Progress Software Corporation reports 202% Net Income growth in 2020 and 11.0 pp EBITDA Margin growth from 23.4% to 34.4%
01/14/2021 • About Progress Software Corporation (
$PRGS) • By InTwits
Progress Software Corporation reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 34.4% in FY2020, 23.4% in FY2019, 32.9% in FY2018, 28.6% in FY2017, 2.4% in FY2016
- Progress Software Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's a lot of higher than industry average of 14.0%.
- CAPEX is quite volatile: $1,129m in FY2020, $10m in FY2019, $7m in FY2018, $4m in FY2017, $2m in FY2016
- The company has highly profitable business model: ROIC is 16.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.1x while industry average is -1.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Progress Software Corporation's Revenue increased on 7.0%. Revenue growth showed slowdown in FY20Q4 - it was 4.6% YoY. During FY2016-FY2020 Revenue growth bottomed in FY2017 at -1.9% and was accelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from 27.6% to 28.7% in FY2020.
Gross Margin increased on 4.2 pp from 81.8% to 86.0% in FY2020. SG&A as a % of Revenue decreased on 2.7 pp from 37.5% to 34.9% in FY2020.
Net Income margin surged on 11.6 pp from 6.4% to 18.0% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 the company had CAPEX/Revenue of 1.5%. The company showed small growth in CAPEX/Revenue of 0.62 pp from 0.85% in FY2017 to 1.5% in FY2020. It's average CAPEX/Revenue for the last three years was 1.4%.
Return on investment
The company operates at high and attractive ROE (23.6%) while ROIC is a bit lower (16.0%). ROIC increased on 8.4 pp from 7.6% to 16.0% in FY2020. ROE jumped on 15.5 pp from 8.1% to 23.6% in FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 2.7x. Net Debt / EBITDA jumped on 0.6x from 1.5x to 2.1x in FY2020. Debt surged on 41.3% while cash dropped on 36.5%. Net Debt/EBITDA followed a growing trend in the last 5 years.
Progress Software Corporation has no short term refinancing risk: cash is higher than short term debt (388.0%).
Valuation and dividends
Progress Software Corporation's trades at EV/EBITDA 14.4x and P/E 23.5x.
Management team
The company's CEO is Yogesh K Gupta. Yogesh K Gupta has 4 years tenure with the company. The company's CFO is Anthony Folger. Anthony Folger has 1 year tenure at the company.
Financial and operational results
FY ended 11/30/2020
Progress Software Corporation ($PRGS) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 405.3 | 397.6 | 397.2 | 413.3 | 442.2 | 7.0% |
| Gross Profit | 339.6 | 328.4 | 330.2 | 338.1 | 380.0 | 12.4% |
| SG&A | 168.0 | 142.1 | 142.1 | 155.1 | 154.1 | -0.6% |
| EBITDA | 9.6 | 113.5 | 130.5 | 96.8 | 152.0 | 57.1% |
| Net Income | -55.7 | 37.4 | 63.5 | 26.4 | 79.7 | 202.0% |
Balance Sheet
|
|---|
| Cash | 207.0 | 133.5 | 105.1 | 154.3 | 98.0 | -36.5% |
| Short Term Debt | 15.0 | 5.8 | 5.8 | 10.7 | 25.3 | 135.7% |
| Long Term Debt | 120.0 | 116.1 | 110.3 | 284.0 | 391.2 | 37.8% |
Cash flow
|
|---|
| Capex | 5.8 | 3.4 | 7.3 | 4.0 | 6.5 | 63.0% |
Ratios
|
|---|
| Revenue growth | 7.4% | -1.9% | -0.1% | 4.1% | 7.0% | |
| EBITDA growth | -83.0% | 1,080.9% | 15.0% | -25.9% | 57.1% | |
|
|---|
| Gross Margin | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% | 4.2% |
| EBITDA Margin | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% | 11.0% |
| SG&A, % of revenue | 41.5% | 35.7% | 35.8% | 37.5% | 34.9% | -2.7% |
| Net Income Margin | -13.7% | 9.4% | 16.0% | 6.4% | 18.0% | 11.6% |
| CAPEX, % of revenue | 1.4% | 0.8% | 1.8% | 1.0% | 1.5% | 0.5% |
|
|---|
| ROIC | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% | 8.4% |
| ROE | -12.0% | 9.6% | 18.5% | 8.1% | 23.6% | 15.5% |
| Net Debt/EBITDA | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x | 0.6x |
