Q1 2025 Progress Software Corp Earnings Call

Operator: Good day, and thank you for standing by.

Good day, and thank you for standing by.

Operator: Welcome to Progress Software Corporation First Quarter 2025 Earnings Conference Call. At this time, all participants are on 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded.

Welcome to <unk> Corporation first quarter 2025 earnings conference 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.

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 yohan this wave.

Today's conference is being recorded.

Operator: I will now hand the conference over to your speaker.

I will now hand, the conference ill logistical host.

Michael Micciche: Michael Micciche, SVP of Investor Relations Please go ahead. Okay, thank you, Olivia. Thanks for your help today.

Michael Mr. K SVP of Investor Relations. Please go ahead.

Speaker Change: Okay. Thank you Olivia thanks for your help today good afternoon, everyone and thanks for joining us for progress Software's first fiscal quarter of 2025 financial results Conference call on the line with me. This afternoon are Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger our CFO.

Yogesh Gupta: Good afternoon, everyone, and thanks for joining us for Progress Software's first fiscal quarter 2025 financial results conference call.

Yogesh Gupta: On the line with me this afternoon are Yogesh Gupta, President and Chief Executive Officer, and Anthony Folger, our CFO.

Michael Micciche: As always, we'll begin the call with our safe harbor statement. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, the integration of ShareFile, which closed on October 31st, 2024, 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 sections in our filings with the SEC. Progress Software assumes no obligation to update the forward-looking statements included in this call.

As always I will begin the call with our safe Harbor statement.

Speaker Change: During this call we will discuss our outlook for future financial and operating performance corporate strategies product plans cost initiatives. The integration of share file which closed on October 31, 2024, and other information that might be considered forward looking such forward looking information represents progress software's outlook and guidance only as of.

Speaker Change: 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 sections in our filings with the SEC progress software assumes no obligation to update forward looking statements including included in this call. Additionally, please note that all the financial figures referenced in this call.

Michael Micciche: Additionally, please note that all the financial figures referenced in this call are non-GAAP unless otherwise indicated. You can find a reconciliation of our 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 first fiscal quarter of 2025, and I recommend that you reference it for specific details. We've also provided a PowerPoint presentation that contains supplemental data for the first quarter, and that slide deck provides highlights and additional financial metrics. Both the earnings release and the supplemental presentation are available on the Investor Relations section of our website at investors.progress.com under the Investor Events and Presentations tab.

Speaker Change: Our non-GAAP unless otherwise indicated you can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP fixtures figure excuse me figures.

Speaker Change: 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 first fiscal quarter of 2025, and I recommend that you reference it for specific details. We have also provided a powerpoint presentation that contains supplemental data for the first quarter and that slide deck provides highlights.

Speaker Change: Additional financial metrics, both the earnings release and the supplemental presentation are available on the Investor Relations section of our website at investors Dot progress dot com under the investor events and presentations tab.

Operator: Today's call is being recorded in its entirety and will be available for replay on the Investor Relations section of our website shortly after we finish.

Speaker Change: Today's call is being recorded in its entirety and will be available for replay on the Investor Relations section of our web site. Shortly after we finish and with all that out of the way Yogesh I'll turn it over to you. Thank you Mike.

Michael Micciche: And with all that out of the way, Yogesh, I'll turn it over to you. Thank you, Mike.

Yogesh Gupta: Good afternoon and thank you for joining us today as we announce the results from our first quarter of fiscal 2025. We're extremely pleased with our solid start to the year, as you can see from the numbers and the updated guidance in our earnings. Our Annualized Recurring Revenue, or ARR, increased 48% over last year in cost and currency, predominantly driven by share files with additional contribution from the rest of us. and our net retention rate again surpassed 100%. For the quarter, revenues came in at the high end of our guidance at $238 million, up 30% in constant currency, showing steady, continuous demand for us.

Yogesh Gupta: Good afternoon, and thank you for joining us today, as we announced the results from our first quarter of fiscal 2025.

Yogesh Gupta: We're extremely pleased with our solid start to the year as you can see from the numbers and the updated guidance in our earnings release.

Yogesh Gupta: Our annualized recurring revenue or <unk> <unk>.

Yogesh Gupta: 48% over last year in constant currency predominantly driven by Sheffield.

Yogesh Gupta: With additional contribution from the rest of our business.

Yogesh Gupta: And our net retention rate against surpassed 100%.

Yogesh Gupta: Fourth quarter revenues came in at the high end of line items.

Yogesh Gupta: $238 million.

Yogesh Gupta: 30% in constant currency, showing steady continuous demand for our solutions.

Yogesh Gupta: Earnings per share of $1.31 significantly exceeded the upper end of the range we provided at the end of Q4, which illustrates that our whole team is executing well while also keeping expenses in check. Our operating margins of 39% this quarter are indicative of our company-wide focus on expense management and execution, as well as faster share file integration.

Yogesh Gupta: Earnings per share of $1.31 significantly exceeded the upper end of the range. We provided at the end of Q4, which illustrate our whole team is executing well while also keeping expenses in check.

Yogesh Gupta: Our operating margins of 39% this quarter are indicative.

Yogesh Gupta: Anthony why focus on expense management and execution as well as faster share file integration.

Yogesh Gupta: So at a high level, our results show several positives, and Anthony will take you through the details of the quarter later. Perhaps most important, the integration of Sharefile is going very well, as you can see from its significant contribution to ARR, revenues, as well as expenses. Each of the milestones and key areas of integration we anticipated are either on track or ahead of plan. During the quarter, we paid down $30 million on our revolver ahead of our original plan to start paying down debt in the second quarter. and in line with our intent to deliver rapidly so that we can be ready for the next day.

Speaker Change: So at a high level our results show several positives and Anthony will take you through the details of the quarterly.

Speaker Change: Perhaps most importantly integration of share pilot is going very well as you could see from its significant contribution to our revenues as well as expense savings.

Speaker Change: Each of our milestones in key areas of integration we anticipated.

Speaker Change: Either on track or ahead of plan.

Speaker Change: During the quarter, we paid down $30 million on our revolver.

Speaker Change: Ahead of our original plan to start paying down debt in second quarter.

Speaker Change: And in line with our intent to Delever rapidly so that it can be ready for the next deal.

Yogesh Gupta: We remain very focused on prudent capital allocation. and on using all facets of our capital allocation strategy to provide solid returns on invested capital. To that end, we also repurchased $30 million of our stock, consistent with our goal of returning capital directly to shareholders in the form of opportunistic buyback. From a macro perspective, we have seen no disruption stemming from the uncertainty in the environment thus far, particularly as it pertains to our relatively modest federal government business. and we continue to monitor the developments closely.

Speaker Change: We remain very focused on prudent capital allocation.

Speaker Change: I'm using all facets of our capital allocation strategy to provide solid returns on invested capital.

Speaker Change: So and again, we also repurchased $30 million of our stock.

Speaker Change: I'll start with a bolt of returning capital directly to shareholders in the form of opportunistic buybacks.

Speaker Change: From a macro perspective, we.

Speaker Change: We have seen no disruption stemming from the uncertainty in the environment thus far.

Speaker Change: Particularly as it pertains to a relatively modest size.

Speaker Change: Our government business.

Speaker Change: And we continue to monitor the developments closely.

Yogesh Gupta: So all in, our first quarter of 2025 was very solid across the board, and our teams are once again showing their excellence in running the business efficiently while meeting and exceeding our operational targets. Let me now provide a little more detail on ShareFile and revisit a couple of highlights of the We ended Q1 about four months into the integration, and with everything proceeding as expected. and probably a bit better in many ways. Our transition services agreement with CSG is working out. While we still have more steps to complete, our progress has been faster than anticipated.

