Brian Flanagan - Senior Director, IR Phil Pead - President and CEO Chris Perkins - CFO.

Steve Koenig - Wedbush Securities Mark Schappel - Benchmark Glen Mattson - Ladenburg Thalmann Scott Zeller - Needham & Co..

Good day and welcome to the Progress Software Corporation Q1 Investor Relations Conference Call. At this time I would like to turn the conference over to Mr. Brian Flanagan. Please go ahead, sir..

Thank you, Cassandra [ph]. Good afternoon everyone and thanks for joining us for Progress Software's fiscal first quarter 2015 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 revenue, operating margin and diluted earnings per share.

You can find the 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 first quarter 2015 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. Good afternoon everyone, and thank you for attending our first quarter earnings call. There is an irony in the use of technology in that making it simple is highly complex. It's that complexity that provides progress with significant opportunities.

Everyone building apps or connecting to data or building a website is striving to make the user experience a simple and rewarding one. And we're not turning back from this goal. No one is seeking to make their app more difficult to use.

Ask yourself this, when was the last time you had to read a manual or even call support? It is that pursuit of simplicity that draws developers to Progress. We do not dictate what language they should use or mandate their deployment platform.

What we do offer is a platform that enables them to rapidly build and deploy mobile, web and on-premise applications, use incredibly intuitive user interface tools, and connect to a wide variety of data sources.

Progress enables every developer the freedom to fulfill their goals of building highly intuitive applications because we reduce the complexity involved in doing so. Over the last two years we focused on building the capabilities necessary to offer a powerful way for developers to create beautiful apps without the tedium of managing the complexity.

This has led us to significantly invest in our OpenEdge platform to enrich both the depth and breadth of our data connectivity and integration technologies, and to make strategic acquisitions in our app dev and deployment business. As a result of these efforts, I am very pleased with our first quarter performance.

All our businesses contributed solid performances and our momentum continues to build. I will now review our individual business unit performance, starting with OpenEdge. All regions showed growth after last year -- over last year and license sales to enterprise customers were particularly strong.

Revenue from our ISPs selling their solutions as software-as-a-service continued to grow, further increasing the percentage of our revenue that is recurring in nature.

We held several well-attended partner connect events during the quarter in locations around the globe, and our ISPs are taking advantage of the technology and programs Progress offers them to help them grow their businesses.

Our recent acquisition of BravePoint has quickly yielded positive results, with their revenues helping to contribute to our solid quarter. Also significant are the application modernization frameworks we put in place as a result of the acquisition.

Through modernization, partners want to improve the scalability, agility and performance of their applications, as well as the user experience.

With the addition of Telerik's user interface capabilities, viewed by many partners as an integral part of any modernization effort, we have a comprehensive offering for our ISPs who want to make their applications more competitive and intuitive. This trend is not limited to North America where BravePoint has historically been focused.

We're also stepping up to meet the increased demand for modernization engagements we're seeing from our partners in EMEA and APJ.

These ongoing modernization efforts, coupled with the enhancements we've made to the OpenEdge technology help our 1,400 partners worldwide remain competitive in their markets and sell more of their existing applications to thousands of new and recurring customers each year.

We're also seeing increased adoption within our direct end-user base with more licenses being acquired as they broaden the use of their internal OpenEdge applications. This has been a focus for us and so I'm very pleased that we're seeing this kind of momentum.

Focusing on our application development and deployment business unit, which for the first time includes Telerik, also turned in a solid quarter. Telerik maintained its growth trajectory and our Pacific platform and module has continued their momentum.

Speaking of our Pacific platform, we're very pleased and excited that last week, leading industry research firm Gartner released the March 2015 Magic Quadrant for Enterprise Application Platform-as-a-Service. Progress is once again positioned very favorably as a visionary.

We have the strongest completeness of vision of all of the visionary players and we are in the third spot overall. This is a major movement up and to the right from last year. Gartner positions technology providers based on their product capabilities, market vision, past success, and future ability to capitalize on that vision.

For this year's report, Gartner looked at our comprehensive, multifunctional PaaS offering that includes Pacific, Rollbase, Modulus, Telerik Platform, DataDirect Cloud, and Easyl. This is something we're very proud of, and you'll see and hear more about this in the coming weeks.

