Progress Software Reports 2012 Fiscal Fourth Quarter and Year End Results

  Progress Software Reports 2012 Fiscal Fourth Quarter and Year End Results

Business Wire

BEDFORD, Mass. -- January 3, 2013

Progress Software Corporation (NASDAQ: PRGS), a global software company that
simplifies and enables the development, deployment and management of business
applications, announced today results for its fiscal fourth quarter and fiscal
year ended November30, 2012.

As of the fiscal fourth quarter of 2012, the results of all non-Core product
lines are reported in discontinued operations because those product lines have
been divested or are under agreement to be divested, and have also met the
accounting criteria for such classification. Continuing operations include the
results of the Core product lines and principally general and administrative
costs related to the non-Core product lines, which do not qualify for
discontinued operations. References to the Core product lines or Core segment
include Progress® OpenEdge® platform, DataDirect® Connect products and the
Decision Analytics portfolio (comprising Progress Apama®, Progress Corticon®
BRMS and the Progress Control Tower®). References to the non-Core product
lines include Actional, Artix, DataXtend, FuseSource, ObjectStore, Orbacus,
Orbix, Savvion, Shadow and Sonic.

Revenue from continued and discontinued operations was $121.7 million in the
fiscal fourth quarter of 2012, compared to $136.3 million in the same quarter
last year. Non-GAAP EPS was $0.42 in the fiscal fourth quarter of 2012,
compared to $0.34 in the same quarter last year.

Consolidated results in the fiscal fourth quarter of 2012 were:

  *Revenue was $91.3 million, essentially flat on a constant currency basis
    year over year, or down 2% using actual exchange rates, and excludes $30.5
    million and $42.8 million of revenue from discontinued operations in the
    current quarter and same quarter last year, respectively;
  *Income from operations was $16.9 million compared to $28.4 million in the
    same quarter last year;
  *Income from continuing operations was $11.6 million compared to $17.2
    million in the same quarter last year;
  *Diluted earnings per share from continuing operations was $0.18 compared
    to $0.27 in the same quarter last year; and
  *Non-GAAP diluted earnings per share from continuing operations was $0.23
    compared to $0.36 in the same quarter last year.

Results for the Core segment in the fiscal fourth quarter of 2012 were:

  *Core revenue was $91.3 million, essentially flat to the same quarter last
    year on a constant currency basis, or a decrease of 2% using actual
    exchange rates;
  *Core income from operations was $27.2 million compared to $42.7 million in
    the same quarter last year; and
  *Operating margin for the Core segment was 30%.

Phil Pead, President and Chief Executive Officer of Progress Software,
said,"Overall, we are pleased with our performance in the fiscal fourth
quarter. During the quarter we remained focused on executing on our strategic
plan and now enter 2013 with substantially all non-Core assets divested. I am
also pleased that we have hired Chris Perkins, who will start as Chief
Financial Officer on February 1, 2013."

Mr. Pead continued, "Our focus for 2013 is to improve our operating margins,
build the foundation for future revenue growth by expanding the functionality
of our existing solutions and begin to leverage our Core competencies to
enable application development using our platform, data integration and
connectivity and data analytics in the Cloud."

Other fiscal fourth quarter 2012 results included the following:

  *Cash flows from operations were $28.4 million, an increase from $8.2
    million in the same quarter in fiscal year 2011;
  *Net cash received from the divestitures of FuseSource and Shadow was $46.6
    million;
  *The company repurchased 4.5 million shares of its common stock for $88.4
    million as part of its previously announced and implemented 10b5-1 plan to
    repurchase $250.0 million by June 30, 2013;
  *Cash, cash equivalents and short-term investments increased to $355.2
    million from $261.4 million at the end of the fiscal fourth quarter of
    2011;
  *DSO from continuing operations was 70 days, compared to DSO of 73 days in
    the fiscal fourth quarter of 2011; and
  *Headcount was 1,395, down 7% from the end of last quarter and down 20%
    from one year ago.

Business Outlook

Progress Software provides the following guidance for the fiscal first quarter
ending February 28, 2013:

  *On a constant currency basis, revenue growth is expected to be essentially
    flat compared to the fiscal first quarter of 2012; and
  *Non-GAAP operating margin is expected to be in the range of 20% to 24%.

