Progress Software Corp Q2 2007

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, 2007. Revenue for the quarter was $120 million, up 9 percent (5 percent at constant currency) from $110 million in the second quarter of fiscal 2006. Software license revenue increased 8 percent (4 percent at constant currency) to $44.6 million from $41.4 million in the same quarter last year.

On a generally accepted accounting principles (GAAP) basis, operating income increased 3 percent to $11.3 million from $11.0 million in the second quarter of fiscal 2006. Net income increased 9 percent to $8.4 million from $7.7 million in the same quarter last year. Diluted earnings per share increased 6 percent to 19 cents from 18 cents in the second quarter of fiscal 2006.

On a non-GAAP basis, operating income increased 20 percent to $25.3 million from $21.1 million in the same quarter last year. Non-GAAP net income increased 21 percent to $17.8 million from $14.7 million in the same quarter last year and non-GAAP diluted earnings per share increased 21 percent to 41 cents per share from 34 cents in the second quarter of fiscal 2006.

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 non-GAAP results in the second quarter of fiscal 2007 exclude after-tax charges of $6.0 million for stock-based compensation (including cash payments to compensation committee members of the board of the directors for reimbursement of cancelled stock options as more fully described in the most recent proxy statement), $2.9 million for amortisation 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 non-GAAP results in the second quarter of fiscal 2006 exclude after-tax charges of $4.1 million for stock-based compensation, $2.7 million for amortisation of acquired intangibles and $0.2 million for certain acquisition-related expenses.

The company's cash and short-term investments at the end of the quarter totaled $271 million. The company purchased 10,000 shares at a cost of $0.3 million in the second quarter of fiscal 2007. The company's existing repurchase authorisation, under which approximately 9.3 million shares remain available for repurchase, expires on September 30, 2007.

With respect to the ERP implementation, the company currently plans to implement the necessary functionality by extending its existing Progress(R) OpenEdge(R) based applications, together with a new OpenEdge based financial system for which the implementation is proceeding as planned. The write-off was necessitated by the conclusion that it was not advisable to proceed further with the implementation of an application which was not based on OpenEdge.

"We achieved nine percent growth in revenue for the second quarter, with a 21 percent increase in non-GAAP earnings per share. All major divisions performed extremely well and the outlook for the balance of the fiscal year is solid," stated Joseph Alsop, co-founder and chief executive officer of Progress Software. "We are pleased to see continuing signs of success as we pursue our strategy of achieving growth in our OpenEdge business while looking to our newer high-growth product lines to accelerate our growth as they become a larger portion of our license revenue."

Business Outlook
The company is providing the following guidance for the fiscal year ending November 30, 2007:

-- Revenue is expected to be in the range of $475 million to $485 million.

-- GAAP diluted earnings per share are expected to be in the range of $1.06 to $1.09.

-- On a non-GAAP basis, diluted earnings per share are expected to be in the range of $1.72 to $1.75.

-- The non-GAAP projections exclude after-tax charges of approximately $16 million (36 cents per share) for stock-based compensation, approximately $11 million (24 cents per share) for amortisation of acquired intangibles and an estimate of approximately $4 million (6 cents per share) for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices.

The company is providing the following guidance for the third fiscal quarter ending August 31, 2007:

-- Revenue is expected to be in the range of $118 million to $120 million.

-- GAAP diluted earnings per share are expected to be in the range of 27 cents to 29 cents.

-- On a non-GAAP basis, diluted earnings per share are expected to be in the range of 42 cents to 44 cents.

-- The non-GAAP projections exclude after-tax charges of approximately $3.2 million (7 cents per share) for stock-based compensation, approximately $3 million (7 cents per share) for amortisation of acquired intangibles and approximately $0.3 million (1 cent per share) for professional services fees associated with the stock option accounting investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices.

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. Compensation of the company's management and its employees is based in part on the performance of the business based on these non-GAAP measures. A reconciliation of non-GAAP adjustments to the company's GAAP financial results is included in the tables below.

www.progress.com.