Progress Announces Third Quarter 2021 Financial Results

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Q3 Revenue and EPS Significantly Ahead of Guidance
Full Year 2021 Guidance Raised Again

BEDFORD, Mass., Sept. 23, 2021 (GLOBE NEWSWIRE) — Progress (NASDAQ: PRGS), the leading provider of products to develop, deploy and manage high-impact business applications, today announced financial results for its fiscal third quarter ended August 31, 2021.

Third Quarter 2021 Highlights:

  • Revenue of $147.4 million increased 34% year-over-year on an actual currency basis, and 33% on a constant currency basis.
  • Non-GAAP revenue of $152.6 million increased 38% on an actual currency basis, and 36% on a constant currency basis.
  • Annualized Recurring Revenue (ARR) of $444 million increased 25% year-over-year on a constant currency basis.
  • Operating margin was 31% and Non-GAAP operating margin was 47%.
  • Diluted earnings per share was $0.70 compared to $0.53 in the same quarter last year, an increase of 32%. 
  • Non-GAAP diluted earnings per share was $1.18 compared to $0.78 in the same quarter last year, an increase of 51%.

“We’re very pleased to announce Q3 results that significantly beat our previous guidance for revenue and earnings, and we’re raising 2021 guidance for the third time this year,” said Yogesh Gupta, CEO at Progress. “We also announced the signing of a definitive agreement to acquire Kemp, a leader in the Application Experience (‘AX’) space. Kemp meets all our acquisition criteria, fits perfectly with our total growth strategy, and brings a very talented team to Progress.”

Additional financial highlights included(1):

  Three Months Ended
  GAAP   Non-GAAP
(In thousands, except percentages and per share amounts) August 31,
2021
  August 31,
2020
  %
Change
  August 31,
2021
  August 31,
2020
  %
Change
Revenue $ 147,417     $ 109,699     34 %   $ 152,597     $ 110,882     38 %
Income from operations $ 46,046     $ 33,193     39 %   $ 71,163     $ 47,117     51 %
Operating margin 31 %   30 %   100 bps   47 %   42 %   500 bps
Net income $ 30,976     $ 23,977     29 %   $ 52,577     $ 35,605     48 %
Diluted earnings per share $ 0.70     $ 0.53     32 %   $ 1.18     $ 0.78     51 %
Cash from operations (GAAP) /Adjusted free cash flow (Non-GAAP) $ 35,224     $ 31,112     13 %   $ 35,022     $ 30,101     16 %

(1)See Legal Notice Regarding Non-GAAP Financial Information

Other fiscal third quarter 2021 metrics and recent results included:

  • Cash, cash equivalents and short-term investments were $383.7 million at the end of the quarter.
  • DSO was 54 days compared to 49 days in the fiscal third quarter of 2020 and 44 days in the fiscal second quarter of 2021.
  • On September 21, 2021, our Board of Directors declared a quarterly dividend of $0.175 per share of common stock that will be paid on December 15, 2021 to shareholders of record as of the close of business on December 1, 2021.
  • On September 23, 2021, we announced a definitive agreement to acquire Kemp Technologies, a leader in the Application Experience space, for $258 million in cash.

Anthony Folger, CFO, said: “Q3 results were outstanding across every metric and our confidence in our business is reflected in the increased outlook for 2021. In addition to our strong financial results and outlook, we continued to execute our total growth strategy while remaining disciplined with the acquisition of Kemp, a deal that positions us exceptionally well for 2022 and beyond.”

2021 Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2021 and the fiscal fourth quarter ending November 30, 2021:

  Updated FY 2021 Guidance
(September 23, 2021)
  Prior FY 2021 Guidance
(June 24, 2021)
(In millions, except percentages and per share amounts) GAAP   Non-GAAP   GAAP   Non-GAAP
Revenue $520 – $524   $548 – $552   $503 – $509   $529 – $535
Diluted earnings per share $1.56 – $1.58   $3.68 – $3.70   $1.51 – $1.55   $3.46 – $3.50
Operating margin 21%   40%   21%   39%
Cash from operations (GAAP) /
Adjusted free cash flow (Non-GAAP)
$168 – $172   $168 – $172   $160 – $164   $158 – $162
Effective tax rate 20% – 21%   20% – 21%   20% – 21%   20% – 21%
  Q4 2021 Guidance
(In millions, except per share amounts) GAAP   Non-GAAP
Revenue $129 – $133   $134 – $138
Diluted earnings per share $0.13 – $0.15   $0.73 – $0.75