The non-GAAP operating margin guidance excludes the items we traditionally
exclude from our non-GAAP reporting metrics: amortization of intangible assets
of $0.5 million to $0.6 million and stock-based compensation of $5.5 million
to $6.4 million, for a GAAP operating margin in the range of 12% to 16%.

Conference Call

The Progress Software quarterly investor conference call to review its fiscal
fourth quarter and fiscal year end of 2012 will be broadcast live at 5:00 p.m.
ET on Thursday, January3, 2013 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 1-888-715-1397, pass code 4194275. 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 at www.progress.com within the investor relations section.

Note Regarding Forward-Looking Statements

This press release contains statements that are “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Progress
has identified some of these forward-looking statements with words like
“believe,” “may,” “could,” “would,” “might,” “should,” “expect,” “intend,”
“plan,” “target,” “anticipate” and “continue,” the negative of these words,
other terms of similar meaning or the use of future dates. Forward-looking
statements in this press release include, but are not limited to, statements
regarding Progress's strategic plan and the expected timing for completion;
the components of that plan including operational restructuring, product
divestitures and return of capital to shareholders; acquisitions; future
revenue growth, operating margin and cost savings; product development,
strategic partnering and marketing initiatives; the growth rates of certain
markets; and other statements regarding the future operation, direction and
success of Progress's business. There are a number of factors that could cause
actual results or future events to differ materially from those anticipated by
the forward-looking statements, including, without limitation:

(1) Progress's ability to realize the expected benefits and cost savings from
its strategic plan; (2) market acceptance of Progress's strategic plan and
product development initiatives; (3) disruption caused by implementation of
the strategic plan and related restructuring and divestitures on relationships
with employees, customers, ISVs, other channel partners, vendors and other
business partners; (4) pricing pressures and the competitive environment in
the software industry and Platform-as-a-Service market; (5) Progress's ability
to complete the proposed product divestitures in a timely manner, at favorable
prices or at all; (6) market conditions, timing constraints and other factors
that could impact Progress's ability to complete the proposed share
repurchases in fiscal 2013; (7) the accuracy of Progress's methodology for
allocating non-dedicated costs and expenses (including general and
administrative expenses) to its Core and non-Core segments; (8) Progress's
ability to make technology acquisitions and to realize the expected benefits
and anticipated synergies from such acquisitions; (9) the continuing weakness
in the U.S. and international economies, which could result in fewer sales of
Progress's products and/or delays in the implementation of Progress's
strategic plan and may otherwise harm Progress's business; (10) business and
consumer use of the Internet and the continuing adoption of Cloud
technologies; (11) the receipt and shipment of new orders; (12) Progress's
ability to expand its relationships with channel partners and to manage the
interaction of channel partners with its direct sales force; (13) the timely
release of enhancements to Progress's products and customer acceptance of new
products; (14) the positioning of Progress's products in its existing and new
markets; (15) variations in the demand for professional services and technical
support; (16) Progress's ability to penetrate international markets and manage
its international operations; and (17) changes in exchange rates. For further
information regarding risks and uncertainties associated with Progress's
business, please refer to Progress's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the fiscal year ended
November 30, 2011, as amended, and Quarterly Reports on Form 10-Q for the
fiscal quarters ended February 29, 2012, May 31, 2012 and August 31, 2012.
Progress undertakes no obligation to update any forward-looking statements,
which speak only as of the date of this press release.

Progress Software Corporation

Progress Software Corporation (NASDAQ: PRGS) is a global software company that
simplifies and enables the development, deployment and management of business
applications on-premise or on any Cloud, on any platform and on any device
with minimal IT complexity and low total cost of ownership. Progress Software
can be reached at www.progress.com or 1-781-280-4000.

