Good day, and welcome to the Progress Software Corporation Fourth Quarter Investor Relations Conference Call. At this time, I'd like to turn the conference over to Senior Director of Investor Relations, Brian Flanagan. Please go ahead, sir.

Thank you, Blake. Good afternoon, everyone, and thanks for joining us for Progress Software's fiscal fourth quarter 2013 earnings call. With me today is Phil Pead, President and Chief Executive Officer; and Chris Perkins, our Chief Financial Officer. Before we get started, I'd like to remind you that during this call, we may discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives or 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. Please review our Safe Harbor statement regarding this information, which is available both in today's press release, as well as in the Investor Relations section of our website at progress.com. Progress Software assumes no obligation to update the forward-looking statements included in this call, whether as a result of new developments or otherwise. Additionally, on this call, we may refer to certain non-GAAP financial measures such as operating margin and diluted earnings per share. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our earnings release issued today. Today, we published our financial press release on our website and also furnished the information to the SEC in an 8-K filing. These documents contain the full details of our financial results for the fiscal fourth quarter 2013, and I recommend you reference these documents for specific details. Today's conference call will be recorded in its entirety and will be available via replay on our website in the Investor Relations section. With that, I'll now turn it over to Phil.

Thank you, Brian, and good afternoon, everyone. Thank you for attending our fourth quarter earnings call. Let me start by reiterating that our objectives for fiscal year 2013 were to improve the efficiency of our company and to build a foundation for future growth. We had quite a list of accomplishments in both of these areas. We successfully completed the divestiture of our non-core assets and reorganized our company around a single platform. We reduced our operating expenses, including stranded costs that remained after the divestitures. We expanded our channel presence by consolidating some of our direct operations and increased the use of distributors in certain markets where appropriate. Executing on these efficiencies enabled us to significantly reduce our run rate costs, resulting in a 37% operating margin for Q4, ahead of our goal of 35%. While these accomplishments are impressive on their own, we also made significant progress in 2013 in establishing our foundation for future growth. Building that foundation required us to provide increased features and functionality for our existing products and to also deliver new products to position us to capitalize on the rapid growth of cloud application development and deployment. During 2013, we significantly enhanced our OpenEdge on-premise platform with features like mobility and the integration of business rules and workflow, which were part of delivering more functionality for OpenEdge in the last 18 months than we had in the previous 5 years. We released DataDirect Cloud, extending our market-leading connectivity capabilities to cloud-based applications, as well as on-premise. Our DataDirect products are the leader in connecting the world's business applications to data and services, providing a much faster native connection to an unparalleled range of data sources. Access to data is becoming more and more critical and more and more difficult with the explosion of…

Thank you, Phil, and good evening, everyone. As a reminder and consistent with our previous earnings calls, all of the financial metrics I will talk about today are related to our continuing operations and exclude results from the Apama and other product lines that were divested in 2012 and 2013, which are reflected in the press release as discontinued operations for all periods presented. Total revenue for the quarter was $91 million compared to $87 million in Q4 2012, which represents growth of 5% on both a constant and actual currency basis, and was in line with our guidance range. For the full year, total revenue was $334 million compared to $318 million in 2012, a growth of 5% in actual exchange rates and 6% in constant currency. License revenue in the fourth quarter was $37 million, up 11% from Q4 2012 on both a constant and actual currency basis. This license growth was achieved through strong performance by our application partners in the Americas and APJ and our direct end-user clients in EMEA and the Americas. Maintenance and services revenue was $54 million, up 1% from Q4 2012 on both a constant and actual currency basis, with our maintenance renewal rates continuing to be above 90%. For the full year, license revenue was $122 million, up 15% from 2012 on both a constant and actual currency basis. And maintenance services revenue -- maintenance and services revenue was $212 million, consistent with 2012. The license growth for the full year was driven by our application partners and direct end-user clients in both EMEA and North America. On a constant-currency basis, fourth quarter year-over-year revenue growth was 5% in OpenEdge and while currently a relatively small portion of our revenues, 119% in Corticon. DataDirect revenue decreased year-over-year by 9% due to…

Thank you, Chris. That concludes our formal remarks for today, and I'd now like to open up the call to your questions. [Operator Instructions] I will now hand over to the operator to conduct the Q&A session.

