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 Factors in our 2025 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.

Current wording

This Quarterly Report on Form 10-Q may contain "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 2025 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 in the second quarter of fiscal year 2026 as compared to the same period last year primarily due to increases in license sales as well as a positive impact from foreign currency exchange, while maintenance, SaaS, and professional services were essentially unchanged from prior periods.

Current wording

Total revenue decreased in the third quarter of fiscal year 2026 as compared to the same period last year primarily due to the timing of renewals on multiyear subscription contracts. Total revenue increased in the first nine months of fiscal year 2026 due to increases in license sales as well as a positive impact from foreign currency exchange, while maintenance, SaaS, and professional services were essentially unchanged from prior periods.

Previous wording

Software licenses revenue increased in the second quarter of fiscal year 2026 primarily due to increases in our DataDirect, Chef, and MarkLogic product offerings. Software licenses revenue increased in the first six months of fiscal year 2026 primarily due to increases in our DataDirect, MarkLogic, and OpenEdge product offerings.

Current wording

Software licenses revenue remained flat in the third quarter of fiscal year 2026 compared to the same period in the prior year. Software licenses revenue increased in the first nine months of fiscal year 2026 primarily due to increases in our DataDirect and OpenEdge product offerings.

Previous wording

Maintenance and SaaS revenue were essentially unchanged from prior periods. Professional services revenue decreased across multiple product offerings as compared to the same periods last year.

Current wording

Maintenance and professional services revenue decreased slightly across multiple product offerings as compared to the same periods last year. SaaS revenue slightly increased compared to prior periods presented.

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 increases in the second quarter and first six months of fiscal year 2026 compared to the same periods last year were related to increased royalty costs.

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 first nine months of fiscal year 2026 compared to the same period last year was due to increased royalty costs.

Previous wording

Cost of maintenance, SaaS, and professional services consist primarily of hosting costs, and personnel-related costs attributable to customer support, cloud operations, consulting, and education. The decreases in all periods shown are primarily due to decreased contractors and headcount related costs in fiscal year 2026.

Current wording

Cost of maintenance, SaaS, and professional services consist primarily of hosting costs and personnel-related costs attributable to customer support, cloud operations, consulting, and education. The decreases in all periods shown are primarily due to decreased contractors and personnel-related costs in fiscal year 2026.

Previous wording

Product development expenses increased in all periods presented primarily due to increased personnel-related costs.

Current wording

Product development expenses decreased in the third quarter of fiscal year 2026 primarily due to decreased headcount related costs. In the first nine months of fiscal year 2026 product development expenses increased primarily due to increased personnel-related costs.

Previous wording

General and administrative expenses include the costs of our finance, human resources, legal, information systems, and administrative departments. The increases in all periods shown was due to higher stock-based compensation expense and additional reserves related to our receivables, partially offset by lower contractors and outside services costs.

Current wording

General and administrative expenses include the costs of our finance, human resources, legal, information systems, and administrative departments. The decrease in the third quarter of fiscal year 2026 was due to lower personnel-related costs. The increase in the first nine months of fiscal year 2026 was due to higher stock-based compensation expense and additional reserves related to our receivables, partially offset by lower contractors and outside services costs.

Previous wording

Since the discovery of the MOVEit Vulnerability that was disclosed on June 5, 2023, we have incurred expenses and will incur future costs related to the MOVEit Vulnerability. Such costs and expenses are net of received insurance recoveries. Please refer to Note 12, Cyber Related Matters for additional details, and updates regarding the MOVEit Vulnerability.

Current wording

Since the discovery of the MOVEit Vulnerability that was disclosed on June 5, 2023, we have incurred expenses and will incur future costs related thereto. Such costs and expenses are net of received insurance recoveries. As of August 31, 2026, there is no remaining insurance recovery available to reduce costs incurred related to the MOVEit Vulnerability. Please refer to Note 12, Cyber Related Matters for additional details and updates regarding the MOVEit Vulnerability.

Previous wording

Restructuring expenses recorded in the second quarter and first six months of fiscal year 2026 primarily relate to the headcount reduction action in November 2025, and facility closures in other existing restructuring actions. 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 2026 primarily relate to the headcount reduction action in November 2025, and facility closures in other existing restructuring actions. 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 business combinations. These costs consist of professional service fees, including third-party legal and valuation-related fees. The decrease in acquisition-related expenses in the second quarter of and first six months fiscal year 2026 are due to the fair value adjustment related to the contingent earn-out to former Nuclia shareholders. See Note 4, Business Combinations, acquisition-related expenses in the same period of fiscal year 2025 were primarily related to our acquisition of ShareFile.

