Good morning, everyone, and welcome. We're delighted to have you join us for the Progress Software 2023 Investor Day. We have a great program for you this morning, during which you'll hear from our CEO, Yogesh Gupta, our Head of Corporate Development, Jeremy Segal, and of course, our CFO, Anthony Folger. Yogesh will provide an overview of Progress Software, who we are today, a bit of where we came from, and also where we're going. Jeremy will give us his insights to the main ingredient of our total growth strategy, M&A, and he'll discuss the current M&A market, how we navigate the acquisition landscape and what makes us good at it, and then he'll talk about our integration process. After a short break, Anthony will tie it all together with the numbers and provide a financial overview and outlook.
We'll open up the phone lines and the webcast for Q&A. Naturally, it wouldn't be an investor day without a recitation of our safe harbor statement, so here goes. During our presentation today, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, our acquisition of MarkLogic, 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 affect our results, please refer to the sections captioned Risk Factors in our most recent Form 10-K and subsequent Form 10-Qs. Progress Software assumes no obligation to update the forward-looking statements included in this presentation, whether a result of new developments or otherwise.
Financial figures we will discuss today are non-GAAP measures unless otherwise indicated, and you can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our most recent financial results press release for the first quarter of fiscal 2023, which was issued last week when we reported Q1. This document contains the full details of our financial results for the first fiscal quarter of 2023, I recommend you reference it for specific details. We have also prepared presentations for each speaker that provide highlights and additional financial metrics. Our presentations, as well as our Q1 2023 results and supplemental information, are available on the investor relations section of our website at investors.progress.com. Today's event will be recorded in its entirety and will be available via replay on the investor relations section of our website.
With all that out of the way, we're ready to get started. First up, I'd like to introduce our CEO, Yogesh Gupta. Yogesh has been President and Chief Executive Officer since late 2016, and in that time, he initiated and has led the successful execution of our total growth strategy, which has resulted in meaningful shareholder returns. With that, welcome, Yogesh.
Thanks, Mike.
Okay.
Good. Hello, everyone, and welcome to our Investor Day. You know, I'm really excited to be here and to share the Progress story with you today. Thank you for joining us. What I'd like to cover today is a little bit of who we are and where we are going, and I then want to talk about our total growth strategy and how it is translating into consistent, sustainable returns for the long run. Let's get started. For those of you who may not know us at all, we were founded over 40 years ago, and we've been on the Nasdaq since 1991. Our market cap is $2.5 billion approximately.
Our business, which is extremely resilient, extremely profitable, we expect to do about $684 million at the midpoint of our guidance this year in revenue and have $4.13 as our EPS. Getting you a little bit more about what makes our business so steady and successful, I wanted to start with the recurring revenue, right? A large amount of our business, a large amount of our revenue is recurring today, over 80%, which is this year we expect to have $575 million of annual recurring revenue. That provides tremendous visibility for us as we look forward on what is going to happen. That ARR is extremely sticky. You know, we have a very sticky customer base. Our net retention rates are truly world-class.
We have today over 100% retention rates. Actually, over the last couple of years, it has been closer to 102%. We really are proud of this. What really drives this is two things. We have very low churn. Anthony will actually share some numbers with you on that, in terms of customers who churn out. Then we of course have some expansions with our existing customers who keep coming back and buying more from us. We do all this very efficiently, which drives margins to truly world-class levels for a business our size, right? We have a 38%+ operating margin expectation for this year.
Those margins and the cash flow that they generate, unlevered free cash flow, is about $220 million at the midpoint of the target this year again. Those actually help us drive our total growth strategy. This really provides the fuel for us to be able to go out and acquire businesses and then make ourselves even stronger going forward. What leads to this high level of net retention, is really our investment in R&D. In the end, customers continue to use our products because the products continue to deliver phenomenal value to them. Our R&D team continues to innovate, make sure that the products stay current and relevant. That, of course, is what keeps our customers coming back to us over and over again.
All of this, of course, would not happen without our 2,300 employees around the globe who are truly engaged, who really help us deliver, this extremely consistent financial performance. Our financial performance has been truly consistent over the last several years. As you can see, we have had very, very impressive results over the last five years. Our revenue has grown at 12.5% CAGR. Our operating income actually has grown even faster at 14.4% CAGR, and our EPS has grown at 13.5% CAGR. You know, we've gone from being a less than $400 million company to, you know, today our guidance is close to $700 million.
In fact, actually that is, you know, doesn't include the full year of MarkLogic acquisition that we did close last month, so actually early February. As you can see, truly impressive results. If you take the full year of MarkLogic into account, it's over $710 million as a target. That really is where we're getting to. The whole trend around ARR and NRR is also very impressive. I actually am delighted that our annual recurring revenue has continued to steadily tick up. The chart on the right, by the way, is the pro forma version of the Annual Recurring Revenue. What that means is we go back every year.
Whenever we acquire a company, whenever FX changes, and currency exchange rates change, we go back and once a year we recast all the numbers, and we recast them based on the current currency FX rate. They're constant currency, and they include as though we had done the acquisition back then. It truly shows you what is happening with the business over the period. When you look at it, you know, going from FY 2019 to today, you know, the ARR has steadily gone up, and our net dollar retention rate has stayed pretty much between 100% and 102% throughout that period. To me, this really is the foundation of our success.
Of course, I've talked about numbers, and I'm really proud of the results we have delivered, but what does Progress really do, right? What is it that makes us able to deliver such great results? Our mission is actually, and our vision is quite straightforward, right? Our vision is that we want to propel business forward in the today's technology-driven world, right? Everybody around is using technology to drive their business and drive their business success. That is what we are here for in terms of helping them do that. The way we help them do that is our mission is to be the trusted provider of the best products to develop, deploy, and manage high impact applications.
You know, these are applications that deliver tremendous value, whether it is to internal users, whether it is to external users, they deliver tremendous business value. They have amazing user experiences and digital experiences. They are backed by data and data analytics. They can be deployed and managed and secured at scale and operated and make sure that everything runs at scale and runs well. That entire portfolio of products is really what we offer, and it delivers tremendous value for our customers around the world. The way we succeed in continuing on this mission is through what we call our Total Growth Strategy. Our Total Growth Strategy has three components. You know, first and foremost, we invest in innovate, right?
We invest in our products, we invest in our people. We invest in our systems and processes. I'll talk a little bit more about that in a minute, but you know, about this in a minute. It is really important that all three of those types of investments, whether it is in the products, which is to keep them current and make sure that the customers continue to stay with us, whether it is in our people, because fundamentally for a software company, people are its most important asset, and so continuing to invest in them so that they stay with us and that they are engaged is critical as well. Our systems and processes, because that's what makes it a very efficient and well-run business.
Those three things put together, that forms the strong, stable business on we can then build on. The way we build on it is by acquiring and integrating businesses that are very similar to us, right? We find businesses that have similar characteristics to what we have, enterprise software companies, who basically would do better when they became part of us. Of course, last but not least, we then drive customer success. We improve gross retention and net retention rate of acquired companies. We have done that successfully with every single company we have acquired since we started on our Total Growth Strategy. We... This is how we continue to be successful.
All of these put together really drive us towards our goal of doubling our business every 5 years. Let me actually take a few minutes and drill down on each of these things, these 3 items, because I think they are really that important. Let's talk first about investing and innovating. We invest in innovate, of course, starting with, as I mentioned, products, people, and then systems and processes as well.
The investment in products really is about making sure that as customers decide that they are going to deploy to the cloud, as they are trying to do different things, as they wanna do mobile, as they wanna do chat, as they wanna do, as they wanna leverage machine learning and AI, you know, we stay current with the market and we stay current with our customers' need. To do that, we make tremendous investments in our R&D, and that results directly in the high retention rates we have with our customers. The customer staying with us is a result of the fact that our products continue to deliver great value to them. The second part is investing in our people.
The thoughtful investments we make in our people to grow the talent, to make sure that they have a great environment to work, to remain engaged and motivated and continue to deliver results. By the way, I am really proud to say that we have an amazingly engaged employee base. Our eNPS, Employee Net Promoter Score, is 40. By the way, that 40 is higher than some of the more well-known tech companies like Microsoft or Google or Apple. The reason is that we have had this commitment to make sure that our employees recognize that we value them and we do the right things so that they understand that we truly mean when we say that they are the most important asset for the company.
Last but not least are our systems and processes, right? Innovating across our systems and processes to continually make them better and more efficient, helps us run better. Also, it allows us to integrate businesses that we're going to acquire, right? Fundamentally, the system integration and process integration is as important as the integration of people and products. We do all this. Our investments, by the way, speaking of each of these a little bit more, especially around the product side, our investments are made across all our products. We truly have a very comprehensive portfolio of products that helps our customers develop, deploy, and manage, their mission-critical, high-impact, you know, awesome experience delivering applications.
You know, let me sort of briefly describe, you know, what our products actually do. You know, when our customers want to build wonderful user experiences, whether for the web or for the mobile environment, and deliver them to our to the end users, our products such as Sitefinity and Telerik DevTools are absolutely phenomenal products in making them the most engaging and wonderful experiences.
When they want to then leverage underneath that front end, great app, data, and they need a data access product or they require data platforms, you know, we have OpenEdge and DataDirect and MOVEit, which basically provide both the most phenomenal platform to build applications on, to connect data from any source, and to move data from any place to another in a secure, reliable way. By the way, our MarkLogic acquisition actually adds to this data platform part of our business because it brings in the ability with MarkLogic product to deal with complex data, and it is a NoSQL database.
Then in addition to that, the Semaphore acquisition, which MarkLogic had done a year before we acquired them, brings in product that makes sense of this complex unstructured data. So metadata management becomes easier. For all of this data and all of this business applications, if businesses want to apply rules easily and integrate business rules into their business application, we offer Corticon. So this entire portfolio so far that I've talked about is all about how do you build and set up great, wonderful applications that have wonderful front ends, wonderful business logic, and can connect to all data that they might have, whether it is traditional data or modern, complex, highly unstructured data. The question then becomes how do you deploy it at scale? That's where Chef comes in.
