BEDFORD, MA, Jun 22, 2010 (MARKETWIRE via COMTEX News Network) -- Progress Software Corporation (NASDAQ: PRGS), a leading software provider that enables enterprises to be operationally responsive announced today results for its second quarter ended May 31, 2010. On a generally accepted accounting principles (GAAP) basis, revenue for the quarter was $127.7 million, up 9 percent from $117.0 million in the second quarter of fiscal 2009. On a non-GAAP basis, revenue totaled $128.3 million, up 9 percent compared to the same period a year ago. Software license revenue increased 15 percent to $44.2 million from $38.5 million in the same quarter last year.
On a GAAP basis:
-- Operating income increased 97 percent to $22.7 million in the second
quarter of fiscal 2010 as compared to $11.5 million in the same quarter
last year;
-- Net income increased 176 percent to $19.1 million from $6.9 million in
the same quarter last year;
-- Diluted earnings per share increased 153 percent to 43 cents in the
second quarter of fiscal 2010 as compared to 17 cents in the same
quarter a year ago.
On a non-GAAP basis:
-- Operating income increased 48 percent to $35.9 million in the second
quarter of fiscal 2010 as compared to $24.3 million in the same quarter
last year;
-- Non-GAAP net income increased 64 percent to $26.3 million from $16.1
million in the same quarter last year;
-- Non-GAAP diluted earnings per share increased 51 percent to 59 cents in
the second quarter of fiscal 2010 as compared to 39 cents in the same
quarter last year.
Richard D. Reidy, president and chief executive officer of Progress Software, said: "We grew total non-GAAP revenue by nine percent and increased revenue in our high-growth Enterprise Business Solutions portfolio, which includes the recently announced Progress(R) Responsive Process Management(TM) (RPM) suite, by 39 percent year-over-year. Additionally, our Application Development Platforms group, which includes the Progress OpenEdge(R) SaaS platform, grew by nine percent year-over-year. The company's solid top line growth, coupled with disciplined expense management, were key factors in generating an increase in our non-GAAP earnings per share by 51 percent during the quarter."
Reidy added: "On the products side, we launched two new solution accelerators (the Progress(R) Order Management Stability [OMS] and Progress(R) Market Surveillance and Monitoring solution accelerator) as part of our global rollout of the Progress Responsive Process Management (RPM) suite."
Progress Software's cash and short-term investments at the end of the second quarter totaled $261 million. Progress Software repurchased approximately 48,000 shares at a cost of $1.5 million in the second quarter of fiscal 2010. The existing re-purchase authorization, under which approximately 598,000 shares remain available for repurchase, expires on September 30, 2010.
The non-GAAP amounts primarily exclude the amortization of acquired intangibles, stock-based compensation, restructuring and acquisition-related costs, purchase accounting adjustments for deferred revenue and certain adjustments to the provision for income taxes.
The non-GAAP results noted above and the non-GAAP financial outlook for 2010 discussed below represent non-GAAP financial measures. A reconciliation of these measures to the appropriate GAAP measures for the three months ended May 31, 2010 and May 31, 2009, and the 2010 outlook, as well as further information regarding these measures, is included in the condensed financial information provided with this release.
Quarterly Highlights
-- Progress Software launched the Progress Order Management Stability (OMS) solution accelerator, which provides telecommunication service providers with the ability to gain end-to-end visibility across multiple order management systems, identify order fallout and resolve potential problems across their customer order lifecycle. The Progress OMS solution accelerator is built on the Progress Responsive Process Management (RPM) suite.
-- The company announced, during May, that it developed additional Foreign Exchange (FX) connectivity adaptors for the Progress Apama(R) Capital Markets Framework. The Apama platform now connects to a much wider range of single bank FX platforms (or portals) as well as a broader spectrum of FX liquidity sources, including electronic communications networks (ECNs) and inter-dealer markets. FX aggregation is a prerequisite for building numerous types of FX trading applications. It is also a key requirement for building effective algorithmic strategies, including high frequency trading.
