[Part I: Financial Information](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements for May 31, 2025, show total assets decreased, liabilities increased, and revenue grew to **$475.4 million** while net income declined to **$28.0 million** [Note 4: Business Combinations](index=14&type=section&id=Note%204%3A%20Business%20Combinations) The company acquired ShareFile for **$875.0 million** on October 31, 2024, contributing **$129.6 million** to revenue for the six months ended May 31, 2025 - Completed the acquisition of ShareFile on October 31, 2024, for an aggregate purchase price of **$875.0 million** in cash[35](index=35&type=chunk) - The acquisition contributed **$65.9 million** and **$129.6 million** in revenue for the three and six months ended May 31, 2025, respectively[41](index=41&type=chunk) Preliminary Purchase Price Allocation for ShareFile (in thousands) | Asset/Liability | Adjusted Purchase Price Allocation | | :--- | :--- | | Purchased technology | $119,000 | | Customer relationships | $318,000 | | Goodwill | $461,091 | | **Net assets acquired** | **$853,897** | [Note 12: Cyber Related Matters](index=20&type=section&id=Note%2012%3A%20Cyber%20Related%20Matters) The company incurred **$1.5 million** in net costs for the MOVEit Vulnerability, facing ongoing lawsuits and inquiries, with no loss contingency recorded due to estimation difficulties - The company is party to class action lawsuits and governmental inquiries resulting from the May 2023 MOVEit Vulnerability[63](index=63&type=chunk) MOVEit Vulnerability Costs, Net (in thousands) | Period | Net Costs Incurred | | :--- | :--- | | Three Months Ended May 31, 2025 | $700 | | Six Months Ended May 31, 2025 | $1,500 | - As of May 31, 2025, approximately **$5.4 million** of cybersecurity insurance coverage remains available under the applicable policy[66](index=66&type=chunk) - A loss contingency liability has not been recorded as a range of possible losses cannot be reasonably estimated at this time[65](index=65&type=chunk) Condensed Consolidated Balance Sheet Summary (in thousands) | Account | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | **Total current assets** | $325,651 | $368,813 | | **Total assets** | $2,413,592 | $2,526,966 | | **Total current liabilities** | $750,271 | $455,145 | | **Total liabilities** | $1,960,891 | $2,088,178 | | **Total stockholders' equity** | $452,701 | $438,788 | Condensed Consolidated Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | $237,355 | $175,077 | $475,370 | $359,762 | | **Income from operations** | $38,616 | $27,148 | $71,042 | $62,154 | | **Net income** | $17,029 | $16,188 | $27,975 | $38,827 | | **Diluted EPS** | $0.39 | $0.37 | $0.63 | $0.87 | Condensed Consolidated Statement of Cash Flows Summary (in thousands) | Cash Flow Activity | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | $98,943 | $134,185 | | Net cash flows used in investing activities | $(2,980) | $(1,264) | | Net cash flows used in financing activities | $(118,103) | $(67,798) | | **Net (decrease) increase in cash** | **$(16,071)** | **$63,462** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue growth, driven by the ShareFile acquisition, was offset by increased operating and interest expenses, while Annualized Recurring Revenue (ARR) grew **46%** to **$838 million**, and liquidity was impacted by debt repayment and share repurchases [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q2 2025 total revenue increased **36%** to **$237.4 million** due to the ShareFile acquisition, driving SaaS revenue up **1,104%**, despite increased operating expenses and interest costs Total Revenue Growth (in thousands) | Period | May 31, 2025 | May 31, 2024 | % Change (As Reported) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | **Three Months Ended** | $237,355 | $175,077 | 36% | 35% | | **Six Months Ended** | $475,370 | $359,762 | 32% | 32% | - The increase in total revenue was primarily due to the acquisition of ShareFile, which contributed **$65.9 million** and **$129.6 million** in the second quarter and first six months of fiscal 2025, respectively[74](index=74&type=chunk) Revenue by Type - Q2 2025 vs Q2 2024 (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Software licenses | $50,795 | $53,979 | (6)% | | Maintenance | $103,491 | $102,503 | 1% | | SaaS | $72,105 | $5,988 | 1,104% | | Professional services | $10,964 | $12,607 | (13)% | - Interest expense increased **159%** for the quarter and **155%** for the six-month period, primarily due to costs associated with drawing on the revolving line of credit to acquire ShareFile[93](index=93&type=chunk) [Select Performance Metrics](index=29&type=section&id=Select%20Performance%20Metrics) Key performance metrics include Annualized Recurring Revenue (ARR) of **$838 million**, a **46%** year-over-year increase, and a stable Net Retention Rate between **100%** and **102%** - Annualized Recurring Revenue (ARR) was **$838 million** as of May 31, 2025, an increase of **46%** year-over-year, primarily driven by the acquisition of ShareFile[103](index=103&type=chunk) - The Net Retention Rate, a measure of revenue from existing customers, has generally ranged between **100%** and **102%** for all periods presented[105](index=105&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by **$16.1 million** to **$102.0 million** due to **$70.0 million** in debt repayments and **$50.1 million** in share repurchases, leading to a dividend suspension - Cash and cash equivalents decreased by **$16.1 million** from November 30, 2024, to **$102.0 million** at May 31, 2025[106](index=106&type=chunk) - Key uses of cash in the first six months of 2025 included **$70.0 million** to pay down the revolving line of credit and **$50.1 million** for share repurchases[106](index=106&type=chunk)[112](index=112&type=chunk) - The Board of Directors approved the suspension of the quarterly dividend to redirect capital toward debt repayment, M&A, and share repurchases[114](index=114&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant changes occurred in market risk disclosures during the first six months of fiscal 2025, apart from revolving credit facility repayments - There were no significant changes to the company's market risk disclosures, aside from repayments on the revolving credit facility[122](index=122&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management deemed disclosure controls effective as of May 31, 2025, excluding the ShareFile business, which comprised approximately **27%** of consolidated revenues - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of May 31, 2025[124](index=124&type=chunk) - The assessment of controls excluded the ShareFile business, acquired on October 31, 2024. ShareFile represented about **27%** of total consolidated revenues for the six months ended May 31, 2025[124](index=124&type=chunk) [Part II: Other Information](index=33&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is addressing legal matters from the MOVEit Vulnerability, including class action lawsuits and governmental inquiries, with outcomes and potential losses currently unpredictable - The company is subject to class action lawsuits and governmental inquiries related to the MOVEit Vulnerability, which are in the early stages of litigation[119](index=119&type=chunk)[126](index=126&type=chunk) - Management does not believe the outcome of other ordinary course legal matters will have a material effect on the company's financial position[127](index=127&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Investors are directed to the comprehensive discussion of risk factors in the company's 2024 Annual Report on Form 10-K - For a complete discussion of risks, the report refers to Part I, Item 1A. Risk Factors in the 2024 Annual Report[128](index=128&type=chunk) [Use of Proceeds and Stock Repurchases](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, the company repurchased **351,216 shares** for approximately **$20.0 million**, with **$57.2 million** remaining for future repurchases Stock Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (in thousands) | | :--- | :--- | :--- | :--- | | March 2025 | — | $— | $— | | April 2025 | 351,216 | $56.93 | $20,000 (approx) | | May 2025 | — | $— | $— | | **Total** | **351,216** | **$56.93** | **$20,000 (approx)** | - As of May 31, 2025, **$57.2 million** remained available under the current share repurchase authorization[129](index=129&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) Several executive officers, including the CEO and CFO, adopted Rule 10b5-1 trading arrangements during Q2 2025 for future stock sales - The CEO, CFO, and Chief Accounting Officer each adopted a Rule 10b5-1 trading arrangement during the quarter[130](index=130&type=chunk)

