OTEX - Earnings call transcript Q4 2018

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Open Text Corporation Fourth Quarter and Fiscal Year End 2018 Conference Call.

As a reminder all participants are in listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. to Investor conference Relations. like Secord, to now President, Vice would turn over the Greg I Please ahead. go

Greg Secord

Thank you, operator, and good afternoon everyone.

On Chair, Chief Officer, is Madhu Ranganathan. OpenText's and Financial President, today and Technology Vice Barrenechea Mark the Chief J. Officer, Executive Chief Executive call Officer our Vice

future to We prepared like and now, replay a available will to proceed thereafter. Harbor I'd remarks, forward-looking Investor be contain where question-and-answer call moment during conference by relating material relating a performance today's note, information. the with have the may Please The readings XX call of is investors investors.opentext.com, minutes take the Safe of section some posted. to our OpenText direct we And a of session. this statements will which our call, I'll that followed of course that last Relations with approximately make shortly statement. website, to

statements from drawing Certain results and represent conclusion. made actual today. were our material judgment, forecast While the such statements in in applied conclusion, these projection assumptions a forward-looking forward-looking current materially any factors differ could or

found conclusion, information course, to be in by statements release obligation was forward-looking or the Additional that material forward-looking could required may this our a that undertake press which well our do OpenText's the unless projection results recent results of that XX-K performance the future of in as so these as Form distributed to as earlier from materially website. in contained factors law. update afternoon, to no on actual the We risk well information, differ project as cause factors about forecast may are OpenText

Reconciliations to found on with non-GAAP non-GAAP may of our call certain available over of turn be public measures that, comparable and may their GAAP our Mark. our include to within which website. conference materials are I'll financial call In the directly most any filings other addition, measures financial discussions measures. And

Mark J. Barrenechea

everyone, to and in Hello, us Greg. get I'll you, be for remarks, questions joining your today. thank Thank can you my sooner. we briefer so

have IR strong release today. financial year go and Let also on delivered our in operational QX principled of ended a through focused encourage of you to innovation, as me record performance, as front our we teams our and call Across you press disciplined OpenText, presentation and they execution. and

have core and are now We intelligent via connected to own platform, adding that information created the and engineering and the our acquisitions. platform we

teams. how customers refined We we our go-to-market our via have to deliver value

investment confidence of OpenText Our performance the in our our people, environment shareholder our to value, demonstrates commitment in was our the midst business and in long-term way. and the a dynamic creating

was best QX QX and Our business viewed below an Consider, greater growing hope we quarterly recurring you'll revenues to I models. slightly strive hear consistency on today. and annual compared overachieved, clear basis through as communications is for and external our slightly

As as in it was new we added $XXX million a dynamic year revenues.

Our business annually. best viewed is

or revenues, as Annual well. given Looking a XX% record our growth. or beyond $X of billion was ARR year. delivered and any billion year-over-year quarter XX% and $X.XX fiscal revenue. a we year-over-year XX% was revenue XXXX total crossed billion in recurring results, threshold grew $X.XX total ARR and year the reviewing with record

or ARR Further, very Guidance X.X% growth. finished Covisint, flow XX.X% or delivered sheet, We annual and of or Let billion strong we was in constant growth. in via to We acquisitions capital OpenText X.X% with me cash including was trailing EBITDA growth XX% acquire XX% million year-over-year transitioned or adjusted with $XXX.X X.X% to we cash months million XX a and business was model. the Hightail year-over-year cash. year. $XXX flows. $X during currency. of Year-over-year in note successfully delivered in organic million also allocated the in currency. Year-over-year to $XXX dividends over have an revenues, revenue growth related XX.X% balance XX% fiscal recurring total $XXX million the Operating year constant

a available revolver X.Xx of ratio million a in net-debt-to-adjusted $XXX Our EBITDA. is XXX%

bandwidth strategy organic and M&A financial We management invest capacity to have pursue and growth. the our in to

Let on capital feel best a allocating spend we company's to is ROIC, or me which moment the capital. return on metric in the assess invested efficiency

non-operating equity minus income, on We tax. operating should also net deferred adjusted by by operating of ROIC OpenText's plus ROIC think tax, be elements. taking minus focused cash elements calculated is divided versus debt,