-- Progress Software further advanced its real-time market monitoring and surveillance capabilities with the launch of the Progress Market Surveillance and Monitoring solution accelerator. This solution accelerator enables financial institutions, exchanges and market regulators to detect patterns of abusive or erroneous trading activity and take corrective action to prevent trading fraud and abuse in real-time. It is also built on the Progress RPM suite.
-- During the month, the company announced that it has added a highly compliant and cost effective data privacy solution to the Progress OpenEdge SaaS platform. With this new functionality, Progress enables full life-cycle data encryption that, for example, complies with the latest Payment Card Industry (PCI) regulations, an important requisite for the ongoing expansion of Cloud Computing.
-- Gartner placed Progress Software in the Visionary Quadrant of the first Gartner Magic Quadrant for Application Performance Monitoring featuring the Progress Actional(R) platform. The Actional product provides comprehensive operational and business visibility, root cause analysis, policy-based auditing, compliance, and control of services in a heterogeneous IT environment. Functionality includes visibility into real-time processing, snapshot views of individual end-to-end transactions, and dynamic controls for improving transaction processing.
-- The Progress Sonic(R) Enterprise Service Bus (ESB) R8.0, which combines the benefits of open standards with the feature-rich tooling native to the Progress Sonic products, was launched in the second quarter. A major highlight of the Sonic ESB 8.0 product release is its support for a RESTful (Representation State Transfer) architectural approach to integration.
-- Lufthansa launched the air travel industry's first real-time, location-based social networking application for frequent flyers called MemberScout. The application was developed by match2blue using the Progress Apama Business Event Processing (BEP) platform.
Additional highlights can be found at: http://web.progress.com/inthenews/pressreleases.html.
Business Outlook
Progress Software is providing the following guidance for the fiscal year ending November 30, 2010:
-- GAAP revenue is expected to be in the range of $509 million to $519
million.
-- On a non-GAAP basis, revenue is expected to be in the range of $510
million to $520 million.
-- GAAP diluted earnings per share are expected to be in the range of
$0.89 to $1.04.
-- On a non-GAAP basis, diluted earnings per share are expected to be in
the range of $2.28 to $2.35.
Progress Software is providing the following guidance for the third fiscal quarter ending August 31, 2010:
-- On a GAAP and non-GAAP basis, revenue is expected to be in the range of
$121 million to $124 million.
-- GAAP diluted earnings per share are expected to be in the range of 9
cents to 19 cents.
-- On a non-GAAP basis, diluted earnings per share are expected to be in
the range of 53 cents to 56 cents.
The outlook for non-GAAP revenue excludes purchase accounting adjustments for deferred revenue. The outlook for non-GAAP earnings excludes the amortization of acquired intangibles, stock-based compensation, restructuring, transition and acquisition-related costs, purchase accounting adjustments for deferred revenue, certain insurance reimbursements and related tax effects.
Legal Notice Regarding Non-GAAP Financial Information
Progress Software provides non-GAAP revenue, operating income, net income and earnings per share as additional information for investors. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). Such measures are intended to supplement GAAP and may be different from non-GAAP measures used by other companies. 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.
Conference Call
The Progress Software quarterly investor conference call to review its fiscal second quarter 2010 results and business outlook will be Webcast live at 9:00 a.m. (EDT) on Wednesday, June 23, 2010 on the company's Web site, located at http://investors.progress.com/.
As previously disclosed, in combination with this press release, Progress Software is providing in advance a copy of prepared remarks for its conference call. The press release and the prepared remarks are available on the Progress website (www.progress.com) on the investor relations page. The conference call will include only brief comments followed by questions and answers. The prepared remarks will not be read on the call.
