SOURCE: Progress Software

Progress Software

September 21, 2010 16:50 ET

Progress Software Reports 2010 Third Quarter Results

Enterprise Business Solutions Revenue Up 77%; Non-GAAP Net Income Up 52%

BEDFORD, MA--(Marketwire - September 21, 2010) - Progress Software Corporation (NASDAQ: PRGS), a leading software provider that enables enterprises to be operationally responsive announced today results for its third fiscal quarter ended August 31, 2010. On a generally accepted accounting principles (GAAP) basis, revenue for the quarter was $128.7 million, up 8 percent from $119.4 million in the third quarter of fiscal 2009. On a non-GAAP basis, revenue totaled $128.8 million, also up 8 percent compared to the same period a year ago. Software license revenue increased 14 percent to $44.7 million from $39.2 million in the same quarter last year.

On a GAAP basis:

--  Operating income increased 81 percent to $16.5 million in the third
    quarter of fiscal 2010 as compared to $9.1 million in the same
    quarter last year;
--  Net income increased 67 percent to $9.2 million from $5.5 million
    in the same quarter last year;
--  Diluted earnings per share increased 62 percent to 21 cents in the
    third quarter of fiscal 2010 as compared to 13 cents in the same
    quarter a year ago.

On a non-GAAP basis:

--  Operating income increased 59 percent to $39.7 million in the third
    quarter of fiscal 2010 as compared to $24.9 million in the same quarter
    last year;
--  Non-GAAP net income increased 52 percent to $25.0 million from $16.5
    million in the same quarter last year;
--  Non-GAAP diluted earnings per share increased 40 percent to 56 cents 
    in the third quarter of fiscal 2010 as compared to 40 cents in the same
    quarter last year.

The GAAP operating results for the third quarter of fiscal 2010 reflect a restructuring charge of $11.5 million taken in connection with the previously announced restructuring of Progress Software's operations.

The non-GAAP amounts primarily exclude the amortization of acquired intangibles, stock-based compensation, restructuring and acquisition-related costs and purchase accounting adjustments for deferred revenue.

The non-GAAP results noted above and the non-GAAP financial outlook for 2010 and 2011 discussed below represent non-GAAP financial measures. A reconciliation of these measures to the appropriate GAAP measures for the three months ended August 31, 2010 and August 31, 2009, and the 2010 and 2011 outlook, as well as further information regarding these measures, is included in the condensed financial information provided with this release.

Richard D. Reidy, president and chief executive officer of Progress Software, said: "The company's third quarter performance was strong. I am particularly pleased with the performance of our products in the Enterprise Business Solutions (EBS) portfolio. Our recently released Progress® Responsive Process Management™ suite helped drive several multi-product solution sales. We also achieved strong results with our best-in-class technologies, comprising the Progress Savvion™ BPM, Apama® CEP, Sonic® ESB, Actional® BTM, and FUSE™ open source product lines. The company's solid top line growth, coupled with disciplined expense management, were also key factors in generating an increase in our non-GAAP operating income by 59 percent during the quarter."

Reidy added: "This month, we held our annual Online Exchange conference, which attracted more than 2,500 attendees from over 66 countries across two days. This conference is targeted towards our Progress OpenEdge® Application Partners, who are ISVs that use OpenEdge to build their software applications, and enterprise customers. Of particular interest to this audience were our recently announced Progress OpenEdge BPM initiative and our vision for simplifying the deployment of applications in the cloud."

Progress Software's cash and short-term investments at the end of the third quarter totaled $269 million. Progress Software repurchased approximately 598,000 shares at a cost of $17.8 million in the third quarter of fiscal 2010.

Quarterly Highlights

-- Air France-KLM Airlines chose the Actional SOA Management platform, part of the Progress Responsive Process Management™ (RPM) suite, to offer better visibility and help deliver 100 percent availability on its reservation systems. Subsequent to their merger with Air France in 2004, KLM recognized they had an ever-growing amount of complex IT systems needing to work together to ensure their transactions work as expected. They also needed to find a way of integrating the multiple disparate systems from both companies, and avoid a costly "rip and replace" strategy.

