Progress Software Corporation

Hello, and thank you for standing by. Welcome to Progress Software Corp First Quarter 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the call over to Michael Michique, Senior Vice President of Investor Relations. You may begin.

Okay. Thank you, Taronda. Good afternoon, everyone, and thanks for joining us for Progress Software's first fiscal quarter 2026 financial results conference call. Joining me on the call are Yogesh Gupta, President and CEO, and Anthony Folger, our Chief Financial Officer. Before we get started, please consider our safe harbor statement as follows. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, 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 vary 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 10Q and the latest 10Q being filed in conjunction with this announcement. Progress assumes no obligation to update forward-looking statements included in this call. Additionally, please note that all the financial figures referenced on 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 first quarter of fiscal 26, and I recommend that you reference it for specific details. We've also provided a slide presentation that contains supplemental data for our first quarter 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. Yogesh, let me turn it over to you.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us. We're very pleased to share our first quarter results with you today, so let's get right to it. We had another very good quarter. Revenue was $248 million, up 4% from last year's Q1. ARR grew 2% in constant currency over the same period, and NRR remained strong at 99%. EPS for the quarter was $1.60, up 22% year-over-year, as operating margins finished above 41%. We saw record cash flows as a result of strong focus on collections, Adjusted free cash flow was $99 million and unlevered free cash flow was $111 million. The balance sheet remains in great shape as we continue to aggressively pay down debt while also repurchasing shares. This strong performance is driven by AI and other innovations across our portfolio that are resonating with our customers. Now, more than ever, Our products remain mission critical, our customers remain loyal, and our team continues to execute at a high level. These are also the reasons why we remain positive about our outlook. As always, the foundation underpinning our success is our total growth strategy. We continue to run the business with discipline as we innovate across the product portfolio and provide increasing value to our customers. That formula has worked for us through multiple technology shifts and industry transformations, and it continues to work today. On M&A, our corporate development team is vetting views aggressively, and we further fine-tune share file operations, which continues to perform very well as one of our best acquisitions. Lastly, customer success remains our key focus. Now, let me address the three topics that we know are top of mind. First, our business remains strong. We see solid retention and good performance across our products. Our product portfolio is broad and continues to power our customers' businesses, resulting in solid year-over-year growth both in ARR and in revenue. As Luke previously said, our goal for NRR is 100%, and over the past few years, our NRR has consistently ranged between 99 and 101%. This quarter, NRR was 99% and ARR growth was solid, driven by the strength in our new customer acquisition as well as existing customer expansions, both of which were positively influenced by our AI investments and innovation. And this leads to the second topic, AI. We continue to see AI as an exciting opportunity for our business. We've discussed for several quarters how we're using AI internally to be better, more efficient operators, which we can demonstrate to improve productivity in every department. Our savings from these efforts are enabling us to continue to invest in our AI-related product efforts while delivering exceptional operating margins. Speaking of our product efforts, AI has enabled us to accelerate our innovation cycles as well as helped us transform our product capabilities to be more relevant for the future. We have been building AI into our products, and that is delivering meaningful business value to our customers today. It is our belief that trusted software companies like ourselves with excellent customer relationships who leverage AI effectively will be the winners of this AI opportunity. Our customers are eager to understand how they can benefit from AI while ensuring that their businesses remain secure and trustworthy. They continue to look to us to deliver AI capabilities that increase their competitiveness and improve their efficiency so that they can thrive in this new world. One such example is a global beverage company that wanted to dramatically improve the way they serve their more than 20,000 employees worldwide. By leveraging our Progress Agent TechWag product, they streamlined their HR operations, resulting in improved employee satisfaction at a significantly lower cost. Similarly, the tax authority and finance ministry of an overseas government is using the same product so that all employees and citizens can get trusted, verifiable answers from a host of data across that organization. And a state government in the U.S. is using the Progress data platform to harmonize and synthesize large volumes of data from different sources to identify and eliminate waste, fraud, and abuse. They first became a Progress customer less than 18 months ago, and they continue to identify new use cases for the data platform, targeting efficiencies and elimination of fraud in the range of tens of millions of dollars annually. Today, they are a seven-figure ARR customer of ours. Progress Data Platform and Progress Agent Tech RAG transform business data, unstructured files, archives, websites, knowledge bases, and multimedia into an information system that instantly and securely delivers fact-based, trusted, and verifiable answers. Our AI-powered infrastructure management products are also being used to manage and secure modern tech infrastructure. For example, a leading financial payment company that annually processes over $100 billion of transactions is using Progress WhatsApp Gold, Loadmaster, and Flowmon to improve the availability and security of the infrastructure and to reduce the time to detect, analyze, and prevent security threats. And ShareFile customers are doing work in minutes that used to take hours. with its AI document summarization and Q&A capabilities. Additionally, ShareFile's AI-powered security capabilities proactively detect sensitive information and recommend actions to significantly reduce security risks. Our customers rely on Progress to support their journeys because they trust us to focus on practical business outcomes. Across our product, AI is contributing to measurable customer value, from workflow automation and productivity gains to monetization. Every product that's progress is now an active participant in our customers' AI efforts, and we have embedded AI into our products with attention to governance, observability, cost, and LLM flexibility. The third topic, capital allocation and M&A. It's worth noting that in Q1, we paid down $60 million in debt and repurchased $20 million of stock. Our balance sheet remains in good shape, and our cash generation gives us significant flexibility. Our capital allocation priorities remain very clear. We will continue to, number one, invest in our business and innovate. Number two, aggressively reduce debt and be opportunistic on buybacks. Number three, maintain our commitment to generate excess returns through disciplined M&A, followed by rapid synergistic integration. We will use the same M&A lens we have always used to acquire good companies with strong infrastructure technology products, loyal customers, high recurring revenue and customer retention, and a compatible culture. It's also worth expanding on how ShareFile continues to create additional value. While it was the largest and most complex acquisition and integration to date, ShareFile has strengthened and scaled our recurring revenue mix, expanded our SaaS capabilities, and contributed meaningfully to the bottom line and cash flow. Just as important, it has enhanced our ability to evaluate and integrate future SaaS opportunities while keeping the same discipline we've always had around returns and fit. I'm also excited to share that Progress recently opened a new innovation hub in Bangalore. This consolidates the office space for our former Progress and Sharefile offices and also demonstrates our long-term commitment to the region as we continue to scale our engineering, product development, sales, and customer success teams. Our people in India are critical to our global growth and our innovation strategy. And this logical next step will enable us to efficiently deliver greater value to our customers worldwide. Finally, we continue to be positive as we look ahead, and Anthony will give you all the details in a minute. From my perspective, what we're seeing in our own business supports our confidence for the rest of this year. We're also maintaining a close watch on the macro environment and geopolitical events. So to summarize, The business is performing well. The model remains durable. AI is making our products and operations stronger. ShareFile is delivering. And our top line, margins, and cash flow reflect solid execution across the company. As always, I want to thank our employees around the world for their hard work and commitment. And I want to thank our customers and partners for their continued trust. With that, I'll turn it over to Anthony.