XXXX strive be the in fiscal in was XX.X% the right teens our For to We range. is ROIC mid-to-high XX.X%. in

it as website. a on presentation We is and growth On flow on Madhu data on and organically. strong will Financial, and Services, most the grew strong Technology, system transactions what Cloud Goods our balance Healthcare do investor few a growth or via $X of customer rate point times OpenText IR strong a Fiscal net-debt-to-adjusted our call shout-outs little our calculation the me saw over delivered quartile QX, through will in during our calculations detail. growth, in of million, ROIC go our more in numbers Consumer and with we we only XX note QX acquisitions We grew see detailed let our XX.X%. and posted we report EBITDA XXXX can XX the a ROIC margin, on You demand. finish cash are produces. total again X.X and industries presentation business was Again today. upper for a to sheet Please XX organic on-premises. an a the have each annual annual record year. growth

for SPAWAR, of Department EMEA Health public Club Group SecureWorks, the U.S. of Enterprise X%. introduced World Auto and of later and Energy, Ness, Agency BMW, XX of out Total We our Department this our include XX% Michigan. of at OTX Project, Release EPX APJ year. applications. wins OTX highlighted XX% and next-generation customer book platform and business, calendar was Americas was is Navy SaaS U.S. River the key of quarter was Hydro-Québec, Salt XX.X% Our EBITDA the quarter the flow proud in U.S. their within business commitment from commitment up Company. QX and The XXX% up of year-ago year-over-year. was and as million, Information XX.X% our $XXX.X $XXX.X ARR I'm in $XXX.X Adjusted up a system revenues OpenText the XX% cash margin year-over-year. purpose year-over-year. the XX% operating team, is million, the our customers, to million, long-term up extremely focus, a to

Let XXXX to and fiscal ahead. exciting me transition the year

of none. and a class software for leadership security, partnerships in and have sheet a measure forward steady customers and business, that Daimler Year-over-year I've global strong customers. business products said business team and organic uncompromised revenue on to wins has General progress AI. BMW, cloud, why to also the networks, with that like down doubled is new is move a value demonstrated analytics balance we've content This sustainability U.S. We world support Siemens. and M&A always our solid recurring scalability sales, continued growth OpenText what and as Department we're Motors, services deliver. healthy platform We've we and our us of business and Interior, winning and on second our Nestlé,

aspects the Let me key fiscal ahead. road highlight a few XXXX in of

currencies are approach, countries, expand and transact the is website significantly reporting. and the against previously target impact we those and the our and dollar days. has long-term this. like annual will QX euro modeling an targets targets. presentation QX, in outperform in The IR other and with annual provide but movements last typically currency strengthened FX not Recognizing your First in as QX does report QX local our over in of our on Madhu this model reflect in and on business, USD. do the XX that XX reflected health it noted, that We consistent our operate

expect have on on recent revenue XXXX average expected negative a fiscal $XX.X ASC minor for effect variances. and fiscal affect ASC by revenue We XXX this year. fiscal revenues course, revenues, about purely exchange million reducing FX million quarter reducing XXXX will to combined fiscal million our the On changes. $XX effect of rate is XXXX revenues, Also XXX a by per quarterly to that $XX million. in subject, $XX based

basis. to on We our be consistent roughly PS revenues an expect year-over-year absolute

and fiscal business on global their win-win. XXXX, partners the increasingly overall intelligent classic grow are businesses platform. a we consulting As OpenText connected our building around the in focused It's

adjusted centers announced we restructuring mid- our XXXX restructuring to for a to The our have partial we'll software XX% as India, performance of is benefit is business, program OpenText our service, expect and will such R&D, in between today hyper-scaling also fiscal in We ideal be operations that in Philippines large and in Canada. speak high-XXs to excellence Madhu the program Operating shared full and and XXXX. on XX%. large support, cloud peers. EBITDA focused software and benefit

and centers excellence. of X,XXX Let scaling in have rate. seven over faster X,XXX ago, had a centers me in note, approximately employees these employees years Today, we at we the

XXX. section fiscal fiscal low-single general general, ASC organically, XXXX provide adjusted Our exiting about context to include Quarterly XX-day billion new assuming the of for with XXXX in visibility XX% a year-over-year introducing into grow like XX% to $X in within XX% short-term million business. have is note cash longer-term growth operating these EBITDA to named and to do fiscal This be in annual remain to a adjusted targets I'd PS the little investor absolute summary, think factors we In XXXX negative an that Quarterly Factors intended we'll on offset via and revenue to our our also with or flows. and Factors. be market, XX% FX to grow In digits long-term $XX and some to presentation consistent cycles M&A, expect EBITDA between healthy as to basis, to due cycles. you nature by forward a and section quarter-to-quarter going strategic health our market

see we highlight our factors let's QX So, as them.

