Progress Software (PRGS) 26 Mar 242024 Q1 Earnings call transcript

Good day, and welcome to the Progress Software Corporation Q1 2024 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Mike Micciche, Senior Vice President of Investor Relations. ahead. go Please

with Good Chief afternoon, Sherri. Progress you with and Call. back First Gupta, are Thank and Officer. President and to thanks Good CEO; Online Conference Results everyone, XXXX Folger, for this for us. afternoon Quarter Yogesh our you, Anthony Financial have me Financial joining Software's us

safe we started, Before statement. get let's harbor go over our

other will and plans, outlook we of call, represents discuss that and operating cost to subject corporate this for information financial and and our today considered During future and be uncertainties. product performance, strategies, initiatives forward-looking as forward-looking. information might outlook is risks guidance Such only Software's Progress

risk of that with results, For filings this affect forward-looking Commission. a the Securities factors risk and in included the the Software call to description update in today. obligation factors assumes Exchange statements no our to may the Progress our please refer

call please note measures all figures indicated. the unless financial Additionally, on that are otherwise non-GAAP this referenced

You press related the results for most contains today. information can GAAP document financial financial measures our details. of issued financial comparable our that of to reconciliation This figures in reference the recommend those which the find first you market directly was additional after and closed non-GAAP results quarter XXXX, to release, these a I for specific

Investor to will available with its Both call for additional are recorded turn Relations supplemental our metrics. website. I contains be presentation And also and entirety will the for Investor investors.progress.com. our earnings it Relations data the We financial quarter that section at first results, our prepared of updated Today's a in conference in highlights be Yogesh. have over XXXX section providing website release replay available you, on the presentation that, and of will supplemental the and

represents was a of joining above you of the Once million growth. line It right demand up busy in as which business Total came jump $XXX results the constant us, strength products. so in first guidance again, ARR Good at our slightly our was benefited first Thank our year-over-year million, $XXX quarter thank customer the currency relationships. you, and for everyone, came from fiscal and our quarter us let's of geographies year-over-year end Mike. for XX%, the today was in. resiliency and the top NRR afternoon, across of high XXXX. announce we and revenue quarter of again which in in of our and steady reflects XX%

were our MarkLogic the of end $XX.X as high and of margins ahead efficiencies free latest performance, million. and driven integration. $X.XX the adjusted management the of in cash of flow the EPS expectations $X.XX XX% our were line above realization came by the our guidance completion coupled result operating solid Our and strong of with top cost of was

in you run release, raising press line, continue top business As remains existing on both we pain. and the our these guidance metrics saw our for to as strong we are

of mission-critical for equivalents Irish news, we fourth you revenue fiscal the Our New mentioned open quarter quarter, a XX call a versus last over with we DSOs used days balance January. of quarter of around finished timing have reported $XX reflective In enterprises in XXX XX Stock strong, globe MariaDB is on cash is and $XXX over XXXX database acquire announced York might the their we sheet MariaDB, who seen, the and the remains by million. to around offer of company possible applications. other also collections million. source listed cash Exchange were which as

makes retention software we've the as needs us XXX%. by serving of home our our the when demonstrated we net This right As MariaDB. other evidenced we customers of on repeatedly companies, enterprise acquired focus for around rates

of valuation significant of this is truly multiple represent believe under Our X.Xx recent their that compelling revenue. a a represents premium possible to price. We value it offer shareholders share as a would stock price net offer a $X.XX for MariaDB's

buyers, terms runrate only the we'll value proceed shareholders. are disciplined for We if and prove

to markets. to respond them these AI products as We're business rapidly products AI-powered our Turning products our customers technologies. enable and seeing the of to realize positively benefits

RAG and improve is MarkLogic generative the and For accuracy AI Semaphore example, Semaphore of becoming of the generation method retrieval generated to RAG GenAI capabilities content our the their data and and retrieval contextualize own automated proprietary MarkLogic most augment enables to or leverage augmented to sophisticated dramatically applications The generation. popular responses. enable customers through to LLS.

