Progress' (PRGS) Q1 Earnings Top Estimates, Revenues Up Y/Y
Progress Software PRGS reported first-quarter fiscal 2024 non-GAAP earnings of $1.25 per share, which beat the Zacks Consensus Estimate by 9.65% and increased 5% year over year.
Non-GAAP revenues of $184.7 million beat the consensus mark by 1.59% and increased 11.5% year over year.
On a constant-currency basis, annualized recurring revenues came in at $571 million, unchanged year over year, driven by strong contributions from OpenEdge and a net retention rate of 99%.
Quarter Details
Software license revenues were $64.1 million, up 11.3% year over year. Maintenance and service revenues were $120.6 million, up 13.1% year over year.
Top-line growth benefited from strong demand for AI-powered Progress solutions, including MarkLogic and Semaphore offerings.
Progress Software Corporation Price, Consensus and EPS Surprise
Progress Software Corporation price-consensus-eps-surprise-chart | Progress Software Corporation Quote
Sales and marketing expenses, as a percentage of revenues, increased 60 basis points (bps) from the year-ago quarter’s level to 21.2%.
Product development expenses, as a percentage of revenues, increased 40 bps to 18.9%.
General and administrative expenses, as a percentage of revenues, increased 10 bps from the year-ago quarter’s level to 11.6%.
Progress reported a non-GAAP operating margin of 41.6%, which contracted 220 bps year over year.
Balance Sheet
As of Feb 29, 2024, cash and cash equivalents (and short-term investments) were $133 million compared with $127 million as of Nov 30, 2023. Total debt was $698 million, representing 2 times of trailing 12-month adjusted EBITDA.
Progress generated $70.195 million in adjusted free cash flow compared with $33 million in the previous quarter.
It completed convertible notes offering worth $450 million, and the proceeds were used to pay bank debt worth $338 million and repurchase $25 million shares. Progress also negotiated a new revolving line of credit worth $900 million.
At the end of the fiscal first quarter, the company had $171 million remaining under its current share repurchase authorization.
Acquisition News
Progress announced that it is considering a possible offer for all the issued and to be issued share capital of MariaDB plc at a value of 60 cents per share, which represents an enterprise value of under 1.5 times revenue. MariaDB currently has more than 600 enterprise customers.
Guidance
For second-quarter fiscal 2024, Progress expects non-GAAP revenues between $166 million and $170 million. The Zacks Consensus Estimate for revenues is currently pegged at $182.93 million, indicating growth of 2.07% from the year-ago quarter’s reported figure.
Progress expects non-GAAP earnings between 93 cents and 97 cents per share. The consensus mark is currently pegged at $1.17 per share, indicating growth of 10.38% from the year-ago quarter’s reported figure.
For fiscal 2024, non-GAAP revenues are still projected between $722 million and $732 million compared with $694 million reported in fiscal 2023. Progress expects ARR to grow slightly this fiscal.
Non-GAAP operating margin is expected between 39% and 40% for fiscal 2024.
Non-GAAP earnings are projected between $4.65 and $4.75 per share, better than the previous guidance range of $4.58-$4.68 per share for fiscal 2024.
The Zacks Consensus Estimate for fiscal 2024 revenues and earnings is currently pegged at $729.14 million and $4.63 per share, respectively.
Adjusted free cash flow is expected between $205 million and $215 million for fiscal 2024.
Zacks Rank & Stocks to Consider
Progress currently has a Zacks Rank #3 (Hold).
PRGS shares have underperformed the Zacks Computer & Technology sector in the year-to-date period. While Progress shares have lost 3%, the broader sector has returned 12%.
NVIDIA NVDA, Meta Platforms META and Synopsys SNPS are some better-ranked stocks in the broader sector, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Year to date, shares of NVDA, META and SNPS have gained 86.9%, 40.1% and 13.4%, respectively.
Long-term earnings growth rates for NVIDIA, Meta Platforms and Synopsys are currently pegged at 29.73%, 19.5% and 17.51%, respectively.
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