UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C., 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Progress Software Corporation

Commission file number: 0-19417

Massachusetts (State or other jurisdiction of incorporation or organization)		04-2746201 (I.R.S. employer identification no.)

14 Oak Park
Bedford, Massachusetts 01730
(Address of principal executive offices, including zip code)

(781) 280-4000
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition

On June 19, 2007, Progress Software Corporation issued a press release announcing financial results for its second fiscal quarter ended May 31, 2007. A copy of this press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits

     99.1 Press Release dated June 19, 2007

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

John Stewart		Claire Rowberry
Progress Software Corporation		Lewis PR
(781) 280-4101		(617) 226-8841
jstewart@progress.com		progress@lewispr.com

PROGRESS SOFTWARE REPORTS SECOND QUARTER RESULTS

Enterprise Infrastructure Revenue up 29%, DataDirect Revenue Up 18%

June 19, 2007 — Progress Software Corporation (NASDAQ: PRGS), a provider of leading application infrastructure software to develop, deploy, integrate and manage business applications, today announced results for its second quarter ended May 31, 2007. Revenue for the quarter was $120 million, up 9 percent (5 percent at constant currency) from $110 million in the second quarter of fiscal 2006. Software license revenue increased 8 percent (4 percent at constant currency) to $44.6 million from $41.4 million in the same quarter last year.

On a generally accepted accounting principles (GAAP) basis, operating income increased 3 percent to $11.3 million from $11.0 million in the second quarter of fiscal 2006. Net income increased 9 percent to $8.4 million from $7.7 million in the same quarter last year. Diluted earnings per share increased 6 percent to 19 cents from 18 cents in the second quarter of fiscal 2006.

On a non-GAAP basis, operating income increased 20 percent to $25.3 million from $21.1 million in the same quarter last year. Non-GAAP net income increased 21 percent to $17.8 million from $14.7 million in the same quarter last year and non-GAAP diluted earnings per share increased 21 percent to 41 cents per share from 34 cents in the second quarter of fiscal 2006.

The GAAP and non-GAAP results in the second quarter of fiscal 2007 include an after-tax charge of $1.6 million (4 cents per share) resulting from a write-down associated with a portion of the implementation of a new ERP system. The non-GAAP results in the second quarter of fiscal 2007 exclude after-tax charges of $6.0 million for stock-based compensation (including cash payments to compensation committee members of the board of the directors for reimbursement of cancelled stock options as more fully described in the most recent proxy statement), $2.9 million for amortization of acquired intangibles and $0.5 million for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company’s historical stock option grant practices. The non-GAAP results in the second quarter of fiscal 2006 exclude after-tax charges of $4.1 million for stock-based compensation, $2.7 million for amortization of acquired intangibles and $0.2 million for certain acquisition-related expenses.

The company’s cash and short-term investments at the end of the quarter totaled $271 million. The company purchased 10,000 shares at a cost of $0.3 million in the second quarter of fiscal 2007. The company’s existing repurchase authorization, under which approximately 9.3 million shares remain available for repurchase, expires on September 30, 2007.

With respect to the ERP implementation, the company currently plans to implement the necessary functionality by extending its existing Progress^® OpenEdge^® based applications, together with a new OpenEdge based financial system for which the implementation is proceeding as planned. The write-off was necessitated by the conclusion that it was not advisable to proceed further with the implementation of an application which was not based on OpenEdge.

“We achieved nine percent growth in revenue for the second quarter, with a 21 percent increase in non-GAAP earnings per share. All major divisions performed extremely well and the outlook for the balance of the fiscal year is solid,” stated Joseph Alsop, co-founder and chief executive officer of Progress Software. “We are pleased to see continuing signs of success as we pursue our strategy of achieving growth in our OpenEdge business while looking to our newer high-growth product lines to accelerate our growth as they become a larger portion of our license revenue.”

