Progress Software Reports 2013 Fiscal Fourth Quarter and Year End Results

  Progress Software Reports 2013 Fiscal Fourth Quarter and Year End Results

Business Wire

BEDFORD, Mass. -- January 9, 2014

Progress Software Corporation (NASDAQ: PRGS), a global software company that
simplifies and enables the development, deployment and management of business
applications, today announced results for its fiscal fourth quarter and fiscal
year ended November30, 2013.

Revenue from continuing operations was $91.0 million compared to $86.6 million
in the same quarter last year, a year over year increase of 5% on an actual
and constant currency basis.

Additional financial highlights included:

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

  *Income from operations was $23.9 million compared to $18.7 million in the
    same quarter last year;
  *Income from continuing operations was $14.6 million compared to $12.5
    million in the same quarter last year;
  *Net income was $15.0 million compared to $36.0 million in the same quarter
    last year; and
  *Diluted earnings per share from continuing operations was $0.28 compared
    to $0.20 in the same quarter last year.

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

  *Income from operations was $33.5 million compared to $24.2 million in the
    same quarter last year;
  *Operating margin was 37% compared to 28% in the same quarter last year;
  *Income from continuing operations was $22.5 million compared to $16.0
    million in the same quarter last year; and
  *Diluted earnings per share from continuing operations was $0.43 compared
    to $0.25 in the same quarter last year.

Phil Pead, president and chief executive officer at Progress Software, said,
“2013 was a year of significant accomplishments and exceeded expectations for
Progress, both in terms of our commitments to improving the company’s
efficiency and building a foundation for future growth. We completed our
divestitures ahead of schedule, reorganized our company, and successfully
introduced innovative new technologies in our core businesses. As we enter
2014, Progress is well positioned to meet the needs of the on-premise market
as well as to take advantage of the rapid growth of cloud application
development with our Pacific platform.”

Pead added, “In addition, our introduction of a new brand identity in 2013
symbolizes the energy and excitement as Progress enters this new era. It
reflects our vision to fuel the innovation and growth of customers and
partners worldwide with technology that makes it easy to take the spark of an
idea and turn it into business reality.”

Other fiscal fourth quarter 2013 metrics and recent results included:

  *Completion in October 2013 of the previously announced and implemented
    10b5-1 plan to repurchase $100.0 million of common stock by December 31,
    2013;
  *Cash, cash equivalents and short-term investments were $231.4 million;
  *Cash inflows from operations were $17.9 million compared to cash inflows
    from operations of $28.4 million in the same quarter in fiscal year 2012;
    and
  *DSO from continuing operations was 66 days, compared to 62 days in the
    fiscal third quarter of 2013.

Business Outlook

Progress Software provides the following guidance for the fiscal year ending
November 30, 2014:

  *On a constant currency basis, revenue is expected to be between $340
    million and $350 million;
  *Non-GAAP earnings per share is expected to be between $1.40 and $1.50;
  *Non-GAAP operating margin is expected to be between 33% and 34%;
  *Free cash flow is expected to be between $80 million and $85 million; and
  *Non-GAAP effective tax rate is expected to be between 32% and 33%.

Progress Software provides the following guidance for the first fiscal quarter
ending February 28, 2014:

  *On a constant currency basis, revenue is expected to be between $80
    million and $82 million; and
  *Non-GAAP earnings per share is expected to be between $0.29 and $0.31.

Free cash flow is equal to cash flows from operating activities less purchases
of property and equipment and capitalized software development costs.

Share Repurchase Program

Progress Software also announced today that its Board of Directors has
authorized a new $100 million share repurchase program. The timing and amount
of any shares repurchased will be determined by management based on its
evaluation of market conditions and other factors, and the Board of Directors
may choose to suspend, expand or discontinue the repurchase program at any
time.

