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Hello, and thank you for standing by. Welcome to Progress Software Corp. First Quarter 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to hand the call over to Michael Micciche, Senior Vice President of Investor Relations. You may begin.

Okay, thank you, Joanna. Good afternoon, everyone, and thanks for joining us for Progress Software's first fiscal quarter 2026 financial results conference call. Joining me on the call are Yogesh Gupta, President and CEO, and Anthony Folger, our Chief Financial Officer. Before we get started, please consider our safe harbor statement as follows. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, and other information that might be considered forward-looking. Such forward-looking information represents Progress Software's outlook and guidance only as of today and is subject to risks and uncertainties, and our actual results may vary materially.

For a description of the factors that may affect our future results and operations, please refer to the risk factors in our SEC filings, particularly the risk factor section of our most recent Form 10-Q and the latest 10-Q being filed in conjunction with this announcement. Progress assumes no obligation to update forward-looking statements included in this call. Additionally, please note that all the financial figures referenced on this call are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures in our earnings press release, which was issued after the market closed today. This document contains additional information related to our financial results for the first quarter of fiscal 2026, and I recommend that you reference it for specific details.

We've also provided a slide presentation that contains supplemental data for our first quarter and provides additional highlights and financial metrics. Both the earnings release and the supplemental presentation are available on the Investor Relations section of our website at investors.progress.com. Today's call is being recorded in its entirety and will be available for replay on the Investor Relations section of our website shortly after we finish. Yogesh, let me turn it over to you.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us. We're very pleased to share our first quarter results with you today. Let's get right to it. We had another very good quarter. Revenue was $248 million, up 4% from last year's Q1. ARR grew 2% in constant currency over the same period, and NRR remained strong at 99%. EPS for the quarter was $1.60, up 22% YoY as operating margins finished above 41%. We saw record cash flows as a result of strong focus on collections. Adjusted free cash flow was $99 million, and unlevered free cash flow was $111 million. The balance sheet remains in great shape as we continue to aggressively pay down debt while also repurchasing shares.

This strong performance is driven by AI and other innovations across our portfolio that are resonating with our customers. Now more than ever, our products remain mission-critical, our customers remain loyal, and our team continues to execute at a high level. These are also the reasons why we remain positive about our outlook. As always, the foundation underpinning our success is our Total Growth Strategy. We continue to run the business with discipline as we innovate across the product portfolio and provide increasing value to our customers. That formula has worked for us through multiple technology shifts and industry transformations, and it continues to work today. On M&A, our corporate development team is vetting deals aggressively, and we further fine-tuned ShareFile operations, which continues to perform very well as one of our best acquisitions. Lastly, customer success remains our key focus.

Now let me address the three topics that we know are top of mind. First, our business remains strong. We see solid retention and good performance across our products. Our product portfolio is broad and continues to power our customers' businesses, resulting in solid YoY growth in both ARR and revenue. As we previously said, our goal for NRR is 100%. Over the past few years, our NRR has consistently ranged between 99% and 101%. This quarter, NRR was 99% and ARR growth was solid, driven by the strength in our new customer acquisition as well as existing customer expansions, both of which were positively influenced by our AI investments and innovation. This leads to the second topic, AI. We continue to see AI as an exciting opportunity for our business.

We've discussed for several quarters how we're using AI internally to be better, more efficient operators, which we can demonstrate to improve productivity in every department. Our savings from these efforts are enabling us to continue to invest in our AI-related product efforts while delivering exceptional operating margins. Speaking of our product efforts, AI has enabled us to accelerate our innovation cycles as well as helped us transform our product capabilities to be more relevant for the future. We have been building AI into our products, and that is delivering meaningful business value to our customers today. It is our belief that trusted software companies like ourselves with excellent customer relationships who leverage AI effectively will be the winners of this AI opportunity. Our customers are eager to understand how they can benefit from AI while ensuring that their businesses remain secure and trustworthy.

They continue to look to us to deliver AI capabilities that increase their competitiveness and improve their efficiency so that they can thrive in this new world. One such example is a global beverage company that wanted to dramatically improve the way they serve their more than 20,000 employees worldwide. By leveraging our Progress Agentic RAG product, they streamlined their HR operations, resulting in improved employee satisfaction at a significantly lower cost. Similarly, the tax authority and finance ministry of an overseas government is using the same product so that all employees and citizens can get trusted, verifiable answers from a host of data across that organization. A state government in the U.S. is using the Progress Data Platform to harmonize and synthesize large volumes of data from different sources to identify and eliminate waste, fraud, and abuse.

They first became a Progress customer less than 18 months ago, and they continue to identify new use cases for the Data Platform, targeting efficiencies and elimination of fraud in the range of tens of millions of dollars annually. Today, they are a seven-figure ARR customer of ours. Progress Data Platform and Progress Agentic RAG transform business data, unstructured files, archives, websites, knowledge bases, and multimedia into an information system that instantly and securely delivers fact-based, trusted, and verifiable answers. Our AI-powered infrastructure management products are also being used to manage and secure modern tech infrastructure. For example, a leading financial payment company that annually processes over $100 billion of transactions is using Progress WhatsUp Gold, LoadMaster, and Flowmon to improve the availability and security of their infrastructure and to reduce the time to detect, analyze, and prevent security threats.

ShareFile customers are doing work in minutes that used to take hours with its AI document summarization and Q&A capabilities. Additionally, ShareFile's AI-powered security capabilities proactively detect sensitive information and recommend actions to significantly reduce security risks. Our customers rely on Progress to support their journeys because they trust us to focus on practical business outcomes. Across our product, AI is contributing to measurable customer value from workflow automation and productivity gains to monetization. Every product at Progress is now an active participant in our customers' AI efforts, and we have embedded AI into our products with attention to governance, observability, cost, and LLM flexibility. The third topic, capital allocation and M&A. It's worth noting that in Q1, we paid down $60 million in debt and repurchased $20 million of stock. Our balance sheet remains in good shape, and our cash generation gives us significant flexibility.

Our capital allocation priorities remain very clear. We will continue to, number one, invest in our business and innovate. Number two, aggressively reduce debt and be opportunistic on buybacks. Number three, maintain our commitment to generate excess returns through disciplined M&A followed by rapid synergistic integrations. We will use the same M&A lens we have always used to acquire good companies with strong infrastructure technology products, loyal customers, high recurring revenue and customer retention, and a compatible culture. It's also worth expanding on how ShareFile continues to create additional value. While it was our largest and most complex acquisition and integration to date, ShareFile has strengthened and scaled our recurring revenue mix, expanded our SaaS capabilities, and contributed meaningfully to the bottom line and cash flow.