Quarterly Highlights

Progress Software and QAD Inc. jointly announced the expansion of their longstanding alliance to allow QAD to globally license and distribute a wider range of application infrastructure products from Progress Software, including Progress Sonic ESB^® (Enterprise Service Bus), Progress Actional^® for SOA management, the Progress EasyAsk^® Natural Language and Query product, and other best-in-class technologies. www.progress.com/QAD

Progress Software and Dow Jones & Company (NYSE: DJ) announced a global agreement to provide the Dow Jones Elementized News Feed via the Progress Apama Algorithmic Trading Platform. The agreement will allow financial institutions to instantly and continuously analyze, evaluate and respond to complex market events and news within the Progress Apama platform. www.progress.com/dowjones

DataDirect Technologies launched DataDirect XML Converters™, a new product which enables bi-directional programmatic access to virtually any non-xml file including EDI, flat files, and other legacy formats (www.progress.com/converters). The division also added new security features to its DataDirect Connect® line of ODBC, JDBC, ADO.NET data access products and released version 3.0 of the DataDirect XQuery® product, with full update capability.

Progress Software announced the availability of the Progress Actional 7.0 SOA management platform that comprises a trio of best-in-class products addressing the diversity of management needs in service-oriented architecture (SOA) environments. www.progress.com/actional7

Progress Software announced the availability of Progress Sonic ESB 7.5, the latest version of the worldwide best-selling enterprise service bus (ESB) that enables the integration and flexible re-use of business applications within a service-oriented architecture (SOA). www.progress.com/sonicesb75

Progress Software announced that, according to research from Nielsen//NetRatings, retailers using EasyAsk achieved the highest online conversion rates among all users of commercially available e-commerce search and navigation technologies during nine of the 12 months in 2006. www.progress.com/neilson

Significant New Customer and Partner Wins, New Technology Adoptions and Major Deployments

Significant new partners and customers adopting technology from Progress Software, or deploying solutions using Progress technology, include: Active Health Management, Alberta Motor Association, Allied World Assurance Company, Arbonne International, Assurant Solutions, ATB Financial, Baptist Health System, BIDS Holdings, Boston Communications Group, BSN Medical, Cablecom, Canadian Institute for Health Information, Canberra, Carrier Call, Cedars Sinai Health System, Challenger Financial Service, Chevron Pipe Line Company, Consorcio Ejecutivo De Administracion, Corbin Capital Partners, Corporation Service Company, Debenhams, DI-Nikko Engineering, Diamond Management & Technology Consultants, Drivesol Global Steering, E. Hoffmann-La Roche, EDB Teamco IT Drift, Eiffel Comercio Automotivo, Eircom, Endurance Reinsurance, Famastil Ferramentas, Fiberweb, First Data Deutschland, Georgia Farm Bureau Mutual Insurance, GetConnected, Griffin Wheel Company, Hama GmbH & Co., HanseNet Telekommunikation, InterNAP Network Services, Itavox Veiculos, ITSC, Juriscoop Progreso Solidari, Kansai Electric Power, Kyowa Wellness, Law School Admission Council, Localiza Rent-A-Car, Markwest, Melco PBL Gaming, Multilog, National Interstate Insurance, Nordisk Mobiltelefon Svergie, North Pacific Bank, OnResolve, Orrick, Herrington & Sutcliff, Pandurata Alimentos, Piedmont Natural Gas Company, Plymouth & South West Cooperative, Redman Equipment, Saison Information System, Saxo Bank, SimpleTech, Sistema Unico de Autofinanciamiento, SNA Chile, Sonnox, Spectra Energy, Staveley Communications,

Steag Ketek IT, Torex Retail Workforce Management Solutions, Travel Alberta Canada and Western Asset Management.

Significant existing partners and customers adopting technology from different Progress Software product lines, or making substantial additional deployments of Progress technology, include: AServint, Avicola La Guasima, British Broadcasting Corporation, Chocolates Garoto, Computers Unlimited, Coasul, Daimler Chrysler Bank, Damartex UK, Deutsche Telekom, GCZ Nederland, Generali France, Hastings Entertainment, Hemopa, HP AppIQ, IBM Ascential, Ingersoll-Rand, ISA, Marketworks, Maryland Transit Administration, Matrikon, McQuay International, Measurement Canada, Micros-Fidelio, Municipio de Merida Yucatan, Norfolk Southern, Olivenca, Pacific Motors Company, Pepsi Bottling Group, QBE Management, ReedHycalog, Rocom Networks, Sanofi-aventis DK, SG Automatisering, Smurfit Kappa South West, Sodexho, SoftBank, Stadtverwaltung Basel Stadt, State Street Bank & Trust Company, Stryker Trauma, Sveriges Televison, T-Systems Enterprise Services and Taiyo Yuden-Vista.

