PROGRESS SOFTWARE CORP /MA

Previous wording

This Quarterly Report on Form 10-Q may contain information that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended; Section 21E of the Securities Exchange Act of 1934, as amended; and the Private Securities Litigation Reform Act of 1995. Whenever we use words such as "believe," "may," "could," "would," "might," "should," "expect," "intend," "plan," "estimate," "target," "anticipate" and negatives and derivatives of these or similar expressions, or when we make statements concerning future financial results, product offerings or other events that have not yet occurred, we are making forward-looking statements. Actual future results may differ materially from those contained in or implied by our forward-looking statements due to various factors which are more fully described in Part I, Item 1A. Risk

Current wording

This Quarterly Report on Form 10-Q may contain information that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended; Section 21E of the Securities Exchange Act of 1934, as amended; and the Private Securities Litigation Reform Act of 1995. Whenever we use words such as "believe," "may," "could," "would," "might," "should," "expect," "intend," "plan," "estimate," "target," "anticipate" and negatives and derivatives of these or similar expressions, or when we make statements concerning future financial results, product offerings or other events that have not yet occurred, we are making forward-looking statements. Actual future results may differ materially from those contained in or implied by our forward-looking statements due to various factors which are more fully described in Part I, Item 1A. Risk Factors in our 2024 Annual Report as well as any risk factors described in Part II, Item 1A of this Quarterly Report on Form 10-Q. Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized. We also cannot assure you that we have identified all possible issues that we might face. We undertake no obligation to update any forward-looking statements that we make.

Previous wording

Total revenue increased as compared to the same period last year primarily due to our acquisition of ShareFile in the fourth quarter of fiscal year 2024. ShareFile revenue in the second quarter and first six months of fiscal year 2025 was $65.9 million and $129.6 million, respectively. These increases were partially offset by a decrease in our DataDirect product offering in all periods presented as a result of the timing of renewals on multiyear subscription contracts.

Current wording

Total revenue increased as compared to the same period last year primarily due to our acquisition of ShareFile in the fourth quarter of fiscal year 2024. ShareFile revenue in the third quarter and first nine months of fiscal year 2025 was $64.6 million and $194.1 million, respectively.

Previous wording

Maintenance revenue remained relatively flat as compared to the same period last year. SaaS revenue increased as compared to the same periods last year due to our acquisition of ShareFile. Professional services revenue decreased as compared to the same periods last year primarily due to a decrease in MarkLogic professional services revenue.

Current wording

Maintenance revenue increased in the third quarter of fiscal year 2025 due to increases in our OpenEdge product offerings. Maintenance revenue in the first nine months of fiscal year 2025 remained relatively flat as compared to the same period last year. SaaS revenue increased as compared to the same periods last year due to our acquisition of ShareFile. Professional services revenue decreased as compared to the same periods last year primarily due to a decrease in MarkLogic professional services revenue.

Previous wording

Total revenue generated in North America increased $44.4 million and $91.8 million in the second quarter and first six months of fiscal year 2025, respectively. Total revenue generated outside North America increased $17.9 million and $23.8 million over the same periods. The increases in each region were primarily due to the acquisition of ShareFile.

Current wording

Total revenue generated in North America increased $59.0 million and $150.8 million in the third quarter and first nine months of fiscal year 2025, respectively. Total revenue generated outside North America increased $12.1 million and $35.9 million over the same periods. The increases in each region were primarily due to the acquisition of ShareFile.

Previous wording

Total revenue generated in markets outside North America represented 38% and 41% of total revenue in the second quarter of fiscal year 2025 and fiscal year 2024, respectively. In the first six months of fiscal year 2025 and fiscal year 2024 total revenue generated in markets outside North America represented 36% and 42%, respectively.

Current wording

Total revenue generated in markets outside North America represented 35% and 42% of total revenue in the third quarter of fiscal year 2025 and fiscal year 2024, respectively. In the first nine months of fiscal year 2025 and fiscal year 2024 total revenue generated in markets outside North America represented 36% and 42%, respectively.