[Operator Instructions] And we'll start with Aaron Schwartz with Jefferies.

I just had a question on the guidance. Chris, you kind of alluded to it here at the end. But on the license guidance, it is implied to be down year-on-year probably in the range of, at least on the license side, maybe 6% or 7% in Q1. Given all the work you've done in '13, maybe we would have expected some growth here earlier in the year, but you did say that there were, I guess, some impacts last Q1 that give you the odd comp and maybe that's sort of impacting, cosmetically, the metrics here. Is there any way you can sort of quantify that so we can get a better sense for the run rate business? What was maybe a little bit artificial or creates the odd comp last year?

Yes, well, coming in -- going into last year, as I mentioned, we did have the impact of a revenue backlog from bookings that took place in Q4 2012 that benefited revenue from a recognition point of view in Q1. And as you said, license revenue is down year-over-year from a quarter comparison, really primarily attributable to that. We also did, as part of that revenue backlog, was 2 things. One, orders that were booked but not delivered and shipped, which are required for revenue recognition, but also revenue related to some of our OEM contracts, that revenue recognition is based sometimes on time of payment. So we did have -- again, that trend is correct that license revenue are down. But again, our bookings year-over-year for the first quarter is going to be positive as we look at our sales pipeline. That is an impact that really primarily affected Q1 of last year, and we expect that to be very normalized as we go forward and looking in the forward quarters throughout 2014. So again, as I mentioned, I expect that the license and total revenue trends in the subsequent quarters will show the positive momentum of our overall business.

Okay. And that's great, and my follow-up question would be on Pacific. As you alluded to last quarter and this quarter to subscription business will probably be muted in terms of the revenue growth here in the near term, is that going to be billed mostly annual or multiyear? How does it get billed? And so -- and I guess the question is how -- are there any early indications you can give us in terms of maybe the conversion rates from some of the free downloads? Or at what time through the year should we at least look on the deferred line to start to see that build?

Sure. Again, we're in the early stages of that and it's probably too early to say what the conversion rate is expected from our trials that are taking place. But we are seeing positive excitement and inquiries from our customer base, as well as noncustomers out there in the marketplace. As we start to get some traction on that, we will be providing guidance, really talking about the -- more than likely, the annual booked, annual recurring revenue that we have under contract. There will be situations that the customers will have flexibility depending on the kind of buyer they are as far as paying a monthly, quarterly or on an annual basis. So we're going to have flexibility in that contracting. So we need to get some experience and some performance that we can look at to see how that will develop into deferred revenue related to subscription. But we will provide metrics that will talk about the booked, contracted, recurring annual revenue once we start to get that traction.

And next, we'll go to Steve Koenig with Wedbush Securities.

Maybe just one housekeeping question here before I do a follow-up, which is do you have available -- for this quarter, what were the software license orders received but not shipped?

For the fourth quarter?

Yes, sorry, for the Q4 that just ended, yes.

Yes, we have got a clean revenue backlog as we exit 2013.

All right. Do you expect to continue to run the orders fairly clean [indiscernible] fairly low in terms of that particular line item?

Yes, that's correct. That is our approach to the operations. There always could be a situation that -- depending on a specific contract. But we've been running very low to essentially 0 in that for the last several quarters.

Okay. And then same sort of question related to the timing of revenue from OEM contracts. Do you -- did you have any -- did you have much revenue that is waiting to be paid on those entering Q1, and maybe just a little color on how did that trend throughout the year?

Yes, we do have some. And again, those are generally going to be tied to timing of payments for multiyear arrangements. So we do have -- we don't disclose that number specifically, but we do have contracts that were signed primarily related to our DataDirect product line that span over multiple years and it has payments over multiple years. But that doesn't show up in a deferred revenue. But it is something that we monitor just from a bookings backlog. And that is something that we continue to have, but it's, again, not something that we disclose.