Financial Performance - Annualized Recurring Revenue (ARR) reached $838 million, growing 46% year-over-year[2] - Revenue for the second quarter was $237 million, an increase of 36% year-over-year[3] - Operating margin was 16%, with a non-GAAP operating margin of 40%[7] - Diluted earnings per share increased to $0.39, up 5% from $0.37 in the same quarter last year[7] - Net income for the three months ended May 31, 2025, was $17,029 thousand, a 5.2% increase compared to $16,188 thousand for the same period in 2024[19] - Non-GAAP income from operations for the three months ended May 31, 2025, was $95,461 thousand, up 42% from $67,086 thousand in the same period last year[21] - GAAP diluted earnings per share for the fiscal year ending November 30, 2025, is projected to be between $1.27 and $1.43[25] - Non-GAAP diluted earnings per share for the fiscal year ending November 30, 2025, is expected to range from $5.28 to $5.40[25] - For Q3 2025, GAAP diluted earnings per share is projected to be between $0.29 and $0.35, with non-GAAP diluted earnings per share expected to range from $1.28 to $1.34[28] Cash Flow and Guidance - Cash from operations decreased by 53% to $29.996 million compared to $63.681 million in the same quarter last year[3] - Adjusted free cash flow for the three months ended May 31, 2025, was $37,068 thousand, a decrease of 42% compared to $64,073 thousand for the same period in 2024[22] - Fiscal Year 2025 adjusted free cash flow guidance ranges from $228 million to $240 million, while unlevered free cash flow guidance is between $285 million and $296 million[27] Debt and Liabilities - The company made significant progress in paying down its revolving credit facility, reducing debt by $40 million this quarter[6] - Total current liabilities increased from $455,145 thousand as of November 30, 2024, to $750,271 thousand as of May 31, 2025, marking a rise of approximately 64.7%[18] - The company’s cash and cash equivalents decreased from $118,077 thousand at the end of November 2024 to $102,006 thousand by May 31, 2025, reflecting a decline of about 13.6%[19] Acquisitions and Investments - Progress Software acquired Nuclia, an innovator in agentic Retrieval-Augmented Generation (RAG) AI solutions[9] - The company reported a significant increase in stock-based compensation, which rose to $16,741 thousand for the three months ended May 31, 2025, compared to $11,989 thousand in the same period last year[21] Tax and Projections - The effective tax rate for FY 2025 is projected to be 17%[12] - Non-GAAP operating margin for fiscal year 2025 is projected to be between 38% and 39%[24] Performance Metrics - Annualized Recurring Revenue (ARR) is a key performance metric, reflecting the substantial majority of the company's revenues from recurring sources[32] - Net Retention Rate (NRR) is calculated based on ARR from the same customer cohort over the past 12 months, excluding new customers[36] - The company emphasizes the importance of non-GAAP financial measures for evaluating operating performance and establishing budgets[29] - Adjusted free cash flow (AFCF) is defined as cash flows from operating activities less purchases of property and equipment, plus restructuring payments[32] - The company uses constant currency measures to present revenue growth rates, aiding in understanding performance across periods[31] Risks and Challenges - Forward-looking statements indicate potential risks including economic conditions, cybersecurity threats, and challenges in achieving financial forecasts[37] - The company expects to continue incurring expenses related to the MOVEit Vulnerability, impacting future operating expenses[30] Other Financial Changes - Days sales outstanding increased to 53 days, compared to 41 days in the same quarter last year[8] - Total assets decreased from $2,526,966 thousand as of November 30, 2024, to $2,413,592 thousand as of May 31, 2025, representing a decline of approximately 4.5%[18]