Apama, Corticon, DataDirect Connect, OpenEdge, the Progress Control Tower,
Artix, Orbix and Orbacus 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                     Three Months Ended                 Fiscal Year Ended
                      November    November              November     November    
(In thousands,                                  %                                     %
except per share      30, 2012     30, 2011     Change    30, 2012      30, 2011      Change
data)
Revenue:
Software licenses     $ 35,726     $ 34,225     4    %    $ 113,270     $ 125,966     (10 )%
Maintenance and       55,545      59,319      (6   )%   221,935      234,738      (5  )%
services
Total revenue         91,271      93,544      (2   )%   335,205      360,704      (7  )%
Costs of revenue:
Cost of software      1,777        1,175        51   %    6,112         5,430         13  %
licenses
Cost of maintenance   9,020        9,324        (3   )%   36,192        37,238        (3  )%
and services
Amortization of
acquired              290         509         (43  )%   1,259        2,600        (52 )%
intangibles
Total costs of        11,087      11,008      1    %    43,563       45,268       (4  )%
revenue
Gross profit          80,184      82,536      (3   )%   291,642      315,436      (8  )%
Operating expenses:
Sales and marketing   35,414       26,787       32   %    117,855       102,618       15  %
Product development   13,415       11,023       22   %    53,017        44,876        18  %
General and           14,216       16,120       (12  )%   62,053        61,816        —
administrative
Amortization of
acquired              234          153          53   %    962           966           —
intangibles
Restructuring         (2       )   (505     )   100  %    6,885         3,383         104 %
expenses
Acquisition-related   —           536         (100 )%   215          536          (60 )%
expenses
Total operating       63,277      54,114      17   %    240,987      214,195      13  %
expenses
Income from           16,907      28,422      (41  )%   50,655       101,241      (50 )%
operations
Other (expense)       (680     )   85          (900 )%   196          (519      )   138 %
income, net
Income from
continuing            16,227      28,507      (43  )%   50,851       100,722      (50 )%
operations before
income taxes
Provision for         4,645       11,286      (59  )%   17,440       34,380       (49 )%
income taxes
Income from
continuing            11,582      17,221      (33  )%   33,411       66,342       (50 )%
operations
Income (loss) from
discontinued          24,443      (5,046   )   584  %    14,033       (6,713    )   309 %
operations, net
Net income            $ 36,025    $ 12,175    196  %    $ 47,444     $ 59,629     (20 )%
                                                                                      
Earnings per share:
Basic:
Continuing            $ 0.18       $ 0.27       (33  )%   $ 0.53        $ 1.01        (48 )%
operations
Discontinued          0.39        (0.08    )   588  %    0.22         (0.10     )   320 %
operations
Net income per        $ 0.57      $ 0.19      200  %    0.75         $ 0.91       (18 )%
share
Diluted
Continuing            $ 0.18       $ 0.27       (33  )%   $ 0.52        $ 0.98        (47 )%
operations
Discontinued          0.38        (0.08    )   575  %    0.22         (0.10     )   320 %
operations
Net income per        $ 0.57      $ 0.19      200  %    $ 0.74       $ 0.88       (16 )%
share
Weighted average
shares outstanding:
Basic                 62,859       63,074       —         62,881        65,705        (4  )%
Diluted               63,576       63,973       (1   )%   63,741        67,540        (6  )%

CONDENSED CONSOLIDATED BALANCE SHEETS

                                                  November 30,  November 30,
(In thousands)                                     2012           2011
Assets
Current assets:
Cash, cash equivalents and short-term              $  355,217     $   261,416
investments
Accounts receivable, net                           70,793         110,927
Other current assets                               32,779         35,568
Assets held for sale                               68,029        —
Total current assets                               526,818       407,911
Property and equipment, net                        63,071         66,206
Goodwill and intangible assets, net                231,229        320,619
Other assets                                       63,859        69,527
Total assets                                       $  884,977    $   864,263
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and other current liabilities     $  110,944     $   80,417
Short-term deferred revenue                        103,925        145,727
Liabilities held for sale                          25,285        —
Total current liabilities                          240,154       226,144
Long-term deferred revenue                         2,817          6,619
Other long-term liabilities                        3,607          6,390
Shareholders’ equity:
Common stock and additional paid-in capital        300,333        309,221
Retained earnings                                  338,066       315,889
Total shareholders’ equity                         638,399       625,110
Total liabilities and shareholders’ equity         $  884,977    $   864,263

