Ladies and gentlemen, good day, and welcome to the Progress Software Corporation First Quarter 2021 Investor Relations Call. At this time, I would like to turn the conference over to Mr. Michael Micciche, Vice President of Investor Relations. Please go ahead, sir.

Great. Thank you, David. Good afternoon, everyone, and thanks for joining us for Progress Software's Fiscal First Quarter 2021 Financial Results Conference Call. My name is Mike Micciche. I recently joined Progress as Vice President of Investor Relations. I'm thrilled to be on board, and I look forward to meeting all of you soon. With me today is Yogesh Gupta, President and Chief Executive Officer; and Anthony Folger, Chief Financial Officer. Before we get started, I'd like to remind you that during this call, we will discuss our outlook for future financial operating performance, corporate strategies, product plans, cost initiatives, our integration of Chef, the impact of the COVID-19 crisis on our business and other information that might be considered forward-looking. This 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 our recent SEC filings, in particular, the section captioned Risk Factors in our most recent Form 10-K. Progress Software assumes no obligation to update the forward-looking statements included in this call, whether a result of new developments or otherwise. Additionally, on this call, all financial figures we use are non-GAAP measures, unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our financial results press release, which was issued after the market closed today and is also published on our website. This document contains the full detail -- details of our financial results for the fiscal first quarter of 2021, and I recommend you reference it for specific details. We also have published a presentation that contains supplemental data for our first quarter 2021 results, providing highlights and additional financial metrics. Before our earnings release -- both our earnings release and this presentation are available in the Investor Relations section of our website at investors.progress.com. Today's conference call will be recorded in its entirety and will be available via replay from the Investor Relations section of our website. With that, I'll now turn it over to you, Yogesh.

Okay. Thank you, Mike, and welcome. It's great to have you on board, and thank you all for joining our Q1 2021 financial results conference call. As I'm sure you've seen by now, the first quarter was an excellent start to 2021, highlighted by better-than-expected performance across all metrics. Our overperformance was driven by a combination of strong execution and an improving demand environment from our customers and partners, spanning virtually all of our product lines. We benefited from improved macroeconomic conditions as more businesses reopened from COVID-19 and became more active with their IT projects. What's more, our performance in Q1 was a testament to the mission-critical nature of our comprehensive product portfolio, which remains as strategic as ever to our customers and partners. As a result of our strong Q1 performance and increased confidence in our business, we have meaningfully raised our 2021 outlook for revenue, EPS and cash flow. And Anthony will cover this in more detail as part of his comments. As I reflect on the strength of our Q1 performance, it's worth stressing the investments we've made to modernize our portfolio and the industry trends benefiting our business. As more customers and partners have taken a cloud-first approach for their applications, data and content, our Chef, OpenEdge, Sitefinity and MOVEit products are available to support their efforts. Our heritage of delivering best-in-class application development offerings that are truly developer-centric, coupled with our strength in data and infrastructure management and our pioneering DevOps capabilities, has produced a portfolio of products that fully addresses the modern continuous application development, deployment and management life cycle. What's more, it was our flagship OpenEdge product that was the single largest contributor to our top line outperformance in Q1. This performance was fueled by the strong execution of our direct sales…

Great. Thanks, Yogesh, and good afternoon, everyone. Thanks for joining our call. As Yogesh mentioned, we're very pleased with our Q1 results and feel we're positioned well for the year ahead. Our revenue for the quarter came in at $131.8 million, well above the high end of the guidance range we provided back in January and represents 16% growth on a year-over-year basis. Our top line results in the quarter were driven by better-than-expected performance across all of our product lines, but much of the outperformance came from OpenEdge, our Ipswitch products, WhatsUp Gold and MOVEit, and finally, Chef. I'd also like to point out that our strong Q1 performance was more than enough to offset the expected year-over-year decline of more than $8 million in our DataDirect products, which we mentioned as part of our outlook back in January. We've previously discussed how ASC 606 has affected revenue recognition for subscription products such as DataDirect. With the addition of Chef to our portfolio, an increasing proportion of our revenue now comes from recurring sources, whether they be on-prem subscriptions, term license agreements, or SaaS deployment models. In order to provide better insight into the underlying performance of our business to address the potential variability in revenue recognition resulting from these different revenue models and to highlight the durability of our recurring revenue base, beginning in the first quarter, we are disclosing annualized recurring revenue and net dollar retention rate. We've provided clear definitions of these metrics in the supplemental presentation accompanying our press release, and I'd like to comment briefly on both. First, our Q1 ending ARR was $432 million, an increase of 22% on a year-over-year basis, with the increase largely driven by the acquisition of Chef. It's also worth highlighting, however, that on a pro forma basis,…

