Progress Software Corp. (PRGS) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended May 31, 2026, and the six months ended May 31, 2026. Progress Software Corporation provides software products for developing, deploying, and managing AI-powered applications and digital experiences. The company operates as a single reportable segment.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $253.5 million | $237.4 million | $501.3 million | $475.4 million |
| Net Income | $21.1 million | $17.0 million | $43.9 million | $28.0 million |
| Diluted EPS | $0.50 | $0.39 | $1.03 | $0.63 |
| Operating Cash Flow (YTD) | $177.5 million (vs. $98.9 million YTD 2025) | |||
| Cash & Equivalents | $103.0 million (as of May 31, 2026) | |||
| Total Debt | $1.29 billion (as of May 31, 2026) | |||
| Annualized Recurring Revenue (ARR) | $868 million (as of May 31, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 7% year-over-year in Q2 2026, driven primarily by a 36% increase in software license revenue ($69.0M vs. $50.8M). Maintenance, SaaS, and professional services revenue remained relatively flat.
- Profitability: Net income rose 24% year-over-year to $21.1 million. Operating income increased to $45.2 million from $38.6 million.
- Debt Restructuring: In April 2026, the company redeemed its $360 million 2026 Convertible Senior Notes. This was funded by borrowings under the revolving credit facility and cash on hand. Consequently, long-term debt increased to $850 million (revolver) plus $450 million (2030 Notes), while the current portion of the 2026 notes was eliminated.
- Share Repurchases: The company repurchased 1.2 million shares for $34.7 million in Q2 2026. As of May 31, 2026, $147.5 million remained under the current authorization.
- Acquisition Activity: The company completed the acquisition of Nuclia in June 2025. In Q2 2026, the contingent consideration liability for this acquisition was adjusted to zero, resulting in a gain recorded as a reduction in acquisition-related expenses.
Outlook, Risks, and Unusual Items
- MOVEit Vulnerability: The company continues to face legal proceedings related to the May 2023 MOVEit Transfer vulnerability. In Q2 2026, net costs were $1.3 million (net of $2.4M insurance recoveries). The Multi-District Litigation (MDL) is ongoing, with fact discovery concluding in September 2026. The company cannot currently estimate a range of possible losses.
- Restructuring: Restructuring expenses were $1.5 million in Q2 2026, related to headcount reductions and facility closures initiated in late 2025. The company does not expect additional material expenses from this action.
- Tax Rate: The effective tax rate increased to 27% in Q2 2026 from 14% in the prior year, due to changes in the jurisdictional mix of earnings and discrete tax items.
- Liquidity: Management believes existing cash, operating cash flows, and the revolving credit facility are sufficient to meet requirements for the next 12 months.
Investor Verification Checklist
- Verify the status and potential financial impact of the MOVEit vulnerability litigation, specifically the timeline for class certification and potential settlement ranges.
- Confirm the sustainability of the 36% growth in software license revenue and whether it is driven by one-time large deals or recurring demand.
- Monitor the utilization of the revolving credit facility, which increased to fund the redemption of the 2026 Notes, and the associated interest expense impact.
- Review the remaining cybersecurity insurance coverage ($1.1 million) against potential future claims from the MOVEit incident.
- Assess the impact of the One Big Beautiful Bill Act (OBBBA) on future tax provisions and R&D deductions.