

 

$

374

 

 

41

%

 

$

1,410

 

 

$

1,234

 

 

14

%

Sales and marketing

 

1,331

 

 

 

1,424

 

 

(7)

%

 

 

3,423

 

 

 

4,679

 

 

(27)

%

Product development

 

2,586

 

 

 

1,848

 

 

40

%

 

 

7,548

 

 

 

6,179

 

 

22

%

General and administrative

 

4,195

 

 

 

3,193

 

 

31

%

 

 

13,729

 

 

 

9,893

 

 

39

%

Total

$

8,639

 

 

$

6,839

 

 

26

%

 

$

26,110

 

 

$

21,985

 

 

19

%

*not meaningful


CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

August 31, 2022

 

November 30, 2021

Assets

 

 

 

Current assets:

 

 

 

Cash, cash equivalents and short-term investments

$

224,864

 

$

157,373

Accounts receivable, net

 

82,258

 

 

99,815

Unbilled receivables and contract assets

 

27,847

 

 

25,816

Other current assets

 

29,465

 

 

39,549

Assets held for sale

 

 

 

15,255

Total current assets

 

364,434

 

 

337,808

Property and equipment, net

 

13,409

 

 

14,345

Goodwill and intangible assets, net

 

906,337

 

 

958,337

Right-of-use lease assets

 

18,950

 

 

25,253

Long-term unbilled receivables and contract assets

 

25,972

 

 

17,464

Other assets

 

17,190

 

 

10,330

Total assets

$

1,346,292

 

$

1,363,537

Liabilities and shareholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and other current liabilities

$

68,581

 

$

84,215

Current portion of long-term debt, net

 

6,234

 

 

25,767

Short-term operating lease liabilities

 

7,443

 

 

7,926

Short-term deferred revenue

 

197,425

 

 

205,021

Total current liabilities

 

279,683

 

 

322,929

Long-term debt, net

 

260,779

 

 

239,992

Convertible senior notes, net

 

352,108

 

 

294,535

Long-term operating lease liabilities

 

16,662

 

 

23,130

Long-term deferred revenue

 

53,696

 

 

47,359

Other long-term liabilities

 

16,391

 

 

23,103

Shareholders’ equity:

 

 

 

Common stock and additional paid-in capital

 

318,989

 

 

354,676

Retained earnings

 

47,984

 

 

57,813

Total shareholders’ equity

 

366,973

 

 

412,489

Total liabilities and shareholders’ equity

$

1,346,292

 

$

1,363,537



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended

 

Nine Months Ended

(In thousands)

August 31,
2022

 

August 31,
2021

 

August 31,
2022

 

August 31,
2021

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

21,797

 

 

$

30,976

 

 

$

71,361

 

 

$

63,494

 

Depreciation and amortization

 

19,219

 

 

 

16,383

 

 

 

57,816

 

 

 

43,074

 

Gain on sale of assets held for sale

 

 

 

 

 

 

 

(10,770

)

 

 

 

Stock-based compensation

 

8,639

 

 

 

6,839

 

 

 

26,110

 

 

 

21,985

 

Other non-cash adjustments

 

234

 

 

 

1,009

 

 

 

6,349

 

 

 

4,132

 

Changes in operating assets and liabilities

 

(10,219

)

 

 

(19,983

)

 

 

1,157

 

 

 

1,917

 

Net cash flows from operating activities

 

39,670

 

 

 

35,224

 

 

 

152,023

 

 

 

134,602

 

Capital expenditures

 

(1,107

)

 

 

(625

)

 

 

(3,086

)

 

 

(2,741

)

Repurchases of common stock, net of issuances

 

(21,438

)

 

 

2,947

 

 

 

(65,140

)

 

 

(25,753

)

Dividend payments to shareholders

 

(7,778

)

 

 

(7,755

)

 

 

(23,351

)

 

 

(23,372

)

Proceeds from the issuance of debt, net of payment of issuance costs

 

 

 

 

 

 

 

5,517

 

 

 

 

Payments of principal on long-term debt

 

(1,719

)

 

 

(5,644

)

 

 

(5,154

)

 

 

(111,669

)

Proceeds from issuance of Notes, net of issuance costs

 