Speaker Change: So all in our first quarter of 2025 was very solid across the board.

Speaker Change: And our teams have once again showing their excellence in running the business efficiently, while meeting and exceeding our operational pockets.

Speaker Change: Let me now provide a little more detail on share file and revisit a couple of highlights of the deal.

Speaker Change: We ended Q1 about four months into the integration.

Speaker Change: And with everything proceeding as expected.

Speaker Change: And probably a bit better in many ways.

Speaker Change: Our transition services agreement with CSC is working out well.

Speaker Change: While we still have more steps to complete our progress has been faster than anticipated.

Yogesh Gupta: And we continue to believe that we can complete the integration and reach our 40% operating margin target for the acquired business by the end of this fiscal year. The people integration efforts with our ShareFile colleagues have gone extremely well as the collective teams have embraced our common culture and are moving forward as one. The hiring and integration of teams and locations such as India, Costa Rica, and Bulgaria has been rapid and we're excited about the progress on the As a reminder, ShareFile is a native SaaS platform with 100% recurring revenue and solid net retention. In addition to the robust, durable revenues and cash flow that ShareFile will generate, We now have extensive expertise.

Speaker Change: And we continue to believe that we can complete the integration and reach our 40% operating margin target for the acquired business by the end of this fiscal year.

Speaker Change: The people integration efforts with our chef our colleagues have gone extremely well.

Speaker Change: The collective teams have embraced our common culture and are moving forward as well.

Speaker Change: The hiring and integration of keys in locations, such as India, Costa Rica, and Bulgaria has been rapid and.

Speaker Change: And we're excited about the progress on the people front.

Speaker Change: As a reminder share file as a native SaaS platform with 100% recurring revenue and solid net retention rates.

Speaker Change: In addition to the robust durable revenues and cash flow that we'll generate.

Speaker Change: We now have extensive expertise.

Yogesh Gupta: running a significant SaaS business at scale with excellent Go Smart. Before we acquired ShareFile, our SaaS platforms only accounted for around 3% of our total revenues. And now SaaS is nearly 30% of our revenues. In addition, the additional share file is helping us in a number For example, the strong cloud operations platform and significant cash flows from an optimized SaaS business opens up a larger segment of potential M&A cash. Previously, we looked at many SaaS businesses and were hesitant because their gross margins and operational capabilities were unappealing. By the time we are ready to take on another deal, we will have cloud operational capability at scale, as well as the additional strong cash flow and balance sheet.

Speaker Change: Running a significant SaaS business at scale with excellent gross margins.

Speaker Change: Before we acquired share file our SaaS platforms only accounted for around 3% of our total revenues and now fast as nearly 30% of R&D.

Speaker Change: In addition, the addition of shift is.

Speaker Change: He's helping us in a number of ways.

Speaker Change: For example, the strong cloud operations platform and significant cash flows from an optimized SaaS business opens up a largest segment potential M&A candidates.

Speaker Change: Previously we looked at many SaaS businesses, and we're hesitant because their gross margins and operational capabilities.

Speaker Change: Underpinning to us.

Speaker Change: By the time, we are ready to take on another deal.

Speaker Change: We will have slowed operational capability at scale as.

Speaker Change: As well as the additional strong cash flow and balance sheet.

Yogesh Gupta: to seriously consider reviews we may have been hesitant about before.

Speaker Change: So seriously considered us we may have been hesitant about before.

Yogesh Gupta: I'm incredibly excited about the possibilities, but I also want to make sure that we remain disciplined, focused, and operationally competent in every regard when it comes to M&A and the execution of that part of our strategy. In fact, to further enable the execution of our strategy, we are also filing a Universal Shelf Registration Statement. which will allow us to access the capital markets with greater agility. while we currently do not have any plans to offer securities under the shelf. It does provide us with additional flexibility to carry out our total growth strategy. And we do see significant opportunities in the M&A market.

Speaker Change: I'm incredibly excited about the possibilities, but I also want to make sure that we remain disciplined focused and operationally competent in every regard when it comes to M&A and the execution of that part of our strategy.

Speaker Change: In fact to further enable the execution of our strategy. We are also filing a universal shelf registration statement, which allows us to which will allow us to access the capital markets with greater agility.

Speaker Change: While we currently do not have any plans to offer securities under the shelf.

Speaker Change: It does provide us with additional flexibility to care.

Speaker Change: Our total growth strategy.

Speaker Change: And we do see significant opportunities in the M&A market.

Yogesh Gupta: There are a multitude of good companies and products that we believe will be coming to the market. and continued higher interest rates have made us meaningfully more competitive for deals when competing against strategic and financial buyers. As I mentioned earlier, ShareFile gives us a ready-made SaaS experience. and our reputation as the buyer of choice in infrastructure software. positions us extremely well in the minds of company founders, management, and investors. All of this creates a competitive differentiation for products. Having a shelf ready to go adds to our advantages and will increase our ability to make apps.

Speaker Change: Our multitude of good companies and products that we believe will be coming to the market.

Speaker Change: And continued higher interest rates have made us meaningfully more competitive for deals when competing against strategic and financial buyers.

Speaker Change: As I mentioned earlier chaparral gives us a ready made SaaS experience and expertise.

Speaker Change: And our reputation as the buyer of choice in infrastructure software.

Speaker Change: Positions us extremely well in the minds of company's founders management and investors.

Speaker Change: All of this creates the competitive differentiation of our progress.

Speaker Change: Having a shelf ready to go add to our advantages and will increase our ability to make acquisitions.

Yogesh Gupta: Let me now highlight a few of our customer wins from the first quarter. Several leading commercial lenders and banks expanded their use of ShareFile in the first. The WINS highlight, how financial service organizations are benefiting from purpose-built AI capabilities in the ShareFile product. to securely share large documents with their clients. Detect when the document contains sensitive information. Verify recipients identity upon access. and integrate eSignature into their work. The customer feedback we continue to hear is that ShareFile is directly contributing to their revenue streams, workforce efficiency, and risk mitigation. also in Q1. to AI Powered, its content recommendations for their customers.

Speaker Change: Let me now highlight a few of our customer wins from the first quarter.

Speaker Change: Several leading commercial lenders and banks expanded their use of share file in the first quarter.

Speaker Change: The wins highlight our financial service organizations that benefiting from purpose built capabilities in the Shanghai product.

Speaker Change: Securely share large documents with their clients.

Speaker Change: When the document contains sensitive information.

Speaker Change: Verify this it gets identity upon access.

And integrate esignature into their workflows.

Speaker Change: The customer feedback we continue to hear is that share file is directly contributing to their revenue streams.

Speaker Change: For sufficiency and risk mitigation.

Speaker Change: Also in Q1.

Speaker Change: So AI powered content recommendations for their customers.

Yogesh Gupta: One of the world's leading streaming entertainment providers turned to our data platform products for semantic analysis. demonstrating our continued impact on shaping our customers' digital experiences, a global leader in industrial machinery manufacturing. expanded its use of our DevTools products to provide touch screen user experiences for the industrial machines to drive easier, accessible, and more efficient workflows for operators. Two states in the U.S. reaffirmed their commitment to use Progress's intelligent decisioning product to automate policy-driven decisions that are part of their digital government infrastructure. And we also saw several global financial, automotive, and retail customers significantly expand the use of our DevOps products to optimize, secure, and assure compliance of their application infrastructure.

Speaker Change: One of the worlds, leading streaming entertainment providers turned to our data platform products for semantic analysis capabilities.

Speaker Change: Demonstrating our continued impact on shaping our customers' digital experiences a global leader in industrial machinery manufacturing.

