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PS

PROGRESS SOFTWARE CORP /MA (PRGS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered $237.355M revenue (+36% YoY) and non-GAAP EPS of $1.40 (+28% YoY); ARR reached $838M (+46% YoY constant currency) with NRR at 100% .
  • EPS was above the high end of prior guidance ($1.28–$1.34), and the company raised FY25 guidance for revenue, operating margin, EPS, and cash flow .
  • ShareFile integration is “ahead of schedule” with primary operational synergies completed; Progress repaid another $40M on its revolver in Q2 and is tracking toward $160M FY25 debt reduction .
  • Progress announced the acquisition of Nuclia (agentic RAG-as-a-service), immaterial financially but strategically broadening AI capabilities across the Data Platform and potentially into Sitefinity and ShareFile .

What Went Well and What Went Wrong

What Went Well

  • “We’re extremely pleased with our solid Q2 results… ARR of $838 million or 46% year-over-year growth. Our Net Retention Rate was 100%… integration of ShareFile is going extremely well… confident in our ability to reach all our ShareFile targets by the end of the year.” — CEO Yogesh Gupta .
  • Non-GAAP operating margin expanded to 40% (+200 bps YoY) on strong execution and cost discipline; EPS came in $0.06 above the high end of guidance .
  • ShareFile and OpenEdge were notable drivers of performance; major renewals and expansions across global pharma, biotech, European retail, and infrastructure customers underscore product relevance amid AI adoption .

What Went Wrong

  • Cash from operations fell to $29.996M (–53% YoY) as DSO rose to 53 days (vs 48 in Q1), largely due to the cutover of ShareFile’s $250M business onto Progress’s billing system (temporary collections timing impact) .
  • Software license revenue declined 6% YoY to $50.795M, reflecting mix shift toward recurring SaaS/maintenance and lower upfront license sales .
  • Other expense increased to $(18.752)M (+167% YoY), and amortization of acquired intangibles rose materially (reflecting ShareFile), which weighed on GAAP profitability metrics .

Financial Results

Revenue, EPS, and Margins (Quarterly)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$214.961 $238.015 $237.355
GAAP Diluted EPS ($)$0.03 $0.24 $0.39
Non-GAAP Diluted EPS ($)$1.33 $1.31 $1.40
GAAP Operating Margin (%)10% 14% 16%
Non-GAAP Operating Margin (%)37% 39% 40%

Q2 2025 Actuals vs Wall Street Consensus (S&P Global)

MetricConsensusActualDelta
Revenue ($USD Millions)$237.229*$237.355 +$0.126M (in-line to slight beat)
Primary EPS ($)$1.300*$1.40 +$0.10 (beat)

Values with an asterisk (*) retrieved from S&P Global.

Segment Revenue Mix

Segment ($USD Millions)Q4 2024Q1 2025Q2 2025
Software Licenses$73.402 $58.445 $50.795
Maintenance, SaaS & Professional Services$141.559 $179.570 $186.560
Total Revenue$214.961 $238.015 $237.355

KPIs and Cash Metrics

KPIQ1 2025Q2 2025
ARR ($USD Millions)$836 $838
Net Retention Rate (%)>100% 100%
Days Sales Outstanding (days)48 53
Cash from Operations ($USD Millions)$68.947 $29.996
Adjusted Free Cash Flow ($USD Millions)$73.211 $37.068
Unlevered Free Cash Flow ($USD Millions)$87.954 $51.579

Guidance Changes

MetricPeriodPrevious Guidance (3/31/2025)Current Guidance (6/30/2025)Change
Revenue ($USD Millions)FY 2025$958–$970 $962–$974 Raised
GAAP Diluted EPS ($)FY 2025$1.19–$1.35 $1.27–$1.43 Raised
Non-GAAP Diluted EPS ($)FY 2025$5.25–$5.37 $5.28–$5.40 Raised
GAAP Operating Margin (%)FY 202514%–15% 15% Raised
Non-GAAP Operating Margin (%)FY 202538% 38%–39% Raised
Cash from Operations ($USD Millions)FY 2025$216–$228 $218–$230 Raised
Adjusted Free Cash Flow ($USD Millions)FY 2025$226–$238 $228–$240 Raised
Unlevered Free Cash Flow ($USD Millions)FY 2025$283–$294 $285–$296 Raised
GAAP Effective Tax Rate (%)FY 202519% 17% Lowered
Non-GAAP Effective Tax Rate (%)FY 202520% 20% Maintained
Revenue ($USD Millions)Q3 2025—$237–$243 Initiated
Non-GAAP Diluted EPS ($)Q3 2025—$1.28–$1.34 Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
AI/Technology initiativesLaunched ShareFile AI-powered collaboration; continued AI investments; NRR >100% .Announced Nuclia (agentic RAG) acquisition; AI coding assistants in Telerik/Kendo; ShareFile AI features improving doc collection and insights .Accelerating AI feature delivery; portfolio-wide AI leverage.
Product performanceShareFile added; strong portfolio contribution; raised EPS guidance .Strength across OpenEdge and ShareFile; major renewals/expansions across pharma, biotech, retail; infrastructure success (AIOps) .Broad-based demand; durable renewals/expansions.
Regional trendsNot emphasized.“Revenue contributions were strong across all geographies” .Broad geographic strength.
Regulatory/legal (MOVEit)Ongoing cyber vulnerability response expenses; net of insurance .Continued exclusion of MOVEit-related costs in non-GAAP; small Q2 expense .Residual legal/professional expenses persist.
R&D executionOngoing investment; integration underway .AI assistants improved dev productivity; internal AI use in engineering, IT, support, marketing, sales .Efficiency gains and faster cycles.
Capital allocationDividend suspended to prioritize debt repayment and buybacks; M&A focus .$40M Q2 debt repayment; $50M YTD buybacks; modeling $160M FY25 debt reduction .Deleveraging and opportunistic buybacks.

