PROGRESS SOFTWARE CORPORATION Critical Accounting Policies
Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with GAAP. We make estimates and assumptions in the preparation of our consolidated financial statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. However, actual results may differ from these estimates. The most significant estimates relate to: the timing and amounts of revenue recognition, including the determination of the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and the transaction price allocated to performance obligations; the realization of tax assets and estimates of tax liabilities; fair values of investments in marketable securities; assets held for sale; intangible assets and goodwill valuations; the recognition and disclosure of contingent liabilities; the collectability of accounts receivable; and assumptions used to determine the fair value of stock-based compensation. This listing is not a comprehensive list of all of our accounting policies. For further information regarding the application of these and other accounting policies, see Note 1 to our Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the fiscal year endedNovember 30, 2019 .
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 contains certain safe harbor provisions regarding forward-looking statements. This Form 10-Q, and other information provided by us or statements made by our directors, officers or employees from time to time, may contain "forward-looking" statements and information, which involve risks and uncertainties. Actual future results may differ materially. Statements indicating that we "believe," "may," "could," "would," "might," "should," "expect," "intend," "plan," "target," "anticipate" and "continue," are forward-looking, as are other statements concerning future financial results, product offerings or other events that have not yet occurred. 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 or other offerings are compromised or subject to a successful cyber-attack, or if such 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) The coronavirus disease (COVID-19) outbreak and the impact it could have on our employees, customers, partners, and the global financial markets could adversely affect our business, results of operations and financial condition. (10) Those factors discussed in Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q, and in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year endedNovember 30, 2019 . Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized. We also cannot assure you that we have identified all possible issues which we might face. We undertake no obligation to update any forward-looking statements that we make.
Use of 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. For example, if the local currencies of our foreign subsidiaries strengthen, our consolidated results stated inU.S. dollars are positively impacted. As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue growth rates on a constant currency basis enhances the understanding of our revenue results and evaluation of our 28
--------------------------------------------------------------------------------
Table of Contents
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.
Impact of COVID-19
InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to be spread throughout theU.S. and the world. The impact from the rapidly changing market and economic conditions due to the COVID-19 outbreak is uncertain, disrupting the business of our customers and partners, and will impact our business and consolidated results of operations and could impact our financial condition in the future. While we have not incurred significant disruptions thus far from the COVID-19 outbreak, we are unable to accurately predict the full impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact to the business of our customers and partners and other factors identified in Part II, Item 1A "Risk Factors" in this Form 10-Q. We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.
Overview
Progress Software Corporation ("Progress," the "Company," "we," "us," or "our") offers the leading platform for developing and deploying strategic business applications. We enable customers and partners to deliver modern, high-impact digital experiences with a fraction of the effort, time and cost. Progress offers powerful tools for easily building adaptive user experiences across any type of device or touchpoint, the flexibility of a cloud-native app dev platform to deliver modern apps, leading data connectivity technology, web content management, business rules, secure file transfer, and network monitoring. Over 1,700 independent software vendors, 100,000 enterprise customers, and two million developers rely on Progress to power their applications. We operate as three distinct segments: OpenEdge, Data Connectivity and Integration, and Application Development and Deployment.
The key tenets of our strategic plan and operating model are as follows:
Align Resources to Drive Profitability. Our organizational philosophy and operating principles focus primarily on customer and partner retention and success for our core products and a streamlined operating approach in order to more efficiently drive financial results.
Protect and Strengthen Our Core Business. A key element of our strategy is centered on providing the platform and tools enterprises need to build modern, strategic business applications. We offer these products and tools to both new customers and partners as well as our existing partner and customer ecosystems. This strategy builds on our inherent DNA and our vast experience in application development that we've acquired over the past 35+ years.
Our offerings enable developers to build the most modern applications quickly and easily, and include:
• our OpenEdge software, which provides a unified development environment
consisting of development tools, application servers, application
management tools, an embedded relational database management system and
the capability to connect and integrate with other applications and data
sources;
• our leading UI development tools, which enable organizations to easily
build engaging user interfaces for any device or front end;
• our data connectivity and integration offerings;
• our business logic and rules offerings;
• our secure file transfer solutions, which provide secure collaboration and
automated file transfers of sensitive data and advanced workflow
automation offerings;
• our network management offerings, which enable small and medium-sized
businesses to monitor and manage their IT infrastructure and applications;
and
• web content management for delivering personalized and engaging digital
experiences.
