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Progress Software Corp. (NASDAQ:PRGS)

F4Q07 (Qtr End 11/30/07) Earnings Call

December 20, 2007 9:00 am ET

Executives

Bud Robertson - SVP of Finance and Administration and CFO

Gordon Van Huizen - VP, GM, Enterprise Infrastructure Division

Rick Reidy - President, DataDirect Technologies

Joe Alsop - Co-Founder and CEO

Analysts

Brent Williams - Benchmark Company

Terry Tillman - Suntrust Robinson Humphrey

Richard Davis - Needham & Company

Jean Orr - Nutmeg Securities

Doug Crook - Global Crown Capital

Brent Williams - Benchmark

Operator

Good day, everyone, and welcome to this Progress Software Corporation fourth quarter earnings results conference. To get us started, I am pleased to go live to Mr. Bud Robertson, CFO of Progress Software Corporation. Please go ahead, sir.

Bud Robertson

Good morning. This is Bud Robertson, Senior Vice President of Finance and Administration and Chief Financial Officer of Progress Software Corporation. Joining me today are Joe Alsop, Co-Founder and CEO, and members of the senior management team. Also joining me today is my cold. Hopefully, between my cold and my Boston accent, you'll be able to understand this call.

We prepared a slide presentation to view during this call. The slide presentation can be found on the Investor Relations section of the Progress website by clicking on the "Live Webcast" icon.

The matters we'll be discussing today other than historical financial information consist of forward-looking statements that involve certain risks and uncertainties. Statements indicating that we expect, estimate, believe, are planning or plan to, are forward-looking as are other statements concerning future financial results, product offerings or other events that have not yet occurred. There are several important risk factors which could cause actual results or events to differ materially from those anticipated by the forward-looking statements contained in our discussion today.

Information on these risk factors is included in our Securities and Exchange Commission reports, including our report on Form 10-Q for the three months ended August 31st, 2007. We reserve the right to change our budget, product focus, product release dates, plans and financial projections from time-to-time as circumstances warrant. We shall have no obligation to update or modify the information contained in our discussion in the future when such changes occur.

With respect to any non-GAAP financial measures discussed in this call, we have provided on our website a presentation of the most directly comparable GAAP financial measure and a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. You could access this information, which is included in our earnings release, at www.progress.com.

We reported this morning the following results for our fourth quarter of 2007, which are reflected in the first few slides of the online presentation. Revenue for the quarter increased 12% from $122 million in Q4 of fiscal 2006 to $137 million.

On a GAAP basis, we reported the following. Operating income for the quarter increased 66% from $9.5 million in Q4 of fiscal 2006 to $15.8 million. Net income increased 75% from $6.9 million in Q4 of fiscal 2006 to $12.1 million. And diluted earnings per share increased 69% from $0.16 in Q4 of fiscal 2006 to $0.27 this quarter.

On a non-GAAP basis, we reported the following. Non-GAAP operating income for the quarter increased 51% from $22.1 million in Q4 of fiscal 2006 to $33.4 million. Non-GAAP net income increased 55% from $15.4 million in Q4 of fiscal 2006 to $23.9 million. And non-GAAP diluted earnings per share increased 54% from $0.35 in Q4 of fiscal 2006 to $0.54 this quarter.

The non-GAAP results in the fourth quarter of fiscal 2007 exclude after-tax charges of $3.7 million for stock-based compensation, $2.7 million for amortization of acquired intangibles, $5.1 million for impairment of goodwill, and $0.3 million for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices.

The non-GAAP results in the fourth quarter of fiscal 2006 exclude after-tax charges of $4.4 million for stock-based compensation, $2.8 million for amortization of required intangibles, and $1.3 million for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices.

For the fiscal year ended November 30th, we reported the following results. Revenue for the year increased 10% from $447 million in fiscal 2006 to $494 million.

