March 28, 2012

Progress Software Reports 2012 Fiscal First Quarter Results

BEDFORD, Mass.--(BUSINESS WIRE)-- Progress Software Corporation (NASDAQ: PRGS), a leading software provider that enables enterprises to be operationally responsive, announced today results for its fiscal first quarter ended February 29, 2012.

Revenue for the quarter was $124.4 million, a decrease of 7% from $134.2 million in the fiscal first quarter of 2011.

On a GAAP basis in the fiscal first quarter of 2012:

  • Income from operations was $11.9 million, a decrease of 58% compared to $28.3 million in the same quarter last year;
  • Net income was $7.5 million, a decrease of 64% compared to $20.5 million in the same quarter last year; and
  • Diluted earnings per share were $0.12, a decrease of 59% compared to $0.29 in the same quarter last year.

On a non-GAAP basis in the fiscal first quarter of 2012:

  • Income from operations was $26.1 million, a decrease of 37% compared to $41.3 million in the same quarter last year;
  • Net income was $17.7 million, a decrease of 40% compared to $29.4 million in the same quarter last year; and
  • Diluted earnings per share were $0.28, a decrease of 33% compared to $0.42 in the same quarter last year.

Jay Bhatt, president and chief executive officer of Progress Software, said: "Despite the stated year-over-year declines, the company performed better than expected, largely due to our OpenEdge product line. As we navigate through the current environment, we will continue to tightly control spending to protect our profitability."

Bhatt also noted: "Since I joined Progress Software in early December, the management team and Board of Directors have been conducting a comprehensive evaluation of the company. This effort includes perspectives from shareholders, customers, partners and from external independent advisors including J.P. Morgan. We are nearing the end of our evaluation and expect to share our revised plan with the marketplace in late April. We understand that the status quo is unacceptable and our plan may include actions on the company's strategy, product portfolio, expense run rate and capital allocation to strengthen the business and to deliver higher levels of shareholder value."

Cash flows from operations for the quarter were $38.5 million, down from $50.2 million in the same quarter in fiscal 2011. Cash, cash equivalents and short-term investments increased to $315.2 million from $261.4 million at the end of the fiscal fourth quarter 2011, primarily as a result of cash flows from operations and stock option exercises.

Business Outlook
In light of the ongoing evaluation and forthcoming announcement of the company's revised business plan, the company will not provide guidance for the fiscal second quarter or fiscal year at this time.

Note to Editors
Progress Software is providing, in advance, a copy of prepared remarks for its conference call. These prepared remarks will not be read on the call. The press release, the prepared remarks, and additional financial disclosures are available on the Progress Software website www.progress.com within the investor relations section.

Conference Call
The Progress Software quarterly investor conference call to review its fiscal first quarter 2012 will be broadcast live at 9:00 a.m. Eastern on Wednesday, March 28, 2012 on the investor relations section of the company's website, located at www.progress.com. Additionally, you can listen to the call by telephone by dialing 1-800-915-4836, pass code 7144347. The conference call will include only brief comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress Software website within the investor relations section after the live conference call.

Legal Notice Regarding Non-GAAP Financial Information
Progress Software provides non-GAAP financial information as additional information for investors. These non-GAAP measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). Progress Software believes that the non-GAAP results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. Management uses these non-GAAP results to compare the company's performance to that of prior periods for analysis of trends and for budget and planning purposes. A reconciliation of non-GAAP adjustments to the company's GAAP financial results is included in the tables below. Additional information regarding the company's non-GAAP financial information is contained in the company's Current Report on Form 8-K filed with the Securities and Exchange Commission in connection with this press release, which is available on the Progress website www.progress.com within the investor relations section.

Note Regarding Forward-Looking Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to those risks and uncertainties described in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with the company's business, please refer to the company's filings with the Securities and Exchange Commission.

Important Shareholder Information
Progress Software will hold its Annual Meeting of Shareholders on May 31, 2012 at 9:00 a.m. Eastern. The company plans to file with the Securities and Exchange Commission and mail to its shareholders a proxy statement in connection with its 2012 Annual Meeting of Shareholders. The proxy statement will contain important information about the company, the Annual Meeting and related matters.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT SOLICITATION MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THESE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION.

The proxy statement and other relevant solicitation materials (when they become available), and any and all documents filed by the company with the Securities and Exchange Commission, may be obtained by investors and security holders free of charge at the Securities and Exchange Commission's web site at www.sec.gov. In addition, filings of the company with the Securities and Exchange Commission, including the proxy statement and other relevant solicitation materials (when they become available), may be obtained, without charge, from the company by directing a request to the company at 14 Oak Park, Bedford, Massachusetts 01730, c/o Corporate Secretary.

The company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the company in connection with the Annual Meeting. Information regarding the company's directors and executive officers is contained in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on January 30, 2012 and definitive proxy statement filed with the Securities and Exchange Commission on March 21, 2011. Additional information regarding the interests of those participants in the solicitation of proxies may be obtained by reading the proxy statement for the Annual Meeting when it becomes available.

Progress Software Corporation
Progress Software Corporation (NASDAQ: PRGS) is a global software company that enables enterprises to be operationally responsive to changing conditions and customer interactions as they occur — to capitalize on new opportunities, drive greater efficiencies and reduce risk. The company offers a comprehensive portfolio of best-in-class infrastructure software spanning event-driven visibility and real-time response, open integration, data access and integration, and application development and deployment — all supporting on-premises and SaaS/Cloud deployments. Progress Software maximizes the benefits of operational responsiveness while minimizing IT complexity and total cost of ownership. Progress Software can be reached at www.progress.com or 1-781-280-4000.