-- Progress Software reported that Royal Bank of Canada (RBC) successfully deployed the Apama FX Aggregation solution accelerator to support its Foreign Exchange dealing operations. The Apama FX Aggregation solution accelerator is completely customizable and has been modified for RBC to meet their specific requirements. RBC's new system has significantly increased the efficiency by which RBC's traders obtain the best FX prices for their clients.

-- Forrester Research, Inc. named Progress Software a leader in "The Forrester Wave™: Business Process Management Suites, Q3 2010" (August 2010) report with its Savvion BPM product. In this detailed review of business process management (BPM) suites, the Savvion BPM product was described as a leader with "competitive products that offer industry-leading development environments and improved tools for business stakeholders."

-- Agora Corretora de Titulos e Valores Mobiliarios S.A. (CVTM), a division of Banco Bradesco S.A. (Bradesco) and one of the largest brokers in Brazil's securities industry, launched a new suite of proprietary algorithms for equities and options powered by the Progress Apama Capital Markets platform. The new suite offers a wide variety of new alpha-seeking and execution strategies. It also enables Agora customers to access these new algorithms remotely through an intuitive web interface.

-- The financial services group, Banco Bilbao Vizcaya Argentaria (BBVA), went 'live' on the Apama FX Aggregation Accelerator for its foreign exchange operations. BBVA FX traders now use the Apama platform along with its customized dashboards to view and trade across aggregated liquidity from a number of banks and FX ECNs. BBVA chose the Apama platform because of Progress Software's extensive experience in the FX market, gained through numerous successful deployments of the FX Aggregation Accelerator with tier one and tier two banks.

-- Charles River Development, a front- and middle-office software solutions provider for investment firms, selected the Progress SonicMQ® messaging platform as the messaging backbone for their real-time event based architecture. The SonicMQ product is a component of Charles River Development's architecture, helping to deliver low latency and continuous availability within the Charles River Investment Management System (Charles River IMS) Version 9.1. Charles River selected the SonicMQ platform and the Sonic Continuous Availability Architecture for its track record in providing financial services firms with highly-available, reliable and secure messaging.

-- Prudential UK has deployed the Progress FUSE ESB® (enterprise service bus) in its annuities business unit as a first step in making their IT infrastructure more agile. This initial stage uses the FUSE ESB product to integrate complex back-end infrastructure enabling automated processing to support its Annuities Operation. Prudential also began adopting the Progress FUSE Message Broker® product for high performance, reliable messaging.

-- Three Progress Software employees were honored during the quarter. Dr. John Bates, Progress Software's chief technology officer, was appointed to the newly established Technology Advisory Committee (TAC) for the US Commodity Futures Trading Commission (CFTC). Colleen Smith, vice president of SaaS, was selected by editors of Everything Channel's CRN Magazine as one of the top 100 Women in the Channel for the second consecutive year. Smith was also rated a 'Rising Star' in CRN's Women in the Channel feature in 2007, as well as being named Channel Chief multiple times. John Wilmes, the company's Chief Technology Architect, Communications Sector, was named a Distinguished Fellow by the TM Forum. The Distinguished Fellow Award recognizes individuals, who have made valuable contributions to the TM Forum and to the communications industry as a whole.

Additional highlights can be found at: http://web.progress.com/inthenews/pressreleases.html.

Business Outlook

Progress Software is providing the following guidance for the fiscal year ending November 30, 2010:

--  GAAP revenue is expected to be in the range of $523 million to $527
    million.
--  On a non-GAAP basis, revenue is expected to be in the range of $524
    million to $528 million.
--  GAAP diluted earnings per share are expected to be in the range of
    $1.01 to $1.09.
--  On a non-GAAP basis, diluted earnings per share are expected to be in
    the range of $2.32 to $2.36.