[Operator Instructions] Our first questioner is Anja Soderstrom with Sidoti.

And congratulations on a great quarter. I just have first question on the guidance. Seems like for the full year increase, you might be a little bit conservative considering the beat on the first quarter. Can you just talk a little bit about that?

So Anja, thank you, first of all. Yes, it was a wonderful quarter. In terms of our ways, as you know, historically, when we've beaten the top line in the first quarter by a couple of million dollars, we have usually not done any changes to our top line for the year. And that's because that's still 3 quarters ahead. Because of the really strong performance and our confidence in the way the business is shaping up for the whole year, we thought that we could raise it in a meaningful way, with the ways that we have done.

Okay. That sounds good. And how about the momentum then through the quarter and into the second quarter? It sounds like that's very strong.

We had a really good quarter. We have provided guidance for Q2 based on what we think we expect for the second quarter. We are confident about the way business is [indiscernible] at this point. Of course, through uncertainties, right? The COVID is not behind us. There is still pockets where businesses have been locked -- that basically are in lockdown mode. But we feel confident about the trajectory of our business. We feel confident about our execution. We feel confident about the demand for our products. And so our guidance reflects that confidence.

And one more for me in regards to M&A. You made a comment about your expansion of the sourcing channels. Can you elaborate on that?

So yes, of course, Anja. So historically, we have focused, of course, with -- working closely with investment bankers. That has gotten expanded. In fact, we have many more investment banker relationships. Once Jeremy came on board, he's been able to expand that in a meaningful way. We have also spent a significant amount of effort and time connecting with a whole host of venture catalysts who have portfolios that are in the application development, deployment and management market segments that have products that would fit in our product portfolio and that basically could have opportunities that are getting to be of scale. So that's another area where Jeremy and the team have done a really good job of expanding. We are also connecting with more founders as well for founder-led companies. If you recall, Ipswitch was a company that was still owned by Roger Greene, who was the Founder. And so we were able to do that. And so expanding that channel has been another effort. And last but not least, we are also expanding our relationships with some of the larger technology companies that might have some carve-outs. And that's a very small universe, as you know. But still, we've begun to have conversations with them as well. So again, to us, it is trying to find all venues and all avenues for us to be able to find more opportunities and to be able to find the right ones that fit us, not only from the perspective of the business criteria, right, high levels of recurring revenue, high retention rates, but also where we believe we can generate meaningful value for our shareholders by being disciplined on the financial side. So that's what we've been doing. And also, Anja, as an aside, we also have continued to improve and strengthen our internal capabilities so that we can do multiple deals. We can have -- the Chef deal was done. And as we said in January, we were ready to do another one. And so that is why we feel really confident about our ability to continue to execute on our total growth strategy driven by M&A.

Our next question comes from Mark Schappel with Benchmark.

So Yogesh, a couple of questions, will start with you. First of all, a very nice job in the quarter.

Thank you.

With respect to the OpenEdge ISV business, it continues to perform well. I was wondering if you could just provide any additional color with respect to what maybe your ISV partners are telling you they're seeing in the business.

