On a GAAP basis in the fiscal second quarter of 2011: -- Operating income increased 20 percent to$27.2 million from$22.7 million in the same quarter last year; -- Net income decreased 6 percent to$18.0 million as compared to$19.1 million in the same quarter last year; -- Diluted earnings per share decreased 10 percent to26 cents as compared29 cents in the same quarter a year ago. On a non-GAAP basis in the fiscal second quarter of 2011: -- Operating income increased 11 percent to$39.8 million from$35.9 million in the same quarter last year; -- Net income increased 1 percent to$26.6 million from$26.3 million in the same quarter last year; -- Diluted earnings per share decreased 5 percent to38 cents from40 cents in the same quarter last year.
The non-GAAP amounts primarily exclude the amortization of acquired intangibles, stock-based compensation, restructuring and transition costs, acquisition-related costs and purchase accounting adjustments for deferred revenue.
The non-GAAP results noted above and the non-GAAP financial outlook for
2011 discussed below represent non-GAAP financial measures. A
reconciliation of these measures to the appropriate GAAP measures for the
three and six months ended
The company's cash flow from operations for the quarter was
The company purchased approximately
Recent Highlights
-- Two top industry analyst firms,
--
-- Several new deals within the EBS unit were announced recently including Betfair, the world's largest international sports exchange, as well as Ativa Corretora and Banif Corretora, leading Brazilian brokerage firms.
--
Additional highlights can be found at: http://web.progress.com/inthenews/pressreleases.html.
Business Outlook
-- On a GAAP and non-GAAP basis, revenue is expected to be in the range
of $133 million to $136 million .
-- GAAP diluted earnings per share are expected to be in the range of 20
cents to 24 cents .
-- On a non-GAAP basis, diluted earnings per share are expected to be in
the range of 34 cents to 36 cents .
-- On a GAAP and non-GAAP basis, revenue is expected to be in the range
of $550 million to $560 million .
-- GAAP diluted earnings per share are expected to be in the range of
$1.08 to $1.15 .
-- On a non-GAAP basis, diluted earnings per share are expected to be in
the range of $1.60 to $1.65 .
The outlook for non-GAAP earnings excludes the amortization of acquired intangibles, stock-based compensation, restructuring and transition costs and related tax effects.
Legal Notice Regarding Non-GAAP Financial Information
Conference Call
The
Note to Editors
Note Regarding Forward-Looking Statements
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 for its third fiscal quarter, 2011, and the full
2011 fiscal year and strategic plans, 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; the customer demand and
acceptance of our new product initiative, the Progress RPM suite;
variations in the demand for professional services and technical support;
pricing pressures and the competitive environment in the software industry;
continuing uncertainty in the U.S. and international economies, which could
result in fewer sales of the Company's products and may otherwise harm the
Company's business; the Company's ability to complete and integrate
acquisitions; the Company's ability to realize the expected benefits and
anticipated synergies from acquired businesses; the Company's ability to
penetrate international markets and manage its international operations;
and changes in exchange rates. 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
Actional, Apama, FUSE ESB, FUSE, OpenEdge, Progress, Progress RPM,
Responsive Process Management, Savvion and SonicMQ, Sonic are trademarks or
registered trademarks of
GAAP Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended
--------------------------
May 31, May 31, Percentage
2011 2010 Change
-------- -------- --------
Revenue:
Software licenses $ 45,417 $ 44,228 3 %
Maintenance and services 89,267 83,428 7 %
-------- -------- --------
Total revenue 134,684 127,656 6 %
-------- -------- --------
Costs of revenue:
Cost of software licenses 2,321 1,619 43 %
Cost of maintenance and services 19,906 18,327 9 %
Amortization of purchased technology 3,930 5,285 (26)%
-------- -------- --------
Total costs of revenue 26,157 25,231 4 %
-------- -------- --------
Gross profit 108,527 102,425 6 %
-------- -------- --------
Operating expenses:
Sales and marketing 44,312 40,140 10 %
Product development 20,137 23,153 (13)%
General and administrative 13,742 13,448 2 %