Business Outlook

The company is providing the following guidance for the fiscal year ending November 30, 2007:

— Revenue is expected to be in the range of $475 million to $485 million.

— GAAP diluted earnings per share are expected to be in the range of $1.06 to $1.09.

— On a non-GAAP basis, diluted earnings per share are expected to be in the range of $1.72 to $1.75.

— The non-GAAP projections exclude after-tax charges of approximately $16 million (36 cents per share) for stock-based compensation, approximately $11 million (24 cents per share) for amortization of acquired intangibles and an estimate of approximately $4 million (6 cents per share) for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company’s historical stock option grant practices.

The company is providing the following guidance for the third fiscal quarter ending August 31, 2007:

— Revenue is expected to be in the range of $118 million to $120 million.

— GAAP diluted earnings per share are expected to be in the range of 27 cents to 29 cents.

— On a non-GAAP basis, diluted earnings per share are expected to be in the range of 42 cents to 44 cents.

— The non-GAAP projections exclude after-tax charges of approximately $3.2 million (7 cents per share) for stock-based compensation, approximately $3 million (7 cents per share) for amortization of acquired intangibles and approximately $0.3 million (1 cent per share) for professional services fees associated with the stock option accounting investigation and shareholder derivative lawsuits related to the company’s historical stock option grant practices.

Legal Notice Regarding Non-GAAP Financial Information

The company provides non-GAAP 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. The company 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 of the company 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. Compensation of the company’s management and its employees is based in part on the performance of the business based on these non-GAAP measures. A reconciliation of non-GAAP adjustments to the company’s GAAP financial results is included in the tables below.

Conference Call

Progress Software’s conference call to discuss its second quarter results will be Webcast live today at 9:00 a.m. Eastern Daylight Time on the company’s Web site, located at www.progress.com/investors. The call will also be Webcast live via Yahoo (www.yahoo.com), Motley Fool (www.fool.com), Streetevents (www.streetevents.com), TD Waterhouse (www.tdwaterhouse.com) and Fidelity.com (www.fidelity.com). An archived version of the conference call will be available for replay.

About Progress Software Corporation

Progress Software Corporation (NASDAQ: PRGS) provides application infrastructure software for the development, deployment, integration and management of business applications. Our goal is to maximize the benefits of information technology while minimizing its 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 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 customer service and technical support, pricing pressures and the competitive environment in the software industry, business and consumer use of the Internet, and the company’s ability to penetrate international markets and manage its international operations; unanticipated consequences of the recent

restatement of the company’s financial statements; the risk that the NASDAQ Stock Market will de-list the company’s common stock; risks associated with the SEC’s formal investigation of the company’s option-grant practices; the risk that the company will face additional claims and proceedings in connection with those stock option grant practices, including additional shareholder litigation and additional proceedings by the other governmental agencies; and the financial impact of the foregoing, including potentially significant litigation defense costs and claims for indemnification and advancement of expenses by directors, officers and others. 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.

Progress, Apama, DataDirect Connect, DataDirect XML Converters, DataDirect XQuery, EasyAsk, OpenEdge, Sonic ESB, and Progress OpenEdge 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 or service marks contained herein are the property of their respective owners.