On a GAAP basis, we reported the following. Operating income for the year increased 40% from $40.9 million in fiscal 2006 to $57.2 million. Net income increased 44% from $29.4 million in fiscal 2006 to $42.3 million. And diluted earnings per share increased 41% from $0.68 in fiscal 2006 to $0.96 this year.

On a non-GAAP basis, we reported the following. Non-GAAP operating income for the year increased 29% from $84.7 million in fiscal 2006 to $109.4 million. Non-GAAP net income increased 31% from $59 million in fiscal 2006 to $77.4 million. And non-GAAP diluted earnings per share increased 29% from $1.36 in fiscal 2006 to $1.76 this year.

The non-GAAP results in fiscal 2007 exclude after-tax charges of $16.6 million for stock-based compensation, $11.1 million for amortization of acquired intangibles, $5.1 million for impairment of goodwill, and $2.3 million for professional services fees associated with the investigation and shareholder derivative lawsuits related to the company's historical stock option grant practices.

The non-GAAP results in fiscal 2006 exclude after-tax charges of $16.3 million for stock-based compensation, $9.8 million for amortization of acquired intangibles, $1.3 million for certain other acquisition related expenses, and $2.2 million for professional services fees associated with the investigation and shareholder derivative lawsuits, related to the company's historical stock option grant practices.

In reviewing the fiscal 2007 fourth quarter, within the total revenue increase of 12% over the last year, software license revenue was up 9%; maintenance revenue increased 12%, and professional services revenue increased 26%. For the full fiscal year, software license revenue increased by 6%; maintenance revenue increased 10%, and professional services revenue increased by 31%.

With regard to the impact of changes in foreign exchange rates during the quarter, total revenue in the fourth quarter of fiscal 2007 would have increased by approximately 6% on a constant currency basis versus the 12% increase reported. Software license revenue would have increased 4% on a constant currency basis versus the 9% increase reported. Maintenance and services revenue would have increased by 7% on a constant currency basis versus the 14% increase reported. For the full fiscal year, total revenue would have increased by approximately 5% on a constant currency basis versus the 10% increase reported. Software license revenue would have increased 2% on a constant currency basis versus the 6% increase reported. Maintenance and services revenue would have increased by 8% on a constant currency basis versus the 13% increase reported.

As noted on slide 10, international business was 58% of the quarterly total as compared to 55% in Q4 of fiscal 2006. For the full fiscal year, international business was 57% of the annual total as compared to 54% in fiscal 2006.

Revenue from the OpenEdge product line increased 8% to $90.5 million this quarter, from $84.1 million in Q4 of fiscal 2006 and represented approximately 66% of the total revenue this quarter, as compared to 69% of the total revenue in Q4 of fiscal 2006.

Revenue from the DataDirect product line increased 20% to $23.7 million, from $19.8 million in Q4 of fiscal 2006.

Revenue from the Enterprise Infrastructure product line increased 23% to $22.6 million, from $18.3 million in Q4 of fiscal 2006.

For the full fiscal year, revenue from the Progress OpenEdge product line increased 6% to $337 million, from $317 million in fiscal 2006 and represented 68% of the total revenue this year, as compared to 71% of the total revenue in fiscal 2006.

Revenue from the DataDirect product line increased 19% to $73.9 million this year, from $61.9 million in fiscal 2006.

Revenue from the Enterprise Infrastructure product lines increased 21% to $83 million this year, from $68.6 million in fiscal 2006.

Revenue from channel partners, including application partners and OEMs, accounted for 56% of our total license business this quarter, as compared to 57% in Q4 of fiscal 2006. Within the OpenEdge product line, partners accounted for 74% of our license business this quarter, as compared to 67% in Q4 of fiscal 2006.

For the full fiscal year, partners accounted for 55% of PSC license revenue, as compared to 58% in fiscal 2006. Within the Progress OpenEdge product line, partners accounted for 70% of our new license business this quarter, as compared to 69% in fiscal 2006.