we strong seasonally first a our down is ASC to revenue customers again, that and is strength tougher negative basis impact. $XX.X revenue ASC other sequential to Recent a will a subject number is to quarter slow significant quarter, a million of first XXX the in the XXX points. variances. could and down First, our combined have estimate QX compared the has comparison hundred QX of Again, we margin factor. a historically QX had the U.S. have summer. been quarter. of as dollar few in It up effect currencies also light QX a of QX, A quarterly FX

factored elections in movements newspapers around our and we're And the the increase already read the privacy in on investment, in and focused security our are our same model We an our cloud our features all private cloud tariffs, investments our and Cloud means currency annual expense. all finally, cetera. will These and which be services. a et OTX, headlines across are we investments services, next-generation target into These all managed public making IR closely new world, monitoring presentation. cloud; continued cloud;

remarks. closing my to turn me Let

experienced to World, market you we purpose information integrating of years our acquiring potential solve firsthand customer We've intelligent to team engineering, and Information deeply a ready sales the in search. record risen our from and to have software passionate XX Company ago and at promise connected many Enterprise got support Enfuse is of track and As only the go to Today, the believe proven to The strongest helping consulting, the and companies. enterprise. XX,XXX customers redefined market's they potential and experienced unlock OpenText in founded deliver our and colleagues the assemble information. on of information and have platform most challenges our energized and their through are OpenText – was in as deeply

when capacity meaningful itself. to strategy, opportunity the a have execute right on that We presents

that focused of proven us, the Factors. and over us believe Our Quarterly is business I a our the untapped are term. shareholder about please I'm read significant strategy often speak value has system that make guide growing opportunity and is asked long to successful on at you OpenText. ahead principles sure there

backwards, highlight the of Let problem. Two, One, few important most owners. principles. with work act and solve start me like their a those customer,

in to Third, and customers forward and It and your Fourth, and to lastly continuous thinking and advances. decision our is culture learn our and innovation lead. you bring technology to making. long-term as listen then value with commitment operational excellence,

ideas and your your I incorporated questions have future am to really today. in excited our to looking forward framework are We

it's CFO, hand Ranganathan. Madhu to Madhu? now, for to So my the call pleasure over our

Madhu Ranganathan

Mark, And thank for thank today. you. you all us joining

our make your we feedback that otherwise. for $XXX $XXX and of by want I to details ways all revenue up thank million year impacted on you negatively to sharing currency was exchange XXXX, information XX% accounting Greg, us revenue the fiscal million foreign for constant results, on further improve behalf on million million, in we even Mark, discussing $X,XXX and to revenue to of XX% Total quarter to of from last $XX last positively the year indicate from USD The due a and was of acquisition $X XX% all fiscal last my of total our constant quarter up provide progress you million same valuable In recurring business. fourth unless can due myself similar was to easier million up and a was on revenue XX%. rules. basis prior I millions quarter from $X,XXX basis or Before with in a or constant fourth to results and million XXXX annual by the evaluate year XX%. up basis With up Annual on XX%. million, $XXX up be currency rounded period $XXX currency compared or impacted the to prior and references respect year, quarters will fiscal it

million fiscal currency XX%. for Our basis $X,XXX the adjusted and on a year revenue impact last foreign XX% for or impacted EPS. revenue up $X,XXX And annual positively FX up impact exchange by on a positive from the was constant quarter XXXX million had million $XX of now recurring

by and a For on million had fiscal $XX margins. now impacted adjusted to gross positively impact And $X.XX EPS. XXXX exchange foreign revenue positive

the as gross quarter follows. margins For were,

from XX%, XX% from XX% cloud was Our year. slightly license last margin slightly was XX% year. up last The down margin

slightly margin Our XX% was compared up XX% last support year. customer to

and XX% activities. services from For was professional efficiencies up margin increase last the integration compared reflects XX% to year post-acquisition the

aspects operating business, Having For remains of it into operating for us we details. key deep a the and next focus our our clear all will at OpenText. lens section discuss income a

with pleased for the are quarter. results We the

prior Our XX% up adjusted year. this quarter million the fiscal margin adjusted compared EBITDA EBITDA was $XXX XX% and XX% was to in

was year. adjusted EBITDA margin fiscal prior in was For million to EBITDA XX% up XX% fiscal XXXX XX%, for XXXX compared $X,XXX adjusted the fiscal

completed refinancing sheet as with very and of expense $XXX strategy. $XXX range other related million strengthened credit refinancing, For further pleased XXXX interest our target facility to originally and $XX the XXXX $XXX we transaction. That Loan related was successful of higher due to million, which the primarily growth was loan We're in list Term which expense balance other revolver interest cost than continued range on total million was outcomes. fiscal slightly capacity May additional The upfront execution of with term solid anticipated a and acquisition our and quarter. B our our of and million in the

for the the compared on share period $X.XX per share basis was quarter per per $X.XX earnings up share. a currency and on XX% a adjusted Our same year $X.XX diluted to basis per XX% constant for up share at last

