Progress (Nasdaq: PRGS), the trusted provider of AI-powered
infrastructure software, today announced financial results for its
fiscal second quarter ended May 31, 2024.
Second Quarter
2024
Highlights1:
- Revenue and non-GAAP revenue of $175
million decreased 2% year-over-year on both an actual and a
constant currency basis.
- Annualized Recurring Revenue (“ARR”)
of $579 million increased 1% year-over-year on a constant currency
basis.
- Operating margin was 16% and non-GAAP
operating margin was 38%.
- Diluted earnings per share was $0.37
compared to $0.27 in the same quarter last year, an increase of
37%.
- Non-GAAP diluted earnings per share
was $1.09 compared to $1.06 in the same quarter last year, an
increase of 3%.
“Our outperformance in the second quarter of fiscal
2024 was once again driven by steady demand for our products, with
revenues and EPS ahead of our forecast, and ARR up 1%,” said Yogesh
Gupta, CEO of Progress. “We are focused on M&A while our sales
teams continue to execute well in the field, and internally we
drive customer success, innovation and margins.”
Additional financial highlights
included:
|
Three Months Ended |
|
GAAP |
|
Non-GAAP1 |
(In thousands, except percentages and per share amounts) |
May 31, 2024 |
|
May 31, 2023 |
|
% Change |
|
May 31, 2024 |
|
May 31, 2023 |
|
% Change |
Revenue |
$ |
175,077 |
|
|
$ |
178,251 |
|
|
(2)% |
|
$ |
175,077 |
|
|
$ |
179,233 |
|
|
(2)% |
Income from operations |
$ |
27,148 |
|
|
$ |
23,027 |
|
|
18% |
|
$ |
67,086 |
|
|
$ |
67,300 |
|
|
—% |
Operating margin |
|
16 |
% |
|
|
13 |
% |
|
300 bps |
|
|
38% |
|
|
|
38 |
% |
|
0 bps |
Net income |
$ |
16,188 |
|
|
$ |
12,090 |
|
|
34% |
|
$ |
47,899 |
|
|
$ |
46,937 |
|
|
2% |
Diluted earnings per share |
$ |
0.37 |
|
|
$ |
0.27 |
|
|
37% |
|
$ |
1.09 |
|
|
$ |
1.06 |
|
|
3% |
Cash from operations (GAAP) /Adjusted free cash flow
(non-GAAP) |
$ |
63,681 |
|
|
$ |
47,951 |
|
|
33% |
|
$ |
64,073 |
|
|
$ |
48,040 |
|
|
33% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other fiscal
second quarter
2024 metrics and recent results
included:
- Cash and cash equivalents were $190.4
million at the end of the quarter.
- Days sales outstanding was 41 days
compared to 44 days in the fiscal second quarter of 2023 and 50
days in the fiscal first quarter of 2024.
- On June 18, 2024, our Board of
Directors declared a quarterly dividend of $0.175 per share of
common stock, which will be paid on September 16, 2024 to
shareholders of record as of the close of business on September 2,
2024.
Anthony Folger, CFO, said: “We’re very pleased with
the outstanding results of our fiscal second quarter. Revenues and
EPS were once again above the high end of our most recent guidance,
and ARR increased versus last quarter. Demand for our products
remains strong, and our execution continues to be on or ahead of
target. We’re looking forward to a solid second half.”