It is the premier product for DevOps and SecOps at scale. Being able to deploy scalably and securely is what Chef is all about. Once you've deployed it, LoadMaster makes sure that the application is always on. Of course, WhatsUp Gold and Flowmon monitor the application and the infrastructure that the application is running on. They make sure that if something goes wrong, IT is alerted, et cetera, so that they can act on it. A phenomenally, wonderfully complete set of products that cover, develop, deploy, and manage, which by the way, as you know, has grown significantly through acquisitions. We continue to expand on this portfolio. We continue to fill this out, and we're really proud of the solution we have today.
We continue to make these investments in these products, as I said, to keep them current. The one of the results is that we have amazing awards that we can share about, right? By the way, many of these awards are actually user driven, right? I mean, the G2 awards, for example, are surveys done by G2 of end users who go in and say what they think about the product, and so on. It's really truly heartening to see such wonderful feedback from customers and users alike about how much our products are doing for them and how much they love our products.
That is really the foundation of our business, to have this great set of products with these great customers who continually use them. Of course, on top of that is a second leg of our total growth strategy, which is acquisitions and integration. Our acquisitions are actually done in a very disciplined way, and we have two parts to our discipline. The first part of our discipline is around our selection criteria, and then the second part of our discipline is the target outcomes that we intend to deliver. We make sure that we are truly focused on both these.
Let me talk about this in a little detail because I think this is really critical, and of course, Jeremy will drill down into this a whole lot more than I will. First of all, our selection criteria are that we look for businesses in infrastructure software. Infrastructure software has some very interesting characteristics. Infrastructure software, once it is deployed, is usually often quite sticky. And you know, if it is a product that continues to deliver great value, customers continue to use it for a long, long time. We of course have a track record of improving the stickiness of those products, improving gross retention and net retention, but we wanna start with businesses that already have high degrees of recurring revenue and high retention rates.
We look for businesses that are modest sized. They're not like, you know... We don't like to look at businesses that are same size as us to acquire. We look for businesses that are 10%-25% of our revenue. You say, "Yogesh, why is that? What difference does it make?" Well, if you pick up a business that is 10%, 15%, 20% of one's revenue, what you get is about, you know, 1 in 6, 1 in 7, 1 in 8 new employees coming into the company. What happens is that your culture survives.
Culture and the way we do things and the way we work, the way we treat our customers, the way we function internally and we treat each other in the company, that is absolutely critical. For us to be able to integrate efficiently, be effective with it, we find that the range of about 10%-25% of revenue at a time is the right range. It doesn't mean that we won't sometimes do something smaller or maybe even think of, if the right one came along, maybe something bigger, but the 10%-25% of our revenue is truly our sweet spot. We continue to look at businesses that are in this range.
This discipline around what type of company to look at is the first part, we also, while we're looking, very quickly we look for and make sure that the target outcomes will be achievable once we acquire the business. The target outcomes, again, as many of you already know, is that we first of all target that the operating margin of the acquired business, once we are done with synergies, will be 40% or higher. Of course, that doesn't mean that we look for companies that have 40% operating margin today. Of course not. You know, we actually usually buy companies that have significantly less operating margin, and our value creation comes from driving that margin up to that 40%+.
We also you know, by doing that, we also make sure that we can get a significant return on investment as long as we don't overpay. We're very, very careful about the price we pay. What we pay and the weighted average cost of capital has to be less than the return on invested capital. Actually, Anthony's gonna share that since we started our total growth strategy, we have been amazingly successful at beating that metric by a meaningful amount. The last part is we drive net retention rates to 100%+. That is also a target for us. We look during the due diligence, during the initial investigation, whether we can actually achieve these outcomes. If we believe we cannot, we walk away. Right?
We are extremely disciplined about the types of businesses we look at and whether or not we will be able to deliver the outcomes that delivers the shareholder value that we want to deliver. You know, I know that really the reality is anybody can go buy companies, but disciplined buying is very hard. It is truly hard. Then comes the next part, integration, which is even harder. I know that often people say, "Oh, you know, acquisitions are tough." Acquisitions are tough, yes, but integration is even tougher. We actually have, over the last 5 years, built a, to be honest, an integration machine in the company. Again, Jeremy will talk more about this, but let me share some of the highlights of it.
The very first thing is that we have a repeatable set of M&A playbooks across everything. The playbooks apply to our initial in our search for businesses. They apply to our due diligence process, and the playbooks also apply to the integration. We have them for every function in the company. So this gives everybody who's involved at Progress the ability to look back and say, "Yep, this is what worked last time. We'll make it better." We continually improve these playbooks. So, hey, if something didn't work well with a particular acquisition, we put that in the playbook, we refine the playbook, and then that is available to us when we do the next acquisition.
This is actually one of the key tools, if I may call it that, for us to be successful with our integration. We, throughout the integration process, continue to have a keen focus on the profitability and margin improvement that we are targeting. As I said before, that 40% or higher operating margin post-integration, post synergies, is really, really critical. We make sure that we continue to drive towards that, and we stick to our integration pipeline, timeline, with truly, sort of a, you know, a focus that is really unrelenting. You know, we make sure that the timeline of integration is not something that falls by the wayside.
We do all that, but the other part that we do that is, I think, even more critical is that we bring employees on board in a very thoughtful and welcoming way. Our employee onboarding experience is truly outstanding. We actually do surveys of employees after they join the company, after we bring them on board, and we survey them periodically, just the ones that have been acquired for first several quarters. Consistently, we have seen, they speak phenomenally positively about how wonderful the onboarding experience has been. We're really thrilled and proud of this ability to bring our employees on. Similarly, we improve the experience for our customers. You know, myself, the leaders inside the company, we ourselves talk to some of the larger customers.
I speak to some of the larger customers of companies that we have acquired, so do the functional leaders and so on, our team leaders. We make sure that customers understand what we're going to do to make their experience with us better, how we're gonna invest in the business and make them more successful going forward. We are also very quick about integrating the systems and processes into Progress. This is what lets us get to our synergy targets within the time frames that we set ourselves. Integration of those and all of this continuously being improved with every acquisition. You know, there's always some learnings. Sometimes they are small, sometimes they're not, you know, slightly bigger. We make sure that we learn from those. We do retrospectives.
We put that back into our playbooks, we continually refine this. I'm truly proud of the way our team has delivered on these outcomes for the acquisitions that we have done since 2019, the first one being Ipswitch and so on, when we launched our total growth strategy, because it's due to this total growth strategy that our revenue, which was $380 million approximately, in 2019, is expected to be $684 million at the midpoint of our range, this year. Of course, our EPS has also gone from $2.19 to what we expect, $4.13 this year. By the way, the...
I keep reminding folks that this really does not include the full year of MarkLogic. As you know, we acquired MarkLogic and closed the deal on February 6th. The January and December months of MarkLogic's business don't fall into FY 2023. They'll fall into FY 2024. If you really sort of pro forma take a full year of MarkLogic and if you were to include that, our revenue for this year would be over $710 million. I feel really happy and proud of the way we have executed on this very disciplined strategy and of the whole entire Progress team being able to integrate these things so that we can not only deliver top-line growth, but we can deliver truly profitable growth.
In fact, even though we have, you know, CAGR growth, CAGR of revenue is 12.5%, our CAGR on EPS is nearly 13.5% over the same period. That is because we continue to even do better as we acquire businesses and as we scale up. This result of this acquisition discipline, you know, combined with our rigorous integration efforts, you know, has really led to this demonstrable M&A success. I wanted to talk about the 4 acquisitions we have done so far since we started the total growth strategy.
The Ipswitch acquisition, which we did in May of 2019, again, you know, if you notice after that we did Chef in October of 2020, then we acquired Kemp in November of 2021 and MarkLogic just this past February, two months ago. Across them all, if you notice, we've paid between 3.5x revenue multiple. You know, that's really not the key number to really look at. The number we look at is what will be the pro forma EBITDA multiple. Our goal is to make sure that it's below eight, and we have hit that very solidly. Actually, Anthony will share with you actual, you know, EBITDA results from our first three acquisitions.
Of course, MarkLogic has just started, so we'll make sure that, you know, that too hits our target, and we are very confident that actually it will. That doesn't mean, by the way, that they start off at the 40% operating margin. You know, as you can see, three out of four of these were 20 or a little bit over in terms of their margin profile when we acquired them. Chef was actually at breakeven. Chef, even though it was at breakeven, within 12 months was well above the 40 %+ operating margin once we were done with the synergies. It really is a testament to our effectiveness and ability to execute on this, and we feel really good about this.
Now let me talk about the third part of our strategy, which is customer success. Driving customer success is really critical. Everything that we have, our people, our technology, our experience, our continuous innovation, everything is focused around the success of our customers. We have phenomenal customers across the world and across every geography and across every vertical. One of them is, by the way, software itself, right? There are so many software companies that build their products on our products, which is, which is a fascinating thing to see. Let me, by the way, share with you some concrete examples of how some of these companies are using our products for the value that they generate. The first one let's talk about is QAD. QAD used to be a public company.
They went private not that long ago. They are a midsize manufacturing ERP vendor. They built on OpenEdge their product more than a couple of decades ago. What has happened is because we have been moving our OpenEdge product forward, when we cloud-enabled it, when QAD came out and decided that they want to build their cloud offering, they chose OpenEdge as well because they realized that it was still the most cost-effective, the best platform for them to have their applications move forward. Their Channel Islands products also run on top of OpenEdge, and they continue to be a great customer of our OpenEdge product. Another company, SAP. SAP has more than 14 million virtual devices in the cloud, and not just one cloud, right?
