Progress Software Corp (PRGS) 2019 Q4 法說會逐字稿

Good day, and welcome to the Progress Software Corporation Fourth Quarter 2019 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, Kathy.

Good afternoon, everyone, and thanks for joining us for Progress Software's Fiscal Fourth Quarter 2019 Earnings Call.

With me today are Yogesh Gupta, President and Chief Executive Officer; and Paul Jalbert, our Chief Financial Officer.

Before we get started, I'd like to remind you that during this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives and 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 in today's earnings 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, the revenue, operating margin, diluted earnings per share and adjusted free cash flow amounts we refer to are on a non-GAAP basis.

You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our earnings release issued today.

Also, please note that all 2018 amounts have been adjusted to reflect ASC 606, which we adopted effective December 1, 2018, using the full retrospective method.

Today, we published our financial press release on our website.

This document contains the full details of our financial results for the fiscal fourth quarter 2019, and I recommend you reference it 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.

And with that, I'll now turn it over to Yogesh.

Thank you, Brian.

Good afternoon, everyone, and thank you for attending our fourth quarter earnings call.

As you've seen in this afternoon's press release, our Q4 performance was even better than expected, closing out a very strong 2019.

Revenue, EPS and operating margin were all well above the high end of our guidance, and we achieved record free cash flow as well.

I'm very pleased with the operational and financial performance of all 3 of our business segments.

Revenue grew 26% for Q4 and 14% for the year.

EPS grew 46% for Q4 and 23% for the full year.

And 2019 operating margins ended at 38%.

These are very impressive results, and I'm extremely proud of the hard work it took to achieve them.

The success we're seeing with Ipswitch is a large part of the reason we were able to raise and then beat our EPS and margin guidance twice in the second half of the year, demonstrating our ability to create value through acquisition.

Our free cash flow grew by $9 million year-over-year to an all-time high $129 million, and we're expecting 2020 to increase by another $16 million to $21 million.

Again, an impressive performance that illustrates our ability to run a highly profitable business with excellent cash conversion.

We also returned over $50 million to shareholders in 2019, including another quarterly dividend increase.

This was the third year in a row that we have increased our dividend since establishing it in 2016, which is another reflection of the confidence we have in our ongoing cash generation.

Overall, our businesses performed at or above expectations throughout the year.

And with Ipswitch continuing to exceed our revenue projections, I'm very pleased with the momentum that we've built.

Let's spend a few minutes reviewing our impressive fourth quarter and full year performance by each of our segments.

Starting with OpenEdge segment.

OpenEdge is, of course, our flagship product, and it's still going strong.

Our partner business is very healthy, evidenced by the growth we continue to see in the SaaS-related revenue we received from partners who sell their applications in the cloud.

We also had a solid year from OpenEdge direct enterprise sales, including a very strong finish that helped drive our overachievement in the fourth quarter.

Our fourth quarter included expansion deals in the high 6 figures for several of our larger OpenEdge direct customers.

These customers are growing, either organically or through acquisition, which results in a need for more licenses for their business-critical OpenEdge applications.

The largest of these deals was with a large U.S.-based mortgage loan provider that was driven by 2 factors: first, their need for more licenses because of their internal growth; and second, by their need for additional technologies within the OpenEdge suite in preparation for their planned upgrade to OpenEdge 12.

And then as I've mentioned many times, one of the reasons for the continued strength of OpenEdge is our ongoing focus on innovation.

OpenEdge 12, which was released in early 2019, is the highest performing version we have ever produced, and many of our customers and partners want to take advantage of all the security and performance improvements in this latest release.

Upgrades to version 12, therefore, strengthen our business in 2 ways.

First, by supporting our already strong retention; and second, by creating additional revenue opportunities within our existing base.

As you know, Ipswitch is now part of the OpenEdge segment as well, and continues to perform above our original expectations.

Revenue from both our network management and secure data transfer products has exceeded our projections, and both were a large part of our overachievement in Q4.

Along with solid sales execution, our ongoing investment in product development has also contributed to Ipswitch's better performance as we release new versions of both MOVEit and WhatsUp Gold in the months following the acquisition.

As with OpenEdge and our other products, these development investments enable us to maintain and strengthen Ipswitch recurring revenue and customer retention.