_________________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.
2024 Business
Outlook
Progress provides the following guidance for the
fiscal year ending November 30, 2024 and the fiscal third quarter
ending August 31, 2024:
|
Updated FY 2024 Guidance(June 25,
2024) |
|
Prior FY 2024 Guidance (March 26, 2024) |
(In millions, except percentages and per share amounts) |
GAAP |
|
Non-GAAP1 |
|
GAAP |
|
Non-GAAP1 |
Revenue |
$725 - $735 |
|
$725 - $735 |
|
$722 - $732 |
|
$722 - $732 |
Diluted earnings per share |
$1.98 - $2.10 |
|
$4.70 - $4.80 |
|
$1.94 - $2.06 |
|
$4.65 - $4.75 |
Operating margin |
19% |
|
39% - 40% |
|
19% - 20% |
|
39% - 40% |
Cash from operations (GAAP) /Adjusted free cash flow
(non-GAAP) |
$205 - $215 |
|
$205 - $215 |
|
$205 - $215 |
|
$205 - $215 |
Effective tax rate |
20% |
|
20% |
|
20% |
|
20% |
|
Q3 2024 Guidance |
(In millions, except per share amounts) |
GAAP |
|
Non-GAAP1 |
Revenue |
$174 - $178 |
|
$174 - $178 |
Diluted earnings per share |
$0.48 - $0.52 |
|
$1.11 - $1.15 |
|
|
|
|
Based on current exchange rates, the expected
positive currency translation impact on Progress' fiscal year 2024
business outlook compared to 2023 exchange rates on GAAP and
non-GAAP revenue is approximately $0.7 million, and approximately
$0.02 on GAAP and non-GAAP diluted earnings per share. The expected
negative currency translation impact on Progress' fiscal Q3 2024
business outlook compared to 2023 exchange rates on GAAP and
non-GAAP revenue is approximately $0.5 million. The expected impact
on GAAP and non-GAAP diluted Q3 2024 earnings per share is not
expected to be material from an accounting perspective.
Fluctuations in exchange rates can impact our future
performance.
Conference Call
Progress will hold a conference call to review its
financial results for the fiscal second quarter of 2024 at 5:00
p.m. ET on Tuesday, June 25, 2024. Participants must register
for the conference call here:
https://register.vevent.com/register/BIcaa7ecfd2ca345fba5c37d9a907a9c8d.
The webcast can be accessed at:
https://edge.media-server.com/mmc/p/78g7r495/. 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 prior period results relates to
Chef Software, Inc. which we acquired on October 5, 2020. 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.
- 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.
- 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 and other - In
all periods presented, we exclude restructuring expenses incurred
because those expenses distort trends and are not part of our core
operating results.
- 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.
- Cyber incident and vulnerability
response expenses, net
- November 2022 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 our filings with the Securities and
Exchange Commission since June 5, 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 associated with the MOVEit Vulnerability. We do not expect
to incur additional costs associated with the November 2022 Cyber
Incident as the investigation is closed. 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.
- Annualized Recurring Revenue ("ARR") -
We disclose ARR as a performance metric to help investors better
understand and assess the performance of our business because our
mix of revenue generated from recurring sources currently
represents the substantial majority of our revenues and is expected
to continue in the future. We define ARR as the annualized revenue
of all active and contractually binding term-based contracts from
all customers at a point in time. ARR includes revenue from
maintenance, software upgrade rights, public cloud, and on-premises
subscription-based transactions and managed services. ARR mitigates
fluctuations in revenue due to seasonality, contract term and the
sales mix of subscriptions for term-based licenses and SaaS.
Management uses ARR to understand customer trends and the overall
health of the Company’s business, helping it to formulate strategic
business decisions.We calculate the annualized value of annual and
multi-year contracts, and contracts with terms less than one year,
by dividing the total contract value of each contract by the number
of months in the term and then multiplying by 12. Annualizing
contracts with terms less than one-year results in amounts being
included in our ARR that are in excess of the total contract value
for those contracts at the end of the reporting period. We
generally do not sell contracts with a term of less than one year
unless a customer is purchasing additional licenses under an
existing annual or multi-year contract. The expectation is that at
the time of renewal, contracts with a term less than one year will
renew with the same term as the existing contracts being renewed,
such that both contracts are co-termed. Historically contracts with
a term of less than one year renew at rates equal to or better than
annual or multi-year contracts.Revenue from term-based license and
on-premises subscription arrangements include a portion of the
arrangement consideration that is allocated to the software license
that is recognized up-front at the point in time control is
transferred under ASC 606 revenue recognition principles. ARR for
these arrangements is calculated as described above. The
expectation is that the total contract value, inclusive of revenue
recognized as software license, will be renewed at the end of the
contract term.The calculation is done at constant currency using
the current year budgeted exchange rates for all periods
presented.ARR is not defined in GAAP and is not derived from a GAAP
measure. Rather, ARR generally aligns to billings (as opposed to
GAAP revenue which aligns to the transfer of control of each
performance obligation). 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 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; (v) the results of inquiries,
investigations and legal claims regarding the MOVEit Vulnerability
remain uncertain and the ultimate resolution of these matters could
result in losses that may be material to our financial results for
a particular period; and (vi) our acquisitions may not be
successful or may involve unanticipated costs or other integration
issues that could disrupt our existing operations. For further
information regarding risks and uncertainties associated with
Progress' business, please refer to our filings with the Securities
and Exchange Commission, including our Annual Report on Form 10-K
for the fiscal year ended November 30, 2023. Progress undertakes no
obligation to update any forward-looking statements, which speak
only as of the date of this press release.