Across eight different clouds, you know, ranging from Azure and AWS and GCP to SAP's own cloud to Alibaba and all kinds of things. They have these 14 million plus devices and to deploy these devices so that they are reliable, safe, secure, configured the right way, they need to use something that is highly scalable, highly robust, and they use Chef, and they continue to be very vocal and positive proponent of Chef. There's a very small team that actually does all of this. The Chef truly makes that team tremendously efficient, and is able to do and deliver the kind of results that SAP needs to run their business. A third example is Boeing. Boeing, by the way, is a customer of ours for the MarkLogic product.
You know, they actually use MarkLogic to make sense out of their parts suppliers and inventory and the complex data around inventory management. They pull it all together, and what MarkLogic does is actually make sense out of it because many times different suppliers will have different names or different terminologies for the same part. Just keeping those things straight, standardizing it, making it so that actually then they can optimize their supply chain, they can optimize their inventory management. They also use it for things like, you know, keeping track of, you know, which mechanics and technical folks have been trained on which kind of aircraft or what kind of machinery.
I mean, it is really extensively used within Boeing to run their business on a day-to-day basis. World Health Organization, right? Most of us didn't really care too much about World Health Organization until COVID hit, and then we all said, "Okay, let's go to the World Health Organization website and see what they say about how we should try to protect ourselves and our loved ones." World Health Organization's website actually runs on our product. Suddenly World Health Organization saw that in March of 2020, they started having 1 billion unique visitors a month. Think about a World Health Organization who probably saw hardly any to go to 1 billion unique visitors a month. You know, it's a testament to our product.
It's also a testament to our people, it's also a testament to World Health Organization working with us closely that they did not experience a hiccup throughout that amazing surge that basically then stayed on pretty much for all of 2020 and well into actually 2021 as COVID went around the world. Again, a very reliable, scalable Sitefinity user, you know, and by the way, other products as well at World Health Organization. Another last but not least example, S&P Global. S&P Global uses our DevTools products to make sure that their front-end applications are engaging, exciting, and they deliver great, you know, mobile and web experiences. Wanted to give you a flavor of the kind of companies and the kind of uses they have for our products.
Our impact on our industry relevance is actually phenomenal. There are more than 1,700 software companies around the world that actually build software on top of Progress, and our software is embedded in it. We are the software that powers the software industry. It's really a wonderful for me to be able to lead this company so that we can basically continue to make those companies successful, whereby, you know, delivering our results that we do deliver. We have more than 3.5 million strong developer community around the world that regularly use our products. By the way, the end result of these products, those business applications, those end applications that get built or deployed, et cetera, you know, they support over 6 million business users and hundreds of thousands of enterprises use them.
Of course, you know, hundreds of millions, if not billions of end consumer users end up benefiting from our product portfolio. That's what we do from the perspective of customer impact. I've talked about our total growth strategy, which is around invest and innovate, acquire and integrate, and then of course, you know, drive customer success. From an investor perspective, you know, what are the keys to our success? Our keys to our success start with our business platform. I mentioned some of this earlier. You know, this operational excellence that we have at Progress around customer retention and success, around making sure not just on the product side, but customer relationship side and so on, that we are very focused on retaining our customers is really key.
Our disciplined M&A methodology, process, and repeatable integration playbooks are truly a competitive advantage in the marketplace as well. Our optimized systems, infrastructure, and processes that allow us to do the integration of our acquired businesses as well as allow us to run well is really key. Our focus on our employees, which allows us to by the way then retain employees and those employees are truly engaged and therefore they work hard and that allows us to have phenomenal expense management. All of this, you know, the systems, process, people, discipline leads to great expense management, which means, you know, tremendous cash flow, which builds up a strong balance sheet, and then we are very prudent about our capital allocation. Speaking of capital allocation for a moment, our capital allocation strategy is very straightforward.
The primary area of capital allocation is M&A because it does achieve the best and most profitable results for our shareholders. Delivering great results through disciplined M&A is where we primarily put our capital. The second part of our capital is buybacks, where we continue to remain flexible and opportunistic. We in general will at least buy back enough to offset dilution from our equity plans, but beyond that it is primarily opportunistic. We also have a small dividend to return capital directly to our shareholders. The most important key to our success is our people, and it is because of them that we are as successful as we are, and that is the reason why we invest in employee development, right?
There are three major areas of employee development we focus on, career growth, personal care, and workplace flexibility. All of these then you know, lead to wonderful things like, you know, great Employee Net Promoter Score, great engagement, and great employee retention. Let me touch a little bit on each of these. In terms of career growth, we actually have tremendous programs for mentoring and career development, training, making sure that they have all the tools they need and capabilities they need to get their work done as well as have a future with us long term. We also are very thoughtful about the personal well-being of our employees and their loved ones, right?
I remember, when at the start of COVID, we made a conscious decision that our decisions about how we function will use our employees' well-being and the well-being of their loved ones as the primary driver. We immediately all worked from home, and we've. By the way, we have continued to work from home today, right? We have provided full workforce flexibility. The delivering that workplace flexibility for employees, in return, they have just sort of embraced what Progress has done for them and love working at Progress. I mentioned earlier our Employee Net Promoter Score being 40, which is really amazingly high. Our engagement, at 80% is at the average of the top quartile, right? It is in the mid-80s percentile range.
It's the average of the top quartile. Because of all this, our net retention of employees last year was 88%. Last year was the year of the great resignation. Everybody was gonna leave. People were finding new jobs. You know, our turnover of employees was less than 12%, which in the software industry is just so wonderful. That directly impacts our bottom line. We don't have to go spend money to replace people. We don't have to hire additional people. We don't have to train them. It doesn't cause disruption. It is all in the end making our business run well. The way we sustain this culture is by living our values. Our values are, you know, we call them ProgressPROUD values.
P-P stands for Progress collaboratively, we work together, respect differences and diversity. We own our tomorrow today. This is about accountability and bias towards action. We uphold trust so that we can fix our problems together. We continue to dare to innovate. We sustain our culture by living these values every single day. By the way, we just published our fourth annual corporate social responsibility report just a couple of weeks ago. This is our fourth year in a row. It's available on our website. We're really, you know, sort of thrilled to share hard data about what we do, how it impacts not only our people, but the whole world. Our areas of focus, of course, are not just our people, but the global community and our planet.
Because of all the work that we do with our employees and because of this employee engagement and our CSR efforts, again, we have been awarded amazing awards. Many of these are, by the way, based on employee surveys. Forbes surveys employees of companies every year. For the last couple of years, Forbes has selected us as one of the best mid-size companies in the Americas to work for. Same thing with Inc. magazine. In the Boston area, the Boston Globe and the Boston Business Journal both have selected us as the best place to work. We have a similar outcome at Forbes in Bulgaria and other parts of the world where we have critical mass of employees.
We really are proud of the fact that our employees are willing to share this externally as well, you know, that they how much they love working at Progress. The couple of other awards here that I'm also especially proud of, the 50 Women on 50 Boards selected us as an honoree because of our board diversity, gender diversity on the board. The Boston Club selected us as one of nine companies, nine public companies out of more than 100 in the Boston area, that have more than three women on the board and more than three women in the executive team.
The fact that, you know, we have such a gender diverse talent both on the board and at the exec level really makes me proud that we're doing the right thing and that we're continuing to build a business that can actually represent the world and actually understand the diversity of the world, and therefore deliver results and sustained outcomes for our shareholders. Our performance, by the way, and results speak for themselves. I wanted to share this with you. Our stock performance in 2022 was outstanding, no matter which index you compare it to, whether it's the Nasdaq or the Russell 2000 or the Nasdaq Software Index or the Nasdaq Mid-Cap Software Index. Those are the four things that we're comparing on this chart, and ours is the green numbers.
It's really gratifying to be able to deliver such truly wonderful outcomes. To wrap up, what I'd like to do is leave you with some key takeaways about our business. First of all, we are a well-established trusted provider of mission-critical infrastructure software. Businesses around the world rely on us. They make sure that, you know, the company like us is delivering to them what they need, and we make sure that we do. That trust has been built over decades, and we value that immensely. It is because of that that our net retention rate is as high as it is, and our customers stay with us as long as they do. We have successfully been executing on our total growth strategy, and we continue to expect to do the same.
If you notice over the last 5 years since we launched the strategy in 2019, we have done very similar deals. We have done very similar M&A. From the M&A side, we've continued to invest in our own core products and improve net retention and gross retention throughout those 5 years. And we have continued to make sure that our customers are successful. Delivering on all 3 aspects of our total growth strategy has allowed us to be as successful as we are. I mentioned earlier about our prudent capital allocation, which is focused on maximizing shareholder returns. I think that shows, and I think it shows in spades with the way we have deployed our capital, and again, Anthony will talk more about that.
Fourth, our reliable, predictable, durable revenues and cash flow and operating income and earnings. I mean, this is what a business in the end is about. We are able to deliver that, and we have been able to consistently demonstrate it that we can do this over and over and over again. Our sticky products, with a loyal customer base and the commitment to innovation and R&D to make that happen is another key thing that you should be aware of about Progress. This is how we're successful with having a strong base in our product portfolio and in our customer base, in our retention. That allows us to steadily increase ARR through the acquisitions while keeping the net dollar retention rates high so that customers stay with us.
The replicable M&A playbook, you know, with the highly disciplined acquisition model is the other part of the foundation around the total growth strategy. We have shown that we can be disciplined. We have shown we are being disciplined. We will continue to be disciplined. That is our commitment to you. That is allowing us to become an acquirer of choice for sellers, for companies, for customers of those companies, and for those employees alike. Actually, Jeremy will talk much more about this shortly. Of course, last but not least, we have an amazing employee culture, corporate culture with our employees with the lowest turnover, which makes us stay strong and continue to deliver and execute on our outcomes. Thank you for the time you've given me, and thank you for attending this session.
