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Progress Reports 2015 Fiscal Third Quarter Results

October 1, 2015 4:16 PM

BEDFORD, Mass.--(BUSINESS WIRE)-- 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 third quarter ended August 31, 2015.

Revenue in the quarter was $94.6 million compared to $79.3 million in the same quarter last year, a year over year increase of 19% on an actual currency basis and 29% on a constant currency basis. On a non-GAAP basis, revenue was $100.7 million compared to $79.3 million in the same quarter last year.

Additional financial highlights included:

On a GAAP basis in the fiscal third quarter of 2015:

On a non-GAAP basis in the fiscal third quarter of 2015:

“We achieved continued positive momentum in key areas of our business in the third quarter," said Phil Pead, President and CEO of Progress. “OpenEdge continued to grow, with significant strength in enterprise sales. We achieved growth in our data business, and several of our Telerik solutions achieved record bookings for the quarter.”

Other fiscal third quarter 2015 metrics and recent results included:

Business Outlook

Progress's fiscal 2015 financial guidance includes the impact of the significant strengthening of the US dollar that began in late 2014 and is based on current exchange rates. The negative currency translation impact on Progress's 2015 business outlook compared to 2014 exchange rates is $25 - $26 million on non-GAAP revenue and $0.14 - $0.15 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's business outlook.

Progress provides the following revised guidance for the fiscal year ending November 30, 2015:

Progress provides the following guidance for the fiscal fourth quarter ending November 30, 2015:

Share Repurchase Program

Progress also announced today that its Board of Directors has authorized a new $100 million share repurchase program. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors, and the Board of Directors may choose to suspend, expand or discontinue the repurchase program at any time.

Conference Call

The Progress quarterly investor conference call to review its fiscal third quarter of 2015 will be broadcast live at 5:00 p.m. ET on Thursday, October 1, 2015 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 1-888-401-4669, pass code 2038969. 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. 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 available on the Progress website at www.progress.com 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's 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) Market acceptance of Progress’s strategy and product development initiatives; (2) pricing pressures and the competitive environment in the software industry and Platform-as-a-Service market; (3) Progress's ability to successfully manage transitions to new business models and markets, including an increased emphasis on a cloud and subscription strategy; (4) uncertainties relating to Progress’ acquisition of Telerik, including whether Progress will be able to realize expected benefits and anticipated synergies of the acquisition and whether Telerik’s business will be successfully integrated with Progress Software's business; (5) Progress's ability to make acquisitions and to realize the expected benefits and anticipated synergies from such acquisitions; (6) the continuing uncertainty in the U.S. and international economies, which could result in fewer sales of Progress's products and may otherwise harm Progress's business; (7) business and consumer use of the Internet and the continuing adoption of Cloud technologies; (8) Progress's ability to expand its relationships with channel partners; (9) the timely release of enhancements to Progress's products and customer acceptance of new products; (10) the positioning of Progress's products in its existing and new markets; (11) variations in the demand for professional services and technical support; (12) Progress's ability to penetrate international markets and manage its international operations; and (13) changes in exchange rates. For further information regarding risks and uncertainties associated with Progress's business, please refer to Progress's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2014. 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 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Nine Months Ended
(In thousands, except per share data)

August 31,2015

August 31,2014

%Change

August 31,2015

August 31,2014

%Change

Revenue:
Software licenses $ 31,840 $ 26,393 21 % $ 85,794 $ 76,645 12 %
Maintenance and services 62,797 52,881 19 % 179,042 157,994 13 %
Total revenue 94,637 79,274 19 % 264,836 234,639 13 %
Costs of revenue:
Cost of software licenses 1,441 1,805 (20 )% 4,526 4,951 (9 )%
Cost of maintenance and services 9,612 5,222 84 % 31,174 16,276 92 %
Amortization of acquired intangibles 4,079 834 389 % 12,805 1,893 576 %
Total costs of revenue 15,132 7,861 92 % 48,505 23,120 110 %
Gross profit 79,505 71,413 11 % 216,331 211,519 2 %
Operating expenses:
Sales and marketing 30,004 22,477 33 % 92,607 71,425 30 %
Product development 20,422 14,975 36 % 65,533 45,568 44 %
General and administrative 14,076 12,162 16 % 42,065 35,236 19 %
Amortization of acquired intangibles 3,186 116 2,647 % 9,559 428 2,133 %
Restructuring expenses 2,561 1,680 52 % 8,715 2,001 336 %
Acquisition-related expenses 662 572 16 % 3,180 3,148 1 %
Total operating expenses 70,911 51,982 36 % 221,659 157,806 40 %
Income (loss) from operations 8,594 19,431 (56 )% (5,328 ) 53,713 (110 )%
Other (expense) income, net (1,165 ) (2,457 ) (53 )% (1,258 ) (2,581 ) (51 )%
Income (loss) before income taxes 7,429 16,974 (56 )% (6,586 ) 51,132 (113 )%
Provision (benefit) for income taxes 11,555 5,879 97 % (7,256 ) 16,138 (145 )%
Net (loss) income (4,126 ) 11,095 (137 )% 670 34,994 (98 )%
Earnings per share:
Basic $ (0.08 ) $ 0.22 (136 )% $ 0.01 $ 0.69 (99 )%
Diluted $ (0.08 ) $ 0.22 (136 )% $ 0.01 $ 0.68 (99 )%
Weighted average shares outstanding:
Basic 50,120 50,383 (1 )% 50,377 50,975 (1 )%
Diluted 50,120 50,931 (2 )% 51,117 51,590 (1 )%

