Good day, and welcome to the Progress Software Corporation Q4 Investor Relations Call. At this time, I’d like to turn it over to Brian Flanagan. Please go ahead.

Thank you, Kayla. Good morning, everyone, and thanks for joining us for Progress Software’s fiscal fourth quarter 2016 earnings call. With me today is Yogesh Gupta, President and Chief Executive Officer; and Kurt Abkemeier, 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 and yesterday’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, all of the revenue, operating margin and diluted earnings per share amounts we refer to are on a non-GAAP basis. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our earnings release issued yesterday. Yesterday, we published our financial press release on our website. This document contains the full details of our financial results for the fiscal fourth quarter 2016, and I recommend you reference it 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. And with that, I’ll now turn it over to Yogesh.

Thank you, Brian, and good morning, everyone. This is my first quarterly call as Progress’ CEO, and my initial interaction with many of you. So welcome and thank you for attending our fourth quarter earnings call. Although our revenue results for the quarter were below expectations, I’m pleased that we’re able to make prudent decisions on expenses and generate earnings per share and adjusted free cash flow at or above our expectation. Kurt will provide a detailed view of our fourth quarter performance, but before he does so, I want to share with my assessment of our core business and our go-forward strategy. I joined Progress on October 10, and in the past 90 days, I’ve immersed myself in our strategy and operations. I visited with partners and customers, listening to what they need from us. And I’ve travelled to our key offices around the globe to hear what our employees believe are our strengths. My analysis confirms what I thought coming in, that Progress has very solid assets. These assets include our core products, they include our customers and partners whose businesses rely on those core products for their success, and our talented employees who build, sell, support and service those products. I’m confident that we can optimize and leverage these assets to create real value for our shareholders. Our core products: OpenEdge, Dev Tools and Data Connectivity, are all offerings that customers and partners have historically used to build mission-critical business applications. Just as it has always been, our focus for these products will continue to be on providing the technology and support needed to succeed and grow in the future. While I’m confident that the capabilities of our products, which are our primary drivers - revenue drivers, OpenEdge, Data Connectivity and Dev Tools, all compete in mature…

Thank you, Yogesh, and good morning, everyone. As I suspect most of you have noticed this is my first quarterly earnings call as the CFO here at Progress. I look forward to updating you on the inner workings of the company going forward, and hopefully, meeting with many of you in person over the next few weeks and months. We got a lot to cover and I want to make sure we don’t miss anything, so let’s dive right in. As Brian mentioned, all of the revenue, operating income and earnings per share amounts, to which I will be referring in my remarks, are on a non-GAAP basis. And for our full GAAP results, you should refer to the earnings release. Now, I’ll review our fourth quarter and full-year results. For our fourth quarter, total revenue was $118 million, an increase of 2% at actual exchange rates and 3% on a constant currency basis. Our Q4 revenue came in below our guidance range, primarily due to some large license deals that closed at lower values than expected. Our fourth quarter EPS was $0.62, an increase of 17%. This was above the high-end of our guidance range, but I will note that had included a one-time $0.05 income tax benefit related to the release of a valuation allowance that is no longer required. Excluding this one-time benefit, fourth quarter EPS would have been $0.57, which is toward the high-end of our range. Also reflected in our Q4 results is the negative year-over-year impact from currency translations due to the strengthening of the U.S. dollar, which was $1.1 million on revenues and $0.01 on EPS. Moving on to more detail for full-year results, for the full-year revenue was $407 million, a decrease of 1% at actual exchange rates and flat to last…

Thank you, Kurt. 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.

[Operator Instructions] We’ll take our first from Steve Koenig with Wedbush Securities.

Hi, gentlemen, and thanks for taking my question. Yes, so I’m curious - well, I want to actually just start by complementing you guys on the transparency you’re providing us on the existing businesses. It’s very, very helpful and we appreciate it. I do want to ask you on - yes, and I do want to ask you on the cognitive business applications. You spilled out a little bit about where the IP is going to come from, that’s helpful. I’m curious to know how you anticipate building that outbound sales capability that will be necessary to sell that IP.

Really good question. Thank you. As you said, this is - would be new IP from the perspective of ability to build Cognitive Apps. But when you think of it, the buyer is still application development teams, and enterprises and partners, who want to build new modern applications, so we initially actually see opportunity just to sell within our own installed-base, while we build out the team that sells beyond that to new logos. And so, we do have a very strong customer relationship organization, and we will expand that as time goes on in a very entrepreneurial way to meet what we will see as the market opportunity and demand for our products. This is really mostly a direct sale opportunity, in terms of how the go-to-market would be, as well as partnering with system integrators and those folks that sometimes do application development for large businesses. So if we’re doing direct sales into larger enterprises, it is both within that organization that we have to sell, as well as to any system integrator that might be participating in that opportunity from a development perspective. But again, I expect the sales organization and our partner organization to grow over time as we build out our portfolio, and as we gain traction in the market.

