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Form 8-K PROGRESS SOFTWARE CORP For: Sep 27

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September 28, 2016 4:20 PM EDT



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
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): September 27, 2016
 Progress Software Corporation
(Exact name of registrant as specified in its charter)
 
Commission file number: 0-19417
 
 
 
Delaware
04-2746201
(State or other jurisdiction of
incorporation or organization)
(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))






Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition.

On September 28, 2016, Progress Software Corporation ("Progress") issued a press release announcing its financial results for the fiscal third quarter ended August 31, 2016. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not deemed incorporated by reference into any other filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Section 8 - Other Events

Item 8.01 Other Events

On September 27, 2016, the Progress Board of Directors approved the payment of a quarterly cash dividend to Progress shareholders. A quarterly dividend of $0.125 per share of common stock will be paid on December 15, 2016 to shareholders of record as of the close of business on December 1, 2016. On September 28, 2016, Progress issued a press release announcing the initiation of the quarterly dividend payment. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.
Exhibit No.
 
Description
99.1
 
Press release issued by Progress Software Corporation dated September 28, 2016 announcing its financial results for the fiscal third quarter ended August 31, 2016
99.2
 
Press release issued by Progress Software Corporation dated September 28, 2016 announcing the initiation of the quarterly dividend payment





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:
September 28, 2016
Progress Software Corporation
 
 
 
 
 
 
By:
/s/ STEPHEN H. FABERMAN
 
 
 
Stephen H. Faberman
 
 
 
Chief Legal Officer




Exhibit Index

Exhibit No.
 
Description
99.1
 
Press release issued by Progress Software Corporation dated September 28, 2016 announcing its financial results for the fiscal third quarter ended August 31, 2016
99.2
 
Press release issued by Progress Software Corporation dated September 28, 2016 announcing the initiation of the quarterly dividend payment



newprogresslogoa01.jpg
 
Exhibit 99.1


P R E S S A N N O U N C E M E N T
Investor Contact:
 
Press Contact:
Brian Flanagan
 
Erica Burns
Progress Software
 
Progress Software
+1 781 280 4817
 
+1 888 365 2779 (x3135)
 

Progress Reports 2016 Fiscal Third Quarter Results

BEDFORD, MA, September 28, 2016 (BUSINESSWIRE) — Progress (NASDAQ: PRGS) today announced results for its fiscal third quarter ended August 31, 2016.

Revenue was $102.0 million during the quarter compared to $94.6 million in the same quarter last year, a year over year increase of 8% on an actual currency basis and 9% on a constant currency basis. On a non-GAAP basis, revenue was $102.4 million during the quarter compared to $100.7 million in the same quarter last year, an increase of 2% on an actual currency basis and 3% on a constant currency basis.

Additional financial highlights included:

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

•
Revenue was $102.0 million compared to $94.6 million in the same quarter in fiscal year 2015;
•
Income from operations was $13.6 million compared to $8.6 million in the same quarter last year;
•
Net income was $7.6 million compared to a net loss of $4.1 million in the same quarter last year;
•
Diluted earnings per share was $0.15 compared to a diluted loss per share of $0.08 in the same quarter last year; and
•
Cash from operations was $19.7 million compared to $19.3 million in the same quarter last year.

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

•
Revenue was $102.4 million compared to $100.7 million in the same quarter last year;
•
Income from operations was $32.0 million compared to $31.7 million in the same quarter last year;
•
Operating margin was 31%, unchanged from the same quarter last year;
•
Net income was $21.6 million compared to $20.0 million in the same quarter last year;
•
Diluted earnings per share was $0.44 compared to $0.39 in the same quarter last year; and
•
Adjusted free cash flow was $19.1 million compared to $18.8 million in the same quarter last year.

Phil Pead, CEO at Progress, said, "Our third quarter was highlighted by a strong performance from our Data Connectivity and Integration segment, along with healthy maintenance renewals for both OpenEdge and our Telerik solutions, and solid cash flows.  We’re looking forward to a strong fourth quarter, and the upcoming release of our DigitalFactory solutions will provide us with additional growth opportunities for the future."

Other fiscal third quarter 2016 metrics and recent results included:

•
Cash, cash equivalents and short-term investments were $232.7 million at the end of the quarter;
•
DSO was 49 days, compared to 54 days in the fiscal third quarter of 2015; and
•
Under the previously announced authorization by the Board of Directors to repurchase up to $200 million of shares of common stock, Progress repurchased 0.4 million shares for $11.5 million during the fiscal third quarter of 2016.


