Progress Software Reports Strong Q1 2025 Results and Raises Guidance

Progress Software (PRGS) saw its shares rise by 14.5% over two trading sessions, closing at $58.98 on Wednesday, after announcing robust first-quarter fiscal 2025 results on Monday. The company reported non-GAAP earnings of $1.31 per share, which outperformed the Zacks Consensus Estimate by 25.96% and marked a 4.8% increase from the previous year.

Additionally, non-GAAP revenues reached $238 million, surpassing the consensus estimate by 0.92%. This figure represents a significant year-over-year growth of 29% on a reported basis and 30% on a constant currency (cc) basis, driven by strong demand for Progress Software solutions, particularly ShareFile.

On a cc basis, Annualized Recurring Revenue (ARR) landed at $836 million, reflecting a 48% increase year over year, primarily owing to contributions from ShareFile and other services. Moreover, the net retention rate has exceeded 100%, further highlighting customer loyalty.

Progress Software Performance Overview

Price, Consensus, and EPS Surprise

Progress Software Corporation price-consensus-eps-surprise-chart | Progress Software Corporation Quote

Quarterly Financial Breakdown

In the first quarter, software license revenues totaled $58.4 million, reflecting an 8.8% decline year over year. Conversely, maintenance and service revenues surged to $179.6 million, indicating a year-over-year growth of 48.9%.

Sales and marketing expenses increased by 40 basis points (bps) from the previous year’s quarter, now standing at 21.6% of revenues. Product development expenses also rose, climbing 50 bps to 19.5% of revenues. However, general and administrative expenses decreased to 10.8% of revenues, an improvement of 80 bps from the prior year. The non-GAAP operating margin for Progress was reported at 39.3%, a contraction of 220 bps compared to the previous year.

Financial Position and Capital Allocation

As of February 28, 2025, the company held cash and cash equivalents totaling $124.2 million, up from $118.1 million as of November 30, 2024. Total debt stood at $1.51 billion, with a net debt position of $1.39 billion. Progress generated an adjusted free cash flow of $73.2 million during this period.

In line with its strategic capital allocation, the company directed $30 million towards debt repayment on its revolving credit line and repurchased an additional $30 million in shares. Consequently, Progress revised its annual share repurchase forecast down from $80 million to $70 million, reallocating the $10 million difference towards debt reduction. By the end of the fiscal first quarter, the balance on PRGS’ revolving credit line was $700 million, with $77 million remaining under its current share repurchase authorization.

Guidance for Fiscal 2025

Looking ahead, non-GAAP revenues for fiscal 2025 are projected to be between $958 million and $970 million, with an expected non-GAAP operating margin of 38%. Projected non-GAAP earnings per share have been raised to an estimated range of $5.25 to $5.37, up from previous guidance of $5.00 to $5.12. Adjusted free cash flow is anticipated to be in the range of $283 million to $294 million for fiscal 2025. For the second quarter, non-GAAP revenues are expected to fall between $235 million and $241 million, with earnings per share projected between $1.28 and $1.34.

Market Position and Stock Considerations

Currently, Progress holds a Zacks Rank of #3 (Hold). In comparison, stocks such as DoorDash (DASH), CSG Systems International (CSGS), and Meta Platforms (META) possess a more favorable Zacks Rank of #2 (Buy). DoorDash shares have appreciated by 13% year-to-date and is scheduled to release its first-quarter 2025 results on May 7. CSG Systems has gained 19.7% year-to-date, also planning to report its first-quarter 2025 results on May 7. Conversely, Meta Platforms has seen a slight decline of 0.2% year-to-date, with its results set to be disclosed on April 30.

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