PRGS - Earnings call transcript Q3 2020 | Progress Software Corporation

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Operator

Good day, and welcome to the Progress Software Corporation Q3 2020 Investor Relations Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Anthony Folger. Please go ahead.

Anthony Folger

Thank you, Allen. thanks XXXX us financial and fiscal Progress everyone, quarter third results afternoon, for for joining Software's Good conference call. is today Officer. me Yogesh and President With Chief Gupta, Executive

outlook site during like and the Before started, to financial initiatives, this call, whether and strategies, review our to our otherwise. information, this today corporate future call, as performance, a developments section Progress plans, update financial remind our be progress.com. and and and regarding our available outlook to we obligation for we is uncertainties. new Relations represents release, in and today's of Please other business crisis on Software integration our information as I'd this as of is forward-looking you product no get of Chef, statements only in forward-looking operating or that acquisition subject which discuss results the guidance statement the in considered might Web impact Progress This at Safe of will result Software's of the that included COVID-XX as assumes cost Harbor press forward-looking. information risks well Investor

the unless we the financial call, are non-GAAP discuss measures, this on of the Additionally, it all that stated number. is figures measure GAAP

recommend a for for release I XXXX press document our financial results release results of issued press Web third find financial the you measures we GAAP financial specific our reference our details. the fiscal quarter to our these financial contains can reconciliation You non-GAAP details site. comparable today. of in the results it most and full numbers directly on published This Today,

results, I'll will third and section the entirety, of now contain a our via for at relations section. providing This available financial our in have be that metrics. our Relations presentation in quarter be that, in site conference With industrial published supplemental over to site Web and investors.progress.com. call Yogesh. Investor is will presentation We Web its highlights the recorded data on additional turn also it available Today's replay XXXX

Yogesh Gupta

of and strategy. planning Chef I'd our our confidence has in acquisition time close of business we and in Anthony the excited continued quarter And through QX some from of results our capital call, On the and cash and allocation our very to friendly our transaction our total integration important well employees. the our bulk continued and for period. today's global year I deal, increased received why our the we are to continued quarterly the quarter continued very reported milestone of our Chef. spend very EPS our in the so perform with reflects like pending meaningfully revenue raise our investors. with pandemic, pending exceeding the like for outlook to you, another We provide have Chef, for consistent execution my momentum represents which dividend, shortly. a hope clearance a of business a commitment improved strength Thank everyone. We of with more acquisition of well major of our financial Against our results to fourth good relationships business and color strong shareholder we discussing throughout recap performance antitrust about EPS. of contribution afternoon, backdrop growth high happy XXXX this end revenue am in on our the third and reflection third increased to been partners guidance. the row, our strong our demonstrates I'd The with underway, policy, our both the Chef. flow. strong The customers us durability strong our the generate ability and outlook the and business, discipline has to recently enabled of

the Chef has stable our the to one successful announced roughly be reaction from businesses we demonstration space. heels M&A customers of the Ipswich, will since our bolstered strategy the following another with complement our month of in infrastructure During transaction, accretive on view the software that

DevOps Chef and we things As calls secure applications markets, modern true on September multi investor in our during discussed and the enabling an a and pioneer deploy manage, build, has cloud, hybrid to on-prem Xth, environments. amazing company is been DevSecOps in growing and

has focused markets employees, in plus enables of demands innovation customer and continuous options companies its high an develop business Chef’s XXX software, With meets innovation Chef retention in very complex talented and to proactive customers, organizations group stability million has verticals. reliable, and us which to in reactive. Progress and retention net rate a high $XX important. success, has is numerous their and approximately continued resulted the customer caliber to relentless in the impressive impact extend instead a ecosystem automation end include XXX slow have in system in organizations across and technology on of will nature. diverse also leader and the be deploy with rapidly consistent, This grow performance for Fortune As IT agile business Chef’s approximately on excites to led recurring that in increasingly revenue. security of This environment. growth today's Chef’s which become increasing What XX% business that focus to success ever is enables and most

to high overall of business by revenue our percentage points. will mix increase forward, the approximately recurring we result, this And revenue predictable of mix with X from Going a drive objectives streams. recurring addition a to Progress’ expect as align Chef we