Are you -- this is my last follow-up and I'll turn it over. Chris, are you able to generalize at all in terms of are you also kind of running those OEMs invoices, that item, more close to 0 than in the past, like the orders not -- booked but not delivered? Is that -- has that also trended down, say, throughout the year, for example?

No, I would say that, that hasn't changed substantially, given it depends on the size of the contract and the period that it covers. So that's not something that we're managing. Again, we look at it on what is appropriate for the arrangement we have with the customer and the appropriate payment terms relative to the period that are covered. But I would say that our focus is going to continue to be, going forward, to put those payment streams on an annual basis in line with the period that the agreement covers. So I guess I would say that it has -- I expect it to continue to stay pretty stable in the future in relation to the period of the service agreement.

And next, we'll go to Scott Zeller with Needham & Company. Robert Scott Zeller - Needham & Company, LLC, Research Division: Wanted to just follow up on Aaron's questions, just looking for metrics. Can you maybe help us understand perhaps with sort of the OEMs or ISVs, any sorts of metrics that you can push us towards that would indicate that we will see growth? Phil's comments were that we'd see organic growth this year, but it sounds as if we're still waiting to disclose some metrics. So what can you tell us now that you've seen that has given you the confidence you'll see organic growth?

Well, on the organic growth, Scott, let me just take this. We're obviously guiding in 2014, the majority of that guidance obviously is driven by our on-premise perpetual license business. And so the percentages that -- and the revenue -- absolute revenue numbers that Chris guided on for 2014 really relate to our on-premise business. The opportunity that we have to take advantage of cloud development, as we've talked about before, is a subscription-based model. And we announced the Pacific platform in the third quarter of last year. We really delivered it to -- at our Progress Exchange user conference. And we're beginning now to see the development of the platform in our base, the adoption, rather, of that platform in our base. And as our partners and ISVs and our direct end users begin to take advantage of the platform, obviously, that's going to translate once those trials are converted into revenue in future periods. The difficulty for us right now is that it's new. And so as it progresses and as those numbers become more meaningful, we have committed that we would provide those metrics associated that give you better visibility into the future revenue growth associated with those metrics. And right now, it's not something that we can do because it's not meaningful. Robert Scott Zeller - Needham & Company, LLC, Research Division: I was just going to say I believe I heard earlier that you thought you had increased visibility and that was the basis of your guidance. I'm wondering what were the metrics that gave you the belief you had increased visibility?

Well, let me just say that for me, the point that I was trying to make is that the increased visibility for us is that if you think about all the distractions that we've been through in late 2013 and early 2013 -- early -- late 2012 rather and 2013 with the divestitures that we were going through and the refocus of the company, we did not have a good sense of the organic growth rate in our on-premise business. As you'll recall, we had a very different focus. And the existing customer base that we had hadn't received new technology and upgrades to, particularly, our OpenEdge application. And so as we went through 2013, a lot of the revenue growth that we experienced came from this renewed interest in our platform and the technology that we delivered and the energy and excitement as -- with our partners going into reselling new applications or new functionality to their customers. As we go into 2014, understanding what that organic growth rate has been really important to us. We had experienced negative growth rates in the OpenEdge application platform in prior years. And we wanted to make sure as we go into 2014, that, that's not going to occur. So we're really comfortable now that we understand what that base of business is capable of, and that's why we guided in terms of the greater visibility to our on-premise business. But our future revenue growth is going to come not only from driving our existing on-premise business, but we're really excited about the Progress Pacific platform. And the fact that we've been named a visionary in the Gartner quadrant is also really important. So this is a transition for Progress as we move into what we think is a very fast-growing opportunity for us. And one in which we think we can become a leader in. But as I -- for those of you that follow a subscription-based revenue model, you know that it takes a while to ramp that up. And as we ramp it up, we will provide greater visibility as far as the metrics go so that you can gauge the success associated with the Progress Pacific platform.

