Q3 2021 Progress Software Corp Earnings Call
[music].
Welcome to the progress software Corporation.
Q3, 2021 earnings call. My name is Daryl and I will 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 stack that during the question and answer section. If you have a question. Please press Star then one on your Touchtone phone.
Now I'll turn the call over to Mike Mitchell K Mike.
You may begin.
Great. Thank you Daryl.
Good afternoon, everyone and thanks for joining us for progress Software's third quarter of fiscal 2021 financial results Conference call.
Today, as Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger, Chief Financial Officer.
Before we get started I'd like to you to.
Remind you that during this call we will discuss our outlook for future financial operating performance corporate strategies product plans cost initiatives or acquisition of camp.
The impact of Covid, the COVID-19 pandemic on our business and other information that might be considered forward looking.
Forward looking information represents progress software's outlook and guidance.
Like to only as of today and are subject to risks and uncertainties.
Ascription of the risk factors that may affect our results. Please refer to the recent SEC filings in particular, the section captioned risk factors caption risk factors in our most recent Form 10-K progress software assumes no obligation to update forward looking statements.
<unk> alluded 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.
<unk> contains the full details of our financial results for the fiscal third quarter of 2021, and I recommend you reference it for specific details.
We have also prepared a presentation that contains supplemental data for our third quarter 2021 results, providing highlights and additional financial metrics.
Strict metrics.
Both the earnings release and this presentation are available in the Investor Relations section of our website at investors Dot progress Dot com.
<unk> conference call will be recorded in its entirety and will be available via replay on the Investor Relations section of our website, so with that I'll now turn it over to Yogesh.
Thank you, Mike Hello, everyone and welcome.
I'm delighted to announce two very positive news items today.
We delivered yet another outstanding quarter, driven by strong demand across the board for our products.
Bind with excellent execution by our teams, which resulted in significant outperformance.
In both the top and the bottom line.
We see the current demand environment for off road is continuing which is why for the third time this year.
We are again raising guidance for the full year.
The second bit of exciting news is our acquisition of <unk> technologies.
Which extends our total growth strategy.
With this acquisition.
Which is offered in as many years.
We'll be that much closer to meeting our goal of doubling our size in five years.
Most importantly, this deal checks all the boxes of our disciplined acquisition criteria.
It's Anthony will detail later.
And we will accomplish it in the most competitive environment I have seen in many years as.
As the software executives.
As you are aware.
Mission is to be the provider of the best products to develop deploy and manage high impact business.
Korea, and a key aspect of managing these application is to ensure high performance and always on availability for an amazing and user experience.
Ken is a leading provider of products that address this need.
Ken product monitor application performance and optimized workloads.
Across servers in the cloud and on Prem.
To ensure high performance and availability.
These products leverage machine learning to look for anomalies and detect it professionals before end users that impacted.
These capabilities complement progress offerings, such as Watson EMR.
Fifth leader and easy to use network management, which we acquired with Ipswich.
Together, we will offer the best application experience solutions to our customers.
<unk> has a strong two tier go to market channel that provides global reach potential thousands of smbs.
Mark obviously with merger and leverage this channel for some of our other products as well.
This focus on <unk> go to market channels has enabled him to win a large and growing set of customers ranging from mid size to some of the largest enterprises in the world.
Who rely on its products to deliver.
And profit application experiences.
Our broader product portfolio and financial strength will enable us to serve these channel partners better.
The cultures of progress on camp are also very aligned.
Both organizations have a strong focus on the success of our customers and.
And with that.
Great and solve the pressing needs of the market.
I look forward to bringing the <unk> team on board once the acquisition complete.
And together driving to even greater success.
Financially this acquisition meets all our disciplined criteria and will again result in meaningful value creation for.
Holders.
Despite the hyper competitive M&A landscape.
We have demonstrated that we can execute our corporate growth strategy without compromising our disciplined approach.
For the third year in a row, we will have completed an acquisition that adds significant revenue earnings and cash.
Harsha when this 70 plus million dollars revenue deal closes.
The 71 day, it will be over $600 million.
With excellent operating margins well over our baseline of 35% and will continue to generate cash flow margins over 30%.
This places us well on our five vehicles to double the size.
Cash flow.
With an even greater increase in EPS and cash flow.
We expect this transaction to close around the end of October.
Once the regulatory and customary closing conditions are satisfied.
We also see other M&A opportunities in our pipeline.
Further advanced our total growth strategy.
While our focus for the immediate future will be on the closing and integration of Kim.
Our ongoing efforts to enhance our sourcing capabilities and to strengthen the depth of our M&A readiness have pause.
<unk> as well to tackle the next opportunity.
That can we will remain disciplined in our approach as campus further evidence.
That our total growth strategy is succeeding in building sustainable long term shareholder value.
As you May recall disciplined accretive M&A is the first of three pillars of our total growth strategy.
The second pillar is to keep our core business strong and increased customer retention.
We achieved this by continuing to innovate keeping our product portfolio current by investing in R&D and by focusing on customer relationship management.
And the third pillar is operational excellence.
Pardon.
That we have also continued to execute on these two pillars as evidenced by the ongoing strength of our business.
So, let's talk a bit about our Q3 results.
And the market for our products and our expectations.
We had an outstanding third quarter rollout.
While our business outperformed on every metric.
Including revenue.
Operating income earnings per cash earnings per share and cash flow.
Our recurring revenue continues to steadily grow.
And as organically, 4% higher than last year.
And our overall net retention rate again exceeded 100%.
This outperformance is.
Brick by two important factors.
First with the continuing emergence of the global economy from Covid the.
The demand for our products across the board continues to be strong.
As a leader in the overall Dev ops cycle with the best products to develop deploy and manage high impact business applications.
We are winning new customers.
Seeing existing customers to recommit to our offerings.
And expand their usage.
Based on our performance in the first three quarters and the continuing strong appetite for our solutions across our product portfolio. We are very confident in raising our full year guidance yet again.
The second factor driving our results is the performance of our team.
Our investments in R&D, our sales marketing and relationship management efforts are.
Our ability to address customer needs.
Our official our efficient operational execution make for a potent combination.
We exceeded our revenue expectations and we did so while operating more efficiently than expected as well.
Leading to a very impressive outperformance of our bottom line.
We now expect our full year EPS to be over 20 tire.
Our significant increases.
He'd been the topline and bottom line expectations reflect our confidence in the ongoing market demand and our team.
We continue to demonstrate that we can execute well on our business source and execute acquisitions in a tough and extremely competitive acquisitions market.
And integrate efficiently.
At great value for our shareholders to our total growth strategy.
When I joined progress nearly five years ago I could not have imagined that we would be as strong as we are today and I'm excited about our prospects ahead.
