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Progress Software Beats Q3 Estimates: Guidance Raise to Lift Shares?

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Progress Software (PRGS - Free Report) posted third-quarter fiscal 2024 non-GAAP earnings of $1.26 per share, beating the Zacks Consensus Estimate by 10.53% and increasing 16.7% year over year.  

Non-GAAP revenues of $179 million beat the consensus mark by 1.67% and increased 2% year over year on an actual and constant-currency basis. The upside can be attributed to stronger-than-expected demand for multiple products in PRGS’s portfolio, particularly OpenEdge, DevTools, Sitefinity, Loadmaster, Flowmon and MOVEit.

On a constant-currency basis, annualized recurring revenues came in at $582 million, flat year over year. The metric was supported by strong contributions from OpenEdge and a net retention rate of 99%.

PRGS inched up 5.3% year to date compared with the Zacks Computer & Technology sector’s growth of 22.1% over the same time frame. However, we expect that strong third-quarter results and raised guidance will help the stock recover in the near term.

Progress Software Corporation Price, Consensus and EPS Surprise

 

Progress Software Corporation Price, Consensus and EPS Surprise

Progress Software Corporation price-consensus-eps-surprise-chart | Progress Software Corporation Quote

 

PRGS Quarter in Details

Software license revenues were $57.9 million, up 14.5% year over year. Maintenance and service revenues were $120.8 million, down 2.9% year over year.

Sales and marketing expenses, as a percentage of revenues, contracted 130 basis points (bps) from the year-ago quarter’s level to 20.8%. 

Product development expenses, as a percentage of revenues, expanded 50 bps to 19.4%.

General and administrative expenses, as a percentage of revenues, declined 40 bps from the year-ago quarter’s level to 11.5%.

Progress reported a non-GAAP operating margin of 41.5%, which contracted 260 bps year over year.

PRGS Balance Sheet Details

As of Aug. 31, 2024, cash and cash equivalents were $232.7 million compared with $190.4 million as of May 31, 2024. Total debt was $577 million, representing 2 times of trailing 12-month adjusted EBITDA.

Progress generated $57.52 million in adjusted free cash flow compared with $60.07 million in the previous quarter.

At the end of the fiscal third quarter, the company had $107 million remaining under its current share repurchase authorization.

PRGS Acquisition News

PRGS announced a definitive agreement to acquire ShareFile, a business unit of Cloud Software Group, for $875 million in cash. ShareFile specializes in SaaS-native, AI-powered, document-centric collaboration solutions.

PRGS Raises 2024 Outlook

For fourth-quarter fiscal 2024, Progress expects non-GAAP revenues between $207 million and $217 million.

Progress expects non-GAAP earnings to be between $1.15-$1.25 per share. 

For the fiscal 2024, non-GAAP revenues are projected to be between $745 million and $755 million.

Non-GAAP operating margin is expected to be 39% for fiscal 2024.

Non-GAAP earnings are projected to be between $4.75 and $4.85 per share, better than the previous guidance range of $4.70-$4.80 per share for fiscal 2024.

Adjusted free cash flow is expected between $195 million and $205 million for the fiscal 2024.

Zacks Rank & Stocks to Consider

Progress currently has a Zacks Rank #3 (Hold).

AudioEye (AEYE - Free Report) , Aspen Technology (AZPN - Free Report) and Badger Meter (BMI - Free Report) are some better-ranked stocks in the broader technology sector. AudioEye and Aspen Technology currently sport a Zacks Rank #1 (Strong Buy) at present, while Badger Meter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

AudioEye’s shares have surged 335% in the year-to-date period. The long-term earnings growth rate for AEYE is pegged at 25%.

Aspen Technology’s shares have moved up 6% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 13.12%. 

Badger Meter’s shares have appreciated 41.6% in the year-to-date period. The long-term earnings growth rate for BMI is currently projected at 17.91%.

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