Progress Software Corporation (NASDAQ: PRGS), a provider of leading application infrastructure software to develop, deploy, integrate and manage business applications, today announced results for its second quarter ended May 31, 2008. Revenue for the quarter was $128 million, up 7 percent (up 1 percent at constant currency) from $120 million in the second quarter of fiscal 2007. Software license revenue increased 1 percent (down 4 percent at constant currency) to $45.0 million from $44.6 million in the same quarter last year.
On a generally accepted accounting principles (GAAP) basis, operating income increased 83 percent to $20.6 million from $11.3 million in the second quarter of fiscal 2007. Net income increased 72 percent to $14.5 million from $8.4 million in the same quarter last year. Diluted earnings per share increased 74 percent to 33 cents from 19 cents in the second quarter of fiscal 2007.
On a non-GAAP basis, operating income increased 15 percent to $29.1 million from $25.3 million in the same quarter last year. Non-GAAP net income increased 15 percent to $20.4 million from $17.8 million in the same quarter last year and non-GAAP diluted earnings per share increased 15 percent to 47 cents per share from 41 cents in the second quarter of fiscal 2007.
The non-GAAP results in the second quarter of fiscal 2008 exclude after-tax charges of $2.9 million for stock-based compensation, $2.8 million for amortization of acquired intangibles and $0.2 million for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices. The non-GAAP results in the second quarter of fiscal 2007 exclude after-tax charges of $6.0 million for stock-based compensation, $2.9 million for amortization of acquired intangibles and $0.5 million for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices. The GAAP and non-GAAP results in the second quarter of fiscal 2007 include an after-tax charge of $1.6 million (4 cents per share) resulting from a write-down associated with a portion of the implementation of a new ERP system.
The company's cash and short-term investments at the end of the second quarter totaled $259 million. In addition, the company had approximately $68 million in investments related to municipal and student loan auction rate securities that were classified as non-current on the balance sheet because these securities failed to clear at auction and the company is currently unable to sell these securities in the market. The failed auctions have resulted in higher interest rates being earned on these securities, but the investments currently lack short-term liquidity.
The company purchased 0.6 million of its shares at a cost of $16.8 million in the second quarter of fiscal 2008. The company's existing repurchase authorization, under which approximately 7.3 million shares remain available for repurchase, expires on September 30, 2008.
Joseph Alsop, co-founder and chief executive officer of Progress Software, stated: "Our overall revenue results were solid, with strong profitability. While our DataDirect(r) product line and our overall product license revenue were below our expectations, growth in our OpenEdge(r) and Enterprise Infrastructure product lines was in line with our expectations, with particularly strong growth in our Apama(r) product line."
Quarterly Highlights
- Progress Software announced the appointment of Ram Gupta to the Board of Directors of Progress Software Corporation (www.progress.com/ramgupta).
- Farmers Alliance Mutual Insurance Company (FAMI), a leading mid-Western property and casualty insurance carrier, will deploy Progress(r) Sonic(tm) ESB in order to streamline ist enterprise information technology (IT) infrastructure using a SOA framework and integrate several discrete applications, which are dispersed across various platforms. FAMI is undergoing a multi-year cost optimization project within its IT environment and regards the Sonic ESB as an integral part of its ability to reduce costs (www.progress.com/farmersalliance).
- Nordisk Mobiltelefon (NMT) is using the Progress Sonic ESB and Progress DataXtend(r) Semantic Integrator to support the rollout and standards-based integration of ist operational and business support applications (OSS/BSS)( www.progress.com/nordisk).
- ING Wholesale Banking delivers algorithmic trading capabilities for emerging markets using the Progress Apama(r) Complex Event Processing (CEP) platform. ING will bring a combination of algorithmic trading capabilities and direct access to emerging European markets to its customers. The technology behind the service uses proprietary algorithms built using the Progress Apama) algorithmic trading platform (www.progress.com/ING).
- Detica Group plc (DCA.L), the specialist business and technology consultancy, and Progress Software jointly announced the launch of the Detica Market Surveillance Accelerator powered by the Apama CEP platform (www.progress.com/Detica).
- Progress announced the availability of the OpenEdge(r) 10.1C business application development platform. With this release, OpenEdge becomes the first business application development platform to support IPv6, a next generation Internet protocol designed to bring superior reliability, flexibility and security to the Internet. Other large vendors failed to reach this key government-regulated milestone at the time of the [April 15, 2008] press announcement, and in some cases were forced to recall products that were originally billed as IPv6-compliant (www.progress.com/openedge101C).
- DataDirect Technologies, an operating company of Progress Software Corporation, announced that it has qualified to receive the NorthFace ScoreBoard AwardSM from Omega Management Group Corp. The award is presented annually to companies who, as rated by their own customers, achieved excellence in customer satisfaction during the prior calendar year. DataDirect Technologies' SupportLinkSM Technical Services Program is a seven-time winner of this prestigious award (www.progress.com/northface).
