Progress projects Q4 revenue of $297M-$305M while integrating Domo by end of FY ’27

• "We delivered another solid quarter as ARR was up over 1% in constant currency to $873 million, and net retention rate finished at 99%, within our expected range of 99% to 100%, consistent over the last several quarters." (CEO, President & Director Yogesh Gupta)
• "Q3 revenue was $246 million, right around the midpoint of our most recent guidance, with notable strength again thanks to OpenEdge, DataDirect, MOVEit, and LoadMaster, among other products." (CEO Gupta)
• "Operating margins were exceptionally strong again, coming in at 43%, while earnings per share increased 13% to $1.69, exceeding the high end of our guidance." (CEO Gupta)
• "We paid $400 million for Domo" and "we anticipate that the steady-state revenue from Domo will stabilize in the range of $280 million to $290 million" as Progress manages "planned churn" in seat-based and "deemphasize Domo's services business." (CEO Gupta)
• "Once Domo is fully integrated, which we plan to complete by the end of FY '27, we believe that Domo will annually add well over $100 million of EBITDA to our business." (CEO Gupta)
• "We delivered ARR growth of more than 1%, an operating margin of 43%, earnings per share well above the high end of our range, and adjusted free cash flow growth of 17%." (Executive VP, CFO & Treasurer Anthony Folger)

Outlook

• "For the fourth quarter of 2026... we expect revenue to be between $297 million and $305 million, and earnings per share between $1.24 and $1.33." (CFO Folger)
• "For the full year 2026, we're raising our outlook and now expect revenue of between $1.044 billion and $1.052 billion" and "earnings per share of between $6.15 and $6.23." (CFO Folger)
• "We expect an operating margin for the year of 38%, which includes the impact of taking on Domo's business, which was running roughly break-even at close." (CFO Folger)
• "For the full year 2027, Domo will likely run slightly below 30% operating margin as the synergies ramp" and "that will result in some compression of Progress' overall 2027 operating margin, 100 to 200 basis points." (CFO Folger)
• "We drew $390 million on our revolver to fund this transaction, and the incremental interest expense in 2027 is expected to be approximately $21 million." (CFO Folger)

Financial Results

• "We closed Q3 with ARR of approximately $873 million" and "our Q3 results exclude Domo, which closed after quarter end, and will be included in our ARR beginning next quarter." (CFO Folger)
• "Total cost and operating expenses were approximately $141 million for the quarter, down approximately $10 million, or 6%, compared to the year-ago quarter." (CFO Folger)
• "Operating income of $105 million increased 6% year-over-year, resulting in an operating margin of 43%, up 300 basis points from a year ago." (CFO Folger)
• "We ended the quarter with cash and cash equivalents of $114 million and total debt of approximately $1.24 billion" and "our net leverage ratio at the end of Q3 was approximately 2.7x." (CFO Folger)
• "Adjusted free cash flow is $87 million for the quarter" and "on a year-to-date basis, adjusted free cash flow is $265 million." (CFO Folger)

