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 Progress Reports 2017 Fiscal Second Quarter Results
   Wednesday, June 28, 2017 4:15:02 PM ET

Progress (PRGS ) today announced results for its fiscal second quarter ended May 31, 2017.

Revenue was $93.2 million during the quarter compared to $96.1 million in the same quarter last year, a year-over-year decrease of 3% on an actual currency basis and 2% on a constant currency basis. On a non-GAAP basis, revenue was $93.4 million during the quarter compared to $96.7 million in the same quarter last year, a decrease of 3% on an actual currency basis and 2% on a constant currency basis.

Additional financial highlights included:

On a GAAP basis in the fiscal second quarter of 2017:

-- Revenue was $93.2 million compared to $96.1 million in the same quarter in fiscal year 2016;



-- Income from operations was $20.3 million compared to $12.3 million in the same quarter last year;

-- Net income was $10.3 million compared to $7.3 million in the same quarter last year;

-- Diluted earnings per share was $0.21 compared to $0.14 in the same quarter last year; and

-- Cash from operations was $22.4 million compared to $26.8 million in the same quarter last year.

On a non-GAAP basis in the fiscal second quarter of 2017:

-- Revenue was $93.4 million compared to $96.7 million in the same quarter last year;

-- Income from operations was $32.6 million compared to $27.0 million in the same quarter last year;

-- Operating margin was 35% compared to 28% in the same quarter last year;

-- Net income was $20.5 million compared to $16.4 million in the same quarter last year;

-- Diluted earnings per share was $0.42 compared to $0.33 in the same quarter last year; and

-- Adjusted free cash flow was $27.9 million compared to $26.4 million in the same quarter last year.

"I’m pleased that our Q2 revenue and earnings per share were above our expectations, and we continued to strengthen our core businesses with several key product releases during the quarter," said Yogesh Gupta, CEO at Progress. "And I’m excited about our future prospects as we focus on the very large and growing market opportunity for development platforms. Our recent acquisition of Kinvey, the top-ranked leader in ’The Forrester Wave’ for Mobile Development Platforms, combined with our unique mobile and web development tools, machine learning capabilities, and unmatched data connectivity products, offer the best-of-breed product portfolio for building and running modern mission-critical business applications."

Paul Jalbert, CFO at Progress, said: "The financial performance of our core business in the first-half, coupled with our continued strong cash flow generation, has enabled us to meaningfully raise our annual guidance for earnings per share, operating margin and free cash flow. We remain confident in our strategy and financial strength, and look forward to a solid second-half of the year."

Other fiscal second quarter 2017 metrics and recent results included:

-- Cash, cash equivalents and short-term investments were $245.1 million at the end of the quarter;

-- DSO was 42 days, compared to 45 days in the fiscal second quarter of 2016;

-- Under the previously announced authorization by the Board of Directors to repurchase up to $200 million of shares of common stock, Progress repurchased 0.2 million shares for $6.9 million during the fiscal second quarter of 2017. As of May 31, 2017, there was $110.4 million remaining under this authorization; and

-- On June 21, 2017, our Board of Directors declared a quarterly dividend of $0.125 per share of common stock that will be paid on September 15, 2017 to shareholders of record as of the close of business on September 1, 2017.

Business Outlook

Progress provides the following updated guidance for the fiscal year ending November 30, 2017 and the third fiscal quarter ending August 31, 2017:

                                                                                                                 
(In millions, except percentages and per share amounts)                                               FY 2017                                                 FY 2017                                                 Q3 2017                                                 Q3 2017
                                                                                                       GAAP                                                  Non-GAAP                                                  GAAP                                                  Non-GAAP
                                                                                                  -------------                                           -------------                                           -------------                                           -------------
Revenue                                                                                             $390 - $395                                             $391 - $396                                               $93 - $96                                               $93 - $96
Diluted earnings per share                                                                        $0.66 - $0.73                                           $1.73 - $1.78                                           $0.17 - $0.19                                           $0.41 - $0.43
Operating margin                                                                                      16% - 17%                                               33% - 34%                                                       *                                                       *
Adjusted free cash flow                                                                               $86 - $91                                             $100 - $105                                                       *                                                       *
Effective tax rate                                                                                          43%                                                     33%                                                       *                                                       *

*We do not provide guidance for this financial measure.

Progress’ fiscal 2017 financial guidance is based on current exchange rates. The negative currency translation impact on Progress’ fiscal year 2017 business outlook compared to 2016 exchange rates is approximately $2.0 million on non-GAAP revenue and $0.02 on non-GAAP earnings per share. The negative currency translation impact on Progress’ fiscal Q3 2017 business outlook compared to 2016 exchange rates on both non-GAAP revenue and non-GAAP earnings per share is not meaningful. 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 second quarter of 2017 will be broadcast live at 5:00 p.m. ET on Wednesday, June 28, 2017 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 1-877-340-7912, pass code 2708560. 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, 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.

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.

-- 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, during the fiscal second quarter of 2016, 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.

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.

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 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 have made acquisitions, and 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, 2016. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

About Progress

Progress (PRGS ) offers the leading platform for developing and deploying mission-critical business applications. Progress empowers enterprises and ISVs to build and deliver cognitive-first applications, that harness big data to derive business insights and competitive advantage. Progress offers leading technologies for easily building powerful user interfaces across any type of device, a reliable, scalable and secure backend platform to deploy modern applications, leading data connectivity to all sources, and award-winning predictive analytics that brings the power of machine learning to any organization. Over 1,700 independent software vendors, 80,000 enterprise customers, and 2 million developers rely on Progress to power their applications. Learn about Progress at www.progress.com or +1-800-477-6473.