And enabled spoken our From has same will retention a customers, retain and the own Chef have well longstanding recurring communities time, Telerik with our to of case we loyal customer products DataDirect serves, on the consistently on satisfaction. tools. we how and rate success length revenue developer are our Like success, addition, at net us Chef’s, ideal focus north drive a employees that to Chef’s customer a stable customer customers decades the of maximize run outstanding in build Chef partners very and dev I of the In contribute perspective network of and at XX%. to track it acquirer. record the has have massive OpenEdge for stream. and

record also of thousands from a platform our impressive we of me have outstanding downloads customer satisfaction. XX extol factor years, build nature will in Chef product is we longstanding You've more products of sense benefited and than Chef’s that how heard the for Similarly, Chef critical mission softwares, have thousands critical from of with the million customers make and on of over its why hundreds tens benefited organizations of our businesses and technologies.

will public to vibrant company further source leverage record assistance, community, additional will a support of key resources to its open which success, success. Progress customers, customer ingredient track XX-year the As we processes Chef’s is of enhance we success another continue of and with a and Chef’s

of to In 'XX, anticipated Chef all acquisition operating acquisition addition business of to and summarize, XXXX objective also at M&A supports increase immediately of the view, from first reaching Chef acquisition integration Based in Once the will grow on the turn these synergies, accretive than end year. technology to the boxes will our accretive scale the complete, implement contribution criteria. to the XX% Chef’s point and and course complete the believe of more through our acquisition strategy through that rigorous in new criteria checks To is transaction our a to product M&A. quarter we is alignment begin we expect through of the accretive squarely M&A margin plans. of we the of with our our

However, our laurels. acquisitions. we aren't intend on grow to accretive continue sitting through We to

over are strategy, the our our excited you quarter forward can move like our look mentioned, acquisition. team on do as the the to opportunistic M&A so to enable and We our third of made themselves, We us with have Ipswitch to we particularly pipeline. forward. our as as bolstered and pending in and today. strategy size requisitions uncertain Chef In strong are our progress With our period. focused internal five an we have are year continued long-term we building business on we in and Chef a we accretive summary, living subsequent updating execution double on success present be And previously performance market to of with

of We potential over and growth outlook. are business through illustrates benefit our confident Chef to of to With that Anthony details to on our expand the that our our will results call serve the total another all stakeholders. proof to provide that, as for turn M&A point the financial I'd like more our strategy accretive

Anthony Folger

Yogesh. call. afternoon, for and thanks Thanks, everyone our joining Good

is excited And term a about very with our As our third pleased with which also we fit Chef, think Yogesh acquisition we're strategy. we're pending of very our quarter noted, perfect longer performance. strong

of On constant revenue, provided and $X.X of revenue primarily For us high are the revenue decline from was above thousands critical and maintenance The demonstrates revenues our benefited renewals customer mission June, end timing the rate and our tens products businesses a The our year-over-year and we've over products decrease and the multiyear by a retention million of the range currency. how increasing durability license by made term than DCI have just is or investments our major in we actual the global of in reflect top quarter, XX% with the even position in the stability year-over-year resulting backdrop a our coupled revenue anticipated. both mix we our of better for in pandemic, The and of basis decreased revenue, driven recurring from of OpenEdge to driven the who well future. in technologies. success total well of by expected performance X% total product. was as million $XXX.X guidance

OEM quarter. both previously decline we cause which recognition revenue but contract XXX, our of revenue that Because contract business closely QX any we caused DCI or us of benefited timing DCI in in timing ASC reported XXXX QX certain reflects trends ACV, in significantly QX longer in with year term our discussed, XXXX. line in fluctuations value, of can XXXX This more renewals impact to under the top annual can partners fiscal timing and and given renewals revenue the materially in As affect recognition, of our DCI believe year-over-year revenue. can than

million $XX performance be actual We to for to XXXX. XXXX, million $XX continue expect in our with to consistent ACV

Turning now to expenses.

in aimed margin the cost greater operating driving fourth and restrictions reductions Our quarter to expenses quarter, This year primarily travel the and to million total both down X% $XX.X a in reduction and of ago. place was decline at efficiency we combat of result of restructuring XXXX, the were as a for made the part by spread put events, a of were compared operating COVID-XX which year-over-year driven in costs and in-person of expansion.

result recognize the a the of came for this increase As cost QX basis some improvement margin points on is operating during margin operating quarter. that result the total in in expenses, basis. of XXX XX%, decline a at an expected and than performance of better of We year-over-year

by a driven it's putt from However, spread to margin the combat important reduced COVID-XX. of place was that expenses, significant to the resulting highlight of improvement portion in restrictions

As a we operating result, high view margins sustainable of in our reiterate the XXs.