Just as importantly, it has enhanced our ability to evaluate and integrate future SaaS opportunities while keeping the same discipline we've always had around returns and fit. I'm also excited to share that Progress recently opened our new innovation hub in Bangalore. This consolidates office space for our former Progress and ShareFile offices and also demonstrates our long-term commitment to the region as we continue to scale our engineering, product development, sales, and customer success teams. Our people in India are critical to our global growth and our innovation strategy, and this logical next step will enable us to efficiently deliver greater value to our customers worldwide. Finally, we continue to be positive as we look ahead, and Anthony will give you all the details in a minute. From my perspective, what we're seeing in our own business supports our confidence for the rest of this year.

We're also maintaining a close watch on the macro environment and geopolitical events. To summarize, the business is performing well, the model remains durable. AI is making our products and operations stronger. ShareFile is delivering, and our top line margins and cash flow reflect solid execution across the company. As always, I want to thank our employees around the world for their hard work and commitment. I want to thank our customers and partners for their continued trust. With that, I'll turn it over to Anthony.

All right. Thanks, Yogesh, and good afternoon, everyone. As you heard in Yogesh's remarks, we're very pleased with our Q1 results, and we're excited to share a strong start to our fiscal year. Let's get right into the numbers, starting with ARR, which as we've discussed, provides the best view into our top line performance. We closed Q1 with ARR of approximately $863 million, representing 2% pro forma YoY growth. For clarity, our pro forma results include ARR from acquired businesses in all periods presented. This growth in ARR reflects a broad-based contribution from across our portfolio, including OpenEdge, ShareFile, LoadMaster, WhatsUp Gold, MOVEit, and our DevTools products. Consistent with prior quarters, our net retention rate remains strong, coming in at 99%, underscoring the resilience of our customer base and the mission-critical nature of our products.

We did see some isolated churn in the quarter, which we expect to work through quickly, and we still delivered solid growth thanks to strength in new customer wins and expansion in the install base, two areas positively influenced by our investments in AI and innovation. As a reminder, we calculate ARR in constant currency with all periods presented at current year budgeted exchange rates. Consistent with past practice, we've updated ARR using 2026 budgeted exchange rates, and as a result, ARR reported in prior periods has changed. The change is not material and doesn't alter the trend in ARR growth, although the previously reported ARR and NRR numbers change slightly. The details of this update are included in the supplemental financial presentation filed with our press release.

In addition to solid ARR growth, Q1 revenue of $248 million came in ahead of our expectations and reflects 4% growth on a YoY basis, led by strong performance in OpenEdge. As we've mentioned on previous earnings calls, the renewal timing of subscription contracts, especially multi-year subscriptions, can have a meaningful impact on our revenue in any given quarter. For this reason, we continue to focus on ARR as the best barometer of top line performance. Turning to expenses, our total cost and operating expenses were approximately $146 million, which was favorable to our internal forecast and largely flat compared to the year ago quarter as we continue to demonstrate disciplined cost management across the business.

Operating income of $102 million was also better than our internal forecast, resulting in an operating margin of 41%, solid YoY margin expansion. Earnings per share of $1.60 for the quarter came in better than our internal expectations, the result of solid execution on the top line, coupled with strong cost management. Turning now to a few balance sheet and cash flow metrics. We ended the quarter with cash and cash equivalents of $113 million and total debt of $1.35 billion for a net debt position of approximately $1.24 billion.

As a reminder, our total debt includes our revolving credit facility with $540 million drawn, a $360 million convertible note maturing this April and a $450 million convertible note maturing in 2030. At the end of this quarter, our net leverage ratio was 3.1x, down meaningfully from when we acquired ShareFile a little over a year ago. DSO for the quarter was 52 days, a significant improvement from 73 days reported in Q4. Deferred revenue was approximately $425 million at the end of the first quarter, up roughly $25 million YoY. Adjusted free cash flow was $99 million for the quarter, a significant increase compared to the $73 million in the prior year quarter. The improvement, primarily the result of increased collections.

During the quarter, we paid down $60 million against our revolving line of credit and repurchased $20 million of Progress stock. We ended the quarter with $540 million drawn on our revolving line of credit and $182 million remaining under our current share repurchase authorization. Okay, now I'd like to turn to our outlook for Q2 and the full year 2026. Before I get into the numbers, I'll highlight a few items. First, we continue to focus on ARR as a key metric and expect ARR growth to be generally in line with revenue growth for the full year. Second, we plan to roll our 2026 convertible notes into our revolving credit facility when they mature in April.

At the end of Q1, we had approximately $960 million of unused revolver capacity, positioning us well to absorb the convert maturity and continue executing our strategy. Our updated EPS outlook reflects higher interest expense associated with the expected refinancing of the 2026 converts. Finally, on capital allocation, we remain focused on deploying capital where we see the strongest returns. At current levels, that means repaying debt and remaining disciplined in pursuit of accretive acquisitions against a high return threshold. It also includes opportunistic share repurchases. We continue to forecast debt repayment of $250 million for the full year, bringing our net leverage ratio to approximately 2.7x by year-end.

With that, for the second quarter of 2026, we expect revenue between $240 million and $246 million and earnings per share between $1.47 and $1.53. For the full year 2026, we expect revenue of between $988 million and $1 billion, approximately 1%-2% growth over 2025. Operating margin for the year of approximately 39%. Adjusted free cash flow of between $263 million and $275 million. Unlevered free cash flow of between $315 million and $326 million. Finally, earnings per share between $5.91 and $6.03.

Our guidance for the full year EPS assumes a tax rate of 20%, the repurchase of approximately $30 million in Progress shares, total debt repayment of $250 million, and approximately 43 million weighted shares outstanding. In closing, we are very pleased to deliver a strong Q1 to start fiscal 2026. Our diversified product portfolio continues to demonstrate resilience. Our cost discipline remains strong, and we continue to focus our capital allocation strategy on generating the highest returns through a combination of aggressive debt repayment and opportunistic share repurchases. In short, we believe we're very well positioned to execute our Total Growth Strategy throughout 2026 and beyond. With that, I'd like to open the call for Q&A.

Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ittai Kidron with Oppenheimer & Co. Your line is open.

