Brian Flanagan - Senior Director, Investor Relations Phil Pead - President and Chief Executive Officer Chris Perkins - Chief Financial Officer.

Steve Koenig - Wedbush Securities Mark Schappel - Benchmark Stan Berenshteyn - Sidoti & Company Scott Zeller - Needham & Co. Glenn Mattson - Ladenburg Thalmann Rishi Jaluria - JMP Securities.

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

Thank you, Don. Good afternoon everyone and thanks for joining us for Progress Software's fiscal second 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 second 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 second quarter earnings call. Our momentum continues in fiscal 2015 with a strong second quarter performance. We now have one of the largest developer communities in our industry and a suite of strategic solutions that offer those developers unrivaled choice and flexibility.

Our ongoing commitment to become the preferred destination for application developers is helping to drive our financial performance with each of our business units contributing to our strong revenue and earnings this quarter.

Let’s take a look at each of our business units starting with OpenEdge, which continues to show growth in line with our expectations. Our EMEA and APJ regions performed particularly well, and license sales to enterprise customers across all our regions were again a highlight.

Our partner channel continues to strengthen with the majority of our revenue in the OpenEdge business unit being driven by the 1,400 partners worldwide who have written applications using our OpenEdge platform. We continue to focus on product enhancements and marketing support to enable our ISVs to sell more of their solutions to their customers.

In support of this goal, there are several initiatives I’d like to highlight today. One of our partners’ main requests was for an analytic solution tailored to OpenEdge.

As a result, we recently announced a partnership with Logi Analytics to launch Progress OpenEdge Analytics360, a new custom analytics platform that will help our customers unlock the value of the operational data from their systems of record.

Analytics360 provides dashboards, reports, and over 100 pre-built KPIs as well as the data warehouse that’s already mapped to their underlying OpenEdge database. This pre-built content dramatically reduces costs and time-to-market providing a clear advantage to our partners and their customers versus traditional business intelligence tools.

Our recent acquisition of BravePoint really facilitated our entry into analytics due to their extensive consulting experience and expertise in this area enabling us to also offer services to help our partners make analytics a key differentiator in their applications. We also released version 5.5 of Corticon, our business rule solution.

The new release offers improved scalability and rule flow making it even easier for business analyst to identify, automate, and deploy business rules and decision systems without the need for expensive custom coding.

A key aspect of modernization for our OpenEdge partners involves separating out the business logic and their applications, and this latest release of Corticon will make it much simpler for them to embed automated business rules as part of their solutions.

Both analytics and our Corticon rule solution are add-on sales, which will generate incremental revenue for us as these new offerings are adopted within our OpenEdge customer base.

Finally, in part through our ongoing partner enablement programs, most of our large partners now offer their application in either an on-premise or a software-as-a-service model, ensuring that they remain competitive in their markets and continue to appeal to new customers.

As a result, revenue from our ISVs selling their solutions in a SaaS model continued to grow in the second quarter further increasing the percentage of our revenue that is recurring in nature. We see this as a trend that will continue in the future.

Turning to our Application Development & Deployment Business unit, Telerik remains on its anticipated growth trajectory and our Pacific platform and Modulus continued to gain traction benefiting from our improved positioning in the Visionary category of Gartner's Magic Quadrant for enterprise application platform as a service announced in March.

Sales of Telerik’s Dev Tools were strong, and bookings for Telerik platform, our full lifecycle platform for building enterprise-grade mobile applications continued to accelerate. We are extremely pleased that Telerik’s large developer community, one of the major benefits of our acquisition has grown from 1.3 million to 1.7 million developers.

In May, our developer community came together for TelerikNEXT, our first global user conference for Telerik customers, which was very well attended. We showcased several of our new releases, and while the conference was primarily focused on our Telerik solutions, it was exciting to see many of our OpenEdge partners attending.

Our Telerik solutions will prominently feature in our OpenEdge user interface modernization framework, which will be released during Q3. During the second quarter, we also announced exciting advancements in the Telerik Sitefinity platform.

We’ve combined Sitefinity CMS, our web content management system with the newly released Sitefinity digital experience cloud to create a powerful Digital Marketing Command Center.

