Press Release

BEDFORD, Mass.--(BUSINESS WIRE)-- Progress Software Corporation (NASDAQ: PRGS), a leading software provider that enables enterprises to be operationally responsive, announced today results for its fiscal first quarter ended February 29, 2012.

Revenue for the quarter was $124.4 million, a decrease of 7% from $134.2 million in the fiscal first quarter of 2011.

On a GAAP basis in the fiscal first quarter of 2012:

• Income from operations was $11.9 million, a decrease of 58% compared to $28.3 million in the same quarter last year;
• Net income was $7.5 million, a decrease of 64% compared to $20.5 million in the same quarter last year; and
• Diluted earnings per share were $0.12, a decrease of 59% compared to $0.29 in the same quarter last year.

On a non-GAAP basis in the fiscal first quarter of 2012:

• Income from operations was $26.1 million, a decrease of 37% compared to $41.3 million in the same quarter last year;
• Net income was $17.7 million, a decrease of 40% compared to $29.4 million in the same quarter last year; and
• Diluted earnings per share were $0.28, a decrease of 33% compared to $0.42 in the same quarter last year.

Jay Bhatt, president and chief executive officer of Progress Software, said: "Despite the stated year-over-year declines, the company performed better than expected, largely due to our OpenEdge product line. As we navigate through the current environment, we will continue to tightly control spending to protect our profitability."

Bhatt also noted: "Since I joined Progress Software in early December, the management team and Board of Directors have been conducting a comprehensive evaluation of the company. This effort includes perspectives from shareholders, customers, partners and from external independent advisors including J.P. Morgan. We are nearing the end of our evaluation and expect to share our revised plan with the marketplace in late April. We understand that the status quo is unacceptable and our plan may include actions on the company's strategy, product portfolio, expense run rate and capital allocation to strengthen the business and to deliver higher levels of shareholder value."

Cash flows from operations for the quarter were $38.5 million, down from $50.2 million in the same quarter in fiscal 2011. Cash, cash equivalents and short-term investments increased to $315.2 million from $261.4 million at the end of the fiscal fourth quarter 2011, primarily as a result of cash flows from operations and stock option exercises.

Business Outlook
In light of the ongoing evaluation and forthcoming announcement of the company's revised business plan, the company will not provide guidance for the fiscal second quarter or fiscal year at this time.

Note to Editors
Progress Software is providing, in advance, a copy of prepared remarks for its conference call. These prepared remarks will not be read on the call. The press release, the prepared remarks, and additional financial disclosures are available on the Progress Software website www.progress.com within the investor relations section.

Conference Call
The Progress Software quarterly investor conference call to review its fiscal first quarter 2012 will be broadcast live at 9:00 a.m. Eastern on Wednesday, March 28, 2012 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 1-800-915-4836, pass code 7144347. 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 www.progress.com within the investor relations section.

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 involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to those risks and uncertainties described in the Company's filings with the Securities and Exchange Commission. 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.

Important Shareholder Information
Progress Software will hold its Annual Meeting of Shareholders on May 31, 2012 at 9:00 a.m. Eastern. The company plans to file with the Securities and Exchange Commission and mail to its shareholders a proxy statement in connection with its 2012 Annual Meeting of Shareholders. The proxy statement will contain important information about the company, the Annual Meeting and related matters.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT SOLICITATION MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THESE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION.

The proxy statement and other relevant solicitation materials (when they become available), and any and all documents filed by the company with the Securities and Exchange Commission, may be obtained by investors and security holders free of charge at the Securities and Exchange Commission's web site at www.sec.gov. In addition, filings of the company with the Securities and Exchange Commission, including the proxy statement and other relevant solicitation materials (when they become available), may be obtained, without charge, from the company by directing a request to the company at 14 Oak Park, Bedford, Massachusetts 01730, c/o Corporate Secretary.

The company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the company in connection with the Annual Meeting. Information regarding the company's directors and executive officers is contained in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on January 30, 2012 and definitive proxy statement filed with the Securities and Exchange Commission on March 21, 2011. Additional information regarding the interests of those participants in the solicitation of proxies may be obtained by reading the proxy statement for the Annual Meeting when it becomes available.

Progress Software Corporation
Progress Software Corporation (NASDAQ: PRGS) is a global software company that enables enterprises to be operationally responsive to changing conditions and customer interactions as they occur — to capitalize on new opportunities, drive greater efficiencies and reduce risk. The company offers a comprehensive portfolio of best-in-class infrastructure software spanning event-driven visibility and real-time response, open integration, data access and integration, and application development and deployment — all supporting on-premises and SaaS/Cloud deployments. Progress Software maximizes the benefits of operational responsiveness while minimizing IT complexity and total cost of ownership. Progress Software can be reached at www.progress.com or 1-781-280-4000.

