Progress Software Corporation
PRGS Technology Q1 2025
Document 1
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
On September 9, 2024, Progress Software Corporation (“Progress” or the “Company”) and Cloud Software Group, Inc. and its subsidiaries (“Cloud”) entered into a definitive agreement (the “Purchase Agreement”) for the sale of certain assets and liabilities that comprise the ShareFile Business (“ShareFile”). The transaction between Progress and Cloud closed on October 31, 2024 for an aggregate purchase price of $875.0 million in cash, subject to a $25.0 million working capital credit and certain customary adjustments (the “Purchase Price”), and was funded through $730.0 million in borrowings under an existing $900.0 million revolving credit facility and cash on hand, resulting in a payment at closing of $852.7 million (the “Acquisition”). The following unaudited pro forma condensed combined Statement of Operations of Progress and ShareFile have been prepared to give effect to the Acquisition of ShareFile by the Company.
The following unaudited pro forma condensed combined Statement of Operations is based on: (i) the audited historical consolidated Statement of Operations of Progress for the year ended November 30, 2024 (the fiscal year end of both Progress and ShareFile); (ii) the audited abbreviated Statement of Operations of ShareFile for the nine months ended September 1, 2024; and (iii) the unaudited Statement of Operations of ShareFile for the two months ended October 31, 2024. The unaudited pro forma condensed combined Statement of Operations for the year ended November 30, 2024 has been prepared to reflect the Acquisition as though it occurred on December 1, 2023, including the related financing.
The Acquisition has been accounted for by using the acquisition method of accounting for the business combination. Accordingly, consideration paid by the Company to complete the Acquisition was allocated to ShareFile’s assets and liabilities based upon their estimated fair values as of the date of completion of the Acquisition. The pro forma purchase price adjustments are preliminary, subject to further adjustments as additional information becomes available along with the completion of the purchase price allocation and as additional analyses are performed, and have been made solely for the purpose of providing the pro forma Statement of Operations presented below. The unaudited pro forma condensed combined Statement of Operations does not reflect any adjustment for costs of, or related liabilities for, any integration and similar activities, or benefits, including potential synergies that may be derived in future periods, from the Acquisition.
The unaudited pro forma condensed combined Statement of Operations is provided for illustrative purposes only and does not purport to represent what the actual combined results of operations of the combined company would have been had the Acquisition and related financing occurred on the dates assumed, nor is the pro forma condensed combined Statement of Operations necessarily indicative of future combined results of operations. The unaudited pro forma condensed combined Statement of Operations is based upon available information and certain assumptions that the Company believes are reasonable, as described in the accompanying notes that should be read in conjunction with the pro forma condensed combined Statement of Operations.
The Unaudited Pro Forma Condensed Combined Statement of Operations have been compiled from and should be read in conjunction with the following sources:
•The Statement of Operations for Progress has been prepared in accordance with U.S. GAAP and derived from: (i) the Company’s audited consolidated Statement of Operations for the fiscal year ended November 30, 2024, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on January 21, 2025.
•The Statement of Operations for ShareFile has derived from: (i) ShareFile’s audited Statement of Revenues and Direct Expenses for the nine months ended September 1, 2024, attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on January 10, 2025; and (ii) the unaudited historical Statement of Operations of ShareFile for the two months ended October 31, 2024.
1
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended November 30, 2024
| (in thousands, except per share data) | Progress Historical Twelve Months Ended 11/30/2024 | ShareFile Historical Nine Months Ended 9/1/2024 | ShareFile Historical Two Months Ended 10/31/2024 | Transaction Accounting and Financing Adjustments | Note | Pro Forma | |||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Software licenses | $ | 249,331 | $ | — | $ | — | $ | — | $ | 249,331 | |||||||||||||||||||||||||
| Maintenance and services | 504,078 | 183,584 | 41,764 | — | 729,426 | ||||||||||||||||||||||||||||||
| Total revenue | 753,409 | 183,584 | 41,764 | — | 978,757 | ||||||||||||||||||||||||||||||
| Costs of revenue: | |||||||||||||||||||||||||||||||||||
| Cost of software licenses | 10,942 | — | — | — | 10,942 | ||||||||||||||||||||||||||||||
| Cost of maintenance and services | 90,318 | 73,075 | 16,239 | (45,027) | (a) | 134,605 | |||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 29,222 | — | — | 15,583 | (a) | 44,805 | |||||||||||||||||||||||||||||
| Total costs of revenue | 130,482 | 73,075 | 16,239 | (29,444) | 190,352 | ||||||||||||||||||||||||||||||
| Gross profit | 622,927 | 110,509 | 25,525 | 29,444 | 788,405 | ||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Sales and marketing | 164,570 | 56,774 | 12,616 | (23,073) | (a) | 210,887 | |||||||||||||||||||||||||||||
| Product development | 146,342 | 32,435 | 7,208 | — | 185,985 | ||||||||||||||||||||||||||||||
| General and administrative | 89,518 | 16,994 | 3,764 | — | 110,276 | ||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 65,290 | — | — | 45,179 | (a) | 110,469 | |||||||||||||||||||||||||||||
| Restructuring expenses | 10,454 | 9,802 | 2,178 | — | 22,434 | ||||||||||||||||||||||||||||||
| Acquisition-related expenses | 17,109 | — | — | — | 17,109 | ||||||||||||||||||||||||||||||
| Cyber vulnerability response expenses, net | 5,641 | — | — | — | 5,641 | ||||||||||||||||||||||||||||||
| Total operating expenses | 498,924 | 116,005 | 25,766 | 22,106 | 662,801 | ||||||||||||||||||||||||||||||
| Income (loss) from operations | 124,003 | (5,496) | (241) | 7,338 | 125,604 | ||||||||||||||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||||||||||||||
| Interest expense | (32,012) | — | — | (44,706) | (b) | (76,718) | |||||||||||||||||||||||||||||
| Interest income and other, net | 4,734 | — | — | — | 4,734 | ||||||||||||||||||||||||||||||
| Foreign currency loss, net | (2,461) | — | — | — | (2,461) | ||||||||||||||||||||||||||||||
| Total other expense, net | (29,739) | — | — | (44,706) | (74,445) | ||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 94,264 | (5,496) | (241) | (37,368) | 51,159 | ||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | 25,826 | — | — | (10,345) | (c) | 15,481 | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 68,438 | $ | (5,496) | $ | (241) | $ | (27,023) | $ | 35,678 | |||||||||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | 1.58 | $ | — | $ | — | $ | — | $ | 0.82 | |||||||||||||||||||||||||
| Diluted | $ | 1.54 | $ | — | $ | — | $ | — | $ | 0.80 | |||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||
| Basic | 43,268 | — | — | — | 43,268 | ||||||||||||||||||||||||||||||
| Diluted | 44,427 | — | — | — | 44,427 | ||||||||||||||||||||||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of Operations.