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) August 31,2015

November 30,2014

Assets
Current assets:
Cash, cash equivalents and short-term investments $ 218,304 $ 283,268
Accounts receivable, net 60,335 68,311
Other current assets 51,728 34,094
Total current assets 330,367 385,673
Property and equipment, net 56,825 59,351
Goodwill and intangible assets, net 491,788 253,414
Other assets 7,654 4,623
Total assets $ 886,634 $ 703,061
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and other current liabilities $ 65,606 $ 60,746
Current portion of long-term debt 7,500 —
Short-term deferred revenue 124,285 92,557
Total current liabilities 197,391 153,303
Long-term deferred revenue 6,711 3,683
Long-term debt 136,875 —
Other long-term liabilities 15,915 2,830
Shareholders’ equity:
Common stock and additional paid-in capital 223,299 209,778
Retained earnings 306,443 333,467
Total shareholders’ equity 529,742 543,245
Total liabilities and shareholders’ equity $ 886,634 $ 703,061

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended Nine Months Ended
(In thousands) August 31,2015 August 31,2014 August 31,2015 August 31,2014
Cash flows from operating activities:
Net (loss) income $ (4,128 ) $ 11,095 $ 670 $ 34,994
Depreciation and amortization 10,115 3,938 31,610 10,985
Stock-based compensation 6,537 6,940 18,812 18,194
Other non-cash adjustments 5,608 1,856 (19,800 ) 2,232
Changes in operating assets and liabilities 1,125 2,099 45,896 2,064
Net cash flows from operating activities 19,257 25,928 77,188 68,469
Capital expenditures (1,952 ) (2,154 ) (7,740 ) (10,191 )
Issuances of common stock, net of repurchases 4,103 (13,795 ) (22,409 ) (41,890 )
Payments for acquisitions — — (246,275 ) (12,493 )
Proceeds from the issuance of debt, net of payments of principle and debt issuance costs (1,955 ) — 142,588 —
Proceeds from divestitures, net — — 4,500 3,300
Other (270 ) 24,737 (12,816 ) 22,657
Net change in cash, cash equivalents and short-term investments 19,183 34,716 (64,964 ) 29,852
Cash, cash equivalents and short-term investments, beginning of period 199,121 226,576 283,268 231,440
Cash, cash equivalents and short-term investments, end of period $ 218,304 $ 261,292 $ 218,304 $ 261,292

RESULTS OF OPERATIONS BY SEGMENT

Three Months Ended Nine Months Ended
(In thousands)

August 31,2015

August 31,2014

%Change

August 31,2015

August 31,2014

%Change

Segment revenue:
OpenEdge $ 73,398 $ 71,847 2 % $ 214,775 $ 211,773 1 %
Data Connectivity and Integration 8,281 7,175 15 % 22,669 22,221 2 %
Application Development and Deployment 12,958 252 5,042 % 27,392 645 4,147 %
Total revenue 94,637 79,274 19 % 264,836 234,639 13 %
Segment costs of revenue and operating expenses:
OpenEdge 18,550 15,524 19 % 56,529 48,770 16 %
Data Connectivity and Integration 3,180 2,515 26 % 9,563 7,913 21 %
Application Development and Deployment 9,933 2,446 306 % 30,169 5,762 424 %
Total costs of revenue and operating expenses 31,663 20,485 55 % 96,261 62,445 54 %
Segment contribution:
OpenEdge 54,848 56,323 (3 )% 158,246 163,003 (3 )%
Data Connectivity and Integration 5,101 4,660 9 % 13,106 14,308 (8 )%
Application Development and Deployment 3,025 (2,194 ) 238 % (2,777 ) (5,117 ) 46 %
Total contribution 62,974 58,789 7 % 168,575 172,194 (2 )%
Other unallocated expenses (1) 54,380 39,358 38 % 173,903 118,481 47 %
Income (loss) from operations 8,594 19,431 (56 )% (5,328 ) 53,713 (110 )%
Other (expense) income, net (1,165 ) (2,457 ) (53 )% (1,258 ) (2,581 ) (51 )%
Income (loss) before provision for income taxes 7,429 16,974 (56 )% (6,586 ) 51,132 (113 )%

(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.