Progress Software is providing the following guidance for the fourth fiscal quarter ending November 30, 2010:

--  On a GAAP and non-GAAP basis, revenue is expected to be in the range
    of $139 million to $143 million.
--  GAAP diluted earnings per share are expected to be in the range of 38
    cents to 46 cents.
--  On a non-GAAP basis, diluted earnings per share are expected to be in
    the range of 64 cents to 68 cents.

Progress Software is also providing the following initial guidance for the fiscal year ending November 30, 2011:

--  On a GAAP and non-GAAP basis, revenue is expected to be in the range
    of $555 million to $565 million.
--  GAAP diluted earnings per share are expected to be in the range of
    $1.60 to $1.80.
--  On a non-GAAP basis, diluted earnings per share are expected to be
    in the range of $2.50 to $2.60.

The outlook for non-GAAP revenue excludes purchase accounting adjustments for deferred revenue. The outlook for non-GAAP earnings excludes the amortization of acquired intangibles, stock-based compensation, restructuring, transition and acquisition-related costs, purchase accounting adjustments for deferred revenue, certain insurance reimbursements and related tax effects.

Legal Notice Regarding Non-GAAP Financial Information

Progress Software provides non-GAAP revenue, 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. Progress Software 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.

Conference Call

The Progress Software quarterly investor conference call to review its fiscal second quarter 2010 results and business outlook will be Webcast live at 9:00 a.m. (EDT) on Wednesday, September 22, 2010 on the company's Web site, located at http://investors.progress.com/.

As previously disclosed, in combination with this press release, Progress Software is providing in advance a copy of prepared remarks for its conference call. The press release and the prepared remarks are available on the Progress website (http://investors.progress.com/) on the investor relations page. The conference call will include only brief comments followed by questions and answers. The prepared remarks will not be read on the call.

The conference call will be webcast and accessible on the Progress Website at http://investors.progress.com/. The conference call will also be webcast live via Yahoo (http://www.yahoo.com), Motley Fool (http://www.fool.com), Streetevents (http://www.streetevents.com), TD Waterhouse (http://www.tdwaterhouse.com) and Fidelity.com (http://www.fidelity.com). An archived version of the conference call and supporting materials will be available on the Progress Software Investor Relations Website after the live conference call.

Progress Software Corporation

Progress Software Corporation (NASDAQ: PRGS) is a global software company that enables enterprises to be operationally responsive to changing conditions and customer interactions as they occur -- to capitalize on new opportunities, drive greater efficiencies and reduce risk. The company offers a comprehensive portfolio of best-in-class infrastructure software spanning event-driven visibility and real-time response, open integration, data access and integration, and application development and deployment -- all supporting on-premises and SaaS/Cloud deployments. Progress Software maximizes the benefits of operational responsiveness while minimizing IT complexity and total cost of ownership. Progress Software can be reached at www.progress.com or +1-781-280-4000.

Safe Harbor Statement

Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which include statements regarding the Company's business outlook for its fourth fiscal quarter, full 2010 fiscal year and full 2011 fiscal year and strategic plans, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to the following: the receipt and shipment of new orders; the timely release of enhancements to the Company's products; the growth rates of certain market segments; the positioning of the Company's products in those market segments; variations in the demand for professional services and technical support; pricing pressures and the competitive environment in the software industry; continuing uncertainty in the U.S. and international economies, which could result in fewer sales of the Company's products and may otherwise harm the Company's business; the Company's ability to complete and integrate acquisitions; the Company's ability to realize the expected benefits and anticipated synergies from acquired businesses; the Company's ability to penetrate international markets and manage its international operations; changes in exchange rates; the Company's ability to realize the expected benefits from its previously-announced restructuring actions; and the potential disruption to the Company's business from those restructuring actions . The Company undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with the Company's business, please refer to the Company's filings with the Securities and Exchange Commission.

Actional, Apama, FUSE ESB, FUSE, OpenEdge, Progress, Progress RPM, Responsive Process Management, Savvion and SonicMQ, Sonic are trademarks 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.