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                         Three Months Ended         Fiscal Year Ended
                          November     November      November     November
                          30,           30,           30,           30,
(In thousands)            2012          2011          2012          2011
Cash flows from
operating activities:
Net income                $ 36,025      $ 12,175      $ 47,444      $ 59,629
Depreciation and          5,597         10,445        30,966        35,078
amortization
Stock-based               6,729         7,244         28,233        25,999
compensation
Net gains and
impairment on sales of    (36,504   )   —             (36,504   )   —
dispositions and assets
held for sale
Other non-cash            (896      )   6,293         866           4,472
adjustments
Changes in operating      17,450       (27,991   )   33,110       1,116     
assets and liabilities
Net cash flows from       28,401       8,166        104,115      126,294   
operating activities
Capital expenditures      (1,129    )   (3,091    )   (7,735    )   (17,047   )
Redemptions and sales
of                        6,030         —             8,955         6,300
auction-rate-securities
Issuances of common
stock, net of             (76,392   )   (56,941   )   (52,108   )   (150,337  )
repurchases
Payments for
acquisitions, net of      —             (22,900   )   —             (22,900   )
cash acquired
Proceeds from
divestitures, net of      46,590        —             46,590        —
direct costs
Other                     (490      )   (10,361   )   (6,016    )   (3,290    )
Net change in cash,
cash equivalents and      3,010        (85,127   )   93,801       (60,980   )
short-term investments
Cash, cash equivalents
and short-term            352,207      346,543      261,416      322,396   
investments, beginning
of period
Cash, cash equivalents
and short-term            $ 355,217    $ 261,416    $ 355,217    $ 261,416 
investments, end of
period

RESULTS OF OPERATIONS BY SEGMENT

                    Three Months Ended           Fiscal Year Ended
                     November 30,  November 30,   November 30,  November 30,
(In thousands)       2012           2011           2012           2011
Revenue:
Core segment         $  91,271      $  93,544      $  335,205     $  360,704
Non-Core segment     —             —             —             —          
Total revenue        $  91,271     $  93,544     $  335,205    $  360,704 
Income (loss) from
operations:
Core segment         $  27,157      $  42,708      $  111,276     $  161,900
Non-Core segment     (5,197     )   (8,351     )   (27,030    )   (32,306    )
Unallocated items    (5,053     )   (5,935     )   (33,591    )   (28,353    )
^(1)
Total income from    $  16,907     $  28,422     $  50,655     $  101,241 
operations
                                                                  


(1) The following items are not allocated to our segments, as we manage and
report our business using these items on a consolidated company basis only:
stock-based compensation, amortization of acquired intangibles, transition
expenses, restructuring expenses, acquisition-related expenses, litigation
settlement and proxy-related costs.

SUPPLEMENTAL INFORMATION

Revenue by Type
                                                                                           
(In            Q4 2011       Q1 2012       Q2 2012       Q3 2012       Q4 2012       FY 2012       FY 2011
thousands)
License        $ 34,225      $ 31,889      $ 21,813      $ 23,842      $ 35,725      $ 113,269     $ 125,967
Maintenance    54,652        51,723        52,883        51,860        52,381        208,847       217,371
Professional   4,667        3,601        3,708        2,615        3,165        13,089       17,366
services
Total          $ 93,544     $ 87,213     $ 78,404     $ 78,317     $ 91,271     $ 335,205    $ 360,704
revenue
                                                                                                   
Revenue by
Region
                                                                                                   
(In            Q4 2011       Q1 2012       Q2 2012       Q3 2012       Q4 2012       FY 2012       FY 2011
thousands)
North          $ 39,553      $ 37,590      $ 32,900      $ 35,665      $ 40,219      $ 146,374     $ 146,572
America
EMEA           38,182        34,698        32,447        29,782        34,224        131,151       153,206
Latin          8,975         7,979         7,539         7,234         8,655         31,407        34,349
America
Asia Pacific   6,834        6,946        5,518        5,636        8,173        26,273       26,577
Total          $ 93,544     $ 87,213     $ 78,404     $ 78,317     $ 91,271     $ 335,205    $ 360,704
revenue
                                                                                                   
Revenue Included in Net Income
                                                                                                   
(In            Q4 2011       Q1 2012       Q2 2012       Q3 2012       Q4 2012       FY 2012       FY 2011
thousands)
Continuing     $ 93,544      $ 87,213      $ 78,404      $ 78,317      $ 91,271      $ 335,205     $ 360,704
operations
Discontinued   42,796       37,213       36,192       33,664       30,451       137,520      172,891
operations
Total          $ 136,340    $ 124,426    $ 114,596    $ 111,981    $ 121,722    $ 472,725    $ 533,595

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Reconciliation of GAAP to non-GAAP Income from Operations and Operating Margin
                                                               