Previous wording

Cost of software licenses consists primarily of royalties, electronic software distribution, duplication, and packaging. Cost of software licenses as a percentage of software license revenue varies from period to period depending upon the relative product mix. The increase in the second quarter of fiscal year 2025 compared to the same period last year was related to increased royalty costs, credit card fees, and hardware sales. The increase in the first six months of fiscal year 2025 as compared to the same period last year was primarily due to increased hardware sales.

Current wording

Cost of software licenses consists primarily of royalties, electronic software distribution, duplication, and packaging. Cost of software licenses as a percentage of software license revenue varies from period to period depending upon the relative product mix. The increase in the third quarter of fiscal year 2025 compared to the same period last year was related to increased royalty costs, credit card fees, and hardware sales. The increase in the first nine months of fiscal year 2025 as compared to the same period last year was primarily due to increased hardware sales.

Previous wording

Amortization of acquired intangibles included in costs of revenue primarily represents the amortization of the value assigned to technology-related intangible assets obtained in business combinations. The year-over-year increase in all periods presented is due to the acquisition of ShareFile.

Current wording

Amortization of acquired intangibles included in costs of revenue primarily represents the amortization of the value assigned to technology-related intangible assets obtained in business combinations. The year-over-year increase in all periods presented is due to the acquisitions of ShareFile and Nuclia.

Previous wording

Our gross profit increased in all periods presented primarily due to the increase in revenue, partially offset by the increases in costs of maintenance, SaaS, and professional services, and amortization of acquired intangibles.

Current wording

Our gross profit increased in all periods presented primarily due to the increase in revenue, partially offset by the increases in costs of maintenance, SaaS, and professional services, and amortization of acquired intangibles. Gross profit as a percentage of total revenue decreased due to higher hosting costs associated with our acquisition of ShareFile.

Previous wording

Amortization of acquired intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology. Amortization of acquired intangibles increased in all periods presented due to the addition of ShareFile intangible assets, as discussed above.

Current wording

Amortization of acquired intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology. Amortization of acquired intangibles increased in all periods presented due to the addition of ShareFile and Nuclia intangible assets, as discussed above.

Previous wording

Restructuring expenses recorded in the second quarter and first six months of fiscal year 2025 primarily relate to headcount reductions and a facility closure in connection with the restructuring action related to the ShareFile acquisition in November 2024. See Note 9: Restructuring for additional details, including types of expenses incurred and the timing of future expenses and cash payments.

Current wording

Restructuring expenses recorded in the third quarter and first nine months of fiscal year 2025 primarily relate to headcount reductions and a facility closure in connection with the restructuring action related to the ShareFile acquisition in November 2024. See Note 9: Restructuring for additional details, including types of expenses incurred and the timing of future expenses and cash payments.

Previous wording

Acquisition-related costs are expensed as incurred and include those costs incurred as a result of a business combination. These costs consist of professional service fees, including third-party legal and valuation-related fees. Acquisition-related expenses in the second quarter and first six months of fiscal year 2025 were primarily related to our acquisition of ShareFile. Acquisition-related expenses in the same periods of fiscal year 2024 were primarily related to our pursuit of other acquisition opportunities.

Current wording

Acquisition-related costs are expensed as incurred and include those costs incurred as a result of business combinations. These costs consist of professional service fees, including third-party legal and valuation-related fees. Acquisition-related expenses in the third quarter and first nine months of fiscal year 2025 were primarily related to our acquisitions of Nuclia and ShareFile. Acquisition-related expenses in the same periods of fiscal year 2024 were primarily related to our pursuit of other acquisition opportunities.

Previous wording

Total other expense, net, increased in the second quarter and first six months of fiscal year 2025 as compared to the same periods last year primarily due to an increase in interest expense resulting from costs associated with drawing on our revolving line of credit to acquire ShareFile. Refer to Note 5: Debt, for further discussion. Foreign currency loss increased year-over-year due to rate volatility and timing of intercompany and hedge settlement activities.