analyze quickly make with XXXX XX it's and content of and facing based the the generate, optimize in allows digital AI capabilities X around to network cyber-attacks. introduced that on personalize out-of-the-box continue as Security editors provide Flowmon-ADS Cloud the last at the ADS advances experiences Sitefinity to product an to understand, content increasingly on sophisticated operations context in already security only generative cybersecurity complex respond the operations solution. been to for intrusion categories events. response. potential OpenAI data improve, Year an namely security button. volume flow marketers help ever-growing detection few product Azure to has for and help increasingly inform security managers short This available click products AI-powered our and uses AI of on Network We a observability cloud awards, we to of of and well. professionals and detect, Best a And quarter, to are effective pinpoint Innovator released IT months to list prioritize anomaly issues

new to continue complement portfolio. products SaaS offer also app existing our to We

will Amazon the the AWS embraced second deployments, released of recently has control half to The moved product deployments. is lead only was is customers will been also be in product customers. derived and XXX telemetry adoption. subscription that a renewal already that rates. for platform of those expansion several many from And SaaS It's seeing ago; LoadMaster data which the Chef allow announced a provides enterprise realize Chef OpsWorks have to large discontinued, value example, SaaS. which meaningful and LoadMaster will the customer turn to claim in XXXX, customers For greater SaaS, by quarter opportunities LoadMaster

their released up we customers subscription-only also We've had a version several month first of remain of product as And which that steadfast within adoption WhatsUp drive sign to customers performed extremely Gold enthusiastically. commitment partners WhatsUp remain and of that robust embraced our even as our always, Gold, will well a further. product, have Lastly, the work in platform. launch expect revenues OpenEdge, and

which we give notes our emphasize it announced of and our of more share are revolving At interest of previously flows around balance going of the recurring pleased size less which facility. This a refinanced $XXX on of total $XXX well pay greater end more how go to lower-cost convertible the a prior to interest back news. new which very restrictive bank will bank recent quarter, detail, saw new and growth a into positions us terms, M&A rate X%. our strong amend remain of sheet while will were you existing our cash outcome upsized a proceeds revenues, that to to is reflect have acquisitions. us With we and has with the capital, offering, fortifying $XXX very slightly Xx line want was revolving convertible want million even of credit. Anthony transactions and for These our facilities now our notes both off debt, transactions our To bit executing revolver bank credit other used scale convertible deploy provide strategy to and I executing with revolving rate flexibility, to variable durable our more the by line likely above access million new we in and debt unchanged. million place solid strategy the our in I flexibility of put a more. can we all we that accretive greater the will able record that carried to through continue which while to Turning discipline notes, we detail, lower forward. and credit

will synergies remain return to and base, on to recurring excellent reach our ensure Likewise, with We how us quickly targets. watchful capital invested to of companies software respect ratio. solid technology, a company disciplined much that average our extremely a to we cost target our for margin leverage allow weighted revenues pay have and intend exceeds for be net we capital will still of that operating infrastructure opportunities that our sticky customer

active vetting opportunities has remain So while model on opportunities, quicker within the us target and so robust, our do the The we to capital far. more ability been intend to have M&A working well remain for change we we and move for that not areas. to deals access

companies, in a the to feel only transaction quality to not confident execute ability continue but our also in We of one more in than availability year.

off to I'd handing a MOVEit. to moment to talk Before Anthony, take about like

As in very vulnerability the our we disclosures, you MOVEit have transparent our been about know, recent XX-K. including

the to our is their have rapidly X% environment than revenues, defend of MOVEit, deployed the is proactively for our attack we important. impacted the and And of every MOVEit MOVEit against while attack shared, patched customers' insight. have primarily we on-premise version we As where previously in which and no Nevertheless, customers on help them customer less communicated MOVEit Progress, to represents our total environments.

