Progress Software Corp /Ma Q2 FY2024 Earnings Call

Good day and welcome to the Progress Software Corporation Q2 2024 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Mike Micciche, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Shuri. Thanks for your help. Always good to hear your voice. Good afternoon, everyone, and thanks for joining us for Progress Second Quarter 2024 Financial Results Conference Call. On the line with me this afternoon is Yogesh Gupta, our President and CEO, and Anthony Folger, our Chief Financial Officer. Before we get started, let's go over the Safe Harbor Statement. 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. For a description of the risk factors that may affect our results, please refer to the risk factors in our filings with the Securities and Exchange Commission. Progress Software assumes no obligation to update the forward-looking statements included in this call. Additionally, please note that all the financial figures referenced on this call are non-GAAP, unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures in our financial results press release, which was issued after the market closed today. This document contains additional information related to our financial results for the second quarter of 2024, and I recommend you reference it for specific details. We also have prepared a presentation that contains supplemental data for our second quarter of 2024 results, providing highlights and additional financial metrics. Both the earnings release and the supplemental presentation are available in the investor relations section of our website at investors.progress.com. As Shuri mentioned, today's conference call will be recorded in its entirety and it will be available via replay on the Investor Relations website after the call concludes. So with that, Yogesh, I'll turn it over to you. Thank you.