Progress Software Corporation
GAAP Condensed Consolidated Statements of Operations

                                                 Three Months Ended
                                         ---------------------------------
                                         August 31,  August 31,   Percent
(In thousands except per share data)        2010        2009      Change
                                         ----------  ----------  --------
Revenue:
     Software licenses                   $   44,748  $   39,173        14%
     Maintenance and services                83,989      80,260         5%
                                         ----------  ----------
          Total revenue                     128,737     119,433         8%
                                         ----------  ----------
Costs of revenue:
     Cost of software licenses                2,025       1,758        15%
     Cost of maintenance and services        17,845      15,957        12%
     Amortization of purchased
      technology                              4,839       4,811         1%
                                         ----------  ----------
          Total costs of revenue             24,709      22,526        10%
                                         ----------  ----------
Gross profit                                104,028      96,907         7%
                                         ----------  ----------
Operating expenses:
     Sales and marketing                     39,362      45,511       (14)%
     Product development                     21,941      22,378        (2)%
     General and administrative              11,937      17,717       (33)%
     Amortization of other acquired
      intangibles                             2,733       2,310        18%
     Acquisition-related expenses                53         110
     Restructuring expense                   11,533        (211)
                                         ----------  ----------
          Total operating expenses           87,559      87,815         0%
                                         ----------  ----------
Income from operations                       16,469       9,092        81%
Other income (expense), net                  (1,720)       (187)
                                         ----------  ----------
Income  before provision for income
 taxes                                       14,749       8,905        66%
Provision for income taxes                    5,505       3,384        63%
                                         ----------  ----------
Net income                               $    9,244  $    5,521        67%
                                         ==========  ==========
Earnings per share:
     Basic                               $     0.21  $     0.14        50%
     Diluted                             $     0.21  $     0.13        62%
                                         ==========  ==========
Weighted average shares outstanding:
     Basic                                   43,224      40,117         8%
     Diluted                                 44,424      41,261         8%
                                         ==========  ==========



                                                 Nine Months Ended
                                         ---------------------------------
                                          August 31, August 31,  Percent
(In thousands except per share data)        2010        2009     Change
                                         ----------  ----------  --------
Revenue:
     Software licenses                   $  136,093  $  123,538        10%
     Maintenance and services               247,847     233,802         6%
                                         ----------  ----------
          Total revenue                     383,940     357,340         7%
                                         ----------  ----------
Costs of revenue:
     Cost of software licenses                5,633       5,602         1%
     Cost of maintenance and services        53,086      49,287         8%
     Amortization of purchased
      technology                             15,222      14,609         4%
                                         ----------  ----------
          Total costs of revenue             73,941      69,498         6%
                                         ----------  ----------
Gross profit                                309,999     287,842         8%
                                         ----------  ----------
Operating expenses:
     Sales and marketing                    122,707     133,331        (8)%
     Product development                     68,481      70,320        (3)%
     General and administrative              38,167      46,123       (17)%
     Amortization of other acquired
      intangibles                             7,833       7,149        10%
     Acquisition-related expenses               468         330        42%
     Restructuring expense                   37,508       5,237
                                         ----------  ----------
          Total operating expenses          275,164     262,490         5%
                                         ----------  ----------
Income from operations                       34,835      25,352        37%
Other income, net                             4,955         582       751%
                                         ----------  ----------
Income  before provision for income
 taxes                                       39,790      25,934        53%
Provision for income taxes                   12,495       9,855        27%
                                         ----------  ----------
Net income                               $   27,295  $   16,079        70%
                                         ==========  ==========
Earnings per share:
     Basic                               $     0.65  $     0.40        63%
     Diluted                             $     0.62  $     0.39        59%
                                         ==========  ==========
Weighted average shares outstanding:
     Basic                                   42,280      40,018         6%
     Diluted                                 43,782      40,826         7%
                                         ==========  ==========





Progress Software Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures

                           Three Months Ended August 31,
                                        2010
                          -------------------------------
(In thousands except per     As
 share data)              Reported  Adjustments Non-GAAP
                          ---------  ---------  ---------
Total revenue             $ 128,737  $      79  $ 128,816
   Purchase accounting
    adjustments for
    deferred revenue (1)        (79)        79