Acquire Accretive Businesses. We are pursuing acquisitions of businesses within
the software infrastructure space, with products that appeal to both IT
organizations and individual developers. These acquisitions must meet strict
financial criteria, which will enable us to drive significant stockholder
returns by providing scale and increased cash flows. As described below, in
April 2019 , we acquired Ipswitch in a transaction that met these strict
financial criteria.
29--------------------------------------------------------------------------------
Table of Contents
Holistic Capital Allocation Approach. We have adopted a shareholder friendly capital allocation policy that utilizes dividends and share repurchases to return capital to shareholders. Pursuant to our capital allocation strategy that we initially announced inSeptember 2017 , we have targeted to return approximately 25% of our annual cash flows from operations to stockholders in the form of dividends. We also intend to repurchase our shares sufficient to offset dilution from our equity plans. InJanuary 2020 , our Board of Directors increased the total share repurchase authorization from$75.0 million to$250.0 million . We repurchased and retired 0.4 million shares of our common stock for$20.0 million in the three months endedFebruary 29, 2020 . The shares were repurchased as part of our Board of Directors authorized share repurchase program. As ofFebruary 29, 2020 , there was$230.0 million remaining under the current authorization. We began paying quarterly cash dividends of$0.125 per share of common stock to Progress stockholders inDecember 2016 and increased the quarterly cash dividend to$0.14 per share inSeptember 2017 . InSeptember 2018 , the quarterly cash dividend was increased to$0.155 per share of common stock. OnSeptember 24, 2019 , our Board of Directors approved an additional increase to our quarterly cash dividend from$0.155 to$0.165 per share of common stock. OnJanuary 8, 2020 , our Board of Directors declared a quarterly dividend of$0.165 per share of common stock that was paid onMarch 16, 2020 to stockholders of record as of the close of business onMarch 2, 2020 . OnMarch 18, 2020 , our Board of Directors declared a quarterly dividend of$0.165 per share of common stock that will be paid onJune 15, 2020 to shareholders of record as of the close of business onJune 1, 2020 . We expect to continue paying quarterly cash dividends in subsequent quarters consistent with our capital allocation strategy. In furtherance of our acquisition strategy, onApril 30, 2019 , we acquired all of the outstanding equity interests of Ipswitch, a provider of award-winning and easy-to-use secure data file transfer and network management software, for an aggregate purchase price of approximately$225.0 million . We expect to continue to evaluate possible acquisitions and other strategic transactions designed to expand our business. As a result, our expected uses of cash could change, our cash position could be reduced and we may incur additional debt obligations to the extent we complete additional acquisitions. However, we believe that existing cash balances, together with funds generated from operations and amounts available under our credit facility, will be sufficient to finance our operations and meet our foreseeable cash requirements, including quarterly cash dividends and stock repurchases to Progress stockholders, as applicable, through at least the next twelve months. We also believe that our financial resources will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future, which could include reductions in revenue and delays in payments from customers and partners. The challenges posed by COVID-19 on our business are expected to evolve rapidly. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19. We derive a significant portion of our revenue from international operations, which are primarily conducted in foreign currencies. As a result, changes in the value of these foreign currencies relative to theU.S. dollar have significantly impacted our results of operations and may impact our future results of operations. With the global economic uncertainty created by COVID-19, beginning inMarch 2020 , the value of theU.S. dollar has strengthened in comparison to certain foreign currencies, including inEurope , and is expected to remain strong in comparison to foreign currencies in fiscal year 2020. Since approximately one-third of our revenue is denominated in foreign currency, our revenue results in fiscal year 2020 are expected to be impacted by fluctuations in foreign currency exchange rates. OnSeptember 26, 2019 , we announced that we are reducing our current and ongoing investment levels within our cognitive application product lines, which consist primarily of our DataRPM and Kinvey products. Accordingly, our fiscal fourth quarter of 2019 results include a restructuring charge of$2.5 million . This restructuring charge relates to employee costs, including severance, health benefits and outplacement services (but excluding stock-based compensation) incurred as a part of the reduction in the investment. In connection with this restructuring action, during the fiscal fourth quarter of 2019, we evaluated the ongoing value of the intangible assets primarily associated with the technologies and trade names obtained in the acquisitions of DataRPM and Kinvey. As a result of this evaluation, we wrote down these assets to fair value, which resulted in a$22.7 million asset impairment charge during the fiscal fourth quarter of 2019. 30
--------------------------------------------------------------------------------
Table of Contents
Results of Operations
Our results of operations in the first quarter of fiscal year 2020 were not materially affected by COVID-19.
