Good day, and welcome to the Progress Software Corporation Q2 Earnings Release Conference Call. At this time, I would like to turn the call over to Brian Flanagan, Senior Director of Investor Relations. Please go ahead, sir.

Thank you, Brendon. Good afternoon, everyone and thanks for joining us for Progress Software’s fiscal second 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 second 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’ll now turn it over to Phil.

Thank you, Brian, and good afternoon, everyone. And thank you for attending our second quarter earnings call. I’m pleased to say that we had a solid second quarter performance. OpenEdge bookings were up over the prior year’s quarter, reflecting our partners’ strong performance in their respective markets. We have an energized partner base driven by our significant technology releases over the last 18 months and a comprehensive partner program that is assisting our partners in their go-to market efforts. Progress Pacific continues to gain momentum with customers and partners and it is exciting that we are seeing adoption not only in our existing customer and partner base, but also that we are signing net new customers and partners. While the appropriate changes have been made to our sales coverage for Corticon and DataDirect, we are still in our pipeline building stage for both solutions. That being said, Corticon has showed strong growth for the second quarter. Some of this growth came from opportunities that were expected to close in the prior quarter but moved into this quarter instead and we also benefited from some opportunities that closed earlier than expected. Corticon remains a market leading solution for complex business rules management and we are experiencing increased demand particularly from industries that are highly regulated such as healthcare, financial services and insurance. While the sales cycle is typically six to nine months, we have seen some of these opportunities accelerate, particularly in healthcare. While the second quarter performance for DataDirect was disappointing, it is important to note that this is not a demand issue, but an execution issue. I won’t dwell on the execution issue as this was discussed previously on our first quarter call other than to say that we have much greater focus on all aspects of our go-to…

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 $81 million, compared to $82 million in Q2 2013, which represents a decrease of 1% at actual exchange rates and 2% on a constant currency basis, but was slightly above our guidance range of $78 million to $80 million. The year-over-year decrease was primarily due to lower license revenue which was $28 million in the second quarter, down 5% from Q2 2013 at actual exchange rates and down 6% on a constant currency basis. The license revenue decrease was in North America, primarily related to our DataDirect products. Also, our second quarter 2013 revenue included $4 million of license revenue related to open orders that were unshipped at the end of Q1 2013. Maintenance and services revenue was $53 million, up 1% from Q2 2013 at actual exchange rates and flat on a constant currency basis. Our maintenance renewals were in line with our expectations with renewals rates above 90%. On a constant currency basis, second quarter year-over-year revenue decreased by 2% in OpenEdge and by 32% in DataDirect and increased by 81% in Corticon. The decrease in OpenEdge was primarily due to $3 million of license revenue in Q2 2013 related to open orders that were unshipped at the end of Q1 2013. Excluding the open orders impact, OpenEdge revenue grew by 4% in the second quarter. The decrease in DataDirect was primarily due to two factors, the timing of revenue recognition for large…

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 session.

Thank you. (Operator Instructions) And we’ll go to Steve Koenig with Wedbush Securities.

Thanks for taking my question. Congrats on the quarter gentlemen and getting things back on track here. Wanted to ask a housekeeping question and then I’ll follow-up with a more significant question. Wondering Chris do you happen to have handy the multi-year licensing backlog ending Q2?

Yeah, I think it’s about $12 million, Steve.

Okay, great. Thank you. And then, I wanted to ask on DataDirect Connect, you provided some good color on the execution issues after the Q1 call. I wanted to get your updated thoughts on what you still need – what targets have you made on fixing the execution issues, what you still need to do, and how long do you think it will take?

Steve, this is Phil. As far as the actual sales coverage, we talked about different model for our sales organization, those changes have been made. So, the way in which we are going to market with our field force is those changes have already occurred. We had, if you remember, from Q1 there was some lead routing issues and I would say that they have predominantly been corrected. I think lead routing is always in a state of some kind of change just because of the way in which we and other companies have the same experience the way in which you tweak the model in order to improve your efficiencies and productivities. But I would say they are substantially corrected. And I guess the last piece to this is DataDirect is very much a search engine optimization driven marketing program, and some of that got seriously disconnected in prior periods. So, we are still rebuilding that part of it. Google has also changed some of their search prerogatives, so we’re going to have to work through that, but I would anticipate within the next 30 to 60 days, just because some of these things take time to find their way in the Web, that we will be substantially back on track with everything that we need to do to drive the kind of revenue that we’re expecting in the third and fourth quarters.

