Progress(PRGS) - 2025 Q1 - Quarterly Results

Financial Performance - Annualized Recurring Revenue (ARR) reached $836 million, growing 48% year-over-year[1] - Total revenue for Q1 2025 was $238 million, an increase of 29% year-over-year[3] - Net income decreased by 52% to $10.946 million compared to $22.639 million in Q1 2024[3] - Diluted earnings per share (EPS) was $0.24, a decrease of 53% from $0.51 in the same quarter last year[3] - Operating margin was 14%, down from 19% in the same quarter last year, a decrease of 500 basis points[3] - Non-GAAP income from operations increased to $93,595,000 for the three months ended February 28, 2025, up 22% from $76,756,000 in the prior year[16] - Cash flows from operations for the three months ended February 28, 2025, were $68,947,000, a decrease of 2% from $70,504,000 in the prior year[17] - Adjusted free cash flow for the three months ended February 28, 2025, was $73,211,000, reflecting a 1% increase from $72,204,000 in the same period last year[17] - The company reported capital expenditures of $1,290,000 for the three months ended February 28, 2025, compared to $309,000 in the same period last year, representing a 317% increase[17] Guidance and Projections - Guidance for FY 2025 revenue is projected between $958 million and $970 million[7] - The company expects GAAP income from operations for fiscal year 2025 to be between $137.2 million and $145.7 million, with an operating margin of 14% to 15%[18] - Non-GAAP diluted earnings per share for fiscal year 2025 is projected to be between $5.25 and $5.37, compared to GAAP diluted earnings per share of $1.19 to $1.35[19] - The company anticipates total adjustments for fiscal year 2025 to be $227.3 million, which includes acquisition-related expenses and restructuring expenses[18] Customer Metrics - Net Retention Rate surpassed 100%, indicating strong customer relationships[2] - The expectation is that contracts with terms less than one year will renew at rates equal to or better than annual or multi-year contracts, historically achieving favorable renewal rates[27] - Net Retention Rate (NRR) is calculated by comparing the ARR from a cohort of customers from 12 months prior to the current period, reflecting expansion and attrition, and is not derived from GAAP measures[31] Cash and Shareholder Actions - Cash and cash equivalents at the end of the quarter were $124.2 million[6] - The company repurchased $30 million of its shares during the quarter[4] Integration and Operational Challenges - The ShareFile integration is on track for completion by year-end 2025[4] - The company has indicated that it will continue to incur expenses related to the MOVEit vulnerability, impacting future operating expenses[25] - The company acknowledges that future acquisitions may involve unanticipated costs or integration issues that could disrupt operations[32] Revenue Recognition and ARR - Annualized Recurring Revenue (ARR) is a significant performance metric, representing the annualized revenue from all active and contractually binding term-based contracts, which is expected to continue as the majority of revenues[27] - The calculation of ARR includes revenue from maintenance, software upgrade rights, public cloud, and on-premises subscription-based transactions, helping to mitigate revenue fluctuations due to seasonality[27] - ARR includes amounts from monthly auto-renewing contracts, which may exceed total contract value at the end of the reporting period[28] - Revenue from term-based licenses is recognized upfront under ASC 606, with expectations for renewal at the end of the contract term[29] - The company emphasizes that ARR is not a forecast and may not be indicative of future revenue, as active contracts may or may not be renewed[31] Risks and Forward-Looking Statements - Forward-looking statements indicate potential risks including economic conditions, international sales risks, and cybersecurity threats that could materially affect business outcomes[32]