Progress Software Corporation Net Income surged on 69.7% and EBITDA Margin increased on 4.3 pp from 28.6% to 32.9%
01/17/2019 • About Progress Software Corporation (
$PRGS) • By InTwits
Progress Software Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 32.9% in FY2018, 28.6% in FY2017, 2.4% in FY2016, 14.9% in FY2015, 28.9% in FY2014
- Progress Software Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.0%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $7m in FY2018, $3m in FY2017, $6m in FY2016, $9m in FY2015, $12m in FY2014
- The company has highly profitable business model: ROIC is 18.5%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.1x while industry average is -1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue showed almost no change in FY2018. Revenue decline showed acceleration in FY18Q4 - it was 4.1% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 4.3 pp from 28.6% to 32.9% in FY2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2016 at 2.4% and was growing since that time.
Gross Margin increased slightly on 0.53 pp from 82.6% to 83.1% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue followed a declining trend at -3.1 pp per annum in FY2014-FY2018.
Net Income margin increased on 6.6 pp from 9.4% to 16.0% in FY2018. During the last 5 years Net Income margin bottomed in FY2016 at -13.7% and was growing since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.8% in FY2018. Progress Software Corporation showed small CAPEX/Revenue decline of 0.52 pp from 2.3% in FY2015 to 1.8% in FY2018. Average CAPEX/Revenue for the last three years was 1.4%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2017 at 0.85%.
Return on investment
The company operates at good ROIC (18.5%) and ROE (18.5%). ROIC increased on 4.9 pp from 13.5% to 18.5% in FY2018. ROE increased on 8.9 pp from 9.6% to 18.5% in FY2018. During FY2014-FY2018 ROIC bottomed in FY2016 at -4.9% and was growing since that time. During FY2014-FY2018 ROE bottomed in FY2016 at -12.0% and was growing since that time.
Leverage (Debt)
Debt level is 0.1x Net Debt / EBITDA and 0.9x Debt / EBITDA. Net Debt / EBITDA surged on 0.2x from -0.1x to 0.1x in FY2018. Debt decreased on 4.8% while cash dropped on 21.2%.
Progress Software Corporation has no short term refinancing risk: cash is higher than short term debt (1,806.6%).
Valuation and dividends
The company's trades at EV/EBITDA 11.8x and P/E 24.0x.
Management team
Yogesh K Gupta is a the company's CEO. Yogesh K Gupta is a founder and has spent 2 years with the company. Progress Software Corporation's CFO is Paul A Jalbert. Paul A Jalbert has 2 years tenure at the company.
Financial and operational results
FY ended 11/30/2018
Progress Software Corporation ($PRGS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 332.5 | 377.6 | 405.3 | 397.6 | 397.2 | -0.1% |
| Gross Profit | 298.3 | 313.8 | 339.6 | 328.4 | 330.2 | 0.5% |
| SG&A | 149.8 | 182.2 | 168.0 | 142.1 | 142.1 | 0.0% |
| EBITDA | 96.0 | 56.4 | 9.6 | 113.5 | 130.5 | 15.0% |
| Net Income | 49.5 | -8.8 | -55.7 | 37.4 | 63.5 | 69.7% |
Balance Sheet
|
|---|
| Cash | 263.1 | 212.4 | 207.0 | 133.5 | 105.1 | -21.2% |
| Short Term Debt | 0.0 | 9.4 | 15.0 | 5.8 | 5.8 | 0.0% |
| Long Term Debt | 0.0 | 135.0 | 120.0 | 116.1 | 110.3 | -5.0% |
Cash flow
|
|---|
| Capex | 11.8 | 8.8 | 5.8 | 3.4 | 7.3 | 114.7% |
Ratios
|
|---|
| Revenue growth | -0.4% | 13.5% | 7.4% | -1.9% | -0.1% | |
| EBITDA growth | 22.8% | -41.2% | -83.0% | 1,080.9% | 15.0% | |
|
|---|
| Gross Margin | 89.7% | 83.1% | 83.8% | 82.6% | 83.1% | 0.5% |
| EBITDA Margin | 28.9% | 14.9% | 2.4% | 28.6% | 32.9% | 4.3% |
| SG&A, % of revenue | 45.0% | 48.2% | 41.5% | 35.7% | 35.8% | 0.0% |
| Net Income Margin | 14.9% | -2.3% | -13.7% | 9.4% | 16.0% | 6.6% |
| CAPEX, % of revenue | 3.5% | 2.3% | 1.4% | 0.8% | 1.8% | 1.0% |
|
|---|
| ROIC | 15.6% | 2.5% | -4.9% | 13.5% | 18.5% | 4.9% |
| ROE | 9.4% | -1.7% | -12.0% | 9.6% | 18.5% | 8.9% |
| Net Debt/EBITDA | -2.7x | -1.2x | -7.5x | -0.1x | 0.1x | 0.2x |
Progress Software Corporation ($PRGS) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 95 | 93 | 96 | 111 | | 4.9% | -0.4% | -1.7% | -4.1% |
| EBITDA | 30 | 30 | 33 | 35 | | 187.6% | -2.9% | 4.5% | -13.0% |
| Net Income | 14 | 13 | 17 | 18 | | | 24.8% | 49.9% | 12.2% |
Balance Sheet
|
|---|
| Cash | 117 | 97 | 99 | 105 | | -48.4% | -50.9% | -31.8% | -21.2% |
| Short Term Debt | 6 | 6 | 6 | 6 | | -60.3% | -60.3% | -60.3% | 0.0% |
| Long Term Debt | 115 | 113 | 112 | 110 | | -0.9% | 1.1% | 3.2% | -5.0% |
Ratios
|
|---|
| Gross Margin | 82.3% | 82.1% | 82.6% | 85.0% | | -0.4% | 0.7% | 1.1% | 0.4% |
| EBITDA Margin | 31.9% | 32.2% | 34.7% | 31.5% | | 20.3% | -0.8% | 2.0% | -3.2% |
| Net Income Margin | 14.4% | 13.9% | 17.5% | 16.6% | | 15.0% | 2.8% | 6.0% | 2.4% |
Peers in Systems Software
Below you can find Progress Software Corporation benchmarking vs. other companies in Systems Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 20.6% | 14.7% | 16.6% | 20.4% |
|---|
| Progress Software Corporation ($PRGS) | | 13.5% | 7.4% | -1.9% | -0.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 76.1% | 74.5% | 73.1% | 73.9% | 73.5% |
|---|
| Progress Software Corporation ($PRGS) | 89.7% | 83.1% | 83.8% | 82.6% | 83.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | -2.4% | -6.6% | -9.8% | -5.4% | -4.7% |
|---|
| Progress Software Corporation ($PRGS) | 28.9% | 14.9% | 2.4% | 28.6% | 32.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.7% | 2.1% | 2.1% | 2.4% | 2.6% |
|---|
| Progress Software Corporation ($PRGS) | 3.5% | 2.3% | 1.4% | 0.8% | 1.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | 0.0% | -4.7% | -1.9% |
|---|
| Progress Software Corporation ($PRGS) | 15.6% | 2.5% | -4.9% | 13.5% | 18.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (22 companies) | -2.1x | -1.5x | -1.0x | -0.8x | -0.5x |
|---|
| Progress Software Corporation ($PRGS) | -2.7x | -1.2x | -7.5x | -0.1x | 0.1x |
