Progress Software Corporation Q2 FY2025 earnings call

• Announced acquisition of Nuclia for $20 million, bringing agentic RAG AI capabilities to enhance products. - Second quarter results: revenue $237M, up 36%; ARR $838M, up 46% y-o-y (pro forma 2%); net retention 100%; operating margin 40%; balance sheet improved with $40M paid down on revolving credit line. - Product highlights: OpenEdge had major renewals/expansions, ShareFile integration ahead of plan with new AI features and Gartner recognition, Telerik/Kendo UI released AI capabilities, infrastructure management products successful. - Progress using AI for operations: expense discipline, AI in engineering, IT, customer support, marketing, sales. - M&A strategy: Disciplined, accretive M&A to drive growth, with ShareFile enabling better evaluation of potential targets.

Total revenue for the second quarter was $237 million, up 36% year-over-year. ARR grew 46% year-over-year to $838 million (2% pro forma growth). Net retention was 100%. The product segments contributing to growth include ShareFile, OpenEdge, DevTools, Sitefinity, LoadMaster, and WhatsUp Gold. ShareFile contributes over a quarter of revenues. The financial performance was solid across geographies and product lines.

• Q3 2025: Expect revenue between $237 million and $243 million and earnings per share of between $1.28 and $1.34. - Full year 2025: Revenue expected between $962 million and $974 million (increase of $4M from prior guidance); operating margin 38% to 39% (increase of ~50 basis points); adjusted free cash flow between $228 million and $240 million; unlevered free cash flow between $285 million and $296 million (increase of $2M from prior guidance); earnings per share between $5.28 and $5.40 (increase of $0.03 from prior guidance). Guidance assumes tax rate 20%, $50M share repurchase, $160M debt repayment.

• Risks related to integration of acquisitions, including timing issues with billing and collections during ShareFile transition. - Foreign exchange dynamics impacting financial results. - Execution risk in maintaining M&A discipline and achieving expected synergies from acquisitions.

Q: Get color about the Nuclia acquisition, which diverges from typical profile.

A: This acquisition was primarily an investment in the product portfolio, bringing agentic RAG AI technology and a strong team to integrate across products.

Q: Can Nuclia be a cross-sell opportunity or embedded in other products?

A: It is expected to be integrated across the product portfolio, bringing value to data platform, ShareFile, and other products.

Q: Free cash flow below expectation, why higher guidance?

A: Timing of collections and transition to Progress billing platform for ShareFile, with focus on customer experience over short-term DSO metrics during the transition.