Thanks. Hey, guys, solid numbers. I have a couple of questions. Yogesh, maybe starting with you. On the M&A front, I mean, one would think that in this current environment, it'll be even easier for you to buy companies. I'm kind of wondering, I know you've always been very disciplined, of course, on the metrics that you're looking for, but why is it still taking you this long to find the next one?

Ittai, you know, two-part answer to that question. One is that as Anthony just mentioned, right? There is clearly a higher bar today given where our own company stock is and our valuation is compared to what it historically was, right? We are trading now at an EBITDA multiple that we would need to pay less to generate additional incremental value for our shareholders. I think that creates a constraint on what we can pay. That's part A. I'm not saying that that's why we haven't bought companies, but that's an important consideration in terms of the filter we can apply to the companies we can look at. The second one is, you know, we want to make sure that we find the right assets, and we are truly very active at this point looking at those.

Again, as I said, that combination creates a challenge. The flip side is that even though the public markets are where they are, the private markets, Ittai, are still, let's just say, disconnected from reality, if what the public markets are is the reality, right? At least they're disconnected from the public markets on the valuation side. I think those two things are really it. We actually, you know, see tremendous activity in the market. You know, we are seeing all kinds of companies come around. You know, obviously everybody on this call will be the first to know when we do one.

Got it. Anthony, for you, can you talk about your SaaS revenue? It's actually down quite substantially on a QoQ basis. You guys talked about ShareFile actually doing well for you but you did mention on the call some elevated churn, isolated churn, I think you called it. Would love to get a little bit more color on what isolated churn means, and why is the SaaS revenue declining QoQ?

Yeah, sure, Ittai. You know, maybe I'll take the isolated churn comment first, 'cause I do think they're a little bit different in terms of you know, the isolated churn and the SaaS revenue. In terms of isolated churn, yeah, we had you know, a couple of, I'd say customer specific events that weren't really related to product value or competitive dynamics or really a broader trend in the business. To give you an example, you know, we had a seven-figure government contract in Eastern Europe for data retention services, and a European court ruled the government had to cease retaining the data. As a result, the contract churns out, right?

Not because of any dissatisfaction with our product or a competitive loss, but the underlying use case effectively gets eliminated by a court rule. Occasionally we see issues like that. You know, we've seen them in the past. We've talked about it. M&A sometimes can be, you know, something that may cause a little bit of churn in our business. Like in times past, you know, not material overall and really specific to a particular situation and I think something we'll probably work through pretty quickly. Despite that, you know, having put up 2% ARR growth for the quarter, you know, was a pretty good testament to new customer acquisition and some of the expansion that we got out of the base. That was the What I was referring to in terms of the, you know, any sort of isolated churn. In terms of the SaaS dynamics on revenue, if you'll recall back in Q4, you know, we were asked about a big sequential increase in our SaaS revenue. I think I said at the time that it was, you know, a little bit of an upside surprise and we expected things to normalize in 2026 and sort of, you know, come back in line with the maybe closer to the annual number for 2025. So the Q4 number wasn't something we expected to sustain if you look at it sequentially on a YoY basis. Obviously, the SaaS revenue number is still growing.

The reason for it, what's underlying it, is just a lot of the cleanup that we have been doing on the ShareFile business, right? We mentioned, I think on the Q2 call last year that CSG was doing, still doing the billings for us up until April 2025. You know, then we had to stand up a billing system internally. You know, it probably took us until the back half of last year to get our arms around that completely. There's a lot of data cleanup that goes on, some of it in Q4, some of it in Q1, and there'll be a little bit of it that continues throughout 2026. Again, you know, not material in total, but it may bump numbers around a little bit from time to time.

The other side of it is as we get our arms around the data, and as we sort of get, you know, more and more control around the ShareFile business, the positive aspects that we saw, especially this quarter, were enhanced collections, right? The free cash flow of almost $100 million for the quarter, I think the significant improvement we saw was largely the result of improved collections in ShareFile. You know, on the one hand there's a lot of data to clean up, but as we get that data cleaned and as we get our arms around the systems, we certainly make up for lost time on the collections front, which was nice.

Greatly appreciate it. Thank you.

Our next question comes from the line of John DiFucci with Guggenheim Securities. Your line is open.

Thank you. My first question is for Yogesh. Yogesh, it was interesting that you mentioned Chef's doing really well and one of your best acquisitions performance-wise. As you know, the developer seat count. I'm glad you said that, 'cause there's a lot of concern out there with the developer seat count, and there's a huge debate out there. I guess you're doing well here. Take Chef out of it. I mean, when you talk to your customers, when you see what they're doing, are you seeing any change in developer numbers at your customer base? And whether that could be like they're not hiring as much as they used to be, or they're actually declining or they're not declining, whatever you're seeing. Secondly, why is it that Regardless of what that answer is, why is it that Chef's doing so well?

By the way, I think there might, I don't know whether it was the audio or whether it was me or which end, but John, the product I mentioned that's doing really well was ShareFile, not Chef.

Oh, I'm sorry.

It could have been a misunderstanding. Anyway, let me talk about the developer scenario though, because you know, our developer products are doing well, right? The reason I think there are two parts. I think first talking about our customers, what we are seeing. I believe that there is a change in trend, but I wouldn't say that the absolute developer numbers overall appear to be dropping. The absolute numbers have dropped in what I would call a small number of customers. By and large, I think the trend is less growth than historic. I think that the developer seats and seat-based developer businesses, which primarily is DevTools for us, which is a relatively small business.

It's about, you know, it's a single-digit, mid-single-digit percentage business for us, right? That business is where if we didn't do the right things, we would see challenges.

What we've done is we've actually done significant AI investments there to make our developer tools, which are primarily libraries for developing a great UI and so on, be more relevant in the agentic age, help with developers who are building agentic apps and provide them with the right tooling for that. You know, we are effectively doing a significant amount of change in that, what I call the value proposition for the developer. We feel good about how that business continues to perform. It is probably the business that has the greatest potential risk, which is why it has also had the greatest acceleration on our part in terms of the AI work that we have done with it. We're seeing good business there, and we continue to see good business there.

I think that the, you know, products like Chef continue to do well because infrastructure needs to be managed, infrastructure needs to be configured, infrastructure needs to be set up so that, you know, things run well. You know, that product is a workhorse for many large enterprises, including, you know, the largest credit card company, pretty much every credit card company, pretty much, you know, many of the Silicon Valley tech companies, et cetera. I mean, literally, you know, you know, two of the Mag Seven have been customers forever. It's a very, very strong and solid product. We continue to see, you know, basically the need for that product. We win some new customers as well with Chef.

