PRGS

Progress Software Corporation (PRGS)

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Progress Software Corporation (PRGS)

F4Q09 Earnings Call

December 22, 2009 9:00am ET

Executives

Bud Robertson - Senior Vice President of Finance and Administration and CFO

Rick Reidy - President and CEO

Chris Larsen - Senior Vice President of Global Field Operations

Dave Ireland - Executive Vice President and General Manager

Analysts

Brent Williams – Benchmark & Company

David Hines – Needham & Company

Jean Orr – Nutmeg Securities

Brian Murphy – Sidoti & Company

Steve Koenig – Longbow Research

Presentation

Operator

(Operator Instructions) Welcome to the Progress Software Corporation Fourth Quarter Earnings Conference Call. At this time I would like to turn the conference over to Mr. Bud Robertson.

Bud Robertson

This is Bud Robertson, Senior Vice President of Finance and Administration and CFO of Progress Software Corporation. Joining me today are Rick Reidy, President and CEO, Chris Larsen, Senior Vice President of Global Field Operations, and Dave Ireland, Executive Vice President and General Manager. We have prepared a slide presentation to view during this call. The slide presentation can be found on the Investor Relations section of the Progress website by clicking on the live webcast icon.

The matters we will be discussing today, other than historical financial information, consist of forward looking statements that involve certain risks and uncertainties. Statements indicating that we expect, estimate, believe, are planning or plan to, are forward looking, as are other statements concerning future financial results, product offerings or other events that have not yet occurred.

There are several important risk factors which could cause actual results or events to differ materially from those anticipated by the forward looking statements contained in our discussion today. Information on these risk factors is included in our Securities and Exchange Commission reports. We reserve the right to change our budget, product focus, product release dates, plans and financial projections from time to time as circumstances warrant. We shall have no obligation to update or modify the information contained in our discussion in the future when such changes occur.

With respect to any non-GAAP financial measures discussed in this call, we have provided on our website a presentation of the most directly comparable GAAP financial measure and a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. You can access this information, which is included in our earnings release, at www.Progress.com.

We reported this morning the following results for our fourth quarter and full fiscal year for 2009 which are reflected in the first few slides of the online presentation. On a GAAP basis we reported the following. Revenue for the quarter decreased 2% from $139.4 million in Q4 fiscal 2008 to $136.8 million. Operating income for the quarter increased 202% from $8.5 million in Q4 fiscal 2008 to $25.8 million. Net income increased 158% from $6.5 million in Q4 fiscal 2008 to $16.7 million. Diluted earnings per share increased 150% from $0.16 in Q4 2008 to $0.40.

On a non-GAAP basis we reported the following. Non-GAAP revenue decreased 4% from $142.1 million in Q4 fiscal 2008 to $136.9 million. Non-GAAP operating income increased 10% from $34 million in Q4 fiscal 2008 to $37.4 million. Non-GAAP net income increased 7% from $24 million in Q4 fiscal 2008 to $25.6 million. Non-GAAP diluted earnings per share increased 5% from $0.58 in Q4 fiscal 2008 to $0.61 this quarter.

The non-GAAP results in the fourth quarter fiscal 2009 exclude after tax charges of $3.5 million for stock based compensation, $4.3 million for amortization of acquired intangibles, and $1.1 million for other adjustments. The non-GAAP results in the fourth quarter fiscal 2008 exclude after tax charges of $6 million for stock based compensation, $4.4 million for restructuring acquisition related expenses, $4.7 million for amortization of acquired intangibles, and $2.4 million for other adjustments.

For the full fiscal year on a GAAP basis we reported the following. Revenue for the year decreased 4% from $515.6 million in fiscal 2008 to $494.1 million. Operating income for the year decreased 21% from $64.4 million in fiscal 2008 to $51.1 million. Net income decreased 29% from $46.3 million in fiscal 2008 to $32.8 million. Diluted earnings per share decreased 26% from $1.08 in fiscal 2008 to $0.80.

On a non-GAAP basis we reported the following. Non-GAAP revenue decreased 4% from $518.3 million in fiscal 2008 to $496.8 million. Non-GAAP operating income decreased 6% from $115.9 million in fiscal 2008 to $109.4 million. Non-GAAP net income decreased 10% from $81.9 million in fiscal 2008 to $73.9 million. Non-GAAP diluted earnings per share decreased 6% from $1.92 in fiscal 2008 to $1.80.

The non-GAAP results in fiscal 2009 exclude after tax charges of $16.4 million for stock based compensation, $3.6 million for restructuring and acquisition related expenses, $18 million for amortization required intangibles, and $3.1 million for other adjustments. The non-GAAP results in fiscal 2008 exclude after tax charges of $14.7 million for stock based compensation, $4.4 million for restructuring and acquisition related expenses, $12.9 million for amortization required intangibles, and $3.6 million for other adjustments.

The following operational analyses are presented utilizing our non-GAAP financial information. In reviewing the fiscal 2009 fourth quarter, within the year over year total revenue decrease of 4% software license revenue was down 7%, maintenance revenue increased 3% and professional services revenue decreased 22%. For the full fiscal year software license revenue was down 9%, maintenance revenue increased 2% and professional services revenue decreased 22%.

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