Progress is a trademark or registered trademark 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
	Fiscal First Quarter Ended
(In thousands, except per share data)	February 29, 2012			February 28, 2011				% Change
Revenue:
Software licenses	$	41,492		$	51,336			-19	%
Maintenance and services		82,934			82,901			0	%
Total revenue		124,426			134,237			-7	%
Costs of revenue:
Cost of software licenses		2,288			2,381			-4	%
Cost of maintenance and services		19,380			17,768			9	%
Amortization of acquired intangibles		3,734			3,975			-6	%
Total costs of revenue		25,402			24,124			5	%
Gross profit		99,024			110,113			-10	%
Operating expenses:
Sales and marketing		47,247			44,698			6	%
Product development		22,395			20,859			7	%
General and administrative		15,452			11,852			30	%
Amortization of acquired intangibles		1,821			2,274			-20	%
Restructuring expenses		-			2,114			-100	%
Acquisition-related expenses		215			-			-
Total operating expenses		87,130			81,797			7	%
Income from operations		11,894			28,316			-58	%
Other income (expense), net		270			(39	)		-792	%
Income before provision for income taxes		12,164			28,277			-57	%
Provision for income taxes		4,675			7,756			-40	%
Net income	$	7,489		$	20,521			-64	%
Earnings per share:
Basic	$	0.12		$	0.31			-61	%
Diluted	$	0.12		$	0.29			-59	%
Weighted average shares outstanding:
Basic		62,145			66,986			-7	%
Diluted		63,130			69,659			-9	%

Condensed Consolidated Balance Sheets
(In thousands)	February 29, 2012				November 30, 2011
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	315,164			$	261,416
Accounts receivable, net		102,645				110,927
Other current assets		33,907				35,434
Total current assets		451,716				407,777
Property and equipment, net		68,048				66,206
Goodwill and intangible assets, net		322,165				327,647
Other assets		66,951				63,680
Total assets	$	908,880			$	865,310
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other current liabilities	$	83,533			$	85,781
Short-term deferred revenue		162,552				145,727
Total current liabilities		246,085				231,508
Long-term deferred revenue		5,069				6,619
Other long-term liabilities		4,296				4,883
Shareholders' equity:
Common stock and additional paid-in capital		329,405				309,221
Retained earnings		324,025				313,079
Total shareholders' equity		653,430				622,300
Total liabilities and shareholders' equity	$	908,880			$	865,310
Condensed Consolidated Statements of Cash Flows
	Fiscal First Quarter Ended
(In thousands)	February 29, 2012				February 28, 2011
Cash flows from operating activities:
Net income	$	7,489			$	20,521
Depreciation and amortization		7,349				8,461
Stock-based compensation		7,091				4,184
Other non-cash adjustments		362				451
Changes in operating assets and liabilities		15,351				16,613
Net cash flows from operating activities		37,642				50,230
Capital expenditures		(3,955	)			(3,352	)
Redemptions at par by issuers of auction-rate-securities		225				-
Net cash paid for acquisitions		-				-
Issuances of common stock, net of repurchases		13,702				(6,120	)
Other		6,134				7,685
Net change in cash and short-term investments		53,748				48,443
Cash, cash equivalents and short-term investments, beginning of period		261,416				322,396
Cash, cash equivalents and short-term investments, end of period	$	315,164			$	370,839

Reconciliation of GAAP to Non-GAAP Financial Measures
	Fiscal First Quarter Ended
(In thousands, except per share data)	February 29, 2012				February 28, 2011				% Change
GAAP income from operations	$	11,894			$	28,316
GAAP operating margin %		9.6	%			21.1	%
Amortization of acquired intangibles		5,555				6,249
Stock-based compensation (1)		7,091				4,184
Transition expenses		-				424
Restructuring expenses		-				2,114
Acquisition-related expenses		215				-
Litigation settlement		900				-
Proxy-related costs		472				-
Total operating adjustments (2)		14,233				12,971
Non-GAAP income from operations	$	26,127			$	41,287			-37	%
Non-GAAP operating margin %		21.0	%			30.8	%
GAAP net income	$	7,489			$	20,521
Operating adjustments (from above)		14,233				12,971
Income tax adjustment		(4,036	)			(4,077	)
Total net income adjustments (2)		10,197				8,894
Non-GAAP net income	$	17,686			$	29,415			-40	%
GAAP earnings per share - diluted	$	0.12			$	0.29
Total net income adjustments (from above) (2)		0.16				0.13
Non-GAAP earnings per share - diluted	$	0.28			$	0.42			-33	%
Weighted average shares outstanding - diluted		63,130				69,659
(1) Stock-based compensation is included in the GAAP statements of income, as follows:
Cost of revenue	$	588			$	223
Sales and marketing		2,134				1,290
Product development		1,945				1,269
General and administrative		2,424				1,402
	$	7,091			$	4,184
(2) Adjustments reported for the fiscal first quarter of 2011 have been revised to eliminate our use of a non-GAAP
revenue measure. See our Current Report on Form 8-K filed with this press release for additional information.

Progress Software Corporation
Investor Relations:
Tom Barth, 781-280-4135
tobarth@progress.com
or
Public Relations:
John Stewart, 781-280-4101
jstewart@progress.com

Source: Progress Software Corporation

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