Progress Software Reports 2012 Fiscal Fourth Quarter and Year End Results

Progress Software Reports 2012 Fiscal Fourth Quarter and Year End 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, announced today results for its fiscal fourth quarter and fiscal year ended November 30, 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, January 3, 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 (NAS: 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 data)

30, 2012

30, 2011

% Change

30, 2012

30, 2011

% Change

Revenue:

Software licenses

$

35,726

$

34,225

4

%

$

113,270

$

125,966

(10

)%

Maintenance and services

55,545

59,319

(6

)%

221,935

234,738

(5

)%

Total revenue

91,271

93,544

(2

)%

335,205

360,704

(7

)%

Costs of revenue:

Cost of software licenses

1,777

1,175

51

%

6,112

5,430

13

%

Cost of maintenance and services

9,020

9,324

(3

)%

36,192

37,238

(3

)%

Amortization of acquired intangibles

290

509

(43

)%

1,259

2,600

(52

)%

Total costs of revenue

11,087

11,008

1

%

43,563

45,268

(4

)%

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 administrative

14,216

16,120

(12

)%

62,053

61,816

Amortization of acquired intangibles

234

153

53

%

962

966

Restructuring expenses

(2

)

(505

)

100

%

6,885

3,383

104

%

Acquisition-related expenses

536

(100

)%

215

536

(60

)%

Total operating expenses

63,277

54,114

17

%

240,987

214,195

13

%

Income from operations

16,907

28,422

(41

)%

50,655

101,241

(50

)%

Other (expense) income, net

(680

)

85

(900

)%

196

(519

)

138

%

Income from continuing operations before income taxes

16,227

28,507

(43

)%

50,851

100,722

(50

)%

Provision for income taxes

4,645

11,286

(59

)%

17,440

34,380

(49

)%

Income from continuing operations

11,582

17,221

(33

)%

33,411

66,342

(50

)%

Income (loss) from discontinued operations, net

24,443

(5,046

)

584

%

14,033

(6,713

)

309

%

Net income

$

36,025

$

12,175

196

%

$

47,444

$

59,629

(20

)%

Earnings per share:

Basic:

Continuing operations

$

0.18

$

0.27

(33

)%

$

0.53

$

1.01

(48

)%

Discontinued operations

0.39

(0.08

)

588

%

0.22

(0.10

)

320

%

Net income per share

$

0.57

$

0.19

200

%

0.75

$

0.91

(18

)%

Diluted

Continuing operations

$

0.18

$

0.27

(33

)%

$

0.52

$

0.98

(47

)%

Discontinued operations

0.38

(0.08

)

575

%

0.22

(0.10

)

320

%

Net income per share

$

0.57

$

0.19

200

%

$

0.74

$

0.88

(16

)%

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 investments

$

355,217

$

261,416

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