1

Business Outlook

Progress provides the following guidance for the fiscal year ending November 30, 2016 and the fourth fiscal quarter ending November 30, 2016:

(In millions, except percentages and per share amounts)
FY 2016
GAAP
 
FY 2016
Non-GAAP
 
Q4 2016
GAAP
 
Q4 2016
Non-GAAP
Revenue
$410 - $413

 
$412 - $415

 
$122 - $125
 
$123 - $126
Diluted earnings per share
$0.61 - $0.63

 
$1.57 - $1.60

 
$0.25 - $0.28
 
$0.55 - $0.58
Operating margin
15%

 
30
%
 
*
 
*
Adjusted free cash flow
$88 - $93

 
$85 - $90

 
*
 
*
Effective tax rate
45
%
 
32%

 
*
 
*
*We do not provide guidance for this financial measure.

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 approximately $5.0 million on GAAP and non-GAAP revenue and $0.04 on GAAP and non-GAAP diluted earnings per share. The negative currency translation impact on Progress' fiscal Q4 2016 business outlook compared to 2015 exchange rates is approximately $0.3 million on GAAP and non-GAAP revenue and $0.01 on GAAP and non-GAAP diluted 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.

Conference Call

The Progress quarterly investor conference call to review its fiscal third quarter of 2016 will be broadcast live at 5:00 p.m. ET on Wednesday, September 28, 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 1-877-591-4951, pass code 4374563. 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.

Non-GAAP Financial Information

Progress provides non-GAAP supplemental information to its financial results.

We use this non-GAAP information to evaluate our period-over-period operating performance because our management believes the information helps illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as a greater understanding of the results from the primary operations of our business, by excluding the effects of certain items that do not reflect the ordinary earnings of our operations. Management also uses this non-GAAP financial information to establish budgets and operational goals, which are communicated internally and externally, evaluate performance, and allocate resources. In addition, compensation of our executives and non-executive employees is based in part on the performance of our business evaluated using this same non-GAAP information.

However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP) and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information often have a material impact on Progress’ financial results. A reconciliation of non-GAAP adjustments to Progress' 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.

As described in more detail below, non-GAAP revenue, non-GAAP costs of sales and operating expenses, non-GAAP income from operations and operating margin, non-GAAP net income, and non-GAAP diluted earnings per share exclude the effect of purchase accounting on the fair value of acquired deferred revenue, amortization of acquired intangible assets, impairment of acquired intangible assets, stock-based compensation expense, restructuring charges, acquisition-related expenses, certain identified non-operating gains and losses, and the related tax effects of the preceding items. We also provide guidance on adjusted free cash flow, which is equal to cash flows from operating activities less purchases of property and equipment and capitalized software development costs, plus restructuring payments.


2

In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:

•
Acquisition-related revenue - In all periods presented, we include acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue by Telerik AD ("Telerik") that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. We acquired Telerik on December 2, 2014. Since GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business because, although we cannot be certain that customers will renew their contracts, we (and Telerik) have historically experienced high renewal rates on maintenance and support agreements and other customer contracts. Additionally, although acquisition-related revenue adjustments are non-recurring with respect to past acquisitions, we expect to incur these adjustments in connection with any future acquisitions.

•
Amortization of acquired intangibles - In all periods presented, we exclude amortization of acquired intangibles because those expenses are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired.

•
Impairment of acquired intangibles - In the current period, we exclude an impairment charge applicable to acquired intangible assets because such expense distorts trends and is not part of our core operating results. Such impairment charges are inconsistent in amount and frequency and we believe that eliminating these amounts, when significant and not reflective of ongoing business and operating results, facilitates a more meaningful evaluation of our current operating performance and comparisons to our operating performance in other periods.

•
Stock-based compensation - In all periods presented, we exclude stock-based compensation to be consistent with the way management and the financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include these charges in operating plans. Stock-based compensation will continue in future periods.

•
Restructuring expenses - In all periods presented, we exclude restructuring expenses incurred because those expenses distort trends and are not part of our core operating results.

•
Acquisition-related and transition expenses - In all periods presented, we exclude acquisition-related expenses because those expenses distort trends and are not part of our core operating results. In recent years, we have completed a number of acquisitions, which result in our incurring operating expenses which would not otherwise have been incurred. By excluding certain transition, integration and other acquisition-related expense items in connection with acquisitions, this provides more meaningful comparisons of the financial results to our historical operations and forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions.

•
Income tax adjustment - In all periods presented, we adjust our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above. In addition, in the current period, we adjusted our income tax provision to remove from non-GAAP income the positive impact of an out-of-period adjustment recorded to the income tax provision during the fiscal second quarter of 2016.

Constant Currency

Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.

3


As exchange rates are an important factor in understanding period to period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP.

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 uncertain economic environment in Europe as a result of the recent Brexit vote, and the continued difficult economic environment in Brazil 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.

About Progress

Progress (NASDAQ: PRGS) is a global leader in application development, empowering the digital transformation organizations need to create and sustain engaging user experiences in today's evolving marketplace. With offerings spanning web, mobile and data for on-premise and cloud environments, Progress powers startups and industry titans worldwide, promoting success one customer at a time. Learn about Progress 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.