Core Insights - Progress Software reported an Annualized Recurring Revenue (ARR) of $838 million, reflecting a 46% year-over-year growth [1][3] - The company's revenue for the second quarter reached $237 million, marking a 36% increase year-over-year [1][5] - Full-year guidance for revenue, operating margin, earnings per share, and cash flow has been raised, indicating strong confidence in business performance [1][9] Financial Performance - The operating income for the second quarter was $38.6 million, a 42% increase from $27.1 million in the same quarter last year [4][5] - The operating margin remained stable at 16%, while the non-GAAP operating margin improved to 40%, up from 38% [4][5] - Net income for the quarter was $17.0 million, a 5% increase compared to $16.2 million in the prior year [4][5] Earnings Per Share - Diluted earnings per share (EPS) for the second quarter was $0.39, up 5% from $0.37 in the same quarter last year [4][5] - Non-GAAP diluted EPS increased by 28% to $1.40 from $1.09 year-over-year [4][5] Cash Flow and Liquidity - Cash from operations was reported at $30.0 million, a decrease of 53% compared to $63.7 million in the same quarter last year [4][5] - The company ended the quarter with cash and cash equivalents of $102.0 million [6] Acquisition Activity - Progress Software announced the acquisition of Nuclia, a company specializing in Retrieval-Augmented Generation (RAG) AI solutions, which is expected to enhance the Progress Data Platform [7][8] Business Outlook - Updated guidance for fiscal year 2025 includes revenue expectations of $962 million to $974 million and diluted EPS of $1.27 to $1.43 [9][27] - The company anticipates an operating margin of 15% for GAAP and 38% for non-GAAP for the fiscal year [9][27]

Core Insights - Progress Software has acquired Nuclia, a company specializing in agentic Retrieval-Augmented Generation (RAG) AI solutions, to enhance its offerings in AI-powered digital experiences and infrastructure [1][2][3] - The acquisition allows organizations to utilize their proprietary business information to retrieve accurate and verifiable answers through a self-service SaaS product, democratizing access to advanced AI capabilities [2][5] - The deal is expected to extend the value of the Progress Data Platform and broaden market reach for agentic RAG technology [2][3] Company Overview - Progress Software (Nasdaq: PRGS) focuses on empowering organizations to achieve success through AI-powered applications and digital experiences, serving over 4 million developers and technologists [4] - Nuclia aims to revolutionize data-driven systems by converting internal data into actionable knowledge, addressing the challenge organizations face in extracting value from their data [5]

