Progress results suffer as painful restructuring takes its toll

Source: Progress Software

Progress Software Corporation (NASDAQ: PRGS) announced today preliminary revenue and non-GAAP earnings per share results for the fiscal second quarter ended May 31, 2012 as well as actions taken during the quarter to implement its new strategic plan announced on April 25, 2012.

Progress' preliminary financial results for the fiscal second quarter 2012 include:

Consolidated revenue is expected to be $110 million to $115 million:
On a constant currency basis, the year-over-year decline was between 12 percent and 15 percent;
Otherwise, the year-over-year decline was between 15 percent and 18 percent.
Revenue for the strategic "Core" products of OpenEdge, DataDirect Connect and Apama Decision Analytics is expected to be $77 million to $80 million:
On a constant currency basis, the year-over-year decline was between 8 percent and 11 percent;
Otherwise, the year-over-year decline was between 12 percent and 16 percent.
Non-GAAP diluted EPS is expected to be $0.17 to $0.19 per share, a year-over-year decline of between 51 percent and 56 percent.

The Company's financial results were adversely impacted by the following factors, which contributed to a very uncertain environment in the quarter:

Customer, partner and employee uncertainty created by the announcement of the strategic plan;
The undertaking of large global restructuring efforts;
The marketing for divestiture of non-Core products;
The re-architecture of our organization and our go-to-market strategy; and
Overall weakness in the global economy.

Jay Bhatt, President and Chief Executive Officer of Progress said, "Because of disruption resulting from the above, we expected the quarter to be challenged and did not provide guidance. We recognize that this created a lack of visibility around fiscal second quarter performance expectations and, as a result, we have been expeditious in pre-announcing our results. Our results reflect a time of transition at Progress, yet we remain optimistic and confident about our long-term prospects that leverage our core strengths. Our intent remains to drive five percent year-over-year Core revenue growth in fiscal 2013 and seven percent in fiscal 2014."

Bhatt added, "I look forward to providing more color rI look forward to providing more color regarding the quarter and the progress we've made in executing our plan as well as financial guidance on June 27."

The Company is moving aggressively to implement its new strategic plan including the following specific actions:

Cost Reductions - Progress initiated its $55 million cost reduction efforts during the fiscal second quarter as reductions in its global workforce were substantially completed in all jurisdictions besides Europe, where the legal notification has begun;
Re-investment - The Company has begun to re-invest $15 million of this cost reduction back into sales, marketing and product development for the Core business;
Share Repurchase - The Company remains committed to completing $150 million of its $350+ million authorized share repurchase program this fiscal year, with the balance to come in fiscal 2013; and
Divest non-Core Product Lines - The Company has made substantial progress toward the divestiture of the ten product lines identified as non-Core in its strategic plan. Interest has been expressed in these product lines by many third parties, and the Company remains optimistic that it can complete the divestitures by the middle to end of fiscal 2013.

The preliminary financial results contained in this release are subject to revision until the Company reports its full fiscal second quarter results on June 27, 2012. The non-GAAP amounts primarily exclude the amortization of acquired intangibles, stock-based compensation, restructuring expenses and proxy-contest related costs.

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