our response conducting It our do on customer-first situation. and of our has entities And to their negative very violated the and anyone a the any important everything SEC do are or received Progress attack fully have helped to that impact believe governmental these in positive SEC that have the while has governmental to entities minimize fact-finding the has mean investigations. approach into a investigations note is MOVEit, and We other or else Progress that also us Progress. to entities been laws I opinion that that inquiries other with regarding the cooperating we not the difficult situation navigate feedback business.

any and proactive cooperative. of be While potential employees, and investigations are quantify we're unable or our support to partners we impact continued customers, the we government for will to from future grateful currently proceedings transparent, and continue

it finish for rest to with Accretive to our remains look another with execution priority, solid positive. we and forward and confidence. year the up, the solid quarter of combined our Progress outlook So M&A, remains was top

that, Anthony. our continued As I'll With always, thank progressors want for hard investors turn and over fellow their support. it to I to work for my their

Thank you, call. everyone, for Good joining Yogesh. and afternoon, our thanks

credit on which high end As also a to range on We're with have our our mentioned, facilities a few in total the pleased the amended growth earnings to flexibility very that share. minutes. significantly believe Progress per we're execution and completed exceeded More guidance revenue and and our the QX Yogesh refinancing continue very facilities liquidity of with our more recently results, of again of provide strategy. pleased

our line. across was starting steady top to modest demand first of $XXX a with several for by basis. products year-over-year quarter and driven results our with which closed Turning in ARR on the million, especially This the portfolio, OpenEdge. represents We ARR growth growth

Another coming in strong rates factor with of to resiliency our continues at XX%. contribute to the net QX top retention line retention is net that

In growth strong demand in for contribution subscription quarter basis, on offset addition revenue guidance quarter high contribution with and timing revenue to our X the renewals by a multiyear was compared solid of this 'XX, above ARR On performance million range, month of multiple partially full $XXX QX contracts. by of was to products of our portfolio. the by the the over our in results, year-over-year end XX% for from a driven driven growth of only MarkLogic was

of both generally Using on 'XX to renewals growth, were single-digit in contract any we a remaining noted illustrate business results earnings quarter QX in I've significant can the on consistent our renewals, growth especially low and timing exclude multiyear have would this if timing subscription to the MarkLogic lower. have calls, recent impact contracts, growth given with point, skew from quarters. subscriptions, revenue on subscription multiyear ARR our and and shown contribution our of of in trends higher or the revenue As previous impact

presentation calculation And therefore, as of ARR the budgeted and we've And the periods a XXXX consistent performance. forma in ARR And this with The the that point, results businesses all in with of filed in reminder, include some will, as was we've top mention rates. all included our has result, constant alter we've the prior barometer and on a material past a that of change year basis ARR retention continue the been on over or net rates. updated using budgeted a currency, details pro ARR I in trend rates reporting the to past periods our acquired supplemental several should growth practice, is doesn't presented our our with current release. in ARR presented We focus exchange slightly. changed that as our to to reported periods illustrate quarters. at isn't press line

expenses. now to Turning

Our lower and compensation our than across last quarter prior business. were total expected costs costs increase expenses to to for was to up $X a our million, slightly up The year operating XX% rest $XXX extent, increase by year compared and full compared year-over-year to was of driven the an of the in when Operating of and MarkLogic the impact the income $XX million compared year quarter. the quarter lesser million, prior a expectations.

