Good day, everyone and welcome to the Progress Software Corporation Q3 Earnings Call. At this time, I would like to turn the conference over to Mr. Brian Flanagan, Senior Director of Investor Relations. Please go ahead, sir.

Thank you, Rebecca. Good afternoon, everyone and thanks for joining us for Progress Software’s fiscal third quarter 2014 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 third quarter 2014 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 will now turn it over to Phil.

Thank you, Brian. Good afternoon, everyone and thank you for attending our third quarter earnings call. Our third quarter performance continued to demonstrate positive momentum from the previous quarter. OpenEdge license revenue and total revenue were both up over last year’s third quarter as that business continues to perform strongly. DataDirect and Corticon remained a work in progress. However, we continued to see very positive pipeline momentum, which signifies strong interest in both of these solutions. We are starting to see significant interest from our existing OEM partners in DataDirect Cloud. As their customers mobile enable their workforces and as our OEMs continue to move their applications to the cloud, the need to securely access the vast amounts of on-premise business data is a growing challenge and risk. DataDirect Cloud provides access to all business data, no matter where it resides. By essentially making data plug and play, DataDirect Cloud simplifies connectivity and reduces the cost and complexity of data integration. DataDirect Cloud offers another strong entry point to our Pacific platform which continues to gain momentum. We are also excited about the growth of our Modulus deployment platform since we acquired it last quarter. We are seeing more and more developers use Node.js to develop their applications, a trend that has continued to accelerate. In June, the number of application modules created for Node.js and stored in the Node Package Manager surpassed the total number of modules created for Java in the last 20 years. In fact, the Node Package Manager is now growing twice as fast as the repository for Java modules. With our Modulus platform, we are excited to be a part of the Node.js community and to assist developers with the rapid growth of Node.js applications. While Node.js is ideal for building today’s data-intensive high transaction…

Thank you, Phil and good afternoon 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 product lines that were divested in prior years, which are reflected in the press release as discontinued operations for all periods presented. Total revenue for the quarter was $79 million compared to $78 million in Q3 2013. This was in line with our guidance range and represents an increase of 2% at actual exchange rates and flat on a constant currency basis. The year-over-year increase was due to growth in both license and maintenance revenue. License revenue was $26 million in the third quarter, up 3% from Q3 2013 at actual exchange rates and 1% on a constant currency basis. The license revenue increase was in North America and Latin America primarily related to OpenEdge. Maintenance and services revenue was $53 million in the quarter, up 2% from last year at actual exchange rates and flat on a constant currency basis. The maintenance and services revenue increase was in North America and EMEA. Our maintenance renewals were in line with our expectations and we remain confident that we will continue to deliver renewal rates above 90%. For our revenue by product, on a constant currency basis, OpenEdge revenue for the third quarter increased by 2%, DataDirect revenue decreased by 10% and Corticon revenue was flat versus the prior year. The increase in OpenEdge was due to growth in North America, EMEA and Latin America. The decrease in DataDirect year-over-year was primarily due to weakness in our pipeline from earlier in the year. Although our pipeline is getting stronger, it is not yet at sufficient levels needed to achieve our growth objectives. As Phil…

Thank you, Chris. That concludes our formal remarks for today. I’d now like to open up the call to your questions. I ask that you keep your remarks to your primary question and one follow-up. I will now hand over to the operator to conduct the Q&A.

(Operator Instructions) And your first question will come from Steve Koenig with Wedbush Securities.

Hi, gentlemen. Thanks for taking my questions. Yes. So, I am wondering if you can remind us on the license guide, you did moderate it – excuse me, on the revenue guide for Q4, you did moderate it essentially at the high end somewhat, but it still looks like a much bigger year end ramp than certainly last year kind of remind us what are the factors behind that?

