PROGRESS SOFTWARE CORP /MA Q1 FY2025 earnings call

• ShareFile integration is going very well, contributing significantly to ARR, revenues, and expense savings. Milestones of integration are on track or ahead of plan. Transition services agreement with CSG is working out well, and people integration efforts with ShareFile colleagues are progressing rapidly.
• Customer wins across various industries: Leading commercial lenders/banks expanded ShareFile use, a global streaming entertainment provider used data platform products for AI content recommendations, an industrial machinery manufacturer expanded DevTools use, etc. The common thread is enabling customers to develop AI-powered applications and digital experiences.
• AI is core to the strategy and product roadmap. Efforts are focused on helping customers build AI-powered applications, offering AI capabilities in products, and using AI internally for operational efficiency. Ed Keisling was appointed Chief AI Officer to spearhead AI efforts.

For the first quarter of fiscal 2025, revenues came in at $238 million, up 30% in constant currency. Annualized recurring revenue (ARR) increased 48% over the previous year in constant currency, with ShareFile being a predominant driver and the rest of the business also contributing. ARR stood at $836 million, showing a 48% year-over-year growth and 3.4% pro forma growth on a year-over-year basis. Revenue growth was driven by the acquisition of ShareFile, partially offset by the renewal timing of multi-year subscription contracts. Total costs and operating expenses for the quarter were $144 million, up 34% from the prior year but lower than expected due to quicker and more cost-effective integration of ShareFile.

• For the second quarter of 2025, revenue is expected to be between $235 million and $241 million, and earnings per share between $1.28 and $1.34.
• For the full year 2025, revenue is expected to be between $958 million and $970 million, operating margin approximately 38%, adjusted free cash flow between $226 million and $238 million, unlevered free cash flow between $283 million and $294 million, and earnings per share between $5.25 and $5.37. Guidance assumes a tax rate of 20%, $70 million share repurchase, $160 million debt repayment, and approximately 45 million shares outstanding including potential dilution from 2026 convertible notes.

• Macro environment uncertainty could potentially impact results. For example, the federal government business is relatively modest, but broader macro developments need to be monitored. Exchange rate fluctuations can come and go, although they weren't a major factor in setting the full-year guidance.

Q: John DiFucci asked about international geopolitical forces' impact on operations. Yogesh Gupta replied that so far there has been no uncharacteristic weakness or strength observed, execution continues well, and teams are focused on serving customers successfully