The following organizations became new Progress customers or partners, adopted additional Progress technologies, or made major deployments of Progress technologies in the past quarter: AEP Canada, Acadian Asset Management, Acer Active Organics, Allied Holdings, Ameriprise Financial, American Electric Power, Amdocs Inc, Amtrust North America, Annadale Technologies, Baker Hughes, Boats.com, Boeing, Buckeye Cablevision, CanWest Global Communication, Capula Limited, Carahsoft Technology, Cap Gemini Outsourcing, Cerner, Chesapeake Energy Corporation, CIBC, Del Monte Fresh Produce, Deutsche Leasing, Dow Jones & Co., DTE Energy, EDS, E Solutions Network, En-Net Services, Entergy, Fidelity Investment HRS, FirstMerit Bank, Fujitsu, GE Treasury, Greenplum, General Electric, Green Tree Servicing, Global Healthcare Exchange, Health Imaging Solutions, Healthcare District of Palm, Healthcare Partners, Hilton Grand Vacations, Insight Technology Solutions, iUniverse, JP Morgan Chase Bank, KAZ Group, Lake Washington School District, Last Minute Network, Linamar, Marketing Computer Service, Maryland State Board, Muir Group Housing, NCS Pearson, Nacco Materials Handling, Nordstrom, Northwest Community Hospital, Orion Corporation, Oxford University Press, Pharsight, PJM Interconnection, Public Interest Data, Quantum Data Systems, Qwest Communications, Savi Technology, SearchAmerica, Sephora, ServiceMaster, Shinko Corporation, Siemens, Software House International, Specialist Computer Center, State of New York, State of Utah, Strand Life Sciences, Texas Capital Bank, Texas Workforce Commission, The Members Group, The Nuance Group, UBS Financial, United Healthcare, United Launch Alliance, University of Illinois, University of Pennsylvania, Varma Mutual Pensions Insurance Company, Western Digital and Wood Consulting Services.
Business Outlook
The company is providing the following guidance for the fiscal year ending November 30, 2008:
- Revenue is expected to be in the range of $518 million to $526 million.
- GAAP diluted earnings per share are expected to be in the range of $1.33 to $1.37.
- On a non-GAAP basis, diluted earnings per share are expected to be in the range of $1.91 to $1.95.
- The non-GAAP projections exclude after-tax charges of approximately $13 million (30 cents per share) for stock-based compensation, approximately $11 million (26 cents per share) for amortization of acquired intangibles and an estimate of approximately $1 million (2 cents per share) for professional services fees associated with our ongoing stock option investigation and derivative lawsuits.
The company is providing the following guidance for the third fiscal quarter ending August 31, 2008:
- Revenue is expected to be in the range of $125 million to $127 million.
- GAAP diluted earnings per share are expected to be in the range of 29 cents to 31 cents.
- On a non-GAAP basis, diluted earnings per share are expected to be in the range of 43 cents to 45 cents.
- The non-GAAP projections exclude after-tax charges of approximately $3 million (7 cents per share) for stock-based compensation and $3 million (7 cents per share) for amortization of acquired intangibles and professional services fees associated with our ongoing stock option investigation and derivative lawsuits.
Legal Notice Regarding Non-GAAP Financial Information
The company provides non-GAAP operating income, net income and earnings per share as additional information for investors. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). Such measures are intended to supplement GAAP and may be different from non-GAAP measures used by other companies. The company 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 of the company 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.
Progress Software Corporation
Progress Software Corporation (NASDAQ: PRGS) provides application infrastructure software for the development, deployment, integration and management of business applications. Our goal is to maximize the benefits of information technology while minimizing its complexity and total cost of ownership. Progress can be reached at www.progress.com or +1-781-280-4000.
Safe Harbor Statement
Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which include statements regarding the company's business outlook, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to the following: the receipt and shipment of new orders, the timely release of enhancements to the company's products, the growth rates of certain market segments, the positioning of the company's products in those market segments, variations in the demand for professional services and technical support, pricing pressures and the competitive environment in the software industry, business and consumer use of the Internet, the company's ability to complete and integrate acquisitions, and the company's ability to penetrate international markets and manage ist international operations; unanticipated consequences of the restatement completed in December 2006; risks associated with the SEC's formal investigation of the company's optiongrant practices and pending shareholder litigation relating to such practices; the risk that the company will face additional claims and proceedings in connection with those stock option grant practices, including additional shareholder litigation and additional proceedings by the other governmental agencies; and the financial impact of the foregoing, including potentially significant litigation defense costs and claims for indemnification and advancement of expenses by directors, officers and others. The company undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with the company's business, please refer to the company's filings with the Securities and Exchange Commission.
Apama, DataDirect, DataXtend, OpenEdge, Sonic, and Progress 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.