I think the ShareFile product, on the other hand, is doing well from a customer perspective as well because of the AI efforts there. I'm sorry about the confusion about my voice. I'm sorry about that.

No. You know what, Yogesh, it wasn't you. I'm sure to me, I can't hear it that well sometimes. But thank you for answering the second question, which was, I think, more important anyway. Thank you. I guess just a follow-up for Anthony. I want to follow up to Ittai's question on the SaaS business because it does sound like ShareFile is doing really well, and it's a big acquisition, and it's your first big SaaS acquisition. You know, the SaaS revenue didn't just decline sequentially. It declined to less than it was the last three quarters. That, I mean, it's not like just the fourth quarter was stronger. It's like the last three quarters were stronger. Can you help us a little bit?

'Cause something odd happened, and it sounds like the business is doing really well. You guys have said it several times, even if I heard it wrong. What happened this quarter? Like, it wouldn't have been just, like, recognition. You know, sometimes I could imagine, you know, you don't get the renewal and you're not recognizing it, and then you recognize it, like, but it's not just the fourth quarter that was stronger than this quarter. Sorry.

Yeah. No, I get it, John. Yeah, I think the range of SaaS revenue, or for the business overall has been, you know, if I were to normalize for the cleanup issues that I sort of referred to, it's between $72 million and $73 million going back to, I don't know, Q1 of last year. That's if I sort of normalize each one of these quarters. All that's happening is, you know, we talked about it a little bit last year that, you know, taking over the billing system from CSG was a pretty significant milestone in terms of integration. In the back half of the year, as we started to get our arms around the data, there was a lot of cleanup that needed to be done.

You know, in some cases, you had customers that hadn't been billed and needed to get invoiced. They, you know, required some catch-up invoicing. There were some that, you know, that needed to be written out of ARR or reserved against revenue for whatever reason. There was just a lot of data that we really didn't have access to pre-acquisition. Even with CSG doing a lot of the billings under the TSA in the back half of last year, as we started to clean that up, you know, it again, not material overall, but if it's a few million dollars here and there as we go quarter to quarter, it may move that number around a little bit. That's really all it was. I mean, otherwise, you're right.

The ShareFile business, you know, if I were to sort of normalize these things out, like I said, you know, $72 million-$73 million for total SaaS revenue on a quarterly basis is where it's been.

Okay. That's helpful. Is it cleaned up now, Anthony? Should we assume that this should behave like a, you know, listen, and we don't expect a lot of growth out of it, but just even if it's solid or steady or could we potentially see some declines going forward too?

No, I think it is largely cleaned up, and any of these cleanup issues that we need to do will get smaller and smaller as we go forward. I don't expect, you know, significant issues with it.

Okay.

As Yogesh said, the business fundamentally from an operational perspective has been incredibly solid.

Great. Thank you very much, guys.

Thank you. Our next question comes from the line of Lucky Schreiner with D.A. Davidson. Your line is open.

Great. Maybe my apologies to follow up again on the line of questioning here, but on that isolated churn event, you know, if I remember last quarter, I believe you guys talked about not seeing an impact of multi-year contracts for this year. It sounds like maybe visibility there changed. Is that related to the isolated churn event, or is that something different?

Lucky, not really. You know, when the you know, the EU court puts out a statement saying thou shalt stop immediately. You know, this was an Eastern European government. They basically instantly told that they were gonna stop paying. This was actually the customers were local telephone customers, and this was call records of phone calls that people make. When that became quote, that was deemed illegal, the government immediately said to all those call record companies and all the telephone companies saying, "Hey, can't retain this anymore. Delete it all. And we will not pay you anymore starting right now." It was what I would call a surprise churn, right?

It was one of those things where they just happened to say, "Sorry, we can't pay you anymore because we're not getting paid anymore." It's a weird thing, right? I mean, we could go and tell them, "Hey, you have a contract. It doesn't expire for a little bit." At the same time, you know, we really, you know, when governments do those kind of things, I think it's tough to get folks to comply. We wanted to basically take the churn, and we've taken the churn.

Gotcha. Yeah, it sounds like visibility hasn't changed then.

No, not at all.

Maybe on-

Not at all. This was unusual. This was truly unusual. The decision came out, the government acted, and the service providers had to act. I mean, it was within a matter of two weeks and completely from left field.

Gotcha. That's helpful. Maybe then on NRR. You know, I know you guys are within your target framework, but, you know, what's it gonna take to get that above the 100% target? Is that a function of just working through the recent churn event? You know, you mentioned maintaining a close watch on the macro. Is that at all playing a factor here?

I don't feel that today macro is playing a factor for our business. I can't speak for the rest of the world, but for Progress, I believe this is purely because of the isolated churn that we saw. As you know, Lucky, because our NRR is a trailing four-quarter number, it moves rather slowly. It'll take us a little bit to get us back. Our target continues to be, you know, being at or above 100%. I mean, our goal says, hey, 100% NRR is our goal. But you know that we've actually fluctuated between 99% and 101% by and large for the last few years. I think occasionally we've touched 102%, but by and large it's been between 99% and 101%.

We actually feel good about our business. We also feel good, Lucky, that we were able to grow ARR by 2% YoY, right? Which is another point because when you think about it, when NRR is somewhat light, you know, it doesn't take much to, you know, for a few tens of basis points for things to move. You know, the fact that we were able to grow our ARR 2% YoY means that, you know, obviously new customers are embracing us, and our expansions continue to be good, et cetera. We continue to be confident. We are not concerned about the way the business is going at this stage.

The reason why I caveat it at this stage is, you know, the macro and the geopolitical events going on, which I think, I mean, the uncertainty around those, I don't have to sort of share with anyone. You know, that it's. We all know that, you know, basically some days people think in the morning it's gonna be okay, in the evening it's gonna be not okay. With that kind of uncertainty, unclear as to what will happen in the market, we will continue to monitor that very closely. So far we have not seen any instance or any example or any anecdotal evidence, anything at all to say that macro is having an impact on us.

Got it. Makes a lot of sense. Thanks for taking my questions.

You're welcome.