About Progress
Progress (Nasdaq: PRGS) empowers organizations to achieve
transformational success in the face of disruptive change. Our
software enables our customers to develop, deploy and manage
responsible, AI-powered applications and experiences with agility
and ease. Customers get a trusted provider in Progress, with the
products, expertise and vision they need to succeed. Over 4 million
developers and technologists at hundreds of thousands of
enterprises depend on Progress. 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, 2024 |
|
May 31, 2023 |
|
% Change |
|
May 31, 2024 |
|
May 31, 2023 |
|
% Change |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
Software licenses |
$ |
53,979 |
|
|
$ |
56,407 |
|
|
(4 |
)% |
|
$ |
118,079 |
|
|
$ |
113,975 |
|
|
4 |
% |
Maintenance and services |
|
121,098 |
|
|
|
121,844 |
|
|
(1 |
)% |
|
|
241,683 |
|
|
|
228,502 |
|
|
6 |
% |
Total revenue |
|
175,077 |
|
|
|
178,251 |
|
|
(2 |
)% |
|
|
359,762 |
|
|
|
342,477 |
|
|
5 |
% |
Costs of revenue: |
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses |
|
2,497 |
|
|
|
2,814 |
|
|
(11 |
)% |
|
|
5,228 |
|
|
|
5,266 |
|
|
(1 |
)% |
Cost of maintenance and services |
|
22,176 |
|
|
|
22,970 |
|
|
(3 |
)% |
|
|
44,395 |
|
|
|
40,471 |
|
|
10 |
% |
Amortization of acquired intangibles |
|
7,398 |
|
|
|
7,994 |
|
|
(7 |
)% |
|
|
15,257 |
|
|
|
14,258 |
|
|
7 |
% |
Total costs of revenue |
|
32,071 |
|
|
|
33,778 |
|
|
(5 |
)% |
|
|
64,880 |
|
|
|
59,995 |
|
|
8 |
% |
Gross profit |
|
143,006 |
|
|
|
144,473 |
|
|
(1 |
)% |
|
|
294,882 |
|
|
|
282,482 |
|
|
4 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
37,889 |
|
|
|
40,147 |
|
|
(6 |
)% |
|
|
77,000 |
|
|
|
73,901 |
|
|
4 |
% |
Product development |
|
35,435 |
|
|
|
34,820 |
|
|
2 |
% |
|
|
70,423 |
|
|
|
65,258 |
|
|
8 |
% |
General and administrative |
|
21,983 |
|
|
|
21,469 |
|
|
2 |
% |
|
|
43,327 |
|
|
|
40,255 |
|
|
8 |
% |
Amortization of acquired intangibles |
|
16,316 |
|
|
|
17,546 |
|
|
(7 |
)% |
|
|
33,705 |
|
|
|
31,157 |
|
|
8 |
% |
Cyber incident and vulnerability response expenses, net |
|
3,036 |
|
|
|
1,483 |
|
|
105 |
% |
|
|
4,023 |
|
|
|
4,175 |
|
|
(4 |
)% |
Restructuring expenses |
|
651 |
|
|
|
3,990 |
|
|
(84 |
)% |
|
|
3,000 |
|
|
|
5,387 |
|
|
(44 |
)% |
Acquisition-related expenses |
|
548 |
|
|
|
1,991 |
|
|
(72 |
)% |
|
|
1,250 |
|
|
|
3,734 |
|
|
(67 |
)% |
Total operating expenses |
|
115,858 |
|
|
|
121,446 |
|
|
(5 |
)% |
|
|
232,728 |
|
|
|
223,867 |
|
|
4 |
% |
Income from operations |
|
27,148 |
|
|
|
23,027 |
|
|
18 |
% |
