Progress Software Reports Fourth Quarter Results, Record Revenue for the Quarter and Year

Bedford, Mass. - 20 December 2006

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 fourth quarter ended November 30, 2006. Revenue for the quarter was a record $122 million, up 13 percent (10 percent at constant currency) from $108 million in the fourth quarter of fiscal 2005. Software license revenue increased 12 percent (10 percent at constant currency) to $49.4 million from $44.1 million in the same quarter last year.
On a generally accepted accounting principles (GAAP) basis, operating income decreased 49 percent to $9.5 million from $18.6 million in the fourth quarter of fiscal 2005. Net income decreased 49 percent to $6.9 million from $13.6 million in the same quarter last year. Diluted earnings per share decreased 50 percent to 16 cents from 32 cents in the fourth quarter of fiscal 2005.

On a non-GAAP basis, operating income decreased 11 percent to $20.1 million from $22.5 million in the same quarter last year. Non-GAAP net income decreased 13 percent to $14.1 million from $16.2 million in the same quarter last year and non-GAAP diluted earnings per share decreased 16 percent to 32 cents per share from 38 cents in the fourth quarter of fiscal 2005.

The non-GAAP results in the fourth quarter of fiscal 2006 exclude after-tax charges of $4.0 million for stock-based compensation, $0.4 million for an accrual for payments to be made to current and former employees for options that were cancelled or expired during the suspension of the issuance of shares under the company's option plans and reimbursements for excise taxes resulting from the exercise of below market options in fiscal 2006 and $2.8 million for amortization of acquired intangibles. The non-GAAP results in the fourth quarter of fiscal 2005 exclude after-tax charges of $0.5 million for stock-based compensation, $1.7 million for amortization of acquired intangibles and $0.4 million for certain other acquisition-related expenses.

The GAAP and non-GAAP results for the fourth quarter of fiscal 2006 include an after-tax charge of $1.5 million, or 3 cents per share, for legal and accounting expenses associated with our stock option accounting investigation and restatement.

For the twelve months ended November 30, 2006, revenue increased 10 percent (11 percent at constant currency) to $447 million from $405 million in fiscal 2005. On a GAAP basis, operating income decreased 32 percent to $40.9 million from $60.0 million in fiscal 2005. Net income decreased 36 percent to $29.4 million from $46.3 million in fiscal 2005 and diluted earnings per share decreased 39 percent to 68 cents from $1.12 in fiscal 2005.

On a non-GAAP basis, operating income increased 4 percent to $81.4 million from $78.3 million last year. Non-GAAP net income increased 4 percent to $56.8 million from $54.8 million last year and non-GAAP diluted earnings per share decreased 1 percent to $1.31 from $1.32 in fiscal 2005.

The non-GAAP results in fiscal 2006 exclude after-tax charges of $15.9 million for stock-based compensation, $0.4 million for an accrual for payments to be made to current and former employees for options that were cancelled or expired during the suspension of the issuance of shares under the company's option plans and reimbursements for excise taxes resulting from the exercise of below market options in fiscal 2006, $9.8 million for amortization of acquired intangibles and $1.3 million for certain other acquisition-related expenses. The non-GAAP results in fiscal 2005 exclude after-tax charges of $1.9 million for stock-based compensation, $6.3 million for amortization of acquired intangibles, $2.3 million for certain other acquisition-related expenses and $1.9 million for compensation expense from repurchase of subsidiary stock and a tax benefit of $3.8 million.

The GAAP and non-GAAP results for fiscal 2006 include an after-tax charge of $2.2 million, or 5 cents per share, for legal and accounting expenses associated with our stock option accounting investigation and restatement.

The company's cash and short-term investments at the end of the quarter totaled $241 million. The company did not purchase any shares in the open market in the fourth quarter of fiscal 2006. The company's existing repurchase authorization, under which approximately 10 million shares remain available for repurchase, expires on September 30, 2007.

The above amounts reflect the restatement of the company's previously issued consolidated financial statements, which were recently filed with the Securities and Exchange Commission.

"Overall, we achieved double-digit growth in software license revenue and total revenue for the fourth quarter and for the full fiscal year. Our Progress(R) OpenEdge(R) division and our DataDirect Technologies(R) division, which includes the DataDirect(R) Shadow(R) mainframe integration products acquired earlier this year, performed extremely well this quarter and for the entire fiscal year," stated Joseph Alsop, co-founder and chief executive officer of Progress Software. "Our Enterprise Infrastructure product line was slightly down this quarter, but achieved double-digit software license revenue and total revenue growth for the year, with Data Services products performing less than anticipated and Sonic and Apama products demonstrating solid growth."

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development