Now I'd like to turn this over to Anthony to take you through the details of our performance.
Our guidance as well as details on our <unk> acquisition.
Anthony.
Great. Thanks, Yogesh and good afternoon, everyone. Thanks for joining our call.
As Yogesh noted the third quarter was exceptionally strong.
And based on that strength.
<unk> and our continued confidence in the business.
We're raising our full year outlook for revenue and earnings per share for the third time this year.
In addition to outstanding financial results. We're also very excited about the acquisition of camp, which we also just announced.
Camp is one more step in our.
<unk> growth strategy.
It meets all our disciplined financial criteria and brings with it an outstanding team and established enterprise grade set of products and a phenomenal customer base.
I'll speak more about <unk> in a bit.
But starting with our Q3 financials.
Our total <unk> for the quarter was $158.0 million.
Which represents 38% year over year growth.
And it's approximately $22 million above the midpoint of the Q3 guidance range, we provided in June.
Let me take a minute to discuss.
Reps the two primary elements driving the upside in our Q3 revenue performance.
And I would encourage you all to have a look at the presentation that Mike referenced earlier, which includes supplemental data and does a good job of illustrating some of the following points.
First.
Approximate.
<unk> $12 million of the over performance relative to our Q3 guidance was driven by better than expected customer and partner demand for our solutions.
This improved environment resulted in better than expected customer retention.
Larger than expected.
<unk> opportunities with existing customers.
And in some cases.
Longer than expected contract durations as customers seem more willing to commit to our solutions for the long run.
This $12 million of over performance relative to our guidance is reflected across.
It up steadily all product lines.
Most notably data direct open edge Dev tools and our it switch products.
The second element of our revenue over performance was the timing of two large contract renewals.
In our June outlook, we had.
<unk> cast these renewals to occur in the fourth quarter with.
With an expected revenue contribution of approximately $10 million.
Both of these renewals closed earlier than forecasted.
And in doing so accelerated the recognition of $10 million of revenue from the fourth quarter into.
<unk> <unk>.
This timing element has no impact on our full year revenue outlook, which is being raised for the third consecutive quarter.
I'll speak more about the outlook in a bit.
But for another level of detail on our Q3 top line performance we.
A R. R provides an informative view.
<unk> at the end of Q3 was $444 million.
Representing approximately 4% organic growth on a year over year basis.
The growth in <unk> is a reasonable reflection of our.
We believe performance in Q3.
And was bolstered by net retention rates that exceeded 100% for the second consecutive quarter.
In the past we've talked about the investments we've made in our products, which are aimed at improving the customer experience.
And our net retention rates in Q.
Three illustrate the continuing benefit of those investments.
Turning now to expenses.
Our total costs and operating expenses were $85.0 million for the quarter.
An increase of $24.0 million compared to Q3 of 2020.
The year over year increase is the result of two primary factors.
First is the addition of chef to our business, which makes up more than half of the year over year increase.
And second our variable incentive costs associated with our topline over performance.
Operating income was 70.
$3.0 million for the quarter.
Up up approximately 51% compared to Q3 of 2020.
Our operating margin was approximately 47% compared to 42% in the year ago quarter.
Our revenue outperformance and the timing of revenue mentioned previously.
<unk> were the primary contributors to this unusually strong performance in the quarter.
Okay.
Turning to the bottom line.
Our earnings per share of $19.0 for the quarter was 35 above the high end of our guidance range and approximately 51% above our ERM.
Earnings per share of 78 in the year ago quarter.
Moving on to a few balance sheet and cash flow metrics for the quarter with cash and short term investments of $384 million and approximately $100 million in untapped capacity under our revolving line of credit for total liquidity.
$484 million.
We intend to utilize a portion of this liquidity.
From the acquisition of camp during Q4.
DSO for the quarter was 54 days, which.
Which is elevated somewhat due to large deals book towards the end of the quarter. However, it's still very.
Much in line with our historical averages.
Deferred revenue was $203 million at the end of the third quarter.
Up slightly from the second quarter, reflecting our strong Q3 top line performance.
Adjusted free cash flow was $35 million for the quarter up five.
$5 million or 16% from the year ago quarter.
And we did not repurchase any stock during the third quarter as a result at the end of Q.
We have $155 million remaining under our current share repurchase authorization and.
And we're not anticipating any additional share repurchases in the fourth quarter.
Turning now to our proposed acquisition of <unk>, we expect to complete the acquisition during Q4 and will fund the $258 million purchase price with cash on hand.
In terms of financial profile Kemp is approximately $70 million in revenue with operating margins in the low 20% range.
We expect the integration of <unk> to be completed in nine to 12 months from closing.
With cost synergies from our integration driving attempts operating margins above 40%.
Turning to our outlook.
Starting with the full year 2021.
We are increase.
Our revenue guidance to be between $1100 million.
This includes a contribution of $4 million to $5 million from camp in the fourth quarter.
Excluding the <unk> contribution our revenue guidance of 544% to.
<unk> hundred 47 million.
<unk> represents an increase of $12 million to $15 million over the outlook we provided in June.
We are increasing our outlook for operating margin for the year to approximately 40%.
We are increasing our outlook for adjusted free cash.
Hello can be between $340 million.
And we are increasing our outlook for earnings per share to be between $71.0
70 <unk>.
Our guidance for full year, EPS assumes a tax rate of approximately 20%.
And approximately 45 million shares outstanding.
For the fourth quarter of 2021, we expect revenue.
Between $272 million.
And as noted earlier this includes a contribution of approximately $4 million to $5 million from camp.
Earnings per share are expected to be between 73, and 75 per share, including the impact of <unk> during the quarter.
Which we anticipate being slightly positive.
In closing, we're thrilled with our financial performance and our outlook for the balance of 2021.
And we're also very pleased to be reached another milestone in the execution of our total growth strategy with the pending acquisition of camp.
With that I'd like to open the call for Q&A.
And if anyone has a question you can press star.
And then one on your Touchtone phone once again if.
Question.
Star then one on your Touchtone phone.
And our first question comes from Ken Wong from Guggenheim Go ahead, Ken.
Great. Thanks, a lot guys and really solid quarter here a lot lots lots to dig into maybe first on camp.
If you have about $70 million of revenue when I looked on the slide deck. It looks like you also have $70 million for camp in 'twenty two.
That just kind of assuming all the write downs are embedded in there and or is this a matter of just the business was flat and you guys will somehow get it to get it to reaccelerate.
You mentioned that we may just be referring to the to the non-GAAP numbers, Ken So I think it's.
Uh huh.
Approximately $70 million. This year, we would expect going into next year that the.
The business is probably a low single digit grower and still sort of in that 70, low $70 million type range.