|
|
62,154 |
|
|
|
58,615 |
|
|
6 |
% |
Other expense, net |
|
(7,020 |
) |
|
|
(8,418 |
) |
|
(17 |
)% |
|
|
(14,419 |
) |
|
|
(14,082 |
) |
|
2 |
% |
Income before income taxes |
|
20,128 |
|
|
|
14,609 |
|
|
38 |
% |
|
|
47,735 |
|
|
|
44,533 |
|
|
7 |
% |
Provision for income taxes |
|
3,940 |
|
|
|
2,519 |
|
|
56 |
% |
|
|
8,908 |
|
|
|
8,769 |
|
|
2 |
% |
Net income |
$ |
16,188 |
|
|
$ |
12,090 |
|
|
34 |
% |
|
$ |
38,827 |
|
|
$ |
35,764 |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.37 |
|
|
$ |
0.28 |
|
|
32 |
% |
|
$ |
0.89 |
|
|
$ |
0.83 |
|
|
7 |
% |
Diluted |
$ |
0.37 |
|
|
$ |
0.27 |
|
|
37 |
% |
|
$ |
0.87 |
|
|
$ |
0.81 |
|
|
7 |
% |
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
43,213 |
|
|
|
43,343 |
|
|
— |
% |
|
|
43,508 |
|
|
|
43,321 |
|
|
— |
% |
Diluted |
|
43,964 |
|
|
|
44,470 |
|
|
(1 |
)% |
|
|
44,395 |
|
|
|
44,411 |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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 |
$ |
912 |
|
$ |
729 |
|
25 |
% |
|
$ |
1,898 |
|
$ |
1,349 |
|
41 |
% |
Sales and marketing |
|
2,458 |
|
|
1,769 |
|
39 |
% |
|
|
4,770 |
|
|
3,264 |
|
46 |
% |
Product development |
|
3,391 |
|
|
3,049 |
|
11 |
% |
|
|
7,056 |
|
|
6,047 |
|
17 |
% |
General and administrative |
|
5,228 |
|
|
4,740 |
|
10 |
% |
|
|
10,729 |
|
|
9,379 |
|
14 |
% |
Total |
$ |
11,989 |
|
$ |
10,287 |
|
17 |
% |
|
$ |
24,453 |
|
$ |
20,039 |
|
22 |
% |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited) |
|
(In thousands) |
May 31, 2024 |
|
November 30, 2023 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
190,420 |
|
$ |
126,958 |
Accounts receivable, net |
|
82,354 |
|
|
125,825 |
Unbilled receivables |
|
33,157 |
|
|
29,965 |
Other current assets |
|
37,052 |
|
|
48,040 |
Total current assets |
|
342,983 |
|
|
330,788 |
Property and equipment, net |
|
13,117 |
|
|
15,225 |
Goodwill and intangible assets, net |
|
1,137,427 |
|
|
1,186,379 |
Right-of-use lease assets |
|
14,219 |
|
|
18,711 |
Long-term unbilled receivables |
|
32,401 |
|
|
28,373 |
Other assets |
|
46,228 |
|
|
23,307 |
Total assets |
$ |
1,586,375 |
|
$ |
1,602,783 |
Liabilities and shareholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable and other current liabilities |
$ |
71,195 |
|
$ |
92,805 |
Current portion of long-term debt, net |
|
— |
|
|
13,109 |
Short-term operating lease liabilities |
|
9,447 |
|
|
10,114 |
Short-term deferred revenue, net |
|
226,579 |
|
|
236,090 |
Total current liabilities |
|
307,221 |
|
|
352,118 |
Long-term debt, net |
|
— |
|
|
356,111 |