I will now turn this back over to Mike, who will introduce Jeremy. Mike?
Next up, I'd like to introduce Jeremy Segal, our EVP of Corporate Development. Jeremy has been driving M&A in the tech sector for more than 20 years, previously with Akamai for most of that time and most recently with LogMeIn. Jeremy has been the key driver of our acquisition strategy over the last 3 years, and he's assembled an outstanding team and created a best-in-class M&A program. Please welcome Jeremy, and he'll tell you all about it. Thanks, Jeremy.
Thanks, Mike.
Hi. Thanks for including me in Progress's Investor Day, Mike. For the last five years, we have been laser-focused on building the team and putting the playbooks and processes in place to allow us to effectively execute on the M&A component of our total growth strategy. I am so excited to share with you today more of the details behind it and specifically why we have such conviction that we can continue to drive one of the critical pillars of Progress's long-term vision for sustained growth. As part of this session, I will spend some time talking about how we build our robust pipeline, how we have developed a strong M&A framework that keeps us focused, and how our integration playbook has put us in such a solid position to successfully execute on our acquisitions.
I will also share some perspectives on the current M&A environment and why I think there are several dynamics that are favorable to Progress. Let's jump in. To execute on our M&A strategy, it is essential that we have a strong pipeline of opportunities within the infrastructure software ecosystem. What makes our team so effective in building a strong pipeline is I've put in place a set of tools and resources, leveraged all my strong relationships, and established a disciplined framework that all contribute to a robust set of quality opportunities in our funnel. One of the benefits of a 20+ year career in corporate development is the vast network of investment banking, VC, and PE relationships that allow us to have phenomenal visibility into a wide array of companies in the infrastructure software ecosystem.
This is not just limited to the biggest investment banks, but our focus also includes the middle market investment banking community that specializes in deal sizes that hit our sweet spot and where infrastructure software is an area of expertise for them. We have great relationships with leading VCs and PEs, as well as smaller VCs that put a greater emphasis in our areas of interest. Last year, we identified the top 75 VCs investing in infrastructure software, and because of my strong network, we had dialogue with many of them so Progress could be on their radar, and we could have the necessary visibility into their portfolios. By having this dialogue with bankers and the investor communities, we are aware of most deals coming to market and can take a more proactive approach and determine what deals make most sense for us.
We can't just rely on these relationships to generate our pipeline. I also need the tools and resources that give us an edge in sourcing and managing deals. Not many corp dev teams are aware of Grata, a phenomenal sourcing tool. Furthermore, most corp dev teams still rely on Excel sheets to manage their deal flow. We've implemented DealCloud to manage our pipeline. As our pipeline of deals grows, having tools like these are critical to our success. Now that I have talked a bunch about how we build our pipeline, let's delve a little deeper into what that opportunity really looks like. Looking across the entire infrastructure software ecosystem allows us to cast a really wide net when we are building our pipeline.
I know Yogesh has shared some of these statistics in the past, but I wanted to remind this audience that from 2016 to 2020, according to PitchBook, VCs invested $135 billion in 18,000 infrastructure software companies. We focus in on this universe as we believe this is where there'll be a greater concentration of companies that fit our criteria and specifically have a more established customer base and recurring revenue of greater scale. We believe this is where we will find companies that are part of older funds, where the VCs are done funding, and a strategic exit could make the most sense. As you look at this graphic in the middle, it is not just VC-backed companies we will look at to drive pipeline.
We spend plenty of time talking to bootstrap companies that are in PE portfolios, and have even evaluated carve-outs in public companies. When I first got to Progress, we ran an exercise to look at companies across the entire software development lifecycle so we could better understand that universe. This was a very fruitful exercise as we uncovered quite a number of interesting companies across many themes of infrastructure software, including over 350, which had revenues of greater than $25 million. We have regular proactive dialogue with this universe of targets, and when the time is right, we'll be well-positioned to pursue them from an M&A standpoint. With all that said around our large set of opportunities, unless we have the right framework in place, successful identification and execution of the right targets is difficult. Let's talk about what sets us apart there.
One of the strongest attributes of our efforts at Progress is our discipline. By being disciplined, we can walk away from deals that don't strictly adhere to the financial criteria that drives our success. This discipline allows us to quickly rule out targets, many targets, and cover vast swaths of the infrastructure software ecosystem with a relatively small team. I'm extremely proud of the talented and experienced corp dev team we have here at Progress. They bring learnings from many transactions, and this has helped us develop robust playbooks that guide our work. With every deal, we incorporate more learnings and retrospectives, always striving to improve our processes and apply more best practices. Our discipline and strict criteria ensure that we only do deals that are accretive to Progress and create value for our shareholders and keep our pipeline and top of funnel strong.
As Yogesh shared in his presentation, there are three pillars to Progress's total growth strategy: invest and innovate, acquire and integrate, and drive customer success. We take the acquire and integrate pillar very seriously and believe everything we do, from identifying attractive acquisition candidates to integrating those targets, ties into these three critical pillars of success. For our total growth strategy to work and create value, our acquisition integration playbooks must be repeatable, and we've made tremendous strides over these last few years to leverage these tools in successfully completing our acquisitions. Without the right M&A framework in place, including a strict set of financial criteria, executing on this strategy would be much more difficult. Let's take a moment to expand on that. One of the most important factors for the success of our total growth strategy is that our process is repeatable.
Therefore, we have certain characteristics that absolutely must be met for us to proceed with any deal. This allows us to prioritize our large pipeline and provides a greater likelihood that every deal will be successful post-execution. As we think about prospective acquisition candidates, we focus on some key financial characteristics, specifically strong recurring revenue streams and customer loyalty. Recurring revenue streams help us with predictability and solid net and gross retention rates provide good indicators of how loyal and committed customers are to the target's products. We also have greater success with acquisitions if they fit a certain growth profile, and this typically means assets that have growth rates from low to mid-single digits up to the mid-teens. Targeting assets with these attributes allows us to pay a multiple that is realistic to the seller and within the parameters of what we are willing to pay.
Also, when it comes to profitability, we are not afraid to do the hard work to get an acquisition to 40% operating margin levels. Given what we look for in a growth profile, our greatest success and where we focus is on assets that tend to be break even to mid 20% operating margins. If we don't see synergy potential where we can create real shareholder value, we will not pursue the opportunity. As it relates to the size of the acquisitions, we are not interested in technology tuck-ins and really don't spend much time with assets below $25 million in revenue. We are all about looking at scale assets that can provide an immediate impact to the top line.
This can be in one acquisition, like our previous four that have all been over $70 million in revenue, or through a combination of acquisitions that help us achieve revenue levels of at least 10% of Progress total revenues in a given year. With all that said, our main goal for any deal, something you've heard often from Yogesh, Anthony and Mike, is that the return on invested capital must exceed our weighted average cost of capital on any deal we do. One way to ensure we hit the mark on this critical financial criteria is to make sure we have a solid integration plan. Let's talk about what we have done to develop an amazing and replicable integration playbook. Many companies don't take the time to think about integration when they acquire a company.
We take a very different approach to integration, and I believe that sets us apart, particularly with our successful track record over these last few years. I am incredibly lucky to have such an accomplished integration leader on my team with over 20 years of integration experience. We work very closely together, as soon as we execute an LOI, she begins devising an integration plan to maximize the likelihood of success. We have several integration guiding principles that we believe have made us successful since commencing our Total Growth Strategy. They are to protect the business, to plan comprehensively and execute rapidly, communication and transparency, provide leadership at all levels, and achieve the results. In the interest of time, I will elaborate on two that I am particularly proud of: communication and transparency and leadership at all levels.
As it relates to communication and transparency, our approach of constant communication throughout the integration process really sets us apart. If you've ever been acquired, you know that the worst part is not knowing what's going to happen. We try to mitigate that stress by proactively and transparently communicating with them as soon as the deal is closed and consistently throughout the first several months. In addition, our integration planning is not one directional. More specifically, we lean on experts from both our team and the acquired team to develop the most comprehensive plan we can and are not afraid to take best practices from the acquired company and incorporate them into Progress. From day one through the first year of a transaction, we work to make sure the integration process is seamless and that we achieve our goals and objectives.
Having a dedicated integration team across product and engineering, go to market, people and culture, and operation puts us in a great position to have a maniacal focus on the people experience and take a similar approach with the customers we inherit through our acquisitions. Further testament came in our most recent acquisition of MarkLogic, where a principal from the PE firm with many years of deal experience specifically called out that our communications plan was the best he had ever seen. While it is great to have the playbooks and the discipline, the real proof is in the results. I think this slide really speaks to the execution success since we implemented our Total Growth M&A strategy. When Yogesh rolled the strategy out, we were a $379 million revenue company, and revenues were flat, if not slightly declining.
Fast-forward to today, we've added over $300 million to the top line with four great scale acquisitions, resulting in a CAGR over that period of over 12%. Combine that with operating margins of 40%, you could say we are a rule of 50 company. To me, that is something to be really proud of. Furthermore, each of these four acquisitions have added real scale to the top line, and the fact that we continue to be disciplined even when the market was frothy, shows that we are adhering to our framework and are poised to continue executing on this model. Let's also take a moment to talk about each of these four transactions since we implemented the Total Growth Strategy.
The true testament of the value of our M&A approach is the results of the acquisitions we have completed since beginning this Total Growth Strategy effort. Ipswitch was our first acquisition after announcing our new M&A approach. It has been nothing short of a home run. The company was bootstrapped, and we were able to enhance its growth and retention rates, and its product suite brought us squarely into the manage pillar of our develop, deploy, and manage high-impact applications mission. Chef has also been a fantastic transaction for us. It's an excellent example of a company that fits our profile. Growth had slowed from its high-flying days, VCs were tired, and we got a great asset at a reasonable valuation. This acquisition helped establish our deploy pillar in develop, deploy, and manage high-impact applications.