Amortization of other acquired intangibles 1,982 2,736 (28)%
Restructuring expense 1,144 203 464 %
Acquisition-related expenses - - 0 %
-------- -------- --------
Total operating expenses 81,317 79,680 2 %
-------- -------- --------
Income from operations 27,210 22,745 20 %
-------- -------- --------
Other income, net 209 3,919 (95)%
-------- -------- --------
Income before income taxes 27,419 26,664 3 %
Provision for income taxes 9,459 7,606 24 %
-------- -------- --------
Net income $ 17,960 $ 19,058 (6)%
======== ======== ========
Earnings per share:
Basic $ 0.27 $ 0.30 (10)%
Diluted $ 0.26 $ 0.29 (10)%
======== ======== ========
Weighted average shares outstanding:
Basic 66,897 63,805 5 %
Diluted 69,246 66,355 4 %
======== ======== ========
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
Three Months Ended May 31, 2011
-----------------------------------------
As Percentage
Reported Adjustments Non-GAAP Change
--------- --------- --------- --------
Total revenue (1) $ 134,684 $ 30 $ 134,714 5 %
Income from operations $ 27,210 $ 12,621 $ 39,831 11 %
Purchase accounting
adjustments for deferred
revenue (1) (30) 30
Amortization of acquired
intangibles (5,912) 5,912
Stock-based compensation (2) (5,103) 5,103
Transition expense (3) (432) 432
Restructuring expense (1,144) 1,144
Operating margin percentage 20.2% 29.6%
Other income (expense), net $ 209 $ - $ 209 (95)%
Provision for income taxes (5) $ 9,459 $ 3,955 $ 13,414 (1)%
Net Income $ 17,960 $ 8,666 $ 26,626 1 %
Earnings per share $ 0.26 $ 0.38 (5)%
Diluted shares outstanding 69,246 - 69,246 4 %
========= ========= ========= ========
Three Months Ended May 31, 2010
-------------------------------
As
Reported Adjustments Non-GAAP
--------- --------- ---------
Total revenue (1) $ 127,656 $ 605 $ 128,261
Income from operations $ 22,745 $ 13,144 $ 35,889
Purchase accounting
adjustments for deferred
revenue (1) (605) 605
Amortization of acquired
intangibles (8,021) 8,021
Stock-based compensation (2) (4,445) 4,445
Restructuring expense (203) 203
Other (4) 130 (130)
Operating margin percentage 17.8% 28.0%
Other income, net $ 3,919 - $ 3,919
Provision for income taxes (5) $ 7,606 $ 5,942 $ 13,548
Net Income $ 19,058 $ 7,202 $ 26,260
Earnings per share $ 0.29 $ 0.40
Diluted shares outstanding 66,355 - 66,355
========= ========= =========
(1) The purchase accounting adjustment for deferred revenue is included
within maintenance and services revenue and represents the write-down
to fair value of the deferred maintenance revenue of Savvion and Iona
Technologies at the date of the acquisitions
(2) Stock-based compensation expense, representing the fair value of
equity awards, is included in the following GAAP expenses:
(In thousands)
Three Months Ended May 31, 2011
--------------------------------
As
Reported Adjustments Non-GAAP
--------- ----------- ---------
Cost of revenue $ 156 $ (156) $ -
Sales and marketing 901 (901) -
Product development 1,290 (1,290) -
General and administrative 2,756 (2,756) -
--------- ----------- ---------
Total $ 5,103 $ (5,103) $ -
========= =========== =========
Three Months Ended May 31, 2010
--------------------------------
As
Reported Adjustments Non-GAAP
--------- ----------- ---------
Cost of revenue $ 210 $ (210) $ -
Sales and marketing 1,215 (1,215) -
Product development 966 (966) -
General and administrative 2,054 (2,054) -
--------- ----------- ---------
Total $ 4,445 $ (4,445) $ -
========= =========== =========
(3) Transition expenses for the three months ended May 31, 2011 represent
incremental costs incurred to transform our cost structure to a more
efficient cost model and such expenses are included primarily within
our product development and general and administrative expenses.
(4) Other adjustments for the three months ended May 31, 2010 include a
credit of $0.1 million in general and administrative expenses for an
insurance reimbursement in excess of previously estimated amounts
related to professional service fees associated with the stock option
investigation and related shareholder derivative lawsuit.
(5) The non-GAAP provision for income taxes was calculated reflecting an
effective rate of 33.5% and 34.0% for the three months ended May 31,
2011 and 2010, respectively. The difference between the effective tax
rate under GAAP and the effective tax rate utilized in the preparation
of non-GAAP financial measures primarily relates to the tax effects of
stock-based compensation expense and amortization of acquired
intangibles, which are excluded from the determination of non-GAAP net
income.
