Item 2.02 Results of Operations and Financial Condition

On June 28, 2022, Progress Software Corporation ("Progress") issued a press release announcing its financial results for the fiscal second quarter ended May 31, 2022. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that Section, and shall not be incorporated by reference into any other filing by Progress under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Non-GAAP Financial Information - Progress provides non-GAAP supplemental information to its financial results. We use this non-GAAP information to evaluate our period-over-period operating performance because our management believes the information helps illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as a greater understanding of the results from the primary operations of our business, by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. Management also uses this non-GAAP financial information to establish budgets and operational goals, which are communicated internally and externally, evaluate performance, and allocate resources. In addition, compensation of our executives and non-executive employees is based in part on the performance of our business evaluated using this same non-GAAP information. We believe this non-GAAP financial information enhances investors' overall understanding of our current financial performance and our prospects for the future by providing more transparency for certain financial measures and providing a level of disclosure that helps investors understand how we plan and measure our business. We believe that providing this non-GAAP information affords investors a view of our operating results that may be more easily compared to our peer companies and enables investors to consider our operating results on both a GAAP and non-GAAP basis during and following the integration period of our acquisitions.

However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP") and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information often have a material impact on Progress' financial results. A reconciliation of non-GAAP adjustments to Progress' GAAP financial results is included in the tables in the press release and is available on the Progress website at www.progress.com within the investor relations section.

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

In the noted fiscal periods, we adjusted for the following items from 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 have been recognized prior to our adoption of Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08") during the fourth quarter of fiscal year 2021. 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 required the elimination of this revenue prior to the adoption of ASU 2021-08, 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. •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-

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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.
•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. Upon adoption of ASU 2020-06 on December 1,
2021, the Company reversed the separation of the debt and equity components and
accounted for the Notes wholly as debt.
•Gain on sale of assets held for sale - We exclude the gain on sale of assets
held for sale in fiscal year 2022 associated with the sale of our Bedford,
Massachusetts headquarters. We don't believe such gains are part of our core
operating results because they are inconsistent in amount and frequency and
therefore may distort operating trends. We believe that eliminating these
amounts, when significant and not reflective of ongoing business and operating
results, facilitates a more meaningful evaluation of our current operating
performance and comparisons to our operating performance in other periods.
•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 - 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 in U.S. dollars are positively impacted.

As exchange rates are an important factor in understanding period to period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and our 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 . . .

Item 7.01 Regulation FD Disclosure

In connection with the issuance of the press release attached hereto as Exhibit 99.1, the supplemental data attached as Exhibit 99.2 to this Current Report will be available on the Progress website within the investor relations section prior to the live conference call.

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The information furnished pursuant to this Item 7.01, including Exhibit 99.2, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section, and shall not be incorporated by reference into any other filing by Progress under the Securities Act or the Exchange Act, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Item 9.01 Financial Statements and Exhibits



(d) Exhibits.

Exhibit No.             Description
                          Press release issued by Progress Software Corporation dated     June
99.1                    28    , 2022
99.2                      Q    2     2022 Supplemental Data
104                     Cover Page Interactive Data File (embedded within the Inline XBRL document)


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