A：Progress Software reported revenues of $250 million, which were above their previous guidance. Earnings came in at $1.50 per share, well above the high end of guidance, and operating margin was 40% above expectations. The company also paid down $40 million of debt, increased revolver capacity from $900 million to $1.5 billion, repurchased $15 million of shares in Q3 for a total of $65 million, and the board of directors further increased the repurchase authorization by $200 million to $242 million.

A：The integration of Sharefile was described as the best acquisition so far for Progress Software, and it played a significant role in Q3 results. The company met all integration challenges, passed major milestones on schedule, and overcame obstacles. The net retention rate of the Sharefile business improved as customers adopted AI capabilities, leading to better-than-expected ARR and top-line growth in the business.

A：The indicators of strong ARR performance include the consistent growth of ARR, the high install rates, the continued relevance and value of products, the strength of customer relationships, and the fact that a meaningful portion of the strong ARR performance both year over year and quarter over quarter is attributed to Sharefile.

A：Progress Software's innovation strategy is reflected in the delivery of dozens of new AI capabilities across their products over the past 12 months. Some of the recent press releases showcase these capabilities, including the latest version of Retrieval-Augmented Generation (RAG) enabled smart logic called Progress MarkLogic 12, AI coding assistance in developer tools, AI-powered insights and questions and answers from documents in Sharefile, and the launch of gen AI capabilities within the OpenEdge platform.

A：The open edge MCP connector for ADL is designed for use in developing, maintaining, and modernizing open edge applications. Similarly, the open Apl connector for Abl is purpose-built for customers' workflows, enabling faster development, reduced risk, and smarter modernization strategies. Both have been well-received by OpenEdge ISV partners and customers.

A：The AI adoption wave is driving demand for Progress' infrastructure management products. A leading chip equipment manufacturer significantly expanded their relationship with Progress to manage the growing complexity of their IT infrastructure as environments continue to grow and scale due to AI adoption.

A：Progress' M&A approach is highly selective and disciplined. Ongoing corporate development efforts include evaluating a strong pipeline of deals. Progress paid down outstanding debt, refinanced, and expanded their revolver to increase flexibility. They think the M&A market is favorable, with many potential targets fitting into their three key areas: application and development platforms, digital experience, and infrastructure management. Progress intends to focus on finding great companies with great technology and high-margin synergies at reasonable valuations.

A：For Q3, Progress achieved ARR of $849 million, representing approximately 47% year-over-year growth and 3% pro forma growth. Q3 revenue of $250 million exceeded the high end of guidance and represented approximately 18% year-over-year growth. Expenses increased by $46 million due to Sharefile's addition, while operating income grew by $25 million, and operating margin remained at 40%. Earnings per share for Q3 were $1.50, which exceeded the high end of guidance and increased by 24 cents or 19% from the prior year quarter.

A：Progress amended their revolving credit facility to increase borrowing capacity from $900 million to $1.5 billion, lower borrowing costs, and provide more growth flexibility. During the third quarter, they repaid $40 million against the revolver, with a total year-to-date debt repayment of $110 million. At the end of Q3, the revolving line of credit had a balance of $620 million, available capacity of approximately $880 million, and Progress repurchased $15 million of their stock, with $42 million remaining under the share repurchase authorization.

A：Progress ended the third quarter with deferred revenue of $381 million and adjusted free cash flow of $74 million, which increased by 17 million or 29% from the year ago quarter. Unlevered free cash flow was $89 million for the quarter, an increase of 26 million or 40% from the year ago quarter.

A：The company's mix of debt repayment and share repurchases may change during the quarter depending on several factors, including the share price.

A：For the fourth quarter of 2025, the company expects revenue between $250 and $256 million, earnings per share between $1.00 and $1.35, and between $975 and $981 million for the full year 2025, representing an increase from prior guidance. The company expects an operating margin of 38% to 39%, adjusted free cash flow between $232 and $242 million, and unlevered free cash flow of between $289 and $299 million. Earnings per share are expected to be between $5.50 and $5.56, assuming a tax rate of approximately 20%.

A：The AI strategy is expected to first show up in the net retention rate (NRR) as innovation and successful customer journeys with AI retention are critical. Improving customer relationships through AI capabilities and the team's efforts have positively impacted the Sharefile retention rate. While new customer acquisitions are part of the strategy, the focus is on retaining customers and finding additional customers. Expansion is another key area where pricing can be a lever, with the potential for indirect pricing opportunities through product upgrades to higher-end versions. NRR and expansion are where the initial impact will be seen, with potential pricing power to follow over time.

A：The company does not view its guidance as conservative. While Q3 results exceeded expectations, the guidance for the year was set based on a view that Q4 would maintain the performance of the previous quarter. The thought process behind the guidance was to ensure the company could sustain the strong performance into the fourth quarter, which is typically an exciting time for the company. Therefore, while Q3 showed strong growth and margins, the guidance reflects an expectation to hold Q4 to the originally forecasted results.

A：The acquisition presented challenges related to integrating the acquired systems, akin to performing complex engine cuts while planes are in flight, and navigating the intricacies of the integration process.

A：The positive aspects include the wonderful engagement and performance of the acquired teams, the customers' strong reliance on Sharefile's products, and the deep integration of the products into their workflows.

A：The new agency product is expected to be monetized primarily through integrating it with existing products to create cross-selling opportunities for the company.

A：The increase in gross margins was a blend of different factors including the growth of the SaaS business and Sharefile's contribution, as well as internal cost efficiencies that allowed for better management of existing SaaS products.

A：The company finds data platform businesses, digital experiences that leverage AI for personalization, and digital workflows enhanced by AI to be the most attractive areas for growth.

A：The company's perception towards acquiring SaaS companies has significantly improved post-acquisition of Sharefile. They now find themselves interested in both traditional software companies and SaaS companies, and are actively looking at potential acquisitions in this space, provided there are no fundamental flaws in the business that could affect profitability.