GAAP Condensed Consolidated Statements of Income
(In thousands, except per share data)
Six Months Ended
--------------------------
May 31, May 31, Percentage
2011 2010 Change
-------- -------- --------
Revenue:
Software licenses $ 96,753 $ 91,345 6 %
Maintenance and services 172,168 163,858 5 %
-------- -------- --------
Total revenue 268,921 255,203 5 %
-------- -------- --------
Costs of revenue:
Cost of software licenses 4,702 3,608 30 %
Cost of maintenance and services 37,674 35,241 7 %
Amortization of purchased technology 7,905 10,383 (24)%
-------- -------- --------
Total costs of revenue 50,281 49,232 2 %
-------- -------- --------
Gross profit 218,640 205,971 6 %
-------- -------- --------
Operating expenses:
Sales and marketing 89,010 83,346 7 %
Product development 40,996 46,540 (12)%
General and administrative 25,594 26,230 (2)%
Amortization of other acquired intangibles 4,256 5,100 (17)%
Restructuring expense 3,258 25,974 (87)%
Acquisition-related expenses - 415 (100)%
-------- -------- --------
Total operating expenses 163,114 187,605 (13)%
-------- -------- --------
Income from operations 55,526 18,366 202 %
-------- -------- --------
Other income, net 170 6,675 (97)%
-------- -------- --------
Income before income taxes 55,696 25,041 122 %
Provision for income taxes 17,215 6,989 146 %
-------- -------- --------
Net income $ 38,481 $ 18,052 113 %
======== ======== ========
Earnings per share:
Basic $ 0.57 $ 0.29 97 %
Diluted $ 0.55 $ 0.28 96 %
======== ======== ========
Weighted average shares outstanding:
Basic 66,942 62,712 7 %
Diluted 69,453 65,191 7 %
======== ======== ========
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
Six Months Ended May 31, 2011
-----------------------------------------
As Percentage
Reported Adjustments Non-GAAP Change
--------- --------- --------- --------
Total revenue (1) $ 268,921 $ 75 $ 268,996 5 %
Income from operations $ 55,526 $ 25,637 $ 81,163 18 %
Purchase accounting
adjustments for deferred
revenue (1) (75) 75
Amortization of acquired
intangibles (12,161) 12,161
Stock-based compensation (2) (9,287) 9,287
Transition expense (3) (856) 856
Restructuring expense (3,258) 3,258
Operating margin percentage 20.6% 30.2%
Other income, net $ 170 $ - $ 170 (97)%
Provision for income taxes (6) $ 17,215 $ 8,032 $ 25,247 (1)%
Net Income $ 38,481 $ 17,605 $ 56,086 15 %
Earnings per share $ 0.55 $ 0.81 8 %
Diluted shares outstanding 69,453 - 69,453 7 %
========= ========= ========= ========
Six Months Ended May 31, 2010
-------------------------------
As
Reported Adjustments Non-GAAP
--------- --------- ---------
Total revenue (1) $ 255,203 $ 1,059 $ 256,262
Income from operations $ 18,366 $ 50,278 $ 68,644
Purchase accounting
adjustments for deferred
revenue (1) (1,059) 1,059
Amortization of acquired
intangibles (15,483) 15,483
Stock-based compensation (2) (8,677) 8,677
Restructuring expense (25,974) 25,974
Other (4) 915 (915)
Operating margin percentage 7.2% 26.8%
Other income, net (5) $ 6,675 $ (899) $ 5,776
Provision for income taxes (6) $ 6,989 $ 18,500 $ 25,489
Net Income $ 18,052 $ 30,879 $ 48,931
Earnings per share $ 0.28 $ 0.75
Diluted shares outstanding 65,191 - 65,191
========= ========= =========
(1) The purchase accounting adjustment for deferred revenue is included
within maintenance and services revenue and represents the write-down
to fair value of the deferred maintenance revenue of Savvion and Iona
Technologies at the date of the acquisitions
(2) Stock-based compensation expense, representing the fair value of equity
awards, is included in the following GAAP expenses:
(In thousands)
Six Months Ended May 31, 2011
------------------------------------
As
Reported Adjustments Non-GAAP
----------- ----------- -----------
Cost of revenue $ 379 $ (379) $ -
Sales and marketing 2,191 (2,191) -
Product development 2,559 (2,559) -
General and administrative 4,158 (4,158) -
----------- ----------- -----------
Total $ 9,287 $ (9,287) $ -
=========== =========== ===========
Six Months Ended May 31, 2010
------------------------------------
As
Reported Adjustments Non-GAAP
----------- ----------- -----------
Cost of revenue $ 473 $ (473) $ -
Sales and marketing 2,793 (2,793) -
Product development 2,074 (2,074) -
General and administrative 3,337 (3,337) -
----------- ----------- -----------
Total $ 8,677 $ (8,677) $ -
=========== =========== ===========
(3) Transition expenses for the six months ended May 31, 2011 represent
incremental costs incurred to transform our cost structure to a more
efficient cost model and such expenses are included primarily within
our product development and general and administrative expenses.