Thank you, Mike. Good evening, everyone, and thank you for joining us to discuss the results of our second fiscal quarter of 2024. As noted in the press release, Progress achieved solid results for Q2, with revenues and earnings surpassing the upper end of guidance and estimates. Total revenue reached $175 million, driven by consistent demand and strong execution. Operating margins exceeded 38%, and earnings per share at $1.09 outperformed our guidance by $0.12 due to robust revenue performance and effective expense management. ARR grew by 1% in the quarter to $579 million, and we noticed a slight increase in our net retention rate, which stood at 99%. Our balance sheet remains healthy, bolstered by strong cash flows and effective collections, ending the quarter with $190 million in cash and DSOs at 41 days, down from 50 days last quarter. We also repurchased approximately 1 million shares during the quarter and have $122 million remaining under our repurchase authorization. Anthony will provide further details regarding the numbers, but I am very pleased with our Q2 performance. As we reach the midpoint of fiscal 2024, I believe we are well-positioned for the remainder of the year and confident in our ability to continue executing our plan. Reflecting this confidence, we have raised our full-year expectations for revenues and earnings. During the second quarter, Anthony, Mike, and I engaged extensively with investors, and our meetings were excellent, allowing us to connect face to face regularly. Three major themes emerged from our discussions: AI, M&A, and MOVEit, which I would like to address today. Starting with AI, we are very excited about the AI initiatives at Progress. Our AI strategy is threefold. First, we are continually enhancing our products so customers can develop, deploy, and manage responsible AI-driven applications and experiences. Our tools assist customers in accelerating their AI journeys by integrating GenAI into their applications and employing AI-driven technologies to meet their business objectives. Second, we leverage AI to simplify our products and improve efficiency for our customers in building, deploying, and managing their experiences and applications. By integrating AI into our tools, we make it easier for them to work. Third, we utilize AI internally to enhance our processes and operations, allowing us to better serve our customers while increasing efficiency in our business. Progress products incorporate advanced AI features, garnering positive feedback from our customers. For example, our new Progress Data Platform, resulting from the integration of MarkLogic and Progress Technologies, includes both semantic and vector capabilities that enhance Retrieval Augmented Generation in AI applications. It employs a semantic layer to validate outputs from GenAI models and provides contextual links to company information within responses. This allows users to understand the origins and relevance of the answers, resulting in improved outcomes for GenAI-powered responses while ensuring the level of governance and auditability organizations require for their critical applications. As a result, a global chemical company and a large financial services firm are experiencing significant ROI using these capabilities. In our developer tools, we provide UI Components for easily integrating AI prompts into GenAI applications. Our Sitefinity product enables marketers to quickly create, refine, and personalize website content using GenAI functionalities, saving substantial time for content editors. Sitefinity also includes AI-powered conversion propensity scoring to identify customer segments most likely to convert, greatly enhancing targeting effectiveness. An event marketing company is leveraging this capability to expand audiences at their events. For infrastructure security clients, the AI-driven version of Flowmon for Anomaly Detection aids cybersecurity professionals in swiftly detecting, understanding, prioritizing, and addressing potential security incidents. This capability, utilized by over a thousand cybersecurity experts at our customer sites, has shown a greater than 50% reduction in the time needed to analyze possible threats, significantly boosting organizational responsiveness while enhancing efficiency. Moving forward, we will share more about our ongoing efforts to integrate AI into our products. We are incredibly excited about the value we provide to customers today and what we can offer in the future through AI-powered applications and experiences. Another topic frequently discussed with investors was M&A, which remains central to our overall growth strategy. Our investors trust us to approach this with patience and discipline, ensuring any deal aligns with our strict financial standards. We have reviewed numerous companies and continue exploring potential acquisitions that would be the right fit for Progress. Last quarter, we mentioned being in the due diligence stage for acquiring MariaDB, an Irish public company. Adhering to Irish takeover regulations requires us to disclose all aspects of any proposed acquisition publicly, offering insight into our corporate development process. We consistently encounter a steady stream of acquisition candidates and at any time, we are analyzing various potential transactions. We remain optimistic about the M&A landscape and our ability to identify fitting opportunities. Through focused and disciplined M&A, a key component of our growth strategy, we are confident in our goal to double our business size in five years. A third recurring theme was MOVEit. Last month marked one year since the incident impacted our customers' MOVEit environments. It is crucial to emphasize that the business has remained strong. MOVEit ARR has increased during this time, and our customers are pleased with how we have interacted with them. We previously revealed that two international data protection agencies concluded their investigations into Progress and the MOVEit incident without any regulatory action—the UK in November and Australia in March. Recently, the Spanish Data Protection Authority also stated that they would not pursue regulatory action against Progress regarding the MOVEit vulnerability. We continue to collaborate transparently with regulators, confident that Progress acted appropriately to protect our customers during the MOVEit incident. We are grateful for the support of our customers, partners, and employees and are committed to executing our growth strategy. To conclude, Q2 was another strong quarter for Progress, characterized by ongoing demand and excellent internal and field execution. Our unwavering focus on customer success contributes to a solid foundation of recurring revenues. I am very pleased with our results in ARR and net retention, along with our significant cash flow. Our outlook remains positive, and we continue to be optimistic about the potential for M&A, which is our strategic priority. Once we identify the right candidate at the right price, we will proceed. Before I finish, I want to highlight that earlier this month, the Boston Business Journal recognized Progress for the fourth consecutive year as one of the best places to work in the Boston area. Additionally, Forbes in Bulgaria recently noted Progress on its list of best employers in that country. These accolades reflect our commitment to both our customers and employees. I am proud of our work environment, culture, and team. I want to thank everyone at Progress for their hard work and dedication, which has led to another solid quarterly performance. Now, I will hand it over to Anthony for his prepared remarks.