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. The increase in acquisition-related expenses in the third quarter of fiscal year 2026 are due to our acquisition of Domo. The decrease in acquisition costs in the first nine months of fiscal year 2026 was due to the fair value adjustment related to the contingent earn-out to former Nuclia shareholders. See Note 4, Business Combination. Acquisition-related expenses in the same periods of fiscal year 2025 were primarily related to our acquisitions of ShareFile and Nuclia.

Previous wording

Total other expense, net, decreased in the second quarter and first six months of fiscal year 2026 due to a lower weighted average balance and interest rate on our revolving line of credit as compared to the same periods last year. These decreases in interest expense were partially offset by the redemption of our 2026 Notes in April, which was funded by drawing on our revolving line of credit that carries a higher interest rate than the Notes. 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.

Current wording

Total other expense, net, decreased in the third quarter and first nine months of fiscal year 2026 due to a lower weighted average balance and interest rate on our revolving line of credit as compared to the same periods last year. These decreases in interest expense were partially offset by the redemption of our 2026 Notes in April, which was funded by drawing on our revolving line of credit that carries a higher interest rate than the Notes. Refer to Note 5, Debt for further discussion.

Previous wording

Our effective tax rate was 27% and 14% in the second fiscal quarters of 2026 and 2025, respectively. The increase in the effective rate is primarily due to changes in the jurisdictional mix of earnings, including the proportion of U.S. versus non-U.S. income, and discrete tax expense of $0.8 million in the second fiscal quarter of 2026 compared to a discrete tax benefit of $1.1 million in the second fiscal quarter of 2025.

Current wording

Our effective tax rate was 23% and 26% in the third fiscal quarters of 2026 and 2025, respectively. The decrease in the effective rate is primarily due to changes in the jurisdictional mix of earnings, including the proportion of U.S. versus non-U.S. income, and minimal discrete tax benefit in the third fiscal quarter of 2026 compared to discrete tax expense of $2.0 million in the third fiscal quarter of 2025.

Previous wording

Our ARR was $868 million and $850 million as of May 31, 2026 and 2025, respectively, which is an increase of 2% year-over-year.

Current wording

Our ARR was $873 million and $861 million as of August 31, 2026 and 2025, respectively, which is an increase of 1% year-over-year.

Previous wording

The increase in cash and cash equivalents of $8.2 million from the end of fiscal year 2025 was due to cash inflows from operations of $177.5 million. The cash inflows described above were offset by cash outflows of $110.0 million to pay down the revolving line of credit, repurchases of common stock of $55.1 million, and purchases of property and equipment of $4.6 million. Except as described below, there are no limitations on our ability to access our cash and cash equivalents.

Current wording

The increase in cash and cash equivalents of $18.8 million from the end of fiscal year 2025 was due to cash inflows from operations of $265.5 million. The cash inflows described above were offset by cash outflows of $170.0 million to pay down the revolving line of credit, repurchases of common stock of $72.0 million, and purchases of property and equipment of $6.3 million. Except as described below, there are no limitations on our ability to access our cash and cash equivalents.

Previous wording

As of May 31, 2026, $70.0 million of our cash and cash equivalents was held by our foreign subsidiaries. The Company has 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, 2026, $68.8 million of our cash and cash equivalents was held by our foreign subsidiaries. We plan to utilize worldwide cash based on the needs of the parent entity, including principal payments on our revolving credit facility. These amounts will be repatriated as needed, and deferred taxes are recorded for earnings of our foreign operations that we determine are not indefinitely reinvested.

Previous wording

The increase in cash generated from operations in the first six months of fiscal year 2026, as compared to the same period last year, was primarily attributable to higher collections, increased income from operations, and lower interest expense.

Current wording

The increase in cash generated from operations in the first nine months of fiscal year 2026, as compared to the same period last year, was primarily attributable to higher collections, increased income from operations, and lower interest expense.

Previous wording

Our gross accounts receivable as of May 31, 2026, decreased by $72.0 million from the end of fiscal year 2025. Our days sales outstanding ("DSO") in accounts receivable was 49 days in the second quarter of fiscal year 2026 compared to 53 days and 73 days in the second and fourth fiscal quarters of 2025, respectively, due to the timing of billings and collections.

Current wording

Our gross accounts receivable as of August 31, 2026, decreased by $78.8 million from the end of fiscal year 2025. Our days sales outstanding ("DSO") in accounts receivable was 42 days in the third quarter of fiscal year 2026 compared to 55 days and 73 days in the third and fourth fiscal quarters of 2025, respectively, 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 capital expenditures as well as the timing of acquisitions. In the first six months of fiscal year 2026, we purchased $4.6 million of property and equipment. In the second quarter of fiscal year 2025 we had $1.8 million of purchases of property and equipment and a payment of $1.2 million related to the acquisition of ShareFile.

