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The call conveys a predominantly positive operational and financial picture: solid revenue growth (+4% YoY), strong margin expansion (operating margin >41%), meaningful EPS improvement (+22% YoY), record cash generation (adjusted FCF $99M), and clear capital allocation actions (debt paydown, buybacks). AI-driven product momentum, ShareFile integration progress, and improved collections are notable strengths. Offsetting items are modest: NRR at 99% (slightly below the 100% target), a discrete churn event driven by external legal action, SaaS revenue volatility from integration/billing cleanup, and elevated absolute debt with expected higher interest expense following refinancing. On balance the positives (profitability, cash flow, product momentum and disciplined capital allocation) outweigh the lowlights, though management is conservative in full-year top-line guidance.
Progress guided Q2 revenue of $240–246 million and EPS of $1.47–1.53, and for full‑year fiscal 2026 expects revenue of $988 million–$1.00 billion (≈1–2% growth), an operating margin of ~39%, adjusted free cash flow of $263–275 million, unlevered free cash flow of $315–326 million, and EPS of $5.91–6.03 (assuming a 20% tax rate and ~43 million weighted shares outstanding). Management said ARR growth should be generally in line with revenue, plans approximately $30 million of share repurchases, and expects $250 million of total debt repayment (reducing net leverage to ~2.7x by year‑end from 3.1x at Q1); it will roll the 2026 convertible notes into the revolver (about $960 million of unused revolver capacity at quarter end) and noted the EPS outlook reflects higher interest expense from that refinancing.
Revenue of $248 million, up 4% year-over-year; ARR of ~$863 million, up 2% pro forma YoY (constant currency). Management emphasizes ARR as the best top-line metric and expects ARR growth to be generally in line with revenue for the full year.
GAAP/Non-GAAP EPS of $1.60 for the quarter, up 22% year-over-year. Operating margin finished above 41% (operating income ~$102M), reflecting disciplined cost management and margin expansion versus prior periods.
Adjusted free cash flow of $99 million and unlevered free cash flow of $111 million in Q1. Adjusted FCF improved from $73 million in prior year quarter (~+36%), driven largely by improved collections and working capital performance.
Paid down $60 million of debt and repurchased $20 million of stock in Q1. Ended the quarter with cash ~$113 million, total debt ~$1.35 billion and net debt ~$1.24 billion. Net leverage at 3.1x and management plans $250 million debt repayment for the year to reduce leverage to ~2.7x by year-end.
Days sales outstanding (DSO) improved to 52 days from 73 days in Q4 (improvement of 21 days), and deferred revenue was ~$425 million, up ~$25 million year-over-year.
Company highlights AI-enabled wins and product adoption across the portfolio (Progress agentic RAG, data platform, WhatsUp Gold, Loadmaster, Flowmon, ShareFile). Specific customer examples include a global beverage company (HR automation), a tax authority/finance ministry (trusted answers), a U.S. state government (data platform delivering tens of millions in efficiencies), and a payments company using infrastructure/security products.
Management reports ShareFile as a strong, accretive acquisition that scaled recurring revenue and SaaS capabilities. Progress opened an innovation hub in Bangalore to consolidate engineering and product teams and support global growth.
Q2 revenue guidance of $240M–$246M and EPS $1.47–$1.53. Full-year 2026 revenue guidance of $988M–$1.0B (~1%–2% growth), operating margin ~39%, adjusted FCF $263M–$275M, unlevered FCF $315M–$326M, and full-year EPS $5.91–$6.03. Management notes $960M of unused revolver capacity to address upcoming convertible maturity.
Hello, and thank you for standing by. Welcome to Progress Software Corp. First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Michael Micciche, Senior Vice President of Investor Relations. You may begin.
Okay. Thank you, Twanda. Good afternoon, everyone, and thanks for joining us for Progress Software's First Fiscal Quarter 2026 Financial Results Conference Call. Joining me on the call are Yogesh Gupta, President and CEO; and Anthony Folger, our Chief Financial Officer. Before we get started, please consider our safe harbor statement as follows. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives 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, and our actual results may vary materially. For a description of the factors that may affect our future results and operations, please refer to the risk factors in our SEC filings, particularly the Risk Factors section of our most recent Form 10-Q and the latest 10-Q being filed in conjunction with this announcement.
Progress assumes no obligation to update forward-looking statements included in this call. Additionally, please note that all the financial figures referenced on this call are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comp...