Revenue
Three Months Ended Percentage Change
Constant
(In thousands)
Currency Revenue $ 109,683 $ 89,549 22 % 23 % Total revenue increased compared to the same quarter last year primarily due to our acquisition of Ipswitch and an increase in license sales in our Data Connectivity and Integration segment. Ipswitch revenue was$15.2 million in our first fiscal quarter of 2020. License Revenue Three Months Ended Percentage Change Constant (In thousands) February 29, 2020 February 28, 2019 As Reported Currency License $ 30,629 $ 22,802 34 % 35 % As a percentage of total revenue 28 %
25 %
Software license revenue increased compared to the same period last year primarily due to an increase in license sales in our Data Connectivity and Integration segment and our acquisition of Ipswitch.
Maintenance and Services Revenue
Three Months Ended Percentage Change
Constant
(In thousands) February 29, 2020 February 28, 2019 As Reported Currency
Maintenance $ 70,056 $ 59,999 17 % 18 %
As a percentage of total revenue 64 % 67 %
Services 8,998 6,748 33 % 34 %
As a percentage of total revenue 8 % 8 % Total maintenance and services revenue $ 79,054 $ 66,747
18 % 19 %
As a percentage of total revenue 72 % 75 %
Maintenance and services revenue both increased compared to the same quarter
last year due to our acquisition of Ipswitch. The increase in services revenue
was also driven by our Application Development and Deployment segment.
31--------------------------------------------------------------------------------
Table of Contents
Revenue by Region
Three Months Ended Percentage Change
Constant
(In thousands) February 29, 2020 February 28, 2019 As Reported Currency
North America $ 65,413 $ 46,498 41 % 39 %
As a percentage of total revenue 59 % 52 %
EMEA $ 34,988 $ 33,372 5 % 8 %
As a percentage of total revenue 32 % 37 %
Latin America $ 4,000 $ 4,461 (10 )% (3 )%
As a percentage of total revenue 4 % 5 %
Asia Pacific $ 5,282 $ 5,218 1 % 7 %
As a percentage of total revenue 5 % 6 %
Total revenue generated inNorth America increased$18.9 million , primarily due to our acquisition of Ipswitch and higher license revenue generated by our Data Connectivity and Integration segment. The increase in revenue generated in EMEA was also due to our acquisition of Ipswitch, partially offset by lower license revenue generated by our Data Connectivity and Integration segment. Revenue inLatin America decreased primarily due to a decrease in OpenEdge license sales. In our first fiscal quarter of 2020, revenue generated in markets outsideNorth America represented 41% of total revenue compared to 42% of total revenue in constant currency and 48% of total revenue in the same period last year. Revenue by Segment Three Months Ended Percentage Change Constant (In thousands) February 29, 2020 February 28, 2019 As Reported Currency OpenEdge segment $ 77,079 $ 65,252 18 % 19 % Data Connectivity and Integration segment 13,685 6,000 128 % 128 % Application Development and Deployment segment 18,919 18,297 3 % 3 % Total revenue $ 109,683 $ 89,549 22 % 23 % Revenue in our OpenEdge segment increased primarily due to our acquisition of Ipswitch. Data Connectivity and Integration revenue increased due to the timing of term license renewals by certain of our OEM partners. Application Development and Deployment revenue increased primarily due to higher professional services revenue. Cost of Software Licenses Three Months Ended Percentage (In thousands) February 29, 2020 February 28, 2019 Change Cost of software licenses $ 1,389 $ 1,167 19 % As a percentage of software license revenue 5 % 5 % As a percentage of total revenue 1 % 1 % Cost of software licenses consists primarily of costs of royalties, electronic software distribution, duplication and packaging. The year over year increase is due to our acquisition of Ipswitch. 32
--------------------------------------------------------------------------------
Table of Contents
Cost of Maintenance and Services
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Cost of maintenance and services $ 11,851 $ 9,439 26 %
As a percentage of maintenance and services revenue 15 % 14 %
As a percentage of total revenue 11 % 11 %
Cost of maintenance and services consists primarily of the costs of providing customer support, consulting, and education. The year over year increase is primarily due to increased headcount resulting from our acquisition of Ipswitch.
