PROGRESS SOFTWARE CORP / MA: Results of operations and financial situation, disclosure of FD regulations, financial statements and supporting documents (form 8-K)

Item 2.02 Operating results and financial position

At September 23, 2021, Progress software company (“Progress”) issued a press release announcing its financial results for the fiscal third quarter ended
August 31, 2021. A copy of the press release is attached to this current report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

Such information will not be considered “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not deemed to be incorporated by reference in any other filing of the Company, whether made before or after the date of this report. , regardless of any language of general incorporation into the repository.

Non-GAAP Financial Information – Progress provides additional non-GAAP information on its financial results. We use this non-GAAP information to assess our operating performance from period to period because our management believes that this information helps illustrate the underlying trends in our business and provides us with a more comparable measure of our business. ongoing operations, as well as a better understanding of the results of the principal activities of our business, excluding the effects of certain items that do not reflect the ordinary results of our activities. Management also uses this non-GAAP financial information to establish operating budgets and objectives, which are communicated internally and externally, to assess performance and to allocate resources. In addition, the compensation of our executives and non-executive employees is based in part on the performance of our business as measured using this same non-GAAP information. We believe that this non-GAAP financial information improves investors’ overall understanding of our current financial performance and future prospects by providing more transparency for certain financial metrics and providing a level of disclosure that helps investors understand how we plan and measure our activities. We believe that providing this non-GAAP information provides investors with a view of our operating results that can be more easily compared to our comparable companies and allows investors to view our operating results on a GAAP and non-GAAP basis during and after the integration period. of our acquisitions.

However, this non-GAAP information does not comply with generally accepted accounting principles of United States (“GAAP”) and should be considered in conjunction with our GAAP results, as items excluded from non-GAAP information often have a significant impact on Progress’s financial results. A reconciliation of the non-GAAP adjustments to Progress’s GAAP financial results is included in the press release tables and is available on Progress’s website at www.progress.com in the Investor Relations section.

As described in more detail below, non-GAAP revenues, non-GAAP costs of sales and operations, non-GAAP operating income and operating margin, non-GAAP net income and diluted income per non-GAAP share exclude the effect of purchase recognition on the fair value of deferred income acquired, amortization of acquired intangible assets, stock-based compensation expense, restructuring costs, related costs on vesting and transition, the amortization of the discount on our convertible senior notes and the related tax effects of the foregoing items. We also provide guidance on adjusted free cash flow, which is equal to cash flow from operating activities less purchases of property, plant and equipment, plus restructuring payments.

During the years mentioned, we adjusted the following elements of our GAAP financial results to arrive at our non-GAAP financial measures:

•Acquisition-related revenue - In all periods presented, we include
acquisition-related revenue, which constitutes revenue reflected as
pre-acquisition deferred revenue that would otherwise have been recognized but
for the purchase accounting treatment of acquisitions. The acquisition-related
revenue in our results relates to Chef Software, Inc. and Ipswitch, Inc., which
we acquired on October 5, 2020 and April 30, 2019, respectively. Since GAAP
accounting requires the elimination of this revenue, 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. Additionally,
although acquisition-related revenue adjustments are non-recurring with respect
to past acquisitions, we expect to incur these adjustments in connection with
any future acquisitions.
•Amortization of acquired intangibles - In all periods presented, 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 - In all periods presented, 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. Stock-based compensation will continue in future
periods.

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•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.
•Acquisition-related and transition expenses - In all periods presented, we
exclude acquisition-related expenses because those expenses distort trends and
are not part of our core operating results. In recent years, we have completed a
number of acquisitions, which result in our incurring operating expenses which
would not otherwise have been incurred. By excluding certain transition,
integration and other acquisition-related expense items in connection with
acquisitions, this provides more meaningful comparisons 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.
•Income tax adjustment - In all periods presented, we adjust our income tax
provision by excluding the tax impact of the non-GAAP adjustments discussed
above.

Constant Currency – Revenues from our international operations have historically represented a substantial portion of our total revenues. As a result, our revenues have been affected, and we expect that they will continue to be affected, by exchange rate fluctuations. For example, if the local currencies of our foreign subsidiaries strengthen, our consolidated results shown in we dollars are positively impacted.

As exchange rates are an important factor in understanding period-to-period comparisons, we present revenue growth rates in constant currencies, which helps to improve the understanding of our revenue and performance by compared to previous periods. The information presented in constant currencies is calculated by converting the results for the current period using the weighted average exchange rates of the previous period. These results should be considered in addition to the results presented in accordance with GAAP, and not as a substitute for them.

Recurring Annual Income (“ARR”) – We provide an ARR performance measure to help investors better understand and assess the performance of our business, as our mix of income generated from recurring sources has grown in recent years. ARR represents the annualized contract value for all active and contractually binding fixed-term contracts at the end of a period. ARR includes maintenance, software upgrade rights, public cloud and on-premises subscription transactions, and managed services.

ARR has no standardized meaning and is therefore unlikely to be comparable to measures with the same title presented by other companies. ARR should be viewed separately from income and deferred income and is not intended to be combined with or replace any of these elements. ARR is not a forecast and contracts active at the end of a reporting period are used in the calculation of ARR. . .

Section 7.01 Regulation FD Disclosure

In connection with the issuance of the press release attached hereto as Exhibit 99.1, the additional data attached as Exhibit 99.2 to this current report will be made available on the Progress website in the Investor Relations section prior to the release. live conference call.

Item 9.01 Financial statements and supporting documents

(d) Exhibits.
Exhibit No.             Description
                          Press release issued by Progress Software Corporation dated September 23,
99.1                    2021
99.2                      Q3 2021 Supplemental Data
104                     Cover Page Interactive Data File (embedded within the Inline XBRL document)

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