Progress Software Reports 2013 Fiscal First Quarter Results

  Progress Software Reports 2013 Fiscal First Quarter Results

Business Wire

BEDFORD, Mass. -- March 27, 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 first quarter ended
February28, 2013.

Revenue was $89.3 million compared to $87.2 million, a year over year increase
of 3% on a constant currency basis, or an increase of 2% using actual exchange
rates.

On a GAAP basis in the fiscal first quarter of 2013:

  *Income from operations was $14.7 million compared to $19.2 million in the
    same quarter last year;
  *Income from continuing operations was $9.1 million compared to $12.0
    million in the same quarter last year;
  *Net income was $31.1 million compared to $7.5 million in the same quarter
    last year, and includes the gains on the divestitures of the Actional,
    Artix, DataXtend, ObjectStore, Orbacus, Orbix, Savvion and Sonic product
    lines of $35.1 million; and
  *Diluted earnings per share from continuing operations was $0.16 compared
    to $0.19 in the same quarter last year.

On a non-GAAP basis in the fiscal first quarter of 2013:

  *Income from operations was $21.1 million compared to $26.7 million in the
    same quarter last year;
  *Operating margin was 24%;
  *Income from continuing operations was $13.5 million compared to $18.4
    million in the same quarter last year; and
  *Diluted earnings per share from continuing operations was $0.23 compared
    to $0.29 in the same quarter last year.

Phil Pead, President and Chief Executive Officer of Progress Software,
said,“Our performance in the quarter reflects continued momentum as we
execute on our strategic plan. Our initiatives to improve our operating margin
are well under way and I am pleased with our early progress. In addition, we
have begun to focus on building our foundation for future revenue growth by
releasing new and innovative functionality across our solution suites and
significantly increasing our customer engagement.”

Other fiscal first quarter 2013 results included the following:

  *Net cash received from the divestitures of the Actional, Artix, DataXtend,
    ObjectStore, Orbacus, Orbix, Savvion and Sonic product lines was $73.4
    million;
  *Under the previously announced and implemented 10b5-1 plan to repurchase
    $250.0 million of common stock by June 30, 2013, through February 28,
    2013, the company has repurchased 9.3 million shares for $194.7 million;
  *Cash, cash equivalents and short-term investments decreased to $321.4
    million from $355.2 million at the end of the fiscal fourth quarter of
    2012;
  *Cash outflows from operations were $25.1 million, compared to cash inflows
    from operations of $38.5 million in the same quarter in fiscal year 2012.
    Operating cash outflows in the first quarter of fiscal year 2013 includes
    $41.7 million in tax payments for the gains realized on the divestitures
    which occurred in the fourth quarter of fiscal year 2012 and the first
    quarter of fiscal year 2013; and
  *DSO from continuing operations was 65 days, compared to 70 days in the
    fiscal fourth quarter of 2012.

Business Outlook

Progress Software provides the following guidance for the fiscal second
quarter ending May 31, 2013:

  *On a constant currency basis, revenue growth is expected to be essentially
    flat compared to the fiscal second quarter of 2012; and
  *Non-GAAP operating margin is expected to be in the range of 21% 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 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
first quarter of 2013 will be broadcast live at 5:00 p.m. ET on Wednesday,
March27, 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 1-888-556-4997, pass code 7342287. 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) market conditions,
timing constraints and other factors that could impact Progress's ability to
complete the proposed share repurchases in fiscal 2013; (6) Progress's ability
to make technology acquisitions and to realize the expected benefits and
anticipated synergies from such acquisitions; (7) the continuing uncertainty
in the U.S. and international economies, which could result in fewer sales of
Progress's products and may otherwise harm Progress's business; (8) business
and consumer use of the Internet and the continuing adoption of Cloud
technologies; (9) the receipt and shipment of new orders; (10) Progress's
ability to expand its relationships with channel partners and to manage the
interaction of channel partners with its direct sales force; (11) the timely
release of enhancements to Progress's products and customer acceptance of new
products; (12) the positioning of Progress's products in its existing and new
markets; (13) variations in the demand for professional services and technical
support; (14) Progress's ability to penetrate international markets and manage
its international operations; and (15) 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, 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 the development, deployment and management of business applications
on-premise or in the cloud, on any platform or device,to any data
source,with enhanced performance, minimal IT complexity and low total cost of
ownership. Progress Software can be reached at www.progress.com or
1-781-280-4000.

