Summary
Progress opened fiscal 2023 with revenue of $164.2 million in the quarter ended February 28, 2023, up 13.3% from $144.9 million a year earlier. Non-GAAP revenue of $165.6 million rose 12% as reported and 14% in constant currency. Management credited demand across nearly all products and geographies. DataDirect strength and the MarkLogic acquisition lifted the top line. Softer OpenEdge sales and a foreign exchange drag in EMEA worked against it.
The recurring base did much of the work. Annualized recurring revenue reached $569 million, up 20% year over year in constant currency, and that figure leans heavily on the roughly $80 million of ARR added with MarkLogic. Put MarkLogic into both periods and ARR growth was 3.9%. Net retention rate was 102%. That gap between the headline and pro-forma numbers matters. It tells investors the durable, organic part of the recurring base is expanding slowly while the acquisition supplies the momentum.
Profitability held up. Gross profit of $138.0 million rose 13.4%, and gross margin was 84.0%, flat against the prior-year quarter. Operating income rose 20.9% to $35.6 million, lifting operating margin to 21.7% from 20.3%, an improvement of 1.4 percentage points. Net income of $23.7 million was up 15.7%, and diluted earnings per share of $0.53 compared with $0.46, up $0.07. On a non-GAAP basis, operating margin was 44% and diluted earnings per share of $1.19 climbed 23% from $0.97. The spread between GAAP and non-GAAP results stays wide, driven by amortization of acquired intangibles, stock-based compensation, restructuring and acquisition costs, and cyber incident expenses.
Cash generation was steady rather than dramatic. Operating cash flow of $46.8 million was up 6.1% from $44.1 million. Capital expenditures fell 53.7% to $0.4 million. Adjusted free cash flow, a non-GAAP measure that adds back restructuring payments, was $46.9 million, up 5%. Days sales outstanding dropped to 42 days from 52 days a year earlier on the timing of billings and collections. Deferred revenue of $301.8 million rose 15.4%, and remaining performance obligations of $309.0 million rose 12.0%, both helped by MarkLogic. The balance sheet absorbed the deal. Cash paid for acquisitions, net of cash acquired, was $355.8 million in the quarter, funded in part by $195.0 million of new debt, and the company describes net leverage as still modest. The board declared a quarterly dividend of $0.175 per share, payable June 15, 2023.
Guidance points to a larger revenue base with GAAP profitability diluted by deal costs. For the full fiscal year ending November 30, 2023, management guided non-GAAP revenue to $680 million to $688 million and kept non-GAAP diluted earnings per share at $4.09 to $4.17. Full-year non-GAAP operating margin is projected at 38% to 39%, and adjusted free cash flow at $175 million to $185 million. For the fiscal second quarter ending May 31, 2023, non-GAAP revenue is guided to $168 million to $172 million with non-GAAP diluted earnings per share of $0.88 to $0.92. Management trimmed its full-year GAAP profit outlook, a shift that follows the MarkLogic deal and the interest expense carried to fund it. Currency is expected to reduce second-quarter revenue by about $1.0 million.
The risk list is familiar but real. Management warns that economic and geopolitical conditions can curb revenue growth and profitability, that international sales expose results to foreign currency swings, and that delayed or smaller transactions, fewer large deals in a given quarter, or lower renewal rates can push results off plan. The MarkLogic integration, closed on February 7, 2023, carries execution risk, and the related restructuring and valuation work remains preliminary. Costs tied to the cyber incident disclosed in December 2022 continue, and the company expects more legal and professional services expenses in future periods. Even so, Progress says its cash, credit facility, and cash flow are enough to cover operations, dividends, buybacks, and debt service for at least the next twelve months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $164.2M | $157.1M | +4.5% | $144.9M | +13.3% |
| Gross profit | $138.0M | $133.6M | +3.3% | $121.7M | +13.4% |
| Gross margin | 84.0% | 85.0% | -1.0 pp | 84.0% | +0.1 pp |
| Sales & marketing | $33.8M | $40.0M | -15.6% | $33.5M | +0.9% |
| General & administrative | $18.8M | $21.5M | -12.8% | $17.0M | +10.6% |
| Total operating expenses | $102.4M | $103.2M | -0.7% | $92.3M | +11.0% |
| Operating income (loss) | $35.6M | $30.4M | +16.9% | $29.4M | +20.9% |
| Operating margin | 21.7% | 19.4% | +2.3 pp | 20.3% | +1.4 pp |
| Net income (loss) | $23.7M | $23.7M | -0.1% | $20.5M | +15.7% |
| Net margin | 14.4% | 15.1% | -0.7 pp | 14.1% | +0.3 pp |
| Diluted EPS | $0.53 | $0.54 | -$0.01 | $0.46 | +$0.07 |
| Net retention rate | 101.0% | 98.0% | +3.0 pp | 100.0% | +1.0 pp |
Risks
In Q1 FY2023, cyber incident costs were $2.7 million versus $0 in the prior-year quarter after irregular activity on certain portions of the corporate network was detected on December 19, 2022; external cybersecurity experts and incident response professionals were engaged.
The February 2023 MarkLogic acquisition drove the quarter's revenue increase but also contributed to higher intangible amortization (up 15% in cost of revenue and up 16% in operating expenses), acquisition-related expenses (up 91%), restructuring expenses (up 173%), and higher personnel costs across sales and marketing, product development, and general and administrative functions.
EMEA revenue decreased 1% as reported but increased 4% on a constant currency basis, and Asia Pacific revenue decreased 16% as reported, down 15% on a constant currency basis, largely from foreign exchange and OpenEdge declines; revenue outside North America represented 40% of total revenue in Q1 FY2023 compared with 46% in Q1 FY2022.
Interest expense increased 58% and total other expense, net increased 63% in Q1 FY2023 after drawing on the term loan and revolving credit facility to fund part of the MarkLogic acquisition; cash, cash equivalents and short-term investments decreased $133.4 million from November 30, 2022.
Restructuring expenses increased 173% in Q1 FY2023, tied to the MarkLogic and Chef acquisitions and related realignment of go-to-market, product, and operational teams, which may disrupt operations.
ARR was $569.0 million as of February 28, 2023, up 20% year-over-year, but growth was primarily driven by the MarkLogic acquisition rather than organic expansion; net retention rates ranged between 101% and 102% for all periods presented.
Q1 FY2023 revenue growth was primarily due to increases in DataDirect product offerings and the MarkLogic acquisition, partially offset by decreases in OpenEdge product offerings; North America represented 60% of total revenue and EMEA represented 32%, so regional and product concentration could amplify volatility.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Annualized Recurring Revenue (ARR)
Net Retention Rate (NRR)
Summary, forecast, risks and KPIs are extracted from PROGRESS SOFTWARE CORP /MA's SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.