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

Operator

Thank you. If you would like to ask a question at this time, please press start, 1 on your touch-tone phone. If you are using a speaker phone please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, it’s star, 1, if you have a question. We will go first to Steve Koenig with Wedbush Securities.

Steve Koenig, Wedbush Securities

Thanks guys for taking my question. You have given plenty of clues. We can probably puzzle together some of the revenue contribution assumption from the acquisitions, for 15. I am curious about margins, I guess, not only because of the acquisitions but also you are investing in the base business – the guide on margins is down and currency is a bit of an impact there – so my question is: how should we think about Telerik’s margins in fiscal 15 and then where they will go? Then secondly, you know, how should we think about the potential and the timeframe for getting back to 30% and then potentially, you know, even mid-thirties in terms of operating margin?

Chris Perkins, Chief Financial Officer

This is Chris. Steve, I’ll comment a little bit on the impact of the acquisitions. As I mentioned, both acquisitions will contribute positively to your EPS in 2015. The operating margins of BravePoint, being a service business, are generally lower. Those operating margins are above 10% and I would say that I expect we can potentially get some expansion as we grow that business, but being a service business, not a significant expansion. The Telerik business again is positive and it generates operating margin also in excess of 10%. I think we’ve got some opportunities as we move forward through the integration work that we’re doing, as well as we experience growth and leverage in the Telerik revenue model – I think we’ve got an opportunity to expand those margins. We haven’t given any outlook on how that will progress but I think that as we get towards the later part of the year, we’ll see an improvement in the operating margin from those businesses.

As we grow and as we continue to generate revenue from the investments we are making in the app dev business – again just to remind, most of the app dev investments are related to revenue that are recognized on a ratable or subscription basis, so the revenue contribution is lagging the time of the investments – I think we have an opportunity to continue to show improved margins through the year and improve those as we go forward. But we are not at a position to give an expectation of how they will progress longer-term until we see how our traction goes in those businesses.

Steve Koenig, Wedbush Securities

Okay. Great, and for my follow-up, I would just like to ask Phil, what is the – you now have, you know, a lot of a pretty broad set of tools for different styles of applications and different languages and different phases of development lifecycle. Where do you see as being the biggest synergy opportunities in the various tools that you have?

Phil Pead, President and Chief Executive Officer

Synergies in what respect, Steve?

Steve Koenig , Wedbush Securities

From a, sorry Phil, from a, really from a revenue perspective and a market perspective – you know, really from a product perspective – in terms of having solutions that could be sold together.

Phil Pead, President and Chief Executive Officer

Oh! Yeah. I see what you’re saying. There are a number of areas that we see between the various solutions that we have that would pull through some of the other solutions we have got. For example, we have always talked about application developers needing data to be included obviously in every application that they build – and the opportunity that we have, for example, with data solutions and our Modulus Deployment platform is an opportunity right there.