2
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations
Note 1: Basis of Pro Forma Presentation and Transaction Summary
The unaudited pro forma condensed combined Statement of Operations presents the pro forma results of operations of the combined company based upon the historical financial statements of the Company and the abbreviated financial statements of ShareFile, after giving effect to the Acquisition and adjustments described in these footnotes, and are intended to reflect the impact of the Acquisition on the Company.
The unaudited pro forma condensed combined Statement of Operations for the year ended November 30, 2024 gives effect to the Acquisition as though it had been consummated on December 1, 2023, including the related financing. The Company funded the Acquisition with $730.0 million in borrowings under an existing $900.0 million revolving credit facility and cash on hand, resulting in a payment at closing of $852.7 million.
The Acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standard Codification 805 - Business Combinations, and the Company’s cost to acquire ShareFile has been allocated to the assets acquired and liabilities assumed based upon respective preliminary estimate of fair values as of the date of the Acquisition using assumptions that the Company’s management believes are reasonable given the information currently available. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and determining appropriate discount rates. The excess of the Purchase Price over the estimated amounts of net assets as of the effective date of the Acquisition was allocated to goodwill in accordance with the accounting guidance. The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period (up to one year from the acquisition date).
The unaudited pro forma condensed combined Statement of Operations do not reflect the cost of any integration activities or benefits from the Acquisition and synergies that may be derived from any integration activities, both of which may have a material effect on Progress’ consolidated results of operations in periods following the completion of the Acquisition.
The total estimated Purchase Price was allocated as follows:
| (in thousands) | |||||
| Other current assets | $ | 3,574 | |||
| Property, plant and equipment | 51 | ||||
| Customer relationships | 318,000 | ||||
| Purchased technology | 119,000 | ||||
| Trade name | 27,000 | ||||
| Right-of-use lease assets and other assets | 5,548 | ||||
| Deferred tax assets | 22,126 | ||||
| Short-term deferred revenue, net | (89,341) | ||||
| Short-term operating lease liabilities and other accrued liabilities | (2,794) | ||||
| Long-term deferred revenue, net | (2,852) | ||||
| Long-term operating lease liabilities | (3,327) | ||||
| Total identifiable net assets | 396,985 | ||||
| Goodwill | 455,717 | ||||
| Fair value of total consideration transferred | $ | 852,702 | |||
The preliminary fair value of the intangible assets has been estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the Acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital.
Acquisition-related transaction costs (e.g., advisory, legal, valuation, and other professional fees) and related charges are not included as a component of consideration transferred, but are required to be expensed as incurred. During the fiscal year ended November 30, 2024, Progress incurred approximately $15.6 million of acquisition-related costs, which are included in acquisition-related expenses.
3
Note 2: Transaction Accounting and Financing Adjustments
| (a) | Reflects the adjustment of ShareFile’s historical identifiable intangible assets to their preliminary estimated fair values, including $318.0 million of customer relationships, $119.0 million of purchased technology, and $27.0 million of trade names, all of which were definite-lived intangible assets. For the purpose of determining pro forma amortization expense to be recorded in the unaudited pro forma condensed combined statements of operations, each identifiable intangible asset was assumed to have a useful life of seven years. For the eleven months ended October 31, 2024, ShareFile recognized $45.0 million of amortization expense in costs of maintenance and services and $23.1 million in sales and marketing expenses. | ||||
| (b) | Reflects proceeds of $730.0 million received from the existing $900.0 million revolving credit facility to partially fund the Acquisition. Additional interest expense incurred was calculated using an interest rate of 6.7%, which was the borrowing rate on the date of the transaction. The interest rate on the revolving credit facility adjusts monthly based on a reference to the Secured Overnight Financing Rate (SOFR). If the interest rates were to increase or decrease by 0.125% from the rate assumed, pro forma interest expense would change by approximately $0.9 million for the year ended November 30, 2024. | ||||
| (c) | Reflects the adjustment to income tax expense on the results of operations of ShareFile and the pro forma adjustments for the eleven months ended October 31, 2024, using an estimated statutory income tax rate of 24.0% (federal and state). Income tax expense was not allocated to ShareFile in the pre-acquisition abbreviated statements of net revenues and direct expenses. | ||||
4
Document 1
 | Exhibit 99.1 | |||||||
P R E S S A N N O U N C E M E N T
Progress Announces First Quarter2025 Financial Results
Annualized Recurring Revenue ("ARR") of $836 million Grew 48% year-over-year
Revenue of $238 million Grew 29% year-over-year
ShareFile Integration Underway
BURLINGTON, Mass, March 31, 2025 (GlobeNewswire) — Progress (Nasdaq: PRGS), the trusted provider of AI-powered digital experience and infrastructure software, today announced financial results for its fiscal first quarter ended February 28, 2025.
First Quarter 2025 Highlights:
•Revenue and non-GAAP revenue of $238 million increased 29% year-over-year on an actual and 30% on a constant currency basis.
•Annualized Recurring Revenue ("ARR") of $836 million increased 48% year-over-year on a constant currency basis.
•Operating margin was 14% and non-GAAP operating margin was 39%.
•Diluted earnings per share was $0.24 compared to $0.51 in the same quarter last year, a decrease of 53%.
•Non-GAAP diluted earnings per share was $1.31 compared to $1.25 in the same quarter last year, an increase of 5%.
"We’re extremely pleased with our excellent Q1 results," said Yogesh Gupta, CEO of Progress. "We are ahead, or on plan, with all our ShareFile integration milestones, which are providing significant contributions to ARR and revenues, as well as expense savings. Our solid performance on the top line was again driven by our product portfolio across the board, with our data platform and infrastructure management products having a particularly solid quarter. Our Net Retention Rate again surpassed 100%, which reflects the resiliency of our business and the strength of our customer relationships. Operationally, our first quarter was solid by every metric, and I am extremely proud of our team for their dedication and relentless commitment to our customers."
Additional financial highlights included:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| GAAP | Non-GAAP | ||||||||||||||||||||||||||||||||||
| (In thousands, except percentages and per share amounts) | February 28, 2025 | February 29, 2024 | % Change | February 28, 2025 | February 29, 2024 | % Change | |||||||||||||||||||||||||||||
| Revenue | $ | 238,015 | $ | 184,685 | 29 | % | $ | 238,015 | $ | 184,685 | 29 | % | |||||||||||||||||||||||
| Income from operations | $ | 32,426 | $ | 35,006 | (7) | % | $ | 93,595 | $ | 76,756 | 22 | % | |||||||||||||||||||||||
| Operating margin | 14 | % | 19 | % | (500) bps | 39 | % | 42 | % | (300) bps | |||||||||||||||||||||||||
| Net income | $ | 10,946 | $ | 22,639 | (52) | % | $ | 58,995 | $ | 55,928 | 5 | % | |||||||||||||||||||||||
| Diluted earnings per share | $ | 0.24 | $ | 0.51 | (53) | % | $ | 1.31 | $ | 1.25 | 5 | % | |||||||||||||||||||||||
| Cash from operations (GAAP) / Adjusted free cash flow (non-GAAP) / Unlevered free cash flow (non-GAAP) | $ | 68,947 | $ | 70,504 | (2) | % | $ | 73,211 | $ | 72,204 | 1 | % | |||||||||||||||||||||||
| $ | 87,954 | $ | 78,079 | 13 | % | ||||||||||||||||||||||||||||||
See Important Information Regarding Non-GAAP Financial Measures, Liquidity Measures, and Select Performance Metrics and a reconciliation of non-GAAP adjustments to Progress’ GAAP financial results at the end of this press release.