Sure. Yes. Historically, we have had strong performance in our fourth quarter, but as you mentioned, Steve, it is a growth of 6% to 10% over the Q4 performance of last year. We have been building our pipeline over the last two quarters and that’s going to positively contribute to our growth for Q4 and all of our product lines and we feel we have got some good momentum developing in all three of our business units. So, it’s going to be contributed really by all product lines and we have got growth expectations in several of our regions that are contributing.

Okay, great. Thank you, Chris. Yes. So for my follow-up I think what I will focus on here is the business unit structure, you went from multiple segments to one segment and now back to multiple segments, maybe could you elaborate a little bit on what’s changed in your thinking and a little bit more on what’s the logic of these three segments being operated under one roof and do they have to be operated under one roof?

Yes. Let me take that, Steve. This is Phil. As we looked at the really the go-to-market strategies for each of our audiences be it OpenEdge or net new application developers or the data audience for OEM and direct end users, it became more and more evident that it’s more difficult for us to organize ourselves to respond to those audiences the way in which we had our organization which was of course very functional and horizontal. By focusing our organization around the audiences that we sell to and the go-to-market strategies that they will employ to respond to the market demands I think will make us much more nimble. We will be more responsive. I think we will have the groups be more accountable for their respective revenue profiles. And I feel that we will get a much better sense of control associated with that. We have got really good leaders of each of the business units. The fact that we put product management and product marketing as well as sales under these business unit leads and then for them to have P&L responsibility means that they start to better control and design the product roadmaps. It means that the marketing dollars that they have will be specifically focused on driving the value propositions in each of their segments. With App Dev for example focused on net new, it means that they are going to rely much more heavily on the high velocity model particularly for our Pacific platform, but they will also enable add-ons for their rules and for data. So we don’t lose the focus on the fact that App Dev will continue to sell solutions that are also contained in other business units because that’s the way the developers will be looking to build their applications. And then for data it just really again aligns the business unit with the market and enables each of them to respond to their needs with having control over their product roadmap as well as their product marketing and their sales organization. So I will tell you that there is great excitement. I was understandably concerned about making a decision like this in mid-quarter, but the functional teams that were in place at that time did a fantastic job at making sure that we focused on the quarter and didn’t lose any momentum. And now going into the fourth quarter which is our biggest quarter of the year we have all the people in place. We have the incentive comp as being designed to create the sense of urgency to accomplish their goals for the fourth quarter. And I am really excited about where the company is at this point with the decision that we made to reorganize around business units.

It sounds good. Thanks a lot, gentlemen. I appreciate your help.

Thanks Steve.

And from Benchmark we will go to Mark Schappell.

Hi, good evening. Thanks for taking my call. Just a follow-on question to Steve’s question, Phil in the past when the company had the separate business units incentivizing cross-selling between the different groups was often very difficult and challenging. And I was just wondering if maybe you can just give us an idea of some of the measures you are putting in place or the processes you are putting in place to see that the cross-selling continues and moves forward?

Yes. Look I will not deny that cross-selling is always a challenge. And the challenges come when you – I believe try and force a solution into a marketplace that isn’t readily accepting of it, number one. Number two is when you have different revenue profile, so for example if you have sales folks that have quotas larger than you would achieve by selling a subscription-based solution, then they are going to clearly gravitate towards the on-premise perpetual license that’s recognizable upfront that enables them to meet their numbers earlier and therefore achieve accelerators and so on. So, essentially as we go into Q4 and more importantly 2015, the go-to-market strategies for each of these groups, obviously, they are going to derive the majority of their focus from their respective audiences, but for the OpenEdge unit, for example, there is really strong interest in continuing with the Pacific platform as our OpenEdge partners and direct end users access the back end data in their OpenEdge databases using our Rollbase productivity platform, for example. And so there is going to be an incentive for each of our sales reps to sell in our OpenEdge category, for example, the new technologies that are contained in the App Dev space as well as our data integration and rules and we will do it through an incentive program that maps to their particular comp plans, but also responds to the market demands of our customers. We can get those two things aligned. I think it will take away a lot of the friction that is inherent I think in any cross-selling.