IDC estimates that the market for worldwide marketing technology will grow from $20 billion in 2014 to over $32 billion in 2018 as more and more companies look for new ways to engage with their customers.

Gartner estimates that by 2020, more than 7 billion people and businesses and at least 35 billion devices will be connected to the Internet, and companies will need to have strong digital competency and delivery capabilities in order to succeed in this increasingly digital world.

That means their websites can no longer function as billboards, places where customers can find relatively static data about the company, and perhaps locate a phone number to contact the sales rep if they’re interested in buying something.

Instead, they need their websites to be transformed into a digital sales channel helping them to convert leads into customers and close business. Our new Digital Marketing Command Center positions us well to take advantage of this transformation.

Sitefinity CMS draws key data from individual customer interactions across channels and devices allowing businesses to personalize and optimize the digital experience for each individual who visits their website. It provides unmatched mobile support, and end users love the elegant intuitive user experience.

The addition of Sitefinety’s digital experience cloud enables integration of third-party data sources providing an expanded 360-degree view of customer interactions.

This allows enterprises to truly analyze and optimize the customer journey using predictive and prescriptive analytics to recommend changes to marketing programs in real time and increase conversions to drive sales and profitability. Sitefinity bridges the gap between marketing and IT by providing solutions for both.

Marketing wants to build beautiful websites with personalized content and user experiences, while IT loves it because it's easy to work with, has a high degree of built-in security, is customizable, supports all devices, and provides data connectivity and accessibility from their existing systems of record all within the Digital Marketing Command Center.

We also announced during the quarter that we've extended our modulus platform to support multiple languages by integrating with Docker.

Modulus has being growing rapidly over the past year as a platform for deploying applications written in Node.js by utilizing Docker to offer support for multiple languages, organizations that have come to rely on modulus for their Node.js support can now use it to deploy scale and monitor other applications as well.

This enables more simplified and efficient deployments and exposes modulus and Progress to an even wider audience of developers. I am pleased with the momentum of our data connectivity and integration business unit as we continue to add new OEMs and direct customers broad data solutions during the quarter.

Although revenue was flat the last year it exceeded our expectations and the strength of our pipeline gives us confidence that our data business will exhibit strong growth in the second half of this fiscal year. We continue to add support for new data sources including our recent release of drivers for MongoDB and Spark SQL.

MongoDB is one of the fastest growing open source databases and Spark SQL is a framework that enables much faster processing of data from Hadoop over 100 times faster than traditional methods.

As enterprises increasingly adopt Hadoop as their data warehouse Spark SQL is the engine that will allow business intelligent vendors to access and process that data quickly and efficiently.

With six of the nine vendors in the leaders category of the Gartner Magic Quadrants of business intelligence already using our drivers as their means of data connectivity, we are well positioned as they use Hadoop continues to grow. In summary, I am pleased to say that our future is trending positively.

We are seeing strong engagement with our customers and partners as we offer a broader suite of strategic solutions. It’s also exciting to see a greater engagement with prospects that are coming to Progress for the first time. We are grateful for the increased media coverage with recent mentions in the Wall Street Journal Forbes and Fortune.

Everyone is working tremendously hard behind-the-scenes to continually evolve our company and we are really starting to see positive outcomes from it. We look forward to sharing much more with you in the quarters ahead.

I’d now like to turn it over to Chris to review in more detail our second quarter performance as well as our expectations for the third quarter and for the full-year of 2015.

Chris?.

Total non-GAAP revenue for the quarter was $101 million compared to $81 million in Q2 2014. This was above our guidance range and represents an increase of 25% at actual exchange rates and 34% on a constant currency basis. Non-GAAP revenue includes acquisition related revenue adjustments for Telerik totaling $12 million.

As I discussed in our April guidance call GAAP rules require us to eliminate certain pre-acquisition revenue classified by Telerik is 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 revenue growth trajectory of over 20%. Excluding the impact of these recent acquisitions, second quarter revenue for our base business grew by approximately 2% at constant currency over last years second quarter.

The total year-over-year revenue increase was due to growth in both license and maintenance and service revenue. License revenue was $32 million in the second quarter, up 13% from Q2 2014 at actual exchange rates and 23% on a constant currency basis.

