Summary
Progress Software reported fiscal second quarter revenue of $148.75 million, up 21.4% from the same quarter a year ago, and year-to-date revenue of $293.67 million, up 20.5%. The press release put growth at 21% on an actual currency basis and 24% in constant currency. Management tied the increase to the Kemp acquisition, which closed in the fourth quarter of fiscal 2021, along with gains in DataDirect and Chef. Foreign exchange reduced license and maintenance revenue in the EMEA region. Non-GAAP revenue was $150.9 million, up 17% as reported and 19% in constant currency.
Profitability improved sharply. Gross profit was $124.79 million, up 20.9%, while gross margin slipped 0.3 percentage points to 83.9%. Operating income rose 80.6% to $40.24 million and operating margin reached 27.0%, up 8.9 percentage points. Those results included a gain on the sale of corporate land and building assets that had been classified as held for sale, partly offset by higher amortization of acquired intangibles and acquisition-related expenses tied to Kemp. Net income was $29.11 million, up 114.7%, and diluted earnings per share was $0.66, up 120%. On a non-GAAP basis, income from operations was $61.3 million, operating margin was 41%, and diluted earnings per share was $1.04, up 27%.
Cash generation stayed healthy. Operating cash flow was $68.26 million in the quarter, up 24.8%, and $112.35 million for the first six months, up 13.1%. Capital expenditures were $1.15 million. Adjusted free cash flow, a non-GAAP measure, was $68.0 million, up 23%. Annualized recurring revenue was $486 million, an increase of 12.5% year over year, and net dollar retention rates have ranged between 100% and 102%. Days sales outstanding improved to 39 days from 44 days in the prior-year quarter and 52 days in the first quarter of fiscal 2022. Deferred revenue rose 27.6% to $258.58 million, and remaining performance obligations rose 23.4% to $265.00 million.
Capital returns continued. Progress repurchased 567,193 shares for $26.5 million during the quarter, leaving $103.5 million under its repurchase authorization at May 31, 2022. The board declared a quarterly dividend of $0.175 per share on June 21, 2022, payable September 15, 2022 to shareholders of record on September 1, 2022.
Guidance for the full fiscal year ending November 30, 2022 calls for non-GAAP revenue of $609 million to $617 million and non-GAAP diluted earnings per share of $4.05 to $4.11. Non-GAAP operating margin is guided to 39% to 40%, with adjusted free cash flow of $185 million to $190 million. For the fiscal third quarter ending August 31, 2022, the company guided non-GAAP revenue to $147 million to $150 million and non-GAAP diluted earnings per share to $0.96 to $0.98. Management said currency translation is expected to be a headwind against both the full-year and third-quarter outlooks.
The filings list a long set of risks. They include economic, geopolitical and market conditions, delays or smaller transactions, fewer large deals in a given quarter, foreign currency movements, and weaker renewal rates. Executing the Kemp integration and realizing its expected synergies gets its own mention. Other items cover cybersecurity breaches and product defects, reliance on the partner channel, the shift toward cloud and subscription models, and the continuing effect of COVID-19. The 10-Q also names Russia's invasion of Ukraine as a source of political and economic disruption.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $148.7M | $144.9M | +2.6% | $122.5M | +21.4% |
| Gross profit | $124.8M | $121.7M | +2.5% | $103.2M | +20.9% |
| Gross margin | 83.9% | 84.0% | -0.1 pp | 84.2% | -0.3 pp |
| Sales & marketing | $32.7M | $33.5M | -2.3% | $29.3M | +11.8% |
| General & administrative | $19.2M | $17.0M | +13.0% | $16.5M | +16.7% |
| Total operating expenses | $84.6M | $92.3M | -8.4% | $80.9M | +4.5% |
| Operating income (loss) | $40.2M | $29.4M | +36.7% | $22.3M | +80.6% |
| Operating margin | 27.1% | 20.3% | +6.7 pp | 18.2% | +8.9 pp |
| Net income (loss) | $29.1M | $20.5M | +42.3% | $13.6M | +114.7% |
| Net margin | 19.6% | 14.1% | +5.5 pp | 11.1% | +8.5 pp |
| Diluted EPS | $0.66 | $0.46 | +$0.20 | — | — |
| Net retention rate | 100.0% | 100.0% | ±0.0 pp | 97.0% | +3.0 pp |
Risks
Growth depends on a total growth strategy driven by accretive acquisitions, and the Kemp acquisition (Q4 fiscal 2021) is the primary driver of the revenue increase in the quarter. Acquisition-related expenses rose 224% in the quarter and 194% year to date, and the company continues to incur Kemp and Chef restructuring costs, with further employee and facility consolidation costs expected in fiscal 2022.
About one-third of revenue is denominated in foreign currency, and the company stated that second fiscal quarter 2022 revenue results were impacted by foreign currency fluctuations. EMEA revenue for the quarter rose 20% as reported but 28% on a constant currency basis, and the EMEA increase was partly offset by a negative impact of foreign exchange on license and maintenance revenue.
The company carries a $271.6 million term loan outstanding at May 31, 2022 plus $360 million of 1% convertible senior notes due 2026, and the amended credit agreement requires compliance with a consolidated interest charge coverage ratio and consolidated total net leverage ratio. Total other expense, net was $3.4 million in the quarter, and an event of default could accelerate the obligations.
The forward-looking discussion flags the continuing impact of the COVID-19 outbreak on employees, customers, partners and global financial markets, as well as substantial political and economic disruption and uncertainty from Russia's invasion of Ukraine and the international community's response. The company notes the pandemic has led to increased disruption and volatility in capital and credit markets that could adversely affect liquidity.
The company warns it may fail to achieve financial forecasts due to delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in renewal rates for contracts. Net dollar retention rates have ranged only between 100% and 102% for all periods presented, leaving recurring revenue growth dependent on new customers and acquisitions.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Adjusted Free Cash Flow
Annualized Recurring Revenue (ARR)
Net Retention Rate
Summary, forecast, risks and KPIs are extracted from PROGRESS SOFTWARE CORP /MA's SEC filings for Q2 FY2022 (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.