PRGS · Research
Progress Software Turns Nearly a Third of Revenue Into Owner Cash, but Its $1.23B of Debt Is Buying Growth That ARR Does Not Show
Twelve-month owner cash was $246.71M on $999.93M of revenue. ARR rose only 1.39% to $873M, maintenance fell 4.61% in Q3, and the revolver now funds both the 2026 note payoff and the Domo deal.
| Scorecard | Read |
|---|---|
| Thesis | Progress keeps buying mature infrastructure software with borrowed money and runs it for cash, so owner cash per share grows even while organic revenue is flat |
| What proves it wrong | Maintenance keeps falling near 5% a year, or net retention drops below 99%, so the acquired bases shrink faster than the debt is repaid |
| Next catalyst | Q4 fiscal 2026 results in January 2027, the first quarter to include Domo, plus the fiscal 2027 outlook and revolver balance |
| Key multiple | 9.20x EV / GAAP EBITDA of $322.74M |
| Debt | $1.23B carrying at Aug 31, 2026: $442.64M of 3.5% convertible notes due 2030 and $790.00M on the revolver |
| Stock pay | $72.44M from the cash flow line, 7.24% of revenue |
What Progress sells
Progress Software sells infrastructure software that developers and IT teams build on: the OpenEdge application platform, DataDirect data connectors, the MOVEit file transfer product, Chef, ShareFile and other tools [1]. It operates as one segment [1].
Q3 fiscal 2026 revenue, the quarter to Aug 31, 2026, was $246,005K against $249,795K a year earlier, down 1.52% [1]. The filing ties the drop to the timing of multiyear renewals.
Nine-month revenue was $747,269K, up 3.05% from $725,165K.
Maintenance was $100,016K, or 40.66% of Q3 revenue, down 4.61%. SaaS was $72,623K, or 29.52%, up 1.55%.
Licenses were $63,556K, or 25.84%, up 0.19%. Professional services were $9,810K, or 3.99% [1].
There is no hardware here. All four revenue lines are software or services attached to software, so the software share of revenue is 100% [1].
By geography, North America was $159,357K of Q3 revenue, or 64.78%. EMEA was $68,994K, or 28.05%.
Latin America was $6,456K and Asia Pacific was $11,198K [1].
The growth comes from deals, not from the base
ARR was $873M at Aug 31, 2026, against $861M a year earlier, up 1.39% [1]. The filing gives net retention of 99% to 100%.
That is a base which is holding its size, not growing it.
Nine-month license revenue rose 15.89% to $200,116K from $172,677K, which the filing ties to DataDirect and OpenEdge [1]. License revenue is recognized up front, so it moves with the timing of large renewals.
Remaining performance obligations were $497.8M, with about 75% expected within twelve months [1]. Deferred revenue was $406,467K.
Progress closed the Domo purchase on Sep 22, 2026, after the quarter ended, for approximately $400 million funded from the revolver [1]. None of Domo's revenue or debt is in these figures, so the next filing will look different.
In our reading, this is the Progress model: acquire a mature software base with borrowed money, cut costs, and use the cash to pay the debt down before the next deal. The filing describes each deal but does not set targets for it.
Margins and the MOVEit tail
Q3 operating income was $46,550K, or 18.92% of revenue, against $43,874K, or 17.56%, a year earlier [1]. Nine-month operating income was $138,217K against $114,916K.
Amortization of acquired intangibles was $8,937K in Q3 cost of revenue alone [1]. Intangible assets were $479,473K and goodwill was $1,309,737K, which is the balance sheet record of the buying model.
MOVEit costs were $3,455K in Q3, and the filing says no insurance recovery remains [1]. The 2023 breach still costs money each quarter.
Interest expense was $16,907K in Q3 [1]. That is 36.32% of Q3 operating income, which shows how much of the margin the debt takes.
The toll-gate test
A toll gate owns the record, owns the connection, prices on outcomes and spends R&D on the gate. Progress passes the first two tests in part.
OpenEdge applications and DataDirect drivers sit deep inside customer systems [1]. Our reading is that rewriting them is costly, which fits net retention near 100%.
MOVEit and Chef carry data and code between systems, but in our view rivals and cloud platforms offer the same jobs.
Pricing is by license, subscription and maintenance, and R&D is run for efficiency. In our reading, Progress collects rent on old gates more than it builds new ones.
Superintelligence raises a direct question for this kind of software. Agents that write and migrate code could lower the cost of moving off OpenEdge or of replacing a connector.
Our reading is that this is a slow risk for Progress, not one the current numbers show.