I'm also pleased to report that the anticipated $15 million of Ipswitch cost synergies were fully realized by the end of 2019, a full 5 months ahead of schedule and contributed to our improved profitability for the full year.

Now turning to our DCI segment.

I'm pleased to say that it continues to perform as expected.

DCI is a very healthy business with an extremely consistent annual contract value.

We are the market leader in relational database connectivity and with many major software companies, including 9 of the top 10 DI analytic firms embedding DataDirect within their products.

We also added a significant new OEM earlier this year, a U.S.-based multi-billion dollar global provider of Internet-related products and services.

This 6-figure multiyear deal was a marquee win for us and will contribute meaningfully to the DCI ACV going forward.

DCI was also partially responsible for our fourth quarter revenue overachievement, resulting from a few notable deals within the quarter.

We did a 7-figure deal with one of our largest OEM who increased the term of their contracts from 3 to 5 years.

Locking in our relationship with this key OEM for an additional 2 years makes great economic and business sense for them and for us.

Another DCI deal that contributed to our Q4 overachievement was a new direct customer win.

This customer provides economic and financial consulting to government and data connectivity is critical to their offering.

DCI beat out several competitors to land a 2-year deal in the high 6 figures.

This is the largest direct customer deal in DCI's history, which is very exciting and proves that DCI continues to be the undisputed leader in premium data access market by providing the best-in-class security performance and scalability.

Our AD&D segment rebounded after a challenging start to the year and continues to be a healthy, stable business.

Q4 revenues for Sitefinity included a handful of new customers and expansion views in the low 6 figures, which are large deals for Sitefinity.

And DevTools bookings grew 10% sequentially over the third quarter.

Our AD&D products feature market-leading innovative technology, with DevTools being the first to market in 2019 with a set of UI components for Microsoft Blazor, which is the new Microsoft framework for .NET developers and Sitefinity being named a Peer Insights Customer Choice by Gartner for the third time in Q4 of 2019.

Overall, our businesses are performing well and running them efficiently, while at the same time, keeping them healthy and strong are key elements of our strategy.

Our other focus area for FY '20 and beyond is accretive M&A, which we project will drive 10% to 20% annual inorganic revenue growth and increased scale in cash flows.

We believe that our success with Ipswitch is repeatable and a strong proof point that this type of M&A will create meaningful shareholder value over the long term.

We're focusing our M&A efforts on companies within the software infrastructure space with products that appeal to both IT organizations as well as individual developers.

I want to emphasize that we continue to follow our disciplined criteria as we evaluate potential targets.

Our pipeline is healthy.

And with the current market conditions, we remain confident that we can achieve our goal of doubling the size of our business in 5 years.

2019 was an excellent year for Progress.

And looking forward, we are well positioned for continued success in 2020 and beyond.

Paul will provide more details on our guidance for 2020, which will include a full year of results for Ipswitch as opposed to only 7 months in 2019.

We anticipate that incremental Ipswitch contribution will help to drive total revenue growth of 4% to 5% for 2020, along with another 100 basis points of margin expansion, both consistent with the preliminary expectations we provided during last quarter's call.

We will continue to focus on running our business efficiently and anticipate operating margins of approximately 39% in 2020.

This represents a 400 basis point improvement versus 2018 levels, an impressive accomplishment that we've achieved by continuing to drive operating leverage across all functions of the business.

Going forward, we will continue to target operating margins in the high 30s range.

In addition to the increased revenue and profitability, we also anticipate $16 million to $21 million more in free cash flow in 2020, which is a significant increase over 2021.

Our increased margins are carefully balanced with continued investments in our business.

We've proven over the past several years that focused targeted spending on products, support and customer relationship management enables us to maintain and grow our recurring revenue and to retain and solidify our customer base.

And we continue to seek out opportunities for accretive M&A.

We will maintain our shareholder-friendly capital allocation policy, which includes both dividends and share buybacks.

We remain committed to allocating approximately 25% of our annual free cash flow to dividends and also plan to resume share buybacks in 2020 with a goal of offsetting the annual dilution from our equity plan.

So in summary, I'm really proud of the year we've had in 2019.

We stayed focused in Q4, finishing the year strongly, and we work hard to sustain that momentum in 2020.

