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PS

PROGRESS SOFTWARE CORP /MA (PRGS)·Q3 2025 Earnings Summary

Executive Summary

  • Progress delivered a strong Q3 2025: revenue $250.0M up 40% YoY, non-GAAP EPS $1.50 up 19% YoY, and non-GAAP operating margin 40% while ARR reached $849M (+47% YoY constant currency) and net retention held at 100% .
  • Results beat Wall Street: revenue beat by ~$9.7M and EPS beat by ~$0.20; Q4 consensus sits near the midpoint of company guidance, implying a stable exit rate and limited near-term estimate risk *.
  • Full-year guidance raised across revenue ($975–$981M), non-GAAP EPS ($5.50–$5.56), GAAP EPS, and cash flow, with tax rate revised to 19% GAAP/20% non-GAAP; Q4 guidance: revenue $250–$256M, non-GAAP EPS $1.29–$1.35 .
  • Catalysts: sustained ShareFile integration outperformance, broadened AI rollout (Agentic RAG, MarkLogic 12, OpenEdge MCP Connector), and enhanced balance sheet flexibility via a new $1.5B revolver; net leverage ~3.5x with continued debt paydown and buybacks .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based outperformance: revenue $250M vs prior guide $237–$243M; non-GAAP EPS $1.50 vs prior guide $1.28–$1.34; ARR +47% YoY; NRR 100% .
    • ShareFile integration exceeding milestones and contributing meaningfully to top-line and ARR; improving NRR through AI features (AI document assistant, secure share recommender) and strong culture integration .
    • AI momentum: product launches across Agentic RAG (Nuclia), MarkLogic 12 with RAG, and OpenEdge MCP Connector for ABL; management cites growing customer ROI from AI .

  • What Went Wrong

    • GAAP profitability pressured: GAAP operating margin down 500 bps YoY (18% vs 23%) and GAAP diluted EPS down 32% YoY ($0.44 vs $0.65), driven by higher amortization of acquired intangibles, stock-based comp, restructuring and acquisition-related costs .
    • Higher other expense: other expense, net rose to $(17.7)M vs $(6.1)M YoY (debt-related costs), lifting net leverage to ~3.5x on trailing adjusted EBITDA; management expects continued debt repayment .
    • DSO ticked up to 55 days vs 53 in Q2 and 45 in Q3’24; deferred revenue down sequentially reflecting normal seasonality and the ShareFile billing migration earlier in the year .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$178.7 $238.0 $237.4 $249.8
GAAP Diluted EPS ($)$0.65 $0.24 $0.39 $0.44
Non-GAAP Diluted EPS ($)$1.26 $1.31 $1.40 $1.50
GAAP Operating Margin (%)23% 14% 16% 18%
Non-GAAP Operating Margin (%)41% 39% 40% 40%

Segment/Component Revenue

Component ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Software Licenses$57.9 $58.4 $50.8 $63.4
Maintenance, SaaS, and Professional Services$120.8 $179.6 $186.6 $186.4
Total Revenue$178.7 $238.0 $237.4 $249.8

KPIs and Cash Metrics

KPIQ3 2024Q1 2025Q2 2025Q3 2025
ARR ($USD Millions, constant currency)$582 $836 $838 $849
Net Retention Rate (%)99% 100%+ 100% 100%
DSO (days)45 48 53 55
Cash from Operations ($USD Millions)$57.7 $68.9 $30.0 $73.4
Adjusted Free Cash Flow ($USD Millions)$57.5 $73.2 $37.1 $74.4
Unlevered Free Cash Flow ($USD Millions)—$88.0 $51.6 $88.6

Vs Estimates (S&P Global consensus)

MetricQ3 2025 ActualQ3 2025 ConsensusSurprise
Revenue ($USD Millions)$249.8 $240.1*+$9.7M (Beat)
EPS (Non-GAAP, $)$1.50 $1.297*+$0.20 (Beat)

