Q2 2024 Progress Software Corp Earnings Call

Operator: Good day, and welcome to the Progress Software Corporation Q2 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. 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. Please go ahead.

Michael Micciche: Thank you, Shuri. Thanks for your help.

Good day and welcome to the progress Software Corporation Q2, 2024 earnings call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then hear an automated message advising Uganda's race to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker.

Speaker Change: Mr. Mike <unk> Senior Vice President of Investor Relations. Please go ahead.

Speaker Change: Thank you Sherri. Thanks for your help always good to hear your voice and good afternoon, everyone and thanks for joining us for progress second quarter 2024 financial results Conference call on the line with me. This afternoon is Yogesh Gupta, our president and CEO and Anthony Folger, Our Chief Financial Officer before.

Michael Micciche: It's always good to hear your voice. Good afternoon, everyone, and thanks for joining us for Progress' second quarter 2024 financial results conference call. On the line with me this afternoon is Yogesh Gupta, our President and CEO, and Anthony Folger, our Chief Financial Officer. Before we get started, let's go over the Safe Harbor Statement.

Michael Micciche: 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. For a description of the risk factors that may affect our results, please refer to the risk factors in our filings with the Securities and Exchange Commission.

Speaker Change: Before we get started lets go over 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 progresses progress so far.

Speaker Change: This outlook and guidance only as of today and is subject to risks and uncertainties for a description of the risk factors that may affect our results. Please refer to the risk factors in our filings with the Securities and Exchange Commission.

Michael Micciche: Progress Software assumes no obligation to update the forward-looking statements included in this call. Additionally, please note that all the financial figures referenced in this call are non-GAAP, unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures in our financial results 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 2024, and I recommend you reference it for specific detail.

Speaker Change: <unk> software assumes no obligation to update the forward looking statements included in this call.

Speaker Change: Additionally, please note that all the financial figures referenced on this call are non-GAAP unless otherwise indicated you can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures in our financial results press release, which was issued after the market closed today. This document contains additional information related to our financial results.

Speaker Change: For the second quarter of 2024, and I recommend you reference it for specific details.

Michael Micciche: We also have prepared a presentation that contains supplemental data for our second quarter of 2024 results, providing highlights and additional financial metrics. Both the earnings release and the supplemental presentation are available in the Investor Relations section of our website at investors.progress.com. As Cherie mentioned, today's conference call will be recorded in its entirety, and it will be available via replay on the Investor Relations website after the call concludes.

Sherry: We also have prepared a presentation that contains supplemental data for our second quarter of 2024 results, providing highlights and additional financial metrics. Both the earnings release and the supplemental presentation are available in the Investor Relations section of our website at investors Dot progress Dot Com as Sherry mentioned today's conference call will be recorded in its entirety.

Yogesh K. Gupta: So with that, Yogesh, I'll turn it over to you. Thank you. Thank you, Mike.

Speaker Change: And it will be available via replay on the Investor Relations website.

Speaker Change: After the call concludes so with that Yogesh I'll turn it over to you. Thank you. Thank you Mike.

Yogesh K. Gupta: Thank you, Mike. Good evening, everyone, and thank you for joining us as we discuss the results of our second fiscal quarter of 2024. As you've seen in the press release, Progress posted solid results for Q2, with revenues and earnings well ahead of the higher end of Guidance and Essays. Total revenue came in at $175 million, driven once again by steady demand and solid expectations. Operating margins were above 38%, and earnings per share, at $1.09, exceeded the high end of our guidance by 12 cents as a result of the strong revenue performance and good expenses. ARR grew 1% in the quarter to $579 million.

Speaker Change: Good evening, everyone and thank you for joining us as we discuss the results of our second fiscal quarter of 2024.

press release: As you've seen in the press release profit posted solid results for Q2 with revenues and earnings well ahead of the higher end of guidance and estimates.

Speaker Change: Total revenue came in at $175 million, driven once again by steady demand and solid execution.

Speaker Change: Operating margins were about 38% and.

Speaker Change: And earnings per share at $1 nine exceeded the high end of our guidance by 12 cents.

Speaker Change: The result of the strong revenue performance and good expense control.

Speaker Change: <unk> grew 1% in the quarter to $579 million.

Yogesh K. Gupta: And we saw a fractional increase in our net retention rate, which was 99%. Our balance sheet continues to benefit from very strong cash flows and solid collections, ending the quarter with cash at $190 million and DSOs at 41 days, which is down from 50 days last quarter. We also repurchased around one million shares in the quarter, and we still have one hundred twenty two million dollars remaining under our overall repurchase authorization.

Speaker Change: And we saw a fractional increase in our net retention rate, which was 99%.

Our balance sheet continues to benefit from very strong cash flows and solid collections ending the quarter with cash at $190 million.

Speaker Change: Dsos at 41 days, which is down from 50 days last quarter.

Speaker Change: We also repurchased around 1 million shares in the quarter and we still have $122 million remaining under our overall repurchase authorization.

Yogesh K. Gupta: Anthony, of course, will provide much more detail around the numbers, but I'm very pleased with the performance achieved. As we cross the halfway point for fiscal 24, I believe we are well positioned for the rest of the year and feel confident in our ability to continue executing on our plan. Reflecting this confidence, we have raised our four-year expectations for revenues and, During the second quarter, Anthony, Mike, and I spent a lot of time talking with investors. Our meetings were excellent, and it was good to be back seeing people face to face on a regular basis.

And of course, we'll provide much more detail around the numbers, but I'm very pleased with our performance in Q2 as.

As we cross the halfway point for fiscal 'twenty four.

Speaker Change: I believe we are well positioned for the rest of the year and feel confident in our ability to continue executing on our plan.

Speaker Change: Selecting the confidence we have raised our full year expectations for revenues and earnings.

Speaker Change: During the second quarter, Anthony Mike and I've spent a lot of time talking with investors. Our meetings were excellent and it was good to be back seeing people face to face on a regular basis.

Yogesh K. Gupta: There were three recurring themes, the first being AI, the second, M&A, and the third, Moobit. So I'd like to discuss each of them, starting with AI. We're extremely excited about all of the AI work going on at Fox. But at the core of our AI strategy is three. First, we continue to add capabilities to our products so that our customers can develop, deploy, and manage responsible, AI-driven applications and experiences. Our products help customers accelerate their AI journeys by providing the tools and technologies to build Gen AI into their applications and to use AI-driven technologies to meet the needs of their customers. Second, we're using AI to make our products easier to use and to drive tremendous efficiencies for our customers in their processes of building, deploying, and So embedding AI in our tools makes their job even easier.

Speaker Change: There were three recurring themes the first being AI.

Speaker Change: Second M&A.

Speaker Change: And the third move it.

Speaker Change: So I'd like to discuss each of these today.

Speaker Change: Yeah.

Speaker Change: Starting with AI with <unk>.

Speaker Change: <unk> excited about all of the I work going on.

Speaker Change: At the corner.

To quantify our strategy is threefold.

Speaker Change: First we continue to add capabilities to our products. So that our customers can develop deploy and manage responsible AI driven applications and experiences.

Speaker Change: Our products help customers accelerate their journeys by providing the tools and technologies to build journey into their applications and to use AI driven technologies to meet the needs of that business.

Speaker Change: Second we're using AI to make our products easier to use and to drive tremendous efficiencies for our customers in their process of building deploying and managing expedience as an applications. So in.

Speaker Change: Bedding AI in our tools makes their job even easier.

Yogesh K. Gupta: And third, we use AI internally to improve our own processes and operations to enable us to better serve our customers, while driving efficiencies. Numerous Progress products offer advanced AI features, and we're receiving positive feedback from our customers. Let me share some examples; our new Progress Data Platform, which is a result of integrating MarkLogic as well as Progress Technology, features both semantic and vector capabilities to power RAG or retrieval augmented generation in AI applications.

Speaker Change: And third we use AI internally to improve our own processes and operations to enable us to better serve our customers while driving efficiencies in the business.

Speaker Change: Numerous profit products offer advanced AI features and we're receiving positive feedback from our customers.

Speaker Change: Let me share some examples.

Speaker Change: Our new data platform, which is a result of integrating <unk> logic as well as progress technologies features both semantic and vector capabilities to power Reg.

Richie: Richie with La Quinta generation in AI applications.

Yogesh K. Gupta: It also uses a semantic layer to validate the output of GenAI models, and the platform provides contextual links to corporate information and knowledge within the responses so users can see where the answers came from, what they mean, and how they are relevant to the business. This drives dramatically better results for GenAI-powered responses and minimizes AI uncertainty.

Richie: It also uses semantically to validate the output of journey models.

Speaker Change: And the platform provides contextual links to corporate information and knowledge within the responses. So users can see where the ounces came from what they mean and how they are relevant to the business.

Speaker Change: This drives dramatically better results of journey high powered responses and minimizes AI on submissions.

Yogesh K. Gupta: And it does so with the level of governance and auditability organizations need for their critical enterprise applications. And that's why a global chemical company and a large financial services company are realizing significant ROI by using these capabilities today. In our developer tools products, we offer UI components for easily embedding AI prompts and creating an AI-powered user experience for Gen AI applications. Our Sitefinity product uses Gen-AI capabilities to enable marketers to rapidly create, improve, and personalize website content, saving content editors tremendous time.

Speaker Change: And it does so with a level of governance and audit ability organizations need for their critical enterprise applications.

Speaker Change: And that's why a global chemical company and a large financial services company.

Speaker Change: Realizing significant ROI by using these capabilities today.

Operator: In our developer tools products, we offer UI components for easily embedding AI pumps and creating an AI-powered user experience for Gen AI applications. I Sitefinity product uses Gen AI capabilities to enable marketers to rapidly create improved and personalized website content, saving content editors tremendous time. Sitefinity also offers AI-powered conversion propensity scoring to make it easy to determine which customer segments are most likely to convert with which messages, dramatically improving the outcomes of targeting efforts.

Speaker Change: And our developer tools products, we offer UI components with easily embedding AI pumps, and creating an AI powered user expedience, Virginia AI applications.

Speaker Change: A slight Nike product user journey I capabilities to enable marketers to rapidly create improved and personalized website content saving content editors tremendous time.

Yogesh K. Gupta: Sitefinity also offers AI-powered conversion propensity scoring to make it easy to determine which customer segments are most likely to convert with which method, dramatically improving the outcomes of targeting efforts. An event marketing company is using this capability to do just that, grow audiences at events, and for Infrastructure Security. The AI-powered version of FlowMon for anomaly detection helps cybersecurity professionals and IT operations managers detect, understand, prioritize, and respond to potential security events faster than ever before.

Speaker Change: <unk> also offers Ci power conversion propensity scoring to.

Speaker Change: To make it easy to determine which customer segments are most like to likely to convert with which messages dramatically improving the outcomes of targeting efforts.

Operator: An event marketing company is using the scalability to do just that: raw audiences at events. And for infrastructure security customers, the AI-powered version of flow-mon for anomaly detection helps cybersecurity professionals and IT operations managers detect, understand, prioritize, and respond to potential security events faster than they will be for. Discapability, now being used by over a thousand cybersecurity experts at our customer sites, is demonstrating a greater than 50% reduction in the time it takes to analyze possible threat events, thereby significantly increasing the responsiveness of those organizations while making them even more efficient at the same time.