Q&A

• Lawrence Vensko, Guggenheim Securities: Asked where Progress expects the most margin leverage from Domo synergies; CEO Gupta: "Definitely, G&A is an area where there are significant savings" and "there are opportunities in multiple places," adding, "we are truly confident that we will get margins to the Progress range by end of FY '27."
• Lawrence Vensko, Guggenheim Securities: Asked if cash flow had anything unique that could reverse; CFO Folger: "2025, our cash flow was probably light" due to ShareFile integration issues, and "in 2026... we've seen pretty meaningful improvement in cash flow and collections," but "it probably normalizes next year."
• Fatima Boolani, Citi: Asked how data growth and AI is influencing capacity and whether Domo’s consumption model could spread across the portfolio; CEO Gupta: "capacity growth will continue to be a driver" and "we have been... analyzing Domo's consumption-based model and trying to understand how it can apply across a variety of our products."
• Fatima Boolani, Citi: Asked whether more consumption/SaaS mix changes profitability ceilings; CFO Folger: "Domo is another SaaS-based -- purely SaaS-based business" and Progress is evaluating whether there is "a slight drag on gross margin" that could mean "a little bit of compression" at scale.
• Lucky Schreiner, D.A. Davidson: Asked if Domo’s ~30% operating margin implies ongoing investment needs and when upside comes; CEO Gupta: "that... was really specific to '27" and "the steady state margin... we expect to be very similar to ours" while still continuing to invest in R&D; CFO Folger: "their exit rate is going to be a lot higher obviously" and Progress will invest "at or even above levels we normally invest in Domo."
• Lucky Schreiner, D.A. Davidson: Asked whether cross-sell is included in the $280 million to $290 million steady-state range; CEO Gupta: "that is not factored into the $280 million to $290 million" and "it's all upside."
• John DiFucci, Guggenheim Securities: Pressed on durability of Domo’s recurring revenue and whether AI displaces analytics; CEO Gupta: "there is a segment of analytics that AI can and will disrupt" while arguing data integration/transformation and deterministic outputs remain critical, and citing that Domo’s "consumption side business has much better net retention rates" and customers on that motion have "net retention rate of over 100%."

Sentiment Analysis

• Analysts were slightly skeptical but constructive, concentrating questions on integration math, margin path, and durability of Domo’s revenue (e.g., DiFucci asked whether the market was questioning "how recurring that revenue stream really is in the era of AI").
• Management sentiment was positive and confident on execution and integration timelines, repeatedly emphasizing integration discipline and margin targets (e.g., CEO Gupta: "we are truly confident that we will get margins to the Progress range by end of FY '27").
• Compared with the prior quarter, the dialogue shifted from general M&A appetite and AI positioning to detailed mechanics of the Domo deal (planned churn, margin dilution timing, interest expense), with management providing more explicit modeling guardrails.

Quarter-over-Quarter Comparison

• The current quarter introduced a closed acquisition: CEO Gupta said Domo "just closed last week," versus the prior quarter’s positioning that Progress was "very active in evaluating potential targets" and seeing sellers "adjust their expectations." (CEO Gupta)
• Guidance language shifted from a modest full-year update in Q2 (CFO Folger guided FY 2026 revenue between "$990 million and just over $1 billion") to a larger raised range in Q3 including Domo partial-quarter impact (CFO Folger guided "$1.044 billion" to "$1.052 billion").
• Profitability messaging changed from Q2’s 40% operating margin (CFO Folger) to Q3’s 43% actual, alongside explicit forward discussion of FY 2027 "100 to 200 basis points" margin compression due to Domo integration timing. (CFO Folger)
• Analyst focus moved from SaaS normalization and deal timing (Q2) to Domo churn assumptions, synergy sources, and whether AI disrupts analytics (Q3).

Risks and Concerns

• "We have believed that the seat-based business of Domo will continue to see significant churn" and Progress expects further decline in Domo professional services as it shifts delivery "towards partners." (CEO Gupta)
• "For the full year 2027... [Domo] will result in some compression of Progress' overall 2027 operating margin" and the Domo financing adds "incremental interest expense in 2027... approximately $21 million." (CFO Folger)
• Management framed mitigation as execution on integration and synergies, with CEO Gupta stating, "Our integration plans and strategy plans are not only in place, but we have begun to execute on those." (CEO Gupta)

Final Takeaway

Progress management described Q3 as delivering $873 million of ARR, 43% operating margin, and $1.69 of EPS while closing the $400 million Domo asset purchase after quarter end. Management raised FY 2026 revenue and EPS guidance and outlined how Domo is expected to settle at $280 million to $290 million of steady-state revenue while contributing "well over $100 million" of annual EBITDA once fully integrated by end of FY ’27, with FY 2027 expected to include temporary margin compression and added interest expense as synergies ramp and deleveraging proceeds.

Read the full Earnings Call Transcript

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