Speaker Change: Expanded its use of our Dev tools products to provide touch screen user experiences for the industrial machines to drive.

Speaker Change: Easier accessible and more efficient workflows for operators.

Speaker Change: Okay.

Speaker Change: Two states in the U S to reaffirm their commitment to use processes and LTM decisioning product.

Speaker Change: The automatic to automate policy driven decisions that are part of their digital government infrastructure.

Speaker Change: And we also saw several global financial automotive and retail customers significantly expanded use our dev ops products to optimize secure and assure compliance of their application infrastructures.

Yogesh Gupta: In addition, our infrastructure and network management offerings drove strong new wins across Europe and Asia, including one of India's newest. The common thread behind all these wins, expansions, and renewals. is our focus on enabling our customers to develop, deploy, and manage verifiable and trustworthy AI-powered applications and digital experience. More and more of our customers are leveraging progress to deliver reliable outcomes from often massive unstructured data sets in ways that can dramatically improve work productivity, customer service, and ultimately revenue. while increasing compliance and reducing.

Speaker Change: In addition, our infrastructure network management offerings drove strong new wins across Europe, and Asia, including one of it is in USD.

Speaker Change: So all in tread behind all of these wins expansions and renewals.

Speaker Change: As our focus on enabling our customers to develop deploy and manage verifiable and trustworthy AI powered applications and digital experiences.

Speaker Change: More and more of our customers are leveraging progress to deliver reliable outcomes from awesome massive unstructured datasets in ways that can dramatically improve what productivity customer service and ultimately revenue.

Speaker Change: While increasing compliance and reducing risk.

Yogesh Gupta: Let me provide a quick update on our AI efforts, as it's a major force driving change in almost every industry. AI has been part of our strategy and product roadmap for many years and is core to the ongoing value we're providing our customers. Those of you who have tracked the company over the years would have seen our early assessment. and focus on how data will be critical to delivering AI-driven applications. concept of AI has certainly come a long way. Today, as our customers continue to rely on Progress to power and solve mission-critical parts of their business, We have stayed ahead of this transformative technology evolution by ensuring our customers have the tools, processes, and expertise to fully leverage AI's potential.

Speaker Change: Let me provide a quick update on our AI efforts as it's a major force driving change in almost every investor.

Speaker Change: Yeah. It has been part of our strategy and product roadmap for many years and is core to the ongoing value, we're providing our customers.

Speaker Change: Those of you who have tracked the company over the years, we have seen our early assessment and focused on how data will be critical to delivering AI driven applications.

Speaker Change: Separately I have certainly come a long way since then.

Speaker Change: Today as our customers continue to rely on <unk> to power and solve mission critical parts of their business.

Speaker Change: We have stayed ahead of this transformation technology evolution by ensuring our customers have the tools processes and expertise to fully leverage AI potentially.

Yogesh Gupta: Our AI efforts continue to be focused on three areas. Number one, help our customers build great agent-taken AI-powered applications and experiences that automate workflows and generate accurate, valid, and verifiable answers that are in context, relevant to the audience, and leverage data in a secure and trustworthy manner. Number two, offer agentic and AI capabilities within our own products to make them much easier to use and to deliver greater value to the user. And three, use AI internally to be operationally more efficient. Managing costs while investing in areas where we need to invest.

Speaker Change: <unk> continued to be focused on three areas.

Speaker Change: Number one.

Speaker Change: Our customers build great agent take an AI powered applications and experiences that automate workflows and.

Speaker Change: And generate accurate valid and verifiable answers that are in context relevant to their audience and leverage data in a secure and trustworthy Madam.

Speaker Change: Number two offer agent again, AI capabilities within our own products to make them much easier to use and to deliver greater value for the users.

Speaker Change: And three use AI internally to be operationally more efficient.

Speaker Change: Managing costs, while investing in areas, where we need to invest.

Yogesh Gupta: To accelerate these efforts, one of our engineering leaders recently stepped up to spearhead our AI efforts across the company as Progress' chief AI officer. Ed Kiesling has been part of Progress Engine leadership for many years, during which he has helped transform that organization. And we knew the importance of appointing someone who can drive such transformation. In this new role, which reports directly to me, Ed is helping us innovate and invest in AI, while also maximizing cost efficiency benefits through AI. In many ways, these efforts are balancing each other out as we continue to focus on retaining, supporting, and innovating for our customers.

Speaker Change: To accelerate these efforts one of our engineering leaders recently stepped up to spearhead our AI efforts across the company as promises Chief Accounting Officer.

Speaker Change: At <unk> has been part of progress with engine leadership for many years during which he has to help platform that organization and renewed importance appointing someone who can drive such transformation again.

Speaker Change: In this new role, which reports directly to me.

Speaker Change: Helping us innovate and invest in AI, while also maximizing cost efficiency benefits.

Speaker Change: Yes.

Speaker Change: In many ways. These efforts are balancing each other out as we continue to focus on retaining supporting and innovating for our customers.

Yogesh Gupta: In summary, the first quarter of 2025 was a great quarter financially and operationally. I want to thank all our employees for all their hard work. You know, we are delighted that we have such a strong employee base.

Speaker Change: In summary, the fourth.

Speaker Change: First quarter of 2025.

Speaker Change: Was a great quarter financially and operationally.

Speaker Change: I want to thank all our employees all of their hard work.

Speaker Change: We're delighted that we have such a strong employee base.

Yogesh Gupta: and the addition of ShareFile further strengthens our organization. We expect to have share files fully integrated by the end of the fiscal year and we will continue to pay down our debt aggressively. At the same time, we're keeping our seat at the table in the M&A market and always looking for great acquisitions. We're also keeping our eyes on the larger global macro environment and remain confident that our customers trust progress to continue to deliver in an ever-changing world.

Speaker Change: And the additional share file further strengthens our organization on touch.

Speaker Change: We expect to have chef are truly integrated back to the fiscal year, and we will continue to pay down our debt aggressively.

Speaker Change: At the same time, we're keeping a seat at the table in the M&A market and always looking for great acquisitions.

Speaker Change: We're also keeping our eyes on the larger global macro environment and remain confident that our customers.

Speaker Change: <unk> progress to continue to deliver in an average engine work.

Anthony Folger: Thank you again for joining us this evening, and now let me pass it over to Anthony for more details around our results and the guidance. All right. Thanks, Yogesh.

Speaker Change: Thank you again for joining us this evening.

Anthony Folger: And now let me pass it over to Anthony for more details around our results.

Speaker Change: And the guidance.

Anthony Folger: Alright, Thanks Yogesh.

Anthony Folger: Good afternoon, everyone, and thanks for joining our call. As Yogesh mentioned, we're very pleased with our Q1 results, and especially with the pace of the ShareFile integration. I'll talk more about ShareFile later on, so let's begin with our results for the quarter. Starting on the top line, we closed Q1 with ARR of $836 million, representing 48% year-over-year growth. and 3.4% pro forma growth on a year over year basis. For clarity, the pro forma results include share files ARR in both periods. Our growth in ARR was driven by multiple products, including ShareFile, but also OpenEdge, our DevTools products, Sitefinity, Kemp Loadmaster, and What's Up Gold.

Speaker Change: Good afternoon, everyone and thanks for joining our call as Yogesh mentioned, we're very pleased with our Q1 results and especially with the pace of the share file integration.

Anthony Folger: I'll talk more about share file later on so let's begin with our results for the quarter.

Anthony Folger: Starting on the top line, we closed Q1 with IRR of $836 million, representing 48% year over year growth.

Anthony Folger: And three 4% pro forma growth on a year over year basis for.

Anthony Folger: For clarity the pro forma results include share files IRR in both periods.