Speaker Change: And event marketing company is using of this capability to do just that grew audiences at events.

Speaker Change: And for infrastructure security customers.

Speaker Change: AI powered version a flow month anomaly detection helped cyber security professionals and IP operations managers.

Understand prioritize and respond to potential security events faster than ever before.

Yogesh K. Gupta: This capability, now being used by over 1,000 cybersecurity experts at our customer site, is demonstrating a greater than 50% reduction in the time it takes to analyze possible threats, thereby significantly increasing the responsiveness of those organizations while making them even more efficient at the same time. Going forward, we'll share more about how we're continuing to incorporate AI into our product. We're incredibly excited about the value we're providing to our customers today and what we can provide tomorrow by enabling them to build AI-powered applications.

Speaker Change: This capability now being used by over 1000, cyber security experts at our customer site.

Speaker Change: Is demonstrating a greater than 50% reduction in the time it takes to analyze possible customers, thereby significantly increasing the responsiveness of those organizations, while making them even more efficient at the same time.

Operator: Going forward, we'll share more about how we're continuing to incorporate AI into our products.

Speaker Change: Going forward, we will share more about how we're continuing to incorporate AI into our products. We're.

Operator: We're incredibly excited about the value we're providing to our customers today, and what we can provide tomorrow by enabling them to build AI-powered applications and experiences. And we're thrilled to see the value we are driving for progress internally with more efficient and effective AI-powered operational systems and processes.

Speaker Change: We're incredibly excited about the value, we're providing to our customers today and what we can provide tomorrow by enabling them to build AI powered applications and experiences.

Yogesh K. Gupta: And we're thrilled to see the value we are driving for progress internally with more efficient and effective AI-powered operational systems and products. Another topic we discussed often with investors was M&A, which remains at the core of our total growth strategy. Our investors trust us to remain patient and disciplined, making sure that any deal we do meets our stringent financial criteria. We have reviewed many companies and continue to do so, looking for the right deal for profit, if you recall last quarter's earnings.

Speaker Change: We're thrilled to see the value, we're driving for progress internally with more efficient and effective AI powered operational systems and processes.

Operator: Another topic we discussed often with investors was M&A, which remains at the core of our total growth strategy. Our investors trust us to remain patient and discipline, making sure that any deal we do needs a stringent financial criteria. We have reviewed many companies and continue to do so, looking for the right deal for progress.

Speaker Change: Yes.

Speaker Change: Another topic, we discussed often with investors was M&A, which remains at the core of our total growth strategy.

Speaker Change: Okay.

Speaker Change: Our investors trust us to remain patient and disciplined making sure that any deal we do meet our stringent financial criteria.

Speaker Change: We have reviewed many companies and continue to do so looking for the right deal for products.

Yogesh Gupta: If you recall last quarter's earnings announcement, we included a bus lease that stated that we were in the process of due diligence for the potential acquisition of an Irish public company, Maria David. Because we have to abide by Irish takeover rules, which mandate that all steps of any proposed acquisition must be disclosed publicly. Everyone got to see parts of our corporate development process in action, and it was a good illustration of some of what we go through everyday. We've had a steady flow of acquisition candidates, and at all times there are numerous potential transactions we're exploring in various stages of viability.

If you recall last quarter's earnings announcement, we included a press release that stated that.

Yogesh K. Gupta: We included a press release that stated that we were in the process of due diligence for the potential acquisition of an Irish public company, MariaDB. Because we have to abide by Irish takeover rules, which mandate that all steps of any proposed acquisition must be disclosed publicly, everyone got to see parts of our corporate development process in action, and it was a good illustration of some of what we go through every day.

Speaker Change: We were in the process of due diligence for the potential acquisition of an Irish public company Maria DB.

Speaker Change: Because we have to abide by Irish takeover rules, which mandate that all steps of any proposed acquisition must be disclosed publicly everyone's got to see parts of our corporate development process in action and it was a good illustration of some of what we go through every day.

Yogesh K. Gupta: We've got a steady flow of acquisition candidates, and at all times, there are numerous potential transactions we're exploring in various stages of viability. We continue to be positive about the M&A environment and our ability to find the right deals through diligent and disciplined M&A, which is a key pillar of our total growth strategy. We are confident that we'll deliver on doubling the size of our business in five. A third consistent theme that came up was, of course, moving.

Speaker Change: We've got a steady flow of acquisition candidates and at all times. There are numerous potential transactions were exploring in various stages of viability.

Yogesh Gupta: We continue to be positive about the M&A environment and our ability to find the right deals, and through diligence and discipline, M&A, which is a key pillar of our total growth strategy.

Speaker Change: We continue to be positive about the M&A environment, and our ability to find the right deals.

Speaker Change: And through diligent and disciplined M&A.

Which is a key pillar of our growth strategy. We are confident that we will deliver on doubling the size of our business in five years.

Yogesh Gupta: We are confident that we'll deliver on doubling the size of our business in five years.

Operator: The third consistent thing that came up was, of course, moving.

Speaker Change: Okay.

Speaker Change: Third consistent theme that came up was of course move it.

Yogesh K. Gupta: Last month, we passed the one-year anniversary of ADAPT on our customers' MOVIT environment. It is important to know that the business has remained solid. Moovit ARR has grown over that period, and we continue to be pleased with the way we've been working with them. We previously disclosed that two international data protection agencies closed their investigations of Progress and the morbid incident without taking any regulatory action, the UK last November and Australia in March. Recently, on May 29th, the Spanish Data Protection Authority also informed us that no regulatory action against progress was required in relation to the COVID-19 pandemic.

Yogesh Gupta: Last month, we passed the one-year anniversary of the attack on our customers' movement and why. It is important to note that the business has remained solid; move it ARR has grown over that period, or continue to be pleased with the way we've been working with them.

Speaker Change: Last month, we passed the one year anniversary of the attacks on our customers' move it environments.

Speaker Change: It is important to note that.

Speaker Change: And that the business has remained solid move.

<unk> has <unk> has grown over that period.

Speaker Change: Our <unk> continue to be pleased with the way we've been working with them.

Yogesh Gupta: We previously disclosed that two international data protection agencies closed the investigations of progress and the movement incident without taking any regulatory action: the UK in last November and Australia in March. Recently, on May 29th, the Spanish Data Protection Authority also informed us that no regulatory action against progress was required in relation to the movement vulnerability. We continued to cooperate with regulators in a transparent manner because we're confident that progress acted appropriately and with the influence of our customers at the forefront in our response to the attack on their movement environments.

Speaker Change: We previously disclosed that to international data protection agencies close their investigation as to the progress and the mortgage incident without taking any regulatory action the U K and last November in Australia in March.

Speaker Change: Recently on May 29, the Spanish data protection Authority also informed us that no regulatory action against progress is required in relation to moving from liquidity.

Yogesh K. Gupta: We continue to cooperate with regulators in a transparent manner because we're confident that Progress acted appropriately and with the interest of our customers at the forefront in our response to the attack on the Mubuton file. We remain grateful for the support of our customers, partners, and employees, and remain focused on executing our total growth strategy. So to wrap up, Q2 was another solid quarter for progress, marked by a continuation of good demand and outstanding execution in the field and in training.

Speaker Change: We continue to cooperate with the regulators in a transparent manner, because we're confident that progress acted appropriately and with the interest of our customers at the forefront in our response to the attack on their move it environment.

Yogesh Gupta: We remained grateful for the support for our customers, partners, and employees and remain focused on executing our total growth strategy. So to wrap up, Q2 was another solid quarter of progress, marked by a continuation of good demand and outstanding execution in the field and internally. Our intense and unrelenting focus on customer success continues to provide progress with a strong, durable base of recurring levels. I'm very pleased with the performance in ARR and net retention, along with our significant cash generation. Once again, our outlook remains positive. We continue to be optimistic about the potential for M&A, which remains our key strategic priority.

Speaker Change: We remain grateful for the support of our customers partners and employees and remain focused on executing our total growth strategy.

Speaker Change: Yeah.

So to wrap up Q2 was another solid quarter for progress marked by a continuation of good demand and outstanding execution in the field and in currently.

Yogesh K. Gupta: Our intense and unrelenting focus on customer success continues to provide progress with a strong, durable base of recurring revenue. I'm very pleased with the performance in ARR and net retention, along with our significant cash generation. Once again, our outlook remains positive. We continue to be optimistic about the potential for M&A, which remains a key strategic priority. When we find the right candidate at the right price, we will. Lastly, before I close, I want to mention that earlier this month the Boston Business Journal recognized Progress for the fourth consecutive year as one of the best places to work in Boston. In addition, Forbes in Bulgaria recently recognized progress on its list of the best employers in that country.

Speaker Change: Our intense and unrelenting focus on customer success.

Speaker Change: Can use to provide profits with a strong durable base of recurring revenues.

Speaker Change: I'm very pleased with the performance in the auto net retention along with our significant cash generation.

Speaker Change: Once again, our outlook remains positive.

Speaker Change: We continue to be optimistic at the potential for M&A, which remains a key strategic priority.

Yogesh Gupta: When we find the right candidate at the right price, we will execute.

Speaker Change: When we find the right candidate at the right price we will execute.

Yogesh Gupta: Lastly, before I close, I want to mention that earlier this month, the Boston Business Journal recognized Progress for the fourth consecutive year as one of the best places to work in the Boston area. In addition, Forbes and Bulgaria recently recognized progress on its list of best employers in that country.

Speaker Change: Lastly, before I close I want to mention that earlier this month, the Boston business Journal recognized progress for the fourth consecutive year as one of the best places to work in the Boston area.

Speaker Change: In addition, Forbes in Bulgaria recently recognized progress on its list of best employers in that country.

Yogesh Gupta: While we often discuss our commitment to our customers, these recognitions also demonstrate our commitment to our employees. And I'm really proud of our work environment, our culture, and our people. As always, I want to thank everyone at Progress for their hard work and consistent above-and-beyond efforts that led to yet another solid quarterly performance.

Yogesh K. Gupta: While we often discuss our commitment to our customers... These recognitions also demonstrate a commitment to our employees. And I'm really proud of our work environment, our culture, and our community. As always, I want to thank everyone at Progress for their hard work and consistent above and beyond efforts that led to yet another solid quarter. Let me now hand it off to Anthony for his prepared remarks.

Speaker Change: While we often discuss our commitment to our customers. These recognitions also demonstrate our commitment to our employees and I'm really proud of our work environment, our culture and our people.

Speaker Change: As always I want to thank everyone that progress for their hard work and consistent above and beyond efforts that lead that led to yet another solid quarterly performance.

Anthony Folger: Let me now hand it off to Anthony for his prepared remarks. Anthony? Thanks, Yogesh, and good evening everyone. Thanks for joining the call. As Yogesh mentioned, we're very pleased with our Q2 results, which again exceeded the high end of our guidance range on revenue and earnings per share.

Let me now hand, it off to Anthony for his prepared remarks Anthony.

Anthony Folger: Thanks, Yogesh. And good evening, everyone.

Anthony: Thank you and good evening, everyone. Thanks for joining the call.