SUPPLEMENTAL INFORMATION

Revenue by Type
(In thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
License $ 26,393 $ 41,154 $ 25,231 $ 28,722 $ 31,840
Maintenance 50,746 51,268 49,239 52,656 55,365
Services 2,135 5,472 6,911 7,439 7,432
Total revenue $ 79,274 $ 97,894 $ 81,381 $ 88,817 $ 94,637
Revenue by Region
(In thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
North America $ 35,654 $ 43,654 $ 42,125 $ 47,520 $ 49,810
EMEA 32,995 35,327 27,863 31,146 30,656
Latin America 5,695 8,406 4,967 4,388 4,621
Asia Pacific 4,930 10,507 6,426 5,763 9,550
Total revenue $ 79,274 $ 97,894 $ 81,381 $ 88,817 $ 94,637
Revenue by Segment
(In thousands) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
OpenEdge $ 71,847 $ 84,948 $ 69,471 $ 71,906 $ 73,398
Data Connectivity and Integration 7,175 12,551 7,113 7,275 8,281
Application Development and Deployment 252 395 4,797 9,636 12,958
Total revenue $ 79,274 $ 97,894 $ 81,381 $ 88,817 $ 94,637

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - QTD

Three Months Ended August 31, % Change
2015 2014
(In thousands, except per share data) GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP Non-GAAP
TOTAL REVENUE $ 94,637 $ 6,086 $ 100,723 $ 79,274 $ — $ 79,274 27 %
Software licenses (1) 31,840 1,418 33,258 26,393 — 26,393 26 %
Maintenance and services (1) 62,797 4,668 67,465 52,881 — 52,881 28 %
TOTAL COSTS OF REVENUE $ 15,132 $ (4,223 ) $ 10,909 $ 7,861 $ (975 ) $ 6,886 58 %
Amortization of acquired intangibles 4,079 (4,079 ) — 834 (834 ) —
Stock-based compensation (2) 144 (144 ) — 141 (141 ) —
GROSS MARGIN % 84 % 89 % 90 % 91 % (2 )%
TOTAL OPERATING EXPENSES $ 70,911 $ (12,803 ) $ 58,108 $ 51,982 $ (9,167 ) $ 42,815 36 %
Amortization of acquired intangibles 3,186 (3,186 ) — 116 (116 ) —
Restructuring expenses 2,561 (2,561 ) — 1,680 (1,680 ) —
Acquisition-related expenses 662 (662 ) — 572 (572 ) —
Stock-based compensation (2) 6,394 (6,394 ) — 6,799 (6,799 ) —
INCOME FROM OPERATIONS $ 8,594 $ 23,112 $ 31,706 $ 19,431 $ 10,142 $ 29,573 7 %
OPERATING MARGIN 9 % 31 % 25 % 37 % (7 )%
TOTAL OTHER (EXPENSE) INCOME, NET $ (1,165 ) $ — $ (1,165 ) $ (2,457 ) $ 2,554 $ 97 1,301 %
PROVISION FOR INCOME TAXES $ 11,555 $ (1,034 ) $ 10,521 $ 5,879 $ 3,748 $ 9,627 9 %
NET (LOSS) INCOME $ (4,126 ) $ 24,146 $ 20,020 $ 11,095 $ 8,948 $ 20,043 — %
DILUTED EARNINGS PER SHARE $ (0.08 ) $ 0.47 $ 0.39 $ 0.22 $ 0.17 $ 0.39 — %
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 50,120 784 50,904 50,931 — 50,931 — %

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue byTelerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAPaccounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note thatacquisition-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 144 141
Sales and marketing 1,604 1,546
Product development 912 1,407
General and administrative 3,878 3,846
Total $ 6,538 $ 6,940

RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES - YTD

Nine Months Ended August 31, % Change
2015 2014
(In thousands, except per share data) GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP Non-GAAP
TOTAL REVENUE $ 264,836 $ 32,193 $ 297,029 $ 234,639 $ — $ 234,639 27 %
Software licenses (1) 85,794 8,181 93,975 76,645 — 76,645 23 %
Maintenance and services (1) 179,042 24,012 203,054 157,994 — 157,994 29 %
TOTAL COSTS OF REVENUE $ 48,505 $ (13,267 ) $ 35,238 $ 23,120 $ (2,332 ) $ 20,788 70 %
Amortization of acquired intangibles 12,805 (12,805 ) — 1,893 (1,893 ) —
Stock-based compensation (2) 462 (462 ) — 439 (439 ) —
GROSS MARGIN % 82 % 88 % 90 % 91 % (3 )%
TOTAL OPERATING EXPENSES $ 221,659 $ (39,804 ) $ 181,855 $ 157,806 $ (23,332 ) $ 134,474 35 %
Amortization of acquired intangibles 9,559 (9,559 ) — 428 (428 ) —
Restructuring expenses 8,715 (8,715 ) — 2,001 (2,001 ) —
Acquisition-related expenses 3,180 (3,180 ) — 3,148 (3,148 ) —
Stock-based compensation (2) 18,350 (18,350 ) — 17,755 (17,755 ) —
(LOSS) INCOME FROM OPERATIONS $ (5,328 ) $ 85,264 $ 79,936 $ 53,713 $ 25,664 $ 79,377 1 %
OPERATING MARGIN (2 )% 27 % 23 % 34 % (7 )%
TOTAL OTHER (EXPENSE) INCOME, NET (3) $ (1,258 ) $ 266 $ (992 ) $ (2,581 ) $ 2,554 $ (27 ) (3,574 )%
(BENEFIT) PROVISION FOR INCOME TAXES $ (7,256 ) $ 32,916 $ 25,660 $ 16,138 $ 9,387 $ 25,525 1 %
NET INCOME $ 670 $ 52,614 $ 53,284 $ 34,994 $ 18,831 $ 53,825 (1 )%
DILUTED EARNINGS PER SHARE $ 0.01 $ 1.03 $ 1.04 $ 0.68 $ 0.36 $ 1.04 — %
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 51,117 — 51,117 51,590 — 51,590 (1 )%

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue byTelerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAPaccounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note thatacquisition-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 462 439
Sales and marketing 4,328 3,736
Product development 3,476 4,186
General and administrative 10,546 9,833
Total $ 18,812 $ 18,194

(3) Adjustment to other income (expense), net relates to the termination of Progress' prior revolving credit facility with JPMorgan ChaseBank, N.A. and the other lenders party to the credit facility in connection with entering into the new credit facility, which was used topartially fund the acquisition of Telerik. Upon termination, the outstanding debt issuance costs related to the prior revolving credit facilitywere written off to other income (expense) in the GAAP statements of income.

OTHER NON-GAAP FINANCIAL MEASURES - QTD

Revenue by Type
(In thousands) Q3 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
License $ 31,840 $ 1,418 $ 33,258
Maintenance 55,365 4,668 60,033
Services 7,432 — 7,432
Total revenue $ 94,637 $ 6,086 $ 100,723
Revenue by Region
(In thousands) Q3 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
North America $ 49,810 $ 5,775 $ 55,585
EMEA 30,656 246 30,902
Latin America 4,621 8 4,629
Asia Pacific 9,550 57 9,607
Total revenue $ 94,637 $ 6,086 $ 100,723
Revenue by Segment
(In thousands) Q3 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
OpenEdge $ 73,398 $ — $ 73,398
Data Connectivity and Integration $ 8,281 $ — $ 8,281
Application Development and Deployment $ 12,958 $ 6,086 $ 19,044
Total revenue $ 94,637 $ 6,086 $ 100,723

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue byTelerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAPaccounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note thatacquisition-related revenue adjustments entirely relate to Progress' Application Development and Deployment business unit.

Free Cash Flow
(In thousands) Q3 2015 Q3 2014 % Change
Cash flows from operations $ 19,257 $ 25,928 (26 )%
Purchases of property and equipment $ (1,673 ) $ (1,084 ) (54 )%
Capitalized software development costs $ (279 ) $ (1,070 ) 74 %
Free cash flow $ 17,305 $ 23,774 (27 )%

OTHER NON-GAAP FINANCIAL MEASURES - YTD

Revenue by Type
(In thousands) YTD 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
License $ 85,794 $ 8,181 $ 93,975
Maintenance 157,259 24,012 181,271
Services 21,783 — 21,783
Total revenue $ 264,836 $ 32,193 $ 297,029
Revenue by Region
(In thousands) YTD 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
North America $ 139,454 $ 27,795 $ 167,249
EMEA 89,667 3,275 92,942
Latin America 13,977 195 14,172
Asia Pacific 21,738 928 22,666
Total revenue $ 264,836 $ 32,193 $ 297,029
Revenue by Segment
(In thousands) YTD 2015 Non-GAAP Adjustment (1) Non-GAAP Revenue
OpenEdge $ 214,775 $ — $ 214,775
Data Connectivity and Integration $ 22,669 $ — $ 22,669
Application Development and Deployment $ 27,392 $ 32,193 $ 59,585
Total revenue $ 264,836 $ 32,193 $ 297,029