Current wording

Total other expense, net, increased in the third quarter and first nine months of fiscal year 2025 as compared to the same periods last year primarily due to an increase in interest expense resulting from costs associated with drawing on our revolving line of credit to acquire ShareFile. Refer to Note 5: Debt, for further discussion. Foreign currency loss decreased year-over-year due to rate volatility and timing of intercompany and hedge settlement activities.

Previous wording

Our effective tax rate was 14% and 20% in the second fiscal quarter of 2025 and 2024, respectively. The primary reason for the decrease in the effective rate was due to $1.1 million of discrete tax benefits in the second fiscal quarter of 2025 compared to $0.2 million of discrete tax benefits in the second fiscal quarter of 2024.

Current wording

Our effective tax rate was 26% and 17% in the third fiscal quarter of 2025 and 2024, respectively. The primary reason for the increase in the effective rate was a discrete tax expense of $2.0 million in the third fiscal quarter of 2025 compared to a minimal amount of discrete tax expense in the third fiscal quarter of 2024.

Previous wording

Our ARR was $838 million and $573 million as of May 31, 2025 and May 31, 2024, respectively, which is an increase of 46% year-over-year. The growth in ARR was primarily driven by the acquisition of ShareFile.

Current wording

Our ARR was $849.0 million and $576.0 million as of August 31, 2025 and August 31, 2024, respectively, which is an increase of 47% year-over-year. The growth in ARR was primarily driven by the acquisition of ShareFile.

Previous wording

The decrease in cash and cash equivalents of $16.1 million from the end of fiscal year 2024 was due to cash outflows of $70.0 million to pay down the revolving line of credit, repurchases of common stock of $50.1 million, purchases of property and equipment of $1.8 million, a $1.2 million payment related to the acquisition of ShareFile, and $0.7 million in dividend equivalent payments to stockholders. The cash outflows described above were offset by cash inflows from operations of $98.9 million, the effect of exchange rates on cash of $6.1 million, and $2.7 million in cash received from the issuance of common stock. Except as described below, there are no limitations on our ability to access our cash and cash equivalents.

Current wording

The decrease in cash and cash equivalents of $19.1 million from the end of fiscal year 2024 was due to cash outflows of $110.0 million to pay down the revolving line of credit, repurchases of common stock of $65.1 million, $20.7 million for acquisitions, payment of debt issuance costs of $6.0 million, purchases of property and equipment of $2.8 million, a $1.2 million payment related to the acquisition of ShareFile, and $0.7 million in dividend equivalent payments to stockholders. The cash outflows described above were offset by cash inflows from operations of $172.4 million, the effect of exchange rates on cash of $7.8 million, and $5.9 million in cash received from the issuance of common stock. Except as described below, there are no limitations on our ability to access our cash and cash equivalents.

Previous wording

As of May 31, 2025, $62.9 million of our cash and cash equivalents was held by our foreign subsidiaries. As a result of the debt obligations arising from the ShareFile acquisition, in the fourth quarter of fiscal 2024 we determined that a substantial portion of unremitted foreign earnings are no longer indefinitely reinvested. As a result of this, we plan to utilize worldwide cash based on the needs of the parent entity. These amounts will be repatriated as needed. Deferred taxes are recorded for earnings of our foreign operations that we determine are not indefinitely reinvested.

Current wording

As of August 31, 2025, $65.8 million of our cash and cash equivalents was held by our foreign subsidiaries. As a result of the debt obligations arising from the ShareFile acquisition, in the fourth quarter of fiscal 2024 we determined that a substantial portion of unremitted foreign earnings are no longer indefinitely reinvested. As a result of this, we plan to utilize worldwide cash based on the needs of the parent entity. These amounts will be repatriated as needed. Deferred taxes are recorded for earnings of our foreign operations that we determine are not indefinitely reinvested.