Anthony Folger: Thanks for joining the call. As Yogesh mentioned, we're very pleased with our Q2 results, which again exceeded the high end of our guidance range on revenue and earnings per share. Turning to the numbers, we'll start on the top line with ARR. We closed the second quarter with ARR of $579 million, which represents approximately 1% growth on a year-over-year basis, although no single product drove material growth in our total ARR. The one percent growth that we delivered was the result of modest growth in multiple products across our portfolio, including OpenEdge, DevTools, Sitefinity, Lodemaster, Flomon, and Moov.

As Yogesh mentioned, we're very pleased with our Q2 results, which again exceeded the high end of our guidance range on revenue and earnings per share.

Anthony Folger: Turning to the numbers, we'll start on the top line with ARR. We closed the second quarter with ARR of $579 million, which represents approximately 1% growth on a year-over-year basis. Although no single product drove material growth in our total ARR, the 1% growth that we delivered was the result of modest growth in multiple products across our portfolio, including open-edge dev tools, Sitefinity, Love Master, Flow-on, and Moving. We also had another strong quarter for net retention, with our Q2 rates coming in at 99%.

Speaker Change: Turning to the numbers will start on the topline with IRR.

Anthony: We closed the second quarter with IRR of $579 million, which represents approximately 1% growth on a year over year basis.

Yogesh K. Gupta: Although no single product drove material growth in our total IRR the 1% growth that we delivered was the result of modest growth in multiple products across our portfolio, including open edge Dev tools site Trinity Loadmaster, Shlomo and move it.

Speaker Change: We also had another strong quarter for net retention with our Q2 rates coming in at 99%.

Anthony Folger: In addition to our solid ARR growth, the revenue for the quarter of $175 million was well above the high end of the guidance range we provided back in March. This better than expected revenue performance in the quarter was driven by stronger than anticipated demand for multiple products in our portfolio, including OpenEdge, DataDirect and MarkLogic.

Speaker Change: In addition to our solid <unk> growth.

Speaker Change: Revenue for the quarter of $175 million.

Speaker Change: Was well above the high end of the guidance range, we provided back in March.

Speaker Change: This better than expected revenue performance in the quarter was driven by stronger than anticipated demand for multiple products in our portfolio, including open edge data direct and Mark logic.

Anthony Folger: We also had another strong quarter for net retention, with our Q2 rates coming in at 99%. In addition to our solid ARR growth, revenue for the quarter of $175 million was well above the high end of the guidance we provided it back in March. This better-than-expected revenue performance in the quarter was driven by stronger-than-anticipated demand for multiple products in our portfolio, including OpenEdge, DataDirect, and MarkLogic. Turning now to

Anthony Folger: Turning now to expenses. Our total costs and operating expenses for the quarter were $108 million, down 4% compared to the prior year, and generally in line with our expectations.

Speaker Change: Turning now to expenses our.

Anthony Folger: Our total costs and operating expenses for the quarter were $108 million, down 4% compared to the prior year and generally in line with our expectations. The Year-over-Year Decrease in Expense was largely because our integration of MarkLogic was ongoing in Q2 of last year. And now that the integration is complete and cost synergies have been realized, we're operating at a lower cost. Operating income was $67 million, consistent with the prior year quarter.

Speaker Change: Our total costs and operating expenses for the quarter were $108 million down 4% compared to the prior year and generally in line with our expectations.

Anthony Folger: The year-over-year decrease in expense was largely because our integration of MarkLogic was ongoing in Q2 of last year, and now that the integration is complete and costs energies have been realized, we're operating at a lower cost base. Operating income was $67 million, consistent with the prior year quarter, and our operating margin was over 38%, compared to 38% in the second quarter of 2023.

Speaker Change: The year over year decrease in expense was largely because our integration of Mark logic was ongoing in Q2 of last year.

Speaker Change: And now that the integration is complete and cost synergies have been realized we're operating at a lower cost base.

Speaker Change: Operating income was $67 million consistent with the prior year quarter.

Anthony Folger: And our operating margin was over 38% compared to 38% in the second quarter of 2023. On the bottom line, our Q2 earnings per share of $1.09 is $0.12 above the high end of our guidance range. This overperformance relative to our expectations was driven by outstanding top-line performance coupled with solid cost management across the business.

And our operating margin was over 38% compared to 38% in the second quarter of 2023.

Anthony Folger: On the bottom line, our Q2 earnings per share of $1.09 is 12 cents above the high end of our guidance range. This overperformance relative to our expectation was driven by outstanding top-line performance coupled with solid cost management across the business.

Speaker Change: On the bottom line, our Q2 earnings per share of $1 nine.

Speaker Change: Is <unk> <unk> above the high end of our guidance range.

Speaker Change: This over performance relative to our expectation was driven by outstanding top line performance, coupled with solid cost management across the business.

Anthony Folger: Moving on now to a few balance sheet and cash flow metrics, we ended the quarter with cash equivalents of $190 million and debt of $810 million for a net debt position of $620 million. This represents net leverage of roughly 2.2 times using our trailing 12-month adjusted EBITDA, and roughly 2.0 times using our projected results for the full fiscal year 2024. DSO for the quarter was a bit ahead of our expectations at 41 days, and improvement from 50 days last quarter. Adjusted free cash flow was $64 million for the quarter, an increase of $16 million, or 33% from the prior year quarter.

Anthony Folger: Moving on now to a few balance sheet and cash flow metrics, we ended the quarter with cash and cash equivalents of $190 million and debt of $810 million, for a net debt position of $620 million. This represents net leverage of roughly 2.2 times, using our trailing 12-month adjusted EBITDA, and roughly 2.0 times using our projected results for the full fiscal year 2024. DSO for the quarter was a bit ahead of our expectations at 41 days, an improvement from 50 days last quarter.

Speaker Change: Moving on now to a few balance sheet and cash flow metrics, we ended the quarter with cash and cash equivalents of $190 million and debt of $810 million.

Speaker Change: For a net debt position of $620 million.

Speaker Change: This represents net leverage of roughly two two times using our trailing 12 month adjusted EBITDA.

Speaker Change: And roughly 2.0 times using our projected results for the full fiscal year 2024.

Speaker Change: DSO for the quarter was a bit ahead of our expectations at 41 days an improvement from 50 days last quarter.

Anthony Folger: Adjusted free cash flow was $64 million for the quarter, an increase of $16 million or 33% from the prior year quarter. I'd also like to point out that our adjusted free cash flow for the first half of fiscal 2024 stands at $136 million, which is an increase of 44% over the same period last year. During the second quarter, we repurchased $50 million of progress stock, including $25 million in connection with the issuance of our convertible notes and markets.

Speaker Change: Adjusted free cash flow was $64 million for the quarter.

An increase of $16 million or 33% from the prior year quarter.

Anthony Folger: I'd also like to point out that our adjusted free cash flow for the first half of fiscal 2024 stands at $136 million, which is an increase of 44% over the same period last year.

Speaker Change: I'd also like to point out that our adjusted free cash flow for the first half of fiscal 2024 stands at a $136 million.

Speaker Change: Which is an increase of 44% over the same period last year.

Anthony Folger: During the second quarter, we repurchased $50 million of progress stock, including $25 million in connection with the issuance of our convertible notes in March. At the end of the quarter, we had $122 million remaining under our current share repurchase authorization.

Speaker Change: During the second quarter, we repurchased $50 million of progress stock, including $25 million in.

Speaker Change: With the issuance of our convertible notes in March.

Anthony Folger: At the end of the quarter, we had $122 million remaining under our current share repurchase authorization. All right, now, I'd like to turn to our outlook for Q3 and the full year 2020. When considering our outlook, we continue to see consistent strength in the demand environment for our solution.

At the end of the quarter, we had $122 million remaining under our current share repurchase authorization.

Operator: All right, now I'd like to turn to our outlook for Q3 and the full year 2020.

Anthony Folger: And for the third quarter, we expect revenue between $174 and $178 million and earnings per share of between $1.11 and $1.15. For the full year 2024, we expect revenue between $700 and $2500. $735 million, an increase of $3 million from our prior guidance. We expect an operating margin of 39 to 40 percent, consistent with our prior guidance. We expect adjusted free cash flow between $205 million and $215 million, again consistent with our prior guidance. And we expect earnings per share of between $4.70 and $4.80, an increase of five cents from our prior guide. Our annual EPS estimate contemplates a tax rate of 20 percent.

Speaker Change: Alright, now I would like to turn to our outlook for Q3.

Speaker Change: And the full year 2024.

Speaker Change: When considering our outlook, we continue to see consistent strength in the demand environment for our solutions.

Speaker Change: And for the third quarter, we expect revenue between 174 and 178 million and.

Speaker Change: And earnings per share of between $1 11, and $1 15.

Speaker Change: For the full year 2024, we expect revenue between 725 and $735 million, an increase of $3 million from our prior guidance.

Speaker Change: We expect an operating margin of 39% to 40% consistent with our prior guidance.

Speaker Change: We expect adjusted free cash flow between 205, and $215 million again, consistent with our prior guidance.

Speaker Change: And we expect earnings per share of between $4 70, and $4 80.

Speaker Change: An increase of five from our prior guidance.

Speaker Change: Our annual EPS estimate contemplates a tax rate of 20%.

Speaker Change: Approximately $44 2 million shares outstanding.

Speaker Change: And the impact of $103 million in share repurchases.

Speaker Change: It's worth mentioning that the $103 million and expected share repurchases represent an increase from the $78 million that I noted on our last earnings call.

Anthony Folger: Approximately 44.2 million shares outstanding and the impact of $103 million in share repurchases. It's worth mentioning that the $103 million in expected share repurchases represents an increase from the $78 million that I noted on our last earnings call. In closing, we're excited to deliver strong financial results across the board in the second quarter. It's a continuation of the trend that we saw in the first quarter, and we believe we're very well positioned to deliver strong results for the remainder of 2024 and beyond. With that, I'd like to open the call for Q&A. Thank you. As a reminder,

Speaker Change: In closing, we're excited to deliver strong financial results across the board in the second quarter.

Speaker Change: It's a continuation of the trend that we saw in the first quarter and we believe we're very well positioned to deliver strong results for the remainder of 2024 and beyond.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again.

Speaker Change: With that I'd like to open the call for Q&A.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Operator: Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. And our first question will come from the line of Fatima Boolani with Citi. Your line is open.

Speaker Change: Restraints, we ask that you please limit yourself to one question and one follow up question. Please standby, while we compile the Q&A roster.

Speaker Change: And our first question will come from the line of Fatima <unk> with Citi. Your line is open.

Fatima Aslam Boolani: Good afternoon. Thank you for taking the time to answer my questions. Yogesh, I wanted to double-click on one of your comments in your script regarding, you know, what you're doing from an AI perspective and infusing those capabilities within your portfolio. But you also made a mention that you are internally deploying AI-powered operational systems, which I think is the terminology that you used. We haven't heard many companies talk about this, so I'd be really curious to get your granular views on how AI is perhaps creating more expense leverage or operating leverage in the business, and how much of that is sustainable, durable, and expandable. And then a follow-up question for Anthony, if I may.

Fatima Aslam Boolani: Good afternoon, and thank you for taking my questions.

Speaker Change: I wanted to double click on one of your comments in your script regarding what.

Youre doing from an AI perspective, and using those capabilities within your portfolio, but you also made a mention that you are.

Speaker Change: Internally deploying AI powered operational system I think is the terminology that we use.

Speaker Change: We havent heard many companies talk about this so I'd be really curious to get your army granular views on how AI is.