Amortization of Acquired Intangibles
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Amortization of acquired intangibles $ 1,646 $ 5,433 (70 )%
As a percentage of total revenue 2 % 6 %
Amortization of acquired intangibles included in costs of revenue is primarily
comprised of technology-related intangible assets obtained in business
combinations. The year over year decrease is due to certain intangible assets
being fully amortized and the impairment of intangible assets recorded in the
fourth fiscal quarter of 2019 associated with the technology of our Kinvey and
DataRPM acquisitions.
Gross Profit
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Gross profit $ 94,797 $ 73,510 29 %
As a percentage of total revenue 86 % 82 %
Our gross profit increased primarily due to the increases in license and maintenance revenue and the decrease in the amortization of acquired intangibles, offset slightly by the increase of cost of maintenance and services, each as described above.
Sales and Marketing
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Sales and marketing $ 24,198 $ 22,323 8 %
As a percentage of total revenue 22 % 25 %
Sales and marketing expenses increased year over year primarily due to higher compensation-related costs as a result of increased headcount from our acquisition of Ipswitch.
33--------------------------------------------------------------------------------
Table of Contents
Product Development
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Product development $ 21,654 $ 19,890 9 %
As a percentage of total revenue 20 % 22 %
Product development expenses increased year over year primarily due to higher
compensation-related costs as a result of increased headcount from our
acquisition of Ipswitch.
General and Administrative
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
General and administrative $ 12,748 $ 12,285 4 %
As a percentage of total revenue 12 % 14 %
General and administrative expenses include the costs of our finance, human
resources, legal, information systems, and administrative departments. General
and administrative expenses increased primarily due to higher headcount-related
costs and stock-based compensation expense compared to the same quarter last
year.
Amortization of Acquired Intangibles
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Amortization of acquired intangibles $ 4,131 $ 3,188 30 %
As a percentage of total revenue 4 % 4 %
Amortization of acquired intangibles included in operating expenses primarily
represents the amortization of value assigned to intangible assets obtained in
business combinations other than assets identified as purchased technology.
Amortization of acquired intangibles increased year over year due to the
addition of intangible assets obtained in connection with our acquisition of
Ipswitch, partially offset by the completion and impairment of amortization of
certain intangible assets, as discussed above.
Restructuring Expenses
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Restructuring expenses $ 1,040 $ 415 151 %
As a percentage of total revenue 1 % - %
Restructuring expenses recorded in the first fiscal quarter of 2020 relate to
the restructuring activities that occurred in fiscal years 2019 and 2017. See
Note 13 to the condensed consolidated financial statements for additional
details, including types of expenses incurred and the timing of future expenses
and cash payments. See also the Liquidity and Capital Resources section of this
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations.
34--------------------------------------------------------------------------------
Table of Contents
Acquisition-Related Expenses
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Acquisition-related expenses $ 314 $ - 100 %
As a percentage of total revenue - % - %
Acquisition-related costs are expensed as incurred and include those costs
incurred as a result of a business combination. These costs consist of
professional service fees, including third-party legal and valuation-related
fees. Acquisition-related expenses in the first quarter of fiscal year 2020 and
2019 were minimal.
Income from Operations
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Income from operations $ 30,712 $ 15,409 99 %
As a percentage of total revenue 28 % 17 %
Income from operations increased year over year due to an increase in revenue
and a decrease in costs of revenue, partially offset by an increase in operating
expenses as shown above. This increase was also partially offset by higher
restructuring expenses in the first fiscal quarter of 2020.
