Progress Software Reports Strong 2013 Fiscal Second Quarter Results

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Progress Software Reports Strong 2013 Fiscal Second Quarter Results

BEDFORD, Mass.--(BUSINESS WIRE)-- Progress Software Corporation (NAS: PRGS) , a global software company that simplifies and enables the development, deployment and management of business applications, today announced strong results for its fiscal second quarter ended May 31, 2013.

As previously announced on June 13, 2013, the company entered into a definitive purchase and sale agreement to divest the Apama product line. The sale is expected to close in July. As a result, the Apama product line results are reported in discontinued operations for all periods presented.


Revenue from continuing operations was $81.7 million compared to $74.1 million, a year over year increase of 12% on a constant currency basis, or an increase of 10% using actual exchange rates.

Additional financial highlights included:

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

  • Income from operations was $14.4 million compared to $12.8 million in the same quarter last year;
  • Income from continuing operations was $8.1 million compared to $8.9 million in the same quarter last year;
  • Net income was $3.9 million compared to $(1.9) million in the same quarter last year; and
  • Diluted earnings per share from continuing operations was $0.15 compared to $0.14 in the same quarter last year.

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

  • Income from operations was $23.7 million compared to $25.2 million in the same quarter last year;
  • Operating margin was 29% compared to 34% in the same quarter last year;
  • Income from continuing operations was $15.0 million compared to $17.3 million in the same quarter last year; and
  • Diluted earnings per share from continuing operations was $0.27 compared to $0.27 in the same quarter last year.

Phil Pead, President and Chief Executive Officer of Progress Software, said, "Our focus this year has been on improving the operating performance of the company and building a foundation for future revenue growth. We are pleased that we remain on track to achieve efficiencies previously outlined and that revenue growth is beginning to take hold. The second fiscal quarter results reflect our efforts to energize our customer and partner base through improved product functionality and targeted marketing activities. In addition, we benefited from closing a number of opportunities sooner than expected."

Pead added, "We are now singularly focused on becoming a leader in the application platform as a service market and while our strong second quarter results demonstrate good progress, our opportunities for continued revenue growth in the future will be driven by increasing the investment in our business."

Other fiscal second quarter 2013 metrics and recent results included:

  • Completion in May 2013 of the previously announced and implemented 10b5-1 plan to repurchase $250.0 million of common stock by June 30, 2013;
  • Cash, cash equivalents and short-term investments were $255.8 million;
  • Cash flows from operations were $13.6 million, a decrease from $15.2 million in the same quarter in fiscal year 2012; and
  • DSO from continuing operations was 56 days, compared to 65 days in the fiscal first quarter of 2013.

Earlier this month, Progress launched its new Progress Pacific platform. As part of this, Progress acquired Saratoga, CA-based Rollbase, Inc., a privately held platform-as-a-service vendor which provides innovative technology that enables powerful applications to be built using point-and-click, drag-and-drop tools in a standard browser. Also in June, Progress announced OpenEdge 11.3, the latest version of its flagship application development platform. The new version brings together leading business process management (BPM) and business rules management system (BRMS) capabilities to dramatically streamline business processes and accelerate developer productivity.

Supplemental Quarterly Information

In the financial tables at the end of this release, we have provided quarterly Condensed Consolidated Statements of Income adjusted for the classification of the Apama product line to discontinued operations for the three months ended February 29, 2012, August 31, 2012, November 30, 2012 and February 28, 2013, respectively. We have also provided Reconciliations of GAAP to Non-GAAP Financial Measures for the same time periods, also adjusted for the classification of the Apama product line to discontinued operations.

Business Outlook

Progress Software provides the following guidance for the fiscal third quarter ending August 31, 2013:

  • On a constant currency basis, revenue is expected to be between 2% and 4% growth compared to the fiscal third quarter of 2012; and
  • Non-GAAP operating margin is expected to be in the range of 24% to 26%.