Got it okay perfect.
And then as I think about that ADC business.
Some of the names that come to mind would be like a citrix and F. Five just wondering kind of how loadmaster kind of stacks up against the peers is there a certain areas protocols, where where you guys.
Hey.
<unk> advantages in Azure incorporated into the broader progress business I guess anything that would stand out from for many.
Benefits to that to that incorporation.
So Ken.
We actually find that.
Yeah, Youre right folks.
I'd say five or are some of the other folks in this in this market.
But what we found is that from a product perspective.
Right.
It is a phenomenal product that can bring to us. So one of the interesting things that we see is.
Looks like that with our broader reach and being able to get the product out there I think we can do a better job of competing.
With this product in the market.
You mentioned.
You really pointed out a really good point about about how does it fit with the rest of the product site until we have what's the goal that we had acquired with this switch.
Which does network monitoring and in the combination of the load balancing and optimizing workloads.
With network monitoring and watching what's going on in infrastructure with <unk>, which is another product that can pass which is around monitoring the application level performance and application.
Net workflows all of that put together.
This wonderful solution two to track monitor and.
And optimize the performance and the experience that end users get in terms of availability and performance from that business application and then of course, there is an opportunity.
And potentially in the future to also take the camp products and based on what is needed to drive infrastructure change.
To optimize things even further.
Leverage chef to make changes to the infrastructure beyond just load balancing so I think there are multiple.
With the multiple touch points, Ken that you can bring to bear we are really excited about about their product technology offerings. They are truly market leading.
And what we've discovered is that even in very large scale competitive situations.
They win remarkably well in fact one.
Multiple one of the things that happened is about that.
I think this is about less than two years ago actually.
<unk> ended up having a very strong building, creating a very strong.
Chandler partnership relationship with EMC, because EMC recognize that this was a great product that actually.
Could sit in front of Emc's object storage solution, because they need something to balance.
The activity that goes on across storage systems as well, so so it's actually a product and.
And therefore now EMC results the product as a companion product to their object storage business. So.
Actually the opposite.
Really market opportunities to compete and win with this product and the technology is extremely sound.
Got it great. Thanks, a lot I'll jump back in the queue Im sure Theres, a theres a ton of questions on a lot of topics today.
Thank you Ken.
Yeah.
And our next question comes.
I think the from.
Hi.
Ron from Oppenheimer go ahead.
Thanks, Hey, guys, Congrats a great quarter and a great acquisition.
Kept for some time and I think you've got a fantastic asset over there maybe I'll start with that Yogesh.
Maybe you can talk.
Yeah, It's great maybe you could talk about the go to market overlap like Yeah. I don't know if you had a chance to map out channels and partners are yours versus theirs to think about how much is incremental versus overlapping.
I think what we have what we have discovered is that.
The vast majority.
How about the channels don't have overlap I mean, obviously.
There's always some overlap rate can I don't want to imply that there is more that but but they are much more.
Focus on channel for their all their go to market efforts in fact, I believe 100% of their business is through the two tier channel model.
Even though we have a good chunk of our Ipswich business through the <unk> channel.
We don't really that was the PPA channel beyond that.
So I think that there is opportunity to continue to help.
To be successful in that channel both from the strength of our portfolio and our ability to support.
Our nurse.
Probably at a better level than than a company the size and scale of campaign. So so we feel really good about that opportunity, but we feel really good about that aspect in terms of.
Go to market as I said, even though it does interact with prospects directly they actually do all the business through channels.
Our top partners so.
Is actually a very complementary go to market model.
Got it got it Okay cool and then Anthony a couple for you.
First on the outlook for the fourth quarter, you really increase the outlook only by $5.0 million.
Come on shortly you can do better.
Panel products following the performance in this third quarter, no, especially given that first quarter as of year end quarter.
It is.
Come on it.
My my objective is to under promise and over deliver so yes, I think we're we've got a good amount of confidence in the business right now obviously Q.
And then they had a great quarter.
We I think we've got enough confidence to take Q4 up a little bit.
And hopefully I think we're always looking to put numbers out that we can be very certain we can we can achieve and hopefully exceed so we feel good about how we're positioned.
Okay very good maybe a last one for me just.
Three we're sure I understand your commentary with regards to synergies with Cam. If you talked about nine to 10, 9% to 12 months to complete the integration, but is that also the timeline to get the margins from the low twenty's to over 40.
Yeah, I think that's exactly the right way to think about it.
Make that.
In the earlier quarters.
The camp margins would be lower.
And in the later quarters, we would expect the margin profile to get up into the <unk>, so it'll be it'll be a.
Gradual increase over that nine to 12 months as the integration activities occur.
And then let's say by Q4 of next year as we exit the year, we'd expect expect is integrated into our operating model running at an operating margin of better than 40%.
That's how the business is going to look for us going forward got it very good congrats guys. Good luck keep it up.
Thank you.
And our next question comes from Tyler Radke from Citigroup go ahead Tyler.
Hi, This is Brian Kim on for Tyler Radke. Thank you for taking my question.
You've pointed out earlier on the call about.
The M&A environment being the most competitive that you've seen.
Our software executive I was hoping to get a little more color on that and how youre thinking about the M&A pipeline going forward and how you can balance being active put out copper I think that disciplined approach.
Absolutely. Thank you.
Seen other folks out there looking to buy companies private equity is very active strategic trying to be very active.
What we have done is we have built a very strong team.
That is clearly.
Exceptional when it comes to identifying and sourcing opportunities.
And it's also very focused on finding opportunities that meet our potential goals right. So I think that's really the.
The key.
A key thing and then we also have built within progress.
A phenomenal team to actually execute.
Unity on these deals and integrate them. So it's a both a sourcing deal.
Our deal sourcing team as well as an integration team and that combined with the fact that as business comes to market. We do a really really good job of.
Quickly narrowing that down to the ones that are truly interesting and that truly makes.
<unk> that fit our size profile that fit the profile of <unk>.
Being businesses with solid recurring revenue and good retention rates.
Basically our infrastructure software.
We find assets and we're continuing to find assets in.
The business can identify.
Makes sense and identify opportunities to optimize sometimes more than somebody else can and and then.
Pete for them and chemical is a competitive situation and I believe we have done a deal that is going to return wonderful rewards to our shareholders.
And I think to me the.
Five we are able to check off all of our financial criteria. The fact that it fits dramatically well with our product portfolio and going into the market with a better solution on both sides combined I think it is.
This really demonstrates our ability to execute so.
The market is a hyper competitive.
I agree but at the same time, we are seeing way more deals every quarter than we did even four quarters ago. When we were seeing over 50 deals a quarter of them. So we are actually.