Convertible senior notes, net |
|
794,277 |
|
|
354,772 |
Long-term operating lease liabilities |
|
9,970 |
|
|
13,000 |
Long-term deferred revenue, net |
|
64,995 |
|
|
58,946 |
Other long-term liabilities |
|
8,245 |
|
|
8,121 |
Shareholders’ equity: |
|
|
|
Common stock and additional paid-in capital |
|
330,813 |
|
|
371,017 |
Retained earnings |
|
70,854 |
|
|
88,698 |
Total shareholders’ equity |
|
401,667 |
|
|
459,715 |
Total liabilities and shareholders’ equity |
$ |
1,586,375 |
|
$ |
1,602,783 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
(In thousands) |
May 31, 2024 |
|
May 31, 2023 |
|
May 31, 2024 |
|
May 31, 2023 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
$ |
16,188 |
|
|
$ |
12,090 |
|
|
$ |
38,827 |
|
|
$ |
35,764 |
|
Depreciation and amortization |
|
27,529 |
|
|
|
27,398 |
|
|
|
55,073 |
|
|
|
49,540 |
|
Stock-based compensation |
|
11,989 |
|
|
|
10,287 |
|
|
|
24,453 |
|
|
|
20,039 |
|
Other non-cash adjustments |
|
(812 |
) |
|
|
(1,949 |
) |
|
|
515 |
|
|
|
(6,156 |
) |
Changes in operating assets and liabilities |
|
8,787 |
|
|
|
125 |
|
|
|
15,317 |
|
|
|
(4,469 |
) |
Net cash flows from operating activities |
|
63,681 |
|
|
|
47,951 |
|
|
|
134,185 |
|
|
|
94,718 |
|
Capital expenditures |
|
(955 |
) |
|
|
(1,584 |
) |
|
|
(1,264 |
) |
|
|
(1,969 |
) |
Repurchases of common stock, net of issuances |
|
(44,636 |
) |
|
|
(7,992 |
) |
|
|
(59,553 |
) |
|
|
(13,635 |
) |
Dividend payments to shareholders |
|
(7,951 |
) |
|
|
(7,848 |
) |
|
|
(16,122 |
) |
|
|
(15,871 |
) |
Payments for acquisitions, net of cash acquired |
|
— |
|
|
|
(275 |
) |
|
|
— |
|
|
|
(356,096 |
) |
Proceeds from the issuance of debt, net of payment of issuance
costs |
|
431,929 |
|
|
|
— |
|
|
|
431,929 |
|
|
|
195,000 |
|
Principal payment on term loan and repayment of revolving line of
credit |
|
(337,813 |
) |
|
|
(26,718 |
) |
|
|
(371,250 |
) |
|
|
(28,437 |
) |
Purchase of capped calls |
|
(42,210 |
) |
|
|
— |
|
|
|
(42,210 |
) |
|
|
— |
|
Other |
|
(4,847 |
) |
|
|
(928 |
) |
|
|
(12,253 |
) |
|
|
(4,456 |
) |
Net change in cash and cash equivalents |
|
57,198 |
|
|
|
2,606 |
|
|
|
63,462 |
|
|
|
(130,746 |
) |
Cash and cash equivalents, beginning of period |
|
133,222 |
|
|
|
122,925 |
|
|
|
126,958 |
|
|
|
256,277 |
|
Cash and cash equivalents, end of period |
$ |
190,420 |
|
|
$ |
125,531 |
|
|
$ |
190,420 |
|
|
$ |
125,531 |
|
|
RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL
MEASURES1(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
(In thousands, except per share data) |
May 31, 2024 |
|