Okay. Great. That’s helpful. I wonder - related to that question for my follow-up, I’m wondering as you build that sales organization and do the whatever internal development you need to supplement your acquisitions, your tuck-ins, how much of the - I calculated $30 million in net investment that you’re making this year that’s directed both to the core business and the new strategy. Can you give us color on how much of that is being directed at cognitive applications and where that’s going to be spent?

So, Steve, a part of that, as you might be aware, goes toward fully funding and [indiscernible] for variable comp plans, right. So that’s one part where the investments are going to go, that $30 million difference you mentioned. The rest of it is going to be investment, as you said, both in our product capabilities and in our IP as well as in our go-to-market efforts as we build that out. As you know, and you yourself commented, we do have significant components already for our Cognitive App story. We have everything from the UI tool building to data connectivity and many other pieces in between. We see the technical investments being made obviously in IP that we don’t have today such as machine learning and mobility as a backend platform and so on. But from the perspective of how much investment to us, we see that as very entrepreneurial investment and running our business very lean to make sure that we do it in a cost effective way. I am also not a big believer in expanding sales and marketing before we get a product to market and begin to see traction. I initially actually see significant opportunity with existing customer base to start gaining traction with this particular segment.

Great, very good. Well, thank you very much for your help.

Thanks, Steve.

Next is Mark Schappel, Benchmark.

Hi, good morning. Thank you for taking my question. First off, Yogesh and Kurt, welcome, welcome aboard here.

Thanks, Mark.

Thank you.

So I guess, just kind of building on the earlier question, Yogesh, what is it about the current set of products that Progress has that give you the confidence you can have - or that you have increased the essential building blocks to make a meaningful impact in this market for cognitive business applications?

I think, Mark, it starts with of course, first of all, our DNA. If you think of Progress as a company, we have always been the provider of mission-critical application platforms. Today, over 50,000 enterprises, businesses run on our platform, and then that is by the way our direct customers as well as customers of our ISV partners who built their products on top of ours. In addition to that, we have tremendously strong assets when you start from things like NativeScript, which is a front-end tool, which is really a unique technology out there that allows people to use JavaScript, which is a very popular frontend development language, and use JavaScript to build native apps for both iOS and Android. We have other UI development tools like Kendo UI and others, which allow us to do web and other platforms as well. When you tie that back to data connectivity, where you have systems of record, both are our systems as well as third-party systems. As you are aware, our data connectivity products have been expanded to support the cloud offerings as well, and other cloud products such as Salesforce and capture data from that. We need to expand that to add IoT capabilities, but we have strong foundational capabilities there today, which are truly market leading in their sub-segment of that market. We have business for logic and rules engines, that are used extensively to have company policies and business policies and business ways of doing things encoded in the application. And of course, we need to find some machine learning capabilities. One of the very strong reasons as to why I believe this is right is my conversations with existing customers that I’ve had over the last 90 days. And I’ve gone and spoken to many of them face to face and dozens of them over the phone. And these customers realize that we offer to them a very mission-critical business platform, and they want to work with us to move their technology forward and to move their business forward. So I think it’s a combination of what technology pieces we have. It’s a combination of what our relationships are with our customers and partners, who are eager to work with us and grow their business with us. And, last but not least, it’s our internal DNA, that’s what my engineering team, my product teams, my sales teams and my entire organization knows how to do well. So I think that’s what, Mark, makes me tremendously confident in this strategy.

Okay, great. Thank you. And then, consistent with the my earlier question, product-wise what are some of the missing components that you think you can either need to build or buy with respect to the cognitive business apps?

I think as I’ve said the machine learning is not something that we offer today and everybody knows that. I think that is one of the areas that we would need to do something to build that out. And that includes bringing onboard data scientists as well as folks that can build out machine learning algorithms. And really the goal there is to make it so that it is easy for businesses to use this technology. In fact there is a lot of, by the way, open source componentry out there that does things like machine learning. The interesting challenge with all of that is it’s not easy to use it. You need hundreds and hundreds of data scientists. When you talk to somebody like a GE, who says they’ve got thousands of data scientists that they have hired in Silicon Valley, that’s a way expensive proposition. And if you want to democratize cognitive business apps and allow somebody who is relatively small to leverage this capability, you need some extremely easy-to-use technologies and capabilities. And so I think that’s where we see investment being made on our part.

Great. Thank you.

Thanks, Mark.

Next question is from Matthew Galinko with Sidoti.

Hey, good morning and welcome, guys.