4

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share data)
August 31, 2016
 
August 31, 2015
 
% Change
 
August 31, 2016
 
August 31, 2015
 
% Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Software licenses
$
33,624

 
$
31,840

 
6
 %
 
$
86,366

 
$
85,794

 
1
 %
Maintenance and services
68,394

 
62,797

 
9
 %
 
201,251

 
179,042

 
12
 %
Total revenue
102,018

 
94,637

 
8
 %
 
287,617

 
264,836

 
9
 %
Costs of revenue:
 
 
 
 
 
 
 
 
 
 
 
Cost of software licenses
1,424

 
1,441

 
(1
)%
 
4,139

 
4,526

 
(9
)%
Cost of maintenance and services
11,825

 
9,612

 
23
 %
 
33,217

 
31,174

 
7
 %
Amortization of acquired intangibles
3,940

 
4,079

 
(3
)%
 
11,818

 
12,805

 
(8
)%
Total costs of revenue
17,189

 
15,132

 
14
 %
 
49,174

 
48,505

 
1
 %
Gross profit
84,829

 
79,505

 
7
 %
 
238,443

 
216,331

 
10
 %
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
29,852

 
30,004

 
(1
)%
 
88,648

 
92,607

 
(4
)%
Product development
21,706

 
20,422

 
6
 %
 
65,800

 
65,533

 
—
 %
General and administrative
11,411

 
14,076

 
(19
)%
 
36,055

 
42,065

 
(14
)%
Amortization of acquired intangibles
3,186

 
3,186

 
—
 %
 
9,556

 
9,559

 
—
 %
Impairment of intangible assets
5,051

 
—

 
100
 %
 
5,051

 
—

 
100
 %
Restructuring (credits) expenses
(36
)
 
2,561

 
(101
)%
 
229

 
8,715

 
(97
)%
Acquisition-related expenses
53

 
662

 
(92
)%
 
449

 
3,180

 
(86
)%
Total operating expenses
71,223

 
70,911

 
—
 %
 
205,788

 
221,659

 
(7
)%
Income (loss) from operations
13,606

 
8,594

 
58
 %
 
32,655

 
(5,328
)
 
713
 %
Other expense, net
(1,288
)
 
(1,165
)
 
11
 %
 
(4,474
)
 
(1,258
)
 
256
 %
Income (loss) before income taxes
12,318

 
7,429

 
66
 %
 
28,181

 
(6,586
)
 
528
 %
Provision (benefit) for income taxes
4,742

 
11,555

 
(59
)%
 
10,114

 
(7,256
)
 
(239
)%
Net income (loss)
$
7,576

 
$
(4,126
)
 
284
 %
 
$
18,067

 
$
670

 
2,597
 %
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.16

 
$
(0.08
)
 
300
 %
 
$
0.36

 
$
0.01

 
3,500
 %
Diluted
$
0.15

 
$
(0.08
)
 
288
 %
 
$
0.36

 
$
0.01

 
3,500
 %
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
48,611

 
50,120

 
(3
)%
 
49,765

 
50,377

 
(1
)%
Diluted
49,135

 
50,120

 
(2
)%
 
50,310

 
51,117

 
(2
)%

5


CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands)
August 31,
2016
 
November 30, 2015
Assets
 
 
 
Current assets:
 
 
 
Cash, cash equivalents and short-term investments
$
232,684

 
$
241,279

Accounts receivable, net
55,758

 
66,459

Other current assets
20,521

 
15,671

Total current assets
308,963

 
323,409

Property and equipment, net
50,778

 
54,226

Goodwill and intangible assets, net
457,781

 
484,098

Other assets
15,257

 
15,390

Total assets
$
832,779

 
$
877,123

Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other current liabilities
$
53,508

 
$
65,314

Current portion of long-term debt
13,125

 
9,375

Short-term deferred revenue
129,354

 
125,227

Total current liabilities
195,987

 
199,916

Long-term deferred revenue
8,529

 
8,844

Long-term debt
123,750

 
135,000

Other long-term liabilities
9,934

 
10,899

Shareholders’ equity:
 
 
 
Common stock and additional paid-in capital
237,136

 
227,930

Retained earnings
257,443

 
294,534

Total shareholders’ equity
494,579

 
522,464

Total liabilities and shareholders’ equity
$
832,779

 
$
877,123




6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
 
Three Months Ended
 
Nine Months Ended
(In thousands)
August 31,
2016
 
August 31,
2015
 
August 31,
2016
 
August 31,
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
7,576

 
$
(4,126
)
 
$
18,067

 
$
670

Depreciation and amortization
9,887

 
10,115

 
29,796

 
31,610

Stock-based compensation
5,779

 
6,537

 
19,009

 
18,812

Other non-cash adjustments
2,803

 
5,606

 
3,780

 
(19,800
)
Changes in operating assets and liabilities
(6,395
)
 