Conference Call

The Progress Software quarterly investor conference call to review its fiscal
fourth quarter of 2013 will be broadcast live at 5:00 p.m. ET on Thursday,
January9, 2014 and can be accessed 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 1-888-378-0320, pass code 9129796. The
conference call will include 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; 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) Market acceptance of Progress’s strategy and product development
initiatives; (2) pricing pressures and the competitive environment in the
software industry and Platform-as-a-Service market; (3) Progress's ability to
successfully manage transitions to new business models and markets, including
an increased emphasis on a cloud and subscription strategy; (4) Progress's
ability to make technology acquisitions and to realize the expected benefits
and anticipated synergies from such acquisitions; (5) 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;
(6) business and consumer use of the Internet and the continuing adoption of
Cloud technologies; (7) the receipt and shipment of new orders; (8) Progress's
ability to expand its relationships with channel partners and to manage the
interaction of channel partners with its direct sales force; (9) the timely
release of enhancements to Progress's products and customer acceptance of new
products; (10) the positioning of Progress's products in its existing and new
markets; (11) variations in the demand for professional services and technical
support; (12) Progress's ability to penetrate international markets and manage
its international operations; and (13) 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 and its Quarterly Reports on Form 10-Q for the fiscal
quarters ended February 28, 2013, May 31, 2013 and August 31, 2013. 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 atwww.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                       Fiscal Year Ended
(In thousands,          November       November       %          November        November
except per share        30,          30,          Change     30,           30,           % Change
data)                   2013           2012                      2013            2012
Revenue:
Software licenses       $ 37,392       $ 33,810       11  %      $ 122,312       $ 106,626       15    %
Maintenance and         53,588        52,832        1   %      211,684        210,986        —     %
services
Total revenue           90,980        86,642        5   %      333,996        317,612        5     %
Costs of revenue:
Cost of software        1,856          1,659          12  %      6,889           5,776           19    %
licenses
Cost of maintenance     5,710          7,865          (27 )%     26,753          29,878          (10   )%
and services
Amortization of
acquired                529           138           283 %      1,340          660            103   %
intangibles
Total costs of          8,095         9,662         (16 )%     34,982         36,314         (4    )%
revenue
Gross profit            82,885        76,980        8   %      299,014        281,298        6     %
Operating expenses:
Sales and marketing     26,911         31,753         (15 )%     105,997         98,838          7     %
Product development     14,428         11,113         30  %      57,336          44,443          29    %
General and             13,604         14,200         (4  )%     55,994          61,989          (10   )%
administrative
Amortization of
acquired                211            198            7   %      760             820             (7    )%
intangibles
Restructuring           2,856          1,057          170 %      11,983          7,204           66    %
expenses
Acquisition-related     975           —             100 %      3,204          215            1,390 %
expenses
Total operating         58,985        58,321        1   %      235,274        213,509        10    %
expenses
Income from             23,900        18,659        28  %      63,740         67,789         (6    )%
operations
Other (expense)         (294     )     (680     )     57  %      (957      )     196            (588  )%
income, net
Income from
continuing              23,606        17,979        31  %      62,783         67,985         (8    )%
operations before
income taxes
Provision for           8,988         5,485         64  %      23,006         23,031         —     %
income taxes
Income from
continuing              14,618        12,494        17  %      39,777         44,954         (12   )%
operations
Income (loss) from
discontinued            418           23,531        (98 )%     35,130         2,490          1,311 %
operations, net
Net income              $ 15,036      $ 36,025      (58 )%     $ 74,907       $ 47,444       58    %
                                                                                                 
Earnings per share:
Basic:
Continuing              $ 0.28         $ 0.20         40  %      $ 0.73          $ 0.71          3     %
operations
Discontinued            0.01          0.37          (97 )%     0.64           0.04           1,500 %
operations
Net income per          $ 0.29        $ 0.57        (49 )%     1.37           $ 0.75         83    %
share
Diluted:
Continuing              $ 0.28         $ 0.20         40  %      $ 0.72          $ 0.71          1     %
operations
Discontinued            0.01          0.37          (97 )%     0.63           0.04           1,475 %
operations
Net income per          $ 0.29        $ 0.57        (49 )%     $ 1.35         $ 0.74         82    %
share
Weighted average
shares outstanding:
Basic                   51,731         62,859         (18 )%     54,516          62,881          (13   )%
Diluted                 52,655         63,576         (17 )%     55,379          63,741          (13   )%
                                                                                                       

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                             
(In thousands)                                   November 30,     November 30,
                                                 2013             2012
Assets
Current assets:
Cash, cash equivalents and short-term            $  231,440       $   355,217
investments
Accounts receivable, net                         66,784           70,793
Other current assets                             39,587           32,779
Assets held for sale                             —               68,029
Total current assets                             337,811         526,818
Property and equipment, net                      57,030           63,071
Goodwill and intangible assets, net              234,236          231,229
Other assets                                     53,110          63,859
Total assets                                     $  682,187      $   884,977
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and other current               $  68,186        $   110,944
liabilities
Short-term deferred revenue                      96,393           103,925
Liabilities held for sale                        —               25,285
Total current liabilities                        164,579         240,154
Long-term deferred revenue                       1,144            2,817
Other long-term liabilities                      2,810            3,607
Shareholders’ equity:
Common stock and additional paid-in capital      205,307          300,333
Retained earnings                                308,347         338,066
Total shareholders’ equity                       513,654         638,399
Total liabilities and shareholders’ equity       $  682,187      $   884,977
                                                                      

