Progress(PRGS) - 2025 Q2 - Quarterly Results

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]