Okay, thank you. And then with respect to Pacific, where does that fall into, what business unit does that fall into?

So, essentially Pacific will remain in the App Dev unit, because it has all the components that is required for developers who want to build an application whether it is a productivity – whether they are seeking a productivity platform or whether they are seeking a control platform, but the key here is that these developers are looking to build something or they maybe looking to integrate their application into several different data sources or they would be deploying their app on the Modulus platform. So, if you think about the way in which we structured our App Dev organization, net new developers who want to build an application or want to integrate with data sources or deploy their application would make use of our Pacific and Modulus platforms. And that will be in the App Dev space.

Okay, thanks. And then moving on last question here and I will let somebody else get on, but with respect to Pacific, could you just talk a little bit about what you are doing in the marketing front? I mean, it seems like the product side is coming together quite nicely, but still a little – there are still some concerns with respect to marketing in that product?

Yes, it’s still ramping up, Mark. Clearly, we would have had a – I think that the momentum that we have got in the Pacific platform, I continue to see – what’s encouraging to me, I continue to see net new logos signing on, which is fantastic. We have got new customers that come to the platform and start building their applications. I think equally exciting for me is the fact that we have a growing number of OpenEdge customers now that are making use of the Pacific platform, particularly with OpenEdge and connected to Rollbase, where Rollbase is accessing the OpenEdge database to get the data. Rollbase Mobile is another area that I think we could lead in. And as I mentioned in my prepared remarks how complicated it is now for developers to build in a browser as well as on a mobile platform. So, I am really encouraged that the start that we made with the announcement last year of our platform as a service and the positioning that we received in the Gartner Magic Quadrant as a visionary, and now moving all that into a business segment that is entirely focused on developing that further and penetrating into the marketplace and applying marketing dollars to support that strategy I think is very exciting at this point.

Thank you.

And your next question will come from Greg McDowell with JMP Securities.

Hi. This is Rishi Jaluria dialing on behalf of Greg McDowell. Thank you for taking my question. Just wanted to think about the different segments, first of all, how much autonomy do you think that each unit is going to have? And second, do you think incremental investments are going to be spread evenly across business units or are they going to change?

The autonomy is clear. I mean, their defined responsibilities include sales which of course is significant. Each of them will have their sales number. They will own their P&L. They will have product management, which defines the short-term roadmap for their respective markets and they have product marketing. The investments that we make in each of those business segments, is really around the need that we have to grow the respective business segments. The audiences are very different and the required dollars associated with those investments will vary, but we put some meaningful R&D dollars this year and we will continue to do that in our Pacific platform. We see that as a significant growth strategy for us. At the same time, we have significant investments growing out the technologies within OpenEdge. As you can see in our results, OpenEdge continues to be a really strong performer for us and it’s really our ISVs, our application partners selling a lot more of their products, making use of our technologies. They are very encouraged by our focus on the OpenEdge product, which we will continue to nurture and maintain and grow. And then finally, in our data segment, we continue to invest and as you can imagine, there are now an exponentially growing number of data sources, but enterprises are looking at data, not just from I need connectivity to a particular database, but they are looking much more holistically at their data needs as social becomes more and more integral, as they are trying to make their market intelligence of how they should approach their customers more intelligible for their dashboards. All this just lends itself perfectly for our data business and we need to invest and continue to invest appropriately in each of these segments depending on our growth strategy for each of them. That’s probably the best way to look at it.

Okay, thank you very much.

You are welcome.

And at this time, there are no other questions in the queue.

Great. Thank you all for joining the call today. As a reminder, we plan on releasing financial results for our fiscal fourth quarter of 2014 on Tuesday, January 13, 2015 after the financial markets close and holding the conference call the same day at 5 PM Eastern Time. We look forward to speaking with you again soon. Have a good day.