In addition to the incremental license revenue from Telerik, OpenEdge license sales were strong in the quarter, which I'll provide more detail on when I review our business unit performance. Revenue was $69 million for the quarter, up 31% from last year at actual exchange rates and 40% on a constant currency basis.

In addition to the incremental maintenance revenue from Telerik, maintenance renewals for our base business were above 90% and maintenance revenue was inline with our expectations in the quarter. 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 $79 million, up 8% for the quarter, including revenues related to our acquisition of BravePoint. Excluding BravePoint revenues, the OpenEdge business unit grew by 2%, with strong license sales in both EMEA and APJ.

The revenue growth promote the OpenEdge product line more than offset a decline in Corticon, which had a difficult comparison in the quarter due to a strong performance in Q2 2014. App dev revenue was $22 million, compared to $0.2 million in 2014, primarily due to revenues from Telerik.

As I mentioned earlier, Telerik revenue was inline with our expectations with growth over 20%. DCI revenue was $7 million flat to Q2 of 2014. While revenue was flat for last year, it exceed our expectations, and as Phil mentioned, strength of our pipeline gives us confidence in our second half growth outlook for DCI.

Another positive indicator is the large increase in our backlog of multiyear license arrangements which grew from $10.2 million in Q2 of last year to $17.4 million at the end of the current quarter. For our revenue by geography, North America was $58 million for the second quarter, up 58% to the same quarter a year ago.

On a constant currency basis, EMEA second quarter revenue was $38 million, up 12%; Latin America revenue was $6 million, flat to last year; and APJ revenue was $7 million, up 43%.

Excluding the acquisitions of BravePoint and Telerik, North America revenue was flat to the second quarter of last year, while EMEA was up 3%, Latin America was down 4%, and APJ was up 24%. The increase in APJ was due to strong OpenEdge license sales to both ISV and direct end users.

Non-GAAP operating margin in the second quarter was 28%, 7 percentage points lower than the second quarter of 2014.

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

Non-GAAP operating expenses were $73 million, up $21 million from a year ago and down sequentially from $75 million in the first quarter of 2015.

The net increase in operating expenses year-over-year is primarily the result of our 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 translations, which benefits us on the expense side.

Our second quarter non-GAAP EPS was $0.35, compared to $0.37 in the second quarter of 2014, a decrease of 5% primarily as a result of the negative impact of currency translation.

This was above our guidance range of $0.29 to $0.32 related to our EPS performance versus the high-end of our guidance $0.02 of this increase was due to operating performance that exceeded our guidance primarily attributable to above range revenue performance and lower operating expenses during the quarter and $0.01 was due to a lower income tax provision in the quarter.

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 in the first several months of fiscal 2015 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 on our operating income.

This is a natural currency translation hedge in our business based on the global diversity of our cost structure. For our second quarter the negative impact of currency translation on our non-GAAP results compared to Q2 2014 exchange rates, was year-over-year revenues were negative $7.4 million and year-over-year EPS was a negative $0.06.

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 $199 million. After making scheduled principal payments during the quarter our ending debt balance for Q2 is $146 million.

Net accounts receivable was $56.4 million in Q2 2015 compared to $59.6 million at the end of Q1. Net DSO for the second quarter was 50 days, down six days sequentially and down 15 days from prior year. Deferred revenue was $130 million in the second quarter compared to $101 million in Q2 2014 an increase of $29 million.

The increase was driven primarily as a result of the Telerik acquisition. As a reminder sales from our Telerik products and services are generally billed and collected upfront while revenue is recognized ratably over the term of the arrangements. Operating cash flow was approximately $21 million for the quarter, compared to $17 million in Q2 2014.

The increase was primarily due to improvements in working capital driven largely by an increase in deferred revenue as a result of the Telerik acquisition. Adjusted free cash flow was approximately $19 million for the second quarter compared to $16 million in Q2 2014. Our year-to-date adjusted free cash flow for 2015 is $55 million.

We repurchased 962,000 shares in the second quarter at a cost of approximately $25 million as part of the $100 million share repurchase program authorized by our Board in January 2014. As of June 2015, we have approximately $15 million remaining under this authorization.

