Table of Contents
UNITED STATES
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 17, 2005
Progress Software Corporation
Commission file number: 0-19417
| Massachusetts (State or other jurisdiction of incorporation or organization) |
04-2746201 (I.R.S. employer identification no.) |
14 Oak Park
Bedford, Massachusetts 01730
(Address of principal executive offices, including zip code)
(781) 280-4000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Item 2.02 Results of Operations and Financial Condition | ||||||||
| Item 9.01 Financial Statements and Exhibits | ||||||||
| SIGNATURES | ||||||||
| Ex-99.1 Press Release dated March 17, 2005 | ||||||||
Table of Contents
Section 2 — Financial Information
Item 2.02 Results of Operations and Financial Condition
On March 17, 2005, Progress Software Corporation issued a press release announcing financial results for its fiscal first quarter ended February 28, 2005. A copy of this press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
| (c) | Exhibits |
| 99.1 | Press Release dated March 17, 2005 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: March 17, 2005 | Progress Software Corporation | |||
| By: | /s/ Norman R. Robertson | |||
| Senior Vice President, Finance and | ||||
| Administration and Chief | ||||
| Financial Officer | ||||
Exhibit 99.1
PROGRESS SOFTWARE REPORTS FIRST QUARTER RESULTS
Revenue up 13%; Operating Income and EPS show Dramatic Increases
BEDFORD, Mass., March 17, 2005—Progress Software Corporation (Nasdaq: PRGS), a supplier of leading technology to develop, deploy, integrate and manage business applications, today announced results for its first quarter ended February 28, 2005. Revenue for the quarter was a record $97.7 million, up 13 percent (10 percent at constant currency) from $86.4 million in the first quarter of fiscal 2004. Software license revenue increased 11 percent (8 percent at constant currency) to $37.6 million from $33.9 million in the same quarter last year.
On a generally accepted accounting principles (GAAP) basis, operating income increased 127 percent to $14.4 million from $6.3 million in the first quarter of fiscal 2004. Net income increased 101 percent to $9.3 million from $4.6 million in the same quarter last year. Diluted earnings per share increased 92 percent to 23 cents per share from 12 cents per share in the first quarter of fiscal 2004. The results for the first quarter of fiscal 2005 include an after-tax charge for amortization of acquired intangibles of $1.4 million. The results for the first quarter of fiscal 2004 include after-tax charges for amortization of acquired intangibles of $1.1 million and in-process research and development of $1.8 million.
On a pro forma basis, excluding the charges for amortization of acquired intangibles and in-process research and development, operating income increased 56 percent to $16.4 million from $10.5 million in the first quarter of fiscal 2004. Pro forma net income increased 42 percent to $10.7 million from $7.5 million in the same quarter last year. Pro forma diluted earnings per share increased 42 percent to 27 cents per share from 19 cents in the first quarter of fiscal 2004.
The company’s cash and short-term investments at the end of the quarter totaled $205 million. During the first quarter, the company purchased approximately 265,000 shares of its stock at a cost of $5.8 million. The company’s existing repurchase authorization, under which 9.7 million shares remain available for repurchase, expires on September 30, 2005.
“During the first quarter of 2005 we saw the payoff from our multi-year growth initiatives and significant increases in overall PSC profitability. Our ObjectStore and DataDirect operating units delivered excellent revenue growth while Sonic Software and the OpenEdge Division produced solid growth with substantial operating improvements,” stated Joseph Alsop, co-founder and chief executive officer of PSC. “Our newer companies now account for over 30 percent of our software license revenue while revenue from OpenEdge continues to grow and is well positioned to deliver solid results for the balance of 2005.”
Highlights
During the quarter, Progress Software received extensive media coverage on Interactive Taxi’s use of the PeerDirect product line from ObjectStore to create a new kind of Internet portal designed for deployment in the backseat of taxicabs. Initial deployments of hundreds of these new “cybercabs” have begun in Boston, Chicago and San Francisco. Passengers can now access the most accurate, up-to-date news from major national and local outlets, real-time traffic information and emergency news, and get fully localized listings of special events and happenings in and around the city, book restaurant and show reservations, buy movie tickets and pay their cab fare with a credit or debit card all on the computer screen embedded in the back of the front seat of the taxicab. PeerDirect technology enables lightning-fast access to Internet content even when no cellular data network connection is available. This innovative use of Progress® technology received broad media coverage, including stories in The Wall Street Journal, eWeek, Boston Business Journal, and on prime time TV. [Media coverage can be found at www.peerdirect.com/news/media_analyst/index.ssp
The IDC report “Worldwide Embedded Database Management Systems 2003 Vendor Shares” published
in December 2004 showed the Progress OpenEdge® RDBMS retaining its worldwide leadership of the
growing embedded database market, for the seventh consecutive year, with 19.7 percent market share,
over 50% greater than the share of any other vendor in this market space.
