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Progress
Software Corporation (PRGS), a global software company that
simplifies and enables the development, deployment and management of
business applications, announced today results for its fiscal third
quarter ended August 31, 2012.
Results for the Core segment, consisting of the Progress(R)
OpenEdge (R) platform, DataDirect(R)
Connect products and the Decision Analytics portfolio (comprising Progress
Apama(R), Progress
Corticon(R) BRMS and the Progress
Control Tower(R)), in the fiscal third quarter of 2012 were:
--
On a constant currency basis, Core revenue declined 6% year over year;
in comparison, Core revenue declined 10% in the fiscal second quarter
of 2012 versus the fiscal second quarter of 2011;
--
Using actual exchange rates, Core revenue declined 12%;
--
Core income from operations was $20.5 million compared to $39.3
million in the same quarter last year; and
--
Operating margin for the Core segment was 26%.
Consolidated results in the fiscal third quarter of 2012 were:
--
Revenue was $107.2 million compared to $124.5 million in the same
quarter last year, a decrease of 9% on a constant currency basis, or
14% using actual exchange rates, and excludes $4.8 million and $3.8
million of revenue from our FuseSource product line, which is included
in discontinued operations, in the current quarter and same quarter
last year, respectively;
--
Income from operations was $14.0 million compared to $14.3 million in
the same quarter last year;
--
Income from continuing operations was $8.0 million compared to $9.6
million in the same quarter last year;
--
Loss from discontinued operations, which is related to our FuseSource
product line, was $2.1 million;
--
Diluted earnings per share from continuing operations was $0.12
compared to $0.14 in the same quarter last year; and
--
Non-GAAP diluted earnings per share from continuing operations was
$0.31 compared to $0.32 in the same quarter last year.
Jay
Bhatt, president and chief executive officer, Progress Software,
said, "Last quarter our tone was optimistic long term but cautious
regarding our fiscal third quarter. We felt this was prudent given the
global economy, seasonality within our business and the significant
amount of change required to execute our strategic plan announced on
April 25th. Our third quarter results reflect improvements on many
fronts over the second quarter and remain on track. Although several
challenges and continued changes remain to fulfill our transformation, I
am pleased to report that during our third quarter we successfully
executed against our strategic plan. This includes the implementation of
our cost reduction program, the hiring of several key executives, the
acceleration of discussions regarding divestitures and the gradual
improvement of both our top line Core segment trajectory and margin."
Other fiscal third quarter 2012 results included the following:
--
Cash flows from operations were $22.0 million, a decrease from $29.1
million in the same quarter in fiscal 2011;
--
Cash, cash equivalents and short-term investments increased to $352.2
million from $261.4 million at the end of the fiscal fourth quarter of
2011;
--
DSO was 63 days, down 4 days from the fiscal second quarter of 2012
and up 4 days year-over-year; and
--
Headcount was 1,506, down 6% from the end of last quarter and down 12%
from one year ago.
Progress Software continues to execute aggressively on its strategic
plan, including the following specific actions:
--
Cost Savings and Re-Investment - The
company continued cost reduction efforts during the fiscal third
quarter with reductions in our EMEA workforce completed and facilities
consolidations underway. The company is on target to reduce its
budgeted 2012 expense run rate by approximately $55 million gross
value, with the net reduction of $40 million after reinvesting $15
million back into the Core segment. Some of these investments began
during the fiscal third quarter;
--
Share Repurchase - The company remains
committed to completing $150 million of its $350+ million authorized
share repurchase program this fiscal year, with the balance to come in
fiscal 2013; and
--
Divest Non-Core Product Lines - The
company completed its previously announced sale of FuseSource to Red
Hat. The company continues to make substantial progress toward the
divestiture of the nine remaining product lines identified as non-Core
in its strategic plan.
Business Outlook
Progress Software provides the following guidance for the fiscal fourth
quarter ending November 30, 2012:
--
On a constant currency basis, Core revenue growth is expected to be
-2% to 1% compared to the fiscal fourth quarter of 2011; and
--
Core segment operating margin is expected to be in the range of 25% to
30%.
The Core segment operating margin guidance excludes the operating income
of the non-Core segment and also excludes the items we traditionally
exclude from our segment reporting metrics.
Conference Call
The Progress Software quarterly investor conference call to review its
fiscal third quarter of 2012 will be broadcast live at 5:00 p.m. ET on
Wednesday, September 26, 2012 on the investor relations section of the
company’s website, located at http://www.progress.com.