Our businesses are all healthy, and Ipswitch is performing even better than expected, which we anticipate will continue this year.

I'm very positive on the financial performance we are projecting for 2020 and the opportunity for accretive M&A to contribute to our efforts to drive real shareholder value.

I'd like to thank our shareholders again for their support and look forward to meeting with many of you over the next 12 months.

You've now all undoubtedly also seen the announcement of Paul's retirement.

So before I hand the call over to him, I'd like to say a few words about Paul's contribution to Progress during his 3-year tenure as our CFO.

Paul has been instrumental in all aspects of our business and operating strategy.

In addition to our improved performance margin under our -- under his stewardship, he has played a critical role in our go-forward M&A strategy and was a major driver behind our capital allocation policy.

Personally, I'm sorry, Paul, to see you go, but I certainly understand and appreciate that he wants to move on to much deserved retirement.

I wish him nothing but the best.

I'll now turn things over to Paul to review our Q4 performance in more detail and to outline our financial expectations for Q1 and for the full year 2020.

Paul?

Thank you for the kind words, Yogesh, and good afternoon, everyone.

As a reminder, all the numbers I'll be referring to in my remarks are on a non-GAAP basis.

I'm very pleased with our fourth quarter and full year financial performance.

For our fourth quarter, total revenue was $123.4 million, $4.4 million above the high end of our guidance range, primarily due to the higher-than-anticipated license sales of OpenEdge, Ipswitch and DCI.

Our earnings per share of $0.79 for the quarter grew 46% year-over-year and was $0.04 above the high end of the guidance range.

For the full year, total revenue was $432 million, an increase of 14% compared to 2018.

Earnings per share was $2.69, up $0.50 or 23% over fiscal 2018.

Looking at a consolidated revenue for the quarter as compared to Q4 of last year, Q4 revenue of $123.4 million increased 26% from last year and 27% on a constant currency basis.

The year-over-year impact of exchange rates on our fourth quarter revenue was a negative $1.2 million.

License revenue of $39.4 million increased by 39% from a year ago at actual exchange rates and by 40% on a constant currency basis.

The increase was due to the license revenue from Ipswitch as well as the renewal of high number of multi-year term OEM contracts within our DCI segment as compared to last year.

Maintenance and services revenue was $84 million, an increase of 20% year-over-year at actual exchange rates and 21% at constant currency basis.

This increase was primarily due to the addition of Ipswitch.

Turning to our full year revenue as compared to prior year, total revenue of $432 million is up 14% versus last year at actual exchange rates and 16% on a constant currency basis.

The year-over-year impact of exchange rates on our full year revenue was a negative $7.3 million.

License revenue of $122.7 million increased by 23% from a year ago at actual exchange rates and 25% on a constant currency basis.

The increase was primarily due to the license revenue from Ipswitch as well as the renewal of a higher number of multi-year OEM contracts within our DCI segment.

Maintenance and services revenue was $309.2 million, growth of 11% at actual exchange rates and 12% on a constant currency basis.

This increase was again due primarily to the addition of Ipswitch.

Turning now to our revenue by segment with all comparisons versus 2018 at constant currency.

OpenEdge revenue was $92.8 million for the fourth quarter, up 27% versus Q4 of last year.

For the full year, revenue was $322.8 million, up 16% when compared to last year.

Ipswitch was the primary driver behind both the quarterly and the annual revenue increases.

We're very pleased that both the network management and secured data file transfer products from Ipswitch are performing better than we had projected.

License revenue from our OpenEdge partner channel continued to be stable, with another solid quarter and year with SaaS-related billings from ISVs who have deployed their applications in the cloud.

We also had a strong quarter from our OpenEdge direct enterprises in Q4 with several large deals where customers purchased expanded capacity as well as added functionality they needed as they prepare to upgrade to OpenEdge 12.

For the full year, license sales from these customers grew slightly.

Maintenance renewal rates continue to be strong at well over 9% for both Q4 and the full year.

Turning to our DCI segment.

Revenue for the quarter was $12.2 million, more than double the revenue in Q4 of last year.

We have projected a significant year-over-year increase based on the scheduled renewals of our multiyear OEM deals.

