Praesidium Investment Management Company, LLC (“Praesidium” or “We”), one of the largest shareholders of Progress Software Corporation (“Progress” or “the Company”) (NASDAQ:PRGS), owning approximately 8.9% of the outstanding shares of the Company, today called on fellow shareholders, the true owners of the business, to hold Progress management accountable in light of the Progress board of directors’ (the “Board”) apparent failure to do so.

Praesidium has learned that members of management including Progress’s CEO Yogesh Gupta, will meet with institutional investors beginning November 1, 2017. As one of Progress’s largest shareholders, Praesidium has raised several critical issues including the Company’s capital allocation decision-making that has resulted in 18 out of 18 failed acquisitions and a massively bloated R&D and SG&A cost structure. As Praesidium showed, this wasteful spending has already cost shareholders over $870 million. Further, the Board has clearly failed to learn from its mistakes. Only one quarter after writing down the largest acquisition in the Company’s history, the Board authorized two of the most wildly speculative acquisitions the Company has ever made. These two ‘venture capital’ deals (DataRPM and Kinvey) represented 70% of the net cash on Progress’s balance sheet and are not expected to generate any material revenue or cash flow in either the near or intermediate future.

Shareholders are invited to review Praesidium’sletter and presentation delivered to the Board on September 15, 2017 which outlined a plan that it believes will unlock significant shareholder value to Progress owners through freeing up what Praesidium believes to be over $100 million in excess sales & marketing and R&D expenditures. Praesidium, and its advisors, believe right-sizing the current operations alone would drive operating margins to over 55% and annual free cash flow to $175 million. Praesidium believes that a shift away from the value destructive capital allocation strategy of the Board to the proven strategy Praesidium is offering, could drive Progress shares to a value of over $80 per share.

Praesidium remains singularly focused on driving shareholder value. Despite being a large Progress shareholder for seven years, management and the Board continue to evade critical questions raised by Praesidium as well as those of other shareholders. Praesidium encourages its fellow owners of Progress to press management for clear answers to the questions below. Praesidium met with the management of Progress on Oct. 6th. Astonishingly, Progress management either refused or could not answer any of these questions. Praesidium believes shareholders will agree that these are questions that any management team of a public company should be able to answer. Management and the Board are by no means precluded from publicly answering these questions today – for the benefit of all Progress shareholders.

Acquisitions of DataRPM and Kinvey

1. When will Progress generate meaningful revenue from either or both of these acquisitions?

2. What is the cash on cash ROI expectation for the acquisitions of both DataRPM and Kinvey, and over what time horizon can shareholders expect a return?

3. Mr. Gupta mentioned on the Company’s last earnings conference call that the “…total expense associated with our new businesses in FY ’17 is less than $10 million”. However, since Kinvey will be owned for only half a year in F17 and DataRPM for only three quarters, what are the annual operating losses of these new businesses?

Bloated Cost Structure

4. Progress has indicated that it is cutting $50 million in costs, but those efforts will only result in a net $20 million reduction due to (a) “fully funding our variable compensation plans” and (b) investments in the cognitive applications growth strategy. How much of the spending will be directed towards variable compensation vs. funding further operating losses and investments at DataRPM and Kinvey?

5. How did Progress arrive at a target operating margin of 35% and on what basis would this be considered “best in class” as characterized by Progress?

6. Did Progress benchmark against any other companies to arrive at the conclusion that 35% would be considered best in class margins? If so, please provide examples of such companies.

7. Note 16 of Progress’s most recent annual filing on form 10-K breaks out the operating profits by segment, allocating all direct selling costs to the individual segments, and then all other costs to “Other unallocated expenses.” Subtracting spending on Product Development, General & Administrative, stock-based compensation, and amortization from the “Other unallocated expenses,” the Company appears to be spending approximately $40 million per year on “corporate marketing.” What is this $40 million of corporate marketing being spent on?

Share Buyback

8. In FY17, Progress has averaged under $15M in share repurchases per quarter at average prices of around $29.50. Over the next five quarters, Progress will average TWICE that amount with ~$30M in share repurchases per quarter ($150M over five quarters). How can Progress justify doubling the size of its repurchases after an ~40% increase in the share price?

9. Was there any discussion in the boardroom around using buybacks as a defensive measure in response to shareholder pressure?

Shareholders deserve answers. The upcoming investor meetings with Progress management represent a critical opportunity for shareholders to press management on these key questions and issues. It is time for accountability at Progress.

About Praesidium:

Praesidium Investment Management Company, LLC is a value-oriented investment management firm based in New York City. The firm was founded in 2003 and manages capital on behalf of some of the world’s most respected university endowments, foundations and wealthy family offices who share a long-term orientation to investing in public equity markets.