All of our Telerik products performed well in the quarter, including Sitefinity which had record license and maintenance bookings and enters Q2 with its strongest pipeline ever. Telerik Platform, our full lifecycle platform for building enterprise-grade mobile applications, continues to exceed expectations.

Although it was introduced only a year ago, developers in over 600 enterprise organizations have already used Telerik Platform to create more than 20,000 mobile apps, ranging from human resources and payroll services to government and inventory control.

During 2014, Gartner positioned Telerik in the visionary category of its Magic Quadrant for mobile application development platforms. And our latest release in the first quarter solidifies its position as one of the most robust platforms in the market for creating beautiful enterprise and consumer mobile apps.

IDC forecasts the mobile enterprise application development platform market to reach almost $4 billion by 2018, a 25% annual growth rate, and estimates that more than a third of large enterprises will develop and deploy mobile apps across their organizations in 2015. The Telerik Platform positions us well to take advantage of that growth potential.

Our latest release makes mobile development easier and more guided than ever by providing new quick-start templates and workflows that allow developers to quickly build complex but highly intuitive mobile apps.

ScreenBuilder, another major enhancement that's currently in beta, enables developers and business users to create 80% of the app's UI from pre-built and pre-widescreens with no coding. There's also support for the latest iOS and Android releases and automated application testing for hundreds of different devices.

In addition, we are really excited about the recent release of Telerik's NativeScript beta, an open source framework for developing native iOS, Android and Windows mobile apps with JavaScript, to great interest from the developer community and media.

NativeScript enables developers to use native APIs, rendering and layout capabilities, to deliver engaging user experiences. And they get to do it all using their existing coding skills, without having to learn new languages and development environments but yet still being able to take advantage of the benefits of a native app.

During the first quarter we announce that Rollbase, our point-and-click, drag-and-drop productivity application development tool within Pacific, is now available to deploy on HP Helion. Helion is HP's distribution of OpenStack, the world's largest open source cloud computing project.

This is a significant step for us as it enables the Progress global ecosystem consisting of millions of developers, ISPs and end-users to take advantage of a leading cloud infrastructure and make the applications they build using Rollbase available to the large base of HP partners and users.

Our Modulus deployment platform is growing rapidly with record new customer growth during Q1. The number of applications being built with Node.js continues to accelerate, as evidenced by the number of application modules that are being created in Node.js and added to the NPM registry.

The number of modules has more than doubled in the past year and continues to grow rapidly. Modulus provides a complete platform for deploying Node.js applications at scale without requiring dedicated development resources, and is a key member of the Node.js community.

Finally, turning to our data connectivity and integration business unit, I'm very pleased, not only with the performance, but also the continued momentum. We are seeing significant growth in our pipelines, not just in North America where our data business has typically been strongest, but in our other regions as well.

There's been increased demand from our OEMs for the new data sources we support, resulting in several contract expansions and extensions to add support for additional sources such as Spark SQL, Cassandra, MongoDB and Hadoop.

There's also been a large uptick in demand from Salesforce customers using Lightning Connect, who need to access -- who need access to legacy on-premise data. With DataDirect Cloud, we launched support for Lightning Connect towards the end of 2014. And it's the fastest, easiest way to integrate any data source with Salesforce.

A recent example is a large financial services company that wanted to provide a single view of the customer to their sales and service reps through Salesforce.com.

The challenge for them was being able to provide direct, secure and real-time access from Salesforce running in the cloud to multiple on-premise applications and data residing behind their firewall.

Using Salesforce's Lightning Connect and DataDirect Cloud, they were able to easily and securely connect their Salesforce.com application to that data and are now providing a real-time single view of their customers for thousands of internal users. In summary, we're off to a great start in 2015.

Our Pacific Platform continues to gain momentum and the integration of Telerik has gone very smoothly.

As I mentioned at the beginning of my prepared remarks, the main focus of both Progress and Telerik has always been on helping developers be as productive as possible so the fit has been even better than expected as we begin to operate as a single company.

I remain excited about our future and the opportunities for each of our business units as we strive towards our commitment of becoming the preferred destination for application developers.