www.progress.com/embedded_database_leadership
Sonic Software enhanced and expanded its Service Oriented Architecture (SOA) infrastructure for the
enterprise with the release of version 6.1. The inventor and leading provider of the enterprise
service bus (ESB), Sonic has extended its ESB-based SOA infrastructure line with two new products:
the Sonic Collaboration Server™ for managing partner interactions; and the Sonic Database Service
™, which simplifies access to relational data. Also in version 6.1, a new deployment tool
simplifies SOA lifecycle management, making it easier to deploy and continually upgrade services
and processes across large-scale deployments. Version 6.1 also includes enhancements to Sonic ESB®
and the Sonic Workbench™, increasing SOA development productivity with a new uniform service
invocation model which enables services of any type, from Web services to databases, to be easily
incorporated into the ESB.
www.progress.com/new_soa_infrastructure
Significant New Customer and Partner Wins, New Technology Adoptions and Major Deployments
Significant new partners and customers adopting technology from PSC operating companies, or deploying solutions using PSC technology, include: Boehringer Ingelheim GmbH, Brasseries Kronenbourg, Carlson Marketing Group, CCIS Inc., Charter Bank in New Mexico, Commonwealth Bank Of Australia, De Federale Politie, Federal Reserve Board, iMetals, Landmark Graphics Corporation, Liberty Mutual Insurance Company, Maersk Sealand, NBC West, New York Merchantile Exchange, Pac Software SA, Park
Motor Sales Co., Perseus Development Corporation, Shinsei, Tegra Systems, Kroger Company, Washington, D.C., Wild Oats Market and Wollaston Alloys, Inc.
Significant existing partners and customers adopting technology from different PSC operating companies, or making substantial additional deployments of PSC technology, include: Artemis International Solutions Corp., Australia Meat Holdings Ltd, Black & Decker, Cerner Corporation, Citigroup Global Markets, ComfortDelGro, Computer Associates International, CRS Retail Systems, CSC Holdings, Delta Technology Inc., Diamant Boart, Distribution Solutions International, Eastman Kodak Company, Edify Corporation, Energy Gdanska, Evoke Software Corporation, Hewitt Associates LLC, Inovis, Inc., Iron Mountain, MarketAxess Holdings, Ministerio de Justicia y Seguridad de Mendoza, Morgan Stanley Capital International, Movaris, Inc., Nokia, Orange UK Ltd, Parametric Technology Corporation, Pepsi Business Solutions, Plumtree Software, Inc., Procter & Gamble Company, Reuters Financial Software, Rhodes University, Ricoh Hong Kong Ltd, Rimage Corporation, SBC Communications, Starwood Hotel & Resorts, Sterling Jewelers, Swiss Reinsurance Company, Toll Holdings, Universal Forest Products, Universal Technical Institute, Wachovia Corporation and Xerox Corporation.
Business Outlook
The company is providing the following guidance for the second fiscal quarter ending May 31, 2005:
| • | Revenue is expected to be in the range of $98 million to $100 million. | |||
| • | GAAP operating income is expected to be in the range of $15 million to $16 million, including amortization of acquired intangibles of approximately $2 million. | |||
| • | GAAP diluted earnings per share are expected to be in the range of 27 cents to 29 cents. | |||
| • | On a pro forma basis, operating income is expected to be in the range of $17 million to $18 million, excluding amortization of acquired intangibles of approximately $2 million. | |||
| • | On a pro forma basis, diluted earnings per share are expected to be in the range of 30 cents to 32 cents, excluding approximately 3 cents per share for amortization of acquired intangibles. | |||
The company is providing the following guidance for the fiscal year ending November 30, 2005:
| • | Revenue is expected to be in the range of $395 million to $405 million. |
| • | GAAP operating income is expected to be in the range of $63 million to $66 million, including amortization of acquired intangibles of approximately $8 million. | |||
| • | GAAP diluted earnings per share are expected to be in the range of $1.08 to $1.12. | |||
| • | On a pro forma basis, operating income is expected to be in the range of $71 million to $74 million, excluding amortization of acquired intangibles of approximately $8 million. | |||
| • | On a pro forma basis, diluted earnings per share are expected to be in the range of $1.21 to $1.25, excluding approximately 13 cents per share for amortization of acquired intangibles. | |||
This guidance does not include any expense associated with stock-based compensation. The company is currently evaluating the impact of the new accounting pronouncement regarding stock-based compensation, which is effective in the company’s fourth quarter of fiscal 2005.