XXXX was $X.XX basis, year. $XX net period per GAAP or quarter the a for million diluted basis compared million income up share per on adjusted On XX%. $X.XX last for $XX $X.XX same the compared year, per per basis earnings or was $X.XX was up earnings $X.XX on currency adjusted share XX%. a last to fiscal For share to a constant share diluted up

share share to For was $X.XX $X,XXX GAAP year. income for last $XXX per net or per $X.XX compared XXXX or million fiscal

mentioned as on efficiencies continue was prior tax cash operating income further for the a included the to Canada. fiscal execute to long-term account the in XXXX of administrative internal flows, reorganization to to as previously the million benefit model. turning in one-time And operational to us now our flows our company's annual of net GAAP However cash operating quarterly indicators key consolidation target that QX of and IP $XXX XXXX recorded our against continue are we enhance and year

million quarter year up supported The was was revenue. million, quarter of as fiscal year million, in $XXX by improving collections $XXX cash ratios. Total leverage it deferred well XX% ended of cash as DSOs the $XXX was $XXX year-over-year. million We XXX% operating and strong the XXXX year-over-year. For up flows with the of and

times. As leverage X.X of X well was June our ratio debt consolidated external ratio of net covenant XX, our times within

I topics results, would of of all already part few to our Mark a today spoke some highlight that you as Now financial with like important to.

to currency our business. the First, impact

of ASC As these the currencies have global seen revenue the standards size not the to to dollar British last international new days Canadian doing Mark health with dollar U.S. XX relating pound, the and the our of the against of our compared business, just business moves a while nothing euro, ago. which XX XXX. weakening guidance to currencies by like reduce math $XX recent mentioned significant currency do give these the we have on where second key we over million the for fiscal And year days would were accounting approximately next do

to QX adopting net fiscal earnings retained expecting tax million an $XX see be will of this approximately upon to and adoption. XXXX of We increase

of last accounting accounting cloud for I on-premise stems impact commissions, we the upon our impacts expect compared quarter for arrangement, fiscal offerings, XXXX our and earnings to be million cost implementation growth adopting which to organic As subscription rules capitalizing our rate. mostly approximately by mentioned revenues the the from to the within for $XX services affected retained current adversely accounting ASC XXX,

with matter, since information last you filing, but new Third, like would IRS to to the I through we the no details. have respect our walk

XXXX. increase draft our reported July an NOPA XX XX-K Form Adjustment Form draft to July a our federal fiscal filed federal revised and on X-K or taxes a for XX, for U.S. received the XXXX proposing XXXX Notice Proposed filed of increase to from today, IRS fiscal taxes in NOPA our that on and proposed our we U.S. an As

adjustments to the certainty further the increase in the our increase IRS together the NOPAs, the approximately these with NOPAs and $XXX these to potential While continued their of sought XXXX accrual of proposed discussions NOPAs asserted do to aggregate as maximum only we on interest. million from U.S. awaited on of and provides potential the of the finalizing the a valuations income of based expect fact million IRS liability long us our to March any that taxes they the IRS' proposals. on the liability to of federal and their not greater intangible own our subject revise reflect being IRS XX, adjustments receipt represent these Based proposed $XXX estimated property documents the previously

and is tax. Form a XX-K disclosed not does within filings impose our to previously NOPA noted and obligation pay X-K any an position IRS and As

and as the intend continue resolution proposed income. let remains We continue to matters take to speak about and usual us for our out. me strongly business contest of the these now, position It disagree vigorously And IRS to adjustment taxable time with some restructuring. to to organizational will the play

As the we're taking during the perspective remainder we We to quarter efficiency. incurred the XXXX, our September initiative operational and we XXXX, fiscal will announced improve start million. approximately plan in a From to to the GAAP will undertaking majority we be be fiscal of today size XXXX. with that XXXX be throughout incur steps restructuring fiscal $XX the further a expect of charge ended

of will as XXXX, expect in restructuring to plans. savings non-GAAP our We $XX charge will fiscal approximately results. realize million it during exclude execute our the impact from this We time only to take

lastly see XX% XXXX range. of restructuring our Our over full impact half the ramp up today. XXX are The me Mark's accrue points are target restructuring basis we have has will comments. second to anticipated sharing annualized fiscal realize framework. presentation, model The our add moved of and benefits In $XX in with has on adjusted approximately course two been XXXX. you model the and to fiscal framework FY expected we target to fiscal expected thirds XXXX XX% model from considered The of XXXX target in updated a year are EBITDA to that the of fiscal XXXX beyond. And approximately to million savings the investor exercise the during that to let