Progress is a trademark or registered trademark of Progress Software Corporation or one of its subsidiaries or affiliates in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.

Condensed Consolidated Statements of Income
   
Fiscal First Quarter Ended
(In thousands, except per share data)

February 29,
2012

 

February 28,
2011

 

% Change

 
Revenue:
Software licenses $ 41,492 $ 51,336 -19 %
Maintenance and services   82,934     82,901     0 %
Total revenue   124,426     134,237     -7 %
Costs of revenue:
Cost of software licenses 2,288 2,381 -4 %
Cost of maintenance and services 19,380 17,768 9 %
Amortization of acquired intangibles   3,734     3,975     -6 %
Total costs of revenue   25,402     24,124     5 %
Gross profit   99,024     110,113     -10 %
 
Operating expenses:
Sales and marketing 47,247 44,698 6 %
Product development 22,395 20,859 7 %
General and administrative 15,452 11,852 30 %
Amortization of acquired intangibles 1,821 2,274 -20 %
Restructuring expenses - 2,114 -100 %
Acquisition-related expenses   215     -     -  
Total operating expenses   87,130     81,797     7 %
Income from operations   11,894     28,316     -58 %
Other income (expense), net   270     (39 )   -792 %
Income before provision for income taxes 12,164 28,277 -57 %
Provision for income taxes   4,675     7,756     -40 %
Net income $ 7,489   $ 20,521     -64 %
 
Earnings per share:
Basic $ 0.12 $ 0.31 -61 %
Diluted $ 0.12   $ 0.29     -59 %
 
Weighted average shares outstanding:
Basic 62,145 66,986 -7 %
Diluted   63,130     69,659     -9 %
Condensed Consolidated Balance Sheets  
 
(In thousands)

February 29,
2012

 

November 30,
2011

Assets
Current assets:
Cash, cash equivalents and short-term investments $ 315,164 $ 261,416
Accounts receivable, net 102,645 110,927
Other current assets   33,907       35,434  
Total current assets   451,716       407,777  
Property and equipment, net 68,048 66,206
Goodwill and intangible assets, net 322,165 327,647
Other assets   66,951       63,680  
Total assets $ 908,880     $ 865,310  
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other current liabilities $ 83,533 $ 85,781
Short-term deferred revenue   162,552       145,727  
Total current liabilities   246,085       231,508  
Long-term deferred revenue 5,069 6,619
Other long-term liabilities 4,296 4,883
Shareholders' equity:
Common stock and additional paid-in capital 329,405 309,221
Retained earnings   324,025       313,079  
Total shareholders' equity   653,430       622,300  
Total liabilities and shareholders' equity $ 908,880     $ 865,310  
 
 
Condensed Consolidated Statements of Cash Flows
 
Fiscal First Quarter Ended
(In thousands)

February 29,
2012

 

February 28,
2011

Cash flows from operating activities:
Net income $ 7,489 $ 20,521
Depreciation and amortization 7,349 8,461
Stock-based compensation 7,091 4,184
Other non-cash adjustments 362 451
Changes in operating assets and liabilities   15,351       16,613  
Net cash flows from operating activities   37,642       50,230  
Capital expenditures (3,955 ) (3,352 )
Redemptions at par by issuers of auction-rate-securities 225 -
Net cash paid for acquisitions - -
Issuances of common stock, net of repurchases 13,702 (6,120 )
Other   6,134       7,685  
Net change in cash and short-term investments 53,748 48,443
Cash, cash equivalents and short-term investments, beginning of period   261,416       322,396  
Cash, cash equivalents and short-term investments, end of period $ 315,164     $ 370,839  
Reconciliation of GAAP to Non-GAAP Financial Measures    
 
Fiscal First Quarter Ended
(In thousands, except per share data)

February 29,
2012

 

February 28,
2011

 

% Change

GAAP income from operations $ 11,894 $ 28,316

GAAP operating margin %

9.6 % 21.1 %
Amortization of acquired intangibles 5,555 6,249
Stock-based compensation (1) 7,091 4,184
Transition expenses - 424
Restructuring expenses - 2,114
Acquisition-related expenses 215 -
Litigation settlement 900 -
Proxy-related costs   472       -      
Total operating adjustments (2)   14,233       12,971      
Non-GAAP income from operations $ 26,127     $ 41,287     -37 %
Non-GAAP operating margin % 21.0 % 30.8 %
 
 
GAAP net income $ 7,489 $ 20,521
Operating adjustments (from above) 14,233 12,971
Income tax adjustment   (4,036 )     (4,077 )    
Total net income adjustments (2)   10,197       8,894      
Non-GAAP net income $ 17,686     $ 29,415     -40 %
 
 
GAAP earnings per share - diluted $ 0.12 $ 0.29
Total net income adjustments (from above) (2)   0.16       0.13      
Non-GAAP earnings per share - diluted $ 0.28     $ 0.42     -33 %
 
Weighted average shares outstanding - diluted 63,130 69,659
           
 
 
 
(1) Stock-based compensation is included in the GAAP statements of income, as follows:
 
Cost of revenue $ 588 $ 223
Sales and marketing 2,134 1,290
Product development 1,945 1,269
General and administrative   2,424       1,402      
  $ 7,091     $ 4,184      
 
(2) Adjustments reported for the fiscal first quarter of 2011 have been revised to eliminate our use of a non-GAAP
revenue measure. See our Current Report on Form 8-K filed with this press release for additional information.

Progress Software Corporation
Investor Relations:
Tom Barth, 781-280-4135
tobarth@progress.com
or
Public Relations:
John Stewart, 781-280-4101
jstewart@progress.com

Source: Progress Software Corporation

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