We ended the quarter with just under 1,800 employees, an increase of approximately 800 employees versus Q2 2014 and flat sequentially versus Q1. The increase versus prior year is primarily due to the incremental headcount associated with the Telerik and BravePoint acquisitions. Now I'd like to discuss our updated guidance for fiscal 2015.

We continue to 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 includes a year-over-year negative currency impact on our 2015 revenue of between $25 million and $26 million based on current exchange rates.

Our April guidance estimated this impact at $27 million to $28 million. We are increasing our expectations for 2015 non-GAAP operating margin to 28%, an improvement to our previous guidance of 27%. Also, we expect our non-GAAP effective tax rate to be approximately 33% as compared to our previous guidance range of between 33% and 34%.

Additionally, there is a favorable impact in the second half of 2015 from the share repurchases completed during Q1 and Q2.

Due to these factors we are increasing our non-GAAP earnings per share guidance from our previous range of a $1.35 to $1.45 now to be between a $1.45 and a $1.52 which represents an increase of $0.07 to $0.10 from our prior guidance.

We continue to monitor exchange rates and based on the current rates estimates for the total year negative impact of currency movements on our non-GAAP EPS of between $0.13 and $0.14, our April guidance estimated this impact to be $0.14 to $0.15.

Additionally, we are increasing our guidance range for free cash flow to be between $92 and $95 million an increase of $2 million versus our prior guidance.

Our non-GAAP revenue guidance reflects our expectation that Telerik will continue on its growth trajectory of over 20% and that BravePoint will add approximately 6% to 7% growth to the 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 businesses, 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 this 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 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 expenses. For our fiscal 2015 third quarter, we expect revenue to be between $101 million and $104 million, a year-over-year increase of 27% to 31%.

Our expectation is that our base business, excluding the BravePoint and Telerik acquisitions, will grow by 10% to 11% in the third quarter at constant currency.

Our guidance for the third quarter is also based on current exchange rates, which have declined by approximately 18% versus the average rates for the third quarter of 2014, and negatively impacts our revenue by approximately $7 million compared to prior-year rates.

We expect non-GAAP earnings per share of between $0.35 and $0.38 for the third quarter, a year-over-year decrease of between 3% and 10%. This guidance reflects our expectation that the acquisitions of BravePoint and Telerik will be accretive net of financing costs for the quarter.

The negative currency translation impact for Q3 is expected to be approximately $0.04 based on the current exchange rate environment compared to prior year rates. In summary, we are very pleased with our Q2 financial results and feel we are well positioned for our growth – the growth we are projecting in the second half 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 back to Phil..

Thank you, Chris. I have some exciting organizational news to share today. I am very pleased to announce that Jerry Rulli has been appointed as Progress’s Chief Operating Officer.

In his new role he will have responsibility for driving the operations of our three business units OpenEdge, Application Development and Deployment and Data Connectivity and Integration.

As you know Jerry joined Progress last August as the President of the OpenEdge business unit with over 30 years of experience in the software and technology industry and extensive operational expertise. Since his arrival he has done an excellent job in engaging with our OpenEdge partners and customers and has driven consistent quarterly growth.

He is also been instrumental in the acquisition and integration of BravePoint and in our recently announced partnership with Logi Analytics both of which will make our ISVs more competitive and help them sell more of their solutions to new and existing customers.

Appointing Jerry to this role builds on the success we've enjoyed since we implemented our business unit structure last year. We’ve benefited from the increased focus and accountability from having dedicated sales, product management and product marketing teams for each unit, resulting in go-to-market strategies tailored for each of our markets.

We believe however that there are opportunities to accelerate our growth by maintaining our acute focus on our respective business segments, but also ensuring that we are leveraging common sales resources and exploiting product roadmap and marketing synergies.

I'm confident that Jerry’s strong leadership will ensure our business units inter-operate seamlessly and I look forward to working with him in his new role to drive our future growth and profitability. With that, I'll hand it off to Brian for the Q&A..

Thank you, Phil. 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 take our first question from Steve Koenig with Wedbush Financial..

Steve Koenig:.

,:.

Yes, first Steve this is Chris. I just want to chime in on the comment that our license revenue is down versus last year. Again, I think well certainly it wouldn't be the case.

