Progress Software PRGS
Q2 2012 Earnings Call Transcript

Operator: Scott Zeller, Needham & Co.

Scott Zeller - Needham & Co.: First question is around the fiscal third quarter. We understand that you're not providing revenue guidance or operating margin guidance but could you tell us what you're targeting for an OpEx run rate, at least overall number?

Tom Barth - VP, IR: I think we were pretty specific that we won't be providing guidance. So I think in terms of operating expenditures – do you mean on a consolidated basis, Scott?

Scott Zeller - Needham & Co.: On a consolidated basis, just what we should be looking for an OpEx number, not necessarily a margin or the rev but an OpEx target number?

Jay Bhatt - President and CEO: The reason we're not providing that is because I mentioned Scott – I appreciate the question, I understand you're trying to resolve it for modeling purposes, et cetera, but as I said, the problem we have with Q3 is we announced a plan halfway through Q2, we started to put programs in place, started to do restructure, there's divestitures, there's a lot of stuff going on that continues through the Q3 period and we're obviously three, four weeks in. So, the line of sight and visibility we have to where we can guide you in terms of numbers for Q3 just wasn't at the level that we felt comfortable going public with. That's why we're talking about Q4. So, we're really not able to give you that line of sight.

Scott Zeller - Needham & Co.: Then to follow-up, you mentioned that your renewals for the consolidated business remained – I believe that was a consolidated business of 90%. Was that just the Core business or the consolidated business 90% renewal rate?

Jay Bhatt - President and CEO: That was consolidated.

Scott Zeller - Needham & Co.: Consolidated. On that topic, can you tell us about pricing and given the disruption has there been pressure to discount in order to get people to stay with you?

Jay Bhatt - President and CEO: There has been -- look we're in the market on Core products that people are going to be (indiscernible) to non-Core which we're really continuing to try to drive. We've tried to not do anything unnatural to the business to change any trajectory. We have people that we've structured the non-Core portfolio and the execution around divestment in sales champions that are staying with the business that are really incented to drive those products in those product lines. So, generally I would say we're trying as best we can obviously given the announcement and some of the confusion initially it caused we're through a lot of that I personally had a bunch of conversations with customers and it accounts, we're trying to be in business as usual as we can with the non-Core portfolio. So, that's kind of where we are.

Operator: Aaron Schwartz, Jefferies.

Aaron Schwartz - Jefferies: I think a lot of us can understand sort of the uncertainty in the plan given all the moving parts here. But the question I have is can you as manager sort of differentiate between this transitional uncertainty in some of the macro based maybe demand uncertainty, have you seen maybe a business come back in, now that you've gotten through some of this changes that would give you confidence to see that this is a temporary disruption where as sort of macro demand led disruption?

Jay Bhatt - President and CEO: I think there are macro factors at play here and we mentioned a little bit of that in the pre-release, so we've got as everybody is experiencing there's EMEA weakness, particularly in parts of EMEA, there's uncertainty in the broad-based macro economy and we all know that. I know I don't need to tell you that, but I don't think – I really fundamentally – one of the things we've done since we came out of the planning process and got into the operational phase here is that I've gotten very – I personally have gotten very close to the sales organization. I've been out in the field with partners, with our sales people. I just got back from Europe on a midyear sales kick-off. I've been in all these partner conferences talking about sales and pipeline and what we think can happen. I don't see a fundamental foundational problem with the business in any way. I didn't see that in the planning process and I do not see that post-planning in the operational phase, I do think they are temporary disruptions and I think that those – if we were – I think it would have been unreasonable to think those temporary disruptions would only last a month and everything would be clean for the third quarter. I think those disruptions will continue through this entire year frankly, but I think by Q4 and the reason I am comfortable giving guidance on Q4,which I think is a very positive trend at 0% to 1% top line growth as we move to that 5% model for next year. I think there is a very positive momentum for us. The only reason I am comfortable, because I really do think that buy then the message would be much more clear, programs will be set, we will be operating on most if not all cylinders at that point so we can get into – I can get more confidence about predicting.