Business context and reporting period
Progress Software Corporation (Nasdaq: PRGS) filed this unaudited Form 10-Q for the quarter and nine months ended August 31, 2026. The company provides software for developing, deploying, and managing AI-powered applications and digital experiences and reports as one operating segment. Fiscal 2026 ends November 30, 2026.
Financial performance
Amounts are in millions of dollars except per-share data. Comparisons are with the same 2025 periods.
| Metric | Q3 2026 | Q3 2025 | Nine months 2026 | Nine months 2025 |
|---|---|---|---|---|
| Revenue | $246.0 | $249.8 | $747.3 | $725.2 |
| Gross profit / margin | $203.5 / 82.7% | $202.3 / 81.0% | $616.1 / 82.4% | $584.1 / 80.5% |
| Operating income / margin | $46.6 / 18.9% | $43.9 / 17.6% | $138.2 / 18.5% | $114.9 / 15.8% |
| Net income | $22.8 | $19.4 | $66.7 | $47.4 |
| Diluted EPS | $0.55 | $0.44 | $1.58 | $1.07 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $265.5 | $172.4 |
- Q3 revenue decreased 2% reported and constant currency; nine-month revenue increased 3% reported and 2% constant currency.
- Q3 license revenue was $63.6 million, essentially flat. Maintenance, SaaS, and professional services fell 2% to $182.4 million; maintenance declined 5%, SaaS grew 2%, and professional services declined 2%.
- For nine months, license revenue grew 16% reported (14% constant currency) to $200.1 million. Maintenance, SaaS, and professional services declined 1% reported (2% constant currency) to $547.2 million.
- Q3 net income rose 17% and nine-month net income rose 41%. Lower service delivery costs and acquired-intangible amortization supported gross-margin improvement. Nine-month expenses included higher stock compensation and elevated cyber-response costs.
- Nine-month net cash from investing activities was $(6.3) million and from financing activities $(238.3) million. Cash increased $18.8 million to $113.7 million. The company reported $1.233 billion of debt at August 31, 2026, comprising $790 million under its revolver and $442.6 million carrying value of 2030 convertible notes; the revolver rate was 5.44%. Cash less reported debt implies net debt of approximately $1.119 billion.
- Current assets were $330.0 million and current liabilities $414.6 million. Deferred revenue was $406.5 million; remaining performance obligations were $497.8 million, of which about 75% is expected to be recognized within a year.
Material changes and management commentary
- Management attributed the Q3 revenue decline primarily to timing of renewals on multiyear subscription contracts. Nine-month growth reflected license sales and favorable foreign-exchange effects; recurring service revenue was broadly stable.
- ARR was $873 million at August 31, up 1% year over year. Net retention rates generally ranged from 99% to 100%. ARR is a non-GAAP operating metric, not a forecast, and may not be comparable across companies.
- Operating cash flow improved by $93.1 million year over year, which management attributed mainly to stronger collections, higher operating income, and lower interest expense. Accounts receivable fell $78.8 million from fiscal year-end; Q3 DSO was 42 days versus 55 days in Q3 2025.
- In April 2026, the company redeemed $360 million principal of 2026 convertible notes, using revolver borrowings and cash. The reported debt total declined from $1.400 billion at November 30, 2025, while revolver borrowings increased.
- Share repurchases totaled $71.6 million for nine months; $130.7 million remained under authorization at August 31. The company repurchased 488,799 shares in Q3 at an average $34.50 per share.
Outlook, risks, and unusual items
- The filing provides no specific revenue, earnings, or cash-flow guidance. Management expects cash, operating cash generation, and revolver availability to cover foreseeable needs for at least 12 months, while noting capital-market and credit-market risks and anticipated spending on debt, acquisitions, repurchases, and other obligations.
- After quarter-end, Progress completed its acquisition of substantially all Domo assets and certain liabilities on September 22, 2026, for approximately $400 million, funded with revolver borrowings. Purchase-price allocation was not yet finalized. This transaction is not reflected in August 31 balances.
- The MOVEit vulnerability litigation remains ongoing. The court dismissed, in whole or part, 23 of 33 bellwether claims; fact discovery was scheduled to conclude September 29, 2026, and class-certification proceedings were continuing. The company cannot estimate a possible loss range, recorded no liability, expects future legal and professional costs, and had exhausted the $15 million of available cyber insurance coverage by August 31.
- Net MOVEit response costs were $3.5 million for Q3 and $6.1 million for nine months, versus $0.7 million and $2.1 million in 2025. Restructuring expenses fell to $2.3 million for nine months; management does not expect additional material restructuring expenses.
- The nine-month tax provision increased to $22.0 million from $12.0 million, with the effective tax rate rising to 25% from 20%. Management cited jurisdictional earnings mix and tax-law changes, including OBBBA provisions affecting fiscal 2026 taxes.
- Management concluded disclosure controls were effective as of August 31, 2026, and reported no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether renewal timing explains the Q3 revenue decline and how maintenance and SaaS trends develop in subsequent quarters.
- The sustainability and composition of ARR growth, given 1% year-over-year growth and net retention of 99%–100%.
- Post-acquisition debt, financing costs, liquidity, and the financial contribution and purchase accounting for Domo.
- Potential MOVEit litigation exposure and future costs now that cyber insurance coverage is exhausted and no loss contingency is accrued.
- Cash conversion and receivables quality, including the effects of billing and collection timing and the reported credit-loss allowances.