Progress Software Posts Strong Q4 Results and Bright FY24 Outlook

Progress Software (PRGS), a business application development software provider, is making significant strides today as it announces impressive Q4 (November) results that have exceeded both top and bottom-line expectations. Additionally, the company has provided a reasonably positive initial outlook for FY24. In this article, we’ll delve into PRGS’s Q4 performance, its outlook for the coming year, and the factors driving its recent success.

Strong Q4 Performance After a Challenging Q3

PRGS’s Q4 results have shone brightly in contrast to the challenging Q3 results it reported in late September. The Q3 results triggered a 10% correction in PRGS’s stock price over the following month. However, the company has rebounded with a stellar Q4 performance, instilling confidence in investors.

The bottom-line performance was particularly noteworthy, with earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... More (EPS) reaching $1.02, surpassing the previous forecast range of $0.87 to $0.93. This impressive earnings result can be attributed to effective cost management, successful integration of MarkLogic (acquired in early 2023), and robust top-line growth.

Impressive Revenue Growth

PRGS also achieved impressive revenue growth in Q4, with total revenues expanding by 11.5% year-over-year to reach $177.52 million. This growth exceeded PRGS’s own prediction of $171-177 million. The strong performance was driven by various products, with OpenEdge, a development platform for running business-critical applications, standing out.

It’s important to note that PRGS offers many products with term-based licenses, making the timing of contract renewals a significant factor in quarterly revenue fluctuations.

To assess PRGS’s performance more holistically, annualized recurring revenue (ARR) is a crucial metric. In this regard, PRGS showed a commendable 17% year-over-year growth on a constant currency basis, reaching $574 million. While this growth rate remained consistent with previous quarters, it’s worth mentioning that when accounting for MarkLogic’s impact in Q4 and the year-ago quarter, ARR increased by just 1% year-over-year.

MarkLogic Acquisition Success and FY24 Outlook

PRGS’s acquisition of MarkLogic for $355 million in January 2023 has achieved nearly all its initial goals, including reaching an annual revenue milestone of $100 million. Looking ahead to FY24, PRGS anticipates that MarkLogic will play a pivotal role in driving revenues to exceed $725 million while expanding total operating margins. As a result, PRGS has set ambitious targets for FY24, aiming for revenues in the range of $722-732 million and adjusted EPS between $4.58 and $4.68.

M&A Remains a Key Focus

Mergers and acquisitions (M&A) will continue to be a central focus for PRGS in 2024. CEO Yogesh Gupta expressed the company’s commitment to remaining highly active in the M&A market, especially as market conditions evolve favorably. PRGS is actively seeking acquisition targets that combine high recurring revenues with attractive retention rates. Mr. Gupta emphasized that PRGS is not solely interested in unicorns but values workhorses that contribute significantly to its growth strategy.

A Positive Outlook for PRGS

In conclusion, Progress Software (PRGS) has delivered a strong Q4 performance that exceeded expectations, setting a positive tone for FY24. Despite the challenges faced in the previous quarter, PRGS is poised for growth and success, driven by its successful acquisition of MarkLogic and its strategic focus on M&A opportunities. With a bright outlook for the year ahead and a commitment to debt reduction and share repurchases, PRGS is well-positioned to capitalize on a stabilizing demand environment and offers attractive potential for investors in the coming year.