We actually see a very very large numbers of deals every quarter, where we thoughtfully with a deliberate and we look for the right ones.
Fact that great. Thank you.
And then in some of the other companies that we cover that have this infrastructure and develop it or developer oriented models.
There has been tremendous tailwind that in some cases, even seeing inflicting demand trends so far.
Wondering even though the MSA based our total growth strategy are executed.
Very well on is there any consideration to invest more either on the product or distribution to extract more of this industry tailwind.
We do actually like we.
Monitor that all the time and and we have actually invested in a whole host of.
King.
Over the last few years.
Our revenue, which actually was declining.
Four years ago is today as you saw we have organic growth.
Our year over year right. So we are seeing some change now we have a very large portfolio of products.
Our problem of off road products.
Products are not.
Not competitive in terms of winning new customers, even though they are yes.
<unk> comes to delivering value to the customers that use them and we keep those products current and we keep them.
Relevant in the modern world So.
Thank all of you know given.
So I've got a quick characteristics of our product.
We are continuing to invest in them appropriately and by the way. The other part is that we are also committed to a very high margin and a very high cash flow generation.
For our investors and so.
Given that most of that as well and we look for opportunities, we invest where we believe we can get good returns.
And we feel that this is the right strategy. The total growth strategy is the right strategy.
For our investors for our shareholders given what our business is today.
Okay. Thank you so much.
Thank you.
And our next question comes from.
Anya <unk> from from Sidoti go ahead.
Hi, everyone can you hear me.
Oh, yes, yes.
Thank you for taking my question and congratulations on that.
<unk>.
The position of Ken.
No.
Okay.
You had new customers coming in.
And then how should we think about.
What kind of customers are the us and how should we think about the potential for further organic growth then in India in your model.
Yeah. Thank you great question on yet.
We are winning new customers across a wide range of our product portfolio.
For example of course chef continues to win new customers.
It is a very much a relevant product in todays world when it comes to Dev ops and desktop ops.
We are winning new customers with with our Whatsapp gold and move it products, which are a secure file transfer and network performance monitoring and network management.
But to win new customers with <unk>, which is used by.
<unk>.
Enterprises around the globe and organizations around the globe to do.
Light delightful web and online experiences, we're winning new customers with our Dev tools products, which are used for building phenomenon. The new wonderful front ends to applications and making those user experience is truly engaging so it's across the board, we're winning new customers.
Uh huh.
And you don't.
<unk>.
Second is to continue right. It is.
Obviously.
It is it is gratifying to see the demand for our products and it is.
It is exciting to be able to continue to win these new customers and and solve problems for.
<unk>.
And continue to make our business stronger as we move forward.
Okay. Thank you for that color and then I'm also curious I know you've touched a little bit on the M&A pipeline.
Is that how did that come about and how when did you start looking at that and how long part of that negotiation.
All of them with them.
Yes.
The time it was a competitive process at some point.
Uh huh.
The company decided and the investors of <unk> decided that they wanted to.
Find a home for the company that would be.
Potentially a better outcome for them.
I've talked before us better outcome for the company as a whole camping home and so the.
I believe we first started looking at it about four months ago, usually these things take three to four months.
But thats the initial steps.
And then.
Yeah.
We are really excited that we are where we are that we we were able to.
Recognize the opportunity that we were able to identify the value that it has we were able to.
Competitively win the deal at a valuation that is.
As I've said before.
We are off all the boxes for us.
And it makes all of our financial criteria. So.
It is it is that that basically is really the most interesting part about it is how do you make it work can you identify the opportunity can you identify what youre going to do with it can you planned it out.
We always do a puddle job of that.
Secondly plan out the go forward plan before we sign it isn't as though we basically do the deal and then figure out what we're going to do with the business afterwards, it's actually.
Total analysis of that and I'm really proud and happy of the work that the team has done and if you notice on here.
The first and second deal.
You're asking about a year and a half to do that this year from chef to this has been about just about a year.
And I think we're getting better and I think we're getting faster and I believe I believe that we can continue to be competitive and find additional opportunities as we go forward.
It sounds like exciting times ahead I wanted to ask a question about the talent.
With population I'm sure you're also suffering from the industry wide shortage of housing.
Affected by math and how do you work around that.
So I think you know.
That's a really good question I think to me right talent retention is so key in today's day and age right.
That was actually have been really happy with the way.
We have over the last 18 months two years worked very closely with our organization throughout.
Yeah, we have now just in the last nine months one.
I think I've mentioned this before.
Being selected by.
We exited one of the best mid sized companies to work for in the U S with <unk>.
The 170 <unk>.
170 out of about 15000 companies.
We were ranked number one by Forbes in Bulgaria. The first number one for all employers in Bulgaria, and as you know we have.
Bye for Oregon population in Bulgaria.
All of our employees.
Boston Business Journal recently.
This is the best place to work and these are all awards based on how employees feel about us our employee engagement is running at least 10 points higher than the industry norm.
Sure.
I think all of this.
Really points to the fact that we have been very very thoughtful about what we need to do for employees and at the same time that I think the employees recognize what we have done for them and so because of all this I think first of all be need for us to go look.
Employees is not as high as maybe some other companies that are seeing greater China. So I think that's the first part, but the second part you're right. It is a competitive landscape.
And what we do is we look for talent and just like everybody else does.
<unk>.
And it is not easy to find great people, but we are finding great people and we are bringing them on board.
Look for and what.
I think helps them too.
The progress are several things we have phenomenal products, we invest in those products, we have phenomenal customers, we invest in making sure that those customers are successful. So whether it is a go to market team or whether it is the product and engineering team. They know that the company is behind them.
Board has success right if the Salesforce and note that if they sell a product.
We will make sure that that customer would be happy and the Salesforce and will therefore, not hear about it in the future and similarly, the product folks know that they get to work on exciting products and exciting things and move the ball forward. So across the board we are actually finding talent.
For that we look for them around the globe. That's another advantage. We have we don't have to limit ourselves to two one geography or one location.
So we continue to do well so long answer to your question, but it is a it is a competitive landscape on talent.
And we are not that its easy.
But we are doing well.
Okay, well, congratulations again and thank you for taking my question.
Thank you very much.
And we have no more questions at this time I would like to turn the call back to Yogesh for closing comments.
Thank you Darryl.
Thank you everyone for joining our call today.
I am extremely proud of our outstanding performance in the third quarter and very pleased to share our confidence in the outlook for the rest of fiscal 2021.
Especially proud of the whole progress team and their work on our acquisition of Tampa as well.
And we believe this.
Yet. Another example of our execution of our total growth strategy.
It will add significant size and scale to our business and it points us to a promising 2022.
I look forward to talking to all of you soon thanks again.
Bye bye.