Speaker Change: Creating more expense leverage or operating leverage in the business.

And how much of that is sustainable and durable.

Speaker Change: Expandable and then a follow up for Anthony.

Speaker Change: Okay.

Yogesh K. Gupta: Thanks, Fatima. So we are actually using AI, and I think we, like many others, are probably in the early stages of using this, but we are using AI fairly extensively across a wide range of functions. So let me share a few examples. We are using, of course, AI in content creation. So, as I'm sure you can relate to this, the role of content creation and marketing is critical. However, marketing is always behind the curve on trying to figure out how quickly they can get targeted content for audiences that we wanna target our marketing messages to.

Speaker Change: Thanks Fatima.

Speaker Change: So we are actually using.

Speaker Change: I think we like many others are probably in the early stages of using this month we are using.

Speaker Change: AI fairly extensively across a wide range of functional so let me share a few examples.

Yogesh K. Gupta: And by leveraging AI, we are seeing significant improvements in the speed with which we can turn around content and be responsive to the needs of the business. So, in a lot of these things, Fatima, it's not just sort of trying to sort of get operational efficiencies from a cost perspective; it is also kindness of responses, accuracy of responses, more effective content, for example, and so on. Another area is this is an interesting one from the perspective of tech support and dealing with our customer support issues.

Speaker Change: We are using of course AI in content creation. So.

Speaker Change: I'm sure you can.

Your complaint to this right.

Speaker Change: The role of content creation and marketing is critical.

Marketing is always behind the curve on trying to figure out how quickly they can get targeted content for audiences that we want to target our marketing messages too.

Speaker Change: And by leveraging AI, we are seeing significant.

Speaker Change: Improvements in the speed with which we can turnaround content.

Speaker Change: And be responsive to the needs of the business. So.

A lot of these things that you might not just sort of trying to sort of get operational efficiencies from a cost perspective. It is also the timeliness of the sponsors accuracy of responses.

Speaker Change: Effective.

Speaker Change: Content for example, and so on.

Speaker Change: Another area is.

Speaker Change: This is an interesting one from the perspective of.

Speaker Change: Tech support in dealing with our customer support issues.

Yogesh K. Gupta: Very often, technical folks will answer questions, and then what we want to do is, of course, create knowledge-based articles that other customers for that particular question could find automatically, right, and so that they don't have to talk to somebody. Now, that's a laborious task. Nobody really enjoys doing it as much.

Speaker Change: They often technical folks will answer questions and then what we want to do is of course create knowledge based articles that other customers for that particular question, but find it automatically right.

Speaker Change: And so that they don't have to talk to somebody now that's a laborious task nobody really enjoys doing it as much again, we're using generative AI to automatically generate a knowledge base article that then is edited and reviewed by the technical person.

Yogesh K. Gupta: Again, we're using generative AI to automatically generate a knowledge-based article that then is edited and reviewed by the technical person who has answered the question to begin with, and thereby, again, simplifying and reducing the time it takes for that to be created. We're seeing, for example, in that scenario, a 50 to 75% improvement in the responsiveness of how quickly we can get knowledge-based articles created for a particular issue. We are at the early stages of looking to apply Gen-AI to really analyze our customer contracts.

Speaker Change: Who has answered the question to begin with and thereby again, simplifying and reducing the time. It takes for that to be created we're seeing for example in that scenario.

Speaker Change: 50% to 75% improvement in the responsiveness how quickly we can get knowledge based articles created.

Speaker Change: Florida particular particular.

Speaker Change: Issue.

Speaker Change: We are at the early stages of looking to apply Jenny I too really analyzing our customer contracts the opportunities are to be honest quite endless and we are also deploying the progress data platform internally as well.

Yogesh K. Gupta: I mean, the opportunities are, to be honest, quite endless, and we are also deploying the Progress Data Platform internally as well for, for example, the legal contract review process and other things so that we can leverage internal corporate data. One of the key challenges with using AI today is how do you make sure that your information, your knowledge, your data stays secure, stays private, and is governable while at the same time you take advantage of LLMs and other AI technologies?

Speaker Change: For for example, the.

Speaker Change: The legal contract review process and other things so that we can leverage internal corporate data at one of the most key challenges with using AI today is how do you make.

Speaker Change: Make sure that your information your knowledge, our data stays secure space private is governable.

Speaker Change: While at the same time, you take advantage of LMS and other AI technologies and our data platform is actually designed to do just that and so therefore to us.

Yogesh K. Gupta: And our data platform is actually designed to do just that. And so, therefore, you know, for us being able to also use our own products and demonstrate that we can use them and we can be beneficiaries as well is also important. Early to say, Fatima, in terms of expense reductions and sustainability, but as we get data on those, we will come back and

Fatima: Being able to also use our own products and demonstrate that we can use them and we can be beneficiaries as well is also an important early to say Fatima in terms of.

Fatima: Expense reductions.

Fatima: Sustainability, but as we get data on those we will come back and share count.

Operator: I appreciate that very detail in theory, Yogesh, and I'd like to hear that you're drinking your own champagne. Anthony, just on the maintenance and services performance in the quarter, it was certainly much better than if it's what we were modeling and what most folks were looking for.

Anthony Folger: I appreciate that very detailed answer, Yogesh, and I like to hear that you're drinking your own champagne. Anthony, just on the maintenance and services performance in the quarter, it was certainly much better than what we were modeling and then what most folks were looking for. Wanted to ask if there's anything atypical or outsized to highlight here vis-a-vis any early renewals or timing of any contractual relationships and renewals. That's it for me. Thank you. Yep. No. If he's

Speaker Change #100: I appreciate that very detailed Ontario question nice to hear that Youre drinking your own champagne.

Speaker Change #100: Anthony just on the events and services performance in the quarter. It was certainly much better than.

Speaker Change #100: What we were modeling and then what most folks were looking for.

Operator: I wanted to ask if there's anything unethical or outside to highlight here. These are the early renewals or timing of any contractual relationships and renewals.

Speaker Change #101: I wanted to ask if there is anything atypical or outsize to highlight here.

Speaker Change #102: These are the oney.

Speaker Change #102: Early renewals or timing.

Speaker Change #103: Any contractual relationships and renewals that's it for me. Thank you.

Operator: That's it for me.

Anthony Folger: Thank you. No, if it came, you know, I think it was a reasonably good quarter from a renewals perspective. You know, we did see a slight improvement in our net retention rates. And we saw, you know, if you were to look at the sequential movement in ARR, you know, there was a nice uptick from Q1 to Q2. And so it just felt like, you know, as slightly better quarter across the board, when it came to renewal and net retention rates. So I would say nothing that looks like an anomaly, nothing really from a timing perspective that would have driven, you know, an outsized performance on the maintenance and service funds.

Anthony Folger: Yeah, no, Fatima, you know, I think it was a reasonably good quarter from a renewals perspective. We did see a slight improvement in our net retention rates. And we saw, you know, if you were to look at the sequential movement in ARR, you know, there was a nice uptick from Q1 to Q2. And so it just felt like, you know, a slightly better quarter across the board when it came to renewal and net retention rates. So I would say nothing that looked like an anomaly, really from a Thank you so much.

Speaker Change #103: Okay.

Speaker Change #104: <unk> I think it was it was a.

Speaker Change #104: Reasonably good quarter.

Speaker Change #105: A renewals perspective.

Speaker Change #106: We did see a slight improvement in our net retention rates and we saw.

Speaker Change #106: If you were to look at the sequential movement in <unk>.

Speaker Change #106: There was a nice uptick from Q1 to Q2 and so it just felt like.

Speaker Change #106: Slightly better quarter across the board when it came to renewal and net retention rates.

Speaker Change #107: I would say nothing that looks like an anomaly nothing really from ups.

Speaker Change #107: A timing perspective that would have driven an.

Speaker Change #107: And outsized performance on the maintenance and service lines.

Operator: Thank you so much. Thank you.

Speaker Change #108: Thank you so much.

Operator: Thank you. One moment for our next question, and that will come from the line of Pinjalim Bora with J.P. Morgan.

Ittai Kidron: One moment for our next question. And that will come from the line of Pendulum Borough with JP Morgan. Great. Hey guys. Thanks for taking the questions and comments on the quarter. One question for you, Jogesh. The archeological acquisition has that expanded.

Speaker Change #109: Thank you one moment for our next question.

Pinjalim Bora: And that will come from the line of pendulum Bora with J P. Morgan.

Pinjalim Bora: Great. Hey, guys, thanks for taking the questions and congrats on the quarter. One question for you, Yogesh. The MarkLogic acquisition, has that expanded your opportunity within the Gen AI RAG-based use cases? Is the intensity of those conversations with your existing customer base increasing as they think about building Gen AI workloads? And how does that compare to something like Mongo?

Speaker Change #111: Great Hey, guys. Thanks for taking the question questions and congrats on the quarter.

Speaker Change #112: One question for you Yogesh.

Speaker Change #113: The <unk> acquisition has that expanded would you say it has expanded your opportunity within kind of the journey II rack based use cases is the intensity of those conversations with your existing customer base, increasing as they think about building Jenny I workloads, and how does that compare to something like <unk>.

Yogesh Gupta: Would you say it has expanded your opportunity within kind of the Jenny I rag based use cases? Is the intensity of those conversations with your existing customers increasing as they think about building Jenny I workloads. And how does that compare to something like a longer elastic. Yeah, so thank you. Benjamin and short answer with yes, give you a slightly longer answer as well. You know, Mark Logic acquisition definitely brought us, and by integrating it with some of our own data platform technologies, data integration and intelligent decision technologies, that combination has created is really powerful solutions to apply rag.

Yogesh K. Gupta: Yeah, so thank you, Pinjalim. And the short answer is yes. I'll give you a slightly longer answer as well.

Speaker Change #112: <unk>.

Yes, so thank you.

Speaker Change #114: Pendulum and short answer is yes.

Speaker Change #114: I'll give you a slightly longer answer as well.

Yogesh K. Gupta: You know, MarkLogic's acquisition definitely brought us, and by integrating it with some of our own data platform technologies, data integration, and intelligent decisioning technologies, that combination has created a really powerful solution to apply RAG, both from a semantic analysis perspective as well as from a vector, to really make Gen AI applications much more accurate, much less error-prone, minimize hallucinations, and also provide the governance and security around it that people are looking for So yes, and I think it really does create an opportunity for us to go back to our customers and work with them to make sure that they see what we have and that they are able to actually leverage our offerings.

Speaker Change #114: Hey.

Mark: Mark logic acquisition.

Mark: Definitely brought us and.

Mark: And by integrating it with some of our own data platform technologies data integration.

Mark: Intelligent Decisioning technologies that combination has created a really powerful solution to apply rag.

Yogesh Gupta: You know, to both from a semantic analysis perspective as well as vector to really make Jenny I applications much more accurate, much less error prone. Minimize hallucinations and also provide the governance and security around it that people are looking for. So yes, and I think it really does create an opportunity for us to go back to our customers and. What would them to make sure that they see that what we have and that they're able to actually leverage our offerings.

Speaker Change #116: Two both from a semantic analysis perspective, as well as <unk>.

Mark: Victor.

Speaker Change #117: To really make gen <unk> applications.

Speaker Change #117: Much more accurate much less error prone.