Previous wording

The decrease in cash generated from operations in the first six months of fiscal year 2025 as compared to the same period last year was primarily due to increased interest expense resulting from the draw down on our revolving line of credit in the fourth quarter of fiscal year 2024.

Current wording

The decrease in cash generated from operations in the first nine months of fiscal year 2025 as compared to the same period last year was primarily due to increased interest expense resulting from the draw down on our revolving line of credit in the fourth quarter of fiscal year 2024.

Previous wording

Our gross accounts receivable as of May 31, 2025, decreased by $21.0 million from the end of fiscal year 2024. Our days sales outstanding (DSO) in accounts receivable increased to 53 days in the second quarter of fiscal year 2025 from 41 days in the second fiscal quarter of 2024 due to the timing of billings and collections.

Current wording

Our gross accounts receivable as of August 31, 2025, decreased by $8.6 million from the end of fiscal year 2024. Our days sales outstanding ("DSO") in accounts receivable increased to 55 days in the third quarter of fiscal year 2025 from 45 days in the third fiscal quarter of 2024 due to the timing of billings and collections.

Previous wording

Net cash outflows and inflows of our net investment activity are generally a result of the timing of our purchases and maturities of securities, which are classified as cash equivalents, as well as the timing of acquisitions and divestitures. In the first six months of fiscal year 2025, we purchased $1.8 million of property and equipment, and had payments for acquisitions of $1.2 million. Through the second quarter of fiscal year 2024 we had $1.3 million of purchases of property and equipment.

Current wording

Net cash outflows and inflows of our net investment activity are generally a result of the timing of our purchases and maturities of securities, which are classified as cash equivalents, as well as the timing of acquisitions and divestitures. In the first nine months of fiscal year 2025, we had payments for acquisitions of $20.7 million, and purchased $2.8 million of property and equipment. Through the third quarter of fiscal year 2024 we had $2.3 million of purchases of property and equipment.

Previous wording

We received $12.8 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan in the first six months of fiscal year 2025 as compared to $12.9 million in the first six months of fiscal year 2024. We made withholding tax payments related to net share settlements of equity awards of $10.1 million in the first six months of fiscal year 2025 as compared to $10.6 million in the first six months of fiscal year 2024. We repurchased $50.1 million of our common stock under our share repurchase plan in the first six months of fiscal year 2025 as compared to $72.4 million in the same period of the prior year. Further, we made payments on our revolving line of credit of $70.0 million and $110.0 million through the second quarters of fiscal years 2025 and 2024, respectively. During the second quarter of fiscal year 2024, we received net proceeds from the issuance of debt of $51.9 million (we refinanced our debt by issuing the convertible senior notes and used the proceeds to pay off the outstanding balance of the term loan and revolving line of credit under our previous credit agreement). In the first quarter of fiscal year 2024 we made payments on our long-term debt of $33.4 million (including a $30.0 million repayment on the revolving line of credit). Finally, we made dividend equivalent payments of $0.7 million to our stockholders during the first six months of fiscal year 2025, as compared to $16.1 million of dividend and dividend equivalent payments made to stockholders through the first six months of fiscal year 2024.

Current wording

We received $16.0 million from the exercise of stock options and the issuance of shares under our employee stock purchase plan in the first nine months of fiscal year 2025 as compared to $17.5 million in the first nine months of fiscal year 2024. We made withholding tax payments related to net share settlements of equity awards of $10.1 million in the first nine months of fiscal year 2025 as compared to $10.6 million in the first nine months of fiscal year 2024. We repurchased $65.1 million of our common stock under our share repurchase plan in the first nine months of fiscal year 2025 as compared to $86.8 million in the same period of the prior year. Further, we made payments on our revolving line of credit of $110.0 million through the third quarters of fiscal years 2025 and 2024. During the third quarter of fiscal year 2025, we paid debt issuance costs of $6.0 million to increase our revolving line of credit to $1.5 billion. During the second quarter of fiscal year 2024, we received net proceeds from the issuance of debt of $51.9 million (we refinanced our debt by issuing the convertible senior notes and used the proceeds to pay off the outstanding balance of the term loan and revolving line of credit under our previous credit agreement). In the first quarter of fiscal year 2024, we made payments on our long-term debt of $33.4 million (including a $30.0 million repayment on the revolving line of credit). Finally, we made dividend equivalent payments of $0.7 million to our stockholders during the first nine months of fiscal year 2025, as compared to $23.8 million of dividend and dividend equivalent payments made to stockholders through the first nine months of fiscal year 2024.