Anthony Folger: Our growth in IRR was driven by multiple products, including share file, but also open edge, our Dev tools products site Finney camp Loadmaster and Whatsapp call.

Anthony Folger: We view this broad-based growth across our product portfolio as a clear indicator of our effective execution and a steady demand environment. As a reminder, our calculation of ARR is presented in constant currency with all periods presented at our current year budgeted exchange rate. Consistent with past practice, we've updated ARR using our 2025 budgeted exchange rates. And as a result, ARR that was reported in prior periods has changed slightly. The change isn't material and doesn't alter the trend in ARR growth or the net retention rates that we've been reporting over the past several quarters. We've included the details of this calculation in the supplemental financial presentation filed with our press.

Anthony Folger: We view this broad based growth across our product portfolio as a clear indicator of our effective execution and a steady demand environment.

Anthony Folger: As a reminder, our calculation of IRR as presented in constant currency with all periods presented at our current year budgeted exchange rates.

Anthony Folger: Consistent with past practice, we've updated.

Anthony Folger: Using our 2025 budgeted exchange rates and as a result.

Anthony Folger: That was reported in prior periods has changed slightly.

Anthony Folger: The change isn't material and it doesn't alter the trend in IRR growth or the net retention rates that we've been reporting over the past several quarters.

Anthony Folger: We've included the details of this calculation in the supplemental financial presentation filed with our press release.

Anthony Folger: Also worth highlighting is our strong net retention rate, which again came in at over 100%, reflecting resiliency in our top line. As we've mentioned several times before, we believe that investments in our product portfolio and good customer relationship management both contribute to our consistently strong net retention rate. In addition to solid ARR growth and a net retention rate more than 100%, revenue for the quarter of $238 million came in at the high end of our guidance. On a year-over-year basis, revenue grew by 29% with growth driven by the acquisition of share file, partially offset by the renewal timing of multi-year subscription contracts.

Also worth highlighting is our strong net retention rate, which again came in at over 100%, reflecting resiliency in our top line.

Anthony Folger: As we've mentioned several times before we believe that investments in our product portfolio and good customer relationship management, both contribute to our consistently strong net retention rates.

Anthony Folger: In addition to solid <unk> growth in our net retention rate more than a 100% revenue for the quarter of $238 million came in at the high end of our guidance range.

Anthony Folger: On a year over year basis revenue grew by 29% with growth driven by the acquisition of share file partially offset by the renewal timing of multi year subscription contracts.

Anthony Folger: As we've mentioned on previous earnings calls, the renewal timing of subscription contracts, especially multi-year subscriptions, can have a significant impact on our revenue in any given quarter, skewing results higher or lower for that period and creating lumpiness in comparative periods. For this reason, we continue to focus on ARR as the best barometer of top-line. Turning to expenses, total costs and operating expenses for the quarter were $144 million, up 34% from the prior year, but lower than expected. The primary reason our costs were better than expected is the quicker, more cost-effective integration of ShareFox. Some of this efficiency that we've gained.

Anthony Folger: As we've mentioned on previous earnings calls the renewal timing of subscription contracts, especially multiyear subscriptions can have a significant impact on our revenue in any given quarter skewing results higher or lower for that period.

Anthony Folger: And creating lumpiness in comparative periods.

Anthony Folger: For this reason we continue to focus on IRR as the best barometer of topline performance.

Anthony Folger: Turning to expenses total costs and operating expenses for the quarter were $144 million up 34% from the prior year, but lower than expected.

The primary reason our costs were better than expected is the quicker more cost effective integration of share file.

Anthony Folger: Some of this efficiency that we've gained.

Anthony Folger: from the integration will benefit our cost base post-integration. As a result, some of these costs have been factored into our outlook. It's also important to note. that the year-over-year expense differential was solely due to the share file acquisition. Without ShareFile, our costs and operating expenses would have slightly decreased on a year-over-year basis. Operating income was $94 million, up $17 million compared to the prior year quarter. Our operating margin of 39% exceeded our expectations due to strong top-line performance and good cost management. Likewise, on the bottom line, earnings per share of $1.31 for the quarter was $0.23 above the high end of our guidance range.

Anthony Folger: From the integration will benefit our cost base post integration.

Anthony Folger: As a result.

Anthony Folger: Some of these costs have been factored into our outlook.

Anthony Folger: It's also important to note.

Anthony Folger: The year over year expense differential was solely due to the share file acquisition.

Anthony Folger: Without share file our cost and operating expenses would have slightly decreased on a year over year basis.

Anthony Folger: Operating income was $94 million up $17 million compared to the prior year quarter.

Anthony Folger: Our operating margin of 39% exceeded our expectations due to strong top line performance and good cost management.

Anthony Folger: Likewise on the bottom line earnings per share of $1 31 for the quarter was 23 above the high end of our guidance range.

Anthony Folger: Moving on to a few balance sheet and cash flow metrics, we ended the quarter with cash and cash equivalents of $124 million and total debt of $1.51 billion for a net debt position of $1.39 billion. On a post-synergy basis, we expect our net leverage ratio to be approximately 3.4%. Our DSO for the quarter was 48 days, an improvement of 19 days compared to last quarter. Unlevered free cash flow was $88 million for the quarter, an increase of $10 million over the prior year quarter, and was driven by stronger-than-expected collections and better operating performance during the quarter.

Anthony Folger: Moving on to a few balance sheet and cash flow metrics, we ended the quarter with cash and cash equivalents of $124 million and total debt of $1 five 1 billion for a net debt position of $1 39 billion.

Anthony Folger: On a post synergy basis, we expect our net leverage ratio to be approximately three four times.

Anthony Folger: Our DSO for the quarter was 48 days, an improvement of 19 days compared to last quarter.

Anthony Folger: Unlevered free cash flow was $88 million for the quarter, an increase of $10 million over the prior year quarter and was driven by stronger than expected collections and better operating performance during the quarter.

Anthony Folger: Finally, because our operating performance and collections were meaningfully better than we expected. we were able to allocate more capital to debt repayment and share repurchases during the quarter. Specifically, during Q1, we paid down $30 million against our revolving line of credit ahead of our expectation to begin de-levering in Q2.

Anthony Folger: Finally, because our operating performance and collections were meaningfully better than we expected.

Anthony Folger: We were able to allocate more capital to debt repayment and share repurchases during the quarter.

Anthony Folger: Specifically during Q1, we paid down $30 million against our revolving line of credit.

Anthony Folger: Ahead of our expectation to begin Delevering in Q2.

Anthony Folger: Also... We repurchased $30 million of Progress stock. at a lower price than anticipated, and as a result, we've lowered our annual share repurchase forecast from $80 million to $70 million. and we've shifted that $10 million savings to our debt repayment plans. and now expect to pay down a total of $160 million against our revolving line of credit during 2025. At the end of Q1, our revolving line of credit has a balance of $700 million. and we have a $77 million remaining under our current share repurchase authorization.

Anthony Folger: Also.

Anthony Folger: We repurchased $30 million of progress stock.

Anthony Folger: At a lower price than anticipated and.

Anthony Folger: And as a result, we have lowered our annual share repurchase forecast from 80 million to $70 million.

Anthony Folger: And we've shifted that $10 million savings to our debt repayment plans.

Anthony Folger: And now expect to pay down a total of $160 million against our revolving line of credit during 2025.

Anthony Folger: At the end of Q1, our revolving line of credit has a balance of $700 million.

Anthony Folger: And we have a $77 million remaining under our current share repurchase authorization.

Anthony Folger: Okay, now I'd like to turn to our outlook for Q2 in the full year 2025. When considering our outlook for Q2, it's important to reiterate the point that I made earlier about the revenue impact of multi-year contract renewals and how their timing can impact revenue in any given quarter. Despite this potential for lumpiness in quarterly revenue, we expect ARR to be a good reflection of our fundamental top-line performance. And as mentioned on our last call, we expect low single-digit ARR growth in 2025. With that.

