As the broader markets treaded water yesterday, one company stood out from the pack. Infrastructure software maker Progress Software
- Revenue for the quarter rose a healthy 9%. However, 4% of that came from favorable currency exchange rates -- no great news there.
- Profits came in light at $0.19 per share. Even if you add back in the $0.04-per-share charge for discontinuing work on an "ERP system" that didn't quite jibe with its OpenEdge-based financial system, the resulting $0.23 per share would have lagged the firm's projections for the quarter. Again, no reason for shares to rise.
Now we get to the good news:
- Progress announced a slew of new clients and expanded relationships for its products. It offered detailed descriptions of projects involving QAD
(NASDAQ:QADI)and Dow Jones (NYSE:DJ), as well as a laundry list of named firms running from Allied World Assurance (NYSE:AWH)to Hastings Entertainment (NASDAQ:HAST)to Spectra Energy (NYSE:SE).
- With all the new business coming in, management guided investors to expect $475 million to $485 million in sales this year. That's a $5 million bump up from what it predicted in last quarter's earnings report, which in turn also increased previous guidance. So business is getting better and better. (Unfortunately, it also appears to be getting less profitable. At the same time it guided up on sales, Progress guided profits down by about 1% to 4%, to a max of $1.09 per share this year.)
But to this Fool's eye, the most interesting part of the entire press release has to be the short paragraph in the middle describing the cash position. I'm particularly intrigued by the way this quarter's stock buybacks affected the cash stash.
For those keeping track, Progress's board has authorized the repurchase of 9.3 million shares of stock. How much of that authorization did management act on this quarter? 10,000 shares. That's right -- with a good $271 million in the kitty, Progress made only a token $300,000 purchase of its stock.
Despite improving its year-to-date free cash flow generation roughly 27% compared to last year, Progress's management apparently doesn't think its stock is particularly attractive at current levels. While I personally think that 27% free cash flow growth is good enough to justify the stock price, management's inaction suggests that it might not expect to maintain such torrid expansion.
Tread carefully if buying into this price spike, Fools. It may not last.
What kind of Progress did we expect last quarter, and what did we get? Find out in:
Fool contributor Rich Smith has no interest, short or long, in any company named above.