Management Commentary

  • “Our Net Retention Rate was 100%, demonstrating the consistent strength of our product portfolio… our integration of ShareFile is going extremely well… confident in our ability to reach all our ShareFile targets by the end of the year.” — CEO Yogesh Gupta .
  • “Operating margin was 40%… EPS $1.40, above the high end of prior guidance… we have raised guidance for the remainder of the year.” — Supplemental deck summary .
  • “We again made significant progress on paying down our revolving credit facility, with another $40 million this quarter, putting us on a solid trajectory to hit our goal of $160 million debt paydown this year.” — CFO Anthony Folger .
  • “We went live on the Progress billing platform for ShareFile… anytime you do a major lift and shift like that, there is always a little bit of a… slower approach… we were more careful about customer experience… this was a big milestone.” — CFO Anthony Folger on DSO and collections timing .
  • “Nuclia… brings leading-edge agentic RAG capabilities… we expect to integrate across our product portfolio… value to Sitefinity and ShareFile; ShareFile has 86,000 customers.” — CEO Yogesh Gupta .

Q&A Highlights

  • Nuclia rationale: Strategic tech acquisition to accelerate AI features across Progress products; modest price, portfolio-wide integration expected (Data Platform, Sitefinity, ShareFile) .
  • Free cash flow/DSO: Q2 FCF below expectations due to cautious ShareFile billing system migration; timing impacts expected to normalize; collection processes now fully under Progress control .
  • Capital allocation: Continued deleveraging ($40M Q2, $70M H1; plan $160M FY25) and buybacks ($50M YTD), maintaining disciplined M&A framework .

Estimates Context

  • Q2 2025: Revenue $237.355M vs S&P Global consensus $237.229M* (in-line to slight beat); EPS $1.40 vs $1.300* (beat). Management also exceeded the high end of its own EPS guidance range .
  • Q3 2025 setup: Guidance implies revenue $237–$243M and non-GAAP EPS $1.28–$1.34; consensus at quarter-end was $240.106M* revenue and $1.297* EPS, broadly consistent with guidance ranges .
  • FY25: Raised guidance to revenue $962–$974M and non-GAAP EPS $5.28–$5.40; S&P Global consensus stood at $978.182M* revenue and $5.527* EPS, suggesting potential for estimate recalibration toward company’s updated range .

Values with an asterisk (*) retrieved from S&P Global.

Detailed Estimates Comparison

PeriodMetricConsensus*Company Guidance/ActualOutcome
Q2 2025Revenue ($M)237.229*$237.355 Slight beat
Q2 2025Primary EPS ($)1.300*$1.40 Beat
Q3 2025Revenue ($M)240.106*$237–$243 guidance In-line range
Q3 2025Primary EPS ($)1.297*$1.28–$1.34 guidance In-line range
FY 2025Revenue ($M)978.182*$962–$974 guidance Consensus above guide
FY 2025Primary EPS ($)5.527*$5.28–$5.40 guidance Consensus above guide

Values with an asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Execution remains strong: broad-based ARR growth (+46% YoY) and NRR at 100% signal durable recurring revenue and retention; non-GAAP margin expansion to 40% underscores disciplined cost control .
  • ShareFile integration progress and synergy realization are tracking ahead of plan, catalyzing raised FY25 guidance across revenue, margins, EPS, and cash flow .
  • Temporary working capital friction from the ShareFile billing migration elevated DSO and depressed Q2 operating cash flow; management expects normalized collections post-cutover .
  • AI is a central growth vector: Nuclia adds agentic RAG capabilities; AI assistants and internal AI use aim to enhance product velocity and efficiency—potentially improving retention and cross-sell over time .
  • Deleveraging and buybacks provide capital flexibility while maintaining a disciplined M&A framework; $160M debt paydown modeled for FY25 and $50M buybacks YTD .
  • Near-term trading implication: Raised guidance and an EPS beat above the high end are positive sentiment drivers; watch cash flow normalization and incremental AI-product announcements as catalysts .
  • Medium-term thesis: High recurring revenue profile, continued integration of ShareFile, and expanding AI feature set support stable top-line growth and margin resilience; monitor MOVEit-related legal costs and acquisition amortization impacts on GAAP optics .