Our aggregate revenue backlog at the end of fiscal 2007 was approximately $178 million, of which $147 million is included on our balance sheet as deferred revenue, primarily related to unexpired maintenance and support contracts. The remaining amount of backlog of approximately $31 million was composed of multi-year license arrangements of approximately $21 million and open software license orders received, but not shipped of approximately $10 million.

Our aggregate revenue backlog at the end of fiscal 2006 was approximately $160 million, of which approximately $127 million was included on our balance sheet as deferred revenue, primarily related to unexpired maintenance and support contracts.

The remaining amount of backlog of approximately $33 million was composed of multi-year license arrangements of approximately $23 million and open software orders received but not shipped of approximately $10 million. We do not believe that backlog as of any particular date is indicative of future results.

Quarter-end headcount of 1,662 was flat with one year ago.

Looking at slide 16, highlighting balance sheet information, our cash balance was approximately $340 million at the end of the year. Our accounts receivable days sales outstanding or DSO was 62 at the end of the fourth quarter, up one day from one year ago.

During the fourth quarter of fiscal 2007, we repurchased approximately 585,000 shares of our stock at a cost of $18.5 million. At the end of the fourth quarter, there were approximately 9.4 million shares available for repurchase under our Board authorized share repurchase program that expires on September 30th, 2008. A summary of our historical share buybacks is reflected in slide 15.

During the past few months, there have been several significant announcements and developments. We announced that Independent Research Firm, Forrester Research named Progress Actional as the #1 product for standalone SOA and Web Services Management in October. The report is titled, “The Forrester Wave: Standalone SOA and Web Services Management Solutions, Q4 2007."

The Forrester Research report recognizes Progress Actional as an especially good fit for buyers that need to quickly implement comprehensive SOA management.

In November, we announced that Lockheed Martin selected Progress Actional to manage an internal service-oriented architecture or SOA initiative within its enterprise information services unit. The Actional web services and SOA management platform combines best-in-class monitoring, analysis, security and policy control, including systems and process level visibility and policy enforcement across an SOA.

More information on these announcements and other announcements and upcoming events can be found on our website at www.progress.com. And looking to fiscal 2008, in the first quarter, we are providing the following guidance.

One, for fiscal 2008, we expect revenue to be in a range of $515 million to $525 million. Software license revenue is expected to be in the range of $196 million to $206 million.

Two, we expect the Progress OpenEdge product line to be in a range of $340 million to $345 million, representing year-over-year growth of approximately 1% to 3%.

Three, we expect DataDirect product line to be in a range of $81 million to $85 million represent year-over-year growth of approximately 10% to 15%.

Four, we expect revenue from the Enterprise Infrastructure product lines to be in the range of $95 million to $104 million represent year-over-year growth of approximately 15% to 25%.

Five, we expect GAAP operating income to be between $85 million and $88 million, including charges of approximately $19 million for stock-based compensation and approximately $16 million for amortization of acquired intangibles.

Six, we expect non-GAAP operating income, which excludes stock-based compensation and amortization of acquired intangibles, to be between $120 million and $123 million.

Seven, we estimate that non-operating income will be between $2 million and $3 million for each quarter of fiscal 2008, all this may vary depending on interest rates, potential stock repurchases, fluctuations in foreign exchange rates and our cash balances.

Eight, we expect the effective tax rate to be around 35% for GAAP purposes and around 34% for non-GAAP purposes, the difference primarily relating to tax treatment of stock-based compensation.

Nine, estimating future weighted average share counts for earnings per share depends on future option activity, future share repurchases, shares prices and other factors. But now, we think using a share count of between 44 million and 45 million for each of the quarters of fiscal 2008 for diluted earnings per share seems reasonable.

Ten, we expect diluted earnings per share on a GAAP basis to be in a range of $1.35 to $1.41. On a non-GAAP basis, which excludes a total charge of approximately $0.55 per share for stock-based compensation and amortization of acquired intangibles, we expect non-GAAP diluted earnings per share to be in a range of $1.90 to $1.96.