1,125

 
(1,742
)
 
45,896

Net cash flows from operating activities
19,650

 
19,257

 
68,910

 
77,188

Capital expenditures
(1,127
)
 
(1,952
)
 
(3,744
)
 
(7,740
)
Issuances of common stock, net of repurchases
(10,832
)
 
4,103

 
(63,340
)
 
(22,409
)
Payments for acquisitions
—

 
—

 
—

 
(246,275
)
Proceeds from the issuance of debt, net of payments of principle and debt issuance costs
(1,875
)
 
(1,955
)
 
(7,500
)
 
142,588

Proceeds from divestitures, net
—

 
—

 
—

 
4,500

Other
(2,241
)
 
(270
)
 
(2,921
)
 
(12,816
)
Net change in cash, cash equivalents and short-term investments
3,575

 
19,183

 
(8,595
)
 
(64,964
)
Cash, cash equivalents and short-term investments, beginning of period
229,109

 
199,121

 
241,279

 
283,268

Cash, cash equivalents and short-term investments, end of period
$
232,684

 
$
218,304

 
$
232,684

 
$
218,304




7

RESULTS OF OPERATIONS BY SEGMENT
 
Three Months Ended
 
Nine Months Ended
(In thousands)
August 31, 2016
 
August 31, 2015
 
% Change
 
August 31, 2016
 
August 31, 2015
 
% Change
Segment revenue:
 
 
 
 
 
 
 
 
 
 
 
OpenEdge
$
67,534

 
$
73,398

 
(8
)%
 
$
198,595

 
$
214,775

 
(8
)%
Data Connectivity and Integration
14,251

 
8,281

 
72
 %
 
30,852

 
22,669

 
36
 %
Application Development and Deployment
20,233

 
12,958

 
56
 %
 
58,170

 
27,392

 
112
 %
Total revenue
102,018

 
94,637

 
8
 %
 
287,617

 
264,836

 
9
 %
Segment costs of revenue and operating expenses:
 
 
 
 

 
 
 
 
 
 
OpenEdge
18,180

 
18,550

 
(2
)%
 
53,539

 
56,529

 
(5
)%
Data Connectivity and Integration
2,828

 
3,180

 
(11
)%
 
8,863

 
9,563

 
(7
)%
Application Development and Deployment
11,021

 
9,933

 
11
 %
 
29,555

 
30,169

 
(2
)%
Total costs of revenue and operating expenses
32,029

 
31,663

 
1
 %
 
91,957

 
96,261

 
(4
)%
Segment contribution:
 
 
 
 

 
 
 
 
 
 
OpenEdge
49,354

 
54,848

 
(10
)%
 
145,056

 
158,246

 
(8
)%
Data Connectivity and Integration
11,423

 
5,101

 
124
 %
 
21,989

 
13,106

 
68
 %
Application Development and Deployment
9,212

 
3,025

 
205
 %
 
28,615

 
(2,777
)
 
1,130
 %
Total contribution
69,989

 
62,974

 
11
 %
 
195,660

 
168,575

 
16
 %
Other unallocated expenses (1)
56,383

 
54,380

 
4
 %
 
163,005

 
173,903

 
(6
)%
Income (loss) from operations
13,606

 
8,594

 
58
 %
 
32,655

 
(5,328
)
 
713
 %
Other expense, net
(1,288
)
 
(1,165
)
 
11
 %
 
(4,474
)
 
(1,258
)
 
256
 %
Income (loss) before provision for income taxes
$
12,318

 
$
7,429

 
66
 %
 
$
28,181

 
$
(6,586
)
 
528
 %
 
 
 
 
 
 
 
 
 
 
 
 
(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 and impairment of acquired intangibles, stock-based compensation, restructuring, and acquisition related expenses.

8

SUPPLEMENTAL INFORMATION

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
License
$
31,840

 
$
44,457

 
$
23,955

 
$
28,787

 
$
33,624

Maintenance
55,365

 
60,458

 
58,336

 
59,485

 
60,368

Services
7,432

 
7,803

 
7,190

 
7,846

 
8,026

Total revenue
$
94,637

 
$
112,718

 
$
89,481

 
$
96,118

 
$
102,018

 
 
 
 
 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
North America
$
49,810

 
$
68,112

 
$
49,065

 
$
53,392

 
$
58,275

EMEA
30,656

 
34,504

 
31,221

 
31,577

 
32,719

Latin America
4,621

 
3,617

 
3,693

 
4,389

 
4,667

Asia Pacific
9,550

 
6,485

 
5,502

 
6,760

 
6,357

Total revenue
$
94,637

 
$
112,718

 
$
89,481

 
$
96,118

 
$
102,018

 
 
 
 
 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
OpenEdge
$
73,398

 
$
81,159

 
$
64,133

 
$
66,928

 
$
67,534

Data Connectivity and Integration
8,281

 
15,257

 
6,596

 
10,005

 
14,251

Application Development and Deployment
12,958

 
16,302

 
18,752

 
19,185

 
20,233

Total revenue
$
94,637

 
$
112,718

 
$
89,481

 
$
96,118

 
$
102,018













9

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - QTD
 
Three Months Ended August 31,
 
% Change
 
2016
 
2015
 
(In thousands, except per share data)
GAAP
 
Adj.
 