Thank you. Thank you. Ladies and gentlemen, as a reminder, to ask the question, please press star one one on your telephone. I'm showing no further questions in the queue. I would now like to turn the call back over to Yogesh for closing remarks.

Well, thank you everyone for joining. It's a pleasure to speak with you all, and we look forward to speaking with you again next quarter. Bye-bye.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and welcome to the Progress Software Corporation Q4 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Michael Micciche, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Sherry. Nice to have you back. Afternoon, everyone, and thanks for joining us for Progress Software Corporation's fourth fiscal quarter and fiscal year 2025 financial results conference call. With me this afternoon are Yogesh Gupta, President and CEO, and Anthony Folger, our Chief Financial Officer. Before we get started, let me go over our safe harbor statement. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, our integration of ShareFile and Nuclea, and other information that might be considered forward-looking. Such forward-looking information represents Progress Software Corporation's outlook and guidance only as of today and is subject to risks and uncertainties, and our actual results may differ materially. For a description of the factors that may affect our future results and operations, please refer to the risk factors in our SEC filings, particularly the risk factor section of our most recent Form 10-K and 10-Q. Progress Software Corporation assumes no obligation to update forward-looking statements included in this call. Additionally, please note that all the financial figures referenced in this call are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures in our earnings press release, which was issued after the market closed today. This document contains additional information related to our financial results for the fourth quarter and the full year of fiscal 2025, and I recommend that you reference it for specific details. We've also provided a slide presentation that contains supplemental data for our fourth quarter and fiscal year and provides additional highlights and financial metrics. Both the earnings release and the supplemental presentation are available on the Investor Relations section of our website at investors.progress.com. Today's call is being recorded in its entirety and will be available for replay on the Investor Relations section of our website shortly after we finish. And with that, I'll turn it over to Yogesh for his prepared comments.

Good afternoon, everyone, and thank you for joining us to discuss our Q4 and fiscal year FY '25 results. Fiscal year '25 was Progress Software Corporation's strongest year to date, driven by a combination of ShareFile and the strong performance of our overall product portfolio, especially during the second half of the year, which was increasingly propelled by our customers' AI projects. This resulted in annual revenue of $978 million, up 30% year over year, and earnings per share of $5.72, up 16% from fiscal year '24. Our business got stronger throughout the year, as evidenced by the fact that we exceeded the midpoint of our original revenue guidance from last January by approximately $14 million and beat our operating income guidance by 6%. We continue to meet our customers' needs in an AI-driven business world by investing and innovating across the products they rely on. This is demonstrated by our 100% net retention rate and 2% year-over-year ARR growth to $852 million, which now represents over 87% of our total revenue. For the fourth quarter, revenue finished at $253 million, up 18% year over year, right in line with our most recent guideline. Earnings of $1.51 were well above the high end of guidance, thanks yet again to excellent expense discipline and consistent execution. As Anthony will discuss in detail, cash flow remains strong, and we continue to both pay down our debt and make opportunistic share repurchases. Our balance sheet is in excellent shape, and we remain flexible and well-capitalized to execute M&A as we carry out our total growth strategy. Looking ahead, the high end of our initial guidance for FY '26 is $1 billion, a very exciting milestone for Progress Software Corporation, with unlevered free cash flow of nearly $320 million at the midpoint. Our confidence in the FY '26 guidance is a result of the momentum in our business during the '25, which I mentioned earlier, and our expectation of continued investments in AI projects by our customers. Our AI product innovations are leading our customers to recommit to us as they see us as a trusted partner in their journey. Before I talk more about this, let me provide an update on our ShareFile and Nuclea acquisitions. During fiscal year 2025, we completed the integration of ShareFile, our largest deal so far, which is proving to be one of our best acquisitions, as you can see from our results. We passed every milestone and met every goal on or ahead of schedule. We also acquired and fully integrated Nuclea Agentic RAD technology, which has been extremely well received by customers and is adding significant functionality and value to our products. In addition to outstanding products and technology, ShareFile and Nuclea have brought us many new, very talented team members with significant and cutting-edge expertise. Let me also quickly recap some other highlights from the fourth quarter. Our investment in innovation and R&D continued across our product lines as we enhanced our offerings, delivering dozens of new AI capabilities in addition to the usual upgrades and features. To list just a few, we launched Progress Agentic RAD, an industry-leading product to help organizations leverage generative AI with confidence. We introduced the industry's first generative content management system with built-in RAC capabilities in Sitefinity. This innovation introduces native multilingual Agentic RAD-based AI technology to deliver dynamically generated user experiences driven by a site visitor's prompt and online activity. We launched an enterprise-grade Agentic UI generator that leverages our market-leading Telerik and Kendo libraries to automatically generate multi-component brand style page layout from simple language prompts. This UI agent delivers robust business functionality and works right inside the developer's IDE of choice. We launched Automate MFT, a new cloud-native file transfer solution that is helping customers reduce total cost of ownership by up to 50% compared to traditional products. To highlight the impact our data solutions are having on our customers' AI initiatives, let me provide a recent example. A Fortune 50 agriculture and food company was struggling to leverage the extremely large volumes of structured and unstructured data stored across its enterprise. This data is stored in hundreds of different sources in nearly a thousand different formats and contains invaluable business information gathered over several decades. They leveraged our Progress Data Platform to unlock value by creating a single unified view of all the information and gain relevant, accurate, and actionable insights worth tens of millions of dollars. This demonstrates the impact and relevance of our products in a world where Gen AI is making it critical for organizations to get their arms around their data and ensure that AI delivers fact-based answers that they can rely upon. Another important news from Q4, the U.S. Department of Defense Chief Digital and AI Office added Progress Federal Solutions Group to the Tradewinds Solutions marketplace, which is the DOD's list of pre-approved providers of AI products. This designation allows DoD customers to rapidly procure and deploy a Progress Data Platform, bypassing the usual government procurement processes. It underscores our commitment to delivering scalable, secure, and innovative AI solutions that help government agencies achieve their AI objectives. During the fourth quarter, we also announced our expanded presence in Costa Rica. Building on ShareFile's existing footprint, we opened a new facility that serves as a center of excellence for tech support, customer success, sales, and corporate functions. This new center strengthens our ability to support regional growth in US time zones and creates new opportunities to deliver value to our customers. Internally, our excellent expense control and operating performance continue to benefit from our own adoption of AI to increase productivity and drive efficiencies. Across engineering, our teams are using AI in every phase of development, whether it is to write PRDs, generate code, create QA tests, establish test environments, or create education and tech support content. This has enabled us to accelerate product innovation, as well as improve the quality of customer tech support while containing costs. Our finance, HR, sales, communications, and marketing teams are increasingly using AI in a variety of ways to improve the quality and increase the quantity of their work. Speaking of our teams, I'm very proud to say that for the fourth year in a row, we experienced a very low voluntary attrition rate, just 6% for fiscal 2025. Once again, this industry-leading metric reflects the positive, inclusive culture of our team, and our ability to retain critical talent, maintain continuity, and keep turnover-related expenses down. And the Boston Globe, in its recent list of top places to work, ranked Progress Software Corporation number one among large software companies in the region, just last month. Now let me touch on our commitment to our total growth strategy and the M&A outlook. As ever, there are many opportunities for Progress Software Corporation to look at, among the literally thousands of software companies. However, the right targets for us are infrastructure software vendors with solid technology and a strong, stable install base of customers. And over the past few quarters, few such assets have come to market. Selectivity, patience, and discipline continue to be the hallmarks of our M&A strategy, and we will evaluate all opportunities, whether they are an outright purchase from founders, VCs, PE sponsors, or a divestiture, as long as it fits our strict criteria. Our corporate development team remains active, and as I mentioned earlier, we feel very good about our ability to finance the next deal and execute well. We got off to a quick start to FY '26 and held our annual sales kickoff in Atlanta during December. Over 650 of our sales, field engineering, and customer success professionals gathered in person to learn about our latest product offerings, go-to-market initiatives, and to review key objectives for FY '26 and beyond. Our business momentum, and particularly our AI innovation work, created an extremely high level of excitement in our sales teams about the opportunity in front of us. It's hard to overstate the energy and excitement among our team. We returned ready to hit the ground running. To conclude, from an operating, financial, and strategic perspective, we're thrilled to be carrying steady momentum into 2026. We are excited about the year ahead. I want to congratulate the entire Progress Software Corporation team for an incredible year in fiscal 2025, and as always, thank them for a job well done. Let me now turn it over to Anthony for his prepared remarks, and then we'll be happy to take questions.