 

 

 

 

 

 

 

 

 

349,196

 

Purchase of capped calls

 

 

 

 

 

 

 

 

 

 

(43,056

)

Other

 

(8,677

)

 

 

(3,130

)

 

 

6,682

 

 

 

475

 

Net change in cash, cash equivalents and short-term investments

 

(1,049

)

 

 

21,017

 

 

 

67,491

 

 

 

277,682

 

Cash, cash equivalents and short-term investments, beginning of period

 

225,913

 

 

 

362,660

 

 

 

157,373

 

 

 

105,995

 

Cash, cash equivalents and short-term investments, end of period

$

224,864

 

 

$

383,677

 

 

$

224,864

 

 

$

383,677

 



RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - THIRD QUARTER
1
(Unaudited)

 

Three Months Ended

 

% Change

(In thousands, except per share data)

August 31, 2022

 

August 31, 2021

 

Non-GAAP

Adjusted revenue:

 

 

 

 

 

 

 

 

 

GAAP revenue

$

151,217

 

 

 

 

$

147,417

 

 

 

 

 

Acquisition-related revenue

 

1,843

 

 

 

 

 

5,180

 

 

 

 

 

Non-GAAP revenue

$

153,060

 

 

100

%

 

$

152,597

 

 

100

%

 

%

 

 

 

 

 

 

 

 

 

 

Adjusted income from operations:

 

 

 

 

 

 

 

 

 

GAAP income from operations

$

32,021

 

 

21

%

 

$

46,046

 

 

31

%

 

 

Amortization of acquired intangibles

 

17,274

 

 

11

%

 

 

11,577

 

 

8

%

 

 

Restructuring expenses and other

 

130

 

 

%

 

 

40

 

 

%

 

 

Stock-based compensation

 

8,639

 

 

6

%

 

 

6,839

 

 

4

%

 

 

Acquisition-related revenue and expenses

 

2,011

 

 

1

%

 

 

6,661

 

 

4

%

 

 

Non-GAAP income from operations

$

60,075

 

 

39

%

 

$

71,163

 

 

47

%

 

(16)

%

 

 

 

 

 

 

 

 

 

 

Adjusted net income:

 

 

 

 

 

 

 

 

 

GAAP net income

$

21,797

 

 

14

%

 

$

30,976

 

 

21

%

 

 

Amortization of acquired intangibles

 

17,274

 

 

11

%

 

 

11,577

 

 

8

%

 

 

Restructuring expenses and other

 

130

 

 

%

 

 

40

 

 

%

 

 

Stock-based compensation

 

8,639

 

 

7

%

 

 

6,839

 

 

3

%

 

 

Acquisition-related revenue and expenses

 

2,011

 

 

1

%

 

 

6,661

 

 

4

%

 

 

Amortization of discount on notes

 

 

 

%

 

 

2,868

 

 

2

%

 

 

Provision for income taxes

 

(5,761

)

 

(4)

%

 

 

(6,384

)

 

(4)

%

 

 

Non-GAAP net income

$

44,090

 

 

29

%

 

$

52,577

 

 

34

%

 

(16)

%

 

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share:

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

0.50

 

 

 

 

$

0.70

 

 

 

 

 

Amortization of acquired intangibles

 

0.39

 

 

 

 

 

0.26

 

 

 

 

 

Stock-based compensation

 

0.19

 

 

 

 

 

0.15

 

 

 

 

 

Acquisition-related revenue and expenses

 

0.05

 

 

 

 

 

0.15

 

 

 

 

 

Amortization of discount on notes

 

 

 

 

 

 

0.06

 

 

 

 

 

Provision for income taxes

 

(0.13

)

 

 

 

 

(0.14

)

 

 

 

 

Non-GAAP diluted earnings per share

$

1.00

 

 

 

 

$

1.18

 

 

 

 

(15)

%

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted avg shares outstanding - diluted

 

43,935

 

 

 

 

 

44,502

 

 

 

 

(1)

%

 

 

 

 

 

 

 

 

 

 


RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - YEAR TO DATE
1
(Unaudited)

 

Nine Months Ended

 

% Change

(In thousands, except per share data)