Non-GAAP
 
GAAP
 
Adj.
 
Non-GAAP
 
Non-GAAP
TOTAL REVENUE
$
102,018

 
$
405

 
$
102,423

 
$
94,637

 
$
6,086

 
$
100,723

 
2
 %
Software licenses (1)
33,624

 
82

 
33,706

 
31,840

 
1,418

 
33,258

 
1
 %
Maintenance and services (1)
68,394

 
323

 
68,717

 
62,797

 
4,668

 
67,465

 
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL COSTS OF REVENUE
$
17,189

 
$
(4,163
)
 
$
13,026

 
$
15,132

 
$
(4,223
)
 
$
10,909

 
19
 %
Amortization of acquired intangibles
3,940

 
(3,940
)
 
—

 
4,079

 
(4,079
)
 
—

 
 
Stock-based compensation (2)
223

 
(223
)
 
—

 
144

 
(144
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GROSS MARGIN %
83
%
 
 
 
87
%
 
84
%
 
 
 
89
%
 
(2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL OPERATING EXPENSES
$
71,223

 
$
(13,810
)
 
$
57,413

 
$
70,911

 
$
(12,803
)
 
$
58,108

 
(1
)%
Amortization and impairment of acquired intangibles
8,237

 
(8,237
)
 
—

 
3,186

 
(3,186
)
 
—

 
 
Restructuring expenses
(36
)
 
36

 
—

 
2,561

 
(2,561
)
 
—

 
 
Acquisition-related expenses
53

 
(53
)
 
—

 
662

 
(662
)
 
—

 
 
Stock-based compensation (2)
5,556

 
(5,556
)
 
—

 
6,394

 
(6,394
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME (LOSS) FROM OPERATIONS
$
13,606

 
$
18,378

 
$
31,984

 
$
8,594

 
$
23,112

 
$
31,706

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING MARGIN
13
%
 
 
 
31
%
 
9
%
 
 
 
31
%
 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL OTHER EXPENSE, NET
$
(1,288
)
 
 
 
$
(1,288
)
 
$
(1,165
)
 
 
 
$
(1,165
)
 
11
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PROVISION (BENEFIT) FOR INCOME TAXES
$
4,742

 
$
4,324

 
$
9,066

 
$
11,555

 
$
(1,034
)
 
$
10,521

 
(14
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS)
$
7,576

 
$
14,054

 
$
21,630

 
$
(4,126
)
 
$
24,146

 
$
20,020

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DILUTED EARNINGS PER SHARE
$
0.15

 
$
0.29

 
$
0.44

 
$
(0.08
)
 
$
0.47

 
$
0.39

 
13
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED
49,135

 
—

 
49,135

 
50,120

 
784

 
50,904

 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to revenue relate to acquisition-related revenue, which 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. Note that acquisition-related revenue adjustments entirely relate to Progress' Application Development and Deployment business unit.
(2) Stock-based compensation is included in the GAAP statements of income, as follows:
Cost of revenue
$
223

 
 
 
 
 
$
144

 
 
 
 
 
 
Sales and marketing
751

 
 
 
 
 
1,604

 
 
 
 
 
 
Product development
2,524

 
 
 
 
 
912

 
 
 
 
 
 
General and administrative
2,281

 
 
 
 
 
3,878

 
 
 
 
 
 
Total
$
5,779

 
 
 
 
 
$
6,538

 
 
 
 
 
 

10

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - YTD
 
Nine Months Ended August 31,
 
% Change
 
2016
 
2015
 
(In thousands, except per share data)
GAAP
 
Adj.
 
Non-GAAP
 
GAAP
 
Adj.
 