Okay, that’s great. And do you -- just a color on that, on DataDirect Connect, do you think that – are you thinking at all differently about how you might work with your OEM partners going forward or what their needs might be in the future and how those needs will evolve?

We are seeing – we are having all kinds of conversations with all kinds of OEM partners as they experience the kinds of things that I discussed in my remarks. Big data is continuing to be a huge opportunity for our OEM partners as we look at more and more unstructured data sources and as I mentioned, as the whole world of devices and Internet of things and wearables, so where people previously thought that we’re going to have a finite number of data sources, it couldn’t be more different than what we’re experiencing. And so, I will tell you that the exciting part for us is that every time that we add a new way of connecting to a new data source, it opens up huge opportunities for us for that particular market. So, our engineering teams, who I think are the best in the world in our data side and generally I would say that of everyone in Progress, is really bullish on the opportunity for us to improve our business on the data side.

We’ll go next to Mark Schappell with Benchmark Investments.

Hi, good evening. And Phil, starting with you, I was wondering if you'd just talk a little bit about the Modulus acquisition and what your timeframe is for combining it with the broader Pacific platform?

We’re really excited about Modulus. It is a small company but really great team. It is fascinating to me that Node.js is becoming such a rapidly accepted language for companies of all sizes and ISVs building applications using Node. I guess a lot of it is driven by the growth in Java script given that it is the de facto standard for Web-based application development. And this was a natural extension of Java script on to the server side. So, application developers love building applications, but all the infrastructure necessary to deploy those applications is a pain in the neck for them. And so, we found that if we can provide a great user experience for those that are using Node to deploy their applications so that they don’t have to worry about all the messy infrastructure and scaling and monitoring and metering and all those things that the Modulus platform does, it would find its way into the open source community in a way that would be delightful to them and that’s what we’re finding. So Modulus has got a great reputation in the marketplace. We are going to keep it as a stand-alone for now because we want to continue to nurture and invest and grow in that business and however we are going to start to integrate some of our Pacific assets on to the Modulus platform. And we’re finding great synergies with Rollbase, for example, and Corticon, because rules and rapid application development for Node developers is something that they would be very interested in consuming. And we would offer those as add-ins to the Modulus – into the Node community and obviously on to the Modulus platform. So what it gives is, is access and bringing the Progress name to literally millions of developers who ordinarily would not consider or would not have considered Progress because we were just not in their world and so we are excited to contribute also given that it’s open source we’re going to be good corporate citizens and contribute to the open source community, but at the same time provide that commercial backing to enable enterprises to feel confident that the platform will be there for them to help sustain their enterprise applications for the long term.

Okay, great. Thanks. And then, Chris one for you, just wondering if there is any open software license orders in the coming fiscal Q3 here that will weigh on next quarter’s license comps?

No, Mark, there is not. The open orders had the impact in just Q1 and Q2 of last year, so there is no impact in Q3, Q4.

We’ll go next to Scott Zeller with Needham & Company. Scott Zeller - Needham & Company: Thank you. Another question on Modulus, could you tell us if there is any revenue associated with that that’s now part of the yearly forecast?

Yeah, this is Chris, Scott. It’s very moderate revenue and I gave some view on the impact from an earnings perspective of Modulus. The revenue is very small today, so our forecast – what’s included in our forecast and outlook for the rest of the year is relatively minor. So, again, as we start to see that revenue grow, we’ll be giving metrics in the future periods – in the future, maybe in 2015 as we build some momentum. Scott Zeller - Needham & Company: But not willing to breakout how much is in the forecast for now?

It’s very small, it’s less. I’ll just say it’s less than $1 million in second half of this year. Scott Zeller - Needham & Company: And could you talk a bit more about Rollbase, I mean you’d mentioned that as part of Pacific, you are encouraged by increasing adoption, but could you give us some more color about the scale or types of projects that you are seeing that give you confidence around that effort?

