Nolan Jenevein

Nolan Jenevein, on behalf of Ittai Kidron, asked for clarification on the monetization strategy for the new Agentic RAG product, built on Nuclea technology, specifically whether it primarily serves as an incremental cross-sell opportunity within the existing customer base. Nolan Jenevein followed up by asking about the drivers behind the sequential increase in gross margins this quarter, particularly given the growing proportion of SaaS revenue in the mix.

Answer

President and CEO Yogesh Gupta confirmed that the initial monetization opportunity for the Agentic RAG product is primarily through cross-selling to existing customers by integrating it with other Progress Software products. While there are efforts to acquire new customers, the larger focus is on leveraging it as a cross-sell opportunity within the current customer base, with aggressive integration across the portfolio underway. President and CEO Yogesh Gupta attributed the gross margin performance to a blended average of the company's SaaS business, including ShareFile's gross margin (in the low 80s), and the core business (in the high 80s). He also noted ongoing efforts to optimize the operation of existing SaaS products, contributing to slight improvements.

Nolan Jenevein inquired about the monetization strategy for Progress Software's new Agentic RAG product, built on Nuclia technology, specifically whether it represents an incremental cross-sell opportunity, and also asked about the factors influencing the sequential pop in gross margins.

Answer

President and CEO Yogesh Gupta confirmed that the initial monetization opportunity for Agentic RAG is primarily through integration with existing products to create cross-sell opportunities for current customers, alongside pursuing new customers. Regarding gross margins, he attributed the improvement to a favorable blend of SaaS business gross margins (ShareFile in the low 80s, other business in the high 80s) and ongoing optimization efforts for existing SaaS products.

Nolan Jenevein, on behalf of Ittai Kidron, asked for clarification on the monetization strategy for the new Agentic RAG product (built on Nuclea technology), specifically if it represents an incremental cross-sell opportunity. He also inquired about the drivers behind the sequential pop in gross margins despite SaaS growth.

Answer

CEO Yogesh Gupta stated that the initial opportunity for Agentic RAG is primarily through cross-selling to existing customers by integrating it with other Progress products, while also pursuing new customers. Regarding gross margins, he attributed the improvement to a blend of SaaS and ShareFile gross margins, along with ongoing optimizations in running existing SaaS products.

Nolan Jenevein of Oppenheimer & Co. Inc. asked for more details on the Nuclea acquisition, noting its profile differs from Progress's typical strategy of acquiring mature software companies.

Answer

CEO Yogesh Gupta explained that the Nuclea acquisition is a strategic investment in the product portfolio, similar to past investments made to adapt to major technology shifts like the internet and mobile. He positioned AI as the next significant wave and described the acquisition as a modest purchase of leading-edge agentic RAG technology. Gupta emphasized that this move will help keep Progress's products current, drive high customer retention, and bring in a strong team to integrate the technology across the portfolio.

Nolan Jenevein from Oppenheimer & Co. Inc. asked for more details on the Nuclea acquisition, noting its profile differs from Progress's typical strategy of acquiring mature software companies.

Answer

CEO Yogesh Gupta explained that the Nuclea acquisition is a strategic investment in Progress's product portfolio, similar to past investments made to adapt to major technology shifts like the internet and mobile. He positioned it as an acceleration of R&D to integrate leading-edge agentic RAG AI capabilities across their products, ensuring high customer retention and future value.

Nolan Jenevein of Oppenheimer & Co. Inc. asked for more details on the Nuclea acquisition, noting its divergence from Progress's typical M&A strategy of acquiring mature software companies.

Answer

CEO Yogesh Gupta explained that the Nuclea acquisition is a strategic investment in Progress's product portfolio, aimed at integrating advanced AI capabilities to maintain high customer retention. He compared it to past technology acquisitions made during major shifts like the internet and mobile computing, framing it as a modest purchase for leading-edge agentic RAG technology to keep products current.