Non-GAAP
 
Non-GAAP
TOTAL REVENUE
$
287,617

 
$
1,726

 
$
289,343

 
$
264,836

 
$
32,193

 
$
297,029

 
(3
)%
Software licenses (1)
86,366

 
289

 
86,655

 
85,794

 
8,181

 
93,975

 
(8
)%
Maintenance and services (1)
201,251

 
1,437

 
202,688

 
179,042

 
24,012

 
203,054

 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL COSTS OF REVENUE
$
49,174

 
$
(12,417
)
 
$
36,757

 
$
48,505

 
$
(13,267
)
 
$
35,238

 
4
 %
Amortization of acquired intangibles
11,818

 
(11,818
)
 
—

 
12,805

 
(12,805
)
 
—

 
 
Stock-based compensation (2)
599

 
(599
)
 
—

 
462

 
(462
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GROSS MARGIN %
83
%
 
 
 
87
%
 
82
 %
 
 
 
88
%
 
(1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL OPERATING EXPENSES
$
205,788

 
$
(33,695
)
 
$
172,093

 
$
221,659

 
$
(39,804
)
 
$
181,855

 
(5
)%
Amortization and impairment of acquired intangibles
14,607

 
(14,607
)
 
—

 
9,559

 
(9,559
)
 
—

 
 
Restructuring expenses
229

 
(229
)
 
—

 
8,715

 
(8,715
)
 
—

 
 
Acquisition-related expenses
449

 
(449
)
 
—

 
3,180

 
(3,180
)
 
—

 
 
Stock-based compensation (2)
18,410

 
(18,410
)
 
—

 
18,350

 
(18,350
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME (LOSS) FROM OPERATIONS
$
32,655

 
$
47,838

 
$
80,493

 
$
(5,328
)
 
$
85,264

 
$
79,936

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING MARGIN
11
%
 
 
 
28
%
 
(2
)%
 
 
 
27
%
 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL OTHER (EXPENSE) INCOME, NET (3)
$
(4,474
)
 
 
 
$
(4,474
)
 
$
(1,258
)
 
$
266

 
$
(992
)
 
351%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PROVISION (BENEFIT) FOR INCOME TAXES (4)
$
10,114

 
$
14,059

 
$
24,173

 
$
(7,256
)
 
$
32,916

 
$
25,660

 
(6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INCOME
$
18,067

 
$
33,779

 
$
51,846

 
$
670

 
$
52,614

 
$
53,284

 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DILUTED EARNINGS PER SHARE
$
0.36

 
$
0.67

 
$
1.03

 
$
0.01

 
$
1.03

 
$
1.04

 
(1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED
50,310

 
—

 
50,310

 
51,117

 
—

 
51,117

 
(2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to revenue relate to acquisition-related revenue, which 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. Note that acquisition-related revenue adjustments entirely relate to Progress' Application Development and Deployment business unit.
(2) Stock-based compensation is included in the GAAP statements of income, as follows:
Cost of revenue
$
599

 
 
 
 
 
$
462

 
 
 
 
 
 
Sales and marketing
2,792

 
 
 
 
 
4,328

 
 
 
 
 
 
Product development
7,600

 
 
 
 
 
3,476

 
 
 
 
 
 
General and administrative
8,018

 
 
 
 
 
10,546

 
 
 
 
 
 
Total
$
19,009

 
 
 
 
 
$
18,812

 
 
 
 
 
 
(3) In the prior year period, the adjustment to other income (expense), net relates to the termination of Progress' prior revolving credit facility in connection with entering into the new credit facility. Upon termination, the outstanding debt issuance costs related to the prior revolving credit facility were written off to other income (expense) in the GAAP statements of income.
(4) In the current period, the Company identified an error in its prior year income tax provision whereby income tax expense was overstated for the year ended November 30, 2015 related to the Company’s tax treatment of an intercompany gain. We corrected this error by recording an out of period $2.7 million tax benefit in its quarter ended May 31, 2016 financial statements. We adjusted our income tax provision to remove from non-GAAP income the positive impact of this out-of-period adjustment.

11

OTHER NON-GAAP FINANCIAL MEASURES - QTD

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2016
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
License
$
33,624

 
$
82

 
$
33,706

Maintenance
60,368

 
323

 
60,691

Services
8,026

 
—

 
8,026

Total revenue
$
102,018

 
$
405

 
$
102,423

 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2016
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
North America
$
58,275

 
$
353

 
$
58,628

EMEA
32,719

 
43

 
32,762

Latin America
4,667

 
1

 
4,668

Asia Pacific
6,357

 
8

 
6,365

Total revenue
$
102,018

 
$
405

 
$
102,423

 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2016
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
OpenEdge
$
67,534

 
$
—

 
$
67,534

Data Connectivity and Integration
14,251

 
—

 
14,251

Application Development and Deployment
20,233

 
405

 
20,638

Total revenue
$
102,018

 
$
405

 
$
102,423

 
 
 
 
 
 
(1) Adjustments to revenue relate to acquisition-related revenue, which 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. Note that acquisition-related revenue adjustments entirely relate to Progress' Application Development and Deployment business unit.
 
