Hello, everyone, and welcome to Progress Software's Second Quarter 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. Now it's my pleasure to turn the call over to Michael Micciche, SVP of Investor Relations. The floor is yours.

Thank you, Carmen. Good afternoon, everyone, and thanks for joining us for Progress Software's Second Fiscal Quarter 2025 Financial Results Conference Call. On the line with me this afternoon are Yogesh Gupta, 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, our integration of ShareFile 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 SEC filings. Progress 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 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 fiscal year 2025, and I recommend that you reference it for specific details. We've also provided a presentation that contains supplemental data of our second quarter and provides highlights and additional 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 will be recorded in its entirety and should be available for replay on the Investor Relations section of our website shortly after we finish. So Yogesh, I'll turn it over to you now that we're done with that.

Thank you, Mike. Good afternoon, everyone, and thank you for joining our conference call to discuss the results of our second fiscal quarter of 2025. We're extremely pleased with our solid second quarter results and the success of our ongoing integration of ShareFile. Before we get into the details of the quarter, let me begin with the news we just announced regarding the acquisition of Nuclia for which we paid $20 million. Nuclia provides an easy-to-use self-service SaaS product that democratizes the use of trustworthy and verifiable genAI. Small and midsized businesses as well as large global corporations can quickly and easily reap the benefits of sophisticated agentic RAG AI capabilities using Nuclia SaaS. While the deal does not have a material impact on our financials, we are very excited about Nuclia and the unique agentic RAG-as-a-Service AI capabilities it brings. As we have often discussed, the first pillar of our total growth strategy is to invest and innovate. We regularly update, modernize and improve our products as an everyday part of our business, which is reflected in the R&D line of our income statement. For us, our R&D investment is an essential element of providing value to our customers, so they stay with us long into the future. With Nuclia, we have accelerated the R&D process by purchasing great technology that addresses an urgent market need, and we will rapidly integrate it with our products. This will allow us to incorporate additional agentic RAG AI features that help our existing customers speed-up their own genAI initiatives, thereby enabling us to continue to drive strong customer retention. You'll hear more about Nuclia in the coming quarters as we integrate this cutting-edge technology with our products. Turning to our second quarter results. Total revenue came in at $237 million, up 36%…

All right. Thank you, Yogesh, and good afternoon, everyone. Thanks for joining our call. As Yogesh mentioned, we're thrilled with our Q2 financial results. The progress we've made integrating ShareFile, and we feel very well positioned for the second half of 2025. Before we dig into the numbers, I'd first like to congratulate Yogesh on recently being named an Ernst & Young Entrepreneur of the Year in New England. This prestigious award recognizes visionary leaders and transformational CEOs and that are driving innovation, accelerating growth and creating lasting impact. Having worked with Yogesh for several years now, I can attest this honor is well deserved. All right. Turning to the numbers. Let's start on the top line with ARR. We closed Q2 with ARR of $838 million, representing 46% growth year-over-year and 2% pro forma growth on a year-over-year basis. For clarity, the pro forma results include ShareFile's ARR in both periods. Although no single product drove material growth in our total ARR, the 2% pro forma growth that we delivered was the result of growth in multiple products across the portfolio, including ShareFile, OpenEdge, DevTools, Sitefinity, LoadMaster and WhatsUp Gold. Also worth highlighting is our strong net retention rate, which again came in at 100%, reflecting resilience in our top line. As we've mentioned several times before, and as Yogesh just covered in his remarks, we believe that smart investments in our product portfolio and good customer relationship management, both serve as the foundation of our consistently strong net retention rates. In addition to our solid ARR growth, revenue for the quarter of $237 million was solidly within the guidance range we provided back in March and was powered by strong performance from ShareFile and OpenEdge. Turning now to expenses. Our total costs and operating expenses for the quarter…

[Operator Instructions] Our first question is from Ittai Kidron with Oppenheimer.

This is Nolan Jenevein on for Ittai. I really just want to get a little bit more color about the Nuclia acquisition. And this is a little bit of a divergence from what we generally see as the profile of company that you guys go after, being a more mature software company. So maybe just give us a little bit more color on Nuclia.