Eleven, for the first quarter of fiscal 2008, we expect revenue to be between $120 million and $122 million, with software license revenue between $45 million and $47 million. We expect diluted earnings per share on a GAAP basis to be in a range of $0.26 to $0.28.

On a non-GAAP basis, which excludes a total charge of $0.14 per share for stock-based compensation, amortization of acquired intangibles and professional services fees associated with our ongoing stock option investigation and derivative lawsuits, we expect non-GAAP diluted earnings per share to be in a range of $0.40 to $0.42.

Twelve, we are utilizing an average euro exchange rate of $1.43 in preparing this guidance for the first quarter. This guidance is built on the continued success of our partners, successful implementation of our new go-to-market strategy, including continued improvement, our ability to generate new business and end user accounts, continued strong performance from our higher growth product lines, especially the Enterprise Infrastructure product lines and DataDirect product lines, and no significant strengthening of the US dollar against currencies from which we derive a significant portion of our business.

As we advised, these and a number of additional factors may affect future results and the actual results may differ materially. Consequently, there can be no assurance that we will achieve results consistent with these comments.

We plan on releasing the financial results for the first quarter on Thursday, March 20th and holding the usual conference call that morning at 9.00 a.m. This conference call would be recorded in its entirety and be available on our website at www.progress.com in the Investor Relations section.

I'd now like to open up the call to your questions. We'll first take questions from the analysts that publish research on Progress Software and then questions from anyone on the call.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question today will come from Brent Williams, with Benchmark Company.

Brent Williams - Benchmark Company

Hi, guys. Congratulations on the quarter. Couple of questions, first housekeeping, what was the goodwill impairment?

Gordon Van Huizen

The goodwill impairment was the write off of EasyAsk investment.

Brent Williams - Benchmark Company

I’m sorry, excuse me.

Gordon Van Huizen

EasyAsk investments.

Brent Williams - Benchmark Company

Okay. And then, let's see. The drivers of the strong performance in professional services on the quarter, is it pretty much the same as last quarter, or is there anything new going on out there?

Gordon Van Huizen

No, it's being driven by the new businesses, and we’ve had a couple of larger service engagements to the OpenEdge, which is consistent with rest of the year.

Brent Williams - Benchmark Company

Okay. And then let's see. No conference call would be complete without me asking about Apama. Any deal size boost there on the solid performance on EID coming from Apama or Sonic or anything, or so, were there large deals involved? Any comments on interest in Apama and financial services, as well as interest in Apama incrementally in other markets? Can you give us any color on that?

Rick Reidy

Brent, hi; this is Rick Reidy. John Bates is actually in a train now coming back from New York, so I'll fill this for Bates. Apama had a pretty good Q4. They had roughly 38 brand new accounts, new deployments throughout the year, 10 of which came in, in the last quarter. Most, if not all, are in the financial services sector and capital markets, but as well as in the areas of risk management and regulation management.

Brent Williams - Benchmark Company

Okay, great. And then any particular observations on Sonic, in terms of new reasons that customers are finding to buy? How was the performance there? Was it just more of the same reasons, or can you give us some more color on Sonic?

Gordon Van Huizen

Well, yeah, first just to comment about the strength of the EI segment for the quarter. This is Gordon Van Huizen. The success of the quarter for EI was really spread evenly across all the products. With Sonic, the growth drivers there tend to be, so it becomes more mission critical. The kind of robust scalable infrastructure we have, it's even more highly regarded by the markets, and the wins against those of the likes of [Cisco] become even more strategic. So really it's a continuation of the curve that we saw late last year and early this year. So it's becoming more and more important, more essential to the organization and having superior infrastructure today.

Brent Williams - Benchmark Company

Okay. And then, I think lastly, this one's for Rick, any color on the NEON, the former NEON, the Shadow stuff and the mainframe stuff? How's that doing?

Rick Reidy

It's actually doing very well. Since we've acquired it, we've grown the revenue quite strongly. I'd say more than 20% over the previous regime. We particularly had a strong Q4 and brought in a lot of big mainframe accounts. So I think partly that might be a result of strong interest in the new product that we introduced and started shipping, which is Shadow 7, which was the most significant mainframe release we've had, and this is from the original NEON folks in their history. So we are pretty, we felt pretty good about that.