typically towards in business When our on half the year. We more annual you the next XX% about down third have quarters rate second tends of the same of adjusted quarter our fourth sequentially other our thinking momentum our a organic reaffirmed of fiscal to and provided an updated related on range, are in quarterly quarters all revenue while sequentially the On revenue of on organic basis, the expenses interest that an we consider encourage also are to first the basis and the basis. up gain for an basis, second fiscal XXXX typically and fiscal and the year. tax

as year. FY and an to tends Quarterly want quarter addition revenue and trend incentives points to to to goals now industry's largest Net the operating the during Factors follow And approximately XXX the to to expenses. end due annual XXXX, and hundred R&D, on the first ASC the QX that the spike Enterprise specific quarter marketing sales the and with emphasize the currency Specific EBITDA is from XXXX sequential we basis. range based the as adjusted are turning to throughout is target World. conferences, invest a for With the down to certain we result will to technology for to the and together QX. With to will made cloud as on few a In respect impact hosting basis typically like that of one million we be expenses fourth $XX FY typical is remain attainments, respect continue consistent year. investment continued target at Specific QX, throughout expenses with revenue model sales annual technology marketing commissions business. high of well modeled and

of As out QX albeit our year, strong the suggest peak and historical margin below levels. would the quarter, your QX point build a a remainder low is for for QX is seasonality a margin that models QX year, you is

be will margin fiscal billion XX% adjusted exit Mark As our XXXX operating and we cash XXXX in fiscal target per as XXXX. EBITDA $X XX% to flow prepared of as his of during fiscal fiscal remarks, our targets XXXX, mentioned

on shareholders cash board of of and payable share $X.XXXX dividend XXXX per a XX, directors for September declared record of of XX, Our XXXX. August

meetings the continued for now our to the I OpenText for I look delivery like their Canada business in with questions. confidence of commitment strengthening excitement consistent during team investor United States. system share our to want August results the and deep my my of of complete in OpenText growth founded first quarter, our forward on full and in I many supported our thank to by financial and you the and that's strategy total As and continuing and balance September We call to sheet. open tours would fiscal

Operator

Thank you.

session. now begin question-and-answer will We the

Our first question Huang Barclays. comes of Phillip from

Phillip Huang

a Hi. have on are Good year. to afternoon, that congrats It's guys the and follow-up see providing finish on to you solid fiscal great the I Quarterly Factors a and that.

guys spend talking update to Thanks. along drive in accelerating an stronger spend You if wondering progress you accelerated that you and cloud provide how of was normalize? are the sales. that do spend expect been about have cloud could when I we period to that, on far

Mark J. Barrenechea

for Thank question. you. you thank the yeah, Phil,

As XXXX, about. we're script we FX digit XXX, via by organically we to to the M&A, look talked grow in as looking and ASC highlighted low-single we and and offset albeit grow to

a of out is First Enterprise coming OTX updates reactions in mode now favorable, into very World. to quarterly of we're And OTX.X.

will in refreshing platform We October. the be

We new that for service fiscal for $X of set our have crossed annual And a our you've seen I privacy cloud. strength and recurring features XXXX. revenues private security around managed billion the of think

I favorable XX-XX. view pedal hybrid. we're XX-XX, short tapping in targets it going to ends cases into a on cloud. think the investments, And if reception world right XXXX that the I XX-XX, up results, still it know we and a ARR of strength us. don't little the and the the now, opens our little baked faster OTX bit has for the I of use of new additional is, see in But as been you think very

the coming in come this to quarters. more So, in

Phillip Huang

your the recent you cross-selling. bit and on helpful. might pass a biggest lead bit talk that the longer. being data wondering Thanks. wondering the was that about if security times, follow-up I a Guidance That's solutions take I'll I you could bit would Maybe imagine line. I little acquisitions, if question was one a the obviously. about your talk on a cross-selling could

Mark J. Barrenechea

out XX,XXX Yeah. AT&T be Thanks, most, that we presentation, customers suite slide and Yeah. own Phil. familiar expanded engineering highlighting Three investor customers and to we to at we've Documentum, base. XX the the of our the And for everyone and particular to customers; where would marquee three of and platform these Motors, Management, where the out the through slide, OpenText direct I inside information have Daimler, Customer for General may acquisitions, security, four cases out use four our our added our Covisint cross-selling four Global content Experience the expanded a within we're of Nestlé, two we then look four. four. specifically,

how this to a and thought nice we via set was So, acquisitions. representative show we're cross-selling cross-pollinating we're our

So material that slide to we XX. the added investor

Operator

Capital comes Our question from RBC next Paul Treiber of Markets.