Based on current exchange rates, the expected positive currency translation impact on Progress’ fiscal year 2021 business outlook compared to 2020 exchange rates is approximately $6.8 million on GAAP and non-GAAP revenue, and approximately $0.04 on GAAP and non-GAAP diluted earnings per share. The expected positive currency translation impact on Progress’ fiscal Q4 2021 business outlook compared to 2020 exchange rates on GAAP and non-GAAP revenue is approximately $0.6 million. The expected positive impact on GAAP and non-GAAP diluted Q4 2021 earnings per share is $0.01. 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 2021 at 5:00 p.m. ET on Thursday, September 23, 2021. 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 800-773-2954 or +1 847-413-3731, passcode 50220857. 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.

Legal Notice Regarding Non-GAAP Financial Information

Progress provides non-GAAP financial information as additional information for investors. These non-GAAP measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States (“GAAP”). Progress believes that the non-GAAP results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results.  A reconciliation of non-GAAP adjustments to the company’s GAAP financial results is included in the tables below and is available on the Progress website at www.progress.com within the investor relations section. Additional information regarding the company’s non-GAAP financial information is contained in the company’s Current Report on Form 8-K furnished to the Securities and Exchange Commission in connection with this press release, which is also available on the Progress website 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 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:

(1) 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. (2) 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. (3) Our ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts. (5) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. (6) 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. (7) 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. (8) We have made acquisitions, and may make acquisitions in the future, and those acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. (9) 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; (10) The continuing impact of the coronavirus disease (COVID-19) outbreak on our employees, customers, partners, and the global financial markets could adversely affect our business, results of operations and financial condition. 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, 2020. 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) provides the best products to develop, deploy and manage high-impact business applications. Our comprehensive product stack is designed to make technology teams more productive and we have a deep commitment to the developer community, both open source and commercial alike. With Progress, organizations can accelerate the creation and delivery of strategic business applications, automate the process by which apps are configured, deployed and scaled, and make critical data and content more accessible and secure—leading to competitive differentiation and business success. Over 1,700 independent software vendors, 100,000 enterprise customers, and three million developers rely on Progress to power their applications. Learn about Progress at www.progress.com or +1-800-477-6473.

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,
2021
  August 31,
2020
  %
Change
  August 31,
2021
  August 31,
2020
  %
Change
Revenue:                      
Software licenses $ 51,930     $ 27,514     89 %   $ 115,354     $ 77,806     48 %
Maintenance and services 95,487     82,185     16 %   275,831     241,959     14 %
Total revenue 147,417     109,699     34 %   391,185     319,765     22 %
Costs of revenue:                      
Cost of software licenses 1,574     1,103     43 %   3,763     3,302     14 %
Cost of maintenance and services 14,895     11,971     24 %   42,887     35,607     20 %
Amortization of acquired intangibles 3,599     1,664     116 %   10,719     4,974     116 %
Total costs of revenue 20,068     14,738     36 %   57,369     43,883     31 %
Gross profit 127,349     94,961     34 %   333,816     275,882     21 %
Operating expenses:                      
Sales and marketing 29,737     22,186     34 %   88,468     68,100     30 %
Product development 25,616     20,676     24 %   76,579     64,117     19 %
General and administrative 16,451     13,514     22 %   46,335     38,702     20 %
Amortization of acquired intangibles 7,978     4,176     91 %   22,836     12,484     83 %
Restructuring expenses 40     91     (56 )%   1,133     1,826     (38 )%
Acquisition-related expenses 1,481     1,125     32 %   2,721     1,439     89 %
Total operating expenses 81,303     61,768     32 %   238,072     186,668     28 %
Income from operations 46,046     33,193     39 %   95,744     89,214     7 %
Other expense, net (6,539 )   (2,962 )   (121 )%   (14,409 )   (9,206 )   (57 )%
Income before income taxes 39,507     30,231     31 %   81,335     80,008     2 %
Provision for income taxes 8,531     6,254     36 %   17,841     17,947     (1 )%
Net income $ 30,976     $ 23,977     29 %   $ 63,494     $ 62,061     2 %
                       
