Progress Software (NASDAQ:PRGS) reported fiscal first-quarter 2026 results that management said reflected steady demand across its portfolio, continued benefits from cost discipline, and record cash generation driven by improved collections.
Quarterly results: revenue up 4% and margins above 41%
President and CEO Yogesh Gupta said the company delivered “another very good quarter,” with revenue of $248 million, up 4% from the prior-year period. Annual recurring revenue (ARR) grew 2% year-over-year in constant currency, while net retention rate (NRR) was 99%.
Chief Financial Officer Anthony Folger said ARR ended the quarter at approximately $863 million, representing 2% pro forma year-over-year growth. Folger attributed ARR growth to “a broad-based contribution from across our portfolio,” naming OpenEdge, ShareFile, LoadMaster, WhatsUp Gold, MOVEit, and DevTools.
Folger added that revenue came in ahead of internal expectations, “led by strong performance in OpenEdge,” and reiterated that subscription renewal timing—particularly multi-year subscriptions—can shift revenue between quarters, which is why the company emphasizes ARR as the better indicator of top-line performance.
On profitability, Folger said total costs and operating expenses were approximately $146 million, “largely flat” year over year and favorable to the company’s forecast. Operating income was $102 million, producing an operating margin of 41% and what he described as “solid YoY margin expansion.”
AI investments highlighted across products and internal operations
Gupta repeatedly tied performance to AI and innovation, saying these efforts are “resonating with our customers” and that “every product at Progress is now an active participant in our customers’ AI efforts.” He said the company is using AI internally to improve productivity “in every department,” and that resulting savings are helping fund continued AI-related product investment while supporting operating margins.
Gupta offered several customer examples tied to Progress’ AI-enabled products:
- A “global beverage company” using the Progress Agentic RAG product to streamline HR operations for more than 20,000 employees, which Gupta said improved satisfaction at “significantly lower cost.”
- An overseas government’s tax authority and finance ministry using the same product to provide “trusted, verifiable answers” across organizational data for employees and citizens.
- A U.S. state government using the Progress Data Platform to harmonize data to identify and eliminate waste, fraud, and abuse; Gupta said the customer became a Progress customer less than 18 months ago and is now a “seven-figure ARR customer,” targeting efficiencies in the “tens of millions of dollars annually.”
- A financial payments company processing over $100 billion in annual transactions using WhatsUp Gold, LoadMaster, and Flowmon to improve availability and security and reduce the time to detect and prevent threats.
Gupta also pointed to ShareFile’s AI document summarization and Q&A features, as well as AI-powered security capabilities that proactively detect sensitive information and recommend actions to reduce security risk.
ShareFile integration: operational progress, billing cleanup, and collections
Management said ShareFile continues to perform well. Gupta called it “one of our best acquisitions,” adding that it has strengthened Progress’ recurring revenue mix, expanded SaaS capabilities, and contributed to profit and cash flow.
During the Q&A, analysts pressed the company on sequential SaaS revenue decline and whether churn played a role. Folger said the “isolated churn” referenced on the call was not tied to product value or competitive dynamics, and described a specific example: a seven-figure government contract in Eastern Europe for data retention services that churned after a European court ruled the government had to stop retaining the data.
On SaaS revenue variability, Folger said the sequential decline reflected normalization following a stronger-than-expected fourth quarter and continued “cleanup” work tied to ShareFile’s billing transition. He noted that CSG handled billings until April 2025, after which Progress stood up billing internally. He said the company has been working through data cleanup, including catch-up invoicing and certain adjustments, which “may bump numbers around a little bit from time to time.”
Folger said that if results are normalized for the billing and data cleanup effects, quarterly SaaS revenue has generally been in the $72 million to $73 million range. He added that the issues are “largely cleaned up,” and that any remaining cleanup should get “smaller and smaller” over time. Folger also credited improved ShareFile collections as a major driver of the quarter’s stronger free cash flow.
Capital allocation: debt paydown, buybacks, and M&A discipline
Gupta said the company paid down $60 million of debt and repurchased $20 million of stock during the quarter, while continuing to evaluate M&A opportunities. Folger said the company ended Q1 with $113 million in cash and cash equivalents and total debt of $1.35 billion, resulting in net debt of about $1.24 billion. He reported net leverage of 3.1x, down “meaningfully” from the period following the ShareFile acquisition.
Folger also highlighted working capital improvements, including DSO of 52 days compared with 73 days in Q4, and deferred revenue of approximately $425 million, up roughly $25 million year over year.
On M&A, Gupta told Oppenheimer’s Ittai Kidron that Progress remains active but is maintaining discipline amid valuation dynamics. He said the company’s current trading multiple creates a higher bar for what it can pay while still generating shareholder value, and added that private market valuations remain “disconnected” from public markets.
Guidance: modest revenue growth outlook and planned refinancing
Looking ahead, Folger said Progress expects ARR growth to be “generally in line with revenue growth” for the full year. He also said the company plans to roll its 2026 convertible notes into its revolving credit facility when they mature in April, and that the updated EPS outlook reflects higher interest expense associated with that refinancing.
Progress provided the following outlook:
- Q2 FY2026: revenue of $240 million to $246 million; EPS of $1.47 to $1.53.
- Full-year FY2026: revenue of $988 million to $1.0 billion (about 1% to 2% growth over 2025); operating margin of about 39%; adjusted free cash flow of $263 million to $275 million; unlevered free cash flow of $315 million to $326 million; EPS of $5.91 to $6.03.
Folger said full-year EPS assumptions include a 20% tax rate, about $30 million in share repurchases, total debt repayment of $250 million, and approximately 43 million weighted shares outstanding. He added that the company expects net leverage to decline to about 2.7x by year-end.
On retention and macro conditions, Gupta said Progress has not seen evidence that macro pressures are impacting its business and attributed the 99% NRR to the isolated churn event. He noted NRR is calculated on a trailing four-quarter basis, which can cause it to move slowly, and reiterated the company’s goal of reaching 100% or higher over time.
About Progress Software (NASDAQ:PRGS)
Progress Software (NASDAQ: PRGS) is a global provider of enterprise software designed to simplify and accelerate the delivery of business applications. The company’s offerings span digital experience management, application development and deployment, data connectivity and integration, and predictive analytics. Progress supports organizations in building, deploying, and managing mission-critical applications across on-premises, cloud and hybrid environments, helping to reduce development complexity and operational overhead.
Key products in Progress’s portfolio include Progress OpenEdge, a robust development and database platform for building transactional applications; Progress DataDirect, which enables high-performance connectivity to disparate data sources; Progress Sitefinity, a digital experience platform for content management and personalization; Progress Telerik, a suite of UI controls and developer tools; and Progress Kinvey, a serverless backend platform for mobile and web applications.