Thanks, Yogesh, and good evening, everyone. Thanks for joining the call. As Yogesh mentioned, we're very pleased with our Q2 results, which again exceeded the high end of our guidance range on revenue and earnings per share. Turning to the numbers, we'll start on the top-line with ARR. We closed the second quarter with ARR of $579 million, which represents approximately 1% growth on a year-over-year basis. Although no single product drove material growth in our total ARR, the 1% growth that we delivered was the result of modest growth in multiple products across our portfolio including OpenEdge, DevTools, Sitefinity, Loadmaster, Flowmon, and MOVEit. We also had another strong quarter for net retention with our Q2 rates coming in at 99%. In addition to our solid ARR growth, revenue for the quarter of $175 million was well above the high end of the guidance range we provided back in March. This better than expected revenue performance in the quarter was driven by stronger than anticipated demand for multiple products in our portfolio, including OpenEdge, DataDirect, and MarkLogic. Turning now to expenses. Our total costs and operating expenses for the quarter were $108 million, down 4% compared to the prior year, and generally in line with our expectations. The year-over-year decrease in expense was largely because our integration of MarkLogic was ongoing in Q2 of last year, and now that the integration is complete and cost synergies have been realized, we're operating at a lower cost base. Operating income was $67 million, consistent with the prior year quarter, and our operating margin was over 38%, compared to 38% in the second quarter of 2023. On the bottom line, our Q2 earnings per share of $1.09 is $0.12 above the high end of our guidance range. This overperformance relative to our expectation was driven by outstanding top-line performance coupled with solid cost management across the business. Moving on now to a few balance sheet and cash flow metrics, we ended the quarter with cash and cash equivalents of $190 million and debt of $810 million for a net debt position of $620 million. This represents net leverage of roughly 2.2 times using our trailing 12-month adjusted EBITDA and roughly 2.0 times using our projected results for the full fiscal year 2024. DSO for the quarter was a bit ahead of our expectations at 41 days, an improvement from 50 days last quarter. Adjusted free cash flow was $64 million for the quarter, an increase of $16 million or 33% from the prior year quarter. I'd also like to point out that our adjusted free cash flow for the first half of fiscal 2024 stands at $136 million, which is an increase of 44% over the same period last year. During the second quarter, we repurchased $50 million of Progress stock, including $25 million in connection with the issuance of our convertible notes in March. At the end of the quarter, we had $122 million remaining under our current share repurchase authorization. All right, now I'd like to turn to our outlook for Q3 and the full year 2024. When considering our outlook, we continue to see consistent strength in the demand environment for our solutions. For the third quarter, we expect revenue between $174 million and $178 million and earnings per share of between $1.11 and $1.15. For the full year 2024, we expect revenue between $725 million and $735 million, an increase of $3 million from our prior guidance. We expect an operating margin of 39% to 40%, consistent with our prior guidance. We expect adjusted free cash flow between $205 million and $215 million, again consistent with our prior guidance. We expect earnings per share of between $4.70 and $4.80, an increase of $0.05 from our prior guidance. Our annual EPS estimate contemplates a tax rate of 20%, approximately 44.2 million shares outstanding, and the impact of $103 million in share repurchases. It is worth mentioning that the $103 million in expected share repurchases represents an increase from the $78 million that I noted on our last earnings call. In closing, we're excited to deliver strong financial results across the board in the second quarter. It's a continuation of the trend that we saw in the first quarter, and we believe we're very well positioned to deliver strong results for the remainder of 2024 and beyond. With that, I'd like to open the call for Q&A. Thank you.

Thank you. And our first question will come from the line of Fatima Boolani with Citi. Your line is open.

Good afternoon. Thank you for taking my questions. Yogesh, I wanted to double-click on one of your comments in your script regarding what you're doing from an AI perspective and infusing those capabilities within your portfolio. But you also mentioned that you are internally deploying AI-powered operational systems, I think is the terminology that we use. We haven't heard many companies talk about this, so I'd be really curious to get your granular views on how AI is perhaps creating more expense leverage or operating leverage in the business and how much of that is sustainable and durable and expandable. And then a follow-up for Anthony if I may.

