Progress Software Corporation

Welcome to the Progress Software Corporation Q4 2021 earnings call. My name is Darrell, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star, then 1 on your touch-tone phone. I will now turn the call over to Mike Michike. Mike, you may begin. Okay.

Okay, thank you, Daryl. Good afternoon, everyone, and thanks for joining us for Progress Software's fiscal fourth quarter 2021 financial results conference call. With us today is Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger, Chief Financial Officer. Before we get started, I'd like to remind you that during this call, we will discuss our outlook for future financial and operating performance, corporate strategies, capital allocation, product plans, cost initiatives, our integration of KEMP, the impact of the COVID-19 pandemic on our business, and other information that might be considered forward-looking. This forward-looking information represents Progress Software's outlook and guidance only as of today and is subject to risks and uncertainties. For a description of the risk factors that may affect our results, please refer to our SEC filings in particular, the section captioned Risk Factors in our most recent Form 10Q. Progress Software assumes no obligation to update the forward-looking statements included in this call, whether a result of new developments or otherwise. Additionally, on this call, all the financial figures we discuss are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our financial results press release, which was issued after the market closed today and is also available on our website. This document contains the full details of our financial results for the fiscal fourth quarter of 2021 and the full fiscal year 2021, and I recommend you reference it for specific details. We also have prepared a presentation that contains supplemental data for our fourth quarter and full fiscal year results, providing highlights and additional financial metrics. Both the earnings release and this presentation are available in the Investor Relations section of our website at investors.progress.com. Today's conference call will be recorded in its entirety and a webcast replay will be available on the investor relations section of our website. With that, I'll now turn it over to you, Yogesh.