driven our was margin expectations top Our combined line by well of our strong operating was XX%, and overperformance with management. which cost ahead

above high of earnings the relative by line. our to solid of top $X.XX per the expectations end quarter business, was overperformance $X.XX the cost across This with mentioned range. is line, coupled the bottom again overperformance previously On the management the driven on for guidance our share

some statements here fixed-rate Moving existing a both our our and future to details. our a previously instrument goal until debt outset, lower-cost notes our amended on the bank to metrics. support that that, were amend bank March and they model agreement into therefore, With begin in I'll the in be was remind XXXX so to completed few better recently QX. and business facilities now and completed and our will At with and not the growth. refinancing are refinance balance of our that convertible cash everyone our flow credit financial reflected sheet

and end a notes new as strategy, In rate credit and negotiated carry no growth transactions; $XX.XX. and bank of convertible was cap and completed The quarter notes transactions maturity $XX privately total were at convert, option are offering closing, and our XXXX, With call a we our during amended related the that our complete the March facility million loans credit. our $XXX outstanding of able offering. transactions after quarter. and the and reflected million offering repurchase $XXX continue balance to an shares cap conversion was proceeds from existing these X.X%, repay to in on proceeds amount, new have our executing call of using under liquidity new million repaid I'll effective the including net million. provides X, line reiterate a in totaled credit the First, financing second significant expands all million revolving premium bank facility. revolving provides this be with were of to of overallotment X-year the they in which negotiate offering from sheet QX the existing $XX currently were the The interest XX% used $XXX flexibility debt, we share they'll Progress This there repurchases of the a the total end line and debt starting

up million with trailing of million. total and million $XXX for debt and cash, cash Moving leverage net of on, position Xx quarter represents a using debt short-term $XXX adjusted investments the equivalents of This net XX-month we $XXX EBITDA. of our ended

the Our of quarter improvement compared prior to cash XX of quarter. $XX days increase when DSO $XX free the quarter, was quarter. the an for for compared And XX an million adjusted million to flow days, was last year

free on operating the cash billings timing we flow the stronger-than-expected collections QX was and was our performance. As by last QX driven in increase of by discussed call, also in aided and

stock. current remaining $XXX authorization. repurchased the $XX our under the first of share quarter, million at of repurchase the also we Progress quarter, And million During had end we

potential With and QX quarterly quarter in between we to grow be on it's outlook reflection share this our $XXX to quarter year $X.XX QX, $X.XX. and second higher Now turning timing our revenue, line fundamental for their top we And and important our our performance. million the about full the considering lower. of expect million revenue and for call, When our or for XXXX. and in between ARR contract made as a we for earlier XXXX. to can multiyear any given Despite in per renewals I volatility revenue expect of reiterate skewing expect point that, good impact the to impact how outlook revenue the $XXX ARR slightly XXXX, mentioned of of last would results earnings

For to macro the the see our may demand continue we're challenging. aware also become solutions, we full strength more the and that year, in environment for environment

year flow cash our full $X.XX guidance, per margin prior free share we prior consistent $X.XX, between $X expect of revenue our generally XX%, guidance; of with to million guidance million between $X.XX $XXX between the $XXX for consistent such, prior increase and with and of operating million, an compared As increase compared our million XX% XXXX, guidance. and and our adjusted between and to prior $XXX $XXX an of earnings and million,

with XXXX a rate to of open share quarter, million approximately for the of our a and expectation EPS annual shares repurchase closing, for first Our to We're deliver the positioned refinancing and of strong bank XX%, saw for $XX the to thrilled we're we strong bringing results contemplates trend of well were impact excited beyond. we for Q&A. our of XX.X the In that, facilities, very across all in board continuation million With additional the call remainder the of I'd million the and repurchases, outstanding estimate in deliver $XX results XXXX. XXXX. to like total share approximately financial tax

Ray come question our line the McDonough from And with Securities. Guggenheim will of Instructions]. [Operator first

in examples few is of MariaDB source you for throughout filings there, the can at Yogesh, businesses there's companies they're When you based in control? of I they source that now. a on margins. right obviously look burning And you, just MariaDB of that like different amount open that is why how ramp open successful very supporting were maybe scaling cash history, And technologies, it seems Progress confident are have good technology.

understand just drive I you're to success to cash So seeing ability free flow and generation. terms what in your business want in of that drive

things. X So

like of growth, we a we and all, and can well on. from so which First the customer do we also source Chef, of do both is that retention, product, business expansion have with demonstrated have margin open perspective an Chef,