And thank you ladies and gentlemen, this concludes today's.
<unk>. Thank you for participating you may now disconnect.
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Welcome to the progress Software Corporation Q3, 2021 earnings call. My name is Daryl and I will 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 sector. During the question and answer session. If you have a question. Please press Star then one on your Touchtone phone I will now turn.
The call over to Mike Mitchell K, Mike you may begin.
Great. Thank you Darryl.
Good afternoon, everyone and thanks for joining us for progress Software's third quarter of fiscal 2021 financial results Conference call.
Today, as Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger, Chief Financial Officer.
Before we get started I'd like to you to like to remind you that during this call. We will discuss our outlook for future financial operating performance corporate strategies product plans cost initiatives our acquisition of <unk>.
Pact of Covid, the COVID-19 pandemic on our business and other information that might be considered forward looking this forward looking information represents.
Represents progress software's outlook and guidance only as of today and are subject to risks and uncertainties.
For a description of the risk factors that may affect our results. Please refer to the recent SEC filings in particular, the section captioned risk factors caption risk factors in our most recent Form 10-K progress software assumes.
No obligation to update 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.
Document contains the full details of our financial results for the fiscal third quarter of 2021, and I recommend you reference it for specific details.
We have also prepared a presentation that contains supplemental data for our third quarter 2021 results.
Highlights and additional financial metrics metrics.
Both the earnings release and this presentation are available on the Investor Relations section of our website at investors Dot progress Dot com.
Today's conference call will be recorded in its entirety and will be available via replay on the Investor Relations section of our website.
So with that I'll now turn it over to Yogesh.
Right.
Thank you, Mike Hello, everyone and welcome.
I'm delighted to announce two very positive news items today.
First we delivered yet another outstanding quarter, driven by strong demand across the board for our products combined with excellent execution by our teams.
Which resulted in significant outperformance on both the top and the bottom line.
We see the current demand environment for off road is continuing which is why for the third time this year.
We are again raising guidance for the full year.
The second bit of exciting news.
Yogesh position of technologies.
Extents, our total growth strategy.
With this acquisition.
As I put it in as many years.
We wouldn't be that much closer to meeting our goal of doubling our size in five years.
Most importantly, this deal checks all the boxes.
Is that all of our disciplined acquisition criteria as Anthony will detail later.
And we will accomplish it in the most competitive environment.
I have seen in many years as.
As the software executives.
As you are aware.
Mission is to be the provider of the best products to develop.
Says boy and manage high impact business applications and.
A key aspect of managing these applications is to ensure high performance and always on availability.
And amazing and user experience.
Ken is a leading provider of products that address this need.
Kent product monitoring.
Monitor application performance and optimize workloads across servers in the cloud and on Prem to ensure high performance and availability.
These products leverage machine learning to look for anomalies and detect it professionals before end users that impacted.
These capabilities.
Complement progress offerings, such as Whatsapp go in March.
Neither an easy to use network management, which we acquired with Ipswich.
Together, we will offer the best application expedient solutions to our customers.
GAAP has a strong go to market channel.
It provides globally.
Bleach, but tens of thousands of Smbs and.
And promise with Russia and leverage this channel for some of our other products as well.
This focus on tier go to market channels has enabled him to win a large and growing set of customers ranging from mid size to some of the largest enterprises in the.
A world who rely on its products to deliver great application experiences.
Our broadened product portfolio and financial extent women will enable us to serve these channel partners better.
The culture is the progress on GAAP are also very alike.
Both organizations have a strong focus.
<unk> of our customers and.
And we dare to innovate and solve the pressing needs of the market.
I look forward to bringing the <unk> team on board once the acquisition complete and together driving to even greater success.
Financially this acquisition meets all our disciplined criteria and will again.
<unk> result in meaningful value creation for our shareholders.
Despite the hyper competitive M&A landscape.
We have demonstrated that we can execute our corporate growth strategy without compromising our disciplined approach.
For the third year in a row, we will have completed an acquisition that adds.
Our significant revenue earnings and cash flow.
When this 70 plus million dollars revenue deal closes.
The 71 day, it will be over $600 million.
With excellent operating margins well over our baseline of 35% and will continue to generate cash flow margins over 30%.
This places us well on our five year goal to double the size of our business with an even greater increase in EPS and cash flow.
We expect this transaction to close around the end of October once the regulatory and customary closing conditions are satisfied.
We also see other M&A opportunities in our pipeline that can further advance our total growth strategy.
While our focus for the immediate future, we will be on the closing and integration of <unk>.
Our ongoing efforts to enhance our sourcing capabilities and to strengthen the depth of our M&A readiness have.
Positioning us well to tackle the next opportunity.
We will remain disciplined in our approach as campus further evidence.
That our total growth strategy is succeeding in building sustainable long term shareholder value.
As you may recall disciplined accretive M&A.
Is the first of three pillars of our total growth strategy.
The second pillar is to keep our core business strong and increased customer retention.
We achieved this by continuing to innovate keeping our product portfolio current by investing in R&D and by focusing on customer relationship management.
And the third pillar is operational excellence.
We're proud that we have also continued to execute on these two pillars as evidenced by the ongoing strength of our business.
So let's talk a bit about our Q3 2000.
And the market for our products and our expectations.
We had an outstanding.
The third quarter.
Where our business outperformed on every metric includes.
Including revenue operating income earnings per cash flow earnings per share and cash flow.
Our recurring revenue continues to steadily grow and as organically, 4% higher than last year.
And our overall net retention rate.
Again exceeded 100%.
This outperformance is being driven by two important factors.
First with the continuing emergence of the global economy from Covid.
The demand for our products across the board continues to be strong.
As a leader in the overall debt off cycle with.
With the best products to develop deploy and manage high impact business applications.
We are winning new customers.
Seeing existing customers to recommit to our offerings and expand their usage.
Based on our performance in the first three quarters and the continuing strong appetite for our solutions across our product portfolio.
Folio, we are very confident in raising our full year guidance yet again.
The second factor driving our results is the performance of our teams.
Our investments in R&D, our sales marketing and relationship management efforts are.
Our ability to address customer needs.
And our official.
Our efficient operational execution make for a potent combination.
We greatly exceeded our revenue expectations and we did so while operating more efficiently than expected as well.
Leading to a very impressive outperformance of our bottom line.
We now expect our full year EPS to.
To be over 20 tire.
Our significant increases in the topline and bottom line expectations reflect our confidence in the ongoing market demand and our team.
We continue to demonstrate that we can execute well on our business.
Source and execute acquisitions in.
A tough and extremely competitive acquisition market.
And integrate efficiently to create great value for our shareholders to our total growth strategy.
When I joined progress nearly five years ago I could not have imagined that we would be as strong as we are today and I am excited about our prospects ahead.