But during the quarter, we also extended the term with a significant OEM contract and signed a new direct customer, both contributing to better-than-expected revenue for Q4.

DCI revenue for the full year was $40 million, an increase of 73% versus 2018.

As a reminder, our results can fluctuate quarterly and annually for DCI segment due to the timing of OEM renewals to the associated accounting treatment under ASC 606.

We benefited in fiscal 2019 from the timing of these multiyear renewals, but 2020 revenue will be lower due to the smaller number of scheduled renewals making our year-over-year comparisons for DCI more challenging.

As we've discussed throughout the year, we believe annual contract value remains the most effective way to evaluate our DCI business.

We continue to expect ACV to be $32 million to $33 million for 2020, consistent with our actual performance through 2019.

For our AD&D segment, revenue was $19.6 million for the quarter, up 1% compared to Q4 of 2018.

Revenue for the full year was $76.5 million, a 2% decline versus 2018.

As expected, total bookings were $21.7 million for the quarter, essentially flat to Q4 of last year and $78.1 million for the full year, down 4% versus 2018.

And turning to expenses.

Total cost and operating expenses were $76.1 million for the quarter, up 13% from Q4 2018 and $269.7 million for the full year, up 10% versus last year.

The increase for both Q4 and the full year was due primarily to the addition of the Ipswitch, partially offset by lower expenses due to efficiencies we continue to realize in our business.

In fact, it's relatively lower in Q4 as a result of our decision to decrease the investment in our Kinvey platform.

As I noted during last quarter's conference call, in light of our reduced expectations in this area, we assess the carrying value of the associated intangible assets and reported a charge of $24.1 million in Q4, that impacts our reported GAAP results.

Operating income was $47.3 million for the quarter, up $16.3 million or 53% versus Q4 2018.

For the full year, operating income was $162.3 million, an increase of $28.3 million or 21% versus last year.

The Q4 2019 operating margin was 38%, up almost 700 basis points from Q4 of last year.

For the full year, operating margin was 38%, 100 basis points higher than our expectations and an improvement of more than 200 basis points from 2018.

Q4 EPS was $0.79, $0.25 higher than last year, and full year EPS was $2.69, a $0.50 improvement versus 2018.

Moving on to a few balance sheet and cash flow metrics.

The company ended the quarter with a strong balance sheet with cash, cash equivalents, short-term investments of $174 million.

Our debt principal balance at the end of Q4 was $297 million.

DSO for Q4 2019 was 56 days, up 3 days sequentially and 9 days versus Q4 of last year.

Our AR balance increased significantly at the end of the year due to the timing of billings during Q4.

And as a result, we anticipate higher collections in fiscal '20.

Deferred revenue was $177 million at the end of the fourth quarter, up $41 million compared with Q4 of 2018, due primarily to the addition of Ipswitch deferred revenue balance.

As a reminder, our deferred revenue balance does not include Ipswitch pre-acquisition deferred revenue, which is eliminated in purchase accounting under GAAP.

We include this revenue in our non-GAAP results and guidance to better reflect our true business performance.

Adjusted free cash flow was $37 million for the quarter compared to $23 million in Q4 of last year and a record high $129 million for the full year compared to $120 million in 2018.

Now I'd like to turn to our business outlook and guidance for 2020, which is consistent with the preliminary outlook we provided during our last call.

In fiscal 2020, we will continue to strengthen our stable, high-margin core business while also pursuing accretive acquisitions.

That said, our 2020 guidance does not incorporate any additional acquisitions.

With that in mind, we expect 2020 revenue to be between $448 million and $455 million, an increase of 4% to 5% in 2019 at both actual exchange rates and on a constant currency basis.

The anticipated currency translation impact on our 2020 revenue was approximately negative $600,000.

The year-over-year revenue increase is driven by the following: first, a full year revenue contribution from Ipswitch versus only 7 months in 2019.

Second, flattish revenue from our OpenEdge and AD&D segments.

And lastly, although we expect ACV for our DCI segment will remain unchanged for fiscal '20 at $32 million to $33 million, as I mentioned earlier, we do anticipate a year-over-year decrease in DCI revenue of approximately 17% due to the timing of OEM renewals.

Turning to EPS.