Other fiscal first quarter 2025 metrics and recent results included:
•Cash and cash equivalents were $124.2 million at the end of the quarter.
•Days sales outstanding was 48 days compared to 50 days in the fiscal first quarter of 2024 and 67 days in the fiscal fourth quarter of 2024.
"We’re off to a very strong start for FY25, as our Q1 results demonstrate. Revenues at the high end of guidance reflect steady demand; expenses remain well-controlled; cash flow was again strong; and our bottom-line results and raised EPS guidance reflect numerous positives," said Anthony Folger, CFO of Progress. "Beyond excellent financial performance, we repurchased $30 million of Progress shares and accelerated repayment of the revolving credit line used to partially finance the ShareFile acquisition, paying down $30 million during Q1. The ShareFile integration is tracking well, and we expect to complete the integration by year-end."
1
2025 Business Outlook
Progress provides the following guidance for the fiscal year ending November 30, 2025 and the fiscal second quarter ending May 31, 2025:
| Updated FY 2025 Guidance (March 31, 2025) | Prior FY 2025 Guidance (January 21, 2025) | ||||||||||||||||||||||
| (In millions, except percentages and per share amounts) | GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||||||||
| Revenue | $958 - $970 | $958 - $970 | $958 - $970 | $958 - $970 | |||||||||||||||||||
| Diluted earnings per share | $1.19 - $1.35 | $5.25 - $5.37 | $1.08 - $1.23 | $5.00 - $5.12 | |||||||||||||||||||
| Operating margin | 14% - 15% | 38% | 14% - 15% | 37% - 38% | |||||||||||||||||||
| Cash from operations (GAAP) / Adjusted free cash flow (non-GAAP) / Unlevered free cash flow (non-GAAP) | $216 - $228 | $226 - $238 | $216 - $228 | $225 - $237 | |||||||||||||||||||
| $283 - $294 | $282 - $294 | ||||||||||||||||||||||
| Effective tax rate | 19 | % | 20 | % | 21 | % | 20 | % | |||||||||||||||
| Q2 2025 Guidance | |||||||||||
| (In millions, except per share amounts) | GAAP | Non-GAAP | |||||||||
| Revenue | $235 - $241 | $235 - $241 | |||||||||
| Diluted earnings per share | $0.24 - $0.30 | $1.28 - $1.34 | |||||||||
Based on current exchange rates, the expected negative currency translation impact on our:
•Fiscal year 2025 business outlook compared to 2024 exchange rates is approximately $2.8 million on revenue.
•Fiscal Q2 2025 business outlook compared to 2024 exchange rates is approximately $0.1 million on revenue.
Based on current exchange rates, the currency translation impact is expected to be immaterial on our GAAP and non-GAAP diluted earnings per share for both fiscal year 2025 and Q2 2025.
To the extent that there are changes in exchange rates versus the current environment and/or our expectations, this may have an impact on Progress' business outlook.
Conference Call
Progress will hold a conference call to review its financial results for the fiscal first quarter of 2025 at 5:00 p.m. ET on Monday, March 31, 2025. Participants must register for the conference call here: https://register-conf.media-server.com/register/BIb86bb577ced14b9fa67069eb761f36a9. The webcast can be accessed at: https://edge.media-server.com/mmc/p/bt5rgqn7. The conference call will include comments followed by questions and answers. Attendees must register for the webcast and an archived version of the conference call and supporting materials will be available on the Progress website within the investor relations section after the live conference call.
About Progress
Progress (Nasdaq: PRGS) empowers organizations to achieve transformational success in the face of disruptive change. Our software enables our customers to develop, deploy and manage responsible AI-powered applications and digital experiences with agility and ease. Customers get a trusted provider in Progress, with the products, expertise and vision they need to succeed. Over 4 million developers and technologists at hundreds of thousands of enterprises depend on Progress. Learn more at www.progress.com.
Progress and Progress Software are trademarks or registered trademarks of Progress Software Corporation and/or its subsidiaries or affiliates in the U.S. and other countries. Any other names contained herein may be trademarks of their respective owners.
| Investor Contact: | Press Contact: | |||||||
| Michael Micciche | Jeff Young | |||||||
| Progress Software | Progress Software | |||||||
| +1 781 850 8450 | +1 781 280 4000 | |||||||
| [email protected] | [email protected] | |||||||
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | |||||||||||||||||
| (In thousands, except per share data) | February 28, 2025 | February 29, 2024 | % Change | ||||||||||||||
| Revenue: | |||||||||||||||||
| Software licenses | $ | 58,445 | $ | 64,100 | (9) | % | |||||||||||
| Maintenance, SaaS, and professional services | 179,570 | 120,585 | 49 | % | |||||||||||||
| Total revenue | 238,015 | 184,685 | 29 | % | |||||||||||||
| Costs of revenue: | |||||||||||||||||
| Cost of software licenses | 2,925 | 2,731 | 7 | % | |||||||||||||
| Cost of maintenance, SaaS, and professional services | 32,884 | 22,219 | 48 | % | |||||||||||||
| Amortization of acquired intangibles | 10,422 | 7,859 | 33 | % | |||||||||||||
| Total costs of revenue | 46,231 | 32,809 | 41 | % | |||||||||||||
| Gross profit | 191,784 | 151,876 | 26 | % | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales and marketing | 51,296 | 39,111 | 31 | % | |||||||||||||
| Product development | 46,375 | 34,988 | 33 | % | |||||||||||||
| General and administrative | 25,623 | 21,344 | 20 | % | |||||||||||||
| Amortization of acquired intangibles | 25,808 | 17,389 | 48 | % | |||||||||||||
| Cyber vulnerability response expenses, net | 737 | 987 | (25) | % | |||||||||||||
| Restructuring expenses | 7,029 | 2,349 | 199 | % | |||||||||||||
| Acquisition-related expenses | 2,490 | 702 | 255 | % | |||||||||||||
| Total operating expenses | 159,358 | 116,870 | 36 | % | |||||||||||||
| Income from operations | 32,426 | 35,006 | (7) | % | |||||||||||||
| Other expense, net | (19,124) | (7,399) | 158 | % | |||||||||||||
| Income before income taxes | 13,302 | 27,607 | (52) | % | |||||||||||||
| Provision for income taxes | 2,356 | 4,968 | (53) | % | |||||||||||||
| Net income | $ | 10,946 | $ | 22,639 | (52) | % | |||||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.25 | $ | 0.52 | (52) | % | |||||||||||
| Diluted | $ | 0.24 | $ | 0.51 | (53) | % | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 43,256 | 43,802 | (1) | % | |||||||||||||
| Diluted | 44,887 | 44,826 | — | % | |||||||||||||
| Cash dividends declared per common share | $ | — | $ | 0.175 | (100) | % | |||||||||||
| Stock-based compensation is included in the condensed consolidated statements of operations, as follows: | |||||||||||||||||
| Cost of revenue | $ | 1,195 | $ | 986 | 21 | % | |||||||||||