 
 
 
 
 
Adjusted Free Cash Flow
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Q3 2016
 
Q3 2015
 
% Change
Cash flows from operations
$
19,650

 
$
19,257

 
2
 %
Purchases of property and equipment
(1,127
)
 
(1,673
)
 
(33
)%
Capitalized software development costs
—

 
(279
)
 
(100
)%
Free cash flow
$
18,523

 
$
17,305

 
7
 %
Add back: restructuring payments
542

 
1,544

 
(65
)%
Adjusted free cash flow
$
19,065

 
$
18,849

 
1
 %

12

OTHER NON-GAAP FINANCIAL MEASURES - YTD

Revenue by Type
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
YTD 2016
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
License
$
86,366

 
$
289

 
$
86,655

Maintenance
178,189

 
1,437

 
179,626

Services
23,062

 
—

 
23,062

Total revenue
$
287,617

 
$
1,726

 
$
289,343

 
 
 
 
 
 
Revenue by Region
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
YTD 2016
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
North America
$
160,732

 
$
1,503

 
$
162,235

EMEA
95,517

 
183

 
95,700

Latin America
12,749

 
5

 
12,754

Asia Pacific
18,619

 
35

 
18,654

Total revenue
$
287,617

 
$
1,726

 
$
289,343

 
 
 
 
 
 
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
YTD 2016
 
Non-GAAP Adjustment (1)
 
Non-GAAP Revenue
OpenEdge
$
198,595

 
$
—

 
$
198,595

Data Connectivity and Integration
30,852

 
—

 
30,852

Application Development and Deployment
58,170

 
1,726

 
59,896

Total revenue
$
287,617

 
$
1,726

 
$
289,343

 
 
 
 
 
 
(1) Adjustments to revenue relate to acquisition-related revenue, which 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. Note that acquisition-related revenue adjustments entirely relate to Progress' Application Development and Deployment business unit.
 
 
 
 
 
 
Adjusted Free Cash Flow
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
YTD 2016
 
YTD Q3 2015
 
% Change
Cash flows from operations
$
68,910

 
$
77,188

 
(11
)%
Purchases of property and equipment
(3,744
)
 
(6,079
)
 
(38
)%
Capitalized software development costs
—

 
(1,661
)
 
(100
)%
Free cash flow
$
65,166

 
$
69,448

 
(6
)%
Add back: restructuring payments
3,024

 
4,098

 
(26
)%
Adjusted free cash flow
$
68,190

 
$
73,546

 
(7
)%

13

Non-GAAP Bookings from Application Development and Deployment Segment

(In thousands)
Q1 2015
 
Q2 2015
 
Q3 2015
 
Q4 2015
 
FY 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
GAAP revenue
$
4,797

 
$
9,636

 
$
12,958

 
$
16,302

 
$
43,693

 
$
18,752

 
$
19,185

 
$
20,233

Add: change in deferred revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
108

 
23,081

 
33,440

 
41,012

 
108

 
49,252

 
49,237

 
51,693

Ending balance
23,081

 
33,440

 
41,012

 
49,252

 
49,252

 
49,237

 
51,693

 
51,736

Change in deferred revenue
22,973

 
10,359

 
7,572

 
8,240

 
49,144

 
(15
)
 
2,456

 
43

Less: acquired deferred revenue balance from Telerik
(7,915
)
 
—

 
—

 
—

 
(7,915
)
 
—

 
—

 
—

Non-GAAP bookings
$
19,855

 
$
19,995

 
$
20,530

 
$
24,542

 
$
84,922

 
$
18,737

 
$
21,641

 
$
20,276


SaaS Revenue (Hosted Services) from Application Development and Deployment Segment

(In thousands)
Q1 2015
 
Q2 2015
 
Q3 2015
 
Q4 2015
 
FY 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
SaaS Revenue - Application Development and Deployment
$
567

 
$
713

 
$
765

 
$
975

 
$
3,020

 
$
1,071

 
$
1,079

 
$
1,160



14

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2016 GUIDANCE
(Unaudited)

Fiscal Year 2016 Non-GAAP Revenue Guidance
 
Fiscal Year Ended
 
Fiscal Year Ending
 
November 30, 2015
 
November 30, 2016
(In millions)
 
 
Low
 
% Change
 
High
 
% Change
GAAP revenue
$
377.6

 
$
410.0

 
9
 %
 
$
413.0

 
9
 %
Acquisition-related adjustments - revenue (1)
$
34.8

 
$
2.0

 
(94
)%
 
$
2.0

 
(94
)%
Non-GAAP revenue
$
412.4

 
$
412.0

 
—
 %
 
$
415.0

 
1
 %
 
 
 
 
 
 
 
 
 
 
(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.