Legal Notice Regarding Pro Forma Financial Information
The company provides pro forma 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 pro forma measures used by other companies. The company believes that the pro forma 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 pro forma 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 pro forma adjustments to the company’s GAAP financial results is included in the tables below.
Conference Call
PSC’s conference call to discuss its first quarter results will be Webcast live today at 9:00 a.m.
Eastern via CCBN on the company’s Web site, located at www.progress.com/investors. The call will
also be Webcast live via Yahoo (www.yahoo.com), Motley Fool (www.fool.com), Streetevents
(www.streetevents.com), TD Waterhouse (www.tdwaterhouse.com) and Fidelity.com (www.fidelity.com).
An archived version of the conference call will be available for replay.
About Progress Software Corporation
Progress Software Corporation (Nasdaq: PRGS) is a $300+ million global software industry leader.
PSC supplies technologies for all aspects of the development, deployment, integration and
management of business applications through its operating
companies: Progress OpenEdge Division, DataDirect Technologies, ObjectStore and Sonic Software Corporation. Headquartered in Bedford, Mass., PSC can be reached on the Web at http://www.progress.com or by phone at +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 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 customer service and technical support, pricing pressures and the competitive environment in the software industry, business and consumer use of the Internet, and the company’s ability to penetrate international markets and manage its international operations. 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.
Progress, Progress OpenEdge, and OpenEdge are trademarks or registered trademarks of Progress Software Corporation in the U.S. and other countries. Sonic ESB, Sonic Collaboration Server, Sonic Database Service, and Sonic Workbench are trademarks or registered trademarks of Sonic Software Corporation in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.
Progress Software Corporation
Condensed Consolidated Statements of Income
| Three Months Ended | ||||||||||||
| February 28, | February 29, | Percent | ||||||||||
| (In thousands except per share data) | 2005 | 2004 | Change | |||||||||
Revenue: |
||||||||||||
Software licenses |
$ | 37,555 | $ | 33,895 | 11 | % | ||||||
Maintenance and services |
60,167 | 52,480 | 15 | % | ||||||||
Total revenue |
97,722 | 86,375 | 13 | % | ||||||||
Costs and expenses: |
||||||||||||
Cost of software licenses |
1,951 | 2,592 | ||||||||||
Cost of maintenance and services |
14,036 | 12,826 | ||||||||||
Sales and marketing |
38,329 | 36,180 | ||||||||||
Product development |
16,399 | 14,609 | ||||||||||
General and administrative |
10,652 | 9,676 | ||||||||||
Amortization of acquired intangibles |
1,997 | 1,559 | ||||||||||
In-process research and development |
— | 2,600 | ||||||||||
Total costs and expenses |
83,364 | 80,042 | 4 | % | ||||||||
Income from operations |
14,358 | 6,333 | 127 | % | ||||||||
Other income (expense), net |
(661 | ) | 392 | |||||||||
Income before provision for income taxes |
13,697 | 6,725 | 104 | % | ||||||||
Provision for income taxes |
4,383 | 2,085 | ||||||||||
Net income |
$ | 9,314 | $ | 4,640 | 101 | % | ||||||
Earnings per share: |
||||||||||||
Basic |
$ | 0.25 | $ | 0.13 | 92 | % | ||||||
Diluted |
$ | 0.23 | $ | 0.12 | 92 | % | ||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
36,573 | 35,644 | 3 | % | ||||||||
Diluted |
39,721 | 38,955 | 2 | % | ||||||||
Pro Forma Condensed Consolidated Statements of Income
| Three Months Ended February 28, 2005 | Three Months Ended February 29, 2004 | |||||||||||||||||||||||||||
| As | Pro Forma | As | Pro Forma | Percent | ||||||||||||||||||||||||
| (In thousands except per share data) | Reported | Adjustments | Pro Forma | Reported | Adjustments | Pro Forma | Change | |||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
Software licenses |
