Progress Software Corporation (PRGS)’s 4th Quarter 2014 Earnings Conference Call Transcript

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Mark Schappel, Benchmark

So it’s not an ISV deal it’s a direct deal.

Phil Pead, President and Chief Executive Officer

Yeah. It was a direct deal.

Mark Schappel, Benchmark

Okay. Then, since you gave us a little bit here, so I was just wondering you talk a little bit about what we can expect in the marketing frontier, now that you have product under your belt?

Phil Pead, President and Chief Executive Officer

We have a lot of stuff going on in marketing. Again, as I mentioned, I think, when we announced the acquisition of Telerik. They really have an incredible machine on the digital marketing side and we are leveraging as much of that infrastructure as we possibly can. We are leveraging their leadership, their knowledge, the analytics tools that they have in the way in which they deploy their content, the way in which they manage search. So we’re very fortunate, I think, to be able to take advantage of that, because that’s an area that – as I have said, I mentioned before – is something we had to build internally on the Progress side, because that was not the way we were doing business. So we are definitely leveraging that.

I am thrilled that we have a new Chief Marketing Officer. She is, I think, in her 4th month of being on the team and the teams come together, we have got opportunity to now incorporate a lot of the Telerik folks into our marketing organizations. So, look for great stuff from us in 15.

Mark Schappel, Benchmark

Great. Thank you.

Phil Pead, President and Chief Executive Officer

You’re welcome.

Operator

We will go next to Greg McDowell with JMP Securities.

Greg McDowell, JMP Securities

Great. Thank you very much. Hi, gentlemen. Happy New Year. My first question and maybe this relates to the question about Asia from before? But, I guess, I don’t understand what an affiliated OpenEdge end-user is, could you just help clarify what that means?

Chris Perkins, Chief Financial Officer

I think what we’re saying is, they are not affiliated with us. They were two affiliated entities that actually were part of the transaction. So it was just they were affiliated. They are direct end users and they have been long-time customers.

Phil Pead, President and Chief Executive Officer

Both of them were customers. I think it was confusing – confusing phrase. Just put it this way, Greg: they are both customers that are long time users of OpenEdge and we now have an opportunity with this agreement in place to help them expand into new markets that they’re looking to expand into and also to add additional solutions to them. It was a very nice opportunity for us to close in the 4th Quarter.

Greg McDowell, JMP Securities

I see. Does it imply that there is some sort of like prepayment, or they essentially brought or bought rights to embed OpenEdge in their solutions, or they are selling, or is there some component like that?

Phil Pead, President and Chief Executive Officer

No, no. It is a direct end-user, so, they are not selling application.

Greg McDowell, JMP Securities

Okay.

Phil Pead, President and Chief Executive Officer

It’s based on their growth.

Greg McDowell, JMP Securities

Got it. Got it. Thank you. Maybe this is sort of a longer term question but taking a step back for a minute – Phil, I was wondering now that, you have three business units, and then three different heads running those business units, just how you’re thinking about, sort of, the incentive structure for those three managers and whether or not you’re driving them to optimize their units for growth versus profitability? How should we think about, sort of, their marching orders that they have for the next 18 – 24 months?

Phil Pead, President and Chief Executive Officer

Right. Let’s just talk about the characteristics of each of these units. OpenEdge is going to absolutely be focused on driving more revenue from the OpenEdge Solutions. So, Jerry Rulli, who is the President of that division and all his team are focused on continuing to expand and build on the momentum that we have generated in OpenEdge.

So as I mentioned again in my prepared remarks over the last two years, growing license revenue by 23%, ostensibly in a business that everybody thought was in maintenance mode, we are really excited about the reinvigorated base of customers that we have and the partners and the incredible work that they are doing with their own applications, becoming more competitive in their markets. Having said that, the OpenEdge business unit is also an opportunity to include other technologies for our OpenEdge ISVs. As I mentioned again, they are beginning to build Node applications which they are deploying on Modulus. They are building Rollbase applications. They are adding Corticon to externalize their rules.

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