The conference call will be webcast and accessible on the Progress Website at http://investors.progress.com/. The conference call will also be webcast live via Yahoo! (http://www.yahoo.com), Motley Fool (http://www.fool.com), Streetevents (http://www.streetevents.com), TD Waterhouse (http://www.tdwaterhouse.com) and Fidelity.com (http://www.fidelity.com). An archived version of the conference call and supporting materials will be available on the Progress Software Investor Relations Website after the live conference call.
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 maximizes the benefits of operational responsiveness while minimizing IT complexity and total cost of ownership. Progress can be reached at www.progress.com or +1-781-280-4000.
Safe Harbor Statement
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, which include statements regarding the Company's business outlook for its third fiscal quarter and full fiscal year and strategic plans, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to the following: the receipt and shipment of new orders; the timely release of enhancements to the Company's products; the growth rates of certain market segments; the positioning of the Company's products in those market segments; variations in the demand for professional services and technical support; pricing pressures and the competitive environment in the software industry; the continuing weakness in the U.S. and international economies, which could result in fewer sales of the Company's products and may otherwise harm the Company's business; the Company's ability to complete and integrate acquisitions; the Company's ability to realize the expected benefits and anticipated synergies from acquired businesses; the Company's ability to penetrate international markets and manage its international operations; changes in exchange rates; the Company's ability to realize the expected benefits from its previously-announced restructuring actions; and the potential disruption to the Company's business from those restructuring actions . 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.
Actional, Apama, OpenEdge, Progress, Progress RPM, Progress Responsive Process Management and Sonic are trademarks or registered trademarks 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.
Progress Software Corporation
GAAP Condensed Consolidated Statements of Operations
Three Months Ended
--------------------------------
May 31, May 31, Percent
(In thousands except per share data) 2010 2009 Change
---------- --------- --------
Revenue:
Software licenses $ 44,228 $ 38,513 15%
Maintenance and services 83,428 78,534 6%
---------- ---------
Total revenue 127,656 117,047 9%
---------- ---------
Costs of revenue:
Cost of software licenses 1,619 1,527 6%
Cost of maintenance and services 18,327 15,997 15%
Amortization of purchased
technology 5,285 5,069 4%
---------- ---------
Total costs of revenue 25,231 22,593 12%
---------- ---------
Gross profit 102,425 94,454 8%
---------- ---------
Operating expenses:
Sales and marketing 40,140 43,505 (8)%
Product development 23,153 23,023 1%
General and administrative 13,448 13,830 (3)%
Amortization of other acquired
intangibles 2,736 2,474 11%
Acquisition-related expenses - 110 (100)%
Restructuring expense 203 (30)
---------- ---------
Total operating expenses 79,680 82,912 (4)%
---------- ---------
Income from operations 22,745 11,542 97%
Other income (expense), net 3,919 (460)
---------- ---------
Income before provision for income
taxes 26,664 11,082 141%
Provision for income taxes 7,606 4,175 82%
---------- ---------
Net income $ 19,058 $ 6,907 176%
========== =========
Earnings per share:
Basic $ 0.45 $ 0.17 165%
Diluted $ 0.43 $ 0.17 153%
========== =========
Weighted average shares outstanding:
Basic 42,537 39,997 6%