Progress and Progress Software are trademarks or registered trademarks of Progress Software Corporation and/or its subsidiaries or affiliates in the U.S. and other countries. Any other names contained herein may be trademarks of their respective owners.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                                                                                                                                                                
                                                                                                                                                                  Three Months Ended                                                                                                                                                                                                               Six Months Ended
                                                                                   --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)                                                           May 31,                                 May 31,                          % Change                                                             May 31,                                 May 31,                                % Change
                                                                                                 2017                                                                          2016                                                                                                                                        2017                                                                          2016
                                                                                   -----------------------------                                             -------------------------------------                                             ------------------                                            -----------------------------                                             -------------------------------------                                             ------------------------------
Revenue:
  Software licenses                                                                $   25,592                                                                $           28,787                                                                           (11 )%                                             $   49,914                                                                $           52,742                                                                        (5 )%
  Maintenance and services                                                             67,621                                                         67,331                                             -- %                                                 134,269                                                        132,857                                                      1 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
    Total revenue                                                                      93,213                                                         96,118                                                         (3 )%                                                184,183                                                        185,599                                                     (1 )%
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
  Costs of revenue:
  Cost of software licenses                                                             1,422                                                                             1,233                                                                            15 %                                                   3,010                                                                             2,715                                                                        11 %
  Cost of maintenance and services                                                     11,262                                                                            11,063                                                                             2 %                                                  21,754                                                                            21,392                                                                         2 %
  Amortization of acquired intangibles                                                  4,683                                                          3,939                                                         19 %                                                   8,361                                                          7,878                                                      6 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
    Total costs of revenue                                                             17,367                                                         16,235                                                          7 %                                                  33,125                                                         31,985                                                      4 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Gross profit                                                                           75,846                                                         79,883                                                         (5 )%                                                151,058                                                        153,614                                                     (2 )%
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Operating expenses:
  Sales and marketing                                                                  21,236                                                                            29,138                                                                           (27 )%                                                 46,957                                                                            58,796                                                                       (20 )%
  Product development                                                                  18,791                                                                            22,297                                                                           (16 )%                                                 36,125                                                                            44,094                                                                       (18 )%
  General and administrative                                                           11,606                                                                            12,264                                                                            (5 )%                                                 22,174                                                                            24,644                                                                       (10 )%
  Amortization of acquired intangibles                                                  3,223                                                                             3,185                                                                             1 %                                                   6,402                                                                             6,370                                                                         1 %
  Restructuring expenses                                                                  662                                                                               331                                                                           100 %                                                  17,801                                                                               265                                                                     6,617 %
  Acquisition-related expenses                                                             44                                                            324                                                        (86 )%                                                     93                                                            396                                                    (77 )%
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
    Total operating expenses                                                           55,562                                                         67,539                                                        (18 )%                                                129,552                                                        134,565                                                     (4 )%
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Income from operations                                                                 20,284                                                         12,344                                                         64 %                                                  21,506                                                         19,049                                                     13 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Other (expense) income, net                                                            (1,552 )                                                                          (1,361 )                                                                         (14 )%                                                 (2,899 )                                                                          (3,186 )                                                                       9 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Income before income taxes                                                             18,732                                                         10,983                                                         71 %                                                  18,607                                                         15,863                                                     17 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Provision for income taxes                                                              8,391                                                          3,708                                                        126 %                                                   8,791                                                          5,372                                                     64 %
                                                                                   -------------------------------                                           ---------------------------------------                                           -------------- ----                                           -------------------------------                                           ---------------------------------------                                           ---------- --------------------
Net income                                                                         $   10,341                                             $            7,275                                                         42 %                                              $    9,816                                             $           10,491                                                     (6 )%
                                                                                   === ====== ====================                                           === ============== ====================                                           ============== ====                                           === ====== ====================                                           === ============== ====================                                           ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
Earnings per share:
  Basic                                                                            $     0.21                                                                $             0.15                                                                            40 %                                              $     0.20                                                                $             0.21                                                                        (5 )%
  Diluted                                                                          $     0.21                                                                $             0.14                                                                            50 %                                              $     0.20                                                                $             0.21                                                                        (5 )%
Weighted average shares outstanding:
  Basic                                                                                48,221                                                                            49,873                                                                            (3 )%                                                 48,477                                                                            50,341                                                                        (4 )%
  Diluted                                                                              48,490                                                                            50,354                                                                            (4 )%                                                 48,762                                                                            50,897                                                                        (4 )%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
Cash dividends declared per common share                                           $    0.125                                                                $   --                                                                           100 %                                              $    0.250                                                                $   --                                                                       100 %
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                                                  
(In thousands)                                                                                                                   May 31,                                                               November 30,
                                                                                                                                  2017                                                                     2016
                                                                                                                    ------------------------------                                             --------------------------
Assets
Current assets:
  Cash, cash equivalents and short-term investments                                                                 $   245,082                                                                $                   249,754
  Accounts receivable, net                                                                                               43,894                                                                                     65,678
  Other current assets                                                                                                   22,332                                                                  20,621
                                                                                                                    --------------------------------                                           ----------------------------
    Total current assets                                                                                                311,308                                                                 336,053
                                                                                                                    --------------------------------                                           ----------------------------
Property and equipment, net                                                                                              44,863                                                                                     50,105
Goodwill and intangible assets, net                                                                                     377,562                                                                                    358,894
Other assets                                                                                                              3,331                                                                   9,775
                                                                                                                    --------------------------------                                           ----------------------------
    Total assets                                                                                                    $   737,064                                             $                   754,827
                                                                                                                    === ======= ====================                                           ====== ====================
Liabilities and shareholders’ equity
Current liabilities:
  Accounts payable and other current liabilities                                                                    $    62,345                                                                $                    59,778
  Current portion of long-term debt                                                                                      14,643                                                                                     15,000
  Short-term deferred revenue                                                                                           133,254                                                                 128,960
                                                                                                                    --------------------------------                                           ----------------------------
    Total current liabilities                                                                                           210,242                                                                 203,738
                                                                                                                    --------------------------------                                           ----------------------------
Long-term deferred revenue                                                                                                8,820                                                                                      8,801
Long-term debt                                                                                                          111,964                                                                                    120,000
Other long-term liabilities                                                                                              13,202                                                                                     15,659
Shareholders’ equity:
  Common stock and additional paid-in capital                                                                           242,331                                                                                    239,496
  Retained earnings                                                                                                     150,505                                                                 167,133
                                                                                                                    --------------------------------                                           ----------------------------
    Total shareholders’ equity                                                               392,836                                                                 406,629
                                                                                                                    --------------------------------                                           ----------------------------
    Total liabilities and shareholders’ equity                                           $   737,064                                             $                   754,827
                                                                                                                    === ======= ====================                                           ====== ====================
                                                                                                                                                                                                       