Speaker Change #117: Hi, as hallucinations and also provided the governance and security around it that people are looking for so yes, and I think it really does create an opportunity for us.

Speaker Change #117: To go back to our customers and work.

Speaker Change #118: Work with them to make sure that date.

Speaker Change #119: See that what we have and that they are able to actually leverage our offerings.

Yogesh K. Gupta: The interesting part about this, Pinjalim, is that mission critical applications and business critical applications leveraging Gen AI are going to be a slow and longer process than folks think. It's easy to just sort of use an LLM for simple questions and answers, but really integrating it into your data, doing it in a methodical way, coming up with a real business use case, and then spending the money on it always takes time.

Yogesh Gupta: The interesting part about this pendulum is that, you know, mission critical applications and business critical applications leveraging Jenny I is going to be a slow and longer process than then folks think, right. It's easy to just sort of use an LLM for simple questions and answers, but really integrating it into your data, doing it in a magical way, coming up with a real business use case. And then spending the money on it always takes time. So, so what we are looking forward to doing that. As I mentioned in my comments earlier, we actually have a couple of customers who are actively using this today in production, which makes us really.

Speaker Change #120: The interesting part about this pendulum is that mission critical applications and business critical applications leveraging journey II is going to be a slow and longer process than than folks think it's easy to just sort of using LLM for simple questions and answers, but really integrating it into your data are doing it in a methodical way.

Speaker Change #120: Coming up with a real business use case, and then spending the money on it always takes time. So so what we are looking forward to doing that.

Yogesh K. Gupta: So, but we are looking forward to doing that. As I mentioned in my comments earlier, we actually have a couple of customers who are actively using this today in production, which makes us really delighted that we have made that much progress so far. The question for us is, at what level are customers ready to adopt? And as that momentum builds, as we hope it does, we'll, of course, share details. Yep, I understand. I have one question for you, Anthony.

Speaker Change #121: As I mentioned in my comments earlier, we actually have a couple of customers who are actively using this today in production, which makes us really.

Yogesh Gupta: Delighted that we have made that question progress so far. The question for us is, you know, at what level our customers ready to adopt, and as that, as that momentum builds, as we hope it does, will of course share share details. University. Yep, understood.

Speaker Change #120: Sure.

Delighted that we have made that much progress so far the question for us is at what level, our customers ready to adopt and as that.

Speaker Change #120: As that momentum builds as we hope it does we will of course share share details with you.

Pinjalim Bora: The outperformance in Q2, I was looking at the outperformance of Q2 versus the kind of the Q3 guide. I'm wondering if there is anything to highlight in terms of timing of term renewals? Did anything pull forward from Q3 to Q2? Anything to highlight there?

Anthony Folger: One question for you, Anthony. The valve performance in Q, those looking at valve performance with Q2, this is kind of the Q3 guide. And wondering if there is anything to highlight in terms of timing of terminal, good ending pull forward from Q3 to Q2 and anything to highlight there.

Speaker Change #122: Yes understood.

Speaker Change #123: One question for you Anthony.

Speaker Change #124: The outperformance in Q I was looking at the outperformance in Q2 versus kind of the Q3 guide I'm wondering if there is anything to highlight in terms of timing of some renewals that anything pull forward.

Speaker Change #124: From Q3 to Q2.

Speaker Change #124: Anything to highlight there.

Anthony Folger: Hey, Pinjalim. You know, no, I would say not really. Like I said, Q2 was a very solid quarter. It felt like, in terms of momentum, maybe a slight step up from where we were in Q1. You know, I think last year we definitely had some larger multi-year contracts that sort of moved some of the revenue around quarter to quarter. And obviously, we're just coming off the Mark Logic acquisition in Q1 of last year. But, you know, I think the outlook for Q3 and the results from Q2, I really don't think there were any material timing issues.

Anthony Folger: Hey, phasome. You know, no, I would say not really. Like I said, Q2 was a very solid quarter. It felt like, you know, in terms of momentum, maybe a slight step up from where we were in Q1. You know, I think last year, we definitely had some larger multi-year contracts that sort of moved some of the revenue around quarter to quarter. And obviously, we're just coming off of our logic acquisition. Q1 of last year. But, you know, we're very in the results from Q2. I really don't. There was any material timing issues there.

Speaker Change #125: Hey, thanks.

Speaker Change #126: No I would say not really like I said Q2 was a very solid quarter it felt like.

Speaker Change #126: In terms of momentum.

Speaker Change #127: Slight step up from where we were in Q1.

Speaker Change #128: I think last year, we definitely had.

Speaker Change #128: Some larger multiyear contracts that sort of moves.

Speaker Change #128: Some of the revenue around quarter to quarter, and obviously, we're just coming off the Mark logic acquisition in Q1 of last year.

But.

Speaker Change #128: Think the.

Speaker Change #128: The outlook for Q3, and the results from Q2, I really don't there was any material timing issues there.

Operator: Understood. Thank you.

Anthony Folger: So, thank you.

Speaker Change #129: Understood. Thank you.

Operator: Thank you. Please take a moment for our next question.

John DiFucci: One moment for our next question. And now we'll come from the line of John Diffucci with Guggenheim Security. Is your line as open? Thank you for taking my question. My, both my questions, I think, for Yogesh. Yogesh, we just published a note today saying that the IT spending backdrop isn't going to get any much better at all, anytime soon. I guess two questions on that. If that's the case, how should we be thinking about progress in regards to your business? And also the potential acquisition opportunities. And the second part is, and this goes back, because Yogesh has known you a long, long time.

Speaker Change #130: Thank you one moment for our next question.

Speaker Change #131: And that will come from the line of John <unk> with Guggenheim Securities. Your line is open.

Operator: Thank you for taking my question. Both my questions, I think, are for Yogesh. Yogesh, we just published a note today saying that the IT spending backdrop isn't going to get any much better at all anytime soon. I guess I have two questions on that.

Thank you for taking my question. My question is I think for Yogesh.

Yogesh K. Gupta: We just published should note today, saying that the spending backdrop isn't going to get much better at all anytime soon.

Speaker Change #132: I guess two questions on that if thats the case.

Operator: If that's the case, how should we be thinking about progress in regards to your business and also potential acquisition opportunities? And the second part is, and this goes back because Yogesh, I've known you for a long, long time. I consider you a very seasoned executive. That's a compliment. I can also say that because we're the same age. But I guess when you look at this and you've seen a lot of different cycles, I mean there are secular tailwinds in IT, at least I believe that still, but when do you think the IT spending environment could get a bit better than it has been over the last couple of years, based on your observations in the past? And sorry for the long-winded questions.

Speaker Change #133: How should we be thinking about progress in regards to your business and also the potential acquisition opportunities in the second part is and this goes back because yogish I've known you a long long time.

John DiFucci: I consider you a very seasoned executive. That's a compliment. I can say that also because we're the same age. But I guess, like, when you look at this, and you've seen a lot of different cycles. I mean, there are secular talents in IT. At least I believe that still.

Yeah.

Speaker Change #134: I consider you a very seasoned executive that's a compliment I can say that we are the same age.

Speaker Change #134: Yes.

Speaker Change #135: But I guess when you look at this and you've seen a lot of different cycles. So I mean, there are secular tailwind.

Yogesh Gupta: But when do you think the IT spending environment could get a bit better than it has been over the last couple of years based on your observations of the past, and sorry for the long-winded questions? No, no, that's quite all right, John. I think season is good with me, so the interesting part about the environment out there today. And I'm speaking really for progress, right? Because you said, hey, because you do think about progress. I actually think that if you look back over the last few quarters, we have not actually been pounding the table, saying, "Oh, man, the amazing first strings I'm going to get opened, and money is going to flood in."

Speaker Change #135: At least I believe that still but when do you think the it spending environment could get a bit better.

Speaker Change #135: Then it has been over the last couple of years based on your observations of the past and sorry for the long winded questions.

Yogesh K. Gupta: Oh, no, that's quite right, John, you know, I think seasoned is good with me, so it's all right, you know, the interesting part about, you know, the sort of the environment out there today. And I'm really speaking for progress, right? Because you said, hey, what do you think about progress?

Speaker Change #136: Now that's quite the right John.

Speaker Change #137: And I think season is good with me so I'll, let you know.

Speaker Change #136: Sure.

Speaker Change #138: The interesting part about.

Speaker Change #138: The.

Speaker Change #139: So does it.

Speaker Change #140: Environment out there today and I'm speaking really for progress why you're doing it because he said hey look as you think about progress I actually think that and if you look back over the last few quarters, we have not actually been pounding the table, saying Oh man.

Yogesh K. Gupta: I actually think that if you look back over the last few quarters, we have not actually been pounding the table saying, oh man, the amazing first strings are gonna get opened, and money's gonna flood in, right? There were a lot of other people who expected that in 2024. We were very straightforward.

Speaker Change #141: Amazing first first strings are going to get open them.

Yogesh Gupta: There are a lot of other people who expected that in 2024. We were very straightforward. We felt that there was a solid environment for our products, and that we would continue to execute within that sort of spending environment. The interesting part about our products, John, is they are not nice-to-have products. They really are essential products. The vast majority of our business, as you know, is existing customers who are either expanding their relationship with us or renewing with us, et cetera. And so therefore, our net retention rates are ARR that comes from our existing customers. Is the solid foundation on which we build?

Speaker Change #141: Money is going to flatten in light of a lot of other people who expect to back in 2024, we were very straightforward. We felt that that was a solid environment for our products.

Yogesh K. Gupta: We felt that there was a solid environment for our products and that we would continue to execute within that sort of spending environment. The interesting part about our products, John, is that they are not nice-to-have products. They are really essential products.

Speaker Change #141: And that we would continue to execute within that within that sort of spending environment.

Dawn: The interesting part about about our politics dawn is they're not nice to have products.

Dawn: They really are essential products.

Yogesh K. Gupta: The vast majority of our business, as you know, is existing customers who are either expanding their relationship with us or renewing with us, et cetera. And so, therefore, our net retention rates, our ARR that comes from our existing customers, is the solid foundation on which we build. On top of that, we have some new acquisitions that take place, obviously, so that we get a little bit of ARR growth as we keep moving forward. So I think that the market for our products looks good. It isn't gangbusters, but it looks good.

Dawn: The vast majority of our business as you know.

Dawn: His existing customers, who are either expanding their relationship with us are renewing with us et cetera, and so therefore, you know our.

Speaker Change #143: Our net retention rates are.

Speaker Change #143: <unk> that comes from our existing customers is the solid foundation on which we built.

Yogesh Gupta: On top of that, we have some new acquisition that takes place, obviously, so that we get a little bit of ARR as we keep moving forward. So, I think that the, you know, the market for ARR products looks good. You know, it isn't gangbusters, but it looks good. And I think it will continue to be very similar going forward for the next few quarters, at least. You know, large macro trends, and even though I've been around the block a few times, every time I try to predict that, I'm usually wrong. So I don't want to try to do something this time around either, but I think that, you know, your point that I think we are in a secularly good but not gang versus growth environment, I think is probably true for some extended period.

Speaker Change #143: On top of that we have.

Speaker Change #143: Some new acquisition that takes place obviously, so that we get a little bit of.

Speaker Change #143: Growth.

Speaker Change #143: As we keep moving forward so.

Bill: Think that bill.

Bill: Sure.

Speaker Change #145: The <unk> the <unk>.