Thanks Fatima. We are actually using, and you know I think we, like many others, are probably in the early stages of using this, but we are using AI fairly extensively across a wide range of functions. Let me share a few examples. We are using, of course, AI in content creation. So as I'm sure you can relate to this, the role of content creation and marketing is critical. Marketing is always behind the curve on trying to figure out how quickly they can get targeted content for audiences that we want to target our marketing messages to. By leveraging AI, we are seeing significant improvements in the speed with which we can turn around content and be responsive to the needs of the business. In many of these things, Fatima, it's not just sort of trying to get operational efficiencies from a cost perspective. It is also timeliness of responses, accuracy of responses, more effective content, for example, and so on. Another interesting area is from the perspective of tech support and dealing with our customer support issues. Very often, technical folks will answer questions. What we want to do is, of course, create knowledge-based articles that other customers for that particular question could find automatically. So they don't have to talk to somebody. Now that's a laborious task; nobody really enjoys doing it as much. Again, we're using generative AI to automatically generate a knowledge-based article that then is edited and reviewed by the technical person who has answered the question to begin with, thereby simplifying and reducing the time it takes for that to be created. We are seeing, for example, in that scenario, a 50% to 75% improvement in the responsiveness, how quickly we can get knowledge-based articles created for a particular issue. We are at the early stages of looking to apply Gen AI to really analyzing our customer contracts. The opportunities are, to be honest, quite endless. We are also deploying the Progress Data Platform internally as well. For example, the legal contract review process and other things, so that we can leverage internal corporate data. One of the most key challenges with using AI today is how do you make sure that your information, your knowledge, your data stays secure, stays private, and is governable, while at the same time you take advantage of LLMs and other AI technologies. Our data platform is designed to do just that. Therefore, to us, being able to also use our own products and demonstrate that we can use them and we can be beneficiaries as well is also important. It's early to say, Fatima, in terms of expense reductions and sustainability, but as we get data on those, we will come back and share that.

I appreciate that very detailed answer, Yogesh, and I'd like to hear that you're drinking your own champagne. Anthony, just on the maintenance and services performance in the quarter, it was certainly much better than what we were modeling and then what most folks were looking for. Wanted to ask if there's anything atypical or outsized to highlight here vis-a-vis any early renewals or timing of any contractual relationships in renewals. That's it for me. Thank you.

Yeah. Fatima, I think it was a reasonably good quarter from a renewals perspective. We did see a slight improvement in our net retention rates. If you were to look at the sequential movement in ARR, there was a nice uptick from Q1 to Q2. It just felt like a slightly better quarter across the board when it came to renewal and net retention rates. So I would say nothing that looked like an anomaly; nothing really from a timing perspective that would have driven an outsized performance on the maintenance and service lines.

Thank you so much.

Thank you. One moment for our next question. And that will come from the line of Pinjalim Bora with JPMorgan.

Great. Hey guys. Thanks for taking the questions and congrats on the quarter. One question for you, Yogesh. The MarkLogic acquisition, has that expanded, would you say it has expanded your opportunity within kind of the GenAI RAG-based use cases? Is the intensity of those conversations with your existing customer base increasing as they think about building GenAI workloads? And how does that compare to something like a Mongo or Elastic?

Yeah, so thank you, Pinjalim. A short answer is yes. I'll give you a slightly longer answer as well. The MarkLogic acquisition definitely brought us, and by integrating it with some of our own data platform technologies, data integration, and intelligent decisioning technologies. That combination has created a really powerful solution to apply RAG, both from a semantic analysis perspective, as well as vector, to really make GenAI applications much more accurate, much less error-prone, minimize hallucinations, and also provide the governance and security around it that people are looking for. So yes, and I think it really does create an opportunity for us to go back to our customers and work with them to make sure that they see what we have and that they are able to leverage our offerings. The interesting part about this Pinjalim is that mission-critical applications and business-critical applications leveraging GenAI is going to be a slow and longer process than folks think. It's easy to just sort of use an LLM for simple questions and answers, but really integrating it into your data, doing it in a methodical way, coming up with a real business use case, and then spending the money on it always takes time. So, we are looking forward to doing that. As I mentioned in my comments earlier, we actually have a couple of customers who are actively using this today in production, which makes us really delighted that we have made that much progress so far. The question for us is at what level are customers ready to adopt? As that momentum builds, as we hope it does, we'll of course share details with you.

I have a question for you, Anthony. Regarding the outperformance in Q2 compared to the Q3 guidance, is there anything noteworthy about the timing of term renewals? Did anything get moved from Q3 to Q2?

Hey, Pinjalim. No, I would say not really. Like I said, Q2 was a very solid quarter. It felt like, in terms of momentum, maybe a slight step up from where we were in Q1. Last year we definitely had some larger multi-year contracts that sort of moved some of the revenue around quarter to quarter. Obviously, we're just coming off the MarkLogic acquisition in Q1 of last year. But I think the outlook for Q3 and the results from Q2, I really don't think there was any material timing issues there.

