Progress Software Corporation

Hello and welcome to Progress Software second quarter 2026 earnings conference call. At this time, all participants are in 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 would then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Michael Micciche. Sir, you may begin.

Thank you, Tawanda. Good afternoon, everybody. Thanks for joining us for Progress Software's second fiscal quarter 2026 financial results conference call. With me tonight are Yogesh Gupta, our president and CEO, and Anthony Folger, our chief financial officer. Before we get started, let's go through the safe harbor statement. 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 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 the latest 10-Q, which was filed in conjunction with this announcement this evening. 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 tonight 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 second quarter of fiscal 2026, and I recommend that you reference it for specific details. We've also provided a slide presentation that contains supplemental data for our second 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. and of course today's call is being recorded in its entirety and it should be available for replay shortly after we finish tonight on the investor relations section of our website. So with that out of the way, Yogesh, I'll turn it over to you.

Thank you, Mike, and good afternoon, everyone. Q2 was another strong quarter for progress as our results exceeded our expectations and we were able to raise our guidance again for the full year. Our Q2 26 results reflect the resilience of our product portfolio and many more. approximately $79 million of adjusted free cash flow and delivered a net retention rate of 100%. These results exceeded our expectations and guidance across every metric and were driven by broad-based strength throughout the portfolio. We saw particularly strong performance in our data platform products as our customers increasingly leveraged their business data to provide context for AI. We also saw strength across the rest of our portfolio, including infrastructure management and content driven workflow automation, demonstrating the benefits of our diversified product strategy and the mission critical role our software continues to play for customers of all sizes around the world. When viewed against the backdrop of the last several quarters, I believe Q2 reinforces the strength and consistency of our business model. Over the past year, we have continued to demonstrate our ability to generate durable recurring revenue, strong margins, and significant cash flows while integrating acquisitions, reducing debt, investing in innovation, and navigating a rapidly evolving technology environment. Over the past year, investors have tried to sort out whether AI ultimately will benefit or disrupt software. Our view remains largely unchanged that AI represents an opportunity for progress. The reason being, while certain aspects of the software business are dramatically changing, enterprises have begun to realize that context and control are key to AI efficacy, outcomes, and value. These realizations play to the strengths of progress. Our data platform and workflow automation products provide the context needed for AI to deliver reliable, verifiable, and trustworthy outcomes. And these products, along with our infrastructure management offerings, deliver the control that AI needs for security, risk mitigation, and cost control. Every modern enterprise runs on three foundational software layers, business logic and workflows, Data and Content, and Security and Infrastructure Management. And Progress has spent decades earning a place in that core. We are uniquely positioned in those three foundational layers, which continue to be critical in a world where AI is changing how businesses run. Over the past few years, we've been embedding AI capabilities across our portfolio and have increased focus and have increasingly focused on helping customers build responsible AI powered applications and digital experiences. We continue to see growing customer interest in leveraging our technologies to improve productivity, automate workflows and accelerate innovation. Just today, we launched Chef Enterprise Management for NVIDIA's DGX Spark, the world's smallest AI supercomputer as NVIDIA calls it. NVIDIA is bringing powerful AI computing out of the data center and into the hands of developers across the enterprise. As the adoption of systems grows across offices, research facilities, edge locations, and secure facilities, organizations will need to manage them with the same rigor as the rest of their critical infrastructure. Recognizing that, NVIDIA identified progress and our Chef platform as a critical enterprise manageability partner to support DGX Spark deployments. This Chef capability extends the reach of Progressive Infrastructure Management Control to a fast-growing class of persistent AI infrastructure at the edge and underscores our broader strategy to help organizations develop, deploy, and manage AI securely and responsibly across their data, digital experiences, and the underlying infrastructure. Speaking of data, we're particularly encouraged about the progress data platform. Last quarter, we highlighted a seven-figure deal amongst our wins, and we saw continued momentum through the second quarter. As organizations move beyond AI experimentation and into production deployments, they are increasingly recognizing that successful AI outcomes depend on leveraging data for context. AI agents are only as effective as the enterprise knowledge that underlies them. The context. Much of that knowledge lives in systems of record and unstructured content, documents, emails, support records, and conversations, often disconnected from the systems where AI operates. Simply trying to provide all that context to AI is hard and extremely expensive. Token expenses rise dramatically, and the accuracy of outcomes continually worsens as the context window grows for AI. Progress Agentic RAG and the data platforms transform fragmented business information into governed AI-ready intelligence, significantly improving tokenomics, as well as the speed, accuracy, and reliability of the AI output. Those organizations that lead and succeed with AI will be the ones that securely contextualize and operationalize enterprise knowledge at scale. and our data platform helps customers address these challenges while improving accuracy, reducing complexity and lowering the cost of AI deployment. So we remain optimistic about the broad technology landscape. AI continues to reshape the software world and we will continue to anticipate and respond while monitoring those trends closely. We remain confident that our products will continue to be highly relevant and integral to our customers' success, and in many cases are becoming even more valuable as customers seek trusted platforms on which to build their AI strategies. You can see this across our business in many ways, and it is especially apparent on our balance sheet. In Q2, collections improved again, and day sales outstanding declined significantly compared to where we exited fiscal 2025. Our balance sheet continues to strengthen and our leverage profile continues to improve as we pay down another $50 million of debt. Combined with our first quarter actions, we have now reduced debt by approximately $110 million during the first half of the fiscal year. And we will continue to reduce leverage significantly through the rest of the year. Our capital allocation strategy remains unchanged. First, we will reduce leverage and strengthen our balance sheet. And second, we will repurchase shares when we believe that valuation presents an attractive opportunity. Let me take a moment to reiterate our focus on our total growth strategy, which, as we have said before, has three components. First, we innovate and invest in our products and our people, delivering new products and new capabilities faster than ever before, while continuing to grow our people skills. Second, we look to grow our product portfolio and customer base through disciplined M&A with a specific focus on future AI relevance. Third, continue an unrelenting focus on our customers to drive the net retention rate to 100%. Speaking of M&A, our perspective is gradually becoming more optimistic as we see signs of sellers beginning to adjust their expectations. Our strong balance sheet enables us to rapidly execute on the right opportunity, and we remain very active in evaluating potential targets while staying disciplined. Go-forward AI relevance continues to be one of the key criteria when evaluating acquisition targets. We have built significant shareholder value over many years through a thoughtful and deliberate acquisition strategy, and we will remain steadfast on our discipline and on our return threshold. Turning to the outlook, a strong first half performance gives us confidence to raise our full year expectations as Anthony will go through next. While customer activity and deal size can vary from quarter to quarter, we're pleased with the momentum exiting Q2 and our updated guidance reflects both the strength of the first half execution and an optimistic and prudent view of the remainder of the year. In closing, we're very pleased with our Q2 results. We exceeded expectations on revenue, earnings, and Cashflow. ARR improved, collections strengthened, and we are continuing to pay down debt aggressively. Most importantly, we believe Progress remains committed to helping our customers navigate a period of unprecedented technological change. We continue to see healthy customer engagement across the portfolio, growing interest in our AI-enabled data and infrastructure offerings, and strong demand for the mission-critical software our customers rely on every day. These factors, combined with a disciplined approach to capital allocation and M&A, position us well to continue creating shareholder value over the long term. As ever, I want to acknowledge and thank Progress employees around the globe for their continued excellence and dedication to making and keeping our customers successful. And with that, I'll turn the call over to Anthony.