Good day and welcome to the Progress Software Corporation First Quarter 2018 Investor Relations Conference Call. At this time, I would like to turn the conference over to Brian Flanagan, VP of Investor Relations. Please go ahead.

Thank you, Ashley. Good afternoon, everyone and thanks for joining us for Progress Software's fiscal first quarter 2018 earnings call. With me today is Yogesh Gupta, President and Chief Executive Officer; and Paul Jalbert, 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, the revenue, operating margin, diluted earnings per share and adjusted free cash flow 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 today. Today, we published our financial press release on our website. This document contains the full details of our financial results for the fiscal first quarter 2018 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 will now turn it over to Yogesh.

Thank you, Brian, and good afternoon, everyone. Welcome to our FY2018 first quarter conference call. I want to first walk you through the highlights of our financial results for the quarter and then provide an update on our business, operations and strategy. We are very pleased to announce another quarter of solid financial results, continuing our strong execution since we announced our new strategic direction more than a year ago. We exceeded both our revenue and earnings per share expectations, with strong year-over-year EPS growth of 59%. We also had another strong free cash flow performance. Our operating margins were 37% and during the quarter we returned over $50 million to shareholder via share repurchases and dividend. Our core business is strong and stable and we remain committed to operating efficiency with targeted investments in product and people to further strengthen our core, while also building our capabilities for future growth. As we've discussed, our goal is to drive sustainable long-term shareholders value by building an increasingly stronger business. And to deliver on that goal, our strategy has a few key elements. One, continue to drive the profitability of our business; two, provide a future technology path for our strong networks of ISVs and customers and acquire new customers and partners in the application development market; and three, leverage our operating model to acquire complementary businesses that we can operate more efficiently. We made good progress on these elements during the first quarter. Our core business was solid, led by a strong performance from our OpenEdge ISVs with an increase of over 20% in SaaS related revenue from our partners who offer their applications in the cloud. These ISVs are the foundation of our core business and our continued investment in our OpenEdge technology helps them keep their OpenEdge-based applications…

Thank you, Yogesh, and good afternoon, everyone. As a reminder, all the numbers that I’ll be referring to in my remarks are on a non-GAAP basis. For our first quarter, total revenue was $94.2 million, which was $1.2 million above the high-end of our guidance range of $93 million. The overachievement was primarily related to a favorable FX impact of approximately $800,000, due to the weaker U.S. dollars, since we provided our revenue guidance in January. Our earnings per share of $0.54 for the quarter grew 59% year-over-year and was well above the high-end of our guidance range of $0.48. The $0.06 overachievement consisted of $0.02 from higher revenue and $0.04 from lower expenses. The solid revenue performance coupled with continued prudent expense management enabled us to achieve a 37% operating margin for the quarter, an increase of 700 basis points over Q1 of last year. Looking at consolidated revenue for the quarter as compared to Q1 of last year, total revenue of $94.2 million was 3% higher at actual exchange rates and flat on a constant currency basis. The year-over-year impact of exchange rates on our first quarter revenue was a favorable $2.8 million. License revenue of $25.4 million increased by 4% at actual exchange rates and 1% on a constant currency basis. Maintenance and services revenue was $68.8 million, an increase of 3% year-over-year at actual exchange rates and flat to last year on a constant currency basis. The 1% license revenue increase at constant currency is due to an increase in our DCI segment, offset by slight declines from our OpenEdge and AD&D segments. Within OpenEdge, our ISV channel showed strong growth, this was more than offset by declines in license revenue from our direct enterprise customers. Although maintenance and services revenue for the quarter was flat…

Thank you, Paul. 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'll now hand the call back to the operator to conduct the Q&A session.

Thank you. [Operator Instructions] And we'll take our first question from Steve Koenig from Wedbush Securities. Please go ahead.

Thanks team for taking my questions. I got one follow up for you as well if you don't mind. I wanted to just ask you Asia-Pac, looks it was down this quarter more than the other regions. Any color there just a small number that bounces around or anything in particular going on?

Yes, I know it is a fairly small number. We did have a fairly sizable deal last year on direct end user that's now replicated this year. And also down on maintenance.

Got it. Okay, thanks. I guess the other thing I would ask into my follow-up. So Kinvey, I think you said there were 10 new customers for Kinvey. I know you're doing a bit in healthcare there. And so I'm curious if you can give us any color maybe insights into they had a good start in the healthcare vertical. I think even before you guys bought them, but then I think you guys said there wasn't significant revenue now or revenue run rate. Can you comment at all on there -- can they bring some revenues with them. Can you remind me please? And what are you expecting in terms of returning those customers into incremental revenue?

Hey, Steve good to hear from you. So we added 10 new customers this past quarter between Kinvey and DataRPM. You are correct that Kinvey had healthcare customers some healthcare customers already. We since then have actually launched a new offering that uses Kinvey at the center of it, which we are calling the Progress Health Cloud, which also includes our front-end tooling to make it easy to build those apps connected to this back end also uses the DCI connectivity to connect to other data sources that they may need in addition to the data sources that Kinvey already had connectivity to. So, it is a more bigger, more solid, more robust offering, more complete offering than what we had by -- that Kinvey had by itself. We haven’t really commented on revenue contributions in the past by Kinvey. And as I said in my earlier remarks, it’s too early to talk about revenue from them, we are happy to see the traction we are seeing in the market. As you are aware healthcare is a healthy market out there and people are trying to figure out how to implement and execute on their digital initiatives, especially in the healthcare arena. And I think patient care applications, patient engagement applications, et cetera are all interesting opportunities for us. As these things become meaningful, we will absolutely share the data with you, but at this point we aren’t sharing anything publicly.