The non-GAAP operating margin guidance excludes the items we traditionally exclude from our non-GAAP reporting metrics: amortization of intangible assets of $0.8 million, stock-based compensation of $4.5 million to $5.0 million, and $0.7 million of acquisition related costs, for a GAAP operating margin in the range of 16% to 18%.

Conference Call

The Progress Software quarterly investor conference call to review its fiscal second quarter of 2013 will be broadcast live at 5:00 p.m. ET on Wednesday, June 26, 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 1-888-438-5519, pass code 9239124. 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 its planned product divestiture 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) Market acceptance of Progress's strategic plan and product development initiatives; (2) disruption caused by implementation of the strategic plan on relationships with employees, customers, ISVs, other channel partners, vendors and other business partners; (3) pricing pressures and the competitive environment in the software industry and Platform-as-a-Service market; (4) Progress' ability to complete the proposed divestiture of its Apama product line on a timely basis, if at all; (5) Progress's ability to make technology acquisitions and to realize the expected benefits and anticipated synergies from such acquisitions; (6) 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; (7) business and consumer use of the Internet and the continuing adoption of Cloud technologies; (8) the receipt and shipment of new orders; (9) Progress's ability to expand its relationships with channel partners and to manage the interaction of channel partners with its direct sales force; (10) the timely release of enhancements to Progress's products and customer acceptance of new products; (11) the positioning of Progress's products in its existing and new markets; (12) variations in the demand for professional services and technical support; (13) Progress's ability to penetrate international markets and manage its international operations; and (14) 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 Report on Form 10-Q for the fiscal quarter ended February 28, 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   (NAS: 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   Six Months Ended
(In thousands, except per share data)

May 31,
2013

  

May 31,
2012

  % Change

May 31,
2013

  

May 31,
2012

  % Change
Revenue:
Software licenses$29,347$20,50643%$59,254$50,17918%
Maintenance and services52,358 53,622 (2)%106,184 106,420 %
Total revenue81,705 74,128 10%165,438 156,599 6%
Costs of revenue:
Cost of software licenses1,3561,357%3,4462,74326%
Cost of maintenance and services6,9907,114(2)%14,64014,0394%
Amortization of acquired intangibles143 139 3%282 383 (26)%
Total costs of revenue8,489 8,610 (1)%18,368 17,165 7%
Gross profit73,216 65,518 12%147,070 139,434 5%
Operating expenses:
Sales and marketing25,89019,37334%54,53242,11529%
Product development14,67110,38741%28,29320,69937%
General and administrative14,06418,014(22)%28,73033,414(14)%
Amortization of acquired intangibles167208(20)%338415(19)%
Restructuring expenses2,7664,736(42)%3,7264,736(21)%
Acquisition-related expenses1,272  100%1,272 215 492%
Total operating expenses58,830 52,718 12%116,891 101,594 15%
Income from operations14,386 12,800 12%30,179 37,840 (20)%
Other (expense) income, net(292)249 (217)%(840)519 (262)%
Income from continuing operations before income taxes14,094 13,049 8%29,339 38,359 (24)%
Provision for income taxes5,952 4,194 42%11,384 13,644 (17)%
Income from continuing operations8,142 8,855 (8)%17,955 24,715 (27)%
Income (loss) from discontinued operations, net(4,232)(10,763)61%17,073 (19,134)189%
Net income$3,910 $(1,908)305%$35,028 $5,581 528%
 
Earnings per share:
Basic:
Continuing operations$0.15$0.147%$0.32$0.39(18)%
Discontinued operations(0.08)(0.17)53%0.30 (0.31)197%
Net income per share$0.07 $(0.03)333%0.62 $0.09 589%
Diluted:
Continuing operations$0.15$0.147%$0.31$0.39(21)%
Discontinued operations(0.08)(0.17)53%0.30 (0.30)200%
Net income per share$0.07 $(0.03)333%$0.61 $0.09 578%
Weighted average shares outstanding:
Basic54,91963,051(13)%56,41062,598(10)%
Diluted55,73663,051(12)%57,24463,641(10)%
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