Today, we are extremely proud that we can say we have more developers working on next gen DevOps and DevSecOps products than when we acquired the business while reaching Progress operating margin levels. Kemp has further enhanced our value proposition around managing mission-critical applications and it checked all the key financial criteria we look for in an acquisition. Since we acquired the business, we have gained footholds in new geographies and have seen solid increase in revenue contributions from the partnership they had established with Dell. MarkLogic is still new, but there's a lot of excitement around this asset and how it takes our data capabilities to the next level with data insights and data agility across a wider array of data types.
This is our largest acquisition to date with over $100 million in revenues. We are excited to see our integration efforts lead to another successful deal. Part of the reason we have put such an emphasis on building our M&A muscle is so that we can be a compelling option for companies looking to sell. In other words, we want to be the acquirer of choice. This means having a proven track record on execution, but also educating the ecosystem on who Progress is and why we are a good acquirer. This has taken time and has been a big focus of mine over the last few years. What I have found is that more and more investment banks, VCs, PEs, and companies have taken notice. Being a 40-year-old software company is no longer a negative.
Our resilience and ability to adjust and be relevant in today's world of digital transformation and cloud adoption has made us an interesting acquirer for even more companies. Speed and certainty to close have also been differentiators for us. We've always placed an emphasis on driving an efficient diligence process. What do we need to understand to validate our deal thesis and get to a go, no-go decision? Too many corporate develop.ent teams get bogged down in the weeds. By training our functional teams on what to look for in diligence, we can drive a faster and more efficient diligence process. Similarly, Progress is committed to certainty to close and having a strong balance sheet and being aware of what is market in today's M&A environment gives sellers assurance that if they enter into a letter of intent with Progress, there's a high likelihood that deal is getting done.
Yogesh talks about this a lot, but we take great care in the people we inherit through acquisitions and the customers who come in a transaction. Our commitment to those constituents cannot be underestimated, and I believe differentiates us as an acquirer of choice. These next two quotes are just some of the validations we have heard from others on how we are demonstrating this acquirer of choice mantra. We recently engaged DLA Piper as a new law firm, and they were blown away by the thoroughness and efficiency of our diligence process. On the Kemp acquisition, one of their VPs specifically called out our amazing attention to the employee onboarding experience, as well as our unwavering commitment to customers. To sum it up, we strive to be the first choice among sponsors, sellers, management, and ultimately, the employees and the customers of the companies we buy.
We believe that our strong balance sheet, global platform, incredibly loyal customer base, and tremendous commitment to people make us a great home for companies considering strategic alternatives. Over the last few years, as this awareness has grown, I have personally seen a desire for more investment banks, VCs, and companies to reach out proactively to us. This is not something that happens overnight, but rather is the result of our successful track record since embarking on this total growth approach to M&A. I also thought it'd be good to share some of my perspectives on why I believe the current M&A environment is favorable for Progress.
Based on many conversations over the last few years, while VCs were willing to extend the runway on portfolio companies in 2022, as we look at 2023, we believe they are taking a harder look at their portfolios and that more of their companies will come to market and with more rational valuation expectations. We also believe macro conditions such as a closed IPO market, continued volatility in software equity markets, and a disappearing SPAC option will lead more companies to consider a strategic sale. This is especially true as we have seen the shift as VCs gain an upper hand versus founders, including more favorable preferential rights and down rounds.
Furthermore, in the aftermath of the recent SVB closure, access to venture funding is likely to become even more limited, and VC-backed companies looking for more capital from their investors will find it increasingly challenging as the VCs become even more discerning on their winners and losers. Progress is also well-positioned as PEs no longer have access to free money and might not be as willing to stretch as much on valuations as they have in the past. As you may recall from some of Yogesh's comments in fiscal 2022, we walked away from a lot of deals that from a valuation or multiple perspective, just did not fit our discipline. Removing this potential competitive inhibitor should also be advantageous to us. Given our strong economic profile, we are well-positioned to act as opportunities arise and we proactively identify deals.
In closing, I believe our disciplined M&A process is repeatable and will continue to drive a robust pipeline that allows us to find the right deals for Progress. We will adhere to our strict set of financial criteria so we can execute on deals that will create the right shareholder value. We'll continue to leverage and enhance our playbooks, so we are well-positioned to continue executing successfully. Lastly, as Anthony will show in his presentation, the strength of our balance sheet, P&L, and cash flows will position us to continue to create real value through M&A. Thank you.
Outstanding. Thank you, Jeremy. That was terrific. We look forward to more of that during the Q&A. We're gonna take a very short break right now and be back with our final speaker, Anthony Folger, our CFO. We're back and ready to conclude our prepared presentations with our CFO, Anthony Folger. Anthony has been with Progress since 2020 and was previously with Carbonite until its acquisition by OpenText. Prior to that, he was at Acronis. Many of you already know him from his prior companies, since he's been here at Progress, Anthony guided the company through the pandemic and manages the financial aspect of the evolution and execution of our total growth strategy. He's got lots of details to share with you, I'll turn it right over to him. Welcome, Anthony. All right.
Thank you, Mike.
Okay.
All right. Well, thank you. Thanks everyone for joining us today. I feel like I get called in to close out the ninth inning, so hopefully I've got my fastball working today. Let me start with putting a financial lens on our total growth strategy. This slide is really meant to represent how we execute our total growth strategy. When we talk about invest and innovate, my first thought is our people. You know, there are a lot of reasons why we should invest in our people. Using that financial lens, one big reason is that an engaged team is more productive and less likely to leave. You've heard from Yogesh a bit about our culture, engagement, and the pretty impressive employee turnover stats, I'm here to tell you that those things make us more effective as an organization
We also invest in infrastructure, systems, processes, security, all aimed at ensuring our operating platform runs with minimal friction. A second benefit of an efficient operating platform is having something to integrate an acquired business into, and I'll talk more about that later. I think acquire and integrate is pretty straightforward, and you've heard a lot about our disciplined M&A strategy from Jeremy and Yogesh. A little later on, I'll discuss past acquisitions and what they've delivered for us and how we think about allocating capital. Then there's the final pillar, driving customer success, which happens when you've got engaged employees who understand our customers and the end markets where we play. They understand the investments we make in our products and the criticality of customer success to our whole operating model.
I know that's a lot, but it really is foundational to understanding our focus as a business. I mentioned the last slide represented how we execute our Total Growth Strategy, and this slide is meant to demonstrate the results we've been able to attain. I've touched on a handful of these items already, but a few items to call out here, in addition to our success with customer and employee retention, would be the consistent ability to maintain best-in-class operating margins and strong, durable free cash flow, and doing so with a pretty modest amount of leverage on our balance sheet. I'd add to that the fact that we actually think about capital allocation and are very deliberate in trying to drive the best returns on capital for our shareholders. Finally, I think we're a pretty rational bunch.
We try to learn from every acquisition we do, and we know that we don't know everything, but we always try to apply learnings to the next deal, and hopefully, this allows us to continue to drive success in the years to come. Here's another slide that's meant to demonstrate the results that we've been able to attain, perhaps with a finer point on it. You know, we've been growing our top line at a 12.5% CAGR since embarking on this strategy, and at the same time, we've been growing the bottom line at or better than that rate.
As Yogesh mentioned earlier, our FY 2023 outlook of $684 million in revenue, it doesn't really tell the whole story because if we were to pro forma our 2023 revenue to approximate a full year of MarkLogic, the number would likely be more than $710 million. It's also important to highlight our operating margin for fiscal 2023, which at the midpoint would be just above 38%. Keep in mind, we're integrating MarkLogic this year, so all else staying the same, I'd expect some upside in that margin as we move into fiscal 2024 based on the integration that we're doing this year.
When it comes to EPS, I think it's important to note that our FY 2023 earnings per share will experience a drag due to the MarkLogic integration, as I mentioned a moment ago, and also from rising interest costs, which have an impact of roughly $0.27 per share this year. Finally, you know, we've continued to grow our unlevered free cash flow over the past several years. And, you know, we've consistently converted more than 80% of our operating income to unlevered free cash flow. To dive a bit deeper on our top line, I think it's important to talk about annualized recurring revenue, or ARR, and our net dollar retention rates, or NRR. We believe ARR provides the best view into the underlying performance of our top line.
As a reminder, our ARR is calculated in this presentation on a pro forma basis to include the results of acquired businesses in all periods presented and in constant currency with all periods presented at our current year budgeted exchange rates. Finally, it's worth noting that our net retention rate is calculated using ARR dollars over a trailing 12 months. Net retention is really an attempt to answer the question: of all the ARR dollars we had 12 months ago, how many of those dollars did we retain at Progress after considering customer renewals, customer upsell, cross-sell, and down-sell? A few other points on ARR. First, the vast majority of our ARR is comprised of maintenance contracts on perpetual software licenses. It's more than 70%.
This is trending down a bit in favor of subscription and term-based license agreements, which are now roughly a quarter of our ARR mix. More to come on these trends in a little bit. My second point is that ARR has been growing consistently, and this is really driven by two factors. First, we've acquired about $330 million of revenue over the past several years, and these acquired businesses, generally speaking, were growing at or slightly higher than our other products. We've been able to maintain, and in some cases accelerate that growth a little bit. The second point is some of our heritage products, like OpenEdge, have seen improved performance over the past few years, and we believe that's a benefit of the investments that we've made in our products and in our customer relationships.
Okay, so for a deeper dive on retention, I'd like to just make a couple of points here. First is to mention that our most important market is our existing customer base, and we want to ensure that customers who've built and run their businesses on our products continue to expand and grow without replacing those products. When you look at the trend lines, I think the fundamental message here is that our dollar churn rates have been improving a little bit, and this improvement is what's driving much of the improvement in net retention rates. While we're thrilled, with that trend, I don't wanna set an expectation here for continued improvement, right? I think our dollar churn rate is about as low as it's gonna go. We're looking to maintain customer retention and continue to grow with those customers.