Diluted 44,237 40,697 9%
========== =========
Six Months Ended
--------------------------------
May 31, May 31, Percent
(In thousands except per share data) 2010 2009 Change
---------- --------- --------
Revenue:
Software licenses $ 91,345 $ 84,365 8%
Maintenance and services 163,858 153,542 7%
---------- ---------
Total revenue 255,203 237,907 7%
---------- ---------
Costs of revenue:
Cost of software licenses 3,608 3,844 (6)%
Cost of maintenance and services 35,241 33,330 6%
Amortization of purchased
technology 10,383 9,797 6%
---------- ---------
Total costs of revenue 49,232 46,971 5%
---------- ---------
Gross profit 205,971 190,936 8%
---------- ---------
Operating expenses:
Sales and marketing 83,346 87,820 (5)%
Product development 46,540 47,942 (3)%
General and administrative 26,230 28,406 (8)%
Amortization of other acquired
intangibles 5,100 4,840 5%
Acquisition-related expenses 415 220 89%
Restructuring expense 25,974 5,448
---------- ---------
Total operating expenses 187,605 174,676 7%
---------- ---------
Income from operations 18,366 16,260 13%
Other income, net 6,675 769 768%
---------- ---------
Income before provision for income
taxes 25,041 17,029 47%
Provision for income taxes 6,989 6,471 8%
---------- ---------
Net income $ 18,052 $ 10,558 71%
========== =========
Earnings per share:
Basic $ 0.43 $ 0.26 65%
Diluted $ 0.42 $ 0.26 62%
========== =========
Weighted average shares outstanding:
Basic 41,808 39,969 5%
Diluted 43,461 40,609 7%
========== =========
Progress Software Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended May 31, 2010
----------------------------------
(In thousands except per As
share data) Reported Adjustments Non-GAAP
--------- ------------ ---------
Total revenue $ 127,656 $ 605 $ 128,261
Purchase accounting
adjustments for deferred
revenue (1) (605) 605
Income from operations $ 22,745 $ 13,144 $ 35,889
Purchase accounting
adjustments for deferred
revenue (1) (605) 605
Amortization of acquired
intangibles (8,021) 8,021
Acquisition-related
expenses - -
Restructuring expense (203) 203
Stock option
investigation (2) 130 (130)
Stock-based
compensation (3) (4,445) 4,445
Operating margin percentage 17.8% 28.0%
Other income (expense), net $ 3,919 $ - $ 3,919
Provision for income
taxes (5) $ 7,606 $ 5,942 $ 13,548
Net income $ 19,058 $ 7,202 $ 26,260
Earnings per share - diluted $ 0.43 $ 0.59
Weighted average shares
outstanding - diluted 44,237 44,237
Three Months Ended May 31, 2009
----------------------------------
(In thousands except per As Percent
share data) Reported Adjustments Non-GAAP Change
--------- ------------ --------- ---------
Total revenue $ 117,047 695 $ 117,742 9%
Purchase accounting
adjustments for deferred
revenue (1) (695) 695
Income from operations $ 11,542 $ 12,737 $ 24,279 48%
Purchase accounting
adjustments for deferred
revenue (1) (695) 695
Amortization of acquired
intangibles (7,543) 7,543
Acquisition-related
expenses (110) 110
Restructuring expense 30 (30)
Stock option
investigation (2) (170) 170
Stock-based
compensation (3) (4,249) 4,249
Operating margin percentage 9.9% 20.6% 36%
Other income (expense), net $ (460) $ - $ (460)
Provision for income
taxes (5) $ 4,175 $ 3,587 $ 7,762 75%
Net income $ 6,907 $ 9,150 $ 16,057 64%
Earnings per share - diluted $ 0.17 $ 0.39 51%
Weighted average shares
outstanding - diluted 40,697 40,697 9%
Six Months Ended May 31, 2010
----------------------------------
(In thousands except per As
share data) Reported Adjustments Non-GAAP
--------- ------------ ---------
Total revenue $ 255,203 $ 1,059 $ 256,262
Purchase accounting
adjustments for deferred
revenue (1) (1,059) 1,059
Income from operations $ 18,366 $ 50,278 $ 68,644
Purchase accounting
adjustments for deferred
revenue (1) (1,059) 1,059
Amortization of acquired
intangibles (15,483) 15,483