Thank you, Mike. Hello, everyone, and welcome. I'm very excited to be here today to discuss our results for the fourth quarter of fiscal 2021, the capstone to one of the best years ever for progress. I will also share some highlights of the full year and then talk about the success of our total growth strategy thus far. And I will wrap with our outlook going forward. So let's get started. Following three straight quarters in which we beat our estimates and raised guidance, we delivered another standout quarter. Our fourth quarter results exceeded guidance for all metrics and did so without the benefit of timing of revenue recognition or large one-time deals. The results reflect the continued success of our go-to-market strategy and its strong demand environment. Our Q4 and fiscal 2021 outperformance was evident across the board in virtually all of our product lines and across all geographies. We benefited from the generally strong economy as well as from the renewed IT budgets of our customers. For example, a global financial organization significantly expanded its use of Chef with a seven-figure expansion deal. And Paletic DevTools closed the largest deal in its history. Sitefinity Cloud continued to see increasing adoption, winning customers across industries such as manufacturing, retail, and finance. And WhatsApp Gold took advantage of opportunities presented by customers seeking alternative network monitoring solutions, enabling it to build on the positive momentum from prior quarters. This strong unprecedented demand and excellent sales execution, along with the contribution of Kemp, built on our growth trend for annualized recurring revenue, or ARR, which grew by over 12% this quarter. We exited the year with $486 million in ARR. And our net dollar retention rate was again above 100% as customers remained committed to our products and in many cases expanded their use. Another Q4 highlight was our acquisition of Kemp in November. Kemp provides us with the best application experience and load balancing products on the market. along with a long list of great customers and strengthens our already deep bench of talented engineers and salespeople. The KEMP integration is off to a great start and without disrupting KEMP's business, we achieved significant integration milestones in the first 30 days after closing. I'm confident that as with HipSwitch and Chef before it, KEMP will exceed our expectations on value creation for our shareholders. As excited as we are about KEMP, we're already looking forward to repeating the success of our total growth strategy by executing on our next opportunity to create and return meaningful value to our shareholders. Let me now share some details about what made FY21 such a strong and, in many ways, unprecedented year of success for Progress. Throughout fiscal 21, we saw a sustained level of increased demand for our products. Our sales and product teams seized the opportunity presented by this increased demand, enabling us to beat and raise guidance each quarter. Some of this demand was indeed pent up from COVID, but by offering the best products to develop, deploy, and manage business applications in an ever-changing business climate, we were positioned to capitalize on that demand. And this demand remains strong into the new year. Fiscal 2021 was indeed an extraordinary year. While OpenEdge remains our workhorse and the customers who use it are extremely loyal and sticky, we saw strength across all of our products with marquee wins for Chef, DataDirect, Sitefinity, WhatsApp Gold, Telerik DevTools, and others. None of this would have been possible without our amazing team. The lingering pandemic has been extremely challenging for everyone, but at Progress, our people have worked hard with dedication and commitment to excel in the face of ongoing adversity. The talented Progress team remains highly motivated and highly effective, and I could not be prouder of them for their performance in 2021. This dedication translated to our being recognized as an employer of choice around the globe. For the first time in our history, Forbes magazine named Progress as one of America's best mid-sized employers. And again, named us the best company to work for in Bulgaria, where we have nearly 500 employees. The Boston Globe and the Boston Business Journal both put Progress on their exclusive best places to work list. And he again won two CDs in the 2021 American Business Awards, including a gold award for our corporate social responsibility program. Let me now reflect a bit on what we have accomplished since we launched our total growth strategy three years ago. We launched this ambitious strategy with the goal of increasing shareholder value through a highly disciplined M&A strategy. At the same time, we committed to strengthening our highly profitable core businesses while remaining intensely focused on operational excellence with the objective of doubling our revenues in five years. To date, I had a plan on executing our total growth strategy. Three years into it, our revenue is up approximately 60%, and EPS has increased nearly 70%. When we launched the strategy, our target was to sustain operating margins above 35%, with the goal of increasing margins as we scaled up our business through acquisitions. We have continued to exceed 35% margins since then, including achieving operating margins of 40% in fiscal 2020, and 41% in FY21. Both of these years were aided by COVID's impact on spending, but we're still forecasting margins of 39% for fiscal 2022. There aren't many software companies who are able to balance the twin goals of growing revenue and doing so profitably as effectively as we have shown. In addition to growing our revenues and margins, Our acquisitions have also made our product portfolio even more robust. Today, we are proud to provide the best products to develop, deploy, and manage high-impact applications and experiences. What's Up Gold from the Ipswich acquisition and Flowmon and Loadmaster, which came from the Kemp acquisition, are the best-in-class offerings to manage and ensure the delivery of application experiences. They provide full-stack observability, and automate optimum performance of modern applications. Chef is the leading product for DevOps and DevSecOps, being used by a growing number of enterprise customers to secure and automate the deployment of their cloud and on-prem infrastructures. And the secure and highly performing data movement capability of Ipswich's MoveIt complement the high-performance, secure, and reliable data access capabilities of our data direct office, enabling customers to access and move data from anywhere to anywhere. Our Telerik and Kendo UI products continue to innovate to lead the market in making it easy for developers to build amazing user experiences. And OpenEdge continues to power business applications of more than 1,500 ISVs and thousands of other enterprises. Our product portfolio has never been stronger or more relevant than it is today. A key to our total growth strategy remains acquiring great businesses at the right price. We're extremely disciplined in our M&A strategy. Returns on our two prior transactions exceeded even our most optimistic projections and offer proof points that we can deliver returns that significantly exceed our cost of capital. And we're well on our way with Kemp to achieving the same results. The M&A market remains very promising, and we're actively seeking opportunities to put capital to work even in the current hyper-competitive market. Our corporate development team continues to vet dozens of candidates each quarter. We believe the best way to create solid returns for shareholders is to keep making disciplined acquisitions while at the same time leveraging operational synergies among the products, technology, and customers we acquire. Now, moving on to fiscal year 22, we expect demand to continue to be robust. We're off to a good start as our customers continue to invest in their existing progress infrastructure and have the willingness and the capacity to do so. As always, we are grateful to our loyal customers, to our shareholders, and to our employees for their hard work and dedication, especially in these difficult times. As Anthony will explain, we remain very optimistic about our future prospects. With that, I will turn it over to Anthony for the financial overview and our forward outlook. Anthony?