I'll now turn it over to Chris to review in more detail our first quarter performance as well as our expectations for the second quarter and for the full year of 2015.

Chris?.

Thank you, Phil, and good afternoon everyone. As we mentioned in our earnings release, we are very pleased that we met our revenue guidance and exceeded our EPS guidance for the quarter. Total non-GAAP revenue for the quarter was $95.5 million, compared to $74.5 million in Q1 2014.

This was at the high end of our guidance range and represents an increase of 28% at actual exchange rates and 34% on a constant currency basis. Non-GAAP revenue includes acquisition-related revenue adjustments for Telerik, totaling $14 million.

As I discussed in our January guidance call, GAAP rules require us to eliminate certain pre-acquisition revenue classified by Telerik as deferred revenue, but we include this revenue in our non-GAAP quarterly reporting to better reflect our true business performance on a normalized basis.

Revenue from BravePoint and Telerik was consistent with our expectations, with Telerik maintaining its growth trajectory of over 20%. Excluding the impact of these recent acquisitions, revenue for our base business grew by 2% at constant currency in the first quarter.

Total year-over-year revenue increase was due to growth in both license, maintenance and services revenues. License revenue was $29 million in the first quarter, up 30% from Q1 2014 at actual exchange rates and 35% on a constant currency basis.

In addition to the incremental license revenue from Telerik, OpenEdge license sales were strong in the first quarter, which I'll provide more detail on when I review the business unit performance. Maintenance and services revenue was $66 million for the quarter, up 27% from last year at actual exchange rates and 33% on a constant currency basis.

Maintenance renewals for our base business were above 90% and generally in line with our expectations. We remain confident that we'll continue to deliver renewal rates in our base business above 90%.

For our revenue by business unit, on a constant currency basis, OpenEdge revenue was $74 million, up 10% for the quarter, including revenues related to our acquisition of BravePoint.

Excluding BravePoint revenues, the OpenEdge business unit grew by 3%, with strong sales to our ISPs in North America and EMEA and good growth in direct sales to enterprise in APJ, reflecting the additional revenue from a large multiyear deal signed in Q4 2014.

App dev revenue was $19 million, compared to $0.2 million in 2014, primarily due to revenue from Telerik. As I mentioned earlier, Telerik revenue was in line with our expectations with growth over 20%. DCI revenue was $7 million, a decrease of 6%.

While revenue was down versus last year, it was in line with our expectation, and as Phil mentioned, we're seeing significant pipeline growth for our data products.

Another positive indicator is the large increase in our backlog of multiyear license arrangements which grew from $10.7 million in Q1 of last year to $17.2 million at the end of the current quarter. We continue to expect that our DCI business unit will contribute to our full year growth in 2015.

For our revenue by geography, North America was $53 million for the first quarter, up 54% to the same quarter a year ago. On a constant currency basis, EMEA first quarter revenue was $33 million, up 13%; Latin America revenue was $6 million, up 11%; and APJ revenue was $7 million, up 32%.

Excluding the acquisitions of BravePoint and Telerik, all of our regions showed growth with the exception of North America which was essentially flat compared to Q1 of last year. Non-GAAP operating margin in the first quarter was 21%, 8 percentage points lower than the first quarter of 2014.

As I discussed during our January guidance call, our operating margin for the first quarter was primarily impacted by currency translation and the acquisitions of BravePoint and Telerik, which were expected to be dilutive to our operating margins in 2015 and slightly dilutive net of financing costs to our first quarter earnings per share.

Non-GAAP operating expenses were $75 million, up $22 million from a year ago and up sequentially from $60 million in the fourth quarter of 2014.

The net increase in operating expenses year over year is primarily the result of the acquisitions of BravePoint and Telerik, along with further prudent investments we are making to drive our growth strategy, partially offset by the impact of currency translation, which benefits us on the expense side.

Our first quarter non-GAAP EPS was $0.29, compared to $0.28 in the first quarter of 2014, an increase of 4%. This was above our guidance range of $0.22 to $0.24.

Related to our EPS performance versus the high end of our guidance, $0.01 of this increase was due to operating performance that exceeded our guidance, primarily attributable to the high end of the range revenue performance and lower operating expenses during the quarter.

