Progress Software Corporation Q1 FY2026 earnings call

• Business is performing well with solid retention and good performance across products. Product portfolio is broad and powers customers' businesses. - AI is an exciting opportunity, used internally to be more efficient and built into products to deliver business value to customers. Examples of customer uses of AI-powered products. - Capital allocation priorities: invest in business and innovate, aggressively reduce debt and be opportunistic on buybacks, maintain commitment to generate excess returns through disciplined M&A. ShareFile has strengthened recurring revenue mix, expanded SaaS capabilities, and contributed to bottom line and cash flow. Opened new innovation hub in Bangalore.

Revenue was $248 million, up 4% from last year's Q1. ARR grew 2% in constant currency. NRR was 99%. EPS was $1.60, up 22% year-over-year. Operating margins finished above 41%. Adjusted free cash flow was $99 million and unlevered free cash flow was $111 million. ARR was approximately $863 million. Revenue for Q1 was $248 million, up 4% y-o-y. Total cost and operating expenses were approximately $146 million, largely flat y-o-y. Operating income was $102 million, resulting in an operating margin of 41%. Cash and cash equivalents ended the quarter at $113 million, total debt was $1.35 billion, net debt was approximately $1.24 billion, net leverage ratio was 3.1 times, DSL was 52 days, deferred revenue was approximately $425 million, up roughly $25 million y-o-y.

• Q2 2026 revenue expected between 240 and 246 million, EPS between $1.47 and $1.53. - Full year 2026 revenue expected between $988 million and $1 billion, approximately 1% to 2% growth over 2025. Operating margin for the year approximately 39%. Adjusted free cash flow between $263 million and $275 million, unlevered free cash flow between 315 and 326 million. EPS between $5.91 and $6.03. Guidance assumes a tax rate of 20%, repurchase of approximately $30 million in progress shares, total debt repayment of $250 million, and approximately 43 million weighted shares outstanding.

• Uncertainty around macro environment and geopolitical events which could potentially affect the business. Isolated churn events like the Eastern European government contract termination due to court ruling which was an unexpected and specific situation.

Q: Itay Kidram asked about M&A, why it's taking time and about SAS revenue and isolated churn.

A: Yogesh said higher bar due to valuation, active but challenges with private market valuations. Anthony talked about isolated churn being specific customer events, SAS revenue having data cleanup issues from billing system transition.

Q: John DeFucci asked about Chef's performance and developer counts.

A: Yogesh said developer products have AI investments, Chef is a strong product.

Q: Lucky Schreiner asked about isolated churn event and NRR.

A: Lucky was told isolated churn was due to unexpected government action, NRR is within target range and business is confident despite macro uncertainty.