It would be up from last year again excluding the acquisitions, and excluding the impact of the currency translation, so that’s certainly a major negative factor there, but we're transitioning - our base business grew in the second quarter excluding acquisitions 2% on a constant currency basis, and we grew our base business in Q1 on a constant currency basis.

So I just want to make sure we level that we are not coming from a period of being declined to an increase. We have an increased level and our base business is expected to grow 10% to 11% in the third quarter compared to the prior year. So we do have a higher-level of growth in the second half, but we’re not coming from a period of decline..

Yes, I was just talking about the license line, Chris specifically, but that’s fine, really I’m looking for a big….

License is not down year-over-year..

Okay. So can you comment though on your – still your expectations for acceleration in the second half looks pretty substantial.

So I’d be interested in commentary there as well as any sort of color you can give us on the SaaS revenue recognition, how that impacts you?.

Sure, we see just kind of going across all of our business units. We see a good momentum in OpenEdge, we see a very significant pipeline in growth opportunity that we have very good visibility.

So we expect that we’ll build a high degree of confidence that we’ll see that growth rate continue to step up based on the pipeline we have and the strength that we have - what we’re doing from the positive impact we are seeing - all of our partners actually selling more software to their customers.

We do have an increasing level of SaaS revenue that we get from our OpenEdge customers is not truly SaaS revenue to us, but as they are selling more and more of their business on a SaaS model, we share in a portion of that revenue, so included in our license revenue is an element that is more SaaS related from our OpenEdge partners and we are seeing that continuing to grow steadily quarter-on-quarter as we go forward.

So OpenEdge, we feel very strong about the strength and the motivation of our ISV partners and the success we’re seeing with our direct end-user customers as well are all contributing. On the DataDirect side - the data side, we’ve seen DataDirect to reach a point where they were flat in the second quarter over prior quarters.

They continue to be below the prior year, so showing a negative growth. We have done several things, one that team has done a great job of building pipeline and executing on multi-year business agreements that we will be recognizing revenue on in the future quarters as well as again building a strong pipeline of net new OEMs and end-user customers.

So we’re seeing – we have a very strong and high expectation that we’ll see very good growth year-over-year in the second half of the year. [Bigger] driver, but we’re seeing a positive growth in our other products which are a smaller element of our app dev division, but we are seeing them gain momentum..

Great. Thanks very much for all the color and congrats..

Thanks, Steve..

Thank you. Next call from Mark Schappel with Benchmark..

Hi, good evening.

Phil, I was wondering if you could just give us an update on the Telerik business with respect to the plans of rolling Telerik into the broader Progress organization, specifically in terms of the sales force and maybe the product branding, it’s my understanding that to date, you’ve essentially left the organization somewhat separate from the broader Progress organization..

Yes, we've actually as I think I mentioned, when we did the acquisition, we were looking very much into Telerik rolling our assets into theirs and which is exactly what we did by utilizing their high velocity sales capabilities with the digital platform they have, we’re leveraging their capabilities for marketing qualified leads, and translating that into the capabilities that we have on closing more business.

So the actual level of integration that we have at the people level has been specifically in those areas, on the sales and marketing area.

With regards to the products sets, we are very excited about the release that we’re going to have in the third quarter, which enables our OpenEdge customers to take advantage of the Telerik UI tools to essentially transform and make more intuitive their front end applications to the systems record predominantly that are being built on the OpenEdge platform.

And Jerry Rulli and his team have done a fantastic job at creating a framework that we are offering to OpenEdge customers really to enable them to take more of an advantage of their cloud infrastructure because as Chris mentioned more, more of our OpenEdge ISVs are now beginning to host their products in the cloud and offering SaaS pricing to their customers.

So without that modernization framework that is in large part due to the Telerik tools it would be difficult for us to be able to offer that to our OpenEdge customers, so we’re thrilled with that.

For the Sitefinity platform that I mentioned in my prepared remarks, our data connectivity software is actually included in the Sitefinity platform so that it enables especially in the digital experience cloud enables you to start getting access to multiple data sources much more easily and seamlessly to the developers then just with the Telerik data connectivity tools that we’re inherent in that software.