Income from Operations by Segment
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
OpenEdge segment $ 57,329 $ 46,937 22 %
Data Connectivity and Integration segment 11,005 4,500 145 %
Application Development and Deployment segment 11,631 12,870 (10 )%
Other unallocated expenses (49,253 ) (48,898 ) 1 %
Income from operations $ 30,712 $ 15,409 99 %
Note that the following expenses are not allocated to our segments as we manage
and report our business in these functional areas on a consolidated basis only:
certain product development and corporate sales and marketing expenses, customer
support, administration, amortization of acquired intangibles, stock-based
compensation, restructuring, and acquisition-related expenses.
Other (Expense) Income, net
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Interest expense $ (2,792 ) $ (1,389 ) (101 )%
Interest income and other, net 211 229 (8 )%
Foreign currency (loss) gain, net (816 ) (843 ) 3 %
Total other (expense) income, net $ (3,397 ) $ (2,003 ) (70 )%
As a percentage of total revenue (3 )% (2 )%
Other expense, net increased year over year due to an increase in interest expense. The change in interest expense is a result of an increase in the principal balance of our debt, which was used to fund the Ipswitch acquisition.
35--------------------------------------------------------------------------------
Table of Contents
Provision for Income Taxes
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Provision for income taxes $ 6,199 $ 4,004 55 %
As a percentage of total revenue 6 % 4 %
Our effective tax rate was 23% in the first fiscal quarter of 2020 compared to
30% in the first fiscal quarter of 2019. The primary reason for the decrease in
effective rate is that during the preparation of our financial statements for
the three months ended August 31, 2019 , we identified an error in our income tax
provisions for the first and second quarters of fiscal year 2019 related to the
tax treatment of an intercompany sale of intellectual property that occurred in
fiscal year 2018. As a result of the error, income tax expense was overstated by
$1.1 million and $2.5 million during the first and second quarters of fiscal
year 2019, respectively. We determined that the error was not material to the
first and second quarters of fiscal year 2019 and corrected the error by
recording an out of period $3.6 million tax benefit in our financial statements
for the period ended August 31, 2019 . If the error had not occurred, the
effective tax rate in the first quarter of fiscal year 2019 would have been 22%.
Net Income
Three Months Ended
Percentage
(In thousands) February 29, 2020 February 28, 2019 Change
Net income $ 21,116 $ 9,402 125 %
As a percentage of total revenue 19 % 10 %
Liquidity and Capital Resources
Cash, Cash Equivalents and Short-Term Investments
February 29, November 30,
(In thousands) 2020 2019
Cash and cash equivalents $ 161,094 $ 154,259
Short-term investments 15,961 19,426
Total cash, cash equivalents and short-term investments
The increase in cash, cash equivalents and short-term investments was due to cash inflows from operations of$33.0 million and$2.3 million in proceeds from common stock (net of$1.9 million in withholding tax payments related to net issuance of restricted stock units). These cash inflows were partially offset by repurchases of common stock of$20.0 million , dividend payments of$7.5 million , scheduled payments of debt obligations in the amount of$1.9 million , payments of capital expenditures of$1.1 million , and the negative effect of exchange rate changes on cash of$1.5 million . Except as described below, there are no limitations on our ability to access our cash, cash equivalents, and short-term investments. As ofFebruary 29, 2020 ,$27.2 million of our cash, cash equivalents and short-term investments was held by our foreign subsidiaries. Foreign cash includes unremitted foreign earnings, which are invested indefinitely outside of theU.S. As such, it is not available to fund our domestic operations. If we were to repatriate these earnings, we may be subject to income tax withholding in certain tax jurisdictions and a portion of the repatriated earnings may be subject toU.S. income tax. However, we do not anticipate that this would have a material adverse impact on our liquidity.
Share Repurchase Program
InJanuary 2020 , our Board of Directors increased the total share repurchase authorization from$75.0 million to$250.0 million . We repurchased and retired 0.4 million shares of our common stock for$20.0 million in the three months endedFebruary 29, 2020 and 0.7 million shares for$25.0 million in the three months endedFebruary 28, 2019 . The shares were repurchased in both periods as part of our Board of Directors authorized share repurchase program. As ofFebruary 29, 2020 , there was$230.0 million remaining under the current authorization.