$0.02 was due to a lower income tax provision in the quarter related to the reinstatement of the federal R&D tax credit retroactive to the beginning of 2014 and $0.02 was due to a foreign exchange gain realized on certain intercompany balances related to the Telerik acquisition structure.

As I discussed last quarter in our guidance call, because we have meaningful revenues denominated in foreign currencies, the significant strengthening of the U.S. dollar during the latter part of 2014 and through the date of our January conference call created a strong headwind for us in 2015 related to currency translation of our non-U.S. revenues.

Also because a meaningful portion of our cost base is denominated in foreign currencies, we get some translation benefit in our cost structure from the strengthening of the U.S. dollar, which reduces the negative impact of currency translation towards our operating margins.

This is a natural currency translation hedge in our business based on the global diversity of our cost structure.

For our first quarter, the negative impact of currency translation on the non-GAAP results, compared to Q1 2014 exchange rates, was a year-over-year revenue impact of negative $4.2 million and a year-over-year negative EPS impact of $0.03.

Moving on to a few balance sheet and cash flow metrics, the Company ended the quarter with a strong balance sheet, with ending cash, cash equivalents and short-term investments of $211 million.

During the quarter we funded the purchase of the Telerik acquisition using approximately $100 million of cash, with the remainder financed with a $150 million term loan under our new five-year credit facility. After making scheduled principal payments during the first quarter, our ending debt balance for Q1 is $148 million.

Net accounts receivable was $59.6 million in Q1 2015, compared to $68.3 million at the end of 2014. Net DSO for the first quarter was 56 days, down seven days sequentially and down 15 days from the prior year. Deferred revenue was $125.9 million, compared to $96.2 million in Q4 2014, an increase of $29.7 million.

The increase was driven primarily as a result of the Telerik acquisition, and to a lesser extent, cyclical billing of our OpenEdge maintenance bookings which is more heavily weighted in the first quarter of the year.

As a reminder, sales from our Telerik products and services are generally billed upfront while revenue is recognized ratably over the term of the agreements. Operating cash flow was approximately $37 million for the quarter, compared to $25 million in Q1 2014.

The increase was primarily due to improvements in working capital driven largely by strong collections across the Company, which included the shorter collection cycle of the Telerik receivables. This is reflected in our low DSO at the end of the quarter. Adjusted free cash flow was $36 million for the first quarter compared to $21 million in Q1 2014.

We repurchased 309,000 shares in the first quarter at a cost of approximately $8 million, as part of our $100 million share repurchase program authorized by the Board in January 2014. As of March 2015, we have $39 million remaining under this authorization.

We ended the quarter with just under 1,800 employees, an increase of approximately 700 employees sequentially versus Q4. This increase is primarily due to the incremental headcount associated with the Telerik acquisition. Moving to our guidance for fiscal year 2015, there are two key points I'd like to make before I discuss the specifics.

First, we remain confident in our business outlook and our updated full year guidance is unchanged from an operational perspective. The guidance we provided on our January 13th call was based on the current exchange rate environment at that time. U.S.

dollar has strengthened further since then against essentially all currencies, as reflected in the euro declining an additional 7% since we issued our previous guidance. This additional strengthening of the U.S. dollar is the reason for the changes in our updated full year guidance.

With that in mind, we expect non-GAAP revenue for fiscal year 2015 to be between $415 million and $425 million, representing a year-over-year increase of 25% to 28%. This decrease of $10 million from our prior guidance is due entirely to the further strengthening of the U.S.

dollar in the last two months, making the total year-over-year negative currency impact on our 2015 revenue between $27 million and $28 million. Our January guidance estimated this impact of $17 million to $18 million. We expect non-GAAP earnings per share to be between $1.35 and $1.45, a year-over-year decrease of 4% to 11%.

This represents a decrease of $0.02 from our prior guidance, again due to the further strengthening of the U.S. dollar. We estimate that total year-over-year negative impact of currency movements on non-GAAP EPS to be between $0.14 and $0.15.