Income from operations    $  16,469  $  23,226  $  39,695
   Purchase accounting
    adjustments for
    deferred revenue (1)        (79)        79
   Amortization of
    acquired intangibles     (7,572)     7,572
   Acquisition-related
    expenses                    (53)        53
   Restructuring expense    (11,533)    11,533
   Stock option
    investigation (2)             -          -
   Stock-based
    compensation (3)         (3,989)     3,989

Operating margin
 percentage                    12.8%                 30.8%

Other income (expense),
 net                      $  (1,720) $       -  $  (1,720)

Provision for  income
 taxes  (5)               $   5,505  $   7,501  $  13,006

Net income                $   9,244  $  15,725  $  24,969

Earnings per share -
 diluted                  $    0.21             $    0.56

Weighted average shares
 outstanding - diluted       44,424                44,424


                           Three Months Ended August 31,
                                        2009
                          -------------------------------
(In thousands except per      As                            Percent
 share data)              Reported  Adjustments  Non-GAAP   Change
                          ---------  ---------  ---------  ---------
Total revenue             $ 119,433        286  $ 119,719          8%
   Purchase accounting
    adjustments for
    deferred revenue (1)       (286)       286

Income from operations    $   9,092  $  15,834  $  24,926         59%
   Purchase accounting
    adjustments for
    deferred revenue (1)       (286)       286
   Amortization of
    acquired intangibles     (7,121)     7,121
   Acquisition-related
    expenses                   (110)       110
   Restructuring expense        211       (211)
   Stock option
    investigation (2)           321       (321)
   Stock-based
    compensation (3)         (8,849)     8,849

Operating margin
 percentage                     7.6%                 20.8%        48%

Other income (expense),
 net                      $    (187) $       -  $    (187)

Provision for  income
 taxes  (5)               $   3,384  $   4,903  $   8,287         57%

Net income                $   5,521  $  10,931  $  16,452         52%

Earnings per share -
 diluted                  $    0.13             $    0.40         40%

Weighted average shares
 outstanding - diluted       41,261                41,261          8%




                           Nine Months Ended August 31,
                                        2010
                          -------------------------------
(In thousands except per     As
 share data)              Reported  Adjustments Non-GAAP
                          ---------  ---------  ---------

Total revenue             $ 383,940  $   1,138  $ 385,078
   Purchase accounting
    adjustments for
    deferred revenue (1)     (1,138)     1,138

Income from operations    $  34,835  $  73,505  $ 108,340
   Purchase accounting
    adjustments for
    deferred revenue (1)     (1,138)     1,138
   Amortization of
    acquired intangibles    (23,055)    23,055
   Acquisition-related
    expenses                   (468)       468
   Restructuring expense    (37,508)    37,508
   Stock option
    investigation (2)         1,330     (1,330)
   Stock-based
    compensation (3)        (12,666)    12,666

Operating margin
 percentage                     9.1%                 28.1%

Other income, net (4)     $   4,955  $    (899) $   4,056

Provision for  income
 taxes  (5)               $  12,495  $  26,001  $  38,496

Net income                $  27,295  $  46,605  $  73,900

Earnings per share -
 diluted                  $    0.62             $    1.69

Weighted average shares
 outstanding - diluted       43,782                43,782



                             Nine Months Ended August 31,
                                         2009
                          -------------------------------
(In thousands except per     As                             Percent
  share data)             Reported  Adjustments Non-GAAP    Change
                          ---------  ---------  ---------  ---------

Total revenue             $ 357,340      2,529  $ 359,869          7%
   Purchase accounting
    adjustments for
    deferred revenue (1)     (2,529)     2,529

Income from operations    $  25,352  $  46,648  $  72,000         50%
   Purchase accounting
    adjustments for
    deferred revenue (1)     (2,529)     2,529
   Amortization of
    acquired intangibles    (21,758)    21,758
   Acquisition-related
    expenses                   (330)       330
   Restructuring expense     (5,237)     5,237
   Stock option
    investigation (2)           120       (120)
   Stock-based
    compensation (3)        (16,914)    16,914