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                                                                                                        
                                                                                                                                                          Three Months Ended                                                                                                                                         Six Months Ended
                                                                                                           ----------------------------------------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------------------------------------
(In thousands)                                                                                                          May 31,                                May 31,                                                                      May 31,                                May 31,
                                                                                                                         2017                                                                         2016                                                                         2017                                                                         2016
                                                                                                           ------------------------------                                             ----------------------------------                                             ------------------------------                                             ----------------------------------
Cash flows from operating activities:
  Net income                                                                                               $    10,341                                                                $         7,275                                                                $     9,816                                                                $        10,491
    Depreciation and amortization                                                                               10,490                                                                          9,969                                                                     19,848                                                                         19,909
    Stock-based compensation                                                                                     3,633                                                                          6,293                                                                      5,263                                                                         13,231
    Other non-cash adjustments                                                                                     444                                                                          1,691                                                                      4,571                                                                            977
    Changes in operating assets and liabilities                                                                 (2,479 )                                                                        1,532                                                  20,231                                                       4,654  
                                                                                                           --------------------------------                                           ------------------------------------                                           --------------------------------                                           ------------------------------------
      Net cash flows from operating activities                                                                  22,429                                                      26,760                                                  59,729                                                      49,262  
                                                                                                           --------------------------------                                           ------------------------------------                                           --------------------------------                                           ------------------------------------
Capital expenditures                                                                                              (140 )                                                                       (1,204 )                                                                     (523 )                                                                       (2,617 )
Repurchases of common stock, net of issuances                                                                   (7,503 )                                                                      (47,137 )                                                                  (19,923 )                                                                      (52,509 )
Dividend payments to shareholders                                                                               (6,044 )                                                               --                                                                    (12,116 )                                                               --
Payments for acquisitions                                                                                      (28,270 )                                                               --                                                                    (28,270 )                                                               --
Payment of long-term debt                                                                                       (3,750 )                                                                       (1,875 )                                                                   (7,500 )                                                                       (5,625 )
Other                                                                                                            4,168                                                       1,074                                                   3,931                                                        (681 )
                                                                                                           --------------------------------                                           ------------------------------------                                           --------------------------------                                           ------------------------------------
Net change in cash, cash equivalents and short-term investments                                                (19,110 )                                                                      (22,382 )                                                                   (4,672 )                                                                      (12,170 )
                                                                                                           --------------------------------                                           ------------------------------------                                           --------------------------------                                           ------------------------------------
Cash, cash equivalents and short-term investments, beginning of                                                264,192                                                     251,491                                                 249,754                                                     241,279  
period
                                                                                                           ----------  --------------------                                           --------------  --------------------                                           ----------  --------------------                                           --------------  --------------------
Cash, cash equivalents and short-term investments, end of period                                           $   245,082                                             $       229,109                                             $   245,082                                             $       229,109  
                                                                                                           === ======= ====================                                           ======= ======= ====================                                           === ======= ====================                                           ======= ======= ====================
                                                                                                                                                                                                                                                                                                                                                                 

RESULTS OF OPERATIONS BY SEGMENT

                                                                                                                                                                                                                                
                                                                                                                                                                      Three Months Ended                                                                                                                                                                                                  Six Months Ended
                                                                                            -----------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(In thousands)                                                                                           May 31,                             May 31,                         %                                                                May 31,                              May 31,                           %
                                                                                                          2017                                                                      2016                                                              Change                                                               2017                                                                       2016                                                                Change
                                                                                            -----------------------------                                             -----------------------------                                             -----------------                                            ------------------------------                                             ------------------------------                                             -------------------
Segment revenue:
  OpenEdge                                                                                  $   65,890                                                                $   66,928                                                                            (2 )%                                            $   130,398                                                                $   131,061                                                                        (1 )%
  Data Connectivity and Integration                                                              7,096                                                                    10,005                                                                           (29 )%                                                 13,924                                                                     16,601                                                                       (16 )%
  Application Development and Deployment                                                        20,227                                                 19,185                                                          5 %                                                  39,861                                                  37,937                                                      5 %
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
    Total revenue                                                                               93,213                                                 96,118                                                         (3 )%                                                184,183                                                 185,599                                                     (1 )%
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
Segment costs of revenue and operating expenses:
  OpenEdge                                                                                      16,287                                                                    17,296                                                                            (6 )%                                                 34,164                                                                     35,360                                                                        (3 )%
  Data Connectivity and Integration                                                              2,069                                                                     3,134                                                                           (34 )%                                                  4,331                                                                      6,035                                                                       (28 )%
  Application Development and Deployment                                                         5,991                                                  9,724                                                        (38 )%                                                 13,527                                                  18,535                                                    (27 )%
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
    Total costs of revenue and operating expenses                                               24,347                                                 30,154                                                        (19 )%                                                 52,022                                                  59,930                                                    (13 )%
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
Segment contribution:
  OpenEdge                                                                                      49,603                                                                    49,632                                                                -- %                                                  96,234                                                                     95,701                                                                         1 %
  Data Connectivity and Integration                                                              5,027                                                                     6,871                                                                           (27 )%                                                  9,593                                                                     10,566                                                                        (9 )%
  Application Development and Deployment                                                        14,236                                                  9,461                                                         50 %                                                  26,334                                                  19,402                                                     36 %
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
    Total contribution                                                                          68,866                                                 65,964                                                          4 %                                                 132,161                                                 125,669                                                      5 %
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
Other unallocated expenses (1)                                                                  48,582                                                 53,620                                                         (9 )%                                                110,655                                                 106,620                                                      4 %
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
Income from operations                                                                          20,284                                                 12,344                                                         64 %                                                  21,506                                                  19,049                                                     13 %
                                                                                            ===============================                                           ===============================                                           ============== ===                                           ================================                                           ================================                                           ========== =========
Other (expense) income, net                                                                     (1,552 )                                                                  (1,361 )                                                                         (14 )%                                                 (2,899 )                                                                   (3,186 )                                                                       9 %
                                                                                            -------------------------------                                           -------------------------------                                           -------------- ---                                           --------------------------------                                           --------------------------------                                           ---------- ---------
Income before provision for income taxes                                                    $   18,732                                             $   10,983                                                         71 %                                             $    18,607                                             $    15,863                                                     17 %
                                                                                            === ====== ====================                                           === ====== ====================                                           ============== ===                                           === ======= ====================                                           === ======= ====================                                           ========== =========
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
(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)                                                                                Q2 2016                                                                   Q3 2016                                                                    Q4 2016                                                                    Q1 2017                                                                   Q2 2017
                                                                                 --------------------------------                                          ---------------------------------                                          ---------------------------------                                          --------------------------------                                          --------------------------------
License                                                                          $   28,787                                                                $    33,624                                                                $    48,497                                                                $   24,322                                                                $                        25,592
Maintenance                                                                          59,485                                                                     60,368                                                                     60,188                                                                    59,138                                                                                         59,898
Services                                                                              7,846                                                   8,026                                                   9,039                                                  7,510                                                                       7,723
                                                                                 -------------------------------                                           --------------------------------                                           --------------------------------                                           -------------------------------                                           --------------------------------
Total revenue                                                                    $   96,118                                             $   102,018                                             $   117,724                                             $   90,970                                             $                        93,213
                                                                                 === ====== ====================                                           === ======= ====================                                           === ======= ====================                                           === ====== ====================                                           ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                            
Revenue by Region
                                                                                                                                                                                                                                                                                                                                                                                            