The owner-cash staircase
Start with GAAP EBITDA of $322.74M: operating income of $176.59M plus D&A of $146.15M over the twelve months [1]. D&A is the sum of two cash flow lines: depreciation of property and equipment, and amortization of acquired intangibles and other.
Each step down the staircase removes one thing an owner cannot spend.
Step one is operating cash flow of $328.27M, above EBITDA by $5.54M. Operating cash ran close to EBITDA.
The filing ties nine-month cash flow of $265,474K, against $172,389K, to higher collections, with days sales outstanding at 42 against 55 [1].
Step two subtracts stock pay of $72.44M, taken from the cash flow line. That leaves $255.84M.
Stock pay is 22.07% of operating cash flow, moderate for software [1].
Step three subtracts all capex of $9.13M, including capitalized software. Owner cash is $246.71M, or 24.67% of revenue and 76.44% of EBITDA.
Capex is property and equipment only. Progress shows no capitalized software line, so little is left out [1].
| Step | Twelve months | What the gap is |
|---|---|---|
| GAAP EBITDA | $322.74M | Operating income plus D&A |
| Operating cash flow | $328.27M | Working capital, cash taxes, interest and non-cash items |
| After stock pay | $255.84M | Stock pay treated as a real cost |
| After all capex | $246.71M | What an owner could take out |
Balance sheet and debt
Total debt was $1,232,635K at Aug 31, 2026 [1]. It has two parts: $450,000K of 3.5% convertible senior notes due 2030, carried at $442,635K, and $790,000K drawn on the revolving credit facility at a rate of 5.44%.
The 2026 convertible notes of $360M were repaid in April 2026 using the revolver and cash, and $170.0M of the revolver was repaid over nine months [1]. The capped call tied to those notes expired unexercised.
Cash and equivalents were $113.65M, of which $68.8M was held outside the US [1]. Domo, funded by the revolver after the quarter, will add to the debt in the next filing.
The cover-page share count was 40,874,192 at Sep 28, 2026 [1]. Over nine months Progress repurchased 2.2 million shares for $71.6 million, and $130.7M of authorization remains.
What the multiple measures
EV is $2.97B: equity value at the Oct 27, 2026 close on 40.87M cover-page shares, plus debt of $1.23B at carrying value, less cash and equivalents of $113.65M.
On GAAP EBITDA of $322.74M that is 9.20x. On operating cash flow of $328.27M it is 9.04x.
Owner cash of $246.71M is 8.31% of EV.
Net debt is $1.12B, or 3.47x GAAP EBITDA. Domo adds to that once the next balance sheet is filed.
What gets overlooked
Twelve-month owner cash of $246.71M is measured before interest [1]. The revolver replaced the 2026 notes only in April 2026, and Domo adds to it, so in our reading the interest line will take a larger share of that cash than the twelve months show.
Maintenance revenue, the largest line, fell 4.61% in Q3 [1]. In our reading, some of that is customers moving to SaaS, and some is customers leaving older products.
The shares count is falling. Repurchases of 2.2 million shares in nine months, against a cover count of 40,874,192, mean owner cash per share grows faster than owner cash [1].
Peers
The peer set is Commvault, Box and Pegasystems: infrastructure and workflow software sold to IT departments.
Peer figures come from each company's latest periodic filing [2][3][4]. Figures are derived from filed statements, and nothing here is a price view.
Progress has the lowest EV / GAAP EBITDA in the set and the only negative latest-quarter growth [1][2][3][4]. It is also the only one of the four carrying net debt above three times EBITDA.
Bull, base and bear
| Case | What happens | What the filings would show |
|---|---|---|
| Bull | Domo adds growth and Progress pays the revolver down fast | ARR growth above 5% and revolver falling each quarter |
| Base | Flat organic base, debt paid down slowly | ARR near flat outside Domo, net retention near 100% |
| Bear | Maintenance decline speeds up and Domo costs more than planned | Net retention below 99% and debt above $1.5B |
The base case is the current pattern: a flat organic base and a balance sheet that carries one deal at a time [1].
The bull case needs Domo to bring growth that the existing base lacks, without pushing leverage much higher.
The bear case is the maintenance line. A faster decline would shrink the cash that services the revolver.
What to watch
Watch ARR including Domo in the Q4 filing, and whether the filing separates acquired from organic ARR.
Watch the revolver balance. It was $790,000K at Aug 31, 2026, before the Domo draw [1].
Watch net retention. A move below the 99% to 100% range would be the clearest sign the base is shrinking [1].
Watch maintenance revenue against SaaS revenue. The gap between a 4.61% decline and a 1.55% rise shows how fully customers are moving rather than leaving [1].
Watch MOVEit costs. They were $3,455K in Q3 with no insurance left, so they now fall fully on earnings [1].
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