And I'll add just a little bit to that. One of the things that I keep a good focus on is really working with our sales team and evaluating their confidence and their view of their pipeline, the interaction. One, we've got a good track record being built from our sales team. The leadership is strong and the team is working together very well. And they've proven that to me, during this past year, that their solidification of their pipelines and their forecasts are strong. So I look at very closely at the sales pipeline and that gives me the confidence of our growth. And I think that's driven by the improved maturity and success of that sales team, as well as the strength of the communication and the interaction with our partners and direct end users as they are getting excited more and more about what we're delivering. So it's really a sales pipeline that I focus on, on making that goal. Robert Scott Zeller - Needham & Company, LLC, Research Division: Okay. Is the management team willing to put out a goal at this point, even a rough estimate of what the percentage of revenue may be from subscription for the total fiscal year?

Well, we -- again, we -- our plan was not to disclose a subscription revenue percentage as far as our revenue in the year, but there is some modest subscription revenue in our guidance for 2014. So again, I think it'll be more meaningful as we are going forward and starting to book business and getting traction to give -- provide -- to provide information -- it's not going to be substantial because of the subscription model for revenue recognition, but it will be -- as we book it and there's future recurring revenue that's coming, we'll be providing metrics on that as we go down the road. So I think that'll be more meaningful to give an outlook on future revenue growth beyond -- in future quarters and beyond 2014. But as we're starting and we're new into this subscription business, we are right now projecting that the revenue in '14 will be relatively modest.

[Operator Instructions] And we'll now go to Greg McDowell with JMP Securities.

My first question, how much R&D effort do you think is left between the integration of Rollbase, OpenEdge, Corticon, DataDirect and any other pieces of the puzzle to make Progress Pacific complete?

This is Phil, Greg. I think that we've made -- in our release in October last year, that was a very large release for us. And the integration of our DataDirect Cloud and Rollbase products together with the -- in the cloud. And then together with the rules and workflow business process management within our OpenEdge application was a significant engineering effort for us and was very well received by our base. As we go through, primarily, I would say the next -- we have a big release in March and a big release in June. That will really represent a substantial part of the integration for Pacific. But it also includes new functionality that we're adding, both organic and then -- and for future roadmap developments as we build out the platform. So I would say that substantially, we would have a highly integrated platform certainly in March and with kind of 2.0 functionality in June of this year.

That's helpful. And my second question is, I guess, I understand how you would pitch Progress Pacific to your existing OpenEdge base. So I was wondering, how is the sales force organized today to sell Progress Pacific to sort of those non-OpenEdge customers?

Yes, it's a great question, Greg. It's clearly a different sales model in the net new customer marketplace than it is in our existing OpenEdge and DataDirect and Corticon customers. Let me deal with the existing customers first because there's a very significant initiative that's planned and being executed on in 2014. There are a growing number of our existing ISVs who are clearly interested in extending their on-premise application with cloud applications. They're doing it for 2 reasons: One is an offensive strategy as they go out and offer this new functionality and on a subscription model for their customers. And secondly, it's a defensive play because there are other cloud application vendors out there that are attacking the on-premise market. So we are excited about the receptivity of the Pacific platform for our ISV base. I'll also say that we have great direct end-user relationships where if you think about this in a citizen developer or a business analyst that has a business problem within their organization, that they can take advantage of our Pacific platform and build solutions on our rapid application development paradigm that we have. So that's where the -- our sales organization, our account managers are really focused on our existing base. The net new, that is clearly a digital strategy for us, which would include a very significant web presence, which includes a significant amount of content and thought leadership. So that we're bringing net new customers who are -- or net new prospects who are looking for a productivity platform that creates for them, a seamless data integration, that represents for them, an opportunity to take advantage of whatever infrastructure they choose to deploy their application on. There are so many significant advantages to coming to Progress as we build out this community, which, by the way, is also generated by our existing customers. So we think that, that's obviously a two-pronged attack here. One is we have a very strong sales organization to take advantage of our large install base, and we have a sophisticated digital strategy to bring net new users to us to begin to explore the opportunities to work with the Pacific platform.