Progress Software Corporation
GAAP Condensed Consolidated Statements of Income

		Three Months Ended
		May 31,				May 31,				Percent
(In thousands except per share data)		2007				2006				Change
Revenue:
Software licenses		$	44,555			$	41,357				8	%
Maintenance and services			75,087				68,229				10	%
Total revenue			119,642				109,586				9	%
Costs of revenue:
Cost of software licenses			1,880				1,817				3	%
Cost of maintenance and services			16,871				15,125				12	%
Amortization of purchased technology			2,493				1,993				25	%
Total costs of revenue			21,244				18,935				12	%
Gross profit			98,398				90,651				9	%
Operating expenses:
Sales and marketing			45,745				44,983				2	%
Product development			20,389				19,346				5	%
General and administrative			19,029				13,034				46	%
Amortization of other acquired intangibles			1,946				1,984				(2	)%
Acquisition-related expenses			—				297				(100	)%
Total operating expenses			87,109				79,644				9	%
Income from operations			11,289				11,007				3	%
Other income, net			1,621				518				213	%
Income before provision for income taxes			12,910				11,525				12	%
Provision for income taxes			4,519				3,807				19	%
Net income		$	8,391			$	7,718				9	%
Earnings per share:
Basic		$	0.20			$	0.19				5	%
Diluted		$	0.19			$	0.18				6	%
Weighted average shares outstanding:
Basic			41,178				41,062				0	%
Diluted			43,636				43,473				0	%

		Six Months Ended
		May 31,				May 31,				Percent
		2007				2006				Change
Revenue:
Software licenses		$	89,284			$	84,137				6	%
Maintenance and services			145,587				129,370				13	%
Total revenue			234,871				213,507				10	%
Costs of revenue:
Cost of software licenses			3,552				4,027				(12	)%
Cost of maintenance and services			33,133				29,356				13	%
Amortization of purchased technology			4,984				3,517				42	%
Total costs of revenue			41,669				36,900				13	%
Gross profit			193,202				176,607				9	%
Operating expenses:
Sales and marketing			90,390				87,627				3	%
Product development			41,184				38,273				8	%
General and administrative			34,060				26,232				30	%
Amortization of other acquired intangibles			3,926				3,367				17	%
Acquisition-related expenses			—				1,831				(100	)%
Total operating expenses			169,560				157,330				8	%
Income from operations			23,642				19,277				23	%
Other income, net			2,711				1,215				123	%
Income before provision for income taxes			26,353				20,492				29	%
Provision for income taxes			9,224				6,865				34	%
Net income		$	17,129			$	13,627				26	%
Earnings per share:
Basic		$	0.42			$	0.33				27	%
Diluted		$	0.39			$	0.31				26	%
Weighted average shares outstanding:
Basic			41,123				40,781				1	%
Diluted			43,537				43,265				1	%

Progress Software Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures

		Three Months Ended May 31, 2007												Three Months Ended May 31, 2006
		As												As												Percent
(In thousands except per share data)		Reported				Adjustments				Non-GAAP				Reported				Adjustments				Non-GAAP				Change
Total revenue		$	119,642				—			$	119,642			$	109,586				—			$	109,586				9	%
Income from operations		$	11,289			$	14,008			$	25,297			$	11,007			$	10,098			$	21,105				20	%
Amortization of acquired intangibles			(4,439	)			4,439				—				(3,977	)			3,977				—
Acquisition-related expenses			—				—				—				(297	)			297				—
Stock option investigation (1)			(755	)			755				—				—				—				—
Stock-based compensation (2)			(8,814	)			8,814				—				(5,824	)			5,824				—
Operating margin percentage			9.4	%							21.1	%			10.0	%							19.3	%			10	%
Effect on provision for income taxes from above adjustments (3)		$	4,519			$	4,633			$	9,152			$	3,807			$	3,105			$	6,912				32	%
Net income		$	8,391			$	9,375			$	17,766			$	7,718			$	6,993			$	14,711				21	%
Earnings per share — diluted		$	0.19							$	0.41			$	0.18							$	0.34				21	%
Weighted average shares outstanding — diluted			43,636								43,636				43,473								43,473				0	%

