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Progress Software (PRGS) Q1 Earnings Beat, Revenues Rise Y/Y – Zacks.com


Progress Software Corporation (PRGS Free Report) reported first-quarter 2020 non-GAAP earnings of 76 cents per share that beat the Zacks Consensus Estimate by 7%. The figure increased 52% from the year-ago quarter.  

Non-GAAP revenues of $113.8 million also surpassed the consensus mark of $112 million. The figure improved 27% on an actual currency basis and 28% on a constant currency (cc) basis.

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

Segment-wise, OpenEdge reported non-GAAP revenues of $91.6 million. Higher sales of network management and secure data file transfer products from Ipswitch were the primary growth drivers.

In first-quarter 2020, Progress Software announced a six-figure new customer win for its Ipswitch MOVEit product.

Progress Software Corporation Price, Consensus and EPS Surprise

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

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

DCI segment reported non-GAAP revenues of $13.7 million. The company won a number of deals in the quarter.

Application Development and Deployment (AD&D) segment generated non-GAAP revenues of $18.9 million

Region-wise, North America, EMEA, Latin America and Asia Pacific reported non-GAAP revenues of $68.4 million, $35.7 million, $4.1 million and $5.6 million, respectively.

Type-wise, Software license reported non-GAAP revenues of $30.6 million 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 $73.8 million and $9.2 million, respectively.

Operating Details

GAAP sales and marketing expenses, as a percentage of revenues, contracted 290 basis points (bps) from the year-ago quarter to 22.1%.

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GAAP product development expenses, as a percentage of revenues, contracted 250 bps from the year-ago quarter to 19.7%.

GAAP general and administration expenses, as a percentage of revenues, contracted 210 bps from the year-ago quarter to 11.6%.

Progress Software reported adjusted operating margin of 42%, which expanded 800 bps from the year-ago quarter.

The company reported total GAAP operating expenses (58.4% of revenues) of $64.1 million which increased 10.3% year over year.

Balance Sheet

As of Feb 29, 2020, cash and cash equivalents (and short-term investments) were $177.1 million, up from $173.7 million as of Nov 30, 2019.

Progress Software generated $33.2 million in cash from operations/adjusted free cash flow compared with $36.2 million reported in the previous quarter.

Progress Software repurchased 0.4 million shares for $20 million during the fiscal first quarter, 2020. As of Feb 29, 2020, $230 million remained under this authorization;

The company declared a quarterly cash dividend of 16 cents per share to be paid out on Jun 15, 2020.

Guidance

For the second quarter of 2020, Progress Software expects non-GAAP revenues between $95 and $101 million. The Zacks Consensus Estimate for revenues is currently pegged at $111.8 billion, indicating growth of 24.8% from the year-ago quarter’s reported figure.

The company expects non-GAAP earnings to be in the range of 60-64 cents per share. The Zacks Consensus Estimate is currently pegged at 71 cents per share, indicating growth of 42% from the year-ago quarter’s reported figure.

For 2020, non-GAAP revenues are projected between $428 and $438 million compared with the prior guidance of $448 and $455 million.

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For 2020, adjusted operating margin is expected to be 39%. Non-GAAP earnings for 2020 are projected between $2.73 and $2.80 per share compared with $2.87 and $2.92 per share.

The Zacks Consensus Estimate for 2020 earnings is currently pegged at $2.9 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 Lam Research Corporation (LRCX Free Report) , Microsoft Corporation (MSFT Free Report) and Applied Materials, Inc. (AMAT Free Report) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Lam Research, Microsoft and Applied Materials is currently pegged at 17.6%, 12.9% and 9.9%, respectively.

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