PROGRESS SOFTWARE CORP /MA Q4 FY2024 earnings call

• Fiscal '24 was an outstanding year with strong profits, exceeding earnings and free cash flow guidance. ARR grew 46% in constant currency, net retention rates above 100% even excluding ShareFile. - Acquired ShareFile on October 31, 2024, with integration on track to complete within 12 months. ShareFile is expected to add ~$250 million to top line in FY '25 as 100% SaaS recurring revenue. - Innovations in products: Data platform products use retrieval augmented generation and vector capabilities for GenAI, Digital Experience products use AI for content creation/personalization, UI developer tools are AI-powered, and core infrastructure management products leverage advanced AI. - Focus on customer success led to net retention rates over 100% despite some customer churn. - Capital allocation strategy includes aggressively paying down debt and looking for next acquisitions.

Progress Software's data platform products (MarkLogic, OpenEdge, DataDirect) and AIOps network management products showed strong performance. ARR grew by 46% in constant currency. Q4 revenue was $215 million, with a full-year revenue of $753 million. ShareFile contributed only one month of revenues in Q4. The data platform products are the foundation for mission-critical applications at over 100,000 businesses, and ARR closed at $842 million, representing ~46% year-over-year growth (including ShareFile pro forma).

• FY '25 revenue expected between $958 million and $970 million (27%-29% growth over 2024). - Operating margin anticipated to be 37% to 38%. - Adjusted free cash flow projected between $225 million and $237 million, unlevered free cash flow between $282 million and $294 million. - EPS expected between $5 and $5.12. - Guidance assumes tax rate of 20%, repurchase of $80 million in shares, and ~46 million shares outstanding including dilution from 2026 convertible notes.

• Integration risks related to fully integrating ShareFile within the 12-month timeframe. - Impact of higher interest rates on debt repayment and overall financials. - Market uncertainties that could affect demand for products and acquisition opportunities.

Q: Use case of MarkLogic with U.S. government agency for GenAI workload?

A: Existing MarkLogic and Semaphore customers use the platform for primary business data. They leverage retrieval augmented generation and vector capabilities to augment GenAI using proprietary data, with initial use for internal purposes and potential broader expansion.

Q: Revenue contribution from ShareFile in FY '25 and growth rate?

A: Expect ShareFile to contribute ~$250 million in FY '25, growing at low single-digits.