Additionally, you can listen to the call by telephone by dialing
1-800-211-3767, pass code 7314843. 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 2012 and 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 (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 and the Progress Control
Tower 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 Nine Months Ended
------------------------------------------------------------- ---------------------------------------------------------
(In thousands, except per share data) August 31, August 31, % Change August 31, August 31, % Change
2012 2011 2012 2011
----------------- -------------- ------------------ ------------- -------------- ------------------
Revenue:
Software licenses $ 30,983 $ 38,713 (20 )% $ 102,148 $ 135,466 (25 )%
Maintenance and services 76,190 85,798 (11 )% 235,010 250,905 (6 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Total revenue 107,173 124,511 (14 )% 337,158 386,371 (13 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Costs of revenue:
Cost of software licenses 1,927 2,321 (17 )% 6,488 7,023 (8 )%
Cost of maintenance and services 14,666 18,557 (21 )% 49,267 52,648 (6 )%
Amortization of acquired intangibles 3,648 3,966 (8 )% 7,365 11,871 (38 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Total costs of revenue 20,241 24,844 (19 )% 63,120 71,542 (12 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Gross profit 86,932 99,667 (13 )% 274,038 314,829 (13 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Operating expenses:
Sales and marketing 33,034 43,661 (24 )% 118,058 130,030 (9 )%
Product development 20,949 18,106 16 % 63,591 57,491 11 %
General and administrative 14,428 20,342 (29 )% 47,949 45,937 4 %
Amortization of acquired intangibles 1,737 1,909 (9 )% 8,918 6,108 46 %
Restructuring expenses 2,787 1,369 104 % 11,175 4,627 142 %
Acquisition-related expenses -- -- -- % 215 -- -- %
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Total operating expenses 72,935 85,387 (15 )% 249,906 244,193 2 %
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Income from operations 13,997 14,280 (2 )% 24,132 70,636 (66 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Other income (expense), net 357 (773 ) 146 % 882 (603 ) 246 %
---------------- ----------------- -------------- ---- ------------ ----------------- -------------- ----
Income from continuing operations before income taxes 14,354 13,507 6 % 25,014 70,033 (64 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Provision for income taxes 6,378 3,919 63 % 10,157 21,536 (53 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Income from continuing operations 7,976 9,588 (17 )% 14,857 48,497 (69 )%
---------------- ---------------- -------------- ---- ------------ ---------------- -------------- ----
Loss from discontinued operations, net (2,138 ) (529 ) 304 % (3,438 ) (1,043 ) 230 %
------------------- ----------------- -------------- ---- --------------- ----------------- -------------- ----
Net income $ 5,838 $ 9,059 (36 )% $ 11,419 $ 47,454 (76 )%
======= ======= ======= ======= ============== ==== === ======= ======= ======= ============== ====
Earnings per share:
Basic:
Continuing operations $ 0.13 $ 0.15 (13 )% 0.24 $ 0.73 (67 )%
Discontinued operations (0.03 ) (0.01 ) 200 % (0.05 ) (0.02 ) 150 %
------------------- ----------------- -------------- ---- --------------- ----------------- -------------- ----
Net income per share $ 0.09 $ 0.14 (36 )% 0.18 $ 0.71 (75 )%
======= ======= ======= ======= ============== ==== ============ ======= ======= ============== ====
Diluted
Continuing operations $ 0.12 $ 0.14 (14 )% $ 0.23 $ 0.71 (68 )%
Discontinued operations (0.03 ) (0.01 ) 200 % (0.05 ) (0.02 ) 150 %
------------------- ----------------- -------------- ---- --------------- ----------------- -------------- ----
Net income per share $ 0.09 $ 0.13 (31 )% $ 0.18 $ 0.69 (74 )%
======= ======= ======= ======= ============== ==== === ======= ======= ======= ============== ====
Weighted average shares outstanding:
Basic 63,469 65,861 (4 )% 62,888 66,581 (6 )%
Diluted 64,105 67,280 (5 )% 63,795 68,728 (7 )%
================ ================ ============== ==== ============ ================ ============== ====
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) August 31, November 30,
2012 2011
---------- --------------
Assets
Current assets:
Cash, cash equivalents and short-term investments $ 352,207 $ 261,416
Accounts receivable, net 75,849 110,927
Other current assets 36,968 35,568
Assets held for sale 6,731 --
------------ ----------------
Total current assets 471,755 407,911
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Property and equipment, net 64,479 66,206
Goodwill and intangible assets, net 300,411 320,619
Other assets 69,681 69,527
------------ ----------------
Total assets $ 906,326 $ 864,263
=== ======= ======= =======
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and other current liabilities $ 82,595 $ 80,417
Short-term deferred revenue 129,606 145,727
Liabilities held for sale 5,265 --
------------ ----------------
Total current liabilities 217,466 226,144
------------ ----------------
Long-term deferred revenue 5,343 6,619
Other long-term liabilities 4,073 6,390
Shareholders’ equity:
Common stock and additional paid-in capital 352,773 309,221
Retained earnings 326,671 315,889
------------ ----------------
Total shareholders’ equity 679,444 625,110
------------ ----------------
Total liabilities and shareholders’ equity $ 906,326 $ 864,263