Paul Treiber

much. Well, thanks very

changes if requested Analyst And on Day to an mentioned on will Enterprise that Do investors management that from have is management metrics. per feedback if evaluated Just to at update metric, evaluated then around publishing received which there on at share be that very that, those and you that is management. to any on? helpful, ROIC World, discussions metrics you now the you be in the regards could the for comment that ROIC is an you related measurement explicit

Mark J. Barrenechea

unknowns. thanks and Paul, I'll programs risk, to XX% have just and the are free in to and maybe We to growth. to myself of question. is our consistent annual tied remuneration in is program. to And we that's say revenue for model, there annual we add myself, two disclosed actually an added and deliver all we basic Yeah. not we that in lot on the operating of what in is highlight the basis at think Acquisitions they acquisition, fact, with profit make have team the my a then it an if programs, the is that risk always total model, because management

tied don't compare tied set the plan ourselves, annual topic. think We deals simplicity. the ROIC. doesn't it's term, simple, we plan. is go pay lot important to a I to we to compare the and to very share value. on annual that is a if revenue We're measured doesn't just So stock of really is ourselves want plus income measure up, it's peers, We Longer that program of there's the a we from note We We a compare metrics ourselves Citrix, is software and We don't ARR, to to course, those quartile them. Oracle, software large ourselves perform and, SAP, learn to companies of for compare our of cash VMware, lot software Symantec, to in to to upper companies. ourselves Adobe, companies. flow companies the growth, EBITDA, goal the compare large consolidators, Canadian ourselves compare ROIC. adjusted total consistently as

the to it's mean note that but move and I said what you on compare we companies, of So will important compare measure deal a minority I those we it answer, have ROIC. longwinded voices to per metrics don't will note of way small the in dilution – to feel don't We your I to lead that our dilution quartile share. is our our upper is the the in now. right right peers. it that's

from burn or burn at companies look you a We're of in rate If greater. software X%. large than they're annually X% rates burn in of a less rate

in rate the and low annual confidence can I quartile. of in burn we that continue that you we upper So that think dilution we'll give perform

companies. be to be an it's thanks compared want for because So who one, to we do software compared the to. And important large it's want to question we and

Paul Treiber

Thanks the is on second long-term model. that explanation. for And the question

now margins. is operating long-term think as adjusted opposed the model I EBITDA on based to

should high-end I – or Is anything think that XX%. it's think slight because potential change the on EBITDA, it implies there? we reduction reduced. – the the at slightly But high-end and how about is is that there based still

Mark J. Barrenechea

a that. Yeah. start reduction, just don't you Paul, for with. We it thank as see to

So see as thank for it that, don't reduction. a you we

analyze those from because metric. the are majority AOM the is We adjusted vast who company EBITDA industry to of have on and moved that the EBITDA. metric the And adjusted

simply we're metric. to So market moving the

right, old. quartile we XX large We to be note to and XX% it metric company peers. the years there to XX%. tightened XX We to XX% is I'll software in And our used XX% years XX% of are moving that to it them upper software Right? we're compare the and large And the get range, to to it XX%. tightened took

And range. on even is I see do So and upper the questions as think large even we reduction. a the for important, great quartile of software important are upper end more it it more performance don't – these it the and as a tightening of company. see We

Operator

comes of Richard Our Financial. National from question Bank Tse next

Richard Tse

you. thank Yes,

really you for thank the disclosure. much detailed It's helpful providing Mark, So Quarterly and those very here. Factors

Mark J. Barrenechea

Richard. Thank you,

Richard Tse

triggered that ROIC are from Certainly, And curious see on growth, a like discussion the of it what or of you kind as past standpoint to contribution the much see sort to so I'm your organic ROIC, potentially ever seen year do guys a of a background more the over kind on it. you focused lot seems as to better probably in organic? I've here.

Mark J. Barrenechea

Maybe, So, a few there. I'll ROIC end. save things in to the

we'll where of I integrating Auto for us Things, have an think you're expanding now management, platform. of in products, seeing electronic information the been I hit content last countries, Israel. Ness maturity new all Department the our products. BMW, in platform, Club over a Internet of we're we've see we've few years. the point customer of Energy, are we've And a for wins. we always sort where invoicing, integrating into like their acquiring at be a And as maturing been businesses, for of threshold that our But,

that, and the we a want means organic we and company with large that total acquired. don't basis growth to and software them look growth So, outperform on both peers at

sort don't grow With that platform to M&A grow you we're the total where us, going and beyond see of that a a from I in to from So, consistent to a ROIC ROIC. with looking growth. We'll happy think we're are. message via we've grow our where created. you yeah, way, continue grow total said, you're our organically

consistently teens OCF ROIC. mantra is the and growth and ROIC think adjusted the And perform ARR, Total upper in EBITDA, consistently perform. in quartile. we high is quartile to Our the in right upper