So the Telerik folks are thrilled that they now have such a wide source of data connectivity solutions as a result of bringing everything together. I am really pleased with the way in which the acquisition is gone, the integration of the people and we are excited about the momentum that we got in our Telerik business..

Great, thanks and one more strategic question, with respect to the emerging NoSQL database market for building web and mobile applications, the check Progress it appears now you know pretty close relationship with MongoDB to modules and that's good, but I’m just wondering Phil if you could just give us an idea are you working with any of the other NoSQL database platforms like Cassandra or Riak?.

We are absolutely and most of the work that's being done there is obviously on our data side being able to connect to Hadoop and non-SQL databases because obviously that's becoming a large component of the analytics community.

So but again those partnerships are important they may begin on the data side that we may see some other opportunities as a result of those relationships that we are building..

Great, thank you..

We will take our next question from Stan Berenshteyn with Sidoti & Company..

Good evening, thanks for taking my question.

I was hoping to get some color as to what percentage of your OpenEdge clients or also clients of Telerik to being acquired and then I guess the second part would be you have seen any meaningful changes in that figure since the acquisition?.

Yes, we actually I could just anecdotally tell you Stan that the number of OpenEdge customers that are using the Telerik is usually the Dev Tools solutions that our OpenEdge customers were using prior to the acquisition was much larger than we expected because we would really not done that analysis.

I cannot give you the exact number right now, but I will tell you that it’s not insubstantial as far as the Telerik tools go. I’ll also tell you that the Telerik platform, the mobile platform is now integrated with our OpenEdge database.

So OpenEdge customers can stop building mobile applications using the Telerik platform through the OpenEdge platform. So that level of integration is done and we are now able to offer that to our OpenEdge customers.

So a lot of OpenEdge customers are beginning to use additional solutions from Telerik, but I’ll tell you I was pleasantly surprised by the number of Dev Tools customers that existed in the OE base. And I think we have something like 80 partners that attended the Telerik next conference, the first user conference that we had.

So there's a significant interest in a lot of the Telerik solutions for our OpenEdge customer base and the reason for that is every one of them is looking to take advantage of the cloud opportunities that they have which requires them to modernize their application and take advantage of the digital transformation that’s going on in the marketplace right now and a lot of the Telerik solutions enable them to do that..

So just to make sure I understand on when an OpenEdge client uses other Telerik platform app dev platform is the revenue, the incremental revenue being recorded as Telerik revenue or is that OpenEdge revenue?.

I'll let Chris….

Yes, it would be included as Telerik revenue and again they would be consuming again prior to the acquisition and post acquisition through the channels of delivery that we have through our Telerik business today.

So they would go again primarily it’s related to Dev Tools so again they would consume it, utilize it and whether they do it through a direct sales effort or a digital sales effort that would be recorded as part of the Telerik or app dev revenue..

Great, thank you..

We will take our next question from Scott Zeller with Needham & Company..

Hi Scott..

So I thought if you could explain to us the revenue benefits it seem thus far to the core business of Progress specifically OpenEdge because I think I heard plenty of strategic rationale and you mentioned about recording over some of the technology to make it available to the Telerik users as well as OpenEdge users to borrow.

For example you just mentioned about database being available to those who were doing Telerik app development.

Are you able to point to revenue benefits to the core business of OpenEdge thus far?.

Well the way that we are looking at this, Scott is and we’re being very clear about this from the beginning. Obviously the more our ISV sell to their customers the more we in turn benefit because that’s the pricing model and the revenue model that we created a long time ago with the ISVs.

And by making their products more competitive in the marketplace we believe that we’re enabling them to sell more. And the enablement is coming in multiple ways we’re either offering it on a technology basis some of which I just described and/or we’re offering it through marketing development funds, hosting the user conferences that they're holding.

So there’s being an enormous amount of activity over the last two years really helping our ISVs become much more competitive with the solutions that they built.

In addition there are lot of direct end users that we’re working with who also want to do the same thing modernizing their applications that haven’t been modernized in a long time, taking advantage of the technologies that we've added to the OpenEdge platform, but in addition to that taking advantage of some of the Telerik solutions that we didn't have obviously prior to the acquisition.