$ | 37,555 | $ | 37,555 | $ | 33,895 | $ | 33,895 | 11 | % | ||||||||||||||||||
Maintenance and services |
60,167 | 60,167 | 52,480 | 52,480 | 15 | % | ||||||||||||||||||||||
Total revenue |
97,722 | 97,722 | 86,375 | 86,375 | 13 | % | ||||||||||||||||||||||
Costs and expenses: |
||||||||||||||||||||||||||||
Cost of software licenses |
1,951 | 1,951 | 2,592 | 2,592 | ||||||||||||||||||||||||
Cost of maintenance and services |
14,036 | 14,036 | 12,826 | 12,826 | ||||||||||||||||||||||||
Sales and marketing |
38,329 | 38,329 | 36,180 | 36,180 | ||||||||||||||||||||||||
Product development |
16,399 | 16,399 | 14,609 | 14,609 | ||||||||||||||||||||||||
General and administrative |
10,652 | 10,652 | 9,676 | 9,676 | ||||||||||||||||||||||||
Amortization of acquired intangibles |
1,997 | $ | (1,997 | ) | — | 1,559 | $ | (1,559 | ) | — | ||||||||||||||||||
In-process research and development |
— | — | — | 2,600 | (2,600 | ) | — | |||||||||||||||||||||
Total costs and expenses |
83,364 | (1,997 | ) | 81,367 | 80,042 | (4,159 | ) | 75,883 | 7 | % | ||||||||||||||||||
Income from operations |
14,358 | 1,997 | 16,355 | 6,333 | 4,159 | 10,492 | 56 | % | ||||||||||||||||||||
Other income (expense), net |
(661 | ) | (661 | ) | 392 | 392 | ||||||||||||||||||||||
Income before provision for income taxes |
13,697 | 1,997 | 15,694 | 6,725 | 4,159 | 10,884 | 44 | % | ||||||||||||||||||||
Provision for income taxes |
4,383 | 639 | 5,022 | 2,085 | 1,289 | 3,374 | ||||||||||||||||||||||
Net income |
$ | 9,314 | $ | 1,358 | $ | 10,672 | $ | 4,640 | $ | 2,870 | $ | 7,510 | 42 | % | ||||||||||||||
Earnings per share: |
||||||||||||||||||||||||||||
Basic |
$ | 0.25 | $ | 0.29 | $ | 0.13 | $ | 0.21 | 38 | % | ||||||||||||||||||
Diluted |
$ | 0.23 | $ | 0.27 | $ | 0.12 | $ | 0.19 | 42 | % | ||||||||||||||||||
Weighted average shares outstanding: |
||||||||||||||||||||||||||||
Basic |
36,573 | 36,573 | 35,644 | 35,644 | 3 | % | ||||||||||||||||||||||
Diluted |
39,721 | 39,721 | 38,955 | 38,955 | 2 | % | ||||||||||||||||||||||
Progress Software Corporation
Condensed Consolidated Balance Sheets
| February 28, | November 30, | |||||||
| (In thousands) | 2005 | 2004 | ||||||
Assets |
||||||||
Cash and short-term investments |
$ | 204,674 | $ | 191,267 | ||||
Accounts receivable, net |
70,857 | 63,503 | ||||||
Other current assets |
24,548 | 23,485 | ||||||
Total current assets |
300,079 | 278,255 | ||||||
Property and equipment, net |
40,567 | 40,658 | ||||||
Goodwill and intangible assets, net |
105,497 | 107,363 | ||||||
Other assets |
19,992 | 20,538 | ||||||
Total |
$ | 466,135 | $ | 446,814 | ||||
Liabilities and shareholders’ equity |
||||||||
Accounts payable and other current liabilities |
$ | 60,246 | $ | 70,669 | ||||
Short-term deferred revenue |
117,919 | 101,106 | ||||||
Total current liabilities |
178,165 | 171,775 | ||||||
Long-term debt |
2,137 | 2,200 | ||||||
Long-term deferred revenue |
6,665 | 5,861 | ||||||
Shareholders’ equity: |
||||||||
Common stock and additional paid-in capital |
74,316 | 70,085 | ||||||
Retained earnings |
204,852 | 196,893 | ||||||
Total shareholders’ equity |
279,168 | 266,978 | ||||||
Total |
$ | 466,135 | $ | 446,814 | ||||
Condensed Consolidated Statements of Cash Flows
| Three Months Ended | ||||||||
| February 28, | February 29, | |||||||
| (In thousands except per share data) | 2005 | 2004 | ||||||
Cash flows from operations: |
||||||||
Net income |
$ | 9,314 | $ | 4,640 | ||||
Depreciation, amortization and other noncash charges |
4,279 | 6,570 | ||||||
Other changes in operating assets and liabilities |
611 | 2,113 | ||||||
Net cash flows from operations |
14,204 | 13,323 | ||||||
Capital expenditures |
(2,106 | ) | (2,071 | ) | ||||
Acquisitions, net of cash acquired |
— | (87,520 | ) | |||||
Share issuances, net of repurchases |
938 | 5,178 | ||||||
Other |
371 | 746 | ||||||
Net change in cash and short-term investments |
13,407 | (70,344 | ) | |||||
Cash and short-term investments, beginning of period |
191,267 | 219,131 | ||||||
Cash and short-term investments, end of period |
$ | 204,674 | $ | 148,787 | ||||