Earnings per share:                      
Basic $ 0.71     $ 0.53     34 %   $ 1.45     $ 1.38     5 %
Diluted $ 0.70     $ 0.53     32 %   $ 1.43     $ 1.37     4 %
Weighted average shares outstanding:                      
Basic 43,762     45,036     (3 )%   43,896     44,941     (2 )%
Diluted 44,502     45,364     (2 )%   44,542     45,382     (2 )%
                       
Cash dividends declared per common share $ 0.175     $ 0.165     6 %   $ 0.525     $ 0.495     6 %
Stock-based compensation is included in the condensed consolidated statements of operations, as follows:            
Cost of revenue $ 374     $ 322     16 %   $ 1,234     $ 979     26 %
Sales and marketing 1,424     1,035     38 %   4,679     3,195     46 %
Product development 1,848     1,693     9 %   6,179     5,518     12 %
General and administrative 3,193     2,635     21 %   9,893     7,667     29 %
Total $ 6,839     $ 5,685     20 %   $ 21,985     $ 17,359     27 %

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In thousands) August 31, 2021   November 30, 2020
Assets      
Current assets:      
Cash, cash equivalents and short-term investments $ 383,677     $ 105,995  
Accounts receivable, net 77,031     84,040  
Unbilled receivables and contract assets 28,479     24,917  
Other current assets 19,710     23,983  
Total current assets 508,897     238,935  
Property and equipment, net 28,724     29,817  
Goodwill and intangible assets, net 670,602     704,473  
Right-of-use lease assets 28,286     30,635  
Long-term unbilled receivables and contract assets 22,225     17,133  
Other assets 16,753     20,789  
Total assets $ 1,275,487     $ 1,041,782  
Liabilities and shareholders’ equity      
Current liabilities:      
Accounts payable and other current liabilities $ 70,713     $ 70,899  
Current portion of long-term debt, net 23,886     18,242  
Short-term operating lease liabilities 7,269     7,015  
Short-term deferred revenue 169,740     166,387  
Total current liabilities 271,608     262,543  
Long-term debt, net 247,375     364,260  
Convertible senior notes, net 291,283      
Long-term operating lease liabilities 24,010     26,966  
Long-term deferred revenue 33,280     26,908  
Other long-term liabilities 11,158     15,092  
Shareholders’ equity:      
Common stock and additional paid-in capital 343,677     306,244  
Retained earnings 53,096     39,769  
Total shareholders’ equity 396,773     346,013  
Total liabilities and shareholders’ equity $ 1,275,487     $ 1,041,782  
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  

  Three Months Ended   Nine Months Ended
(In thousands) August 31,
2021
  August 31,
2020
  August 31,
2021
  August 31,
2020
Cash flows from operating activities:              
Net income $ 30,976     $ 23,977     $ 63,494     $ 62,061  
Depreciation and amortization 16,383     7,480     43,074     22,721  
Stock-based compensation 6,839     5,685     21,985     17,359  
Other non-cash adjustments 1,009     655     4,132     8,311  
Changes in operating assets and liabilities (19,983 )   (6,685 )   1,917     (8,367 )
Net cash flows from operating activities 35,224     31,112     134,602     102,085  
Capital expenditures (625 )   (1,662 )   (2,741 )   (3,419 )
Issuances of common stock, net of repurchases 2,947     1,719     (25,753 )   (10,973 )
Dividend payments to shareholders (7,755 )   (7,452 )   (23,372 )   (22,358 )
Payments of principal on long-term debt (5,644 )   (3,763 )   (111,669 )   (7,525 )
Proceeds from issuance of Notes, net of issuance costs         349,196      
Purchase of capped calls         (43,056 )    
Other (3,130 )   6,520     475     (1,376 )
Net change in cash, cash equivalents and short-term investments 21,017     26,474     277,682     56,434  
Cash, cash equivalents and short-term investments, beginning of period 362,660     203,645     105,995     173,685  
Cash, cash equivalents and short-term investments, end of period $ 383,677     $ 230,119     $ 383,677     $ 230,119  

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

  Three Months Ended   % Change
(In thousands, except per share data) August 31, 2021   August 31, 2020   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 147,417         $ 109,699          
Acquisition-related revenue(1) 5,180         1,183          
Non-GAAP revenue $ 152,597     100 %   $ 110,882     100 %   38 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 46,046     31 %   $ 33,193     30 %    
Amortization of acquired intangibles 11,577     8 %   5,840     5 %    
Restructuring expenses and other 40     %   91     %    
Stock-based compensation 6,839     4 %   5,685     5 %    
Acquisition-related revenue(1) and expenses 6,661     4 %   2,308     2 %    
Non-GAAP income from operations $ 71,163     47 %   $ 47,117     42 %   51 %
                   