Anthony Folger: Okay.

Anthony Folger: Okay, now I would like to turn to our outlook for Q2, and the full year 2025, when considering our outlook for Q2, it's important to reiterate the point that I made earlier about the revenue impact of multi year contract renewals and how their timing can impact revenue in any given quarter.

Despite this potential for Lumpiness in quarterly revenue, we expect <unk> to be a good reflection of our fundamental topline performance and as mentioned on our last call. We expect low single digit IRR growth in 2025.

With that.

Anthony Folger: For the second quarter of 2025, we expect revenue between $235 and $241 million and earnings per share of between $1.28 and $1.34. For the full year, we expect revenue between $958 and $970 million, consistent with our prior guidance. We expect an operating margin of approximately 38%, a slight increase from prior guidance. We're projecting adjusted free cash flow between $226 and $238 million. And we're projecting unlevered free cash flow between $283 and $294 million, both reflecting a slight increase from prior guidance. Finally, we're projecting earnings per share of between $5.25 and $5.37. an increase of $0.25 per share compared to our prior guide.

Anthony Folger: For the second quarter of 2025, we expect revenue between $235 and $241 million and earnings per share of between $1 28, and $1 34.

Anthony Folger: For the full year, we expect revenue between 958 and $970 million consistent with our prior guidance.

Anthony Folger: We expect an operating margin of approximately 38% a slight increase from prior guidance.

Anthony Folger: We're projecting adjusted free cash flow between 226, and $238 million and we're projecting unlevered free cash flow between 283 and $294 million.

Anthony Folger: Both reflecting a slight increase from prior guidance.

Anthony Folger: Finally, we are projecting earnings per share of between $5 and 25 and $5 37.

Anthony Folger: An increase of 2025 per share compared to our prior guidance.

Anthony Folger: Our guidance for full year EPS assumes a tax rate of 20%, the repurchase of $70 million in progress shares, total debt repayment of $160 million, and approximately 45 million shares outstanding, including approximately 350,000 shares associated with potential dilution on our 2026 convertible notes. I'm sure you'll recall that we purchased a call spread on our 2026 convertible notes to hedge the economic impact of dilution up to approximately $89 per share. However, accounting regulations do not allow for recognition of any benefit from that call spread when calculating shares outstanding. Because of this added nuance, we'll continue to provide the number of shares that we've assumed for dilution each time we provide an outlook on earnings per share.

Anthony Folger: Okay.

Anthony Folger: Our guidance for full year, EPS assumes a tax rate of 20%.

Anthony Folger: The repurchase of $70 million in progress shares total debt repayment of $160 million.

Anthony Folger: And approximately 45 million shares outstanding, including approximately 350000 shares associated with potential dilution on our 2026 convertible notes.

Anthony Folger: I'm sure you'll recall that we purchased a call spread on our 2026 convertible notes to hedge the economic impact of dilution up to approximately $89 per share.

Anthony Folger: However, accounting regulations do not allow for recognition of any benefit from that call spread when calculating shares outstanding.

Anthony Folger: Because of this added nuance will continue to provide the number of shares that we've assumed for dilution. Each time, we provide an outlook on earnings per share.

Anthony Folger: For more details, I'd recommend that you refer to the supplemental financial presentation filed with our press release, which now includes more information on our outstanding debt.

Anthony Folger: For more details I'd recommend that you refer to the supplemental financial presentation filed with our press release, which now includes more information on our outstanding debt.

Anthony Folger: In closing, we are thrilled to deliver a great Q1 really across the board. We believe our integration of ShareFile along with accelerating our debt repayment positions us really well to continue to execute our total growth strategy for the remainder of this year and well beyond.

Anthony Folger: In closing we are thrilled to deliver a great.

Anthony Folger: Q1 really across the board, we believe our integration of share file along with accelerating our debt repayment positions us really well to continue to execute our total growth strategy for the remainder of this year and well beyond.

Operator: With that, I'd like to open the call for Q&A. Thank you.

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

Operator: Ladies and gentlemen, to ask a question at this time, you will need to press star 1 1 on your telephone and wait for your name to be announced. To draw your question, simply press star 11 again. Please stand by while we compile the KineROT.

Anthony Folger: Thank you, ladies and gentlemen to ask a question at this time, you will need to press star one on your telephone.

Anthony Folger: Planning to be announced to.

Anthony Folger: To withdraw your question simply press Star one again, please standby, while we compile the Q&A roster.

Fatima Boolani: And our first question coming from the line of Fatima Boolani with Citi, you're on his now. Good afternoon. Thank you for taking my questions.

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

Speaker Change: Good afternoon. Thank you for taking my question.

Yogesh Gupta: Yogesh, I wanted to direct this one to you first. You gave us a good picture of the macro health and some of the commentary there. But if I were to ask you to double click on just the share file business, you know, we understand that of the 86,000-ish customers in that base, the vast majority I think you characterized as being SMB. So I'm wondering if there are any observations that are worthwhile sharing from an SMB or midsize company health behavior perspective, just kind of given the more domestic policy whiplashing that's going on, just any high level or broad commentary in terms of how some of these customers might be behaving in the cross section of this customer size.

Speaker Change: I wanted to direct this one to you first you gave us a good picture of the macro health and some of the commentary there.

Speaker Change: If I would ask you to double click on just the share firewall business.

Speaker Change: Understand that.

Speaker Change: <unk> thousand dish customary and not being the vast majority I think you characterized as being F&B and so im wondering if there are any observations that are worthwhile sharing front end SMB or mid type company health behavior perspective, just kind of given the arm.

Speaker Change: Jack.

Speaker Change: Policy Whiplash Ing that's going on.

Speaker Change: Any high level broad commentary in terms of how many customers might be behaving in the cross section the customer size and then I have a follow up for Paul.

Yogesh Gupta: And then I have a follow up for Anthony, please. Yes, thank you, Fatima. So, you know, it's interesting, you know, I'll give you, of course, our perspective. by Davo Navarro. I want to make sure people understand that what applies to it may or may not apply to other things that those spend money on. So when you think about, for example, a legal business, a law firm, an accounting firm, a firm that is basically interacting with its doctor's office, a small physician's office, you name it. When they are interacting with their patients or pharmacies or clients and trying to share securely their documents, making sure that there's document tracking, change management, versioning, compliance, regulatory compliance.

Speaker Change: Yes, Thank you Fatima so.

Speaker Change: It's interesting.

Speaker Change: I'll give you of course our perspective.

Speaker Change: <unk>.

Speaker Change: But I will now also.

Speaker Change: Is that by pointing out the shell file is really so the mission critical workflow management solution for the customers that use it.

Speaker Change: I want to make sure people understand that what applies to it may or may not apply to other things that those businesses spend money on so when you think about for example, a legal business a law firm accounting firm a firm that is base interacting with it.

Speaker Change: A doctor's office.

Speaker Change: Small physician office you name it when they are interacting with the patients pharmacies are clients.

And trying to sure.

Speaker Change: Securely their documents, making sure that there's.

Speaker Change: Document tracking change management with worsening.

Speaker Change: Appliance regulatory compliance.

Yogesh Gupta: You know, these things are required, and so we haven't really seen anything in the market to date. We are keeping a very close eye on what's going on, but so far, business has been very healthy. So, Fatima, I wouldn't want to speak more broadly for other things, but at least for Progress, for ShareFile specifically, you know, business continues to be very healthy.

Speaker Change: These things are required.

Speaker Change: So we haven't really seen anything in the market to date.