This is an additional negative impact of $0.04 as compared to our January guidance when we estimated a $0.10 to $0.11 impact. The net $0.02 reduction in our guidance reflects this additional $0.04 negative impact from currency translation, partially offset by the $0.02 foreign exchange gain we achieved in the first quarter.

We expect non-GAAP operating margin for 2015 to be approximately 27%, free cash flow to be between $90 million and $93 million, and a non-GAAP effective tax rate of between 33% and 34%, all unchanged from our prior guidance.

Our non-GAAP revenue guidance reflects our expectation that Telerik will continue its growth trajectory of over 20% and that BravePoint will add approximately 6% to 7% growth to our OpenEdge business unit.

Excluding revenues from these recent acquisitions, we continue to expect organic growth of 6% to 7% on a constant currency basis from our base business, reflecting the momentum we see in all three of our business units.

Our non-GAAP revenue guidance also includes an adjustment for acquisition-related deferred revenue, as I discussed earlier in my remarks. Our full year 2015 guidance includes our current estimate of approximately $35 million of non-GAAP revenue.

As the majority of the Telerik agreements are for one year, we expect any non-GAAP revenues beyond 2015 to be minimal. For operating margins, our full year guidance reflects our expectations that both the BravePoint and Telerik acquisitions will be accretive net of financing cost on a full year basis.

Our operating margin guidance also includes investments we are making in our app dev business unit to drive our growth strategy, including a full year of Modulus expense. For fiscal 2015 second quarter, we expect revenue to be between $97 million and $100 million, a year-over-year increase of 20% to 24%.

Our expectation is that our base business, excluding BravePoint and Telerik acquisitions, will grow by 1% to 2% in the second quarter at constant currency.

Our guidance for the second quarter is also based on current exchange rates, which have declined by approximately 21% versus the average rates for the second quarter of 2014, and negatively impacts our revenue by approximately $9 million compared to prior-year rates.

We expect non-GAAP earnings per share of between $0.29 and $0.32 for the second quarter, a year-over-year decrease of between 14% and 22%. This guidance reflects our expectation that the acquisitions of BravePoint and Telerik will be neutral to slightly accretive net of financing costs for the quarter.

The negative currency translation impact for Q2 is expected to be approximately $0.05 based on the current exchange rate environment compared to prior-year rates.

Additionally, as compared to 2014, our second quarter non-GAAP EPS outlook is impacted by a higher tax rate and by investments in our app dev business to drive our growth strategy, including expenses associated with Modulus which was acquired in May 2014.

In summary, we are very pleased with our Q1 financial results and feel we are positioned well towards achieving our objectives for the rest of the year. Our acquisitions of BravePoint and Telerik are contributing positively to our strategy and financial performance.

We remain confident in the strategy and products of each of our business units and we continue to see positive future growth opportunities in our business. With that, I'd like to hand it off to Brian for the Q&A..

Thank you, Chris. That concludes our formal remarks for today and 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 take our first question from Steve Koenig of Wedbush Securities..

Hi. Thanks, gentlemen, for taking my question. Let's see. I want to focus on organic constant currency growth. And just reviewing the numbers, it looks like you guided 2% to 4% growth in Q1, you're at 2%, the kind of the low end.

For Q2, Chris, I'm not sure if I got it right, did I hear you that the guidance was 1% to 2% constant currency?.

That's correct, Steve..

Okay. And so for the full year you're sticking to your 6% to 7% organic constant currency growth.

Can you give us some color on what gives you the confidence in the ramp that you expect to be, which should be pretty large than in the second half, what are the drivers there?.

Sure. I'll make a comment from a financial perspective and Phil can add to it if he likes..

Okay..

First, I'd say, again, going just by our business units, we see good pipeline growth in our OpenEdge business unit, really for both the OpenEdge and QuarterCon [ph] product categories.

So we see that that has the opportunity to contribute positively through the selling cycle in the second half of the year at a higher rate than it is in the first half of the year. We expect BravePoint will continue to contribute to that, but again we're focused on non-acquisition growth.

In our data business, again we continue to build a strong backlog of multiyear revenue in our backlog versus the prior year and even in the fourth quarter. So we're seeing that pipeline grow as well as the revenue backlog grow, and we see positive momentum coming across our regions outside of North America as well.