May 31, 2023 |
|
May 31, 2024 |
|
May 31, 2023 |
Adjusted revenue: |
|
|
|
|
|
|
|
GAAP revenue |
$ |
175,077 |
|
|
$ |
178,251 |
|
|
$ |
359,762 |
|
|
$ |
342,477 |
|
Acquisition-related revenue |
|
— |
|
|
|
982 |
|
|
|
— |
|
|
|
2,367 |
|
Non-GAAP revenue |
$ |
175,077 |
|
|
$ |
179,233 |
|
|
$ |
359,762 |
|
|
$ |
344,844 |
|
|
|
|
|
|
|
|
|
Adjusted income from operations: |
|
|
|
|
|
|
|
GAAP income from operations |
$ |
27,148 |
|
|
$ |
23,027 |
|
|
$ |
62,154 |
|
|
$ |
58,615 |
|
Amortization of acquired intangibles |
|
23,714 |
|
|
|
25,540 |
|
|
|
48,962 |
|
|
|
45,415 |
|
Stock-based compensation |
|
11,989 |
|
|
|
10,287 |
|
|
|
24,453 |
|
|
|
20,039 |
|
Restructuring expenses and other |
|
651 |
|
|
|
3,990 |
|
|
|
3,000 |
|
|
|
5,387 |
|
Acquisition-related revenue and expenses |
|
548 |
|
|
|
2,973 |
|
|
|
1,250 |
|
|
|
6,101 |
|
Cyber incident and vulnerability response expenses, net |
|
3,036 |
|
|
|
1,483 |
|
|
|
4,023 |
|
|
|
4,175 |
|
Non-GAAP income from operations |
$ |
67,086 |
|
|
$ |
67,300 |
|
|
$ |
143,842 |
|
|
$ |
139,732 |
|
|
|
|
|
|
|
|
|
Adjusted net income: |
|
|
|
|
|
|
|
GAAP net income |
$ |
16,188 |
|
|
$ |
12,090 |
|
|
$ |
38,827 |
|
|
$ |
35,764 |
|
Amortization of acquired intangibles |
|
23,714 |
|
|
|
25,540 |
|
|
|
48,962 |
|
|
|
45,415 |
|
Stock-based compensation |
|
11,989 |
|
|
|
10,287 |
|
|
|
24,453 |
|
|
|
20,039 |
|
Restructuring expenses and other |
|
651 |
|
|
|
3,990 |
|
|
|
3,000 |
|
|
|
5,387 |
|
Acquisition-related revenue and expenses |
|
548 |
|
|
|
2,973 |
|
|
|
1,250 |
|
|
|
6,101 |
|
Cyber incident and vulnerability response expenses, net |
|
3,036 |
|
|
|
1,483 |
|
|
|
4,023 |
|
|
|
4,175 |
|
Provision for income taxes |
|
(8,227 |
) |
|
|
(9,426 |
) |
|
|
(16,688 |
) |
|
|
(17,185 |
) |
Non-GAAP net income |
$ |
47,899 |
|
|
$ |
46,937 |
|
|
$ |
103,827 |
|
|
$ |
99,696 |
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share: |
|
|
|
|
|
|
|
GAAP diluted earnings per share |
$ |
0.37 |
|
|
$ |
0.27 |
|
|
$ |
0.87 |
|
|
$ |
0.81 |
|
Amortization of acquired intangibles |
|
0.54 |
|
|
|
0.57 |
|
|
|
1.10 |
|
|
|
1.02 |
|
Stock-based compensation |
|
0.27 |
|
|
|
0.24 |
|
|
|
0.56 |
|
|
|
0.45 |
|
Restructuring expenses and other |
|
0.02 |
|
|
|
0.09 |
|
|
|
0.07 |
|
|
|
0.12 |
|
Acquisition-related revenue and expenses |
|
0.01 |
|
|
|
0.07 |
|
|
|
0.03 |
|
|
|
0.14 |
|
Cyber incident and vulnerability response expenses, net |
|
0.07 |
|
|
|
0.03 |
|
|
|
0.09 |
|
|
|
0.09 |
|
Provision for income taxes |
|
(0.19 |
) |
|
|
(0.21 |
) |
|
|
(0.38 |
) |
|
|
(0.39 |