MariaDB, actually with. So announced of we of open that we have there, this the that some an not reflect do last before done financials points the to example restructuring end year's an company of couple source respect of With have very at a last they year.

they a done significant So restructuring. have

that which us. costs a can company revenue dealing think we about I talked head full they small but you further a have, believe businesses. shareholders. that structure, announced They were public they publicly XX% tremendous employee very, opportunity the they have unprofitable truly opportunity at is company imagine have if honest, count. eliminating significant our that of they also for fact that million value $XX-something to least here highly meaningful expense to be public with X also exited company And for have We very create their

go your and of you're would of in is wrong those And mentioned become just level a more of then And understand one, could macro your might move what product I'm what be in in and we and your what help of terms any as maybe you follow-up just what for in better could high terms wondering, your the in just right around of putting guidance, of guidance? there you're the or macro anything In forward. base that out sort seeing achieving behind go end comments what us mean category? comments aware customer guidance you're the what maybe challenging Anthony. prudence here could two,

perspective, we through still cost to think Ray. I inflation see from running continue a

the probably challenge that a that there. is a a and were for point so out us that's making for of And still companies we of bit lot

inflationary to I cost managing And forward-looking to terms I profile our going we're nod develop. is and costs that the to same disciplined think of And going at in we're because and just pretty we'll continue to some continue in in managing have the stay our being good business. think a fact our it's how still and see the with to managing of pressures market that margins. we in that

a side, add not from I to we anything just to think demand And seeing, honest, a to be different. bit, are

see to steady solid across We continue portfolio. demand the

from Our come next line Boolani will Citi. question the Fatima of with

one any. for to have follow-up for you and I start Yogesh, a

material last themes been I'm sticky, was base. of of discussed course we And for having and curious been I'm the large ability conservative with and behavior enjoy the one then on that installed very deliberate this very MarkLogic under very to now if or actually bases. a drive OpenEdge going expectation your to into belt that conservative to Over synergies or year any or Anthony, take had cross-sell cross-pollinate full your this opportunity rather, a cross-sell some to your please. you're curious just year, those for year? steps follow-up having with very

trade-off So efforts are Fatima, between the around cross-sell the as know, modest the things one efforts we in in go-to-market what on we what that our terms margins. are and go-to-market I is that deliver happens our you trade-off of our around make on spend efforts general, of because, the mean modest.

single we with, said think I one fundamentally, So call to then our this for I value always acquisitions to be that's every honest, cross-sell, is modeling. actually upside. businesses of cross-sell. targeted no But publicly, what around do do these we modeled cross-sell our deliver we would And modeled We shareholders. stand have can and efforts to we our to think continue as in alone some having of if

our Fatima meaningful any the a see, perspective, top honest, to in way. real, moved that from cross-sell I meaningful So line needle be don't

just it's other base. OpenEdge, even customer the MarkLogic And to not actually into into MarkLogic will cross-sell; are products doing cross-selling it's we do We cross-selling continue cross-sell. some

that environments a whether the product end So managing and ending is for those up MarkLogic deployment for DevOps front Chef environments, like something whether and it is those experience and digital products application. it Sitefinity our other

and going impact that into really, OpenEdge and But with as our a this, guess well I meaningful as there opportunities we don't keep see repeat myself again, customer we on MarkLogic I see over we I saying really from over, base. opportunities see So business.

the on at net retention you Anthony, XX%. rate

that nitpick threshold initiated in at below your XXX%. just Now internal

any So down. to on can that you us why nuance offer step

You've percent. XXX-ish consistently pretty at been XXXXX-ish level,

to additional context site maybe wanted just that get some So this compression around quarter.

