Progress Software (PRGS, Financial) saw its stock drop by 10% after announcing its Q2 results. Despite beating EPS expectations and raising FY25 guidance, the results failed to meet high investor expectations following a robust Q1 performance. The company's 7% EPS beat was its smallest in seven quarters, and it missed revenue expectations for the first time in 19 quarters.
- PRGS reported strong top-line performance, with EPS exceeding the upper end of guidance by $0.06. Revenue was $237.36 million, aligning with expectations, and marked a 35.6% year-over-year increase—the strongest in 15 quarters.
- Annual Recurring Revenue (ARR) rose 46% year-over-year to $838 million, with a net retention rate of 100%, showcasing stability in PRGS's revenue stream.
- Guidance for Q3 is in line with analyst expectations, though at the lower end of the midpoint. FY25 EPS guidance was modestly raised, not fully accounting for the Q2 beat.
- The integration of ShareFile is progressing well, with most synergies achieved. ShareFile now contributes significantly, accounting for over 25% of total revenue. PRGS also announced the acquisition of Nuclia, aimed at enhancing its product portfolio.
- The Nuclia acquisition is focused on bolstering PRGS's data platform business. Although it's a small acquisition, it is not expected to significantly impact FY25 results, potentially disappointing investors.
Overall, while PRGS delivered a solid quarter, the results did not exceed investor expectations sufficiently to trigger a positive stock reaction. The smaller-than-usual EPS beat and limited impact of the Nuclia acquisition on near-term results contributed to the market's lukewarm response.