Group 1 - Progress Software Corporation is set to release its second-quarter earnings results on June 30, with analysts expecting earnings of $1.30 per share, an increase from $1.09 per share in the same period last year [1] - The company is projected to report quarterly revenue of $237.23 million, compared to $175.08 million a year earlier [1] - In the first quarter, Progress Software reported better-than-expected financial results, leading to a 0.3% increase in share price, closing at $63.75 [2] Group 2 - DA Davidson analyst maintained a Buy rating but reduced the price target from $75 to $70 [4] - Guggenheim analyst reiterated a Buy rating with a price target of $83 [4] - Wedbush analyst maintained an Outperform rating with a price target of $75 [4] - Citigroup analyst maintained a Neutral rating and increased the price target from $65 to $68 [4] - Jefferies analyst maintained a Hold rating and raised the price target from $65 to $70 [4]

Core Insights - Progress Software (PRGS) is expected to report quarterly earnings of $1.30 per share, reflecting a 19.3% increase year over year, with revenues projected at $237.84 million, indicating a 35.9% year-over-year growth [1] - The consensus EPS estimate has remained stable over the last 30 days, suggesting analysts have not changed their initial earnings projections during this period [1][2] Revenue Estimates - Analysts predict 'Revenue- Services' will reach $52.70 million, representing a significant year-over-year increase of 183.4% [4] - The 'Revenue- Maintenance' is expected to be approximately $111.65 million, indicating an 8.9% increase from the previous year [4] - 'Revenue- Maintenance and services' is forecasted to total $167.92 million, reflecting a 38.7% year-over-year growth [4] - 'Revenue- Software licenses' is anticipated to be $70.20 million, showing a 30.1% increase compared to the same quarter last year [5] Stock Performance - Shares of Progress Software have increased by 4.4% over the past month, slightly underperforming the Zacks S&P 500 composite, which rose by 5.1% [6] - The company holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the overall market in the near term [6]

Core Insights - Progress Software has announced the latest release of its Semaphore platform, which enhances user productivity, knowledge modeling, and support for semantic compliance standards to drive data value and business success [1][3] Group 1: Product Features - The Semaphore platform now includes an AI Model Builder that connects to a wider range of Large Language Model (LLM) providers, simplifying the knowledge modeling experience [5] - Users can define and manage data quality standards for their knowledge models visually, without needing to write custom code, enhancing productivity [5] - The platform supports Simple Knowledge Organization System (SKOS) mapping relationships, allowing users to map existing concepts to external reference models [5] - Structural-level classification settings have been improved, enabling users to update classification settings at scale for better results [5] - The Concept Reuse feature allows for agile editing of local models, enabling users to copy branches from one model to another for better business outcomes [5] Group 2: Market Position and Recognition - Semaphore was recognized as a Leader and Gold Medalist in Info-Tech Research Group's 2024 Metadata Management Data Quadrant, based on user feedback [3]

Core Viewpoint - The market anticipates Progress Software (PRGS) to report a year-over-year increase in earnings driven by higher revenues for the quarter ended May 2025, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected to be released on June 30, with a consensus EPS estimate of $1.30, reflecting a +19.3% year-over-year change, and revenues projected at $237.84 million, up 35.9% from the previous year [3][2]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their initial projections during this period [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Progress Software is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +0.46%, suggesting a likelihood of beating the consensus EPS estimate [12][8]. Historical Performance - Progress Software has a history of exceeding consensus EPS estimates, having beaten expectations in the last four quarters, including a +25.96% surprise in the most recent quarter where actual earnings were $1.31 compared to an expected $1.04 [13][14]. Investment Considerations - While a positive earnings surprise is a strong indicator of potential stock price movement, other factors may also influence the stock's performance post-earnings release, making it essential for investors to consider the broader context [15][17].

Group 1 - The real estate investing landscape features various personas, including luxe developers and stable renovators [1]

Core Insights - Progress Software's CEO, Yogesh Gupta, has been awarded the Entrepreneur Of The Year® 2025 New England Award by Ernst & Young LLP, recognizing his leadership in innovation and growth [1][4] - Under Gupta's leadership since 2016, Progress Software has more than doubled in size and completed five strategic acquisitions, including the significant purchase of ShareFile in 2024 [2][3] - Gupta has fostered a culture of agility and operational excellence, leading to record revenues and an increase in the global workforce from 1,500 to 3,000 employees [3] Company Growth and Strategy - Progress Software has executed its Total Growth Strategy, focusing on innovation, disciplined mergers and acquisitions, and customer retention, positioning the company favorably in the AI market [2] - The company serves a global client base, with over 75% of the Fortune 500 relying on its solutions [2] Leadership and Recognition - Gupta's entrepreneurial approach emphasizes building a future through innovation and community investment, which has shaped the company's culture [3] - He was selected for the award by an independent panel based on criteria such as long-term value creation and significant growth [4] Future Considerations - As a New England award winner, Gupta is eligible for the Entrepreneur Of The Year 2025 National Awards, with winners to be announced in November 2025 [4]