Operating margin
 percentage                     7.1%                 20.0%        41%

Other income, net (4)     $     582  $       -  $     582        597%

Provision for  income
 taxes  (5)               $   9,855  $  14,459  $  24,314         58%

Net income                $  16,079  $  32,189  $  48,268         53%

Earnings per share -
 diluted                  $    0.39             $    1.18         43%

Weighted average shares
 outstanding - diluted       40,826                40,826          7%

(1) The purchase accounting adjustment for deferred revenue is included
    within maintenance and services revenue and represents the write-down
    to fair value of the deferred maintenance revenue of Savvion and Iona
    Technologies at the date of each acquisition.

(2) Stock option investigation expenses are included within general and
    administrative expenses and primarily represent professional services
    fees associated with the SEC's investigation and shareholder derivative
    lawsuits related to the company's historical stock option grant
    practices. The credit amount for the nine months ended August 31, 2010
    relates to insurance reimbursements in excess of previously estimated
    amounts.

(3) Stock-based compensation expense, representing the fair value of equity
    awards, is included in the following GAAP expenses:


                           Three Months Ended       Three Months Ended
                            August 31, 2010           August 31, 2009
                      -------------------------- --------------------------
                                           Non-                       Non-
                        GAAP  Adjustments  GAAP     GAAP Adjustments  GAAP
                      -------- ---------  ------ -------- ---------  ------
        Cost of
         software
         licenses     $      7 $      (7) $    - $      8 $      (8) $    -
        Cost of
         maintenance
         and services      225      (225)      -      238      (238)      -
        Sales and
         marketing       1,340    (1,340)      -    1,445    (1,445)      -
        Product
         development     1,066    (1,066)      -    1,037    (1,037)      -
        General and
         administrative  1,351    (1,351)      -    6,121    (6,121)      -
                      -------- ---------  ------ -------- ---------  ------
                      $  3,989 $  (3,989) $    - $  8,849 $  (8,849) $    -
                      ======== =========  ====== ======== =========  ======

                           Nine Months Ended         Nine Months Ended
                             August 31, 2010          August 31, 2009
                      -------------------------- --------------------------
                                           Non-                       Non-
                        GAAP  Adjustments  GAAP    GAAP  Adjustments GAAP
                      -------- ---------  ------ -------- ---------  ------
        Cost of
         software
         licenses     $     22 $     (22) $    - $     28 $     (28) $    -
        Cost of
         maintenance
         and services      684      (684)      -      706      (706)      -
        Sales and
         marketing       4,132    (4,132)      -    4,331    (4,331)      -
        Product
         development     3,139    (3,139)      -    2,984    (2,984)      -
        General and
         administrative  4,689    (4,689)      -    8,865    (8,865)      -
                      -------- ---------  ------ -------- ---------  ------
                      $ 12,666 $ (12,666) $    - $ 16,914 $ (16,914) $    -
                      ======== =========  ====== ======== =========  ======

   In addition, the restructuring expense for the three and nine months
   ended August 31, 2010 includes approximately $0.2 million and $0.5
   million of stock-based compensation expense, respectively.

(4) The non-GAAP adjustment in other income for the nine months ended
    August 31, 2010 relates to an insurance settlement gain from a
    pre-acquisition contingency assumed as part of a prior acquisition.

(5) The non-GAAP provision for income taxes was calculated reflecting an
    effective rate of 34.3% for the three and nine months ended August 31,
    2010, and 33.5% for the three and nine months ended August 31, 2009.
    The difference between the effective rate under GAAP and the effective
    tax rate utilized in the preparation of non-GAAP financial measures
    primarily relates to the tax effects of stock-based compensation and
    amortization of acquired intangibles, which are excluded from the
    determination of non-GAAP net income. The non-GAAP effective tax rate
    for the nine months ended August 31, 2010 also excludes a one-time
    benefit of $2.5 million.




