Progress Software Corporation

Good day, and welcome to the Progress Software Q4 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Mike Michique, Senior Vice President of Investor Relations. Please go ahead.

Okay. Thank you, Sheree. Nice to have you back. Good afternoon, everyone, and thanks for joining us for Progress Software's fourth fiscal quarter and fiscal year 2025 financial results conference call. With me this afternoon are Yogesh Gupta, President and CEO, and Anthony Folger, our Chief Financial Officer. Before we get started, let me go over our safe harbor statement. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, our integration of share file and Nuclea, and other information that might be considered forward-looking. Such forward-looking information represents Progress Software's outlook and guidance only as of today and is subject to risks and uncertainties, and our actual results may differ materially. For a description of the factors that may affect our future results and operations, Please refer to the risk factors in our SEC filings, particularly the risk factor section of our most recent Form 10-K and 10-Q. Progress assumes no obligation to update forward-looking statements included in this call. Additionally, please note that all the financial figures referenced in this call are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures In our earnings press release, which was issued after the market closed today, this document contains additional information related to our financial results for the fourth quarter of fiscal year 2025 and the full year of fiscal 2025. And I recommend that you reference it for specific details. We've also provided a slide presentation that contains supplemental data for our fourth quarter and fiscal year and provides additional highlights and financial metrics. Both the earnings release and the supplemental presentation are available on the investor relations section of our website at investors.progress.com. Today's call is being recorded in its entirety and will be available for replay on the investor relations section of our website shortly after we finish. And with that, I'll turn it over to Yogesh for his prepared comments.