) |
Non-GAAP diluted earnings per share |
$ |
1.09 |
|
|
$ |
1.06 |
|
|
$ |
2.34 |
|
|
$ |
2.24 |
|
|
|
|
|
|
|
|
|
Non-GAAP weighted avg shares outstanding -
diluted |
|
43,964 |
|
|
|
44,470 |
|
|
|
44,395 |
|
|
|
44,411 |
|
|
|
|
|
|
|
|
|
|
OTHER NON-GAAP FINANCIAL
MEASURES1(Unaudited) |
|
Adjusted Free Cash Flow |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
(In thousands) |
May 31, 2024 |
|
May 31, 2023 |
|
% Change |
|
May 31, 2024 |
|
May 31, 2023 |
|
% Change |
Cash flows from operations |
$ |
63,681 |
|
|
$ |
47,951 |
|
|
33 |
% |
|
$ |
134,185 |
|
|
$ |
94,718 |
|
|
42 |
% |
Purchases of property and equipment |
|
(955 |
) |
|
|
(1,584 |
) |
|
(40 |
)% |
|
|
(1,264 |
) |
|
|
(1,969 |
) |
|
(36 |
)% |
Free cash flow |
|
62,726 |
|
|
|
46,367 |
|
|
35 |
% |
|
|
132,921 |
|
|
|
92,749 |
|
|
43 |
% |
Add back: restructuring payments |
|
1,347 |
|
|
|
1,673 |
|
|
(19 |
)% |
|
|
3,356 |
|
|
|
2,162 |
|
|
55 |
% |
Adjusted free cash flow |
$ |
64,073 |
|
|
$ |
48,040 |
|
|
33 |
% |
|
$ |
136,277 |
|
|
$ |
94,911 |
|
|
44 |
% |
|
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR
FISCAL YEAR 2024
GUIDANCE1(Unaudited) |
|
Fiscal Year 2024 Updated
Revenue Guidance |
|
Fiscal Year Ended |
|
Fiscal Year Ending |
|
November 30, 2023 |
|
November 30, 2024 |
(In millions) |
|
|
Low |
|
% Change |
|
High |
|
% Change |
GAAP revenue |
$ |
694.4 |
|
$ |
725.0 |
|
4 |
% |
|
$ |
735.0 |
|
6 |
% |
Acquisition-related adjustments - revenue |
|
3.8 |
|
|
— |
|
(100 |
)% |
|
|
— |
|
(100 |
)% |
Non-GAAP revenue |
$ |
698.2 |
|
$ |
725.0 |
|
4 |
% |
|
$ |
735.0 |
|
5 |
% |
Fiscal Year 2024 Updated
Non-GAAP Operating Margin Guidance |
|
Fiscal Year Ending November 30, 2024 |
(In millions) |
Low |
|
High |
GAAP income from operations |
$ |
135.9 |
|
|
$ |
142.6 |
|
GAAP operating margins |
|
19 |
% |
|
|
19 |
% |
Acquisition-related expense |
|
3.3 |
|
|
|
3.3 |
|
Restructuring expense |
|
3.8 |
|
|
|
3.8 |
|
Stock-based compensation |
|
47.7 |
|
|
|
47.7 |
|
Amortization of acquired intangibles |
|
89.0 |
|
|
|
89.0 |
|
Cyber incident and vulnerability response expenses, net |
|
6.3 |
|
|
|
6.3 |
|
Total adjustments |
|
150.1 |
|
|
|
150.1 |
|
Non-GAAP income from operations |
$ |
286.0 |
|
|
$ |
292.7 |
|
Non-GAAP operating margin |
|
39 |
% |
|
|
40 |
% |
Fiscal Year 2024 Updated
Non-GAAP Earnings per Share and Effective Tax Rate
Guidance |
|
Fiscal Year Ending November 30, 2024 |
(In millions, except per share data) |
Low |
|
High |
GAAP net income |
$ |
87.2 |
|
|
$ |
92.9 |
|
Adjustments (from previous table) |
|
150.1 |