		Six Months Ended May 31, 2007												Six Months Ended May 31, 2006
		As												As												Percent
		Reported				Adjustments				Non-GAAP				Reported				Adjustments				Non-GAAP				Change
Total revenue		$	234,871				—			$	234,871			$	213,507				—			$	213,507				10	%
Income from operations		$	23,642			$	25,176			$	48,818			$	19,277			$	20,481			$	39,758				23	%
Amortization of acquired intangibles			(8,910	)			8,910				—				(6,884	)			6,884				—
Acquisition-related expenses			—				—				—				(1,831	)			1,831				—
Stock option investigation (1)			(2,437	)			2,437				—				—				—				—
Stock-based compensation (2)			(13,829	)			13,829				—				(11,766	)			11,766				—
Operating margin percentage			10.1	%							20.8	%			9.0	%							18.6	%			12	%
Effect on provision for income taxes from above adjustments (3)		$	9,224			$	8,296			$	17,520			$	6,865			$	6,452			$	13,317				32	%
Net income		$	17,129			$	16,880			$	34,009			$	13,627			$	14,029			$	27,656				23	%
Earnings per share — diluted		$	0.39							$	0.78			$	0.31							$	0.64				22	%
Weighted average shares outstanding — diluted			43,537								43,537				43,265								43,265				1	%

		Three Months Ended May 31, 2007												Three Months Ended May 31, 2006
		GAAP				Adjustments				Non-GAAP				GAAP				Adjustments				Non-GAAP
Cost of software licenses		$	43			$	(43	)		$	—				37			$	(37	)		$	—
Cost of maintenance and services			511				(511	)			—				427				(427	)			—
Sales and marketing			2,678				(2,678	)			—				2,160				(2,160	)			—
Product development			1,715				(1,715	)			—				1,335				(1,335	)			—
General and administrative			3,867				(3,867	)			—				1,865				(1,865	)			—
		$	8,814			$	(8,814	)		$	—			$	5,824			$	(5,824	)		$	—

		Six Months Ended May 31, 2007												Six Months Ended May 31, 2006
		GAAP				Adjustments				Non-GAAP				GAAP				Adjustments				Non-GAAP
Cost of software licenses		$	74			$	(74	)		$	—			$	77			$	(77	)		$	—
Cost of maintenance and services			868				(868	)			—				877				(877	)			—
Sales and marketing			4,525				(4,525	)			—				4,384				(4,384	)			—
Product development			2,867				(2,867	)			—				2,689				(2,689	)			—
General and administrative			5,496				(5,496	)			—				3,739				(3,739	)			—
		$	13,830			$	(13,830	)		$	—			$	11,766			$	(11,766	)		$	—

Progress Software Corporation
Condensed Consolidated Balance Sheets

		May 31,				November 30,
(In thousands)		2007				2006
Assets
Cash and short-term investments		$	270,777			$	241,315
Accounts receivable, net			84,415				82,762
Other current assets			39,887				36,062
Total current assets			395,079				360,139
Property and equipment, net			60,239				57,585
Goodwill and intangible assets, net			223,862				232,927
Other assets			18,565				19,588
Total		$	697,745			$	670,239
Liabilities and shareholders’ equity
Accounts payable and other current liabilities		$	79,597			$	93,195
Short-term deferred revenue			133,237				120,974
Total current liabilities			212,834				214,169
Long-term deferred revenue			8,565				6,355
Other liabilities			5,222				5,151
Shareholders’ equity:
Common stock and additional paid-in capital			213,631				197,748
Retained earnings			257,493				246,816
Total shareholders’ equity			471,124				444,564
Total		$	697,745			$	670,239

Condensed Consolidated Statements of Cash Flows

		Six Months Ended May 31,
(In thousands except per share data)		2007				2006
Cash flows from operations:
Net income		$	17,129			$	13,627
Depreciation, amortization and other noncash items			28,128				23,951
Other changes in operating assets and liabilities			(5,919	)			(4,992	)
Net cash flows from operations			39,338				32,586
Capital expenditures			(9,622	)			(9,161	)
Acquisitions, net of cash acquired			—				(66,438	)
Share issuances (repurchases), net			(2,170	)			(2,520	)
Other			1,916				5,777
Net change in cash and short-term investments			29,462				(39,756	)
Cash and short-term investments, beginning of period			241,315				266,420
Cash and short-term investments, end of period		$	270,777			$	226,664