So year over year, while we expect the data business to be down in the first half of the year from a revenue -- recognized revenue point of view, we expect we will have positive growth on a full year basis, so that will contribute positively, certainly more positively in the second half of the year.

And then in our app dev business, which was small prior to bringing Telerik into the business, we are seeing good interest and good buildup in our subscription pipeline. We think that that revenue base will start to -- I mean that subscription base will start to contribute more positively to the year-over-year revenue growth in the second half..

Great. Okay.

And then I think for the follow-up, you know, just maybe any thoughts from Phil on that, is there anything you want to add, Phil?.

Yeah. Go ahead..

Yeah.

And then I would just toss, then I'll pass it to the next person, and then, Chris, maybe if you could just explain a little bit how the -- how does the -- it sounded as if the multiyear agreements will help accelerate in the second half, the recognized revenue for DataDirect, maybe could you explain a little bit how that works, if I understood that correctly?.

Sure. Yeah. Again we have multiyear OEM agreements that are included in the data business and the revenue recognition is based on the timing, we're signing a multiyear agreement, it's based on certain revenue factors which could be timing of payments or other contractual deliverables that -- our revenue to be recognized once those points are hit.

So --.

Got it..

-- can contribute to this year in the second half, as well as to future years..

Got it..

So, Steve, this is Phil, just to add to Chris' comprehensive remarks around why we believe that the opportunity is there for us to continue to see that organic growth rate through the balance of this year ending with the guidance that we've given, this is really all about the momentum that really began towards the end of last year.

We had a very strong fourth quarter.

Usually that would result in, you know, a seasonally adjusted first quarter, but yet here we are again I think showing really positive momentum going into the first quarter, driven by building strong pipelines, as I've talked about from the beginning, that resonate with the market, there is a real appetite for the solutions that we have.

The partnerships that we're creating, the one that I just mentioned with HP, with Salesforce, with a host of others, that are now recognizing Progress to be a leader in so many different areas, that just help us get that visibility for the growth of our business towards the balance of this year..

Terrific. Thanks very much for taking my question..

You're welcome, Steve..

And we'll go next to Mark Schappel of Benchmark..

Hi, good evening, and nice job on the quarter. Chris, starting with you, foreign exchange impact to the top line.

Do I hear you correctly $4.2 million negative?.

That's correct, for the first quarter, that's correct..

Okay, great. Thank you.

And Telerik revenue in the quarter and BravePoint revenue in the quarter [inaudible] I know you said that expectation, do you have the exact numbers on those?.

No, we really haven't broken those specific numbers out other than the metrics that we give. So we're really not providing those details specific by product category numbers..

Okay.

And then shifting gears a little bit here, Phil, with respect to the early success you're seeing with the Pacific platform, is that success coming mostly from your ISP customers or are you seeing that just from some new direct guys [ph]?.

It's really a combination, Mark. Obviously ISPs are really important to us. But if you look at the mix of solutions that we have and the target markets that we drive sales to, you'll see what I'm very pleased to see is a good healthy mix between ISPs and enterprises, as well as the adoption by our partners to resell our channels.

I mean I'm talking specifically like service providers, that we are also targeting, along with service integrators. So it's really a combination of all four of those stakeholders that are helping us achieve that momentum..

Okay, great. And then finally, you know, Phil, with respect to the DataDirect business, if my numbers are correct, it's down four of the five past quarters.

And I'm just wondering if you could just run through once again what gives you confidence why you believe this is more operationally related rather than some negative secular trends you're seeing?.

Yeah, I think that, you know, clearly the numbers speak for themselves, but if you just look at the increase in our pipeline numbers, which is really what Chris targeted in his prepared remarks, I'm very confident that we're going to start to see that business begin to grow as we report out the balance of this year in the next - really not necessarily in Q2 but certainly three and four..

Okay, great. That's all for me. Nice job on the quarter. Thanks..

Thank you..

And we'll go next to Glen Mattson of Ladenburg Thalmann..

Yeah, hi.

Can you hear me?.

Hey, Glen..

Hi. Yes. So, curious also about DataDirect.

