Progress(PRGS) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $237 million, representing a 36% increase year-over-year [7] - Annual Recurring Revenue (ARR) grew 46% year-over-year to $838 million, with a net retention rate of 100% [8][23] - Operating margin was 40%, with earnings per share of $1.40, exceeding guidance [8][26] - Total costs and operating expenses were $142 million, a 31% increase driven by the addition of ShareFile [26] - Cash and cash equivalents at the end of the quarter were $102 million, with total debt of $1.47 billion [27] Business Line Data and Key Metrics Changes - Significant strength was noted in OpenEdge and ShareFile, contributing to strong renewals and expansions [9] - ShareFile's integration is ahead of schedule, with operational synergies completed [13] - New AI capabilities were introduced in ShareFile, enhancing document collection speed and insights extraction [14] Market Data and Key Metrics Changes - The company reported consistent performance across all geographies and product areas, with major renewals from various sectors including biotech and pharmaceuticals [9][10] - The integration of AI into products is driving customer retention and satisfaction [11][12] Company Strategy and Development Direction - The acquisition of Nuclear for $20 million aims to enhance the product portfolio with Gen AI capabilities [5][6] - The company emphasizes disciplined M&A strategy to drive sustained top-line growth, focusing on companies with strong products and customer bases [19][20] - Continued investment in R&D is seen as essential for customer retention and product value [6][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the business and raised guidance for the remainder of the year [9][29] - The integration of ShareFile is progressing well, with expectations for improved customer experience [27][28] - The outlook for Q3 2025 includes revenue expectations between $237 million and $243 million, with full-year revenue guidance increased to between $962 million and $974 million [29][30] Other Important Information - The company has maintained expense discipline, which is central to its operating philosophy [15][17] - Progress was recognized as one of the Best Places to Work by the Boston Business Journal [20] Q&A Session Summary Question: Can you provide more details about the Nuclea acquisition? - Management indicated that the acquisition is an investment in the product portfolio, aimed at integrating advanced AI technology to enhance customer value [33][36] Question: Will Nuclea be a cross-sell opportunity or embedded in other products? - Management confirmed that Nuclea is expected to integrate across the product portfolio, adding value to various offerings including ShareFile and OpenEdge [41][43] Question: Why was free cash flow below expectations this quarter, yet annual forecasts were raised? - Management explained that timing on collections and the transition of ShareFile to Progress' billing system impacted cash flow, but they remain optimistic about future performance [46][48]