$X.XX year per the On $X.XX ago. of exceeded the guidance a increased of share from the bottom line, our high end our range earnings and quarter for

up quarter, historical nine million on $XX flow ended the $XXX for third cash the equivalents free million. any slightly days and almost the up million cash a from XX flow Deferred million of reflecting end did second and ago stock million between the recent cash, We quarter year the seasonally. was during not $XX down quarter. short-term a balance normal and quarter, Moving from $XXX at third for achieved was with quarter investments year million We within the ago. DSO $XX now, metrics. revenue from Adjusted of was we of debt the repurchase $XXX ranges. cash quarter

the announced enable we into the end important under recently our As the is a our million $X.XXX Chef and for performance strong Directors of we funded declared an which in hand price purchase at The anticipate healthy pending a be a shareholder quarter. an our represents We're and announce share, acquisition will our Board QX, Note our Chef of fiscal also balance facility. friendly share $XXX roughly fourth sheet an improved increase. by to result, of dividend our million on and quarterly end current of occur authorization. combination existing was shortly, one have and the quarter of a of to third closing pleased after million remain increase. along such capital strategy and and month our fiscal cash that revolving X% drawing $XXX $XXX with credit of remaining with down element allocation balanced repurchase XXXX, Dividend per

With net This products in Yogesh mentioned is single strong the as high our other and anticipate business consistent growth that reflects customer Chef’s some forward. on rates to grow move focus recurring earlier, dollar our with revenue and retention we low of retention. we digits rate the

the of transaction business. like expected year turn full reflects XX% better income first impact quarter quarter XXXX, which our expect slightly to for of an the We we to and Chef's the XXXX outlook combination to than third quarter synergies Chef the would business dilutive for but now the XXXX operating acquisition. QX be net our to in for the I in of margin accretive fourth performance, of momentum the year the with ongoing our and and exiting the to more than with become realized throughout increasing

the has outlook As headwinds, our while the the to pandemic far originally economic on than brought been some thus COVID assume impact we've continues pandemic. the on anticipated, less by of resulting challenges business mentioned, our from

between million. loss $X.XX. contribution from $XXX the between $X.XX, we expect of million approximately and quarter, $XXX and earnings to which of and million during revenue of fourth the Chef For $XX This of Chef XXXX, the million being per a quarter including $XX includes we impact breakeven and anticipate between share $X.XX

the acquisition. our anticipate the guidance of with healthy date. third year for quarter better realized we $X XX% million pandemic, guidance million and impact than For provided a approximately million guidance with what headwind from we This year the from are $XX to updated margin our fiscal $XX QX with increasing million the be $XX contribution $XXX revenue full performance, trends is between the expected from increase We preliminary we to impact results. million reflects the have Chef $XXX our consistent to quarter third in of million and Chef. incorporated a including Also slight operating COVID-XX XXXX, of to the business

adjusted projecting to free and our are $XXX $XXX increase flow an We from million, prior million cash outlook. be between

FDA third earnings updated the on a foreign to $X.XX that note When consistent important basis. with reduction We $X.XX, we've a the per guidance between also preliminary anticipated to negative current with guidance results. to XXXX and expect share included for $X.XX comparing quarter provided exchange it's EPS year-over-year be of our our results, the impact

for XX guidance EPS shares assumes full tax a Our XX% rate of year and million approximately outstanding.