Speaker Change: We are keeping a very close eye on what's going on.

Speaker Change: But so far.

Speaker Change: Our business has been very healthy.

Speaker Change: Fatima I wouldn't want to speak more broadly for other things, but at least for progress for <unk> specifically.

Speaker Change: Business continues to be very healthy.

Fatima Boolani: I appreciate that.

Anthony Folger: Anthony, for you, Yogesh reiterated, I guess, the increased proclivity to look at more SAS native assets, as you think about your M&A strategy as part of a total growth strategy. And so when we think about When we think about gross margins and gross margins trajectory, you know, how should that tactically play out for gross margins in the near term and the medium term as you onboard and scale more staff-oriented assets? Thank you. Yep, thanks, Fatima. That's a good question. You know, the ShareFile business when we acquired it had gross margin north of 80%, which we thought was was outstanding, especially for a, you know, sort of a document centric and SMB focused business.

Anthony Folger: I appreciate that Anthony for you you guys reiterated I guess.

Anthony Folger: Increased proclivity to look at margin SaaS native asset.

Anthony Folger: Do you think about that.

Our M&A strategy as part of the total growth strategy and so when we think about.

Anthony Folger: Sorry about that when we think about gross margins on gross margin trajectory.

Anthony Folger: How should that tactically play out for gross margin in the near term and medium term as you onboard and scale more scale oriented assets. Thank you.

Anthony Folger: Yes, Thanks for team that's a good question.

Anthony Folger: The share file business when we acquired it had gross margins north of 80%.

Anthony Folger: Which we thought was was outstanding especially for.

Anthony Folger: Sort of a document centric and SMB focused business.

Anthony Folger: You know, I would say they were in the low 80s, 82, 83%. You know, Opportunities that we had looked at previously, you know, certainly, especially subscale assets, had gross margins at much lower levels than that. And we just hadn't, we really didn't have the capability or the capacity to take those margins up in any meaningful way. To Yogesh's point, we now do have that competency internally. I would expect that anything we would buy, we'd look to get gross margins at least up to the share file level. And so I don't think that that has an enormously dilutive impact on our gross margin overall.

Anthony Folger: I would say what they were in the low 80% $82 83%.

Anthony Folger: Tom.

Anthony Folger: Opportunities that we have looked at previously.

Anthony Folger: Certainly, especially subscale assets have gross margins at much lower levels than that and we just hadn't we really didn't have the capability or the capacity to take those margins up in any meaningful way.

Yogesh Gupta: So yogesh his point, we now do have that competency internally.

Yogesh Gupta: I would expect that anything we would buy we'd look to get gross margins at least up to the sheriff share file level.

Yogesh Gupta: And so I don't think that that has.

Yogesh Gupta: An enormously dilutive impact on our gross margin overall pure software is always going to be slightly higher margin.

Anthony Folger: Pure software is always going to be slightly higher margin. But we are very happy with low 80s on on SAS based products. And I think this opens up the opportunity set pretty broadly for us. Thanks.

Yogesh Gupta: We are very happy with low eighties on.

Yogesh Gupta: On SaaS based products.

Yogesh Gupta: This opens up the opportunity set pretty broadly for us.

Yogesh Gupta: Thank you.

Yogesh Gupta: Thank you.

Pinjalim Bora: Now next question coming from the line of Pinjalim Bora with JPMorgan, yell on his mouth. Oh, great. Thank you for taking the questions, and congrats on the quarter. Staying on that same thread, since you called out SAS, should we expect, basically, progress to lean in on SAS acquisitions? Obviously, it'll provide you more visibility on kind of the revenue, given the ratable rubric and all that. Are you are you kind of making a concerted effort towards adding more SAS going forward? And should we expect that SAS makes to be more than 50 percent of the business over time?

Yogesh Gupta: And our next question coming from the line of.

Speaker Change: And John <unk> with Jpmorgan. Your line is now open.

John <unk>: Oh, great. Thank you for taking the questions and congrats on the quarter.

Speaker Change: Staying on that same thread since you called out SaaS.

Speaker Change: Should we expect basically progressed to lean in on SaaS acquisitions, obviously to provide you more visibility on kind of the revenue given the ratable Rev Rec and all that.

Speaker Change: Are you kind of making a concerted effort towards adding more SaaS going forward and should we expect that SaaS mix to be.

Speaker Change: More than 50% of the business over time.

Yogesh Gupta: Well, Pinjalim, you know, thank you. You know, it's it's actually interesting, right? As you know, usually we buy companies. I like to say we don't buy, you know, unicorns. We buy thoroughbreds, right? And thoroughbreds means that the company has been around 10 or 15 years and and really has built up a great customer base and has built up a reputation in the market. And when you start thinking now about companies that were started, let's say between 2005 and 2010, the vast majority of them are SaaS. So I think the market opportunities that will come up by definition will be more SaaS, Pinjalim, right?

Speaker Change: Well pendulum.

Speaker Change: Thank you.

Speaker Change: Is that can be interesting right.

Speaker Change: As you know usually we buy companies I'd like to say, we don't buy.

Speaker Change: Unicorns, whereby total goods and funnel breads means that the company has been around 10 or 15 years.

Speaker Change: And really has built up a great customer base and has built up a reputation in the market and when you start thinking now about companies that are started let's say between 2005 and 2010 the vast majority of them are SaaS.

Speaker Change: So I think the market opportunities that will come up by definition, we'd be more SaaS.

Yogesh Gupta: So it isn't just that we would necessarily focus primarily on SaaS. Yes, given two assets that are the same on every other front, we would prefer SaaS because I think like you said, the revenue is much more ratable and predictable and also the business has longer legs for the future. And all of our acquisitions have had a strong eye towards improving the relevance of our product portfolio overall going forward. So we continue to invest in our own product portfolio to keep it current and relevant, but we wanna buy companies that have, you know, greater relevance going forward.

Speaker Change: So it isn't just that we would necessarily focused primarily on SaaS.

Speaker Change: Yes.

Speaker Change: Two assets that are the same on every other front.

Speaker Change: Would prefer SaaS because I think like you said the revenue is.

Speaker Change: Much more ratable and predictable.

Speaker Change: And also the business has longer legs for the future.

Speaker Change: All of our acquisitions have have had a strong eye towards.

Speaker Change: Improving the relevance of our product portfolio overall going forward.

Speaker Change: So we continue to invest in our own product portfolio to keep it current and relevant but we want to buy companies that have.

Speaker Change: Greater relevance going forward and I think that so I think those kind of things will drive us to look at more SaaS I don't think theres going to be considered thing that says, let's not look at on Prem.

Yogesh Gupta: And I think that, so I think those kind of things will drive us to look at more SaaS. I don't think there's gonna be a concerted thing that says let's not look at on-prem, you know. Yes, we have the ability to run SaaS businesses at excellent gross margins, which is the envy of almost any other SaaS software company out there. But at the same time, licensed businesses have even slightly better gross margins. So we're not necessarily going to just say, let's go look only at SaaS, but yeah, I think you can reliably expect that over time there'll be more SaaS.

Speaker Change: Yes, we have the ability to to run SaaS businesses had excellent gross margins.

Speaker Change: Which is the envy of almost any other SaaS software company out there, but at the same time right.

Speaker Change: License businesses.

Speaker Change: Or have even slightly better gross margins. So so.

Speaker Change: Not necessarily going to just say lets go look only at SaaS, but yes. I think you can you can reliably expect that over time there'll be more SaaS acquisitions.

Pinjalim Bora: Got it. Thank you for that.