Acquisition-related
expenses (415) 415
Restructuring expense (25,974) 25,974
Stock option
investigation (2) 1,330 (1,330)
Stock-based
compensation (3) (8,677) 8,677
Operating margin percentage 7.2% 26.8%
Other income, net (4) $ 6,675 $ (899) $ 5,776
Provision for income
taxes (5) $ 6,989 $ 18,500 $ 25,489
Net income $ 18,052 $ 30,879 $ 48,931
Earnings per share - diluted $ 0.42 $ 1.13
Weighted average shares
outstanding - diluted 43,461 43,461
Six Months Ended May 31, 2009
----------------------------------
(In thousands except per As Percent
share data) Reported Adjustments Non-GAAP Change
--------- ------------- --------- ---------
Total revenue $ 237,907 2,243 $ 240,150 7%
Purchase accounting
adjustments for deferred
revenue (1) (2,243) 2,243
Income from operations $ 16,260 $ 30,814 $ 47,074 46%
Purchase accounting
adjustments for deferred
revenue (1) (2,243) 2,243
Amortization of acquired
intangibles (14,637) 14,637
Acquisition-related
expenses (220) 220
Restructuring expense (5,448) 5,448
Stock option
investigation (2) (201) 201
Stock-based
compensation (3) (8,065) 8,065
Operating margin percentage 6.8% 19.6% 37%
Other income, net (4) $ 769 $ - $ 769 651%
Provision for income
taxes (5) $ 6,471 $ 9,556 $ 16,027 59%
Net income $ 10,558 $ 21,258 $ 31,816 54%
Earnings per share - diluted $ 0.26 $ 0.78 45%
Weighted average shares
outstanding - diluted 40,609 40,609 7%
(1) The purchase accounting adjustment for deferred revenue is included
within maintenance and services revenue and represents the write-down
to fair value of the deferred maintenance revenue of Savvion and Iona
Technologies at the date of each acquisition.
(2) Stock option investigation expenses are included within general and
administrative expenses and primarily represent professional services
fees associated with the SEC's investigation and shareholder derivative
lawsuits related to the company's historical stock option grant
practices. The credit amount for the three and six months ended May
31, 2010 relates to insurance reimbursements in excess of previously
estimated amounts.
(3) Stock-based compensation expense, representing the fair value of equity
awards, is included in the following GAAP expenses:
Three Months Ended May Three Months Ended May
31, 2010 31, 2009
------------------------ ------------------------
Adjust- Adjust-
GAAP ments Non-GAAP GAAP ments Non-GAAP
------ ------- -------- ------ ------- --------
Cost of software
licenses $ 6 $ (6) $ - $ 8 $ (8) $ -
Cost of
maintenance and
services 204 (204) - 231 (231) -
Sales and
marketing 1,215 (1,215) - 1,398 (1,398) -
Product
development 966 (966) - 1,003 (1,003) -
General and
administrative 2,054 (2,054) - 1,609 (1,609) -
------ ------- -------- ------ ------- --------
$4,445 $(4,445) $ - $4,249 $(4,249) $ -
====== ======= ======== ====== ======= ========
Six Months Ended May Six Months Ended May
31, 2010 31, 2009
------------------------ ------------------------
Adjust- Adjust-
GAAP ments Non-GAAP GAAP ments Non-GAAP
------ ------- -------- ------ ------- --------
Cost of software
licenses $ 15 $ (15) $ - $ 20 $ (20) $ -
Cost of
maintenance and
services 458 (458) - 468 (468) -
Sales and
marketing 2,793 (2,793) - 2,886 (2,886) -
Product
development 2,074 (2,074) - 1,947 (1,947) -
General and
administrative 3,337 (3,337) - 2,744 (2,744) -
------ ------- -------- ------ ------- --------
$8,677 $(8,677) $ - $8,065 $(8,065) $ -
====== ======= ======== ====== ======= ========
In addition, the restructuring expense for the six months ended May 31,
2010 includes approximtely $0.3 million of stock-based compensation
expense.
(4) The non-GAAP adjustment in other income for the six months ended May
31, 2010 relates to an insurance settlement gain from a pre-acquisition
contingency assumed as part of a prior acquisition.