|
|
|
150.1 |
|
Income tax adjustment(2) |
|
(30.0 |
) |
|
|
(30.4 |
) |
Non-GAAP net income |
$ |
207.3 |
|
|
$ |
212.6 |
|
|
|
|
|
GAAP diluted earnings per share |
$ |
1.98 |
|
|
$ |
2.10 |
|
Non-GAAP diluted earnings per share |
$ |
4.70 |
|
|
$ |
4.80 |
|
|
|
|
|
Diluted weighted average shares outstanding |
|
44.1 |
|
|
|
44.3 |
|
|
|
|
|
|
|
|
|
|
|
2 Tax adjustment is based on a non-GAAP effective tax rate of
approximately 20%, calculated as follows: |
|
|
Fiscal Year Ending November 30, 2024 |
|
|
Low |
|
High |
Non-GAAP income from operations |
|
$ |
286.0 |
|
|
$ |
292.7 |
|
Other (expense) income |
|
|
(26.9 |
) |
|
|
(26.9 |
) |
Non-GAAP income from continuing operations before income taxes |
|
|
259.1 |
|
|
|
265.8 |
|
Non-GAAP net income |
|
|
207.3 |
|
|
|
212.6 |
|
Tax provision |
|
$ |
51.8 |
|
|
$ |
53.2 |
|
Non-GAAP tax rate |
|
|
20 |
% |
|
|
20 |
% |
|
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR
FISCAL YEAR 2024
GUIDANCE1(Unaudited) |
|
Fiscal Year 2024 Adjusted
Free Cash Flow Guidance |
|
Fiscal Year Ending November 30, 2024 |
(In millions) |
Low |
|
High |
Cash flows from operations (GAAP) |
$ |
205 |
|
|
$ |
215 |
|
Purchases of property and equipment |
|
(5 |
) |
|
|
(5 |
) |
Add back: restructuring payments |
|
5 |
|
|
|
5 |
|
Adjusted free cash flow (non-GAAP) |
$ |
205 |
|
|
$ |
215 |
|
|
|
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
FOR Q3 2024
GUIDANCE1(Unaudited) |
|
|
|
Q3 2024 Revenue
Guidance |
|
|
Three Months Ended |
|
Three Months Ending |
|
|
August 31, 2023 |
|
August 31, 2024 |
|
(In millions) |
|
|
Low |
|
% Change |
|
|
High |
|
% Change |
GAAP revenue |
$ |
175.0 |
|
$ |
174.0 |
|
(1 |
)% |
|
$ |
178.0 |
|
2 |
% |
Acquisition-related adjustments - revenue |
|
0.8 |
|
|
— |
|
(100 |
)% |
|
|
— |
|
(100 |
)% |
Non-GAAP revenue |
$ |
175.8 |
|
$ |
174.0 |
|
(1 |
)% |
|
$ |
178.0 |
|
1 |
% |
Q3 2024 Non-GAAP Earnings per Share
Guidance |
|
Three Months Ending August 31, 2024 |
|
Low |
|
High |
GAAP diluted earnings per share |
$ |
0.48 |
|
|
$ |
0.52 |
|
Acquisition-related expense |
|
0.02 |
|
|
|
0.02 |
|
Restructure expense |
|
0.01 |
|
|
|
0.01 |
|
Stock-based compensation |
|
0.26 |
|
|
|
0.26 |
|
Amortization of acquired intangibles |
|
0.46 |
|
|
|
0.46 |
|
Cyber incident and vulnerability response expenses, net |
|
0.03 |
|
|
|
0.03 |
|
Total adjustments |
|
0.78 |
|
|
|
0.78 |
|
Income tax adjustment |
|
(0.15 |
) |
|
|
(0.15 |
) |
Non-GAAP diluted earnings per share |
$ |
1.11 |
|
|
$ |
1.15 |
|
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