Sure, happy to. And Anthony, feel free to add, if you like. So you're right that this is not like some of our more recent acquisitions that we have done. This acquisition was primarily driven as an investment in our product portfolio. As many of you know, Progress has had a long history over many, many decades of continuing to invest in our portfolio to make sure that the portfolio stays current, and our customer retention stays high. When -- and I know this is probably maybe before some folks on the call may even be aware of this. But before the Internet came around, Progress was primarily a client service software company. Internet came along, cloud came along. We basically invested heavily in making OpenEdge multi-tenant, which allowed the OpenEdge business to continue extremely strong and stable. Then when mobile computing came along, we again invested heavily in that, made a small acquisition along the way to add mobile computing capabilities to that. And today, we're doing something similar with AI, which is sort of third major wave in the enterprise software that we see dramatically changing the landscape, probably even more than the first two did. And so from our perspective, this is something that the company has a strong history of doing. We believe that there is tremendous opportunity in ensuring that our customers continue to find great value with our products, that they stay with us. This is a rather modest purchase price for a leading-edge technology around agentic RAG solutions for genAI. So we feel really, really good about it. Both for adding the technology as well as bringing on a strong team that can help us continue to move this technology forward, integrate it with our products and [ can ] go to market.

One moment for our next question. And it comes from the line of John DiFucci with Guggenheim Securities.

I'm going to ask another question on Nuclia. I know it's a small acquisition, but it's really interesting in another way. You guys know you typically buy products that sort of stand on their own and you run them -- frankly, you run them a lot more efficiently. And -- but Nuclia, feels like it's something you can leverage across your portfolio of products, which is not what you normally do. I know sometimes there is a confusion over that. But can this one be a cross-sell opportunity or perhaps even something that can be embedded in other products? It seems like maybe it can.

John, you're absolutely right. Sorry -- John, you're absolutely right. It is something that we expect to integrate across our product portfolio. I think it brings value not just to our data platform business, which is OpenEdge and MarkLogic and Semaphore, but I think it brings value to things like Sitefinity and ShareFile. I think it has all kinds of interesting opportunities to bring value to those [ customers ] that are dealing with levering their information that -- in fact, as you know, ShareFile has 86,000 customers and their data is sitting in ShareFile, right? So we see opportunity here. We see opportunity to integrate across the portfolio over time and create value for our customers and therefore, for our business.

And that makes sense. It makes it a little different, too, for at least from ShareFile certainly, but a lot of your acquisitions.

It does, John. It does.

Okay. And if I could, a follow-up for Anthony. Anthony, free cash flow in the quarter was actually below what we had expected, a little bit below what we were looking for, but you brought up annual forecast meaningfully. So could you just give us a little color on that, like what happened this quarter and why are expectations so much higher for the second half? Was it just some timing things happening? Just want to just make sure we understand that.

Yes. I think two things, John. One is a little bit of timing on collections. The second is we did move -- we basically picked up ShareFile's business, which, up to this point, we had still been on a transition service agreement with CSG, and we went live on the Progress billing platform for ShareFile. And so that's basically picking up a $250 million business and cutting it over onto a new billing, fulfillment and credit and collection system. And so I would say we are really happy with the result. We are really happy with the early returns on it. But any time you do a sort of a major lift and shift like that, there's always a little bit of -- you'll go a little bit slower to make sure that everything is working properly. And I would say there was a little bit of that in the quarter in terms of how we were sort of batching up invoices and how we were handling collections. I think we were being much more careful and much more thoughtful about the customer experience and the long-term implementation of the system and less so maybe about the DSO in the quarter. I view it as something that we sort of move past very quickly here, but it's -- we were more excited just to get this. I mean it was a big milestone, as you might imagine, on the integration plan. So it was a nice one to get done.

Yes. No, okay. That makes a lot of sense. And by the way, I mean you sort of -- that's reflected in your guidance for the year. So -- but you know that's such an important metric for -- especially for you guys. But anyway, that's great, especially with ShareFile given the size of that and it's nice to see that coming along so well.

[Operator Instructions] All right. As I see no further questions in the queue. I will pass it back to management for final remarks.

Thank you. Thank you again for joining our call today. I'm truly excited about our performance in Q2 and pleased to share our confidence in the outlook for the rest of fiscal 2025. I'm especially proud of the dedication of our entire organization and their continued hard work, which positions us well as we continue to execute our total growth strategy. We look forward to talking to you soon. Thanks again and bye-bye.

And this concludes our program for today. Thank you for participating, and you may now disconnect.