(In thousands)                                                                                Q2 2016                                                                   Q3 2016                                                                    Q4 2016                                                                    Q1 2017                                                                   Q2 2017
                                                                                 --------------------------------                                          ---------------------------------                                          ---------------------------------                                          --------------------------------                                          --------------------------------
North America                                                                    $   53,392                                                                $    58,275                                                                $    68,471                                                                $   50,305                                                                $                        51,430
EMEA                                                                                 31,577                                                                     32,719                                                                     35,301                                                                    29,844                                                                                         30,646
Latin America                                                                         4,389                                                                      4,667                                                                      8,407                                                                     5,023                                                                                          5,637
Asia Pacific                                                                          6,760                                                   6,357                                                   5,545                                                  5,798                                                                       5,500
                                                                                 -------------------------------                                           --------------------------------                                           --------------------------------                                           -------------------------------                                           --------------------------------
Total revenue                                                                    $   96,118                                             $   102,018                                             $   117,724                                             $   90,970                                             $                        93,213
                                                                                 === ====== ====================                                           === ======= ====================                                           === ======= ====================                                           === ====== ====================                                           ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                            
Revenue by Segment
                                                                                                                                                                                                                                                                                                                                                                                            
(In thousands)                                                                                Q2 2016                                                                   Q3 2016                                                                    Q4 2016                                                                    Q1 2017                                                                   Q2 2017
                                                                                 --------------------------------                                          ---------------------------------                                          ---------------------------------                                          --------------------------------                                          --------------------------------
OpenEdge                                                                         $   66,928                                                                $    67,534                                                                $    77,672                                                                $   64,508                                                                $                        65,890
Data Connectivity and Integration                                                    10,005                                                                     14,251                                                                     17,157                                                                     6,828                                                                                          7,096
Application Development and Deployment                                               19,185                                                  20,233                                                  22,895                                                 19,634                                                                      20,227
                                                                                 -------------------------------                                           --------------------------------                                           --------------------------------                                           -------------------------------                                           --------------------------------
Total revenue                                                                    $   96,118                                             $   102,018                                             $   117,724                                             $   90,970                                             $                        93,213
                                                                                 === ====== ====================                                           === ======= ====================                                           === ======= ====================                                           === ====== ====================                                           ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                       

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

                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                        Three Months Ended                                                                                                                                                           % Change
                                                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)                                                                                                 May 31, 2017                                                                                       May 31, 2016                                                                                          Non-GAAP
                                                                                             -----------------------------------------------------------------------------------------------                                          -----------------------------------------------------------------------------------------------                                          ---------------------
Adjusted revenue:                                                                                                                                                                                                                  
  GAAP revenue                                                                               $   93,213                                                                                                                               $   96,118
  Acquisition-related revenue (1)                                                                   214                                                                                                564                                              
                                                                                             -------------------------------                                           ---------------------                                          -------------------------------                                           ---------------------
    Non-GAAP revenue                                                                         $   93,427                                                        100 %                                               $   96,682                                                        100 %                                                       (3 )%
                                                                                             === ====== ====================                                           ============== =====                                           === ====== ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                
Adjusted gross margin:
  GAAP gross margin                                                                          $   75,846                                                                            81 %                                               $   79,883                                                                            83 %
  Amortization of acquired intangibles                                                            4,683                                                                             6 %                                                    3,939                                                                             4 %
  Stock-based compensation (2)                                                                      294                                                                -- %                                                      180                                                                -- %
  Acquisition-related revenue (1)                                                                   214                                             -- %                                                      564                                             -- %
                                                                                             -------------------------------                                           -------------- -----                                           -------------------------------                                           -------------- -----
    Non-GAAP gross margin                                                                    $   81,037                                                         87 %                                               $   84,566                                                         87 %                                                       (4 )%
                                                                                             === ====== ====================                                           ============== =====                                           === ====== ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                
Adjusted operating expenses:
  GAAP operating expenses                                                                    $   55,562                                                                            60 %                                               $   67,539                                                                            70 %
  Amortization of acquired intangibles                                                           (3,223 )                                                                          (3 )%                                                  (3,185 )                                                                          (3 )%
  Restructuring expenses and other                                                                 (498 )                                                                          (1 )%                                                    (331 )                                                              -- %
  Acquisition-related expenses                                                                      (44 )                                                              -- %                                                     (324 )                                                              -- %
  Stock-based compensation (2)                                                                   (3,339 )                                                                          (4 )%                                                  (6,113 )                                                                          (7 )%
                                                                                             -------------------------------                                           -------------- -----                                           -------------------------------                                           -------------- -----
    Non-GAAP operating expenses                                                              $   48,458                                                         52 %                                               $   57,586                                                         60 %                                                      (16 )%
                                                                                             === ====== ====================                                           ============== =====                                           === ====== ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                
Adjusted income from operations:
  GAAP operating income                                                                      $   20,284                                                                            22 %                                               $   12,344                                                                            13 %
  Amortization of acquired intangibles                                                            7,906                                                                             8 %                                                    7,124                                                                             7 %
  Restructuring expenses and other                                                                  498                                                                             1 %                                                      331                                                                -- %
  Stock-based compensation (2)                                                                    3,633                                                                             4 %                                                    6,293                                                                             7 %
  Acquisition-related                                                                               258                                             -- %                                                      888                                                          1 %
                                                                                             -------------------------------                                           -------------- -----                                           -------------------------------                                           -------------- -----
    Non-GAAP income from operations                                                          $   32,579                                                         35 %                                               $   26,980                                                         28 %                                                       21 %
                                                                                             === ====== ====================                                           ============== =====                                           === ====== ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                
Adjusted diluted earnings per share:
  GAAP diluted earnings per share                                                            $     0.21                                                                                                                               $     0.14
  Amortization of acquired intangibles                                                             0.16                                                                                                                                     0.14
  Restructuring expenses and other                                                                 0.01                                                                                                                                     0.01
  Stock-based compensation (2)                                                                     0.07                                                                                                                                     0.13
  Acquisition-related                                                                              0.01                                                                                                                                     0.02
  Provision for income taxes                                                                      (0.04 )                                                                                                                                  (0.11 )
                                                                                             -------------------------------                                                                                                          -------------------------------
    Non-GAAP diluted earnings per share                                                      $     0.42                                                                                                            $     0.33                                                                                                                    27 %
                                                                                             === ====== ====================                                                                                                          === ====== ====================
                                                                                                                                                                                                                                                                                                                                                                                
