Progress Software Reports 29% Revenue Growth in Q1 FY 2025, Net Income Declines 52%

Progress Software Corporation reported its financial results for the first quarter of fiscal year 2025, revealing a total revenue of $238.0 million, a 29% increase from $184.7 million in the same period last year. This growth was primarily driven by the acquisition of ShareFile, which contributed $63.6 million in revenue. However, the company experienced a decline in software license revenue, which fell to $58.4 million from $64.1 million, attributed to decreased performance in its DataDirect product line. The overall gross profit for the quarter was $191.8 million, representing a 26% increase year-over-year.

Despite the revenue growth, Progress Software's net income decreased significantly to $10.9 million, down 52% from $22.6 million in the prior year. This decline was largely due to increased operating expenses, which rose to $159.4 million from $116.9 million, driven by higher costs associated with sales and marketing, product development, and amortization of acquired intangibles. The company's operating income also fell to $32.4 million, a 7% decrease compared to the previous year.

In terms of strategic developments, Progress Software completed the acquisition of ShareFile on October 31, 2024, for $875 million, funded through a combination of cash and borrowings from its revolving credit facility. This acquisition is expected to enhance the company's SaaS offerings and contribute to future revenue growth. The company also reported a significant increase in its annualized recurring revenue (ARR), which reached $836 million, up 48% from $566 million a year earlier, reflecting the positive impact of the ShareFile acquisition.

Operationally, Progress Software's customer base and engagement metrics showed positive trends, with a notable increase in SaaS revenue, which surged to $69.4 million from $5.6 million in the previous year. The company reported a decrease in accounts receivable, which fell to $126.4 million from $163.6 million, indicating improved collection efficiency with a decrease in days sales outstanding (DSO) from 50 to 48 days. The company also maintained a strong cash position, ending the quarter with $124.2 million in cash and cash equivalents, up from $118.1 million at the end of the previous fiscal year.

Looking ahead, Progress Software anticipates continued growth driven by the integration of ShareFile and the expansion of its SaaS offerings. The company plans to focus on leveraging its existing cash reserves and operational cash flows to support future acquisitions and strategic initiatives. However, it also acknowledges potential risks related to market conditions and the ongoing impact of the MOVEit vulnerability, which has led to legal challenges and associated costs. The company remains committed to enhancing its product offerings and maintaining a strong market position in the software industry.