on today previously year's Although, financial comments we will outlook businesses provide double-digit remaining year-over-year results our XXXX, continuing guidance stability revenue from demonstrate summarize for by a to for fiscal helpful call, those made measures on next Chef, directional few a contribution should flat fiscal be our be we To a to net full and driven while our and XXXX provide conference gauge. to growth their anticipate basis. a

to the respect synergies. year the diminish In will pressure With early Chef high-XXs. be in from margin, we year, operating can the during believe which an drive maintain addition, operating as will we in some margin we there

of Chef. In longer pleased of place may milestones Q&A. the in original our another very that, addition, to We're we relaxed open the quarters assume term that restrictions in spread With acquisition call a in COVID-XX the also execution pending our like to our XXXX, travel and expenses. that guidance exceeded to with strategy of in pickup be the be some about third reaching ranges. combat I'd growth for of related in In resulting closing, excited we’re put the

Operator

go question Sidoti. Thank we'll Soderstrom Instructions]. Please first And you ahead. [Operator from Anja our from take

Anja Soderstrom

Chef the Congratulations want you guys to since speak Hey, we and and the ask DCI. Anthony. to great in quarter acquisition I about have fluctuation you. on of a Yogesh

term, there. that about a or the seeing spoken any have it the content or you what in push, near there? DCI? I renewals in that pulling fluctuations contracts You What of of last before. held in are Are are about year contracts was larger And remember in seeing coming you matter of you for terms of terms the there

Yogesh Gupta

-- to are largely it really business is a in not to ISV DataDirect any different very, right? fact had are business first vendors decade an in So sort The embedded is way, OEM renewals a their who think sticky XXX software we've come business very about product. is with that up -- churn And actually of that by right? well, over all, In that talked those going this that products. before fact, the they mean, the renew, that more. a I I'll or ISVs, up coming the the of speak I we've

it's think I a really, business. So sticky really

of what the more? coming the it, in In terms from of to when, add like bookings guidance in renewals includes expectation any period. given you our Anthony, up comes are would that

Anthony Folger

No.

look right, move when you the an tend from look that's that think lumpiness range a basis, obviously will to to the and reality million for little at renewals revenue on around drive I I generating $XX been our I amount at in ACV recognition. we're a they Yogesh. of bit the an basis, think now. of it's revenue is to that in mean ultimately tend be But that you $XX business and years lumpy annual when couple of the million

stable very Yogesh's been point. I it's So to think

Anja Soderstrom

and should in we you. Thank you But And asset think in renewal DCI churn. just of the said renewals… had pricing you about any terms terms of haven’t how related

Yogesh Gupta

be to stable. stable. be to continue to They very things expect we continue Anja,

stable, them million stable at which $XX million $XX contract the We annual stayed is to to value range. the be to expect continue the why

it year, they a don't. they any was somebody if we will had previously most a million a, contract had So why see renew likely don't year and three that reason $X

they renew seen we same any In have that the year at price. fact, difference not this

Anja Soderstrom

me queue. now. get was for for That you. all back I'll thank Okay, into

Operator

We'll question our now from Schappel from Please take ahead. Benchmark. Mark next go

Mark Schappel

with of do? So business on starting they couple questions international off a How did much Chef.

Yogesh Gupta

is, as significantly a smaller than Their business Mark, percentage international overall. Progress’

quarters So to they all want their make -- miss… of just didn't sure revenues that [three] are I Anthony, are correct? is U.S. I

Anthony Folger

asked is it, you than as business. Mark, Yes, that more even and so the Progress

Mark Schappel

with respect mostly geographic focused where then is in is business, overseas, to Europe? that And it

Yogesh Gupta

any EMEA geographies. well other is But they customers, said, parts where some I of APAC. the as of North Yeah, America as on I have mean, pretty more place as way than focused the it's so much a

Mark Schappel

And Yogesh, a between price any acquisition. sales Chef? weeks Telerik you since But are I believe potential do know or the it's there only been points and few business your synergies

Yogesh Gupta

So, I much mean, -- Mark, sides as just what revenue no not focused sell, things on as side additional well. no we going but additional forward you the know that interesting we very potentially businesses. are But some to have done is there modeled business other between cross synergies have trying around the there, Telerik find

very stay said, the Now to sure and is the that honest, to focus to, the that as and those the sure be the revenue in recurring high that make continues customer goal, low we focused grow on digits. base very retention Anthony is from business stable, single is and making that very, customers the

not we're so cross for And sell pushing across portfolios. we nor are contemplating product

Mark Schappel

Chef entity a the at So operate integration first most for plan part year? kind for of to least is the the standalone let as

Yogesh Gupta

No.

