Summary
Progress reported fiscal Q2 2021 revenue of $122.5 million, up 22.0% from the prior-year quarter. Gross profit was $103.2 million, up 19.8%, while gross margin slipped to 84.2%, down 1.6 percentage points. Operating income fell 12.0% to $22.3 million, and operating margin was 18.2%, down 7.0 percentage points. Net income dropped 20.1% to $13.6 million. Diluted EPS was $0.30, down 18.9%. The decline in profitability came as costs rose across the business, including higher amortization, stock-based compensation, and personnel costs following the Chef acquisition.
For the first six months of fiscal 2021, revenue was $243.8 million, up 16.0%. Gross profit rose 14.1% to $206.5 million. Operating income fell 11.3% to $49.7 million, and net income fell 14.6% to $32.5 million. Operating cash flow was $54.7 million for the quarter, up 44.1%, and $99.4 million year to date, up 40.0%. Capital expenditures were $0.95 million in the quarter, up 56.0%. Deferred revenue was $202.6 million, up 16.9%, and remaining performance obligations were $214.8 million, up 19.3%.
Operationally, Progress said annualized recurring revenue reached $437 million, up 23% year over year on a constant currency basis. The net retention rate improved to above 100%, compared with a range of 97% to 100% in prior periods. Days sales outstanding was 44 days, compared with 47 days in the fiscal second quarter of 2020 and 53 days in the fiscal first quarter of 2021. Management said the Chef integration is ahead of plan and that the company began operating as one segment during the quarter. Progress also completed a $360 million convertible senior notes offering in April 2021. The notes carry a 1.00% interest rate and mature April 15, 2026. Capped call transactions set an effective conversion price of $89.88 per share. The company repurchased 0.4 million shares for $20.0 million in the quarter, leaving $155.0 million under its $250 million authorization. On June 22, 2021, the board declared a quarterly dividend of $0.175 per share, payable September 15, 2021.
Guidance was raised for the full fiscal year ending November 30, 2021. For fiscal Q3 ending August 31, 2021, the company guided non-GAAP revenue to $129 million to $132 million and non-GAAP diluted EPS to $0.81 to $0.83. For the full fiscal year, non-GAAP revenue is guided to $529 million to $535 million, non-GAAP diluted EPS to $3.46 to $3.50, non-GAAP operating margin to 39%, and adjusted free cash flow to $158 million to $162 million. The prior full-year outlook called for non-GAAP revenue of $519 million to $527 million and non-GAAP diluted EPS of $3.38 to $3.42. Progress expects currency translation to add roughly $8.4 million to full-year GAAP and non-GAAP revenue. The expected currency translation benefit to fiscal Q3 revenue is about $2.2 million.
Risks include economic and geopolitical conditions, foreign exchange fluctuations, renewal rates, competition, and the continuing impact of COVID-19. The company also cites cybersecurity and data security exposure, dependence on its partner channel, the shift toward cloud and subscription models, and the need to complete the Chef integration and realize expected synergies. Progress repurchased shares and pays a dividend, but its capital allocation plans remain sensitive to acquisition opportunities and market conditions.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $122.5M | $121.3M | +1.0% | $100.4M | +22.0% |
| Gross profit | $103.2M | $103.3M | -0.1% | $86.1M | +19.8% |
| Gross margin | 84.2% | 85.2% | -0.9 pp | 85.8% | -1.6 pp |
| Sales & marketing | $29.3M | $29.5M | -0.7% | $21.7M | +34.7% |
| General & administrative | $16.5M | $13.4M | +22.6% | $12.4M | +32.3% |
| Total operating expenses | $80.9M | $75.9M | +6.6% | $60.8M | +33.0% |
| Operating income (loss) | $22.3M | $27.4M | -18.7% | $25.3M | -12.0% |
| Operating margin | 18.2% | 22.6% | -4.4 pp | 25.2% | -7.0 pp |
| Net income (loss) | $13.6M | $19.0M | -28.5% | $17.0M | -20.1% |
| Net margin | 11.1% | 15.6% | -4.6 pp | 16.9% | -5.8 pp |
| Net retention rate | 97.0% | — | — | — | — |
Risks
The ongoing COVID-19 pandemic could delay sales cycles, cause customers to fail to renew at expected scope, seek payment deferrals or pricing concessions, and disrupt third-party service providers. MD&A notes improved demand in FY2021 Q2 but says the full impact remains uncertain and may be material.
As of May 31, 2021, the filing reports approximately $543 million of consolidated indebtedness, including newly issued convertible senior notes. Increased interest expense associated with the convertible notes contributed to net income decreasing 20.1% in FY2021 Q2 versus the prior-year quarter.
The credit facility requires compliance with financial and operating covenants and scheduled term loan repayments; failure to comply or pay could cause acceleration of amounts due or prevent future borrowing. The term loan matures in April 2024, when all amounts outstanding are due and payable in full.
The October 2020 Chef acquisition creates risks related to maintaining employee, customer, and partner relationships, integration, and realizing anticipated synergies. MD&A attributes revenue growth to the Chef acquisition while also citing Chef-related increases in costs, amortization, and restructuring.
Revenue forecasting is uncertain because pipeline conversion requires management judgment, and a high percentage of revenue is generated in the third month of each fiscal quarter. COVID-19 could also delay sales cycles, and failure to meet forecasts or guidance could cause the stock price to decline.
The company is substantially dependent on Progress OpenEdge for a significant portion of software license and maintenance revenue. If demand declines or new technologies make OpenEdge less competitive, business, financial condition, and operating results may be materially adversely affected.
Accounting for the convertible senior notes may lower reported income, require reclassification of the liability as current, and dilute existing stockholders upon conversion. Capped call counterparties expose the company to default risk, and capped call or hedge activity could affect the common stock price.
Progress intends to pursue additional accretive acquisitions, which involve integration delays, unexpected expenses, diversion of management, potential goodwill or intangible impairment, and possible dilution if stock is issued.
The software industry segments are intensely competitive, with greater-resourced competitors and low barriers to entry. Increased acceptance of open source software may create downward pricing pressure, and Chef offerings incorporate open source components that can limit the value of software copyright assets.
A substantial portion of revenue comes from sales through third-party ISVs, distributors/resellers, and OEMs. Reduced sales efforts, financial difficulties, misalignment, or termination of a major channel partner could harm revenues and results of operations.
Approximately 41% of total revenue is generated outside North America, and about one-third of revenue is denominated in foreign currencies. Fluctuations in foreign exchange rates, Brexit, political instability, and regional health crises could adversely affect international operations and revenue.
Global privacy and data protection laws, including GDPR, CCPA, and the invalidation of the EU-U.S. Privacy Shield, may require changes to data handling, cause reluctance among European customers, and expose the company to enforcement actions and fines of up to 4% of worldwide revenue.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Adjusted Free Cash Flow
Annualized Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from PROGRESS SOFTWARE CORP /MA's SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.