Previous wording

In January 2023, our Board of Directors increased our share repurchase authorization by $150 million, to an aggregate authorization of $228.0 million. In the three months ended May 31, 2025 and May 31, 2024, we repurchased and retired 0.4 million shares for $20.0 million and 1.0 million shares for $49.9 million, respectively. In the six months ended May 31, 2025 and May 31, 2024, we repurchased and retired 0.9 million shares for $50.0 million and 1.4 million shares for $72.4 million, respectively. The shares were repurchased in both periods as part of the share repurchase program as authorized by our Board of Directors. As of May 31, 2025, there was $57.2 million remaining under the current authorization.

Current wording

In the three months ended August 31, 2025 and August 31, 2024, we repurchased and retired 0.3 million shares for $15.0 million and 0.3 million shares for $14.3 million, respectively. In the nine months ended August 31, 2025 and August 31, 2024, we repurchased and retired 1.2 million shares for $65.1 million and 1.6 million shares for $86.8 million, respectively. The shares were repurchased in both periods as part of the share repurchase program as authorized by our Board of Directors. As of August 31, 2025, there was $42.2 million remaining under the current authorization. On September 23, 2025, our Board of Directors increased the share repurchase authorization by $200.0 million to an aggregate authorization of $242.2 million.

Previous wording

As previously disclosed, on the evening of May 28, 2023, we learned that our MOVEit Transfer (the on-premise version) and MOVEit Cloud (a cloud-hosted version of MOVEit Transfer) products were attacked by a threat actor who compromised and exfiltrated personal data from various customer-controlled MOVEit Transfer environments. As a result of the MOVEit Vulnerability, we are party to certain class action lawsuits filed by individuals who claim to have been impacted by the exfiltration of data from the environments of our MOVEit Transfer customers, which have been centralized in the MDL. The MDL remains in a relatively early litigation stage in which motions to dismiss have been filed but not yet ruled upon. In the event dismissals are not granted, the MDL is not expected to conclude within this fiscal year. We have also been cooperating with inquires and investigations from various governmental authorities, none of which have, as of this filing, resulted in any prosecution or enforcement actions. Please see our 2024 Annual Report and previous SEC filings for additional information, including risk factors, related to the MOVEit Vulnerability.

Current wording

As previously disclosed, on the evening of May 28, 2023, we learned that our MOVEit Transfer (the on-premise version) and MOVEit Cloud (a cloud-hosted version of MOVEit Transfer) products were attacked by a threat actor who compromised and exfiltrated personal data from various customer-controlled MOVEit Transfer environments. As a result of the MOVEit Vulnerability, we are party to certain class action lawsuits filed by individuals who claim to have been impacted by the exfiltration of data from the environments of our MOVEit Transfer customers, which have been centralized in the MDL. The MDL remains in a relatively early litigation stage in which motions to dismiss were filed and partially granted, resulting in the dismissal of approximately half of the pending claims. Following the court’s ruling on the motions to dismiss, we filed a motion for reconsideration in which we asked the court to reconsider its ruling on some of the undismissed claims. The MDL is not expected to conclude within this fiscal year. We have also been cooperating with inquires and investigations from various governmental authorities, none of which have, as of this filing, resulted in any prosecution or enforcement actions. Please see our 2024 Annual Report and previous SEC filings for additional information, including risk factors, related to the MOVEit Vulnerability.