Progress Software Corporation ($PRGS) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 110 | 100 | 110 | 122 | | 22.5% | 0.4% | 2.8% | 4.6% |
| EBITDA | 38 | 35 | 43 | 33 | | 48.2% | 27.3% | 30.4% | 212.2% |
| Net Income | 21 | 17 | 24 | 18 | | 124.6% | 107.4% | 76.9% | - |
Balance Sheet
|
|---|
| Cash | 161 | 193 | 221 | 98 | | 51.2% | 87.1% | 77.9% | -36.5% |
| Short Term Debt | 19 | 21 | 23 | 25 | | 191.2% | 201.3% | 156.1% | 135.7% |
| Long Term Debt | 301 | 297 | 291 | 391 | | 179.0% | 1.9% | 1.1% | 37.8% |
Ratios
|
|---|
| Gross Margin | 86.4% | 85.8% | 86.6% | 85.1% | | 4.3% | 3.4% | 6.1% | 2.8% |
| EBITDA Margin | 35.0% | 35.0% | 39.0% | 26.8% | | 6.1% | 7.4% | 8.2% | 17.8% |
| Net Income Margin | 19.3% | 16.9% | 21.9% | 14.4% | | 8.8% | 8.7% | 9.2% | 18.5% |
Peers in Systems Software
Below we provide Progress Software Corporation benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | - | 56.5% | 51.3% | 59.2% | 42.4% |
| ServiceNow, Inc. ($NOW) | - | 38.0% | 36.0% | 32.6% | 30.6% |
| SailPoint Technologies Holdings, Inc. ($SAIL) | - | 40.5% | 33.8% | 15.9% | 26.6% |
| Rapid7, Inc. ($RPD) | - | 27.6% | 21.5% | 33.9% | 25.9% |
| Tenable Holdings, Inc. ($TENB) | - | 50.9% | 42.4% | 32.6% | 24.2% |
| |
|---|
| Median (23 companies) | 12.9% | 16.6% | 20.4% | 19.4% | 15.1% |
|---|
| Progress Software Corporation ($PRGS) | - | -1.9% | -0.1% | 4.1% | 7.0% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% |
| Varonis Systems, Inc. ($VRNS) | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% |
| Vmware, Inc. ($VMW) | 85.2% | - | 85.5% | 83.9% | 83.4% |
| Tenable Holdings, Inc. ($TENB) | 88.6% | 86.4% | 83.9% | 82.8% | 82.4% |
| CyberArk Software Ltd. ($CYBR) | 86.1% | 84.0% | 85.9% | 85.6% | 82.2% |
| |
|---|
| Median (23 companies) | 73.1% | 73.9% | 73.5% | 75.4% | 76.5% |
|---|
| Progress Software Corporation ($PRGS) | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% |
| Qualys, Inc. ($QLYS) | 23.8% | 25.1% | 28.4% | 36.5% | 40.3% |
| SolarWinds Corporation ($SWI) | -8.0% | 44.0% | 44.8% | 44.7% | 39.8% |
| Fortinet, Inc. ($FTNT) | 7.2% | 11.1% | 15.9% | 19.8% | 23.9% |
| Vmware, Inc. ($VMW) | 25.2% | - | 28.8% | 26.3% | 22.9% |
| |
|---|
| Median (23 companies) | -9.8% | -5.4% | -4.7% | -1.4% | -1.1% |
|---|
| Progress Software Corporation ($PRGS) | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% |
| ServiceNow, Inc. ($NOW) | 7.6% | 7.8% | 8.6% | 7.7% | 9.3% |
| Qualys, Inc. ($QLYS) | 11.7% | 16.4% | 8.2% | 8.6% | 8.3% |
| Zuora, Inc. ($ZUO) | 3.4% | 3.3% | 2.8% | 5.7% | 7.8% |
| Proofpoint, Inc. ($PFPT) | 9.2% | 9.0% | 4.1% | 4.0% | 6.9% |
| |
|---|
| Median (23 companies) | 2.1% | 2.4% | 2.6% | 3.8% | 3.4% |
|---|
| Progress Software Corporation ($PRGS) | 1.4% | 0.8% | 1.8% | 1.0% | 1.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Fortinet, Inc. ($FTNT) | 5.3% | 15.0% | 28.0% | 29.0% | 46.3% |
| Check Point Software Technologies Ltd. ($CHKP) | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% |
| Qualys, Inc. ($QLYS) | 13.7% | 12.3% | 14.3% | 18.7% | 22.0% |
| Vmware, Inc. ($VMW) | 15.9% | - | - | 18.1% | 19.6% |
| A10 Networks, Inc. ($ATEN) | -24.4% | -11.3% | -27.2% | -13.0% | 13.0% |
| |
|---|
| Median (23 companies) | 0.0% | -4.7% | -1.9% | -6.4% | -6.4% |
|---|
| Progress Software Corporation ($PRGS) | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SolarWinds Corporation ($SWI) | - | 6.2x | 4.1x | 4.4x | 4.1x |
| Proofpoint, Inc. ($PFPT) | - | - | - | -27.4x | 2.5x |
| Vmware, Inc. ($VMW) | -0.7x | - | -0.8x | 0.3x | 1.5x |
| CyberArk Software Ltd. ($CYBR) | -4.1x | -5.7x | -4.5x | -3.6x | 0.9x |
| ServiceNow, Inc. ($NOW) | - | 9.0x | 0.9x | 1.0x | 0.9x |
| |
|---|
| Median (11 companies) | -1.0x | -0.8x | -0.5x | -0.3x | -0.1x |
|---|
| Progress Software Corporation ($PRGS) | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x |