Yes. So absolutely, Mark. So we -- interestingly enough, in this quarter, we had strong OpenEdge ISV performance as well as, by the way, OpenEdge Direct as well as some of the some of our customers expanded their relationships with us in a meaningful way. I think what we hear from the ISVs, of course, is that their business -- they're becoming more confident in their own business. And since they are the ones that, of course -- as you know, Mark, they have a very, very large reach on a global basis. I think to us, that reflects a strengthening of the market and the demand for the kind of products we offer, right? And the customers saying, "Hey, how do we modernize? How do we expand? How do we take our application that is on OpenEdge and do more with it as business needs grow?" So that's really a very, very positive sign for us, and we feel really good about what is happening with our ISV base. And as I said, we are also actually seeing -- and we saw in Q1 was actually a pickup on some of our direct customers who ended up expanding relationships with us as well. So we're seeing some interesting -- very positive signs. We also saw signs that were positive with respect to IT projects being started for new online engagement and new customer engagement projects. And those professional services projects, of course, are only done when, I think, business is feeling a little bit better because they are not just -- just add some more licenses, right? They're doing something more, doing something new. So we think that business is getting more confident around the globe, and that's reflected in the performance of ISVs who use OpenEdge.

Good. And then shifting gears a little bit. With respect to the integration of Chef, it sounds like it's proceeding ahead of plan. That's good. I was just wondering if maybe you can give us an idea of some of the integration work that still remains to be performed out there.

Yes. So I think it's -- the initial sort of heavy lifting is all done, so -- which we feel really good about. Obviously, Mark, for certain things like some back-end systems that need to be integrated, that are not related to finance, but that are related to, let's say, technical support or customer support, those kind of things are being worked on and will continue to be worked on, and which is why Anthony said some of the integration will take us towards the end of the year. And -- but overall, we've actually been able to accelerate a lot of the integration. And that helped us, of course, on the profitability. Chef also, of course, outperformed on the top line as well compared to our plan. So we're really pleased with the way Chef is shaping up, both on the top line and on the bottom line. And the team that has come across is just absolutely phenomenal, and it fits so well with Progress. They have a very much a customer-centric view of what they do. They are passionate about the product. They are passionate about the open source community. They are passionate about serving their customers and making sure that the customers are successful. We have been able to not only connect with a very large number of the large customers, but we've also been able to connect with the open source community contributors, and they are very engaged with us. So all of that stuff. And it's really meshed as well with our DNA at Progress, which has always been customer-centric, as you know, Mark. So it has been -- so far, it has been wonderful. It has been a really, really positive acquisition.

Okay. Very good. And then bringing Anthony into the next chair. Andy, I was wondering if you could just review some of the reasons why the company has decided to move to a single reporting structure rather than the current 3-segment structure.

Yes. Yes. Sure, Mark. It's a good question. I think there was a point in time historically where I would say the company was probably very rigidly aligned around those 3 segments, and it made a lot of sense in terms of how we manage the business. And I think over time, things started to shift a little bit. And when we bought Chef in, Chef, in our existing segment structure, fit into application development and deployment. And once we put that in there, it really became, I would say, its own unit. And we started to look at the business more on a product-by-product level, and I would say, less so on the traditional segment. So we were evaluating performance down at the product level, thinking about resource allocation down to the product level. And ultimately, it just no longer made sense to -- with all the realignments that have gone on to carry the 3 segments forward. So I think that change will roll through in the second quarter. I think we'll still continue to give color on some product-level performance as it's relevant to the operations overall. But I don't think that the 3 segments are still going to be meaningful to Progress. And so I think, ultimately, what starts to probably become interesting, I think, is the annualized recurring revenue and, really, the stability there, the net dollar retention rates and the stability that those display as well and then a lot of product-level detail that we can share as quarters go by and as products may or may not have a material impact on the business.

At this time, we have no further questions. I'll turn it back to Mr. Yogesh Gupta for closing comments.

Thank you, David. Thank you all for joining our call today. I'm genuinely excited about our performance in Q1. Our product portfolio addresses a large market opportunity, and I'm especially proud of the continued hard work and dedication of our entire organization during the quarter, which positions us really well as we continue to execute our total growth strategy. And I look forward to talking to you all soon. Thank you again, and buh-bye.

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