| Sales and marketing | 3,032 | 2,312 | 31 | % | |||||||||||||
| Product development | 4,410 | 3,665 | 20 | % | |||||||||||||
| General and administrative | 6,046 | 5,501 | 10 | % | |||||||||||||
| Total | $ | 14,683 | $ | 12,464 | 18 | % | |||||||||||
3
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands) | February 28, 2025 | November 30, 2024 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 124,161 | $ | 118,077 | |||||||
| Accounts receivable, net | 126,366 | 163,575 | |||||||||
| Unbilled receivables | 35,454 | 34,672 | |||||||||
| Other current assets | 54,694 | 52,489 | |||||||||
| Total current assets | 340,675 | 368,813 | |||||||||
| Property and equipment, net | 13,233 | 13,746 | |||||||||
| Goodwill and intangible assets, net | 1,980,181 | 2,015,748 | |||||||||
| Right-of-use lease assets | 28,308 | 30,894 | |||||||||
| Long-term unbilled receivables | 30,416 | 28,893 | |||||||||
| Other assets | 69,605 | 68,872 | |||||||||
| Total assets | $ | 2,462,418 | $ | 2,526,966 | |||||||
| Liabilities and shareholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and other current liabilities | $ | 90,768 | $ | 113,801 | |||||||
| Short-term operating lease liabilities | 8,975 | 9,202 | |||||||||
| Short-term deferred revenue, net | 328,798 | 332,142 | |||||||||
| Total current liabilities | 428,541 | 455,145 | |||||||||
| Long-term debt, net | 700,000 | 730,000 | |||||||||
| Convertible senior notes, net | 797,277 | 796,267 | |||||||||
| Long-term operating lease liabilities | 24,260 | 26,259 | |||||||||
| Long-term deferred revenue, net | 71,508 | 72,270 | |||||||||
| Other long-term liabilities | 8,985 | 8,237 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock and additional paid-in capital | 353,469 | 354,592 | |||||||||
| Retained earnings | 78,378 | 84,196 | |||||||||
| Total stockholders’ equity | 431,847 | 438,788 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,462,418 | $ | 2,526,966 | |||||||
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | |||||||||||
| (In thousands) | February 28, 2025 | February 29, 2024 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 10,946 | $ | 22,639 | |||||||
| Depreciation and amortization | 39,209 | 27,544 | |||||||||
| Stock-based compensation | 14,683 | 12,464 | |||||||||
| Other non-cash adjustments | 3,070 | 1,327 | |||||||||
| Changes in operating assets and liabilities | 1,039 | 6,530 | |||||||||
| Net cash flows from operating activities | 68,947 | 70,504 | |||||||||
| Capital expenditures | (1,290) | (309) | |||||||||
| Repurchases of common stock, net of issuances | (23,870) | (14,917) | |||||||||
| Dividend equivalent and dividend payments to stockholders | (359) | (8,171) | |||||||||
| Payments for acquisitions | (1,195) | — | |||||||||
| Principal payment on term loan and repayment of revolving line of credit | (30,000) | (33,437) | |||||||||
| Other | (6,149) | (7,406) | |||||||||
| Net change in cash and cash equivalents | 6,084 | 6,264 | |||||||||
| Cash and cash equivalents, beginning of period | 118,077 | 126,958 | |||||||||
| Cash and cash equivalents, end of period | $ | 124,161 | $ | 133,222 | |||||||
5
RECONCILIATIONS OF GAAP TO NON-GAAP SELECTED FINANCIAL MEASURES
(Unaudited)
| Three Months Ended | |||||||||||
| (In thousands, except per share data) | February 28, 2025 | February 29, 2024 | |||||||||
| Adjusted income from operations: | |||||||||||
| GAAP income from operations | $ | 32,426 | $ | 35,006 | |||||||
| Amortization of acquired intangibles | 36,230 | 25,248 | |||||||||
| Stock-based compensation | 14,683 | 12,464 | |||||||||
| Restructuring expenses | 7,029 | 2,349 | |||||||||
| Acquisition-related expenses | 2,490 | 702 | |||||||||
| Cyber vulnerability response expenses, net | 737 | 987 | |||||||||
| Non-GAAP income from operations | $ | 93,595 | $ | 76,756 | |||||||
| Adjusted net income: | |||||||||||
| GAAP net income | $ | 10,946 | $ | 22,639 | |||||||
| Amortization of acquired intangibles | 36,230 | 25,248 | |||||||||
| Stock-based compensation | 14,683 | 12,464 | |||||||||
| Restructuring expenses | 7,029 | 2,349 | |||||||||
| Acquisition-related expenses | 2,490 | 702 | |||||||||
| Cyber vulnerability response expenses, net | 737 | 987 | |||||||||
| Provision for income taxes | (13,120) | (8,461) | |||||||||
| Non-GAAP net income | $ | 58,995 | $ | 55,928 | |||||||
| Adjusted diluted earnings per share: | |||||||||||
| GAAP diluted earnings per share | $ | 0.24 | $ | 0.51 | |||||||
| Amortization of acquired intangibles | 0.80 | 0.56 | |||||||||
| Stock-based compensation | 0.32 | 0.28 | |||||||||
| Restructuring expenses | 0.16 | 0.05 | |||||||||
| Acquisition-related expenses | 0.06 | 0.02 | |||||||||
| Cyber vulnerability response expenses, net | 0.02 | 0.02 | |||||||||
| Provision for income taxes | (0.29) | (0.19) | |||||||||
| Non-GAAP diluted earnings per share | $ | 1.31 | $ | 1.25 | |||||||
| Non-GAAP weighted avg shares outstanding - diluted | 44,887 | 44,826 | |||||||||
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OTHER NON-GAAP FINANCIAL MEASURES
(Unaudited)
| Adjusted Free Cash Flow and Unlevered Free Cash Flow | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| (In thousands) | February 28, 2025 | February 29, 2024 | % Change | ||||||||||||||
| Cash flows from operations | $ | 68,947 | $ | 70,504 | (2) | % | |||||||||||
| Purchases of property and equipment | (1,290) | (309) | 317 | % | |||||||||||||
| Free cash flow | 67,657 | 70,195 | (4) | % | |||||||||||||
| Add back: restructuring payments | 5,554 | 2,009 | 176 | % | |||||||||||||
| Adjusted free cash flow | $ | 73,211 | $ | 72,204 | 1 | % | |||||||||||
| Add back: tax-effected interest expense | 14,743 | 5,875 | 151 | % | |||||||||||||
| Unlevered free cash flow | $ | 87,954 | $ | 78,079 | 13 | % | |||||||||||
7
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2025 GUIDANCE
(Unaudited)
Fiscal Year 2025 Updated Non-GAAP Operating Margin Guidance | |||||||||||
| Fiscal Year Ending November 30, 2025 | |||||||||||
| (In millions) | Low | High | |||||||||
| GAAP income from operations | $ | 137.2 | $ | 145.7 | |||||||
| GAAP operating margins | 14 | % | 15 | % | |||||||
| Acquisition-related expense | 6.0 | 6.0 | |||||||||
| Restructuring expense | 9.4 | 9.4 | |||||||||
| Stock-based compensation | 62.8 | 62.8 | |||||||||
| Amortization of acquired intangibles | 144.9 | 144.9 | |||||||||
| Cyber vulnerability response expenses, net | 4.2 | 4.2 | |||||||||
Total adjustments(1) | 227.3 | 227.3 | |||||||||
| Non-GAAP income from operations | $ | 364.5 | $ | 373.0 | |||||||
| Non-GAAP operating margin | 38 | % | 38 | % | |||||||
(1)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from ShareFile and restructuring expenses. The final amounts will not be available until the Company's internal procedures and reviews are completed.
