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Progress Software Reports 2012 Fiscal Second Quarter Results

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 second quarter ended May 31, 2012.

Revenue for the quarter was $114.6 million, down from $134.7 million in the same quarter last year, a decrease of 12% on a constant currency basis, or 15% otherwise.

Revenue for the strategic "Core" products, represented by the Progress® OpenEdge ® platform, DataDirect® Connect products and the Decision Analytics portfolio (comprising Progress Apama®, Progress Corticon® BRMS and the Progress Control Tower®) was $78.7 million, down from $91.2 million in the same quarter last year, a year-over-year decline of 10% on a constant currency basis, or 14% otherwise.

On a GAAP basis, consolidated results in the fiscal second quarter of 2012 were:
  • Loss from operations was $(3.8) million compared to income from operations of $27.2 million in the same quarter last year;
  • Net loss was $(1.9) million compared to net income of $18.0 million in the same quarter last year; and
  • Diluted earnings per share were $(0.03) compared to $0.26 in the same quarter last year.

On a non-GAAP basis, consolidated results in the fiscal second quarter of 2012 were:
  • Adjusted income from operations was $19.6 million compared to $39.8 million in the same quarter last year;
  • Adjusted net income was $13.5 million compared to $26.6 million in the same quarter last year; and
  • Adjusted diluted earnings per share were $0.21 compared to $0.38 in the same quarter last year.

Jay Bhatt, president and chief executive officer, Progress Software, said, “Our quarterly results reflect a company in transition. Our announcement on April 25 outlined Progress' new strategic plan, leveraging our 30-year history, experience, expertise and leadership in application development and deployment. The first phase of this strategic plan is focused on improving the performance in our “Core” product portfolio, and the second phase is to enhance and refine our next-generation Application Platform-as-a-Service (aPaaS) offering. Our second quarter performance was impacted by significant disruption among our employees, customers, and partners caused by the announcement of dramatic changes to our strategy and operations, among other things. We anticipate some disruption to continue into the third and fourth quarters but feel confident with the potential of our “Core” products to exit the year with positive momentum.”

Other fiscal second quarter 2012 results include the following:
  • Revenue for non-Core products was $35.9 million compared to $43.5 million in the same quarter last year;
  • Cash flows from operations were $15.2 million, a decrease from $38.8 million in the same quarter in fiscal 2011;
  • Cash, cash equivalents and short-term investments increased to $328.2 million from $261.4 million at the end of the fiscal fourth quarter 2011;
  • DSO was 67 days, down 7 days from the fiscal first quarter of 2012 and up 6 days year-over-year; and
  • Headcount was 1,607, down 8% from the end of last quarter and down 3% from one year ago.

Progress Software is executing aggressively on its new strategic plan, including the following specific actions:
  • Cost Savings and Re-Investment — The company initiated cost reduction efforts during the fiscal second quarter, and reductions in our global workforce were substantially completed in all jurisdictions besides Europe, where the legal notification processes commenced. Facilities consolidations will occur during the fiscal third quarter. Ultimately, when completed, we will reduce our annual run-rate costs by approximately $55 million gross value, with the net reduction of $40 million after reinvesting $15 million back into the Core business;
  • Share Repurchase — The company reiterates its plans to execute a $150 million share repurchase before the end of the fiscal year ending November 30, 2012, and its intent to repurchase at least another $200 million in fiscal 2013; and
  • Divest Non-Core Product Lines — The company has made substantial progress toward the divestiture of the ten product lines identified as non-Core in its strategic plan, including entering into a definitive purchase and sale agreement for the FuseSource product line with Red Hat, Inc. Subject to customary closing conditions, the FuseSource divestiture is expected to be completed in the fiscal third quarter of 2012. Terms of the transaction were not disclosed.

Business Outlook

Due to continued anticipated disruption, the company is not providing guidance for the fiscal third quarter ending August 31, 2012.

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