Now I'd like to turn this over to Anthony to take you through the details of our performance our guidance as well as details on our camp acquisition.
Anthony.
Great. Thanks, Yogesh and good afternoon, everyone. Thanks for joining our call.
As Yogesh noted.
Did the third quarter was exceptionally strong.
And based on that strength and our continued confidence in the business.
We're raising our full year outlook for revenue and earnings per share for the third time this year.
In addition to outstanding financial results. We're also very excited about the acquisition.
Physician Perm, which we also just announced camp.
<unk> is one more step in our total growth strategy.
It meets all our disciplined financial criteria and brings with it an outstanding team.
An established enterprise grade set of products and a phenomenal customer base.
Ill.
Speak more about <unk> in a bit.
But starting with our Q3 financials revenue for the quarter was $158.0 million.
Which represents 38% year over year growth.
And it's approximately $22 million above the midpoint of the Q3 guidance.
Guidance range, we provided in June.
Let me take a minute to discuss the two primary elements driving the upside in our Q3 revenue performance.
And I would encourage you all to have a look at the presentation that Mike referenced earlier, which includes supplemental data and does a good job.
Illustrating some of the following points.
First approximately $12 million of the over performance relative to our Q3 guidance.
It was driven by better than expected customer and partner demand for our solutions.
This improved environment.
Resulted in better than expected customer retention.
Larger than expected upsell opportunities with existing customers.
And in some cases.
Longer than expected contract durations as customers seem more willing to commit to our solutions for the long run.
This 12 million.
Of over performance relative to our guidance is reflected across virtually all product lines, most notably data direct open edge Dev tools and our Ipswich products.
The second element of our revenue over performance was the timing of two large.
Large contract renewals.
In our June outlook, we had forecast these renewals to occur in the fourth quarter.
With an expected revenue contribution of approximately $10 million.
Both of these renewals closed earlier than forecasted.
And in doing so accelerated the record.
Recognition of $10 million of revenue from the fourth quarter into the third.
This timing element has no impact on our full year revenue outlook, which is being raised for the third consecutive quarter.
Yes.
I'll speak more about the outlook in a bit.
But for another level of detail on our Q3 top line performance. We believe <unk> provides an informative view.
<unk> at the end of Q3 was $444 million.
Representing approximately 4% organic growth on a year over year basis.
The growth in <unk> is a reasonable reflection of our underlying performance in Q3.
And was bolstered by net retention rates that exceeded 100% for the second consecutive quarter.
In the past we've talked about the investments we've made in our products, which are aimed at improving.
Improving the customer experience.
And our net retention rates in Q3 illustrate the continuing benefit of those investments.
Turning now to expenses.
Our total costs and operating expenses were $85.0 million for the quarter an increase of.
$24.0 million compared to Q3 of 2020.
The year over year increase is the result of two primary factors.
First is the addition of chef to our business, which makes up more than half of the year over year increase.
And second our variable incentive costs associated with our top.
Offline over performance.
Operating income was $73.0 million for the quarter.
Up approximately 51% compared to Q3 of 2020.
Our operating margin was approximately 47% compared to 42% in the year ago quarter.
Our revenue outperformance and the timing of revenue mentioned previously were the primary contributors to this unusually strong performance in the quarter.
Okay.
Turning to the bottom line.
Our earnings per share of $19.0 for the quarter was 35 above the high end.
Our guidance range and approximately 51% above our earnings per share of <unk> 78 in the year ago quarter.
Moving onto a few balance sheet and cash flow metrics for the quarter with cash and short term investments of $384 million and approximately $100 million.
In untapped capacity under our revolving line of credit for total liquidity of $484 million.
We intend to utilize a portion of this liquidity to <unk>.
From the acquisition of <unk> during Q4.
DSO for the quarter was 54 days, which is elevated somewhat due.
Due to large deals booked towards the end of the quarter. However, it is still very much in line with our historical averages.
Deferred revenue was $203 million at the end of the third quarter.
Up slightly from the second quarter, reflecting our strong Q3 top line performance.
Adjusted free cash flow was $35 million for the quarter up $5 million or 16% from the year ago quarter.
And we did not repurchase any stock during the third quarter as a result at the end of Q1.
We have $155 million remaining under our current share repurchase authorization.
And we're not anticipating any additional share repurchases in the fourth quarter.
Turning now to our proposed acquisition of <unk>, we expect to complete the acquisition during Q4 and will fund the $258 million purchase price with cash on hand.
In terms of financial profile camp is.
At least $70 million in revenue with operating margins in the low 20% range.
We expect the integration of <unk> to be completed in nine to 12 months from closing.
With cost synergies from our integration driving intense operating margins above 40%.
Turning to our outlook.
<unk> with the full year 2021.
We are increasing our revenue guidance to be between $1100 million.
This includes a contribution of $4 million to $5 million from camp in the fourth quarter.
Excluding.
The camp contribution or revenue guidance of 544% to $547 million represents an increase of $12 million to $15 million over the outlook. We provided in June.
We are increasing our outlook for operating margin for the year to approximately 40.
<unk>.
We are increasing our outlook for adjusted free cash flow to be between $340 million.
And we are increasing our outlook for earnings per share to be between $71.0
And 70.
Our guidance.
Guidance for full year, EPS assumes a tax rate of approximately 20%.
And approximately 45 million shares outstanding.
For the fourth quarter of 2021, we expect revenue.
Between $272 million.
And as noted earlier this includes.
<unk>, a contribution of approximately $4 million to $5 million from camp.
Earnings per share are expected to be between 73, and <unk> 75 per share, including the impact of <unk> during the quarter, which we anticipate being slightly positive.
In closing.
We're thrilled with our financial performance and our outlook for the balance of 2021, and we're also very pleased to be reaching another milestone in the execution of our total growth strategy with the pending acquisition of camp.
With that I'd like to open the call for Q&A.
And if anyone.
One has a question you can press Star then one on your Touchstone phone once again, if you have a question.
Star then one on your Touchtone phone.
And our first question comes from Ken Wong from Guggenheim Go ahead, Ken.
Great. Thanks, a lot guys and really solid.
Solid quarter here, a lot lots and lots of the dig into maybe first on camp you mentioned $70 million of revenue when I looked on the slide deck. It looks like you also have $70 million for camp in 'twenty two.
Is that just kind of assuming all the write downs are embedded in there and or is this a matter of us.
Just the business was flat and you guys will somehow get it to get it to reaccelerate.
Note that we may just be referring to the to the non-GAAP numbers, Ken So I think it's.
<unk>.
Approximately $70 million. This year, we would expect going into next year that the.
The business is.