Fiscal Year 2025 Updated Non-GAAP Earnings per Share and Effective Tax Rate Guidance | |||||||||||
| Fiscal Year Ending November 30, 2025 | |||||||||||
| (In millions, except per share data) | Low | High | |||||||||
| GAAP net income | $ | 53.2 | $ | 60.9 | |||||||
| Adjustments (from previous table) | 227.3 | 227.3 | |||||||||
Income tax adjustment(2) | (46.1) | (46.2) | |||||||||
| Non-GAAP net income | $ | 234.4 | $ | 242.0 | |||||||
| GAAP diluted earnings per share | $ | 1.19 | $ | 1.35 | |||||||
| Non-GAAP diluted earnings per share | $ | 5.25 | $ | 5.37 | |||||||
| Diluted weighted average shares outstanding | 44.7 | 45.1 | |||||||||
2 Tax adjustment is based on a non-GAAP effective tax rate of approximately 20%, calculated as follows: | ||||||||||||||
| Fiscal Year Ending November 30, 2025 | ||||||||||||||
| Low | High | |||||||||||||
| Non-GAAP income from operations | $ | 364.5 | $ | 373.0 | ||||||||||
| Other (expense) income | (71.5) | (70.5) | ||||||||||||
| Non-GAAP income from continuing operations before income taxes | 293.0 | 302.5 | ||||||||||||
| Non-GAAP net income | 234.4 | 242.0 | ||||||||||||
| Tax provision | $ | 58.6 | $ | 60.5 | ||||||||||
| Non-GAAP tax rate | 20 | % | 20 | % | ||||||||||
8
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR FISCAL YEAR 2025 GUIDANCE
(Unaudited)
Fiscal Year 2025 Adjusted Free Cash Flow and Unlevered Free Cash Flow Guidance | |||||||||||
| Fiscal Year Ending November 30, 2025 | |||||||||||
| (In millions) | Low | High | |||||||||
| Cash flows from operations (GAAP) | $ | 216 | $ | 228 | |||||||
| Purchases of property and equipment | (7) | (7) | |||||||||
| Add back: restructuring payments | 17 | 17 | |||||||||
| Adjusted free cash flow (non-GAAP) | 226 | 238 | |||||||||
| Add back: tax-effected interest expense | 57 | 56 | |||||||||
| Unlevered free cash flow (non-GAAP) | $ | 283 | $ | 294 | |||||||
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q2 2025 GUIDANCE
(Unaudited)
Q2 2025 Non-GAAP Earnings per Share Guidance | |||||||||||
| Three Months Ending May 31, 2025 | |||||||||||
| Low | High | ||||||||||
| GAAP diluted earnings per share | $ | 0.24 | $ | 0.30 | |||||||
| Acquisition-related expense | 0.04 | 0.04 | |||||||||
| Restructuring expense | 0.03 | 0.03 | |||||||||
| Stock-based compensation | 0.38 | 0.38 | |||||||||
| Amortization of acquired intangibles | 0.83 | 0.83 | |||||||||
| Cyber vulnerability response expenses, net | 0.01 | 0.01 | |||||||||
Total adjustments(1) | 1.29 | 1.29 | |||||||||
| Income tax adjustment | (0.25) | (0.25) | |||||||||
| Non-GAAP diluted earnings per share | $ | 1.28 | $ | 1.34 | |||||||
(1)Total adjustments include preliminary estimates relating to the valuation of intangible assets acquired from ShareFile and restructuring expenses. The final amounts will not be available until the Company's internal procedures and reviews are completed.
9
Important Information Regarding Non-GAAP Financial Measures, Liquidity Measures and Select Performance Metrics
Progress furnishes certain non-GAAP supplemental information to our financial results. We use such non-GAAP financial measures to evaluate our period-over-period operating performance because our management team believes that excluding the effects of certain GAAP-related items helps to illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as greater understanding of the results from the primary operations of our business. Management also uses such non-GAAP financial measures to establish budgets and operational goals, evaluate performance, and allocate resources. In addition, the compensation of our executives and non-executive employees is based in part on the performance of our business as evaluated by such non-GAAP financial measures. We believe these non-GAAP financial measures enhance investors’ overall understanding of our current financial performance and our prospects for the future by: (i) providing more transparency for certain financial measures, (ii) presenting disclosure that helps investors understand how we plan and measure the performance of our business, (iii) affords a view of our operating results that may be more easily compared to our peer companies, and (iv) enables investors to consider our operating results on both a GAAP and non-GAAP basis (including following the integration period of our prior and proposed acquisitions). However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP") and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information may have a material impact on Progress’ financial results. A reconciliation of non-GAAP adjustments to Progress' GAAP financial results is included in the tables above.
In the noted fiscal periods, we adjusted for the following items from our GAAP financial results to arrive at our non-GAAP financial measures:
•Amortization of acquired intangibles - We exclude amortization of acquired intangibles because those expenses are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired. Adjustments include preliminary estimates relating to the valuation of intangible assets from ShareFile. The final amounts will not be available until the Company's internal procedures and reviews are completed.
•Stock-based compensation - We exclude stock-based compensation to be consistent with the way management and, in our view, the overall financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include these charges in operating plans.