Fiscal Year 2016 Non-GAAP Operating Margin Guidance
 
Fiscal Year Ending November 30, 2016
(In millions)
Low
 
High
GAAP income from operations
$
60.9

 
$
62.7

GAAP operating margins
15
%
 
15
%
Acquisition-related revenue
2.0

 
2.0

Stock-based compensation
24.9

 
24.9

Amortization and impairment of intangibles
33.5

 
33.5

Acquisition-related expense
0.5

 
0.5

Restructuring expense
0.2

 
0.2

Total adjustments
61.1

 
61.1

Non-GAAP income from operations
$
122.0

 
$
123.8

Non-GAAP operating margin
30
%
 
30
%

Fiscal Year 2016 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
 
Fiscal Year Ending November 30, 2016
(In millions, except per share data)
Low
 
High
GAAP net income
$
30.4

 
$
31.4

Adjustments (from previous table)
61.1

 
61.1

Income tax adjustment (2)
(12.6
)
 
(12.1
)
Non-GAAP net income
$
78.9

 
$
80.4

 
 
 
 
GAAP diluted earnings per share
$
0.61

 
$
0.63

Non-GAAP diluted earnings per share
$
1.57

 
$
1.60

 
 
 
 
Diluted weighted average shares outstanding
50.1

 
50.1

 
 
 
 
(2) Tax adjustment is based on a non-GAAP effective tax rate of 32% for Low and High, calculated as follows:
Non-GAAP income from operations
$
122.0

 
$
123.8

Other (expense) income
(5.7
)
 
(5.7
)
Non-GAAP income from operations before income taxes
116.3

 
118.1

Non-GAAP net income
78.9

 
80.4

Tax provision
$
37.4

 
$
37.7

Non-GAAP tax rate
32
%
 
32
%

15

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2016 GUIDANCE
(Unaudited)

Fiscal Year 2016 Adjusted Free Cash Flow Guidance
 
Fiscal Year Ending November 30, 2016
(In millions)
Low
 
High
Cash flows from operations (GAAP)
$
88

 
$
93

Purchases of property and equipment
(6
)
 
(6
)
Add back: restructuring payments
3

 
3

Adjusted free cash flow (non-GAAP)
$
85

 
$
90



16

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2016 GUIDANCE
(Unaudited)

Q4 2016 Non-GAAP Revenue Guidance
 
Three Months Ended
 
Three Months Ending
 
November 30, 2015
 
November 30, 2016
(In millions)
 
 
Low
 
% Change
 
High
 
% Change
GAAP revenue
$
112.7

 
$
122.3

 
9
 %
 
$
125.3

 
11
 %
Acquisition-related adjustments - revenue (1)
$
2.7

 
$
0.3

 
(89
)%
 
$
0.3

 
(89
)%
Non-GAAP revenue
$
115.4

 
$
122.6

 
6
 %
 
$
125.6

 
9
 %
 
 
 
 
 
 
 
 
 
 
(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.


Q4 2016 Non-GAAP Earnings per Share Guidance
 
Three Months Ending November 30, 2016
 
Low
 
High
GAAP diluted earnings per share
$
0.25

 
$
0.28

Acquisition-related revenue
0.01

 
0.01

Stock-based compensation
0.12

 
0.12

Amortization of intangibles
0.14

 
0.14

Total adjustments
0.27

 
0.27

Income tax adjustment
0.03

 
0.03

Non-GAAP diluted earnings per share
$
0.55

 
$
0.58





17
newprogresslogoa01.jpg
 
Exhibit 99.2

P R E S S A N N O U N C E M E N T
Investor Contact:
 
Press Contact:
Brian Flanagan
 
Erica Burns
Progress Software
 
Progress Software
+1 781 280 4817
 
+1 888 365 2779 (x3135)
 

Progress Initiates Quarterly Dividend


BEDFORD, MA, September 28, 2016 (BUSINESSWIRE) - Progress (NASDAQ: PRGS) today announced an expanded capital allocation strategy that reflects the company’s confidence in its long-term business prospects and ability to generate consistent earnings and cash flow while expanding its commitment to return capital to shareholders.

The Progress Board of Directors has approved the initiation of a quarterly cash dividend to Progress shareholders. The first quarterly dividend of $0.125 per share of common stock will be paid on December 15, 2016 to shareholders of record as of the close of business on December 1, 2016.

Progress also intends to continue to repurchase Progress common stock under the existing $200 million authorization previously approved by the Board in March 2016.
  
"Our confidence in the strength of our business and free cash flow generation enable us to expand our capital allocation strategy in meaningful and lasting ways,” stated Phil Pead, president and chief executive officer. “We are pleased to be able to augment the strategic investments in our business with increased returns to shareholders.”

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 uncertain economic environment in Europe as a result of the recent Brexit vote, and the continued difficult economic environment in Brazil 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 (NASDAQ: PRGS) is a global leader in application development, empowering the digital transformation organizations need to create and sustain engaging user experiences in today's evolving marketplace. With offerings spanning web, mobile and data for on-premise and cloud environments, Progress powers startups and industry titans worldwide, promoting success one customer at a time. Learn about Progress 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.



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