(5) The non-GAAP provision for income taxes was calculated reflecting an
effective rate of 34.0% and 32.6% for the three months ended May 31,
2010 and 2009, respectively, and 34.3% and 33.5% for the six months
ended May 31, 2010 and 2009, respectively. The difference between the
effective rate under GAAP and the effective tax rate utilized in the
preparation of non-GAAP financial measures primarily relates to the tax
effects of stock-based compensation and amortization of acquired
intangibles, which are excluded from the determination of non-GAAP net
income. The non-GAAP effective tax rate for the three months ended May
31, 2010 also excludes a one-time benefit of $2.5 million.
Progress Software Corporation
Condensed Consolidated Balance Sheets
May 31, November 30,
(In thousands) 2010 2009
--------- -------------
Assets
Cash and short-term investments $ 260,568 $ 224,121
Accounts receivable, net 86,842 98,872
Other current assets 44,612 34,626
--------- -------------
Total current assets 392,022 357,619
--------- -------------
Property and equipment, net 57,289 59,625
Goodwill and intangible assets, net 336,053 304,887
Other assets 76,682 76,719
--------- -------------
Total $ 862,046 $ 798,850
========= =============
Liabilities and shareholders' equity
Accounts payable and other current liabilities $ 82,377 $ 85,681
Short-term deferred revenue 136,946 141,243
--------- -------------
Total current liabilities 219,323 226,924
--------- -------------
Long-term deferred revenue 3,788 4,511
Other liabilities 9,887 11,963
Shareholders' equity:
Common stock and additional paid-in capital 316,629 247,265
Retained earnings 312,419 308,187
--------- -------------
Total shareholders' equity 629,048 555,452
--------- -------------
Total $ 862,046 $ 798,850
========= =============
Condensed Consolidated Statements of Cash Flows
Six Months Ended
--------------------
May 31, May 31,
(In thousands) 2010 2009
--------- ---------
Cash flows from operations:
Net income $ 18,052 $ 10,558
Depreciation, amortization and other noncash
items 30,224 27,754
Other changes in operating assets and
liabilities 2,643 (20,391)
--------- ---------
Net cash flows from operations 50,919 17,921
Capital expenditures (4,076) (3,242)
Redemptions of auction-rate securities 575 5,400
Acquisitions, net of cash acquired (49,177) -
Share issuances, net 51,460 1,675
Other (13,254) 8,452
--------- ---------
Net change in cash and short-term investments 36,447 30,206
Cash and short-term investments, beginning of period 224,121 118,529
--------- ---------
Cash and short-term investments, end of period $ 260,568 $ 148,735
========= =========
Progress Software Corporation
Reconciliation of Forward-Looking Guidance
Diluted Earnings Per Share Range
Three Months Ended
August 31, 2010
----------------------------
GAAP expectation $ 0.09 - $ 0.19
Adjustment to exclude stock-based compensation $ 0.08 - $ 0.09
Adjustment to exclude amortization of acquired
intangibles $ 0.11 - $ 0.11
Adjustment to exclude restructuring and
transition expenses $ 0.18 - $ 0.24
------- -------- -------
Non-GAAP expectation $ 0.53 - $ 0.56
======= ======== =======
Twelve Months Ended
November 30, 2010
-------------------------
GAAP expectation $ 0.89 - $ 1.04
Adjustment to exclude stock-based compensation $ 0.29 - $ 0.30
Adjustment to exclude amortization of acquired
intangibles $ 0.45 - $ 0.45
Adjustment to exclude restructuring and
transition expenses $ 0.59 - $ 0.65
Other adjustments ($ 0.02) - $ (0.01)
------- -------- -------
Non-GAAP expectation $ 2.28 - $ 2.35
======= ======== =======
John Stewart Progress Software Corporation (781) 280-4101 Email Contact Claire Rowberry Lewis PR (617) 226-8841 Email Contact
SOURCE: Progress Software
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