would XX-month a say out couple retention on basis, and back a out trailing rates net we and our of I mentioned you over the QX trailing measure we in ins because turn XX-month contracts that And period the outs. out. we that had compression figure

them losing will due to that that One of calculation. of It net the a was M&A, frankly, in be customer. little brought more in a bit. the where QX there we rate us quarters. for still a contract up retention And down denominator ended our And couple impacted is

we're bit, change outlook retention little target surprised things our a being doesn't not to a certainly XXX% a net perspective at So XX% or or long-term of and better. see for from XXX%

Jefferies. Our line next from with question of Brent will Thill the come

line. you revenue looks Brett like strong guys This to had growing and give in on is the Can the flat and an overall versus up growth bottom for quarter It on the slightly double takes digits. delta puts Thill. just you ARR between growth top Venturim being Antonio your us

takes can us you be puts that on give that would just great. and If

MarkLogic So full month the got take a only this if quarter look and year-over-year, from a for we contribution get the you year. quarter, year, a MarkLogic, we last at

that renewed this last didn't an to We We They quarter. the some have was offset So that. majority in the year last year. contracts But year. the growth. subscription did have that drove same our executed vast opportunity there multiyear of

timing think some of little got renewals, at from looking way MarkLogic you're when subscription those the reconcile So on the a offset some year-over-year bit growth it right basis, is gets to revenue contract you've a I by of deals. it

And accurate to this down just fundamentally. business so on reconcile single-digit being, I of low what's up still the revenue, quarter going more reflection think, you in the but a can ends growth ARR on

results. look pro of interesting year-over-year, last what's included last is ARR ARR in And was MarkLogic when year's forma year, that you at the

about that compare as think include when you So way, acquisition our when of we was prior we it though ARR, business. part it ARR

is really ARR to the real XX-month in because quarter MarkLogic the looks have significantly of is year, as growth growth whereas a just business, the a for the was trajectory a the revenue cycle, Anthony full last or about adding full real you of reported business higher quarter, actual month. whereas So until said, this the

quarter. Congrats in the

moment for come next our of the JPMorgan. will that from Bora line One Pinjalim Instructions]. question. And with [Operator

to a on ask MarkLogic, MarkLogic document database, I with heard it's can know far you what us a a DV for layer at a there? look world want Vector store? RAG RAG customers us you there created they I I developed that. Have search cases? Are the that MarkLogic, seriously standpoint? Is from has seeing in help throughout remind so you along their RAG Maybe but understand more

is information. the is really Semaphore But that that of semantic top So if of analysis unstructured you think of course, data. MarkLogic, about

out it actually leverage to and out information don't their customers get question content use you to we on customers Semaphore top I we it? contextualize -- do LLM, but have so we yes, any and want then you data say And actually their augmenting how have of and using content. have both receivable the that created capabilities, of becomes when do figure they to looking and MarkLogic information who how to production, their any in an So of generative through are LLM

the where So the provide we from to augment we have its you Basically, get customers, answers. can information with thing. wish talk get about I the point it. MarkLogic#X more LLM we generation production contextual and therefore, will they do

churn that But no churn, ARR, the I had couple impacting it's a that's like I when you last Anthony. of for hear the seeing in One decline just is churn maybe you there a last more NRR. on sequential point? about year the or incremental you little that that made customers quarter, seems a quarter. and you're dollar I than this comment ago see to sure want gross it make even at bit maybe customer

we're generally because It's do for software I from contracts us uncommon generally can the for trends we've a consistent. seasonal lapse; have a to been down ARR. us We of that a step ARR not would in QX terms seen QX. see where say company in move

so And that saw quarter. again we this

incremental it think year. in back it anything in and than may was slightly the I tail in terms in terms don't it see last what be meaningful into in quarter. just what QX of the trends I business, comes as higher of our But the perspective, from churn

Mr. the I remarks. would Yogesh no this showing in queue like over for closing the call questions turn I'm back further at now to time. to Gupta any

everyone, with and you, call, you look forward to again you. joining we in for Thank Bye-bye. a our thank quarter. Well, speaking

Thank concludes all program. This participating. for today's you

may disconnect. You now