And then finally another piece of the business that we weren’t able to offer and has actually been a barrier to us being able to grow our business is being able to offer services.

So the acquisition of BravePoint is being very strategic to us to enable our ISVs to modernize their application and for our direct end users to take advantage of that same modernization, so that they can offer better systems of engagement with their customers using the backend systems of record that have been built on OpenEdge.

So I can't give you again specific revenue examples on this call, but I will tell you that it has enabled our OpenEdge ISVs to begin to become much more competitive with their products as they roll out more and more the technologies that we’re offering them..

And just to follow-up and maybe Chris you could help me here, but the as reported year-on-year OpenEdge growth I believe plus 2%?.

Correct..

That’s correct.

The estimate what it would have been if you had not bought Telerik, [would you] talking about negative growth?.

No, no the Telerik again if a OpenEdge partner or customer consumes one of the Dev Tools goes to the website download that use it, used it for their development. That revenue is included in the app dev revenue. So there's no Telerik revenue that’s included in the OpenEdge business.

Today what Phil is referring to is that our objective is to help them grow their sales and customers and therefore grow the OpenEdge business and I think it would be difficult to attribute much of that directly in the second quarter since we own the business that their – the OpenEdge sales to their end user customers have grown because of the impact of Telerik, I would tell you the it wouldn’t be measurable or meaningful.

But I think an opportunity long-term is what Phil was referring to. But any revenue or any consumption of the Telerik Dev Tools products by our OpenEdge base would be included in our app dev revenues. And I would say that's not a significant number at this point in time..

And the last – just quick one.

Can you - Chris tell us your assumptions again for the revenue contribution from both BravePoint and Telerik for the year I believe previously referred the fiscal year would be a $100 million? Could you please update us on that?.

We haven't given any specific numbers as far as what the revenue is but again Telerik when we acquired it they had a trailing 12 month revenue of $60 million when we announced the acquisition and our guidance was that we think the Telerik revenues will grow in excess of 20% year-over-year and we’ve said that of the growth that we will see in the OpenEdge business 6% to 7% of that is related to the year-on-year addition of BravePoint revenue related to the acquisition..

Okay.

It sounds like there is no change to your assumption?.

No, change to the assumption at this point..

Okay, all right. Thank you very much..

We will go next to Glenn Mattson with Ladenburg Thalmann..

Yes, hi, gentlemen..

Hi, Glenn..

As we look at the model a little bit nice job on the cost control. I guess I'm wondering I know obviously you’re not going to have any guidance for 2016.

But I am kind of wondering is the product development inflated this year as you integrate all these acquisitions and directionally do you expect that number to be I guess flat or down or up next year.

And then I guess part of that is also, do you feel like you are getting to the spot with the past, the app dev solution set is getting pre-built out or is just a lot of more that you want to add in there either through purchases or internal development?.

Let me take the last one right Glenn and I’ll hand it back to Chris. I don't think we’re ever done in the development world given the speed with which things are going on in the marketplace right now that we have a very good roadmap and I think the team that we have in place to deliver on those roadmaps are working hard to do that.

I'm looking at 2016 as a year that I see some areas that we clearly need to accelerate and most of this by the way, comes from just looking at the growth in certain areas that we see that have great synergies or adjacencies with our existing business that we maybe able to take advantage off, but I think that in terms of the overall engineering capacity that we have I think we’re in pretty good shape right now with the resources that we got to deliver on at least the foreseeable roadmap..

Okay. So that would maybe imply that general trend wise would be more of a flattish number in 2016 perhaps for the line item..

I certainly would say that we have an expectation of rationalization through integration of the businesses. So I would not project it go down. Again we think our investments and our products are key to our future success in our growth objectives.

So certainly what we factor down and again we haven't given any outlook for 2016 yet, but going back to rationalization..

Okay. And then just a follow-up you did a pretty sizable repurchase during the quarter.

So as you think about capital allocation is there plans to continue to look at that because I think you are getting close to exhausting the current authorization?.

Yes, as I mentioned we have $15 million left at the end of the quarter, we had $50 million left under the authorization. Yes we’ll continue to evaluate that – we saw great opportunity.