Non-GAAP weighted avg shares outstanding - diluted                                               48,490                                                                                                                                   50,354                                                                                                                                       (4 )%
                                                                                                                                                                                                                                                                                                                                                                                
(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                                                                              $      294                                                                                                            $      180  
                                                                                             --- ------ --------------------                                                                                                          --- ------ --------------------
  Sales and marketing                                                                               200                                                                                                                                      962
  Product development                                                                             1,158                                                                                                                                    2,397
  General and administrative                                                                      1,981                                                                                                                 2,754  
                                                                                             -------------------------------                                                                                                          -------------------------------
Operating Expenses                                                                                3,339                                                                                                                 6,113  
                                                                                             -------------------------------                                                                                                          -------------------------------
    Total                                                                                    $    3,633                                                                                                            $    6,293  
                                                                                             === ====== ====================                                                                                                          === ====== ====================
                                                                                                                                                                                                                                                                                                                                                                                

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

                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                            Six Months Ended                                                                                                                                                               % Change
                                                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)                                                                                                  May 31, 2017                                                                                          May 31, 2016                                                                                            Non-GAAP
                                                                                             ------------------------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------------------------                                          ---------------------
Adjusted revenue:                                                                                                                                                                                                                        
  GAAP revenue                                                                               $   184,183                                                                                                                               $       185,599
  Acquisition-related revenue (1)                                                                    446                                                                                                   1,321                                              
                                                                                             --------------------------------                                           ---------------------                                          ------------------------------------                                           ---------------------
    Non-GAAP revenue                                                                         $   184,629                                                        100 %                                               $       186,920                                                        100 %                                                       (1 )%
                                                                                             === ======= ====================                                           ============== =====                                           ======= ======= ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                      
Adjusted gross margin:
  GAAP gross margin                                                                          $   151,058                                                                            82 %                                               $       153,614                                                                            83 %
  Amortization of acquired intangibles                                                             8,361                                                                             5 %                                                         7,878                                                                             4 %
  Stock-based compensation (2)                                                                       551                                                                -- %                                                           376                                                                -- %
  Acquisition-related revenue (1)                                                                    446                                             -- %                                                         1,321                                             -- %
                                                                                             --------------------------------                                           -------------- -----                                           ------------------------------------                                           -------------- -----
    Non-GAAP gross margin                                                                    $   160,416                                                         87 %                                               $       163,189                                                         87 %                                                       (2 )%
                                                                                             === ======= ====================                                           ============== =====                                           ======= ======= ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                      
Adjusted operating expenses:
  GAAP operating expenses                                                                    $   129,552                                                                            70 %                                               $       134,565                                                                            72 %
  Amortization of acquired intangibles                                                            (6,402 )                                                                          (3 )%                                                       (6,370 )                                                                          (4 )%
  Restructuring expenses and other                                                               (17,637 )                                                                         (10 )%                                                         (265 )                                                              -- %
  Acquisition-related expenses                                                                       (93 )                                                              -- %                                                          (396 )                                                              -- %
  Stock-based compensation (2)                                                                    (4,712 )                                                                          (2 )%                                                      (12,855 )                                                                          (7 )%
                                                                                             --------------------------------                                           -------------- -----                                           ------------------------------------                                           -------------- -----
    Non-GAAP operating expenses                                                              $   100,708                                                         55 %                                               $       114,679                                                         61 %                                                      (12 )%
                                                                                             === ======= ====================                                           ============== =====                                           ======= ======= ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                      
Adjusted income from operations:
  GAAP operating income                                                                      $    21,506                                                                            12 %                                               $        19,049                                                                            10 %
  Amortization of acquired intangibles                                                            14,763                                                                             8 %                                                        14,248                                                                             8 %
  Restructuring expenses and other                                                                17,637                                                                             9 %                                                           265                                                                -- %
  Stock-based compensation (2)                                                                     5,263                                                                             3 %                                                        13,231                                                                             7 %
  Acquisition-related                                                                                539                                             -- %                                                         1,717                                                          1 %
                                                                                             --------------------------------                                           -------------- -----                                           ------------------------------------                                           -------------- -----
    Non-GAAP income from operations                                                          $    59,708                                                         32 %                                               $        48,510                                                         26 %                                                       23 %
                                                                                             === ======= ====================                                           ============== =====                                           ======= ======= ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                      
Adjusted diluted earnings per share:
  GAAP diluted earnings per share                                                            $      0.20                                                                                                                               $          0.21
  Amortization of acquired intangibles                                                              0.30                                                                                                                                          0.28
  Restructuring expenses and other                                                                  0.36                                                                                                                                --
  Stock-based compensation (2)                                                                      0.11                                                                                                                                          0.26
  Acquisition-related                                                                               0.01                                                                                                                                          0.03
  Provision for income taxes                                                                       (0.21 )                                                                                                                                       (0.19 )
                                                                                             --------------------------------                                                                                                          ------------------------------------
    Non-GAAP diluted earnings per share                                                      $      0.77                                                                                                            $          0.59                                                                                                                    31 %
                                                                                             === ======= ====================                                                                                                          ======= ======= ====================
                                                                                                                                                                                                                                                                                                                                                                                      