Progress is a trademark 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
(In thousands, except per share     February 28,     February 29,     % Change
data)                               2013             2012
Revenue:
Software licenses                   $  32,666        $  31,889        2     %
Maintenance and services            56,603          55,324          2     %
Total revenue                       89,269          87,213          2     %
Costs of revenue:
Cost of software licenses           2,239            1,498            49    %
Cost of maintenance and             8,857            8,760            1     %
services
Amortization of acquired            286             392             (27   )%
intangibles
Total costs of revenue              11,382          10,650          7     %
Gross profit                        77,887          76,563          2     %
Operating expenses:
Sales and marketing                 31,535           29,205           8     %
Product development                 15,786           12,264           29    %
General and administrative          14,682           15,415           (5    )%
Amortization of acquired            209              242              (14   )%
intangibles
Restructuring expenses              960              —                100   %
Acquisition-related expenses        —               215             (100  )%
Total operating expenses            63,172          57,341          10    %
Income from operations              14,715          19,222          (23   )%
Other (expense) income, net         (548       )     270             (303  )%
Income from continuing              14,167          19,492          (27   )%
operations before income taxes
Provision for income taxes          5,044           7,542           (33   )%
Income from continuing              9,123           11,950          (24   )%
operations
Income (loss) from discontinued     21,995          (4,461     )     593   %
operations, net
Net income                          $  31,118       $  7,489        316   %
                                                                      
Earnings per share:
Basic:
Continuing operations               $  0.16          $  0.19          (16   )%
Discontinued operations             0.38            (0.07      )     643   %
Net income per share                $  0.54         $  0.12         350   %
Diluted:
Continuing operations               $  0.16          $  0.19          (16   )%
Discontinued operations             0.37            (0.07      )     629   %
Net income per share                $  0.53         $  0.12         342   %
Weighted average shares
outstanding:
Basic                               57,901           62,145           (7    )%
Diluted                             58,752           63,130           (7    )%

                                                             
CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                  
(In thousands)                                   February 28,     November 30,
                                                 2013             2012
Assets
Current assets:
Cash, cash equivalents and short-term            $  321,375       $   355,217
investments
Accounts receivable, net                         64,026           70,793
Other current assets                             47,440           32,779
Assets held for sale                             —               68,029
Total current assets                             432,841         526,818
Property and equipment, net                      61,528           63,071
Goodwill and intangible assets, net              230,678          231,229
Other assets                                     55,327          63,859
Total assets                                     $  780,374      $   884,977
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and other current               $  65,572        $   110,944
liabilities
Short-term deferred revenue                      115,564          103,925
Liabilities held for sale                        —               25,285
Total current liabilities                        181,136         240,154
Long-term deferred revenue                       1,284            2,817
Other long-term liabilities                      2,138            3,607
Shareholders’ equity:
Common stock and additional paid-in capital      264,810          300,333
Retained earnings                                331,006         338,066
Total shareholders’ equity                       595,816         638,399
Total liabilities and shareholders’ equity       $  780,374      $   884,977