Speaker Change #145: Market for our products look good.

Yogesh K. Gupta: And I think it'll continue to be very similar going forward for the next few quarters, at least. You know, large macro trends and changes. I have been around the block a few times. Every time I try to predict that, I'm usually wrong. So I don't want to try to do something this time around either, but I think that, you know, your point that I think we are in a secularly good but not gangbusters growth environment is probably true for some extended period.

It isn't gangbusters, but it looks good and I think it will continue to be very similar going forward for the next few quarters at least.

Speaker Change #146: Large macro trends unchanging.

Speaker Change #147: Even though I have been around the block a few times.

Speaker Change #147: Every time I titled predict that unusually wrong. So so I don't want to.

Speaker Change #147: Try to do something this time around either but I think that.

Speaker Change #147: I think that your point that I think we are in a secular really good but not gangbusters growth environment. I think is probably true for some extended period.

Yogesh Gupta: I, you know, to be honest, you know, there's a lot of technology catalysts that are happening, so to speak, but, you know, on the business side, people are being very cautious, and I think they will continue to be cautious. Again, you know, my, you know, I shouldn't do any macro stuff ever, but, you know, I think that interest rates are not coming down soon, you know, any time soon. I, I think people will be watchful on what they spent. I think they will spend on important stuff that is truly mission critical, which makes me feel again good about our business.

Yogesh K. Gupta: I, you know. To be honest, there are a lot of technological catalysts that are happening, so to speak. But, you know, on the business side, people are being very cautious, and I think they will continue to be cautious. Again, you know, my. You know, I shouldn't do any macro stuff ever, but, but, you know, I think that interest rates are not coming down soon, you know, anytime soon. I think people will be watchful on what they spend. I think they will spend it on important stuff that is truly mission critical, which makes me feel good again about our business.

Speaker Change #147: Hi.

Speaker Change #147: To be honest.

Speaker Change #147: There's a lot of technology catalysts that are happening so to speak but on the business side people are being very cautious and I think they will continue to be cautious.

Speaker Change #147: Again.

Speaker Change #147: Mike.

Speaker Change #147: I sure do any macro stuff ever but.

Speaker Change #147: I think that interest rates are not coming down soon anytime soon.

Yogesh K. Gupta: So I'm sorry, John. I'm not really helping you with the long-term stuff. But, but, you know, you're, you're asking me to go well beyond my abilities. So I'll stop talking.

Speaker Change #147: I think people will be watchful on what they spend I think they will spend on important stuff that is truly mission critical which makes me feel again, good about our business. So I am sorry, John I am not really helping you with the long term stuff, but but.

John DiFucci: So I'm sorry, John, I'm not really helping you with the long-term stuff, but you know, you're asking me to go well beyond my abilities. I'll stop talking.

Speaker Change #148: Youre asking me to go well beyond my abilities.

Operator: No, you're too modest, Yogesh, and that was very helpful, and I really appreciate it. Keep up the good work. Thank you.

Operator: So your, your two modest, your guess, and that was very helpful, and I really appreciate it. And keep up, keep up the good work. Thank you. Thank you, John. Thank you.

John: I'm talking though you're too modest there, yes, and that was very helpful. I really appreciate it.

Speaker Change #150: And keep up keep up the good work. Thank you.

Yogesh K. Gupta: And thank you, John. Thank you.

Operator: Thank you. One moment for our next question, and that will come from the line of Ittai Kidron with Oppenheimer. Your line is open.

John: Thank you John Thank you.

Ittai Kidron: Thank you. One moment for our next question. And that will come from the line of, it's I kid drawn with Oppenheimer; your line is open. Hey, guys, this is a her song for you, Ty.

Speaker Change #151: Thank you one moment for our next question.

Speaker Change #152: And that will come from the line of <unk> Kidron with Oppenheimer. Your line is open.

Operator: Hey guys, this is Harshal for Ittai. Yogesh, just on the M&A front, just around the opportunities that the corporate development team may be betting on, is the velocity of opportunities that you're looking at starting to pick up? You know, what are you hearing from founders, maybe both from VC-backed and PE-backed companies out there? And then, sorry, Anthony, just one on the free cash flow guide. I know that was left unchanged, so if I just kind of look at the second half and Precastle performance, it does imply a bit of a step down. So I was just wondering if you could give us any input and take on the outlook there. Thank you.

Speaker Change #153: Hey, guys. This is her song for you Ty.

Herschel Venturim: You know, guys, just on the M&A front, just from the opportunities that the corporate development team may be vetting, is the velocity of opportunities that you're looking at starting to pick up. You know, what are you hearing from founders, you know, maybe both from VC back and P back companies out there.

Speaker Change #154: Yes, I guess just on the M&A front.

Speaker Change #155: It's around the opportunities that the corporate development team may be betting is the velocity of opportunities that youre looking at starting to pick up what are you hearing from founders maybe both from VC backed ANP back companies out there and then you'll get it sorry, Anthony just one on the free cash flow guide.

Anthony Folger: And then, you'll get, or sorry, Anthony, just one on the free cash flow guide. I know that was left unchanged, so if I just kind of look at, you know, the second half free cash flow performance, it does imply a bit of a step down. So just wondering if you can give us any put and take from the outlet there.

Speaker Change #156: I know that was left unchanged. So if I just kind of look at.

Speaker Change #156: The second half free.

Speaker Change #157: Free cash flow performance that does imply a bit of a step down. So just wondering if you can give us any puts and takes on the outlook. There. Thank you.

Yogesh Gupta: Thank you. So, you know, also, you know, on the M&A side, yes, I believe that they pay faces greater than it has previously been. I think it goes back to John's last question as well. I think the macro conditions being what they are, the market conditions being what they are. I think more and more folks out there are realizing that this is sort of the new normal. And, and therefore, I think more assets are coming to market today. And to be honest, more chunkier assets are coming to market today than they were before. Whether it is PE-backed or VC-backed.

Harshil Rajesh Thakkar: So, you know, Harshal, on the M&A side, yes, I believe that the pace is greater than it has previously been. I think it goes back to John's last question as well. I think the macro conditions being what they are, the market conditions being what they are, I think more and more folks out there are realizing that this is sort of the new normal. And therefore, I think more assets are coming to market today. And to be honest, more chunkier assets are coming to market today than they were before, whether it is PE-backed or VC-backed.

Speaker Change #157: So.

Speaker Change #158: Also on the M&A side, yes.

Speaker Change #159: Yes, I believe that the.

Speaker Change #160: Okay basis greater than.

Speaker Change #161: And then it has previously been I think it goes back to John's last question as well I think the macro conditions being what they are the market conditions being what they are I think more and more.

Speaker Change #161: Folks out there are realizing that this is sort of the new normal and therefore.

Speaker Change #161: I think more assets are coming to market today and to be honest more chunkier assets are coming to market today than they were before whether it is a p/e backed RBC back.

Yogesh K. Gupta: And and, you know, so we are very active. I am delighted with the amount of activity we are seeing. We are in the deal flow, and I think that's a really important thing for me to share the, you know, the. We want to make sure that we are in the deal flow that is taking place out there so that we get to see and that we get to decide whether we want to participate in something or not and to what level. So, Harshal, yes, I am. But I am much more excited about where the market appears to be shifting on M&A.

Yogesh Gupta: And, and, you know, so we are, we are very active. I am delighted with the amount of activity we are seeing here in the deal flow. And I think that's a really important thing for me to share. The, you know, the, we want to make sure that we are in the deal flow that is taking place out there. So that we get to see and that we get to decide whether we're going to participate in something or not. And, and to what level. So, so Herschel, yes, I am.

Speaker Change #161: And so we are we are very active.

Anthony Folger: And to answer your second question on free cash flow and the guide, I have a couple of points I would make. One is:

Speaker Change #161: I am.

Speaker Change #161: Delighted with the amount of activity. We are seeing we are in the deal flow and I think that's a really important thing.

Speaker Change #161: For me to share.

Speaker Change #161: The.

Speaker Change #161: We want to make sure that we are in the deal flow that is taking place out there. So that we get to see and that we get to decide whether we're going to participate in something or not.

Speaker Change #162: And to what level. So so harshly, yes I am.

Speaker Change #162: <unk>.

Speaker Change #162: Yes.

I am much more.

Speaker Change #162: Excited about where the market appears to be shifting on M&A.

Speaker Change #162: Okay.

Speaker Change #163: And to answer your second question on free cash flow in the guide I guess, a couple of points I would make one is.

Anthony Folger: When we acquired MarkLogic, we had mentioned that they had a January 31st fiscal year end and had a significant amount of billings and revenue in what would be our first quarter. And so from a cash flow perspective, I think what we're seeing now is, You know, Q4 is our biggest billing quarter, and then that's probably followed by Q1. And so, you know, with 40 or 50-day DSOs, that means our big cash collection quarters end up being Q1 and Q2.

Speaker Change #163: When we acquired Mark logic, we had we had mentioned that they.

Speaker Change #163: Had a January 31 fiscal year end and had a significant amount of billings and revenue in what would what would be our first quarter.

Speaker Change #163: So from a cash flow perspective, I think what we're seeing now is.

Speaker Change #163: Q4 is our biggest billings quarter and then that's probably followed by Q1.

Mark Logic: And so with 40 or 50 day Dsos that means our big cash collection quarters ended up being Q1, and Q2 and so we've seen a little bit more seasonality to the front half of the year I think with the addition of Mark logic.

Anthony Folger: And so we've seen a little bit more seasonality in the front half of the year, I think, with the addition of MarkLogic. The other thing to keep in mind is that our tax payments that we make are generally weighted toward the back half of the year. So, you know, I think you have some billings that have been, you know, sort of seasonalally; the cash is going to get collected in the first half.

Mark Logic: The other thing to keep in mind is that our tax payments that we make are generally weighted towards the back half of the year. So.

I think you have some some buildings that have been.

Mark Logic: Sort of seasonally the cash is going to get collect the first half and then we have some expenses where the seasonality is going to be in the second half.

Mark Logic: But nothing nothing.

Anthony Folger: And then we have some expenses where the seasonality is going to be in the second. Um, you know, but nothing, nothing, more than that. You know, I think it was a great first half of the year for us. In terms of cash flow, I think collections were very strong. Kind of another indication of the strength of our business and the strength of our customer base when it comes to the essential nature of our product.

Speaker Change #165: More than that I think it was a great first half of the year for us in terms of cash flow I think collections were very strong kind of another indication of strength of our business and.

The strength of our customer base when it comes to the essential nature of our products.

Anthony Folger: Got it. Very helpful. Thank you, guys, and congrats on the quarter.

Speaker Change #166: Got it very helpful. Thank you guys congrats on the quarter.

Operator: Thank you. One moment for our next question, which will come from the line of Lucky Schreiner with D.A. Davidson. Your line is open.

Speaker Change #166: Thanks.

Speaker Change #167: Thank you one moment our next question.

That will come from the line of Lucky Schreiner with D. A Davidson your line is open.

Lucky Schreiner: Great, thanks for taking my question. I wanted to dig deeper into the M&A market following up on the last question. I know you guys try to acquire about a company a year in terms of cadence. Can we maybe expect to see that pace pick up here? And in terms of MariaDB, I know that one didn't close, but it was smaller in terms of revenue size than normal or than your previous four acquisitions. Could we see maybe a higher frequency of smaller acquisitions here moving forward?