Understood, thank you.

Thank you. One moment for our next question. And that will come from the line of John DiFucci with Guggenheim Securities. Your line is open.

Thank you for taking my question. Both my questions I think, for Yogesh. Yogesh, we just published a note today saying that the IT spending backdrop isn't going to get any much better at all anytime soon. I guess two questions on that. If that's the case, how should we be thinking about Progress in regards to your business and also the potential acquisition opportunities? And the second part is, and this goes back as Yogesh I've known you a long, long time, and I consider you a very seasoned executive. That's a compliment. I can say that also because we're the same age. But I guess, like when you look at this, and you've seen a lot of different cycles, I mean there are secular tailwinds in IT at least I believe that still. But when do you think the IT spending environment could get a bit better than it has been over the last couple of years based on your observations of the past? And sorry for the long-winded questions.

No, no, that's quite alright, John. I think seasoned is good with me. So it’s all right. The interesting part about the environment out there today, and I'm speaking really for Progress because you said, hey what do you think about Progress. I actually think that and if you look back over the last few quarters, we have not actually been pounding the table saying, "Oh, man, amazing purse strings are going to get opened and money is going to flood in, right?" There were a lot of other people who expected that in 2024. We were very straightforward. We felt that there was a solid environment for our products and that we would continue to execute within that sort of spending environment. The interesting part about our products, John, is they are not nice-to-have products. They really are essential products. The vast majority of our business, as you know, is existing customers who are either expanding their relationship with us or renewing with us, etc. Therefore, our net retention rates or ARR that comes from our existing customers is the solid foundation on which we built. On top of that, we have some new acquisitions that take place, obviously, so that we get a little bit of ARR growth as we keep moving forward. I think, the market for our products looks good. It isn't gangbusters, but it looks good. I think it will continue to be very similar going forward for the next few quarters at least. Large macro trends are changing. Even though I've been around the block a few times, every time I try to predict that, I'm usually wrong. So, I don't want to try to do something this time around either. But I think that your point that we are in a secularly good but not gangbusters growth environment is probably true for some extended period. There are a lot of technology catalysts that are happening. But on the business side, people are being very cautious, and I think they will continue to be cautious. Again I shouldn't do any macro stuff ever. But I think that interest rates are not coming down soon any time soon. People will be watchful on what they spend. They will spend on important stuff that is truly mission-critical, which makes me feel again good about our business. So I'm sorry John, I'm not really helping you with the long-term stuff, but you are asking me to go well beyond my abilities. I'll stop talking.

No, you're too modest, Yogesh, and that was very helpful. I really appreciate it and keep up the good work. Thank you.

Thank you, John. Thank you.

Thank you. One moment for our next question, and that will come from the line of Ittai Kidron with Oppenheimer. Your line is open.

Hi Yogesh, regarding the M&A opportunities that the corporate development team may be exploring, is there an increase in the number of opportunities you are considering? What feedback are you receiving from founders of both VC-backed and PE-backed companies? Additionally, Anthony, on the free cash flow guidance, I noticed it was unchanged. Looking at the second-half free cash flow performance, it seems to suggest a decline. Can you provide some insights on the outlook there? Thank you.

So Harshil, on the M&A side, yes, I believe that the pace is greater than it has previously been. I think it goes back to John's last question as well. I think the macro conditions being what they are, the market conditions being what they are, I think more and more folks out there are realizing that this is sort of the new normal. Therefore, I think more assets are coming to market today. To be honest, more chunkier assets are coming to market today than they were before, whether it is PE-backed or VC-backed. We are very active. I am delighted with the amount of activity we are seeing. We are in the deal flow. I think it's really important for me to share. We want to make sure that we are in the deal flow that is taking place out there so that we get to see and that we decide whether we are going to participate in something or not and to what level. So Harshil, yes, I am much more excited about where the market appears to be shifting on M&A.