We expect full year earnings per share of $2.87 to $2.92, an increase of $0.18 to $0.23 or 7% to 9% versus 2019.

The anticipated currency translation impact on our 2020 EPS was not material.

Our EPS guidance reflects the following: first, excluding the impact of Ipswitch, we expect lower operating expenses for 2020 compared to 2019.

Second, we expect a tax rate of approximately 20%, slightly higher than our 2019 rate.

And finally, our 2020 EPS guidance includes the impact of $60 million of share repurchases we are targeting to complete by the end of 2020.

We continue to believe that share repurchases provided solid, low-risk returns to shareholders and consistent with our capital allocation policy.

Our target is to buy back shares at a level sufficient to offset the annual dilution from our equity plan.

Of course, we have the additional flexibility to increase, reduce or suspend buybacks depending on the size and timing of M&A activity as well as market conditions.

We expect approximately $0.03 to $0.04 of our EPS improvement for the full year to be due to a targeted $60 million of share repurchases.

We expect our operating margin for 2020 to be approximately 39%, an improvement more than 100 basis points when compared to 2019.

We continue to target operating margins in the high 30% range going forward and are confident in our ability to run our operations efficiently while also making the investments required to sustain a strong business.

Our adjusted free cash flow guidance for 2020 is between $145 million and $150 million, an increase of $16 million to $21 million versus 2019.

Our business continues to generate strong cash flows with a significant increase in 2020, driven primarily by improved profitability and higher collections.

Turning to our guidance for Q1 2020.

We expect revenues to be between $110 million and $113 million, with year-over-year increase of 23% to 26%.

This includes an anticipated currency translation impact of approximately negative $500,000.

On a constant currency basis, the increase is expected to be 23% to 27%.

The increase is primarily due to the addition of Ipswitch as well as much higher revenue from DCI, which is expected to more than double versus Q1 of last year due to the timing of OEM contract renewals.

Although we expect full year revenue for DCI to decline by approximately 17%, the majority of the impact will be in Q2 and Q3, which are both expected to decrease more than 50% year-over-year.

We expect earnings per share of $0.69 to $0.71 for the first quarter compared to $0.50 in Q1 of last year, an increase of 38% to 42%.

This is in part related to the Ipswitch contribution, but also the ongoing efforts to manage our business efficiently as we expect expenses for Q1 to decrease year-over-year, excluding the entirety of Ipswitch.

The expected currency translation impact on our Q1 EPS is not material.

In closing, I'm very pleased with our strong finish for 2019 and our positive outlook for 2020.

We achieved better-than-expected revenue and earnings per share in Q4, and with Ipswitch performing better than our original business race, we are well positioned to sustain our momentum in 2020 and beyond.

We delivered record adjusted free cash flow for 2019 and projecting a very significant increase for 2020, perhaps the best indication of our efficient approach to running our company.

And we'll continue to be thoughtful and prudent in making investments that will strengthen our business.

And on a personal note, it's been an honor and a privilege to serve as CFO for Progress over the last 3 years.

I'm proud of what we've been able to accomplish during that time.

I'm very confident that the company will be in good hands with Anthony taking over as CFO.

I believe that Progress is well positioned to deliver on its financial goals for 2020 and create lasting value for its shareholders.

With that, let's turn it over to Brian for Q&A.

Thank you, Paul.

That concludes our formal remarks for today.

I'd now like to open up the call to your questions.

And I ask that you keep your remarks to your primary question and 1 follow-up.

I'll now hand over to the operator to conduct the Q&A session.

(Operator Instructions) And we'll take our first question from Steve Koenig with Wedbush Securities.

Congrats to Paul for a great tenure at Progress and best wishes in your retirement.

I hope you get one of those little drinks with a umbrella floating around, that sounds like you would be in runway.

Thank you, Steve.

Yes.

So I want to ask Yogesh, the -- Yogesh, you made a remark about the upgrades to OpenEdge 12, providing good customer retention, seat expansion opportunities and additional functionality.

Is there monetization upside in terms of functionality expansion from those upgrades or is it more about seat expansions?

Steve, in general, it is about capacity expansion as needed, and it is about retention, right?

I actually want to talk about retention first because, as you know, keeping that core business stable and keeping them with us and keeping our renewal rates as high as they have been is really the primary goal of doing what we've been doing on the product side and customer support side.