                                                             
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                  
                                                 Three Months Ended
(In thousands)                                   February 28,     February 29,
                                                 2013             2012
Cash flows from operating activities:
Net income                                       $  31,118        $  7,489
Depreciation and amortization                    3,401            8,562
Stock-based compensation                         4,906            7,091
Net gains on sales of dispositions               (35,106    )     —
Other non-cash adjustments                       (2,927     )     359
Changes in operating assets and liabilities      (26,451    )     15,028     
Net cash flows from operating activities         (25,059    )     38,529     
Capital expenditures                             (898       )     (3,942     )
Redemptions and sales of                         25               225
auction-rate-securities
Issuances of common stock, net of                (80,069    )     13,973
repurchases
Proceeds from divestitures, net                  73,381           —
Other                                            (1,222     )     4,963      
Net change in cash, cash equivalents and         (33,842    )     53,748     
short-term investments
Cash, cash equivalents and short-term            355,217         261,416    
investments, beginning of period
Cash, cash equivalents and short-term            $  321,375      $  315,164 
investments, end of period

                                                                  
SUPPLEMENTAL INFORMATION
                                                                             
Revenue by Type
                                                                             
(In              Q1 2012        Q2 2012        Q3 2012        Q4 2012        Q1 2013
thousands)
License          $ 31,889       $ 21,813       $ 23,842       $ 35,726       $ 32,666
Maintenance      51,723         52,883         51,860         52,381         53,026
Professional     3,601         3,708         2,615         3,164         3,577
services
Total            $ 87,213      $ 78,404      $ 78,317      $ 91,271      $ 89,269
revenue
                                                                             
Revenue by Region
                                                                             
(In              Q1 2012        Q2 2012        Q3 2012        Q4 2012        Q1 2013
thousands)
North            $ 37,590       $ 32,900       $ 35,665       $ 40,219       $ 41,215
America
EMEA             34,698         32,447         29,782         34,224         35,547
Latin            7,979          7,539          7,234          8,655          7,196
America
Asia Pacific     6,946         5,518         5,636         8,173         5,311
Total            $ 87,213      $ 78,404      $ 78,317      $ 91,271      $ 89,269
revenue

                                              
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
                                                 
                                                 Three Months Ended
(In thousands, except per share data)            February 28,   February 29,
                                                 2013             2012
GAAP income from operations                      $  14,715        $  19,222
GAAP operating margin                            16         %     22         %
Amortization of acquired intangibles             495              634
Stock-based compensation ^(1)                    4,906            5,241
Restructuring expenses                           960              —
Acquisition-related expenses                     —                215
Litigation settlement                            —                900
Proxy contest-related costs                      —               472        
Total operating adjustments                      6,361           7,462      
Non-GAAP income from operations                  $  21,076       $  26,684  
Non-GAAP operating margin                        24         %     31         %
                                                                  
GAAP income from continuing operations           $  9,123         $  11,950
Operating adjustments (from above)               6,361            7,462
Income tax adjustment                            (1,941     )     (993       )
Total income from continuing operations          4,420           6,469      
adjustments
Non-GAAP income from continuing operations       $  13,543       $  18,419  
                                                                  
GAAP diluted earnings per share from             $  0.16          $  0.19
continuing operations
Income from continuing operations                0.08            0.10       
adjustments (from above)
Non-GAAP diluted earnings per share from         $  0.23         $  0.29    
continuing operations
                                                                  
Diluted weighted average shares outstanding      58,752           63,130
                                                                  
                                                                  
(1) Stock-based compensation is included in the GAAP statements of income, as
follows:
                                                                  
Cost of revenue                                  $  230           $  282
Sales and marketing                              1,261            1,522
Product development                              1,637            1,013
General and administrative                       1,778           2,424      
Stock-based compensation from continuing         $  4,906        $  5,241   
operations

                             
                                Three Months Ended
(In thousands, except per       February 28,   February 29,   November 30,
share data)                     2013             2012             2012
GAAP costs of revenue           $  11,382        $  10,650        $   11,087
GAAP operating expenses         63,172          57,341          63,277
GAAP expenses                   74,554          67,991          74,364
Operating adjustments (from     6,361           7,462           5,053
above) ^ (2)
Non-GAAP expenses               $  68,193       $  60,529       $   69,311
                                                                      

(2) Refer to our Form 8-K filed on January 3, 2013 for details of the non-GAAP
operating adjustments for the three months ended November 30, 2012.

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
 
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