Okay, one final cut of our top line here, I'd like to just point out that OpenEdge was roughly 41% of our revenue in fiscal 2022. With the addition of MarkLogic in fiscal 2023, we expect that percentage to drop a little bit further, and that's down from about 70% in 2018 before we embarked on our current strategy. Down the bottom, I'd like to point out that, you know, we consider just over 50% of our revenue to come from indirect channels, which includes ISVs, OEM, and more traditional distributors and resellers. Our geographic mix, that's something we've talked about quite often in the past, I'll mention it again. Roughly a third of our business is in EMEA and close to 60% in North America, pretty well diversified there.
The final point here is one I alluded to a while ago on the bottom right, and that is our mix of ARR by revenue type. That really has shifted a bit from maintenance on those perpetual licenses toward more subscription and term license arrangements. The fundamental trend here is, you know, growth in products like DataDirect, Chef, and now MarkLogic. All of those utilize a subscription model. I'm gonna shift gears now and move to capital allocation, which is something we think about and talk about constantly within the business. Today, our capital allocation priorities flow as, you know, M&A at the top, and really, it's M&A that meets our criteria. I'll talk in a moment about how we acquire and integrate and the results that we've been able to obtain. Up next is share repurchases.
Our current view on share repurchases is that we'll continue with the repurchases on an annual basis in order to offset dilution from our equity programs, and we'll return some capital to our shareholders, but we're constantly looking at interest rates and our share price as we evaluate the M&A landscape. There may be times where we'll be opportunistic and maybe we'll acquire more or fewer shares than necessary to offset dilution. For example, last year, we repurchased $77 million of our own shares, and that was at a time when our stock price was in the low to mid-40s. This is an assessment that evolves constantly within the company. Next is making the right investments in R&D to ensure continued product competitiveness and those high retention rates as we've discussed. Up next is debt repayment.
Like share repurchases, this is an assessment that's constantly evolving, but, you know, in a market where our bank facilities have an interest rate of roughly 6%, before any of the interest rate swaps, we think de-levering probably makes sense. Finally is our dividend. We think a dividend can be a, you know, a pretty attractive option for certain shareholders, especially in a lower interest rate environment. In an environment of elevated and maybe rising rates, frankly, we make the same assessment on dividends as we do with share repurchases and debt repayment, and we want to ensure that we're being as efficient as we can be with capital allocation.
Digging into our M&A approach a bit further, I think we've done a good job of covering the M&A criteria on the front end, which, you know, is what does it take for us to commit to a deal? A question we get often is: How do you integrate once a deal is done, and how do you actually get the margins that you target, you know, solely with cost synergies? A few fundamental points on this. I think the first point is, you know, Jeremy and his team screen out an incredible number of deals before they get any airtime within Progress. One important criteria that's handled there, and maybe it's the most important criteria, is that when deals come into the business, the target companies operate in end markets that we understand very well.
We generally understand the end customer, the routes to market, the technology, all of this is critically important to our model because we're targeting post-integration operating margins of better than 40%. You know, the normal back office and real estate consolidations alone generally won't get us to that level. It's important for us to know that we can find additional synergies across the business with the scale and efficiency of our operating platform. It's very important. Now, beyond that, sort of that end market fit, we act as quickly as possible, you know, communicate intentions to employees as soon as we possibly can. We know that nobody likes uncertainty, we try to be respectful and direct in our communications to employees. Another thing we try to do quickly is rationalize any redundancies with, you know, leadership, back office systems, real estate.
Finally, I should mention that we put a lot of focus on our onboarding process for employees who come in through acquisition. Getting employees assimilated is really critical because we want folks to stay, and we want them to continue to drive success for their business within Progress. Let's double click on what we've done with our M&A model and why we continue to believe that M&A is the priority for Progress's capital allocation strategy. I think it's worth putting a lens on our M&A efforts that doesn't just consider what we modeled sort of at the outset of these deals, but what we actually achieved with these acquisitions and how they've benefited our business. In the 4 acquisitions we've executed since we embarked on this strategy, we've deployed more than $1 billion in capital.
For that investment, we're generating more than $330 million in incremental annual revenue and frankly, growing annual revenue. That gives you a revenue multiple of about 3x. We're generating almost $150 million in incremental EBITDA, which translates to a, you know, post-integration EBITDA multiple of approximately 7x. You know, that represents a return on invested capital of more than 14% using EBITDA as a measure. I note return on invested capital of 12%-14% here in order to account for taxes. In either case, these returns easily hurdle our weighted average cost of capital, which is running, you know, just around 9% today. Now, we run more detailed analysis internally on each of our deals.
However, these are the returns in aggregate that we have been able to generate for the business as a whole while pursuing the total growth strategy, and it's why we believe M&A is the number one priority when it comes to capital allocation. Okay. As we've mentioned, beyond M&A, we're also returning capital to shareholders in the form of dividends and share repurchases. This has been consistent for a number of years, and as I mentioned previously, our primary goal with repurchases is to offset dilution from our equity plans. We also tend to be opportunistic, as you can see in fiscal 2022 when we repurchased 77 million shares of Progress stock. Just a quick reminder here that, you know, we focus quite a bit on driving cash flow in the business.
In fact, I'd say strong cash flow is a strategic imperative at Progress. It allows us to execute our model and for a company of our size to deploy more than $1 billion in capital and keep our leverage at a comparatively modest level. That doesn't happen by accident. I cover this slide just to emphasize the strategic importance of cash flow to our business and our model. Before we get to the part of the presentation where we look forward, I thought it would be worth highlighting how we're positioned today with our debt facilities. The message here is that our liquidity today, and where it's projected at year-end would allow us to do another deal in the near future. Obviously, time allows us to delever, which is consistent with how we've operated in the past.
In terms of our cost of debt today, you can see our bank facilities over the past five quarters and the impact of rate increases. You can also see the interest rate swap that we bought back in 2019 to fix about half of our term loan A and the fact that that swap flipped and started to pay off a little bit last year. I should also mention that our total debt portfolio includes our convert and has a cost of roughly 3.4% at the end of Q1. Now, that's with just one month of revolver drawn down in the quarter. So if the revolver was drawn for the full quarter in Q1, that rate probably looks more like 3.9%.
You know, before anybody mentions the call spread on our convert and whether that makes the debt more expensive than 1%, you know, I would say that we're getting close to the break-even point on the call spread. We've got 3 years left on the convert, more or less at this point. You know, we think of our convert as 1% paper. Okay. Now let's talk a bit about how we forecast the business. First and foremost, we target an operating margin. Over the past several years, we've been anchored in the high 30% range, and we've generally overperformed against that target. The exact target will vary year to year depending on a number of factors within the business. Generally speaking, we focus on 2 primary factors.
First is customer retention. We build a bottoms-up revenue plan based on our expectations of customer retention and any upsell along with expected contract renewal cycles. The second thing we do is, you know, we have a really good handle on our employee base. Employee-related costs make up about 70% of our expense base. It is important for us to have a good understanding of the labor markets where we operate. I should also mention that our company culture is one in which employees are pretty frugal with company money. They're generally looking to find efficiencies. You know, a good example of this behavior was the sale of our former corporate headquarters. You know, it became clear during the pandemic that our business could function in a remote or hybrid model.
Excess office space became an obvious cost-saving opportunity, and it was one that I did not need to highlight to the people within Progress. You know, that type of attitude, that type of DNA within the company is, it's prevalent, and it certainly helps when you're trying to maintain operating margins that really are best in class for software. That's our base business, and that's how we forecast it. Again, it's anchored to and driven by that operating margin target. On top of that, we know we're gonna grow through acquisition. There are a handful of really key variables to consider in the M&A model. I think first is deal size. You know, we look to acquire roughly 15% of our revenue on an annual basis.
You know, that target might end up being a bit lower or a bit higher in any given year. But in the long-term model, we're using 15%. Next is target multiples. You know, revenue multiple's important, and I've put a range here of 2.5x-3.5x revenue. And that's what we've used in our long-term model. The reality is that the pro forma EBITDA multiple, and pro forma meaning after synergies are attained, that is critically important and really one of the ways we assess the opportunity for value creation.
Those first two variables are about purchase price, and purchase price is really important in our model because after all, our financial criteria, really the foundational criteria, is that the return on invested capital has to exceed our weighted average cost of capital, and invested capital is purchase price. Another call-out here are interest rates, which again, those are critically important in our model. After all, we're using a discounted cash flow model to value potential opportunities, and interest rates obviously impact the present value of future cash flows in that model. The way to think about interest rates is higher rates will require lower revenue multiples, sort of in that 2.5-3.5 range, right? Higher rate probably means lower end of the multiple range.
In our long-term model, we're using 6% as an interest rate on the cost of debt, and we're assuming that we'll use debt to finance all of our acquisitions. Interest rates, again, very important. They also impact our weighted average cost of capital, which is our hurdle rate for M&A. Currently that weighted average cost of capital is running around 9%. Finally, I'll mention synergies again. I've mentioned this before, but synergies for us mean cost synergies. We don't model top-line synergies from things like cross-sell, nor do we model accelerating revenue growth. In our experience, top-line synergies are very difficult to predict.
Okay, with that context in mind, we've got a brief snapshot where we were for fiscal year 2022, our current guidance for fiscal year 2023, we've got a range of outcomes that we're targeting for fiscal year 2028 in our long-term model. You know, at this point, I would hope that people feel like they've got the assumptions necessary to understand how we arrived at the fiscal 2028 ranges. It's worth reiterating the fact that purchase price and interest rates are important factors in our ability to hit these target ranges, we'll do our best to adjust to a changing dynamic as we execute on the strategy. It's also worth mentioning, I've got a financial model from 2019 that Progress prepared, it was put together in a very similar way.