So that really is the primary function.

Yes, it does create the opportunity to potentially get additional revenue opportunities, but primarily through seat expansions.

Got it.

Got it.

Okay.

And then on the M&A, we know kind of we have a good idea of what your criteria are, you had a home run with Ipswitch.

We know you have equipped or good pipeline ahead.

If you -- let's see if you're kind of looking at the state of your progress towards the next deal, do you feel like this -- is there a material change from 90 days ago?

Is it still fairly formative?

Your remarks sounded like you are confident you'll do a deal this year.

Maybe just any additional color there you can give us.

So Steve, as -- first of all, thank you for your kind remarks about Ipswitch.

We -- our goal is to continue to target acquisitions like Ipswitch going forward, which we can then get greater scale and increase cash flows.

Our pipeline continues to strengthen.

We see potential opportunities for future transactions within the software infrastructure space.

Even -- with the current market conditions, we are still confident that we can execute on this M&A strategy and double our business.

As you know, with any deal, I don't want to put a specific time line down because that always then creates a -- not a realistic pressure because it suddenly becomes, are you going to relax your criteria to meet that deadline?

So to us, the criteria are sacrosanct.

And so we will stick to our criteria but -- I mean, despite saying that, I'm confident that we can actually execute on this.

So I -- yes, I feel good.

(Operator Instructions)

Steve?

Hello?

Yes, Steve, are you still there?

Yes, okay.

I'm back.

So okay.

Thanks.

Yes, thanks guys.

Yes, thanks, Yogesh.

And congrats to you again, Paul.

That's worth it.

All right.

Thanks, Steve.

Your next question from Matthew Galinko with National Securities.

Congrats on the quarter and congrats, Paul.

Thank you, Matt.

Sure.

You -- I think you mentioned in the prepared remarks that you made -- maybe invested a little bit in products of Ipswitch as they came in or this new launch in the version of their -- maybe a couple of their products that you highlighted as and maybe part of the reason for the outperformance on that side of the business this quarter.

So I'm curious how you think about whether you'll continue to invest in Ipswitch?

Or are there opportunities to continue driving organic growth in that business?

So Matt, really a good question.

There is a little bit of organic growth in that business.

The business is ahead of projections that we had.

But from our perspective, the investment that we're making is very similar to what we're doing with all of our other products, right, which is to make sure that, that business stays strong.

We don't see materially growing organically with that product portfolio.

So it is truly more about, again, retention, keeping it solid, keeping the momentum going, which we believe we can do.

I actually see top line growth primarily coming, Matt, from acquisitions.

The biggest component of our FY '20 guidance in terms of top line revenue growth is the full year's contribution of Ipswitch, right, which is offset by DCI, as Paul said, because of timing of OEM deals.

So that really is really what is driving it.

I -- we continue to invest in it to make sure that the customers stay with us.

We keep a competitive product and the business momentum continues.

Okay.

And I guess my follow-up would be with respect to the large direct DCI deal.

Can you point out any key factors or factor that carry you over the finish line?

I think you mentioned that it was competitive.

So how did you get there?

And do you see -- and I guess, should we see that as a one-off or is that -- should we see that as maybe a bit of an expansion of the DCI TAM into more direct customers?

So right now, Matt, I don't have enough of a trend to call it a trend, right?

I mean, we don't have enough data points, right?

But that said, we have the best offering, what won this deal for us was a combination of factors.

It was a combination of the depth of the capability of our connectivity.

So not just the fact that we have broad connectivity to a very large number of data sources but the level of connectivity and the depth of that connectivity capabilities are high.

The scalability, performance and security are really the 2 differentiators there.

And really, they continue to be why direct as well as OEM customers continue to use this technology over and over and over again.

But I don't see this as a big driver in changing the trajectory on DCI at this point.

(Operator Instructions) We will take our next question from Mark Schappel with Benchmark.

Let me just start off by saying nice job on the quarter.

And Paul, congratulations on your retirement.

Thank you, Mark.

Thank you, Mark.

Just a couple of questions here.

Just going back to DCI.

Yogesh, in your prepared remarks, you called out a handful of positive developments in that business.