Great. Thanks, Yogesh. And good afternoon, everyone. We're very pleased to share our outstanding Q4 and full year 2025 results, closing out a very successful year for Progress Software Corporation. Let's get right into the numbers, starting with ARR, which we believe provides the best view into our top-line performance. We closed Q4 with ARR of $852 million, approximately 2% pro forma year-over-year growth. For clarity, our pro forma results include ARR from acquired businesses in all periods presented. This growth in ARR was driven by multiple products, including ShareFile, OpenEdge, WhatsUp Gold, and our DevTools products. And consistent with prior quarters, our net retention rate remained strong at 100%. In addition to growth in ARR and solid net retention, Q4 revenue was $253 million, up approximately 18% year over year. Our revenue strength in the quarter was broad-based, with outperformance coming from OpenEdge and ShareFile, both of which performed better than our internal expectations. For the full year, our revenue was $978 million, up $224 million or 30% over the prior year. That growth is entirely driven by a full-year contribution from ShareFile. Reflecting on 2025, we believe we made the right investments in our products, keeping them mission-critical in an AI-driven world. And this is validated by our strong customer retention and consistent ARR growth across multiple products throughout the year, a demonstration of the resilience in our portfolio. Turning now to expenses. Total costs and operating expenses were $156 million for the quarter, up 16% over the year-ago quarter, and $593 million for the full year, up 30% compared to fiscal 2024. The year-over-year increase for the quarter and for the year was entirely driven by the inclusion of a full year of ShareFile activity. Operating income for the quarter was $96 million for an operating margin of 38%, exceeding our internal expectations. Earnings per share were $1.51, which was $0.16 above the high end of our guidance range. This better-than-expected performance in operating margin and EPS was the result of strong top-line execution, coupled with excellent cost management across the business. Turning now to a few balance sheet and cash flow metrics. We ended the year with cash and cash equivalents of $95 million and debt of $1.4 billion, for a net debt position of $1.3 billion. Our net leverage ratio at year-end was approximately 3.4 times, which was slightly better than where we expected to be with the ShareFile integration now complete. DSO for the quarter was seventy-three days, up six days compared to the year-ago quarter. Deferred revenue was $425 million at the end of the fourth quarter, up approximately $21 million year over year and $44 million sequentially, reflecting strong fourth-quarter top-line performance. Adjusted free cash flow was $62 million for the quarter, and $247 million for the year, an increase of 16% over the prior year. And we also continued to return capital to shareholders, repurchasing $40 million in stock in Q4 and $105 million for the full fiscal year 2025. We ended our fiscal year with $202 million remaining under our current share repurchase authorization. Okay. Now we'll turn to the outlook. And before getting into the numbers, I'd like to highlight the following items. First, we will continue to focus on ARR as a key metric, and we expect ARR growth generally consistent with the 2% growth we saw in fiscal year 2025. Also, our 2026 outlook assumes minimal revenue impact from the timing of multiyear contract renewals, and as a result, we expect annual revenue growth similar to our ARR growth. Second, we expect to aggressively repay the revolving line of credit that we used to partially finance the ShareFile acquisition. We've modeled $250 million of repayments for fiscal 2026, which would improve our net leverage ratio to approximately 2.7 times by year-end. As a reminder, in July 2025, we upsized the capacity of our revolving credit facility from $900 million to $1.5 billion. Finally, we expect to roll our 2026 convertible notes into our revolving credit facility when those converts mature in April 2026. With $900 million of unused revolver capacity today, together with our aggressive debt repayment plan, we'll have more than enough capacity to absorb $360 million in principal and continue executing our total growth strategy. With all that said, for 2026, we expect revenue between $244 million and $250 million and earnings per share of between $1.56 and $1.62. For the full year 2026, we expect revenue between $986 million and $1 billion, representing between 12% growth over 2025, an operating margin of 39%, adjusted free cash flow between $260 million and $274 million, and unlevered free cash flow between $313 million and $326 million. Finally, earnings per share are expected to be between $5.82 and $5.96 per share. Our guidance for full-year EPS assumes a tax rate of 20%, the repurchase of $20 million in Progress Software Corporation shares, and approximately 44 million shares outstanding. In closing, we're excited to deliver great fourth-quarter results, capping off a strong 2025. With the product investments we've made and the ShareFile integration complete, we believe we're well-positioned to execute our strategy and deliver solid results throughout 2026 and well beyond. With that, I'd like to open the call for Q&A.

Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. And our first question will come from the line of John Stephen DiFucci with Guggenheim Securities. Your line is open.

Thank you. And nice job here, guys, on this quarter. And you know, as usual, the execution is really impressive, especially seeing ShareFile here. I guess I have a bunch in my mind. I'm gonna go high level right now. Because you guys see the market. You see what's happening to all of software, especially applications. And Yogesh, you've been in this for a long time. And I knew you. You've been a business, and that's meant to be a compliment. I've been around a while too. And you've been a business leader for a long time, but I first knew you as a technology leader. And I'm just curious about your perspective. Because right now, there's this fear out there on AI. You talked a lot about it in your prepared remarks. And especially for applications. So I wanna like, broadly speaking for software, how do you think this evolves? And I know there's no real like, no one really knows right now. How do you think? Yeah. What do you think it involves for software? And in that context, for Progress Software Corporation? Thank you.

Yeah. Absolutely, John. Thank you. And you know, it is fascinating to see sort of the level of hype, if I may call it that, that has led to the level of fear around the disruption of software in the business world. You know, you said specifically, let me start with applications even though that's not our business. You know, I have yet to speak to a CIO of any meaningful size business who realistically is planning to write their own ERP, write their own financial system, their own HR system, like their own whatever. Right? So I think, you know, in the end, businesses are in the business of whatever business they are in, and the tools they use, applications they use to run their business, basically are, you know, a means to an end. And so unless they are a technology company themselves, I really don't see, you know, a lot of that today. Now, obviously, over time, things will get different. I think what can happen is that you can get new competitors come to market with offerings that are, let's say, similar to the application available in the market today. But then the question is how hard it is to do three things. One, get your data out of, let's say, a Salesforce or a ServiceNow or a whatever and move to the new offering, whoever that is, by the way, and they're not gonna be free either. So the question is, you know, how much effort will that be? Even more importantly, what risk will that create for the business? You know, we have seen historically when people have tried to move from one ERP to another, I mean, I remember, John, a long time ago when SAP was the appointed to by Fortune 50 companies as a reason why they were gonna miss results for a quarter and the year. Because their implementation of SAP was going like a disaster. Right? And they were trying to move from some ERP to SAP being a manufacturing company, that was the heart and soul of the business. So I think that there's a risk involved, and the question is can the risk be minimized? And then last but not least, what does it take to get the employees in the company and organization retrained in the new system? So I think these are real hurdles. So I actually think that the fears, at least in the near term and the near term in my mind is the next one to three years, are, to be honest, way overblown. And from a Progress Software Corporation perspective, it's even more fascinating because, you know, we sit inside, you know, environments, and our software is helping people run their environments well, govern their environments well, get access to the data, leverage that data for business-critical work, you know, do their workflows internally, manage their content, deliver digital experiences. And all of those are becoming AI-enabled. But it doesn't mean that people won't want to do that. Right? People will still want to have, you know, digital experiences. They just want to be able to have AI, you know, natural language interfaces, and easy to build out and easy to connect them to existing data, which we do today. Right? So I think as long as we continue to invest in our products, we will see continued success in the market. And you know, it's interesting that we have a footprint out in the world that ranges from, you know, fundamental design of ASICs companies to people who manufacture machines to build chips to chip manufacturers themselves, to everywhere up and down the tech stack also. And we're seeing interesting things happening there where they are using our products more because their needs are growing. So whenever a business grows, and sometimes the financial industry grows, sometimes manufacturing grows, sometimes the chip industry grows. It doesn't matter which one it is. Right? For us, it is as industries grow, as certain sectors grow, because we are so broad-based, and we are, by the way, in large companies and extremely small and midsized companies as well. We are actually quite well, you know, in my mind, broad-based and hedged that way. That I expect us to continue to do well, which is why I am excited about Progress Software Corporation, which is why we basically think that our growth this year will reflect what it was last year. That our ARR organic will continue to grow at a 2% rate. You know, it all is a reflection of how we feel and how I feel about our business.

Thank you. Thank you very much for that perspective, Yogesh. It sounds, if I could just as I was listening to you talk, it sounds like there's a lot of complications here that you can't just gloss over. One thing sounds clear is that software companies, including Progress Software Corporation, are gonna have to embrace AI and help customers leverage it. Thanks a lot for that.

Absolutely, John. You're absolutely correct. And that is why we, as well as others, are, I think, doing it aggressively.

Awesome. Well, I'll turn it over to others and get back in the queue. Thanks.

Thanks, John.

One moment for our next question. And that will come from the line of Fatima Boolani with Citi. Your line is open.

Good afternoon. Thank you so much for taking my question. Yogesh, I wanted to drill down into the same line of questioning, riding on John's coattails a little bit. You know, the last time we had a conversation around, hey, how does Progress Software Corporation insert itself in the monetization path of AI? Because clearly, there has been a lot of considered and deliberate investment in your entire portfolio as it relates to AI and AI enablement. You know, I think one of the things you said very clearly was, you know, this should show up, you know, maybe more imminently or more materially visibly in net retention rates. And so when I kind of look at the trajectory of the 100% net retention rate levels, you kind of pretty consistently put up for the last four or five quarters. I wanted to ask you why we haven't seen maybe more of a meaningful uptick in that in terms of monetization manifesting in that figure, especially because you gave some very clear examples of how you are at the nexus of transformation for a lot of your customers. So any incremental detail around that would be very helpful. And I have a follow-up for Anthony, please.

Sure. Happy to. So I think, and I'll share my view, and Anthony is happy to chime in as well. You know, I think that in terms of net retention rate growth, and increasing it over 100% means there's meaningful expansion across the broad customer base. And I think that even today, you know, the vast majority of investment in AI is limited to, to be honest, a relatively small number of tech companies. A lot of other companies actually are doing things that are more around, you know, trying to leverage infrastructure that is already being built by others. And so on. So they're spending money on data centers, they're spending money on things that are truly bottom level. And in the business space, in the business community, I don't see yet a spend that is taking place to the same level that I expect as time goes on. So I think it is early. This is sort of like reminds me of the, you know, Internet pipe laying era where everybody was saying, let's lay down dark fiber as fast as we can. And then we'll figure out how to leverage it. And if you notice, right, it took Amazon a decade to then really start getting into its stride after that. And people forget that, you know, what Amazon's trajectory was earlier. And then, of course, Amazon has been unbelievable over the last twenty years. So I think that it is just it takes time, and I think people always underestimate the short-term time it will take. But then they also underestimate how quickly it accelerates when it does accelerate.