•Restructuring expenses - In all periods presented, we exclude restructuring expenses incurred because those expenses distort trends and are not part of our core operating results. Adjustments include preliminary estimates relating to restructuring expenses from ShareFile. The final amounts will not be available until the Company's internal procedures and reviews are completed.
•Acquisition-related expenses - We exclude acquisition-related expenses in order to provide a more meaningful comparison of the financial results to our historical operations and forward-looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions.
•Cyber vulnerability response expenses, net - We exclude certain expenses resulting from the zero-day MOVEit Vulnerability, as more thoroughly described in our filings with the Securities and Exchange Commission since June 5, 2023. Expenses include costs to investigate and remediate these cyber related matters, as well as legal and other professional services related thereto. Expenses related to such cyber matters are provided net of expected insurance recoveries, although the timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. Costs associated with the enhancement of our cybersecurity program are not included within this adjustment. We expect to continue to incur legal and other professional services expenses in future periods associated with the MOVEit vulnerability. Expenses related to such cyber matters are expected to result in operating expenses that would not have otherwise been incurred in the normal course of business operations. We believe that excluding these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.
•Provision for income taxes -We adjust our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above.
•Constant currency - Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. As exchange rates are an important factor in understanding period-to-
10
period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates.
In the noted fiscal periods, we also present the following liquidity measures:
•Adjusted free cash flow ("AFCF") and unlevered free cash flow ("Unlevered FCF") - AFCF is equal to cash flows from operating activities less purchases of property and equipment, plus restructuring payments. Unlevered FCF is AFCF plus tax-effected interest expense on outstanding debt.
In the noted fiscal periods, we also present the following select performance metrics:
•Annualized Recurring Revenue ("ARR") - We disclose ARR as a performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources currently represents the substantial majority of our revenues and is expected to continue in the future. We define ARR as the annualized revenue of all active and contractually binding term-based contracts from all customers at a point in time. ARR includes revenue from maintenance, software upgrade rights, public cloud, and on-premises subscription-based transactions and managed services. ARR mitigates fluctuations in revenue due to seasonality, contract term and the sales mix of subscriptions for term-based licenses and SaaS. We use ARR to understand customer trends and the overall health of our business, helping us to formulate strategic business decisions.
We calculate the annualized value of annual and multi-year contracts, and contracts with terms less than one year, by dividing the total contract value of each contract by the number of months in the term and then multiplying by 12. Annualizing contracts with terms less than one-year results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period. We generally do not sell non-SaaS-based
contracts with a term of less than one year unless a customer is purchasing additional licenses under an existing annual or multi-year contract. The expectation is that at the time of renewal, such contracts with a term less than one year will renew with the same term as the existing contracts being renewed, such that both contracts are co-termed. Historically, such contracts with a term of less than one year renew at rates equal to or better than annual or multi-year contracts.
For SaaS-based contracts, there is a meaningful percentage of monthly auto-renewing contracts for which annualizing the contracts results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period.
Revenue from term-based license and on-premises subscription arrangements include a portion of the arrangement consideration that is allocated to the software license that is recognized up-front at the point in time control is transferred under ASC 606 revenue recognition principles. ARR for these arrangements is calculated as described above. The expectation is that the total contract value, inclusive of revenue recognized as software license, will be renewed at the end of the contract term.
The calculation is done at constant currency using the current year budgeted exchange rates for all periods presented.
ARR is not defined in GAAP and is not derived from a GAAP measure. Rather, ARR generally aligns to billings (as opposed to GAAP revenue which aligns to the transfer of control of each performance obligation). ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
•Net Retention Rate ("NRR") - We calculate net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period ARR"). We then calculate the ARR from these same customers as of the current period end ("Current Period ARR"). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net retention rate. Net retention rate is not calculated in accordance with GAAP and is not derived from a GAAP measure.
11
Note Regarding Forward-Looking Statements
This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-looking statements with words like "believe," "may," "could," "would," "might," "should," "expect," "intend," "plan," "target," "anticipate" and "continue," the negative of these words, other terms of similar meaning or the use of future dates. Forward-looking statements in this press release include, but are not limited to, statements regarding Progress' business outlook (including future acquisition activity) and financial guidance. There are a number of factors that could cause actual results or future events to differ materially from those anticipated by the forward-looking statements, including, without limitation: (i) economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price; (ii) our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses; (iii) we may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts; (iv) if the security measures for our software, services, other offerings or our internal information technology infrastructure are compromised or subject to a successful cyber-attack, or if our software offerings contain significant coding or configuration errors or zero-day vulnerabilities, we may experience reputational harm, legal claims and financial exposure; and the results of inquiries, investigations and legal claims regarding the MOVEit Vulnerability remain uncertain, while the ultimate resolution of these matters could result in losses that may be material to our financial results for a particular period; and (v) future acquisitions may not be successful or may involve unanticipated costs or other integration issues that could disrupt our existing operations; and (vi) expected synergies and benefits of the ShareFile acquisition may not be realized which could negatively impact our future results of operations and financial condition. For further information regarding risks and uncertainties associated with Progress' business, please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended November 30, 2024. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this press release.
12
Document 1
March 31, 2025 Q1 2025 Supplemental Information Progress Financial Results
2© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Forward Looking Statements This presentation contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Progress has identified some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “should,” “expect,” “intend,” “plan,” “target,” “anticipate” and “continue,” the negative of these words, other terms of similar meaning or the use of future dates. Forward-looking statements in this presentation include, but are not limited to, statements regarding Progress’s strategy; future revenue growth, operating margin and cost savings; future acquisitions; and other statements regarding the future operation, direction, prospects and success of Progress’s business. There are a number of factors that could cause actual results or future performance or achievements to differ materially from those anticipated by the forward-looking statements, including, without limitation: (i) economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price; (ii) our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses; (iii) we may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, fluctuations in currency exchange rates, or a decline in our renewal rates for contracts; (iv) if the security measures for our software, services, other offerings or our internal information technology infrastructure are compromised or subject to a successful cyber-attack, or if our software offerings contain significant coding or configuration errors or zero-day vulnerabilities, we may experience reputational harm, legal claims and financial exposure; and the results of inquiries, investigations and legal claims regarding the MOVEit Vulnerability remain uncertain, while the ultimate resolution of these matters could result in losses that may be material to our financial results for a particular period; and (v) future acquisitions may not be successful or may involve unanticipated costs or other integration issues that could disrupt our existing operations; and (vi) expected synergies and benefits of the ShareFIle acquisition may not be realized which could negatively impact our future results of operations and financial condition. For further information regarding risks and uncertainties associated with Progress' business, please refer to Progress' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended November 30, 2024, and its Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2025. Progress undertakes no obligation to update any forward-looking statements, which speak only as of the date of this presentation. Non-GAAP Financial Measures We refer to certain non-GAAP financial measures in this presentation, including but not limited to, non-GAAP revenue, non-GAAP income from operations and operating margin, adjusted free cash flow, annualized recurring revenue ("ARR"), Net Retention Rate ("NRR"), and non-GAAP diluted earnings per share. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles (“GAAP”). Please see "Important Information Regarding Non-GAAP Financial Information" below for additional information. A reconciliation between non-GAAP measures and the most directly comparable GAAP measures appears in our earnings press release for the fiscal quarter ended February 28, 2025, which is furnished on a Form 8-K concurrently with this presentation and is available in the Investor Relations section of our website.
3© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Conference Call Details Please note: Webcast is listen-only. What: When: Time: To register for the Live Call: Live / Recorded Webcast: Progress Fiscal Q1’25 Financial Results Monday, March 31, 2025 5:00 p.m. ET Please go to this link to retrieve dial-in details. https://edge.media-server.com/mmc/p/bt5rgqn7
4© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Summary Highlights Q1 2025 • Revenues of $238M increased 30% year-over-year in constant currency; at high end of prior guidance of $232M - $238M • ARR: $836M, up 48% year-over-year in constant currency, 3% pro-forma • NRR 100+% • Operating margins strong at 39% • EPS: $1.31, well above high end of prior guidance of $1.02 - $1.08 • Q2 ’25 guidance: Revenue $235M - $241M; EPS $1.28 - $1.34 • FY ’25 guidance: Revenue of $958M - $970M; EPS of $5.25 - $5.37 All figures presented are non-GAAP. Definitions of non-GAAP financial measures (including ARR and NRR) can be found in "Important Information Regarding Non-GAAP Financial Information". Strong Q1 Results; ARR Growth of 48%, Net Retention Rate Exceeds 100%; ShareFile Integration Ahead of Plan
5© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Note: ARR is a Non-GAAP operating metric and does not have a standardized definition. It is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. Annualized Recurring Revenue ARR growth of 48% year-over-year ShareFile adds ~$250M of ARR Other products further add to year- over-year growth All periods reported in constant currency, using current year budgeted exchange rates
6© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Annualized Recurring Revenue Trend All periods reported in constant currency, using current year budgeted exchange rates Pro Forma ARR growth of 3% year-over-year (ShareFile included in all periods) Consistent Annual Growth
7© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. ARR Growth and Net Retention All periods reported in constant currency, using current year budgeted exchange rates` Pro Forma ARR growth of 3% year-over- year (ShareFile included in all periods) + Net Retention Rate between = 100%-102% = Predictable and durable top line performance * NRR & Growth percentage for Q1 ‘23 through Q3 ‘23 excludes ShareFile YoY ARR Growth % in Purple
8© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Total Growth Strategy: Driving ARR Growth ARR CAGR of 19% Q1 2020 – Q1 2025 All periods reported in constant currency, using current year budgeted exchange rates
9© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Total Growth Strategy: Driving Revenue Growth Revenue CAGR of 15% 2021 – 2025(E)* * Represents the mid-point of our FY’25 guidance range
10© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Operating Income CAGR of 13% 2021 – 2025(E)* Best-in-class non-GAAP operating margins consistently above 35% * Represents the mid-point of our FY’25 guidance range Total Growth Strategy: Growing Profitability
11© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Unlevered FCF CAGR of 11% 2021 – 2025(E)* * Represents the mid-point of our FY’25 guidance range Total Growth Strategy: Growing Unlevered Free Cash Flow
12© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Capital Allocation Strategy PRIMARY FOCUS Continue to prioritize accretive M&A opportunities that meet our disciplined criteria to create the strongest returns. Repurchase shares to offset dilution from our equity programs. • Management has flexibility to increase, reduce, or suspend repurchases depending on market conditions and other considerations including size and timing of proposed M&A. • $30M of shares repurchased in Q1 ’25. Use our significant free cash flow to aggressively pay down debt and reload for the next acquisition. • $30M repaid in Q1 ’25 • Currently modeling $160M in debt repayment for FY2025
13© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Well Defined M&A Framework Cast a wide net across infrastructure software and all aspects of the development lifecycle Tight alignment increases synergy potential ~10-25% of current Progress revenues Can be financed and integrated efficiently High recurring revenue and customer retention Potential to achieve operational efficiency Focused on sustained returns, accretiveROIC > WACC Financial Characteristics Appropriate Sizing End Market Alignment
14© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Summary Q1 2025 Financial Results Q1 2025 Results Prior Q1 2025 Outlook (provided on Jan 21, 2025) Revenue $238M $232M - $238M GAAP earnings per share (Diluted) $0.24 $(0.01) - $0.05 Non-GAAP earnings per share (Diluted) $1.31 $1.02 - $1.08 GAAP Operating Margin 14% Not guided Non-GAAP Operating Margin 39% Not guided Cash from Operations (GAAP) $69M Not guided Adjusted Free Cash Flow (Non-GAAP) $73M Not guided Unlevered Free Cash Flow (Non-GAAP) $88M Not guided
15© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Business Outlook (as of March 31, 2025) Q2 2025 Current Outlook FY 2025 Prior Outlook (provided on January 21, 2025) FY 2025 Updated Outlook Revenue $235M - $241M $958M - $970M Unchanged GAAP EPS $0.24 - $0.30 $1.08 - $1.23 $1.19 - $1.35 Non-GAAP EPS $1.28 - $1.34 $5.00 - $5.12 $5.25 - $5.37 GAAP Operating Margin Not guided 14% - 15% Unchanged Non-GAAP Operating Margin Not guided 37% - 38% 38% Cash from Operations (GAAP) Not guided $216M - $228M Unchanged Adjusted Free Cash Flow (Non-GAAP) Not guided $225M - $237M $226M - $238M Unlevered Free Cash Flow (Non-GAAP) Not guided $282M - $294M $283M - $294M GAAP Effective Tax Rate Not guided 21% 19% Non-GAAP Effective Tax Rate Not guided 20% Unchanged
16© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Outstanding Debt and Potential Impact on Share Count Convertible # 1 Balance: $360M Interest Rate: 1.00% Conversion Price: $57.30 Expiration: April 15, 2026 Capped Call Coverage: up to $89.88* * Subject to downward adjustment for dividend policy Convertible # 2 Balance: $450M Interest Rate: 3.50% Conversion Price: $67.74 Expiration: March 1, 2030 Capped Call Coverage: up to $92.98* * Subject to downward adjustment for dividend policy Revolver (as of 2/28/25) Balance: $700M drawn out of $900M Interest Rate: 1.5% to 3.0% above benchmark (Current interest rate ~ 6.7%) Unused revolver fee: 0.15% - 0.4% Expiration: March 7, 2029 Projected ending FY 2025 Balance = $570M Approximately $5.5M of additional interest expense in FY 2025 for amortization of debt issuance costs $55 $60 $65 $70 $75 $80 Impact of convertible notes on diluted weighted average share count (M)* - 0.3 0.7 1.4 2.1 2.8 Current Guidance Assumption * Does not contemplate the impact on diluted weighted average share count from other events such as repurchases, issuance under equity plans, etc. Prior Guidance Assumption Future Share Price
Supplemental Financial Information
18© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. ARR Exchange Rate Comparison – 2024 by Quarter ARR is presented in constant currency, using our current year budgeted exchange rates “ARR at FY24 Rates” represents results reported translated using our FY24 budgeted exchange rates “ARR at FY25 Rates” represents those same results translated using our FY25 budgeted exchange rates
19© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. ARR Exchange Rate Comparison – 2022-2024 ARR is presented in constant currency, using our current year budgeted exchange rates “ARR at FY24 Rates” represents results reported translated using our FY24 budgeted exchange rates “ARR at FY25 Rates” represents those same results translated using our FY25 budgeted exchange rates
20© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Supplemental Revenue Information (Unaudited)
21© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Progress furnishes certain non-GAAP supplemental information to our financial results. We use such non-GAAP financial measures to evaluate our period-over-period operating performance because our management team believes that excluding the effects of certain GAAP-related items helps to illustrate underlying trends in our business and provides us with a more comparable measure of our continuing business, as well as greater understanding of the results from the primary operations of our business. Management also uses such non-GAAP financial measures to establish budgets and operational goals, evaluate performance, and allocate resources. In addition, the compensation of our executives and non-executive employees is based in part on the performance of our business as evaluated by such non-GAAP financial measures. We believe these non-GAAP financial measures enhance investors’ overall understanding of our current financial performance and our prospects for the future by: (i) providing more transparency for certain financial measures, (ii) presenting disclosure that helps investors understand how we plan and measure the performance of our business, (iii) affords a view of our operating results that may be more easily compared to our peer companies, and (iv) enables investors to consider our operating results on both a GAAP and non-GAAP basis (including following the integration period of our prior and proposed acquisitions). However, this non-GAAP information is not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP") and should be considered in conjunction with our GAAP results as the items excluded from the non-GAAP information may have a material impact on Progress’ financial results. A reconciliation between non-GAAP measures and the most directly comparable GAAP measures appears in our earnings press release for the fiscal quarter ended February 28, 2025, which is furnished on a Form 8-K concurrently with this presentation and is available on the Progress website at www.progress.com within the investor relations section. In this presentation, we may reference the following non-GAAP financial measures: • Amortization of acquired intangibles - We exclude amortization of acquired intangibles because those expenses are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired. Adjustments include preliminary estimates relating to the valuation of intangible assets from ShareFile. The final amounts will not be available until the Company's internal procedures and reviews are completed. • Stock-based compensation - We exclude stock-based compensation to be consistent with the way management and, in our view, the overall financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include these charges in operating plans. • Restructuring expenses and other - In all periods presented, we exclude restructuring expenses incurred because those expenses distort trends and are not part of our core operating results. Adjustments include preliminary estimates relating to restructuring expenses from ShareFile. The final amounts will not be available until the Company's internal procedures and reviews are completed. • Acquisition-related expenses - We exclude acquisition-related expenses in order to provide a more meaningful comparison of the financial results to our historical operations and forward-looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. • Cyber vulnerability response expenses, net - We exclude certain expenses resulting from the zero-day MOVEit Vulnerability, as more thoroughly described in our filings with the Securities and Exchange Commission since June 5, 2023. Expenses include costs to investigate and remediate these cyber related matters, as well as legal and other professional services related thereto. Expenses related to such cyber matters are provided net of expected insurance recoveries, although the timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. Costs associated with the enhancement of our cybersecurity program are not included within this adjustment. We expect to continue to incur legal and other professional services expenses in future periods associated with the MOVEit vulnerability. Expenses related to such cyber matters are expected to result in operating expenses that would not have otherwise been incurred in the normal course of business operations. We believe that excluding these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance. Important Information Regarding Non-GAAP Financial Information
22© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Important Information Regarding Non-GAAP Financial Information • Income tax adjustment - We adjust our income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above. • Constant Currency - Revenue from our international operations has historically represented a substantial portion of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. As exchange rates are an important factor in understanding period-to-period comparisons, we present revenue growth rates on a constant currency basis, which helps improve the understanding of our revenue results and our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. We also may reference the following liquidity measures: • Adjusted free cash flow ("AFCF") and unlevered free cash flow ("Unlevered FCF") - AFCF is equal to cash flows from operating activities less purchases of property and equipment, plus restructuring payments. Unlevered FCF is AFCF plus tax-effected interest expense on outstanding debt. We also may reference the following select performance metrics: • Annualized Recurring Revenue (“ARR”) - We disclose ARR as a performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources currently represents the substantial majority of our revenues and is expected to continue in the future. We define ARR as the annualized revenue of all active and contractually binding term-based contracts from all customers at a point in time. ARR includes revenue from maintenance, software upgrade rights, public cloud, and on-premises subscription-based transactions and managed services. ARR mitigates fluctuations in revenue due to seasonality, contract term and the sales mix of subscriptions for term-based licenses and SaaS. We use ARR to understand customer trends and the overall health of our business, helping us to formulate strategic business decisions. We calculate the annualized value of annual and multi-year contracts, and contracts with terms less than one year, by dividing the total contract value of each contract by the number of months in the term and then multiplying by 12. Annualizing contracts with terms less than one-year results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period. We generally do not sell non-SaaS- based contracts with a term of less than one year unless a customer is purchasing additional licenses under an existing annual or multi-year contract. The expectation is that at the time of renewal, such contracts with a term less than one year will renew with the same term as the existing contracts being renewed, such that both contracts are co-termed. Historically, such contracts with a term of less than one year renew at rates equal to or better than annual or multi-year contracts. For SaaS-based contracts, there is a meaningful percentage of monthly auto-renewing contracts for which annualizing the contracts results in amounts being included in our ARR that are in excess of the total contract value for those contracts at the end of the reporting period. Revenue from term-based license and on-premises subscription arrangements include a portion of the arrangement consideration that is allocated to the software license that is recognized up-front at the point in time control is transferred under ASC 606 revenue recognition principles. ARR for these arrangements is calculated as described above. The expectation is that the total contract value, inclusive of revenue recognized as software license, will be renewed at the end of the contract term. The calculation is done at constant currency using the current year budgeted exchange rates for all periods presented.
23© 2025 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Important Information Regarding Non-GAAP Financial Information • ARR continued - ARR is not defined in GAAP and is not derived from a GAAP measure. Rather, ARR generally aligns to billings (as opposed to GAAP revenue which aligns to the transfer of control of each performance obligation). ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. • Net Retention Rate - We calculate net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period ARR"). We then calculate the ARR from these same customers as of the current period end ("Current Period ARR"). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net retention rate. Net retention rate is not calculated in accordance with GAAP and is not derived from a GAAP measure.