(1) Adjustments to revenue relate to acquisition-related revenue, which constitutes revenue reflected as pre-acquisition deferred revenue byTelerik that would otherwise have been recognized but for the purchase accounting treatment of the acquisition of Telerik. Since GAAPaccounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. Note thatacquisition-related revenue adjustments entirely relate to Progress' Application Development and Deployment business unit.

Free Cash Flow
(In thousands) YTD 2015 YTD Q3 2014 % Change
Cash flows from operations $ 77,188 $ 68,469 13 %
Purchases of property and equipment $ (6,079 ) $ (7,183 ) 15 %
Capitalized software development costs $ (1,661 ) $ (3,008 ) 45 %
Free cash flow $ 69,448 $ 58,278 19 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2015 GUIDANCE(Unaudited)

Fiscal Year 2015 Revenue Growth Guidance
Fiscal Year Ended Fiscal Year Ending
November 30, 2014 November 30, 2015
(In millions) Low % Change High % Change
GAAP revenue $ 332.5 $ 375.0 13 % $ 380.0 14 %
Acquisition-related adjustments - revenue (1) $ — $ 35.0 100 % $ 35.0 100 %
Non-GAAP revenue $ 332.5 $ 410.0 23 % $ 415.0 25 %

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

Fiscal Year 2015 Non-GAAP Operating Margin Guidance
Fiscal Year Ending November 30, 2015
(In millions) Low High
GAAP income from operations $ 12.4 $ 14.7
GAAP operating margins 3 % 4 %
Acquisition-related revenue 35.0 35.0
Restructuring expense 11.2 11.2
Stock-based compensation 25.9 25.9
Acquisition related expense 4.0 4.0
Amortization of intangibles 29.6 29.6
Total adjustments 105.7 105.7
Non-GAAP income from operations $ 118.1 $ 120.4
Non-GAAP operating margin 29 % 29 %
Fiscal Year 2015 Non-GAAP Earnings per Share and Effective Tax Rate Guidance
Fiscal Year Ending November 30, 2015
(In millions, except per share data) Low High
GAAP net income $ 6.4 $ 7.9
Adjustments (from previous table) 105.7 105.7
Income tax adjustment (2) (34.7 ) (34.0 )
Non-GAAP net income $ 77.4 $ 79.6
GAAP diluted earnings per share $ 0.13 $ 0.15
Non-GAAP diluted earnings per share $ 1.51 $ 1.55
Diluted weighted average shares outstanding 51.4 51.4
(2) Tax adjustment is based on a non-GAAP effective tax rate of 33% for both Low and High, calculated as follows:
Non-GAAP income from operations $ 118.1 $ 120.4
Other income (expense) (2.2 ) (2.2 )
Non-GAAP income from continuing operations before income taxes 115.9 118.2
Non-GAAP net income 77.4 79.6
Tax provision $ 38.5 $ 38.6
Non-GAAP tax rate 33 % 33 %

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2015 GUIDANCE(Unaudited)

Q4 2015 Revenue Growth Guidance
Three Months Ended Three Months Ending
November 30, 2014 November 30, 2015
(In millions) Low % Change High % Change
GAAP revenue $ 97.9 $ 110.0 12 % $ 115.0 17 %
Acquisition-related adjustments - revenue (1) $ — $ 3.0 100 % $ 3.0 100 %
Non-GAAP revenue $ 97.9 $ 113.0 15 % $ 118.0 21 %

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

Q4 2015 Non-GAAP Earnings per Share Guidance
Three Months Ending November 30, 2015
Low High
GAAP diluted earnings per share $ (0.20 ) $ (0.16 )
Acquisition-related revenue 0.05 0.05
Restructuring expense 0.05 0.05
Stock-based compensation 0.14 0.14
Acquisition related expense 0.01 0.01
Amortization of intangibles 0.14 0.14
Total adjustments 0.39 0.39
Income tax adjustment $ 0.28 $ 0.28
Non-GAAP diluted earnings per share $ 0.47 $ 0.51

Progress Software

Investor Contact:

Brian Flanagan, +1 781-280-4817

[email protected]

or

Press Contact:

Erica Burns, +1 888-365-2779 (x3135)

[email protected]

Source: Progress Software

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