Non-GAAP weighted avg shares outstanding - diluted                                                48,762                                                                                                                                        50,897                                                                                                                                       (4 )%
                                                                                                                                                                                                                                                                                                                                                                                      
(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                                                                              $       551                                                                                                            $           376  
                                                                                             --- ------- --------------------                                                                                                          ------- ------- --------------------
  Sales and marketing                                                                                563                                                                                                                                         2,041
  Product development                                                                              1,054                                                                                                                                         5,077
  General and administrative                                                                       3,095                                                                                                                      5,737  
                                                                                             --------------------------------                                                                                                          ------------------------------------
Operating Expenses                                                                                 4,712                                                                                                                     12,855  
                                                                                             --------------------------------                                                                                                          ------------------------------------
    Total                                                                                    $     5,263                                                                                                            $        13,231  
                                                                                             === ======= ====================                                                                                                          ======= ======= ====================
                                                                                                                                                                                                                                                                                                                                                                                      

OTHER NON-GAAP FINANCIAL MEASURES - QTD

                                                                                                                               
Revenue by Type
                                                                                                                                                                                                                                                   
(In thousands)                                                                                Q2 2017                                                                         Non-GAAP                                                                         Non-GAAP
                                                                                                                                                                           Adjustment (1)                                                                       Revenue
                                                                                 ------------------------------                                             -----------------------------------------                                             --------------------------------
License                                                                          $    25,592                                                                $                   47                                                                $      25,639
Maintenance                                                                           59,898                                                                                   167                                                                       60,065
Services                                                                               7,723                                                     --                                                     7,723  
                                                                                 --------------------------------                                           -------------------------------------------                                           ----------------------------------
Total revenue                                                                    $    93,213                                             $                  214                                             $      93,427  
                                                                                 ==== ====== ====================                                           ======= ============== ====================                                           ====== ====== ====================
                                                                                                                                                                                                                                                   
Revenue by Region
                                                                                                                                                                                                                                                   
(In thousands)                                                                                Q2 2017                                                                         Non-GAAP                                                                         Non-GAAP
                                                                                                                                                                           Adjustment (1)                                                                       Revenue
                                                                                 ------------------------------                                             -----------------------------------------                                             --------------------------------
North America                                                                    $    51,430                                                                $                  214                                                                $      51,644
EMEA                                                                                  30,646                                                                        --                                                                       30,646
Latin America                                                                          5,637                                                                        --                                                                        5,637
Asia Pacific                                                                           5,500                                                     --                                                     5,500  
                                                                                 --------------------------------                                           -------------------------------------------                                           ----------------------------------
Total revenue                                                                    $    93,213                                             $                  214                                             $      93,427  
                                                                                 ==== ====== ====================                                           ======= ============== ====================                                           ====== ====== ====================
                                                                                                                                                                                                                                                   
Revenue by Segment
                                                                                                                                                                                                                                                   
(In thousands)                                                                                Q2 2017                                                                         Non-GAAP                                                                         Non-GAAP
                                                                                                                                                                           Adjustment (1)                                                                       Revenue
                                                                                 ------------------------------                                             -----------------------------------------                                             --------------------------------
OpenEdge                                                                         $    65,890                                                                $       --                                                                $      65,890
Data Connectivity and Integration                                                      7,096                                                                        --                                                                        7,096
Application Development and Deployment                                                20,227                                                                214                                                    20,441  
                                                                                 --------------------------------                                           -------------------------------------------                                           ----------------------------------
Total revenue                                                                    $    93,213                                             $                  214                                             $      93,427  
                                                                                 ==== ====== ====================                                           ======= ============== ====================                                           ====== ====== ====================
                                                                                                                                                                                                                                                   
(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)                                                                                Q2 2017                                                                          Q2 2016                                                                         % Change
                                                                                 ---------------------------------                                          --------------------------------------------                                          -----------------------------------
Cash flows from operations                                                       $    22,429                                                                $               26,760                                                                          (16 )%
Purchases of property and equipment                                                     (140 )                                                                              (1,204 )                                                                        (88 )%
                                                                                 --------------------------------                                           -------------------------------------------                                           ----------------------------------
Free cash flow                                                                        22,289                                                             25,556                                                       (13 )%
                                                                                 --------------------------------                                           -------------------------------------------                                           ----------------------------------
Add back: restructuring payments                                                       5,566                                                                891                                                       525 %
                                                                                 --------------------------------                                           -------------------------------------------                                           ----------------------------------
Adjusted free cash flow                                                          $    27,855                                             $               26,447                                                         5 %
                                                                                 ==== ====== ====================                                           ======= ============== ====================                                           ==================================
                                                                                                                                                                                                                                                                 

OTHER NON-GAAP FINANCIAL MEASURES - YTD

                                                                                                                                
Revenue by Type
                                                                                                                                                                                                                                                    
(In thousands)                                                                                YTD 2017                                                                         Non-GAAP                                                                          Non-GAAP
                                                                                                                                                                            Adjustment (1)                                                                        Revenue
                                                                                 -------------------------------                                             -----------------------------------------                                             ---------------------------------
License                                                                          $     49,914                                                                $                   99                                                                $       50,013
Maintenance                                                                           119,036                                                                                   347                                                                       119,383
Services                                                                               15,233                                                     --                                                     15,233  
                                                                                 ---------------------------------                                           -------------------------------------------                                           -----------------------------------
Total revenue                                                                    $    184,183                                             $                  446                                             $      184,629  
                                                                                 ==== ======= ====================                                           ======= ============== ====================                                           ====== ======= ====================
                                                                                                                                                                                                                                                    
