Progress Software has continued its strong series of financial results, reporting 17% growth in revenues for the fourth quarter ended 30 November 2004. Revenue for the quarter was a record $96.2 million, up 17% from $82 million in the fourth quarter of fiscal 2003. Software licence revenue increased 23% to $36.8 million, from $29.9 million in the same quarter the previous year.
On a generally accepted accounting principles (GAAP) basis, operating income increased 29% to $15.9 million from $12.3 million in the fourth quarter of fiscal 2003. Diluted earnings per share increased 22% to 28c from 23c in the fourth quarter of fiscal 2003.
For the 12 months ended 30 November 2004, revenue increased 17% to $363 million from $309 million in fiscal 2003. On a GAAP basis, operating income increased 26% to $46.4 million from $36.8 million in fiscal 2003. Net income increased 19% to $32.1 million from $27.1 million in fiscal 2003, and diluted earnings per share increased 14% to 82c from 72c in fiscal 2003.
The company`s cash and short-term investments at the end of the quarter totalled $191 million.
"During fiscal 2004, Progress`s initiatives to broaden its markets and accelerate growth began to pay off in substantial revenues," says Rick Parry, MD of Progress Software South Africa. "Newer companies in the group, such as DataDirect, ObjectStore and Sonic Software, now account for 30% of software licence revenue. Total revenue from these newer companies should continue to grow at double-digit rates in 2005. At the same time, revenue from the OpenEdge product line continues to grow."
During the fourth quarter, Progress acquired Persistence Software, the technology and market leader in distributed data access and caching software, in an all-cash transaction for $16 million in the aggregate.
A number of new and existing customers bought Sonic ESB (enterprise service bus) and related suite products as the basis of their enterprise service oriented architecture (SOA). For instance, BAA, the operating authority for seven UK airports, chose Sonic ESB as its service-oriented infrastructure. Sonic also closed significant deals with SAIC, Pacific Capital Bancorp, Lexicon Marketing, Bendit GmbH and Northrop Grumman.
"Locally, Progress continues to perform ahead of the rest of the software and IT market," says Parry. "We have focused intensely for our growth on three key areas: growing our base of partners and stimulating the level of activity, including cross-selling, in this base; boosting the volume of software as a service, relative to our traditional once-off licence-based revenues; and building sales volumes in new areas of the market, such as Sonic, DataDirect and ObjectStore. Through this approach, we expect to continue to keep Progress growing steadily in SA and maintain its position as among the leading Progress performers worldwide."
Parry expects software as a service to be a particularly powerful driver of business for Progress. "Progress has led the market in its articulation of software as a service, also known as risk-based billing. In terms of this, clients pay nothing up-front for their software, and we and our partners assume the costs and risk. Only once a working solution has been delivered do we and our partners begin charging. This approach has gained particular favour in SA, which now represents 30% of all software-as-a-service revenue for Progress worldwide.
"As this new paradigm becomes a de facto standard, I expect it to be the major contributor to our business locally, so much so that in the next few years it will double our revenues, and add significantly to the business of our partners."
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