So to perform over grow. we'd like the long-term consistently we as there

Richard Tse

increasing of helpful. curious could on may sell-through sticking of channel. us size the hasn't products Okay. to with the if channel that channel? really side see, Thanks. partner been sort of and the survive sort kind OpenText much that to through of recent There the you help their opportunity And That's doing what expanded be that the you as or to organic in with I I'm guess here. years discussion respect

Mark J. Barrenechea

and them point potential, strategic X, extended their value. sales for in and I a their as needed you've products World. real partner full Oracle, Yes. probably force to at mean, Richard. they X, many And to are Enterprise Yeah. early add to channels harken have the were The reach seen to got an SAP products back got their platform transformative Microsoft, and they and Thanks, seen point XXs. important I started to where when

to country, partnership where and are Israel. on Global platform. – in growing our initiatives Global point XXXXX extend our right. this that's approaching can't there to We is the connect that's every system We XXXXX platform get customers information to we're get the can't to every reach, strategic so everywhere, in implementers the our get we been can more large to our global So focus

Operator

CIBC question Markets. next Our of Stephanie comes World from Price

Stephanie Price

afternoon. Good

Mark J. Barrenechea

Hi, Stephanie.

Stephanie Price

that as organic focus Hi. if to you fiscal XXXX wonder targets? the growth aspirational unfolding you growth and how X.X% constant to see head organic I just that are could I XXXX you want currency products on talk that towards in the driving it

Mark J. Barrenechea

for to, the are product growth. them and sort services, – the point Fives organic Thanks network And driving of and question. I'd are sort long-term five I content analytics/AI. the It's security, cloud, internally. our And of those that it service these call key call trends. are Yeah. Big that initiatives business

trends, seen immune and staying secular what contribute public the World more as analytics. if the and have from to has of growth So been reinvented lot cloud in them the to system these I viewing will. short-term the security privacy private are will and beyond. business, it interest power Enfuse think need for recently as in these we've do GDPR are But services we we're AI Enterprise both Content to kind I where we and don't organic add and seeing side, of as and Steph you a not and with XXXX

Stephanie Price

one about share? talk bit you organic do the a for replacements growth, can slide where gain you then some and to the opportunity is the see the moment competitive drivers of And deck Great. mentions the competitive at environments

Mark J. Barrenechea

Yeah, other platforms, big for strategic IBM competitive I'd kind focus and at we so there at our against being house IBM the for of of wins and very remains looking replacement. are right And say and focused remain now that competitor sure. FileNet top

Operator

Scotia Steep Our next Paul question from Capital. of comes

Paul Steep

got Mark, growth maybe quarters the the beyond four Thanks. a into currency quick fiscal services could Cloud Great. little driving What you bit about see and good next guess, there. then positive momentum that of follow-up. that you now year talk we've consistently and one seen, I I constant

Mark J. Barrenechea

thank than for our is Paul, strategy differentiated One network our value-added that. Yeah. VAN, you Again, services. our very is others. of sort

doing dozens Now to understand be off look but invoicing requirements, to was at think the to Enterprise understand remember digitally. can't close the electronic country electronic I to of it World now about we countries talked electronic XX a we're local local across invoicing we world, and count I or countries. how doing win law for settlement the at local do of it top around head, invoicing, my I where where where this And going BMW, invoicing

driver Cloud for the all That's for that's us. service an So, us. important

is Second XX,XXX, very is, cloud in the Global private important.

the designs plant IP. or other IP where they banking, who not instances, are and power in very ECB, in clients proprietary interested have a be public may pharmaceuticals, like in confidential in nuclear or We things, being

lane – and for aspect cloud then on is our SaaS public opening growth. private we're second third, up a top the our of that. public So, a cloud layer And to application for new swim in

very we about OTX our is So our our public new which network, value-added cloud. private there, and cloud our feel trifecta good

Paul Steep

And to that comp, ARR or sales a the then have force, anything it be sales environment sales about nice model, should would is transition through and any usual? I there thinking is XXXX, again just, in guess, Thanks. as we to stable business gone Great. kick-off with that we're thinking full an already, about you the change like

Mark J. Barrenechea

nice Yeah. Thanks, stable environment. Paul,

In to on one – is here. the paused myself of being an fact, we're studying just advantages acquirer I

need Let's out put see the say model And a years we week, that's don't practices. and every place, product-specific study contract a marketplace, we we that, they and where either develop in back, incent best value. our comp a give in annual we few number we quotas. so method retire We or get an to get through annual to we to give a the field, through license company there them

in learned years a of put place what through doing, had had we few And and our studied them, this, see we companies So, lot Oracle from and we we others ago. method due SAP were seen a diligence. we that

in I that XXXX. think the stability us of results showed plan

stability long of field. there are the can't a we into zero in I there coming in a great ago, We and change so into XXXX think plan in those put to coming single the structure that XXXX, of So changes plan. for place actually comp changes have the the time organization

Operator

Our Thanos of comes BMO from next Moschopoulos Capital question Markets.