To answer your second question on free cash flow and the guide, a couple of points I would make. One is when we acquired MarkLogic, we had mentioned that they had a January 31 fiscal year-end and had a significant amount of billings and revenue in what would be our first quarter. From a cash flow perspective, I think what we're seeing now is Q4 is our biggest billings quarter, and that's probably followed by Q1. With 40 or 50 days of DSOs, our big cash collection quarters end up being Q1 and Q2. We've seen a little bit more seasonality to the front half of the year. The other thing to keep in mind is that our tax payments that we make are generally weighted towards the back half of the year. So we have some billings that have been seasonally collected first half. We have some expenses where the seasonality is going to be in the second half. But nothing more than that. It was a great first half of the year for us in terms of cash flow. Collections were very strong; another indication of strength in our business and strength of our customer base when it comes to the essential nature of our products.

Got it. Very helpful. Thank you guys and congrats on the quarter.

Thank you. One moment for our next question. And that will come from the line of Lucky Schreiner with D.A. Davidson. Your line is open.

Great. Thanks for taking my question. I wanted to dig deeper on the M&A market, following up on the last question. I know you guys try to acquire about a company a year in terms of cadence. Can we maybe expect to see that cadence pick up here? And in terms of MariaDB, I know that one didn't close, but it was smaller in terms of revenue size than normal or than your previous four acquisitions. Could we see maybe a higher frequency of smaller acquisitions here moving forward? Thanks.

Lucky, thanks for the question. I think I've said this before, and I'll repeat. From an operating perspective, from the way we run our business, I do believe we can do more than one transaction in a year. It's not just doing the deal, right? The question is can we integrate it? I think that's where, over the last several years as we've done these acquisitions and integrated them, I think we've gotten better and better at that. Therefore, I believe that yes, we can acquire and integrate more than one business. That said, obviously, the market has to be such that deals do come up that we are really interested and excited about. In terms of the size, MariaDB was on the smaller side, but I think we've always said that our sweet spot is 10% to 20%, 10% to 25% of our revenue. MariaDB was slightly lighter than 10% of our revenue, but it was the right asset for us. I think the size criteria, we are a little bit flexible on, but we look to buy businesses that provide us with the ability to deliver some meaningful return to our shareholders. We're not going to pursue extremely tiny ones. They are a lot of work for very little return. At the same time, yes, we could do a deal of the size of MariaDB or one smaller, one larger or whatever. So we are actively looking. Yes, if the right opportunities come along, we will do more than one in a year.

That makes a lot of sense. Thanks. Then a follow-up on some of your earlier comments on the AI capabilities and customers already getting an ROI from that. I think there is a discussion on how pricing for AI is going to look moving forward. What are your thoughts on how you are going to recognize? Are you just going to increase prices for customers in the future? Or how is that going to actually drive your revenue moving forward? Thanks.

Lucky, I think that's a really good question because I think we are all in this industry trying to figure out the best way for us to, as you yourself pointed out, price our products for the value we are generating. Historically, in software, pricing has been done by some metric that is data or consumption or capacity or users or seats or servers or whatever, right? It is a measurable quantity. Something like this kind of capability, it really, when you think about it, the business value is if it is meaningful and significant, it often is not related to those things. We are experimenting, I think, as I think the best answer I can give you because I think that is the honest answer. The business models for this are going to evolve over the coming year or two in our industry. Some products are easy, right? Personal productivity is easy. Your Microsoft, you come out with CoPilot for office. Everybody who has Office, if you use CoPilot, this is what we charge you more for on a per person basis. But this is not like that. This is business value. You might have a fairly small number of users, and suddenly see hundreds of thousands or millions of dollars of benefit every year. The challenge becomes what do you tie that to becomes a key question. So great question. I wish I had a hard, specific concrete answer for you, but I don't other than the fact that we are experimenting as we speak. We are working with these customers and others to basically figure out what is the best way to price these things so that they get the value and recognize that they pay us for the return we're generating for them.

I appreciate the answer. I can squeeze in one more actually. Now that the MarkLogic acquisition has closed or that integration is complete, sorry is there anything to call out that you learned from that integration? I know you guys improve on your process every time. And maybe is there an opportunity, help me understand, can AI advances in AI help you increase your integration speed of the integration process?