=== ======= ======= =======
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
(In thousands) August 31, August 31, August 31, August 31,
2012 2011 2012 2011
------------- ------------- ------------- -------------
Cash flows from operating activities:
Net income $ 5,838 $ 9,059 $ 11,419 $ 47,454
Depreciation and amortization 8,390 8,077 25,369 24,633
Stock-based compensation 7,744 9,468 21,504 18,755
Other non-cash adjustments 759 (3,269 ) 1,762 (1,821 )
Changes in operating assets and liabilities (706 ) 5,750 15,660 29,107
--------------- ------------ ------------ ------------
Net cash flows from operating activities 22,025 29,085 75,714 118,128
------------ ------------ ------------ ------------
Capital expenditures (465 ) (5,462 ) (6,606 ) (13,956 )
Redemptions at par by issuers of auction-rate-securities 2,700 100 2,925 6,300
Issuances of common stock, net of repurchases 3,797 (32,074 ) 24,284 (93,396 )
Other (4,098 ) (34,084 ) (5,526 ) 7,071
--------------- --------------- --------------- ------------
Net change in cash, cash equivalents and short-term investments 23,959 (42,435 ) 90,791 24,147
------------ --------------- ------------ ------------
Cash, cash equivalents and short-term investments, beginning of 328,248 388,978 261,416 322,396
period
---------- ---------- ---------- ----------
Cash, cash equivalents and short-term investments, end of period $ 352,207 $ 346,543 $ 352,207 $ 346,543
=== ======= === ======= === ======= === =======
RESULTS OF OPERATIONS BY SEGMENT
Three Months Ended
--------------------------------------------------------------
February 28, May 31, August 31,
2012 2012 2012
---------------- ---------------- --------------
Revenue:
Core segment $ 87,213 $ 78,404 $ 78,317
Non-Core segment 33,278 31,090 28,856
---------------- ---------------- ---------------
Total revenue $ 120,491 $ 109,494 $ 107,173
=== ============ === ============ == ============
Income (loss) from operations:
Core segment $ 34,844 $ 28,761 $ 20,461
Non-Core segment (7,747 ) (8,503 ) 8,868
Unallocated items (1) (14,120 ) (23,100 ) (15,332 )
------------------- ------------------- -----------------
Total income (loss) from operations $ 12,977 $ (2,842 ) $ 13,997
=== ============ === =============== == ============
Three Months Ended
--------------------------------------------------------------------------------
February 28, May 31, August 31, November 31, 2011
2011 2011 2011 2011
--------------- ------------ ---------------- ---------------- ------------
Revenue:
Core segment $ 87,523 $ 90,954 $ 88,683 $ 93,544 $ 360,704
Non-Core segment 43,406 39,977 35,828 38,860 158,071
------------- -------------- ---------------- ---------------- ---------------
Total revenue $ 130,929 $ 130,931 $ 124,511 $ 132,404 $ 518,775
==== ======= == ======= === ======= === ======= === =======
Income (loss) from operations:
Core segment $ 38,904 $ 40,961 $ 39,327 $ 42,708 $ 161,900
Non-Core segment 2,302 (407 ) (8,239 ) (8,828 ) (15,172 )
Unallocated items (1) (12,922 ) (12,482 ) (16,808 ) (13,455 ) (55,667 )
----------------- --------------- ------------------- -------------------
Total income from operations $ 28,284 $ 28,072 $ 14,280 $ 20,425 $ 91,061
==== ======= == ======= === ======= === ======= === =======
2010
---------------
Revenue:
Core segment $ 351,610
Non-Core segment 165,019
---------------
Total revenue $ 516,629
== ============
Income (loss) from operations:
Core segment $ 173,662
Non-Core segment (18,320 )
Unallocated items (1) (87,461 )
-----------------
Total income from operations $ 67,881
== ============
(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.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
Three Months Ended Nine Months Ended
------------------------------------------ -----------------------------------------
(In thousands, except per share data) August 31, August 31, August 31, August 31,
2012 2011 2012 2011
----------------- ----------------- ----------------- -----------------
GAAP income from continuing operations $ 7,976 $ 9,588 $ 14,857 $ 48,497
Amortization of acquired intangibles 5,385 5,875 16,283 17,979
Stock-based compensation 7,139 9,368 20,720 18,552
Transition expenses -- 196 -- 1,054
Restructuring expenses 2,787 1,369 11,175 4,627
Acquisition-related expenses -- -- 215 --
Litigation settlement -- -- 900 --
Proxy contest-related costs 21 -- 3,259 --
Income tax adjustment (3,331 ) (4,947 ) (15,123 ) (12,846 )
------------------- ------------------- ------------------- -------------------
Total non-GAAP adjustments 12,001 11,861 37,429 29,366
---------------- ---------------- ---------------- ----------------
Non-GAAP income from continuing operations $ 19,977 $ 21,449 $ 52,286 $ 77,863
======= ======= ======= ======= ======= ======= ======= =======
GAAP diluted earnings per share from continuing operations $ 0.12 $ 0.14 $ 0.23 $ 0.71
Total non-GAAP adjustments (from above) 0.19 0.18 0.59 0.43
---------------- ---------------- ---------------- ----------------
Non-GAAP diluted earnings per share from continuing operations $ 0.31 $ 0.32 $ 0.82 $ 1.13
======= ======= ======= ======= ======= ======= ======= =======
Diluted weighted average shares outstanding 64,105 67,280 63,795 68,728
SOURCE: Progress Software Corporation
Progress Software Corporation
Investor Relations Contact:
Tom Barth, 781-280-4135
tobarth@progress.com
or
Media Contact:
John Stewart, 781-280-4101
jstewart@progress.com
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