<unk> is probably a low single digit grower and still sort of in that 70, low $70 million type range.
Got it okay perfect.
And then as I think about that ADC business.
And then some of the names that come to mind would be like a citrix and F. Five just wondering kind.
Kind of how loadmaster kind of stacks up against the peers is there a certain <unk>.
Areas protocols, where where you guys see.
Competitive advantages and an azure incorporated into the broader progress business I guess anything that would stand out from for many.
Benefits to that to that incorporation.
So can.
We actually find that.
Youre right folks like a five or are some of the other folks in this in this market.
But what we found is that from a product perspective.
Sure.
It is a phenomenal product that.
That can brings to us so one of the interesting things that we see is that with our broader reach and being able to get the product out. There I think we can do a better job of competing with this product in the market.
You mentioned.
Reported a really good point about.
About how does it fit with the rest of the products right until we have what is the goal that we had acquired with Ipswich.
Which does network monitoring and in the combination of the load balancing and optimizing workloads.
With network monitoring and watching what's going on in infrastructure with <unk>, which.
As another product that can pass which is around monitoring the application level performance an application network close all of that put together create this wonderful solution two to track monitor and.
And optimize the performance and the experience that end users.
In terms of availability and performance from their business application and then of course, there is an opportunity potentially in the future to also take the camp products.
And based on what is needed to drive infrastructure change.
To optimize things even further.
Leverage chef.
To make changes to the infrastructure beyond just loan balances. So I think there are multiple parts in multiple touch points can that we can bring to bear we are really excited about about their product technology offerings. They are truly market leading.
And what we've discovered is that even in.
A very large scale competitive situations.
They win remarkably well in fact, one of the one of the things that happened this is about.
I think this is about less than two years ago actually.
<unk> ended up having a very strong building, creating a very strong.
Channel partnership relationships.
Laser chip with EMC, because EMC recognize that this was a great product that actually could sit in front of emc's object storage solution, because they need something to balance.
The activity that goes on across storage systems as well. So so it's actually a product that.
And therefore now EMC results the product as a companion product to their object storage business. So I think that our opex.
Really market opportunities to compete and win with this product and the technology is extremely sound.
Got it great. Thanks, a lot I'll jump back in the queue Im sure Theres, a theres a ton of questions on a lot of topics.
Okay.
Thank you Ken.
And our next question comes from.
It's high.
Ron from Oppenheimer go ahead.
Thanks, Hey, guys, congrats great quarter, and a great acquisition I've known kept for some time.
I think you've got a fantastic asset over there maybe I'll start with that Yogesh.
And maybe you could talk about yeah. It's great. Maybe you could talk about the go to market overlap like I don't know if you had a chance to map out channels and partners are yours versus there is to think about how much is incremental versus overlapping.
I think what we have what we have discovered is is that you know.
The vast majority of the channels don't have overlap I mean, obviously, there's always some overlap rate can I don't want to imply that there is no overlap, but but they are much more.
Focus on channel for their all their go.
To market efforts in fact, I believe 100% of their business is through the two tier channel model.
Even though we have a good chunk of our switch business through the two tier channel.
Don't really leveraged the PPA channel beyond that.
So I think there is there is opportunity to continue to help.
And be successful in that channel both from the strength of our portfolio and our ability to support our partners.
Probably at a better level than than a company the size and scale of camp can so so we feel really good about that opportunity, but we feel really good about that aspect in terms of our direct go to market as I said.
Said, even though it does interact with prospects directly they actually do all the business through channel partners. So so so it is actually a very complementary go to market model.
Got it got it Okay cool and then Anthony a couple for you.
First on the outlook for the fourth quarter, you really increase.
Because only by $5.0 million.
Come on shortly you can do better than that following the performance in this third quarter, no, especially given that first quarter as of year end quarter.
[laughter] it that come on it you know my my objective is to under promise and over deliver so.
Yes, I think we're we've got a good amount of confidence in the business right. Now, obviously Q3 was a great quarter.
We.
We've got enough confidence take Q4 up a little bit.
And hopefully I think we're always looking to put numbers out that we can be very certain we can we can achieve and hopefully.
Exceed so we feel good about how we're positioned very well maybe last one for me just to make sure I understand your commentary with regards to the dis synergies.
Cam if you talked about nine to 10, 9% to 12 months to complete the integration, but is that also the timeline to get the margins from the low twenty's to over 40.
Yeah, I think that's exactly the right way to think about it.
Is that.
In the earlier quarters.
<unk> margins would be lower.
And in the later quarters, we would expect the margin profile to get up into the <unk>.
So it'll be it'll be a <unk>.
Gradually.
We'll increase over that nine to 12 months as the integration activities occur.
And then let's say by Q4 of next year as we exit the year, we'd expect expect is integrated into our operating model running at an operating margin of better than 40%.
That's how the business is going to look for us going forward.
Got it very good congrats guys. Good luck keep it up.
Thank you.
And our next question comes from Tyler Radke from Citigroup go ahead Tyler.
Hi, This is Brian Kim on for Tyler Radke. Thank you for taking my question.
Pointed out earlier on the call about.
No.
The M&A environment being the most competitive that you've seen for executives.
Hoping to get a little more color on that and how youre thinking about the M&A pipeline going forward and how you can balance being active without compromising that disciplined approach. Thanks.
Absolutely.
Thank you.
We all know that there are a lot of folks out there looking to buy companies private equities, they active strategic trying to be very active.
I think what we have done is we have built a very strong team.
That is truly.
Exceptional.
When it comes to identifying and sourcing opportunities and is also very focused on finding opportunities that meet our potential goals right. So I think that's really the key.
A key thing and then we also have built within progress.
Yes.
A phenomenal team to actually execute on these deals and integrate them. So it's about the sourcing deal.
S deal sourcing team as well as an integration team and that combined with the fact that as business comes to market. We do a really really good job of it.
Okay.
Narrowing that down to the ones that are truly interesting and that truly makes sense that fit our size profile that fits the profile of <unk>.
Being businesses with solid recurring revenue and good retention rates.
That's basically our infrastructure software.
We find assets and we're continuing to find assets.
And.
As a business.
And identify those patent identify opportunities to optimize sometimes more than somebody else can and and then.
Pete for them and chemical is a competitive situation and I believe we have done a deal that is going to return wonderful.
Awards to our shareholders.
And I think to me the fact that we're able to check off all of our financial criteria. The fact that it fits dramatically well with our product portfolio and going into the market with a better solution on both sides combined I think it is.
It's really demonstrates.
Rates, our ability to execute so.
The market is a hyper competitive I agree but at the same time, we are seeing way more deals every quarter than we did even four quarters ago, and we were seeing over 50 deals a quarter. Then so we are actually.
We actually see a very very large numbers.