Hey, Matt.

Hey, so I was hoping you could talk a little bit more about the lack of, I think you described as traction in Digital Factory, as you’ve evaluated progresses of asset. So it seemed like it would have been little bit early to expect much out of it. So were they coming more from pushback in your conversations with existing or potential customers, or it’s just not really due to your point, was it more the competitive landscape in the market you were going after? And then second part of that question is, you talked about cognitive application having a relatively fragmented market with no significant concentrated player, but can you go over again your view of the competitive landscape there.

Sure, Matt. So talking about the Digital Factory strategy first in answering your first question, they were all of the factors actually that you yourself outlined went into figuring this out, right. In talking to customers and partners and prospects it became very clear that the technology that we’re offering was not mature enough. I don’t know whether, Matt, you know this or not. But I actually ran a business in this market segment several years ago, which basically makes - that’s one of the areas that I’m fairly comfortable with and then know this market. So competitively the offering was not mature, and our customers and partners and prospects were reflecting that. The second part is actually it was becoming clear to us that it’s very difficult to reach the marketing person who is the decision maker and a key constituent buyer, because we don’t really have credibility. So just even getting an opportunity to speak within marketing organizations was tough for us. And we have tremendously strong competitors in this market, folks like Adobe and Acquia and Sitecore and others, whose core businesses is this, right. And then this is what they have been doing, living, breathing for the last several years and have created tremendous mindshare and market share in the marketplace as a whole. And so, all of those things, the lack of maturity of our product, the dominant competitors in this marketplace, the lack of credibility and awareness with marketers who would potentially be the buyers for this. All of those things made it the wrong strategy for us to continue at this point and we decided to pivot and move away. In terms of your second question regarding Cognitive Apps, yes - oh, I’m sorry, yes, the fragmented market state of the Cognitive Apps…

Got it. Thank you.

Our final question is from Glenn Mattson with Ladenburg Thalmann.

Good morning. I wonder about OpenEdge just a little bit. I realize it’s a fresh set of eyes and taking a fresh look at it. But if you compare what seems like a quite or soft quarter for OE versus Phil’s comments last quarter for a market that’s picking up, and then use your outlook for it longer term, being more superior; I wonder a little bit more about what drove the outlook decision and also about if there was anything that happened during the quarter that reflected the change versus what Phil was talking about in Q3? Thanks.

Hey, you are welcome, Glenn. Thank you for asking. Glenn, the - if you look at the longer-term trend of the market, and I think OpenEdge is actually a business that fluctuates. I mean, occasionally we see some large deals come in and that makes the revenue look good for that quarter. And then for a while they don’t come in. And our business is difficult to predict, because the timing and size of these deals are completely dependent on either our partners who go off and win some new customer and therefore they need licenses. Or our existing customers who decide, oh, you know what, the application I’m currently using, I need more capacity for that. That’s where any new licenses that come in. Those are the only two sources of those licenses. So they are not really first of all in our control, right. We don’t really have the ability to push in a true sales, what would be sales and go-to-market efforts, right, to change that. So overall, we continue to expect a flattish business, maintenance revenues continue to be very strong, Glenn, with our OpenEdge product line, as well as our core products as a whole. And because of the fact that these things are unpredictable and occasionally we do get large deals, we want to make sure that we have a realistic view of what is happening in this business. I think if you actually look at the last three years or so in constant currency, I think the business has been flattish, right. And occasionally we do some good stuff, and occasionally it doesn’t look that good, but quarter-to-quarter fluctuations will happen in our business.

I think it’s also worth pointing out that we had a difficult comp year-over-year too, because the fourth quarter of 2015 was, for lack of a better characterization, a little bit of inflated compared to what they normally would have been. So it’s a tough comp year-over-year.

Okay, great. Good luck going forward, guys.

Thank you, Glenn.

At this time, I’d like to turn it back to our speakers for closing remarks.

Thank you all for joining the call today. As a reminder, we plan on releasing financial results for our fiscal first quarter of 2017 on Wednesday, March 29, 2017 after the financial market’s close and holding the conference call the same day at 5:00 PM Eastern Time. I’ll now turn the call back over to Yogesh for his closing remarks.

Thanks, Brian. I’d like to wrap up by reiterating that I truly am excited to be leading Progress as we transform ourselves into a much stronger innovative company. We’re putting into place a strategy that positions us well for future growth, while operating our business much more efficiently to continue to generate strong earnings and cash flow. And we believe this will deliver the optimal results for our shareholders. I really appreciate and thank you for your continued support. And I look forward to beginning a dialogue with each of you in the coming days and weeks and months. Thank you very much.

That concludes today’s conference. We thank you for your participation. You may now disconnect.