Thank you, Mike. Good afternoon, everyone, and thank you for joining us to discuss our Q4 and fiscal year FY25 results. Fiscal year 25 was Progress's strongest year to date, driven by a combination of share file and the strong performance of our overall product portfolio, especially during the second half of the year, which was increasingly propelled by our customers' AI projects. This resulted in annual revenue of $978 million, up 30% year over year, and earnings per share of $5.72, up 16%, on fiscal year 24. Our business was stronger throughout the year, as evidenced by the fact that we exceeded the midpoint of our original revenue guidance from last January by approximately $14 million and beat our operating income guidance by 6%. We continue to meet our customers' needs in an AI-driven business world by investing and innovating across the products they rely on. This is demonstrated by our 100% net retention rate and 2% year-over-year ARR growth to $852 million, which now represents over 87% of our total revenue. For the fourth quarter, revenue finished at $253 million, up 18% year-over-year, right in line with our most recent guidelines. Earnings of $1.51 were well above The high end of guidance thanks yet again to excellent expense discipline and consistent execution. As Anthony will discuss in detail, cash flow remains strong, and we continue to both pay down our debt and make opportunistic share repurchases. Our balance sheet is in excellent shape, and we remain flexible and well-capitalized to execute M&A as we carry out our total growth strategy. Looking ahead, the high end of our initial guidance for FY26 is $1 billion, a very exciting milestone for progress, with unlevered free cash flow of nearly $320 million at the midpoint. Our confidence in the FY26 guidance is a result of the momentum in our business during the second half of FY25, which I mentioned earlier, and our expectation of continued investments in AI projects by our customers. Our AI product innovations are leading our customers to recommit to us as they see us as a trusted partner in their journey. Before I talk more about this, let me provide an update on our share file and nuclear acquisitions. During fiscal year 25, we completed the integration of share file, our largest deal so far, which is proving to be one of our best acquisitions, as you can see from our results. He passed every milestone and met every goal on or ahead of schedule. He also acquired and fully integrated Nucleus agentic lag technology, which has been extremely well received by customers and is adding significant functionality and value to our products. In addition to outstanding products and technology, ShareFile and Nucleus have brought us many new, very talented team members with significant and cutting-edge expertise. Let me also quickly recap some other highlights from the fourth quarter. Our investment in innovation and R&D continued across our product lines as we enhanced our offerings, delivering dozens of new AI capabilities in addition to the usual upgrades and features. To list just a few, we launched Progress Agentic RAG, an industry-leading product to help organizations leverage generative AI with confidence. We introduced the industry's first generative content management system with built-in RAC capabilities in Sitefinity. This innovation introduces native multilingual agentic RAC-based AI technology to deliver dynamically generated user experiences driven by a site visitor's prompt and online activity. We launched an enterprise-grade agentic UI generator that leverages are market leading Telerik and Kendo libraries to automatically generate multi-component RAM style page layout from simple language prompts. This UI agent delivers robust business functionality and works right inside the developer's IDE of choice. We launched Automate MFT, a new cloud native file transfer solution that is helping customers reduce total cost of ownership by up to 50% compared to traditional products. To highlight the impact that our solutions are having on our customers' AI initiatives, let me provide a recent example. A Fortune 50 agriculture and food company was struggling to leverage the extremely large volumes of structured and unstructured data stored across its enterprise. This data is stored in hundreds of different sources in nearly a thousand different formats and contains invaluable business information gathered over several decades. They leveraged our progress data platform to unlock value by creating a single unified view of all the information and gain relevant, accurate, and actionable insights worth tens of millions of dollars. This demonstrates the impact and relevance of our product in a world that Gen AI is making it critical for organizations to get their arms around their data and ensure that AI delivers fact-based answers that they can rely upon. In other important news from Q4, the U.S. Department of Defense Chief Digital and AI Office added Progress Federal Solutions Group to the Tradewinds Solutions Marketplace, which is the DoD's list of pre-approved providers of AI products. This designation allows DoD customers to rapidly procure and deploy a progress data platform, bypassing the usual government procurement processes. It underscores our commitment to delivering scalable, secure, and innovative AI solutions that help government agencies achieve their AI objectives. During the fourth quarter, we also announced our expanded presence in Costa Rica. Building on ShareFi's existing footprint, we opened a new facility that serves as a center of excellence for tech support, customer success, sales, and corporate functions. This new center splendors our ability to support regional growth in the U.S. time zone and creates new opportunities to deliver value to our customers. Internally, our excellent expense control and operating performance continues to benefit from our own adoption of AI. to increase productivity and drive efficiency. Across engineering, our teams are using AI in every phase of development, whether it is to write PRDs, generate code, create QA tests, establish test environments, or create education and tech support content. This has enabled us to accelerate product innovation, as well as improve the quality of customer tech support while containing cost. Our finance, HR, sales, communications, and marketing teams are increasingly using AI in a variety of ways to improve the quality and increase the quantity of their work. So, speaking of our teams, I'm very proud to say that for the fourth year in a row, we experienced very low voluntary attrition rate, just 6% for fiscal 25. This industry-leading metric reflects the positive, inclusive culture of our team and our ability to retain critical talent, maintain continuity, and keep turnover-related expenses down. And the Boston Globe, in its recent list of top places to work, ranked progress number one among large software companies in the region just last month. Now let me touch on our commitment to our total growth strategy and the M&A outlook. As ever, there are many opportunities for progress to look at among the literally thousands of software companies. However, the right targets for us are infrastructure software vendors with solid technology and a strong, stable, and strong base of customers. And over the past few quarters, few such assets have come to market. Selectivity, patience, and discipline continue to be the hallmarks of our M&A strategy, and we will evaluate all opportunities, whether they are an outright purchase from founders, VCs, or PE sponsors, or a divestiture, as long as it fits our strict criteria. Our corporate development team remains active, and as I mentioned earlier, we feel very good about our ability to finance the next deal and execute well. We got off to a quick start to FY26 and held our annual sales kickoff in Atlanta during the very first week of December. Over 650 of our sales, field engineering, and customer success professionals gathered in person to learn about our latest product offerings, go-to-market initiatives, and to review key objectives for FY26 and beyond. Our business momentum, and particularly our AI innovation work, created an extremely high level of excitement in our sales teams. about the opportunity in front of us. And it's hard to overstate the energy and excitement among our team who returned ready to hit the ground running. To conclude, from an operating, financial, and strategic perspective, we're thrilled to be carrying steady momentum on this and are excited about the year ahead. I want to congratulate the entire progress team for an incredible year in fiscal 25, and as always, thank them for a job well done. Let me now turn it over to Anthony for his prepared remarks, and then we'll be happy to take questions.