Brent Williams - Benchmark Company

Okay, great. And I think that's it from me. So thanks guys.

Operator

We'll go next to Terry Tillman of SunTrust Robinson Humphrey.

Terry Tillman - SunTrust Robinson Humphrey

Yeah, thanks. Good morning, gentlemen, and congratulations on the quarter as well as from me. But a couple of financial questions, when you gave guidance for the segments, and you talked about $81 million to $85 million of DataDirect, that's representing 10% to 15% growth. Can you remind me, had you all talked, at least more recently talked about 10% to 20% growth and if this is a tighter range, and what's behind that?

Rick Reidy

We have talked in the past of the new stuff growing between 10% and 20%, and right now, the tighter range is 10% to 15%, and the other one is 15% to 25%. So the new one is still 10% to 20%, which we've talked about.

Terry Tillman - SunTrust Robinson Humphrey

Okay. Well I guess the one at DataDirect, the 10 to 15 is there anything related to like older products, maybe just slower growth or anything related to that or --?

Rick Reidy

No. I wouldn’t read too much into it. I think our business is very solid and we hope to do better than that.

Terry Tillman - SunTrust Robinson Humphrey

Okay, that’s fair. And then, Bud, you just talked about the EI, that does seem like a higher growth rate, because you had talked, I think about 10% to 20%, you are raising that range. Anything specifically that's kind of a needle mover, or is it just more of the same, or is there something baked in, in terms of Actional or the DataXtend SI or the Apama becoming bigger pieces there?

Gordon Van Huizen

Yeah. Certainly. This is Gordon again. Certainly Actional and DSSI are core component to the growth of the EI segment, and so the option continues. Things like SOA management really come to the fore. We have a superior offering in that space. We saw dramatic growth for Actional this year, and we see that continuing in to next year. Same thing for DataXtend and Semantic Integrator; Data management challenges in SOA are our big challenges, and we have a very strong offering in that space. So, they are definitely heavily contributing to the growth of the EI segment.

Terry Tillman - SunTrust Robinson Humphrey

Okay. And Gordon, since you've just talked about DataXtend SI, I think last quarter you guys have talked about closing a large deal on Telco, and I know you are targeting all the top strategic telco players or carriers with this offering. Is this business going to be lumpy though over the next couple of years? Maybe it's one large deal this quarter, maybe then it's a couple of quarters before something else plays out that's large, or are you getting all of these folks to buy a little bit initially, and then, over time, the idea is that they will make even more strategic purchases?

Gordon Van Huizen

We don't see the DSSI business as being particularly lumpy. I think the one very large deal is something of an anomaly. And the deal flow that we've seen following that deal is more along the lines of what we're accustomed to with our SOA infrastructure products, in general, which isn't necessarily small from all deals, but certainly smaller than the one we were talking about. So, since there is this Q4 performance really across all the products and I'd say a higher volume of smaller deals, in general.

Terry Tillman - SunTrust Robinson Humphrey

Okay. And then, Bud, in terms of EI category, I know we'll see more details in the filing, Bud, in the 10-K. But with the EI business, can you comment on was there an improvement in the EBIT loss in that business versus the third quarter, first? And then, secondly, what is baked into an assumption for the EI business on the operating income line for '08 and the guidance?

Bud Robertson

If you recall last quarter, on the call, I stated that we expected to have a 20% improvements for the year. And that would represent about a $6 million improvement year-over-year, and, in fact, that's where we ended up. We ended up 20% improvement in the loss position or a pickup of about $6 million.

Going forward, we haven't changed from our thought process because which does really expect this business to breakeven by the end of '09 and be profitable in '10. If nothing is changed, then actually you'll see continued improvement next year as we go through 2008.

