Summary
Progress Software closed fiscal 2022 with fourth-quarter revenue of $157.1 million, up 12.1% from the prior-year quarter, and full-year revenue of $602.0 million, up 13.3%. The Kemp acquisition, which closed in the prior-year fourth quarter, drove much of the increase, helped by gains in OpenEdge, DataDirect, Sitefinity, Chef, DevTools and FileTransfer. Annualized recurring revenue reached $497 million, up 3.5% year over year on a constant currency basis, and net retention was 101%. Chief executive Yogesh Gupta said demand held steady across nearly every market and product line even as the global environment worsened.
Profitability grew faster than the top line. Gross profit was $133.6 million in the quarter, up 12.2%, and gross margin held at 85.0%. Operating income climbed 49.5% to $30.4 million, pushing operating margin to 19.4%. Net income for the quarter was $23.7 million, up 58.8%. Non-GAAP income from operations was $62.0 million, non-GAAP operating margin was 39%, and non-GAAP diluted earnings per share of $1.12 compared with $0.92 in the prior-year quarter, an increase of 22%. Those non-GAAP figures exclude amortization of acquired intangibles, stock-based compensation, restructuring and acquisition-related costs. Full-year operating income of $132.1 million was up 13.8%, net income of $95.1 million was up 21.2%, operating margin of 21.9% was flat, and diluted earnings per share of $2.15 compared with $1.76.
Cash generation was mixed. Operating cash flow was $40.1 million in the quarter, down 8.6% from the prior-year quarter, while full-year operating cash flow of $192.2 million was up 7.6%. Capital expenditures were $3.0 million in the quarter, up 57.0%, and $6.1 million for the year, up 30.9%. Non-GAAP adjusted free cash flow was $37.5 million in the quarter, down 12%, and $189.4 million for the year, up 6%. Cash and cash equivalents ended the quarter at $251.8 million. Days sales outstanding rose to 62 days from 60 days a year earlier. Deferred revenue of $282.4 million was up 11.9%, and remaining performance obligations of $295.0 million were up 38.0%, a sign of the backlog sitting behind the recurring revenue base.
The company kept returning capital while funding acquisitions. The board declared a quarterly dividend of $0.175 per share payable on March 15, 2023, and raised the share repurchase authorization by $150 million to $228 million. Progress repurchased $77 million of stock in fiscal 2022. On January 3, 2023, it signed a definitive agreement to buy MarkLogic for $355 million in cash, funded with roughly $155 million of cash on hand and about $200 million drawn on the revolving credit facility. MarkLogic serves more than 300 enterprise customers, and management expects the deal to close in February 2023, to add to non-GAAP earnings and cash flow starting in the second quarter of 2023, and to carry operating margins above 40% once integration is complete. Gupta framed the purchase as a step that would scale Progress substantially.
Guidance for fiscal 2023, the year ending November 30, 2023, calls for non-GAAP revenue of $675 million to $685 million, non-GAAP diluted earnings per share of $4.09 to $4.17, a non-GAAP operating margin of 38%, and adjusted free cash flow of $175 million to $185 million, at an effective tax rate of 20% to 21%. For the first quarter ending February 28, 2023, the outlook is non-GAAP revenue of $157 million to $161 million and non-GAAP earnings per share of $1.04 to $1.08. Currency translation is expected to weigh on revenue in both periods. Other risks include renewal rates, the cyber incident disclosed in December 2022, economic and geopolitical conditions that could delay or shrink large deals, and integration work and management distraction tied to the MarkLogic purchase.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $157.1M | $151.2M | +3.9% | $140.1M | +12.1% |
| Gross profit | $133.6M | $127.4M | +4.8% | $119.0M | +12.2% |
| Gross margin | 85.0% | 84.3% | +0.8 pp | 85.0% | +0.1 pp |
| Sales & marketing | $40.0M | $34.6M | +15.6% | $37.4M | +6.9% |
| General & administrative | $21.5M | $20.1M | +6.9% | $18.8M | +14.6% |
| Total operating expenses | $103.2M | $95.4M | +8.1% | $98.7M | +4.5% |
| Operating income (loss) | $30.4M | $32.0M | -4.9% | $20.4M | +49.5% |
| Operating margin | 19.4% | 21.2% | -1.8 pp | 14.5% | +4.8 pp |
| Net income (loss) | $23.7M | $21.8M | +8.8% | $14.9M | +58.8% |
| Net margin | 15.1% | 14.4% | +0.7 pp | 10.7% | +4.4 pp |
| Diluted EPS | $0.54 | $0.50 | +$0.04 | $0.33 | +$0.21 |
| Net retention rate | 98.0% | 101.0% | -3.0 pp | 98.0% | ±0.0 pp |
Risks
On December 19, 2022, Progress disclosed a cyber incident involving unauthorized access to its corporate network and evidence that certain company data had been exfiltrated. The forensic investigation remains ongoing and the company recorded $602 thousand of cyber incident costs in fiscal year 2022.
Approximately 43% of fiscal 2022 total revenue was generated outside North America, including 35% from EMEA, exposing Progress to geopolitical tensions from Russia's invasion of Ukraine, inflation, and economic uncertainty. MD&A notes these conditions may disrupt commercial activities and have already contributed to foreign exchange headwinds in EMEA.
On January 3, 2023, Progress announced a definitive agreement to acquire MarkLogic for approximately $355 million, to be funded with about $155 million of cash and a $200 million revolver draw. Risk factors warn that failure to complete the acquisition could hurt the stock price and that integration may not achieve expected synergies.
As of November 30, 2022, consolidated indebtedness was approximately $618 million, including $325 million of convertible senior notes due 2026. The credit facility includes covenants and a springing maturity feature that could require repayment earlier than stated.
OpenEdge accounted for approximately 42% of aggregate revenue in fiscal year 2022. If demand declines or competitors offer superior technology, Progress could lose a significant revenue base.
About one-third of revenue is denominated in foreign currencies, and the strengthening U.S. dollar reduced reported international revenue. Fiscal 2022 revenue increased 13% as reported and 16% on a constant currency basis per MD&A.
Progress is realigning go-to-market, product, and operational teams and centralizing shared services. Prior realignment initiatives increased restructuring costs and temporarily reduced productivity, and current efforts may disrupt operations or divert management attention.
Expanding global privacy laws, including GDPR and the California Privacy Rights Act effective January 1, 2023, increase compliance costs and potential fines of up to 4% of worldwide revenue. Uncertainty around the EU-U.S. Data Privacy Framework may cause European customers to refuse or limit use of Progress products.
Chef offerings incorporate open source components, and low barriers to entry allow competitors to develop competing open source software. This could put price pressure on Chef products and limit the value of those software assets.
A high percentage of revenue is generated in the third month of each fiscal quarter, and pipeline conversion is uncertain. Failure to receive, complete, or process late-quarter orders could cause revenue to fall short of targets.
The pending MarkLogic acquisition would increase the amount and variety of government entities Progress contracts with, adding extended sales and collection cycles, complex procurement compliance, and potential debarment risks.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Adjusted Free Cash Flow
Net Retention Rate
Annualized Recurring Revenue
Summary, forecast, risks and KPIs are extracted from PROGRESS SOFTWARE CORP /MA's SEC filings for Q4 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.