We actually as rapidly with intending integrate we are did to it Ipswitch.

in we GMs quickly plan it integration fast as then just and basically G&A bring place to and do did Mark, the of on. the start rock place as structures fast sure acquisitions structure any is our including very support of don't -- you as make under you with that going it one so other basically going so boat with are putting our well, various do but are in Obviously, and possible. well, get to technical We we our it as Ipswitch consideration put to our part you

do So no, intent it standalone as run run separate to not a we do to entity. business. We intend as a it separate not

business. into it our integrating are We

Mark Schappel

business, just actually you business of And in quarter? Could which to the quick your the the core Yogesh. upside then summarize turning drove parts real

Yogesh Gupta

year-to-year. DCI, knew Really a in going nutshell, I we primarily The what the was to OpenEdge Mark. happen product, from mean,

even had expected, testament And but it to well. product is times we've that as year-over-year like in to decline the So that well. these but was of business did that the actually a it the perform OpenEdge continues strength

Mark Schappel

the Is the kind OpenEdge it that was on say of side? fair core channel to it ISV

Yogesh Gupta

new when about Yes, we provided had business WhatsUp when [dev we that of part you around the business as the our Ipswich well QX Gold had -- end is know, correct. the talked you is at acquisition. as MOVEit. COVID primary guidance, And of the contemplating in as acquisition portfolio, know, And and the tools] the we in new had product, were of fact Mark, our that headwinds

ISVs been whatever the the So where we've seen have seen we've strong. been OpenEdge that's strong little has primary really sales, business really and

Operator

question now Ittai from We’ll ahead. Please take Oppenheimer. next go our from Kidron

Ittai Kidron

add Yogesh about in build Chef a very itself, bit bone the Chef? kind and meat kind congrats you looks add on around again and attractive. Yogesh asset one? to you the of there out the other to marketplace can more talk little can that the things that Anthony, around deal, of you on Chef are mean, there I think

Yogesh Gupta

exists I lots assets of market. think, in Ittai, the that

and it deal. the tremendous time extremely a But face you to challenges yes, deploying, whenever opportunity a with sides is you good of think doing a it modern whole Chef not whole do complex even or are area environment, managing, needed do we that mean, successfully agree aspect about around As to of if portfolio that that participate of M&A today. opportunistic. now's a a operating, but think absolutely. good I mean that market is do time have is in there both I know that solutions there's set and and products do the a in I to there's in whole DevOps enterprises and leader are capabilities by a DevOps And whole a cycle there that well. one

tremendous opportunity. I yes, think there's So

Ittai Kidron

XX% exiting increase Correct are margin deal. thinking the And to And think at -- of right? Am about this $X business about then Did $X we on on as a to that basis? on side side 'XX. wrong, XX% looking Anthony, a follow-up, me I so million the mentioned get that if to you I financial profit on get million quarterly operating if I right? the

Anthony Folger

you're as margin gradually the for 'XX. certainly projecting to of in through It'll course business. correct we Chef Ittai, operating that get year build exit we're the XX% the

compressed a through So think work yeah, one. margin it'll QX. we you're I see that. little operating Yeah, might QX, QX, in as the bit be on But quarterly right I we of that that from terms think

Operator

And does call we no like to for closing conclude That the questions. have further our any question-and-answer session. turn to I'd over remarks. Yogesh now back

Yogesh Gupta

Thank forward. on joining call continued our strong all you, Allie. I to our work for and closing deal forward also momentum today. Thank going getting and pleased the our you plan. us to looking in this very performance excited on the am We're integration QX business Chef with

and the you is and infrastructure to you space. company M&A and strong through Bye-bye. software forward during in us for call. execute XXXX long-term look Our our full Thank accretive drive will financially continue strategy to value to next FY we again today healthy conference total our I with year aggressively on growth speaking joining

Operator

you And this participation. does for conclude today's your call. Thank

You may now disconnect.

Progress Software (PRGS) 29 Sep 202020 Q3 Earnings call transcript