Terry Tillman - SunTrust Robinson Humphrey

Okay. Just my last question, I'm pleased to see the return of buybacks with $18.5 million. It's better than nothing. But I can't help but notice that even with the buyback activity starting to reoccur, the cash has built significantly again. And I'm curious what is philosophically the stance on cash usage in '08? Are you potentially going to start revisiting larger acquisitions or a more aggressive acquisition stance, or could we see more regular stock buyback activity each quarter or even, maybe, a greater amount?

Bud Robertson

Well, in the past, other than last year when we had a lot of blackouts, we have historically always bought back shares. And we bought back quite a few shares, and we continue to believe that that's a good use of our cash, if. In fact, acquisitions or technology purchases our first use. So, right now, we continue to look at acquisitions. Whether we find it a big one or not, I don't know, but we're looking for technologies and companies that fit where we are going.

But as we said before, last year and continuing this year, the drivers to gain more efficiencies and be better market positioned in the products we have, and that's what we've been doing. So we are going to execute very well what we have. So next year, this year I should say, you can expect to see more repurchases of shares. And, in fact, if something does appear that makes sense for our portfolio, we will acquire it.

Terry Tillman - SunTrust Robinson Humphrey

Okay. Thank you.

Operator

We'll go next to Richard Davis at Needham & Company

Richard Davis - Needham & Company

Yeah, thanks. Gordon, this is a little bit more of a strategy question. So, on the infrastructure side of the business, I just get a sense after following you guys for a while that you're kind of working those tools together better in terms of either, at least, marketing or presenting those to the customers and things like that. So, the question I have for you is, is that an accurate assessment of your strategy on the enterprise infrastructure side of the house, and are there examples where this has actually been helpful? So then, in other words, you can lock and go, look, we have a more unified strategy as opposed to selling you one-off tools. Thanks.

Gordon Van Huizen

Richard, this is Gordon again. Yes, as you've noticed, we've assembled a rather comprehensive portfolio of SOA infrastructure products. This still marks as an interesting one and in some cases, the customer is trying to solve the very specific needs and they're definitely looking for the best product to build that sort of requirement and we offer that.

In other cases, customers are looking for something a little bit broader. They are buying ESP along with SOA management and in those cases we are definitely investing in product integration to support that, make it easier for the customer, positioning of the product, as a collective unit if you will, but we are at a position where we can address the market through both of those branches or both of those angles.

Richard Davis - Needham & Company

Got it. That’s what I am trying to figure out, it seems to me maybe that the SOA market is still early days enough, that there is no consensus yet, I guess eventually your view is that a single kind of unified platform like all software goes, to be the selling point, but at this point Dell also sound like individual tools can be awfully successful, is that correct?

Gordon Van Huizen

That’s absolutely correct. And we have had some cases this year where the combination of Sonic International in particular has been a very powerful one for customers and has led to some very significant deals. But by and large customers select based upon individual products requirements in SOAs.

Richard Davis - Needham & Company

Got it. Okay, now that's very helpful, that's what I needed. Thanks so much.

Gordon Van Huizen

You bet.

Operator

Next we go to Jean Orr at Nutmeg Securities.

Jean Orr - Nutmeg Securities

Good morning, I just have a quick question about the outlook for 2008, is there anything in the macro outlook that would change the outlook for Progress, if it changed significantly, slower economic growth in the US or Europe or something like that?

Bud Robertson

Jean I missed part of that question, you said [plug] changes whether --

Jean Orr - Nutmeg Securities

I just wondered if there was anything in the macro outlook that if they change significantly, it would change your outlook for fiscal 2008?

Bud Robertson

Well I mean we always run in to the Deer and the Headlight syndrome, which is as people get concerned, well they stop buying, just because they are nervous, obviously if you go into recession then all bets are off, but we believe that our products that we have are both mission-critical, like Gordon talked about, competitive advantage or in fact they have high ROI.