Revenue by Region
                                                                                                                                                                                                                                                    
(In thousands)                                                                                YTD 2017                                                                         Non-GAAP                                                                          Non-GAAP
                                                                                                                                                                            Adjustment (1)                                                                        Revenue
                                                                                 -------------------------------                                             -----------------------------------------                                             ---------------------------------
North America                                                                    $    101,735                                                                $                  446                                                                $      102,181
EMEA                                                                                   60,490                                                                        --                                                                        60,490
Latin America                                                                          10,660                                                                        --                                                                        10,660
Asia Pacific                                                                           11,298                                                     --                                                     11,298  
                                                                                 ---------------------------------                                           -------------------------------------------                                           -----------------------------------
Total revenue                                                                    $    184,183                                             $                  446                                             $      184,629  
                                                                                 ==== ======= ====================                                           ======= ============== ====================                                           ====== ======= ====================
                                                                                                                                                                                                                                                    
Revenue by Segment
                                                                                                                                                                                                                                                    
(In thousands)                                                                                YTD 2017                                                                         Non-GAAP                                                                          Non-GAAP
                                                                                                                                                                            Adjustment (1)                                                                        Revenue
                                                                                 -------------------------------                                             -----------------------------------------                                             ---------------------------------
OpenEdge                                                                         $    130,398                                                                $       --                                                                $      130,398
Data Connectivity and Integration                                                      13,924                                                                        --                                                                        13,924
Application Development and Deployment                                                 39,861                                                                446                                                     40,307  
                                                                                 ---------------------------------                                           -------------------------------------------                                           -----------------------------------
Total revenue                                                                    $    184,183                                             $                  446                                             $      184,629  
                                                                                 ==== ======= ====================                                           ======= ============== ====================                                           ====== ======= ====================
                                                                                                                                                                                                                                                    
(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 2017                                                                        YTD Q2 2016                                                                        % Change
                                                                                 ----------------------------------                                          --------------------------------------------                                          ------------------------------------
Cash flows from operations                                                       $     59,729                                                                $               49,262                                                                            21 %
Purchases of property and equipment                                                      (523 )                                                                              (2,617 )                                                                         (80 )%
                                                                                 ---------------------------------                                           -------------------------------------------                                           -----------------------------------
Free cash flow                                                                         59,206                                                             46,645                                                         27 %
                                                                                 ---------------------------------                                           -------------------------------------------                                           -----------------------------------
Add back: restructuring payments                                                       11,630                                                              2,483                                                        368 %
                                                                                 ---------------------------------                                           -------------------------------------------                                           -----------------------------------
Adjusted free cash flow                                                          $     70,836                                             $               49,128                                                         44 %
                                                                                 ==== ======= ====================                                           ======= ============== ====================                                           ===================================
                                                                                                                                                                                                                                                                   

Non-GAAP Bookings from Application Development and Deployment Segment

                                                                                                                                                                                                                                                           
(In thousands)                                                                         Q1 2016                                                                   Q2 2016                                                                   Q3 2016                                                                   Q4 2016                                                                   FY 2016                                                                   Q1 2017                                                               Q2 2017
                                                                          --------------------------------                                          --------------------------------                                          --------------------------------                                          --------------------------------                                          --------------------------------                                          --------------------------------                                          -------------------------
GAAP revenue                                                              $   18,752                                             $   19,185                                             $   20,233                                             $   22,895                                             $   81,065                                             $   19,634                                             $                 20,226
                                                                          --- ------ --------------------                                           --- ------ --------------------                                           --- ------ --------------------                                           --- ------ --------------------                                           --- ------ --------------------                                           --- ------ --------------------                                           --- --------------------
Add: change in deferred revenue
  Beginning balance                                                           49,252                                                                    49,237                                                                    51,693                                                                    51,736                                                                    49,252                                                                    52,971                                                                                  51,298
  Ending balance                                                              49,237                                                 51,693                                                 51,736                                                 52,971                                                 52,971                                                 51,298                                                               52,400
                                                                          -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------
Change in deferred revenue                                                       (15 )                                                                   2,456                                                     43                                                  1,235                                                  3,719                                                 (1,673 )                                                                                 1,102
                                                                          -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------------                                           -------------------------
    Non-GAAP bookings                                                     $   18,737                                             $   21,641                                             $   20,276                                             $   24,130                                             $   84,784                                             $   17,961                                             $                 21,328
                                                                          === ====== ====================                                           === ====== ====================                                           === ====== ====================                                           === ====== ====================                                           === ====== ====================                                           === ====== ====================                                           === ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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

                                                                                                                                                                                                                                                    
(In thousands)                                                                               Q1 2016                                                                 Q2 2016                                                                 Q3 2016                                                                 Q4 2016                                                                 FY 2016                                                                Q1 2017                                                             Q2 2017
                                                                                 ------------------------------                                          ------------------------------                                          ------------------------------                                          ------------------------------                                          ------------------------------                                          ----------------------------                                          -------------------------
SaaS Revenue - Application Development                                           $  1,071                                             $  1,079                                             $  1,160                                             $  1,163                                             $  4,473                                             $  963                                             $                    854
and Deployment
                                                                                 -- ----- --------------------                                           -- ----- --------------------                                           -- ----- --------------------                                           -- ----- --------------------                                           -- ----- --------------------                                           -- --- --------------------                                           --- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2017 GUIDANCE (Unaudited)

 
Fiscal Year 2017 Revenue Growth Guidance
                                                          Fiscal Year Ended                                                                                                               Fiscal Year Ending
                                                                                        ---------------------------------                                          -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                November 30, 2016                                                                                                                                                      November 30, 2017
                                                                                        ---------------------------------                                          -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(In millions)                                                                                                                                                                    Low                  % Change                  High                       % Change
GAAP revenue                                                                            $     405.3                                                                $  390.0                                                                  (4 )%                                             $  395.0                                                                        (3 )%
Acquisition-related adjustments - revenue (1)                                                   2.1                                                  1.0                                              (52 )%                                                  1.0                                                    (52 )%
                                                                                        --------------------------------                                           -----------------------------                                           ---- ----                                           -----------------------------                                           ---------- ---------
Non-GAAP revenue                                                                        $     407.4                                             $  391.0                                               (4 )%                                             $  396.0                                                     (3 )%
                                                                                        ===== ===== ====================                                           == ===== ====================                                           ==== ====                                           == ===== ====================                                           ========== =========
                                                                                                                                                                                                                                                                                                                                                                        
(1) Acquisition-related revenue constitutes revenue reflected as
pre-acquisition deferred revenue that would otherwise have been
recognized but for the purchase accounting treatment of
acquisitions. Since GAAP accounting requires the elimination of this
revenue, GAAP results alone do not fully capture all of our economic
activities.
 