It covered a five-year period, and it is shocking how close we are to the targets, four years later. It's truly amazing. And, you know, I suppose that's another way of saying that I realize that it can be easy to dismiss long-term targets. But we've already run through one cycle of this, and frankly, we've nailed it. Our view is that, you know, we're just gonna keep executing, and we're confident you'll see a lot of value creation. Okay, to wrap up, if you come away from today with anything, I hope it's that we've got an entire organization here at Progress that is engaged, and aligned to our strategy. That we're very focused on our customers and our employees and ensuring the success of both.
That we're gonna be very careful and thoughtful with allocating capital and trying to generate the best possible returns for our shareholders. Thank you very much for joining us today.
All right. Thank you, Anthony. That was great. We're gonna take a short break right now, we'll be back in about 2 minutes. In that time, you can log in your questions either through the webcast portal or on the phone lines. We've got several waiting already. When we come back, we'll dive right into Q&A. Great. Welcome back, everybody. Thank you for joining us for Progress Investor Day. We've got the whole team assembled here on stage for Q&A, and we've got several questions in the portal already. I'm gonna get started with the first one here. The question from an analyst is, "Why would ARR in fiscal year 2023 be only $575 million?
It seems like you are assuming net retention to be 102%. Why would ARR grow 1% year-over-year versus 4% last year?
Yeah. Let me start with that, Anthony, happy to have you jump in as well. First of all, as you know, we don't guide for ARR. We wanted to make sure that we provided some level of indication as to where we think ARR would be. As you know, our goal internally is to keep our net retention rate at or above 100%. We have been able to keep it at 102%. I would love to see that again this year. You know, we at Progress Software don't like to count our chicken before they hatch. We just thought we'd put out a number that was an approximate number. Anthony, anything more?
Yeah, no. I think a number we feel like we can meet or exceed. No, I think that's right, Yogesh.
Okay. All right. Next question is, "What is the revenue growth rate for the non-legacy business?
You wanna take that, Anthony? I mean, you know, to me, I'm not sure what people are thinking when they think of legacy versus non-legacy. Let me interpret it my way, and then Anthony, you can add, too. I'm assuming that the non-legacy is sort of the acquisitions we have done since we started on the Total Growth Strategy, right? That is the combination of Ipswitch, Chef, Kemp, and now, MarkLogic, which is yet to be, you know, growth rate on that is yet to be seen. For the other three. In general, by the way, it isn't really remarkably different. It isn't as though the legacy businesses are shrinking in any meaningful way. They are not. And it isn't as though the new businesses are growing very aggressively. They are not.
They are in a relatively narrow range, and that's the way we continue to run our business, right? Even when we acquire companies, we, as you know, significantly reduce, among other things, sales and marketing expense, and we focus on customer retention. So it isn't as though we're trying to drive Top line growth on the newly acquired businesses to something meaningfully high. So we actually are very happy with the overall blended range, which we've been able to get to as some of you have noticed, you know, 103%, 104% of, you know, of, like 3%-4% growth on our ARR. But it's relatively narrow.
Yeah. No, I... Nothing really to add. I think it's, you know, some of the acquisitions we've done, businesses have had slightly higher growth rates coming in. I think by and large, we've maintained that. We're talking, you know, maybe mid-single digits versus low. It's a pretty tight range.
Mm-hmm.
Okay. All right. We have several questions here that address similar topics, so I'm gonna combine a couple here. This one is directed toward Jeremy, but is there a priority sequence or preference as to which solution area you'd like to see beefed up via M&A? Along with that is, what areas of infrastructure have you not addressed yet are interested in moving into, and what about analytics? Maybe both of you guys can tackle that one.
Yeah. Well, I think for us, like I talked about in my presentation, I mean, we really do try to cast a wide net across all the different businesses of Progress. Spending time with our application and data team, our infrastructure management team, and our digital experience team. You know, we're really focused on trying to find opportunities, and keep the funnel strong for all three of those businesses. Right now, you know, with MarkLogic being integrated in the application and data business, you know, we're very focused on the other two business units. One of the great things about building up the M&A muscle that we have at Progress is, you know, we can look at multiple things simultaneously, and have the bandwidth to be able to do that.
I wouldn't say there's any specific theme that we're really focused on. We really do continue to cast that wide net. With regards to analytics and embedded analytics, that's certainly an area that we look at and could be a good fit for Progress. Certainly a theme that we look at. We have lots of themes that we spend time on. The great thing about our business units is they spend a lot of time talking to us about what's important to them, and then we can go see what types of companies sort of fit those profiles.
You know, you're right, Jeremy. Actually, the reality again about acquisitions is that they are opportunistic, right? You know, it isn't as though we started off by saying, "You know what? We need to actually find something in DevOps and go look for Chef," right? Chef or Puppet or whoever was around at that time. It was really that, you know, we said, "Yep, this is one of the areas," and Chef came along, and we acquired Chef. It wasn't as though we're saying, "You know, next thing should be complex data management and therefore MarkLogic, let's go after them." It's actually the other way around.
We have this wonderfully nice broad opportunity set and a really wide aperture that allows Jeremy's team to look at you know, businesses and opportunities across the range of these functions and areas, and that allows us to, you know, pick and choose. By the way, I've said this before I wanna repeat it, we are actually okay acquiring a second company that has similar products to something that we already have. We're absolutely not averse to it at all. If we can support two products in the same domain, no problem whatsoever. We can keep both customer sets happy. We can actually leverage some of the capabilities of one product with another and vice versa to make both the product portfolios stronger. We've done it.
I've been at places that it has been done before. I'd be happy to do it again at Progress. I don't want folks to think, "Oh, you know, Progress already has a product in this area, so they will not acquire another one there." To us, the criteria that Jeremy laid out, right? The characteristics of the business.
Yeah.
The net dollar retention rate.
Yeah.
the size and scale, whether we can get the efficiencies we need to get to the kind of ROIC, so that we beat our WACC. Those are the important things.
For sure.
The actual specific product category is less so.
Yeah.
Okay. All right. Anthony, we're gonna throw one your way 'cause it's kinda model based. The question is, can you speak to the linearity of inorganic revenue additions through fiscal 2028, or is this largely gonna prove opportunistic based on the asset type?
Yeah.
really kind of a model question.
Yeah. You know, I think in reality, it will be opportunistic and sort of as Yogesh and Jeremy just discussed in terms of how we approach things. You know, there are a lot of variables out there that we need to consider as we're executing. From the perspective of modeling, we've just modeled things out as one deal per year, targeting 15% of our revenue to go and acquire. Like I said, 6% interest rates. We keep doing our share repurchases. We continue to do our dividend payments, and sort of all those variables need to be in the mix. That's, you know, purely to drive a model and take a look at maybe what some of the boundaries and restrictions are. The reality is these things are opportunistic.
We have to evaluate every deal based on facts and circumstances as they come in.
Okay. All right. Well, as long as you're warmed up, let me give you a follow-up here. On R&D spending, innovation versus maintenance, what's the split there? Then among the three solution areas that that we've got, given the varying levels of SKU, S-K-U maturity and saturation. Again, another model question really.
I guess I would say that the... We don't really provide detail on our R&D spend by product, right? It's something we look at internally. It's not something we break out, maintenance versus innovation. What I can tell you is if we're spending roughly 17% of revenue on R&D, there are certain products that based on the market dynamics or maturity or scale, right? I mean, scale matters as well, that spend could be higher or lower. If for example, we've got products that require more net new acquisition, we may be spending a little bit higher than that 17% on R&D. We've got other products maybe that are higher scale and less dependent on new customer acquisition. We're spending, you know, maybe well below that 17%.
I don't wanna give a sort of innovation versus maintenance breakout because I think it's, I don't wanna say misleading, but it's really not the way we look at it. We look at it at the individual product level. We think about the technology, you know, is there any sort of cloud-based offering that we're serving up? What scale do we have? How competitive is the market? All of those different dynamics will drive the amount of R&D spend and the type of R&D spend that goes into each product.
Okay. All right. Jeremy, this one sounds like it's for you. With 350 companies with over $25 million in revenue that we've identified, how many have revenue of $75 million or above? I'm sure you know that right off the top of your head.
That's a great question. We do have it broken out between $25 million-$50 million and $50 million and greater. You know, off the top of my head, I don't know, but there's a good mix of ones that have scale north of the $50 million-$75 million range, as well as a good mix that have revenues in the $25 million-$50 million. You know, as we talked about in my presentation, I mean, Anthony mentioned as well, you know, we're looking at a bunch of deals over the course of any given year. In one year, we might do a $70+ million deal, and another year we might do a couple smaller deals that get us to that 10%-25%. It really varies.
I'd say, you know, it's a good mix in that, 350 of companies that have some good scale north of $50 million-$75 million, as well as ones in that $25 million-$50 million. I don't know the exact number off the top of my head.
All right. Well, if there's a follow-up to that, we can get you more detail.
Yes.
I'm sure Jeremy's got it.
Okay.
All right. Here's a wild card. Even though we have a very strong track record of integration, what do we see as the biggest risk? I think maybe everybody can jump on that one.
I'll start with that, and then I'll let Jeremy and Anthony also add. You know, I mean, I think the risks are always around our own execution, right? That's the way I look at it, right? The risk is that we miss something quite meaningful during due diligence for whatever reason, right? Now, we believe we have phenomenally wonderful playbooks. We believe we have good experience under our belt. You know, we have done three deals that we've already demonstrated, have delivered significantly wonderful results, as Anthony pointed out and shared. We've just completed the fourth, and integration there is on track.
You know, we feel good about where we are, but that's still, you know, the unknown unknowns, as I think somebody said, is really what we keep watching for and looking for and saying, you know, what might be around the corner on integration that we miss either during due diligence or during integration. However, we mitigate that risk in multiple ways, right? First of all, we begin with picking businesses that have solid customer recurring revenue and retention rates. I think that is a fundamental backstop against that risk going haywire against us and causing significant downside. I think that, to me, I think is something that may often not be fully understood or that the importance of that may not be fully understood.
