PROGRESS SOFTWARE CORP /MA Q3 FY2024 earnings call

• Q3 was ahead of the high end of guidance on both top and bottom lines. Revenue grew 2% YOY to $179 million, EPS grew 17% YOY.
• ARR was $582 million, up 1% sequentially, with net retention rate at 99%.
• Received good news from SEC regarding MOVEit with no enforcement action recommended.
• Announced acquisition of ShareFile for $875 million, expected to close before end of fiscal 2024, with integration expected within 12 months.

Revenue grew by 2% year-over-year to $179 million. ARR ended the quarter at $582 million, up sequentially 1%. Net retention rate held steady at 99%. Cash flows were excellent with DSOs at 45 days. The company ended the quarter with over $230 million in cash. ShareFile is expected to add over $240 million in annual revenue and ARR when acquired.

• Q4 2024 revenue expected between $207 million and $217 million, EPS between $1.15 and $1.25.
• Full-year 2024 revenue expected between $745 million and $755 million, operating margin approximately 39%, free cash flow between $195 million and $205 million, EPS between $4.75 and $4.85.
• ShareFile expected to contribute approximately one month of results to Q4 2024 with revenue of $18 million to $20 million, operating margin 15% to 20%, and negative adjusted free cash flow of $15 million to $20 million initially, but expected to become increasingly positive in 2025.

Q: John DiFucci asked about cash flow guidance excluding ShareFile effect and confidence in integrating ShareFile.

A: Anthony Folger confirmed cash flow guidance math was correct and expressed confidence in integrating ShareFile due to its similar business model to Progress' DX business, strong gross margins, and net retention rates.

Q: Lucky Schreiner asked about cross-sell opportunities between MOVEit and ShareFile and average contract length for ShareFile.

A: Yogesh Gupta stated no planned cross-sell at present and ShareFile has a mix of annual and monthly contracts with credit card-based auto renewals.

Q: Bo Yin asked about confidence in integrating ShareFile given its size and if M&A pool could expand.

A: Yogesh Gupta explained that the headcount ratio between Progress and ShareFile (approx 4:1) makes integration manageable, and bringing in ShareFile employees is doable.