Thanos Moschopoulos

we these an But can we're in why reason look bigger for us taken. to seasonal any a seen well seems QX QX? quarterly like on license Hi, and business specific point annual we've good historically. afternoon. the there it And on Mark, at basis revenue's that getting is is you on becoming peaks the than should your licenses more basis point and valleys

Mark J. Barrenechea

really to Thanos, I to the can't say is calendar point QX year. except end something of No a specific, our – that

many individuals' end budgeting So, of it's cycle. the

grown business well, in budget U.S. Second, a our the as is end has government think of May as the I cycle

end As year. our grown its business has Japan, in of the Japan has

look over to is So, trend which I now. it business. I now, which back-to-school, think we're the is seasonality, our if scaling not it's but precise summer, you to feels of like time, have norms at given answer, going or a the market more And

time cycles trending like a I budget other know end-of-year federal feels you government have there? more like any anything than and towards Madhu, U.S. things. norm if have it's have over other and don't you else. spends, You It observation

Madhu Ranganathan

being that's in very calendar normal. Sure. the Mark QX, about the QX said... as I very, quarter, factors December right, mean, summer talked QX, our And we

Mark J. Barrenechea

Everybody else's QX.

Madhu Ranganathan

...is budgets up. open everybody QX and else's certainly

Mark J. Barrenechea

Yeah.

Madhu Ranganathan

open December, this, And all in slow budgets again back think then March. quarter, know in up you I open And right. the down up because June they in the budgets

Mark J. Barrenechea

And everyone QX. QX else's our is

have to we reps So exceed in plan. pushing natural just behavior

Madhu Ranganathan

business the enterprises to there. said, and as again the mean think converges sort what I it the norms right. of Right, I Mark

Thanos Moschopoulos

services you on been throughout XXXX. head flat And PS enough. of expect to revenue, quarterly has be that Fair revenue flat mentioned PS you count course a the And the personal on basis overall XXXX.

part that? effort clarify, is to there money dynamic leave some on or more for the to your underlying table other on Just a that your partners conscious is

Mark J. Barrenechea

hoping said us, you I is, partners our to Thanos, looking we classic fine, the lines revenues on No, other We're think win-win. grow as a year-over-year it's an think which And it revenue absolute hold for PS we our we're are consistent going basis. grow ARR. to

So a and ARR. distribution conscious expanding it's our partner effort growing of

Operator

question comes from Matthew Research. Wells next Citi Our of

Matthew Wells

taking my thanks for Mark, question. Hi,

cloud the the As the ongoing pose how at does margins you a margin headwind expansion? in investment long across business look

Mark J. Barrenechea

it's great Yes, question. a

start margin. a always with we've So viewed I'll just blended our in business

support, So it's we to look services. customer factoring target all license, up at our factoring, adjusted in XX% revenue cloud professional XXXX XX%, for the lines EBITDA

on to into tap next-gen security, a for So we're the the year-over-year. XX% customers bps, attracting margin blended investment Look, the have already by XXX a of that's XX% XXX for gas for expanding right bps they a managed factored OTX, opportunity to an And into our now bit cloud. company going more it range by we services. take to pedal

So, at to target year think the look Madhu. I XX% for – the XX% XX%? of it's we when

Madhu Ranganathan

Yeah, that's correct.

Mark J. Barrenechea

We've whole Yeah. that factored into the year.

going XX% So, to for year and as more all scale, next to factored is get I it XX% we're we the we year. but into think have it look this efficient year, the

Operator

now Barrenechea hand back to call Mr. the I for will over closing remarks.

Mark J. Barrenechea

And you and between All at look much. time listened, today thank and to had we're adjusted QX, we single-digit negative upcoming Thank low I EBITDA Madhu ASC offset to and your learned everyone call which by XXXX you XX% my XX% right. the seeing I look to today. to FX a growth you remarks, for via we've due grow thank XXXX XXX. me us to and million Well, for we've prepared M&A, as strong let And time that one-on-ones. noted to our our so to and and organically record grow conferences forward $XX to now it's Well, we lead. joining excited in for as contributed summary and

Madhu Ranganathan

all. you, Thank Yeah.

Operator

call. concludes conference This today's

may have a your You day. disconnect pleasant lines. Thank for and participating, you

Open Text (OTEX) 3 Aug 182018 Q4 Earnings call transcript