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (6/30/25)Current Guidance (9/29/25)Change
Revenue ($USD Millions)FY 2025$962–$974 $975–$981 Raised
GAAP Diluted EPS ($)FY 2025$1.27–$1.43 $1.38–$1.45 Raised
Non-GAAP Diluted EPS ($)FY 2025$5.28–$5.40 $5.50–$5.56 Raised
GAAP Operating Margin (%)FY 202515% 15% Maintained
Non-GAAP Operating Margin (%)FY 202538%–39% 38%–39% Maintained
Cash from Operations ($USD Millions)FY 2025$218–$230 $221–$231 Raised
Adjusted Free Cash Flow ($USD Millions)FY 2025$228–$240 $232–$242 Raised
Unlevered Free Cash Flow ($USD Millions)FY 2025$285–$296 $289–$299 Raised
GAAP Effective Tax Rate (%)FY 202517% 19% Raised
Non-GAAP Effective Tax Rate (%)FY 202520% 20% Maintained
Revenue ($USD Millions)Q4 2025—$250–$256 New
GAAP Diluted EPS ($)Q4 2025—$0.31–$0.37 New
Non-GAAP Diluted EPS ($)Q4 2025—$1.29–$1.35 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
AI/Technology initiativesNuclia (Agentic RAG) acquired to embed across portfolio; AI central to product roadmap; ARR pro-forma growth low single digits; early wins, broadly anecdotal Multiple AI launches: Agentic RAG platform, MarkLogic 12 with RAG, OpenEdge MCP Connector; customer adoption examples; AI features driving improved NRR in ShareFile Accelerating
ShareFile integrationAhead of schedule; strong SaaS gross margins low-80s; Q1 debt paydown and buybacks; billing migration in Q2 “Best acquisition so far”; milestones met/on or before schedule; improving NRR and ARR; positive culture integration Strengthening
Capital allocation (debt & buybacks)$30M debt repaid and $30M repurchased in Q1; plan $160M FY paydown $40M repaid in Q3 (YTD $110M); $15M buybacks in Q3 (YTD $65M); repurchase authorization increased by $200M to $242M; new $1.5B revolver Improving flexibility
Gross margin & mixSaaS low-80s gross margins; blended margins sustained; caution on subscale SaaS assets previously Blend of SaaS (low 80s) with higher-margin license; tweaks to run SaaS better; blended gross margin positive commentary Stable
M&A appetiteExpanded scope post-ShareFile and Nuclia; prefer assets with forward relevance; SaaS more acceptable Active across all three areas (data platforms, digital experience, infrastructure management); increased openness to SaaS with margin discipline Broadening
Macro/geopolitical“Steady as she goes”; no unusual regional weakness noted No specific macro headwinds cited; demand aided by AI adoption across customers Steady

Management Commentary

  • “We reported another outstanding quarter… Net retention was solid at 100%, and ARR grew 47% year over year… ShareFile is meaningfully contributing… we continue to invest and innovate in AI capabilities, including agentic RAG technology” — Yogesh Gupta, CEO .
  • “ARR… $849 million… 47% growth YoY and 3% pro forma YoY… revenue of $250 million meaningfully exceeded the high end of the guidance… operating margin was 40%” — Anthony Folger, CFO .
  • “Over 3,000 customers have started using the new AI document assistant… secure share recommender has identified and protected nearly 15,000 files containing PII” — Yogesh Gupta on ShareFile AI features .
  • “We increased our borrowing capacity from $900 million to $1.5 billion… repaid $40 million… available capacity of approximately $880 million” — Anthony Folger .

Q&A Highlights

  • AI monetization: Near-term impact shows first in net retention and expansion; pricing lever via higher-edition features rather than broad price hikes .
  • EBIT/operating margin guidance: Management “rolled through” Q3 beats into FY outlook; not being conservative, expect strong Q4 .
  • ShareFile integration surprises: Positive customer reliance on product workflows and strong team engagement; carve-out created system migration challenges that were navigated well .
  • Gross margin puts/takes: Blend of SaaS low-80s gross margins and higher-margin license; operational tweaks aiming to improve SaaS margins .
  • M&A focus: Attractive opportunities across data platforms, digital experience, and infrastructure management; more open to SaaS given learned capabilities from ShareFile .

Estimates Context

  • Q3 2025 earnings beat: revenue $249.8M vs consensus $240.1M*, EPS $1.50 vs $1.2967*; both were meaningful beats supporting FY guidance raise *.
  • Q4 2025 consensus: revenue ~$252.9M*, EPS ~$1.3126* sits inside company guidance of $250–$256M and $1.29–$1.35, implying limited near-term estimate pressure *.

Values retrieved from S&P Global.*

PeriodMetricCompany GuideConsensusContext
Q3 2025Revenue ($M)—240.1*Beat by ~$9.7M *
Q3 2025EPS ($)—1.2967*Beat by ~$0.20 *
Q4 2025Revenue ($M)250–256 252.86*In-range*
Q4 2025EPS ($)1.29–1.35 1.3126*In-range*

Key Takeaways for Investors

  • Execution remains robust with non-GAAP operating margins at 40% and broad-based product strength; ShareFile continues to be a top-line and ARR driver .
  • The integration playbook is delivering: milestones met, improving NRR via embedded AI features; expect durable ARR trend and cash generation .
  • Strong estimate beats and raised FY guide reduce downside risk into year-end; Q4 guide aligns with consensus, pointing to steadier cadence *.
  • GAAP results are pressured by amortization of acquired intangibles, stock-based comp, and restructuring; non-GAAP metrics better reflect ongoing operations per company reconciliation .
  • Liquidity and optionality improved via $1.5B revolver; capital allocation flexibility to balance debt repayment vs buybacks opportunistically .
  • AI is increasingly embedded across the portfolio (Agentic RAG, MarkLogic 12, OpenEdge MCP Connector), supporting expansion and retention; watch for cross-sell traction over time .
  • Near-term focus: maintain gross margin blend and operating discipline while leveraging AI-driven upsell; medium term: selective M&A across data platforms, digital experience, and infrastructure management with SaaS openness and margin rigor .