Anthony Folger: And, Anthony, one question for you on the guidance. You all performed on your Q1 guide. It seems like the FX headwind year-over-year annually has lowered versus what you baked in coming into the year. But it still seems like you kind of maintained the full year guide. I just want to be sure. I mean, it makes sense. There's a lot of uncertainty. So, you know, companies being prudent completely makes sense. But I want to be sure. Is that just that? Just you being prudent? Or are you actually seeing something in the pipeline that makes you being more conservative?

Speaker Change: Got it. Thank you for that Anthony one question for you on the guidance.

Speaker Change: Outperformed on your Q1 guide it seems like the FX headwind year over year annually.

Speaker Change: <unk> lowered versus what.

Speaker Change: What you baked in coming into the year, but still seems like you kind of maintain the full year guide I just want to be sure I mean, it makes sense, there's a lot of uncertainty.

Speaker Change: Companies being prudent completely makes sense, but I wanted to just be sure is that just that just you being prudent or are you actually seeing something in the pipeline that makes you being more conservative.

Anthony Folger: No, you know, I think, Pinjalim, we came in, I would say this, we came in right at the high end of our range for the quarter. And to us, you know, that means we hit an upside case. I think there's a little bit of FX benefit as we look at the full year results relative to where we were last quarter. But I think as we all know, in this environment, those FX movements can come and go. It's not really something we took a lot of consideration of when we set the guide. For us, it was more operational to say, okay, you know, it's Q1.

Speaker Change: No I think pendulum we came in I would say this we came in right at the high end of our range for the quarter and to us that that means we hit an upside case.

Speaker Change: I think theres, a little bit of FX benefit as we look at the full year results relative to where we were last quarter, but I think as we all know in this environment. Those FX movements can come and go it's not really something we took.

Speaker Change: A lot of consideration of when we set the guide for US It was more operational to say okay.

Anthony Folger: We hit an upside case for Q1, which is great, but it's still Q1. I think we're rarely going to raise our revenue outlook after Q1, but it certainly gives us a lot more confidence as we go into the remaining three quarters of the year. Understood.

Speaker Change: Q1, we hit we hit an upside case for Q1, which is great, but it's still Q1, I think we're rarely going to raise our revenue outlook. After Q1, but it certainly gives us a lot more confidence as we go into the the remaining three quarters of the year.

Pinjalim Bora: Thank you very much.

Speaker Change: Understood. Thank you very much.

Speaker Change: Thank you.

Lucky Schreiner: Our next question coming from the line-off, Lucky Schreiner with DA Davidson, your line is now open. Great. Thanks very much, and congrats on the quarter.

Speaker Change: Our next question coming from the line of Lucky Schreiner with D. A Davidson your line is now open.

Lucky Schreiner: Great. Thanks, very much and congrats on the quarter.

Anthony Folger: I know this is a bit of a nitpicky question, I know, but just can you help me understand the slight decline in ARR quarter over quarter? Is there anything to call out for that change, especially since it looks like ShareFile still grew decently well in the quarter? Yeah, hey, Lucky. Good observation. And yes, that that's, we've seen that before in fourth quarter to first quarter sort of transitions. Part of that is because we've got a lot of ARR in maintenance contracts, and as you might imagine, you know, sort of the Q4 to Q1 to Q2 time frame is one where there's a heavy concentration of those contracts, and sometimes they slip out of a quarter in terms of their renewal.

Speaker Change: This is a.

Speaker Change: A bit of a nitpicky question I know, but just can you help me understand the slight decline in <unk> quarter over quarter is there anything to call out that change, especially since it looks like share file grew decently well in the quarter.

Lucky Schreiner: Yeah, Hey, Lucky.

Lucky Schreiner: Good observation and yes that that's we've seen that before in fourth quarter to first quarter sort of transitions.

Lucky Schreiner: Part of that is because we've got a lot of <unk> in maintenance contracts and as you might imagine sort of the Q4 to Q1 to Q2 timeframe is one where there is a heavy concentration of those contracts and sometimes they slip out of a quarter in terms of their renewal.

Anthony Folger: If we don't have a contract in-house and signed, we do not count the ARR, and so sometimes Q4 to Q1, we will see a slight, I'll call it a seasonal dip in ARR, and then we generally see that bounce back in the second quarter. If you were to look back at some of our Q1 earnings calls, you know, maybe 23 or 22, you'd probably see a similar trend line, so nothing out of the ordinary from our perspective. Gotcha. That's helpful.

Lucky Schreiner: If we don't have a contract in house and signed we do not count the IRR and so sometimes Q4 to Q1, we will see a slight I'll call. It a seasonal dip in.

Lucky Schreiner: And then we generally see that bounce back in the second quarter. If you were to look back at some of our our earning our Q1 earnings calls maybe 'twenty three or 'twenty. Two you would probably see a similar trend line. So nothing.

Lucky Schreiner: Nothing out of the ordinary from our perspective.

Lucky Schreiner: And then there was a lot of commentary around your positioning in AI. Can you maybe just, you know, help me understand how much of that is meaningful to the business today in terms of, like, revenue generation and customers building those ad-powered applications? And a bit of a nuanced one, you know, any impact on M&A in terms of the companies available out there? I know that they're typically more expensive than you'd be willing to buy, but a bit of a two-parter there. So, you know, from my perspective, Lucky, you know, the Customers that we are winning on AI offerings are, you know, still anecdotal, right?

Speaker Change: Gotcha. That's helpful. And then there was a lot of commentary around your positioning and AI can you maybe just help me understand how much of that is meaningful to the business today in terms of like revenue generation.

Lucky Schreiner: And customers building those add power applications and a bit of a newest one.

Lucky Schreiner: Any impact on on M&A in terms of the company's available out there I know that theyre typically.

Lucky Schreiner: More expensive than you'd be willing to buy but.

Lucky Schreiner: A bit of a two parter there.

Lucky Schreiner: So.

Lucky Schreiner: From my perspective Lucky.

Lucky Schreiner: Hey.

Lucky Schreiner: Customers.

Lucky Schreiner: Customers that we are winning.

Lucky Schreiner: AI offerings are still anecdotal right and so I don't want us to think that there is a meaningful revenue that we are seeing.

Yogesh Gupta: And so I don't want us to think that there is a meaningful revenue that we are seeing, which is why we keep saying that, you know, we expect our NRR growth to be, you know, low single digits. By the way, just, you know, year over year, this year, I think our NRR growth was 3.4%, but if you exclude share file, it was 2.5%, right, Anthony? So, you know, 2.5% if you exclude, you know, share file from both those periods. So, you know, we have a strong, steady business. So we're not seeing enough traction to basically say, oh, you know what, we think we have revenue that we can start talking about.

Lucky Schreiner: Which is why we keep saying that at all.

Lucky Schreiner: We expect our and all of our growth to be.

Lucky Schreiner: Low single digits Baidu AI just year over year. This year I think our MLR growth was three 4%, but if you exclude.

Lucky Schreiner: <unk>.

Phil: Sure Phil.

Lucky Schreiner: It was two.

Lucky Schreiner: Two 5% right Anthony.

Lucky Schreiner: So two 5% if you exclude <unk>.

Alex: Chef Alex on both those periods so.

Lucky Schreiner: We have a strong steady business.

Lucky Schreiner: So we're not seeing enough traction to basically say Oh, you know what.

Lucky Schreiner: We think we have.

Yogesh Gupta: But if we do, we absolutely will share that. From an acquisition perspective, again, there are some companies that are completely priced at valuations that, you know, are not just out of our reach, but out of reach of almost practically everyone else as well. There are very few people who can buy them. But, but, you know, from our perspective, there are lots and lots of companies. that offer capabilities that are essential in people's AI journey. And I go back to Mark Logic. You know, being able to do semantic analysis and leverage content and data, bring it together and be able to make sense out of it, leverage a vector database, and effectively create a WAG solution out of it, which we did at Progress after the acquisition, right, enabled us to now get into the market and talk about the stories we're talking about.