Adjusted net income:                  
GAAP net income $ 30,976     21 %   $ 23,977     22 %    
Amortization of acquired intangibles 11,577     8 %   5,840     5 %    
Restructuring expenses and other 40     %   91     %    
Stock-based compensation 6,839     3 %   5,685     5 %    
Acquisition-related revenue(1) and expenses 6,661     4 %   2,308     2 %    
Amortization of discount on notes 2,868     2 %       %    
Provision for income taxes (6,384 )   (4 )%   (2,296 )   (2 )%    
Non-GAAP net income $ 52,577     34     $ 35,605     32 %   48 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 0.70         $ 0.53          
Amortization of acquired intangibles 0.26         0.12          
Stock-based compensation 0.15         0.13          
Acquisition-related revenue(1) and expenses 0.15         0.05          
Amortization of discount on notes 0.06                  
Provision for income taxes (0.14 )       (0.05 )        
Non-GAAP diluted earnings per share $ 1.18         $ 0.78         51 %
                   
Non-GAAP weighted avg shares outstanding – diluted 44,502         45,364         (2 )%
                   
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities.

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

  Nine Months Ended   % Change
(In thousands, except per share data) August 31, 2021   August 31, 2020   Non-GAAP
Adjusted revenue:                  
GAAP revenue $ 391,185         $ 319,765          
Acquisition-related revenue(1) 22,394         7,384          
Non-GAAP revenue $ 413,579     100 %   $ 327,149     100 %   26 %
                   
Adjusted income from operations:                  
GAAP income from operations $ 95,744     24 %   $ 89,214     28 %    
Amortization of acquired intangibles 33,555     8 %   17,458     5 %    
Restructuring expenses and other 1,133     %   1,826     %    
Stock-based compensation 21,985     5 %   17,359     5 %    
Acquisition-related revenue(1) and expenses 25,115     6 %   8,823     3 %    
Non-GAAP income from operations $ 177,532     43 %   $ 134,680     41 %   32 %
                   
Adjusted net income:                  
GAAP net income $ 63,494     16 %   $ 62,061     19 %    
Amortization of acquired intangibles 33,555     8 %   17,458     5 %    
Restructuring expenses and other 1,133     %   1,826     %    
Stock-based compensation 21,985     5 %   17,359     5 %    
Acquisition-related revenue(1) and expenses 25,115     6 %   8,823     3 %    
Amortization of discount on notes 4,348     1 %       %    
Provision for income taxes (18,036 )   (4 )%   (8,563 )   (2 )%    
Non-GAAP net income $ 131,594     32 %   $ 98,964     30 %   33 %
                   
Adjusted diluted earnings per share:                  
GAAP diluted earnings per share $ 1.43         $ 1.37          
Amortization of acquired intangibles 0.75         0.38          
Restructuring expenses and other 0.03         0.04          
Stock-based compensation 0.48         0.39          
Acquisition-related revenue(1) and expenses 0.56         0.19          
Amortization of discount on notes 0.10                  
Provision for income taxes (0.40 )       (0.19 )        
Non-GAAP diluted earnings per share $ 2.95         $ 2.18         35 %
                   
Non-GAAP weighted avg shares outstanding – diluted 44,542         45,382         (2 )%
                   
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities.

OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)

Quarter to Date Adjusted Free Cash Flow          
           
(In thousands) Q3 2021   Q3 2020   % Change
Cash flows from operations $ 35,224      $ 31,112      13 %
Purchases of property and equipment (625 )   (1,662 )   (62 )%
Free cash flow 34,599      29,450      17 %
Add back: restructuring payments 423      651      (35 )%
Adjusted free cash flow $ 35,022      $ 30,101      16 %
Year to Date Adjusted Free Cash Flow          
           
(In thousands) Q3 2021   Q3 2020   % Change
Cash flows from operations $ 134,602     $ 102,085     32 %
Purchases of property and equipment (2,741 )   (3,419 )   (20 )%
Free cash flow 131,861     98,666     34 %
Add back: restructuring payments 5,087     3,131     62 %
Adjusted free cash flow $ 136,948     $ 101,797     35 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021 GUIDANCE
(Unaudited)