I appreciate that nuanced perspective. Thank you, Yogesh. Anthony, maybe a more tactical one for you. You very specifically mentioned that from a revenue growth perspective in fiscal 2026, you are not going to see as much of a material impact from multiyear contract renewals. I'm wondering if you can translate that into how we should think about free cash flow and free cash flow linearity and seasonality over fiscal 2026? And maybe if you can also sneak in some commentary on some of the 4Q free cash flow performance that maybe was a little bit late from a seasonality side relative to where some broader expectations were. Thank you.

Sure. So I guess maybe the second part of that question first. Q4 was a great quarter in terms of cash flow. Q4 was also a quarter where we had a significant beat on bookings. And, you know, a lot of what we do in the quarter is back-end loaded. So as we sort of work our way through year-end, we saw a pretty significant uplift in cash flow for the quarter. And also for '26. Right? I think a lot of the beat when a significant beat in bookings happens back-end loaded, a little bit of benefit in '25, but really where we saw it was '26. And I think you can see the growth in free cash flow in '26, you know, certainly outpacing growth in revenue or margins. And so, you know, I think we feel pretty good about sort of an acceleration that we're starting to see in terms of free cash flow. In terms of the linearity, you know, I don't know that it's gonna be any different. I think ShareFile is, you know, I would say, subject to seasonal fluctuations than the rest of our business would have been. Just because of the nature of that business. And so I wouldn't expect material differences in the seasonality or the linearity of our free cash flow from where we've been historically.

Thank you. Very clear.

Thank you.

And our next question will come from the line of Lucky Schreiner with D.A. Davidson.

Congrats on the quarter and some impressive results here. It looks like your SaaS revenues, you know, had a pretty strong sequential increase, and I guess I was wondering, you know, what drove that? Was there anything to call out? And maybe translating that to guidance, you know, I assume you're not baking in similar strength on the SaaS side. You know, would you say it's, you know, roughly a similar mix in 2026 as in 2025 in terms of the different revenue lines?

Yeah. Hey, Lucky. Yeah. It was a very good quarter. Q4 was a really strong quarter on the SaaS line. I think sequentially, you can see the move up, and, you know, I think there was a lot of strength in ShareFile, and there was a lot of strength in some of the other products, some of our other SaaS offerings. So both of those combined, you know, were really what led to the uptick. I guess I would say this. As we look forward to 2026, you know, ShareFile's growing well. But it's a single-digit grower. It's not a significant outlier with the rest of our business. So I don't, you know, I wouldn't want to leave anybody with the impression that ShareFile or SaaS generally is sort of driving outsized growth. It's a little bit better than the rest of our business, but it's not so dramatically different. So, you know, Q4 was a pleasant upside surprise for us on the SaaS side. I think we're, you know, we're probably, you know, looking for in '26, something that's a little more consistent with the annual results. Right? So sort of a steady up into the right growth trajectory as we go.

Gotcha. That makes a lot of sense. And then maybe for Yogesh, a little bit of another philosophical question. You guys look at a lot of private companies, right, with your growth strategy, and I feel like you might have a unique vantage point here. Have you noticed any change in retention rates of the targets, the software companies that you're looking at acquiring? As, you know, there are these overhanging fears of AI startups disrupting, you know, fundamental software businesses. I'm just curious if you've noticed any change in retention rates at some of the companies you look to acquire.

To be honest, Lucky, yes. And, you know, I mentioned that, you know, it's tough to find really good quality companies. I think one of the challenges I think smaller companies are facing is that the customers are questioning whether, you know, they will make it, and they're trying to decide whether they should switch to somebody larger or something like that. So there is a bit more of a churn. Some of the businesses we have seen that have had exposure to the federal government that has been significantly larger as a proportion of their business, I think they have seen challenges as well. So yes, we are seeing softening in their both gross and net retention rates. And, again, from our perspective, we want to buy a business that is a solid business that we believe, you know, we can sustain the 100% net retention rate going forward. And so we continue to be very selective in what we look for, and we continue to make sure that whatever we buy is a good quality business. There's a lot of stuff that's available cheap, but it doesn't mean it's a good business to have.

I think that's why you guys have been so successful so far, so I appreciate that context. Thanks.

Thank you.

And that will come from the line of Ittai Kidron with Oppenheimer. Your line is open.

Hi. This is Nolan Bruce Jenevein on for Ittai. Thanks for taking my question. Just kind of want to double-click a little bit on operating margins. It was a really strong quarter for operating margin. But you're kind of guiding for roughly flat next year. And it feels like you still have a lot of initiatives going on that, you know, seem to be favorable to operating margins. So I just kind of want to double-click. What are the sort of implicit assumptions for operating margins next year? In terms of the fundamental puts and takes. Thank you.

Yeah. Sure. So I guess maybe the one thing I would point to is when you look at 2025 and sort of look back at the year, coming into the year, I think our initial guide was something like 37%, maybe 37 and a half as an operating margin. And, I mean, we just blew that away. Right? I think we were able to integrate ShareFile more quickly and at a much lower cost than we expected, and we ended up getting to our target margin a lot faster. And so, you know, we end the year with roughly 39% margins, which is pretty much where we were at prior to ShareFile. And so, you know, I think, to me, sort of the upside or the positive in this is that the ShareFile integration and the execution around it was fantastic. I think the team did an absolutely outstanding job, got us to our target margin a lot faster. And, you know, ultimately, as we look out into '26, you know, we're already at our target margin. That gives us an ability to make investments in other areas in the business. You know, we acquired Nuclea. We continue to make investments in AI. You know, smart investments, we think, that are gonna continue to propel us forward. And I think those are the dynamics. Those are really the puts and takes. But I think, really, the positive there is getting to that target margin in '25 a lot more quickly was just a really, you know, a lot of upside and a big positive for us.

Got it. Thank you so much.

Thank you. I'm showing no questions in the queue at this time. I would now like to turn the call back over to Mr. Yogesh Gupta for any closing remarks.

Thank you, Sherry, and thank you, everyone, for joining us. We look forward to speaking with you in the near future. Have a good night.

This concludes today's program. Thank you all for participating. You may now disconnect.