Lucky Schreiner: Revenue upside that we can start talking about them, but if we do we absolutely will share that.

Lucky Schreiner: From a acquisition perspective again, there are some companies that are completely.

Lucky Schreiner: That valuation.

Lucky Schreiner: Valuations that are not just out of our reach by Doctor reach of almost practically everyone else as well of a few people who can buy them.

Lucky Schreiner: But from our perspective, there are lots and lots of companies.

Speaker Change: <unk> offer capabilities that are essential in People's AI journey.

Lucky Schreiner: And I go back to Mark logic acquisition.

Lucky Schreiner: Being able to do semantic analysis and leverage content and data to bring it together and be able to make sense out of it leverage of acro database.

Lucky Schreiner: And effectively create.

Lucky Schreiner: AG solution out of it which we did it progress after the acquisition.

Lucky Schreiner: Enabled us to now get into the market and talk about the stories, we're talking about so I think that you know.

Yogesh Gupta: So I think that, you know, we can find companies and assets that have those capabilities, you know, share file, right? It has more AI capabilities in its product than pretty much anyone else in the competitive landscape that it is in, right? And so I think that to us, we are looking for those businesses that have significant go forward relevance, including AI capabilities, including being possibly SaaS, including ability for us to help our customers with their AI journey. And I think that really is key. We even look at, for example, our Chef offering, right, as businesses, you know, deploy massive scale applications and massive infrastructures to go with it, right, they have to make sure that that deployment and changes and configurations and compliance and all that stuff is done the way they want it done, which is what something like Chef does.

Lucky Schreiner: We can find companies and assets that have those capabilities share file it has more AI capabilities.

Lucky Schreiner: Our product then.

Lucky Schreiner: Pretty much anyone else in the competitor landscape that it doesn't.

Lucky Schreiner: And so I think that to US we are looking for those businesses that have significant go forward relevance, including AI capabilities, including being possibly SaaS, including the ability for us to help our customers with the AI journey and I think that really is key.

Lucky Schreiner: We even look at for example, our shelf offering right as businesses.

Lucky Schreiner: Deploy massive scale applications on massive infrastructures to go with it.

Lucky Schreiner: They have to make sure that that deployment and changes and configurations and compliance and all of that stuff is done the way they want it done which is what something like Sheffield. So I think that that are what I would call products that enable our customers to really help them build.

Lucky Schreiner: So I think that there are what I would call products that enable our customers to really help them build, you know. reliable, responsible AI business applications and experiences, and deploy them and run them well. And that's what we continue to Appreciate the answer. Thank you.

Lucky Schreiner: Reliable responsible AI business applications and experiences.

Lucky Schreiner: And deploy them and run them well and that's what that's what we continue to look forward.

Speaker Change: I appreciate the answer thank you.

Lucky Schreiner: Okay.

Lucky Schreiner: Thank you.

Lawrence Vanskohan: And as a reminder, to ask a question, please press star 1 1 and wait for your name to be announced. And our next question coming from the line of John DiFucci with Guggenheim Securities. Your line is now open.

Speaker Change: And as a reminder to ask a question. Please press star one one and wait for your name to be announced.

Speaker Change: And our next question coming from the line of John <unk> with Guggenheim Securities. Your line is now open.

Lawrence Vanskohan: Hi all, this is Lawrence Vanskohan for John DiFucci. Thanks for taking my question. So internationally, there are clearly many geopolitical forces at play, and we were wondering if you have seen any resulting changes in any of the major geographies that you operate in outside of the U.S. Has there been any uncharacteristic weakness or strength that's worth calling out, and are you expecting any in fiscal 2025? Thank you.

Speaker Change: Hi, This is Lauren on for John Fucci. Thanks for taking my question. So internationally. There are clearly many geopolitical forces at play and we were wondering if you've seen any resulting changes and any other major geographies that you operate in outside of the U S has there been any uncharacteristic weakness or strength, that's worth calling out and are you.

Speaker Change: <unk> any in fiscal 2025, thank you.

Yogesh Gupta: Hey Lawrence, thanks for the question. You know, again, so far nothing, right? It's a short answer. You know, we keep watch. We are very careful. You know, we are a global company. As you said, we have businesses, you know, customers around the world. We have employees around the world who serve them. You know, we are monitoring whether there'll be sentiment changes and so on, and if so, we will share. But at this point, you know, customers have trusted us for decades. We are, you know, we are embedded in their mission critical systems. We are being used by them to run things that are core to their business.

Speaker Change: Hey, Laura Thanks for the question.

Speaker Change: Again, you know.

Speaker Change: So far nothing right, it's a short answer.

Speaker Change: We keep watch.

Speaker Change: We are very careful we are a global company.

Speaker Change: As you said we have.

Speaker Change: Businesses.

Speaker Change: Customers around the world.

Speaker Change: We have employees around the world who serve them.

Speaker Change: We are monitoring.

Speaker Change: Whether there'll be sentiment changes and so on and if so we will share but at this point.

Speaker Change: Must have trusted us for decades.

Speaker Change: We are.

Speaker Change: We are embedded in their mission critical systems, we are being used by them to two.

Speaker Change: To run things that are core to their business.

Yogesh Gupta: And so, so really, I think, yes, you know. you know, maybe there's some sentiment out there that others are seeing, but we are at this point not seeing anything. You know, neither positive nor negative. I just, I wanna make sure that it's clear that it isn't just negative sentiment I'm talking about. So there's really, you know, for us it's been as steady as she goes. Execution continues to be really going well. Our teams continue to execute. They are focused on serving our customers, and our customers understand that. And they understand that we are a business that is dedicated to making them successful and innovating and investing towards their success.

Speaker Change: So so really I think.

Speaker Change: Yes.

Speaker Change: Maybe there is some sentiment out there that others are seeing but we are we are at this point not seeing anything.

Speaker Change: Neither positive nor negative.

Speaker Change: I want to make sure that it's clear that isn't just negative effect of my time talking about it today is really for us it's been steady.

Speaker Change: Steady as she goes execution continues to be really growing well our teams continue to execute they are focused on serving our customers and our customers understand that.

Speaker Change: And they understand that we've got a business that has that is dedicated to making them successful and innovating and investing towards that success and I think thats why we are the trustworthy partner. So so far so good.

Yogesh Gupta: And I think that's why we are the trustworthy partner. So, so far so good.

Lawrence Vanskohan: Okay, that's clear. Thank you, and also thank you for that data. You're welcome. Thank you.

Speaker Change: Okay. That's clear thank you and also thank you for that data.

Speaker Change: <unk>.

Mark: Youre welcome Mark.

Speaker Change: Okay.

Speaker Change: Thank you.

Operator: And I'm not showing any further questions in the queue at this time.

Speaker Change: And I'm not showing any further questions in the queue. At this time I will now turn the call back over to Mr. Yogesh Gupta for any closing remarks.

Yogesh Gupta: I will now turn the call back over to Mr. Yogesh Gupta for any closing remarks. Thank you everyone for joining, you know, we are delighted with our performance in Q1 and we look forward to speaking with you again at our Q2 results. Thanks again.

Speaker Change: Thank you everyone for joining.

Yogesh Gupta: We're delighted with our performance in Q1, and we look forward to speaking with you again.

Speaker Change: At our Q2 results. Thanks again.

Operator: Disconnecting today's conference call. Thank you for your participation.

Speaker Change: This conclude today's conference call. Thank you for your participation you may now disconnect.

Operator: You may now disconnect.

Speaker Change: Okay.

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Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

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