When you have a product that is sticky, when you have a customer base that is happy, then when they come into somebody like Progress, we know how to retain customers. We know how to treat customers right. We know that that part of it, we will continue to do at least as well, if not better, than the acquired company. In fact, we've demonstrated that we do better than the acquired company. To me, I think that really mitigates significant portion of the risk. That's the way I would look at it.
Yeah. Yeah.
I... Jeremy, you want to add?
No, I think, you're right on the execution piece, as an area where, you know, we are putting maniacal focus towards. As I talked about, I mean, we have our integration lead basically sitting in once we kick off formal diligence of any acquisition target, and that gives her the ability to really start formulating that integration plan, which, you know, the earlier you can start working on that, it mitigates that execution risk. You know, there are always unknowns, as Yogesh talked about, and that could affect the integration, the timing of the integration. I think that we've really put the playbooks in place to minimize that risk by, you know, paying such close attention to that integration plan so early in the process.
Okay. All right. Here's one that we get fairly often from different kinds of investors and analysts. How do we think about top-line synergies? Obviously, that's not what we're looking for, and we say that often. As we keep acquiring companies, the opportunity should increase. How do we think about that?
You know, top-line synergies can happen. I, you know, I actually very much believe in not using top-line synergies, especially when we figure out whether the deal is worth doing, right? If they happen, it should be on the upside. I've always felt that, and I think that that's sort of the approach we take, and that's the philosophy we will keep stay focused on. You're right that as we acquire these portfolio companies and as the portfolio becomes more complete, there may be additional opportunities to have some top-line synergies, cross-sell, et cetera. However, I do wanna caution that, you know, we don't really spend a lot of money on go-to-market and, you know, and sales and that aspect of our business, right?
I'd like to temper that enthusiasm that we get when people go, "Oh, yeah, you know what? This product works well with this. You know, it's next to this. We should be able to go sell." You know, Just like any other infrastructure software, the companies that we acquire, their products are also not just sticky for us, but similar products, if they're already in the market, and if a customer is already using them, replacing that is also hard, right? Because the other product is quite sticky as well. The market shifts among, you know. If it was a market that was wide open, and there was, like, a lot of growth happening and it was a new sort of, you know, market opportunity, there you could say, "Oh, you know what?
Nobody really has complex data management at this point yet, therefore, you know, maybe MarkLogic will have good cross-sell. The reality is that that market is now eight, 10 years in the making, there are other players who also are there. Now you're talking about potentially shifting share, and shifting share is not that easy for enterprise software. We are very, very careful about not modeling that. We're very, very careful about not betting on it at all. If it happens, it's upside. I'm sure over time we will start seeing some of that, right? We occasionally do see some of that. I don't wanna say it's zero even today, but it's not meaningful. Anthony, I don't know whether, you know, you.
No, agree completely. We wouldn't start modeling it until we saw it for probably an extended period of time.
Yeah. For the record, we field that question a lot, so. Okay. All right. We are gonna open up the phone lines. We've got one on the phone lines, our old friend John DiFucci from Guggenheim. John, I think your line should be open.
Thanks, Mike. Can you hear me okay?
Yep. Loud and clear.
Okay, great. Yogesh, this question's for Yogesh, but I really think maybe Jeremy might chime in too. Yogesh, your legacy long before Progress includes a playbook for software M&A before that was a thing in the investment community. Like, I remember it. I was trying to figure it out back then. At least a thing that's studied the way you approach it by targeting the recurring revenue of very sticky products. I realize your approach today is likely more refined than what you were a part of earlier in your career. Your approach, it's not as unique today as perhaps it used to be.
As you grow and you plan to double your business every five years, and this kind of goes back to a number of companies out there, I would think it's gonna get more difficult as more players like yourself are vying for the same sort of greater scale assets, whether it's PE firms or other ISVs.
Mm-hmm.
Does that make sense? If so, how do you plan to deal with that? Are there so many more companies on all those companies Jeremy was talking about that it shouldn't be a concern for a very long time? Because that's. Like when we think about you guys and when we think about your TAM, we don't think about. I mean, we do think about the DevOps world and all of that, but we really think about something a little different than we do for any other company. Sorry for the long-winded question.
Oh, no. I think, you know, John, you are absolutely right? Our TAM is the entire infrastructure software industry, right? I think when you think about it, right, I mean, you're right that there are other companies who are trying to do the same thing and who are doing it well as well. I do wanna highlight a few things. On the public side, at the size and scale we are, with infrastructure software, we are the only one, right? OpenText is much larger than we are. Some of the other companies are primarily focused on application and vertical applications and so on. Private equity really is the other play that happens in this space. The reality is that there is a very large pool of companies.
Even in the last three years, I mean, look at this, right? The market was hot, right? Any company that came for sale was being bought, and some of them at really outrageous multiples, right? We were still able to execute on it, and we're able to consistently execute on it and get to where we are. Jeremy mentioned 350 companies that are $25+ million in revenue. What's interesting is for us is we only need one or two a year. More of those get born every year than they get invested in, right? To us, the more interesting number is, to be honest, the $100+ billion that got invested by VCs in the five-year period from 2016 to 2020, right?
Those companies, many of them, and by the way, there were a very large number of companies there too. They, you know, 5, you know, 4 digits or 5 digits, right? More than 10,000 companies. You've got a large number of companies there, and then, you know, we get to basically take 1 or 2 of them a year. It really is not a limiting factor, John, for a long time to come. I don't know by the time we're $3 billion, $4 billion, $5 billion in revenue that whether we will be able to do this or not.
The other thing that I think, you know, Jeremy touched on as well is that we're willing to do more than one deal within a year to get to our growth rate, right? It doesn't have to be just one deal. We can actually do 2 $50 million deals to get to $100 million. That's one of the reasons why operationally we keep working on our ability to do more than one deal a year, even though we've only done one deal a year. It is to us, that operational excellence around being able to do more than one deal a year, to be able to integrate it well is really critical for us to sustain this. I don't see a constraint there. Yeah.
No, I. It's a great question. I mean, I think, you know, a few of the things that we do just to sort of make sure that, you know, we stay at the, at the forefront is, you know, the relationship piece is so key, and I talked about that. You know, having those relationships with the investment banks and the VCs and the PEs, so we can meet those companies early in their life cycle. Maybe not when they're ready to sell, but start establishing those relationships with them and getting them excited about Progress as a potential acquirer. Building that relationship early in the process helps us, particularly in some of the more competitive situations. I think, you know, as we think about it, price, speed, and certainty to close are three factors that sellers think about.
You know, obviously, we can be competitive on price, but on the speed and the certainty to close, that's where I think we really differentiate, you know, by being able to execute our diligence process so efficiently. You know, having a strong balance sheet to be able to have the capital on the balance sheet, to be able to do deals and move quickly on those deals. You know, those things are valued pretty highly by sellers, and so we've put a lot of emphasis there to help differentiate, particularly in competitive situations. I think that, you know, there are gonna be plenty of opportunities that we can continue to pursue.
Yeah. The only thing I would add, Yogesh, the point you made about, building the capability to be able to do more than 1 deal a year, I think that's important. I think that has been a focus for us for probably 2 years now.
Yep.
Mm-hmm.
I think, you know, starting to think about, hey, we could do $250 million deals, doesn't have to be a $100 million deal every year. Because we know as we get bigger, maintaining that growth rate, you know, it will become harder unless we can handle multiple opportunities in a given year.
Okay. All right. Let's go to a next question. Here's a good one. Would you consider funding acquisitions going forward with equity rather than debt?
Anthony, squarely in your ball park.
Yeah. I mean, Look, I think every deal is gonna be based on facts and circumstances. We wanna evaluate every deal on its own, on its own merits and understand, you know, competitive dynamics and negotiation. You know, we do look at cost to capital. Cost to capital is very important. Depending on where rates are, where our share price is, equity could make sense. I think we have been more apt to just go with straight debt and ideally low cost debt over the past several years. You know, we'll evaluate. I think the market will drive, whether we're using debt equity or something else to do deals.
Fundamentally, you know, for us it's about cash flow, and just being able to buy deals that we know we're gonna be accretive, we're gonna bring them into our business, we're gonna get integrations done quickly, we're gonna drive more incremental cash flow and create value. How we finance them, you know, we're comfortable with debt, but, you know, we'll evaluate every deal on its own merits.
Okay. All right. Let's go back to the phone lines. I believe we have Fatima waiting in the wings here for one. If you can hear us, Fatima. No question? Okay. All right. Okay. Let's go back to one of our emailed ones. All right. With $200 million in stock buybacks available, why assume only $30 million in buybacks in 2023, and what would potentially increase that?
Yeah, I can probably take that one. We estimated $30 million this year. That's what was in our guide and our outlook. Really if you look back, last year we did $77 million in repurchases. Typically, we would say we're just looking to offset dilution with our repurchases. Last year, we obviously did a bit more. We were opportunistic. We feel like this year, you know, $30 million might be slightly less. That authorization is in place. That'll last us for some period of time, so it's not like we're looking to exhaust that in any given year. You know, again, we're looking at our share price, we're looking at interest rates, we're considering M&A opportunities when we think about share repurchases. $30 million felt like the right number for this year.
Okay. All right. Then we have one last one here to go back to it, if I can. Okay. Nope, that was it. Actually, that was just a comment that came through. I think we're good, and we're right up against time, and there's no more questions on the phone line. Thank you, gentlemen. This was great. Hopefully, everybody got some new information and, if you'd like to, the webcast replay will be available probably in a couple of hours on our website, along with the presentations that are available now. Please go to investors.progress.com, for the information about the webcast replay and, access to the slide decks. Thank you all very much for tuning in.
We're available all the time, so give us a call if you have.