(4) Other adjustments for the six months ended May 31, 2010 include
acquisition-related expenses of $0.4 million for the Savvion
transaction and a credit of $1.3 million in general and administrative
expenses for an insurance reimbursement in excess of previously
estimated amounts related to professional service fees associated with
the stock option investigation and related shareholder derivative
lawsuit.
(5) The non-GAAP adjustment in other income for the six months ended
May 31, 2010 relates to an insurance settlement gain from a
pre-acquisition contingency assumed as part of a prior acquisition.
(6) The non-GAAP provision for income taxes was calculated reflecting an
effective rate of 31.0% and 34.3% for the six months ended May 31, 2011
and 2010, respectively. The difference between the effective tax rate
under GAAP and the effective tax rate utilized in the preparation of
non-GAAP financial measures primarily relates to the tax effects of
stock-based compensation expense and amortization of acquired
intangibles, which are excluded from the determination of non-GAAP
net income.
Condensed Consolidated Balance Sheets
(In thousands)
May 31, November 30,
2011 2010
------------ ------------
Assets
Cash and short-term investments $ 388,978 $ 322,396
Accounts receivable 91,738 119,273
Other current assets 38,041 42,189
------------ ------------
Total current assets 518,757 483,858
------------ ------------
Property and equipment 63,023 58,207
Goodwill and intangibles 309,845 321,551
Other assets 68,604 73,207
------------ ------------
Total $ 960,229 $ 936,823
============ ============
Liabilities and Shareholders' Equity
Accounts payable and other current liabilities $ 81,207 $ 98,715
Short-term deferred revenue 149,888 138,961
------------ ------------
Total current liabilities 231,095 237,676
------------ ------------
Long-term deferred revenue 5,222 2,908
Other noncurrent liabilities 6,989 7,907
Shareholders' Equity:
Common stock and additional paid-in capital 366,204 347,604
Retained earnings 350,719 340,728
------------ ------------
Total shareholders' equity 716,923 688,332
------------ ------------
Total $ 960,229 $ 936,823
============ ============
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
------------------------
May 31, May 31,
2011 2010
----------- -----------
Cash flows from operations:
Net income $ 38,481 $ 18,052
Depreciation, amortization and other noncash
charges 25,844 30,224
Changes in operating assets and liabilities 24,718 2,643
----------- -----------
Net cash flows from operations 89,043 50,919
Capital expenditures (8,494) (4,076)
Redemptions of auction-rate-securities 6,200 575
Acquisitions - (49,177)
Issuance (repurchase) of common stock, net (29,102) 51,460
Other 8,935 (13,254)
----------- -----------
Net change in cash and short-term investments 66,582 36,447
Cash and short-term investments, beginning of
period 322,396 224,121
----------- -----------
Cash and short-term investments, end of period $ 388,978 $ 260,568
=========== ===========
Reconciliation of Forward-Looking Guidance
Reconciliation of GAAP to Non-GAAP forward-looking guidance range of
diluted earnings per share for the three months ended August 31, 2011 :
GAAP expectation for diluted earnings per share $ 0.20 to $ 0.24
Adjustment to exclude stock-based compensation $ 0.05 to $ 0.06
Adjustment to exclude amortization of acquired
intangibles $ 0.06 to $ 0.06
Adjustment to exclude restructuring & transition-related
expenses $ 0.01 to $ 0.02
----------------
Non-GAAP expectation for diluted earnings per share $ 0.34 to $ 0.36
================
Reconciliation of GAAP to Non-GAAP forward-looking guidance range of
diluted earnings per share for the twelve months ended November 30, 2011 :
GAAP expectation for diluted earnings per share $ 1.08 to $ 1.15
Adjustment to exclude stock-based compensation $ 0.20 to $ 0.21
Adjustment to exclude amortization of acquired
intangibles $ 0.23 to $ 0.23
Adjustment to exclude restructuring & transition-related
expenses $ 0.07 to $ 0.08
----------------
Non-GAAP expectation for diluted earnings per share $ 1.60 to $ 1.65
================
Investor Relations Contact:Tom Barth Progress Software Corporation (781) 280-4135 tobarth@progress.com Media Relations Contact:John Stewart Progress Software Corporation (781) 280-4101 jstewart@progress.com
Source:
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