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Progress Software (PRGS) Q4 Earnings Beat, Revenues Rise Y/Y

Zacks Equity Research

Progress Software Corporation PRGS reported fourth-quarter 2019 non-GAAP earnings of 79 cents per share that beat the Zacks Consensus Estimate by 5.3%. The figure increased 46% from the year-ago quarter.  

Non-GAAP revenues of $123.4 million also surpassed the consensus mark of $119 million. The figure improved 27% at constant currency (cc) year over year.

Higher than anticipated sales of OpenEdge, Ipswitch and Data Connectivity and Integration (DCI) solutions drove top-line growth.

Progress Software Corporation Price, Consensus and EPS Surprise

Progress Software Corporation Price, Consensus and EPS Surprise

Progress Software Corporation price-consensus-eps-surprise-chart | Progress Software Corporation Quote

Quarter Details

Segment-wise, OpenEdge reported non-GAAP revenues of $91.6 million and grew 27% on a year-over-year basis at cc to $92.8 million. Higher sales of network management and secure data file transfer products from Ipswitch were primary growth drivers.

In fourth-quarter 2019, Progress Software signed expansion deals in high six figures with several OpenEdge direct customers who needed more licenses for their business critical OpenEdge applications.

Customers also upgraded to the company’s OpenEdge 12 technology to take advantage of the security and performance improvements in the latest version.

DCI segment reported non-GAAP revenues of $12.2 million. The company won a number of deals in the quarter including a seven-figure deal with one of its largest OEM customers to increase the term of their contracts from three to five years alongside new direct customer wins.

Application Development and Deployment (AD&D) segment generated non-GAAP revenues of $19.6 million

Region-wise, North America, EMEA, Latin America and Asia Pacific reported non-GAAP revenues of $74.9 million, $36.3 million, $5.7 million and $6.5 million, respectively.

Type-wise, Software license reported non-GAAP revenues $39.4 million and grew 40% on a year-over-year basis at cc due to increase in license revenues from Ipswich and renewal of multiple multiyear-term OEM contracts within the DCI segment compared to last year.

Maintenance and service reported non-GAAP revenues of $74.6 million and $9.5 million respectively and grew 21% on a year-over-year basis at cc to $84 million primarily due to the addition of Ipswitch.

Operating Details

GAAP sales and marketing expenses, as a percentage of revenues, contracted 360 basis points (bps) from the year-ago quarter to 25.1%.

GAAP product development expenses, as a percentage of revenues, contracted 30 bps from the year-ago quarter to 20.4%.

GAAP general and administration expenses, as a percentage of revenues, contracted 90 bps from the year-ago quarter to 12.7%.

Progress Software reported adjusted operating margin of 38%, which expanded 600 bps from the year-ago quarter.

The company reported total GAAP operating expenses (87.45 of revenues) of $102.3 million which increased 45.4% year over year.

Balance Sheet

As of Nov 30, 2019, cash and cash equivalents (and short-term investments) were $173.7 million, up from $145.4 million as of Aug 31, 2019.

Progress Software generated $36.7 million in cash from operations/adjusted free cash flow compared with $27.4 million reported in the previous quarter.

Progress Software increased the total share repurchase authorization to $250 million.

The company declared a quarterly cash dividend of 16 cents per share to be paid out on Mar 16, 2020.

Guidance

For the first quarter of 2020, Progress Software expects non-GAAP revenues between $110 and $113 million. The Zacks Consensus Estimate for revenues is currently pegged at $109.1 billion, indicating growth of 21.8% from the year-ago quarter’s reported figure.

The company expects non-GAAP earnings to be in the range of 69-71 cents per share. The Zacks Consensus Estimate is currently pegged at 63 cents per share, indicating growth of 26% from the year-ago quarter’s reported figure.

For 2020, non-GAAP revenues are projected between $448 and $455 million.

For 2020, adjusted operating margin is expected to be 39%. Non-GAAP earnings for 2020 are projected between $2.87 and $2.92 per share.

The Zacks Consensus Estimate for 2020 earnings is currently pegged at $2.87 per share.

Zacks Rank & Stocks to Consider

Progress Software currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Apple AAPL, Match Group, Inc. MTCH and Garmin Ltd. GRMN. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple, Match Group and Garmin are set to release quarterly results on Jan 28, Feb 4 and Feb 19, respectively.

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