Yeah, sure Scott, it’s really a – I look at this in a number of different ways. Obviously, our first focus was to enable our OpenEdge partners and customers to modernize and extend their existing OpenEdge applications using Rollbase. And we’re seeing more and more of our partners doing that. And not only are they doing that to extending their existing applications, but they are building new applications. And I mentioned the particular example of one of our partners building a CRM application which enable them to replace their own CRM application and they are in the construction industry and they love the idea of going out to that vertical and offering it as a CRM using Rollbase, so they’ll resell their CRM application to that vertical industry that is tied specifically to the construction industry. So we’ve got that element and that’s growing nicely and we’re excited and they are excited. It’s not just, of course, Rollbase because they can also consume the data access, data connectivity products as well our external rules. So, they are now beginning to embrace the platform and it’s doing what we initially designed it to do. The other part of it, of course, is getting net new customers. And where I think some of the most exciting opportunities are is working with service providers who are looking to enable either their infrastructure or get a broader access to an ISV base where they would use Pacific as a value-add to their infrastructure, so basically moving up the stack to create a value proposition that not only includes infrastructure, but also a rapid application development platform. Adding mobile in the way that we have creates even more of an opportunity now, so you’ve got the rapid application development functionality of Pacific and the mobile part of that with a same paradigm is giving service providers, we think, a competitive advantage as they go to market with their offerings. So we’re seeing it being adopted in a variety of ways including by the way SMBs who come to our site and click on free eval. So it’s a combination of go-to market strategies that – I got to tell you I’m pleased with the performance as we continue to trend in positive directions but it’s just not big enough, as Chris mentioned earlier, for us to share those metrics with you yet.

We’ll go next to Greg McDowell with JMP Securities.

Great. Thank you very much. Hi, Phil. Hi, Chris. Thanks for taking my questions. I first wanted to ask about just how we should be thinking about maybe long-term operating margins. I mean, if I look at sort of your operating margin expansion in the first half of this year compared to the first half of last year, I mean, in Q1 you’re up 300 Bps in operating margin expansion, this quarter, really nice, 600 Bps in operating margin expansion. So I guess are there a lot of other operating levers left to pull for you guys, I know last year there was some talk about stranded costs, but are we getting to the point where just the scale of the operating margin expansion is going to start to moderate and should we think about sort of this 35% non-GAAP operating margin as sort of a peak sort of mid-year non-GAAP operating margin moving forward? I know a lot of questions in there, but just general thoughts.

That’s fine. And again, as we’ve said before, the margin on a quarter-to-quarter basis can be impacted by the seasonality and the revenue movement from seasonality in our business, but I think from a full-year perspective, again, our guidance for the operating margins is 33% to 34%, which is very strong margin certainly compared to the prior year. We did achieve our objectives and completed our work related to the stranded costs at the end of last year. We’ll continue to focus as we look forward on areas where we have opportunities to improve efficiencies or cost structure, however, we’re also focused on opportunities that will drive and support our future growth, investment in our products, marketing programs and selling. So, when we see an opportunity to accelerate revenue growth as we begin to get traction and momentum. If there are opportunities to invest to accelerate that growth even further, we will evaluate those and we’ll articulate those steps that we take to our shareholders going forward. So, again, I would not look forward to continuing margin expansion year-over-year as we go to 2014, I think we’ll be focused on investing in our business to drive growth both for our customers and our partners.

That’s helpful. Thank you. And then, maybe one for you Phil and I just spent the last couple of days at the MongoDB conference and your DataDirect team had a nice boost there and looked like they were getting some good foot traffic. So I wanted to ask how much of sort of the challenge in DataDirect do you think is driven purely by execution or is it something else, is it something like just this proliferation of alternative database platforms like the NoSQL players? Is that changing something into the market where maybe DataDirect just isn’t needed as much today as it was currently when we’re in a much sort of fewer vendor data platform environment?