Dividends
We began paying quarterly cash dividends of$0.125 per share of common stock to Progress stockholders inDecember 2016 and increased the quarterly cash dividend to$0.14 per share inSeptember 2017 . InSeptember 2018 , the quarterly cash dividend was increased to$0.155 per share of common stock. OnSeptember 24, 2019 , our Board of Directors approved an additional increase to our quarterly cash dividend from$0.155 to$0.165 per share of common stock. OnJanuary 8, 2020 , our Board of Directors declared a quarterly dividend of$0.165 per share of common stock that was paid onMarch 16, 2020 to stockholders of record as of the close of business onMarch 2, 2020 . OnMarch 18, 2020 , our Board of Directors declared a quarterly dividend of$0.165 per share of common stock that will be paid onJune 15, 2020 to shareholders of record as of the close of business onJune 1, 2020 .
Restructuring Activities
During the second quarter of fiscal year 2019, we restructured our operations in connection with the acquisition of Ipswitch. This restructuring resulted in a reduction in redundant positions, primarily within administrative functions of Ipswitch. We expect to incur additional expenses as part of this action related to employee costs and facility closures as we consolidate offices in various locations during fiscal year 2020, but we do not expect these costs to be material. For the three months endedFebruary 29, 2020 , we incurred expenses of$1.0 million in connection with the restructuring, which are recorded as restructuring expenses in the consolidated statements of operations. Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2020. We do not expect to incur additional material costs with respect to this restructuring. During the fourth quarter of fiscal year 2019, we announced the reduction of our current and ongoing investment level within our cognitive application product lines, which consist primarily of our DataRPM and Kinvey products. This restructuring resulted in a reduction in positions primarily within the sales and product development functions. For the three months endedFebruary 29, 2020 , we incurred minimal expenses in connection with the restructuring, which are recorded as restructuring expenses in the consolidated statements of operations. Cash disbursements for expenses incurred to date under this restructuring are expected to be made through fiscal year 2020. We do not expect to incur additional material costs with respect to this restructuring.
Credit Facility
Our credit agreement provides for a$301.0 million secured term loan and a$100.0 million secured revolving credit facility. The revolving credit facility may be made available inU.S. Dollars and certain other currencies and may be increased by up to an additional$125.0 million if the existing or additional lenders are willing to make such increased commitments. The revolving credit facility has sub-limits for swing line loans up to$25.0 million and for the issuance of standby letters of credit in a face amount up to$25.0 million . We expect to use the revolving credit facility for general corporate purposes, including acquisitions of other businesses, and may also use it for working capital. The credit facility matures onApril 30, 2024 , when all amounts outstanding will be due and payable in full. The revolving credit facility does not require amortization of principal. The outstanding balance of the term loan as ofFebruary 29, 2020 was$295.4 million , with$13.2 million due in the next 12 months. The term loan requires repayment of principal at the end of each fiscal quarter, beginning with the fiscal quarter endedAugust 31, 2019 . The principal repayment amounts are in accordance with the following schedule: (i) four payments of$1.9 million each, (ii) four payments of$3.8 million each, (iii) four payments of$5.6 million each, (iv) four payments of$7.5 million each, (v) three payments of$9.4 million each, and (vi) the last payment is of the remaining principal amount. Any amounts outstanding under the term loan thereafter would be due on the maturity date.
The term loan may be prepaid before maturity in whole or in part at our option
without penalty or premium. The interest rate of the credit facility as of
36--------------------------------------------------------------------------------
Table of Contents
Revolving loans may be borrowed, repaid, and reborrowed untilApril 30, 2024 , at which time all amounts outstanding must be repaid. As ofFebruary 29, 2020 , there were no amounts outstanding under the revolving line and$1.8 million of letters of credit. The credit facility contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, grant liens, make investments, make acquisitions, incur indebtedness, merge or consolidate, dispose of assets, pay dividends or make distributions, repurchase stock, change the nature of the business, enter into certain transactions with affiliates and enter into burdensome agreements, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain compliance with a consolidated fixed charge coverage ratio, a consolidated total leverage ratio and a consolidated senior secured leverage ratio. We are in compliance with these financial covenants as ofFebruary 29, 2020 .
© Edgar Online, source
