Progress Software Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended November 30, 2022. This is an annual filing, not a stand-alone fourth-quarter report. Progress sells software for developing, deploying and managing business applications through direct sales and channel partners; more than half of license revenue comes through indirect channels.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $602.0 million | $531.3 million | +13% reported; +16% constant currency |
| Software license revenue | $188.3 million | $156.6 million | +20% |
| Maintenance and services revenue | $413.7 million | $374.7 million | +10% |
| Gross profit / margin | $507.5 million / 84% | $452.9 million / 85% | Gross profit +12% |
| Operating income / margin | $132.1 million / 22% | $116.1 million / 22% | +14% |
| Net income / margin | $95.1 million / 16% | $78.4 million / 15% | +21% |
| Diluted EPS | $2.15 | $1.76 | +22% |
| Cash from operations | $192.2 million | $178.5 million | +8% |
Revenue growth reflected the full-year contribution from the November 2021 Kemp acquisition and growth in several product lines, partly offset by foreign-exchange pressure. EMEA supplied 35% of revenue and North America 57%. OpenEdge accounted for approximately 42% of consolidated revenue.
Management reported ARR of $497 million at year-end, up 3.5% from $480 million. Net dollar retention generally ranged from 98% to 101%. These are non-GAAP operating measures as defined by the company, not substitutes for revenue or forecasts.
Cash, debt and capital allocation
- Cash and cash equivalents were $256.3 million at November 30, 2022, up from $155.4 million; there were no short-term investments at year-end. Cash from operations was the main source of the increase.
- Investing activities generated $22.0 million, including $26.0 million of net proceeds from selling long-lived assets. Financing activities used $101.4 million, including $77.0 million for repurchases and $31.1 million for dividends.
- Debt carrying value was $611.8 million, including $352.6 million of convertible notes and $259.2 million of term debt. The term loan had $268.1 million outstanding at face value; the $300 million revolving facility had no borrowings at year-end. The company reported covenant compliance.
- The $360 million face-value convertible notes bear 1% interest and mature April 2026. The secured credit facility is scheduled to mature in January 2027, subject to a springing-maturity provision tied to the notes.
- FY2022 repurchases totaled 1.7 million shares for $77.0 million. The quarterly dividend was $0.175 per share. In January 2023, the board expanded the repurchase authorization to $228 million.
Changes, outlook and notable items
- FY2022 revenue, operating income and net income increased year over year. Maintenance and services remained the largest revenue category. Gross margin declined about one percentage point, while operating margin was broadly steady.
- Management said cash, operating cash generation and credit-facility availability should fund foreseeable needs for at least 12 months. It provided no quantified FY2023 revenue or earnings guidance in the supplied filing text.
- On January 3, 2023, after year-end, Progress agreed to acquire MarkLogic for approximately $355 million in cash, subject to adjustments and closing conditions. Management expected to fund it with about $155 million of cash and a $200 million revolver draw, with closing expected in early 2023.
- A cyber incident disclosed in December 2022 involved unauthorized access to parts of the corporate network and evidence of company-data exfiltration. The investigation was ongoing; FY2022 incident-response costs were $0.6 million, and the filing did not establish the incident’s full business or financial impact.
- Other unusual items included a $10.8 million gain on the sale of headquarters property and a $0.9 million restructuring charge. Adoption of convertible-debt accounting guidance reduced FY2022 interest expense by $11.5 million versus the prior accounting treatment.
- Key risks include reliance on OpenEdge, competition and technology change, acquisition execution and integration, international exposure and foreign exchange, cybersecurity, privacy regulation, and leverage. A hypothetical 10% adverse currency move was estimated to reduce revenue by about $17 million and net income by about $6 million, before any offset from hedging.
- The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition for arrangements with multiple performance obligations was identified as a critical audit matter. Management assessed disclosure controls and internal control over financial reporting as effective.
Investor verification priorities
- Track the cyber investigation, any data or customer impact, remediation spending, and potential legal, regulatory or insurance consequences.
- Verify MarkLogic’s closing, final funding mix, post-acquisition debt and liquidity, and whether expected strategic and financial benefits materialize.
- Assess OpenEdge’s ongoing contribution to revenue and whether ARR and customer retention improve beyond the reported modest ARR growth and 98%–101% retention range.
- Monitor debt service, convertible-note terms and springing maturity, credit-facility covenant headroom, and the effect of acquisition funding on capital returns.
- Separate underlying operating trends from acquisition contributions, currency movements, asset-sale gains, restructuring charges and accounting changes.