Fiscal Year 2021 Updated Revenue Guidance
  Fiscal Year Ended   Fiscal Year Ending
  November 30, 2020   November 30, 2021
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 442.1     $ 520.4     18 %   $ 524.4     19 %
Acquisition-related adjustments – revenue(1) 14.1     27.6     96 %   27.6     96 %
Non-GAAP revenue $ 456.2     $ 548.0     20 %   $ 552.0     21 %
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Ipswitch, Chef, and Kemp.
Fiscal Year 2021 Updated Non-GAAP Operating Margin Guidance
  Fiscal Year Ending November 30, 2021
(In millions) Low   High
GAAP income from operations $ 108.9     $ 110.0  
GAAP operating margins 21 %   21 %
Acquisition-related revenue 27.6     27.6  
Acquisition-related expense 3.4     3.4  
Restructuring expense 4.8     4.8  
Stock-based compensation 28.9     28.9  
Amortization of acquired intangibles 46.9     46.9  
Total adjustments(2) 111.6     111.6  
Non-GAAP income from operations $ 220.5     $ 221.6  
Non-GAAP operating margin 40 %   40 %
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Chef and Kemp and restructuring expenses. The final amounts will not be available until the Company’s internal procedures and reviews are completed.
Fiscal Year 2021 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance
  Fiscal Year Ending November 30, 2021
(In millions, except per share data) Low   High
GAAP net income $ 69.7     $ 70.6  
Adjustments (from previous table) 111.6     111.6  
Amortization of discount on notes 7.2     7.2  
Income tax adjustment(3) (24.4 )   (24.3 )
Non-GAAP net income $ 164.1     $ 165.1  
       
GAAP diluted earnings per share $ 1.56     $ 1.58  
Non-GAAP diluted earnings per share $ 3.68     $ 3.70  
       
Diluted weighted average shares outstanding 44.6     44.6  
       
(3)Tax adjustment is based on a non-GAAP effective tax rate of approximately 21% for Low and 20% for High, calculated as follows:
Non-GAAP income from operations $ 220.5     $ 221.6  
Other (expense) income (14.0 )   (14.0 )
Non-GAAP income from continuing operations before income taxes 206.5     207.6  
Non-GAAP net income 164.1     165.1  
Tax provision $ 42.4     $ 42.5  
Non-GAAP tax rate 21 %   20 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2021 GUIDANCE
(Unaudited)

Fiscal Year 2021 Adjusted Free Cash Flow Guidance
  Fiscal Year Ending November 30, 2021
(In millions) Low   High
Cash flows from operations (GAAP) $ 168     $ 172  
Purchases of property and equipment (5 )   (5 )
Add back: restructuring payments 5     5  
Adjusted free cash flow (non-GAAP) $ 168     $ 172  

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2021 GUIDANCE
(Unaudited)

Q4 2021 Revenue Guidance
  Three Months Ended   Three Months Ending
  November 30, 2020   November 30, 2021
(In millions)     Low   % Change   High   % Change
GAAP revenue $ 122.4     $ 129.2     6 %   $ 133.2     9 %
Acquisition-related adjustments – revenue(1) 6.7     5.2     (22 )%   5.2     (22 )%
Non-GAAP revenue $ 129.1     $ 134.4     4 %   $ 138.4     7 %
(1)Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue that would otherwise have been recognized but for the purchase accounting treatment of acquisitions. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Acquisition-related revenue adjustments relate to Ipswitch, Chef, and Kemp.
Q4 2021 Non-GAAP Earnings per Share Guidance
  Three Months Ending November 30, 2021
  Low   High
GAAP diluted earnings per share $ 0.13     $ 0.15  
Acquisition-related revenue 0.12     0.12  
Acquisition-related expense 0.02     0.02  
Restructuring expense 0.08     0.08  
Stock-based compensation 0.15     0.15  
Amortization of acquired intangibles 0.30     0.30  
Total adjustments(2) 0.67     0.67  
Amortization of discount on notes 0.06     0.06  
Income tax adjustment (0.13 )   (0.13 )
Non-GAAP diluted earnings per share $ 0.73     $ 0.75  
(2)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from Chef and Kemp. The final amounts will not be available until the Company’s internal procedures and reviews are completed.

Progress Announces Third Quarter 2021 Financial Results

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