Slide 1: Financial Overview & Outlook
Financial Overview & Outlook Anthony Folger EVP, Chief Financial Officer April 4, 2023 People. Proven. Progress.
Slide 2: Our Value Proposition
Our Value Proposition Total Growth Strategy Pillars • Invest in employees to drive the right culture 1. Invest and Innovate • Scale our highly efficient operating platform • Display discipline around our acquisition strategy 2. Acquire and Integrate • Focus capital allocation strategy on cash-based
Slide 3: Track Record of Delivering Strong Results
Track Record of Delivering Strong Results 5 YEARS Commitment to our Total Growth Strategy FY '18 – FY '23E • High customer retention rates and ~80% recurring revenue Revenue CAGR Operating Income CAGR • Industry-leading employee retention 12.5% 14.4% • Strong, steady unlevered free cash flow (UFCF)
Slide 4: Track Record of Delivering Strong Results
Track Record of Delivering Strong Results Revenue Operating Income and Margin 40% 41% 40% $684 38% 38% - 39% 35% $263 $611 R R $242 C AG $557 AG 5% %C $229 12. 14.4 $456 $432 $183 $162 $379 $134 FY '18 FY '19 FY '20 FY '21 FY '22 FY '23E FY '18 FY '19 FY '20 FY '21 FY '22 FY '23E Earnings Per Share
Slide 5: Consistent ARR Growth & NRR 100+%
Consistent ARR Growth & NRR 100+% High Mix of Recurring Revenue ARR and NRR Continuous ARR Growth ~80% 102% 100% 100% 102% 102% of Total Revenue ~$575 $567 ARR 4-Year CAGR (Pro Forma) 3.2% $543 $532 NRR Consistently at or Above 100% $507 R&D Drives Strong Retention ~17% R&D in FY22 FY '19 FY '20 FY
Slide 6: Strong Net Retention Driven by Low Churn
Strong Net Retention Driven by Low Churn Net Retention % - TTM 102% 102% 100% 100% • Consistently low churn even during economic downturns FY '1 9 FY '2 0 FY '2 1 FY '2 2 • Improving churn and customer expansion Dollar Churn % - TTM driven by R&D investment and customer success 5% 4% 3% 2% FY '1 9 F
Slide 7: Positive Trends and Well Diversified
Positive Trends and Well Diversified Revenue Mix by Product 45% 36% 30% 11% 19% 30% 30% 27% 24% 23% 20% 70% 59% 54% 46% 41% 35% FY '18 FY '19 FY '20 FY '21 FY '22 FY '23E OpenEdge All Others Acquired Revenue Mix by Channel Revenue Mix by Geography ARR Mix by Type 3% 3% 6% 24% 47% 34% 53% 57% 2% 2% 7
Slide 8: Prudent Approach to Capital Allocation
Prudent Approach to Capital Allocation Capital Allocation Priorities Capital Allocation FY '19 – FY '23 ($ Millions) 1. Accretive M&A that meets our disciplined criteria (ROIC>WACC) $152 2. Disciplined approach to share repurchases 3. Rapid debt repayment $227 4. Dividends, to the extent not constra
Slide 9: Acquisition & Integration Playbook
Acquisition & Integration Playbook Target 40+% margin within 12-months of close through cost synergies • Communicate intentions to employees as soon as possible • Rationalize senior management, back office, G&A, systems • Right-size real estate • Retain key employees across the business • Integrate
Slide 10: M&A Track Record
M&A Track Record • ~$330M in Revenue • Ipswitch $225M • ~3X Revenue • Chef $220M • $149M Incremental EBITDA Capital Deployed $1.058 B • ~7X PF EBITDA • Kemp $258M • ~ 12% - 14% ROIC • <9% WACC • MarkLogic $355M PF Revenue ~$710M Total Growth PF Adj. EBITDA Strategy ~$290M Implemented Revenue $379M A
Slide 11: Returning Capital to Shareholders
Returning Capital to Shareholders Share Repurchases Dividends $152 $31 $30 $227 $32 $32 $28 $77 $60 $25 $35 $30 FY '19 FY '20 FY '21 FY '22 FY '23E 5-Year Total $227M in repurchases including remaining forecasted in FY '23 Average price on executed repurchases of $43.35/share © 2023 Progress Softwar
Slide 12: Cash Flow and Debt Profile
Cash Flow and Debt Profile Cash Flow Debt Profile Cash (USD$M) (a/o 2/28/23) Net Leverage Ratio 2.7 Total Cash $123M 2.0 1.9 1.6 1.7 1.5 1.5 1.3 1.3 FY '22 Cash Flow (USD$M) 1.1 Operating Cash Flows $192M Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Adj Unlevered Free Cash F
Slide 13: Current Liquidity and Debt Profile
Current Liquidity Bank Facilities (Trailing 5-quarters) and Debt Profile In August ‘22, our interest rate swap flipped to be “in the money” 6.2% 5.4% • Sufficient liquidity in place 2.8% 3.0% • Interest rate swap expires in April 2024 2.9% • Future financing options will depend 1.9% Interest Interes
Slide 14: Long-Term Model Framework
Long-Term Model Framework Modeling Our Base Business Acquisition Assumptions Critical Model Factors Considerations Assumptions • Larger acquisition targets can result in higher leverage 15% of Target Size • Existing leverage and deal value (multiples) are critical Customer revenues Retention determi
Slide 15: Long-Term Model
Long-Term Model ($ In Millions) FY '22 FY '23 FCST * FY '28 Target Revenue $611 $684 $1,300 - $1,500 Operating Income $242 $263 $500 - $600 As a % of Total Revenue 40% 38% - 39% 38% - 40% Earnings Per Share $4.13 $4.13 $7.50 - $9.00 Net Leverage Ratio 1.5X 2.2X =< 3.5X throughout projection period A
Slide 16: Summary
Summary • Prudent capital allocation drives profitable growth and returns value to shareholders • Discipline in our acquisition strategy focused on ROIC • Efficient operating platform delivers best in class operating margins and provides landing spot for acquired businesses • Investments in R&D to d
Slide 17: D Progress
D Progress
Slide 18: Disclosure Slides
Disclosure Slides Safe Harbor/Forward Looking Statements GAAP/non-GAAP Reconciliation
Slide 19: Forward Looking Statements
Forward Looking Statements This presentation contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-lookin
Slide 20: Important Information Regarding Non-GAAP Financial Information
Important Information Regarding Non-GAAP Financial Information Progress furnishes certain non-GAAP supplemental information to its financial results. We use such non-GAAP financial measures to evaluate our period-over-period operating performance because our management team believes that by excludin
Slide 21: Important Information Regarding Non-GAAP Financial Information
Important Information Regarding Non-GAAP Financial Information • Cyber incident - We exclude certain expenses resulting from the detection of irregular activity on certain portions of our corporate network, as more thoroughly described in the Form 8-K that we filed on December 19, 2022. Expenses inc