Progress Software Corporation

Ladies and gentlemen, good day and welcome to the Progress Software Corporation First Quarter 2021 Investor Relations Call. At this time, I would like to turn the conference over to Mr. Michael Michike, Vice President of Investor Relations. Please go ahead, sir.

Great. Thank you, David. Thank you, David. Good afternoon, everyone, and thanks for joining us for Progress Software's Fiscal First Quarter 2021 Financial Results Conference Call. My name is Mike Michique. I recently joined Progress as Vice President of Investor Relations. I'm thrilled to be on board, and I look forward to meeting all of you soon. With me today is Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger, Chief Financial Officer. Before we get started, I'd like to remind you that during this call, we will discuss our outlook for future financial operating performance, corporate strategies, product plans, cost initiatives, our integration of SHEP, the impact of the COVID pandemic, 19 crisis on our business, and other information that might be considered forward-looking. This forward-looking information represents Progress Software's outlook and guidance only as of today and is subject to risks and uncertainties. For a description of the risk factors that may affect our results, please refer to our recent SEC filings, in particular the section captioned Risk Factors in our most recent form 10-K. Progress Software assumes no obligation to update the forward-looking statements included in this call, whether a result of new developments or otherwise. Additionally, on this call, all financial figures we use are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our financial results press release, which was issued after the market closed today and is also published on our website. This document contains the full details of our financial results for the fiscal first quarter of 2021, and I recommend you reference it for specific details. We also have published a presentation that contains supplemental data for our first quarter 2021 results, providing highlights and additional financial metrics. Before our earnings release, both our earnings release and this presentation are available in the investor relations section of our website at investors.progress.com. Today's conference call will be recorded in its entirety and will be available via replay from the investor relations section of our website. With that, I'll now turn it over to you, Yogesh.

Thank you, Mike. and welcome. It's great to have you on board. And thank you all for joining our Q1 2021 financial results conference call. As I'm sure you've seen by now, the first quarter was an excellent start to 2021, highlighted by better than expected performance across all metrics. Our overperformance was driven by a combination of strong execution and an improving demand environment from our customers and partners spanning virtually all of our product lines. We benefited from improved macroeconomic conditions as more businesses reopened from COVID-19 and became more active with their IT projects. What's more, our performance in Q1 was testament to the mission-critical nature of our comprehensive product portfolio, which remains as strategic as ever to our customers and partners. As a result of our strong Q1 performance, and increased confidence in our business, we have meaningfully raised our 2021 outlook for revenue, EPS, and cash flow. And Anthony will cover this in more detail as part of his comments. As I reflect on the strength of our Q1 performance, it's worth stressing the investments we've made to modernize our portfolio and the industry trends benefiting our business. As more customers and partners have taken a cloud-first approach for their applications, data, and content, our Chefs, OpenEdge, Sitefinity, and Mubit products are available to support their efforts. Our heritage of delivering best-in-class application development offerings that are truly developer-centric coupled with our strength in data and infrastructure management and our pioneering DevOps capabilities has produced a portfolio of products that fully addresses the modern continuous application development, deployment, and management lifecycle. What's more, it was a flagship OpenEdge product that was the single largest contributor to our top-line outperformance in Q1. Its performance was fueled by the strong execution of our direct sales team and increased strength from our OpenEdge ISP. which is a tremendously positive data point because of the large number of global businesses that these independent software vendors touch. Our long-term expectations for OpenEdge haven't changed, and the stability and resiliency of OpenEdge remains its true strength. In addition, the acquisition of Chef, which expanded our presence in the DevOps and DevSecOps market, gives us further optimism about FY21. The DevOps and DevSecOps space continues to see growth as the shiftless paradigm in application development and deployment accelerates and the role of developers becomes increasingly more important. We continue to win new logos in our Chef business during the quarter. The world's top two social media companies and four of the five bank companies are now Chef customers. In addition to acquiring new Chef logos, Our net retention rates with Chef continue to run higher than anticipated as a result of continued success, renewing and expanding relationships with some of the world's largest and fastest growing SaaS companies, such as Salesforce, Slack, and Microsoft, to name a few. The Chef team, product suite, and customer base have been tremendous additions to progress. And I've been amazed by the dedication of the team to customer centricity, which is similar to the dedication within our progress DNA. We also saw strength within our DCI direct business, as well as with our network monitoring solution that came over with the Ipswich acquisition. We have seen increased interest given the turmoil in that space. All in all, we could not be pleased with the performance of our products. We will continue to focus our growth efforts on this market by enhancing and expanding our portfolio And we will also remain laser-focused on delivering superior value to our customers in order to maintain our solid net dollar retention rate, which has consistently been above 97% across our portfolio. A stable customer base, coupled with some of the market trends I described earlier, have allowed us to maintain a very stable top line, which is reflected in our high and increasing mix of recurring revenue. As we mentioned previously, the mix of revenue from recurring sources has increased 600 basis points from 74% in 2018 to 80% in 2020, and we expect this trend to continue. Additionally, to provide investors better visibility into this dynamic in our top line and to provide more insight into our underlying performance, we've begun to disclose ARR, annualized recurring revenue, which also highlights the stability and durability of our business. Anthony will talk in more detail about our ARR and net dollar retention rates in his comments, but I'd like to reiterate that the strength and stability of our top line continues to come from a combination of, first, outstanding enterprise technology that powers mission-critical systems serving a growing and dynamic market, and second, a customer-centric approach across our entire organization, including product management, engineering, technical support, sales, and customer relationship management. Now, turning to our M&A efforts, which underpin our overall total growth strategy, we remain laser-focused on building up opportunities in this hyper-competitive but plentiful environment. Our integration of Chef is proceeding ahead of schedule, which contributed to our profitability upside in the quarter. Meanwhile, our pipeline for deals has grown meaningfully, and we've continued to expand and spend on our sourcing channels, as well as our internal capabilities to simultaneously operate, integrate, and support acquired companies. We have been and are actively pursuing deals across the entire DevOps lifecycle, application development, deployment, and operation. Our financial criteria, which includes a mix of recurring revenue and strong retention rates, continues to be paramount. And we will, of course, remain disciplined to ensure we realize meaningful value from each acquisition. In summary, QM marked an excellent start to the year for Providence. Our performance was stronger than expected across virtually all product lines. and all of our metrics. And I'm thrilled with how well we are positioned to tackle the opportunities ahead of us. I would like to now turn the call over to Anthony to discuss our financial results and our guidance for Q2, as well as for the full year. Anthony?