Okay, no that’s good. I appreciate the color. Thanks, Yogesh, thanks, Paul.

You’re welcome Steve, thank you.

Thanks, Steve.

And we will take our next question from Mark Schappel with Benchmark Commitments. Please go ahead.

Hey, guys.

Hey, Mark.

Hey, Mark.

Hey, thanks for taking my question here. So, Paul starting with you, with respect to the revenue guidance, the $4 million increase for foreign exchange that you are expecting in fiscal 2018 actually suggest that your revenue guidance is coming down here, I was just wondering what’s driving the thought process here behind the lower revenue guidance?

Yes, know Mark, I think in my remarks I stated that we are not changing guidance for the incremental $4 million. As I said earlier in Q1 we had an $800,000 favorable variance, right of which $4 million is part of. The rest of that currency is really projected based on the exchange rates and given where we are in the year on changing guidance for FX movement, I didn’t think it was prudent at this point.

Okay, great. Thank you. And then, Yogesh the OpenEdge direct business that continues to struggle and continues to offset the positive performance we are seeing to the ISV channel and I was just wondering if there was initiatives underway or things you are thinking about to turn that around to the direct business?

Yes, so Mark as you know in the direct business that business is actually lumpier than the in-direct business, because sometimes customers want to expand and they buy more licenses and then other times they don’t. So we’ve had certain periods when certain customers have decided to expand their business and we have seen healthier performance in that business and other times not. From a maintenance perspective and retention perspective that business continues to be very, very solid. The expansion happens basically based on whether or not the usage of that application within that business grows. So Mark, that to some degrees out of our control, what we do control and what we have done a very, very good job of is to maintain the maintenance revenue and retention of those customers. So I want to be very clear here that the license revenue part is not really in our control because after all whether an application that is currently being used at a business gets used by more users or they need more capacity or not is really dependent on their business. Whereas the maintenance and retention and keeping them in our fold and keeping them using our product is really what we are focused on for our direct customers.

Okay, great. Thanks. And then if I can sneak another on in here.

Sure.

On the ISVs, the two ISVs that are beta testing, the data RPM product for you, is there anything new to report on that front this quarter?

They continue to work with us. They actually are not just beta testing, they are actually working with us to go-to market and integrated into their products as well as go-to-market to their customers, Mark. So there our product is available, it is not in beta it is generally available and they are out there with and we are out there with them speaking to some of their direct customers as well. Nothing more to report than that.

Okay, great. Thank you.

And we'll take our next question from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Hi, good afternoon. Just curious what the impact guide from the shift in the conference was to the sales and marketing line in Q1 in dollar terms?

Yes, I'm not going to provide you the dollar term, but I think if you look at based on the guidance that we provided for Q2 and where the expense level is for Q1 there is a slight uptick as a result of that.

Okay. Thanks.

You're welcome.

And then just on the cost cutting, can you give us -- is there any more steps to go in that. I mean most companies always in the seventh inning of costs cutting program. Is that how you see yourselves now, or is most of the work done in your minds?

So, Glenn, as we've said right all along, our job is to continue to run a very lean operation and we've continued to do that. We always are on the lookout for opportunities to make our business more efficient. But we don't really see significant changes. I mean, after all if you look at our guidance we are guiding 36% to 37% operating margins this year, which is an improvement even from last quarter guidance of 100 basis points. So we do what we can, but there isn't anything large that we see in the foreseeable future.

Okay great. Thanks for the help.

And we'll take our last question from Matthew Galinko with Sidoti. Please go ahead. .

Hey, thanks for taking my question. You called out the Canopy deal. So I just had a couple of questions around that. One would be, I was wondering if you can quantify kind of the time to market benefit if any that they enjoyed from kind of deploying your tools. And then secondly what was the competition for that deal like? Who did you see in the market or was it closely contested and kind of what brought you over the top?

Hey, Matt thanks for the question. So two part question, so the first part in terms of value that they saw and the pace at which they were able to deploy. The project from the time they signed up for it to the time they went live was a matter of months somewhere between four and six months with all three of the initiatives, which was dramatically faster than -- in fact they had attempted to do something with one of our competitor's offerings prior to this and it spent a significantly longer period without anything going live on even one of the channels. So it was a phenomenal reduction because the alternative never even got there. The competition was the usual folks. I mean in fact Canopy Health among other things use their sales force for their CRM. So all kinds of people were in the mix with their health cloud offerings. And we feel really good about what we were able to do for them and what they were able to accomplish and be successful with our product offering.

Thanks. If I may ask a quick follow-up, when the competitor that I guess effectively displaced or was displaced earliest was that selected prior to your owning the Kinvey asset or is it a deal that sort of you participated in and then it gathered and came back to you.

No, that was before. That was before we got Kinvey.

Perfect, alright. Thank you.

And that concludes our question-and-answer session for today. I'd like to turn the conference call back over to Brian for any additional or closing comments.

Thank you all for joining the call today. As a reminder, we plan on releasing financial results for our fiscal second quarter of 2018 on Wednesday June 27, 2018 after the financial markets closed and holding the conference call the same day at 5 PM Eastern Time. I'll now turn the call over to Yogesh for his closing remarks.

Thanks, Brian. We continue to execute well and with our strong financial performance in Q1 have maintained the momentum we’ve worked so hard to achieve. We remain committed to building a strong sustainable business and we look forward to further meetings with our shareholders to discuss our strategy, goals and accomplishments. Thank you so much for joining the call. Have a great evening.

And that does conclude today's conference call. We thank you all for your participation and you may now disconnect.