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       
                            Three Months Ended              Fiscal Year Ended
                            November        November        November        November
(In thousands)              30,           30,             30,           30,
                            2013            2012            2013            2012
Cash flows from
operating activities:
Net income                  $ 15,036        $ 36,025        $ 74,907        $ 47,444
Depreciation and            3,061           5,596           14,435          30,965
amortization
Stock-based                 5,039           6,729           21,399          28,233
compensation
Net gains on sales of       (610      )     (36,504   )     (71,601   )     (36,504   )
dispositions
Other non-cash              8,985           (895      )     9,432           867
adjustments
Changes in operating        (13,652   )     17,450         (43,992   )     33,110    
assets and liabilities
Net cash flows from         17,859         28,401         4,580          104,115   
operating activities
Capital expenditures        (2,073    )     (1,129    )     (5,062    )     (7,735    )
Redemptions and sales
of                          —               6,030           25              8,955
auction-rate-securities
Issuances of common
stock, net of               (30,032   )     (76,392   )     (222,107  )     (52,108   )
repurchases
Payments for
acquisitions, net of        —               —               (9,450    )     —
cash acquired
Proceeds from               —               46,590          111,120         46,590
divestitures, net
Other                       3,704          (490      )     (2,883    )     (6,016    )
Net change in cash,
cash equivalents and        (10,542   )     3,010          (123,777  )     93,801    
short-term investments
Cash, cash equivalents
and short-term              241,982        352,207        355,217        261,416   
investments, beginning
of period
Cash, cash equivalents
and short-term              $ 231,440      $ 355,217      $ 231,440      $ 355,217 
investments, end of
period
                                                                                      

SUPPLEMENTAL INFORMATION
                                                                                                 
Revenue from continuing operations by Type
                           
(In              Q4 2012        Q1 2013        Q2 2013        Q3 2013        Q4 2013        FY 2013         FY 2012
thousands)
License          $ 33,810       $ 29,907       $ 29,347       $ 25,666       $ 37,392       $ 122,312       $ 106,626
Maintenance      50,891         51,456         50,419         49,752         51,230         202,857         202,691
Professional     1,941         2,370         1,939         2,160         2,358         8,827          8,295
services
Total            $ 86,642      $ 83,733      $ 81,705      $ 77,578      $ 90,980      $ 333,996      $ 317,612
revenue
                                                                                                            
Revenue from continuing operations by Region
                                                                                                            
(In              Q4 2012        Q1 2013        Q2 2013        Q3 2013        Q4 2013        FY 2013         FY 2012
thousands)
North            $ 39,179       $ 39,309       $ 37,540       $ 34,596       $ 42,833       $ 154,278       $ 142,659
America
EMEA             33,214         32,548         33,481         32,315         35,256         133,600         125,566
Latin            7,384          6,822          6,526          5,496          6,526          25,370          28,335
America
Asia Pacific     6,865         5,054         4,158         5,171         6,365         20,748         21,052
Total            $ 86,642      $ 83,733      $ 81,705      $ 77,578      $ 90,980      $ 333,996      $ 317,612
revenue
                                                                                                              

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
                                                 
                        Three Months Ended            Fiscal Year Ended
(In thousands,          November       November       November        November
except per share        30,          30,            30,           30,
data)                   2013           2012           2013            2012
GAAP income from        $ 23,900       $ 18,659       $ 63,740        $ 67,789
operations
GAAP operating          26       %     22       %     19        %     21       %
margin
Amortization of
acquired                740            336            2,100           1,480
intangibles
Stock-based             5,039          4,103          19,109          18,161
compensation ^(1)
Restructuring           2,856          1,057          11,983          7,204
expenses
Acquisition-related     975            —              3,204           215
expenses
Litigation              —              —              —               900
settlement
Proxy
contest-related         —             —             —              3,259    
costs
Total operating         9,610         5,496         36,396         31,219   
adjustments
Non-GAAP income         $ 33,510      $ 24,155      $ 100,136      $ 99,008 
from operations
Non-GAAP operating      37       %     28       %     30        %     31       %
margin
                                                                      
GAAP income from
continuing              $ 14,618       $ 12,494       $ 39,777        $ 44,954
operations
Operating
adjustments (from       9,610          5,496          36,396          31,219
above)
Income tax              (1,759   )     (2,027   )     (10,159   )     (8,713   )
adjustment
Total income from
continuing              7,851         3,469         26,237         22,506   
operations
adjustments
Non-GAAP income
from continuing         $ 22,469      $ 15,963      $ 66,014       $ 67,460 
operations
                                                                      
