Progress(PRGS) - 2024 Q2 - Quarterly Results

Financial Performance Overview Second Quarter 2024 Financial Highlights The company surpassed Q2 2024 revenue and EPS guidance, driven by strong operational execution and steady product demand - The outperformance in Q2 was driven by steady product demand and strong execution, with revenue and EPS exceeding forecasts[3][4] - Annualized Recurring Revenue (ARR) reached $579 million, a 1% increase year-over-year on a constant currency basis[5] - Days sales outstanding (DSO) improved to 41 days from 44 days in the prior year's quarter, and a quarterly dividend of $0.175 per share was declared[6] Q2 2024 Financial Performance Summary (Three Months Ended May 31, 2024) | Metric | GAAP | GAAP % Change (YoY) | Non-GAAP | Non-GAAP % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $175.1M | (2)% | $175.1M | (2)% | | Income from Operations | $27.1M | 18% | $67.1M | 0% | | Operating Margin | 16% | +300 bps | 38% | 0 bps | | Net Income | $16.2M | 34% | $47.9M | 2% | | Diluted EPS | $0.37 | 37% | $1.09 | 3% | | Cash from Operations | $63.7M | 33% | N/A | N/A | | Adjusted Free Cash Flow | N/A | N/A | $64.1M | 33% | 2024 Business Outlook Full Year 2024 Guidance The company raised its full-year 2024 guidance for revenue and EPS, reflecting confidence from strong first-half performance Updated vs. Prior Full Year 2024 Guidance | Metric | Updated FY 2024 Guidance | Prior FY 2024 Guidance | | :--- | :--- | :--- | | Revenue (GAAP & Non-GAAP) | $725M - $735M | $722M - $732M | | Diluted EPS (GAAP) | $1.98 - $2.10 | $1.94 - $2.06 | | Diluted EPS (Non-GAAP) | $4.70 - $4.80 | $4.65 - $4.75 | | Operating Margin (Non-GAAP) | 39% - 40% | 39% - 40% | | Adjusted Free Cash Flow | $205M - $215M | $205M - $215M | Third Quarter 2024 Guidance For Q3 2024, the company anticipates revenue between $174 million and $178 million and non-GAAP diluted EPS of $1.11 to $1.15 Q3 2024 Guidance | Metric | GAAP Guidance | Non-GAAP Guidance | | :--- | :--- | :--- | | Revenue | $174M - $178M | $174M - $178M | | Diluted EPS | $0.48 - $0.52 | $1.11 - $1.15 | Detailed Financial Statements Condensed Consolidated Statements of Operations Quarterly revenue decreased 2% YoY, but effective cost management led to an 18% increase in operating income and a 34% rise in net income Income Statement Highlights (Three Months Ended May 31) | (In thousands) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $175,077 | $178,251 | (2)% | | Gross Profit | $143,006 | $144,473 | (1)% | | Income from Operations | $27,148 | $23,027 | 18% | | Net Income | $16,188 | $12,090 | 34% | | Diluted EPS | $0.37 | $0.27 | 37% | Condensed Consolidated Balance Sheets As of May 31, 2024, total assets were $1.59 billion, with cash and cash equivalents increasing significantly to $190.4 million Balance Sheet Summary | (In thousands) | May 31, 2024 | November 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $190,420 | $126,958 | | Total current assets | $342,983 | $330,788 | | Total assets | $1,586,375 | $1,602,783 | | Total current liabilities | $307,221 | $352,118 | | Total liabilities | $1,184,708 | $1,143,068 | | Total shareholders' equity | $401,667 | $459,715 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities for Q2 2024 increased 33% year-over-year to $63.7 million Cash Flow Highlights (Three Months Ended May 31) | (In thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $63,681 | $47,951 | | Capital expenditures | ($955) | ($1,584) | | Repurchases of common stock | ($44,636) | ($7,992) | | Net change in cash | $57,198 | $2,606 | Reconciliation of GAAP to Non-GAAP Financial Measures Q2 and Six Months 2024 Reconciliation Q2 GAAP income from operations was adjusted by $39.9 million, primarily for amortization and stock-based compensation, to reach non-GAAP figures Q2 2024 GAAP to Non-GAAP Reconciliation (Income from Operations) | (In thousands) | Amount | | :--- | :--- | | GAAP income from operations | $27,148 | | Amortization of acquired intangibles | $23,714 | | Stock-based compensation | $11,989 | | Restructuring expenses and other | $651 | | Acquisition-related revenue and expenses | $548 | | Cyber incident and vulnerability response expenses, net | $3,036 | | Non-GAAP income from operations | $67,086 | Other Non-GAAP Financial Measures (Adjusted Free Cash Flow) Adjusted free cash flow for Q2 2024 was $64.1 million, representing a 33% increase year-over-year Adjusted Free Cash Flow Calculation (Three Months Ended May 31) | (In thousands) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Cash flows from operations | $63,681 | $47,951 | 33% | | Purchases of property and equipment | ($955) | ($1,584) | (40)% | | Free cash flow | $62,726 | $46,367 | 35% | | Add back: restructuring payments | $1,347 | $1,673 | (19)% | | Adjusted free cash flow | $64,073 | $48,040 | 33% | Fiscal Year 2024 Guidance Reconciliation Full-year 2024 GAAP income from operations is reconciled with $150.1 million in adjustments to achieve a non-GAAP operating margin of 39%-40% FY 2024 Non-GAAP Operating Margin Guidance Reconciliation | (In millions) | Low | High | | :--- | :--- | :--- | | GAAP income from operations | $135.9 | $142.6 | | Total adjustments | $150.1 | $150.1 | | Amortization of acquired intangibles | $89.0 | $89.0 | | Stock-based compensation | $47.7 | $47.7 | | Non-GAAP income from operations | $286.0 | $292.7 | | Non-GAAP operating margin | 39% | 40% | Q3 2024 Guidance Reconciliation Q3 GAAP diluted EPS is bridged to non-GAAP EPS with pre-tax adjustments of $0.78 per share, mainly from amortization and stock compensation Q3 2024 Non-GAAP EPS Guidance Reconciliation | Per Share | Low | High | | :--- | :--- | :--- | | GAAP diluted earnings per share | $0.48 | $0.52 | | Amortization of acquired intangibles | $0.46 | $0.46 | | Stock-based compensation | $0.26 | $0.26 | | Other adjustments | $0.06 | $0.06 | | Income tax adjustment | ($0.15) | ($0.15) | | Non-GAAP diluted earnings per share | $1.11 | $1.15 | Important Information and Disclosures Explanation of Non-GAAP Financial Measures The company uses non-GAAP measures to illustrate underlying business trends by excluding items not reflective of ordinary operations - Management uses non-GAAP measures to evaluate period-over-period performance, establish budgets, and allocate resources[10] - Key non-GAAP adjustments include amortization of acquired intangibles, stock-based compensation, and restructuring expenses[12] - Annualized Recurring Revenue (ARR) is a key performance metric used to understand customer trends and overall business health[12][13] Forward-Looking Statements This section cautions that financial guidance is subject to significant risks, including economic conditions and cybersecurity attacks - The press release contains forward-looking statements concerning the company's business outlook and financial guidance[18] - Material risks include economic conditions, cybersecurity vulnerabilities like the MOVEit incident, and challenges with acquisition integration[18]