Every quarter.
We're very thoughtful with a deliberate and we look for the right one.
Great. Thank you.
And then in some of the other companies that we cover that have this infrastructure and develop it or developer oriented models.
There has been tremendous tailwind that in some cases, even seeing inflicting demand trends so.
And I'm wondering even though the MSA based our total growth strategy you are executing very well on is there any consideration to invest more either on the product or distribution to extract more of this industry tailwind.
We do actually like we monitor that all the time.
And and we have actually invested in a whole host of our products.
Over the last few years.
Our revenue, which actually was declining.
Four years ago is today as you saw we have organic growth.
And already at our year over year.
So we are seeing some change now we have a very large portfolio of products some of our products.
Products are not.
Not competitive in terms of winning new customers, even though they yes.
So now it comes to delivering value to the customers that use them and we keep those products current and we keep them.
Relevant in the modern world So.
I think given the territory characteristics of our product.
We are continuing to invest in them appropriately and by the way. The other part is that we are also committed to a very high margin very high cash flow generation.
Four.
For our investors and so.
We balance that as well and we look for opportunities, we invest where we believe we can get good returns.
And we feel that this is the right strategy. The total growth strategy is the right strategy.
For our investors for our.
Shareholders, given what our business is today.
Okay. Thank you so much.
Thank you.
And our next question comes from.
Anya <unk> from Sidoti go ahead.
Can you hear me.
Oh.
Yes.
Great. Thank you for taking my question and congratulations on that.
And the precision of Kim Ann.
Right.
You have new customers coming in.
And then how should we think about.
What time, what kind of customers.
How should we think about the potential for further organic growth then in India in your model.
So yeah. Thank you great question on Yeah, you know, we are winning new customers across <unk>.
It's a wide range of our product portfolio like I mean, you know for example of course chef continues to win new customers.
Customers are at.
It is a very much a relevant product in todays world when it comes to Dev ops and desktop ops.
Winning new customers with with our Whatsapp gold and move it products, which are a secure file transfer and network performance monitoring and network management.
Thanks to win new customers with <unk>.
<unk>, which is used by.
Enterprises around the globe and organizations around the globe to do.
To provide delightful web and online experiences, we're winning new customers with our Dev tools products, which are used for building phenomenon.
Wonderful front ends to applications and making those.
User experience is truly engaging so it's across the board, we're winning new customers are in and and and you know.
I expect this to continue right. It is.
Obviously you know.
It is.
It is gratifying to see the demand for our products.
And it is.
It is exciting to be able to continue to win these new customers and and solve problems for them.
And continue to make our business stronger as we move forward.
Okay. Thank you for that color and then I'm also curious I know you've touched a little bit on the M&A pipeline.
How did that come about and how when did you start looking at that and how long the negotiation with them.
Yes.
It was a competitive process at some point.
The company decided and the investors off campus decided.
That they wanted to find.
Find a home for the company that would be.
Potentially a better outcome for them and a better outcome for us.
Outcome for the company as a whole camping home and so they.
The I believe we first started looking at it about four months ago, usually these things take.
Three to four months.
But thats the initial steps.
And then.
We are we are really excited that we are where we are that we were able to.
Recognize the opportunity that we were able to identify the value that it has we were able to.
Competitively win.
The deal at a valuation that is.
As I've said before checks off all the boxes for us.
And it meets all of our financial criteria. So.
It is it is it is that that basically is really the most interesting part about it is how do you make it work can you identify.
<unk> the opportunity can you identify what youre going to do with it can you plan it out and we always do a thorough job of that we actually plan out. The go forward plan before we sign it isn't as though.
Do the deal and then figure out what we're going to do with the business. Afterwards, it's actually a very very thorough analysis of that and I'm really.
Im proud and happy of the work that the team has done and if you notice on yet.
From the first and second deal with took us about a year and a half to do that this year from chef to this has been about just about a year.
And I think we're getting better and I think we're getting faster and I believe I believe that we can continue to be competitive and find additional opportunities as we move forward.
It sounds like exciting times ahead.
Question about the talent acquisition I'm sure you're also suffering from the industry wide shortage.
Affected by math and how do you work around that.
So I think you know Honeywell.
That's a really good question I think to me right.
Talent retention is so key in today's day and age where we actually have been really happy with the way.
We have over the last 18 months two years worked very closely with our organization throughout.
And yet we have now just in the last nine months.
One.
I think I've mentioned this before.
<unk> been selected by Forbes as one of the best mid sized companies to work for in the U S.
170, 170 out of about 15000 companies.
We are.
Ranked number one by Forbes in Bulgaria.
The first number one for all employers in Bulgaria, and as you know right. We have a significant population in Bulgaria.
All of our employees.
Boston Business Journal recently picked.
Picked us as the best place to work and these are all awards based on how employees feel about us our employee engage.
<unk> is running at least 10 points higher than the industry norm.
And I think all of this.
Really points to the fact that we have been very very thoughtful about what we need to do for employees and at the same time that I think the employees recognize what we have done for them and.
So because of all this I think first of all the need for US to go look for employees is not as high as maybe some other companies that are seeing greater chance. So I think thats. The first part, but the second part you're right. It is a competitive landscape.
What we do is we look for talent and just like everybody else does.
And.
It is not easy to find great people, but we are finding great people and we are bringing them on board.
And what.
I think helps them come to.
The progress are several things we have phenomenal products, we invest in those products, we have phenomenal customers, we invest in making sure that those customers are successful so whether it is.
Go to market teams or whether it is the product and engineering team. They know that the company is behind them for their success.
Salesforce a note that if they sell a product.
We will make sure that that customer will be happy and the Salesforce and will therefore, not hear about it in the future and similarly, the product folks and all that they get to work on exciting products.
<unk>, an exciting things and move the ball forward so across the board we are actually finding talent.
Look for them around the globe. That's another advantage, we have we don't have to limit ourselves to two one geography or one location.
So we continue to do well so long answer to your question, but it is a.
It is a competitive landscape on talent.
Yes.
And we are not that its easy, but we are doing well.
Okay, well, congratulations again and thank you for taking my question.
Thank you very much.
And we have no more questions at this time I would like to.
I turn the call back to Yogesh for closing comments.
Thank you Daryl Thank you everyone for joining our call today I.
I am extremely proud of our outstanding performance in the third quarter and very pleased to share our confidence in the outlook for the rest of fiscal 2021.
Specialty proud.
Good of the whole progress team and their work on our acquisition of Tampa as well.
And we believe this transaction to be yet. Another example of our execution of our total growth strategy.
It will add significant size and scale to our business and it points us to a promising 2022.
I look forward to talking to all of you soon.
Thanks again.
Bye bye.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.