Current wording

Net cash outflows and inflows of our net investment activity are generally a result of capital expenditures as well as the timing of acquisitions. In the first nine months of fiscal year 2026, we purchased $6.3 million of property and equipment. In the third quarter of fiscal year 2025 we had $2.8 million of purchases of property and equipment and a payment of $20.7 million related to the acquisition of Nuclia.

Previous wording

We repurchased $55.1 million of our common stock under our share repurchase plan in the first six months of fiscal year 2026 as compared to $50.1 million in the same period of the prior year. Further, we received proceeds from our revolving line of credit of $360.0 million which we used to repurchase our convertible senior note for $360.0 million, and additionally we made payments on our revolving line of credit of $110.0 million through the second quarter of fiscal year 2026 as compared to $70.0 million in the same period of fiscal year 2025.

Current wording

We made payments on our revolving line of credit of $170.0 million through the third quarter of fiscal year 2026 as compared to $110.0 million in the same period of fiscal year 2025. We repurchased $72.0 million of our common stock under our share repurchase plan in the first nine months of fiscal year 2026 as compared to $65.1 million in the same period of the prior year. Further, we received proceeds from our revolving line of credit of $360.0 million which we used to repurchase the 2026 Notes for $360.0 million.

Previous wording

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. During the three and six months ended May 31, 2026, we repurchased and retired 1.2 million shares for $34.7 million and 1.7 million shares for $54.7 million, respectively. During the three and six months ended May 31, 2025, we repurchased and retired 0.4 million shares for $20.0 million and 0.9 million shares for $50.0 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, 2026, there was $147.5 million remaining under the current authorization.

Current wording

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. During the three and nine months ended August 31, 2026, we repurchased and retired 0.5 million shares for $16.9 million and 2.2 million shares for $71.6 million, respectively. During the three and nine months ended August 31, 2025, we repurchased and retired 0.3 million shares for $15.0 million and 1.2 million shares for $65.1 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, 2026, there was $130.7 million remaining under the current authorization.

Previous wording

Cash from operations in fiscal year 2026 could be affected by various risks and uncertainties, including, but not limited to, the effects of various risks detailed in Part I, Item 1A. Risk Factors in our 2025 Annual Report, including increased disruption and volatility in capital markets and credit markets that could adversely affect our liquidity and capital resources in the future. However, based on our current business plan, we believe that existing cash balances, together with funds generated from operations and amounts available under our revolving credit facility, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months. Our foreseeable cash needs include capital expenditures, acquisitions, debt repayments, share repurchases, lease commitments, restructuring obligations, and other long-term obligations.

Current wording

Cash from operations in fiscal year 2026 could be affected by various risks and uncertainties, including, but not limited to, the effects of various risks detailed in Part I, Item 1A. Risk Factors in our 2025 Annual Report, including increased disruption and volatility in capital markets and credit markets that could adversely affect our liquidity and capital resources in the future. However, based on our current business plan, we believe that existing cash balances, together with funds generated from operations and amounts available under our revolving credit facility, will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months. Our foreseeable cash needs include capital expenditures, acquisitions (including the acquisition of Domo for approximately $400 million, funded with borrowings under our existing revolving credit facility), debt repayments, share repurchases, lease commitments, restructuring obligations, and other long-term obligations.

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 has also consolidated an insurance subrogation complaint (where an insurer is seeking recovery for expenses incurred on behalf of its insured in connection with the MOVEit Vulnerability) and, as of the date of this filing, one customer cross-claim. Motions to dismiss were filed and partially granted in July 2025, then further partially granted in January 2026 in response to our motions for reconsideration. In all, the court has dismissed, in whole or in part, 23 of the 33 claims asserted by the bellwether plaintiffs in the MDL. The court has ordered the conclusion of fact discovery by September 29, 2026, and that the filing of class certification briefing will begin on August 28, 2026, and continue into the fourth quarter of 2026. The MDL is not expected to conclude within the next twelve months. As previously disclosed, we have also cooperated with inquiries and investigations from various governmental authorities, a number of which have been formally closed and, as of the date of this filing, have not resulted in any prosecution or enforcement actions.

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 has also consolidated an insurance subrogation complaint (where an insurer is seeking recovery for expenses incurred on behalf of its insured in connection with the MOVEit Vulnerability) and, as of the date of this filing, one customer cross-claim. Motions to dismiss were filed and partially granted in July 2025, then further partially granted in January 2026 in response to our motions for reconsideration. In all, the court has dismissed, in whole or in part, 23 of the 33 claims asserted by the bellwether plaintiffs in the MDL. The court has ordered the conclusion of fact discovery by September 29, 2026. The filing of class certification occurred on August 28, 2026, and will continue into the fourth quarter of 2026. The MDL is not expected to conclude within the next twelve months. As previously disclosed, we have also cooperated with inquiries and investigations from various governmental authorities, a number of which have been formally closed and, as of the date of this filing, have not resulted in any prosecution or enforcement actions.