Alright, Thanks for taking my question I wanted to dig deeper on the M&A market following up on the last question.

Lucky Schreiner: I know you guys try to acquire about our company a year in terms of cadence can we maybe expect to see that cadence pick up here.

Lucky Schreiner: In terms of Mario DB, I know that one didn't close but it was smaller in terms of revenue size, the normal or than previous for acquisitions.

Speaker Change #169: Could we see maybe a higher frequency of smaller acquisition certainly going forward. Thanks.

Yogesh K. Gupta: Lucky, thanks for the question. So, you know. I think I've said this before, and I'll repeat, I think from an operating perspective, from the way we run our business, I do believe we can do more than one transaction in a year. It's not just doing the deal, right? The question is, can we integrate it? Right?

Speaker Change #170: Lucky Thanks for the question so.

Uh huh.

Speaker Change #171: I think I've said this before and I'll repeat I think from a operating perspective from the way we run our business perspective, I do believe we can do more than one transaction in the year. It's not just doing the deal right. The question is can be integrated and I think that's where.

Yogesh K. Gupta: And I think that's where, you know, over the last several years, as we have done these acquisitions and integrated them, I think we've gotten better and better and better at that. And so, therefore, I believe that, yes, we can acquire and integrate more than one business. That said, obviously, the market has to be such that, you know, deals do come up that we are really interested and excited about. In terms of size, MariaDB was on the smaller side, but I think we've always said that, you know, our sweet spot is 10 to 20, 10 to 20, 10 to 25% of our revenue.

Speaker Change #171: Over the last several years as we have done these acquisitions and integrated them I think we've gotten better and better and better at that and so therefore, I believe that yes, we can acquire and integrate more than loan business.

That said, obviously the market has to be such that.

Speaker Change #171: Deals do come up that we are really interested and excited about in terms of the size.

Speaker Change #172: Marie <unk> was on the smaller size, but I think we have always said that our sweet spot is 10 to 2010 to 2010% to 25% of our revenue linearity was slightly lighter than 10% of our revenue.

Yogesh K. Gupta: MariaDB was slightly lighter than 10% of our revenue, but it was a good asset for us. I think the size criteria we are a little bit flexible on, but we, in general, are looking to buy businesses that obviously provide us with the ability to deliver some meaningful returns to our shareholders. And so, therefore, we are not going to do extremely tiny ones. They just are a lot of work for very little return, to be honest.

Speaker Change #173: But it was a it was the right asset for US I think the size criteria, we are a little bit flexible on but we in general are looking to buy businesses that obviously provide us.

We have the ability to deliver some meaningful return to our shareholders and so therefore, we are not going to do extremely tiny one they just they just aren't a lot of work for very little return to be honest.

Yogesh K. Gupta: But at the same time, you know, yes, we could do a deal the size of MariaDB or one smaller, one larger, or whatever. I mean, you know, so we are actively looking, and yes, if the right opportunities come along, we will do more than one in a year.

Speaker Change #173: But at the same time.

Speaker Change #173: Yes, we could do a deal of the size of Maria DB or or one smaller one larger or whatever I mean, so we are we are actively looking and.

Yes, if the right opportunities come along we will do more than one in the year.

Yogesh K. Gupta: That makes a lot of sense. Thank you.

Speaker Change #174: That makes a lot of thing. Thank you and then a follow up on some of your earlier comments on the AI capabilities and customers are already getting an ROI from that I think there is a.

Lucky Schreiner: And then, a follow-up on some of your earlier comments on the AI capabilities and customers already getting an ROI from that. I think there's a discussion on how pricing for AI is going to look moving forward. What are your thoughts on how you're going to recognize, you know, are you just going to increase prices for customers in the future? You know, how is that going to actually drive your revenue moving forward? Thanks.

Speaker Change #175: A discussion on how pricing for AI is going to look moving forward what are your thoughts on how youre going to recognize.

Increased prices for customers in the future how is that going to actually drive your revenue moving forward. Thanks.

Yogesh K. Gupta: Lucky, I think that's a really, really good question because I think we are all in this industry trying to figure out what is the best way for us to, as you yourself pointed out, price our products for the value we are generating, right? And the reality with software historically has been that pricing has been done by some metric that is sort of, you know, data or consumption or capacity or users or seats or servers or whatever, right?

Speaker Change #176: I think that's a really really good question because I think we are all in this industry trying to figure out what is the best way for us to as you yourself pointed out price our products for the value we are generating.

Speaker Change #176: And reality with software historically has been that pricing has been done by some metric that is sort of you know.

Speaker Change #176: Data consumption of capacity or users or seat so set of orders so whatever it is a measurable quantity.

Yogesh K. Gupta: It is a measurable quantity on sort of some metric that is very different, and something like this kind of capability. It really, when you think about it, the business value is, if it is meaningful and significant, you know, it often is not related to, you know, things like those. So we, I think, are experimenting as I think the best answer I can give you because I think that is the honest answer.

Speaker Change #176: On sort of some metric that is very different and something like.

Speaker Change #176: This kind of capability it really when you think about it the business value is if it is meaningful and significant.

Speaker Change #176: It often is not related to.

Speaker Change #176: Things like those.

Speaker Change #176: So we I think are experimenting as I think the best answer I can give you because I think that is the honest answer and I think that the business models for this are going to.

Yogesh K. Gupta: And I think that the business models for this are going to evolve over the coming year or two in our industry. Now, some products are easy, right? Personal productivity is easy.

Speaker Change #176: Going to evolve over the coming year or two.

Speaker Change #176: In our industry now some products, it's easy right personal productivity is easy Microsoft do you come out with Profiler for office, everybody who is in office <unk> Copilot. This is what we charge more for that on a per person basis, but this is not like that right. This is this business value and you might have a fairly small number of users and you might suddenly.

Yogesh K. Gupta: You know, you're Microsoft, you come out with Copilot for Office. You know, everybody who has an office, if you use Copilot, this is what we charge you more for on a per person basis. But this is not like that, right?

Yogesh K. Gupta: This is business value, and you might have a fairly small number of users, and you might suddenly see, you know, hundreds of thousands or millions of dollars of benefit every year. So how do you calculate it? It isn't on a per seat basis. It isn't on a data volume basis.

Speaker Change #176: <unk>.

Hundreds of thousands or millions of dollars of benefit every year.

Speaker Change #176: So how do you you know it isn't on a per seat basis. It isn't on data volume basis, its truly on the value delivered to the end customer basis.

Yogesh K. Gupta: It's truly about the value delivered to the end customer. And I think that's where, you know, what do you tie that to becomes a really key question. So great question. I wish I had a hard, you know, specific concrete answer for you. I don't, other than the fact that we are experimenting as we speak. We are working with these customers and others to basically figure out what is the best way to price these things so that they get value, and they recognize that they pay us for the return we're generating.

Lucky Schreiner: I appreciate the answer. And I can squeeze in one more, actually.

Speaker Change #176: And I think that that's where.

Speaker Change #176: What do you tie that to become a really key question. So great question I wish I had a hard out specific concrete answer for you I don't other than the fact that we are experimenting as we speak.

We are working with these customers and others to basically figure out what is the best way to price. These things so that they get the value and they recognize that they pay us for the return we're generating from that.

I appreciate the answer and I can squeeze in one more actually.

Lucky Schreiner: Now that the MarkLogic acquisition is closed, or that the integration is complete, sorry. Is there anything to call out that you learned from that integration? I know you guys improve your process every time. And maybe, is there an opportunity to help me understand how can AI, the advances in AI, help you increase your integration, the speed of the integration process?

Speaker Change #177: Mark logic acquisition is closed.

Speaker Change #177: Our that integration is complete sorry.

Speaker Change #178: Is there anything to call that you learned from that integration I know you guys improve on your process every time and maybe is there an opportunity to help them understand can AI. The advances in AI Hope you increase your integration the speed of the integration process.

Yogesh K. Gupta: So I think I'll give you the second part first. I think AI is helping with the speed of integration, but I think that's a little premature. As you know, with a lot of these AI capabilities, you need a lot of data before they do something right and meaningful. I don't know anybody who can say, "I've got a database of 1,000 acquisitions done right in the enterprise software industry that I can leverage to help with my AI."

Speaker Change #179: So I think.

Speaker Change #180: I'll give you the second part first I think the AI, helping with speed of integration I think thats a little premature.

Speaker Change #180: As you know with a lot of these AI capabilities, you need a lot of data before they do something right and meaningful.

Speaker Change #180: I don't know anybody who can say I've got a database of.

Speaker Change #181: The acquisition was done right in the enterprise software industry that I can leverage for helping with my I think they can act I think it can help on some superficial incidental work like doing some analysis of for example contracts or something like that of our customer contracts that the business might have in those kind of things and we're looking at that but overall I don't know when.

Yogesh K. Gupta: I think it can act, I think it can help with some superficial incidental work, like doing some analysis of, for example, contracts or something like that, or customer contracts that a business might have and those kind of things, and we're looking at that. But overall, I don't know whether it can actually dramatically help. So I just, at least right now, we're not sure it can.

Speaker Change #181: It can actually dramatically helps so I just.

Speaker Change #182: At least right now we're not sure at Cat.

Yogesh K. Gupta: What did we learn from MarkLogic? I think one of the things that we were not as prepared for, to be honest, when we did the MarkLogic acquisition, we didn't fully realize the level of complexity around the government, the federal government business that MarkLogic had that was with three-letter agencies, which was extremely classified, which meant that we had to create processes inside Progress to keep that information very, very contained and sort of keep it from those folks in the company who are not cleared.

Speaker Change #183: What did we learn from Mark logic, I think one of the things that.

Yogesh K. Gupta: And this is really a non-trivial thing, and it's a really critical thing for those federal agencies who require security clearances. So, you know. Most of the folks at Progress don't even know the names of those customers. We use code names for those customers, because even the names of those customers are confidential and secure.

Speaker Change #182:

Speaker Change #182: We're not as prepared for to be honest when we did the Mark logic acquisition is we didn't fully realize the level of complexity around the government. The federal government business that <unk> had that was with three letter agencies, which.

Was extremely classified which meant that we had to create processes inside progress to keep that information very very contained.

Speaker Change #184: And sort of keep it from those folks in the company who are not cleared.

Speaker Change #184: And then this is really a non trivial thing and it's a really critical thing.

Speaker Change #184: For those federal agencies, who require security clearances.

Yogesh Gupta: You know, most of the folks at Progress don't even know the names of those customers. We use code names for those customers because even names of those customers are confidential and secure.

Speaker Change #184: So.

Most of the folks that progress don't even know the names of those customers. We use code names for those customers because because even the names of those customers are confidential and secure so so lucky I think that was a wrinkle that we did not expect we've learned how to work around that and figure out how to do the right things there and we were created a very.

Yogesh K. Gupta: So, lucky, I think that was a wrinkle that we did not expect. We've learned how to work around that and figure out how to do the right things there. And we've created a very strong governance model around it to make sure that we keep the secure information secure, yet conduct our business in a way that we can do our governance, our policies, and our processes. So, it took us a little bit longer in the first part of that acquisition, and that's what we learned out of it. We always learn something new with every single one. So, thank you, Chris.