Next, we'll go to Mark Schappel with Benchmark.

I apologize if one of these questions were asked before, but I've been bouncing around a couple of different conference calls this evening. Anyway, Phil, are there any major changes to the sales organization in the coming fiscal year, specifically in the coming quarter, with respect to like territory assignments or anything like that?

No. Thankfully, Mark, all those have been made, and I'm very excited about the fact that we've now got folks in their positions and have been in their positions for some time. We've got that maturity. We've got that -- we have very sophisticated tools in place now to give us the visibility on pipeline and coverage, the quality of the leads that we're working, the metrics that we now have are outstanding. And our sales leader, Andy Zupsic, has done a fantastic job at converting our sales organization, certainly over the last 18 months, to the one that we have today that's highly effective.

Okay, great. And then, Phil, on the M&A front, I was wondering if you'd just give us a few ideas of maybe some products or technologies that you believe would be beneficial to your product line or to your existing product set?

Yes, this is a really exciting time, Mark. There are an incredible number of technology tuck-in opportunities for us to expand the Pacific base. And what it does obviously is it really brings to market for us a lot sooner than it would be if we built it ourselves. The -- so certainly, on the technology tuck-ins is I think there's lots of opportunity out there for us to take advantage of that. And the fact that we have the capacity to do it is also -- gives us that flexibility. In terms of larger acquisitions, again, we are very diligent at looking at what I would say our up-and-coming technology companies that have something that we think is -- that represents a unique opportunity to leverage within the Pacific platform. If there are companies that have a larger revenue base with an installed customer base, we're looking obviously at the characteristics of that organization and how it compares to ours and what the architecture of that product is. So my answer to you is that -- and the way that I'm answering it, it would show you that we're very focused on what's available in the marketplace today. And we'll do -- we'll make the right decisions based on obviously, our long-term shareholder value. But I'm excited about the opportunities that are out there. I'm also not that excited about some of the valuations, however. But that's the nature of the beast right now, but we're working hard at building out our existing roadmap. There's an enormous amount of new technology organically being created by what I think is one of the best engineering teams in the software industry today at Progress. And I think we have an opportunity to take advantage of some of the other technologies that may come up as we look outside for M&A.

Next, we'll go back to Steve Koenig with Wedbush Securities.

I was just going to ask a question related to Greg's, which was can you give us any color or proof points or just commentary on new application partners that you've signed, or any traction there getting new ones in the door?

I gave a couple of examples in my prepared remarks on that, Steve, as it relates to some of the partners that we've signed or new business that we've signed and/or extensions to the existing partners. I will tell you that it's growing for us. And it's something that I think has been an area that we've been very focused on in expanding the number of customers that we have at Progress. We believe that, that opportunity is going to be driven substantially by our Pacific platform. It's where we're going to be able to create an opportunity for net new users to come to Progress, either through -- either direct end users or ISVs. And Progress Pacific represents our growth platform. But I'm not also -- I want everyone also to recognize that we have a vibrant on-premise business. And we are going to be continuing to add functionality to that on-premise business because we're going to be living in a hybrid world for some period of time. And so we're very focused on expanding our on-premise business. That may mean adding more functionality to our existing base so that they in turn resell it to their customers, which would generate good revenues and solid profitability for us. But the growth opportunity that we see in 2014 and beyond is going to come from our Progress Pacific platform in generating net new users for us.

And we have one more follow-up from Scott Zeller. Robert Scott Zeller - Needham & Company, LLC, Research Division: My questions have all been answered.

And there are no further lines in the queue at this time.

Thank you. Thank you, all, for joining the call today. As a reminder, we plan on releasing financial results for our fiscal first quarter of 2014 on Thursday, March 27, 2014, after the financial markets close and holding the conference call the same day at 5 p.m. Eastern time. We look forward to speaking with you again soon. Have a good day.

That does conclude today's conference. We thank you for your participation.