We see value in making investment in our stock during the second quarter it will continue to monitor that with our board in evaluating our overall capital allocation strategy going forward. So again we’re very pleased to go ahead and execute what we did in the second quarter..

Okay, great. Thanks..

We’ll take our next question from Greg McDowell with JMP Securities..

Hi, this is Rishi Jaluria dialing in for Greg McDowell. Thank you for taking my question Lot of them have kind of been answered just one or two quick ones. First, you talked a little bit about how Telerik is tracking with your expectations at roughly over 20 percentage growth.

You also talked about how you saw Telerik bookings accelerated in the quarter I guess when you anticipate seeing that acceleration from Telerik on the top line?.

Well, again I just give a background on making sure we’re clear on the revenue recognition related to Telerik. Telerik you know as we generally that sold where clients buy, when they buy a solution they pay for them but all the revenue is recognized ratably after the transaction takes place.

So it’s generally recognized ratably over year there can be multiyear agreements, but so it’s ratable revenue recognition so very much it takes a while for that revenue once as there is growth it takes some time for revenue growth to show in revenue, so it is ratable revenue recognition.

Then we will continue to give information on how our bookings and our outlook is trending, but again we feel it has met our bookings trajectory to support our expectations over 20% growth rate for this year, so that’s really all we’ve given and as we get some more time with that being part of our business and going into 2016 we’ll update that outlook..

Okay.

Great, thanks and then a quick follow-up so we’ve spoken a lot about Telerik, how does BravePoint perform so far relative to your expectations does that being tracking closely with expectations?.

Yes, it has. From a financial perspective it has tracked close and well with our expectations it's part of our modernization strategy which Phil has talked about today and in previous calls as well, so it’s a very good addition for us, it’s very well received by our partners and they are the tracking within our expectation..

Okay. Great, thank you so much..

And we will go to Steve Koenig with Wedbush Financials..

Hi gentlemen thanks for just taking one follow-up here.

I was curious on Sitefinity understand that you got the data connectivity portion and got the cloud functionality, can you tell us a little bit about who you are seeing in the marketplace either in CMS or marketing and who you might expect to see going forward in terms of kind of more modern next generation type providers?.

Yes, it depends on the customer Steve it could be Sitecore is a big CMS vendor in the marketplace and we see them a lot obviously Adobe is a big player in that space then you got to move downstream depending on the price point of the customer, but essentially I would say that Sitecore is probably the biggest competitive for us in this space right now..

And do you expect your differentiation here is going to be based on the data connectivity in the cloud or there other things as well that you are having more portfolio in the marketplace?.

Yes, this is a very interesting market because the marketing technology space has being driven primarily by companies that are offering very specific point solutions to marketeers by that I mean that the product is something that you build out specifically for either content management, marketing automation, campaign management any of those multiple requirements that CMO's have for the enterprise.

What we see as one of the biggest reasons that folks choose Sitefinity is because of the app dev [slam] to it that this is really an extensible platform so while you are solving the initial problem of delivering omni-channel content to multiple devices and being able to serve up content that’s very specific to your prospects interest.

The developers within your enterprise can take that platform and start adding new applications or customizing the platform in a way that continues to create better conversions for the enterprise. And so if you think about websites today they’re actually a very sophisticated intelligent application platform.

If you think about all the banking websites out there that the website itself is just the point of entry most people that are accessing those websites are actually conducting and transacting financial transactions on that platform that moving money around, they are looking at balances, they are buying stocks, they are selling stocks there is enormous amount that goes on that connects to their backend systems.

And one of the key differentiators in this space for us we believe is the fact that we have a great appeal to the technologists within the enterprise who are trying to serve up to the CMO new ways of discovering prospects and customers and Sitefinity is an incredible platform to do that.

So we look at this as both the data connectivity play, but probably a bigger portion of this is really the focus on app dev..

Great, thanks so. Appreciate it..

Yes, thanks Steve. End of Q&A.

That concludes today’s question-and-answer session. At this time, I’ll turn the conference back to management for any additional remarks..

Thank you all for joining the call today. As a reminder, we plan on releasing financial results for our fiscal third quarter of 2015 on Thursday, October 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 concludes today's conference. Thank you for your participation..