I mean as you move towards this cloud model, do you expect it to be a less lumpy than we've seen in the past, and, you know, we're transitioning towards that period, or do you still expect kind of big fluctuations quarter to quarter?.

Well, we are, as we've talked about before, we are looking and we see opportunities for more of the data license revenue to be recognized ratably.

And one of the things that we're -- we see interest in and we included that is the impact on some of our guidance for this year that we see some of our data OEM agreements that come up for renewal, there will be interest in bundling DataDirect Cloud with that.

And once we bundle those products together with DataConnect, we will be recognizing revenue on a ratable monthly basis. So we are eager and positive on flattening out that revenue stream.

There could be quarters where renewals are signed and a client does not choose to go with the -- with bundling of DataDirect Cloud, but there could still be spikes or lumps within a period or a year.

But, you know, again we're focused on making sure we get that as evened out as we can so that we, for a three-year multiyear deal, we get three years -- three separate years of revenue recognition. So we're focused on that. Some of that is up to the choice of the customer as far as what products they want and how they need their contracts structured..

Okay, great. And then just as a follow-up, on the balance sheet, the better DSOs.

Is there any concerted effort on your part to improve collections? And is that sustainable or what is behind that?.

Well, I think it was really attributable to two things. One, we did have a very good performance. We had a good even flow of bookings for the quarter, which helped. So we didn't have a large amount of bookings at the very end of the quarter that go into -- that get collected after the quarter. So that helped.

We had great performance by our entire organization on credit and collections. They performed very well globally for us, and that we certainly noted that internally. But also the Telerik business has a better cash philosophy to it just by the nature of it. So that also impacted our DSOs.

Because a meaningful amount of that business is load and no touch [ph] and the payment comes through very quickly. So that does improve the actual DSO calculation. So, you know, I think we performed very well. I think we can sustain lower than we've done historically in the DSO.

But I would -- we had a lot of things happen very positively in the first quarter that actually brought it down to a lower -- a very low level..

Thank you..

Yeah..

And we'll go next to Greg McDowell of JMP Securities..

Hi. This is Richard Leary [ph] dialing in for Greg McDowell. Thanks for taking my question. A lot of my questions have been answered, but wanted to get one quick one. You did mention, if I'm not mistaken, you expect this 20% plus growth rate from Telerik, you've seen and you expect going forward for the year.

Are you looking at that in constant currency terms or is that on an actual basis?.

Well, historically it's on actual and constant currency. Historically Telerik is invoiced in U.S. dollars. So it is, even though -- the majority of the revenues are in North America as well. But because globally they invoice in U.S. dollars, there is not a currency translation impact on the revenue..

Okay then.

How about on the expense side?.

Expense side, a meaningful portion of the Telerik expenses are based in Bulgaria and linked to the euro. So we do get a benefit from exchange translation on our expenses. That's part of our natural translation hedge that we have through our cost structure. So, Telerik does benefit us with their European-based expenses..

Okay, great.

And then just kind of a quick follow-up, and apologies if you've covered this before, but while you're walking through the different segments, between OpenEdge, data connectivity and app dev, is -- in terms of where BravePoint and Telerik are contributing, can you just quickly walk me through, is BravePoint going to OpenEdge and Telerik's going to app dev, or how are you thinking about it?.

Yeah, BravePoint is in OpenEdge and Telerik is entirely in app dev..

Okay. Fantastic. Thank you so much..

You bet..

And we'll go next to Scott Zeller of Needham & Co..

Hi, thank you. Another question on Telerik. Could you - I believe we heard previously at the time of the deal announcement that it had been growing at about 20% year on year both for bookings and GAAP revenues.

Could you update us on that and tell us currently what the -- you said that it was maintaining its 20% growth rate, but could you tell us if that is also in bookings as well as GAAP revenues?.

It is in both..

Okay. Thank you..

And that concludes our question-and-answer session. At this time I would like to turn the call back over to Mr. Brian Flanagan 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 second quarter of 2015 on Wednesday, July 1st, 2015, after the financial markets close, and holding the conference call the same day at 5:00 p.m. Eastern Time. We look forward to speaking with you again soon. Have a good day..

This does conclude today's conference. We thank you for your participation. You may now disconnect..