August 31, 2022

 

August 31, 2021

 

Non-GAAP

Adjusted revenue:

 

 

 

 

 

 

 

 

 

GAAP revenue

$

444,886

 

 

 

 

$

391,185

 

 

 

 

 

Acquisition-related revenue

 

6,558

 

 

 

 

 

22,394

 

 

 

 

 

Non-GAAP revenue

$

451,444

 

 

100

%

 

$

413,579

 

 

100

%

 

9

%

 

 

 

 

 

 

 

 

 

 

Adjusted income from operations:

 

 

 

 

 

 

 

 

 

GAAP income from operations

$

101,688

 

 

23

%

 

$

95,744

 

 

24

%

 

 

Amortization of acquired intangibles

 

51,919

 

 

12

%

 

 

33,555

 

 

8

%

 

 

Restructuring expenses and other

 

784

 

 

%

 

 

1,133

 

 

%

 

 

Stock-based compensation

 

26,110

 

 

5

%

 

 

21,985

 

 

5

%

 

 

Acquisition-related revenue and expenses

 

10,374

 

 

2

%

 

 

25,115

 

 

6

%

 

 

Gain on sale of assets held for sale

 

(10,770

)

 

(2)

%

 

 

 

 

%

 

 

Non-GAAP income from operations

$

180,105

 

 

40

%

 

$

177,532

 

 

43

%

 

1

%

 

 

 

 

 

 

 

 

 

 

Adjusted net income:

 

 

 

 

 

 

 

 

 

GAAP net income

$

71,361

 

 

16

%

 

$

63,494

 

 

16

%

 

 

Amortization of acquired intangibles

 

51,919

 

 

12

%

 

 

33,555

 

 

8

%

 

 

Restructuring expenses and other

 

784

 

 

%

 

 

1,133

 

 

%

 

 

Stock-based compensation

 

26,110

 

 

6

%

 

 

21,985

 

 

5

%

 

 

Acquisition-related revenue and expenses

 

10,374

 

 

2

%

 

 

25,115

 

 

6

%

 

 

Gain on sale of assets held for sale

 

(10,770

)

 

(2)

%

 

 

 

 

%

 

 

Amortization of discount on notes

 

 

 

%

 

 

4,348

 

 

1

%

 

 

Provision for income taxes

 

(16,242

)

 

(4)

%

 

 

(18,036

)

 

(4)

%

 

 

Non-GAAP net income

$

133,536

 

 

30

%

 

$

131,594

 

 

32

%

 

1

%

 

 

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share:

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

1.61

 

 

 

 

$

1.43

 

 

 

 

 

Amortization of acquired intangibles

 

1.17

 

 

 

 

 

0.75

 

 

 

 

 

Restructuring expenses and other

 

0.02

 

 

 

 

 

0.03

 

 

 

 

 

Stock-based compensation

 

0.59

 

 

 

 

 

0.48

 

 

 

 

 

Acquisition-related revenue and expenses

 

0.23

 

 

 

 

 

0.56

 

 

 

 

 

Gain on sale of assets held for sale

 

(0.24

)

 

 

 

 

 

 

 

 

 

Amortization of discount on notes

 

 

 

 

 

 

0.10

 

 

 

 

 

Provision for income taxes

 

(0.37

)

 

 

 

 

(0.40

)

 

 

 

 

Non-GAAP diluted earnings per share

$

3.01

 

 

 

 

$

2.95

 

 

 

 

2

%

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted avg shares outstanding - diluted

 

44,299

 

 

 

 

 

44,542

 

 

 

 

(1)

%

 

 

 

 

 

 

 

 

 

 


OTHER NON-GAAP FINANCIAL MEASURES
1
(Unaudited)

Quarter to Date Adjusted Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Q3 2022

 

Q3 2021

 

% Change

Cash flows from operations

$

39,670

 

 

$

35,224

 

 

13

%

Purchases of property and equipment

 

(1,107

)

 

 

(625

)

 

77

%

Free cash flow

 

38,563

 

 

 

34,599

 

 

11

%

Add back: restructuring payments

 

674

 

 

 

423

 

 

59

%

Adjusted free cash flow

$

39,237

 

 

$

35,022

 