And that's a business you typically don't see too many of those.

And I was just wondering if you could -- it strikes me that something has changed there.

I was wondering if you could maybe address any internal changes you've made at the company in your DCI business?

I think, Mark, we have a continued focus on our core businesses, whether it's DCI or any others.

And it is a -- it is that continued focus we continue to also come out with new capabilities and invest in those technologies.

So all those things help.

That said, right, I do want to be careful and not say, hey, suddenly, we're going to -- we're seeing a great trend among direct customers.

If and when we do, we will share that.

But we are -- we feel good about the DCI business.

It is clearly a solid business.

As you know, Mark, the direct part of that business is really quite small.

So in terms of the overall business, it is a really tiny part of the business.

So that would have to move meaningfully for us to then start seeing something that is meaningful to progress as a whole.

Great.

And then last quarter, you announced that your operations around the Kinvey business were being scaled back pretty meaningfully.

I was wondering if all the scale back activities have actually taken place yet.

Yes, they have.

We completed those changes.

And we still have some investment in that area, Mark, because we do see some opportunities there.

But it has been scaled back significantly.

And our 2020 guidance includes the scaled back investment in that area.

And so yes, all that was completed.

Okay, great.

And then finally, you called out in your prepared remarks, your direct OE, excuse me, direct OpenEdge deal.

I was wondering if you could just give some additional color.

And just maybe repeat your prepared remarks around that deal.

Yes.

So the one that I highlighted was a large mortgage company, a financial company that does mortgages.

The key there was really -- the large part of the deal was more on the expansion side because their business is growing, they need more licenses to cover the bigger footprint that they need of the product.

There was also a component to it, which was related to additional technologies from within the OE suite so that they could get ready to upgrade to OpenEdge 12.

As you know, OpenEdge 12 has some -- not just performance and security, but some additional capabilities and characteristics as well.

And so to get full use and full advantage of those, they need to sometimes buy additional products within that suite.

So that was an additional sort of cherry on top type of a thing in that deal.

We also saw some deals with direct customers, which were around compliance and those were good deals as well.

So OE had a -- OpenEdge had a good solid Q4 in the direct business.

Again, as, Mark, you are well aware, that direct business for OE is quite lumpy.

It depends on when these customers run into their thresholds and feelings on their capacity and so on and so forth.

So it isn't something that is a steadily repeatable all the time type of things, but we are really happy that whenever it happens, it helps us make sure that it offsets a little bit of churn that happens inside the OE direct business.

Okay, great.

And Paul, congratulations again on your retirement.

That's all for me.

Thank you, Mark.

We'll take our last question from Anja Soderstrom with Sidoti.

Congratulations on a great quarter and good outlook for 2020.

And Paul, good luck with your retirement.

There's been a lot of good questions asked already.

But I just wonder if you had anything that you could call out sort of on a geographic basis, if there's anything to call out?

Anja, thank you very much for your compliments regarding the quarter and the performance.

From a overall geographic perspective, as you might be aware, Ipswitch is predominantly a North American business.

And so the North America performance and year-over-year growth in Q4 was significantly higher because of that compared to other regions.

Overall, it was a good performance across the board across all regions.

We had a solid performance across EMEA, Lat Am and APJ as well.

It appears there are no further questions at this time.

I'd like to turn the conference back to Mr. Flanagan for additional remarks.

Thank you all for joining the call today.

As a reminder, we plan on releasing financial results for our fiscal first quarter of 2020 on Thursday, March 26, 2020, after the financial markets close, and holding a conference call the same day at 5 p.m.

Eastern Time, and I'll now turn the call over to Yogesh for his closing remarks.

Thanks, Brian.

An excellent 2019 is behind us, and we are well positioned for success going forward with continued strong execution and a focus on repeatable, accretive M&A.

The company is as strong as it has ever been financially and Anthony Folger brings a wealth of knowledge and experience as he moves into the CFO role.

He is committed to our strategy, and I'm confident he shares our focus on driving long-term shareholder value.

I look forward to introducing him to our investors once he starts out with us in February, and thank you again for joining us today, and I look forward to speaking with you at the next quarter's conference call.

Thanks and bye.

That concludes today's presentation.

Thank you for your participation, you may now disconnect.