Now, I would tell you, Greg, that is not what we’re seeing at all. We’re seeing the complete opposite. In fact, if you look at – you are at the MongoDB conference right? So, you can see the draw that we had and the number of leads that we got out of that conference was amazing. So, this is not about are we relevant and is DataDirect product really was focused on traditional relational databases with ODBC-JDBC drivers, this is much more of a conversation about data solutions not data drivers, it’s not about data connectivity and everything that I mentioned in my opening remarks about the complexity of the environment that we’re living now as social and cloud and mobile and data come together. It’s just staggering to me how much people want to make sense of the data that they have and where it’s all stored and we are so relevant today and it’s frustrating, I got to tell you it’s frustrating that I’m answering questions like this because I think that once we get this right, we will see a dramatic improvement in our opportunities going forward. But, as I mentioned, it’s going to take us some time, and it’s got nothing to do from all the channel checks that we’ve done and as we look at the leads that we generate, it’s got nothing to do with the demand for our solutions.

I don’t want to frustrate you with my questions, Phil, but I do appreciate the response.

Now, I’m not frustrated by your questions, Greg, I’m just frustrated that we’re in this position to have to answer something like that and it shouldn’t be that way.

(Operator Instructions) We’ll go next to Glenn Mattson with Sidoti & Company. Glenn Mattson - Sidoti & Company: Good afternoon. OpenEdge renewals you guys, I think, you said were solid. In the past, I think we’ve said other things like greater than 90%, is that still the case or?

Yes, and I did comment that it continues to be over 90%. Glenn Mattson - Sidoti & Company: Okay. I missed that. And then, I guess just it sounds like Pacific is picking some steam a little bit, and can you just kind of help us reinforce the idea maybe that there wouldn’t be any type of potential for a slip-up in OpenEdge as people kind of take their eye off the ball there and focus more on the opportunities in Pacific? And any color on that would be good.

Yeah, I think that what we try to do is separate the go-to market so that our field force know that really the opportunities that they have to sell Pacific back into the OpenEdge base actually, as I mentioned earlier, energizes those partners, Glenn, so I feel confident that that’s not going to happen. And then, the second part of our strategy is very much a digital one where, as I mentioned, we’re looking at search engine optimization, we’re looking at search content optimization and we’re trying to get into the conversation with developers out there that are looking for a platform like Pacific to meet their needs. So those two are very different and shouldn’t be distracting. And then, for service providers, Pacific is really what they are looking for, so it doesn’t again detract from our OpenEdge opportunities. I would tell you that as I spend more and more time with our partners and our customers on the OpenEdge side, I’m really pleased with the connection that we made back with our OpenEdge base and I think they really appreciate it too. So we’re going to continue to nurture and maintain and grow OpenEdge and work closely with our partners so they can sell more of their products to their customers which is where we’re seeing the pickup and why bookings are up, but I’d also tell you that we’re excited about selling Pacific as a platform to net new customers, we’re excited about the addition of Modulus because we now have an incredible access to Java script and Node.js developers and it opens up a whole new world for Progress. And it really just all connects together with the platform-as-a-service vision that we have. Glenn Mattson - Sidoti & Company: Okay, great. Yeah, that helps. And as you were talking about the service providers, that part of the strategy is paying off because I think that makes a lot of sense, so have you ever released which service providers you are working with, I think Amazon was one that you’ve talked before?

We haven’t, Glenn, because what I like to do is give you examples of opportunities that we won and as they come up or at least something that’s meaningful that we can talk about, but as they come up I’m hoping that perhaps in next earnings release we’ll be able to share some of those examples with you. But it’s still early in our sales cycle, but we’re very encouraged because of the reaction that we are getting from service providers and hopefully next call we’ll be able to share some of that with you.

And that concludes our question-and-answer session for today. I’d like to turn the call back over to our presenters for any additional or closing remarks.

Thank you all for joining the call today. As a reminder, we plan on releasing financial results for our fiscal third quarter of 2014 on Thursday, September 25, 2014 after the financial markets close, and holding the conference call the same day at 5:00 PM Eastern Time. We look forward to speaking with you again soon. Have a good day.

And that does conclude today’s call. Thank you all for your participation.