Progress Software Corporation
Condensed Consolidated Balance Sheets


                                                  August 31,   November 30,
(In thousands)                                        2010         2009
                                                  -----------  -----------
Assets
Cash and short-term investments                   $   269,213  $   224,121
Accounts receivable, net                               84,966       98,872
Other current assets                                   40,198       34,626
                                                  -----------  -----------
    Total current assets                              394,377      357,619
                                                  -----------  -----------
Property and equipment, net                            57,963       59,625
Goodwill and intangible assets, net                   330,117      304,887
Other assets                                           77,863       76,719
                                                  -----------  -----------
                Total                             $   860,320  $   798,850
                                                  ===========  ===========

Liabilities and shareholders' equity
Accounts payable and other current liabilities    $    79,171  $    85,681
Short-term deferred revenue                           134,334      141,243
                                                  -----------  -----------
     Total current liabilities                        213,505      226,924
                                                  -----------  -----------
Long-term deferred revenue                              3,342        4,511
Other liabilities                                      10,335       11,963
Shareholders' equity:
     Common stock and additional paid-in capital      314,562      247,265
     Retained earnings                                318,576      308,187
                                                  -----------  -----------
                Total shareholders' equity            633,138      555,452
                                                  -----------  -----------
                Total                             $   860,320  $   798,850
                                                  ===========  ===========


Condensed Consolidated Statements of Cash Flows

                                                     Nine Months Ended
                                                  ------------------------
                                                   August 31,  August 31,
(In thousands)                                        2010        2009
                                                  -----------  -----------
Cash flows from operations:
     Net income                                   $    27,295  $    16,079
     Depreciation, amortization and other noncash
      items                                            44,551       47,465
     Other changes in operating assets and
      liabilities                                      (2,023)     (27,822)
                                                  -----------  -----------
                Net cash flows from operations         69,823       35,722
Capital expenditures                                   (7,091)      (6,061)
Redemptions and reclassification of auction-rate
 securities                                             1,250       24,925
Acquisitions, net of cash acquired                    (49,186)           -
Share issuances, net of repurchases                    38,478        2,262
Other                                                  (8,182)      11,140
                                                  -----------  -----------
Net change in cash and short-term investments          45,092       67,988
Cash and short-term investments, beginning of
 period                                               224,121      118,529
                                                  -----------  -----------
Cash and short-term investments, end of period    $   269,213  $   186,517
                                                  ===========  ===========


Progress Software Corporation
Reconciliation of Forward-Looking Guidance


Diluted Earnings Per Share Range

                                                        Three Months Ended
                                                        November 30, 2010
                                                        ------------------
GAAP expectation                                        $  0.38  - $  0.46

Adjustment to exclude stock-based compensation          $  0.07  - $  0.08
Adjustment to exclude amortization of acquired
 intangibles                                            $  0.11  - $  0.11
Adjustment to exclude restructuring and
 transition expenses                                    $  0.04  - $  0.07

                                                        ------------------
Non-GAAP expectation                                    $  0.64  - $  0.68
                                                        ==================


                                                       Twelve Months Ended
                                                        November 30, 2010
                                                        ------------------
GAAP expectation                                        $  1.01  - $  1.09

Adjustment to exclude stock-based compensation          $  0.29  - $  0.30
Adjustment to exclude amortization of acquired
 intangibles                                            $  0.45  - $  0.45
Adjustment to exclude restructuring and
 transition expenses                                    $  0.62  - $  0.65
Other adjustments                                       ($ 0.09) - ($ 0.09)

                                                        ------------------
Non-GAAP expectation                                    $  2.32  - $  2.36
                                                        ==================


                                                       Twelve Months Ended
                                                        November 30, 2011
                                                        ------------------
GAAP expectation                                        $  1.60  - $  1.80

Adjustment to exclude stock-based compensation          $  0.27  - $  0.29
Adjustment to exclude amortization of acquired
 intangibles                                            $  0.36  - $  0.36
Adjustment to exclude restructuring and
 transition expenses                                    $  0.15  - $  0.30

                                                        ------------------
Non-GAAP expectation                                    $  2.50  - $  2.60
                                                        ==================

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