GAAP diluted
earnings per share      $ 0.28         $ 0.20         $ 0.72          $ 0.71
from continuing
operations
Income from
continuing
operations              0.15          0.05          0.47           0.35     
adjustments (from
above)
Non-GAAP diluted
earnings per share      $ 0.43        $ 0.25        $ 1.19         $ 1.06   
from continuing
operations
                                                                      
Diluted weighted
average shares          52,655         63,576         55,379          63,741
outstanding
                                                                      
                                                                      
(1) Stock-based compensation is included in the GAAP statements of income, as
follows:
                                                                      
Cost of revenue         $ 101          $ 145          $ 601           $ 734
Sales and marketing     931            426            3,599           3,274
Product development     1,036          795            4,723           3,170
General and             2,971         2,737         10,186         10,983   
administrative
Stock-based
compensation from       $ 5,039       $ 4,103       $ 19,109       $ 18,161 
continuing
operations
                                                                               

               Three Months Ended              Fiscal Year Ended
(In                                                                 November
thousands,       November 30,   November 30,     November 30,   30,
except per       2013             2012             2013             2012
share data)
GAAP costs       $  8,095         $  9,662         $  34,982        $  36,314
of revenue
GAAP
operating        58,985          58,321          235,274         213,509
expenses
GAAP             67,080          67,983          270,256         249,823
expenses
Operating
adjustments      9,610           5,496           36,396          31,219
(from above)
Non-GAAP         $  57,470       $  62,487       $  233,860      $  218,604
expenses
                                                                       

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2014
GUIDANCE
(Unaudited)

Fiscal Year 2014 Revenue Growth Guidance
                 Fiscal
               Year          Fiscal Year Ending
                 Ended
                 November        November 30, 2014
                 30, 2013
(In                             Low         %           High     %
millions)                                      Change                   Change
Total
revenue          $334.0          $340.0        2%            $350.0     5%
(1)
                                                                        
(1) Total revenue growth is shown on a constant currency basis, by applying
the percentage change to the total revenue.


Fiscal Year 2014 Non-GAAP Operating Margin Guidance
                                  Fiscal Year Ending November 30, 2014
(In millions)                       Low                   High
GAAP income from operations         $   82.0                $  88.0
GAAP operating margins              24          %           25        %
Stock-based compensation            24.9                    24.9
Acquisition related expense         2.5                     2.5
Amortization of intangibles         2.6                    2.6       
Total operating adjustments         30.0                   30.0      
Non-GAAP income from operations     $   112.0              $  118.0  
Non-GAAP operating margin           33          %           34        %
                                                                      

Fiscal Year 2014 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
                               Fiscal Year Ending November 30, 2014
(In millions, except             Low                        High
per share data)
GAAP net income                  $    53.0                    $    57.5
Operating adjustments            30.0                         30.0
(from above)
Income tax adjustment            (7.4          )              (7.4         )
(2)
Non-GAAP net income              $    75.6                   $    80.1    
                                                              
GAAP diluted earnings            $    0.98                    $    1.07
per share
Non-GAAP diluted                 $    1.40                    $    1.50
earnings per share
                                                              
Diluted weighted
average shares                   54.0                         53.5
outstanding
                                                              
(2) Tax adjustment is based on a non-GAAP effective tax rate of 33% for Low
and 32% for High, calculated as follows:
                                                              
Non-GAAP income from             $    112.0                   $    118.0
operations
Non-GAAP net income              75.6                         80.1
Other income (expense)           (0.2          )              (0.2         )
Tax provision                    36.6                        38.1         
Non-GAAP tax rate                33            %              32           %
                                                                           

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q1 2014 GUIDANCE
(Unaudited)

Q1 2014 Revenue Growth Guidance
                 Three
               Months        Three Months Ending
                 Ended
                 February        February 28, 2014
                 28, 2013
(In                             Low        %           High      %
millions)                                     Change                    Change
Total
revenue          $83.7           $79.5        (5)%          $81.5       (3)%
(1)
                                                                        
(1) Total revenue growth is shown on a constant currency basis, by applying
the percentage change to the total revenue.


Q1 2014 Non-GAAP Earnings per Share Guidance
                                      Three Months Ending February 28, 2014
                                        Low                   High
GAAP diluted earnings per share         $   0.19                $   0.21
Stock-based compensation                0.11                    0.11
Acquisition related expense             0.02                    0.02
Amortization of intangibles             0.01                   0.01       
Total operating adjustments             0.14                   0.14       
Income tax adjustment                   $   (0.04   )           $   (0.04  )
Non-GAAP diluted earnings per share     $   0.29               $   0.31   
                                                                           

Contact:

Investor Contact:
Progress Software
Brian Flanagan, +1 781-280-4817
flanagan@progress.com
or
Press Contact:
Progress Software
Rick Lacroix, +1 781-280-4604
rlacroix@progress.com
 
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