                       Three Months Ended           Fiscal Year Ended
                       November 30,   November 30,  November 30,   November
                                                                   30,
(In thousands,
except per share       2012           2011          2012           2011
data)
GAAP income from       $  16,907      $  28,422     $  50,655      $ 101,241
operations
GAAP operating         19         %   30         %  15         %   28        %
margin
Amortization of        524            662           2,221          3,566
acquired intangibles
Stock-based            4,531          5,181         20,111         20,108
compensation ^(1)
Transition expenses    —              61            —              760
Restructuring          (2         )   (505       )  6,885          3,383
expenses
Acquisition-related    —              536           215            536
expenses
Litigation             —              —             900            —
settlement
Proxy
contest-related        —             —            3,259         —         
costs
Total non-GAAP         5,053         5,935        33,591        28,353    
adjustments
Non-GAAP income from   $  21,960     $  34,357    $  84,246     $ 129,594 
operations
Non-GAAP operating     24         %   37         %  25         %   36        %
margin
                                                                   
                                                                   
(1) Stock-based compensation is included in the GAAP statements of income, as
follows:
                                                                   
Cost of revenue        $  174         $  316        $  898         $ 760
Sales and marketing    639            882           4,280          3,258
Product development    981            1,022         3,950          3,202
General and            2,737         2,961        10,983        12,888    
administrative
Stock-based
compensation from      $  4,531      $  5,181     $  20,111     $ 20,108  
continuing
operations

Reconciliation of GAAP to non-GAAP Diluted Earnings per Share from Continuing
Operations
                                                                
                        Three Months Ended           Fiscal Year Ended
                        November 30,   November 30,  November 30,   November
                                                                    30,
(In thousands, except   2012           2011          2012           2011
per share data)
GAAP income from        $  11,582      $  17,221     $  33,411      $ 66,342
continuing operations
Amortization of         524            662           2,221          3,566
acquired intangibles
Stock-based             4,531          5,181         20,111         20,108
compensation
Transition expenses     —              61            —              760
Restructuring           (2         )   (505       )  6,885          3,383
expenses
Acquisition-related     —              536           215            536
expenses
Litigation settlement   —              —             900            —
Proxy contest-related   —              —             3,259          —
costs
Income tax adjustment   (2,094     )   (84        )  (9,299     )   (8,229   )
Total non-GAAP          2,959         5,851        24,292        20,124   
adjustments
Non-GAAP income from    $  14,541     $  23,072    $  57,703     $ 86,466 
continuing operations
                                                                    
                                                                    
GAAP diluted earnings
per share from          $  0.18        $  0.27       $  0.52        $ 0.98
continuing operations
Total non-GAAP
adjustments (from       0.05          0.09         0.38          0.30     
above)
Non-GAAP diluted
earnings per share      $  0.23       $  0.36      $  0.91       $ 1.28   
from continuing
operations
                                                                    
Diluted weighted
average shares          63,576         63,973        63,741         67,540
outstanding

Reconciliation of GAAP to non-GAAP Diluted Earnings per Share
                                                                
                        Three Months Ended           Fiscal Year Ended
                        November 30,   November 30,  November 30,   November
                                                                    30,
(In thousands, except   2012           2011          2012           2011
per share data)
GAAP net income         $  36,025      $  12,175     $  47,444      $ 59,629
Amortization of         2,725          5,682         19,090         23,746
acquired intangibles
Stock-based             6,729          7,244         28,233         25,999
compensation ^(1)
Transition expenses     —              109           —              1,163
Restructuring           4,036          —             17,742         4,627
expenses
Acquisition-related     —              536           215            536
expenses
Litigation settlement   —              —             900            —
Proxy contest-related   —              —             3,259          —
costs
Net gains and loss on
sales of dispositions   (36,504    )   —             (36,504    )   —
and assets held for
sale
Income tax adjustment   13,763        (3,723     )  (2,798     )   (16,592  )
Total non-GAAP          (9,251     )   9,848        30,137        39,479   
adjustments
Non-GAAP net income     $  26,774     $  22,023    $  77,581     $ 99,108 
                                                                    
                                                                    
GAAP diluted earnings   $  0.57        $  0.19       $  0.74        $ 0.88
per share
Total non-GAAP
adjustments (from       (0.15      )   0.15         0.47          0.58     
above)
Non-GAAP diluted        $  0.42       $  0.34      $  1.22       $ 1.47   
earnings per share
                                                                    
Diluted weighted
average shares          63,576         63,973        63,741         67,540
outstanding

Contact:

Investor Contact:
Progress Software
Tom Barth, +1 781-280-4135
tobarth@progress.com
or
Press Contact:
Progress Software
Rick Lacroix, +1 781-280-4604
rlacroix@progress.com