Progress Software (PRGS +8%) rebounded from recent lows, gaining momentum toward March highs due to stronger-than-expected Q1 results and optimistic guidance for the upcoming quarter and FY25. The software provider's shares had previously dipped following a disappointing quarterly report, but have now climbed approximately 30% over the past six months, despite a 20% YTD decline as of yesterday.
Q1 showcased significant improvements, with accelerated top-line growth and adjusted earnings surpassing projections. PRGS also raised its FY25 EPS outlook, a positive move despite not meeting initial analyst expectations from January. This is noteworthy given the cautious economic climate and PRGS's historically conservative earnings guidance.
- Revenue grew by 28.9% year-over-year to $238.02 million, aligning with the high-end of PRGS's $232-238 million guidance. Earnings exceeded expectations, rising 4.8% year-over-year to $1.31, attributed to faster-than-anticipated ShareFile integration and disciplined expense management.
- The $875 million acquisition of ShareFile last year has been a significant growth driver, boosting annualized recurring revenue by 48% year-over-year in constant currency during Q1. The file-sharing platform, crucial for business collaboration, is on track with PRGS's integration timeline.
- ShareFile is anticipated to contribute approximately $250 million to FY25 revenue, enhancing PRGS's recurring revenue stream to over 85% of total revenue. As a SaaS platform, ShareFile boasts gross margins of over 80%, with PRGS targeting 40% operating margins by FY25's end.
- For Q2 (May) and FY25, PRGS projects adjusted EPS of $1.28-1.34 on revenues of $235-241 million, indicating a 36% year-over-year increase at the midpoint. The company reaffirmed its FY25 revenue guidance of $958-970 million and increased its earnings forecast by $0.25 to $5.25-5.37.
Progress Software's Q1 performance outshone Q4, setting a positive tone for FY25. While macroeconomic conditions may introduce volatility, PRGS remains resilient, particularly in its minor federal government business. The company is well-positioned for continued success, especially as it further integrates ShareFile.