Fiscal Year 2017 Non-GAAP Operating Margin Guidance
                                                                         Fiscal Year Ending November 30, 2017
                                                                            ----------------------------------------------------------------------------------------------------------
  (In millions)                                                                            Low                                High
                                                                            --------------------------------                                          --------------------------------
GAAP income from operations                                                 $     61.9                                                                $     68.4
GAAP operating margins                                                              16 %                                                                      17 %
  Acquisition-related revenue                                                      1.0                                                                       1.0
  Acquisition-related expense                                                      0.1                                                                       0.1
  Stock-based compensation                                                        15.0                                                                      15.0
  Restructuring expense and other                                                 20.0                                                                      18.0
  Amortization of intangibles                                                     32.9                                                   32.9  
                                                                            -------------------------------                                           -------------------------------
    Total adjustments                                                             69.0                                                   67.0  
                                                                            -------------------------------                                           -------------------------------
Non-GAAP income from operations                                             $    130.9                                             $    135.4  
                                                                            ==== ===== ====================                                           ==== ===== ====================
Non-GAAP operating margin                                                           33 %                                                                      34 %
                                                                                                                                                                  
Fiscal Year 2017 Non-GAAP Earnings per Share and Effective Tax
Rate Guidance
                                                                                                         Fiscal Year Ending November 30, 2017
                                                                                                         ----------------------------------------------------------------------------------------------------------------
(In millions, except per share data)                                                                                     Low                                   High
                                                                                                         -----------------------------------                                          -----------------------------------
GAAP net income                                                                                          $        32.1                                                                $        35.8
  Adjustments (from previous table)                                                                               69.0                                                                         67.0
  Income tax adjustment (2)                                                                                      (17.1 )                                                                      (15.8 )
                                                                                                         ----------------------------------                                           ----------------------------------
Non-GAAP net income                                                                                      $        84.0                                             $        87.0  
                                                                                                         ====== ====== ====================                                           ====== ====== ====================
                                                                                                                                                                                       
GAAP diluted earnings per share                                                                          $        0.66                                                                $        0.73
Non-GAAP diluted earnings per share                                                                      $        1.73                                                                $        1.78
                                                                                                                                                                                       
Diluted weighted average shares outstanding                                                                       48.6                                                                         48.8
                                                                                                                                                                                       
(2) Tax adjustment is based on a non-GAAP effective tax rate of 33%
for Low and High, calculated as follows:
Non-GAAP income from operations                                                                          $       130.9                                                                $       135.4
  Other (expense) income, net                                                                                     (5.6 )                                                                       (5.6 )
                                                                                                         ----------------------------------                                           ----------------------------------
Non-GAAP income from continuing operations before income taxes                                                   125.3                                                     129.8  
                                                                                                         ----------------------------------                                           ----------------------------------
  Non-GAAP net income                                                                                             84.0                                                      87.0  
                                                                                                         ----------------------------------                                           ----------------------------------
Tax provision                                                                                            $        41.3                                             $        42.8  
                                                                                                         ====== ====== ====================                                           ====== ====== ====================
Non-GAAP tax rate                                                                                                   33 %                                                                         33 %
                                                                                                                                                                                                     

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2017 GUIDANCE (Unaudited)

Q3 2017 Revenue Growth Guidance
                                                          Three Months Ended                                                                                                                    Three Months Ending
                                                                                        -----------------------------------                                          ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  August 31, 2016                                                                                                                                                             August 31, 2017
                                                                                        -----------------------------------                                          ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(In millions)                                                                                                                                                                     Low                       % Change                      High                       % Change
GAAP revenue                                                                            $       102.0                                                                $  92.6                                                                            (9 )%                                             $  95.6                                                                            (6 )%
Acquisition-related adjustments - revenue (1)                                                     0.4                                                 0.4                                             -- %                                                  0.4                                             -- %
                                                                                        ----------------------------------                                           ----------------------------                                           -------------- ----                                           ----------------------------                                           -------------- -----
Non-GAAP revenue                                                                        $       102.4                                             $  93.0                                                         (9 )%                                             $  96.0                                                         (6 )%
                                                                                        ====== ====== ====================                                           == ==== ====================                                           ============== ====                                           == ==== ====================                                           ============== =====
                                                                                                                                                                                                                                                                                                                                                                                  
(1) Acquisition-related revenue constitutes revenue reflected as
pre-acquisition deferred revenue that would otherwise have been
recognized but for the purchase accounting treatment of
acquisitions. Since GAAP accounting requires the elimination of this
revenue, GAAP results alone do not fully capture all of our economic
activities.
 
Q3 2017 Non-GAAP Earnings per Share Guidance
                                                                            Three Months Ending August 31, 2017
                                                                              ----------------------------------------------------------------------------------------------------------
                                                                                             Low                                High
                                                                              --------------------------------                                          --------------------------------
GAAP diluted earnings per share                                               $     0.17                                             $     0.19  
                                                                              ---- ----- --------------------                                           ---- ----- --------------------
  Acquisition-related revenue                                                       0.01                                                                      0.01
  Stock-based compensation                                                          0.10                                                                      0.10
  Amortization of intangibles                                                       0.19                                                   0.19  
                                                                              -------------------------------                                           -------------------------------
    Total adjustments                                                               0.30                                                   0.30  
                                                                              -------------------------------                                           -------------------------------
  Income tax adjustment                                                       $    (0.06 )                                                              $    (0.06 )
                                                                              ---- ----- --------------------                                           ---- ----- --------------------
Non-GAAP diluted earnings per share                                           $     0.41                                             $     0.43  
                                                                              ==== ===== ====================                                           ==== ===== ====================

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