PROGRESS SOFTWARE CORP /MA - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 27, 2013

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8-K - FORM 8-K - PROGRESS SOFTWARE CORP /MAform8-kxq12013.htm
 
Exhibit 99.1


P R E S S A N N O U N C E M E N T

Investor Contact:
 
Press Contact:
Tom Barth
 
Rick Lacroix
Progress Software
 
Progress Software
+1 781 280 4135
 
+1 781 280 4604
tobarth@progress.com
 
rlacroix@progress.com

Progress Software Reports 2013 Fiscal First Quarter Results


BEDFORD, MA, March 27, 2013 (BUSINESSWIRE) — 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 February 28, 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.

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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, March 27, 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

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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 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.

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.


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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 
Three Months Ended
(In thousands, except per share data)
February 28, 2013
 
February 29, 2012
 
% Change
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 services
8,857

 
8,760

 
1
 %
Amortization of acquired intangibles
286

 
392

 
(27
)%
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 intangibles
209

 
242

 
(14
)%
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 operations before income taxes
14,167

 
19,492

 
(27
)%
Provision for income taxes
5,044

 
7,542

 
(33
)%
Income from continuing operations
9,123

 
11,950

 
(24
)%
Income (loss) from discontinued operations, net
21,995

 
(4,461
)
 
593
 %
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
)%

4

CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands)
February 28,
2013
 
November 30, 2012
Assets
 
 
 
Current assets:
 
 
 
Cash, cash equivalents and short-term investments
$
321,375

 
$
355,217

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 liabilities
$
65,572

 
$
110,944

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




5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
 
Three Months Ended
(In thousands)
February 28,
2013
 
February 29,
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 auction-rate-securities
25

 
225

Issuances of common stock, net of repurchases
(80,069
)
 
13,973

Proceeds from divestitures, net
73,381

 
—

Other
(1,222
)
 
4,963

Net change in cash, cash equivalents and short-term investments
(33,842
)
 
53,748

Cash, cash equivalents and short-term investments, beginning of period
355,217

 
261,416

Cash, cash equivalents and short-term investments, end of period
$
321,375

 
$
315,164



SUPPLEMENTAL INFORMATION

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2012
 
Q2 2012
 
Q3 2012
 
Q4 2012
 
Q1 2013
License
$
31,889

 
$
21,813

 
$
23,842

 
$
35,726

 
$
32,666

Maintenance
51,723

 
52,883

 
51,860

 
52,381

 
53,026

Professional services
3,601

 
3,708

 
2,615

 
3,164

 
3,577

Total revenue
$
87,213

 
$
78,404

 
$
78,317

 
$
91,271

 
$
89,269

 
 
 
 
 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q1 2012
 
Q2 2012
 
Q3 2012
 
Q4 2012
 
Q1 2013
North America
$
37,590

 
$
32,900

 
$
35,665

 
$
40,219

 
$
41,215

EMEA
34,698

 
32,447

 
29,782

 
34,224

 
35,547

Latin America
7,979

 
7,539

 
7,234

 
8,655

 
7,196

Asia Pacific
6,946

 
5,518

 
5,636

 
8,173

 
5,311

Total revenue
$
87,213

 
$
78,404

 
$
78,317

 
$
91,271

 
$
89,269



6

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

 
Three Months Ended
(In thousands, except per share data)
February 28,
2013
 
February 29,
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 adjustments
4,420

 
6,469

Non-GAAP income from continuing operations
$
13,543

 
$
18,419

 
 
 
 
GAAP diluted earnings per share from continuing operations
$
0.16

 
$
0.19

Income from continuing operations adjustments (from above)
0.08

 
0.10

Non-GAAP diluted earnings per share from continuing operations
$
0.23

 
$
0.29

 
 
 
 
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 operations
$
4,906

 
$
5,241


 
Three Months Ended
(In thousands, except per share data)
February 28, 2013
 
February 29, 2012
 
November 30, 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 above) (2)
6,361

 
7,462

 
5,053

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.


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PROGRESS SOFTWARE CORP /MA Reports