Yogesh Gupta: So, lucky I think that was a wrinkle that we did not expect. We learned how to work around that and figure out how to do the right things there. And we created a very strong governance model around it to make sure that we keep the secure information secure. Yet conduct our business in a way that we can do our governance and our policies and our processes. So, it took us a little bit longer in the first part of that acquisition, and that's what we learned out of it. We always learned something new with every single one.

Speaker Change #185: Strong governance model around it to make sure that we keep the secure information secure yet conduct our business in a way that we can do our governance and our.

Speaker Change #185: And our policies and our processes. So it took us a little bit longer in the <unk>.

First part of that acquisition and that's what we learned how quickly they were always learn something new with every single one so thank you for asking.

Operator: So, thank you, Grassy. Yeah, it's very clear.

Lucky Schreiner: Yeah, it's great to hear, and thanks very much for taking my question.

Operator: And thanks very much for taking my question.

Speaker Change #186: Yes, if you're here and thanks very much for taking my questions.

Operator: Thank you. One moment for our next question, and that will come from the line of Brent Thill with Jeffries. Your line is open.

Antonio Venturim: One moment for our next question. And that will come from the line of Brent Phil with Jefferies. Your line is open. Hey, guys. Thanks for taking my questions. Antonio Venturim on for Brent.

Speaker Change #187: Thank you one moment for our next question.

Speaker Change #187: And that will come from the line of Brent Thill with Jefferies. Your line is open.

Operator: Hey, guys. Thanks for taking my question, Antonio Venturim, on behalf of Brent.

Antonio: Hey, guys. Thanks for taking my question Antonio of entire I'm on for Brian.

Antonio Venturim: I wanted to ask, given your diverse portfolio of companies and markets that sort of fall in your preview, can you maybe give your thoughts on what you're seeing across sub-segments of your portfolio? Are you seeing any differences in behaviors maybe across seed-based versus consumption end markets or, you know, changes in trends in your relational versus NoSQL databases or on-prem versus, you know, cloud customers? Anything that sort of stuck out to you in the quarter that may have surprised you relative to expectations?

Yogesh Gupta: I wanted to ask, given your diverse portfolio of companies and markets that sort of fall on your preview. Can you maybe give your puts and takes on what you're seeing across sub segments of your portfolio? Are you seeing differences in behaviors, maybe across seat base versus consumption and markets or changes in trends in your relation versus those equal databases or on premises, you know cloud customers. And anything that sort of stuck out to you in the core that may surprise you relative to expectations. And, you know, it's interesting, right? So, we don't really have consumption-based pricing in our products, to be honest, right?

Brent John Thill: Wanted to ask given your diverse portfolio of companies.

In end markets that sort of fall in your preview can you can you maybe give your puts and takes on what you are seeing across sub segments of your portfolio are you seeing differences in behaviors, maybe across C based versus consumption in markets or changes in trends in Europe relational versus dose eco databases or.

Brent John Thill: On Prem versus cloud customers and anything that sort of stuck out to you in the quarter that may have surprised you relative to your expectations.

Yogesh K. Gupta: Hey, Antonio, you know, it's interesting, right? So we don't really have consumption-based pricing in our products, to be honest. And, you know, you could potentially say, okay, you know what? Our OEM relationships are quote, consumption-based, but they're not really, they're not consumption-based in the true sense of the word. You know, they, they, the OEM, you know, they find new customers, or they expand their customer base, and they get more licenses from us.

Antonio you know it's interesting right. So we don't really have consumption based pricing in our in our products to be honest right Ed.

Yogesh Gupta: You know, you could potentially say, okay, you know what our OEM relationships are called consumption based, but they're not really. They're not consumption based in the 200s of the world. You know, they, they, the OEM, you know, they find new customers or they expand their customer base and they get more licenses from us. But that's not consumption-based the way, you know, the market talks about consumption-based where they say, you know, more users using it or more data being put through it or those kind of more transactions going through it. So, really, you know, for us, it is a more traditional enterprise software business.

Brent John Thill: You could potentially say, okay, you know what our OEM relationships are called consumption base, but they're not really they're not consumption based on the two central the word.

Brent John Thill: The OEM.

Brent John Thill: Find new customers or are they expand their customer base and they get more licenses.

Yogesh K. Gupta: But that's not consumption-based the way the market talks about consumption-based, where they say, you know, more users using it, or more data being put through it, or those kinds of more transactions going through it. So really, you know, for us, it is a more traditional enterprise software business. We are continuing to see strength in our cloud as well as on-prem offerings, so nothing sort of unusual there for us.

Brent John Thill: From us, but that's not consumption based the way the market talks about consumption base, where they say.

Brent John Thill: More users using it or more data being put through it or those kind of a more transactions going through it so really.

Speaker Change #190: For us it is a more traditional enterprise software business, we are continuing to see strength in our cloud as well as on Prem offerings. So nothing sort of unusual there for us but again.

Yogesh Gupta: We are continuously spent in our cloud as well as on-prem offerings, so nothing sort of unusual there for us. But again, you know, we are not selling cloud apps that basically somebody has to go, hey, I need a new project to put in a new HR system or a new financial system or a new this or a new that, right? What they are looking to say is, you know, what, how do I better manage what I have, how do I secure it more, how do I deploy these things well, how do I expand my applications, how do I add capabilities to my applications, how do I leverage my data, how do I integrate that data into my business processes, how do I make my business processes more intelligent.

Yogesh K. Gupta: But again, you know, we are not selling cloud apps that basically somebody has to go, hey, I need a new project to put in a new HR system, or a new financial system, or a new this, or a new that, right? What they are looking to say is, you know what? How do I better manage what I have? How do I secure it more.

Speaker Change #190: No we are not selling cloud apps that basically somebody has to go hey, I need a new project to put in a new HR system, a new financial system or a new auto knew that what they are looking to say as you know what how do I better manage what I have how do I secure it more how do I deploy these things well how do I expand my applications, how do I add capabilities.

Yogesh K. Gupta: How do I deploy these things well? How do I expand my applications? How do I add capabilities to my applications?

Yogesh K. Gupta: How do I leverage my data? How do I integrate that data into my business processes? How do I make my business processes more intelligent? So how do I have better user experiences for my customers? I mean, all kinds of things.

Speaker Change #190: My applications, how do I leverage my data.

How do I integrate that data into my business processes, how do I make my business processes more intelligent so.

Yogesh Gupta: So, how do I have better user experiences for my customers? I mean, all kinds of things, so all those things are around sort of the infrastructure and the mission critical applications that they have that run on that infrastructure.

Yogesh K. Gupta: So all those things are around sort of the infrastructure and the mission-critical applications that they have that run on that infrastructure. And so, therefore, you know, what many of those guys out there are seeing that are dependent on, quote, new projects, right, is, I think, a very different market segment overall than what Progress plays in. And that is one of the reasons why Progress has been a very resilient company throughout. I know that a lot of people, you know, including myself, weren't here when the Great Recession took place.

Speaker Change #190: I have better user experiences for by customers I mean, all kinds of things. So all of those things are around sort of the infrastructure and the mission critical applications that they have that run on that infrastructure and so therefore.

Yogesh Gupta: And so therefore, you know, you know, what many of those guys out there are seeing that are dependent on code new projects, right, is I think a very different market segment overall than what Progress plays in and which is one of the reasons why Progress has been a very resilient company throughout. I know that a lot of people, you know, including myself, weren't here when the great recession took place, but do you even doing the great recession, if you look at historic results of progress, they were extremely good compared to what happened to the rest of the industry and just to the tech market from a business perspective on the revenue and those kind of.

Speaker Change #191: Got it.

You know what.

Speaker Change #191: Many of those guys out there are seeing that are dependent on new projects.

Speaker Change #191: As I think of a different market segment overall than what progress plays in and which is one of the reasons why progress has been a very resilient company throughout I know that a lot of people.

Lawrence: Including myself Lawrence here.

Yogesh K. Gupta: But even during the Great Recession, if you look at the historic results of Progress, they were extremely good compared to what happened to the rest of the industry and the rest of the tech market. From a business perspective, from a revenue and those kind of... And so the reason is that it is a very resilient business and our customers are, you know, using our software, which is essential software. And it is about, you know, sort of, continuing to work with them and winning some new ones, right?

Lawrence: When the great recession took place, but do even during the great recession. If you look at historic with also progress they were extremely good.

Lawrence: Back to what happened to the rest of the industry industrial the tech market.

Lawrence: From a business perspective from a revenue and those kind of perspective.

Yogesh Gupta: perspective. And so the reason is that it is a very resilient business, and our customers are using our software, which is essential software. And it is about, you know, sort of, you know, continuing to work with them and winning some new, right? If you look at our business, obviously, we win some new because we see our growth, right? And it's rather small, but for us, it is, it is, you know, important. And so we continue to win some new customers, and we win them across the board. So no specific segment, specific or market specific, or, you know, product specific. I mean, again, you heard Anthony's commentary on how our products performed, you know, many of which did well this quarter.

Speaker Change #193: And so the reason is that it is a very resilient business.

Speaker Change #193: And our customers are using our software which is essential software.

Speaker Change #193: And it is about.

Sort of.

Yogesh K. Gupta: If you look at our business, obviously, we win some new customers because we see our growth, right? And it's rather small, but for us, it is, you know, important. And so we continue to win some new customers, and we win them across the board. So, no specific segment, market, or, you know, product specific. I, you know, I mean, again, you heard Anthony's commentary on how our products performed, many of which did well this quarter. So it's always quite often a different set of products every quarter, but overall, you know, very solid business and will continue to see the same type of demand going forward.

Speaker Change #193: Turning to work with them and winning some new right. If you look at our business. Obviously, we win some new because we see it on our growth.

Speaker Change #193: And it's rather small but for us it is important and so we continue to win some new customers and win them across the board. So no specific segment specific or market specific car.

Speaker Change #193: Product specific.

Speaker Change #194: I mean again, you heard Anthony's commentary on how our products performed.

Yogesh Gupta: So it's always quite often a different set of products every quarter, but overall, you know, very solid business and continue to see the same type of demand going forward. Thank you.

Speaker Change #194: Of which did well this quarter. So it's always quite often a different set of products every quarter, but overall very solid business.

Speaker Change #194: And continue to see the same type of demand going forward.

Antonio Venturim: Awesome, thank you guys!

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

Speaker Change #195: Thank you guys.

Operator: I'm showing no further questions in the queue at this time.

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

Yogesh Gupta: I would now like to turn the call back over to Mr. Yogesh Gupta for any closing remarks. Thank you, Sherry. And thank you, everyone, for joining us. We really appreciate it. And we look forward to talking to all of you again soon. Have a good night. Thank you.

Yogesh K. Gupta: Thank you, Sherry, and thank you everyone for joining us. We really appreciate it, and we look forward to talking to all of you again soon. Have a good night.

Operator: Thank you. This concludes today's program. Thank you all for participating. You may now disconnect.

Yogesh K. Gupta: Thank you Shari and thank you everyone for joining us really appreciate it and we look forward to talking to all of you again soon have a good night.

Operator: This concludes today's program. Thank you all for participating. You may now disconnect.

Speaker Change #196: Thank you. This concludes today's program. Thank you all for participating you may now disconnect.

Speaker Change #196: Okay.

Speaker Change #196: [music].

Speaker Change #196: Okay.

Speaker Change #196: [music].