We are very diversified around, as you know with 45 in Europe, 45 in North America, as well as with all our verticals, so we feel that the forecast we have now based on the current market conditions that are out there is a reasonable estimate. The one thing we have done however, so for those putting the models together, if you look at the increase, we have raised the year-over-year guidance and revenue, that we believe based on the model of our direct selling force is going to fall into the second half of the year versus the first half.

So, when you think about model and the increase we're seeing that we believe is going to occur and most of our businesses will be in the second half of the year, it's not dramatic, but that's where most of that increase is coming. But we don't see right now anything that would not allow us, based on the product suite we have to achieve this numbers.

Jean Orr - Nutmeg Securities

In terms of, during the headlights, have you seen any signs in any segments of concern, given what's happening in the financial markets?

Bud Robertson

Well, as you know we have, because of the verticals that we have, we don't have a high exposure to really any verticals, its somewhere in the single-digits, for example financial service we look around, and we have had some of our OpenEdge business, we might have had a customer too that didn't buy, that would buy in a prior year. But again that noise gets taken away by the fact that another vertical, such as retail is up as an example, so and then the financial services that Rick deals with in Apama.

Rick Reidy

I specifically asked John Bates this morning, and he said, because we are worried about that. That's where Apama plays. And so far, there has been zero impact called the credit crunch on the Apama business so far. If anything, it's waking people up to the fact they need more software to help them monitor in real-time what's going on.

Jean Orr - Nutmeg Securities

Okay. And just one clarification, the GAAP tax rate you expect was what?

Joe Alsop

35. And the non-GAAP was 34.

Jean Orr - Nutmeg Securities

Okay. Thank you.

Operator

Anything further Ms. Orr?

Jean Orr - Nutmeg Securities

No. Thank you.

Operator

We'll go next to Doug Crook at Global Crown Capital.

Doug Crook - Global Crown Capital

Hi. Thanks. I am not familiar with the comment you made about the write-off of the goodwill. I am wondering if you can give me a little more detail on that.

Joe Alsop

The write-off on the EasyAsk that I discussed?

Doug Crook - Global Crown Capital

Yes.

Bud Robertson

Yes, we acquired the company a couple of years ago, 2.5 I think Joe said. We have to, every year, look and see what the bio of that is. And based on the current revenue estimate and the future revenue estimate and some other formula for accounting rules based on those growth rates we actually paid and we have to write-off that investment for GAAP purposes.

Doug Crook - Global Crown Capital

Do you anticipate any additional write-off in the near future?

Bud Robertson

No.

Doug Crook - Global Crown Capital

Okay. All right, that's helpful. That's it. Thanks to all.

Bud Robertson

Okay.

Operator

We'll take a follow-up from Brent Williams at Benchmark.

Brent Williams - Benchmark

Hi. I think if I get this right, within the OpenEdge division, the percentage that came through your channel partners and OEMs was kind of a leg-up here over normal and implying that the direct sales was down. Anything going on there or is this random bouncing around or is there anything going on there?

Bud Robertson

No. Like you said, Brent, that's random bouncing. If you look at '05 number, it was 69% for the year. '06 was 69%, and this is 70% for the year, the partner percentage of revenues. So if you look within any quarter within those yearly numbers, it is bouncing around.

Brent Williams - Benchmark

Okay. Just a follow-up check. Thanks.

Operator

And at this time, there are no further questions from the phones. (Operator Instructions) And no questions from the phones.

I'll turn it back to you for any additional or closing remarks, gentlemen.

Bud Robertson

Okay. Thank you. Just for everyone to know on the call, we will have our analyst conference on Tuesday, February 12, at The Ritz Carlton Hotel in Boston, and we will be sending out information on that from our IR people. So, if anyone is interested, email me, but we will be getting to everyone on the call anyways to see if you are interested in attending. As you know, it is our yearly conference and it is a great time to gather information on all the products lines as well as many industry analysts who are there.

So with that, this concludes today's conference call. I hope everyone has a happy holiday and thank you for participating.

Operator

This does conclude today's teleconference. Thank you for your participation, and you may now disconnect your lines.

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