Progress Software Reports 2016 Fiscal First Quarter Results

Progress (NASDAQ: PRGS), a global software company that simplifies and enables the development, deployment and management of business applications, today announced results for its fiscal first quarter ended February 29, 2016.

Revenue was $89.5 million compared to $81.4 million in the same quarter last year, a year over year increase of 10% on an actual currency basis and 14% on a constant currency basis. On a non-GAAP basis, revenue was $90.2 million compared to $95.5 million in the same quarter last year, a decrease of 5% on an actual currency basis and 2% on a constant currency basis.

Additional financial highlights included:

On a GAAP basis in the fiscal first quarter of 2016:

• Revenue was $89.5 million compared to $81.4 million in the same quarter in fiscal year 2015;
• Income from operations was $6.7 million compared to a loss from operations of $11.2 million in the same quarter last year;
• Net income was $3.2 million compared to a net loss of $1.0 million in the same quarter last year;
• Diluted earnings per share was $0.06 compared to a loss per share of $0.02 in the same quarter last year; and
• Cash from operations was $22.5 million compared to $37.1 million in the same quarter last year.

On a non-GAAP basis in the fiscal first quarter of 2016:

• Revenue was $90.2 million compared to $95.5 million in the same quarter last year;
• Income from operations was $21.5 million compared to $20.4 million in the same quarter last year;
• Operating margin was 24% compared to 21% in the same quarter last year;
• Net income was $13.8 million compared to $15.1 million in the same quarter last year;
• Diluted earnings per share was $0.27 compared to $0.29 in the same quarter last year; and
• Adjusted free cash flow was $22.7 million compared to $35.9 million in the same quarter last year.

Phil Pead, President and CEO of Progress, said, “While our first quarter revenue fell slightly short of our expectations, we remain confident in our strategy and capabilities, and in the value that our products provide to our customers and partners. We continue to see significant opportunities in the marketplace for our technologies, and remain committed to creating shareholder value, and achieving our goal of becoming the preferred destination for application developers."

Other fiscal first quarter 2016 metrics and recent results included:

• Cash, cash equivalents and short-term investments were $251.5 million;
• DSO was 59 days, compared to 56 days in the fiscal first quarter of 2015; and
• Under the previously announced authorization by the Board of Directors to repurchase up to $100 million of shares of common stock, Progress repurchased 0.5 million shares for $11.7 million during the fiscal first quarter of 2016.

Business Outlook

Progress' fiscal 2016 financial guidance is based on current exchange rates. The negative currency translation impact on Progress' fiscal year 2016 business outlook compared to 2015 exchange rates is unchanged at approximately $7.0 million on non-GAAP revenue and $0.02 to $0.03 on non-GAAP earnings per share. The negative currency translation impact on Progress' fiscal Q2 2016 business outlook compared to 2015 exchange rates is approximately $1.0 million to $2.0 million on non-GAAP revenue and $0.01 to $0.02 on non-GAAP earnings per share. To the extent that there are further changes in exchange rates versus the current environment, this may have an additional impact on Progress' business outlook.

Progress Software provides the following revised guidance for the fiscal year ending November 30, 2016:

• Non-GAAP revenue is expected to be between $414 million and $420 million (previously $427-$433 million);
• Non-GAAP earnings per share is expected to be between $1.57 and $1.63 (previously $1.59-$1.65);
• Non-GAAP operating margin is expected to be approximately 29% (previously 29%-30%);
• Adjusted free cash flow is expected to be between $80 million and $85 million (previously $97-$102 million); and
• Non-GAAP effective tax rate is expected to be approximately 33% (unchanged).

Progress Software provides the following guidance for the second fiscal quarter ending May 31, 2016:

• Non-GAAP revenue is expected to be between $93 million and $96 million; and
• Non-GAAP earnings per share is expected to be between $0.26 and $0.29.

Share Repurchase Program

Progress also announced today that its Board of Directors has authorized a new $100 million share repurchase program, increasing the total authorization to $203 million. Progress' intent is to utilize the full amount of this authorization by the end of this fiscal year, and will provide updates each quarter on any repurchase activity.

Conference Call

The Progress quarterly investor conference call to review its fiscal first quarter of 2016 will be broadcast live at 5:00 p.m. ET on Wednesday, March 30, 2016 and can be accessed 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 1-877-545-1407, pass code 8077674. The conference call will include brief comments followed by questions and answers. An archived version of the conference call and supporting materials will be available on the Progress website within the investor relations section after the live conference call.

Legal Notice Regarding Non-GAAP Financial Information

Progress 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 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 and is available on the Progress website at www.progress.com within the investor relations section. Additional information regarding the company's non-GAAP financial information is contained in the company's Current Report on Form 8-K furnished to the Securities and Exchange Commission in connection with this press release, which is also available on the Progress website within the investor relations section.

Note Regarding Forward-Looking Statements

This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “should,”“expect,” “intend,” “plan,” “target,” “anticipate” and “continue,” the negative of these words, other terms of similar meaning or the use of future dates.

Forward-looking statements in this press release include, but are not limited to, statements regarding Progress' business outlook and financial guidance. There are a number of factors that could cause actual results or future events to differ materially from those anticipated by the forward-looking statements, including, without limitation:

(1) Economic, geopolitical and market conditions, including the continued difficult economic environment in Brazil, and the continued slow economic recovery in Europe, parts of the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts. (3) Our ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our existing products and services in a timely manner to meet market demand, partners and customers may not purchase new software licenses or subscriptions or purchase or renew support contracts. (5) We depend upon our extensive partner channel and we may not be successful in retaining or expanding our relationships with channel partners. (6) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (7) If the security measures for our software, services or other offerings are compromised or subject to a successful cyber-attack, or if such offerings contain significant coding or configuration errors, we may experience reputational harm, legal claims and financial exposure. (8) We may make acquisitions in the future and those acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. For further information regarding risks and uncertainties associated with Progress' business, please refer to Progress' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2015. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

Progress Software Corporation

Progress Software Corporation (NASDAQ: PRGS) is a global software company that simplifies the development, deployment and management of business applications on-premise or in the cloud, on any platform or device, to any data source, with enhanced performance, minimal IT complexity and low total cost of ownership. Progress Software can be reached at www.progress.com or 1-781-280-4000.

Progress is a trademark 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.

(1) The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: product development, corporate marketing, administration, amortization of acquired intangibles, stock-based compensation, restructuring, and acquisition related expenses.

(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue by Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities.

(1) Acquisition-related revenue constitutes revenue reflected as pre-acquisition deferred revenue by Telerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities.

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