 

12

%


Year to Date Adjusted Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Q3 2022

 

Q3 2021

 

% Change

Cash flows from operations

$

152,023

 

 

$

134,602

 

 

13

%

Purchases of property and equipment

 

(3,086

)

 

 

(2,741

)

 

13

%

Free cash flow

 

148,937

 

 

 

131,861

 

 

13

%

Add back: restructuring payments

 

3,019

 

 

 

5,087

 

 

(41)

%

Adjusted free cash flow

$

151,956

 

 

$

136,948

 

 

11

%



RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR
2022 GUIDANCE1
(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

 

26.0

 

 

8.5

 

(67)

%

 

 

8.5

 

(67)

%

Non-GAAP revenue

$

557.3

 

$

609.0

 

9

%

 

$

617.0

 

11

%


Fiscal Year 2022 Updated Non-GAAP Operating Margin Guidance

 

Fiscal Year Ending November 30, 2022

(In millions)

Low

 

High

GAAP income from operations

$

133.0

 

 

$

138.7

 

GAAP operating margins

 

22

%

 

 

23

%

Acquisition-related revenue

 

8.5

 

 

 

8.5

 

Acquisition-related expense

 

4.3

 

 

 

4.3

 

Restructuring expense

 

0.9

 

 

 

0.9

 

Stock-based compensation

 

35.6

 

 

 

35.6

 

Amortization of acquired intangibles

 

69.0

 

 

 

69.0

 

Gain on sale of assets held for sale

 

(10.8

)

 

 

(10.8

)

Total adjustments

 

107.5

 

 

 

107.5

 

Non-GAAP income from operations

$

240.5

 

 

$

246.2

 

Non-GAAP operating margin

 

39

%

 

 

40

%


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

$

93.8

 

 

$

97.2

 

Adjustments (from previous table)

 

107.5

 

 

 

107.5

 

Income tax adjustment2

 

(20.8

)

 

 

(22.6

)

Non-GAAP net income

$

180.5

 

 

$

182.1

 

 

 

 

 

GAAP diluted earnings per share

$

2.12

 

 

$

2.20

 

Non-GAAP diluted earnings per share

$

4.08

 

 

$

4.12

 

 

 

 

 

Diluted weighted average shares outstanding

 

44.2

 

 

 

44.2

 


 

 

 

 

 

 

 

 

 

 

2Tax 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

 

 

$

246.2

 

Other (expense) income

 

 

(15.7

)

 

 

(15.7

)

Non-GAAP income from continuing operations before income taxes

 

 

224.8

 

 

 

230.5

 

Non-GAAP net income

 

 

180.5

 

 

 

182.1

 

Tax provision

 

$

44.3

 

 

$

48.4

 

Non-GAAP tax rate

 

 

20

%

 

 

21

%


RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR
2022 GUIDANCE1
(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 Q4 2022 GUIDANCE1
(Unaudited)

Q4 2022 Revenue Guidance

 

Three Months Ended

 

Three Months Ending

 

November 30, 2021

 

November 30, 2022

(In millions)

 

 

Low

 

% Change

 

High

 

% Change

GAAP revenue

$

140.1

 

$

155.7

 

11

%

 

$

163.7

 

17

%

Acquisition-related adjustments - revenue

 

3.6

 

 

1.9

 

(47)

%

 

 

1.9

 

(47)

%

Non-GAAP revenue

$

143.7

 

$

157.6

 

10

%

 

$

165.6

 

15

%


Q4 2022 Non-GAAP Earnings per Share Guidance

 

Three Months Ending November 30, 2022

 

Low

 

High

GAAP diluted earnings per share

$

0.53

 

 

$

0.57

 

Acquisition-related revenue

 

0.04

 

 

 

0.04

 

Acquisition-related expense

 

0.01

 

 

 

0.01

 

Stock-based compensation

 

0.22

 

 

 

0.22

 

Amortization of acquired intangibles

 

0.39

 

 

 

0.39

 

Total adjustments

 

0.66

 

 

 

0.66

 

Income tax adjustment

 

(0.13

)

 

 

(0.13

)

Non-GAAP diluted earnings per share

$

1.06

 

 

$

1.10