I will give you the second part first. The AI helping with speed of integration, I think that's a little premature. As you know, with a lot of these AI capabilities, you need a lot of data before they do something right and meaningful. I don't know anybody who can say I've got a database of 1,000 acquisitions done right in the enterprise software industry that I can leverage to help with my AI. I think it can help on some superficial incidental work, like doing some analysis of contracts or customer contracts that the business might have. We're looking at that. Overall, I don't know whether it can dramatically help. So at least right now, we are not sure it can. On the MarkLogic acquisition, I think one thing that we were not as prepared for, to be honest, when we did the MarkLogic acquisition is we didn't fully realize the level of complexity around the government, the federal government business that MarkLogic had that was with three-letter agencies, which was extremely classified. This means that we have to create processes inside Progress to keep that information very contained and keep it from those folks in the company who are not cleared. This is a non-trivial thing and it's critical for those federal agencies that require security clearances. Most of the folks at Progress don't know the names of those customers. We use code names because even the names are confidential and secure. I think that was a wrinkle that we did not expect. We've learned how to work around that and figure out how to do the right things there. We have created a very strong governance model around it to ensure that we maintain secure information while conducting our business in a compliant manner. So it took us a little longer in the first part of that acquisition, and that's what we learned.

That's great to hear. Thanks very much for taking my questions.

Thank you. One moment for our next question. And that will come from the line of Brent Thill with Jefferies. Your line is open.

Hi guys. Thanks for taking my question. It's Antonio Venturim on for Brent. I wanted to ask, given your diverse portfolio of companies and end-markets that sort of fall in your preview, can you maybe give your puts and takes on what you're seeing across sub-segments of your portfolio? Are you seeing differences in behaviors maybe across seat-based versus consumption end markets or changes in trends in your relational versus NoSQL databases or on-prem versus cloud customers? Anything that sort of stuck out to you in the quarter that may have surprised you relative to expectations.

Hi Antonio, it is interesting. We don't really have consumption-based pricing in our products to be honest. You could potentially say, okay, you know what, our OEM relationships are consumption-based, but they are not really. They're not consumption-based in the two sense of the word where the OEMs find new customers or expand their customer base and get more licenses from us, but that's not consumption-based. The way the market talks about consumption-based, more users using it or more data being put through it or those kinds of things where more transactions go through it. For us, it is a more traditional enterprise software business. We are continuing to see strength in our cloud as well as our on-prem offerings. So nothing unusual there. But again, we are not selling cloud apps where someone has to say, hey, I need a new project to put in a new HR system or a new financial system or a new this or a new that. What they are looking to say is, how do I better manage what I have? How do I secure it more? How do I deploy these things well? How do I expand my applications? How do I add capabilities to my applications? How do I leverage my data? How do I integrate that data into my business processes? How do I make my business processes more intelligent? So how do I create better user experiences for my customers? All those things are around the infrastructure and the mission-critical applications that run on that infrastructure. Therefore, what many customers out there are seeing that are dependent on new projects is I think a very different market segment overall than what Progress plays in, which is one of the reasons why Progress has been a very resilient company throughout. I know that a lot of people, including myself, weren't here when the Great Recession took place. However, in the past few quarters, if you look at historic results of Progress, they were extremely good compared to what happened to the rest of the industry and the rest of the tech market from a business perspective, from a revenue perspective, and so on. The reason is a very resilient business, and our customers are using our software, which is essential software. It is about continuing to work with them and winning some new customers. Our business continues to grow, and it is important. So no specific segment-specific or market-specific product—again, you heard Anthony's commentary on how our products performed, many of which did well this quarter. It’s often a different set of products every quarter, but overall a very solid business, and we continue to see the same type of demand going forward.

Awesome. Thank you guys.

Thank you. I'm showing no further 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, Shuri, and thank you, everyone for joining us. Really appreciate it, and we look forward to talking to all of you again soon. Have a good night.

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